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Business Laws > Indian Contract Act 1872: Part I > Types of Contract – Based on Formation
Indian Contract Act 1872: Part I

Types of Contract – Based on Formation

While getting into a contract various aspects are to be taken into consideration. Like if the contract has to be in written form, it must be an Express Contract. Similar to the express contract, we have four other types of contracts based on the formation of the contract. Let us learn more!

Types of Contract – Based on Formation

In the essentials of a contract, we saw some important aspects of an agreement as well as a contract. We also saw that some contracts are void contracts if certain aspects are missing from them. For example, a contract for a lease is void if it is not registered.

Such conditions allow us to classify contracts on the basis of the terms or conditions under which the agreements or contracts come into existence. On the basis of the formation of a contract, there are four types of contracts. They are listed below.

Express Contract

Types of Contract Based on Formation: Express Contract, Implied Contract

The Section 9 of the Act defines what is meant by the term express: “Promises, express and implied —In so far as the proposal or acceptance of any promise is made in words, the promise is said to be express.”

This means that if a proposal or a promise is expressed by listing the terms in words – in writing or orally is said to be an Express Contract as long as it gets acceptance from the other party.

The terms of the Express Contract are clearly stated either orally or in writing. So the main aspect of the Express Contract is that the terms of the contract are expressed clearly. For example, consider the following:

A person A sends a text from his phone to person B, proposing to sell their bike for a cost of Rs. 10,000/-. The person B calls the first person and agrees to the terms of the promise.

This is an Express Contract as the terms have been stated clearly in oral as well as written form. Note that the communications could be entirely oral or written.

Implied Contracts

The second part of section 9 of the Act defines what is meant by an implied contract: “In so far as such proposal or acceptance is made otherwise than in words, the promise is said to be implied.”

Going by the definition we can say that a contract in which the terms of the agreement are not expressed in written or oral form is an implied contract. Let us see an example to understand this.

For example, you board a rickshaw and the driver starts to drive. You tell the driver the address where he has to drop you. The driver stops and you pay him.

As you can see this is a contract but did you and the driver express any of the terms in written and oral form? No, the intent was implied by your conduct and thus there was an implied contract.

Quasi-Contract

They are not contracts in the sense that no agreements are made between any of the parties. In fact, there is no contract prior to some court order. Let us first see an example and then we will get a clear idea of what we mean by Quasi-Contract.

For example, a bank mistakenly transfers a large amount of money into your account. Now there is no written or oral or any sort of agreement between you and the bank but the money doesn’t belong to you.

You will have to return the money even if you don’t want to. The bank will approach the court and the court will issue an order to return the money, which is becoming a quasi-contract.

So here we see that a quasi-contract is not agreed upon by the two parties but it comes into existence by a court order. It is thus enforced by the law which also creates it. Most of the times the quasi-contract is created to stop any of the parties from taking unfair advantage of the other.

Consider this example. You have a yard and you commission a person to build a small door for your car. You come home one day to find out that the mansion has made a big door which is very expensive. At the same time very good for the value of your property. Now, what would happen if you both approach the court?

The courts usually enforce what is known as the “Quantum Merit” which means “as much as is deserved.” Since the work was done also increased the value of your property, it would be immoral if the worker doesn’t get paid for the extra work and materials. The payment might be lesser than the normal cost but the quantum merit will apply. This is a quasi-contract.

E-Contract

When a contract is formed by the use of electronic devices and means, it is called an electronic contract or an e-contract. The electronic means and devices may include emails, tests, telephones, digital signatures etc. They are also known as the Cyber contracts, the EDI contracts or the Electronic Data Interchange contracts. The terms of the contract are listed by electronic means or implied by the actions of the users.

Solved Examples on Types of Contract

Q1: Is every E-contract an express contract?

Answer: The answer is no. You might think that every E-Contract will have to state the terms of the contract clearly as there are no other means of communication than exchanging data in the form of text and other forms. But there are many forms of communicating.

For starters, we could arrive at a contract via video chats. Also, the actions of the user can imply that he is willing to get into a contract. For example, when you click on a video that is not free, you automatically imply that you agree to pay for it. So an E-contract can be implied as well as an Express Contract.

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