BUSINESS LAWS AND

ETHICS

Dr Zainab Fatima
TYPES OF CONTRACT- BASED ON VALIDITY
1. Valid contract: An agreement which has all the essential elements of a contract is
called a valid contract. A valid contract can be enforced by law.

2. Void contract[Section 2(g)]: A void contract is a contract which ceases to be

enforceable by law. A contract when originally entered into may be valid and binding
on the parties. It may subsequently become void.

-- There are many judgments which have stated that where any crime has been
converted into a "Source of Profit" or if any act to be done under any contract is
opposed to "Public Policy" under any contract— than that contract itself cannot be
enforced under the law-
3. Voidable contract[Section 2(i)]: An agreement which is enforceable by law at
the option of one or more of the parties thereto, but not at the option of other or
others, is a voidable contract.
If the essential element of free consent is missing in a contract, the law confers right on
the aggrieved party either to reject the contract or to accept it. However, the contract
continues to be good and enforceable unless it is repudiated by the aggrieved party.
• 4. Illegal contract: A contract is illegal if it is forbidden by law; or is of such
nature that, if permitted, would defeat the provisions of any law or is
fraudulent; or involves or implies injury to a person or property of another,
or court regards it as immoral or opposed to public policy. These agreements
are punishable by law. These are void-ab-initio.

• “All illegal agreements are void agreements but all void agreements are not
illegal.”

• 5. Unenforceable contract: Where a contract is good in substance but because

of some technical defect cannot be enforced by law is called unenforceable
contract. These contracts are neither void nor voidable. Ex- Unlicensed
contractor
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TYPES OF CONTRACT BASED ON
FORMATION

1. Express contract: Where the terms of the contract are expressly

agreed upon in words (written or spoken) at the time of
formation, the contract is said to be express contract.

2. Implied contract: An implied contract is one which is inferred

from the acts or conduct of the parties or from the circumstances
of the cases. Where a proposal or acceptance is made otherwise
than in words, promise is said to be implied.
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3. Quasi contract: A quasi contract is created by law. Thus, quasi contracts are strictly
not contracts as there is no intention of parties to enter into a contract.

• It is legal obligation imposed by a court to prevent one party from being unjustly
enriched at the expense of another. A quasi contract is based on the principle that
a person shall not be allowed to enrich himself at the expense of another.

• Ex- Paying doctor later.

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TYPES OF CONTRAST BASED ON

PERFORMANCE

1. Executed contract: An executed contract is one in which both the parties

have performed their respective obligation.

2. Executory contract: An executory contract is one where one or both the

parties to the contract have still to perform their obligations in future. Thus,
a contract which is partially performed or wholly unperformed is termed as
executory contract.
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3. Unilateral contract: A unilateral contract is one in which only one party has to perform his
obligation at the time of the formation of the contract, the other party having fulfilled his
obligation at the time of the contract or before the contract comes into existence.

Ex- Prize for finding a pet

4. Bilateral contract: A bilateral contract is one in which the obligation on both the parties to
the contract is outstanding at the time of the formation of the contract. Bilateral contracts are
also known as contracts with executory consideration.
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CONCEPT OF ‘PERFORMANCE’ IN
CONTRACTS
• Section 37, Para 1, of the Contract Act lays down that, “The
parties to a contract must either perform, or offer to perform,
their respective promises, unless such performance is dispensed
with or excused under the provisions of this act, or of any other
law.”
• The offer to perform the contract is called Tender or attempted
performance.
• It is a substantial performance.
• Performance involves fulfilling contractual obligations while
tender involves offering performance.
CONCEPT OF ‘BREACH’ IN CONTRACTS
If a party breaks his obligations which the contract imposes;
contract is no longer binding on the other person. A breach
can happen
- Actual Breach of Contract is when one party fails or refuses to perform
his obligation
- During the performance of the contract
• Express Repudiation (by word or act refuses to continue to perform
his obligation)
• Implied Repudiation (makes by his own act the complete
performance of the contract impossible)
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• Anticipatory Breach of Contract (done before the time for

performance arrives)
– By Renunciation (Express Repudiation)
– By creating some Impossibility (Implied Repudiation)
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CONCEPT OF ‘DISCHARGE’
IN CONTRACTS
• Discharge of a contract implies termination
of contractual obligations.
• This is because when the parties originally entered into
the contract, the rights and duties in terms
of contractual obligations were set up.
• Consequently when those rights and duties are put out
then the contract is said to have been discharged.
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CONDITIONS OF DISCHARGE
OF C0NTRACTS

❖Discharge by Law

❖Discharge by Impossibility

❖Discharge by a New contract

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SPECIAL CONTRACTS
• Special contracts are contained in sections 124 to 238 of the Indian Contract
Act. These special contracts are Indemnity, Guarantee , Bailment, Pledge and
Agency.
▪ Contract of Bailment
▪ Contract of Indemnity
▪ Contract of Guarantee
▪ Contract of Agency
▪ Pledge
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CONTRACT OF BAILMENT
(SEC. 148)
▪The word Bailment is derived from the French word “ballier” which means “to
deliver”
▪Bailment means delivery of goods by one person to another for some purpose,
upon a contract, that they shall, when the purpose is accomplished, be returned
or otherwise disposed of according to the instructions of the person delivering
them.
▪The person delivering the goods is called the ‘bailor’ and the person to whom
they are delivered is called the ‘bailee’.
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CONTRACT OF INDEMNITY
SEC 124 & 125
A contract by which one party is promises to
another to save him from loss caused to him by
the conduct of the promisor himself , or by the
conduct of any other person .
 ESSENTIAL ELEMENTS
OF INDEMNITY
• Two parties.

• Legal relationship.

• Free consent.

• Competence.

• Consideration.

• Lawful objective.

• Express or implied.
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CONTRACT OF GUARANTEE
• A contract of guarantee is a contract to perform the promise, or
discharge the liability , of a third person in case of his default.
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CONTRACT OF AGENCY
SEC. 182
• An agent as a person employed to do any act for
another , or to represent another in dealings with
third persons the person for whom such act is
done is called the principal.
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ESSENTIAL ELEMENTS OF CONTRACT

OF AGENCY
▪ Name of relation between agent and his principal.
▪ Agreement , not necessarily a contract.
▪ Competence of the principle.
▪ Free consent.
▪ Consideration not necessary.
▪ Intention to create contractual relations and other essentials.
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PLEDGE
Sec 172 of The Indian Contract Act 1872 defines the Contract of
Pledge as:

From the definition of the term pledge in the given section, it is clear
that pledge is also a type of bailment due to the fact that a contract of
pledge to come into existence, delivery of goods is requisite. A pledge
can also be defined as , Pledge is the transfer by one person to another
of the possession of certain goods to be held by the latter as security
for the performance by the former of some obligation to pay or
perform, which being performed, the pledge must be restored.