Types of Contracts under the Indian Contract Act, 1872: Executed and Executory, Express and Implied, Quasi-Contract, Unilateral and Bilateral, Standard-Form, Adhesion and Electronic Contracts

Contracts are classified along four independent axes, and a single contract is simultaneously located on all of them. The axes are the stage of performance, which produces the executed and executory categories; the mode of formation, which produces express, implied, quasi and electronic contracts; the nature of the obligation, which produces unilateral and bilateral contracts; and the manner of bargaining, which produces standard-form and adhesion contracts. A cash purchase in a shop is an executed, implied, bilateral, negotiated contract. A software licence accepted by clicking is an executory, express, bilateral, electronic contract of adhesion. The classifications are not alternatives and it is a mistake to treat them as though a contract had to be one thing only.

1. Classification by Stage of Performance

• Executed contract. Both parties have wholly performed. Nothing remains outstanding on either side, and the contract survives only as a source of collateral obligations such as warranties. A cash sale across a counter is executed the moment goods and money change hands.
• Executory contract. Something remains to be done by both parties. A contract concluded today for delivery next month against payment on delivery is wholly executory.
• Partly executed and partly executory. One side has performed and the other has not. This is the commonest commercial position: goods delivered on thirty days' credit produce an executed obligation for the seller and an executory one for the buyer.

The distinction is not merely descriptive. It determines which party may sue and on what footing. A party who has wholly performed sues for the agreed sum as a debt, which is a liquidated claim requiring no proof of loss. A party whose obligation is still executory and who faces a repudiation sues for damages under Section 73 and must prove the loss caused. It also bears on Section 56, since supervening impossibility can only discharge what remains to be done and cannot undo what has been performed.

2. Classification by Mode of Formation

2.1 Express contracts

Section 9 provides that in so far as a proposal or acceptance is made in words, the promise is said to be express. Words may be spoken or written, and the Act attaches no general preference to writing. An oral contract is as binding as a written one unless some other statute requires writing, which the second paragraph of Section 10 preserves. Writing matters for proof, not for validity.

2.2 Implied contracts

Where the proposal or acceptance is made otherwise than in words, the promise is implied. The implication is drawn from conduct, from the circumstances, or from the course of dealing between the parties. Boarding a bus, taking an article from a self-service shelf to the counter, stepping into a taxi and consulting a professional without discussing fees are all implied contracts. The legal effect is identical to that of an express contract; only the evidence by which assent is established differs.

2.3 Quasi-contracts

Sections 68 to 72 appear under the heading 'of certain relations resembling those created by contract'. The drafters chose that phrasing deliberately. These obligations do not rest on agreement at all; they are imposed by law to prevent one person from being unjustly enriched at another's expense, and they would exist even if the parties had never communicated. They are therefore not a species of contract but a category placed alongside contract because the remedy resembles a contractual one.

1. Section 68. Claim for necessaries supplied to a person incapable of contracting, or to anyone whom he is legally bound to support. Reimbursement is from the incapable person's property, not from him personally.
2. Section 69. Reimbursement of a person paying money due by another, in payment of which he is interested. The payer must be interested in making the payment and must not himself have been bound to pay.
3. Section 70. Obligation of a person enjoying the benefit of a non-gratuitous act. Where a person lawfully does something for another, not intending to do so gratuitously, and the other enjoys the benefit, the latter must compensate or restore.
4. Section 71. Responsibility of a finder of goods, who is subject to the same duties as a bailee.
5. Section 72. Liability of a person to whom money is paid or a thing delivered by mistake or under coercion, who must repay or return it.

2.4 Online and electronic contracts

An electronic contract is an ordinary contract concluded by electronic means. Section 10A of the Information Technology Act, 2000 provides that a contract shall not be deemed unenforceable solely on the ground that electronic records were used for the communication of the proposal, its acceptance, or their revocation. Sections 11 to 13 of that Act govern attribution of an electronic record and the time and place of its despatch and receipt, which matter for Section 4 of the Contract Act and for jurisdiction.

• Click-wrap. The user must affirmatively indicate acceptance, typically by clicking, before proceeding. Notice of the terms is ordinarily adequate, and assent is unambiguous.
• Browse-wrap. Terms are said to be accepted by continued use of a site or service, with a link to them somewhere on the page. This is the weakest form, because incorporation depends entirely on whether the notice was reasonably prominent.
• Shrink-wrap. Terms are enclosed with a packaged product and are said to be accepted by opening or using it, which raises the question whether the terms came to the buyer's notice before the contract was concluded.

3. Classification by the Nature of the Obligation

3.1 Bilateral contracts

In a bilateral contract each party makes a promise, and the promises form the consideration for each other within Section 2(e). Both parties are bound from the moment of acceptance, each being promisor as to his own undertaking and promisee as to the other's. Almost all commercial contracts are bilateral, and Sections 51 to 58 on reciprocal promises are written for them.

3.2 Unilateral contracts

In a unilateral contract only one party makes a promise, and the other accepts by doing the act called for rather than by promising to do it. Reward advertisements, general offers to the public and prize competitions are the standard examples. Section 8 gives the category its statutory footing by providing that performance of the conditions of a proposal, or the acceptance of any consideration for a reciprocal promise which may be offered with a proposal, is an acceptance of the proposal.

Two consequences follow. Communication of acceptance in advance is dispensed with, because the proposal by its terms invites performance rather than a counter-promise. And at the moment the contract is formed only one party is under any obligation, since the other has already done everything required of him. Whether the offeror may revoke after performance has begun but before it is complete is the classic difficulty of the category, and the answer generally given is that he may not, because the offer carries an implied undertaking not to revoke once performance has started.

4. Classification by the Manner of Bargaining

The last axis is not found in the Act, because the forms it describes had not become dominant in 1872. A standard-form contract is one whose terms are settled in advance by one party and offered to all counterparties without negotiation. A contract of adhesion is a standard-form contract in which the other party's only real choice is to accept the document whole or to go without, typically because the supplier holds a monopoly or the service is a necessity. Every adhesion contract is a standard-form contract; a standard form settled between commercial equals who could have insisted on amendments is not a contract of adhesion. The judicial and statutory techniques for controlling these forms are treated in the dedicated topic.

5. The Four Axes Compared

6. The Position Stated Shortly

1. The classifications are independent axes, not alternatives; every contract sits somewhere on each of them.
2. Executed and executory describe the stage of performance and determine whether the claim is for a liquidated debt or for damages under Section 73.
3. Section 9 makes express and implied a statutory distinction turning on whether assent was signified in words.
4. Haji Mohammed Ishaq: a contract may be inferred from conduct and the course of dealing where goods are accepted and dealt with.
5. Sections 68 to 72 are quasi-contractual obligations imposed by law to prevent unjust enrichment, not contracts.
6. B. K. Mondal: Section 70 has three conditions, and it operates even where no enforceable contract exists.
7. Section 8 recognises the unilateral contract by treating performance of the conditions of a proposal as acceptance.
8. Section 10A of the Information Technology Act, 2000 confirms that the electronic medium does not affect enforceability; click-wrap, browse-wrap and shrink-wrap differ in the adequacy of notice.
9. Standard-form and adhesion contracts describe the bargaining position, not the legal effect, and are controlled through notice, construction and Section 23.

7. Related Topics and Provisions