Types of Contract Based on Formation

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What is a Contract?

A contract is a legal document that binds the contracting parties that are recognized and governed by the rights and duties of the parties to the agreement. A contract is legally enforceable as it meets the requirements and confirmation or approval of the law.A contract can either be written or oral. However, oral contracts are challenging and it should be avoided if possible. 

Contacts are classified into three different types on the basis of their formation. Read on to know more about types of contracts based on the  formation


Classification  of Contract Based on Formation

In accordance with the mode of formation, the contracts are classified into three -

  1. Express Contract

  2. Implied Contract

  3. Quasi - Contract


Express Contract

If the terms of the contract are expressly agreed by the parties, either by spoken words or in writing at the time of formation of the contract, it is called Express Contract.


An Implied Contract

An implied contract is one for which the proposal or the acceptance is made otherwise than in words. Implied contracts are the result arising from the circumstances of the case and the conduct of the parties.


A Quasi-Contract

A quasi-contract is created by law. There is no intention on either side to make a contract. The rights and obligations arise here not by an agreement but by the operations of law.


Let Us Learn The Different Types of Contact Based on Formation in Detail Below

Quasi-Contract 

An agreement which is a retroactive arrangement between two parties is known as the Quasi-Contract. In this type of contract, there are no previous obligations to one another. It is created by a judge to correct a circumstance in which one party acquires something at the expense of the other party. 

Quasi-contracts are designed to prevent one party from unfairly gaining any benefits from the situation at the other party's expense. These arrangements may be created and imposed when goods or services are accepted, though not requested, by a party. This acceptance then creates an expectation of payment.

Quasi-contracts frame the obligation of one party to another when the latter owns the original party's property. These parties might not necessarily have a prior agreement with one another. The agreement is imposed by law through a judge. It is legal in nature. As the agreement is constructed in a court of law, it is legally enforceable, so neither party has to agree to it. The purpose of the quasi-contract is to exhibit a fair outcome in a situation where one party has an advantage over another.


Types of Quasi Contract

The types of quasi-contract are as follows-

  1. Supply of Necessities - A person who is incapable of entering into a contract or anyone whom he is legally bound to support is supplied by another with necessaries of life. The person furnishing such supplies is entitled to be settled up with the property of such an incapable person.

  2. Payment By an Interested - A person who is interested in the payment of money on behalf of another party, and where the other party is bound by law to pay, is entitled to be reimbursed by the other.

  3. Obligation to Pay for Non - Gratuitous Acts - When a person legally does anything for another person or delivers anything to him, or anything has been done non-gratuitously and such other person enjoys the benefit from that, the latter is bound to make compensation to the former in respect of, or to restore, the things that are done or delivered by the person.

  4. Responsibilities of the Finder of Goods - A person who finds goods of another person and takes them into his custody is subject to the same responsibilities as a bailee. He is bound by the law to take as much care of the goods as a man of ordinary prudence would. If he does not, he will be guilty of the wrongful conversion of the property. Till the owner is found out, the property in goods will be responsible for the finder.

  5. Mistake Or Coercion- A person to whom either money has been paid or anything is delivered, by mistake or under coercion, the person must repay or return it to the person who paid or delivered it by mistake or under coercion.


Express Contract

An express contract is a contract which has clearly stated terms already. It is different from an implied contract, which is a contract that is believed to operate based on the behaviours of those involved in the contract. The terms that are exclusively defined in an express contract includes the type, quantity of goods delivered (or any services rendered), as well as the time duration during which the transaction is expected to take place.

The acceptance of an express contract must be in conformation to the terms offered in the contract. If a party agrees to the contract but looks to amend its terms and conditions in some way, the party is not unconditionally agreeing to the contract, instead of looking to make a counter-offer. Once a counter-offer has been made, the contract henceforth no longer qualifies as an express contract.

Further, for an express contract to be considered valid in the court of law, the parties contracting must either exchange or give value, or suffer a loss of particular kind (make the payment). This binds them to the terms of the contract legally.


Implied Contract

An implied contract is a legally-binding obligation that arises from the actions, conduct or circumstances of one or more parties present in the agreement. It has an equal legal force as an express contract, which is a contract that is voluntarily entered and agreed on verbally or in writing by two or more contracting parties. The implied contract, on the other hand, is assumed to exist, but there is no written or verbal confirmation for the same is necessary.


FAQ (Frequently Asked Questions)

1. What is an implied offer?

An offer made by conduct is made because of the way the party making the offer behaves or acts. This is known as an implied offer.

2. Give an example of a Quasi-contract.

A classic quasi-contract circumstance may be created by the delivery of an item to the wrong address that is not to the person who paid for it.

3. How do contracts work?

A contract mainly answers the who, what, how, where, how and when of the contractual agreement. 

4. Give some examples of a Implied contract.

  • Travelling in  a bus can be considered as an implied contract between the passengers and the owner of the bus.

  • X went to a hotel to have lunch. X had pizzas and burgers. In such a situation, there is an implied contract, as X has to make payment for lunch.