A contract can be defined as an agreement validated by law under Section 2(h) of the Indian Contract Act, I872. According to Section 2(e) of the Act, an agreement is “every promise and every set of promises forming consideration for each other.” It also creates and defines several obligations between the two parties. All the conditions enforcing the validity of a contract are mentioned under Section 10 of the Act.
Contracts can be of different types, including unilateral, bilateral, contingent, voidable, express, implied, executed, and executory contracts. It can be broadly classified on the basis of four contexts, such as:
Nature of Consideration
Based on formation, contracts can be either expressed, implied or a quasi-contract. On the other hand, contracts can be either unilateral, bilateral, executed, or executory based on their performance and executions. When it comes to contract validity, it can be void, voidable, valid, unenforceable, or even illegal.
Different Types of Contracts Based on Performance
A contract specifies all the terms on which both the parties had mutually agreed while entering into an agreement. Until the expiry or termination of that contract, neither parties are allowed to defy the terms. They are bound to perform and abide by the contract provisions.
Here are the different types of contracts classified on a performance basis:
This is a type of contract where both the parties involved in the contract have fulfilled their respective obligations as specified in the agreement. Executed contract meaning is when an agreement has been carried out exactly how it was supposed to be carried out. In such contracts, the parties have fulfilled their promises and also performed their duties soon after entering the contract.
Buying and selling of goods or services usually fall under the category of executed contracts. Here, there is hardly any trouble regarding the date of execution because these contractual duties are fulfilled instantly.
This is a kind of contract where both the parties in a contract are yet to perform their respective obligations and duties. Executory meaning is the contractual promises and agreements made between the people are to be carried out sometime in future. Thus, it also has time agreements or deadlines mentioned in the contract.
A lease can be cited as an example of an executed contract. In a lease, the specified conditions cannot be fulfilled immediately. They are performed and fulfilled over a stipulated time. Both executed and executory contracts are performance-oriented classifications of a contract. However, one requires immediate fulfilment of duties while the other has eventual fulfilment of duties.
There is also something called ‘partly executed and partly executory contract’. In such contracts, one party has already fulfilled his share of duties while the party will have to perform his obligation after a certain period.
Executory contracts can again be divided into types based on the presence and performance of the parties included. These are unilateral and bilateral contracts.
Difference Between Bilateral and Unilateral Contract
Bilateral and unilateral contracts can be said to be two different types of contract based on execution.
As the name itself denotes, these are one-sided contracts. In such contracts, only one party vows to perform a duty. The agreement is then open to anyone who wishes to vow the same and enter into the contract. A unilateral agreement is, however, complete only when one of the parties fulfils the promise.
Suppose, a person has announced a reward of Rs.1000 for anyone who finds him his lost puppy. Here, a unilateral offer is formed where only this person is in the contract initially. When someone finds the puppy and hands it over to that person, he is bound to pay him the reward. Once this is done, the unilateral contract is fulfilled.
These are two-sided or mutual contracts. Unlike a unilateral one, bilateral contract definition is of a dual subject. In these contracts, the promises made by both the parties are yet to be fulfilled. One promise is exchanged for another promise in this agreement. Owing to its mutuality of obligation, bilateral contracts are also called reciprocal contracts.
Any contracts of sale where a certain seller sells a product and the buyer pays the purchase price is an example of a bilateral agreement. Such agreements are often a source of legal complications known as a bilateral mistake. It happens when both the parties involved in a contract misunderstand the terms and operate on incorrect information.