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The Contract Act,


1872
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The Contract Act, 1872


The Act: Contract act 1872 governs the
law of contract in Pakistan

Contract: An agreement enforceable by


law is a contract. [Section 2 (h).]

to be a lawful contract, an agreement is


necessary and that agreement must be
lawful that is enforceable by law. A
contract is thus a combination of two
ideas agreement and obligation.
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The Contract
Formation of Contracts: To form a
contract the following steps are the basic
steps which are required to follow:
No.1 : A proposal has to be
accepted to be a promise;
No 2: Then the promise is to be
considered to form an agreement;
No. 3: The agreement should have the
enforceability of law to form a lawful
contract
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The Contract

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Scope of a contract:

The Act describes two types of law of contracts;


general laws and special laws.
1. General laws relating to contract
(i) Laws relating to formation of contract;
(ii) Laws relating to performance;
(iii)Laws of remedy for a breach of contract.
2. Laws relating to some particular types of
contract
(i) Contract of agency;
(ii) Contract of indemnity and guarantee;
(iii)Contract of bailment and pledge.
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Types of Contract:
Contracts so far brought into practice
have been classified into different
groups on the basis of different
assessments. The classification of
contract is made depending on certain
modes. The classification made under
certain modes, is not expressly said in
the Contract Act, 1872 .Details of
classification of contract depending on
certain moods are mentioned as under.
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Types of Contract
a. Contracts depending on the mode of
Creation
i. Express contract :The offer and
acceptance of a contract if made in words,
either expressed orally or in written words,
the contract will be considered to be an
expressed one. There are two types of
expressed contract -Written contract& Oral
contract
ii. Implied contract: An
implied(understood, disguised) contract is
formed when the offer and acceptance of a
contract is made without the use of any
words, rather by some other means.
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Types of Contract
b. Contracts as regards the mood of time of
performance
i. Executed contract: If the conditions of a contract
are performed as soon as possible, the contract is
said to be a executed contract. On other , the
contract the obligations of which, is already
performed, or to be performed in a very short time
is the executed contract.
ii. Executory contract: In this contract the
obligations of the contract is supposed to be
performed at the later period of the formation of the
contract. There is no limitation of time for the
performance of the contract in this regard. The
contract itself suggests such limitation, unless it is
prescribed by law.

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Types of Contract
c. Contracts as regards the number of
parties
i. Bilateral contract: It is obvious that at least two
parties are necessary to form a contract. Therefore
all contracts are bilateral or multilateral. Where
there are two or more parties of a contract and
both of the parties have their obligations on each
other, the contract is said to be a bilateral
contract.
ii. Unilateral contract: In a contract, where one
party has to fulfill his obligations whereas the other
party has already performed his obligations, it is
called unilateral contract.
Here it is simply to be noted that in both the above
cases, two or more parties are necessary.
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Types of Contract
d. Contracts as regards the mood of enforceability and validity

(i)Valid contract, ii) Voidable contract & iii) Void


contract.
There may be a further division of contracts on
the basis of their validity and enforceability.
Under this section 2, four classifications are:
(i) Valid, (ii) Void,
(iii) Voidable, & (iv) Unenforceable

i. Valid Contract: In Law, such a contract


creates an outstanding obligation or legal
liability which law steps in to enforce whenever
a party to the agreement breaks it.
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Types of Contractii

ii. Void Contract: Literally the word


void means not binding in law.
Accordingly the term void contract
implies useless contract which has
no legal effect at all.
A contract which ceases to be enforceable
by law becomes void when it ceases to be
enforceable [Section 2(j)]

Definition explains that a void contract is not void from its


inception (origin) and that it is valid and binding on the
parties when originally entered but subsequent to its
formation it becomes invalid and destitute of till
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Types of Contractii
Pursuant to the Contract Act, the following
contracts have void abilities:
(a) If any part of a single consideration for one
or more objects or any one or any part of
anyone of several considerations for a single
object is unlawful, the agreement is
void.Section 24
(b) An agreement made without consideration
is void except in the case of those covered by
exceptions.
(c) Every agreement in restrain of the marriage
of any person, other than a minor, is void
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Types of Contract ii

(d) Every agreement in restraint of a lawful


profession, trade or business of any kind is
void to the extent of the restraint" except
that "one who sells the goodwill of a business
may agree with the buyer to refrain from
carrying on a similar business, within
specified local limits, so long its the buyer or
any person deriving title to the goodwill from
him, carries On a like business therein
provided that such limits appear to the court to
be reasonable, regard being had to the
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Types of Contract ii

(e) Agreements in restraint of judicial


proceedings are void except, those that provide
for reference of disputes to
arbitration.Section 28

(f) Agreements which are uncertain, i.e., "the


meaning of which is not certain or capable of
being made certain , are void".
.Section 29
(g) Agreements by way of wager are
void..Section 30

(h) Every single agreement of which the


object(purpose) or consideration is unlawful
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Types of Contractii
i. Where both the parties to an agreement
are under a mistake to a matter of fact
essential to the agreement, the agreement
is void.Section 20

j. Contract entered into by minors, lunatics


and insolvents are void owing to the
incapacity of such persons to contract..
Section 11

k. An agreement to do an act impossible


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Types of Contract ii

Distinction between void and illegal contract:


An illegal contract is one whose object is declared
illegal by law. The distinction, however, lies not in
the comparative validity of the two or, both are
void, but in the fact that an illegal contract is
prohibited by law on pain of penalty whereas a void
contract does not get the assistance of law.
A further point of division is that an
illegal contract affects the collateral
transaction but a void contract does
not.

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Types of Contract iii

iii. Voidable contract:


An agreement which is enforced by law at
the opinion of one or more of the parties
thereto, but not at the opinion of the
others, is a voidable contract
[Section 2(i)]

So, a voidable contract is one which is enforced by


the law at the opinion of one of the parties. Usually
a contract becomes voidable when the consent of
one of the parties to the contract is obtained by
coercion, undue influence, is representation or
fraud.
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Types of Contractiv
iv. Unenforceable Contract:
An unenforceable contract is one which is
valid in itself but is not capable of being
enforced in a court of law because of some
technical defects such as absent of writing,
registration, requisite stamps etc. or time
barred by the law of limitations. Under Sec. 10
of the Contract Act, "all agreements are
contracts if they are made by the free consent
of parties competent to contract, for a lawful
consideration and with a lawful object, and are
not hereby expressly-declared to be
void". Endure till You Succeed (Tehseen)
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