Kinds of Contracts

Contracts are the assential part of getting the work done under the law. If the agreement is not turned in to a contract then for the porposes of implementation the law cannot play its role. As per we very clearly know that all contracts are to be considered as agreements for with out a agreement a contract cannot come in to formation but that all agreements are not contracts for they are either not eligible under the court of law as per the Contract act 1872.

It is very important at the time of getting in to a contract the parties should respectively inquire about each others potential and back grounds for if any clause as per the promeisers age and mental conditions can effect the conditions of the contract at the time of implementation. For Example The promiser or the promisee should not be a minor such that under the age of 18 and that at the time of contract should be in full sences and should not be intoxicated or any related things and that the mental condition of the parties should be stable too. For violation of any of the above mentioned points can turn out to make a contract viode.

It is also important to keep in mind that at the time of the agreement the formost thing that comes is the PROPSAL made by one party and it depends on the other party to accept the offer made. This is how on which mile stone the steps for the contract are followed resulting in to a contract. Contracts are of basically 3 different groups in terms of there accordance, these are 1. According to enforceability 2. According to formation 3. According to performance For contracts the way they are to be followed and abide by are given in different sections which will be told as carried on.

According to Enforceability Enforcement is the main thing and a surity to both the parties that what ever happens even if one of the party moves back the law will help the effected party in terms of compensation or what so ever terms be required for the parties in term of the panelty. Enforceability is further more dvided in to different catagories 1. Valid contracts 2. Voidable contracts 3. Void contracts 4. Unenforceable contracts 5. Illegal contracts These five catagories are mainly described in the law to specify the terms in which the contract can be applicable and can seek the backing of the law.

Valid contracts In the valid contracts there are certain specifications that need to be followed as prescribed in Section 10 of the contract act stating: “All agrrements are contracts, if they are made by a free consent of parties competent to the contract, for a lawful consideration and with a lawful object, and are not expressely declared to be void” The over view of the contract can be taken as that a contract is going to be a contract if the agreement is reached and signed as per the parties are valid for getting in to the contract.

For example as prescribed before that the individual is not minor, not adicted to any unlawful product and that is mentally stable and has no desease which may cause him not to abid by the contract. As so if any of these things is present in the party then even if the contract is signed and brought in to black and white the contract is not enforceable and is not valid. Pointers provided which are neceassary to be followed and if not resulting in to a in valid contract are as follows. * There must be an agreement.

(it is very much important to have and agreement between the offerer and the acceptor) * Parties must be competent to contract. (not minor, unstable, professionally ill) * Consent must be free. ( must agree t the terms with out any force and should not be on the basis of coercion (section 15), undue influence (section16), fraud (section 17), misrepresentation (section18), mistake (section20,21,22)and legal object and consideration (section 23)) * Consideration must be lawful * Object of agreement must be lawful.

(agreement can be also between thiefs but in the court of law they are not suppoerted but punished hence in that case it is important that the object be lawful such as rice, wheat, fruits, chairs etc unlike alcohol, cocain etc) * Agreement must not be declared void. ( discussed later) * Other legal requirements. (the official paper work fees and stuff) Rules regarding the proposal and acceptance and mentioned in section 6 and 7 of the contract act 1872. Voidable contracts Voidable contracts are associated with the circumstances that can be avoided but still if not can cize the contract from existing.

Sections 46-50 have points prescribing to the time orientation place and procedure which must be followed in order for the perfomance of the contracts. A contract can be termed voidable in many conditions such as that one party in not providing the raw material for the finished good, or that the enterpenuer has not given essential funds to its partner in order to expand the organization and share profits, or that if the contracts is proven to be breached as pr sections 15-23 of the contract act 1872. For example.

A promises to give B a summ of 100 million for the unstakllation of the new product as to which the profit and the share of A in B’s organization would increase. But if A fails to pay on time as the contract states then the contracts is voidable. A contarct is signed betwwen two parties proves to be on the basis ofundue influence and fraud still the contract is voidable Mainly trying to say is that with the influecn of the promiser not fulfilling his side of affairs the contract is termed voidable. Void Contracts Law with time is ammended looking at the requirements of the civilization.

As to that with time thethings are made lawful and unlawful. to illustrate prior to Zia Ul Haqs tenure contracts were made for the production of the wine and that it was not unlawful as per the constitution of Pakistan but from the day amendment was made in the constitution according to the rules and regulation of the parlimentary system all of the contracts made on the basis of the wine be it legal at the time of signing were made illiegal and further no more of the contracts for the illegal product can be made or that it is going to be against the law of pakistan.

In the it contract will be void. The reasons for it becoming void can be summed up in following points. * Impossibility of performance * Subsequent illegality * Rejection of the viodable contract * Contingent contract when depending events becomes impossible. Unenforceable Contracts In the world there is only one country the has a contract which is not in black and white but other then that every thing has to be in required procedure that is the contract must be duly in black and white, in the repective stamped paper and has to be registered.

If these things are not fulfilled then the contract can not be inforceable irrespective of the strong power of spoken words be. According to procedure to make the contract enforceable these steps need to be followed. Illegal Contracts The word illegal very clealy shows that any thing that is against the book of law is unlawful. A void contract is basically not a contract and that any thing or contract formed which is against the social and moral values and the law of Pakistan is going to be termed as illegal contracts. According to Formation.

Formation of the contract is the second for division of the contract it states in what terms and how the contract is designed. It consists of: * Express contract * Implied contract * Constructive or quasi contract Express Contract When ever one goes in to the market we intend to get in to the agreement with the shop keeper in the way that he offers the product at a specified price and that the buyer going in to the market intends to bring the seller to his terms and that at the end, a contract is reached be it in the written form of the verbal form.

This way of getting in to a contract is stated as the express contract. Implied Contract Implied contracts are those which don’t need to get in to the minor details of offer and bid but that in it it is obvious that if one is to attain a service he is expected to be paying in return for exapmle if u go to a doctor at that very instant it is obvious that u aquire service from him and that in return you shall be paying him back in terms of his fees. Constructive or Quasi Contract A quasi-contract is a fictional contract created by courts for equitable, not contractual purposes.

A quasi-contract is not an actual contract, but is a legal substitute for a contract formed to impose equity between two parties. The concept of a quasi-contract is that of a contract that should have been formed, even though in actuality it was not. It is used when a court finds it appropriate to create an obligation upon a non-contracting party to avoid injustice and to ensure fairness. It is invoked in circumstances of unjust enrichment, and is connected with the concept of restitution. * The plumber conferred a benefit on the owner by installing the sprinkler system.

* The owner accepted the installation of the sprinkler system by not stopping the plumber when he first noticed the mistake. * Without payment, the owner will unfairly benefit at the expense of the mistaken plumber. According to Performance The third and the last part of the contract is by performance it is divided in to following parts: * Executed contract * Executory contract Executed Contract After the obligations of both of the parties is ful filled the the contract is executed and that the contract is discharged for both the parties are now free from each others commitments and that not one of them is liable to any other party.

Executary Contract As for the finished job it is executed contract but at the time of the implementation of the contracts requirements the contract is executionary for that the requirements are not ful filled and that both of the parties are reliable at each other and are waiting for the required out put. Discharge of Contract Contract has to come to an end one time or the other when the obligations of both the parties are reached and that there is no further need of remaining in the contract.

Hence in that situation the contract is terminated or that it becomes discharged. Contracts are not always terminated on commiting the respective promises there are certain other ways involved which can result in the discharge of the contract. These conditions are. * Discharge by performance * Discharge by agreement * Discharge by subsequent impossibilities * Discharge by lapse of time * Discharrge by operation of law * Discharge by breach of contract Discharge by Performance The most prefrable way of getting out of the contract is by the discharge by performance such that you are done with your work and that you have reached the goals that were aimed for and further there is no more need of remaining in the contract.

Via this method it is that the credit worthiness of the individual also increases. This method is described in section 37 of the contract act 1872. Example: Mr Ali was supposed to seel a car to Mr. Khan and that when the key is handed over to Mr. Khan in return of cash to Mr. Ali then in that case the contract is discharged by performance. Another be that Mr. Hasan was to Supply Mr. John ith certain merchendises from pakistan and once they are exchanged the contract is discharged by performance. These fulfilments are actual performance.

Where as there are contracts on offer to performance in which tender is announced in terms of offer and acceptance. Discharge by Agreement Discharge by agreement is the term used when the parties feel like that the prevailing contract should be replaced with a new one remaining that the parties are same. Hence to it the older or previous contract is terminated. It can be of following ways. Novation Meaning that the existing contract is changed in terms of the paties such that in case one of the member dies then in that case if his succesor wishes can carry on the contract. Alternation.

Alternation is that the wordings of the contract are changed and that the parties remain the same. Unlike novation in alternation the parrties remain the same just that it might be that the terms of the contract are changed. Recission Not only that the if in case the paries are in agreement that they further don’t feel like continuing with the contract then in that case they can terminate the contract before he maturity by an agreement. For example if two brothers in the business are no more interested in carrying on the contract with each other then in that case the contract can be discharged.

Remission It is the acceptance of the amount which is not exact to that of the promised one. This mainly occurs when the individual is continuoesly facing losses and that it is not appropriate form him to carry on the stuff hence he can pay par of the principle amount or can ask for more time or extension in the payment procedures. Waiver It is very rear to see any one of the individaul stepping back from the contract but in the law there is a condition given that if one of the individual requires he can call of the contract releasing the other party from the contract.

A customer asks a paitner to paint hi a potrait but later forbids him from doing so hence he releases him from the contract. ` Discharge by Subsequent Impossiblity There are two reasons that can be held responsible those can be initial impossibilty and Subsequents Impossibility. In initial u can not take a task in hand which is not possble at all where as in the other part it is that it was not impossible in the beginning but later it was impossible to do so the contract can be terminated. Subsequent impossiblities can be any of these. * Destruction of subject matter. (when the fixed asset is destroyed) * Failure of Ultimate purpose.

(change in the patern of the work which causes change in the contract) * Death of Personal Incapacity. (one can not work due to any sort of disability) * Change in Law. ( any thing that was lawful was prohibited such as wine) * Declaration of war. ( in case of war tall contracts are suspended till it finishes) Discharge by lapse of Time Under section 46-50 the rules are layed down in regard to the time period required for the payment and that it is important theat the contract be fulfulled on time in case it is not completed in time and that the complain is not done with in the time period of 3 years then the contract is discharged.

Discharge by Operation of Law In the case of insolvancy all of the contracts of the company are discharged. In case of merger new owners are coming in hence all of the previous contracts anre discharged and that if an alternation is made to a contract with out the concent of the other party then the contract stands discharged as per unauthorized material alternation. Discharge by breach of Contract Whe n teh contracts are not completed then they are breached such that the promisor is unablr to ablide by the terms of the contracts clauses.

Breach of the contracts are of two types: * Actual Breach It is the condition in which the one of the party fails to abide by the contract and that he can not complete the requirement to that the individual is conducting breach of contract. * Anticipatory breach It is that the individual before hand after the contract comes in to existance tells the contracted party that he does not wishes to cayy on the requirements of the contract or that the contract is not acted upon by one f the parties.

As to the anticipatory braech the promisee is excused from the performance or that the promisee can take the individual to the court of law and that he can wait for the promiser to act upon his commitment in later date. Indemnity and Guarantee Indemnity Under the section 124 the indemnity is stated as “ a contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself or by the conduct of any other person” Such that what if some one comes in to the accident which was not his fault and that it is proven in the court of law hence the will save him from getting in to any of the losses.

Such that if the car is hit then the third party will step in to save you from incuring any of greater amount of loss. For example Ali contract to indemnify Saleem against the consequences of any proceedings which hassan may take against in respectt of the certain sum of RS 200. In the contract there are basically two players involved they are Indemnifier and Indemnified. In the insurance companies the 30% of the amount is saved out of which 70% is given away to the other insurance companies. The damages which are incured are to be paid by the third party to the indemnified in the matter of him getting in to the loss.

The rights of the indemnifier are not in the contact of indemnity but he becomes entitled to the benefits similar to the surety under section 141. Indemnity is done between two parties with a sibngle contract. Liability is independent deboter is not involved in it and that the indemnifier cannot go against the third party in the court of law. Rights of the indemnity holder are * He is enttled to recover his damages from the respected faulty in respect of the case agaibnst the promiser. * He can recover expenxses that are incured in the suit Guarantee.

The difference between the indemnity and guarantee is that indemnity can be given only when there is a loss but in guarantee there is promise and that you have to give what ever be the condidtion. For example the equity holders tend to give guarantee of the asstes in terms of the business asstes. Such that if the company faces the losses the guarentee giver has to give away his asset in order to cover the loss of the lenders. Such that when the loan is recieved the guarentee is given by the individula such that if the lender gets wanished then guartenteer has to pay the loan back.

Gurantee is between three or more parties depending on the surety amount to be given with three contracts. Under section 126 it states: “ A contract to perform the promise of discharge the liability of a third person in case of his default. ” The parties invoved in the gurantee are: * Surety: the person who gives guarantee * Creditor: the person who is assured by the guranteer * Principle Debitor: on behalf of whom the gurantee is given. The features of the Gurantee are * Secondary contract.

The main parties are the creditor and the debitor and that the surity given by the surer to the creditor is the seconday contract. * Consideration Any promise made for the debitor has to be brought in to the consideration of the surer otherwise the contract may not further exist * Misrepresentation Surity achived by false means results in making the contract invalid and that the parties may encure losses when defaulted. * Writing not necassary It is not important that the contract for the guarentee be in the writing form. Kinds of Gurantee.

* Specific: it is the specific amount of asset gurantee given to the lender agaist a single debt or transaction and that when the transaction comes to an end the gurantee also comes to an end. * Continuing Guarantee: as the transaction gets finished the same gurantee is transfered to the new transaction and that the it keeps on moving on with time. Rights of Surety The rights of the surity are divided in to three catagories. * Rights of Creditors * Rights of Debtors * Surety’s right against co surity. Rights of Creditors Right of creditors are.

* Right to indemnnity If the debtor fails to pay the creditor the creditor has the ful right to claim the property and take out the loss which he has incurred from giving away the loan once the debtor is has defaulted. * Right to Subrogation When the claim has been paid the creditor has full rights to the Right of Debitor Rights of debtor are * Right of Securities After the payment is done the debtor has the right to claim for the colletarol placed in by the debtor to the creditor against the loan that he has collected. * Right ot claim off

In case that the property has been sold if the debtor has defaulted, but to it the creditor can only take the amount for which he has given the loan but that creditor has to give away the rest of the amount the extra that he holds back to the debtor or the surity. Surity Right Against Co Surity There are two sets of surity givers one is similar amount that is the parties have given the same amount of gurantee if the debtor defaults for the same loan or the different amount that is that the surity of different amounts has been given to the crditor for the same amount of loan.