Types & Special Contracts: Agency, Quasi, Contingent & Breach

TAKEAWAYS:

• 12 contract types are classified by formation (express vs. implied), obligations (unilateral vs. bilateral), and validity (void vs. voidable)—memorize the Mermaid classification tree below.
• Agency contracts (e.g., Daraz sellers, Ncell distributors) require principal-agent relationships, modes of creation (express, implied, ratification), and fiduciary duties (loyalty, obedience, disclosure).
• Quasi contracts (e.g., NTC’s refunds for undelivered services) are not true contracts but enforceable under Section 70 of the Contract Act to prevent unjust enrichment.
• Contingent contracts (e.g., Nabil Bank’s loan approvals tied to property sales) suspend performance until an uncertain event occurs—rules for revocation and compensation are critical.
• Breach of contract has 3 types (actual, anticipatory, fundamental) and 3 remedies (damages, specific performance, injunction)—trace the flowchart for exam scenarios.
• Real-world tie-ins: Pathao drivers (agency), eSewa’s refund policies (quasi), and Daraz’s "order cancellation" clauses (contingent) all rely on these concepts.

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1. Classification of Contracts: The 12 Types

Contracts are categorized based on formation, obligations, validity, and performance. Use this Mermaid mindmap to visualize the hierarchy:

Key Definitions:

• Express Contract: Terms explicitly stated (e.g., a written lease agreement).
• Implied Contract: Terms inferred from conduct (e.g., ordering food at a restaurant).
• Unilateral: One party makes a promise in exchange for an act (e.g., "Find my lost dog, I’ll pay Rs. 50,000").
• Bilateral: Both parties exchange promises (e.g., buying a phone: seller promises delivery, buyer promises payment).

Worked Example: NTC’s Service Agreement NTC’s mobile plan contracts are bilateral implied contracts:

• Offer: NTC’s advertised plan (e.g., "Rs. 1,000 for 1GB/day").
• Acceptance: Customer’s use of the service (implied by activation).
• Consideration: Payment (customer) ↔ Service (NTC). Why it matters: If NTC fails to provide service, the customer can terminate the contract under breach of bilateral contract rules.

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2. Special Contracts: Agency, Quasi, and Contingent

A. Contract of Agency

Definition: A fiduciary relationship where an agent acts on behalf of a principal (e.g., Daraz sellers, Ncell distributors, real estate agents).

How It Works:

1. Creation Modes (3 types):

   • Express Agency: Written/verbal agreement (e.g., a power of attorney for property sales).
   • Implied Agency: Conduct implies authority (e.g., a shopkeeper selling goods on behalf of the owner).
   • Ratification: Principal approves an unauthorized act (e.g., an employee makes a deal, and the boss later accepts it).

2. Duties of an Agent:

   • Loyalty: Act in the principal’s best interest (e.g., a Nabil Bank loan officer cannot favor a friend’s business).
   • Obedience: Follow principal’s instructions (e.g., a Pathao driver must use the approved route).
   • Disclosure: Reveal conflicts of interest (e.g., a Daraz seller must disclose if they’re also a buyer).
   • Accounting: Provide financial records (e.g., a rental agent must account for all payments).

3. Liabilities:

   • Agent is liable if acting without authority (e.g., a fake NTC employee selling SIMs).
   • Principal is liable if the agent has apparent authority (e.g., a shop assistant promising a discount the owner didn’t authorize).

Real-World Case: Nabil Bank’s Loan Agents

• Scenario: A bank hires loan agents to collect applications. If an agent forges a signature, the bank is not liable (no authority). But if the agent acts within their job description (e.g., verifying documents), the bank is liable.
• Exam Tip: Always check whether the agent had authority in case studies.

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B. Quasi Contract (Quantum Meruit)

Definition: Not a true contract, but the law enforces it to prevent unjust enrichment. Governed by Section 70 of the Contract Act, 2074.

When Does It Apply?

Worked Example: eSewa Refund Policy

• Scenario: You pay Rs. 2,000 for a Khalti transfer to a friend, but the transfer fails. eSewa must refund you under quasi contract (they unjustly retained your money).
• Legal Rule: Section 72 allows recovery of money paid by mistake or under coercion.

Advantages:

• Protects innocent parties from exploitation.
• Ensures fairness in transactions without formal contracts.

Disadvantages:

• No pre-agreed terms (unlike real contracts).
• Courts decide "reasonable" compensation (e.g., "fair wage" for unpaid work).

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C. Contingent Contract

Definition: A contract where performance depends on an uncertain future event (e.g., "I’ll pay you Rs. 10,000 if my business wins a government tender").

Key Rules (Section 31-34, Contract Act):

1. Event Must Be Uncertain: Must not be already decided (e.g., "I’ll pay you if the sun rises tomorrow" is valid; "I’ll pay you if I won the lottery last week" is not).
2. Revocation: Either party can revoke the offer if the event becomes impossible (e.g., a law bans the event).
3. Compensation: If the event doesn’t happen, the promisor is not liable (unless they misrepresented the chance).

Worked Example: NTC’s Spectrum Auction

• Scenario: A telecom company bids Rs. 50 billion for NTC’s spectrum, but the auction is canceled due to protests. The contract is contingent on the auction’s success.
• Legal Outcome:
  • If the auction happens, the company must pay.
  • If canceled, the company is not liable (no breach).

Comparison Table: Contingent vs. Real Contracts

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3. Breach of Contract and Remedies

Definition: Failure to fully or partially perform contractual obligations.

Types of Breach:

Worked Example: Daraz Order Cancellation

• Scenario: You order a Rs. 5,000 laptop from Daraz, but the seller cancels it 2 days later without reason.
• Type of Breach:
  • Actual Breach: Seller failed to deliver.
  • Fundamental Breach: Goes to the core of the contract (delivery is essential).
• Remedy: You can claim damages (compensation) or specific performance (force delivery).

Remedies for Breach:

1. Damages: Monetary compensation (e.g., Rs. 5,000 + 10% penalty for late delivery).
2. Specific Performance: Court orders exact fulfillment (e.g., force a seller to deliver a unique item like a vintage book).
3. Injunction: Court stops a party from acting (e.g., stop a competitor from copying your business model).

Exam Tip: Always ask:

• Was the breach actual or anticipatory?
• Was it fundamental (entitles you to terminate the contract)?
• What remedy fits the scenario?

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4. Performance of Contract

Definition: Fulfillment of contractual obligations as agreed.

Rules:

1. Time is Essence: If a contract specifies a deadline, performance after the date is a breach (e.g., NTC must deliver a new SIM within 24 hours).
2. Place of Performance: Must be as agreed (e.g., delivery to Kathmandu vs. Pokhara).
3. Manner of Performance: Must follow agreed methods (e.g., digital payment vs. cash).

Worked Example: Pathao Driver’s Performance

• Contract: Pathao driver agrees to pick up passengers within 10 minutes.
• Breach Scenario: Driver takes 30 minutes.
• Remedy: Passenger can cancel the ride (breach of time) and claim compensation.

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In the Real World

1. Nabil Bank’s Loan Agents (Agency Contracts)

   • How it works: Bank hires loan officers to process applications. Officers act as agents with express authority (written job description).
   • Real risk: If an officer forges documents, the bank is not liable (no authority). But if the officer acts within their role, the bank is liable.
   • Exam link: Past questions ask about modes of creation of agency contracts—always mention express, implied, and ratification.

2. eSewa’s Refund Policy (Quasi Contract)

   • How it works: If a Khalti transfer fails, eSewa must refund under Section 70 (unjust enrichment).
   • Why it matters: Shows how quasi contracts protect consumers even without formal agreements.
   • Exam link: Questions may give a failed transaction scenario—always apply Section 70.

3. Daraz’s "Order Cancellation" Clause (Contingent Contract)

   • How it works: Sellers can cancel orders if payment fails or customs hold the item. This is a contingent condition.
   • Real case: In 2023, Daraz suspended orders during the lockdown—a contingent event (government restrictions).
   • Exam link: Always check if the event is uncertain (e.g., "if customs clears the item") or certain (e.g., "if the seller is lazy").

4. NTC’s Spectrum Auction (Contingent Contract)

   • How it works: Telecom companies bid for spectrum, but the auction’s success is contingent on government approval.
   • Legal risk: If the auction is canceled, companies lose their bid money (no breach).
   • Exam link: Questions may ask about revocation rules—if the event becomes impossible, the contract terminates.

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Exam Tip: How to Score Full Marks

1. For Definitions: Always use legal terms and section numbers (e.g., "Quasi contract is governed by Section 70 of the Contract Act").
2. For Agency Contracts:
   • Structure your answer as:
     1. Definition (fiduciary relationship).
     2. 3 modes of creation (express, implied, ratification).
     3. Duties of agent (loyalty, obedience, disclosure).
     4. Liabilities (principal vs. agent).
3. For Contingent Contracts:
   • Always state the 3 rules:
     • Event must be uncertain.
     • Can be revoked if impossible.
     • No compensation if event doesn’t happen.
4. For Breach Questions:
   • Identify the type (actual/anticipatory/fundamental).
   • Match with remedies (damages/specific performance/injunction).
5. Use Real-World Examples:
   • Nabil Bank (agency), eSewa (quasi), Daraz (contingent), NTC (breach).
   • Always link your answer to Nepali businesses—examiners love this!

Common Mistakes to Avoid:

• ❌ Saying quasi contracts are real contracts (they’re not!).
• ❌ Forgetting Section numbers (e.g., Section 31 for contingent contracts).
• ❌ Mixing up actual vs. anticipatory breach (always check timing).
• ❌ Ignoring fiduciary duties in agency contracts (loyalty is key).

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Final Mermaid Summary: Contract Types Flowchart