I know that i don't do my chords right. I mean i mute chords and the sound is not the best but i am having fun playing whole songs like Deep purple Smoke on the water, Christmas songs, CCR Bad moon rising, Misfits Saturday night ect..

While playing i am Learning my major and minor chords as well as some other chords such as E7,A7, Power chords

I find this more rewarding than sitting with a chords book and Learning to do each chords just right. You know when you take lessons you can spend the whole lesson on just one chord. No Wonder people just give up on guitar.

each year my little cousin comes over the Holiday and he plays guitar and violin. I try to follow him on the guitar or with my drum
yeah if you're having fun (as long as you're not getting into bad habits etc.) then that's half the battle, if you ask me.
It's always good to learn based on music in action, not just from a book.

Besides, there are a load of chords that you'd probably reject out of hand if you just randomly chose one from the book, whereas in musical context you may like it. Knowledge of how some chords set up other chords helps here.

If a teacher is requiring a student to play one chord for an entire lesson, then that teacher shouldn't be teaching. If the teacher is showing examples how the chord can be used, and how to play over it, that's fair enough.

It's worth spending some effort during practice so the chord can ring out cleanly ... that just helps overall technique and accuracy. Doesn't mean you have to play it like that in a song.

cheers, Jerry
that's my preferred way to learn. but just because you're just jamming doesn't mean you have to be any less attentive to the details of your technique. from time to time, i'll check up on my technique by revisiting songs i used to think i could play and seeing if what i've picked up since then has helped.
If you know the basic major, minor, 7th chord shapes you should play your favorite songs and start learning them by ear. If you stumble upon something check out some theory, I think that's the funnest way to learn it. I would suggest J.J. Cale for ear training - lots of beautiful mini licks and riffs that aren't too difficult if you know some theory.