Void Agreements

Void Agreements
12 September 2020

Void Agreements

The law relating to contracts in India is governed by The Indian Contract Act, 1872. However the Contract Act does not purport to codify the entire law relating to contracts, the Act also specifically preserves any usage or custom of the trade or any incident of any contract not inconsistent with the provisions of the Act. The law of contract confines itself to the enforcement of voluntarily created civil obligation. The law of contract is not able to take care of the whole range of agreements, Many agreements remain outside the purview because they do not fulfill the requirement of a contract.

A Contract is an agreement; an agreement is a promise and a promise is an accepted proposal. Thus, every agreement is the result of a proposal from one side and its acceptance by the other.

An agreement is regarded as a contract when it is enforceable by law. Section 10 of the Act deals with the conditions of enforceability, According to this section, an agreement is a contract if it is made for some consideration, between parties who are competent to contract, with free consent and for a lawful object.

What is an Agreement?

“Agreement” is defined in Section 2(e) of the Indian Contract Act, 1872 as “every promise and every set of promises forming the consideration for each other”. And a promise is defined as an accepted proposal. And a promise is defined as an accepted proposal. Section 2(b) of the same act says: “A proposal, when accepted, becomes a promise.”

Meaning of Void Agreement

 “Void Agreement” is defined in Section 2(g) of the Indian Contract Act, 1872 as “an agreement which is not enforceable by law is said to be void.

A void contract means that a contract does not exist at all. The law can not enforce any legal obligation to either party especially the disappointed party because they are not entitled to any protective laws as far as contracts are concerned. An agreement to carry out an illegal act is an example of a void contract or void agreement. For example, a contract between drug dealers and buyers is a void contract simply because the terms of the contract are illegal. In such a case, neither party can go to court to enforce the contract.

Void Contracts
  1. The mistake of Fact (Section 20): This provision states that if the parties to a contract are under a mistake as to a matter of fact essential to the agreement. Therefore, any agreement with a bilateral mistake is void. 
  2. Mistake of Law (Sections 23 & 24): If either the consideration or the object of a contract is illegal, then the agreement is void as it defeats the provisions of the law. This applies to contracts which the court may deem as immoral or opposed to public policy, such as fraudulent agreements, which may cause financial loss to a person. However, if the legal part of the contract is severable from the illegal part, then the former can be enforced in the court of law.
  3. Agreements without Consideration (Section 25): This section provides that a contract without any consideration would be rendered void unless it is a gift made on account of natural love and affection; it is a time-barred debt, or it is compensation to someone who has voluntarily done something for the promisor.
  4. Agreements in restraint of marriage (Section 26): Any agreement which is made in restraint of marriage, either partially or absolutely, of a person is void as it the policy of the law to protect a person’s freedom to choose their marital partner. 
  5. Agreements in restraint of trade (Section 27): Agreements made in restraint of trade are also rendered void as the law protects a person’s right to carry on their choice of trade or profession, given that it is not illegal in nature. The exception to this section is laid out in the proviso to Section 27 pertaining to the sale of goodwill, which restrains a buyer from carrying on similar trade with other sellers.
  6. Agreement in restraint of legal proceedings (Section 28): An agreement by which a person is restrained to enforce his/her legal rights is void on the grounds of public policy as it is in contravention to the jurisdiction of judicial bodies. 
  7. Uncertainty/Impossibility of performance (Sections 29, 30 & 36): These sections provide that an agreement, the terms of which are uncertain, based on uncertain events or based on impossible occurrences, are void except in certain cases such as that of horse racing. Basically, wagering agreements such as betting or gambling are not enforceable in the court of law. However, the formation of a contingent contract is perfectly valid.