Explain void agreements. Discuss the rules in the Indian Contract Act regarding void agreements.

Question: Explain void agreements. Discuss the rules in the Indian Contract Act regarding void agreements. [BJS 2000]

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Answer

Section 2(g) of The Indian Contract Act,1872 states that, “An agreement not enforceable by law is said to be void agreement.” The effect of terming any contracts as void contracts is that it would mean the contract never existed in the first place and either party doesn’t have to perform any obligations related to that contract.

Now, The Indian Contract Act,1872 has specified certain types of contracts as void contracts from Section 24 to 30 & Section 56 which this article shall be discussing in a detailed manner.

Following are the list of void agreements:-

Agreements which have unlawful consideration and/or objectives in whole or in part [Section 24]

Section 24 of the Act states that if the consideration or the objective of the contract in whole or in part is unlawful then the agreement shall be considered as void agreement. The working philosophy behind this section is that if the unlawful clause can be severed out from the contract, then the whole contract is not regarded as void but only the unlawful part shall be regarded as void and the rest of the contract is deemed as valid, but if the unlawful clause cannot be separated from the legal part then the whole contract shall be deemed as illegal.

Like if ‘A’ promise to ‘B’ to pay Rs 5000/- in return for having an adulterous relationship with him and also working as a maid in his house. So in this case, the unlawful part-having adultery relationship with ‘A’ shall be considered a void agreement, and since it can be severed from the rest of the contract hence the whole contract is not void.

Agreement without consideration [Sec 25]

This section states that an agreement shall be considered as a void agreement unless if it falls under the following exceptions:-

1. If the agreement has been made out of love and natural affections: The first exception which comes under Section 25(1) is “contract based on love & affection”, where the contract which is in writing and registered is made out of love and affection by a party standing near relationship. “Is made” are not to be regarded as equivalent to “is expressed to be made”. So if an agreement doesn’t contain any reference regarding love and affection, then the court will take account of the evidence produced in the court for the same to verify whether the disposition was made out of love & affection or not. For example, if a contract is made out between mother & son that mother shall provide money to buy son’s books, and then in this case contract shall be enforceable even if consideration is not mentioned.
2. The person has already voluntarily done something for the promisor: This exception under Section 25(2) means that if a person promises to compensate/reimburse partly or wholly to a person who had already done something either voluntarily or legally compellable to do. It means that the person stands as a guarantee for any of the act done by the person who has done the act voluntarily or legally compellable to do. In a contract like this, consideration is not compulsory. In such contracts, past consideration may be a good consideration if the previous one was an existing and valid one.
3. It’s a promise to pay them in whole or in part the debt which the creditor might have enforced if not for the contracts falling under the limitation of the suits. This exception comes under Section 25(3), which states that a promise made in writing and it is signed by the debtor or by his agent to pay the time-barred debt is enforceable, even when the contract is to pay either the whole or the part of the amount.

The intention of the parties should be clearly expressed. This exception doesn’t take into account if the time-barred debt is paid by other people than the debtor himself. So if a widow in her personal capacity pays the time-barred debt of her husband, then that transaction won’t be considered under this exception.

Agreement which is in restraint of marriage [Section 26]

This section states that any agreement which interferes with the marital life of any other person shall be considered as a void agreement. This restraint can either be partial or general in the sense, a party may be restraint from marrying for a particular period of time, or from marrying a class of person or particular person or from marrying at all or he may be restraint from.

But it has to be differentiated from imposing of penalty upon remarriage. Penalty upon remarriage is not considered as a restraint on marriage. As clarified in Rao Rani v. Gulab Rani [ILR 1942 All 810] when an agreement has been entered between two co-widows that if either of them marries then the other person has to forgo her share in the deceased husband’s property. The court held that there was no restraint of marriage in the contract. All that was provided was if the widow chose to remarry she would have to forgo her rights into the property.

Agreement which is in restraint of trade [Section 27]

This section states that any agreement which obstructs any person from exercising his right to undertake any profession or trade, then that agreement shall be considered as a void agreement. The freedom of trade and commerce is a fundamental right given by the constitution under Art 19(1)[g] and no individual can take the right through the medium of any agreement.

There are two exceptions to this rule: –

• Sale of goodwill: This principle states that the person when one person sells goodwill of his business to another person, then that person can impose certain reasonable restrictions to the seller like restricting him from carrying business of similar nature in the same locality.
• Partnership Act: There are 3 provisions in the partnership Act which allow for the agreement which restrains the trade by restricting the partners from carrying out the same business or opening similar business as of the dissolved firm within the specified limit.

Agreement which in restraint of legal proceeding [Section 28]

This section states that any contract which either absolutely restricts any party from enforcing his right to a legal proceeding or which restricts the person’s right to a legal proceeding after the expiry of a certain time period shall be considered as a void agreement. Right to appeal doesn’t come under the purview of this section.

Unmeaning agreement [Section 29]

This section states that any unclear or ambiguous agreement whose meaning can’t be made certain of then such agreements shall be deemed as void agreement. For example, if ‘A’ enters into an agreement with ‘B’ where he says that deliver a certain amount of wheat to his place of business. Now contract shall be deemed as a void one in case ‘B’ has multiple places of business then it creates confusion on the mind of ‘B’ regarding the delivery place.

Agreements which are wagering in nature [Section 30]

Wagering in very simple terms is defined as a bet on something which could bring a win or the opposite on the parties at the occurrence of uncertain future events. It is essential to a wagering contract that each party may under it either win or lose, whether he will win or lose being dependent on the issue of the event, and, therefore, remaining uncertain until that issue is known. So in layman terms wagering agreements usually mean to bet on something and of which its result must be unknown to both the parties and after the outcome of the result or the occurrence of such uncertain event one party loses and the other wins.

Agreement to do impossible act [Section 56]

This section stipulates the doctrine of frustration that any contract which has been entered to undertake any impossible activity shall be considered as a void contract. It stipulates that the performance of the contracts becomes impossible because of the disappearances of the subject matter or where the objective of the contract has failed.

Moreover, if the promisor knows that the objective of the contract has become impossible but still he enters into a contract with the promisee then, in that case, the promisor shall be liable to pay certain compensation which the promisee sustains because of non-performance of the contract.

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Law of Contract Mains Questions Series: Important Questions for Judiciary, APO & University Exams

1. Law of Contract Mains Questions Series Part-I
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8. Law of Contract Mains Questions Series Part-VIII
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10. Law of Contract Mains Questions Series Part-X