Void and Voidable Contracts

Void and Voidable Contracts

INTRODUCTION:

The law identifying with contracts in India is administered by The Indian Contract Act, 1872. Anyway the Contract Act doesn’t indicate to systematize the whole law relating to contracts, the Act likewise explicitly safeguards any use or custom of exchange or any incident of any agreement not conflicting with the provisions of the Act. The law of contract limits itself to the implementation of deliberately made civil obligation. The law of contract can’t deal with the entire scope of agreements; many agreements stay outside the domain since they don’t satisfy the prerequisite of a contract.

A Contract is an agreement; an agreement is a promise and a promise is an acknowledged proposal. Consequently, every agreement is the consequence of a proposal from one side and its acceptance by the other.

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

Types of Contract on the basis of its validity are:

1. Valid contract
2. Void contract [section 2(i)]
3. Voidable contract [section 2(i)]
4. Illegal contract
5. Unenforceable contract

VOID AGREEMENT:

Void Contract implies that an agreement doesn’t exist by any stretch. The law cannot implement any legal obligation to either party particularly the disillusioned party since they are not qualified for any protective laws as far as contracts are concerned. An agreement to do an illicit or illegal act is an illustration of a void agreement or void contract. For instance, an agreement between drug dealers and purchasers is a void agreement just on the grounds that the object of the agreement is unlawful. In such a case, neither one of the parties can go to court to enforce the agreement.

According to Section 2(g) of The Indian Contract Act, 1872 “An agreement not enforceable by law is said to be void”, and as per Section 2(j) of The Act “A Contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”. The void contracts can be of the following types:

1. Void ab initio: It means that the contract is unenforceable for the very beginning.
2. Void due to the impossibility of its performance: An agreement can likewise be void because of the difficulty of its implementation. For example: If an agreement is entered between two parties A and B however during the performance of the agreement the object of the agreement gets difficult to accomplish (because of activity by a person or thing other than the contracting parties), at that point the agreement can’t be upheld in the courtroom and is in this way void.
3. Void arrangements according to the provisions of Indian Contract Act, 1872:
4. Any agreement with a bilateral mistake is void. (Section 20): Where both the parties to an agreement are under a mistake as to matter of truth essential to agreement, the agreement is void. For example: A consents to purchase from B a specific horse. Incidentally, the horse was dead at the hour of the deal, however neither one of the parties knew about the reality. The contract is void.
   • However, an agreement isn’t voidable just on the grounds that it was brought about by one of the parties to it being under a mistake as to a matter of fact. (Section 22)
5. Agreements which have unlawful consideration and objects are void. (Section 23 & 24): The consideration or object of an agreement is unlawful on the off chance that it is prohibited by law or of such a nature that whenever allowed, it would defeat the provisions of any law or is deceitful or includes injury to the individual or property of another or court sees it as immoral or restricted to public policy.
   • If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void. In any case, where the legal part of a contract is severable from the unlawful, the previous would be enforced.
6. Agreements made without consideration is void. (Section 25): An agreement without any consideration is void except if-
   1. It is made by virtue of natural love and affection and it is communicated in writing and has been registered under the law for the time being in force.
   2. It is a promise to redress, an individual who has voluntarily accomplished something for the promisor.
   3. If it is a promise to pay a time barred debt.
7. Agreement in restraint of marriage of any major person is void (Section 26): Every agreement in limitation of the marriage of any individual, other than a minor is void. It is the approach of the law to debilitate agreements which restrains freedom of marriage. The limitation might be general or partial, in other words, the party might be controlled from marrying at all, or from marrying for a fixed time or from marrying a specific individual or class of people, the agreement is void.
8. Agreement in restraint of trade is void. (Section 27): Every agreement by which anybody is limited from practicing a lawful profession, or exchange or business of any sort, is to that extent void. There are two of exceptions to the rule, those made by Statutes:
   • Sale of Goodwill: The lone exception referenced in the proviso of section 27 is that identifying with sale of goodwill. It expresses that “One who sells the goodwill of the business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving the title to the goodwill from him, carries on a like business therein: Provided that such limits appear to the court reasonable, regard being had to the nature of the business.”
   • Partnership Act: There are four provisions in the Partnership Act which approve agreements in limitation of trade. Section 11 empowers partners during the duration of the firm to confine their common freedom by concurring that none of them will continue any business other than that of the firm. Section 36 empowers them to control an outgoing partner from carrying on a similar business inside a predefined period or inside a particular nearby cut-off points. A similar agreement might be made by partners upon or expectation of dissolution.
9. Agreement in restraint of legal proceedings is void. (Section 28): An agreement indicating to remove the purview of the courts is illegal and void on grounds of public policy. Section 28 of the Act renders void two sorts of agreements, in particular:
   • An agreement by which a party is limited totally from upholding his legal rights emerging under a contract by the usual legal procedures in the ordinary tribunals.
   • An agreement which restricts the time inside which the agreement rights might be enforced.
10. An agreement the terms of which are uncertain is void. (Section 29): Agreements, the meaning of which isn’t sure, or capable of being made certain, are void. It is an essential equipment that an agreement to be restricting should be adequately clear to empower the court to give it a functional significance. An agreement to concur later on is void, for there is no sureness whether the parties will be ready to agree.
    • Where just a section or a clause of the agreement is uncertain, however the rest is fit for bearing a sensibly certain significance, the agreement will be viewed as binding. Similarly, if the agreement is absolutely quiet as to price, it will be valid, for, all things considered, Section 9 of the Sale of Goods Act,1930 will apply and reasonable cost will be payable.
11. An agreement by way of wager (betting/gambling) is void. (Section 30): Agreements by way of wager are void; and no suit will be brought for recuperating anything affirmed to be won on any bet or depended to any individual to maintain the consequence of any game or other uncertain occasion on which any wager is made. In any case, wager can be said as a promise to give money or money’s worth upon the assurance or ascertainment of an uncertain event.
    • The following are the exceptions to the rule:
      • Horse race
      • Crossword Competitions & Lottery.
12. An agreement contingent upon the happening of an impossible event is void. (Section 36): A contingent contract is a contract to do or not to accomplish something, if some occasion, collateral to such contract, does or doesn’t occur. Contingent agreements to do or not to do anything, if an inconceivable occasion occurs, are void, if the difficulty of the occasion is known to the parties to the agreement when it is made. For example: A consents to pay B 1000 Rs if two straight lines ought to encase a space. The agreement is void.
13. Agreement to do impossible acts is void. (Section 56): An agreement to do any act impossible in itself is void. An agreement to do a demonstration which, after the agreement is made, becomes impossible, or, by reason of some occasion which the promisor couldn’t forestall, unlawful, becomes void when the demonstration gets impossible or unlawful.

VOIDABLE CONTRACT:

An agreement which is enforceable by law at the option of the at least one of the parties thereto, however not at the choice of others or others, is a voidable contract. Voidable Contract are valid except if one of the parties has saved it. Voidable Contract generally happens when one side of the party is fooled into entering an agreement by other party.

1. Voidable Agreements according to arrangements of Indian Contract Act,1872:
2. Voidability of arrangements without free consent: When consent to an agreement is brought about by compulsion, extortion or distortion the agreement is voidable at the choice of the party whose assent was so caused.
   • Notwithstanding, A party to a contract, whose assent was acquired by extortion or distortion, may, in the event that he thinks fit, demand that the contract will be performed.
3. Capacity to put aside contract induced by Undue Influence: When consent to an agreement is brought about by undue influence, the agreement is a contract voidable at the choice of the party whose assent was so caused. An agreement is supposed to be instigated by undue influence where the connection staying alive between the contracting parties are such that one of the parties is in a position to dominate the will of the other.
   • In such a case the burden of proving that such an agreement was not incited by undue influence will lie upon the individual who is in a situation to dominate the will of the other.
4. Consequences of rescission of Voidable Contract: When an individual at whose alternative an agreement is voidable revokes it, the other party thereto need not play out any promise in that contained in which he is promisor. The party revoking a voidable agreement will, on the off chance that he has received any advantage there under from another party to such agreement, restore such advantage, so far as might be , to the individual from whom it was received.
5. Mode of Communicating or denying rescission of voidable agreement: The rescission of a voidable agreement might be conveyed or renounced in a similar way, and subject to similar principles, as apply to the communication or denial of a proposition.

DIFFERENCE BETWEEN VOID AND VOIDABLE CONTRACT:

1. When managing with contracts, the expressions “void” and “voidable” are regularly confounded. Despite the fact that these two agreement types appear to be comparable, they are entirely extraordinary.
2. A contract that is “void” can’t be enforced by one or the other party. The law regards a void contract as though it had never been made. A contract will be viewed as void, for instance, when it requires one party to play out an act that is impossible or unlawful.
3. A “voidable” contract, then again, is a valid contract and can be enforced. Normally, just one party is bound to the contract terms in a voidable contract. The unbound party is permitted to cancel the contract, which makes the agreement void.
4. The primary contrast between the two is that a void contract can’t be performed under the law, while a voidable contract can in any case be performed, despite the fact that the unbound party to the contract can decide to void it before the other party performs.

CONCLUSION:

To make sure about the presentation and enforceability of a contract, the agreement should be a valid contract. As the void agreements can’t be enforced. Regardless of whether one party breaches the agreement, we can’t recuperate anything on the grounds that basically there was no valid contract. A few instances of void agreements include: Contracts including an unlawful subject, for example, gambling, prostitution, or committing a wrongdoing. Voidable agreements are valid arrangements, however either of the parties to the contract can void the contract whenever they want.

Author: PRISHITA SARAIWALA,
KIIT SCHOOL OF LAW / 2ND YEAR