VOID AGREEMENTS

SECTION 26

Agreement in restraint of marriage

Agreement in restraint of marriage of any person, other than a minor, is void.

SECTION 27

Agreement in restraint of trade

Any agreement whereby anyone is restrained from carrying on a lawful trade, profession
or business of any kind is to that extent void.

To carry on any lawful trade or profession is a fundamental right guaranteed by the

Constitution of India and it cannot be taken away by making an agreement.

Note:- Restraint may not be absolute. A partial restraint is also void.

Exceptions

a) Statutory

i) Sale of goodwill

A person who sells the goodwill of a business may agree not to carry on similar business
within local limits and for a reasonable period. This is a valid restraint.

ii) Partnership

Partners of a firm may mutually agree not to carry on a similar business either directly or
indirectly.

An outgoing partner may also be restrained from doing the business competing with the
firm provided the limits are reasonable.

b) Judicial

i) Exclusive Dealing Agreements

ii) Service Agreements
iii) Business Combinations
SECTION 28

Agreement in restraint of legal proceedings.

An agreement whereby anyone is restrained absolutely from exercising his lawful rights
by resorting to courts or tribunals is to that extent void

Note:- Restraint has to be absolute.

Illustration -A contract where parties agree to have jurisdiction of Mumbai courts only is
not void.

Exception- Arbitration

Illustration – The parties to the contract decide that in case of dispute none of them shall
go to any court and the dispute shall be referred to the arbitration of an independent third
person.

SECTION 29

Ambiguous/ Uncertain agreements

Agreements the meaning of which is not certain or capable of being made certain are
void.

Illustrations-

1) A agrees to sell his horse to B. B in consideration agrees to pay Rs.5000 if the

horse is lucky to him.
2) Ramesh agrees to sell 500 litres of oil to Suresh. The agreement is void since it
does not specify the type of oil.
3) Ramesh who deals in coconut oil only, agrees to sell 500 litres of oil to Suresh.
The agreement is valid since it is implied that he is to sell coconut oil.
SECTION 30

Wagering Agreements

Agreements by way of wager are void and no suit shall be brought for anything alleged to
be won on any wager.

Essentials of a wager

a) Uncertain event- Event may be past or future. The parties are uncertain about the
outcome.
b) Mutual chances of gain or loss

Both the parties shall have an opportunity to win or lose. If one party is to win only, it is
not a wager.

c) The parties do not have any control over the event.

d) The parties do not have any other interest in the event except the amount of the bet.

Exceptions

i) Horse races
ii) Government Lotteries
iii) Quiz games
TENDER OF PERFORMANCE

Section 38

When the parties to a contract offer to perform their respective promises, it is a tender or
offer of performance.

ESSENTIALS OF A VALID TENDER OF PERFORMANCE

1. It should be of a proper quality

If the contract is to supply basmati rice, the promisor cannot offer any other
variety.

2. It should be of proper quantity

If the contract is to supply 100 Kgs., the promisor cannot offer 80 kgs. lying in his
stock and balance to be given at a future date.

3. It should be at a proper place

If the contract specifies the place of performance, the offer shall be made at that
place, else it should be offered at the place where the promise is carrying on his
business.

4. It should be at a proper time

If the time of performance is specified, the offer shall be made at that time. If no
time is specified in the contract, the offer shall be made during normal business
hours of the promise.

5. It should be unconditional

If the contract for supply of an article is on credit of 3 months, the promisor

cannot insist on cash terms while offering to perform

If the valid offer or tender of performance is refused by the promisee, tender shall be
equal to performance and the promisor shall be entitled to exercise all the rights under
the contract, as if he has performed his promise.
ANTICIPATORY BREACH OF CONTRACT

Section 39

Where a party to a contract has refused to perform or has disabled himself from
performing his promise in its entirety, the promisee may put an end to the contract,
unless

he has signified by words spoken or written or by conduct his acquiescence in its

continuance.

Illustration

A theatre manager employs a singer to perform concert on 7 consecutive nights. The

singer remains absent on 4 th night. The theatre manager can immediately put an end to
the contract.

However, if the singer after remaining absent on 4 th night turns up on 5 th night and he
is allowed to sing by the theatre manager, the contract cannot be terminated before the
expiry of 7 th night. The theatre manager by his action in allowing the singer to perform
on 5 th night, signified his acquiescence in continuance of the contract.

The theatre manager is still entitled to claim compensation from singer for his absence on
4 th night.

Note –

Doctrine of anticipatory breach of contract can be applied only to those contracts

which involve series of performances.
DOCTRINE OF FRUSTRATION

SECTION 56

History of doctrine

PARADINE V/S JANE

The plaintiff agreed to let out his residential premises to the defendant. Due to
outbreak of war, the defendant could not occupy the premises.

The court held that defendant is liable to pay the rent.

To mitigate the rigour of the above rule, doctrine of frustration was introduced. The
doctrine states that-

Sometimes the parties to the contract are discharged from their respective obligations
under the contract, due to supervening impossibility. The contract is then said to be
frustrated.

In the following cases, the courts have applied the doctrine-

a) Destruction of subject matter

A agrees to give his marriage hall on rent to B. Before the date of marriage, the hall
is burnt by fire.

The contract is frustrated.

b) Non occurrence of expected events

A cricket match is scheduled between India and Pakistan. Mr. X books the flat of Mr. Y
wherefrom the match can be viewed. The wicket is damaged by some hooligans and the
match is cancelled.

The contract is frustrated.

If Mr. X has already paid any amount to Mr. Y, he is entitled to get the refund.

c) Govt. regulations

A agrees to supply liquor to B on a particular day for a specific price. Before the
date of performance, the Govt. bans the sale of liquor.
The contract is frustrated.

EFFECTS OF FRUSTRATION

1) Future obligations are put to an end

2) In respect of obligations already incurred, a right of compensation accrues to the

party performing the obligations

DOCTRINE OF NOVATION

SECTION 62

The parties to the contract may agree to substitute a new contract for it or to rescind or
alter it. The original contract need not be performed.

Consent of parties to the old as well as new contract is necessary.

By virtue of a contract between A and B, B is liable to A to pay Rs. 5000.

By virtue of another contract between B and C, C is liable to pay Rs. 5000 to B.

A, B and C agree that C will pay rs. 5000 to A. In this case the original contracts between
A and B as ell as between B and C are discharged.