VOID AGREEMENT AND VOIDABLE CONTRACT

SUBMITTED BY:
ASHUTOSH SINGH (2218)
BBA LLB ,2ND SEMESTER

SUBMITTED TO:
MS. SUSHMITA SINGH
FACULTY OF LAW OF CONTRACTS
(FINAL DRAFT)

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TABLE OF CONTENTS

DECLARATION…………………………………………………………...3
ACKNOWLEDGEMENT………………………………………………….4
INTRODUCTION………………………………………………………….5
SOURCES OF DATA COLLECTION…………………………………….8
RESEARCH MYTHODOLOGY…….…………………………………….8
AIM AND OBJECTIVE OF STUDY……………………………………...8
RESEARCH QUESTION………………………………………………….9
HYPOTHESIS……….……………………………………………………..9
FREE CONSENT…………………………………………………………..10
VOIDABLE CONTRACT…………………………………………………12
COERCION…………………………………………………………….... 13
UNDUE INFLUENCE……………………………………………………………...15
FRAUD………………………………………………………………………………17
MISREPRESENTATION……………………………………………………………19
MISTAKE AS A VOIDABLE CONTRACT……………………………...22
VOID AGREEMENT……………………………………………………...25
AGREEMENTS IN WHICH A PART OF CONSIDERATION OR OBJECT IS
UNLAWFUL……………………………………………………………………………25
AGREEMENTS WITHOUT CONSIDERATION………………………………...26
AGREEMENT IN RESTRAINT OF MARRIAGE………………………………..27
AGREEMENT IN RESTRAINT OF TRADE……………………………………..27
AGREEMENTS VOID FOR UNCERTAINTY UNDER SECTION 29………….29
DIFFERENCE BETWEEN VOID AND VOIDABLE CONTRACT…….30
CONCLUSION……………………………………………………………31
BIBLIOGRAPHY…………………………………………………………32

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 DECLARATION BY THE CANDIDATE

I, hereby, declare that the work reported in the BBA L.L.B (Hons.)
Project Report entitled “VOID AGREEMENT AND VOIDABLE
CONTRACT” submitted at CHANAKYA NATIONAL LAW
UNIVERSITY PATNA is an authentic record of our work carried out
under the supervision of MS. SUSHMITA SINGH.

I have not submitted this work elsewhere for any other degree or
diploma. I am fully responsible for the contents of my Project Report.

(Signature of the Candidate)

ASHUTOSH SINGH (2218)
BBA LLB, 1st year
SEMESTER -2ND
CNLU, Patna
Dated

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 ACKNOWLEDGEMENT

I would like to show my gratitude towards my guide MS. SUSHMITA

SINGH, Faculty of LAW OF CONTRACTS, under whose guidance, I
structured my project. I owe the present accomplishment of my project
to my CNLU librarians, who helped me immensely with materials
throughout the project and without whom I couldn’t have completed it in
the present way.

I would also like to extend my gratitude to my friends and all those

unseen hands that helped us out at every stage of my project.

THANK YOU,
ASHUTOSH SINGH (2218)
SEM.–2ND
CNLU, PATNA

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INTRODUCTION

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 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 agreement, Many agreements remain outside the purview because they do not fulfill the
requirement of a contract.

A contract is a legally binding agreement that recognises and governs the rights and duties of the
parties to the agreement. A contract is legally enforceable because it meets the requirements and
approval of the law. An agreement typically involves the exchange of goods, services, money, or
promises of any of those. In the event of breach of contract, the law awards the injured party
access to legal remedies such as damages and cancellation.

In the Anglo-American common law, formation of a contract generally requires an offer,

acceptance, consideration, and mutual intent to be bound. Each party must have the capacity to
enter into the contract. Although most oral contracts are binding, some types of contracts may
require formalities such as being in writing or by deed.

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.

Section 2(h) in The Indian Contract Act, 1872 defines contract as-
An agreement enforceable by law is a contract

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Types of Contract on the basis of its Validity :-

(i) Valid contract: An agreement which has all the essential elements of a contract is called a
valid contract. A valid contract can be enforced by law.

(ii) Void contract [Section 2(j)]: An agreement not enforceable by law is said to be void. A
void contract is a contract which ceases to be enforceable by law. A contract when
originally entered into may be valid and binding on the parties. It may subsequently
become void.

(iii) Voidable contract [Section 2(i)]: “An agreement which is enforceable by law at the
option of one or more of the parties thereto, but not at the option of other or others, is a
voidable contract”. However, the contract continues to be good and enforceable unless it
is repudiated by the aggrieved party.

(iv) Illegal contract: A contract is illegal if it is forbidden by law; or is of such nature that, if
permitted, would defeat the provisions of any law or is fraudulent; or involves or implies
injury to a person or property of another, or court regards it as immoral or opposed to
public policy.

These agreements are punishable by law. These are void-ab-initio.

“All illegal agreements are void agreement, but all void agreements are not illegal.”

Void and illegal Agreement:- The Contract Act draws distinction between an agreement which is
only void and the one which is unlawful or illegal . An illegal agreement is one which is
forbidden by law; but a void agreement may not be forbidden, the law may merely say that if it is
made, the courts will not enforce it. Thus every illegal contract is void but a void contract is not
necessarily illegal

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(v). Unenforceable contract: Where a contract is good in substance but because of some technical
defect cannot be enforced by law is called unenforceable contract. These contracts are neither
void nor voidable..

The main difference between a void and illegal contract is that, a void contract is not punishable
and its collateral transactions are not affected but on the contrary illegal contract is punishable
and its collateral transactions are also void.

Difference between Void and Voidable Agreement:-

A void contract is considered to be a legal contract that is invalid, even from the start of signing
the contract. On the other hand, a voidable contract is also a legal contract which is declared
invalid by one of the two parties, for certain legal reasons.

While a void contract becomes invalid at the time of its creation, a voidable contract only
becomes invalid if it is cancelled by one of the two parties who are engaged in the contract.

In the case of a void contract, no performance is possible, whereas it is possible in a voidable

contract. While a void contract is not valid at face value, a voidable contract is valid, but can be
declared invalid at any time.

While a void contract is nonexistent and cannot be upheld by any law, a voidable contract is an
existing contract, and is binding to at least one party involved in the contract.

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SOURCES OF DATA COLLECTION

1. INTERNET WEBSITES AND ARTICLES

2. BOOKS

RESEARCH MYTHODOLOGY
The researcher will do doctrinal type of research in which he will go through the primary as well
secondary sources.

The researcher through this methodology will be able to get an exact picture of the project. To
satisfy the need of the project, the researcher will go through section by section and clause by
clause of each section in question.

Then, the researcher will cross check the commentary of those provisions. This methodology
will be the most effective way in preparing the project. The doctrinal method helps in doing a
comparative study of the topic. This methodology helps in going through not only the work of
one eminent person but of many other too. This helps in getting the bird’s eye view of the
subject.

AIM AND OBJECTIVE OF STUDY

1.To study about contact that are voidable.

2.To study about void agreements.
3.To study coercion, undue influence, misrepresentation , mistake and concept of free consent.

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RESEARCH QUESTION

1.What is a void agreement?

2.What is a voidable contract?
3.What is the concept of free consent?
4.Why coercion, mistake, undue influence is part voidable contract?
5.Under what circumstances an agreement become void?

HYPOTHESIS

VOID AND VOIDABLE AGEEMENT ARE IMPORTANT AS TO DISTINGUISH A VALID

CONTRACT FROM VOID AND VOIDABLE ONE.IT IS ALSO IMPORTANT TO KNOW
TO DISTINGUISH BETWEEN VOID AND VOIDABLE CONTRACT AS BOTH CONCEPT
ARE DIFFERENT.

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2. FREE CONSENT

Free Consent is a vital part of a sound contract. But how does the law determine if two parties
have willingly and knowingly entered into a contract? For a contract to be enforceable consensus
ad idem i.e meeting of minds of all the parties involved is necessary.

According to Section 13 of the Indian Contract Act, 1872 two or more persons are said to be in
consent when they agree on the same thing in the same sense (Consensus-ad-idem). This means
that the two parties must have the same understanding with regards to the subject matter of the
contract. If consent is gained by coercion or even mistake the contract will not be considered
enforceable by law.

For Example- Ankita agrees to sell her house to Ira. Ankita owns three houses and wants to sell
the house in Delhi. Ira thinks she is buying her Mumbai House. Here there is no Consensus-ad-
idem between Ankita and Ira. Hence there is no consent and therefore no contract between them.

Case Law-

In Raffles vs Wichelhaus(1864), two parties part A and part B entered into a contract for
sale for 125 bales of cotton arriving from Bombay by a ship named “Peerless”.There were two
ships with the same name and while party A had one ship in mind, Party B had the other ship in
mind. It was held by the court that both the parties were not ad idem and therefore the contract
was void.

Consent when considered “not free”

The parties in a contract might agree upon the same thing in the same sense but mere consent is
not enough, consent must also be free to complete the validity of a contract.

*When there is no consent, there can be no contract at all and the agreement will be considered
void.

*When there is consent but not free consent, the contract is considered voidable at the option of
the party whose free consent was not taken.

According to section 14 of the Indian Contract Act, 1872, consent is said to be free when it is not
caused by-

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1)Coercion– as defined in section 15

2)Undue Influence -as defined in section 16

3)Fraud – as defined in section 17

4)Misrepresentation- as defined in section 18 or

5)Mistake– subject to the provisions of section 20,21,22

If consent is given under any of the above four circumstances, the contract is considered
voidable and shall be considered enforceable only at the option of the aggrieved party (section
19 of Indian contract act,1872).

If the consent is caused by a mistake of fact of both the parties, the contract shall be considered
void.

Thus for the formation of a valid contract, it is essential that there should be free consent of both
the parties.

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3.VOIDABLE CONTRACT
INTRODUCTION

Generally, to define the word agreement, accord and satisfaction have been used. The parties
accept something in the expectation of a right to the action.@ The Indian Contract Act has
defined agreement as-
SECTION 2(e)– Every promise and every set of promises, forming the consideration for each
other, is an agreement@
But the application of the force of law changes with the kind of agreement that has been entered
into. On such an agreement that would be dealt with in the article is the Voidable agreement.

MEANING
The Indian Contract Act defines “Voidable contract” as-
SECTION 2(i)- An agreement which is enforceable by law at the option of one or more of the
parties thereto, but not at the option of the other or others, is a voidable contract.

The voidable act is one which is a good act unless avoided@. Hon’ble Supreme Court[4] gives
the example of an allegation of fabrication of document. The voidable state of affairs, in such a
situation, would be the real state of affairs. A party who alleges otherwise is obliged to prove it.
The oft-quoted passage of Salmond on Jurisprudence is pertinent to understand the concept-
“A valid agreement is one which is fully operative in accordance with the intent of the parties. A
void agreement is one which entirely fails to receive legal recognition or sanction, the declared
will of the parties being wholly destitute of legal efficacy. A voidable agreement stands midway
between these two cases…

…It is not a nullity, but its operation is conditional and not absolute. By reason of some defects
in its origin, it is liable to be destroyed or cancelled at the option of one of the parties to it. On
the exercise of this power the agreement not only ceases to have any efficacy but is seemed to
have been void ab initio. The avoidance of it relates back to the making of it”.[5]

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Salmond has used the words “hypothetical or conditional efficacy” for attributing the validity to
such agreements. At the election of one of the parties, the contract can become VOID or VALID.
This definition is not only important from an academic point of view. It has found highlight in
the judicial circles through the Privy Council[6] authoritative ruling. In the case of Satgur Prasad
v. Harnarain Das, the Court had noted this distinction.

The concept of the election has also been highlighted since the refusal results into an abdication
of the legal basis to the contract. Hon’ble High Court had noted in the case of S.N.R. Sundara
Rao and Sons v. CIT.[7]

3.(A) COERCION
According to section 15 of the Indian Contracts Act,1872 coercion is –

Committing or threatening to commit any act forbidden by the Indian Penal code.
The Unlawful threatening or unlawful detaining of any property to the prejudice of any person.
-With the intention of causing the other person to enter into an agreement.

It is, however, immaterial whether the Indian Penal Code is or is not in force in the place where
the coercion takes place.

Illustration– Party A uses criminal intimidation as a means of entering into an agreement with B
on the high seas while aboard on an English ship. Later on, A sues B for breach of contract while
in Mumbai. Although this act is not an offense under the English law and section 506 of the
Indian Penal Code was not in force when the act took place yet it is said that A has employed
coercion.

Coercion might be employed by a party to the contract or a stranger to the contract and might be
aimed at a party to the contract or a stranger to a contract but the only important thing is that the
intention of the party resorting to coercion should be to cause an individual to enter a contract.

13
Section 72 of the Indian Contract Act, 1872 says that if anything is delivered or if any money is
paid to another person while under the threat of coercion, then it is the liability of the person who
has received such an item to repay or return it back to the original owner.

Illustration– A Home shifting service refused one of its clients the delivery of certain agreed
goods unless they paid an illegal service charge for the goods. The client paid the charge in order
to receive the items but he is entitled to recover the amount of illegal charge that was paid from
the company.

The burden of proof lies on the person who he avoiding the contract i.e the person whose free
consent has not been taken in order to enter into a contract.

The threat to commit suicide

Chikkam Ammiraju and Ors. v. Chikkam Seshamma and Anr(1917)

In this case, a husband threatened his wife and son to commit suicide if they did not release a
sale added in favor of his younger brother. They executed the deal but later filed a plea of
coercion. Since the very act of committing suicide is forbidden under the Indian Penal
Code,1860.

Held that threat to commit suicide also amounts to coercion and the party who is affected by it
has the right to avoid the contract.

In Ranganayakamma v. Alwar Setti (1889) it was held that an adoption by a Hindu widow 13
years of age was not binding on her, it having been found that the relations of the adopted boy
obstructed the removal of the corpse of her husband from her house until she consented to the
adoption. The decision proceeded on the ground that the widow's consent to the adoption was not
free. the court seems to have thought that the obstructing the removal of the corpse by the
deceased's widow was within Section 15 of the Contract Act as being forbidden by the Penal
Code, the section applicable being presumably Section 297, Indian Penal Code.

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3.(b) Undue Influence

The relevant portion of SECTION 16 of the Indian Contract Act where the undue influence as a
concept is explained, is reproduced herein below-
SECTION 16 .“Undue influence” defined.—(1) A contract is said to be induced by “undue
influence” where the relations subsisting between the parties are such that one of the parties is in
a position to dominate the will of the other and uses that position to obtain an unfair advantage
over the other.

The contracts entered into through undue influence are termed voidable and not void. [12]
A person who claims that a contract is voidable needs to establish that the contract is vitiated by
fraud, undue influence, misrepresentation or any other circumstance, which would entitle a party
to contract to avoid it. [13] A situation can also arise where the party has acted upon a voidable
contract as being a valid one. Once this happens, that party is estopped from denying the validity
later.[14]

In the landmark case of Oriental Insurance Co. Ltd. v. Ram Moorjani[15], this question of
voidability was under consideration. It was alleged by the defendant that the plaintiff exercised
undue influence in obtaining an indemnity bond. But, the plaintiff defended by asserting that it
was a practice so followed.

Now, there was no legal or statutory right with the plaintiff to obtain such an indemnity bond.
The court also did not accept the argument of practice. It was authoritatively held that such
practise needs to have the sanction of law. The practice can also be flowed out of mutual
agreement concluded and entered into between the parties. Unless such requirements are not
fulfilled, the undue influence remains.

Thus, the contract was found vitiated. The indemnity bond so given under undue influence was
found unenforceable.

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Other Examples
1.A contract that falls under Section 236 of the Indian Contract Act, is a voidable contract. [16]
The section also about a person falsely contracting as an agent and one not entitled to
performance.
2.If a natural guardian transfers minor’s property in contravention of Section 8(2) and (3) of
Hindu Minority and Guardianship Act, 1956, it becomes a voidable transaction. The transaction
can be avoided by the restoration of any benefits received under such transfer.[17]
3.A mortgage can be done by a junior member. In such a case, the transaction is not deemed
void. It only becomes voidable.[18]
4.There can be a unilateral postponement of the right to claim performance of the contract. The
motive can be that of taking undue benefit of a favourable market. This makes the contract
voidable.[19]

Lingo Bhimrao Naik v. Dattatrya Shripad Jamadagni

In this case, the mother of an adopted son was alleged to have used undue influence on her son in
order to gain consent when he reached the age of majority to ratify the gift deeds made to her
daughters with regards to non watan property and did not let him consult his natural father.

Held -The adoptive mother used her position of authority to dominate her son into ratifying the
gift deeds nor was the son aware of his legal rights, therefore, the court set aside the matter.

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3.(c)Fraud
Consent is not considered to be free when it has been gained by fraud. Fraud is a false
representation of facts with the intention to deceive the other party. Fraud is proved when false
representation has been made-
1.Knowingly

2.Without belief in its truth

Recklessly whether it is true or not

So according to Section 17, a fraud is when one party convinces another party to enter into an
agreement by-

1.Suggesting a fact that is not true or which he does not believe it to be true(Suggestio falsi)

2.Active concealment of facts while having knowledge of the fact(Suppresio veri)

3.Making a promise made without any intention of performing it.

4. Performing any other such act with the intention to deceive.

5.When the act is considered fraudulent by the court.

Section 17(1) says that to constitute fraud, there should be a statement of fact which is not true.
The mere expression of opinion shall not constitute a fraud.

Illustration-
A man above insurable age i.e 60 years claims that he is 50 years old in order to take an
insurance policy. This amounts to fraud and the insurer is entitled to avoid the policy.

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MERE SILENCE NOT FRAUD

Section 17 clearly states that mere silence does not constitute fraud. But Active concealment of
facts requires efforts to conceal the truth therefore when silence amounts to active concealment
of facts, it amounts to fraud.

In Bimla Bai vs Shankarlal (AIR 1959), A father called his illegitimate son, “Son” at the time of
fixing his marriage. It was held that the father knowingly concealed the illegitimacy of the son
with the intention of deceiving the Brides parents which amounted to fraud.

Exceptions
1)When there is a duty to speak, keeping silence is fraud.

2)When silence is in itself equivalent to speech, silence is considered fraud.

In KIRAN BALA vs. BHAIRE PRASAD SRIVASTAVA(1982), the first marriage of the
appellant was annulled on the grounds that she was not of sound mind at the time of marriage.
She was married for the second time to the respondent keeping the reason for the annulment of
the first marriage a secret from the groom and his parents. It was held by the court that the
consent of the groom has been attained through fraud and it annulled by a decree under the
Hindu marriage act.

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3.(d) Misrepresentation
Misrepresentation is defined under section 18 of the Indian Contracts Act and can be divided
into 3 types-

1)First is when the statement is made about a fact which is not true, though he believes it to be
true.

2)Second is the type when there is a breach of duty by a person who is making the false
statement and he gains some kind of advantage even though it wasn’t his intention to deceive the
other party.

3)The third type is when one party acts innocently and causes the other party to make any
mistake with regards to the subject matter of the agreement.

The common point between the three types is that the misrepresentation is an innocent mistake
made without the intention to deceive the party.

The burden of proof lies on the party whose consent has been gained through misrepresentation
and is voidable at the option of the aggrieved party although he cannot sue the other party for
damages.

Illustration-

Ira said that her radio is in good condition and Ankita bought the radio from her because of the
trust she had in Ira. After some time the radio did not work properly and Ankita thought she was
misled by but Ira believed that her radio was in good condition and had no intention to deceive.

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Types Of Misrepresentation
Misrepresentation is basically of three types:

Fraudulent Misrepresentation
Negligent Misrepresentation
Innocent Misrepresentation.

Fraudulent Misrepresentation

As the name implies, fraudulent misrepresentation is a misrepresentation that is made

fraudulently. In the case of Derry vs. Peek[1], it was aptly defined as:

A false statement made knowingly without belief in its truth, or made recklessly, carelessly
without concern as to its truth.

In the case of Reese Silver Mining Co vs. Smith[2], the directors of a company issued out a
prospectus stating the advantages of working a particular mine. They did this without
ascertaining the truth of their assertions. When it was later discovered that their statements were
untrue, they were held liable for fraudulent misrepresentation.

Negligent Misrepresentation

A negligent misrepresentation occurs when a person with a duty of care makes a false statement
to his client intentionally or without caring to ascertain its truth. Thus, a misrepresentation
cannot be termed as negligent unless there is a duty of care owed to the representing person.

In the vase of Nocton vs. Ashburton[4], the plaintiff sued his solicitor because the solicitor had
given him improper advice regarding the security for a mortgage. The solicitor did this because

20
he stood to benefit from his client’s loss. The court held in this case that the misrepresentation
was a negligent one, and thus the solicitor was held liable for the plaintiff’s loss.

Originally, negligent misrepresentation could only apply in cases where there was a direct
contractual relationship between the representor and the representee. However, this has been
extended to include person who are affected by the representation, although there is no
contractual relationship with the representee. The groundwork for this was laid by Lord
Denning’s dissenting judgement in the case of Candler vs. Crane, Christmas & Co[5]. Lord
Denning stated that the people upon which liability would rest include:

Innocent Misrepresentation

Innocent misrepresentation can simply be understood as a false statement which the user made
not knowing that it was false and he was also not negligent in ascertaining its truth. A good
example of an innocent misrepresentation is in the case of Derry vs. Peek[7].

In this case, a company was statutorily incorporated by the British Parliament to construct
tramways by means of animal power (horses). However, if the consent of the Board of Trade
was obtained, they could make use of steam power. The directors of the company believed that
the Board of Trade would approve their request since in the earlier processes to be followed,
they didn’t meet any objections. They represented this to the plaintiff, which induced him to
purchase shares in the company.

Subsequently, the Board of Trade didn’t give its assent and thus the company had to be closed
down. The plaintiff thus sued for fraudulent misrepresentation. The court held that it would not
be applicable in this case because the representor honestly believed in what they represented. It
could also not be negligent because by following the due process and meeting no objection, they
had tried their best to ascertain the veracity of their assertions. The defendants were thus held not
liable for misrepresentation.

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4.MISTAKE AS A VOIDABLE CONTRACT

Mistake of fact
When there is a misunderstanding of fact by both or one of the parties, it is considered to be a
mistake of fact. The mistake of fact can be of 2 types-

1)Bilateral Mistake
Section 20 says that when both the parties do not agree on the same thing in the same sense and
therefore are under a mistake of fact which is essential to the contract, they are said to have
committed a Bilateral mistake. This contract is said to be void.

Illustration

Ankita agrees to buy from Ira a certain cow but it turns out that the cow was dead at the time of
bargain though neither party was aware of the fact. The agreement is considered to be void.

2)Unilateral Mistake
Section 22 says that if one person has made a mistake of fact, the contract will not be void or
voidable and will remain a valid contract unless the mistake of fact is regarding the subject
matter of the contract or the identity of the person contracted with.

In Dularia Devi v. Janardan Singh(1990), The plaintiff an illiterate woman wanted to gift her
properties to her daughter. Her thumb impressions were taken on two documents which she
believed were gift deeds in favor of her daughter while in reality, the second deed was in favor
of the defendants who were executing the deed. Later she filed a suit for cancellation of the sale
deed and it was held that the since the woman had absolutely no idea of the nature of the second
document,it was considered void.

22
Mistake of Law

Section 21 of the Indian Contract Act,1872 is based on the maxim- Ignorantia Juris non-exusant
which means ignorance of the law is no excuse. Hence it provides that a contract is not voidable
because it was caused by a mistake as to any law in force in India.

Exceptions
1)Private Rights of Property-aA party cannot fully know the private rights of the other party,
therefore it is excusable.

2)Mistake as to any foreign law is considered to be treated like a mistake of fact and is
considered excusable since knowledge of foreign laws is not necessary.

RESCISSION

To rescind is to expressly or unequivocally cancel a contract. [22]

As explained in the flowchart being out above, affirmation and rescission are two options
available to a party. It has been explained by Bowstead[23] with regards to the agency. He
explains that if the agent has made full disclosure of a contract to him, the Principal can do two
things. He can either rescind or affirm (and claim the profit if any).
With regards to rescission, it has been opined that the Principal has to take the proceedings
within a reasonable time after discovering the truth. Otherwise, he will be taken to have
acquiesced. In case of rescission, it will also not matter that the contract has been executed or the
property has meanwhile decreased in value. [24]
U/§ 62 of the Indian Contract Act, the party to a contract can easily rescind, after which the party
will not have to perform the contract.[25] Now, a voidable contract can also be rescinded.
It is because; voidability of an agreement gives the option of rescission to a party. A transaction
in which a party has entered through inducement may be set aside. Inducement can be through
duress or undue influence. Thereby, the person induced gets the right to rescind not only against

23
the person exercising compulsion but also against the party having notice of the fact that
compulsion or influence was used.[26]
After exercising such option of rescission, money or property transferred can be recovered. They
can be recovered from the person exercising the undue influence. But, it can also be recovered
from a person though ignorant about undue influence, has furnished no consideration.
The reasoning for the above-mentioned proposition is taken from the settled jurisprudence. It
says, “Let the man receiving it be ever so chaste, yet if it comes through a polluted channel, the
obligations of restitution will follow it”[27]

In the context of Indian law, § 64 of the Indian Contract Act governs the said position-

1.Consequences of rescission of voidable contract.—When a person at whose option a contract

is voidable rescinds it, the other party thereto need not perform any promise therein contained in
which he is promisor. The party rescinding a voidable contract shall, if he has received any
benefit thereunder from another party to such contract, restore such benefit, so far as may be, to
the person from whom it was received.
Thus, performance is no more required. But, the right to receive the damages remains intact.
There is no objection for such a position with regards to the section appended hereinabove.[28]
Thus, the benefits received have to be refunded.
This is also fortified in the case where an agreement to finance the litigation happened. Later,
when the other party refused to pay the full amount, the court awarded damage under this
section.[29] Hence, the obligation of paying back arises in case an agreement is voidable.
Because it is not applicable for the cases where the agreement is void ab initio.[30]
Hence, restoring benefits is a duty cast upon the party rescinding the voidable contract.[31] A
party is fully within its power and scope to rescind a contract and put an end to all the ensuing
transactions. But, on the same hand, that party is duty-bound under the law to restore to the
wrongdoer all the benefits received under the contract.[32]
In the case of personal services, this restoration of benefit can be done through money. The
reason would be that in such case, it would be sufficient.[33] In case of an unauthorised sale, a
bona fide purchaser would be entitled to any expenditure incurred by him in the improvement of
the permanent value of the property being reimbursed to him.[34]

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5.VOID AGREEMENTS

Contracts and agreements are by far the most widely used legal devices and to some extent also
govern most of our social relationships. However, those agreements which are legally
enforceable can be termed as contracts whilst those which are unenforceable by law are called
void agreements. These agreements are generally those which are concerned with immoral
elements or go against the public policies of the state. Section 2(g) of the Indian Contract Act,
1872 defines void agreements. Further, Sections 24 to 30 and 56 of the Act specify the particular
kinds of agreements/contracts which are void. Since a void agreement is meaningless in the eyes
of law, it does not cause any change in the position or relationship of the contracts.

5.(A) AGREEMENTS IN WHICH A PART OF CONSIDERATION OR

OBJECT IS UNLAWFUL

This is mentioned in Section 24 of the Act. The basic essence of this statement is that if the
consideration, as a whole or in part is unlawful or if the end product of the agreement is illegal
then the agreement is declared void. The contract would, however, be considered valid after
deleting the unlawful clauses. For example, if there is an agreement between A and B for the
exchange of drugs and medicinal herbs for ₹5000, then the agreement stands void even though
the consideration of the agreement is legal. This is because the object of the agreement is illegal.
But in this case, if we remove the drugs from the object then the agreement would be termed
valid.

Moreover, if transaction which arises out of an unlawful act is such that if they are separated
from the illegal part, then they would count as a valid agreement, then those transactions hold
value in the eyes of law irrespective of the illegality of the agreement [1].

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5(B). AGREEMENTS WITHOUT CONSIDERATION

Section 2(d) of the Indian Contract Act, 1872, states, consideration may be furnished by ‘the
promisee or any other person’ as long as it is ‘at the desire of the promisor’. In the case of Currie
v. Misa, the court defined valuable consideration as “in the sense of the law may consist either in
some right, interest, forbearance, detriment, loss or responsibility given, suffered or undertaken
by the other”. Section 25 of the Act mentions that all agreements devoid of consideration would
be declared void unless they fall into the following categories:

If the agreement is made out of natural love and affection

This is the first exception mentioned under Section 25(1). In Rajlukhy Dabee v Bhootnath
Mookerjee [2], the Hon’ble court had held that “A written and registered agreement which is
based on natural love and affection between kins is enforceable without consideration”.
Examples of this involve a daughter taking care of her father [3], a brother giving away property
to his siblings, etc. Essentials of an agreement like this involve [4]:

The agreement made out of natural love and affection;

The agreement is registered;
The agreement is in writing;
Parties are in close relation to one another.
The person has already done something voluntarily for the promisor
This is mentioned in Section 25(2) of the Act. Under this, the promisor performs the act in order
to compensate the promisee either wholly or partially for some previously performed voluntary
act of the promisee. For example, if there’s a contract between A and B where A’s expenses are
taken care of by B for taking care of his son, then, it must be noted that the service provided
wasn’t voluntary as B was legally bound to support his infant son. As per this exception, the
promise must be to compensate a person who has himself done something for the promisor and
not to a person who has done nothing for the promisor [5].

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5(C) AGREEMENT IN RESTRAINT OF MARRIAGE

Section 26 of the Act mentions that all agreements in restraint, either partial or full, of a marriage
except that with a minor, would be void. For example, if Ria’s father provides Amit with some
incentives only to prevent him from marrying his daughter, then such an agreement would stand
void in the eyes of the law, provided the parties involved are not minors. In the case of Shrawan
Kumar v. Nirmala, the plaintiff held that the defendant had promised to marry him and therefore
her present marriage should be injuncted by the court. This petition was dismissed by the
Allahabad High Court on the grounds of restraint of marriage. The philosophy behind this law is
the fact that marriage is a sacred social institution and nothing should be allowed to interfere
with it or restrict it, until and unless it involves minors. Therefore, an agreement in restraint of
marriage of adults is void whereas the same in the case of the minor would not be held void. But
this clause doesn’t apply in case of remarriage. In the case of remarriage, any penalty imposed
upon the widow wouldn’t be counted as a restraint. This was held in the case of Rao Rani v.
Gulab Rani, where it was held that the widow will have to forego her property rights.

5(D) AGEEMENT IN RESTRAINT OF TRADE

This is dealt with under Section 27 of the Act. The freedom to practice any form of trade and
occupation is a fundamental right guaranteed by the Constitution of India under Article 19(1).
Hence, any agreement in restraint of trade and occupation would be deemed as void. The
restraint can be both partial and complete. This was brought out in the case of Madhub Chander
v. Raj Coomar, where the defendant had proposed to pay the plaintiff a certain amount of money
if the latter agreed to shut down his shop in a particular locality. However, upon shutting down
his shop, the plaintiff was denied payment by the defendant. The court here, ruled that the
defendant did not own any money to the plaintiff since the agreement was void (as it was in
restraint of trade), even though it imposed partial restraint i.e. extended to only a particular
locality.

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However, there are two exceptions to this rule:

The foundation for delegitimizing an agreement in restraint of trade lies the historical backdrop
of contention between free markets and the opportunity of agreements. Guaranteeing freedom to
the agreement would mean legitimizing agreements in limitation of trade, which would bring
about parties consenting to check competition. Under the common law, the present position is
taken from the case of Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co Ltd.
In the said case, Thorsten Nordenfelt was a producer of firearms in Sweden and England.
Thorsten sold his business to an organization, which at that point moved the business to Maxim
Nordenfelt. Then, Thorsten went into a concurrence with Maxim that he would not take part in
the assembling of weapons for a period of 25 years, other than what he produces for the benefit
of the organization. Afterward, Thorsten broke his promise asserting that the understanding was
not enforceable as it was in restriction of trade. The decision of the court was in support of
Thorsten. In common law, a reasonability test is pursued. An agreement in restriction of trade is
legitimate, if:

There is a substantial interest that the party forcing the restriction is attempting to secure.
The restriction is no more than what is important to secure this interest.
Restriction isn’t in opposition to public interest.
General principle in India and England similar?
The general principles in India and England regarding void agreements is more or less the same
which is basically that all restraints on trade, whether partial or whole, are void. The only point
of difference arises in the fact that in England, the decision on validity of restriction is taken on
the basis of reasonableness while in India restrictions would be valid only if they fall within the
category of the already stated statutory or judicial exceptions. Therefore, there aren’t any wide
dissimilarities between the two laws. The English law tends to be more flexible as the clause of
“reasonableness” helps to constantly change its ambit. As LORD WILBERFORCE remarked in
Esso Petroleum Co Ltd v. Harper’s Garage (Stourport) Ltd “the classification (of agreements in
restraint of trade) must remain fluid and the categories can never be closed”.

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5.(E) AGREEMENTS VOID FOR UNCERTAINTY UNDER SECTION 29
An agreement is void under Section 29 when its terms are vague and uncertain and thus cannot
be made certain. Illustration: A agrees to sell a ton of oil. The agreement is void for uncertainty
as the kind of oil intended cannot be ascertained.

An agreement may be uncertain either because the terms in it are ambiguous or vague or because
it is incomplete. The general rule is that if the terms of an agreement are vague or indefinite
which cannot be ascertained with reasonable certainty of the intention of the parties, then there is
no contract enforceable by law.

Section 29 provides the meaning of an agreement that should be clear on the face of it, as shown
in Kovuru Kalappa Devara vs Kumar Krishna Mitter [1], but the effect can be provided to the
contract if its meaning is found with reasonable clearness. If this is not possible then the contract
would not be enforceable. Merely difficulty in interpretation will not be considered as vague.
The principle can be formulated as a party who seeks remedy from court for breach of a contract,
the obligation must be able to identify the obligation with sufficient precision to justify the
remedy. The law thus stated is more flexible, and recognizes that different levels of certainty
may be needed for the remedies.

Concluded Contract
As stated in The parties should make their own contract and the court will not construct a
contract for parties when the terms are indefinite or unsettled. The court must first be satisfied
that the parties have a concluded contract, before seeking to make certain terms.

Capable of Being Made Certain

As given in Bahadur Singh vs Fuleshwar Singh [2], a contract is not void if its terms are capable
of being made certain. The meaning of the contract should not be uncertain and further, it needs
to be shown that it is not capable of being made certain. Mere vagueness or uncertainty which
can be easily removed by proper interpretation does not make a contract void. Even oral
agreements will not be considered vague if its terms are ascertainable with precision.

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A contract out of which more than one meaning, when constructed, can produce in its
application more than one result will not be void for uncertainty. A contract will be void for
uncertainty only if its essential terms are uncertain or incomplete unless the uncertain part being
not essential is severed, leaving the balance of the agreement intact. To ascertain what is
essential and what is not, one must look into the intention of the parties. There is no concluded
contract when an essential or critical terin is expressly left to be settled by future agreement of
the parties. Also, there will not be a binding contract where the language is obscure and
incapable of any definite meaning.

An agreement that provides for the future fixation of price by the parties or by a third party is
capable of being certain and is valid under Section 29. Such a contract will not be void for
uncertainty.

6.DIFFERENCE BETWEEN VOID AND VOIDABLE CONTRACT

• The primary distinction between a Void and Voidable Contract is that the former is illegal and
invalid from its creation while the latter is a legal contract but may become invalid if one party
opts to cancel or revoke the contract.

• A Void Contract is unenforceable by law and the law does not recognise its existence at any
point in time. This means that the performance of a Void Contract is impossible.

• Further, a Void Contract typically refers to contracts that involve illegal activity or the
performance of some illegal act, or contracts that were entered into by persons who lacked the
capacity to contract (for example, minors).

• In contrast, a Voidable Contract is valid in law and enforceable by the parties to the contract.
Thus, the performance of the contract is possible. Such a contract becomes Voidable only if one
party chooses to reject or cancel the contract based on some defect within the contract. Such
defects refer to instances where the contract was made on grounds of fraud, misrepresentation,
duress or undue influence, or contracts that were made based on a mutual mistake of fact.

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7. CONCLUSION

The voidable agreement is interesting but risky. Since it gives a right to rescind the
performance but also imposes a duty to restore the benefit received. The act of the
party is very much necessary if a voidable contract has to be nullified. Such an act
would amount to impeachment.[35] Only then can the party lay off its duty to
perform and can avoid it.
To avoid any such complications, the parties should ensure that the contract is a
valid one only under the law.

After thoroughly analysing the major sections related to void agreements, it can
easily be deduced that the agreements which have been declared void and the
exceptions to them, are done only to protect the rights and interests of the public at
large. The restrictions assume paramount importance as agreements and contracts
are the most commonly used legal tools and directly or indirectly, affect most of
our social relations.

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8.BIBLIOGRAPHY

1. CONTRACT 1 BY DR. R.K BANGIA

2.CONTRACT AND SPECIFIC ACT BY AVTAR SINGH
3. https://blog.ipleaders.in/what-is-free-consent/
4. https://www.differencebetween.com/difference-between-void-and-vs-voidable-
contract/
5. https://www.legalbites.in/voidable-agreements/#_ftn2
6. https://www.lawteacher.net/cases/undue-influence-cases.php
7. https://digestiblenotes.com/law/contract/misrepresentation.php
8. https://blog.ipleaders.in/void-agreements/
9. https://blog.ipleaders.in/agreements-in-restraint-of-trade-marriage-and-legal-
proceedings/
10. http://www.legalservicesindia.com/article/315/Void-&-Voidable-
Agreements.html

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