According to 

Section 10 of the Indian Contract Act 1872, Free consent of parties is an
essential element of any contract. Section 14 of the Indian Contract Act states that ‘Free
consent means consent not caused by coercion, undue influence, fraud, misrepresentation and
mistake’.

A mistake means ‘believe in those things which do not exist in reality’. Thus, the mistake is
an erroneous belief. 

Mistake’ is not defined in the Indian Contract Act. Section 20, 21 and 22 deals with the
concept related to mistake. ‘Mistake’ can be defined as any action, decision or judgement that
produced an unwanted and unintentional result. A Mistake is said to have occurred where
parties intending to do one thing by error do something else.

Types of Mistake

A mistake is of two types:

 Mistake of Law,

 Mistake of Fact.

Mistake of Law

Mistake of Law means any contract which is performed by parties without knowing the law
(or by ignoring the law), which is essential for that contract. Section 21 of the Indian Contract
Act deals with ‘effect of mistake as to law’.

Grant v. Borg

In this case, the person was not knowing the clauses of the Immigration Act 1971, for staying
beyond the time limit by the leave. Here, he cannot apply for defence under the mistake of
law.

Mistake of Law can be of two types:

  Mistake of Indian Law: “Ignorantia Juris non excusat” is a Latin maxim which
means “Ignorance of the law is not excused”. If a person takes part in a contract
without knowing any specific provisions of Indian Law (which is essential for that
contract), then Contract is not voidable because everyone is supposed to know the
law of his country.

Illustration- A murdered B, A cannot apply for the defence of mistake of law that is; he was
not aware of law related to the murder.

 Mistake of Foreign Law:- If a person takes part in a Contract without knowing any
specific provisions of Foreign Law (which is essential for that contract), then that
mistake is treated as a mistake of fact i.e, the contract is void if both the parties
under a mistake as to a foreign law because one can not be expected to know the
law of other foreign countries.

Mistake of Fact

Mistake of fact means any contract which is performed by parties without knowing any
material fact (or ignoring the fact), which is essential for that contract. Section 20 and 22 of
the Indian Contract Act deals with ‘Mistake of Fact’. Mistake of Fact is of two types:
Bilateral mistake, Unilateral mistake.

Bilateral Mistake

According to Section 20, “Where both the parties to an agreement are under a mistake as to a
matter of fact essential to the agreement, the agreement is void”. In simple words, if parties
are involved in an agreement without knowing any essential facts related to the agreement,
then it is considered as a Bilateral Mistake and that agreement will be void.

For example- A agrees to sell to B any goods supposed to be on its way from America to
Bombay. It is found that before the day of the bargain, the ship containing goods had been
cast away and the goods were lost. But, neither party was aware of these facts. The agreement
is void.
Essentials elements of Bilateral mistakes are:

(i) Both parties must be under a mistake.

(ii) The mistake must be of fact, not of law.

(iii) The mistake must be related to an essential fact.

What facts are essential in Bilateral Mistake?

A bilateral mistake as to the subject matter includes the following:

1. Mistake as to the existence of subject matter.

2. Mistake as to the identity of subject matter.

3. Mistake as to the quantity of subject matter.

4. Mistake as to the quality of subject matter.

5. Mistake as to the price of subject matter.

6. Mistake as to the performance of subject matter.

Mistake as to the existence of subject matter

‘A’ and ‘B’ are involved in a contract to sell a horse in a specific amount. But, horse dies
before the contract is performed and both the parties (A and B) are unaware of this fact that
the horse does not exist. In this case, the Contract is void.

Mistake as to the quantity of subject matter

‘A’ and ‘B’ made a contract in which a transaction of 200 pens in return of some amount
involves. But 100 pens are sold early by the brother of ‘A’ before the contract could be
performed and both the parties (A and B) were unaware of this fact that only 100 articles do
exist. In this case, the contract is void.
Mistake as to the quality of subject matter

‘A’ and ‘B’ made a contract together in which ‘A’ sold his car in return of some amount to
‘B’. They believed that the car is for racing purpose but the car was for tourism purpose. In
this case, the Contract is void.

In the case of Smith vs Hughes(1870), The plaintiff agreed to buy certain Oats from the
defendant believing that they were old when in reality they were new. 

Mistake as to the price of subject matter

‘A’ and ‘B’ made a contract to sell things in consideration for some money which was not a
valid amount and both the parties (A and B) are unaware of this fact. In this case, the
Contract is void.

Matter as to the identity of subject matter

‘A’ and ‘B’ made a contract in which ‘A’ promise to sell his car to ‘B’. ‘A’ has two different
types of car (one for racing and other for tourism purpose). Here, the real identity of the car is
not clear and both the parties are thinking about different types of car. In this case, the
Contract is void.

In the case of Cundy v Lindsay, it is held that contract as a mistake as a matter of identity will
be automatically void. 

Matter as to the possibility of subject matter

Sometimes, a contract is made but during the performance of the same, we come to know that
it is impossible to fulfil the performance of the contract. The agreement is void where there is
a mistake as to the possibility of performance. Impossibility is an excuse for non-performance
of a contract. Impossibility can be of two types:

 Physical impossibility: Any performance of the contract when physically

impossible, can be taken up as an excuse for non-performance of duties under a
contract and contract will be void. For example- a painter made a contract with a
person to paint a house but before the performance of duties, the house burns.
 Now, it is impossible for the painter to perform his duties under the contract. Thus,
it is considered as an excuse for non-performance of duties.

 Legal impossibility: Any performance of the contract is when legally impossible,

can be taken as an excuse for non-performance of duties under a contract and
contract will be void. For example- any amendment made by legislation which
makes it impossible to fulfil the performance of duties under the contract.

Unilateral Mistake

According to Section 22, a contract is not voidable merely because it was caused by one of
the parties to it being under a mistake as to a matter of fact.

Such a mistake does not invalidate the agreement. For example, ‘A’ and ‘B’ made a contract
in which only ‘A’ was under a misbelief for any product which is in the transaction. Then, the
contract is not voidable for ‘A’ and will be classified as a valid contract.

In the case of Tapline Vs Jainee(1880), The buyer at an auction brought a property described
with reference to a plan. The buyer was under the assumption that he was well versed with
the property and therefore did not refer to the plan. Later he discovered that a garden plot
which he thought was a part of the property was not in fact included in the plan. It was held
that the buyer cannot revoke the contract on the grounds of the unilateral mistake made by
him and was bound by the contract.

Consideration is defined under Section 2d of the Indian Contracts Act, 1872. It is defined as
when the promisee at the request to the promisor has:

 Done or abstained from doing something,

 Does or abstains from doing something,

 Promises to do or abstain from something,

Then such act or abstinence is called consideration.
Forbidden by law- When the object of an agreement or the consideration of an agreement is
prohibited by law, at that point they are not legal consideration or object any longer. They at
that point become unlawful in nature. Thus such an agreement can not be substantial or valid
any longer. Unlawful consideration of an object incorporates acts that are explicitly
punishable by the law.

Forbidden by law” isn’t synonymous with the word ‘void’ and thus it is not essential that
anything that is void is also “illegal by law”.

The above decision was made by the Supreme Court in Gherulal Parakh v. Mahadeodas (AIR
1959 SC 781) and the court held that:

The court held that though the wagers are void under section 30 of the Indian Contract Act, 1872
but cannot be forbidden by law under section 23 of the Indian Contract Act for the person
entering a wagering contract.

Against public policy:

1. Trading with the Enemy: Entering into an agreement with an individual from a
nation with whom India is at war, will be a void agreement.

2. Smothering Prosecution: This is an invasion of the normal course of law, and such
agreements are void. For instance, A consents to offer land to B in the event that
he doesn’t participate in the criminal proceedings against him;

3. Maintenance and Champerty: Maintenance agreement is the situation in which the

individual vows to keep up a suit wherein he has no genuine interest personally.
Champerty is the point at which individual consent to help another party in a suit
for a bit of portion of the damages or harm;

4. An Agreement to Traffic in Public Offices;

5. Agreements to make Monopolies;

6. A consent to brokerage marriage for remunerations;

7. Interfering with the Courts: An agreement whose object is to actuate a legal or

state authorities to act corruptly and interfere with legitimate procedures.
Illustrations (a) A agrees to sell his house to B for 10,000 rupees. Here B‟s promise to pay
the sum of 10,000 rupees is the consideration for A‟s promise to sell the house, and A‟s
promise to sell the house is the consideration for B‟s promise to pay the 10,000 rupees. These
are lawful considerations.

A, B and C enter into an agreement for the division among them of gains acquired or to be
acquired, by them by fraud. The agreement is void, as its object is unlawful.

A promises B to drop a prosecution which he has instituted against B for robbery, and B
promises to restore the value of the things taken. The agreement is void, as its object is
unlawful.

Legal requirements as to consideration

Must move at the desire of the promisor- Section 2d of the Indian Contract Act, 1872,
clearly mentions that the consideration should be at the desire of the promisor if the
consideration is made at the will of the third person or is not according to the promisor then it
is not a good consideration.

“In Durga Prasad v. Baldeo, In Durga Prasad v. Baldeo,on the order of the collector of

a town Durga Prasad built some shops on his own expense in a market. The
shopkeepers who occupied these shops promised to pay to Durga Prasad commission
on their sales. Durga Prasad sued the shopkeepers when he did not receive the
commission. The court held that the promise was not supported by any consideration
as the shops were built on the collector’s order and not at the request of the
shopkeepers. Therefore there could not be a recovery.

Can move from the promisee or another person- Unlike English law in which the
consideration must move at the desire of the promisor, in Indian law as long as there is
consideration it is immaterial as to who has given it. Moreover, in the case of Chinnaya vs
Rammyya the consideration can also move at the desire of the third party but only in the
condition where he is the beneficiary of the contract. 

Dutton v. Poole: 

A son made a contract with his father for his father to not cut down an oak woodland. As
consideration for this, the son would make a payment to his sister of £1000 once she had
married. The money gained from the woodland would have been paid to the sister. The father
died before the sister was married and the son subsequently refused to pay his sister the
money as was previously agreed, at the time of her marriage. The sister sued her brother for
the amount that was originally promised between the father and son. The court found in
favour for the sister on the basis that the relationship between the father and the daughter had
made the sister a party to the agreement, even if she was not included at the time the contract
was agreed. The relationship between father and daughter was found to extend the
consideration that the father gave in the promise to the children. So in this consideration by a
third party was allowed but later on this case was reversed.

English Law now says that:-

1. Consideration must move from the promisee and the promisee only, in whatsoever
condition.

2. An agreement can’t be authorized by an individual who isn’t involved with it

despite the fact that it is made for his advantage. He is an alien to the agreement
and can claim no rights under it.

These recommendations were given because of the Tweedle v. Atkinson case, which

established the foundation of what in this way came to be known as ‘privity of consideration
and overruled Dutton v Poole case.
This implies that an agreement is an agreement between the parties in particular and no third
individual can sue upon it in any event when he is profited.

 Dunlop Pneumatic Tire Co. v Selfridge and Co.

Offended parties (Dunlop and Co.) offered certain merchandise to one Dew and Co.
furthermore, and took an understanding from them not to sell the merchandise underneath the
listed cost and that in the event that they offered the products to another dealer, they would
get a similar undertaking to maintain the price list.

Dew and Co. offered the engine tires to the (Selfridge and Co.) who made a deal to avoid
offering the tires to any private client at not exactly the listed costs. The offended parties sued
the respondents for breach of the agreement. It was held that accepting the plaintiffs’ were
undisclosed principals, no consideration moved from them to the defendants and that the
agreement was unenforceable by them. 

India does not follow the rule of privity of consideration as held in the decision of the Madras
High Court in Chinnaya v. Ramayya.

Can be an act, abstinence or even a promise- If the promisee does something or abstains
from doing something for the promisor, at his desire, then it will be a good consideration.

Can be past, present or future:

PAST- When the consideration is given before the promise was made. For example- A saves
B from drowning. B after a month promises to pay A. the act of A will amount to past
consideration for the payment made by B.
It is the consideration which is made before the agreement. It is something which the
promisee has already done at the desire of the promisor. 

For example- A rescues B. B promises to give him Rs. 1000 for the same. Here it is a past
consideration as the act of rescuing happened before any agreement. 
In English law past consideration is no consideration. If A saves B and B promises him to pay
but later refuses to do so, then under English law, A cannot enforce it in a court of law. B can
give him the money, but that would not be considered as a past consideration but it would be
by way of gratitude.

In India however, there is no compulsion to follow the English law and past consideration is
regarded to be valid. 

The past act done for consideration would be a good consideration in England when other
person himself asked to do something.. In the case of Lampleigh vs Brathwait, in which the
defendant requested the plaintiff to help him get a pardon from the king. The plaintiff put in
efforts, travelled up to the king etc.his request was not sanctioned. The defendant promised to
pay him for the same. Later he refused to do so. Plaintiff sued him in a court of law. The
court held that the defendant must pay the plaintiff because he has himself requested him to
help him. Hence the act of the plaintiff, although done in the past, would still be regarded as a
valid consideration.

PRESENT- When the consideration is given at simultaneously to the promise made, then this
is present consideration or executed consideration. For example- cash sales.

FUTURE- When the consideration of the promise made is to be passed at a future date then
that is called future or executory consideration. For example- A promises to pay B for the
goods supplied after 15 days.

Consideration need not be adequate- It is not necessary that the consideration is equal or
adequate for the promise made. However, it is mandatory that the consideration should be
something in which the law has some value. It is for the parties to decide the value of the
consideration and not a court of law. For example- A sells table to B and B gave him rs 500.
So if A is satisfied with the amount given then the consideration is valid.

Should be real- although the consideration need not be adequate it should be real and not
illusory.
Should not be something which the promisor is already bound to do- a consideration to
do something which the promisor is already required to do is not a good consideration. For
example- the public duty done by a public servant.

Should not immoral, or against the public policy of the state- Under Section 23 of the
Indian contract it is given that consideration should not be illegal, immoral or against public
policy.

Value need not be adequate

Consideration is defined as an act of abstinence from doing something, at the desire of the
promisor. The consideration should be of some value in the eyes of law, but the courts have
been very liberal in interpreting and anything of value by the parties is regarded as a valid
consideration. 

The value need not be adequate for the promise made. The court will not enquire whether the
value of the consideration is equivalent to the promise that is made. If the parties agree to the
value of the consideration then it is sufficient. This rule is applicable as per Indian and
English law.

Inadequacy as evidence of imposition

The inadequacy of consideration is checked when the consent is not freely given. For
example- A agrees to sell his property worth Rs 1 crore to B for Rs 10,000. A denies that his
consent for the sale of the property was not freely given. A party seeking to set aside the
transaction based on the inadequacy of the consideration must show that he was unable to
understand it or was by way of some imposition. If the court is satisfied that the contract was
freely entered into then it would not matter whether the consideration was adequate or not.
Where the consideration is inadequate, it could be because of fraud, coercion, mistake etc.

Exceptions under Section 25, Indian Contract Act

Section 25 of the Contract Act reads- “Agreements without consideration, void unless it is
writing and registered or is a promise to compensate for something or is a promise to pay a
debt barred by limitation law”. This section after defining consideration in definition clause
in Sec. 2(d) declares that “consideration is the vital part of a valid contract” and also states
some exception to the rule that the contract cannot be rendered void even if it is without
consideration.

The exceptions are:

1. When the contract is in writing and registered

2. When it is for compensating someone for his voluntary services for the promisor
in the past.

3. When it is a promise, signed or made in writing by the person or his agent to pay
whole or part of a debt which is barred by the law of limitation.

Illustrations

1. X agrees to sell his bicycle worth Rs. 5000 for Rs. 1000 to Z. The agreement is
lacking adequate consideration but it is not void. However, it may be taken into
account by the court to see whether the consent was free or not.

2. A Promises without consideration to give his car to B. This is a void agreement.

However, if A out of natural love and affection promises and writes and registers
it, to give his car to B, this is a contract.

In Indian law, The general rule is the ex nudo pacto non-oritur action, which means that no
right of action arises from the contract which is entered into without any consideration. Still,
Section 25 of the Indian Contract Act,1872 provides certain exceptions to this.

Fiduciary relation

In case of a contract entered into between the relatives or on account of natural love and
affection is enforceable without consideration. The meaning of love and affection is not
judicially construed but parties who are nearly related would have instinctive love and
affection.
This is the first exception mentioned under Section 25(1). In Rajlukhy Dabee v Bhootnath
Mookerjee, 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, a brother giving away property
to his siblings, etc. Essentials of an agreement like this involve:

1. The agreement made out of natural love and affection; 

2. The agreement is registered;

3. The agreement is in writing;

4. Parties are in close relation to one another.

Past voluntary services 

A promise to compensate the person who has done something voluntary in the past for the
promisor is enforceable. This exception is attracted in the cases when the services are
rendered voluntarily.

It is a prerequisite under Section 25 that the act is done or service rendered should be
voluntary in nature and specifically for the promisor- without his knowledge or at his request.
In addition, there must be a promise by the promisor to compensate for volunteer’s service in
the future.

The promisor must be competent at the time when he promises to compensate in the future. If
a minor for example, in case of voluntarily done service, promises that he will repay a sum or
will do anything for the plaintiff, such cases cannot be entertained on the ground that the
party to the contract was incompetent and thus the contract is void ab initio.
Time barred debt

A promise to pay a time-barred debt is enforceable and it should be signed by the person or
his agent.

The promise to pay the debt must be expressed, it is not sufficient if the intention to pay
could not be gathered from the circumstances. 

Acknowledgement of the debt is different from the promise to pay the debt. The
acknowledgement of the person should be done before the period of limitation. Promise to
pay a time-barred debt is a new contract. It is not just merely an acknowledgement of the
existing liability.

 There should be a written promise signed by a person or his appointed agent.

 A promise must be there, either to pay a whole or a part of the debt.

 The debt must have been enforced by the creditor for the limitation period.

A debtor can enter into a written agreement under Section 25 (3) for paying a part of the
complete debt and a suit can lie in such cases when there is a written promise for paying it.

Agreements in Restraint of Marriage

According to Section 26 of the Indian Contract Act, all agreements in restraint of marriage
except that of a minor are void.

The basis of making agreements in restraint of marriage void is that marriage is a sacrament
and nothing should interfere in the institution of marriage, not even contracts. The idea
behind this provision is to not snatch away the personal right of every individual to marry
someone of their own choice. It is important to note here that according to the section,
agreements in restraint of marriage of a minor are not void.
Illustrations

A person Susan agrees with John, in return for some consideration, that she will not marry a
certain person Mark. This agreement is one in restraint of marriage and is thereby void.

Tina’s father promises a person Rahul, that he won’t marry his daughter Tina to anyone else
but he, if only he would pay a sum of Rs. 20,000 per month until their wedding date. This is a
void agreement, as it is in restraint of marriage of a person of age.

The case of Lowe v. Peers set a precedent in the law relating to restraint of marriage. In this
case, the defendant contended that if he marries any other person except the plaintiff, he
would give her 1000 pounds within three months of his marriage. It was held that such an
agreement is void.

In the recent case of Shrawan Kumar v. Nirmala, the petitioner filed a suit in the Allahabad
High Court asking the court for an injunction on the defendant’s marriage to the other person.
The plaintiff contended that the defendant had promised to marry him, and therefore her
marriage with the other person should be injuncted against. The court cited Section 26 of the
Indian Contract Act, 1872 while pronouncing his judgment, whereby he dismissed the
petition.

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.

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.

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.

Exceptions

 Sale of Goodwill

According to this, a person who buys the business goodwill of another person is thereby
privileged to impose certain restrictions on the business activities of the latter. The
restrictions include preventing the seller from carrying out similar business within local limits
only. This is done to protect the rights of the purchaser. However, the restraint should be
reasonable according to the nature of the business under consideration.

In the case of Chandra v. Parsullah the plaintiff and defendant both had the business of
running buses between Pune and Mahabaleswar. To avoid competition, the plaintiff bought
the defendant’s business along with its goodwill and made a contract whereby the defendant
would not be allowed to carry on business in the same locality. However, there was a breach
of contract on the part of the defendant. When brought to the court, the court ruled in favour
of the plaintiff since the agreement was valid under Section 27.

 Partnership Act

There are three provisions of the partnership act that provide for restriction of business. They
are:
Section 11, which states that none of the partners would carry on any business till the
continuity of the business.

Section 36, which provides the remaining partners to prevent the outgoing partner from
opening any business similar to theirs’ in the same locality subject to certain restrictions.

Section 54, which prevents all the partners from engaging in any business of similar kind
after dissolution of the firm/business.

In the case of Kores Mfg Co Ltd v. Kulok Mfg Ltd, the two sugar mill employees had come
to an agreement wherein either of them wouldn’t employ a person who had been working in
the other person’s factory in the past 5 years, to protect trade secrets and other confidential
information. The court had held this agreement to be void since the ban was applicable to all
employees irrespective of their skills and positions held.

Restraint on employees

Restraint during employment: While an employee is engaged in a business, he/she is not

allowed to work for any other business which is in direct competition with his employer. This
is done for the protection of trade secrets, customer details, plans, etc. This was established
in Charlesworth v. Macdonald.

Restraint after termination of employment: An agreement to restrain a servant from

competing with his employer after the termination of employment may not be allowed by the
courts. This was pronounced in Brahmaputra Tea Co v E. Scarth, where an attempt was made
to restrain a servant from competing for five years after the period of service.

Section 28-

Section 28 (a) of the Indian Contract Act, 1872 states that:

 1. No agreement can bar anyone from enforcement of rights through a court of law. 

2. No agreement can oust the jurisdiction of a court.

3. No agreement can stipulate a time limit below the time limit prescribed under the
Indian Limitation Act, 1963.

An agreement is void under Section 29 when its terms are vague and uncertain and thus
cannot be made certain. 

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.

As given in Bahadur Singh vs Fuleshwar Singh, 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.