Law of contract assignment

Name: Aminesh Nayan Gogoi

UID: SM0120004

Subject: Law of Contract

Faculty: Daisy Changmai

National Law University and Judicial Academy, Assam

“Agreements which are declared to be void under the

Contract law”

The objective of this paper is to explain about the agreements which are
declared to be void under the Law of Contract.
Introduction:

 “Void Agreement” is defined in Section 2(g) of the Indian Contract Act,

1872 as “an agreement which is not enforceable by law is said to be void.”1

We know that certain agreements are void under the Contract Act,
like agreements by incompetent persons [Section 11], agreement with
unlawful object or consideration [Section 23], agreement made under
mutual mistake of fact [Section 20], agreement without consideration
[Section 25], agreement in restraint of marriage, trade or legal proceedings
etc.,as they are opposed to public policy.

Non-fulfillment of any of these conditions by one of the parties to a contract

shall make an agreement void. These conditions being:-

1. Free consent of the parties;

2. Competency of the parties to contract;

3. Existence of a lawful consideration;

4. Existence of a lawful object;

5. Agreement being not included in the list of those specially declared to be

void by the Indian Contract Act by its Section 26, 27, 28, 29, 30, and 56;

6. Completion of certain formalities required by any other law of the country

like transfer of Property, Act, Company Act, etc.

Expressly declared void agreements:

Indian Contract Act, 1872 lay down the provisions from Section 24 to
section 30 and in section 56 relating to the Agreements, which are declared
void are explained below:

1
Avtar Singh, Contract & Specific Relief, Page- 288, 12th Edition, EBC Publishing (P) Ltd.
  Section 24. Agreements void, if consideration and objects
unlawful in part:

If any part of a single consideration for one or more objects, or any one or
any part part of any one of several consideration of a single object, is
unlawful, the agreement is void.

In the case of Gopalrao v. Kallappa2, a person was granted licence for the
sale of opium and ganja with this restriction that without the permission of
the collector he would not take any partner in the opium-ganja business.
Later on he admitted a partner without the permission of the collector after
receiving a fixed sum as his share of capital from him. The new partner
filed a case for the dissolution and refund of his money due to differences
arose between them but his claim was not allowed and the court held that it
is impossible to separate the contract.

 Section 25. Agreements without consideration:

This section says that an agreement made without consideration are void,
unless it is in writing and registered or is a promise to compensate for
something done or is a promise to pay a debt barred by limitation law.

 Section 26. Agreement in restraint of Marriage void:

Any agreement that restrains the marriage of a major (adult) is a void

agreement.  This does not apply to minors. But if an adult agrees for some
consideration not to marry, such an agreement is expressly a void
agreement according to the contract act.

In the case of Lowe v. Peers3, the husband contended that other than the
plaintiff if he marries to to a lady, he would give her 1000 pounds within
three months of his marriage but it was held that such an agreement is
void.

 Section 27. Agreement in restraint of trade void:

2
See, (1901) 3 Bom LR 164.

3
See, (1768) 4 Burr 2225.
An agreement by which any person is restrained from plying a trade or
practising a legal profession or exercising a business of any kind is an
expressly void agreement. Such an agreement violates the constitutional
rights of a person.

However, there are a few exceptions to this rule. If a person sells his
business along with the goodwill then the buyer can ask the seller to refrain
from practising the same business at the local limits.

So if according to such an agreement as long as the buyer or his successor

carry on such a business the agreement to restrain the trade of the seller
will be valid.

Similarly, if an outgoing partner can enter into such a restraint of a trade

agreement with the partnership firm. Also, a contract between partners not
to carry out any competing business during the continuance of
a partnership is also a valid contract.

One point to keep in mind regarding the above agreements is that the
terms of such an agreement have to be reasonable. Such reasonable
terms are not defined under the act but are to be judged according to each
unique situation and circumstance.

The scope of the this section came up for consideration before the Calcutta
High Court first in the case of Madhub Chander v. Raj Coomar4.

“The classification of agreements in restraint of trade must fluid and the

categories can never be closed”5.

This section contains one exception i.e., Sale of Goodwill- Saving of

agreement not to carry on business of which goodwill is sold.

Any restraint through which a person binds himself would be covered under
the exceptions to this section and would not be void6.

4
See, (1874) 14 Beng LR 76.
5
Esso Petroleum Co Ltd v. Harper’s Garage (Stourport) Ltd, UKHL 1 ,, AC 269.
6
Brahmaputra Tea Co. Ltd v. Scarth, (1885) ILR 11Cal 545.
In Firm Daulat Ram v. Firm Dharm Chand7, the restraint was held to be
valid as in a partnership,  two similar business owners, came to an
agreement that only one of their factories would work at a time and the
profit will be shared between them.

 Section 28. Agreements in restraint of legal proceedings void:

An agreement that prevents one party from enforcing his legal rights under
a contract through the legal process (of courts, arbitration, etc) then such
an agreement is expressly void agreement.

However, there are exceptions like, if the agreement states that any dispute
between parties will be referred to arbitration and the amount awarded in
such arbitration will be final will be a valid contract.

Also if the parties agree that any dispute between them in the present or
the future will be referred to arbitration, then such an agreement is also
valid. But such a contract has to be in writing.

It says that in case of breach of contract any agreement that restricts an

aggrieved party from enforcing his rights to approach a relevant court or
tribunal or limits the time within which he may to do so, is a void
agreement. It further says that any agreement that extinguishes the rights
of any party or discharges either of the parties from liability is a void
agreement.

This section have three exceptions:

1) Saving of contract to refer to arbitration dispute that may arise.

2) Saving of contract to refer questions that have already arisen.

3) Saving of a guarantee agreement of a bank or a financial institution.

In the case of Food Corporation of India v. New India Assurance Co.

Ltd8, the Supreme Court held that the an agreement which was made
should not be so construed as to bar the other party from seeking the
remedy of the suit.
7
See, AIR 1934 Lah 110.
8
See, 1994 SCC (3) 324.
  Section 29. Agreements void for uncertainty:

An agreement whose meaning is uncertain cannot be a valid agreement, it

is a void agreement. If the essential meaning of the contract is not assured,
obviously the contract cannot go ahead. But if such uncertainty can be
removed, then the contract becomes valid.

 Section 30. Agreements by way of wager, void:

 According to this section an agreement to wager is a void agreement.The

basis of a wager is that the agreement depends on the happening or non-
happening of an uncertain event. Here each side would either win or lose
money depending on the outcome of such an uncertain event.

The essentials of a wagering agreement are as follows. If all elements are

met then the agreement will be void.

1. Must contain a promise to pay money or money’s worth

2. Is conditional on the happening or non-happening of a certain event
3. The event must be uncertain. Neither party can have any control over
it
4. Must be the common intention to bet at the time of making the
agreement
5. Parties should have no other interest other than the stake of the bet

The following agreements are not considered wagering agreements,

(a)Chit Fund

(b)Commercial Transactions, i.e Transactions of the Share MArket

(c) Athletic Competition and Competitions involving Skills

(d) Insurance Contracts

Wager definition in a most illustrative form is given by HAWKINS J in Carlill

v. Carbolic Smoke Ball Co.9.
9
See,  (1893) 1 QB 256 (CA).
  Section 56. Agreement to do impossible act:
 It says that an agreement to do an act impossible in itself is void.

A contract to do an act which, after the contract is made, becomes

impossible, or by reason of some event which the promisor could not
prevent, becomes void when the act becomes impossible or unlawful.

Where one person has promised to do something which he knew, or with

reasonable diligence, might have known, and which the promisor did not
know to be impossible or unlawful, such promisor must make
compensation to such promise for any loss which such promise sustains
through the non- performance of the promise. 

For example- Tina agrees with Kapil to discover a treasure by magic, being

impossible of performance is void.

Conclusion:

It is concluded that void agreements are the agreement which has no legal
effect as it is not enforceable by law or In other words we can say that the
agreement which does not satisfy the essential elements of contract is void,
for example, the agreement which is made by a minor, an agreement which
is made without consideration, also the agreements which is made against
the public policy.

References:
1. Avtar Singh, Contract & Specific Relief, 12th Edition, EBC Publishing (P) Ltd.
2. http://lawtimesjournal.in/void-agreement
3. https://www.ourlegalworld.com/void-agreement-under-section-24-to-30-of-indian-
contract-act-1872/
4. https://www.taxdose.com/agreement-expressly-declared-as-void/
5. https://www.toppr.com/guides/business-laws/indian-contract-act-1872-part-ii/expressly-
void-agreements
6.  Brahmaputra Tea Co. Ltd v. Scarth, (1885) ILR 11Cal 545.