Ch # 3.

Validity of Contracts and Agreements Page 14

VALIDITY OF CONTRACTS AND AGREEMENTS

Void agreement [Section 2(g)]

An agreement not enforceable by law is said to be void.
Notice that a void agreement is void ab initio i.e. void from the beginning.

Valid contract [Section 2(h)]

An agreement enforceable by law is a contract.

Void contract [Section 2(j)]

A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable.
Note: Void contract was valid contract at the time of formation but subsequently it ceases to
be enforceable.

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 the other or others, is a voidable contract.
(Contract is voidable at the option of aggrieved party and not at the option of defaulting party)

Essentials of a valid contract [Section 10]

An agreement is a contact if it meets the following conditions:

§ The agreement is made by the free consent of the parties. (Discussed in later chapters)
§ The parties making the agreement are competent to contract.
§ The agreement is made for a lawful consideration.
§ The agreement is made with a lawful object.
§ The agreement is not expressly declared to be void by law. (Discussed in later chapters)

Competent to contract [Section 11]

Every person is competent to contract who is:

§ Of the age of majority according to the law to which he is subject; and
§ Of sound mind; and
§ Not disqualified from contracting by any law to which he is subject.

Age of Majority
As per Majority Act, 1875, age of majority of a person domiciled in Pakistan is
§ 18 years (normal case)
§ 21 years (where a guardian of a minor is appointed by the court)
Ch # 3. Validity of Contracts and Agreements Page 15

Rules for Minor

§ An agreement with a minor is void ab initio.

§ It is necessary that the minor must be competent to contract at the time of entering in the
contract. Agreement with a minor cannot be ratified subsequently after he attains majority.
(Ratification is approving or accepting something which has happened already)
§ A minor cannot be declared insolvent because he is incompetent to contract.
§ If a minor enters into an agreement jointly with a major person then such agreement can be
enforced against the major person who has jointly promised to perform.
§ If minor represents fraudulently or otherwise that he is of age of majority and induces
another to enter into a contract with him, even then, he will not be liable. Rule of estoppel
does not apply to minor.
(Tutor’s Note: We would be discussing Estoppel in later chapters)

Sound mind [Section 12]

A person is said to be of sound mind for the purpose of making a contract

§ if at the time when he makes it,
§ he is capable to understand the terms of the contract,
§ to form a rational judgment as to its effect upon his interests.

The examples of persons having an unsound mind include:

§ Specific persons/idiots (permanent insanity)
§ Lunatics (mental strain or disease with possibly some intervals of sanity)
§ Drunken persons (excessive use of certain things may cause temporary incapability of mind).

Rules for unsound person

§ A person who is usually of unsound mind, but occasionally of sound mind, may make a
contract when he is of sound mind.
§ A person who is usually of sound mind, but occasionally of unsound mind, may not make a
Contract when he is of unsound mind.

Disqualified from contracting by law

Following persons are disqualified by certain legislation in respect of their capacity to contract:
§ A citizen of foreign country while Pakistan is at war with that country.
§ Foreign sovereigns and ambassadors have immunity. They have a right to enter into a
contract but can claim the privilege of not being sued.
(unless they choose to submit themselves to the jurisdictions of our courts).
§ A convict while under imprisonment is incapable of contracting
(but this disability comes to an end after the expiry of the sentence or when he is on parole)
§ A person declared as insolvent cannot enter into a contract
(his property is dealt with by official assignee or official receiver)
Ch # 3. Validity of Contracts and Agreements Page 16

CONSIDERATION AND OBJECT

Consideration2
When at the desire of the promisor, the promisee or any other person who has done or
abstained from doing, or does or abstains from doing, or promises to do or to abstain from
doing something, such act or abstinence or promise is called a consideration for the promise.

§ Consideration may be:

- An act (i.e. doing something);
- An abstinence or forbearance; or
- A promise (for act or abstinence in future).
§ Consideration must be at the desire of promisor.
§ Consideration may be from promisee or any other person.
§ Consideration may be past, present, or future.
§ Consideration must be something which the promisor is not already bound to do
§ Consideration must be real and not illusory.

Adequacy of Consideration [Section 25]

§ If consideration is inadequate but consent of promisor is freely given then its valid.
§ However court may suspect that consent was not free because consideration is inadequate

Agreements without consideration is void except following

Natural love Agreements made on account of natural love and affection, if it is:
and § Expressed in writing,
affection3 § Registered under the law,
§ Made on account of natural love and affection, and
§ Between parties standing in a near relation to each other.
Promise to Such promise made is valid if:
compensate § It is a promise to compensate and
past § The person who is to be compensated has already done something
voluntary voluntarily or has done something which the promisor was legally bound
services4 to do.
Time barred A promise to pay time barred debt is enforceable if:
debt § It is made in writing,
§ It is signed by the debtor or his agent, and
§ It relates to a debt which could not be enforced by a creditor because of
law of limitation.
Gifts5 Gifts which are accepted by the donee are called completed gifts and are valid
A gift is executed in writing through a deed duly registered
Ch # 3. Lawful consideration and objects, and capacity of parties Page 17

Circumstances where object or consideration is unlawful [Section 23]

Every agreement of which the object or consideration is unlawful is void.

The consideration or object of an agreement is lawful, unless

§ It is forbidden by law; or
§ Is of such a nature that, if permitted, it would defeat the provisions of any law; or
§ Is fraudulent; or
§ Involves or implies injury to the person or property of another; or
§ Court regards it as immoral, or opposed to public policy.

Where object or consideration is partly unlawful [Section 24]

The agreement is void:

§ if any part of a single consideration for one or more objects, is unlawful; or
§ if any one or any part of any one of several considerations for a single object, is unlawful.