Void Agreement

The Indian Contract Act, 1872 defines a Contract under Section 2(h) as an ‘agreement enforceable by law’.

There are two key elements of this definition.

  1. Agreement

An agreement can be defined as promises between two or more parties based on mutual obligations.

  • Enforceable by law

For any agreement to be a contract it has to have an offer that is accepted, there must be consideration provided on the promise being completed and the parties should have mental capacity.

According to Section 23 of The Indian Contract Act, 1872 that agreements comprise considerations that are unlawful in nature and are called void contracts.

An agreement can be considered a void agreement when:-

  • It is unlawful in nature or opposes the public policy
  • It is fraudulent in nature
  • It is considered to be immoral by the Court
  • It consists of parties who are mentally capable enough to comprehend the consequences of the agreement

Agreements that are void from the very beginning are called ‘ab-Initio. These agreements include conditions such as promises that cannot be executed, oppose the public policy, are unlawful, and are made without any consideration.

There are also void agreements that were valid at the point of time but gradually ceased to have legal effect. This can be because of new laws being passed that now claim the agreement to be unlawful, the promises become impossible to fulfill due to external circumstances, and the contract being contingent on a condition that cannot happen now.

Agreements that are stated to be void agreements under Indian Contract law are:

  1. Agreements in which the consideration or parts of the consideration are unlawful

 Section 24 of the Indian Contract Act, 1872 it is stated that if any part of a single consideration for one or more objects or anyone or any part of several considerations for a single object is unlawful, the agreement is considered to be void agreement.

  • Agreements without any consideration

Section 25 of the Indian Contract Act, 1872 stated that an agreement without consideration is void unless it is in writing and registered, is a promise to compensate for something or is a promise to pay debt time-barred by the limitation law.

There are a few exceptions to this rule:

  1. Agreements made due to natural care and affection
  2. Agreements made in order to compensate
  3. Agreements made as a promise to pay a time-barred debt
  • Agreements in restraint of marriages

Section 26 of the Indian Contract Act, 1872 it is stated that any agreement in restraint of marriage of any person other than a minor 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. Pankaj Mithal, J. cited Section 26 of the Indian Contract Act, 1872 while pronouncing his judgment, whereby he dismissed the petition.

  • Agreement in restraint of trade

 Section 27 of the Indian Contract Act,1872 it is stated that an agreement restraining any individual to carry out their lawful profession is void.

The Delhi High Court in Modicare Ltd. v. Gautam Bali2, has explained the validity of Section 27 of ICA as:

Section 27 of the Contract Act makes void i.e. unenforceable, every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind. Thus, even if the defendants or any of them, under their agreement with the plaintiff, had undertaken not to carry on or be involved in any capacity in any business competing with the business of the plaintiff, even after leaving employment with/association of the plaintiff, the said agreement, owing to Section 27 supra, would be void and unenforceable and the plaintiff on the basis thereof could not have restrained any of the defendants from carrying on any business or vocation, even if the one which the defendant had agreed not to carry on. Section 27, contained in the legislation of the year 1872, on promulgation of the Constitution of India in the year 1950, conferring the right to practice any profession or to carry on any occupation, trade, or business, the status of a fundamental right, under Article 19(1) (g) thereof, today has a different connotation. Article 19(6) only clarifies that nothing contained in clause (g) shall affect the operation of any existing law or prevent the State from making any law, imposing in the interest of the general public, reasonable restrictions on the exercise of the right conferred by the said clause. Thus, restrictions, in the interest of the general public and if reasonable, to the fundamental right to practice any profession or to carry on any occupation, trade, or business, can be imposed only by law.

  • Agreement in restraint of Legal Proceedings

Section 28 of the Indian Contract Act, 1872 stated that any agreement that restricts an aggrieved party from enforcing his rights to approach a relevant court or tribunal in case of a breach of contract, or limits the time within which he may do so, is a void agreement. It further states any agreement that extinguishes the rights of any party or discharges either of the parties from liability is a void agreement.

There are two exceptions to Section 28:

  • A future dispute or a past dispute is referred to as arbitration. That is if there is an arbitration clause in the said agreement.
  • Agreements stating the limit of time as per the Limitation Act, 1963. For instance, as per the Limitation Act, 1963, a suit for breach of contract may be brought within a period of three years from the date of the breach.

Food Corporation of India v. New India Assurance Co. Ltd. The Supreme Court of India held that the terms of an agreement should not be so construed as to bar the other party from seeking the remedy of the suit.

  • Uncertain Agreement

Section 29 of the Indian Contract Act,1872  stated that agreements which don’t have their meanings certain or capable of being made certain are void.

  • Wagering agreement

Section 30 of the Indian Contract Act, 1872 stated that agreements by way of wager are void, and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide by the result of any game or other uncertain event on which any wager is made.

  • Agreements that are impossible in nature

Section 56 of the Indian contract Act, 1872 stated that any agreement impossible in itself to perform is void.

Thus, Void agreements are formal agreements that are illegitimate and unenforceable by law.

References

Aishwarya Says:

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