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“All illegal agreements are void but All void agreements are not illegal.” Discuss in detail.
According to section 2 (g), “an agreement not enforceable by law is void.” Such agreement does not give rise to any legal consequences and is void ab initio.
It will be useful to distinguish between illegal agreement and void agreements. An unlawful or illegal agreement is one which is actually forbidden by law. A void agreement on the other hand, is not forbidden by law as in the case of a contract with minor. But both illegal and void agreements are not enforceable by law. Thus, “All illegal agreements are void but All void agreements are not illegal.”
The following agreements have been expressly declared as void by the Indian Contract Act:
1. Agreement made by incompetent parties [Sec. 11]: According to Section 11, the following persons are incompetent to contract, and contracts entered into by these persons are void:
i) A Minor
ii) Person of unsound mind
iii) A person disqualified by any law.
2. Agreement made under a mutual mistake of fact [Sec. 20]: Section 20 provides that “where both parties commit a mutual mistake as to a matter of fact, essential to the agreement, that agreement is void.”
For example: ‘A’ agrees to sell his horse to ‘B’. Both ‘A’ and ‘B’ are unaware that the horse is dead. The agreement is void.
3. Agreement, the consideration or object of which is unlawful [Sec. 23]: According to Section 23 of the Indian Contract Act, “an agreement of which the object or consideration is unlawful is void.” Both the object and the consideration of agreement must be lawful otherwise the agreement would be void.
4. Agreement, the consideration or object of which is unlawful in part [Sec. 24]: According to Section 24 of the Contract Act, where consideration and object of an agreement is unlawful in part, and unlawful part cannot be separated from the lawful part, the whole agreement is void.
For example: ‘A’ promises to work on behalf of ‘B’, a legal manufacturer of indigo and an illegal traffic in other articles. ‘B’ promises to pay Rs. 10,000 a year to ‘A’. The agreement is void.
5. Agreement made without consideration [Sec. 25]: Every agreement to be enforceable at law must be supported by valid consideration. “No consideration No contract.” An agreement made without consideration is a void and unenforceable except in certain cases. Section 25 specifies the cases where an agreement though made without consideration will be valid.
6. Agreement in restraint of marriage [Sec. 26]: According to Section 26, An agreement in restraint of marriage of any person other than a minor is void. An agreement that restrains a person not to marry at all, or agreement that restraining a person from marrying somebody or restraining from marrying anybody except particular person, all such agreements are void agreements.
For example: ‘A’ promised to marry none except ‘B’, and in default to pay her a sum of £2,000. ‘A’ married to someone else. ‘B’ sued ‘A’ for recovery of the said amount. It was held that the agreement was in restraint of marriage and agreement is void.
7. Agreement in restraint of trade [Sec. 27]: According to Section 27, every agreement by which one is restrained from exercising a lawful profession, trade or business is said to be a void agreement. Any restriction which may be absolute, partial or restriction limited to some place or restriction limited to a fixed time; all are in the nature of the nature of the restraint of trade and therefore are void.
For example: An agreement to close a mill for three months in a year, is void.
8. Agreement in restraint of legal proceedings [Sec. 28]: Section 28 as amended by the Indian contract (Amendment) Act 1997 states that every agreement by which a party is restrained absolutely from enforcing his rights under contract by ordinary legal proceedings in the ordinary tribunals, or which limits the time within which he can enforce his rights, is void to that extent.
For example: ‘A’ in Jalandhar enters into a contract with ‘B’ in Bangalore that all the disputes will be subject to Bangalore jurisdiction. This limits the rights of ‘A’ to sue only in Bangalore Court in case of dispute.
9. Agreement the meaning of which is uncertain [Sec. 29]: Section 29 provides that an agreement the meaning of which is not certain or capable of being made certain is void.
For example: The buyer of a horse agreed to pay £5 more, if the horse proved lucky. The agreement was held to be void for uncertainty.
10. Agreements by way of wager [Sec. 30]: According to Section 30, agreement by way of wager are void. No suit will lie for recovering anything alleged to be won on any wager or entrusted to any person to abide by the results of any game or other uncertain event on which any wager is made.
For example: There is an agreement between ‘A’ and ‘B’ which provides that if it rains on a particular day, ‘A’ will pay ‘B’ Rs. 100 and if it does not rain ‘B’ will pay the same amount t ‘A’. it is a wagering agreement.
11. Agreements to do impossible acts: An agreement to do or not to do anything, if an impossible event happens, are void. Where the impossibility of the event is known or not to the parties of the agreement at the time when it is made.
For example: ‘A’ agrees to pay ‘B’ Rs. 1,000 if two parallel lines become one, is void.
According to section 2 (g), “an agreement not enforceable by law is void.” Such agreement does not give rise to any legal consequences and is void ab initio.
It will be useful to distinguish between illegal agreement and void agreements. An unlawful or illegal agreement is one which is actually forbidden by law. A void agreement on the other hand, is not forbidden by law as in the case of a contract with minor. But both illegal and void agreements are not enforceable by law. Thus, “All illegal agreements are void but All void agreements are not illegal.”
The following agreements have been expressly declared as void by the Indian Contract Act:
1. Agreement made by incompetent parties [Sec. 11]: According to Section 11, the following persons are incompetent to contract, and contracts entered into by these persons are void:
i) A Minor
ii) Person of unsound mind
iii) A person disqualified by any law.
2. Agreement made under a mutual mistake of fact [Sec. 20]: Section 20 provides that “where both parties commit a mutual mistake as to a matter of fact, essential to the agreement, that agreement is void.”
For example: ‘A’ agrees to sell his horse to ‘B’. Both ‘A’ and ‘B’ are unaware that the horse is dead. The agreement is void.
3. Agreement, the consideration or object of which is unlawful [Sec. 23]: According to Section 23 of the Indian Contract Act, “an agreement of which the object or consideration is unlawful is void.” Both the object and the consideration of agreement must be lawful otherwise the agreement would be void.
4. Agreement, the consideration or object of which is unlawful in part [Sec. 24]: According to Section 24 of the Contract Act, where consideration and object of an agreement is unlawful in part, and unlawful part cannot be separated from the lawful part, the whole agreement is void.
For example: ‘A’ promises to work on behalf of ‘B’, a legal manufacturer of indigo and an illegal traffic in other articles. ‘B’ promises to pay Rs. 10,000 a year to ‘A’. The agreement is void.
5. Agreement made without consideration [Sec. 25]: Every agreement to be enforceable at law must be supported by valid consideration. “No consideration No contract.” An agreement made without consideration is a void and unenforceable except in certain cases. Section 25 specifies the cases where an agreement though made without consideration will be valid.
6. Agreement in restraint of marriage [Sec. 26]: According to Section 26, An agreement in restraint of marriage of any person other than a minor is void. An agreement that restrains a person not to marry at all, or agreement that restraining a person from marrying somebody or restraining from marrying anybody except particular person, all such agreements are void agreements.
For example: ‘A’ promised to marry none except ‘B’, and in default to pay her a sum of £2,000. ‘A’ married to someone else. ‘B’ sued ‘A’ for recovery of the said amount. It was held that the agreement was in restraint of marriage and agreement is void.
7. Agreement in restraint of trade [Sec. 27]: According to Section 27, every agreement by which one is restrained from exercising a lawful profession, trade or business is said to be a void agreement. Any restriction which may be absolute, partial or restriction limited to some place or restriction limited to a fixed time; all are in the nature of the nature of the restraint of trade and therefore are void.
For example: An agreement to close a mill for three months in a year, is void.
8. Agreement in restraint of legal proceedings [Sec. 28]: Section 28 as amended by the Indian contract (Amendment) Act 1997 states that every agreement by which a party is restrained absolutely from enforcing his rights under contract by ordinary legal proceedings in the ordinary tribunals, or which limits the time within which he can enforce his rights, is void to that extent.
For example: ‘A’ in Jalandhar enters into a contract with ‘B’ in Bangalore that all the disputes will be subject to Bangalore jurisdiction. This limits the rights of ‘A’ to sue only in Bangalore Court in case of dispute.
9. Agreement the meaning of which is uncertain [Sec. 29]: Section 29 provides that an agreement the meaning of which is not certain or capable of being made certain is void.
For example: The buyer of a horse agreed to pay £5 more, if the horse proved lucky. The agreement was held to be void for uncertainty.
10. Agreements by way of wager [Sec. 30]: According to Section 30, agreement by way of wager are void. No suit will lie for recovering anything alleged to be won on any wager or entrusted to any person to abide by the results of any game or other uncertain event on which any wager is made.
For example: There is an agreement between ‘A’ and ‘B’ which provides that if it rains on a particular day, ‘A’ will pay ‘B’ Rs. 100 and if it does not rain ‘B’ will pay the same amount t ‘A’. it is a wagering agreement.
11. Agreements to do impossible acts: An agreement to do or not to do anything, if an impossible event happens, are void. Where the impossibility of the event is known or not to the parties of the agreement at the time when it is made.
For example: ‘A’ agrees to pay ‘B’ Rs. 1,000 if two parallel lines become one, is void.
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