Void Agreements

Following are the list of void agreements:-

1. Agreements which have unlawful consideration

and/or objectives in whole or in part
2. Agreement without consideration
3. Agreement which is in restraint of marriage
4. Agreement which is in restraint of trade
5. Agreement which in restraint of legal
proceeding
6. Unmeaning agreement
7. Agreements which are wagering in nature
8. Agreement to do impossible act
Agreements which have unlawful consideration and/or objectives in whole or in part

If any part of a contract involves unlawful activities or

objectives, that specific part of the agreement is deemed void,
which means it's legally unenforceable. However, the rest of
the contract can still stand if it's possible to separate the
unlawful parts from the lawful ones.

For instance, consider a situation where Person A agrees to pay

Person B Rs 5000. The payment is for two things: to have an
adulterous relationship, and to work as a maid. The part of the
agreement involving the adulterous relationship is illegal and
therefore void. However, the maid work is a lawful activity.
Since these two activities can be clearly separated, the contract
for the maid work remains valid and enforceable.
Furthermore, if any legal transactions are mixed up with illegal
activities but can be isolated from them, these transactions can
still be considered valid and legally binding despite the overall
illegality in other parts of the agreement.

In simple terms, the law tries to salvage what is lawful in a

contract while discarding what is unlawful, provided the two
can be distinctly separated.
Agreement which is in restraint of marriage

This section of the law addresses agreements that restrict a

person's marital choices, declaring them void if they interfere
with someone's freedom to marry. Such restrictions can vary in
scope and intensity. For example, an agreement might prevent
someone from marrying:

• For a specific period of time.

• A certain class of people.
• A particular individual.
• At all.

These stipulations are considered void because they impose

unreasonable constraints on a person's fundamental right to
marry.
Two co-widows agree that if one remarries, she must relinquish
her share of the deceased husband's property. The court ruled
that this agreement does not restrain marriage because it does
not prevent any widow from remarrying. Instead, it only
specifies the financial consequences of choosing to remarry.
Essentially, the widow has the freedom to marry but must
accept the financial outcome specified in the agreement if she
does.

This distinction is crucial as it respects the individual's right to

marry while allowing them to enter into agreements that have
financial implications related to their marital decisions.
Agreement which is in restraint of trade

This section deals with agreements that unlawfully restrict

someone's right to work in their chosen profession or trade,
declaring such agreements void. The constitution guarantees
the freedom of trade and commerce as a fundamental right.
Therefore, just as the legislature cannot remove an individual's
right to practice any profession, similarly, no agreement can
lawfully restrict this right.
 Madhub Chander vs. Raj Commar

In this case, Madhub Chander and Raj Commar were business

competitors. To reduce competition, Raj Commar offered to pay
Madhub Chander a sum of money to shut down his shop in a
specific locality. Madhub Chander agreed and closed his shop,
but Raj Commar then refused to pay the agreed sum. Madhub
Chander sued for the recovery of the money, arguing that his
agreement to stop business in just one locality was a partial
restraint and thus should not be considered void under the law.

The court decided that the agreement was void. It clarified that
a "restraint" in this context does not mean only a total
prohibition against working in any locality but can also include
partial restrictions, such as limiting business operations to a
certain area.
Exceptions to the Rule:

1.Sale of Goodwill:

When a business owner sells the 'goodwill' of their

business, they can agree to not engage in the same type of
business within a certain area to protect the buyer’s new
venture. This ensures the buyer retains the value of the
purchased goodwill without competition from the seller.
The restriction must be reasonable based on the
business's nature.
Partnership Act Provisions:

• Section 11: Partners are prohibited from carrying on any

similar business if the partnership exists.

• Section 36: Allows partners to reasonably prevent an

outgoing partner from starting a similar business within a
certain area to protect the partnership's interests.

• Section 54: After a partnership is dissolved, the partners can

agree to restrict themselves from starting a similar business,
safeguarding the interests of all former partners.
Agreement which in restraint of legal proceeding

Section 28 of the Act is focused on protecting the right to

access legal proceedings by ensuring that contracts do not
unfairly restrict this right. Here’s a simplified breakdown of the
key points:

Absolute Restrictions on Legal Proceedings:

Any contract that completely prevents a party from

enforcing their rights through legal proceedings is
considered void. For instance, a clause stating that a party
cannot sue at all would fall under this category.
Limitations on Time to Sue:

Contracts that impose a time limit for starting legal proceedings

shorter than what is allowed by the Limitation Act of 1963 are
also void. The Limitation Act generally allows actions for breach
of contract to be filed within three years from the date the
breach occurred. If a contract specifies, for example, that
lawsuits must be filed within two years, this would be void.

Amendment to Section 28 in 1997:

An update to this section specified that any contractual clause

that reduces the statutory period for filing a lawsuit beyond
what is established by law will be considered void to that
extent.
Partial Restrictions:

If a contract partially restricts the right to sue but does not

completely prevent it, such an agreement is still valid. For
example, a contract that allows suing under certain conditions
but not others does not completely prevent legal action and is
therefore valid.
Exceptions for Arbitration:

The section does not consider agreements void if they direct

disputes to arbitration. This includes:

Future Disputes: Agreements stating that any future

disputes will be resolved through arbitration are valid.

Existing Questions: Agreements that mandate arbitration

for existing issues are also upheld.
Unmeaning agreement

Section 29 of the Act deals with the clarity and certainty

required in contractual terms. Contracts must be clear enough
for all parties involved to understand their obligations, rights,
and the terms of agreement. If a contract contains terms that
are ambiguous or unclear, making it difficult or impossible to
ascertain the meaning, then such a contract is deemed void.
 Key Illustrations of Section 29:

Multiple Business Locations:

Example: If A enters a contract with B to deliver a certain

amount of wheat to B’s "place of business" but B has
several locations, the contract does not specify which
location the wheat should be delivered to. This lack of
clarity about the delivery location can lead to confusion
and disputes. Since the contract does not clearly specify
where the obligations are to be fulfilled, it is considered
void due to its ambiguity.
 Subjective Terms:

Example: Consider a contract where a car is bought for Rs

1,00,000 with an additional provision that the buyer will pay
more if the car is found to be "lucky." The term "lucky" is
inherently subjective and not measurable by objective
standards. Since it's unclear how one would determine whether
the car is lucky or not, the provision is considered too vague to
be enforceable, rendering the agreement void.
Agreements which are wagering in nature

Section 30 of the Act addresses wagering contracts, which are

agreements based on the occurrence of a future uncertain
event. These contracts are generally considered void because
they involve betting on outcomes in which the parties have no
control and are purely speculative. Here's a breakdown of this
section and its key elements:
Key Characteristics of Wagering Contracts:

• Uncertain Events:

The contract must involve an uncertain future event or an

event that has already occurred but is unknown to the
parties. This uncertainty is the basis of the wager.

• Mutual Chances of Gain and Loss:

Each party must have an equal chance to win or lose

based on the outcome of the event. This mutual risk is
essential for a contract to be considered a wager.
No Control Over the Event:

Neither party involved in the wager can have any control over
the event's outcome. If one party can influence the result, the
contract is not a true wager.

No Interest in the Event Beyond the Bet:

The parties should not have any vested interest in the event
itself other than the outcome of their bet. This distinguishes
wagering from insurance contracts, where the policyholder has
an insurable interest in the insured event.
Exceptions to the Rule:

While most wagering contracts are void, there are exceptions

where such agreements are legally enforceable:

Horse Racing:

Wagering contracts related to horse racing are often exempt

from being void, provided they meet certain legal criteria.

Competitions Involving Skill:

Competitions where skill plays a significant role (like some

crossword or other intellectual contests) are not considered
wagers. However, if a competition's outcome relies primarily on
chance, it is treated like a lottery and is subject to wagering
regulations.
Contingent Contract

A contingent contract is essentially an agreement where the

obligation to perform or to refrain from performing is triggered
by the occurrence or non-occurrence of a certain event, which
must be external to the contract and uncertain in nature.

Key Elements of Contingent Contracts:

• Dependency on an Event: The performance of the contract

depends on the outcome of a future event.

• Event is Collateral: The event must be collateral, meaning it

is not directly related to the contract but rather incidental or
external to it.
Doctrine of Frustration

The Indian Contract Act, 1872, does not define the term
“frustration of contract”.

However, the doctrine of frustration is enshrined under section

56 of the Act. According to section 56, an agreement to do an
impossible act is void. Further, it states that when a contract to
do an act becomes impossible, or, by reason of some event
which the promisor cannot prevent, it becomes unlawful, the
whole contract becomes void when the act becomes
impossible or unlawful.
Conditions required to prove frustration of Contract

• The existence of a valid contract between both parties is

essential;
• The contract should not have been performed yet;
• The performance of the contract has become impossible;
• The impossibility has occurred due to the event being
uncontrollable by both parties.
Reasons for the Frustration of Contract

1. Destruction of Subject Matter

The doctrine of impossibility applies with full force “where the actual
and specific subject matter of the contract has ceased to exist”.

2. Change of Circumstances
A contract will frustrate where circumstances arise which make the
performance of the contract impossible in the manner and at the
time contemplated.

3. Non-occurrence of a Contemplated Event

If the contract between two parties is based on an event, and that
event becomes impossible to do, then the contract will become void.

4. Government, the administrative or legislative intention

The contract can be frustrated due to the law. If a situation arises
that the legislation has passed the new laws in which the objective
of your contract has become void, it will also lead to the frustration
of the contract.
• Death or incapacity of a party

• Intervention of War

The intervention of war makes the performance of

the contract difficult, thereby making the contract
void.

For example, A, an Indian company enters a

contract with B, a Chinese manufacturer to sell
4000 pieces of crackers before Diwali. However,
before the delivery could take place, war broke out
between India and China resulting in India
suspending the import of all Chinese goods. This is
an example where the Doctrine of
Frustration will be applicable.
Satyabrata Ghose v. Mugneeram Bangur and Co. 1954 AIR 44,
1954 SCR 310

In this case, the defendant company promised to sell the

plaintiff a plot of land after developing it by constructing the
roads and drains. However, some portion of the area comprised
in the scheme was requisitioned for military purposes. The
Supreme Court, while applying the doctrine, held that the
requisitioning of the area had not substantially prevented the
performance of the contract as a whole and therefore, the
contract had not become impossible within the meaning of
section 56 of the Indian Contract Act.