Void Agreements in Contract Law
Void Agreements in Contract Law
1. Definition of Void Agreement
A void agreement is an agreement that is not legally enforceable from the very beginning. It lacks legal effect and cannot be enforced by either party in a court of law.
It is different from a voidable contract, which is initially valid but can be voided at the option of one party.
A void agreement creates no rights or obligations on the parties.
2. Legal Position under Indian Contract Act, 1872
Section 2(g) of the Indian Contract Act, 1872 defines a contract as an agreement enforceable by law.
An agreement not enforceable by law is not a contract.
Void agreements are specifically addressed in Section 2(j) and Section 10 which lays down the essentials of a valid contract.
Agreements which lack any one or more of these essentials are void.
3. Characteristics of Void Agreement
No legal obligation arises.
Neither party can enforce it.
It has no legal effect.
It is void from the outset.
It cannot be ratified or enforced later.
4. Types of Void Agreements
Some common categories of void agreements include:
4.1 Agreement without Consideration
An agreement without consideration is void unless it is in writing and registered under Section 25 of the Indian Contract Act.
Exception: Natural love and affection between parties related in blood.
4.2 Agreement in Restraint of Trade
Any agreement restraining a person from exercising a lawful profession, trade, or business is void under Section 27.
However, reasonable restrictions like non-compete clauses during sale of business may be valid.
4.3 Agreement in Restraint of Legal Proceedings
Agreements restraining parties from approaching courts or legal tribunals are void under Section 28.
4.4 Agreement for Uncertain or Impossible Event
An agreement to do something impossible or uncertain is void (Section 56).
4.5 Agreement to do Illegal Acts
Any agreement for illegal or immoral purposes is void.
5. Distinction Between Void and Voidable Agreements
| Aspect | Void Agreement | Voidable Agreement |
|---|---|---|
| Legal Status | Not enforceable from the beginning | Initially valid, but can be voided |
| Effect | No legal effect | Valid until voided by aggrieved party |
| Example | Agreement in restraint of trade | Contract induced by fraud or coercion |
6. Important Case Laws on Void Agreements
a) Derry v. Peek (1889) 14 App Cas 337
The court held that a contract based on false statements made fraudulently is voidable, but a fraudulent agreement is generally void if illegal.
b) Nair Service Society Ltd. v. K.C. Alexander (1968) 2 SCR 157
The Supreme Court held that an agreement which restricts the transfer of property is valid if it is reasonable and not against public policy, else void.
c) Gherulal Parekh v. Mahadeodas Maiya AIR 1959 SC 781
The Court held that an agreement without consideration is void unless in writing and registered or unless it falls under exceptions.
d) Foster v. Mackinnon (1869) LR 4 CP 704
Established that an agreement to restrain a person from practicing a lawful profession is void as against public policy.
e) Bhim Singh v. Union of India AIR 1981 SC 234
The Court held that agreements made for an illegal object are void and cannot be enforced.
7. Effect of Void Agreements
Neither party can sue for performance or damages.
If any party has received any benefit, it must be restored to prevent unjust enrichment.
Quasi-contractual remedies may apply to recover money or property transferred under a void agreement.
8. Illustrative Examples of Void Agreements
An agreement to sell a property that the seller does not own.
Agreement restraining a person from carrying on trade forever.
Agreement promising to pay money for illegal gambling winnings.
Contract to commit a crime or fraud.
9. Conclusion
Void agreements are those agreements which are not enforceable by law and therefore create no legal obligations or rights. Their foundation lies in public policy, legality, and fairness. The law regards such agreements as nullities, to prevent misuse and maintain social and legal order.
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