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Basics of Void Agreement and Void Contract
INTRODUCTION
A contract is an agreement enforceable by law. All agreements, however, may not always be valid. All contracts are agreements but not all agreements are contracts. According to Section 2(g) of the Indian Contract Act of 1872, an agreement not enforceable by law is void. Section 10 of the act prescribes the essential elements required for a valid agreement, which in turn in most cases leads to a valid contract. A void agreement does not give rise to a contract and is void ab initio.
An agreement becomes void when complies with certain non-essentials of a valid agreement. They are:
- An agreement with incompetent parties, such as mentally challenged persons, minors, etc.
- An agreement with unlawful consideration
- An agreement without consideration
- An agreement that restrains a person from getting married
- An agreement that restrains trade
- An agreement that restrains legal proceedings
- An agreement that is unmeaning
- An agreement which is wagering in nature, and so on
Section 2 (j) of the Indian Contract Act, 1872 defines a Void Contract as a contract that no longer remains a valid contract and cannot be enforced in a court of law. When a contract is declared void, the individual who has received any advantage under it is required to either restore it or make compensation for it to the person from who he received it. In the case of a void contract, it is not void from the beginning, but it loses its validity later on.
A contract becomes void in the following scenarios:
- Supervening impossibility
- Subsequent illegality
- Change of law
- Repudiation of voidable contract
- Contingent contract, etc.
NATURE OF AGREEMENT
According to section 2(e), every promise and every set of promises, forming the consideration for each other, is an agreement, which implies that agreement is by nature, a promise. A promise is defined under section 2(b) of the Indian Contract Act, 1872 as “when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise”. This implies that in order for an agreement to form, it should have:
- A plurality of persons: There must be two or more parties for an agreement to come into existence. A person cannot enter into an agreement with himself
- Consensus ad idem: All parties should agree to the subject of agreement in the same sense and at the same time
In an agreement, there is a promise from both sides.
Illustration: A promises to sell his car to B and in return B promised A to pay a sum of Rs.60,000 to him. This is thus an agreement between A and B.
ILLEGAL AND VOID AGREEMENT
- An illegal agreement is not enforceable by law and is forbidden by IPC
- A void agreement is not enforceable by law but may not be prohibited by IPC
- An illegal agreement can lead to the penalization of one or both the parties
- A void agreement has no legal consequences since it is void ab initio
- All illegal agreements are void
- All void agreements are not illegal
- Agreements connected to illegal agreements will be void
- Agreements connected to void agreements may be valid
- Illegal agreements have a narrow scope
- Void agreements have a wide scope
- Illustration of illegal agreement: an agreement between two parties to commit homicide in exchange for financial gain.
- Illustration of void agreement: An agreement between two parties where one of them is a minor.
NATURE OF CONTRACT
According to Section 2(h) of the Indian Contract Act, an agreement enforceable by law forms a contract. A contract is an agreement between two or more persons or organizations to perform or abstain from performing certain acts in the present or future. Basically, it is a legally binding exchange of promises.
To establish a contract, all parties must make their intention to enter into a legally binding promise clear. The conditions of the contract must be specific so what exactly is being promised can be brought into the knowledge of the court.
There must be a mechanism of enforcement that would allow the concerned court to ensure that the parties involved honoring the obligations listed in the contract
A contract must specify the following:
- Identities of the participating parties
- A promise made by all parties
- Price for the performance
- Time limit, if applicable
There are 4 basic essentials required to form a contract. There are:
- Offer
- Acceptance
- Intention to create a contract and certainty
- Consideration and promissory estoppel
Illustration: A offers B to sell his car for Rs. 60,000. B communicates his acceptance and sends the pre-decided sum to A and gets the car in exchange.
VOID AND VOIDABLE CONTRACT
- The definition of a voidable contract is under section 2(i) of the ICA.
- The definition of a void contract is mentioned under section 2(g) of the ICA.
- The voidable contract is an agreement that 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.
- The contract is valid, but it subsequently becomes invalid due to certain reasons.
- In a voidable contract, only the aggrieved party has rights.
- In a void contract, there are no rights to party.
- In case of a voidable contract, the aggrieved party can claim a remedy
- In a void contract suit for damage is not given to any party in case of non-performance, but in case any benefit was caused by the nulled contract they must be repaid.
- Illustration of voidable contract: A forces B to enter into a contract to sell his property for Rs.4,000. In this case, it is at B can either choose to perform the contract, making it void or decline, making it void.
- Illustration of void contract: A promises to pay B a sum of money if a certain ship returns within the year. The contract may be enforced if the ship returns within the year; and becomes void if the ship is burnt within the year.
VOID AGREEMENT AND VOID CONTRACT
- The void agreement is neither enforceable by law nor does it lead to any legal consequences.
- A void contract is not enforceable and may or may not lead to a legal penalty.
- Void agreements are void from the beginning.
- Void contracts are valid at the time of creation but become void later on.
- Void agreements are unenforceable due to the absence of one or more necessary elements.
- Void contracts are void due to the impossibility of performance.
- Damages or restorations are not granted in case of void agreements except under certain circumstances.
- Restitution is granted to the aggrieved party when the contract becomes void if the rights were hurt.
- Illustration of void agreement: A makes an offer to B, who is a minor, to buy 10 books from B for Rs.100. This agreement is void because an agreement with a minor is void ab initio.
- Illustration of void contract: A signs a contract with B to sing at B’s birthday party. However, on the day of the performance A falls from the stairs and goes into a coma, hence cannot perform at the event. The contract is now void.
