VOID AGREEMENTS

An agreement not enforceable by

law is said to be a void agreement
in terms of Section 2(g). It does not
give rise to any legal consequences
and is void ab initio.

Agreement Expressly
Declared Void
1. Agreement by incompetent persons [Sec.
11]
2. Agreements made under a bilateral
mistake of fact material to the agreement
[Se. 20].
3. Agreements with unlawful objects or
consideration [Sec.23].
4. Agreements of which consideration or
object is unlawful in part [Sec.24].

6. Agreements in restraint of marriage

[Sec. 26].
7. Agreements in restraint of trade
[Sec.27].
8. Agreements in restraint of legal
proceedings [Sec.28].
9. Agreements the meaning of which are
uncertain [Sec.29].
10. Agreements by way of wager [Sec.
30].
11. Agreements contingent on impossible
event [Sec.56].

Agreements of which consideration

or object is unlawful in part [Sec.24].
1. Where the legal part can not be separated
from the illegal part then
(a)If there are several objects but a single
consideration, the agreement is void if any one
of the objects is unlawful.
(b)If there is a single object but several
consideration, the agreement is void if any one
of the considerations in unlawful.

Eg.: A agrees to supervise on

behalf of B a legal manufacture in
indigo and an illegal traffic in other
articles for a salary of Rs. 10,000/- a
year. The Agreement is void, the
object of As promise and the
consideration of Bs promise being
in part unlawful.

2. Where there is a reciprocal promise to

things legal and also the things illegal,
and the legal part can be separated from
the illegal part, the legal part is a contract
and the illegal part is a void agreement.
Eg.: A agrees to sell his house to B for
Rs. 10,000/- , but that if B used it as a
place of gambling, he shall pay Rs.
50,000/- to A. The first part of the
agreement is valid and binding but the
second part shall be void and
unenforceable.

3. In the case of an alternative

promise, one branch of which is legal
and the other illegal, the legal branch
alone can be enforced.
Eg.: A agrees to pay B Rs. 1000/- for
which B is to deliver either rice or
smuggled opium. There is a valid
contract to deliver rice and a void
agreement as to opium.

Agreement in Restraint of marriage:

Every agreement in restraint of marriage
of any person, other than a minor is void.

Eg.: In Lower Vs. Peers, P promised to

marry L only and none else and to pay a
definite sum if he married someone else.
P married X . Held L could not recover
the sum as the agreement was in
restraint of marriage and therefore
unenforceable.

Agreement in restraint of Trade:

Every agreement by which anyone is
restrained from exercising a lawful
profession, trade or business of any kind,
is to that extent void.

Eg: In Madhub Chander Vs. Raj Koomar,

A and B were rival shopkeepers in a
locality of Kolkata. B agreed to pay A, a
sum of money if he would close his
business in that locality. A did so but B
refused to pay him. Held , the
agreement was void.

A. Statutory Exception
1. Sale of goodwill
(a)The seller should be restrained only from
carrying on a similar business.
(b)The restriction shall apply so long as the
buyer or any person deriving title from
him, is carrying on a similar business.
(c) The restraint should apply only within
specified local limits.
(d)The restraint must be reasonable in the
eyes of the court.

Eg.: A is running a grocery shop in

Connaught Place. He sells his
business to B on the condition that
A will not run a similar business
within specified limits. This
restriction is valid. But a restriction
on
A for not carrying on similar
business anywhere in India, will be
a restraint of trade and hence void.

2. Exceptions mentioned in the

Partnership Act.
a) Restriction on existing partner
b) Restriction on outgoing partner
c) Restriction in anticipation of
dissolution
d) Restriction in case of sale of
goodwill of the firm

B. Judicial Exceptions:
a. Trade combinations.
b. Service Contracts
c. Exclusive Dealing Agreements:

Eg.: In Narayan Shankar Golikar Vs

Century Spg. & Mfg. Co.Ltd., an
employee was restrained by the service
contract from serving anywhere else
during the five years even after he had
left the employment. The restraint was
imposed because he had access to
technical information. The employee left
the organization and took up
employment in another Firm. The former
employer could successfully prevent him
by means of an injunction.

Restraint of Legal
Proceedings
Every agreement which restricts any
party absolutely from enforcing his rights
under a contract, or which limits the
time of their enforcement, or which
extinguishes the rights of a party, or
discharges a party from liability under a
contract on the expiry or a specific
period, is to that extent void.

a. Absolute restriction on legal

proceeding
b. Agreements curtailing the limitation
period
c. Extinguishment of rights after expiry of
specific period
d. Agreement discharging a party from
liability after expiry of specified period.

Eg.: A pays an advance of an

advance of Rs. 2 lac out of total
price of Rs. 20 lac to B for the
purchase of a flat. The contract
provides that if a fails to take
possession within 3 months, his
right to take possession will be lost.
Since there is an extinguishment of
right, it is void.

Exceptions to Sec. 28.

(a) Agreement to refer a present dispute
to arbitration.
(b) Agreement to refer a future dispute to
arbitration and to recover only the
amount awarded in such arbitration in
respect of the dispute so referred.

Agreement the meaning of which is uncertain.

Agreements the meaning of

which is not certain or capable of
being made certain are void.
In Guthina Vs. Lynn, a horse was brought
for a certain price, coupled with a
promise to give 5 pounds more if the
horse proved lucky. The agreement was
held to be void for want of certainty.

Wagering Agreements Section 30.

Wager is an agreement between two
parties in which one promises to pay
money or moneys worth on the
happening of some uncertain event in
consideration of the other partys
promise to pay if the event does not
happen.
Eg.: A and B may make an agreement
that A shall pay to B Rs. 50/- if it rains on
Monday, and that B shall pay to A the
same amount if it does not rain.

Essentials of a Wager
1. Money or moneys worth
2. Event
3. Uncertainty of the event.
4. Mutual chances of gain or losses
5. No control over the event.
6. Stake as the only Interest

Effects of Wagering Agreements

According to Sec. 30 , no suit can be

brought to recover 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.

Exceptions to Wager:
1.Horse race
2. Cross word competitions
3. Games of Skill
4. Share market transactions
5. Contracts of Insurance
6. Chit fund

Difference between Wagering

Agreement and Insurance Contracts
S.
No.
1.

2.

Wagering
Agreements
There is no
insurable interest
except for the
stake
These are void as
these are not
contracts of
indemnity

Insurance contracts
The assured has an
insurable interest in the
subject matter
These are valid
contracts being
contracts of indemnity.
Their object is to make
good the actual loss of

3.

These are
conditional

These are contracts of

indemnity except life
insurance contracts
which are contingent
contracts

4.

It is just a gamble

These are based on

scientific and actuarial
calculation of risks

5.

It is of no benefit
to the society

It is a form of social
cooperation

Collateral Transactions:
Though wagering agreements are
void, agreements collateral or
incidental to them are valid.
Eg.: A instructs his agent B to bet
with C. B lost and had to pay out of
his own pocket. Since payment by
B is on behalf of his principal, it is a
collateral transaction. B can
recover from A.

Agreements to do Impossible Acts [Sec.

56]

An agreement to do an act
impossible in itself is void.
Eg.: A agrees to put life into the
dead body of Bs father. It is void
for want of possibility.

Contingent Contracts

Contracts may be either

absolute or contingent.
Eg. : A contracts to pay B
Rs. 10,000/- if Bs house is
burnt. This is a contingent
contract.

Essential elements of a Contingent

Contract:

1. The performance of the contract

depends on the happening or non
happening of an event in future.
2. The event must be uncertain
3. The event must be collateral to
the contract
4. The event should not be at the
discretion of the promise

Rules regarding contingent contracts

[Sec 32 to 36]
1. Contracts contingent on the
happening of event.
2. Contracts dependent on the non
happening of an event.
3. Contracts contingent upon the future
conduct of a living person.
4. Contracts contingent upon the
happening or non happening of a
specified event within a fixed time.
5. Contracts contingent upon the

1. Contracts contingent on the

happening of event.
Eg.: i) A makes a contract with B to buy
Bs horse if A survives C. The contract
can not be enforced until C dies in As life
time.
ii) A contracts to pay B a sum of money
when B marries C. C dies without being
married to B. The contract becomes
void.

2. Contracts dependent on the non

happening of an event.
Eg.: A agrees to pay B a sum of
money if a certain ship does not
return. The ship is sunk. The
contract can be enforced when the
ship sinks and not before.

3. Contracts contingent upon the

future conduct of a living person.
Eg.: A agrees to pay B a sum of
money if B marries C. C marries D.
The marriage of B to C must be
considered impossible although it is
possible that D may die and C may
afterwards marry B.

4. Contracts contingent upon the

happening or non happening of a
specified event within a fixed time.

Eg.: i) A promises to pay B a sum of

money if a certain ship returns within a
year. The contract may be enforced if
the ship returns within a year and
becomes void if the ship is sunk within a
year.
ii) A promises to pay B a sum of money
if a certain ship does not return within a
year or is burnt within a year. The
contract may be enforced if the ship does

5. Contracts contingent upon the

happening of an impossible event.
Eg.: A agrees to pay B Rs. 1000/- if
two straight lines should a enclose a
space. The agreement is void.

Difference between Wagering

Agreement and Contingent Contract
S.
No
.
1.

Basis of
differenc
e
Interest
in the
subject
matter

Wagering
agreement

Contingent
contract

The parties do not

have insurable
interest in the
happening or the
non-happening of
the event as such.
Their main interest
is in winning or

The parties
have insurable
interest in the
happening or
non-happening
of the event

2.

3.

Future event The future

uncertain even is
the sole
determining factor
of the agreement.
Nature
These are
contingent in
nature

4.

Reciprocal
promises

5.

Validity

It consists of
reciprocal
promises.
It is void.

The future event

is only collateral
or incidental to
the contract
All contingent
contracts, such as
insurance,
indemnity and
guarantee are not
wagers.
There need not
be reciprocal
promises.
It is a valid
contract.

Thank You