Law Of Contracts

SEMESTER II

RESEARCH PAPER ON:

“Void Contracts”

SUBMITTED TO:

Prof. Sunil George

Assistant Professor, NMIMS School of Law

SUBMITTED BY:

Ekanksh Shekhawat

First Year B.B.A., LL.B (Hons.), Division D

VOID CONTRACTS

Abstract
My research includes the difference between void agreements and void contracts, difference
between void and voidable contracts and certain things which makes a contract void.

 The contract is against prevailing public policies.

 The contract is severely one-sided or unilateral.
 The contract involves illegal or unlawful matters (such as drug dealing or other crimes)
 Any of the parties to the contract is not "competent" to enter into a legal agreement
 The contract is impossible to perform.
 The contract restricts certain rights or actions (such as the right to work).

The terms "void" and "voidable" often get confused when dealing with contracts. Although these
two forms of contract sound similar, they are actually quite different. Any party can not enforce a
contract that is "void." The law treats a void contract as if it had never been created. For
example, a contract will be deemed void when one person is required to perform an act that is
unreasonable or unlawful. On the other hand, a "voidable" contract is a contract that is legitimate
and can be implemented. Usually in a voidable contract only one party is bound by the terms of
the contract. The unbound party is permitted to terminate the contract, which makes the contract
void. The main difference between the two is that a void contract can not be executed under the
law, while a voidable contract can still be executed, although it may be terminated by the
unbound party to the contract before the other party executes it.

Voidable contracts contain problems such as: one party was not of legal age when they entered
into the contract (or did not have a valid legal representative). The contract was agreed under
conditions of intimidation or trickery One of the parties did not have the mental capacity to enter
into a contract (i.e. they were under compulsion, insanity or other circumstances). Therefore, one
of the parties generally finds the contract "voidable at election." In some cases, the court may
allow for the rewriting of a portion of the contract. Nonetheless, this is not always the case and
legal remedies (such as damages) will undoubtedly differ according to the circumstance.
Introduction
A void contract is one which is not enforceable by law. Many situations automatically make such
contracts void based on some aspect of the law. With void contracts, the contractual obligations
set out in the original agreement release both parties. Void contracts often focus on illegal
activity, are patently unfair, or violate public policy. Some void contract circumstances may
include someone who is not qualified to enter into a legal contract or include conditions which
can not be fulfilled. You may be able to restrain contracts that are invalid by a process known as
severance in just one or two sections. Usually, void contracts include illegal acts like:
prostitution, committing a gambling crime. Take, for instance, a contract between a drug
manufacturer and a local dealer for an illegal drug trade. Because it involves illegal goods, this
contract would be void. From the beginning, it is unenforceable, because it does not serve a legal
purpose. Another example is a contract that limits certain things, such as who may marry a
person or his or her right to work for a living. A voidable contract could be one in which
someone was coerced into entering into the contract or at the time one party was disabled (e.g.,
under the influence of alcohol or drugs).

The term void agreement is used to represent or refer to an agreement between two or more
persons which the court of law can not enforce. This agreement does not have the basic
fundamentals to confer rights on the parties concerned, which means it lacks legal consequences.
It is essential to understand that at any point null and void agreements can never become legal
contracts whereas the word void contract is used to refer to a valid contract which can be
enforced by a court of law because it fulfills all the essential elements of a valid contract until it
reaches a point where the contract can not be fulfilled and thus renders it enforceable. This
means that such contracts have no legal effect and the contract is not enforceable by any party
involved.
Legal analysis and judicial analysis
Section 2(j) of the Act describes a void contract as "When a contract ceases to be enforceable by
law, it becomes void." It makes all those contracts which a court of law can not enforce as void.

Example: A agrees to pay B a sum of Rs 10,000 after 5 years against a loan of Rs. 8,000. A dies
of natural causes in 4 years. The contract is no longer valid and becomes void due to the non-
enforceability of the agreed terms.

Voidable Contract
Such types of contracts are described in section 2(i) of the Act: "An agreement enforceable by
statute at the option of one or more of the parties, but not at the option of the other or others, is an
invalid contract." This may seem difficult to wrap your head around but take the following example:
Assume that a person A agrees to pay an amount of Rs. 10,0000 to a person B for an antique c. That
contract would be legitimate, the only issue is that person B is a minor and can not enter into a
contract legally.

Section 65 of the Indian Contract Act, (1872). Compulsory for a person who has gained an
advantage under a void agreement or a contract that becomes void.— When an agreement is
found to be void or a contract becomes void, any person who has obtained an advantage under
that agreement or contract is obliged to recover it or compensate the person from whom it has
been received. —When a contract is found to be invalid or a contract is void, any person who has
received any benefit under that arrangement or contract is obliged to restore it or compensate the
person from whom it was received.
For example

1.) A, a singer, contracts with C a theater manager, to sing in his theater during the next two
months for two nights each week, and C ensures to pay her a thousand rupees for the
performance of each night. A willfully withdraw herself from the theater on the sixth
night, and B rescinds the deal as a result. C has to pay A for the five nights she'd been
performing on. A, a singer, contracts with B, the theater manager, to sing at his theater
for two nights each week in the next two months, and B commits to pay her one hundred
rupees for the performance each night. A willfully removes herself from the theater on
the sixth night, and C rescinds the contract as a result. C has to pay A for the five nights
on which she had sung no matter what.

2.) Contracts to sing for B at a concert for 1,000 rupees, to be paid in advance. A is just too
ill to sing. A is not bound to compensate B for the loss of the profits that B would have
made if A had been able to sing, but the 1,000 rupees paid in advance must be refunded
to B. (D) Singing contracts for B at a 1,000 rupee concert which are paid in advance. A is
just too ill to sing. A is not bound to compensate B for the loss of profits that B would
have made if A had been able to sing, but the 1,000 rupees paid in advance must be
refunded to B.

Wundy v Lindsay, (1878) 3 App Cas 458 HL

In this case a rogue called lenkarn sends Lindsay (P) a letter offering to buy certain goods and he
makes sure that sign his name so that it looks like ‘lenkiron & Co’ which is a well respected
business and then P sent the goods to the address the Rogue had listed, but he never paid for
them and instead sold them to the defendant and lindsay called it “mistake tand it was held that
he Plaintiff had never intended to deal with lenkarn, and would not have been consensus
between the Plaintiff and the rogue, so the Plaintiff’s mistake voided the contract. Therefore the
rogue had no title and as per nemo dat, no right to sell the goods. The plaintiff succeeded in an
action of conversion.

Mohoribibi vs Dharmodas Ghose(1903)

In this case a minor mortgaged his property in favour of the defendant and took some money in
advance. He therefore went to file an action to cancel this mortgage. However the defendant
pleaded that he should be get his money back relying on section 64 of Indian Contracts Act 1872
which deals with voidable contracts. The court held that the contract entered by a minor was void
ab initio and not voidable. Therefore minor is not liable to pay any some of money already
advanced to him.
Conclusion

On the basis of this research we can conclude that to construct a valid contract it should have
certain requirements such as consensus ad idem, certainty, free consent, two directional
consideration, fulfillment of legal formalities, legal obligation, lawful object, capacity of parties,
possibilities of performance etc . If any contract lacks any one of the stated features( except free
consent and legal formalities), it is a void contract and cannot be entertained in the court of law.
While a void contract is nonexistent and cannot be upheld by any law, a voidable contract is an
existing contract, and is binding to at least one party involved in the contract.

References
1.) Indian Contracts Act 1872
2.) Case laws:-
 Cundy v Lindsay,(1873) 3 App Cas 458 HL
 Mohoribibi v Dharmodas Ghose(1903)
3.) Section 65 of the Indian Contract Act, 1872 65.
4.) https://www.lawnn.com/law-contract-types-contract-cases-indian-contract-act-1872/
5.) A book named AVATAR SINGH
6.) Indian Kanoon
7.) https://www.upcounsel.com/void-contract