Unit III-Void Agreements-EC-11

Law of Contract-I
BA.LL.B.(Hons.) IIIrd Semester
Session 2020-21

Dr. Sonal Shankar

Assistant professor
Department of law
University of Allahabad
 Void agreements.
• Section 10 provides that ‘All agreements are contracts if they are
made by the free consent of parties competent to contract, for a
lawful consideration and with a lawful object, and are not hereby
expressly declared to be void” The last conditioned mentioned is
that agreement should not have been expressly declared to be void
by the Act.The Act declares few agreements as void-
• Section 20- Agreement void where both parties are under mistake
as to matter of fact
• Section 23-Every agreement of which the object or consideration is
unlawful is void.
• Section 24-Agreements void, if consideration are objects unlawful
in part-If any part of a single consideration for one or more objects,
or any one or any part of any one of several consideration of a
single object, is unlawful, the agreement is void
• Section 25- Agreement without consideration, void, ……..
• Section 26- Agreement in restraint of marriage, void- Every
agreement in restraint of the marriage of any person, other than a
minor, is void.
• Section 27-Agreements in restraint of trade , void….

• Section 28- Agreements in restraint of legal proceedings, void.

• Section 29- Agreements void for uncertainty.—Agreements, the meaning of which

is not certain, or capable of being made certain, are void. —Agreements, the
meaning of which is not certain, or capable of being made certain, are void.“

• Illustrations
• (a) A agrees to sell B “a hundred tons of oil”. There is nothing whatever to show
what kind of oil was intended. The agreement is void for uncertainty.“

• (b) A agrees to sell B one hundred tons of oil of a specified description, known as
an article of commerce. There is no uncertainty here to make the agreement void.

• (c) A, who is a dealer in coconut-oil only, agrees to sell to B “one hundred tons of
oil”. The nature of A’s trade affords an indication of the meaning of the words, and
A has entered into a contract for the sale of one hundred tons of coconut-oil.“

• (d) A agrees to sell B all the grain in my granary at Ramnagar There is no

uncertainty here to make the agreement void."
• (e) A agrees to sell to B one thousand maunds of rice at a price to be fixed
by C As the price is capable of being made certain, there is no uncertainty
here to make the agreement void.
• (f) A agrees to sell to B “my white horse for rupees five hundred or rupees
one thousand”. There is nothing to show which of the two prices was to be
given. The agreement is void.
• Section 30- Agreements by way of wager, void…

• Section 36-Agreements contingent on impossible event void.—Contingent

agreements to do or not to do anything, if an impossible event happens,
are void, whether the impossibility of the event is known or not to the
parties to the agreement at the time when it is made. —
• Illustrations
• . (a) A agrees to pay B 1,000 rupees if two straight lines should enclose a
space. The agreement is void.“
• (b) A agrees to pay B 1,000 rupees if B will marry A’s daughter C. C was
dead at the time of the agreement. The agreement is void.

• Section 56- Agreement to do impossible act. —An agreement to do

an act impossible in itself is void.

(a) A agrees with B to discover treasure by magic. The agreement is void.

Agreements in Restraint of Trade
Section 27-Agreement in restraint of trade Void-Every
agreement by which anyone is restrained from exercising a
lawful profession, trade or business of any kind, is to that extent
void.

Exception: Saving of agreement not to carry on business of

which goodwill is sold. One who sells the goodwill of a business
may agree with the buyer to refrain from carrying on a similar
business, within specified local limits, so long as the buyer, or
any person deriving title to the goodwill from him, carries on a
like business therein:
provided that such limits appear to the Court reasonable,
regard being had to the nature of the business.
Any kind of restraint- partial, total, qualified,unqualified is
void(See Madhub Chandar v. Rajkumar Das, Oakes and co. v.
Jackson.)
• Position in England-Early English law declared all agreements placing any
restriction on trade as void being against public policy, with time an
exception was carved in favor of partial restraint or restraint confined to a
limited space and time. With further growth of trade test of partial
restraint was substituted by test of reasonableness (See Nordenfelt v.
maxim Nordenfelt guns and Ammunition co. ltd)
• In India restriction is valid if under statutory and judicially created
exceptions –
• Statutory created exceptions-
1. Exception to section 27-Saving of agreement not to carry on business of
which goodwill is sold. One who sells the goodwill of a business may agree
with the buyer to refrain from carrying on a similar business, within
specified local limits, so long as the buyer, or any person deriving title to
the goodwill from him, carries on a like business therein:
provided that such limits appear to the Court reasonable, regard being
had to the nature of the business.
• Object is to protect the interest of the purchaser. Goodwill is the good
name and reputation of the firm and advantages associated with it, it's a
very important asset. However it has to be seen that agreement is actually
to protect the goodwill and not to merely avoid the competition.(See
Goldsall v. Goldman, Vancouver Malt and Sake Brewing co. v. Vancouver
breweries ltd.)
• Provisions of Partnership Act-S11(2)- Sec 11-Determination of
rights and duties of partners by contract between the partners…..
• (2) Notwithstanding anything contained in section 27 of the Indian
Contract Act, 1872 (9 of 1872), such contracts may provide that a
partner shall not carry on any business other than that of the firm
while he is a partner.
• S 36(2)-…. (2) A partner may make an agreement with his partners
that on ceasing to be a partner he will not carry on any business
similar to that of the firm within a specified period or within a
specified local limits; and, notwithstanding anything contained in
section 27 of the Indian Contract Act, 1872 (9 of 1872), such
agreement shall be valid if the restrictions imposed are reasonable.

• S.54-Agreements in Restraint of time.

• Partners may, upon or in anticipation of the dissolution of the firm,
make an agreement that some or all of them will not carry on a
business similar to that of the firm within a specified period or
within specified local limits;
and notwithstanding anything contained in Section 27 of the Indian
Contract Act, 1872, such agreement shall be valid if the restrictions
imposed are reasonable.
• S.55(3) …..(3) Any partner may, upon the sale of the goodwill of a firm,
make an agreement with the buyer that such partner will not carry on any
business similar to that of the firm within a specified period or within
specified local limits and, notwithstanding anything contained in section
27 of the Indian Contract Act, 1872 (9 of 1872), such agreement shall be
valid if the restrictions imposed are reasonable.
• Judicially created Exceptions-
• Trade combinations-Such combinations are required to maintain price
level, quality etc.(See- S.B Fraser and co.v. Bombay ice mfg co.Hari Bhai v.
Sharaf Ali)
• 2.Exclusive dealing Arrangements /Solus agreements-such arrangements
are beneficial to both producers and customers. However monopolies
must not be created in garb of such agreements(See Gujarat bottling co v.
Coca cola co., S.K Kalu v. Ram Saran Bhagat, Har Bilas v. Mahadeo prasad)
• 3. Employment Contracts-generally there is a negative covenant or
restraint upon employees during currency of employment ,sometimes the
restraint can go beyond employment too(e.g. confidential information and
technical knowhow, (See Charlsworth v. Mcdonald , Niranjan Shankar
Golikari v. Century Spinning and Mfg. co., Attawood v. lamoni)

• To be continued in EC-12