LAW OF CONTRACT – I

Unit 1 – Formation Of Contract

Topic 1.e - Effect of Void,

Voidable, Valid, Illegal, Unlawful
Agreements
Ms. Bhoomika Ahuja
Assistant Professor
DME Law School
 Introduction
• On the basis of validity or enforceability, we
have five different types of contracts as given
below- Void
Agreements

Unlawful Voidable
Agreements Agreements

Illegal Valid
Agreements Agreements
 Void Agreements
• An agreement that is not enforceable by law is said to be
void, according to Section 2(g) of the Indian Contract Act,
1872.
• For example - A minor’s agreement has been declared void,
An agreement with an unlawful consideration or object is
void, An agreement without consideration, an agreement in
restraint of marriage, and an agreement in restraint of trade
etc.
• EFFECT
– A void agreement is described as one that cannot be enforced by law, i.e. one
that cannot be challenged in a court of law, according to section 2(g) of the
Indian Contract Act, 1872. Because such an agreement has no legal effects, it
does not give the parties involved any rights.
.

A void agreement is void from the An agreement valid in the

moment it is made and can never beginning may BECOME VOID
become a contract. due to Impossibility Sec 56 Para 2
 Voidable Agreements
• A voidable contract is one that is enforceable by law at the option of one or
more parties but not at the option of the other. A voidable contract is one
that can be avoided at the discretion of one of the contracting parties. The
contract remains legitimate if such a party does not avoid it; nevertheless, if
he prefers to avoid it, the contract becomes voidable.
• A voidable contract appears to be lawful and enforceable at first glance, but
it can be rejected by one party if flaws are discovered.
• EFFECT
– If a party having the authority to reject the contract decides to reject it, the contract
becomes unenforceable.
– If a party having the authority to reject the contract decides not to reject it despite the
fault, the contract remains legal and enforceable.
• Committing to a voidable contract usually harms only one of the parties
because that person fails to recognize the other’s dishonesty or fraud.
• For example, Contracts made through obtaining consent by coercion, undue
influence, fraud, misrepresentation etc.
 Valid Agreements
• A valid contract is one that is legally enforceable and legally
binding.
• It must qualify all essentials of the contract as per Section 10.
• Through interpretation and numerous judgments, the Indian
Contract Act, 1872 defines and outlines the essentials of a
legal contract.
• The basic elements required for the agreement to constitute a
legally enforceable contract are mutual assent, expressed by a
genuine offer and acceptance; adequate consideration;
capacity; and legality.
• EFFECT
– All parties are legally bound to perform the contract in a valid contract.
– It is legally enforceable and legally binding.
 Illegal Agreements
• Illegal agreements are those agreements that are: (i) void, and
(ii) punishable by criminal law of the country or by any
special legislation/regulation.
• An illegal arrangement is one that breaks the law or has a
criminal element, is contrary to public policy, or is immoral.
• EFFECT
– These agreements are void from the start, and all agreements that are
collateral to the original agreement are void as well. (The transaction
linked with or ancillary to the main agreement is referred to as a
collateral agreement)
• Because such arrangements are expressly prohibited by law,
entering into an illegal agreement is considered a criminal
offense. As a result, the parties can be punished under the
Indian Penal Code. Eg- An agreement to kill someone, kidnap
someone, etc
 Unlawful Agreements
• Similar to Illegal
Agreements are Unlawful
Agreements.
• Section 23 of the Contract
Act lays down a plethora of
circumstances wherein the
object or consideration of an
agreement is unlawful.
• EFFECT
– An agreement hit by Section
23 is void ab initio and
thereby in no circumstances
enforceable.
 CONCLUSION
Illegal
Agreements Valid
Agreements

Unlawful
Void
Agreements
Agreements

ENFORCEABLE BY
Voidable LAW
UNENFORCEABLE BY Agreements
LAW

UNENFORCEABLE ENFORCEABLE BY
BY LAW LAW