The Indian Contract Act, 1872 Void Agreements

VOID AGREEMENTS
 Those agreements which are not enforced by law courts
 Section 2(g) of the Indian Contract Act defines a void agreement as,
“an agreement not enforceable by law”
 Thus the parties to the contract do not get any legal redress in the case of void agreements.

Agreements made by Agreements made

parties not possessing under Mistake of
capacity to contract Facts

Agreements having Agreements having

unlawful objects and unlawful objects and
consideration consideration in part

Some other agreements declared void are

Agreement in
Agreement in Agreement in
restraint of legal
restraint of marriage restraint of trade
proceedings

Agreements to do Wagering Agreements

impossible acts

Dr Shilki Bhatia, Assistant Professor, DIAS Page 1

The Indian Contract Act, 1872 Void Agreements

Agreement
Agreement in restraint
in restraint of of
marriage
marriage

 Every person has got a right as well as freedom of choice to marry

 Agreement agreeing:
o Not to marry at all; or
o Not to marry a certain person; or
o Not to marry a class of person; or VOID
o Not to marry for a fixed period

 Agreement restraining marriage of minor is

 Agreement agreeing to marry a particular person is VALID

Agreement in restraint of trade

 Every person has a lawful right to do or adopt any lawful profession, trade or business
 Agreements which restricts a person from freely exercising his trade or profession
 These are not opposed to public policy
 These cannot be enforced by law
 Only those restraints are valid and enforceable which are reasonable both in the interest of
parties to the contract and general public

Exceptions trade
Exceptions:
 One who sells the goodwill of a business may agree with the buyer to refrain from carrying in 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
 Where an agreement is entered into between the employer and the employee that during
service contract, the employee shall not undertake any or the service
 Partnership Transactions
o A partner shall not carry on any other business other than the business of the firm
o A retiring partner may agree with the existing partner of the firm not to carry on a
competing business within a specified period and specified local limits
o In anticipation of dissolution of the firm all partners may agree not to carry on a
business carried by the firm within a specified area and a specified period.
o Any partner of a firm upon the sale of a firm enters into an agreement with the buyer
not to carry on a similar business up to a specified period and specified limits.

Dr Shilki Bhatia, Assistant Professor, DIAS Page 2

The Indian Contract Act, 1872 Void Agreements

Agreement in restraint of legal

proceedings

 Agreements, the meaning of which is uncertain or incapable of being made certain-VOID

Agreements to do impossible acts

 Impossibility of performance of an act does not give or create any obligation upon the parties
to a contract
 An agreement to do an act impossible in itself is void.
 A contract to do an act which, after the contract is made, becomes impossible, or by reason of
some event which the promisor could not prevent, becomes void when the act becomes
impossible or unlawful

Example: A agrees with B to discover treasure by magic. The agreement is void. Example: A and B contract to marry
each other. Before the time fixed for the marriage. A goes mad. The contract becomes void

Example: A contracts to marry B, being already married to C, and being forbidden by law to which he is subject to
practice polygamy. A must make compensation to B for the loss

Example: A contracts to take in cargo for B at a foreign port. A’s Government afterwards declares war against the
country in which the port is situated. The contract becomes void when war is declared.

Wagering Agreements

 Wager means (A bet)

 An agreement between two parties to the effect that if a given uncertain event is determined in
one way, on of them shall pay a certain sum of money to the other and if it is determined thae
other way, the latter shall pay to the former
 Agreements by the way of wager are VOID
 No suit shall be brought for recovery

Essentials

 It relates to a promise to pay money or money’s worth

 The promise must be conditional on an event happening or not happening
 Event must be certain
 Each party must stand equally to win or lose
 The gain of one party must be the loss of the other
 Neither party should have any interest in the event other than the sum he will win or lose
Dr Shilki Bhatia, Assistant Professor, DIAS Page 3
The Indian Contract Act, 1872 Void Agreements

Example: Lotteries; Horse race betting; Crossword competitions (not puzzle competition)

To conclude, an agreement by way of wager though is void, contract

collateral to it or in respect of a wagering agreement is not void
(except in the Maharashtra State.)

Transactions which are not Wager

 Prize competitions, according to the Prize Competition Act, 1955 in games of skill, if the prize
does not exceed Rs. 100. Crossword puzzle is such an example, since it depends upon the skill.
 Games of skill like athletic competition, wrestling bouts.
 Subscription or contribution or an agreement to subscribe or contribute, towards any prize,
plate or sum of money to be awarded to the winners of the horse race.
 Tezi Mandi transactions or deals in shares and stocks, where the party’s intention is to deliver
the goods or securities.
 Insurance contracts.

Dr Shilki Bhatia, Assistant Professor, DIAS Page 4

The Indian Contract Act, 1872 Void Agreements

CONTINGENT CONTRACTS
 A contract to do or not to do something, if some event collateral to such contract does or does
not happen
 Example: Insurance contracts, Contracts of Indemnity and Guarantee
 Collateral Event: an event regarding which neither of the parties makes any promise
 Essentials
o Performance of contract depends upon happening or non-happening of certain event in
future
o The event is uncertain
o The uncertain future event is collateral to contract

Contingent Contracts are of two types

Those depending upon Those depending upon the

happenings of an event non-happening of an event.

A promises to pay B a
A promises to pay B a
sum of money if a certain
sum of money if a certain
ship does not return
ship returns within a year
within a year

The contract may be

enforced if the ship The contract may be
returns within the year, enforced if the ship does
and becomes void if the not return within the year
ship is burnt, within the or is burnt within the year
year

Dr Shilki Bhatia, Assistant Professor, DIAS Page 5

The Indian Contract Act, 1872 Void Agreements

SNO Contingent Contract Wagering agreement

.
1 Does not consists of reciprocal Consists of reciprocal promises
promises
2 Every CC is not of wagering nature Every WA is of contingent nature
3 Parties are interested in subject Parties are not interested in subject matter-
matter but only winning or losing the money or
money’
4 Perfectly VALID Absolutely VOID

Assignment

 NO ASSIGNMENT 

Dr Shilki Bhatia, Assistant Professor, DIAS Page 6