VOID AGREEMNETS

Business & Corporate Law

 VOID AGREEMENTS
• An agreement not enforceable by
law is said to be void. All agreements
may not be enforceable by law.
• The agreements which are not
enforceable by law right from the
time when they are made are called
void-ab-initio. [Section 2(g)]
 Effect on agreement collateral to
void agreement
• When an agreement is void, other agreement
which is collateral to it is also void and is not
enforceable by law if the other party has
knowledge about it
 Agreements expressly declared void
• Agreement in restraint of marriage
• Agreement in restraint of Trade
• Agreement in restraint of Legal proceedings
• Uncertain agreements
• Wagering agreements
• Agreement contingent on impossible events
• Agreement to do Impossible Acts
• Agreements made under mistake of fact/Law
• Agreement with Minor
• Agreement with Unsound Mind
• Agreement with Insolvent Person
Agreement in restraint of Marriage

Exceptionally
It is allowed in special cases
 Some Exceptions
• An agreement restraining the marriage of a
minor child is not considered any restrain of
marriage.

Mr.Ahmed father of Ali

restrains to his son for
marriage because he is
under 18 years
Agreement in restraint of Trade

Exceptionally
It is allowed in special cases

Seller of Partnership Trade Service

Goodwill Agreement Combination Contract
 Seller of Goodwill Seller
Mr. X

•Mr. X is a famous
designer of dresses he
has maintained a
strong goodwill in the
market
Agreement between Seller & Buyer
Seller
•One day Mr. Y came to him to Mr. X
buy his Goodwill.
Buyer
•Mr. Y (Buyer) offers certain Mr. Y
conditions to be followed.

•Mr. X (Seller) will not sell his

Goodwill to any other person
in Karachi.

•Agreement is For next 5 years.

 Agreement of Goodwill
Mr. X has
Mr. Y is accept the
happy as conditions
his offer is
accepted
Partnership Agreement
A B C & D are ( partners ) of Partners
electronic company. They have
signed partnership deed all have
25% shares of each. Conditions
in the deed are:
•During partnership, no partner
will do similar business else
where for 10 years
•After retirement no partner will
work in similar business for next
5 years in Karachi.
•In case of dissolution no partner
will work in similar business for
next 1 year
 Valid Agreement between Partners
Mr. A,B and D
one day Mr. C had quarrel with Mr. B are now the
on some financial matters and remaining
partners of
consequently he decided to leave the the business
company.
Now the other 3 partners ask Mr. C to
sign an agreement according to which Mr. A
Mr. B
he could not work in a similar business
in Karachi for 1 year .
Mr. D
Mr. C

Mr. C
accepted
and sign the
agreement
 Service contract UNIVERSITY

Mr. AFRAZ is a professor in

University. According to job
contract he cannot teach in any
other Institute during this
period.

Professor
Afraz

JOB
CONTRACT
Invalid Job Contract
No, as per
contract you
Sir, I have
can not do
Now the Manager says that decided to
private
start my
business
own
business
“you can not do private
business even after
retirement” ,according to the
job contract
 Mr. Basit become
disappointed

This job contract

is void due to
this condition..
 Trade combinations
• An agreement between different firms in the nature of
a trade combination in order to maintain a price level
and avoid under selling is not void.
• Example: An agreement by two persons to avoid
competition is void because it tends to create
monopoly.
• An agreement among some manufacturing companies
not to sell goods below a minimum price and to divide
the profits in a certain proportion is not void because
such agreement was made to regulate the business and
not to restrain it.
Agreement in restraint of Legal Proceedings

Exceptionally
It is allowed in special cases
 Legal Proceeding

Mr. A entered in the

contract with Mr. B to Mr. A
construct a road. Contractor

Among other
Mr. B
conditions one of the KDA
term of agreement is
that any dispute arises
it will be referred to
arbitrator only.
 Mr. B
Legal Proceeding KDA

After 2 months Mr. A have

completed the road but Mr. B
said it is out of our budget we
Arbitrator
can not pay you full amount.
Mr. A
In this situation where the Contractor
conflict arise Mr. A went to
arbitrator. Now arbitrator will
give his decision. The decision
of the arbitrator is not
appealable.
 Uncertain agreements
• Mr. A want to sell his house to Mr. M or Mr N
in Rs 500, 000.

• Mr. A want to sell his house to Mr. M in Rs

500,000 or 800,000.
 Wagering agreements
• An agreement between two persons under
which money or money’s worth is payable, by
one person to another on the happening or
non-happening of a future uncertain event is
called a wagering event. An agreement by way
of wager is void. [Section 30]
• Example: A promises to pay Rs. 10,000 to B if it
rained today, and B promises to pay Rs. 1,000
to A if it did not.
• Prize competitions, An agreement to contribute
to a prize, Stock market transaction, Contracts
of insurance are not wagering agreements.
 Effects of Wagering Agreement
The effects of wagering agreements are
following:
• Such agreements are void
• No suit can be filed to recover the amount
won on any wager.
• Transactions which are collateral to wagering
agreements may also be void.
 Agreements contingent on
impossible events
• 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. [Section 32]
• Example: Agreements contingent on
impossible events A agrees to pay Rs. 1,000 if
B marries C (a Hindu) who is already married
to D. This agreement is void.
Agreements to do impossible acts
• An agreement to do an impossible act is void.
[Section 56]
Example: Agreements to do impossible acts A
agrees with B to discover treasure by magic.
The agreement is void.
Agreements made under mistake
of fact/Law