Void agreements

By
Dr. Sridevi Krishna
Assistant Professor
Vidyavardhaka Law College
Mysore
 Agreements declared as void
• Agreement of which the consideration or the object
is not lawful (s 23 & 24)
• Agreement without consideration (s25)
• Agreement in restraint of marriage( s 26)
• Agreement in restraint of trade(s 27)
• Agreement in restraint of legal proceedings (s 28)
• Agreement which is ambiguous and uncertain (s 29)
• Agreement by way of wager(s 30)
• Agreement to do an impossible act(S 56)
 S24-Agreements void, if considerations and
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 considerations for a single
object, is unlawful, the agreement is void
• A promises to do, on behalf of B, a legal
manufacturer of indigo, and an illegal traffic in
other articles. B promises to pay to A, a salary
of 10,000 rupees a year for both the jobs. The
whole agreement is void.
 Agreement in restraint of marriage( s 26)

• Every agreement in restraint of the marriage of

any person, other than a minor, is void. 
• An agreement which restricts a person freedom to
marry or to marry any person of his choice is void.
• Lowe V Peers the promise by a man in favour of
Mrs Catherine Lowe that he would not marry any
person other than Mrs Lowe and a further
promise to pay Mrs Lowe a sum of 2000 pounds if
he married somebody else was held to be void.
 Agreement in restraint of trade s 27
• Every agreement by which any one is restrained from
exercising a lawful profession, trade or business of any kind, is
to that extent void.
•  Exception 1.—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
Nordenfelt V Maxim Nordenfelt Guns and Ammunition Co Ltd

• In this case the appellant Nordenfelt, was the

manufacturer of guns and ammunitions. He sold his
business to the respondents company for a
consideration of 2,87,500 pounds. He agreed that for 25
years he would not engage either directly or indirectly
• In the trade or business of manufacture of guns, or
carriage, gunpowder explosives or ammunition.
• In any business competing or liable to compete in any
way with that for the time being carried on by the
company.
 Held
• The first part of the agreement provided a
reasonable protection to the interest of the
buyer of the business for such a large sum and
it was valid whereas
• the second part requiring him not to compete
in any business was unreasonable and
therefore void.
 Gujarat Bottling Co Ltd V Coca Cola Co
• On April 30th 1994 Coca Cola co entered into an agreement with
Gujarat Bottling Co whereby the former granted to GBC a non-
exclusive license to use the trade marks mentioned in the
schedule to the agreement viz, gold spot, limca, Thumps up,
Maaza, Citra etc in relation to goods prepared by or for the
licensee from syrups and concentrations in accordance with
standards, specifications, formula, process and instructions
furnished or approved by licensor i.e, coca cola company. The
said agreement could be terminated by 90 days notice from
either side.
• The agreement was subject to a condition that the franchisee
GBC, shall not deal with competing goods.
 Held
• Such a condition requiring the franchisee not
to deal with the competing goods is meant to
facilitate distribution of the goods of the
franchiser and it cannot be regarded as in
restraint of trade. Moreover, the negative
restriction is operative only during the period
of franchise, it is not hit by S 27 of the Act so
as to be termed as in restraint of trade.
 Exceptions
• Exception 2. Exception under Indian
Partnership Act,1932
• Section 11(2)- Agreements in restraints of
trade.— 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) 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.
 Section 54
• Agreements of restraint of trade.—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 (9 of 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.
• 3. Restraint by contract of service

• Trade combinations
• Solus agreement- where the seller or the
manufacturer of a certain product may agree that he
will suplly the whole of his product to a particular
buyer only, or a buyer may agree that he will
purchase all his requirements of a certain commodity
from a particular seller only and none else.
 Exceptions
• When the buyer does not agree to purchase
the whole quantity he cannot restrain the
seller from selling his surplus to others.
• When the object of agreement is to corner
goods or to monopolize trade or restrain for
unduly longer period
 28. Agreements in restraint of legal proceedings, void

• Every agreement,-
• (a) by which any party thereto is restricted absolutely
from enforcing his rights under or in respect of any
contract, by the usual legal proceedings in the
ordinary tribunals, or which limits the time within
which he may thus enforce his rights; or
• (b) which extinguishes the rights of any party thereto,
or discharges any party thereto from any liability,
under or in respect of any contract on the expiry of a
specified period so as to restrict any party from
enforcing his rights, is void to that extent.
• Section 28 of the Indian Contract Act renders void two
kinds of agreement, namely:
• An agreement by which a party is restricted absolutely
from enforcing his legal rights arising under a contract
by the usual legal proceedings in the ordinary tribunals.
• An agreement which limits the time within which the
contract rights may be enforced.
• Hyman v Hyman. In this case, a covenant in a
separation deed provided that the wife would not apply
to the divorce-court for maintenance and it was held
that it was void as being contrary to public policy. 
• An agreement which provides that a suit should be brought for
the breach of any terms or agreement within a time shorter
than the period of limitation prescribed by law is void.
• The effect of such an agreement is absolutely necessary to
restrict the parties from enforcing their rights after the
expiration of the stipulated period, though it may be within the
period of the limitation sometimes occur where parties agree to
extend the period of limitation.
• There is no restriction imposed upon the right to sue; on the
contrary, it seeks to keep the right to sue subsisting even after
the period of limitation. It would, however be void under s.23,
as tending to defeat the provisions of the Limitation Act 1908,
s.3 which provides that every suit instituted after the period of
limitation prescribed by the act shall be dismissed, although
limitation has not been set up as a defence
 Agreement extinguishing rights on expiry of a specified period

• Baroda Spinning and weaving Co Ltd v Satyanarayana Marine & Fire

Ins Co Ltd.
• If the policy of insurance provides that if a claim is made and rejected
and no action is commenced within the time stated in the policy, the
benefits flowing from the policy shall stand extinguished and any
subsequent action would be time barred. Such a clause would fall
outside the scope of S. 28 of the Contract Act.”
• The 1997 Amendment
• The amendment of s.28 has brought about the change that all clauses
which reduced the normal period of limitation would be void to that
extent.
• It now prohibits clauses which seek to extinguish the right of any
party thereto, or discharge any party thereto from any liability, under
or in respect of any contract on the expiry of a specified period so as
to restrict any party from enforcing his rights. The amendment gave
effect to the 97th Report of the Law Commission of India.
 Exceptions
• Exception 1 : Saving of contract to refer to arbitration dispute that
may arise: This section shall not render illegal contract, by which
two or more persons agree that any dispute which may arise
between them in respect of any subject or class of subject shall be
referred to arbitration, and that only the amount awarded in such
arbitration shall be recoverable in respect of the dispute so
referred . 

• Exception 2 : Saving of contract to refer questions that have

already arisen : Nor shall this section render illegal any contract in
writing, by which two or more persons agree to refer to arbitration
any question between them which has already arisen, or affect any
provision of any law in force for the time being as to references to
arbitration.
 S.29. Agreements void for uncertainty

• Agreements, the meaning of which is not certain, or

capable of being made certain, are void.
• 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.
• Ex- A who is a dealer in coconut-oil only, agrees to sell
to B "100 tons of oil". The nature of A's trade affords
an indication of the meaning of the words, and A has
entered into contract for the sale of one hundred tons
of coconut-oil.
 30. Agreements by way of wager, void
• Agreements by way of wager are void; and no suit
shall be brought for recovering anything alleged to
be won on any wager, or entrusted to a person to
abide the result of any game or other uncertain
event on which any wager is made.
• Exception- This section shall not be deemed to
render unlawful a subscription or contribution, or
agreement to subscribe or contribute, made or
entered into for or toward any plate, prize or sum of
money, of the value or amount of five hundred
rupees or upwards, to be rewarded to the winner or
winners of any horse-race.
 Definition
• A wagering contract is one by which two
persons, professing to hold opposite views
touching the issue of a future uncertain event,
mutually agree that dependent on the
determination of that event, one shall pay or
hand over to him, a sum of money or other
stake; neither of the contracting parties having
any other interest in that contract than the sum
or stake he will so win or lose, there being no
other real consideration for the making of such
contract by either of the parties.
 Essentials

• 1. Uncertain Event- performance of the bargain must depend

upon the determination of an uncertain event.
• It may even relate to the event happened in the past but the
parties are not aware of its result or the time of its happening.
• 2. Mutual chances of gain or loss- each party should either win or
lose. If there is mutual chances of gain or loss there is no wager.
• Babasaheb v Rajaram
• Two wrestlers agreed to play a wresteling match on the
condition that the party failing to appear on the day fixed was
to forfeit Rs 500 to the opposite party, and the winner was to
receive Rs 1125 out of the gate money. The defendant failed to
appear in the ring and the plaintiff sued him for Rs. 500.
• Held- the agreement could not be looked upon as one of
wagering in law.
 Continued..
• 3. neither party to have control over the
event- the parties should have no control over
the happening of the event one way or the
other
• 4. no interest in the event- neither party
should have any interest over the event other
than the sum or stake he will win or lose.
• 294A. Keeping lottery office.—Whoever keeps
any office or place for the purpose of drawing
any lottery not being a State lottery nor a
lottery authorized by the State Govern­ment,
shall be punished with imprisonment of either
description for a term which may extend to six
months, or with fine, or with both.