Preface
An agreement whose object or consideration is unlawful is considered void. A contract is always based on an agreement. An apparent agreement is not always a real agreement. One party may have deceived the other party or in some other way, there be no genuine consent. The parties may be laboring under a mistake or one or both parties may be incapable of making a contract. In all such cases, there is no real agreement.
Relevant Provisions
Sections 2(g), 10, 20, 24, 25, 26, 27, 28, 29, 30, and 56 of the Contract Act, of 1872 deal with void and voidable agreements/contracts.
Definition of Void Agreements
According to Section 2(g) of the Contract Act, 1872:
An agreement not enforceable by law is a void agreement, e.g., an agreement with a minor.
Definition of a Void Contract
According to section 2(j) of the Contract Act, 1872:
A void contract is one which subsequently ceases to be enforceable by law.
Example: A contract to import goods from a party in a foreign country is good during peace times. But it will become void as soon as war breaks out between Pakistan & the country from which the goods are imported.
Nature of Void Agreement and Void Contract
A void agreement creates no legal rights & obligations.
A void contract is when originally made, perfectly valid, and binding, but due to subsequent changes of circumstances, it becomes void.
Voidable Contracts
According to Section 2 (i) of the Contract Act, 1872:
“An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of others, is a voidable contract”
Explanation: A voidable contract is one in which one or more of the parties has a legal right to enforce the contract or to cancel it. This contract takes place when any of the contracting parties reports & justify that his consent was caused unfreely or he is being prevented by the other party to perform his promise or the other party has failed to perform to contract within the specified time.
Nature and Object:
- It is valid & binding so long as it lasts.
- The law gives an option to one of the parties to avoid it if he so chooses.
- The party entitled to avoid the contract is not bound to avoid it.
- The aggrieved party may affirm it, in which case the other party remains bound to carry it out as agreed.
- If the party entitled to avoid the contract does not exercise his right within a reasonable time, the contract is binding & enforceable.
Void Agreements are not Contracts
All agreements that are enforceable at law are contracts. However, Section 10 of the Contract Act, of 1872 states there are a few cases where agreements do not become contracts, and such reason is that they have expressly been declared void by law.
Agreements, declared void by Law
Below is a list of some agreements that are expressly declared void by the law.
1. Uncertain Agreements U/s 29
Parties to a contract should be aware of the precise nature and scope of their mutual rights and obligations under the contract. If the terms are vague or ambiguous, the agreement is void. If the main object of an agreement is not clear & is not capable of being certain, the agreement is void.
Example: A agrees to sell 1000 tons of oil to B but the kind of oil is not mentioned in the agreement, such an agreement would be void.
2. Agreements Contingent on Impossible Events U/s 36
Contingent agreements to do or not to do anything if an impossible event happens are void regardless of the fact that the impossibility is known to the parties or not.
3. Impossibility of Performance of Acts U/s 56
An agreement to do an act impossible in itself is void.
Example: A agrees with B to discover the treasure by magic, such an agreement is void.
4. Moral Welfare of People
All the agreements or contracts that are against society’s moral welfare are also declared to be void.
5. Agreements in Restraint of Marriage U/s 26
Every individual has a fundamental right to marry. An agreement forbidding marriage is known as an agreement in restraint of marriage.
Every agreement in restraint of marriage of any person other than or minor is void. The law does not favor marriages of minors that’s why restraining marriages of minor’s valid. However, it is interesting to note that agreement to marry a particular individual is valid but not an agreement on restraint of marriage.
6. Restraint of Legal Proceedings U/s 28
It is against public policy to stop someone from seeking redress from a court of law. Courts are meant to administer justice.
7. Restraint of Trade or Profession U/s 27
Every agreement by which anyone is restrained from exercising a lawful profession; trade or business of any kind is to that extent void. The law does not favor contracts in restraint of trade as it is a guaranteed right. Agreements in its restraint are void. Such agreements are against public policy and the interest of the community. But agreements that merely restrain the freedom of action in the exercise of business are valid.
However, there are some exceptions to this rule which are as follows:
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- Sale of goodwill
- Trade combinations
- Partner’s agreement
- Service contracts.
8. Agreements involving mistake U/s 20
Where both parties to a contract are under a mistake as to a matter of fact essential to an agreement or as to law enforceable in Pakistan, the agreement is void.
Mistakes of fact may be regarding or due to:
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- Error in the expression of contract.
- Nature or terms of the contract
- Facts, subject matter, or reason of the contract.
9. Agreements without Consideration U/s 10
Every promise or set of promises forming the consideration for each other is an agreement. Therefore, all the agreements without consideration are void. It is a general rule that an agreement is void without consideration. There can be no contract without consideration.
However, this rule has some exceptions as well.
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- Where agreement is in writing and registered and is out of natural love and affection.
- Where agreement is to compensate somebody for a voluntary act done.
- Agreement to pay a time-barred debt.
10. Unlawful Object & Consideration U/s 23 and 24
According to Sections 23 and 24, if any part or whole of a contract (agreement) has an unlawful object or consideration the agreement is void in part or in whole.
Every agreement of which object or consideration is void. The object or consideration is unlawful when it is against the law of a country or public policy or it defeats the provisions of any law.
11. Minor’s Agreements
A minor is incompetent to contract, therefore, a minor’s agreement is absolutely void and he is not liable to perform his agreement.
12. Wagering Agreements U/s 30
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- Agreement by way of wager is void U/s 30
- Agreement collateral to wagering agreement is void U/s 30(a)
Term wagering means a bet, something staked to be lost or won on the result of something uncertain. Thus wagering agreements are ordinary betting agreements.
Circumstances that make a Contract Voidable
Following are some situations that lead a contract to become voidable.
1۔ Absence of Free Consent U/s 14
According to Section 14 of the Contract Act,
“A consent is said to be free when t is made freely or is not caused by coercion, undue influence, fraud, misrepresentation of mistake.”
In other words, When the consent is not free, ie, the consent is caused by coercion, undue influence, fraud, misrepresentation, or mistake, the contract is voidable at the option of the aggrieved party.
2. Prevention of Performance
When a contract contains reciprocal promises, and one party to the contract prevents the other from performing his promise, the contract becomes voidable at the option of the party so prevented.
Example: A and B contract that B shall repair A’s house for a certain sum. B is willing to execute the work. But if A prevents him from doing so, the contract is voidable at the option of B and if B elects to rescind it, he is entitled to recover compensation for any loss which he has incurred by its non-performance.
3. Failure to Perform the Contract
When a person or party to a contract promises to do a certain thing or act at or before the specified time but fails to do so, the contract becomes impossible at the option of the other person or party.
4. Temporary Unsoundness of Mind
A person who is permanently of unsound mind cannot be entered into a contract and a contract with or by such person is absolutely void. But a person, who is usually of sound mind but occasionally of unsound mind, may not contract when he is of unsound mind. A contract made by a person of occasional unsound mind, ie, a lunatic is voidable if he proves himself that he was an unsound mind at the time of entering into a contract.
Legal Effects of the Void and Voidable Contracts
A contract is always based on an agreement. But the fact is that an apparent agreement is not always a real agreement. One party may have deceived the other party, or in some other way, there is no genuine consent. The parties may be laboring under a mistake or one or both parties may be incapable of making a contract. In all such cases, there is no real agreement.
Where there is no real agreement the law has three remedies. These remedies are as follows:
- The contract may be treated as of no effect, and it will then be known as a void contract.
- The law may give the party aggrieved the option of getting out of his bargain, and the contract is then known as voidable.
- The party at fault may be compelled to pay damages to the other.
DISTINCTION b/w the Two
The distinction between Void and Voidable Contract is as follows;
1. As to Enforceability:
Void Contract: It is not enforceable by law
Voidable Contract: It is enforceable by law at the option of an aggrieved party
2. As to Legal Rights:
Void Contract: It creates no legal rights for the contracting parties
Voidable Contract: It creates legal rights for the aggrieved party
3. As to Compensation:
Void Contract: No party can claim any compensation for non-performance
Voidable Contract: Only the aggrieved party claim compensation
4. As to Validity:
Void Contract: It is void ab-initio
Voidable Contract: It is valid until it is avoided by the aggrieved party
Final Note
To conclude that a void contract is without any legal effect and a voidable contract lies in a middle zone between valid and void contracts A voidable contract is valid if an action is not taken to avoid it, on the other hand, a void contract remains a legal cipher.
FREQUENTLY ASKED QUESTIONS
Contract 1872 has expressly declared certain agreements as void. What are those agreements? Discuss in detail.
(2018-A, 2017-S, 2016-S, 2014-A)
“Agreement which ceases to be enforceable by law becomes void when it ceases to be enforceable”. Discuss with reference to the provisions regarding the subsequent impossibility of the performance of a contract.
(2018-A, 2017-A, 2016-A, 2014-A)
What are the agreements which have been expressly declared void?
(2015-A)
Define the term void contract. Discuss the circumstances under which a contract becomes void.
(2013-8)
REFERENCES
- The Contract Act, 1872
- N-Series by M.A. Chaudhary
- Law of Contract by Avtar Singh
