LEGAL ASPECTS OF BUSINESS
LESSON 10: VOID AGREEMENTS
After today’s class you should be able to answer the following questions; • • •
The agreements expressly declared to be void The uncertain agreements The wagering agreements
have not been discussed in the preceding chapter. Illegal agreements are also ‘unlawful agreements’ as they are expressly declared void by the Contract Act. It may be recalled that in the case of illegal agreements, transactions collateral to them are also tainted with illegality and hence void. 1. Agreements in Restraint of Marriage Every individual enjoys the freedom to marry and so according to Section 26 of the Contract Act “every agreement in restraint of the marriage of any person, other than a minor, is void.” The restraint may be general or partial but the agreement is void, and therefore, an agreement agreeing not to marry at all, or a certain person, or a class of persons, or for a fixed period, is void. However, an agreement restraining the marriage of a minor is valid under the Section. It is interesting to note that a promise to marry a particular person does not imply any restraint of marriage, and is, therefore, a valid contract. Illustrations (a) Agrees with B for good consideration that he will not marry C. It is a void agreement. (b) A agrees with B that she will marry him only. It is a valid contract of marriage. 2. Agreements in Restraint of Trade The Constitution of India guarantees the freedom of trade and commerce to every citizen and therefore Section27 declares “every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void,” Thus no person is at liberty to deprive himself of the fruit of his labour, skill or talent, by any contracts that he enters into. It is to be noted that whether restraint is reasonable or not, if it is in the nature of restraint of trade, the agreement is void always, subject to certain exceptions provided for statutorily. Illustration. An agreement whereby one of the parties agrees to close his business in consideration of the promise by the other party to pay a certain sum of money, is void, being an agreement in restraint of trade, and the amount is not recoverable, if the other party fails to pay the promised sum of money ( Madhub Chander vs Raj Kumar) But agreements merely restraining freedom of action necessary for the carrying on of business are not void, for the law does not intend to take away the right of a trader to regulate his business according to his own discretion and choice. Illustration An agreement to sell all produce to a certain party, with a stipulation that the purchaser was bound to accept the whole quantity, was held valid because it aimed to promote business
In today’s lecture we shall study about void agreements and their different classes You all must be aware by now that “An agreement not enforceable by law is said to be void” [Sec.2(g)]. Thus a void agreement does not give rise to any legal consequences and is void ab-initio. In the eye of law such an agreement is no agreement at all from its very inception. We have already dealt with the following types of void agreements in the preceding chapters, and will not therefore discuss them here again: The preceding chapters, and will not therefore discuss them here again: 1. 2. 3. 4. Agreements by a minor or a person of unsound mind (Sec. 11). Agreements made under a bilateral mistake of fact material to the agreements(Sec. 20). Agreements of which the consideration or object is unlawful (Sec. 23). Agreements of which the consideration or object is unlawful in part and the illegal part cannot be separated from the legal part (Sec. 24). Agreements made without consideration (Sec. 25).
Expressly Declared Void Agreements The last essential of a valid contract as declared by Section 10 is that it must not be one which is ‘expressly declared’ to be void by...
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