Explain Void agreement with exception with the suitable act, case law, example according to Indian contract act 1872

Introduction

In the Indian Contract Act, 1872, a void agreement is one that is not enforceable by law, meaning it has no legal effect, and no rights or obligations can be derived from it. The Act defines a void agreement as an agreement that is not legally binding and has no legal consequences.

Essentials of a Void Agreement:

1. Not enforceable by law.
2. Has no legal consequences.
3. Cannot create legal rights or obligations.

an explanation of void agreements under the Indian Contract Act, 1872, along with the relevant sections and examples.

Section 2(g) of the Indian Contract Act, 1872 defines a void agreement as “an agreement not enforceable by law.” In other words, a void agreement is one that is invalid from the outset and has no legal effect.

There are several circumstances under which an agreement may be considered void under the Indian Contract Act, 1872. These are:

Agreement by a minor (Section 11): A contract entered into by a person who is not of the age of majority (which is 18 years in India) is void ab initio, i.e., from the beginning. This is because minors are considered to be lacking in the legal capacity to contract.

For example, if a 16-year-old enters into a contract to buy a car, the agreement will be void because the minor does not have the legal capacity to enter into a contract.

Agreement made under coercion, undue influence or fraud (Sections 14, 16 and 17): An agreement that is entered into under duress or coercion, undue influence, or fraud is considered to be voidable at the option of the aggrieved party. If the aggrieved party chooses to rescind the contract, it becomes void from the beginning.

Section 14 defines coercion as the act of committing or threatening to commit any act that is forbidden by law or that is unlawful. Undue influence, as defined in Section 16, refers to the exercise of undue influence by one party over the other. Section 17 defines fraud as the act of making a false representation or concealing a material fact with the intention to deceive the other party.

For example, if a person is forced to sign a contract under threat of physical harm, the agreement is voidable at the option of the aggrieved party. Similarly, if a person is induced to enter into a contract based on a false representation, the agreement is voidable at the option of the aggrieved party.

Agreement made without consideration (Section 25): A contract that is made without consideration is void. Consideration refers to something of value that is given or promised by one party in exchange for something of value given or promised by the other party.

For example, if a person promises to give a gift to another person, but the promise is not supported by any consideration, the agreement is void.

Agreement in restraint of marriage (Section 26): An agreement that puts a restraint on a person’s right to marry is void. This is because such an agreement is considered to be against public policy.

For example, if a person enters into a contract that prohibits them from getting married, the agreement is void.

Agreement in restraint of trade (Section 27): An agreement that puts a restraint on a person’s trade, profession or business is void. This is because such an agreement is considered to be against public policy.

For example, if a person enters into a contract that prohibits them from practicing their profession in a particular area, the agreement is void.

Restraint in Legal Proceeding (section 28) : an agreement is void to the extent that it forbids a party from defending his contractual rights through customary legal channels or if it restricts the amount of time he has to do so. It protects three different kinds of contracts: (a) those that stipulate that an arbitration award must come before a lawsuit can be filed; (b) agreements to refer ongoing legal disputes to arbitration; and (c) guarantees made by banks and other financial institutions that include the clauses listed in the exception to the rule.

Agreement with uncertain terms (Section 29): A contract that has uncertain terms is void. In other words, if the terms of the contract are not clear and cannot be ascertained, the agreement is void.

For example, if a person enters into a contract to provide a service, but the terms of the service are not clearly defined, the agreement is void.

Wagering agreement (Section 30): A wagering agreement is one where the parties involved make a bet on the outcome of an uncertain event. Such agreements are considered to be void.

For example, if a person enters into a contract to bet on the outcome of a particular sports match, it is considered a wagering agreement.

However, there are a few exceptions to this rule. First, if the wagering agreement is made in the course of business and is not prohibited by any law, it is considered to be a valid contract. For example, insurance contracts, where the insurer takes a risk on the outcome of an uncertain event, are not considered to be wagering agreements.

Another exception is the skill-based competition, where the outcome of the event depends on the skill or ability of the parties involved. For example, a contract to participate in a chess tournament or a car race is not considered to be a wagering agreement because the outcome depends on the skill of the parties involved.

The Indian Contract Act, 1872, specifically defines wagering agreements as void. Section 30 of the Act states that “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 any person to abide by the result of any game or other uncertain event on which any wager is made.”

One of the landmark cases related to wagering agreements is R.M.D. Chamarbaugwala v. Union of India (1957). In this case, the petitioner organized a game of “Rummy” for amusement and did not charge any participation fee. The game required a certain amount of skill and was not purely based on chance. However, the government declared it to be a wagering game and prohibited its organization. The court held that the game was not a wagering game and did not fall under the definition of a gambling act. The court also stated that a game of skill could not be considered as gambling or wagering even if it involved the distribution of prizes.

In conclusion, a wagering agreement is considered void under the Indian Contract Act, except in certain situations like insurance contracts and skill-based competitions. It is important to note that betting on a game or contest is illegal under the Public Gambling Act, 1867, and any agreement made for the same purpose is also considered void.

Case laws:

Mohiri Bibee v. Dharmodas Ghose (1903): In this case, the plaintiff, Mohiri Bibee, had given a bond to the defendant, Dharmodas Ghose, as security for a loan. The bond stated that Mohiri Bibee would pay Dharmodas Ghose a sum of money with interest, but the bond was not stamped as required by the Indian Stamp Act. The court held that the bond was void as it was not properly stamped.

Abdullah v. Masum (1979): In this case, the plaintiff, Abdullah, entered into an agreement with the defendant, Masum, to pay him money in exchange for obtaining a license to operate a certain business. The agreement was found to be void as it was against public policy and therefore not enforceable by law.

1. Natarajan v. B. Chidambaram (2004): In this case, the plaintiff, N. Natarajan, entered into a contract with the defendant, B. Chidambaram, to purchase a property. The contract was found to be void as the property was not owned by the defendant and therefore he could not transfer the property to the plaintiff.

Jayabharathi v. S. Subramanyam (1999): In this case, the plaintiff, Jayabharathi, entered into an agreement with the defendant, S. Subramanyam, to sell him a property. The agreement was found to be void as the plaintiff did not have the legal capacity to enter into the agreement as she was a minor.

Kedar Nath v. Gorie Mohamad (1885): In this case, the plaintiff, Kedar Nath, entered into an agreement with the defendant, Gorie Mohamad, to transfer a property to him. The agreement was found to be void as it was not registered as required by the Indian Registration Act.

Conclusion

In conclusion, a void agreement is one that is not enforceable by law and has no legal consequences. An agreement may be void if it is not properly stamped, is against public policy, involves fraud, misrepresentation, or mistake, or is not registered as required by law. It is important to ensure that agreements are properly executed and comply with legal requirements to avoid entering into void agreements.