VOID AGREEMENTS
DEFINITION:
Literally: Void means having no legal value and agreement means Arrangement, promise or contract made with somebody. So void agreement means an agreement that has no legal value.
Traditionally: “An agreement not enforceable by law is said to be void”. [Sec 2(g)]
LEGAL POSITION
A void agreement has no legal effect. An agreement which does not satisfy the essential elements of contract is void. Void agreement confers no rights on any person and creates no obligations.
Example of void agreement: An agreement made by a minor, agreement without consideration, certain agreements against public policy etc.
EXPRESSLY DECLARED VOID AGREEMENT
There are certain agreements, which are expressly declared to be void.
They are as follows:
(1) Agreement by incompetent persons
(2) Agreement of which the consideration or object is unlawful[Sec(23)]
(3) Agreement made under a bilateral mistake of fact material to the agreement[Sec(20)]
(4) Agreement of which the consideration or object is unlawful in part. [Sec(24)]
(5) Agreement made. without consideration.[Sec(25)]
(6) Agreement in restraint of marriage [Sec(26)]
(7) Agreement in restrain of trade [Sec(27)]
(8) Agreement in restrain of legal proceedings[Sec(28)]
(9) Agreements the meaning of which is uncertain [Sec(29)]
(10) Agreements by way of wager [Sec(30)]
(11) Agreements contingent on impossible events [Sec(36)]
(12) Agreements to do impossible acts [Sec(56)]
Some discussions on void agreement are as follows:
(1) Agreement by incompetent persons.
(2) Agreement Made Without Consideration-
An agreement made without consideration is void, unless it is expressed in writing and registered under the law for the registration of(documents), and
1) It is made on account of natural love and affection between parties standing in a near relation to each other.
2) It is a promise to compensate, past voluntarily services done for the promisor.
3) It is a promise to pay time barred debts under limitation act.
In any of these cases, such an agreement is a contract.
Illustrations
a) A promises for no consideration, to give to B Rs. 1000; this is a void agreement.
b) A, for natural, love and affection, promises to give his son, B Rs. 1000. A puts his promise to B into writing and registers it. This is a contract.
c) A finds be B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract.
d) A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract.
(3) Agreements in Restraint of Marriage-
Every individual enjoys the freedom to marry and so according to section 26 of the contract act “every agreement is restraint of the marriage of any person, other than a minor, is void.”
It is interesting to note that a promise to marry a particular person is a valid contract.
Illustrations
(a) A agrees with B for good consideration that she 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.
(4) Agreement in Restraint of Trade-
The constitution of Pakitan guarantees that the freedom of trade and commerce to every citizen and therefore section 27 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.”
It is to be noted that whether restraint is responsible 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 some of money , is void, being an agreement is restraint of trade, and the amount is not recoverable, if the other party fails to pay the promised some of money. (Mad hub Chander vs. Raj Kumar).
Following are exceptions of section 27 application.
(5) Agreement in restraint of legal proceedings-
Every agreement, by which any party thereto is restricted absolutely from enforcing his right 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, is void to that extent. Section 28 declares the following two kinds of agreements void:
(a) An agreement by which a party is restrained absolutely from taking usual legal
Proceeding, in respect of any rights arising from a contract.
(b) An agreement which limits the time within which one may enforce his contract
Rights, without to the time allowed by the limitation act.
Illustration
In a contract of fire insurance, it was provided that if a claim is rejected and a suit is not filed within three months after such rejection, all benefits under the policy shell be forfeited. The provision was held valid and binding and the suit filed after three months was dismissed. (Baroda spinning Ltd. vs. Satyanarayan Marine and Fire Ins. Com. Ltd.)
Exception 1: This section shell not render illegal a contract by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shell be referred to arbitration and that only the amount awarded in such arbitration shell be recoverable in respect of the dispute so referred.
Exception 2: Nor shell 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.
(6) Uncertain Agreements-
“Agreements, the meaning of which is not certain, or capable of being made certain, are void” (Sec-29). Through Sec-29 the law aims to ensure that the parties to a contract should be aware of the precise nature and scope of their mutual rights and obligation under the contract. Thus, if the word used by the parties are or indefinite, the law cannot enforce the agreement.
Illustration
(a) A agrees to sell to B “a hundred tons of oil.” There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.
(b) A who is dealer in coconut oil only, agrees to sell to B “a hundred tons if oil.” The nature of A’s trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred toms of coconut oil.
(c) A agrees to sell to B “one thousand mounds of rice at a price to be fixed by C.” As the price is capable of being made certain, there is no uncertainty here to make the agreement void.
(d) A agrees to sell to “his white house for rupees five hundred or rupees one thousand.” There is nothing to show which of the price was to be given. The agreement is void.
Further, an agreement “to enter into an agreement in future” is void for uncertainty unless all the terms of the proposed agreement are agreed expressly or implicitly. Thus, an agreement to engage a servant some time next year, at a salary to be mutually agreed upon is a void agreement.
(7) Wagering Agreement-
Literally the word ‘wager’ means ‘a bet’ something stated to be lost or won on the result of a doubtful issue, and, therefore, wagering agreements are nothing but ordinary betting agreements. Thus where A and B mutually agree that if it rains today A will pay B Tk.100 and if it does not rain B will pay A Tk.100 or C and D entered into agreement that on tossing up a coin, if it fall head upwards C will pay D Tk.50 and if falls tail upwards D will pay C Tk.50, there is a wagering agreement.
In Tracker vs. Hardy Cotton, L.J., described a ‘wager’ ad follows: “The essence of gaming and wagering is that one party is to win and the other to lose upon a future event which at the time of the contract is of an uncertain nature- that is to say, if the event turns out the other way he will win.”
(8) Agreement 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 know on not to the parties to thr agreement at the time when it is made.” (Sec. 36)
Illustration
(a) A agrees to pay B Rs.1000 (as a loan) if two straight line should enclosed a space. The agreement is void.
(b) A agrees to pay B Rs.1000 (as a loan) if B will marry A’s daughter, C. C was dead at the time of the agreement, the agreement is void.
(9) Agreements to do Impossible Act-
“An agreement to do an act impossible in itself is void.” (Sec, 56 Part-1)
Illustration
(a) A agrees with B to discover treasure by magic. The agreement is void. [Section 56].
(b) A agrees with B to run with a speed of 100 Kilometer per hour. The agreement is void.
The constitution of Pakitan guarantees that the freedom of trade and commerce to every citizen and therefore section 27 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.”
It is to be noted that whether restraint is responsible 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 some of money , is void, being an agreement is restraint of trade, and the amount is not recoverable, if the other party fails to pay the promised some of money. (Mad hub Chander vs. Raj Kumar).
Following are exceptions of section 27 application.
- Sale of business goodwill.
(5) Agreement in restraint of legal proceedings-
Every agreement, by which any party thereto is restricted absolutely from enforcing his right 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, is void to that extent. Section 28 declares the following two kinds of agreements void:
(a) An agreement by which a party is restrained absolutely from taking usual legal
Proceeding, in respect of any rights arising from a contract.
(b) An agreement which limits the time within which one may enforce his contract
Rights, without to the time allowed by the limitation act.
Illustration
In a contract of fire insurance, it was provided that if a claim is rejected and a suit is not filed within three months after such rejection, all benefits under the policy shell be forfeited. The provision was held valid and binding and the suit filed after three months was dismissed. (Baroda spinning Ltd. vs. Satyanarayan Marine and Fire Ins. Com. Ltd.)
Exception 1: This section shell not render illegal a contract by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shell be referred to arbitration and that only the amount awarded in such arbitration shell be recoverable in respect of the dispute so referred.
Exception 2: Nor shell 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.
(6) Uncertain Agreements-
“Agreements, the meaning of which is not certain, or capable of being made certain, are void” (Sec-29). Through Sec-29 the law aims to ensure that the parties to a contract should be aware of the precise nature and scope of their mutual rights and obligation under the contract. Thus, if the word used by the parties are or indefinite, the law cannot enforce the agreement.
Illustration
(a) A agrees to sell to B “a hundred tons of oil.” There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.
(b) A who is dealer in coconut oil only, agrees to sell to B “a hundred tons if oil.” The nature of A’s trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred toms of coconut oil.
(c) A agrees to sell to B “one thousand mounds of rice at a price to be fixed by C.” As the price is capable of being made certain, there is no uncertainty here to make the agreement void.
(d) A agrees to sell to “his white house for rupees five hundred or rupees one thousand.” There is nothing to show which of the price was to be given. The agreement is void.
Further, an agreement “to enter into an agreement in future” is void for uncertainty unless all the terms of the proposed agreement are agreed expressly or implicitly. Thus, an agreement to engage a servant some time next year, at a salary to be mutually agreed upon is a void agreement.
(7) Wagering Agreement-
Literally the word ‘wager’ means ‘a bet’ something stated to be lost or won on the result of a doubtful issue, and, therefore, wagering agreements are nothing but ordinary betting agreements. Thus where A and B mutually agree that if it rains today A will pay B Tk.100 and if it does not rain B will pay A Tk.100 or C and D entered into agreement that on tossing up a coin, if it fall head upwards C will pay D Tk.50 and if falls tail upwards D will pay C Tk.50, there is a wagering agreement.
In Tracker vs. Hardy Cotton, L.J., described a ‘wager’ ad follows: “The essence of gaming and wagering is that one party is to win and the other to lose upon a future event which at the time of the contract is of an uncertain nature- that is to say, if the event turns out the other way he will win.”
(8) Agreement 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 know on not to the parties to thr agreement at the time when it is made.” (Sec. 36)
Illustration
(a) A agrees to pay B Rs.1000 (as a loan) if two straight line should enclosed a space. The agreement is void.
(b) A agrees to pay B Rs.1000 (as a loan) if B will marry A’s daughter, C. C was dead at the time of the agreement, the agreement is void.
(9) Agreements to do Impossible Act-
“An agreement to do an act impossible in itself is void.” (Sec, 56 Part-1)
Illustration
(a) A agrees with B to discover treasure by magic. The agreement is void. [Section 56].
(b) A agrees with B to run with a speed of 100 Kilometer per hour. The agreement is void.
10. Agreement void where both parties are under a mistake as to matter of fact.
Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.
Explanation.--- An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement is not to be deemed a mistake as to a matter of fact.
Explanation.--- An erroneous opinion as to the value of the thing which forms the subject-matter of the agreement is not to be deemed a mistake as to a matter of fact.
Illustrations
(a) A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void.
11. 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.
Illustration
A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in other articles. B promises to pay to A a salary of 10,000 rupees a year. The agreement is void, the object of A's promise and the consideration for B's promise being in part unlawful.
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