Void Agreements under Chapter II of the Indian Contract Act, 1872

This section explains that the contracts where the object and consideration are not lawful in nature are held to be void. Even if a part of the object or consideration is illegal, such an agreement cannot be enforceable and is void.

“If any part of a single consideration for one or more objects, or anyone or any part of any one of several considerations for a single object, is unlawful, the agreement is void.” [2]

To understand this section in an easier way let us see an example. A proposes to B that if B sells 5000 kgs of sugar then as payment A gives B 10 kgs of cocaine, such a contract is void. Why is the contract void? The selling of cocaine (a drug) is illegal, thus such a transaction cannot take place, the object of the contract is not lawful.

In the case of Alice Mary Hill v. William Clarke, ILR (19050 27 All 266, the defendant promised to pay some amount of money to the plaintiff for living in adultery with the defendant and for keeping the house given by him. The former part of this transaction is unlawful thus the whole agreement was held to be void.[3]

In the case of BOI Finance v. Custodian, (1997) 10 SCC 488: AIR 1997 SC 1952, it was held that prohibiting a forward transaction in the securities, a part of which were ready for spot delivery is not applicable. [4]

Section 25 of the Act:

  1. If the agreement is clearly expressed in writing and registered under any law which is in force at that time for the document’s registration. Such an agreement must be made from natural love and affection between the parties
  2. If it is any promise for compensation for a job voluntarily done by the promisor or any task which the promisor was legally obliged to do so.
  3. If it is any promise in writing that is signed by a person or the agent of the said person, the promise being the payment of a debt (partly or wholly) for which the creditor had enforced payment but barred by the limitation law.

Let us understand this section with the help of an example. A is a wholesaler who sells cotton and woolen clothes as per season. A has taken a loan from B of Rs. 5000 but fails to repay it and it becomes a debt barred by the limitation act. But to proceed with his business smoothly without any disturbance from B, A pays Rs. 4000 to B and registers in writing the same. This is a contract.

In the case of Rajlukhy Dabee v. Bhoothnath, (1900) 4 Cal WN 488, the defendant was sued for non-performance of the promise. The promise was that he will provide separate residence and amount of maintenance to his wife (plaintiff). The contract was void ab initio and the court stated that there was a lack of love and affection.[5]

Section 26 of the Act:

This section simply states that agreements which restrain any marriage are void. The word restraint means a condition that keeps someone under control. Restraint of marriage means getting a person married to someone with a condition. Such an agreement is not enforceable. Every person has the freedom to marry a person of their choice and no one can put restrictions on the freedom of the person for marriage and such restriction is against public policy and considered void under this section.

For example, A promises B that he will pay her Rs. 15000 if she does not marry C. Such an agreement is void. Another example, A promises B that he will not marry any other person and if he marries someone else, he will pay an amount of 2000 Euros to A.[6]

Section 27 of the Act

This section explains that any agreement which is restraining any person from trading is void. No person shall restraint anyone from exercising a lawful profession, trade, or business.

Article 19 (1) (g):
Freedom to practice any profession. This article says that every citizen of Indian has the right to practice any profession or any occupation, trade, or business. However, this right is subject to reasonable restrictions in the interest of the public.[7]

    Sale of Goodwill:
    Saving of agreement not to carry on the business of which goodwill is sold.[8] It means that any person who has sold the goodwill of his business can come into an agreement with the buyer of his goodwill that he will refrain from carrying on the same or similar type of business within the limits of the pace where the buyer is planning to open the business or has already established one.

Agreements which include non-disclosure of confidential information and other trade secrets are not one-sided or unfair. If any employee of an organization fails to follow this clause of the contract about keeping confidential information safe, then the employee can also be treated as on who breached the contract and liable for misconduct.[13]

  1. Saving of contract to refer to arbitration dispute that may arise. This exception is applicable in those contracts where the parties agree that there will be no legal action against each other and any dispute arising shall be referred to arbitration and only the expenses spent for such arbitration will be recoverable.
  2. Saving of contract to refer questions that have already arisen. This exception explains that a contract where the parties agree to refer to the arbitration for any question which has already arisen between them is a valid one. Such a contract now will be dealt through arbitration.
  3. Saving of a guarantee agreement of a bank or a financial institution. A contract where any bank or a financial institution demands a guarantee or any other agreement for the provision of guarantee for the cancellation of a debt or to discharge any party from such liability in respect of such guarantee or any other agreement when the specified period expires, and such period not being less than one year from the date of occurrence or non-occurrence of such event for the cancellation od debt or discharge of party from the liability. [15]

Section 30 of the Act
This section says that wagering agreements are void. Wager means in simple terms a bet; it is a sum or money or money’s worth someone agrees to bet against another for the occurrence or non-occurrence of an event. For example, A and B enter into an agreement that A will pay Rs. 500 to B is a particular team of B’s choice wins in the Indian Premier League cricket match. Such an agreement is void as the winning probability of that team is 1:1.

  1. Exception in favor of certain prizes for horse-racing. This exception says that any bet on a horse race will be a valid contract if it carries any certain amount as prize money which is more than Rs. 500 which will be awarded to the winner.[16]

Conclusion
There are few agreements which cannot be enforced legally and thus are declared to be void under the Indian Contract Act, 1872. Exceptions are bound to occur everywhere, so do they occur in the case of void agreements as well. Any type of agreement (other than exceptions) who fall under the sections 24 to 30 of the Indian Contract Act, 1872 are thereby held void.

  1. Avtar Singh, Contract & Specific Relief, Twelfth Edition, Page No. 2, EBC Publication
  2. https://indiankanoon.org/doc/1649313/#:~:text=Section%2024%20in%20The%20Indian%20Contract%20Act%2C%201872&text=24.,unlawful%2C%20the%20agreement%20is%20void.
  3. https://www.casemine.com/judgement/in/56e0f1ca607dba38965f90ab
  4. Avtar Singh, Contract & Specific Relief, Twelfth Edition, Page No. 290, EBC Publication
  5. https://blog.ipleaders.in/examining-section-25-indian-contract-act/
  6. See case law Lowe v. Peers (1768), 4 Burr. 2225
  7. Hema Raman, Student’s Handbook on Legal Aptitude & Constitution of India (Vol. 2), Page 90. A. J. Publications
  8. https://www.indiacode.nic.in/bitstream/123456789/2187/1/A1872-9.pdf
  9. Avtar Singh, Contract & Specific Relief, Twelfth Edition, Page No. 291 and 292, EBC Publication
  10. Avtar Singh, Contract & Specific Relief, Twelfth Edition, Page No. 300, EBC Publication
  11. Avtar Singh, Contract & Specific Relief, Twelfth Edition, Page No. 301, EBC Publication
  12. http://www.legalservicesindia.com/article/1753/Exceptions-of-agreement-in-restraints-of-trade-with-reference-to-Indian-and-English-case-laws.html
  13. Avtar Singh, Contract & Specific Relief, Twelfth Edition, Page No. 307, EBC Publication
  14. See case law India Charlesworth v. Mac Donald, ILR (1899) 34 Bom 103
  15. Avtar Singh, Contract & Specific Relief, Twelfth Edition, Page No. 315, EBC Publication
  16. http://thelawstudies.blogspot.com/2016/08/what-is-void-agreement.html
  17. Avtar Singh, Contract & Specific Relief, Twelfth Edition, Page No. 336, EBC Publication
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