Law,Mayur Vihar Phase 3,(Ravish Roshan,9968009808)

STUDENT- PGDMINSTITUTE OF MANAGEMENT STUDIES, NOIDA

Prepared by –1.RAVISH ROSHAN ([email protected]),9968009808 (m

ail ur comm

ents, please)

VOID,VALID & VOIDABLECONTRACT

Definition of a Contract A contract is an agreement that is enforceable

by law or equity. There are two parties to a contract: the offeror who makes an offer to enter into a

contract and, the offeree to whom an offer to enter into a

contract is made.

According to legal scholar Sir John William Salmond, a contract is "an agreement creating and defining the obligations between two or more parties".

Valid Contract A valid contract is

a contract that meets all of the essential elements to establish a contract. It is a contract that is enforceable by at least one of the parties.

Objectives of Valid Contract Understand how a valid contract is

made.

Understand the essentials of a valid contract such as the intention to be bound, offer and acceptance.

Apply the law on formation of contracts to problem situations.

Elements necessary to form a valid contract To have an enforceable contract, four elements must

be present:

Agreement—To have an enforceable contract, there must be an agreement between the parties.

Consideration—The promise must be supported by bargained-for consideration that is legally sufficient.

Contractual Capacity —The parties to a contract must have contractual capacity.

Lawful Object —The object of the contract must be lawful.

Essentials of a Valid Contract All agreements are contracts if they are made:

1. BY THE FREE CONSENT OF PARTIES competent to contract. Consent is said to be free if it is not caused by:

Coercion - Consent is said to be caused by coercion when it is obtained by pressure exerted by either committing or threatening to commit an act forbidden by the Indian Penal Code or unlawfully detaining or threatening to detain any property.

Undue influence - A contract is said to be induced by

"undue influence" where the relation subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.

Fraud - Means and includes the following acts done with the intention to deceive or to induce a person to enter into a contract.

(a) the suggestion that a fact is true when it is not true and the person making the suggestion does not believe it to be true,

(b) active concealment of a fact by a person who has knowledge or belief of the fact,

(c) promise made without the intention of performing it.

Misrepresentation - When a person positively asserts that a fact is true when his information does not warrant it to be so, though he believes it to be true, it is misrepresentation. A breach of duty which brings an advantage to the person committing it by misleading the other to his prejudice is also a misrepresentation.

Mistake - Where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. An erroneous opinion as the value of the thing, which forms the subject matter of the agreement, is not deemed as mistake as to a matter of fact. Unilateral mistake, i.e. the mistake in the mind of only one party does not affect the validity of the contract.

2. FOR A LAWFUL CONSIDERATION AND OBJECT

Consideration or object is unlawful if (1) It is forbidden by law, (2) Is of such a nature if permitted it would defeat the

provisions of any law, (3) It is fraudulent,(4) The court regards it immoral,(5) The court regards it opposed to public policy. Every

agreement of which the consideration or object is unlawful is void.

3. NOT EXPRESSLY DECLARED TO BE VOID.

Void Contract A void contract is a contract that has no

legal effect : a nullity. A void contract, also known as a void

agreement, is not actually a contract. A void contract cannot be enforced by law. Void contracts are different from voidable contracts, which are contracts that may be (but not necessarily will be) nullified.

An agreement to carry out an illegal act is an example of a void contract or void agreement.

For example, a contract between drug

dealers and buyers is a void contract simply because the terms of the contract are illegal. In such a case, neither party can go to court to enforce the contract.

Reasons which transform a valid contract into a void contract Supervening Impossibility- A contract

becomes void by impossibility of performance after the formation of the contract.

Subsequent Illegality- A contract also becomes void by subsequent illegality.

Following agreements are expressly declared to be Void

Agreements void if considerations and objects unlawful in parts.

Agreement without consideration is void, unless it is in

writing and registered, or it is a promise to compensate for something done, or is a promise to pay a debt barred by limitation.

Agreement in restraint of marriage- Every agreement in

restraint of the marriage of any person, other than a minor is void. It is the policy of law to discourage agreements, which restrain freedom of marriage. Where a party is restrained from marrying at all, or for marrying for a fixed period or from marrying a particular person, or class of persons, the agreement is void.

Agreements for uncertainty- Agreements the meaning of

which is not certain, or capable of being made certain, are void.

Agreement in restraint of trade- Every agreement, by which one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.

Agreement in restraint of legal proceedings- Every

agreement by which any party there is restricted absolutely from enforcing his rights 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.

Agreements by way of wager/ Bet- Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on wager, or entrusted to any person to bide by the result of any game or other uncertain event on which any wager is made. (Wager means betting or gambling). However certain prizes for horseracing are exempted.

Voidable Contract

A voidable contract is a contract where one or both of the parties have the option to avoid their contractual obligations. If a contract is avoided, both parties are released from their contractual obligations.

Characteristics of a Voidable Contract

It is valid and binding on both the parties till it is avoided by the aggrieved parties.

It can be avoided only by one party, and not by the other.

The party at whose option the contract is voidable, is not bound to repudiate it.

The party repudiating the contract is entitled to get damages for any loss that he may have suffered.

Difference b/w Void & Voidable AgreementA void agreement is one in which there is found to be no

agreement; such as A selling his mobile to B for $50.00, and B thought A was selling his cycle for $50.00. Since there was no meeting of the minds, the contract is void (mutual mistake).

A voidable agreement is one in which one or both parties have the option to void the contract, and may elect to either continue performance of the contract, or void the contract.

For instance, someone under 18 years old does not have the required capacity to enter into a contract. However, if the under 18 year old does enter into a contract with another, under the law, the youngster has the option of going through with the contract, or voiding the contract