Void Agreements (Section 26-30) Indian Contract Act, 1872

    Void Agreements (Section 26-30) Indian Contract Act, 1872
    Void Agreements (Section 26-30) Indian Contract Act, 1872

    Void Agreements (Section 26-30) Indian Contract Act, 1872 Void Agreements (Section 26-30) Indian Contract Act, 1872 Void Agreements (Section 26-30) Indian Contract Act, 1872 Void Agreements (Section 26-30) Indian Contract Act, 1872 Void Agreements (Section 26-30) Indian Contract Act, 1872 Void Agreements (Section 26-30) Indian Contract Act, 1872 Void Agreements (Section 26-30) Indian Contract Act, 1872 Void Agreements (Section 26-30) Indian Contract Act, 1872 Void Agreements (Section 26-30) Indian Contract Act, 1872 Void Agreements (Section 26-30) Indian Contract Act, 1872 Void Agreements (Section 26-30) Indian Contract Act, 1872 Void Agreements (Section 26-30) Indian Contract Act, 1872 Void Agreements (Section 26-30) Indian Contract Act, 1872

    What is an agreement?

    Section 2(e) of the Indian Contract Act, 1872 defines agreement as a promise and every set of promises forming consideration for each other is an agreement. 

    For an agreement to be formed there must be at least two or more parties and there must be a proposal from one party and acceptance from the other party. Person making a proposal is called the “Promisor”, and on the other hand, the person accepting the proposal is called “Promisee

    There are two types of agreement namely:

    • Valid Agreement – Section 2(h) of the Indian Contract Act defines a valid agreement as to the one, which is enforceable in the eyes of law.
    • Void Agreement- According to Section 2 (g) of the Contract Act these contracts are not enforceable in the eyes of law and there are no legal consequences as it is void ab initio (void from the beginning), the parties to the contract do not get legal redress in the case of void agreements.

    We will be dealing majorly with the conception of Void Agreements in the article.

    How does an Agreement become Void?

    Void agreements arise due to the non-fulfillment of certain conditions laid down in Section 10 of the Indian Contract Act. The Section states as follows:

    All agreements are contracts if they are made with the free consent of parties competent to contract, for a lawful, consideration and with a lawful object, and are not hereby expressly declared void.

    Agreements in restraint of marriage (Section 26)

    According to Section 26 of the Act, any agreement, which is made in the lieu of restraint of marriage, is void; one exception here is restraint of marriage of a minor i.e. the person who has not attained the age of majority will not be void. 

    Every person has the right to marry any person of his/her choice and any restraint by any person whatsoever will be declared as void. In 1768, a case at the Court of King’s Bench in Lowe v. Peers where the defendant had promised not marry anyone else other than the person who made the promise, on failing to do so a penalty of 1000 pounds was to be paid within three months of marrying anyone else.

    The Court found the contract void as it was restrictive in nature and it was a promise not to marry anyone else other than the person who made the promise, and the promisee had no obligation to marry the promisor.

    Case Law

    Rao Rani v. Gulab Rani: 

     A bench of the Allahabad High Court in the case where the two parties to the suit were the widows of the same man, Ram Adhar. After the death of their common husband, a dispute had arisen on the matter of inheritance of the property of the said deceased man.

     The parties cordially settled the dispute by signing a deed where it was stated that both of them would inherit an equal amount of property but if anyone would re-marry, the entire right would go over to the other. Subsequently, Gulab Rani married again and the property came under the control of Rao Rani.

    Gulab Rani filed a suit to get back the ownership of part of that property and, taking the favor of Section 26 of the Contract Act saying that the deed, which was signed, was restrictive in nature as it was in restraint of marriage. 

     The High Court in its judgment gave that there was no direct prohibition to re-marry and this was so done in order to preserve the property and ensure proper management thus, the said case was not against the principles of Section 26.

    Agreements in restraint of trade (Section 27)

    Every agreement, which is made in the restraint of trade and provided that the trade that is being conducted is lawful, is void. There are certain exceptions to this Section, which is in the case of the sale of goodwill.

    The person who sells the goodwill of any business may agree with the buyer to certain conditions on not carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear reasonable.

    Nordenfelt v Maxim Nordenfelt Guns and Ammunition Co. Ltd.

     Thorsten Nordenfelt, herein the Appellant was a Swedish gun manufacturer with a worldwide business. He sold the business to the respondents and agreed to enter into a restrictive promise not to work for any rival business for a period of 25 years in an unlimited geographical area. Later, he worked for a rival business. The respondents brought an action to enforce the promise.

    The court in its judgment stated that some clauses in the agreement were beyond reasonability and cannot be enforced on the Appellant and ruled in favor of the appellant.

    Agreement in restraint of legal proceedings (Section 28)

    Any agreement by which any party is restricted from enforcing his rights by the usual legal proceedings in the ordinary tribunals, or which limits the time within which the party may enforce rights is void to that extent.

    Exception 

    • Any Present dispute arising to be referred to arbitration
    • Any Future dispute arising to be referred to arbitration. 

    Tapash Majumdar vs. Pranab Dasgupta

    In the particular case, there was a club in Bengal and according to the rules of the club, there was a laid provision that if any elections were held in the club and the result whatsoever was to be accepted by the members, and no member was allowed to go the court, the Court stated that such kind of agreement is void. 

    Baroda Spinning & Weaving Co. Ltd. vs. Satyanarayan Marines & Fire Insurance Co. Ltd. 1914

    According to the agreement between the parties, if the party suffers any damage and if the claim is rejected then the party had to file the suit within 3 months. The court held the agreement valid because the evidence that had to be collected was to be fresh. Later, an amendment was added, and was stated that no limitation of time can be set unless given in the limitation Act.

    Uncertain Agreements (Section 29)

    Section 29 of the Act states that every agreement, which is of an uncertain nature and cannot be ascertained of being made certain is to that extent void.

    Examples 

    • Ram agrees to sell Raju “all the grain in my granary at Kolkata”. There is no uncertainty here to make the agreement void. 
    • Ritu agrees to sell to Palak “five thousand kilos of rice at a price to be fixed by Rani”. As the price is capable of being made certain, there is no uncertainty here to make the agreement void. 

    Agreements by the way of Wager (Section 30)

    Agreements by way of wager are void, and no suit shall be brought for recovering anything to be won by a way of wager, or to any person to abide by the result of any game or other uncertain event. Exception in favor of certain prizes for horseracing.

    Section 294A of the Indian Penal Code states that nothing in this section shall be deemed to legalize any transaction connected with horseracing, to which the provisions of section 294A of the (45 of 1860) apply.

    The following Agreements are not considered as wagering agreements: 

     1. Chit fund

     2. Commercial transactions i.e. transactions relating to the stock market.

     3. Athletic competition and competition involving skills.

     4. Insurance Contracts.

    Conclusion 

    Looking at the major sections related to void agreements, it can be concluded that the agreements, which have been declared void are done to protect the rights and interests of the public. The restrictions assume foremost importance, as agreements are the most commonly used legal tools and directly or indirectly, affect most of our social relations.