News Ticker

What are the situations under which a contract becomes void?

I want to know the meaning of void agreements?

Section 10 of the Indian Contract Act states that all agreements if made by free consent by competent parties for a lawful consideration and which are not declared void are contracts.

Void agreements are those that cannot be enforced by law in any courts.  Section 2(g) of Indian Contract Act defines it as an agreement not enforceable by law.  Void agreement will not create any legal right upon the parties to the agreement.If non-fulfilment of the following conditions by any one party itself makes the contract as void they are as follows:

  • Free consent of parties;
  • Competency of parties to contract;
  • Existence of a lawful consideration;
  • Existence of lawful object;

Agreement that should not come under Section 26, 27, 28,29, 30 and 56 of the Act.

Under Section 24 an agreement becomes void if considerations and objects in it are unlawful. For ex. An agreement to live in adultery and to keep the house where one single sum is taken as consideration for two acts is void agreement. Section 26 states that an agreement in restraint of marriage is void.  Section 27, 28, 29 states about agreement in restraint of a trade is void. But here an agreement not to carry on business of which good-will is sold is an exception. An agreement that is not certain in itself is void. Where an agreement which is not capable of being made certain is void. Section 30 states an agreement by way of wager is void. Wager is a promise to give money upon determination of certain event.  An agreement contingent on impossible event is void like, A agrees with B to discover treasure by magic and such agreement is void. Agreements to do some impossible acts are void. Agreements that restrain any legal proceedings are also void. But there are some exceptions to wagering agreements are like:

  • Horse races
  • lottery;
  • crossword competitions;
  • games of skill;
  • contract of insurance;
  • share market transactions

In Union of India Vs. Col. L.S.N. Murthy & ANR.(23 November, 2011) Supreme Court held that the arbitrator’s award that the contract was void ab-initio and was not enforceable was a wrong award and the apex court set aside the award.

by  Sushma Javare