The Indian Contract Act, 1872 defines specific situations where agreements become void. A void agreement has no legal effect and cannot be enforced by law. Let’s explore the conditions that make an agreement void.
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What Is Unlawful Consideration or Object That Makes Agreement Void
If any part of the consideration or object of an agreement is unlawful, the whole agreement becomes void. For example, if someone agrees to do both legal and illegal acts in return for payment, the entire agreement is invalid.
A contract must have valid consideration. But there are some exceptions:
- If it’s written, registered, and based on natural love between close relatives.
- If it’s a promise to compensate someone for a past voluntary act.
- If it’s a written promise to pay a time-barred debt.
In these cases, the agreement is valid and enforceable.
Are Gifts an Inadequate Consideration
A gift made between donor and donee remains valid, even without consideration. Also, an agreement isn’t void just because the consideration is inadequate. But the court may check if the promisor gave consent freely.
What Is Restraint of Marriage is Void
Any agreement that stops a person (other than a minor) from getting married is void under the law.
Restraint of Trade or Profession is Void
If an agreement restricts someone from practicing a lawful profession, trade, or business, it is void.
If a person sells the goodwill of a business, they can agree not to start a similar business within a reasonable area.
Restriction on Legal Proceedings is Void
An agreement that prevents someone from enforcing their legal rights or sets time limits for doing so is void.
- Future Disputes: Agreements to resolve future disputes through arbitration are valid.
- Existing Disputes: Agreements to arbitrate existing disputes are also valid.
- Bank Guarantees: Banks or financial institutions can legally include a clause that ends liability after a set period (minimum one year), if in writing.
Are Uncertain Agreements Void
If the terms of an agreement are unclear or cannot be made clear, the agreement is void. For example, if someone agrees to sell “100 tons of oil” without saying which type of oil, the agreement is uncertain and invalid.
Agreements based on bets or uncertain future events are void. No one can claim money won through betting.
Exception: Prizes worth ₹500 or more for winners of horse races are allowed.
Conclusion
Indian contract law clearly outlines situations where agreements become void. These rules ensure contracts are made with lawful purpose, clear terms, and valid consideration. Understanding these conditions helps parties avoid invalid agreements and secure their legal rights.
