Introduction
The Indian Contract Act, of 1872, governs various types of agreements and their enforceability. Understanding the distinctions between unlawful agreements and those considered void is crucial for comprehending how contract law functions in India. Here, we explore several key types of agreements, including those with unlawful objects, agreements without consideration, and various restraints, all of which play a significant role in contract law.
Agreements with Unlawful Object
Section 23 of the Indian Contract Act states that the consideration or object of an agreement is lawful unless it is:
- Forbidden by law.
- Of such a nature that it would defeat the provisions of any law.
- Fraudulent.
- Involving or implying injury to a person or property.
- Immoral or opposed to public policy.
Examples of agreements with unlawful objects include those for committing illegal acts, engaging in fraud, or involving harm to individuals or property. Such agreements are considered void and unenforceable.
Case Law: Gherulal Parakh v. Mahadeodas Maiya
The Supreme Court held that an agreement that involved committing fraud upon the government was void as it was against public policy.
Agreements Without Consideration
According to Section 25 of the Indian Contract Act, agreements made without consideration are generally void. However, there are exceptions:
- Natural love and affection: Agreements made out of natural love and affection between close relatives, provided they are in writing and registered.
- Past voluntary services: Agreements to compensate for past voluntary services rendered to the promisor.
- Promise to pay a time-barred debt: An agreement to pay a debt barred by the statute of limitations.
Case Law: Rajlukhy Dabee v. Bhootnath Mookerjee
The court upheld that a written and registered agreement based on natural love and affection between close relatives is enforceable without consideration.
Agreements in Restraint of Marriage
Section 26 of the Act voids any agreement that restrains a person from marrying, except in the case of minors. For example, if a father pays someone to prevent their daughter from marrying, this agreement is void unless the daughter is a minor.
Case Law: Shrawan Kumar v. Nirmala
The Allahabad High Court dismissed a petition to restrain a woman’s marriage, emphasizing that agreements in restraint of marriage are void.
Agreements in Restraint of Trade
Section 27 states that any agreement restraining trade or business is void. However, exceptions include:
- Sale of goodwill: Reasonable restrictions protecting the buyer of business goodwill.
- Partnership agreements: Restrictions on partners’ business activities as stipulated in the Indian Partnership Act.
Case Law: Madhub Chander v. Raj Coomar
The court held that an agreement to close a shop for money was void as it restrained trade.
Case Law: Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co Ltd
Under common law, the court upheld a reasonable restraint on trade, considering it valid if it protected legitimate business interests.
Agreements in Restraint of Legal Proceedings
Section 28 declares that agreements restricting the parties from enforcing their legal rights through judicial proceedings are void. This ensures individuals can freely access the legal system to resolve disputes.
Case Law: Firm Daulat Ram vs. Firm Dharm Chand
The court held that any agreement preventing a party from enforcing legal rights through judicial proceedings is void.
Ambiguous and Uncertain Agreements
Agreements with terms that are ambiguous or uncertain cannot be enforced, as there is no clarity on the obligations and expectations of the parties involved. Clarity in contractual terms is essential for enforceability.
Case Law: Scammell and Nephew Ltd v. Ouston
The House of Lords held that an agreement was void due to uncertainty as the terms were too vague to be enforceable.
Wagering Agreements
Wagering agreements are those where the outcome is dependent on uncertain events, such as betting. These agreements are void under Indian law, as they are considered speculative and lack any legitimate consideration.
Case Law: Carlill v. Carbolic Smoke Ball Co
Although not directly a wagering agreement case, this case established principles about the enforceability of contracts involving betting or uncertain outcomes.
Void vs. Illegal Agreements
Understanding the distinction between void and illegal agreements is essential:
- Void Agreements: These are not enforceable by law but are not necessarily against the law. Examples include agreements without consideration or those restraining trade or marriage.
- Illegal Agreements: These are void from the outset and involve acts prohibited by law, such as agreements for committing crimes or fraud. Participating in illegal agreements can result in legal penalties.
Case Law: Kedar Nath Motani v. Prahlad Rai
The Supreme Court ruled that an agreement to stifle prosecution is illegal and void as it is against public policy.
Conclusion
In summary, the Indian Contract Act sets clear guidelines on the enforceability of various agreements, ensuring that contracts serve lawful purposes and protect the interests of all parties involved.
Also Read: Exception to Consideration
Reference: Ipleaders
