Unit I:

The Indian Contract Act, 1872

Q1) – Explain Indian Contract Act.

A1) - INTRODUCTION

The Indian Contract Act, 1872 prescribes the law regarding contracts in India and is that the key act regulating Indian law.

The Act relies on the principles of English Common Law. It’s applicable to all or any the states of India. It determines the circumstances during which promises made by the parties to a contract shall be legally binding.

Under Section 2(h), the Indian Contract Act defines a contract as an agreement which is enforceable by law.

OBJECTIVE OF THE ACT

The purpose of the Contract Act is to make sure that the rights and obligations arising out of a contract are honored which legal remedies are made available to an aggrieved party against the party failing to honor a part of agreement. The Indian Contract Act makes it obligatory that this is often done and compels the defaulters to honor their commitments.

EXTENT AND COMMENCEMENT

DEVELOPMENT

The Act as enacted originally had 266 Sections, it had wide scope

At present the Indian Contract Act could also be divided into two parts:

STEPS INVOLVED WITHIN THE CONTRACT

1. Proposal and its communication

2. Acceptance of proposal and its communication

3. Agreement by mutual promises

4. Contract

5. Performance of Contract

Q2) - What do you understand by contract and agreement?

A2) - CONTRACT

The Indian Contract Act, 1872 defines the term “Contract” under its section 2 (h) as “An agreement enforceable by law”. In other words, we will say that a contract is anything that's an agreement and enforceable by the law of the land.

This definition has two major elements in it viz – “agreement” and “enforceable by law”. So as to know a contract in the light of The Indian Contract Act, 1872 we need to define and explain these two pivots within the definition of a contract.

AGREEMENT

The Indian Contract Act, 1872 defines what we mean by “Agreement”. In its section 2 (e), the Act defines the term agreement as “every promise and each set of promises, forming the consideration for each other”.

Now that we know how the Act defines the term “agreement”, there may be some ambiguity within the definition of the term promise.

 An agreement enforceable by law could also be a contract.

Q3) - What is the difference between Contract and Agreement?

A3) - Let us see how a contract and agreement are different from one another. This can assist you summarize and make a map of all the important concepts that you simply have understood.

Contract Agreement

Q4) – Explain the types of Contracts.

A4) - 1. on the idea of validity

a)       Valid contract: An agreement which has all the essential elements of a contract is named a legitimate contract. A legitimate contract is often enforced by law.

b)       Void contract: A void contract may be a contract which ceases to be enforceable by law. A contract when originally entered into could also be valid and binding on the parties. It’s going to subsequently become void. There are many judgments which have stated that where any crime has been converted into a "Source of Profit" or if any act to be done under any contract is against "Public Policy" under any contract— than that contract itself can't be enforced under the law-

c)       Voidable contract: An agreement which is enforceable by law at the option of 1 or more of the parties thereto, but not at the option of other or others, is a voidable contract. If the essential element of free consent is missing in a contract, the law confers right on the aggrieved party either to reject the contract or to accept it. However, the contract continues to be good and enforceable unless it's repudiated by the aggrieved party.

d)       Illegal contract: A contract is against the law if it's forbidden by law; or is of such nature that, if permitted, would defeat the provisions of any law or is fraudulent; or involves or implies injury to an individual or property of another, or court regards it as immoral or against public policy. These agreements are punishable by law. These are void-ab-initio.

“All illegal agreements are void agreements but all void agreements aren't illegal.

e)       Unenforceable contract: Where a contract is good in substance but due to some technical defect can't be enforced by law is termed unenforceable contract. These contracts are neither void nor voidable.

2. On the idea of formation

a)       Express contract: Where the terms of the contract are expressly prescribed in words (written or spoken) at the time of formation, the contract is claimed to be express contract

b)       Implied contract: An implied contract is one which is inferred from the acts or conduct of the parties or from the circumstances of the cases. Where a proposal or acceptance is formed otherwise than in words, promise is claimed to be implied.

c)       Quasi contract: A contract is made by law. Thus, quasi contracts are strictly not contracting as there's no intention of parties to enter into a contract. It’s legal obligation which is imposed on a celebration that is required to perform it. A contract is predicated on the principle that an individual shall not be allowed to complement himself at the expense of another.

3. on the idea of Performance

a)       Unilateral contract: A agreement is one during which just one party has got to perform his obligation at the time of the formation of the contract, the opposite party having fulfilled his obligation at the time of the contract or before the contract comes into existence.

b)       Bilateral contract: A contract is one during which the requirement on both the parties to the contract is outstanding at the time of the formation of the contract. Bilateral contracts also are referred to as contracts with executory consideration.

4. on the bases of execution

a)       Executed contract: An executed contract is one during which both the parties have performed their respective obligation.

b)       Executory contract: An executory contract is one where one or both the parties to the contract have still to perform their obligations in future. Thus, a contract which is partially performed or wholly unperformed is termed as executory contract.

5. Other Contracts

Besides the above said classification, there are other kinds of contract also. Contingent Contract is one such type.

Q5)– What are the essential requirements and rules of a valid contract?

A5) - ESSENTIAL REQUIREMENTS OF A VALID CONTRACT

RULES OF VALID OFFER

Here are some of the few essentials that make the offer valid.

1] Offer must create Legal Relations

The offer must cause a contract that makes legal relations and legal consequences just in case of non-performance. So, a social contract which doesn't create legal relations won't be a valid offer. Say for instance a dinner invitation extended by A to B isn't a valid offer.

2] Offer must be clear, not vague

The terms of the offer or offer should be very clear and definite. If the terms are vague or unclear, it'll not amount to a valid offer. See example the following offer – A offers to sell B fruits worth Rs 5000/-. This is often not a valid offer since what sorts of fruits or their specific quantities aren't mentioned.

3] Offer must be communicated to the Offeree

For an offer to be completed it must be clearly communicated to the offeree. No offeree can accept the offer without knowledge of the offer. It makes clear that acceptance in ignorance of the offer doesn't amount to acceptance.

4] Offer could also be Conditional

While acceptance can't be conditional, an offer could be conditional. The offeror can make the offer subject to any terms or conditions he deems necessary. So, A offers to sell goods to B if he makes half the payment in advance. Now B can accept these conditions or make a counteroffer.

5] Offer cannot contain a Negative Condition

The non-compliance of any terms of the offer cannot result in automatic acceptance of the offer. Hence it cannot say that if acceptance isn't communicated by a particular time it'll be considered as accepted. Example: A offers to sell his cow to B for 5000/-. If the offer isn't rejected by Monday it'll be considered as accepted. This is often not a valid offer.

6] Offer is often specific or general

As we saw earlier the offer are often to at least one or more specific parties. Or the offer might be to the public generally.

7] Offer could also be Expressed or Implied

The offeror can make an offer through words or maybe by his conduct.

An offer which is formed via words, whether such words are written or spoken (oral contract) we call it an express contract and when an offer is formed through the conduct and therefore the actions of the offeror it's an implied contract.

Q7) – What is consideration? Explain the importance of Consideration.

A7) - CONSIDERATION (AS PER SECTION 2 AND 25)

 CONCEPT

 When at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise.

DEFINITION OF CONSIDERATION:

Consistent with Pollock, “Consideration is the price for which the promise of other is brought & the promise thus given for value is enforceable.”

According to section 2(d) when at the desire of the promisor, the promisee or any other person:

EXAMPLE: ‘P’ aggress to sell his car to ‘Q’ for Rs.50, 000 Here ‘Q’s Promise to pay Rs.50, 000 is that the consideration for P’s promise and ‘P’s promise to sell the car is that the consideration for ‘Q’s promise.

 IMPORTANCE OF CONSIDERATION

Consideration explains why a party is entering a contract and what they get from being a part of the contract. A contract must include consideration for each party involved so as to be valid. Essentially, consideration is that the benefit a party gets for entering a contract. During a basic contract, if you pay money for an item at the store and receive the item, that's your consideration. So as to qualify as consideration, each party must change their position.

Consideration usually results from:

• A promise to do something you are not legally obligated to try and do

• A promise to not do something you're allowed to do

Q8) - What Happens Without Consideration?

A8) - If a court believes the contract doesn't have adequate consideration, it can step in and rule the contract unenforceable. This will happen for variety of reasons, including:

A party was already obligated to perform. If one among the parties is already legally obligated to do something, it is not actually consideration.

The promise may be a gift, not a contract. If one party gives something to the other party without expecting anything reciprocally, it's considered a present, not a contract. Because the other party didn't provide anything in exchange for the gift, they need no legal standing if the promise falls apart.

The exchange is past consideration. Consideration doesn't apply if the action has already taken place. For instance, a promise to pay money for a product that somebody has already given you isn't legally binding.

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 LEGAL RULES REGARDING CONSIDERATION U/S 2

 It must move at the will of the promisor: It must be offered by the promisee at the will or request of the promisor. An act done at the will or request of the third party doesn't form a legitimate consideration.

 It’s going to move from the promisee or the other person: Consideration may move from the promisee or the other person i.e. even a stranger. It may be an act, abstinence or forbearance or a return promise.

The following are good consideration for the contract:

 It’s going to be present, past or future. i. Past Consideration ii. Present Or Executed Consideration iii. Future or Executory Consideration

Consideration needn't to be adequate but it must have some value. It must be real & not illusory.

There’s no consideration within the following cases:

1. Physical impossibility 2. Legal impossibility 3.Uncertain consideration

It must be something which the promisor isn't already sure to do A promise to try to what one is sure to do , either by general law or under an existing contract, isn't an honest consideration. It must not be illegal, immoral or against public policy

 Unlawful consideration includes any activities:

Q9) – What are the exceptions of the rule “NO CONSIDERATION NO CONTRACT”?

A9) -  EXCEPTIONS OF THE RULE “NO CONSIDERATION NO CONTRACT” (AS PER U/S 25)

1. On account of natural love & affection u/s 25(1): Such agreements are enforceable even inconsiderately.

2. for voluntary services u/s 25(2): A promise to compensate wholly or partially, an individual who has voluntarily done something for the promisor, is enforceable, even inconsiderately.

3. For promise to pay time-barred debts 25(3): A promise by a debtor to pay a time barred debt is enforceable provided it's in writing and signed by the debtor or his agent.

4. Within the case of completed gifts: The rule no consideration no contract doesn't apply.

5. Within the case of agency: to make workplace relationship consideration isn't necessary.

 UNLAWFL CONSIDERATION (AS PER SECTION 23)

According to Section 23, within the following cases consideration or object of an agreement is unlawful:

1. If it's forbidden by law:

Where the object of a contract is forbidden by law, the agreement shall be void. An act is claimed to be forbidden if it's punishable by criminal law or any special statute, or if it's prohibited by any law or order made in exercise of powers or authority conferred by the legislature.

Example:

(1) A and B agreed to deal in smuggled goods. It is forbidden by law and thus void.

(2) A committed B's murder within the presence of C. A promise to pay Rs. 500 to C, if C doesn't inform the police about the murder

The agreement in example No. 2 given above is against the law as its object is unlawful. Besides, A and C are going to be responsible for the act of murder and its concealment under the Indian penal code.

2. If it's of such a nature that if permitted, it might defeat the provisions of the other law:

The object of an agreement might not be directly forbidden but indirectly, it's going to defeat the thing of any other law, and the agreement would be void in such a case.

Example:

(1) A failed to pay his land revenue. Therefore, his estate was sold for arrears of revenue by the govt. By the law, the defaulter is prohibited from purchasing the land again. A asks B to get the estate and afterward, transfer an equivalent to him at an equivalent price. The agreement is void because it will defeat the thing of the law which prohibits a defaulter to get back the land, for indirectly A will again become the owner of the estate.

The second agreement is additionally void because it would defeat the provision or object of the law of limitation.

3. If it's fraudulent:

If the object of an agreement is fraudulent, i.e., to cheat people, it's void. Example:

A, B & C enter into an agreement to sell bogus plots of land in Delhi the agreement is void because it is fraudulent and thereby unlawful.

4. If it involves or implies injury to the person or property of another: Law protects property and person of its citizens. It cannot permit any contract which ends up in an injury to the person or property of anyone.

Examples:

(1) A promise to pay Rs. 500 to B if B beats C. It involves injury to C; hence it's unlawful and void.

5. If the Court regards it as immoral or against public policy: If the thing of an agreement is immoral or against public policy, it'll be void. Morality here means something which the law regards as immoral.

Examples:

(1) A agrees to offer his house on rent to a prostitute for her immoral purpose. A cannot recover the rent of his house if he prostitute refuse to pay. However, he could also be allowed to urge his house vacated from the prostitute because it will put an end to the immoral purpose.

(2) A agrees to offer his daughter on hire to B for concubinage. The agreement is void because it's immoral, though the letting might not be punishable under the Indian penal code.

Effect of Illegality:

1. An illegal agreement is void:

It is not enforceable at law.

2. Collateral transactions to illegal transactions also are void:

Not only the illegal agreement is void but also the collateral transactions are void.

Example:

A borrows Rs. 2,000 from B to shop for a revolver to shoot C. Since the thing of the transaction is against the law, B cannot recover his Rs. 2,000 if he has given the loan, knowing that A is taking the loan to get a revolver to shoot C.

Thus, people are going to be discouraged to finance or assist illegal transaction once they know that they're going to not be able to recover their loans.

3. Law doesn't help any party:

Where the agreement is against the law, the law won't help any of the parties. The rationale is that both the parties are equally guilty and therefore the law doesn't help a guilty person. The law wants to discourage both the parties.

Example:

A promise to pay a bribe of Rs. 200 to B, if B does his work The agreement is against the law   cannot recover the amount of Rs. 200 after doing A's work. Similarly, if A has paid the bribe in advance, he cannot get it back if B doesn't do his work.

4. Indirectly defendant is helped:

Defendant may be a person against whom the suit is filed. When the law doesn't help any of the parties, it means the party who has paid the amount won't be ready to get it back as we've seen within the above example. The party who has received the quantity is thus helped to stay the money with it and isn't asked by the Court to return it. The Court is neutral and therefore the defendant gets the advantage of the Court's neutrality. Within the example given above, B can keep Rs. 200, even if B doesn't do the work of A. The Court won't ask B to return the quantity. Thus, B is indirectly benefited or helped by the refusal of the Court to intervene.

5. in cases of fraud, coercion, etc., money or property transferred is often recovered:

Where the illegality is that the results of coercion and fraud of the other party, the Court can compel the guilty to return the cash paid or property transferred.

6. Agreement partly legal and partly illegal (Sec. 24):

An agreement may contain promises which are legal and illegal. If the legal promise is often separated from the illegal one, the legal promise is often enforced. In Such a case the illegal part are going to be void.

Where the legal promise can't be separated from the illegal one, the entire of it might be void.

Where there's one consideration for one or more unlawful objects, the agreement is void.

Example:

(1) A promise to manage B's factory, where genuine and bogus motor parts are manufactured. B agrees to pay A (Manager) a salary of Rs. 1,000 per month.

The agreement is void as partly it's legal and illegal and therefore the legal part can't be separated because the salary is for both the parts.

7. Reciprocal promises, legal and illegal (Sec. 57):

Where persons reciprocally promise, firstly to do certain things which are legal, and secondly under specified circumstances to do certain other things which are illegal, the first set of promise may be a contract, but the second may be a void agreement.

Example:

A and B agree that A shall sell a house to B for Rs. 10,000 but that if B uses it as a gambling house, he shall pay A Rs. 50,000 for it.

The first set of promise, i.e., to sell the house and to pay Rs. 10,000 may be a contract.

The second set of promise, i.e., B may use the house as a gambling house and pay Rs. 50,000 may be a void agreement.

8. Alternative promise, legal and illegal (Sec. 58):

In the case of an alternate promise, one branch of which is legal and therefore the other illegal, the legal branch alone is often enforced.

Q10) – Explain Contractual Capacity.

A10)- DEFINATION

The parties who enter into a contract must have the capacity to do the contract.

“Capacity “here means competence of the parties to enter into a legitimate contract. According Sec 10, an agreement becomes a contract if it's entered into between the parties who are competent to contract.

According Sec .11, every person is competent to contract who

Thus Sec. 11 declares following persons to be incompetent to contract:

1. Minors

2. Persons of unsound mind

3. Persons disqualified by any law to which they're subject.

1. MINORS

According to Sec 3 of the Indian Majority Act, 1875, a minor is a person who has not completed eighteen years of age.

 In following cases he attains majority after 21 years aged

The position of minor as regards his agreements could also be summed up as under:

2. PERSONS OF UNSOUND MIND

One of the essential conditions of competency of parties to a contract is that they ought to be of sound mind.

Sec 12 lays down the soundness of mind “A person is said to be of sound mind for the purpose of making the contract if, at the time when he makes it, he's capable of understanding it and of forming a rational judgment as to its effect upon his interests.

A person, who is usually of unsound mind but occasionally of sound mind, may make a contract when he's of sound mind.

 A person, who is typically of sound mind but occasionally of unsound mind, might not make a contract when he's of unsound mind

E.g.: an individual may be a lunatic, who is at intervals of sound mind, may contract during those intervals.

 Soundness of minds depends on two facts:

CONTRACTS OF PERSONS OF UNSOUND MIND

3. PERSONS DISQUALIFIED BY ANY LAW TO WHICH THEY'RE SUBJECT

Q11) – What do you understand by Consent? What are the essentials of Consent?

A11) -

Sec 10 of contract act states “all agreements are contract, if they're made by the free consent of parties.” in order to form a valid contract it's necessary that there should be a (a) consent & (b) Free consent. For the formation of a contract the parties should either have assented, or be deemed to possess assented, to an equivalent thing within the same sense it's called consensus ad idem.

MEANING OF CONSENT:

The term consent has been defined by many scholars are as under:

ESSENTIALS OF CONSENT:

There need to be two parties to a contract, who willingly and knowingly enter into an agreement. But how does the law determine if the parties are both these things? this is often where the concept of free consent comes in. allow us to learn more about free consent and therefore the elements vitiating free consent.

DEFINITION:

In the Indian Contract Act, the definition of Consent is given in Section 13, which states that “it is when two or more persons agree upon the same thing and in the same sense”. Therefore, the two people must comply with something within the same sense also.

 Example: A agrees to sell his car to B. A owns three cars and needs to sell the Maruti. B thinks he's buying his Honda. Here A and B haven't prescribed an equivalent thing within the same sense. Hence, there's no consent and subsequently no contract.

Now Free Consent has been defined in Section 14 of the Act. The section says that consent is taken into account free consent when it's not caused or suffering from the subsequent,

Let us take a glance at these elements individually that impair the free consent of either party.

1. Coercion (Section 15)

Coercion means using force to compel an individual to enter into a contract. So force or threats are wont to obtain the consent of the party under coercion, i.e it's not free consent. Section 15 of the Act describes coercion as committing or threatening to commit any act forbidden by the law within the IPC unlawfully detaining or threatening to detain any property with the intention of causing a person to enter into a contract

Example: A threatens to harm B if he doesn't sell his house to A for five lakh rupees. Here albeit B sells the house to A, it'll not be a legitimate contract since B’s consent was obtained by coercion.

Now the effect of coercion is that it makes the contract voidable. this suggests the contract is voidable at the choice of the party whose consent wasn't free. Therefore, the aggravated party will decide whether to perform the contract or to void the contract. So, within the above example, if B still wishes, the contract can plow ahead.

Also, if any monies are paid or goods delivered under coercion must be repaid or returned once the contract is void. And therefore, the burden of proof proving coercion are going to be on the party who wants to avoid the contract. Therefore, the aggravated party will need to prove the coercion, i.e. prove that his consent wasn't freely given.

2 Undue Influences (Section 16)

Section 16 of the Act contains the definition of undue influence. It states that when the relations between the 2 parties are such one party is during a position to dominate the opposite party, and uses such influence to get an unfair advantage of the opposite party it'll be undue influence.

The section also further describes how the person can abuse his authority within the following two ways: When an individual holds real or maybe apparent authority over the opposite person or if he's during a fiduciary relationship with the opposite person. He makes a contract with an individual whose brain is suffering from age, illness or distress. The unsoundness of mind are often temporary or permanent

Example: A sold his gold awaits only Rs 500/- to his teacher B after his teacher promised him good grades. Here the consent of A (adult) isn't freely given, he was under the influence of his teacher.

Now undue influence to be evident the dominant party must have the target to require advantage of the opposite party. If influence is wielded to profit the opposite party it'll not be undue influence. But if consent isn't free thanks to undue influence, the contract becomes voidable at the choice of the aggravated party and therefore the burden of proof is going to be on the dominant party to prove the absence of influence.

3. Fraud (Section 17)

Factors Impairing Free Consent: Fraud

Fraud means deceit by one among the parties, i.e. when one among the parties deliberately makes false statements. Therefore, the misrepresentation is completed with full knowledge that it's not true, or recklessly on faith for the trueness, this is often said to be fraudulent. It absolutely impairs free consent.

So consistent with Section 17, a fraud is when a celebration convinces another to enter into an agreement by making statements that are suggesting an incontrovertible fact that isn't true, and he doesn't believe it to be true the active concealment of facts a promise made with none intention of performing it the other such act fitted to deceive.

Example: A bought a horse from B. B claims the horse are often used on the farm. seems the horse are lame and A cannot use him on his farm. Here B knowingly deceived A and this may amount to fraud.

One factor to think about is that the aggravated party should suffer from some actual loss thanks to the fraud. There’s no fraud without damages. Also, the falsehood must be a fact, not an opinion. Within the above example if B had said his horse is best than C’s this is able to be an opinion, not a fact. And it might not amount to fraud.

4. Misrepresentation (Section 18)

Misrepresentation is additionally when a celebration makes a representation that's false, inaccurate, incorrect, etc. The difference here is that the misrepresentation is innocent.

 i.e. not intentional. The party making the statement believes it to be true. Misrepresentation are often of three types an individual makes a positive assertion believing it to be true any breach of duty gives the person committing it a plus by misleading another. But the breach of duty is with none intent to deceive.

When one party causes the opposite party to form an error on the topic matter of the contract. But this is often done innocently and not intentionally.

5 Mistake: an error is described as a component, which when occurs during a contract makes it void.

There are two sorts of mistakes, which occurs during a contract

Example: “A” made an offer to “B” to sell his scooter. “A” intended to sell his 3G scooter but “B” believed that “A” would sell his 4G scooter. Thus, there was no proper communication and therefore the fact was mistaken. it might amount to an effective agreement.

Q12) – What are void and voidable contract?

A12) - VOID AND VOIDABLE CONTRACT

 An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract

A contract which ceases to be enforceable by law becomes a void contract.

The section 2(j) of the Act defines a void contract as “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”. This makes all those contracts that are not enforceable by a court of law as void.

Example: A agrees to pay B a sum of Rs 10,000 after 5 years against a loan of Rs. 8,000. A, dies of natural causes in 4 years. The contract isn't any more valid and becomes void due to the non-enforceability of the agreed terms.

Void Contract means a contract doesn't exist in any respect. The law can't enforce any legal obligation to either party especially the disappointed party because they are not entitled to any protective laws as far as contracts are concerned.

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

Example: Contract between drug dealers and buyers could also be a void contract simply because the terms of the contract are illegal. In such a case, neither party can move to court to enforce the contract.

As per Section 2(g) of The Indian Contract Act, 1872 “An agreement not enforceable by law is claimed to be void”, and as per Section 2(j) of The Act “A Contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”

Thus, Void Contracts are often of following two types-

Void agreements as per the provisions of Indian Contract Act, 1872:Any agreement with a bilateral mistake is void(Section 20)- Where both the parties to an agreement are under a mistake on matter of fact essential to agreement, the agreement is void, for ex. A agrees to shop for from B a specific horse. It seems that the horse was dead at the time of the discount, though neither party was aware of the particular fact. The agreement is void.

But a contract isn't voidable merely because it had been caused by one of the parties thereto being under a mistake on a matter of fact. (Section 22)

Agreements which have unlawful consideration and objects are void.(Section 23 & 24): The consideration or object of an agreement is unlawful if it's forbidden by law or of such a nature that if permitted , it'd defeat the provisions of any law or is fraudulent or involves injury to the person or property of another or court regards it as immoral or against public policy .

If any a neighborhood of one consideration for one or more objects, or anybody or any a neighborhood of anybody of several consideration for one object, is unlawful, the agreement is void. But where the legal a neighborhood of an agreement is severable from the illegal, the previous would be enforced.

Agreements made inconsiderately is void(Section 25): An agreement without the consideration is void unless:

Agreement in check of marriage of any major person is void (Section 26):

Every agreement in check of the marriage of an individual, apart from a minor is void. It’s the policy of the law to discourage agreements which restrains freedom of marriage. The restraint could even be general or partial, that's to say, the party could even be restrained from marrying within the least, or from marrying for a hard and fast time or from marrying a selected person or class of persons, the agreement is void.

Agreement in check of trade is void. (Section 27): Every agreement by which anyone is restrained from exercising a lawful profession, or trade or business of any kind, is thereto extent void. There are two kinds of exception to the rule, those created by Statutes-

Sale of Goodwill: the only exception mentioned within the proviso to section 27 is that regarding sale of goodwill. It states that “One who sells the goodwill of the business may accept as true with the customer to refrain from carrying on the same business, within specified local limits, so long because the buyer , or an individual deriving the title to the goodwill from him , carries on a like business therein : as long intrinsically limits appear to the court reasonable , regard being had to the character of the business.

Partnership Act: There are four provisions within the Partnership Act which validate agreements in restraint of trade. Section 11 enables partners during the continuance of the firm to limit their mutual liberty by agreeing that none of them shall keep it up any business apart from that of the firm. Section 36 enables them to restrain an outgoing partner from carrying on an equivalent business within a specified period or within specific local limits. an equivalent agreement could even be made by partners upon or I anticipation of dissolution.

Q13) – Explain Voidable Contract.

A13) - VOIDABLE CONTRACT:

 An agreement which is enforceable by law at the choice of the one or more of the parties thereto, but not at the choice of others or others, may be a voidable contract. Voidable Contract is valid unless one of the parties has set it aside. Voidable Contract generally happens when one side of the party is tricked into entering a contract by other party.

(I) Voidable Agreements as per provisions of Indian Contract Act,1872-

• Void ability of agreements without free consent: - when consent to an agreement is caused by coercion, fraud or misrepresentation the agreement is voidable at the selection of the party whose consent was so caused. However, a celebration to a contract, whose consent was obtained by fraud or misrepresentation, may, if he thinks fit, insist that the contract shall be performed.

• Power to line aside contract induced by Undue Influence: When consent to an agreement is caused by undue influence, the agreement could also be a contract voidable at the selection of the party whose consent was so caused. A contract is claimed to be induced by undue influence where the relation subsisting between the contracting parties are such during all during a ll|one in every of"> one of one in every of" one of the parties is in a position to dominate the desire of the other.

In such a case the burden of proving that such a contract wasn't induced by undue influence shall lie upon the one that's during an edge to dominate the desire of other.

• Liability of a celebration preventing event on which contract is to require effect - When a contract contains reciprocal promises and one party to contract prevents the other from performing his promise, the contract becomes voidable at the selection of the party so prevented. Obvious principle is that a private cannot cash in of his own wrong.

For ex. A and B contract that B shall execute certain work for A for a specific sum of money. B is ready and willing to execute the work accordingly, but A prevents him from doing so, the contract is voidable at the selection of B.

• Effect of failure to perform at fixed time, during a accept which period is crucial: When time is essence of contract and party fails to perform in time, it's voidable at the choice of other party. a private who himself delayed the contract cannot avoid the contract on account of (his own) delay.

(II) Consequences of rescission of Voidable Contract:

 When an individual at whose option a contract is voidable rescinds it, the other party thereto needn't perform any promise therein contained within which he's promisor. The party rescinding a voidable contract shall, if he has received any benefit there under from another party to such contract, restore such benefit, so far as could even be, to the person from whom it had been received.

(III) Mode of Communicating or revoking rescission of voidable contract:

The rescission of a voidable contract could even be communicated or revoked within an equivalent manner, and subject to the same rules, as apply to the communication or revocation of a proposal.

Void and illegal Agreement: The Contract Act draws distinction between an agreement which is simply void and thus the one which is unlawful or illegal. An illegal agreement is one which is forbidden by law; but a void agreement won't be forbidden, the law may merely say that if it's made, the courts won't enforce it. Thus, every illegal contract is void but a void contract isn't necessarily illegal.

The main difference between a void and illegal contract is that, a void contract isn't punishable and its collateral transactions aren't affected but on the contrary illegal contract is punishable and its collateral transactions are also void.

Q14) – What is the difference between void and voidable agreement?

A14) - A void contract is taken into account to be a legal contract that's invalid, even from the start of signing the contract. On the other hand, a voidable contract is additionally a legal contract which is claimed invalid by one of the two parties, surely legal reasons.

While a void contract becomes invalid at the time of its creation, a voidable contract only becomes invalid if it's cancelled by one of the two parties who are engaged within the contract.

In the case of a void contract, no performance is possible, whereas it's possible during a voidable contract. While a void contract isn't valid at face value, a voidable contract is valid, but is usually declared invalid at any time.

While a void contract is nonexistent and cannot be upheld by any law, a voidable contract is an existing contract, and is binding to a minimum of 1 party involved within the contract.