Expressly Void Agreement

A legitimate contract must have a few basic components. If such components are absent, the contract will be null, invalid, or voidable. Certain agreements, meanwhile, are null and invalid. This refers to certain contracts that the law has deemed to be invalid.

According to Section 2(h) of the Indian Contract Act, 1872 (the Act), "An agreement enforceable by law is a contract." Stated otherwise, a contract is an agreement that is enforceable by law. Section 10 of the Act addresses whether contracts can be enforced.

"All agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object," as stated explicitly in the first part of Section 10 of the Act. An offer and an acceptance do not automatically create a contract. Therefore, if an agreement satisfies certain requirements for enforcement, it qualifies as a contract.

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This Story also Contains

1. Agreements Without Consideration
2. Agreements When Consideration or Object is Unlawful
3. Agreements in Restraint of Marriage - Section 26
4. Agreements in Restraint of Trade - Section 27
5. Agreements in Restraint of Legal Proceedings - Section 28
6. Conclusion

Agreements Without Consideration

"No consideration, no contract" refers to a contract being null and invalid without consideration under Sections 10 and 25 of the Indian Contract Act. However, several circumstances listed in Section 25 of the Contract Act prevent a contract signed in exchange for nothing from becoming invalid.

For example: A pledged to paint B's house for five thousand rupees. Here, B is offering A Rs. 5,000 as payment for the latter's pledge to paint her home. This is not an instance of a considerationless agreement because each party is contributing something worthwhile to the other parties.

Essential elements of such an agreement include:

• The understanding is based on innate warmth and love.

• The parties are closely related to one another.

• The agreement is in writing.

• The agreement is registered.

Agreements When Consideration or Object is Unlawful

• The Act's Section 24 refers to this. This phrase essentially states that the agreement is void if any portion or all of the consideration is illegal, or if the agreement's final result is illegal.

• Nonetheless, the contract would remain enforceable if the illegal provisions were removed.

• For instance, even though the consideration of the agreement is lawful if A and B have an agreement for the exchange of medications and medicinal plants for ₹5000, the agreement is null and invalid.

• This is a result of the agreement's illegitimate goal.

• However, in this instance, the agreement would be deemed genuine if the medicines were removed from the item.

Agreements in Restraint of Marriage - Section 26

All agreements restricting marriage, except for those involving minors, are null and invalid, as per Section 26 of the Indian Contract Act. The first people to delegitimise contracts that restricted marriage were the Romans. Since marriage is a sacrament and nothing, not even contracts, should interfere with the institution of marriage, agreements that restrict marriage are invalid. This clause intends to protect each person's unique freedom to marry the person of their choosing. It is essential to remember that the provision states that agreements prohibiting a minor from marrying are valid.

Examples: An individual in exchange for some thought, Aman consents to Johny that he will not wed a certain individual, Mark. This agreement is null and invalid since it restricts marriage.

Related Case Laws

Shrawan Kumar v. Nirmala

The petitioner in the recent case of Shrawan Kumar v. Nirmala filed a complaint in the Allahabad High Court, requesting an injunction against the defendant's marriage to another individual. The plaintiff argued that an injunction should be placed against the defendant's marriage to the other individual since she had agreed to marry him. Section 26 of the Indian Contract Act, 1872 was cited by Pankaj Mithal, J. in his decision to reject the plea.

Lowe v. Peers

In terms of marriage restriction, the Lowe v. Peers decision established a precedent. In this instance, the defendant said that within three months after being married, he would give the plaintiff a thousand pounds if he married someone else. Such an agreement was ruled to be null and invalid.

Agreements in Restraint of Trade - Section 27

Section 27 of the Act declares unlawful any agreement that restricts commerce. In other words, any contract that prevents someone from beginning or pursuing their trade or career in exchange for payment is null and void. Thus, any arrangement with another party that prevents a person from dealing in a way that he or she chooses, provided that the other party stands to gain from the other party's cessation of commerce or profession, would be classified as a restraint of trade agreement. With two exceptions that we shall cover later, all agreements on trade restrictions are null and invalid. The Sale of Goodwill and Partnership Act contain two exclusions.

Example: Anjali owns a book and office supply store in a Bareilly neighbourhood. Supriya intends to launch a comparable commodities company in the same neighbourhood. Fearing competition in the market, Anjali makes a deal with Supriya to keep her company out of the region for 15 years in exchange for a monthly payment that will be made in full. Anjali later defaults on the agreed-upon amount. Supriya attempts to take the issue to court. Supriya has no case because the agreement is null and invalid.

Related Case Laws

Madhub Chander v. Raj Coomar

In Madhub Chander v. Raj Coomar, the plaintiff agreed to close his store in a specific area in exchange for the defendant offering to pay the plaintiff a specific sum of money. However, the defendant refused to pay the plaintiff when he closed his store. Even though the agreement only applied to a certain area and imposed partial constraint, the court determined that the defendant owed the plaintiff no money since it was unlawful due to restraint of commerce.

A Few Exemptions from Trade Restriction

There is just one exemption listed in Section 27 of the Act, and that is the Sale of Goodwill. The Partnership Act is another example of an exception. These are explained below:

Sale of Goodwill

An intangible asset of a company is goodwill; it is present but not tangible or substantial. It refers to the company's standing or reputation in society. Goodwill stems from a variety of sources, including customer advantage, staff morale, reputation, and brand value. It is a valuable asset since, due to the company's brand and reputation, customers are inclined to do business with the same reputable company that they did business with previously. This is the reason a company's goodwill is valuable.

Conditions that make restraint of trade valid

A trade restriction during a sale of goodwill is only legal under the following circumstances:

• The seller may only be prohibited from operating a comparable business.

• The limitation is only applicable to certain municipal boundaries.

• The constraints or limitations have to seem sensible.

Related Case Laws

Chandra v. Parsullah

In this case, the plaintiff owned a fleet of buses that were used to travel between Mahabaleshwar and Pune. Additionally, the defendant operated a comparable firm nearby. To prevent competition, the plaintiff acquired the defendant's company along with goodwill, and the contract required him to promise not to launch a rival company in the neighbourhood for three years. The defendant launched his business in defiance of the law. The agreement was deemed legitimate by the court since it was covered by S. 27's exemption.

Partnership Act

The Partnership Act of 1932 provides another exception to the statute of limitations for agreements in restriction of commerce. Three exclusions are outlined in the Act. These are the following:

• Section 11: This stipulates that until the firm continues, none of the partners shall do any business.

• Section 36: This gives the surviving partners, subject to certain limitations, the ability to stop the departing partner from starting a business that is comparable to theirs in the same community.

• Section 54: This forbids any of the partners from pursuing a comparable line of business following the firm's dissolution.

Related Case Laws

Firm Daulat Ram vs. Firm Dharm Chand

In this instance, two comparable business owners decided to form a partnership and decided that they would split the profits and only operate one of their factories at a time. The validity of this constraint was upheld.

Agreements in Restraint of Legal Proceedings - Section 28

Any agreement between the two that prevents one or both of them from suing the other if the other party breaches the terms of the agreement is null and invalid. According to Section 28 of the Indian Contract Act, an agreement that limits the amount of time that a party who has been wronged can take legal action against a competent court or tribunal for a violation of a contract is null and invalid. It goes on to state that any agreement that absolves any party of their obligations or releases any party from liabilities is null and invalid.

As stated in the Act, Section 28 has two exceptions. Agreements to stop legal action are enforceable if and only if:

• Arbitration is used to resolve disputes, both past and future. That is if the aforementioned agreement has an arbitration clause.

• Agreements that specify the time restriction by the 1963 Limitation Act. For example, a lawsuit for breach of contract may be filed within three years after the date of the violation, according to the Limitation Act, of 1963.

Related Case Laws

Food Corporation of India v. New India Assurance Co. Ltd.

The Supreme Court ruled in this case that an agreement's provisions should not be interpreted in a way that prevents the other party from pursuing the suit's remedies.

Conclusion

Certain agreements violate public policy and interest, making them unenforceable in court. These kinds of agreements are still permissible and cannot be enforced in court, but they are not unlawful. That is to say, if any party to the agreement neglects to carry out his or her obligations under it, the injured party will not be able to take the matter before a court or other appropriate body to have his or her rights upheld. Examples of these agreements include those about marriage, trade restrictions, and judicial processes.