VALID, VOID & VOIDABLE CONTRACTS UNDER THE CONTRACT ACT, 1872

INTRODUCTION:

Contract law forms the backbone of commercial transactions and legal agreements between parties. A contract is a legally binding agreement enforceable by law. However, not every agreement is a valid contract. For an agreement to become a contract, it must meet the essential elements provided under the Contract Act, 1872. This write-up discusses what constitutes a valid, void, and voidable contract, the essential elements of a valid contract, and the factors that render an agreement invalid.

RELEVANT PROVISIONS AND LAW:

• Section 10

• Section 2(i), 2(g), 2(h), 2(j) of the Contract Act, 1872

WHAT IS AN AGREEMENT:

U/Sec: 2(h)
“An agreement enforceable by law is a contract.”

WHAT IS A VALID, VOID, AND VOIDABLE CONTRACT:

• U/Sec: 10
  “All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”

• U/Sec: 2(i)
  “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.”

• U/Sec: 2(g)
  “An agreement not enforceable by law is said to be void.”

• U/Sec: 2(j)
  “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.”

ESSENTIAL ELEMENTS OF A VALID CONTRACT (U/Sec 10):

“All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”

1. Proper Offer and Proper Acceptance

   There must be an agreement based on a lawful offer made by one person to another and lawful acceptance of that offer made by the latter.

2. Lawful Consideration

   An agreement to form a valid contract must be supported by lawful consideration.

3. Parties Must Be Competent

   As per Section 11, a person is considered competent to contract if:

   • The person has reached the age of majority;

   • The person is of sound mind;

   • The person is not disqualified from contracting by any law.

4. Free Consent

   To constitute a valid contract, there must be free and genuine consent of the parties. Consent must not be obtained through misrepresentation, fraud, coercion, undue influence, or mistake.

5. Lawful Object and Agreement

   The object of the agreement must not be illegal or unlawful.

6. Agreement Not Declared Void or Illegal

   Agreements declared void or illegal by law are not enforceable and hence do not constitute a valid contract.

7. Legal Formalities Should Be Fulfilled

   Legal formalities must be fulfilled, such as the agreement being in writing, signed by the parties, attested by witnesses, and registered with the appropriate authority, where required.

FACTORS THAT RENDER AN AGREEMENT INVALID:

1. Uncertainty of the Meaning of the Agreement

   An agreement is void if its meaning is neither certain nor capable of being made certain.

   Illustration:
   Raja agrees to sell his cellphone to Ratan for a "good price." Since the price is uncertain, the agreement is void.
   However, if the price is to be fixed by a third party (e.g., Nira), it becomes a valid contract.

2. Illegality of Consideration or Object

   As per Section 23, an agreement is void if the consideration or object is:

   • Forbidden by law;

   • Defeats the provisions of any law;

   • Fraudulent;

   • Involves or implies injury to a person or property;

   • Regarded as immoral or opposed to public policy.

   Illustration:
   Manmohan promises to withdraw a robbery case against Raja in exchange for Raja returning the stolen goods. This agreement is void due to its unlawful object.

3. Wagering Agreements

   Under Section 30, wagering agreements are void unless related to horse-racing. Wagering is not illegal but is unenforceable.

4. Restraint of Marriage

   Section 26 states that an agreement that restrains the marriage of any person (other than a minor) is void.

   Illustration:
   Rahul agrees not to marry a foreigner in exchange for being appointed as President of a political party. This agreement is void as it restrains marriage.

5. Restraint of Trade, Business, or Profession

   Section 27 declares such agreements void unless the restraint is reasonable and connected with the sale of business goodwill.

   Illustration:

   • During employment: Bill agrees not to work elsewhere—valid.

   • After employment: Bill agrees not to work for any company or start his own for 2 years—void due to unreasonable restraint of profession.

6. Restraint of Legal Remedies Under the Agreement

   Section 28 states that any agreement that restricts a party from enforcing their legal rights or extinguishes them absolutely is void.
   However, this does not apply to arbitration clauses.

7. Agreement Contingent on an Impossible Event is Void

   Section 31 defines a contingent contract as a contract dependent on the occurrence or non-occurrence of an uncertain future event.

   Illustration:
   A agrees to pay B ten lakhs if B’s car is stolen. This is a valid contingent contract.
   However, if the event is impossible (e.g., a person flying without aid), the agreement is void.

CONCLUSION:

The Contract Act, 1872 provides a detailed legal framework for determining the validity and enforceability of agreements. For an agreement to be recognized as a valid contract, it must fulfill all essential elements mentioned in Section 10. Contracts that lack free consent, lawful object, consideration, or competency of parties, or are expressly declared void by law, are not enforceable. Hence, understanding the nature of valid, void, and voidable contracts is crucial for ensuring that legal agreements are binding and enforceable.