Description
A void contract, also known as a void agreement, is not actually a contract. A void contract cannot be enforced by law. Void contracts are different from voidable contracts, which are contracts that may be (but not necessarily will be) nullified.
Void Contracts
1
Void Contracts
2
Case: Dispute over theft
Chandan and Yaksh get into a contract to carry out a theft and to share the loot. After a successful operation, they get into a dispute among themselves on how to share the loot. Chandan claims that it was agreed that he would get 60% of the loot while Yaksh is insisting that they would share it equally. Chandan is claiming his rights under the contract.
1. What is wrong with this contract? 2. What remedy should the courts Chandan?
provide
3
Case: Buying of stolen cars
Ashish entered into a contract with Baman to buy stolen cars. What is wrong with this contract?
4
Case: Buying of stolen cars
Ashish entered into a contract with Baman to buy stolen cars. What is wrong with this contract? Buying and selling of goods in itself is not illegal. However, the consideration of the sale transaction is illegal.
5
Case: Government employment
A government employee had agreed to obtain employment for Deep in a public service, for a consideration of Rs five lakh. After getting the employment, the person refused to pay. What is wrong with this contract?
6
Case: Government employment
A government employee had agreed to obtain employment for Deep in a public service, for a consideration of Rs five lakh. After getting the employment, the person refused to pay. What is wrong with this contract? The consideration, the act of getting employment, is illegal.
7
Case: Tax evasion
Vinit and Kamat got into a contract to forge documents to evade taxes. A dispute arose between them on the sharing of the benefits. What is wrong with this contract?
8
Case: Tax evasion
Vinit and Kamat got into a contract to forge documents to evade taxes. A dispute arose between them on the sharing of the benefits. What is wrong with this contract? The object of the contract, evading taxes, is illegal.
9
Summary
There are different ways in which a contract can be permeated with illegality. The objective or purpose of the contract can be illegal. Other times, the consideration can be illegal. In both cases, the contract is void.
10
Indian Contract Act
Section 23 declares:
Every agreement of which the consideration is unlawful is void.
object
or
11
Indian Contract Act
Section 23 lists unlawful objects and consideration: 23. What considerations and objects are lawful and what not.- The consideration or object of an agreement is lawful, unlessit is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. 12
M.G. Brothers v. Prasad Textiles
M/s. M. G. Brothers Lorry Service, a transport company, had the following terms of contracts with the persons availing its service. No suit shall lie against the firm in respect of any consignment without a claim made in writing in that behalf and preferred within thirty days from the date of booking or from the date of arrival at the destination by the party concerned.
13
… cond
Section 10 of the Carriers Act, 1865, however, provides: No suit shall be instituted against a common carrier for the loss of, or injury to goods entrusted to him for carriage, unless notice in writing of the loss or injury has been given to him before the institution of the suit and within six months of the time when the loss or injury first came to the knowledge of the plaintiff.
14
Judgement
Section 23 of the Indian Contract Act provides that the consideration or object of agreement was lawful, unless, inter alia, it was of such a nature, that, if permitted, would defeat the provisions of any law. In the instant case, it appears to us that if Condition 15 be permitted then it will defeat the provisions of Section 10 of the Carriers Act …
15
Brij M v. M.P. Road Corporation
The Madhya Pradesh Road Transport Corporation had the permit under the Motor Vehicles Act to ply buses on certain routes. The corporation got in a contract to allow persons, using its permit, to ply on the route. A dispute arose between the parties.
16
Judgement
The Supreme Court, with reference to the Motor Vehicles Act, noted: The provisions of the Act and in particular Sections 42 and 59 clearly debar all holders of permits including the Corporation from indulging in such unauthorised trafficking in permits. The agreement entered into by the petitioner with the Corporation is clearly contrary to the Act and cannot, therefore, be enforced.
17
Other Void Contracts
Section 28. Agreements in restraint of legal proceedings void Section 30. Agreements by way of wager void Section 26. Agreement in restraint of marriage void Section 27. Agreement in restraint of trade void
18
doc_613000203.ppt
A void contract, also known as a void agreement, is not actually a contract. A void contract cannot be enforced by law. Void contracts are different from voidable contracts, which are contracts that may be (but not necessarily will be) nullified.
Void Contracts
1
Void Contracts
2
Case: Dispute over theft
Chandan and Yaksh get into a contract to carry out a theft and to share the loot. After a successful operation, they get into a dispute among themselves on how to share the loot. Chandan claims that it was agreed that he would get 60% of the loot while Yaksh is insisting that they would share it equally. Chandan is claiming his rights under the contract.
1. What is wrong with this contract? 2. What remedy should the courts Chandan?
provide
3
Case: Buying of stolen cars
Ashish entered into a contract with Baman to buy stolen cars. What is wrong with this contract?
4
Case: Buying of stolen cars
Ashish entered into a contract with Baman to buy stolen cars. What is wrong with this contract? Buying and selling of goods in itself is not illegal. However, the consideration of the sale transaction is illegal.
5
Case: Government employment
A government employee had agreed to obtain employment for Deep in a public service, for a consideration of Rs five lakh. After getting the employment, the person refused to pay. What is wrong with this contract?
6
Case: Government employment
A government employee had agreed to obtain employment for Deep in a public service, for a consideration of Rs five lakh. After getting the employment, the person refused to pay. What is wrong with this contract? The consideration, the act of getting employment, is illegal.
7
Case: Tax evasion
Vinit and Kamat got into a contract to forge documents to evade taxes. A dispute arose between them on the sharing of the benefits. What is wrong with this contract?
8
Case: Tax evasion
Vinit and Kamat got into a contract to forge documents to evade taxes. A dispute arose between them on the sharing of the benefits. What is wrong with this contract? The object of the contract, evading taxes, is illegal.
9
Summary
There are different ways in which a contract can be permeated with illegality. The objective or purpose of the contract can be illegal. Other times, the consideration can be illegal. In both cases, the contract is void.
10
Indian Contract Act
Section 23 declares:
Every agreement of which the consideration is unlawful is void.
object
or
11
Indian Contract Act
Section 23 lists unlawful objects and consideration: 23. What considerations and objects are lawful and what not.- The consideration or object of an agreement is lawful, unlessit is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. 12
M.G. Brothers v. Prasad Textiles
M/s. M. G. Brothers Lorry Service, a transport company, had the following terms of contracts with the persons availing its service. No suit shall lie against the firm in respect of any consignment without a claim made in writing in that behalf and preferred within thirty days from the date of booking or from the date of arrival at the destination by the party concerned.
13
… cond
Section 10 of the Carriers Act, 1865, however, provides: No suit shall be instituted against a common carrier for the loss of, or injury to goods entrusted to him for carriage, unless notice in writing of the loss or injury has been given to him before the institution of the suit and within six months of the time when the loss or injury first came to the knowledge of the plaintiff.
14
Judgement
Section 23 of the Indian Contract Act provides that the consideration or object of agreement was lawful, unless, inter alia, it was of such a nature, that, if permitted, would defeat the provisions of any law. In the instant case, it appears to us that if Condition 15 be permitted then it will defeat the provisions of Section 10 of the Carriers Act …
15
Brij M v. M.P. Road Corporation
The Madhya Pradesh Road Transport Corporation had the permit under the Motor Vehicles Act to ply buses on certain routes. The corporation got in a contract to allow persons, using its permit, to ply on the route. A dispute arose between the parties.
16
Judgement
The Supreme Court, with reference to the Motor Vehicles Act, noted: The provisions of the Act and in particular Sections 42 and 59 clearly debar all holders of permits including the Corporation from indulging in such unauthorised trafficking in permits. The agreement entered into by the petitioner with the Corporation is clearly contrary to the Act and cannot, therefore, be enforced.
17
Other Void Contracts
Section 28. Agreements in restraint of legal proceedings void Section 30. Agreements by way of wager void Section 26. Agreement in restraint of marriage void Section 27. Agreement in restraint of trade void
18
doc_613000203.ppt