List of Contracts Expressly Void/Business Law Note for BBS TU

Define void contract. Explain the contracts that are declared as expressly void.

There is no uniformity in principles to classify contracts. In general, contracts may be classified on the basis of their validity, formation, performance, and liability. On the basis of validity contract further can be classified into three categories; valid contract, void contract, and voidable contract.

When a contract has no legal effect or is unenforceable in nature, it is a void contract. On the other hand, a contract that is valid at the time of formation but becomes void or becomes impossible to perform or void subsequently at the time of performance because of some changes in law or impossibility.

Literally, the term void refers to not binding in legal literature. Thus, accordingly, the term void contract implies a useless contract that has no legal effect at all. Such a contract is null, as far there has been no contract at all. Section 2 (j) of Indian Contract Act, defines “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.” 

From the definition, we can say that a void contract is not void from its inception that is valid and binding on the parties at the time of formation but subsequent to its formation it becomes invalid and destitute of legal effect because of certain reasons.

The reasons which transform a valid contract into the void contract as given in the Contract Act of India under Section 56 are; a supervening impossibility, subsequent the illegality, repudiation of the voidable contract, in the case of a contract contingent on the happening of an uncertain event, and if that event becomes impossible.

Null and void contract examples, Business Law Note 

For example, A agrees to sell 100 bags of wheat at Rs. 250 per bang. Before delivery, the Government bans private trading in wheat. The contract becomes void due to the immediate or subsequent illegality of the matter of the contract. 

Similarly, for example, M by threatening to murder B’s son, makes B agree to sell his car worth Rs. 30,000 for a sum of Rs. 10,000 only. The contract, being the result of coercion, is voidable at the option of B. 

B may either affirm or reject the contract. In case B decides to rescind the contract, it becomes void.

A void contract is not necessarily unlawful, nut it loses its legal effect due to certain identified and well-defined reasons. Neither a law can enforce it not can the parties make it valid. For example, contract void by the breakout of war, destruction of subject matter, etc.

(You have to understand the concept of void contract and void agreement before answering the above question)

Void agreement: A void contract differs from a void agreement. A void agreement never matures into a contract. An agreement with a minor party is void from its beginning. It is better to call it void agreement, rather than a void contract to avoid contradictions.  Therefore there is clear cut demarcation between void contract and void agreement. We might have question like list the contracts that are declared as expressly void, in such case we don’t have the answer to say these are the contracts declared as expressly void. In fact void contract is not expressly void rather it is valid at the time of formation or entering into it by parties but latter on it becomes impossible to perform and turned into void. Thus there is no contract which we could say expressly void. So answer to these types of question is littler difficult and you have to answer as agreements which are expressly void. 

Therefore, Section 517 of the Civil Code, 2074 has stipulated some agreements which are expressly void from the initial point of their formation;

Agreement in restraint of trade (Section 517 (2) (a))

Any agreement to restrain any person to follow or accept any kind of lawful occupation, profession, business, trade or commercial activities is void on the ground of conflicting to the right guaranteed by the current law.

Agreement in restrains marriage (Section 517 (2) (b))

Getting married is the basic right of every person and every person can enjoy this right lawfully.  The legally competent couple can enter into marriage with each other on the basis of their free consent. No agreement can be made to control their marriage since it is the violation of current law and such agreement is void. 

Agreement in restraining for using the public facility (Section 517 (2) (c))

Any individual enjoys the facilities as provided to the public. Such facilities would have been utilized on the ground of law or tradition. So if any agreement concluded with an intention to restrain anyone from enjoying such facilities, the agreement is void.

Agreement in restraint of legal proceedings (Section 517 (2) (d))

Nobody can prevent another from exercising his/her legal right. If an agreement is made that seeks to restrict the legal rights of any person from being enforced by the government office or court, the agreement is void. For example, A and B enter into an agreement of partnership mentioning a term, that in case of any dispute arise no party can go to court. This agreement is void.

Agreement with unlawful object and consideration (Section 517 (2) (k))

Any agreement made with an illegal object and consideration is declared void by the law. It means if the object and consideration of an agreement are against existing norms and principles of law than such agreement is termed void expressly. For example, Babu purchased a Maruti 800 car for Rs. 100,000 from Maya which brought from India without paying customs duty is void.

Agreement made by mutual mistake (Section 517 (2) (l))

If both of the parties to an agreement are not clearly known or mistaken about the fundamental the subject-matter of the fact of agreement, the agreement is void since it is not possible to perform due to mistake.

Agreement to do impossible work (Section 517 (2) (h))

Any agreement that is not possible to perform from the beginning is also called void agreement. For example, S enters into an agreement to sell his truck to B which is running in Hetauda. Before entering into the agreement the truck fells Trisuli River is void.

Agreement having uncertain meaning (Section 517 (2) (i))

Agreements which are uncertain, vague, and do not provide reasonable meaning thereof are also void. For example, A and B enter into an agreement of business to supply oil is not valid, it creates confusion about what type of oil and what quantity to be supplied? It must be clear and definite in the agreement. 

Agreement by the incompetent party (Section 517 (2) (j))

The agreement made with and by the incompetent party is also void except some legal conditions.

Therefore, these agreements are in the null position as the time of the agreement. Such agreements are declared void ab-initio.

In this way, a void agreement is a mere agreement and not a contract at all and cannot be enforced by law. Moreover, some of the agreements are in the enforceable position at the time of formation but the performance subsequently becomes impossible and void after the formation due to various reasons.