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    Tuesday, 18 November 2014

    Voidable contracts and Void Contracts

    (1) 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 contracts. Section 2 (I).

    The word voidable in the contract Act has been used to mean that the contract is binding on the parties unless  set aside on the ground that the transaction was vitiated by fraud, undue influence, misrepresentation or any other circumstance which would entitle a party to a contract to avoid it.

    (a) Want of mutuality
    A one-sided contract although extremely unfavorable to one of the parties is still a valid and binding contract unless the Court can find that there is no mutuality or that there is really no obligation upon one of the parties to fulfill his part of the contract. Thus when consent to agreement was caused by misrepresentation and deceit, the same would became voidable at the option of persons who was misled or deceived.

    Where a contract is not binding upon one of the parties to it because it is not in the form in which it is required to be executed by the mandatory provisions of a statute and what has been done by that party is to be regarded only as a part performance under the contract, its consideration being executor, it is open to the other party to successfully claim that the contract is void on the ground of absence of mutuality and not merely voidable.

    (b) Mis-representation on major point
    Misrepresentation on material point which induced party to enter into contract would be good ground for setting aside such contract.

    (c) No objection raised to validity of contract
    When a voidable contract is acted upon by a party as valid, the party is stopped form denying its validity. Where no objection was raised to an arbitration agreement at the stage of arbitration but subsequently when the award was given, it was contended that the agreement was void and it was sought to be rescinded. It was held that as the party had not raised any objection to the agreement at any earlier stage, and it was acted upon as valid, no objection could be taken to it subsequently.

    (2) Void Contract

    A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable. Section 2 (j)

    (a) Unenforceable by law
    The words “unenforceable by law” mean unenforceable by substantive law, and not by reason of some procedural regulation. Therefore failure to sue for possession of the land within 3 year as required by Art. 47, Limitation Act does not make the contract of sale void within the meaning of S. 65 of the Contract Act.

    Similarly a contract embodied in a document which is compulsorily register able, does not render the contract void ab initio if that document is not registered.

    (b) Non-performance of void contract
    Where a void contract remains unperformed, the amount advanced by one of the parties thereto can be recovered. Where a contract of transfer of property is void, and such property can be followed, the property belongs to the promisee and can be taken after. There is each value to support him for restoring the property to him. Be that as it may where the property is not traceable and the only way to grant compensation is by granting a money decree and the transferor is a minor; decreeing that claim would almost tantamount to enforcing the minor’s pecuniary liability under the contract which is void. There is no rule of equity, justice and good  conscience which entitles a court to enforce a void contract of a minor against him under the cloak of equitable doctrine.

    Distinction between void and voidable

    A contract is said to be void in which a contract fails to be made when it seems to have been made. A contract is said to be voidable when it has been made but it is subject to being unmade at election of one party. To avoid is to insist on both parties being restored to  position in which they stood before the contract was made.

    The expression void in the strict or accurate sense means absolutely mull that is to, say incapable of ratification or confirmation and of no impact whatever. The statement voidable then again is something which could be avoided or inherent vice or defect. Thus that which is voidable operates to accomplish the thing sought to be accomplished until the fatal vice in the transaction has been judicially ascertained and declared.

    A common place instance of a void act or transaction in the sense of an absolute nullity is an agreement by a person under a lawful handicap, e.g, a minor or an individual of unsound personality. Such act is void stomach muscle initio and is inadequate of ratification or confirmation, Law forbids the enforcement of such a transaction even if the minor were to ratify it after accomplishing lion's share. This is plainly discernable from a case in which a thing or an act is relatively void which the law condemns as wrong to the individual concerned who can avoid it by appropriate proceedings. A common place instance of such transaction is that which is brought about by undue influence, fraud, etc, which stays of full impact unless avoided by appropriate proceeding.

    Parties not competent to make agreement
    An agreement by the parties who are not competent to make it is not enforceable in law. Thus an agreement entered into by the mother alone for the marriage of the major daughter and which was not made by her on behalf of her daughter is unenforceable. Similarly the manager of a joint Hindu family being only representative of the co parceners  cannot bring about a valid and binding agreement when such agreement is beyond the capacity of the co-parcencers themselves to enter into.

    Agreement must be in proper form
    Disappointment to consent to statutory procurements relating to the manner in which a particular agreement should be made would render it void.

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    Item Reviewed: Voidable contracts and Void Contracts Rating: 5 Reviewed By: Usman Ali
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