Void and voidable agreements -A Brief Analysis By Nupur Thapliyal “I like not fair terms and a villains mind.” -William Shakespeare (in The merchant of Venice)

WHAT IS AN AGREEMENT? Sec2 (e) Every promise and every set of promises, forming the consideration for each is an agreement. Now this leads us to another term ‘promise’. What is a promise?

WHAT IS A PROPOSAL? Sec 2 (a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. So diagrammatically we can understand a contract as following:

REPRESENTATION: PROPOSAL + PROMISE AGREEMENT = CONTRACT

WHAT IS A ‘VOID AGREEMENT’?. Sec 2(g) Sec-11 Sec-20 Sec- 10 Sec-24 An agreement not enforceable by law is said to be void. An agreement made by incompetent parties (Minor/of unsound mind/Incapacitated Person for other reason) is void. Any agreement with a bilateral mistake- as to essential fact(s)- is void. Agreements which have unlawful consideration are void.

ALL CONTRACTS ARE VALID WHEN MADE We also say void and voidable contracts…What are those? As defined earlier, all contracts are valid when made. Enforceability of contracts would change when additional factual/ circumstantial features surface.

NATURE OF CONTRACTS Enforceability -Valid -Voidable -Void

EXAMPLES OF VOID AGREEMENTS Agreement in restraint of legal proceedings is void. (Sec 28) An agreement the terms of which are uncertain is void. (Sec 29) An agreement by way of wager (betting/gambling) is void. (Sec 30) An agreement contingent upon the happening of an impossible event is void. (Sec 36) Agreement to do an impossible act is void. (Sec 56)

WHAT IS A ‘VOIDABLE CONTRACT’? 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.

WHAT IS A ‘VOID CONTRACT’? Sec 2(j) A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.

DISTINCTION BETWEEN VOID ANDVOIDABLE CONTRACTS Is valid when made but subsequently becomes unenforceable on certain grounds. A voidable contract becomes voidable at the option of the aggrieved party, and hence remains valid until such rescission.

GROUNDS WHICH MAKE A CONTRACT VOID -Supervening impossibility -Subsequent illegality -Repudiation of a voidable contract -When the occurrence of an event becomes impossible, whose occurrence is the contingency of a contingent contact

What makes an agreement void or voidable? because it violates the law as stated in constitutions, statutes, or court opinions because sometimes one of the parties lacks capacity to contract or failed to give consideration because one of the parties failed to genuinely assent to the agreement genuine assent : exists when consent is not clouded by fraud, duress, undue influence, or mistake disaffirmance : refusal to carry out or to comply with the terms of a voidable contract, with out any liability to pay damages

What types of agreements are illegal? -agreements to commit crimes or torts -agreements that obstruct legal procedures -agreements that injure public service -agreements made without a required competency license -agreements that restrain trade unreasonably

Continued: -agreements to pay usurious interest -agreements that involve illegal gambling, wagers, or lotteries -agreements that affect marriage negatively

What is fraud? Fraud false representation or concealment of a material fact all of the following elements must be present for fraud to exist: the false representation or concealment of a past or present fact must be deliberate personal opinion: are not statements of fact and should not be taken serious. the misrepresented or concealed fact must be material material fact : fact that influences a decision.

the person making the false representation must know it is false or make it recklessly without regard to its possible falsity the misrepresentation must be made with the intention of influencing the other person to act upon it the misrepresentation or concealment must induce action and cause injury to the other party

What is duress? Undue influence? duress if one person compels another to enter into it through coercion or by illegal imprisonment undue influence one person insidiously, or by wrongful persuasion and control over the free will of another, gets the other to make a contract that is unfavorable

Two types of mistakes. Unilateral mistake: one of the parties has an erroneous idea about the facts of a contract mutual mistake or bilateral mistake: both parties are wrong about some important facts

When can a minor disaffirm a voidable contract? A minor can disaffirm a voidable contract any time while still a minor or within a reasonable time after reaching majority After reaching majority, a person may ratify a voidable contract made while a minor ratification the approval of a voidable contract in its entirety

Can minors disaffirm contracts for necessaries? Necessaries goods and services that are reasonably required to maintain one’s life-style An article must meet all of the following requirements for necessaries before a minor for a minor or parent can be held responsible for payment the item must be reasonably required the item must be actually furnished the item must be reasonably suitable to the age and social and economic status of the minor the item must not be otherwise furnished

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