VOID & VOIDABLE CONTRACTS

PRESENTED BY Ammar JuzarAnkur Dubey

A legally binding agreement that means there must be some kind of

agreement between two parties However, not all agreements are contracts

because not all agreements are legally enforceable

legally enforceable means that a court will confirm that an agreement is a contract

What is a Contract

Void contract: A void contract should be

distinguished from a void agreement. An agreement not enforceable at law is a void agreement. Agreement with a minor is void as the minor is not competent to enter into a contract. A void agreement never amounts to a void contract as the former is void from the beginning.

A void contract is valid when it is entered into, but subsequent to its formation, something happens which makes it unenforceable by law.

Void Contracts

Example: Ram enters into a contract with

Rahim for purchase of his horse for Rs. 10,000 and pays an advance of Rs. 5,000. It turns out that the horse has been dead, before the date of the contract and the fact is not known to both the parties. The agreement is void, due to impossibility of performance. Rahim has to refund the advance received from Ram. Rahim cannot retain the benefit of advance. In this case, no contract ever existed at all.

Let us discuss another situation. On the date

of entering into the contract, the horse is alive. But before the scheduled date of delivery, the horse dies. Here too, the contract is void, due to impossibility of performance. The contract is valid as the horse is alive on the date of formation of the contract, but, later, with the death of the horse, the contract has become void.

Voidable contract: According to Section 2 (i) of

the Indian Contract Act, 1872, an agreement which is enforceable at the option of one or more of the parties to the contract, but not at the option of the other or others, is a voidable contract. In other words, “A voidable contract is one which can be set aside or repudiated or avoided at the option of the aggrieved party.”

Until the contract is repudiated or set aside by the aggrieved party, it remains a valid contract.

Voidable Contracts

The presence of the flaw (coercion, undue influence,

fraud and misrepresentation) affects the validity of the contract. This defect enables the aggrieved party to take steps to repudiate the contract.

The important point is till the steps are taken by the aggrieved, the contract is binding. The aggrieved party must exercise the option of rejecting the contract

(A) within a reasonable time, and (B) before the rights of third parties intervene In case, the aggrieved party does not choose to

repudiate, the contract becomes binding and enforceable.

X threatens to shoot his father-in-law if he does not sell his

land for Rs. 50,000 to him. X pays an advance of Rs. 10,000 towards the sale and obtains receipt for the amount paid. His father-in-law signs the sale agreement.

The contract has been executed through coercion. So, the contract is voidable at the option of

the father-in-law. The party rescinding the contract must restore the benefit received by him under the contract. In case, father-in-law chooses to avoid the contract, he is free to do so, within a reasonable time. In case of his repudiation, he has to refund the amount Rs. 10, 000 to his son-inlaw. It is not possible to retain the amount and repudiate the contract.

DIFFERENCES BETWEEN VOID AND VOIDABLE CONTRACTS

Void Contract It is not enforceable by

law It is not performable by

either of the parties It cannot become a

voidable contract A void contract is not

enforceable by the court of law

Voidable Contract It is enforceable by law on the

option of one or more of the parties, but not at the option of the others

The performance of a voidable contract is possible

Voidable can become a void contract

It is enforceable at the option of the aggrieved party

Any party has the

right to object on a void contract

It is void at the very beginning

The collateral agreement and contract also becomes void due to illegal objective

Only the aggrieved party has the right to the objection

It is a valid contract until or unless it is avoided

It does not affect the collateral agreement

There is an important distinction between "void"and

"voidable" contracts. Confusion sometimes arises from the failure to understand the difference. A contract is void when the law declares it to be so absolutely - there is no contract whatever and no change in the legal position of the parties it cannot be ratified. A voidable contract, on the other hand, binds one party but not the other; it is valid until it is avoided by the party entitled to avoid it (refuse to do his part). Until thus disaffirmed it is binding. It may be ratified

IN SIMPLER WORDS

THANK YOU