A valid contract must follow certain requirements and one of the most important requirements is that the contracts must not be void. Let’s start by explaining what is a void contract. Section 10 of the Indian Contract Act defines a void contract as ‘a contact that cannot be enforced by law.’ Any contract that is not legally enforceable is a void contract.
There is, however, a difference between void contracts and void agreements. A void agreement is void ab-initio that means it is void from the start but a void contract is valid at the time of entering into a contract but becomes void or non-enforceable subsequently.
There are several types of void agreements and some of them are expressly declared void agreements. Such agreements are considered void by law. Expressly void agreements are considered harmful to the society as they are deemed to be against the public policy. Such agreements are expressly declared void under section 26-28 of the Indian Contract Act.
Agreements that are in Restraint of Marriage - Section 26
Under section 26 of the Indian Contract Act, all agreements in restraint of marriage are deemed to be expressly void agreements, unless they involve a minor. Entering into an agreement that prevents party/parties from getting married or restraining marriage is not enforceable by law and hence it is expressly void. The provision aims at protecting the right of every individual to enter into a marital relationship. This provision however does not apply to agreements that involve minors.
If an adult agrees to not enter into marriage in lieu of consideration, it is an agreement expressly declared void.
Example: A agrees with B, stating that B will not marry C. Such an agreement will be deemed void.
A agrees to not marry B if C agrees to pay him a certain amount. Such an agreement is considered expressly void.
Case Law: Shrawan Kumar vs Nirmala
In this case, the plaintiff contended that the defendant had promised to marry him, but married someone else instead. He asked for an injunction of her marriage with the other person. The case was decided against the plaintiff as the agreement was considered void.
Agreements that are in Restraint of Trade - Section 27
Agreements that Prevent a Person(s) From
Practising a trade
Pursuing a legal profession
Undertaking a business of any kind
Such agreements are deemed expressly void agreements as they are against the constitutional right of an individual to practice a trade of his choice. An agreement where a person agrees to not pursue a trade or profession for consideration is also deemed expressly void. All agreements in restraint of trade are void pro tanto but they are void agreements and not invalid agreements. This means that it is legal to enter into such agreements but they will not be enforceable by law if one or all the parties fail to fulfil the agreement
However, there are two exceptions to this law:
Sale of Goodwill- If a person sells his goodwill along with the business, then the buyer can restrain the seller from practising the same business within local limits. Such an agreement will be deemed valid and it is an agreement not expressly declared void.
Sale of Partnership- A partner exiting a partnership firm can enter into a restraint of trade agreement with the firm. It is an agreement not expressly declared void and will be considered valid. An agreement between the partners of a firm to not carry out a trade of their own, similar to the trade of the firm is also a valid agreement.
Agreements Restrain Legal Proceedings - Section- 28
Agreements that prevent a party from enforcing his legal rights under an agreement through the legal process in a court of law or through arbitration are expressly declared void agreements.
Q1. What are the Exceptions to the Restraint to Trade in the Case of the Sale of Goodwill?
Ans: An agreement that restrains a person from practising business in case of sale of goodwill is deemed a valid agreement. In the case of the sale of goodwill, there are certain conditions that make an agreement for restraint on trade valid. These include:
The seller can be restrained from carrying out a similar business only.
The restraint applies only to certain local limits.
The limits/restraint should be reasonable.
Q2. What happens in the Case of an Agreement with an Uncertain Meaning?
Ans: An agreement whose meaning is uncertain is deemed to be a void agreement. Such an agreement becomes valid when the element of uncertainty is removed or clarified.
Example: A agrees to sell 1000 kg of wood to B. The agreement does not specify the type of wood to be sold and that makes the agreement uncertain and thus void.
Q3. Is Wagering Agreement an Example of Expressly Void Agreement?
Ans: In a wagering agreement, a wager is placed on the happening or the non-happening of an event. A wagering agreement must follow certain conditions to be considered void.
It must include a promise to pay money or money’s worth to a party/parties
The event specified in the agreement must be uncertain with no control of either party over it
It must be the common intention of all the parties to wager at the time of making the agreement
Parties should have no other interest in the agreement other than the stake of the wager
However, the following agreements are not considered as wagering agreements:
Share market transactions
Athletic competitions and any other competitions involving skills