Void Agreements and Agreements Void for Uncertainty

An agreement is a promise or set of promises that people exchange. It becomes a contract only if it is enforceable by law. A void agreement is one that is not enforceable at all. Section 2(g) of the Act defines it as an agreement not enforceable by law. It is void from the start, so no one can sue on it.

The Act lists certain agreements as void even when the parties agree freely. These are: agreements in restraint of marriage (Section 26), agreements in restraint of trade (Section 27), agreements in restraint of legal proceedings (Section 28), uncertain agreements (Section 29), wagering agreements (Section 30), and agreements to do impossible acts (Section 56).

Restraint of marriage: Section 26 makes void every agreement in restraint of the marriage of any person other than a minor. A restraint on the marriage of a minor is not declared void by this section. Example: Ravi promises Meera ₹1,00,000 if she never marries. Meera is an adult, so this is void.

Restraint of trade: an agreement that stops a person from carrying on a lawful profession, trade or business is void to that extent. The main exception is the sale of goodwill. The seller can agree not to carry on a similar business within specified local limits, as long as the restriction is reasonable. The Indian Partnership Act also permits certain reasonable restraints, for example under Sections 11(2), 36(2) and 54. These cover a partner not carrying on a competing business during the partnership, an outgoing partner not carrying on a similar business within a specified period or local limits, and partners agreeing not to compete after dissolution of the firm.

Restraint of legal proceedings: Section 28 makes an agreement void if it absolutely restricts a party from enforcing their rights through ordinary courts, or limits the time within which a party may enforce their rights, or extinguishes a party's right or discharges a party from liability on the expiry of a specified period so as to restrict enforcement. There are two exceptions. A contract to refer to arbitration disputes that may arise between the parties is valid (Exception 1). A written agreement to refer existing questions to arbitration is also saved (Exception 2).

Uncertain agreements (Section 29): if the meaning of an agreement is not certain, or cannot be made certain, the agreement is void. Example: Ajay agrees to sell Sunil 'a quantity of rice' at 'a fair price', with nothing else to fix the amount or price. This is void. But if the meaning can be made certain, it is valid. Example: selling 'all the rice in my godown' is certain because the quantity can be determined. Another classic illustration: an agreement to sell 'a hundred tons of oil' is void because the kind of oil is not stated, unless the kind can be made certain from the context or the course of dealing between the parties.

Wagering agreements (Section 30): a wager is a promise to pay money or money's worth on an uncertain event, where one party wins and the other loses, and neither has any interest other than the stake. Wagering agreements are void. Exception: Section 30 saves subscriptions or contributions towards a plate, prize or sum of money of ₹500 or more to be awarded to the winner of a horse race. Also, genuine contracts of insurance and genuine share market transactions are not wagers.

Even a void agreement can have consequences. Section 65 requires anyone who has received a benefit under a void agreement, or under a contract that becomes void, to restore it.

For any MCQ on void agreements, identify what the agreement does and then match it to a category.