What Makes an Agreement Void under Indian Contract Act, 1872 -

Last Updated on: 24th April 2025, 12:53 pm

Void Agreements under Indian Contract Act

Introduction to Void Agreements under Indian Contract Act, 1872

An agreement not enforceable by law is said to be void.

Factors leading to Void Agreements

The Contract Act specifies following agreements as void and ab initio, and unenforceable by law. Such an agreement does not give rise to any legal obligation and is void.

Agreements by incompetent parties
Agreements involving mutual mistake
Agreements of unlawful consideration or object
Agreements of partly unlawful consideration or object
Agreements without consideration
Agreements in restraint of marriage
Agreements in restraint of trade
Agreements in restraint of legal proceedings
Agreements of uncertain terms
Wagering Agreements
Contingent agreements
Agreements to do impossible acts
Reciprocal promises involving legal and illegal part

Factors leading to Void Agreements

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Condition for Valid Contract subsequently becoming Void under Indian Contract Act, 1872

Reasons for Contract becoming void

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Reasons for Contract Nullification

The following types of contracts, initially valid, but become void and not enforceable:

Consent not free : A voidable contract becomes void when the party whose consent is not free, repudiates the contract.
Ex. A,by misrepresenting certain facts to B, enters into a contract with B. B on becoming aware of the misrepresentation, repudiates the contract. On such repudiation by B, the contract becomes void.
Supervening impossibility : A contract becomes void by supervening impossibility or illegality (s. 56).
Ex. Acontracts to take in cargo for B at a foreign port. A war breaks out against the foreign country. The contract becomes void when war is declared.
Contract turning impossible : A contingent contract turning impossible to happen (Sec. 32).
Ex. A contracts to pay B a sum of money when B marries C. C dies unmarried.The contract becomes void.

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Restitution of Void Contract under Indian Contract Act, 1872 (s. 65)

When a contract becomes void, the party who has received any benefit under it must restore it to the other party or must compensate the other party by the value of the benefit (called Restitution). It is based on the principle that a person getting unjustly benefited at the expense of another should make it to the other. It is thus not based on loss suffered by the plaintiff but on the unjust benefit one has enjoyed at the cost of the other.

In contracts with parties incompetent to contract (like minor, person of unsound mind), the Court may,on equitable grounds, order for the restoration of the benefit by the minor where he has misrepresented his age.

Ex. A pays B Rs.1,000 in consideration of B’s promise to marry C, A’s daughter. C is dead. The agreement is void but B must repay A Rs.1,000.

Ex. A,a singer, contracts with B, the manager of a theatre, to sing at his theatre for two nights in every weekend during the next two months, and B agrees to pay her Rs.1,000 for each night’s performance. After singing for 5 nights, on the sixth night, A wilfully absents herself from the theatre. So, B rescinds the contract. He must pay A for the five nights on which she had sung.

Ex. A contracts to sing for B at a concert for Rs.1,000 which are paid in advance. A is too ill to sing. B asks A for refund of money and the loss suffered. A is not bound to make compensation to B for the loss of the profit but must refund to B Rs.1,000 paid in advance.

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Distinction between Void Agreement and Void Contract under Indian Contract Act, 1872

Void Agreement	Void Contract
An agreement not enforceable by law is void agreement.	A contract when ceases to be enforceable by law is said to be void contract.
At the time of formation of the valid agreement all the essentials of the contract are not satisfied resulting in nullity from the very beginning.	At the time of formation of a contract all the essentials of the contract are satisfied which subsequently becomes void. Thus at the time of formation it is a valid contract.
Restitution is allowed in case of expressly declared void agreements.	Restitution is not allowed in case of a void contract.
A void agreement does not create any legal obligations between the parties from the very beginning.	When the legal obligation created under a contract come to an end subsequent to formation of the contract, the contract becomes void.

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Voidable Contract under Indian Contract Act, 1872

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.

A contract becomes a voidable contract if the consent of a party was not free (i.e., the consent was obtained by coercion, undue influence, fraud or misrepresentation).

Rescission of Voidable Contract under Indian Contract Act, 1872

Right to rescind a voidable contract:

The party whose consent was not free (i.e., the aggrieved party) has the right to rescind the voidable contract, within a reasonable time.
Alternatively, the aggrieved party may sue the other for performance of the contract. Until a voidable contract is rescinded, it remains valid and enforceable.

Loss of right of recession : The right to rescind a voidable contract is lost in the following cases:

Where the aggrieved party affirms the contract.
Where the aggrieved party does not, within reasonable time, exercises its right to avoid the contract.
Where a third party, acting in good faith, acquires rights in the subject matter of the contract.
If the aggrieved party is not in a position to restore the benefits that he had obtained under the voidable contract.

Communication of Rescission: The rescission of voidable contract can be communicated in same manner as revocation. (s.66)

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Difference between Void and Voidable Contract under Indian Contract Act, 1872

Void Contract	Voidable Contract
A contract when ceases to be enforceable by law is said to be void contract.	It may be repudiated at the will of one or more of the parties but not at the will of the other side.
It is valid at the time of making but subsequently it becomes unenforceable due to some defect.	It is voidable at the option of the aggrieved party and remains valid till rescinded by him.
It does not provide any legal remedy for the parties to the contract.	Aggrieved party can rescind the contract and the contract becomes void, otherwise the contract remains valid.
A void contract does not grant any right to any party.	Under a voidable contract, the party whose consent was not free has the right to rescind the contract.
A void contract cannot be performed. No party can sue the other party for performance of a void contract.	If the aggrieved party does not, within reasonable time, exercise its right to avoid the contract, the voidable contract becomes enforceable. In such case, any party can sue the other for performance of the contract.
A contract becomes void due to change in law or change in circumstances.	A contract becomes a voidable if the consent of a party was not free (i.e., the consent was obtained by coercion, undue influence, fraud or misrepresentation).
All the essentials of the contract are satisfied at the time of formation of a contract, which subsequently becomes void.	The consent of a party is not free in case of a voidable contract. All essentials of a contract are also not satisfied at the time of formation of a voidable contract.
No damages are awarded to any party for non-performance of a void contract (since it is impossible to perform it).	A party whose consent was not free may rescind the voidable contract, and may claim damages also (in certain cases).

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Unlawful Consideration or Object Makes Agreement Void under Indian Contract Act, 1872

The Object and Consideration of a contract must be lawful. The Object means the purpose of the contract. A contract with unlawful object is void even if the consideration is lawful.

Ex. A let a maruti car to B a terrorist, knowing that it would be used for immoral purposes. The agreement is void due to unlawful object even the consideration is lawful.

Agreements with Unlawful Object or Consideration under Indian Contract Act, 1872

Agreements with Unlawful Object or Consideration

Forbidden by Law : An agreement for an act forbidden by law & punishable under criminal law or prohibited by special legislation or regulations, is void

Ex. A promises B to drop a prosecution against B for robbery, B having promised to get back the articles robbed. The agreement is void as its object is unlawful.

Ex. A promises B to get B employment in Railways and B promises to pay Rs.1,000 to A. The agreement is void, as the consideration for it is unlawful.

Defeats any Law : The agreement is void if the object or the consideration, though not directly forbidden by law, would defeat the provisions of any law.

Ex. A, an employer, engaged B, an employee at monthly salary of Rs.15,000. But to evade Income Tax, both A & B agreed that A would pay only 10,000 as salary and Rs.5,000 as office expenses The agreement is unlawful because though everything is legal in the eye of law, it would defeat the purpose of taxation.

Ex. A was running a licensed liquor shop. The law forbids to sale, transfer, sub-lease the license, or creation of a partnership to run the shop. A took B into partnership. The agreement is void.

Ex. A leased B a flat at a rent of Rs.1,200 a year. To avoid municipal taxes, agreement was drawn as Rs.450 as Rent and Rs.750 as maintenance expenses. The agreement is void.

Ex. An agreement by a debtor not to raise the plea of limitation is void.

Fraudulent Purpose: An agreement made for a fraudulent purpose is void.

Ex. A, B and C enter into an agreement for the division among them of profits gained from a fraudulent act. The agreement is void.

Causing Personal Injury : Any contract resulting into personal injury or of property is void. Here, ‘Injury’ means ‘wrong’, ‘harm’, or ‘damage’, ‘Person’ means one’s body, Property means movable or immovable property.

Ex. B borrowed Rs.100 from L and executed a bond promising to work for L without pay for a period of two years. In case of default, B was to pay Interest (at a very exorbitant rate) and the principal sum at once. Held, the contract was void as it involved Injury to the person of B.

Ex. An agreement between proprietor & printers of a newspaper to indemnify them against any charge arising from libels printed in the newspaper was held to be void.

Immoral : An agreement, the consideration or object of which is immoral, is void.

Ex. A married woman was given money to enable her to obtain divorce from her husband and then to marry the lender. Held, the agreement was immoral and the lender could not recover the money.

Ex. A agrees with B to let her daughter to live with B as B’s wife without marrying B. The agreement is unlawful, being immoral.

Ex. Agreements for immediate separation between a husband and wife, in view to preserve peace and reputation of families, are enforceable. Similarly agreements in respect of past separation are also valid.

Ex. A lends money to B to help prostitution. After some period, A asks for return of money. Held the contract is illegal and A cannot recover the money.

Ex. A firm hired out a carriage to a prostitute, knowing that it was to be used for immoral practice. Held, A could not recover the hire charges as the agreement was unlawful.

Opposed to Public Policy : Agreements which tend to be mischievous and injurious to the interest of public, or which are against public goods or welfare are considered to be opposed to public policy and are void.

Ex. The consideration under a sale deed was for marriage expenses of a minor girl aged 12. Held, that the sale was a void transaction opposed to public policy.

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Agreements opposed to Public Policy under Indian Contract Act, 1872

Agreements which tend to be mischievous and injurious to the interest of Public, or which are against public good or welfare are considered to be opposed to public policy.

Agreements opposed to Public Policy

Types of Agreements, considered to be opposed to public policy

Trading with enemy.
Ex. A had a contract to supply 10 tons of iron ore to B of another country, during the war between the country. Such contract is void and opposed to public policy.
Committing a crime.
Ex. D promises to indemnify E in consideration of his beating C. The agreement is opposed to public policy.
Interference in administration of Justice : Interference in course of justice, stifling prosecution, Maintenance & Champerty etc.
Maintenance & Champerty : Maintenance or Champerty are agreements to instigate or stir up litigation with malafide intention :
- Maintenance : To assist another to defend legal proceedings when he has no interest of his own in the subject matter.
  Ex. Y owes some amount to X, X said to Y that he(X) will discharge Y’s liability if Y sues Z. Here the intension of X is to harass Z. This agreement between X and Y (called Maintenance Agreement) is considered to be opposed to public policy and so is void.
- Champerty : To assist to recover money or property and share into its proceeds.
  Ex. A filed a suit against B to recover his house which he mortgaged earlier. C helped A in the case, as both C and A made an agreement that C will be allowed a share in the recovered house. This agreement between A and C (called a Champerty Agreement) is considered to be opposed to public policy and so is void.

Trafficking in public offices : Trafficking in public offices and titles, like agreements for the sale or transfer of public offices and Titles for monetary consideration etc.
Ex. A promised to obtain an employment to B in a public office and B promised to pay A Rs.1,000. Held, the agreement was against public policy and illegal.
Ex. R paid a sum of Rs.15,000 to A who agreed to obtain a seat for R’s son in a Medical College. On A’s failure to get the seat, R filed a suit for the refund of Rs.15,000. Held, the agreement was against public policy.
Influence elections: An agreement with voters to procure their votes for monetary consideration is void being opposed to public policy.
Interest opposed to duty :
Ex. P directs A, his agent, to buy a certain house for him. A tells P that it cannot be bought and buys the house for himself. P may, on discovering that A has bought the house, compel A to sell it to him (P) at the price A gave for it.
Ex. An agreement by a newspaper proprietor not to comment on the conduct of a particular person is unlawful being opposed to public policy.
Restraint of parental rights: Agreement by guardian of a minor, inconsistent with his parental responsibilities.
Restraint of personal liberty: Agreements which unduly restrict the personal freedom of the parties.
Ex. A borrower agreed with his money-lender that, without the lender’s written consent, he would not leave his job, or borrow money, or dispose of his property, or change his residence. Held, the agreement was void.
Marriage Brokerage Agreements: An agreement to procure the marriage of another for monetary consideration is void. Also, an agreement to pay money to the parent or guardian of a minor in consideration of his/her consenting to give the minor in marriage is void.
Ex. K agreed to pay S a sum of Rs.1,00,000 in consideration of his (S’s) giving daughter in marriage. Held, such a promise amounted to a marriage brokerage contract and was void.
Interfering with marital duties: Any agreement interfering with marital duties is void.
Ex. A, a married person, promised to marry B during the lifetime or after the death of his spouse. This is void.
Ex. An agreement that husband and wife will always stay at the wife’s parents’ house is void.
Defraud : Agreements to defraud creditors or revenue authorities, like giving allowance in excess of expense to reduce basic salary to lower income tax liability is void.
Restraint of Trade : An agreement which interferes with the liberty of a person to engage himself in any lawful trade, profession or vocation is void.
Ex. A, carrying on business of cookware, promised B, another person in similar trade in the same locality, to stop his business in consideration of B giving him a certain amount. B, subsequent to A’s closing the business, refused to pay. A filed a suit for the recovery of the amount. Held, the agreement was void.
Restraint of legal proceedings: If a party to an agreement is restricted absolutely from enforcing his rights or in respect of any contract, by legal proceeding in ordinary tribunals, or it limits the time within which he may thus enforce his rights, is void.
Deprive Court Jurisdictions: An agreement to deprive the courts of their jurisdiction is opposed to public policy.
Changing periods of limitation: Agreements curtailing or extending the periods of limitation prescribed by the Law subjected to defeat the provisions of the law are void.
Agreements in Restraint of Marriage: Any agreement in restraint of the marriage of any person, other than a minor, is void. Marriage is the fundamental right of every person. Therefore, an agreement in restraint of this fundamental right of a person is opposed to public policy and void. It is immaterial as to whether the restrain is for life or for a specified period.
Ex. P promised to marry L only and none else and to pay Rs.2,000 if he married someone else, P married X. Held, L could not recover the sum agreed.
Ex. X, agreed to marry Y and none else. He further agreed to pay Rs.1,000 to Y, if he married someone else. But X married Z. Y brought an action against X for the recovery of the agreed sum. The agreement is void as it was in restraint of marriage and Y could not recover the amount.

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Trade Restriction Agreements and Their validity under Indian Contract Act, 1872

Though normally agreements or services in restraint of Trade are void, following types of agreements, though restraint of trade or service are not considered void:

Sale of Goodwill: A seller of goodwill of a business may be restrained from carrying on similar business within specified local limits, provided such restraint is reasonable.
Partners’ Agreements: Certain types of agreement by an existing or outgoing partner, as allowed under Indian Partnership Act, are held to be valid.

Ex. A outgoing partner’s agreement not to carry on a business similar to that of the firm within specified local limits, solicit customers or persons who were dealing with the firm before his exit, within a specified period, etc. are valid.

Ex. A Partner’s agreement not to carry on any business other than that of the firm while he is partner is valid.

Trade Body Regulations:
- Business Regulation : Trade bodies normally form associations to regulate business or to fix prices are not unlawful even if they are in restraint of trade, provided that they are not opposed to public policy.
- Ex. Members of a consumer society decided to regulate supply and maintain price, of the goods consumed by the society. It is not necessarily opposed to public policy and hence valid.
- Ex. An agreement among the members of an agricultural society to deliver all produce grown by the society members to the society and divide the profit among the members was held to be valid.
- Ex. An agreement between manufacture not to sell certain products below a stated price and to divide the profits in a certain proportion is not void.
- Monopoly : However, an agreement with an intention to create monopoly is held to be opposed to public policy and not valid.
Service Contracts: Certain Agreements with restrictions on employment or service (like taking up employment with competitor) are valid.

Ex. An agreement with an employee not to take up any other engagement during his employment is valid.

Ex. Agreements restraining Doctors in hospital cannot to do private practice is valid.

Ex. Agreement not to take up similar engagement by the leaving employee, after termination of his services is void.

Ex. Agreement restraining an employee applying or making use of trade secrets acquired by him in the course of his employment, is valid provided it is not for any other purpose.

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Legal Proceedings Restraint – Void by Nature under Indian Contract Act, 1872

Restriction of Rights : Agreement restricting enforcement of rights is void in following cases:
- Absolute Restriction : Absolutely restricts, any party, from enforcing his rights in respect of any contract, by usual legal proceedings in the Ordinary Tribunals.
- Limiting Time Period : Limits the time within which he may enforce his rights by way of legal proceedings in the Ordinary Tribunals.
- Limiting Rights : Extinguishes the rights of any party thereto.
- Discharge of Liability : Discharges any party thereto from liability, in respect of any contract on the expiry of a specified period, so as to restrict any party from enforcing his rights.
Arbitration : However, an agreement providing for arbitration of dispute is valid

Ex. An agreement purporting to oust the jurisdiction of Courts is contrary to public policy. But an agreement between two or more parties to refer to arbitration any disputes which have arisen or which may arise between them is perfectly valid.

Ex. The rules of a crossword competition of a weekly published by X Ltd. that under Rule1, in matters arising in the competition, the editor’s decision shall be final and legally binding on the competitors and that under Rule 2, at the expiration of three months from the publication of the prize list, X Ltd. shall not be liable to pay any claim unless a suit for it is then pending.

Held, Rule No. 1 restricts persons from enforcing their rights through Court of law. Rule No. 2 limits the time to a period shorter than the period prescribed by the Law of Limitation. Hence, the rules are not enforceable.

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Wagering Agreements: Not Legally Enforceable under Indian Contract Act, 1872

A wager is an agreement between two parties by which one promises to pay money or money’s worth on the happening of some uncertain event in consideration of the other party’s promise to pay if the event does not happen.

Ex. A and B enter into an agreement that A shall pay B Rs.100 if it rains on next Monday, otherwise B shall pay A the same amount, is a wagering agreement. So, it is void.

Ex. In a wrestling bout, A and B bet with each other over the result of the bout. This is a wagering agreement.

Ex. An agreement for transaction only to share gain / loss, for the difference between the contract and market price of certain goods on a specified day, without any intention to take delivery is a wagering transaction. Hence it is void.

Ex. In a commercial transaction, where the intention is not to deliver the goods but only to pay the difference in price, is wager.

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Essential elements of a Wagering Agreement under Indian Contract Act, 1872

Essential elements of Wagering Agreement

Promise to pay money or money’s worth: The wagering agreement must contain a promise to pay money or money’s worth.
Uncertain Event: The promise must be conditional on happening or not happening of an uncertain event. The event normally is yet to happen, but it may also relate to a past event provided the parties are not aware of its result or the time of its happening.
Any Party to win or lose: On determination of the happening of the event, each party should stand to win or lose. An agreement is not a wager if either of the parties may win but cannot lose or may lose but cannot win.
No control over the event: Neither party should have any control over the happening of the event in any way. If one of the parties has the event in his own hands, the contract is not in nature of wager.
No other interest in the event: Neither party should have any interest in the happening or non-happening of the event except the stake to win or lose. If the party to whom money is promised on the occurrence of an event has an ‘interest’ in its non-occurrence, it is not in nature of a wager. That is why insurance contract is not a wagering agreement.

Agreements not amounting to Wager under Indian Contract Act, 1872

The following type of transactions, though depending on uncertain events are not wager:

Competition involving skill: A competition or game involving skill and not merely dependent on chance, is not wager.
Ex. A crossword competition involving a good measure of skill for its successful solution is not wager. But if prizes of a crossword competition depend upon matching with a previously prepared solution is a lottery and hence a wagering transaction.
Ex. Prize competitions in games of skill are not wagers (provided the amount of prize does not exceed Rs.1,000).
Share market transactions : Share market transactions in which delivery of stocks and shares is intended to be given and taken.
Contract of Insurance : A contract of insurance is a contract of indemnity and not wager,

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Legal Consequences of Wagering Agreements

Wagering agreements have been expressly declared to be void in India. In the State of Maharashtra and Gujarat they are declared illegal. No suit can be brought for recovering anything on any wager, or entrusted to any person to abide by the result of any event on which any wager is made (Sec. 30). Effect of various types of wagering contracts:

Promissory Note: A promissory note was executed for payment of indebtedness arising out of wagering transactions in shares. Held, that the promissory note was not enforceable.
Recovery Suit: Money deposited with a person (called stakeholder) to be paid to the party winning upon a wager cannot be recovered by the winner. On the other hand, the loser can recover his deposit from the stakeholder. But where the stakeholder pays the money to the winner, the loser cannot recover it from him.
Principal and Agent’s Rights: Principal cannot enforce in a wagering contract:
- An agent cannot recover from the principal any money paid on a wagering agreement entered into on behalf of his principal.
- Where the agent fails to carry out his instructions in respect of a wagering transaction, the principal cannot sue him for breach of the contract of agency.
- He cannot resist the principal’s claim on the ground that he received money in respect of a void transaction.
Collateral Transactions: As the wagering agreements are void, transactions collateral to them are not affected. However, in the States of Maharashtra and Gujarat, the wagering agreements have been declared to be Illegal. So, the collateral transactions to such wagering agreements in the States of Maharashtra and Gujarat become tainted with Illegality. In the rest of India, collateral transactions are valid.

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Is Lottery legally enforceable under Indian Contract Act

A Lottery, being a game of chance, is a Wagering Agreement. An agreement to buy a ticket for a lottery is also a Wagering Agreement. Since lottery is illegal, collateral transactions are also tainted with illegality. Any place or office maintained for the purpose of drawing a lottery (other than a Government authorised) shall be unauthorized and illegal and will be liable for imprisonment upto 6 months or fine.

Ex. A lottery, which is a game of chance, is a wagering agreement. An agreement to buy a ticket for a lottery is also a wagering agreement. If the lottery is authorised by the Government, the persons conducting the lottery will not be punished, but the lottery remains a wager all the same.

Rights of Lottery Ticket Purchaser : Purchaser of a lottery ticket has :

A right to participate in a draw.
A right to claim a prize contingent upon his being successful in the draw.

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Distinction between Insurance Contract and Wagering Agreements under Indian Contract Act

The contracts of insurance also rely on uncertain event on which either of the party has no control, and so appear to be wagering agreements, but they are really transactions of a different nature:

In insurance, the assured has an insurable interest in the subject-matter. In a wagering agreement there is no such interest.
In insurance, both the parties are interested in the protection of the subject-matter whereas in a wagering agreement it is only one of the parties who is interested in its protection.
A contract of insurance, except life insurance, is a contract of indemnity. In a wagering agreement, the amount is fixed.
Contracts of insurance are beneficial to the public whereas wagering agreements do not serve such useful purpose.
A contract of insurance is based on scientific and actuarial calculation of risks. A wagering agreement is just a gamble.

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Contingent Contract under Indian Contract Act

A Contingent Contract is a contract to do or abstain from doing something, if some event, collateral to such contract, does or does not happen (e.g. goods are sent on approval, the contract is a contingent contract depending on the act of the buyer to accept or reject the goods on inspection of sample).

Ex. A agrees to sell a certain piece of land to B, in case he succeeds in his litigation concerning that land. This is a contingent contract.

Ex. Xcontracts to cover Y against the consequences of any proceedings which Z may take against Y in respect of a certain sum of 2000 rupees. This is a contingent contract.

Agreements dependent on Uncertain events

Elements of a Contingent Contract

Performance Dependent : Its performance depends upon the happening or non-happening of some event in future.
Uncertain Event: The event must be uncertain. If the event is bound to happen and so the contract is certain to be performed, it is not a contingent contract.
Collateral to & Incidental : The event must be collateral to & incidental to the contract. Contracts of insurance, indemnity and guarantee are instances of a contingent contract.

Ex. A in Bombay, made contract for sale of some items to be imported from Taiwan to B, on condition that the goods would be delivered only on arrival. The goods did not arrive and A failed to give delivery. B sued for damages for breach. Held, the contract was absolute and the obligation of A was not contingent upon the arrival of the goods, so A was liable to pay damages.

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Legal Consequences of uncertain Event outcome under Contingent Contracts

Contingent Contract Event Outcome

Event Occurs: Contingent contracts dependent on the happening of an uncertain future event cannot be enforced until the event has happened. If the event becomes impossible, such contracts become void (Sec. 32).

Ex. A contracts to pay B a sum of money when B marries C. C dies unmarried.The contract becomes void.

Ex. A makes a contract with B to sell a horse to B at a specified price, if C, to whom the horse has been offered earlier, refuses to buy it. The contract cannot be enforced by law unless and until C refuses to buy the horse.

Event becoming impossible : Where a contingent contract is to be performed if a particular event does not happen, its performance can be enforced when the happening of that event becomes impossible (Sec. 33).

Ex. A agrees to pay B a sum of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks.

Ex. A agrees to sell his car to B after C dies. The contract cannot be enforced so long as C is alive.

Event happening at unspecified Time : If a contract is contingent upon how a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which renders it impossible to act within definite time, or otherwise than under further contingencies (Sec. 34).

Ex. A agreed to take shares in a company if the company would appoint him its sole agent at a certain place. The company went into liquidation before appointing him agent and A was entered on the list of contributories. Held, A was not liable as the contract to take shares was contingent on his appointment as agent which event never took place.

Ex. A agrees to pay B a sum of money if B marries C. C marries D. The marriage of B to C must now be considered impossible, although it is possible that D may die and that C may afterwards marry B, and sothe contract becomes void.

Event happening at fixed Time : Contingent contracts to do (or not to do) something on happening of an uncertain event within a fixed time, become void if the event does not happen or its happening becomes impossible before the expiry of that time.
Contingent contracts to do or not to do something on non-happening of an uncertain event within a fixed time, may be enforced if the event does not happen or itsuser happening becomes impossible before the expiry of that time (s. 35).
Ex. Apromises to pay B a sum of money if a certain ship does not return within a year. The contract may be enforced if the ship does not return within the year or the ship sinks within a year.
Impossible event : Contingent agreements to do or not do something, on happening an impossible event, are void, whether or not the fact is known to the parties (Sec. 36).

Ex. Aagrees to pay B Rs.1,000 if B will marry A’s daughter, C. C was dead at the time of the agreement. The agreement is void.

Ex. Aagrees to pay B Rs.1,000 if two straight lines should enclose a space. The agreement is void.

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Difference between Wager and Contingent Contract under Indian Contract Act 1872

A wagering agreement consists of reciprocal promises whereas a contingent contract may not contain reciprocal promises.
A wagering agreement is essentially of a contingent nature whereas a contingent contract may not be of a wagering nature.
A wagering agreement is void whereas a contingent contract is valid.
In a wagering agreement, the parties have no other interest in the subject matter of the agreement except the winning or losing of the amount of the wager. Thus, a wagering agreement is a game of chance, but a contingent contract is not so.
In a wagering agreement, the future event is the sole determining factor while in a contingent contract the future event is only collateral.
A wagering agreement is a promise to pay money or money’s worth on the happening of some uncertain event in consideration of the other party’s promise to pay if the event does not happen.
Whereas, a contingent contract is a contract to do (or abstain from doing something), if some event, collateral to such contract, does or does not happen.

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No action on illegal agreement under Indian Contrcat Act 1872

The general rule of law is that no action is allowed on an illegal agreement. This is based on the following two premises:

No action arises from a base cause. The effect of this is that the law discourages people from entering into illegal agreements which arise from base causes.
In cases of equal guilt, the defendant is in a better position.

Consequences of Illegality

Collateral transactions : The collateral transactions to an illegal agreement become tainted with illegality and are treated as illegal even though they would have been lawful by themselves.
No action : No action can be taken for the recovery of money paid or property transferred under an illegal agreement or for breach of an illegal agreement.

Ex. A promises to pay B Rs.500 if he beats T. If B beats T, he cannot recover the amount from A. If A has already paid the amount and B does not beat T, A cannot recover the amount.

Position of Parties : In cases of equal guilt in an illegal agreement, the position of the defendant is better than that of the plaintiff.
Rights of Plaintiff : The plaintiff (e.g the Innocent party) may, however, sue to recover money paid or property transferred:
- Where he is not in pari delicto (equally guilty) with the defendant, e.g., where he was induced to enter into an agreement by fraud, undue influence or coercion.
- Where he does not have to rely on the illegal transaction.
- Where a substantial part of the illegal transaction has not been carried out, and he is truly and genuinely repentant (this way, the law encourages repentance even in bad men).
Severance of illegal contracts: Sometimes, a contract may contain several distinct promises or promise to do several distinct acts of which some are legal and others illegal, or a part of which is legal and a part of which is illegal. If the illegal promise or act is severable from the legal one, the legal promise may be enforced. If the Illegal promise or act cannot be separated from the legal one, the whole contract is declared illegal.
Reciprocal Promises: Where persons reciprocally promise, firstly, to do certain things which are legal, and secondly, under specified circumstances, to do certain other things which are illegal, the first set of promises is a contract, but the second is a void agreement.
Ex. A and B agree that A shall sell B a house for Rs.10,000 but if B uses it as a gambling house, B shall pay A Rs.50,000 for it. The first set of reciprocal promises, namely to sell the house and pay Rs.10,000 for it, is a contract. The second set is for an unlawful object, namely that B may use the house as a gambling house, and is a void agreement.
Alternative promise: In the case of an alternative promise, one part of which is legal and the other illegal, the legal part alone can be enforced.
Ex. A and B agree that A shall pay B Rs.1,000, for which B shall afterwards deliver to A either rice or smuggled opium. This is a valid contract to deliver rice and a void agreement as to the opium.
Unlawful Object or Consideration: If there are several objects but there is a single consideration, the agreement is void if any one of the objects is unlawful. Similarly, if there is a single object but there are several considerations, the agreement is void if any one of the considerations is unlawful.
Ex. A employs B to supervise his business ofa legal manufacture of indigo and an illegal traffic in other articles. The agreement is void. The object and the consideration being in part unlawful.

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Partially Unlawful Contract under Indian Contract Act 1872

Partially Unlawful Object or Consideration (s. 24): An Agreement is void if-
- any part of a single consideration (of one or more objects) is unlawful, or
- any one part of (having any one of several considerations) a single object is unlawful.
Lawful Consideration enforceable: When there are several distinct promises made for one and the same consideration, and one or more of them are of such nature that law will not enforce it, only such of the promises as are unlawful cannot be enforceable. Others which are lawful, can be enforced. (s.58)
Test of Severability:
- If illegal part cannot be severed from part of a covenant, contract is altogether void.
- If it is possible to severe them, whether the illegality be due to Statute or Common Law, bad part alone may be rejected and good retained.

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Distinction between Unlawful and Illegal Agreements under Indian Contract Act 1872

Both Unlawful & illegal agreements are not enforceable by law. But there is a subtle distinction between them:

An unlawful agreement is void ab initio and it affects only the immediate parties and has no further consequences. An illegal agreement, on the other hand, is not only void as between immediate parties but the collateral transactions also become tainted with illegality.

Ex. An agreement to assault somebody is illegal. Similarly, an agreement to publish a libel is illegal.

Ex. Llends B to purchase some prohibited goods from T, an alien enemy. The agreement between B & T, is illegal. Consequently, the agreement between B and L shall also become illegal, being collateral to the main transaction which is illegal. L cannot, therefore, recover the amount (he can recover the amount if he did not know of the purpose of the loan).

Every illegal agreement is unlawful, but every unlawful agreement is not necessarily illegal.
An Illegal act, involve crime of moral turpitude or contrary to public policy (e.g., an agreement for illicit cohabitation, or an agreement to defraud the revenue or commit a crime, or an agreement which tends to endanger the public safety). Unlawful acts, on the other hand, involve a “non-criminal breach of law”. These are normally disapproved by law on some ground of public policy (like agreements in restraint of trade, marriage, legal proceedings, etc).

Distinction between Void and Illegal Agreement under Indian Contract Act 1872

Void Agreement	Illegal Agreement
It is not forbidden under law.	It is forbidden under law.
All void agreements are not illegal.	All Illegal agreements are void ab-initio.
A valid contract may subsequently become void.	An illegal agreement is void from the very beginning.
Void agreements are not punishable.	Illegal agreement may be punishable with fine or imprisonment or both.
Collateral transactions are not affected.	Collateral transactions become void.
An agreement not enforceable by law is a void agreement.	An agreement which is forbidden by any law in force, is an illegal agreement.
An agreement may be void when it does not satisfy essential legal requirements	An agreement becomes an illegal agreement only if it is made against the provisions of any law in force.
When an agreement is discovered to be void, any person who has received any advantage under such agreement is bound to restore it, or to make compensation for it, to the person from whom he received it (s.65).	Any money or property transferred under an illegal agreement cannot be recovered by going to a Court of law.

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Agreements Void under Indian Contrcat Act – Key Takeaways

A void agreement is one that is not legally enforceable from the beginning.
Wagering contracts and agreements in restraint of trade or marriage are examples of void agreements.
Void agreements are different from voidable contracts, which are initially valid but can be canceled.
An agreement without consideration is generally void, unless under certain exceptions.
Agreements with unlawful objects or considerations are not recognized under Indian law.
Any contract that is uncertain or vague in terms of meaning may be declared void.
Contracts to perform an impossible act are not enforceable in court, and so void.

Agreements Void under Indian Contrcat Act – FAQs with Brief Answers

What is a void agreement under the Indian Contract Act?
A void agreement is one that is not legally enforceable, and has no legal effect from the start.
Is a void agreement the same as a void contract?
No, while both are not enforceable, a void contract was once valid, but lost legality later on. A void agreement is invalidright from inception.
Are wagering agreements valid in India?
No, wagering agreements are considered void and unenforceable in India
What happens if a contract is made with unlawful consideration?
Such a contract is void and cannot be enforced by law.
Why are agreements in restraint of legal proceedings void?
Because they restrict an individual’s right to legal remedy, which is against public policy.

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What Makes an Agreement Void under Indian Contract Act, 1872