Test: Void and Voidable Contracts - CLAT PG MCQ

For an agreement to become a valid contract under law, mutual consent (i.e., offer and acceptance) of the parties is essential. Both parties must agree to the terms freely, without coercion, misrepresentation, or undue influence.

Other points:

• Legal enforcement is a result of a valid contract, not the primary requirement.
• Presence of witnesses is not necessary unless required by specific laws (e.g., for certain contracts like wills).
• Written documentation is required only for specific types of contracts (e.g., sale of immovable property), but most contracts can be valid orally.

Mutual consent is the foundational requirement for contract validity.

A void contract is an agreement that cannot be enforced by law, meaning it has no legal effect from the outset or becomes unenforceable due to certain circumstances. For instance, a contract for an illegal purpose is void, and neither party can claim any rights under it. Understanding the characteristics of void contracts is crucial for ensuring that agreements made are legally valid.

A voidable contract is characterized by the fact that consent may have been obtained through coercion, fraud, or misrepresentation. Unlike a void contract, which is unenforceable from the beginning, a voidable contract remains valid until the aggrieved party chooses to cancel it. This distinction is important because it allows one party the option to affirm or rescind the contract based on their experience.

A contract can be rendered void due to a mistake of fact when both parties are mistaken about a critical aspect of the agreement. For example, if both parties believe a piece of art is an original when it is actually a reproduction, the contract is void due to this mutual mistake regarding an essential fact. This principle protects parties from being bound to agreements based on incorrect assumptions.

A contract that has an unlawful object or consideration is deemed void, meaning it has no legal effect. Such agreements are not enforceable in a court of law because they contravene established legal principles or public policy. For instance, a contract to sell illegal drugs would be void, as it involves an unlawful object, thereby nullifying any claims for enforcement.

A contract may be classified as voidable if one party was induced to enter into it through fraud. Fraud undermines the integrity of consent, allowing the deceived party to either affirm or rescind the contract. This protection is essential to ensure that individuals are not unfairly bound by agreements based on misleading information.

The Doctrine of Frustration posits that a contract becomes void if it becomes impossible to perform due to unforeseen events beyond the control of the contracting parties. For example, if a venue for an event burns down, making it impossible to hold the event, the contract is void. This principle ensures fairness, as it recognizes that certain external factors can render contractual obligations unfeasible.

An agreement to never work again would be considered void due to restraint of trade, as it imposes an unreasonable limitation on an individual's ability to engage in lawful employment. The law recognizes the right to work and earn a livelihood, hence contracts that entirely restrict this right are unenforceable. However, reasonable restrictions, such as those in a non-compete clause, may be acceptable if they are limited in duration and scope.

Free consent of the parties is a fundamental requirement for a valid contract. This means that both parties must agree to the terms of the contract voluntarily and without any coercion, undue influence, fraud, or misrepresentation. If consent is not freely given, the contract may be considered voidable, providing protection to the aggrieved party.

If the aggrieved party chooses to rescind a voidable contract, they must return any benefits received under the contract. This ensures that both parties are returned to their original positions prior to the agreement. The principle behind this requirement is to promote fairness and justice, ensuring that no party unjustly benefits from the cancellation of the contract.

Section 29 of the Indian Contract Act addresses agreements that are void due to uncertainty. An agreement is considered void if its terms are vague or ambiguous, making it impossible to ascertain the obligations of the parties involved. Clarity in contractual terms is essential for enforcement; hence, agreements that lack specificity are rendered unenforceable.

Agreements made without consideration are generally considered void. Consideration refers to something of value exchanged between parties, and without it, the agreement lacks the necessary binding element. However, there are exceptions, such as agreements made out of natural love and affection or for past voluntary services, which may be enforceable even without consideration.

A contract that cannot be enforced due to an external factor, such as a new law that makes performance illegal, is classified as a void contract. This means that it has no legal effect and cannot be enforced by either party. Such situations underscore the importance of external legal contexts in contractual agreements, illustrating how they can impact enforceability.

In a void contract, no legal rights arise from the agreement, meaning that neither party can enforce the contract or claim benefits from it. Since the contract has no legal standing, it is as though it never existed in the eyes of the law. This highlights the importance of ensuring that contracts meet legal requirements to be enforceable.

"Capacity to contract" refers to the legal ability of parties to enter into a contract. This means that the parties involved must be of sound mind, not minors, and must have the legal competence to understand the terms of the agreement. Contracts with individuals lacking capacity, such as minors or those of unsound mind, are typically void, protecting those who may not fully grasp the implications of their contractual commitments.