Cheat Sheet: Void and Voidable Contracts

1. Void Agreements and Void Contracts

1.1 Definitions and Basic Concepts

1.2 Key Distinctions

1.3 Agreements Void Ab Initio

• Section 10: Agreement without consideration (except exceptions under Section 25)
• Section 11: Agreement by person incompetent to contract
• Section 20: Agreement based on mutual mistake of fact material to the agreement
• Section 23: Agreement with unlawful consideration or object
• Section 24: Agreement where consideration or object is unlawful in part
• Section 26: Agreement in restraint of marriage
• Section 27: Agreement in restraint of trade (with exceptions)
• Section 28: Agreement in restraint of legal proceedings
• Section 29: Agreement by way of wager
• Section 30: Agreements to do impossible acts

1.4 Contracts Becoming Void

2. Voidable Contracts

2.1 Definition and Nature

2.2 Essential Characteristics

• Valid until rescinded by the aggrieved party
• Aggrieved party has the option to affirm or rescind
• If affirmed, contract remains valid and binding
• If rescinded, becomes void from the beginning
• Only the aggrieved party can avoid the contract

2.3 Grounds for Voidable Contracts

2.3.1 Coercion (Section 15)

• Committing or threatening to commit any act forbidden by Indian Penal Code
• Unlawful detaining or threatening to detain any property
• Purpose: to cause any person to enter into an agreement
• Effect: Contract voidable at the option of party whose consent was obtained by coercion (Section 19)
• Burden of proof: On the party alleging coercion

2.3.2 Undue Influence (Section 16)

2.3.3 Fraud (Section 17)

• Suggestion of fact which is not true by one who does not believe it to be true
• Active concealment of a fact by one having knowledge or belief of the fact
• Promise made without intention of performing it
• Any other act fitted to deceive
• Any such act or omission as the law specially declares to be fraudulent
• Effect: Contract voidable at the option of aggrieved party (Section 19)
• Aggrieved party may insist on performance if possible

2.3.4 Misrepresentation (Section 18)

2.4 Distinction: Fraud vs Misrepresentation

2.5 Distinction: Coercion vs Undue Influence

3. Consequences and Remedies

3.1 When Contract is Voidable (Section 19)

• Consent obtained by coercion, fraud, or misrepresentation: contract voidable at option of aggrieved party
• If consent caused by mistake or misrepresentation: contract not voidable if party whose consent was obtained had means of discovering truth with ordinary diligence
• Exception: Party was prevented by fraud or misrepresentation from discovering truth

3.2 When Contract is Not Voidable (Section 19A)

• If party whose consent was obtained by coercion, fraud, or misrepresentation had means to discover truth with ordinary diligence
• Exception: Where fraud or coercion prevented discovery

3.3 Rights of Aggrieved Party

3.4 Restitution Provisions

3.5 Communication of Rescission (Section 66)

• Rescission must be communicated to other party
• May be expressed or implied by conduct
• Rescission is complete when communicated
• Once rescinded, contract becomes void

3.6 Loss of Right to Rescind

• When aggrieved party affirms the contract after knowledge of ground for rescission
• When restitution becomes impossible
• When third party rights intervene in good faith and for value
• Undue delay (laches) in exercising option
• When aggrieved party has obtained some benefit under contract

4. Special Situations

4.1 Mistake of Fact

4.2 Contracts with Minors and Incompetent Persons

4.3 Supervening Impossibility (Section 56)

• Contract to do act which becomes impossible or unlawful after making becomes void
• Doctrine of frustration applies
• Performance must become impossible, not merely difficult or expensive
• Compensation for work already done under Section 65

4.4 Agreements in Restraint

4.5 Agreements by Way of Wager (Section 30)

• Agreements by way of wager are void
• Collateral transactions not affected
• Does not apply to Crossword puzzles, horse racing (exceptions in some states)
• Exception: Share market transactions

5. Key Case Law Principles

5.1 Landmark Cases

5.2 Important Principles

• Silence is not fraud unless duty to speak exists
• Mere non-disclosure is not fraud unless duty to disclose
• Active concealment amounts to fraud
• Burden of proving fraud is on the party alleging it
• Voidable contracts are valid until rescinded
• Third party rights acquired in good faith are protected
• Estoppel may prevent rescission of voidable contract

6. Comparison Tables

6.1 Void vs Voidable Contracts

6.2 Consent Defects Comparison