A Collateral Transaction to an Illegal Agreement Is Valid Voidable Void Uncertain

Related agreements are not always invalid and may be valid in some situations. The Contracts Act in India is governed by the Indian Contract Act 1872. However, the Contracts Act does not purport to codify all contract law, the Law also expressly preserves any use or habit of commerce or incident of a contract that is not incompatible with the provisions of the Law. Contract law is limited to the performance of civil law obligations created voluntarily. Contract law is not able to take over all agreements, many agreements remain outside the scope because they do not meet the requirement of a contract. A contract is an agreement; an agreement is a promise and a promise is an accepted proposal. Thus, each agreement is the result of a proposal by one party and its adoption by the other. An agreement is considered a contract if it is legally enforceable. Section 10 of the Act deals with the conditions of applicability, according to this section, an agreement is a contract if it is concluded in return between the parties responsible for a contract with free consent and for a legitimate purpose. 2.

Types of contracts according to their validity:- (i) Valid contract: An agreement that contains all the essential elements of a contract is called a valid contract. A valid contract can be enforced by law. (ii). Invalid Contract [Section 2(j)]: An agreement that is not legally enforceable shall be deemed void. A void contract is a contract that is no longer legally enforceable. A contract, if originally concluded, can be valid and binding on the parties. It can become null and void later. (iii) Countervailable agreement [Article 2(i)]: « An agreement that is enforceable by the choice of one or more parties, but which is not at the choice of others or others, is a countervailable contract ».

However, the contract remains valid and enforceable unless it is terminated by the injured party. (iv). Illegal Contract: A contract is illegal if prohibited by law; or is of such a nature that, if authorized, the provisions of a law would be nullified or fraudulent; or involves or implies a violation of any person or other person, or the court considers it immoral or contrary to public order. These agreements are punishable. They are dummies-ab-initio. All illegal agreements are invalid agreements, but not all invalid agreements are illegal. « (v). Unenforceable contract: If a contract is essentially good but cannot be performed by law due to a technical defect, this is called an unenforceable contract. These contracts are neither void nor voidable.3. Invalid agreement: -Invalid contract means that a contract does not exist at all. The law cannot impose a legal obligation on either party, especially the disappointed party, as it is not entitled to protective laws with respect to contracts.

An agreement to perform an illegal act is an example of a void contract or agreement. For example, a contract between drug traffickers and buyers is an invalid contract simply because the terms of the contract are illegal. In such a case, neither party may apply to the court for performance of the contract. Pursuant to section 2(g) of the Indian Contract Act, 1872, « If an agreement that is not enforceable by law is deemed void » and pursuant to section 2(j) of the Act, « A contract that is no longer enforceable by law becomes void if it is no longer enforceable. » Thus, null contracts of two types can be:-(i) Null ab initio:- null-ab-initio i.e. not enforceable from the beginning (ii) Null because of the impossibility of its performance:- A contract may also be invalid due to the impossibility of its execution. E.B.: If a contract is concluded between two A & B parties, but during the performance of the contract, the object of the contract is impossible to achieve (due to actions of someone or something other than the contracting parties), the contract cannot be performed in court and is therefore void. (iii) Nullity of agreements under the provisions of the Indian Contracts Act, 1872:-§ Any agreement involving a bilateral error is void. (Article 20): – If both parties to an agreement have an error in relation to the fact essential to the agreement, the agreement is void, e.B. A agrees to buy a particular horse from B.

It turns out that the horse was dead at the time of the agreement, although neither party is aware of this. The agreement is null and void. However, a contract cannot be challenged solely because it was caused by one of the parties, because it made an error in relation to a fact. (§ 22)§ Agreements that have consideration and illegal objects are null and void. (Articles 23 and 24): – The consideration or object of an agreement is illegal if it is prohibited by law or of such a nature that, if authorized, it would nullify the provisions of any law or is fraudulent or involves a violation of the person or property of others, or the court considers it immoral or contrary to public order. If any part of a single consideration for one or more objects or one or part of a consideration on several for a single object is illegal, the agreement is null and void. But if the legal part of an agreement is separable from the illegal, the former would be enforced. § Free agreements are null and void. (Article 25): – An agreement without consideration is void unless: -(i) it is concluded on the basis of natural love and affection and is expressed in writing and registered under the law currently in force. (ii) It is a promise to compensate a person who has already voluntarily done something for the promiser.

(iii) It is a promise to settle a prescribed debt.§ The agreement on the restriction of the marriage of an important person is void (Article 26): Any agreement to restrict the marriage of a person, with the exception of a minor, is void. It is the policy of the law to prevent agreements that restrict the freedom of marriage. The restriction may be general or partial, i.e. the party may be prevented from marrying at all or from marrying for a certain period of time or from marrying a certain person or category of persons, the agreement is void. § The agreement restricting trade is null and void. (Article 27): Any agreement preventing a person from exercising a legal profession, a trade or a business of any kind whatsoever is void in this respect. There are two types of exceptions to the rule created by the laws:-Ø Sale of goodwill:- The only exception mentioned in the reservation to Article 27 is that of the sale of goodwill. It states: « A person who sells the goodwill of the company may agree with the buyer not to conduct a similar business within certain local boundaries as long as the buyer or a person who derives ownership of the goodwill from it carries out a similar activity there: provided that these limits seem appropriate to the court. In this way, special attention is paid to the type of business. Ø Partnerships Act: – There are four provisions in the Partnerships Act that validate agreements restricting trade. .