Legal and Regulatory

Void Agreements and

4
Environment of
Business

Notes
Contingent Contracts

Learning Objectives
1. Void agreement versus void contract
2. Void agreement versus illegal agree-
ment
3. Agreements expressly declared void
4. Restitution of benefits received under
void agreements
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5. Essentials of a contingent contract
6. Enforcement of contingent contracts
7. Contingent contracts distinguished
from wagering contracts

What is a Void Contract?

A n agreement enforceable by law is a contract1, but when it is not enforceable it is said to be

void2. Thus, the real test of voidness of an agreement lies in its enforceability at law. A void
agreement never matures into a contract. It is unenforceable from the very beginning and devoid
of any legal effect.

Void Agreement Versus Void Contract

A void agreement should be distinguished from a void contract. Some agreements are (legally)
unenforceable from their very inception. These agreements are called void ab initio. They have no
legal effect at all. A void agreement is a nullity and cannot be ratified even at the pleasure of the
aggrieved party. For example, an agreement with a minor is void ab initio. The minor on attaining the
age of majority cannot ratify it. On the other hand, there may be some agreements, which may be
enforceable at the time of their formation but at a later stage, due to certain reasons, may become
unenforceable. Since such agreements are enforceable initially, they assume the character of a con-
tract but their subsequent unenforceability renders them to be treated as ‘void contracts’ [Section
2(j)]. According to this section, ‘A contract, which ceases to be enforceable by law, becomes void
when it ceases to be enforceable’. For instance, suppose a contract between a foreign national and
an Indian citizen is enforceable in the ordinary course. But the same contract would cease to be
enforceable in the event of an outbreak of war between India and the country, the foreign national
belongs to, and be treated as void. Therefore, a contract may become void for one reason or the
other. But it cannot be void ab initio; it is only an agreement that can be void ab initio.

Void Agreement Versus Illegal Agreement

A viod agreement and an illegal agreement have several things in common in terms of legal effects.
For instance, both are unenforceable and, in general, incapable of specific performance. However,
Self-Learning
60 Material the two differ in a number of ways. A void agreement is different from an illegal one inasmuch
as the former is simply unenforceable but may not necessarily be forbidden by law. For instance,