VOID AGREEMENTS AND CONSIDERATION

VOID AGREEMENTS AND CONSIDERATION

                            

  

VoidAgreements

Clause (e) of Section 2 of Indian Contract Act 1872, defines an agreement as every promise and every set of promises forming consideration of each other in an agreement. Agreements are instruments wherein two or more parties agree over something, to do some work, to sell or purchase a property. The essential requirement of an agreement are consideration and objects.

VoidAgreements are those agreements which cannot be enforced in any court of law. An agreement not enforceable by law is said to be void. An agreement which does not comply with the mandatory provisions of a statute is void. If, in an agreement,  consideration or  a part of consideration or the object is unlawful,  such an  agreement is a void agreement. Neither of the party to the agreement can seek remedy for violation of such an agreement in any court of law.

The status of an agreement withoutconsideration

In general, any agreement without consideration is void. Section 25 of Indian Contract Act 1872, has certain exceptions to this general rule and the following agreements without consideration are not void:

a) An agreement which is made in writing registered and made out of natural love and affection by a person standing in a near relationship;

b) An agreement which is promise made to compensate for something done for the promisor by a person voluntarily. The compensation may be  whole or in part; and

c) An agreement which is a promise to pay a debt which is barred by limitation. Such a promise must be in writing and signed by the concerned person or his authorized agent. The debt may in whole or in part.

Whether a gift without consideration is Void ?

By gift one transfers the property without consideration. It is a unilateral act of one person. It is not a contract between parties. Section 25 of the Indian contract Act provides that the provisions of the section do not affect the validity of any gift actually made as between the donor and  donee, through no consideration is passed.

Consideration at most times is the market value of the property. The Indian contract Actsimply states that  agreements without consideration are void. The Act does not refer to adequacy of consideration. It is matter between the parties to the agreements to decide the amount of consideration. The testing factor is whether the consent was given freely for inadequate consideration. The courts will take inadequacy of consideration in determining whether consent was given freely or not in resolving the disputes. But the agreements cannot be void on the basis of inadequate consideration alone.

Can an agreement restrain a person from seeking legal remedy ?

As stated earlier, if the object of an agreement is unlawful, such an agreement is void. Any agreement which restrains any party to the agreement from enforcing his rights by the usual legal proceedings in the  ordinary courts or tribunals or which limits the time within which he may enforce his rights is void.

The consideration and objects are lawful unless,

1) They are forbidden by laws in force.

2) They are of such nature that if permitted they would defect the provisions of any law.

3) They are fraudulent.

4) They involve or implies injury to the person or property of another.

5) The courts regards them as immoral or opposed to public policy.

Suppose in an agreement to sell, there is a clause that the vendor shall complete the sale transaction within three months of the date of agreement to sell, but fails to comply with this requirement.  Whether the agreement would become void and unenforceable?

Non-complianceof a clause in the agreement to sell would not make the agreement void. The vendor has legal remedy open to him upto three years from the date of such alapse.

More,

Advocate S. Selvakumar