CHAPTER II OF CONTRACTS, VOIDABLE CONTRACTS AND VOID AGREEMENTS
Section 10: What Agreements are Contracts
This is the master checklist for a valid contract.
The Main Rule:
Legal Text: “All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.”
Simple English: To be a real, enforceable contract, an agreement must have all five of these ingredients:
Free Consent: Both sides must agree willingly, without being threatened, forced, or tricked (covered in later sections).
Competent Parties: The people involved must be legally able to make a contract (e.g., be adults, of sound mind) (covered in Sec 11-12).
Lawful Consideration: The “price” of the promise (the “what you get”) must be legal (covered in Sec 23).
Lawful Object: The purpose of the agreement must be legal (covered in Sec 23).
Not Expressly Void: The Act must not have a specific rule that says “this type of agreement is always void” (e.g., agreements to gamble) (covered in Sec 24-30).
Practical Example (Passes): You (an adult) freely agree to buy a toaster (lawful object) from a store for ₹2,000 (lawful consideration). This is a valid contract.
Practical Example (Fails): You agree to pay someone ₹50,000 to steal a car for you. This agreement is not a contract because the object (theft) and consideration (payment for crime) are unlawful.
The Exception Clause:
Legal Text: “Nothing herein contained shall affect any law… by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents.”
Simple English: This just clarifies that while most contracts can be verbal, if another law (like a property law) requires a specific agreement (like selling a building) to be in writing and registered, you must follow those rules.
Practical Example: You can sell your old phone with a verbal agreement. But you cannot sell your apartment with just a verbal agreement; the law requires a written and registered sale deed.
Who is “competent” to make a contract? (Sections 11-12)
What is “free consent”? (Sections 13-20)
Section 11: Who are competent to contract
This section lists the three essential requirements a person must meet to be legally allowed to enter into a contract.
Legal Text: “Every person is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law to which he is subject.”
Simple English: To be legally able to make a contract, a person must meet three conditions:
They must be an adult.
They must be of “sound mind” when they make the contract.
They must not be banned (“disqualified”) from making contracts by any other law.
Breakdown & Examples:
1. Age of Majority:
Simple English: In India (under the Indian Majority Act, 1875), this means you must be 18 years old.
Practical Example: A 17-year-old agrees to sell his new laptop to a neighbor for ₹50,000. He takes the money but doesn’t deliver the laptop. The neighbor cannot sue him. The agreement is void (dead from the start) because the 17-year-old is a minor and not competent to contract.
2. Of Sound Mind:
Simple English: The person must be able to understand the terms of the deal and what its effects will be on them at the time they are making it. (Section 12 explains this in more detail).
Practical Example: A person who is so drunk that they don’t understand they are signing a document agreeing to sell their car is not of sound mind.
3. Not Disqualified by Law:
Simple English: Some laws specifically ban certain people from making contracts.
Practical Example: A person who has been declared an “insolvent” by a court may be disqualified from entering into new financial contracts. Similarly, an enemy alien (a citizen of a country India is at war with) is disqualified from contracting.
Section 12: What is a sound mind for the purposes of contracting
This section defines what “sound mind” actually means.
Legal Text (Main Clause): “A person is said to be of sound mind for the purpose of making a contract, if, at the time when he makes it, he is capable of understanding it and of forming a rational judgment as to its effect upon his interests.”
Simple English: “Sound mind” has two parts. At the exact moment of making the contract, you must be able-
To understand the deal.
To make a reasonable judgment about how it will affect you.
Practical Example: A person with an ongoing mental illness may still be of “sound mind” if they sign a simple lease agreement during a lucid period when they fully understand the rent, the duration, and their obligation to pay.
Legal Text (First Proviso): “A person who is usually of unsound mind, but occasionally of sound mind, may make a contract when he is of sound mind.”
Simple English: Someone who is “usually” not lucid (like a patient in a mental health facility) can legally make a contract during a “good” period when they are clear-headed.
Practical Example: (This is the illustration from the Act) A patient in a mental asylum who has clear, lucid intervals can sign a valid contract during one of those intervals.
Legal Text (Second Proviso): “A person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind.”
Simple English: A person who is perfectly healthy most of the time cannot make a valid contract while they are temporarily not of sound mind.
Practical Example: (This is the illustration from the Act) A sane person who is delirious from a high fever, or so drunk they cannot understand the terms of a deal, cannot make a contract during that time. If they sign a cheque, it would be voidable.
Section 13: “Consent” defined
This is a simple but critical definition.
Legal Text: “Two or more persons are said to consent when they agree upon the same thing in the same sense.”
Simple English: “Consent” means everyone is on the exact same page. Both parties must understand and agree to the same thing in the same way. This is also known as consensus ad idem (a meeting of the minds).
Practical Example: I offer to sell you my “Maruti car.” I own an Alto and a Swift. I am thinking of my Alto. You accept, thinking you are buying my Swift. Here, there is no consent because we did not agree on the “same thing.” Therefore, no contract was ever formed.
Section 14: “Free consent” defined
It’s not enough to just “consent.” That consent must also be free. This section defines what “free consent” is by explaining what it is not.
Legal Text: “Consent is said to be free when it is not caused by—
(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16, or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18, or
(5) mistake, subject to the provisions of sections 20, 21 and 22.”
Simple English: Your “yes” to a deal is free only if it is genuine. Your “yes” is not free if you were forced, manipulated, lied to, misled, or you were seriously mistaken about the facts.
Legal Text (Concluding part): “Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.”
Simple English: This means the “bad act” (like the threat or the lie) must be the reason you agreed to the deal. If you would have agreed anyway, you can’t use this as an excuse.
Practical Example: If a seller lies about the car’s speakers (fraud), but you were buying the car for its engine and didn’t care about the speakers at all, the fraud “did not cause” your consent.
Section 15: “Coercion” defined
This is the first thing that makes consent “not free.”
Legal Text: “‘Coercion’ is the committing, or threatening to commit, any act forbidden by the Indian Penal Code (45 of 1860) or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement.”
Simple English: “Coercion” is forcing someone into a deal by:
Threatening their person: Committing or threatening to commit a crime (e.g., “Sign this contract, or I’ll hurt you”).
Threatening their property: Illegally taking or threatening to take their belongings (e.g., “Sign this new lease, or I’ll lock you out of your apartment and keep your things”).
The threat must be made with the intention of making them agree.
Practical Example (Threat to Person): A loan shark tells a shopkeeper, “Sign this paper agreeing to pay 100% interest, or I’ll break your legs.” The shopkeeper’s consent is caused by coercion.
Practical Example (Threat to Property): A shipping company refuses to release a customer’s urgent goods (which they are legally required to deliver) unless the customer agrees to pay a sudden, extra “handling fee.” This is coercion.
Legal Text (Explanation): “Explanation.—It is immaterial whether the Indian Penal Code (45 of 1860) is or is not in force in the place where the coercion is employed.”
Simple English: It doesn’t matter where the threat happens, even if it’s on a ship in the middle of the ocean (like the Act’s illustration). If the act is a crime under Indian law, it’s coercion.
Section 16: “Undue influence” defined
This is the second thing that makes consent “not free.” It’s about psychological pressure, not physical threats.
Section 16(1):
Legal Text: “A contract is said to be induced by ‘undue influence’ where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.”
Simple English: This happens when:
There is a special relationship where one person trusts the other (or is dependent on them).
The “dominant” person uses that relationship to pressure the “weaker” person.
The result is an unfair deal for the weaker person.
Practical Example: An elderly, sick man is completely dependent on his caregiver. The caregiver is the only person he sees. The caregiver “convinces” him to sell her his house for 1/10th of its value. This is undue influence.
Section 16(2):
Legal Text: “…a person is deemed to be in a position to dominate the will of another— (a) where he holds a real or apparent authority over the other, or where he stands in a fiduciary relation to the other; or (b) where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress.”
Simple English: The law automatically assumes one person can dominate the other in these relationships:
(a) Real/Apparent Authority: Boss over employee, police officer over a citizen.
(a) Fiduciary Relation (a duty of trust): Doctor over patient, lawyer over client, parent over child, spiritual guru over disciple.
(b) Affected Mental Capacity: Making a deal with someone who is very old, very sick, or in deep emotional distress.
Practical Example (Fiduciary): A lawyer, who is advising a client on their will, “convinces” the client to include a large gift for the lawyer in that will.
Practical Example (Mental Distress): A man’s son has just died. While he is in a state of intense grief, his relative “helps” him by getting him to sign papers that hand over his son’s property.
Section 16(3):
Legal Text: “Where a person who is in a position to dominate the will of another, enters into a contract with him, and the transaction appears, on the face of it or on the evidence adduced, to be unconscionable, the burden of proving that such contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other.”
Simple English: This is a “guilty until proven innocent” rule. If:
A dominant relationship exists (like doctor-patient); AND
The deal looks obviously one-sided or unfair (“unconscionable,” e.g., a ridiculously low price)…
…the court will assume there was undue influence. The dominant person (the doctor) now has the burden to prove that the deal was fair and the patient agreed freely.
Practical Example: A spiritual guru (dominant) convinces his disciple (weaker) to “donate” his entire ₹5 crore inheritance. The deal is obviously one-sided. In court, the guru must prove that the disciple made this decision freely and was not manipulated.
Section 17: “Fraud” defined
This is the third thing that makes consent “not free.” “Fraud” is intentional deception. It’s when you knowingly lie or hide something to trick someone into a deal.
Section 17(1):
Legal Text: “the suggestion, as a fact, of that which is not true, by one who does not believe it to be true;”
Simple English: A direct lie. Saying something you know is false.
Practical Example: “This car has only driven 20,000 km,” when the seller knows they tampered with the odometer and it has actually driven 1,50,000 km.
Section 17(2):
Legal Text: “the active concealment of a fact by one having knowledge or belief of the fact;”
Simple English: Hiding a serious flaw. This is more than just “keeping quiet”; it’s taking active steps to hide the truth.
Practical Example: The car’s engine has a major crack. The seller patches it up with plaster and fresh paint just enough to last through a test drive, actively concealing the crack.
Section 17(3):
Legal Text: “a promise made without any intention of performing it;”
Simple English: Making a promise you have no intention of keeping.
Practical Example: A person takes a large loan from a friend, promising to repay it next month, when in reality, they have already booked a one-way ticket to another country and plan to disappear.
Section 17(4):
Legal Text: “any other act fitted to deceive;”
Simple English: A “catch-all” for any other clever trick or scheme designed to mislead someone.
Practical Example: A company creates a fake website that looks just like a government portal to trick people into signing up for a “service” that is actually a costly, useless subscription.
Section 17(5):
Legal Text: “any such act or omission as the law specially declares to be fraudulent.”
Simple English: A “technical” fraud. This is when another law (like the Companies Act or Insolvency Act) says that a specific action is automatically considered fraudulent.
Practical Example: A company director knowingly hiding company debts from investors. The Companies Act specifically declares this to be fraudulent.
Explanation (Mere Silence):
Legal Text: “Mere silence as to facts… is not fraud, unless the circumstances of the case are such that… it is the duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech.”
Simple English: Just “not saying something” is usually not fraud. You don’t have to reveal every single flaw (this is caveat emptor, or “buyer beware”).
Exception 1 (Duty to Speak): You must speak if you are in a “fiduciary relationship” (based on trust), like a father selling to a daughter (Act’s illustration).
Exception 2 (Silence = Speech): Your silence becomes a lie. (Act’s illustration) The buyer says, “If you do not deny it, I shall assume that the horse is sound.” The seller stays quiet. This is fraud.
Section 18: “Misrepresentation” defined
This is the fourth thing that makes consent “not free.” It’s a false statement, but it’s unintentional. The person believes they are telling the truth.
Section 18(1):
Legal Text: “the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true;”
Simple English: Stating something as a fact with confidence, but having no good reason for it, and it turns out to be false.
Practical Example: A man is selling his land. He tells the buyer, “You can build a 3-story building here, I’m sure of it.” He genuinely believes this (but he never checked the zoning laws). The buyer purchases the land and later finds out the laws only permit 1 story. The seller made a misrepresentation.
Section 18(2):
Legal Text: “any breach of duty which, without an intent to deceive, gains an advantage to the person committing it… by misleading another to his prejudice…”
Simple English: This is a “constructive fraud.” It happens when you have a duty to do something correctly, you mess it up (innocently), and that mistake misleads someone and gives you an advantage.
Practical Example: An insurance agent helps a client fill out a form. The agent unintentionally ticks the wrong box for a pre-existing condition (a breach of his duty to be careful). This misleads the insurance company. This is a misrepresentation.
Section 18(3):
Legal Text: “causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement.”
Simple English: You innocently cause the other person to be completely mistaken about the fundamental nature of what they are buying.
Practical Example: A seller is selling a painting. He innocently tells the buyer, “I’ve been told this is an original by a famous artist.” Both parties believe this. The buyer pays a high price. Years later, it’s proven to be a fake. The seller’s innocent statement caused a “mistake as to the substance,” so it’s a misrepresentation.
Section 19: Voidability of agreements without free consent
This section explains the consequence of Coercion (S.15), Fraud (S.17), and Misrepresentation (S.18).
Legal Text (Main Clause): “When consent… is caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the option of the party whose consent was so caused.”
Simple English: If you were forced (coercion), lied to (fraud), or misled (misrepresentation), your consent was not “free.” Therefore, the contract is voidable. This means you (the innocent party) get to choose:
Option 1: Cancel the contract (avoid it).
Option 2: Go through with it (insist on performance).
Practical Example: You were tricked (fraud) into buying a car with a tampered odometer. You find out. You can either (1) return the car and get your money back, OR (2) keep the car.
Legal Text (Second Paragraph): “A party… may, if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representations… had been true.”
Simple English: This is a powerful part of Option 2. You can not only keep the deal, but you can also demand that the other person make their statement true.
Practical Example: (This is the Act’s illustration) A seller (fraudulently) tells you an estate is “free from all charges.” You buy it and discover there’s a ₹10 Lakh mortgage on it. You can insist that the seller pays off the ₹10 Lakh mortgage and completes the sale as promised.
Legal Text (Exception): “If such consent was caused by misrepresentation or by silence, fraudulent… the contract, nevertheless, is not voidable, if the party… had the means of discovering the truth with ordinary diligence.”
Simple English: This is the “you should have checked” rule. If the problem was an innocent misrepresentation (not an active lie) OR fraudulent silence (not an active lie), you cannot cancel the contract if you could have easily found the truth yourself (“ordinary diligence”).
Practical Example: (This is the Act’s illustration) The factory owner misrepresents that they make 500 tons. The buyer, before signing, examines the factory’s accounts, which clearly show they only make 400 tons. The buyer still buys the factory. He cannot later void the contract. He had the “means of discovering the truth” and even used them!
Legal Text (Explanation): “A fraud or misrepresentation which did not cause the consent… does not render a contract voidable.”
Simple English: The lie or misrepresentation must be the reason you agreed to the deal. If it was irrelevant to you, it doesn’t count.
Practical Example: The seller of a horse lies and says, “This horse won a race in 2015.” You buy the horse only because you need it for farm work and don’t care about its racing history. The lie did not “cause” your consent, so you cannot void the contract.
Section 19A: Power to set aside contract induced by undue influence
This section explains the consequence of Undue Influence (S.16).
Legal Text (19A-1): “When consent… is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused.”
Simple English: Just like with fraud, if your consent was caused by “undue influence” (psychological manipulation), the contract is voidable. You (the weaker party) get to choose whether to cancel it.
Practical Example: The elderly man who sold his house to his caregiver for 1/10th its value can go to court and ask to have the contract canceled.
Legal Text (19A-2): “Any such contract may be set aside either absolutely or, if the party… has received any benefit… upon such terms and conditions as to the Court may seem just.”
Simple English: When the court cancels a contract for undue influence, it has options to be fair.
Set aside absolutely: Cancel the whole deal completely.
Set aside on terms: Cancel it, but with conditions. This usually happens if the weaker party did receive some money or benefit that they need to return.
Practical Example: (This is the Act’s illustration) A money-lender (dominant) uses undue influence to make a farmer agree to a loan of ₹100 at an insane interest rate. The court can set aside the contract. But it won’t just let the farmer keep the ₹100. It will likely order the farmer to repay the ₹100 with a fair, reasonable interest rate. This is a “term or condition” that is “just.”
Section 20: Agreement void where both parties are under mistake as to matter of fact
This section deals with the fifth and final item on the “free consent” list: Mistake.
Legal Text: “Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void.”
Simple English: This is a “mutual mistake.” Both of you were wrong about a fundamental fact that the entire deal was based on. This isn’t fraud or misrepresentation; it’s just a shared, honest mistake. The result is that the contract is void (dead from the start, as if it never existed).
Key points:
Both parties must be mistaken.
It must be a “matter of fact” (not an opinion).
It must be “essential” (central) to the whole point of the agreement.
Practical Example (from Act): “A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of the bargain, though neither party was aware of the fact. The agreement is void.” The horse’s existence was essential to the agreement.
Practical Example (Modern): You agree to buy a specific, rare painting from an art gallery. Both you and the gallery believe the painting is in their secure vault. It turns out, unknown to both of you, the painting was destroyed in a fire the night before. The agreement is void.
Legal Text (Explanation): “An erroneous opinion as to the value of the thing… is not to be deemed a mistake as to a matter of fact.”
Simple English: Being wrong about the value of something is not an “essential mistake of fact.” It’s just a bad opinion. The contract is still valid.
Practical Example: You buy an old painting from a shop for ₹1,000, and you both think it’s just a cheap copy. You later discover it’s a lost masterpiece worth ₹1 crore. The seller cannot void the contract. You were both mistaken about the value, not the substance (it was still the painting you both agreed to buy/sell).
Section 21: Effect of mistakes as to law
This section explains what happens if you make a mistake about the law.
Legal Text: “A contract is not voidable because it was caused by a mistake as to any law in force in [India]; but a mistake as to a law not in force in [India] has the same effect as a mistake of fact.”
Simple English: The law follows a principle: “Ignorance of the law is no excuse.”
Mistake of Indian Law: If you make a deal based on a misunderstanding of a law in India, the contract is still valid. You can’t cancel the deal just because you didn’t know the law.
Mistake of Foreign Law: If you make a deal based on a misunderstanding of a foreign country’s law, the law treats this as a “mistake of fact.” This means if both parties are mistaken (as in Section 20), the agreement is void.
Practical Example (Indian Law): (Based on the Act’s illustration) You agree to buy a product from someone, wrongly believing that a particular debt you are owed is “time-barred” by the Indian Limitation Act (and thus you can’t use it to pay). You later find out the debt is not time-barred. You cannot cancel the contract. Your mistake about Indian law doesn’t make the contract voidable.
Practical Example (Foreign Law): You and a vendor sign a contract in India to import goods, both believing a specific UK export tax is 10%. You later discover the UK tax is actually 50%, making the deal unprofitable. Since you were both mistaken about a foreign law, this is treated as a “mutual mistake of fact” (like S.20), and the agreement is void.
Section 22: Contract caused by mistake of one party as to matter of fact
This section deals with a “unilateral mistake”—where only one person is mistaken.
Legal Text: “A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.”
Simple English: If only one person is mistaken about a fact, the contract is still valid. The mistaken person cannot cancel the deal. The law does not protect you from your own carelessness or failure to do research.
Practical Example: You go to a store and buy a new phone, thinking it has a 5,000 mAh battery. The seller never said this; it was just your personal assumption. You get home and find it only has a 4,000 mAh battery. You cannot return the phone or void the contract. Your “unilateral mistake” does not make the deal voidable.
Compare to S.20: In Section 20 (Mutual Mistake), both parties are mistaken, so the agreement is void. In Section 22 (Unilateral Mistake), only one party is mistaken, so the contract is valid.
Section 23: What considerations and objects are lawful, and what not
This is a core section, detailing the “Lawful Consideration and Object” pillar from Section 10. It lists what makes a deal’s purpose illegal.
Legal Text: “The consideration or object of an agreement is lawful, unless—
it is forbidden by law; or
is of such a nature that, if permitted, it would defeat the provisions of any law; or
is fraudulent; or
involves or implies injury to the person or property of another; or
the Court regards it as immoral, or opposed to public policy.”
Simple English: The “price” (consideration) and the “purpose” (object) of your deal are legal, unless they fall into one of these forbidden categories. If they do, the agreement is void.
Breakdown & Examples:
1. Forbidden by Law:
Simple English: The deal involves doing something that a law directly forbids.
Practical Example: You pay a person to start an illegal, unlicensed money-lending business. The agreement is void because the object is forbidden by law.
2. Defeats the Provisions of any Law:
Simple English: The deal isn’t directly illegal, but it’s a “back-door” or “loophole” attempt to get around another law.
Practical Example (from Act): A law says a person who defaults on government revenue cannot buy back their own estate when it’s auctioned. The defaulter, A, makes a deal with B: “You buy the estate at the auction, and I’ll buy it back from you.” This agreement is void because its purpose is to “defeat the provisions” of the auction law.
3. Is Fraudulent:
Simple English: The purpose of the deal is to commit fraud on a third party.
Practical Example (from Act): A, B, and C make an agreement to divide the money they get from “acquired by them by fraud.” The agreement is void.
Practical Example 2: An agent, A, agrees to accept money from B in exchange for selling his principal’s land to B without telling his principal. This deal between A and B is void because its object is to defraud the principal.
4. Involves Injury to Person or Property:
Simple English: The deal requires harming another person or their property.
Practical Example (from Act): You borrow ₹100 from someone and sign a bond agreeing that if you don’t pay it back, you will work for them as a slave. This agreement is void because its object (“slavery”) involves injury to a person.
5. Immoral:
Simple English: The agreement is considered “immoral” by the standards of society at the time.
Practical Example (from Act): A agrees to rent her apartment to B for the purpose of “concubinage” (a sexual relationship outside of marriage, which was considered immoral). The agreement is void.
Practical Example 2: An agreement to pay someone to get a divorce or to break up a marriage would be considered void as immoral.
6. Opposed to Public Policy:
Simple English: This is a broad, catch-all category. It means the agreement is “injurious to the public” or “against the public good.”
Practical Example (from Act): A promises to get B a job in the public service (a government job) if B pays him ₹1,000. This agreement is void. Trading in public offices is against the public good (“public policy”).
Practical Example 2: An agreement to pay a witness to give false testimony in court is void because it is opposed to public policy.
Section 24: Agreement void, if considerations and objects unlawful in part
Legal Text: “If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void.”
Simple English: If any part of the deal is illegal, the entire agreement is void. This applies if the “price” is illegal or the “purpose” is illegal. You cannot separate the “good” parts from the “bad” parts if they are all mixed together in one deal.
Practical Example (from Act): A promises to be the manager for B. B’s business has two parts: (1) a legal indigo factory and (2) an illegal traffic in other goods. B promises to pay A a single salary of ₹10,000 for managing both. The entire agreement is void. The legal part (managing the factory) cannot be separated from the illegal part (managing the illegal traffic) because they are both tied to the same single salary.
Section 25: Agreement without consideration, void, unless…
This section lays down a fundamental rule: “No consideration = No contract.” An agreement for a one-sided promise is void. It then gives three specific exceptions where a promise is valid even without consideration.
Legal Text: “An agreement made without consideration is void, unless—”
Simple English: A promise to give someone something for nothing in return is not a contract and cannot be enforced in court.
Practical Example (from Act): “A promises, for no consideration, to give to B Rs. 1,000. This is a void agreement.” If A refuses to pay, B cannot sue him.
Exception 25(1): Natural Love and Affection
Legal Text: “it is expressed in writing and registered… and is made on account of natural love and affection between parties standing in a near relation to each other;”
Simple English: A promise is a valid contract if it meets all four of these conditions:
It’s in writing.
It’s registered (under the relevant registration law).
It’s made because of “natural love and affection.”
It’s between parties who are closely related (e.g., parent-child, siblings).
Practical Example (from Act): A father, out of “natural love and affection,” promises to give his son ₹1,000. The father puts this promise in a written document and gets it registered. This is a valid contract. If the father refuses, the son can sue.
Exception 25(2): Promise to compensate for something done
Legal Text: “it is a promise to compensate… a person who has already voluntarily done something for the promisor, or something which the promisor was legally compellable to do;”
Simple English: This is a promise to pay for a “past voluntary service.”
Someone voluntarily (without being asked) did something for you in the past.
You, feeling grateful, later promise to pay them for it. This promise is a valid contract.
Practical Example (from Act): “A finds B’s purse and gives it to him. B promises to give A Rs. 50. This is a contract.”
Practical Example 2 (from Act): “A supports B’s infant son. B promises to pay A’s expenses in so doing. This is a contract.” (A voluntarily supported the son; B later promised to pay).
Exception 25(3): Promise to pay a time-barred debt
Legal Text: “it is a promise, made in writing and signed… to pay wholly or in part a debt of which the creditor might have enforced payment but for the law for the limitation of suits.”
Simple English: A debt that is too old (e.g., 3+ years) is “time-barred.” A creditor cannot sue to recover it. However, if the debtor, after the debt is barred, makes a new, written, signed promise to pay that old debt, that promise is a valid contract.
Practical Example (from Act): “A owes B Rs. 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs. 500 on account of the debt. This is a contract.”
Explanation 1: “Nothing in this section shall affect the validity, as between the donor and donee, of any gift actually made.”
Simple English: This section is about promises to give. It does not affect completed gifts. If you have already given someone ₹1,000 as a gift, you can’t ask for it back just because there was no consideration.
Explanation 2: “An agreement… is not void merely because the consideration is inadequate;”
Simple English: The amount of consideration (the “price”) doesn’t have to be “fair.” As long as there is some consideration, the contract is valid.
Practical Example (from Act): “A agrees to sell a horse worth Rs. 1,000 for Rs. 10. A’s consent… was freely given. The agreement is a contract notwithstanding the inadequacy of the consideration.”
But… The explanation also says that if the price is ridiculously low (like ₹10 for a ₹1,000 horse), the court can use this as evidence to investigate if the consent was truly “free” (e.g., was there undue influence or fraud?).
Section 26: Agreement in restraint of marriage, void
Legal Text: “Every agreement in restraint of the marriage of any person, other than a minor, is void.”
Simple English: You cannot make a contract that stops an adult from getting married. Any such deal is void. The law protects a person’s freedom to marry.
Practical Example: A man, B, promises to pay a woman, A, ₹1,00,000 if she promises to “never marry” C. A agrees. This agreement is void. If A marries C, B cannot sue her for the money, and if she doesn’t marry C, she cannot sue B for the ₹1,00,000.
Exception: The law only protects adults (“other than a minor”). An agreement that restrains the marriage of a minor (e.g., a parent agreeing their 16-year-old child will not marry until 18) is valid.
Section 27: Agreement in restraint of trade, void
Legal Text: “Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.”
Simple English: You cannot make a contract that stops someone from working or doing business. The law protects a person’s right to earn a livelihood. Such agreements are void.
Practical Example: Two shopkeepers in the same neighborhood agree that one will pay the other ₹50,000 to “shut down his shop permanently.” This agreement is void. The second shopkeeper can take the money and immediately re-open his shop, and the first shopkeeper cannot sue him.
Exception 1: Saving of agreement not to carry on business of which good-will is sold
Simple English: This is a major exception, especially for business sales. It says: if you sell your business (including its “goodwill” – its reputation and customer base), you can make a valid agreement with the buyer to not start a similar business in a specific local area for a reasonable time.
This is valid only if the restrictions are “reasonable.”
Practical Example: You sell your popular bakery “Sweet Bakes” in Koramangala, Bangalore. The buyer makes you sign an agreement not to open another bakery (similar business) within a 5-km radius (specified local limits) for 3 years (reasonable time). This agreement is VALID.
Practical Example (Unreasonable): If the agreement said “you can never open a bakery anywhere in India,” it would be void because the restrictions are not reasonable.
Section 28: Agreements in restraint of legal proceedings, void
Legal Text: “Every agreement,—
(a) by which any party… is restricted absolutely from enforcing his rights… by the usual legal proceedings… or which limits the time within which he may thus enforce his rights; or
(b) which extinguishes the rights of any party… on the expiry of a specified period…
is void to that extent.”
Simple English: You cannot make a contract that:
(a) Stops you from suing: “You agree to never take me to court, no matter what.” This is void.
(a) Shortens the legal time limit: The law (Limitation Act) gives you 3 years to sue for breach of contract. A clause saying “you must sue within 6 months” is void.
(b) Kills your right entirely: A clause saying “if you don’t make a claim within 30 days, your right to the money disappears.” This is also void.
Practical Example: An insurance policy says “if you don’t file a claim within 3 months of the incident, your right to any compensation is extinguished.” This clause (b) is void.
Exception 1: Saving of contract to refer to arbitration dispute that may arise
Simple English: You can make a valid agreement that says “if we have a dispute in the future, we will go to an arbitrator first, and only the amount the arbitrator decides will be recoverable.” This is a standard arbitration clause.
Exception 2: Saving of contract to refer questions that have already arisen
Simple English: If you already have a dispute, you can make a valid written agreement to “refer this specific matter to arbitration.”
Exception 3: Saving of a guarantee agreement of a bank…
Simple English: This is a special exception for banks. A bank can put a clause in a bank guarantee that says “this guarantee will expire and all rights under it will be extinguished if no claim is made within one year.” This is VALID for banks.
Section 29: Agreements void for uncertainty
Legal Text: “Agreements, the meaning of which is not certain, or capable of being made certain, are void.”
Simple English: If an agreement is so vague that no one can figure out what it actually means, the court cannot enforce it, so it is void.
Practical Example (Void): (from Act) “A agrees to sell to B ‘a hundred tons of oil’.” What kind of oil? Coconut? Engine? At what price? When? The agreement is void for uncertainty.
**Practical Example (Void):A agrees to sell to B “my white horse for rupees five hundred or rupees one thousand.” Which price? It’s not certain. The agreement is void.
Practical Example (VALID): (from Act) “A, who is a dealer in cocoanut-oil only, agrees to sell to B ‘one hundred tons of oil’.” Here, the meaning is “capable of being made certain” by looking at A’s business. It means 100 tons of coconut oil. This is a valid contract.
Practical Example (VALID): (from Act) “A agrees to sell B ‘one thousand maunds of rice at a price to be fixed by C’.” The price is not certain yet, but it is “capable of being made certain” (when C fixes it). This is valid.
Section 30: Agreements by way of wager, void
Legal Text: “Agreements by way of wager are void; and no suit shall be brought for recovering anything alleged to be won on any wager, or entrusted to any person to abide the result of any game…”
Simple English: A “wager” is a bet. It’s an agreement to pay money only if a specific uncertain event happens, where neither party has any real interest in the event except for the bet itself. All betting agreements are void.
Practical Example: You and your friend bet ₹1,000 on tomorrow’s cricket match. You bet on Team A; your friend bets on Team B. This is a wager. If Team A wins, your friend does not have to pay you. If he refuses, you cannot sue him for the ₹1,000. The agreement is void.
Exception in favour of certain prizes for horse-racing:
Simple English: An agreement to pay a prize of ₹500 or more for a horse race is VALID.
Practical Example: A “Bangalore Derby” prize of ₹5,00,000 is a valid prize. The winner can sue for it if the organizer refuses to pay.
Note: This exception does not make betting on the horse race legal. It only makes the prize money for the winners of the race legal.