Agreement in Restraint of Trade

What are Void Agreements?

The Indian Contract Act, 1872 defines a Void agreement as “an agreement that is not enforceable by law.”  Void agreements do not have any legal binding on either party. A Void agreement possesses no legal effect and does not satisfy the essential elements of a contract, hence it is void. A Void agreement confers no rights on parties to the contract or creates any obligation....

Expressly Declared Void Agreements

The Indian Contract Act, 1872 provides that some agreements shall be expressly declared void. The illegality, immorality, being against public policy, involving fraud or misrepresentation, and being impossible to perform are some of the reasons why an agreement is declared void. For example, An agreement is created between two parties to commit a crime....

1. Agreement in Restraint of Marriage

Section 26 of the Indian Contract Act, 1872 establishes that agreements that are made to restrain someone from marrying are not valid; i.e., void. However, this shall not apply in the case of a minor. The main idea behind the introduction of this section is that marrying someone is a matter of one’s own choice and is a basic right of every individual, and one should not be deprived by imposing any restraint. Herewith, any agreement that prohibits someone from marrying a person of his or her own choice will be declared void as it causes a restraint of marriage....

2. Agreement in Restraint of Trade

Section 27 of the Indian Contract Act, 1872 establishes that any contract between two persons restrains a person from not practicing or commencing his trade or profession for some consideration. Any case of a person restraining someone from practicing a trade or profession for his benefit will be classified as a restraint of trade and shall be void....

3. Agreements in Restraint of Legal Proceedings

Section 28 of the Indian Contract Act, 1872 establishes that any agreement that restrains one or both of the parties to the contract from proceeding to the courts is not valid or void. When there is a contract that prohibits a party to the contract from going to the courts or tribunals, or imposes any limit in time to approach a court is void and such agreements belong to restraint of legal proceedings. However, the act also provides for exceptions like, in case the agreement states that in case of any dispute between parties, such dispute will be referred to the arbitration, and if any amount is awarded in such arbitration, that shall be considered as final and it will be a valid contract....

4. Agreement whose Meaning is Uncertain

Section 29 of the Indian Contract Act, 1872 establishes that when an agreement whose meaning is vague and uncertain, such an agreement cannot be a valid agreement, and it will be a void agreement. Where the essential meaning of the contract is not clear and assured, such a contract cannot be legally binding on either party as the terms and conditions of the contract are complex and indefinite. However, in a case where such uncertainty can be removed, the contract becomes valid and binding....

5. Agreement by Meaning of Wager

Section 30 of the Indian Contract Act, 1872 establishes that an agreement to wager will be considered a void agreement. The word ‘wager’ means a bet. Such agreements are based on the happening or non-happening of any event that is uncertain. Wagering agreements are similar to ordinary betting agreements. In a wager, each side would have a chance to either win or lose money, depending on the outcome of an uncertain event. The essentials of a wagering agreement are as below:...

6. Agreements Contingent on an Impossible Event

Section 36 of the Indian Contract Act, 1872 establishes that if a contingent contract is based on the happening or non-happening of an event that is impossible to perform, then such a contract will be void. The agreement will remain void regardless of whether the parties to the contract are aware of such an impossibility or not....

7. Agreement to do Impossible Acts

Section 56 of the Indian Contract Act, 1872 establishes that any agreement made to do impossible acts is void. Furthermore, the contract act also establishes that any agreement to do an act that becomes impossible or unlawful after the contract was made, is also considered as void agreement....

Conclusion

A void contract is an agreement which is not enforceable by law. Under a void contract, the essential elements of a valid contract are absent. An agreement might be declared void due to Illegality, immorality, being against public policy, involving fraud or misrepresentation, and being impossible to perform. An agreement made to prohibit someone from commencing a trade, practicing a profession, or engaging in any business is expressly declared void. The reason the act has specified such agreements as void is because these agreements violate the person’s constitutional rights by making such arrangements. Parties to a contract must go through the terms and understand the terms and consequences well so that they can protect themselves from probable damage as remedies in such arrangements are either restricted or not available....

Frequently Asked Questions (FAQs)

1. What is a Void Agreement?...