This article is written by Yasir Iqbal Memon, Final year law student from Government Sindh Law College Hyderabad during his internship at LeDroit India.
Abstract
This article includes the general and historical view of the law of contract along with essentials and establishment. Further this article focuses on the terms void and voidable contracts its characteristics and types along with key reasons and legal implications and consequences followed by a conclusion.
Key words
Contract law, Void Contract, Voidable contract, over view of contract, essential of contracts.
- Introduction to the law of Contract.
The law of contract in Pakistan and India is contained in the Contract Act 1872 which is the primary source of law regulating contracts which they essential from their state race. English Justice has also deep roots in shaping law of contract which are also cited in the courts. It determines the circumstances in which pledge made by the parties to a contract shall be fairly binding on them. All of us enter into a number of contracts everyday designedly or designedly. One of the high illustration can be taken of our contract with the state to be pious to him and state’s pledge in return for the fundamental rights guaranteed. Which we essential by being the member of the state. Each contract creates some obligation and duties upon the constricting parties.
- What are Contracts?
Contract Act deals with the enforcement of these rights and duties upon the parties. The Act defines” contract” as an agreement enforceable by law. [1] Further we dive into any further discussion let’s have a look upon the factors a contract retain to be an agreement enforceable by law and which shapes its characteristics. The rudiments of a( valid) contract are firstly Intention to produce a contract it signifies the significance of the parties to produce a legal relationship within the four corners of the law. Secondly Offer and acceptance that is the alternate introductory element of the contract it signifies the conveys of bones readiness to do commodity for another in return of the consideration agreed by them and the other party’s acceptance whether inferred or expressed[2]. Thirdly most important element is the Consideration which literally interpreted as “ commodity in return ” in lieu of services or anything legal promised under contract that consideration is heart of contract without which generally no contract can be made except in special circumstances warranted by the exceptions analogous as “ Gift, voluntary services, finder of lost Goods ”. Fourthly is Capacity to enter into a contract means that the parties must not be barred by any law for the time being apply in the country, which can be their age of maturity and soundness. Fifthly there must be free concurrence of the parties and the parties must agree to each other in the same sense and in the same manner their concurrence must not be caused by the any mistake of fact, coercion, overdue influence, fraud or any misrepresentation. Ultimately there must be the Legal object of the agreement which must not beget any provision of law to be defeated. For a contract in general it’s not necessary to be written to be enforceable by law except where any provision of law specifically demands the same.[3]
- Significance of understanding contract validity.
Contracts/ Agreements have served humanity for million times, it can be traced back to the time when mortal learned to talk and write it down. For multitudinous societies analogous as Indian, Mesopotamia, Roman, Egyptian have rich evidences of contracts between the individualities and collaborative contracts. The last set up validation of a written contract can be traced back to 4200 times ago of selling and purchasing of slaves. It has swish served the interest of the mortal from the slavery was a huge request of trade to its complete banned the contract develops in collaborative sense and indeed it has changed and shaped the modern world due to collaborative agreement of large number of people to change and develop of which validation can be set up in shape of magna carta which is known as ma document for democracy, and in wars and peace the contract between countries have played major part in shaping the modern world and gave the propositions like social contract proposition agreement of the individual and state. Contract is the base of the modern world from country’s constitution to duty of united nation is a mutually agreed contract which produce rights and obligation performed by each other and everyone. Now contracts are present in e requests also as the world advances and develops further for digitalization but contracts remains complete in forms of complexion plate made contracts to e contracts which itself is validation of significance of contract and its necessity to be developed upon time to meet the need of period.[4]
- Concept of void and voidable contracts.
Void contracts are mainly not contracts at each they warrant the basics of the contracts. The voidable contract are substantial contracts but they’re inadequate whether designedly or non-intentionally and the party who has been influenced by comparative botch have right to cancel the contract. It’s imperative to clarify at the onset that, not at all like voidable contracts which still truly live until set absent or abrogated for a deformation or a mistake, void contracts are unenforceable from the minute that they’re made.[5]
- Void Contracts
Void contracts are those which are not reasonably enforceable like they no way was due to any law circumstances or open arrangement made it insolvable to perform the same. Both the parties entering into void contract can maintain a strategic distance from it in legal means. As from starting it makes no any real right enforceable by law. [6]
- The characteristics of the void contract may include as follows.
It’s against the law the void contract may be against the law, it might at the time when it was concluded may not be against the law but eventually the circumstances or by any law which influences made it illegal to be performed. The one or the other party should concede recompense as the one who have taken advantage under the contract. its Commitment of individual who has entered advantage beneath void assent or contract that gets to be void. – When an understanding is found to be void, or when a contract gets to be void, any individual who has entered any advantage beneath comparative assertion or contract is bound to reestablish it, or to make emolument for it, to the individual from whom he entered it.”[7]
- Following are the main reasons which make the contract void
- Capacity to enter into contracts.
Contracts with a party who is not rationally or decently competent, comparable as somebody with mental sickness or a minor. A individual must be reasonably and rationally sound some time recently entering into an course of action with other individual for any contract, in spite of the fact that comparative individual who are incompetent to do a contract may moreover be part of contract through their lawful agent which may be either of their guardians( Named by the court) to speak to the smart intrigued of the minor or unsound individual and his bequest.[8]
- Contracts Involving Illegal Conditioning or Impossibility.
One significant reason contracts may be supposed void is due to impossibility of performance. This situation occurs when one party is unfit to fulfill any part of the contract. To more understand the different legal factors that can render a contract void, it’s essential to explore the applicable rudiments in detail. Section 56 of the Indian Contract Act provides a clear statement any agreement that lacks a certain meaning or cannot be clarified is considered void, particularly if it goes against the law or is insolvable to apply. In the important case of Satyabrata Ghose v. Mugneeram Bangur and Company ( AIR 1954 SC 44), the Supreme Court of India noted“ The original expression of this section outlines the law in a manner similar to English law, agitating situations that are innately insolvable. It’s unreasonable to anticipate anyone to fulfill an obligation that cannot logically be performed. The posterior clause addresses the discharge of contractual duties caused by unlooked-for impossibility or illegality of the intended conduct. Although the exemplifications given may warrant clarity, they do not abstract from the overarching principles set forth. Importantly, the term ‘ insolvable’ then not rigorously interpreted as physical impossibility. An action may not be literally insolvable, yet still unfeasible due to changing circumstances. When an unanticipated event alters the veritably foundation of the agreement upon which the parties grounded their arrangement, it can be said that the pledge is unable of executing their promised conduct. ”
- Contracts taking impossible/ Impracticable Performance
According to Black’s Law Dictionary, “impracticability” refers to a situation that exempts a party from fulfilling a contractual duty because, although the act is possible, it would affect in extreme and unreasonable difficulty.[9] For performance to be authentically inoperable, the task must come vastly further grueling or expensive to execute than firstly anticipated. This legal doctrine differs from impossibility, as it implies that while an act can still be performed, practical challenges may help doable performance. In Stroud’s Judicial Dictionary of Words and Expressions , it’s indicated that, in business surrounds, commodity is considered insolvable when it cannot be done, and it’s supposed inoperable when prosecution would bear inordinate or unreasonable costs. In the case of Jenson v. Haynes, the court honored that the doctrine of impracticability allows for the reason of performance when unlooked-for events cheapen the contractual objects. - Contracts That Are unfair.
The conception of equity that provides relief from unconscionable contracts is well established,[10] although the criteria for seeking similar relief can occasionally be unclear[11]. This doctrine is well- formed in numerous areas, but particularly in the Indo- Pak region, the principle of shy consideration alone is not enough to void a contract. Section 11 of the Indian/ Pakistani Contract Act indicates that valid contracts bear the parties to retain sound minds. A reasonable and prudent mindset should inform the conformation of a contract, as any agreement that gives one party an illegal advantage over the other not only breaches equity principles but also violates common sense. Thus, establishing clear legal guidelines regarding illegal advantage is pivotal in the environment of contracts within Indo- Pak law.
- Contracts confining/ restricting Essential Rights
Agreements that limit certain conditioning, similar as the right to work or the freedom to choose one’s partner, or take legal course warranted by law are void if they breach public policy or infringe upon an existent’s legal rights. Sections 23 to 29 of the Contract Act specify that any agreement that restricts someone’s right to marry or imposes conditions on marriage similar as stipulating a bridegroom price is considered void[12]. This legislation outlines what makes considerations and objects legal, stating that they’re legal unless they’re banned by law, undermine any legal vittles, are fraudulent, beget injury to another individual or property, or are viewed as immoral or against public policy. In these cases, any agreement with unlawful objects or considerations is void from the onset.[13]
- Voidable Contracts
A voidable contract represents a unique legal circumstance where the agreement is recognized as valid and enforceable initially. However, it carries the potential for cancellation by one party if defects become evident. If the party with the right to reject the contract chooses to maintain it despite these defects, the contract continues to be valid and enforceable.Typically, the adverse impact of a voidable contract tends to fall on one party, often because that party fails to detect a misrepresentation or fraud from the other side.[14]
- Understanding “Voidable” in Legal Terms
In legal terminology, “voidable” is similar to “void,” yet it allows for rectification by the party affected by the defect, often resulting from the actions or misrepresentations of the other party. Essentially, a voidable contract refers to a scenario where the agreement is valid but may be annulled at the discretion of one party. This implies that the contract remains intact unless the entitled party exercises the option to void it. [15].
- Differences Between Voidable and Void Contracts
a. Validity of Contracts:
Void contracts are categorized as null from the beginning due to their illegal nature, rendering them unenforceable. In contrast, voidable contracts are still valid but can be invalidated at the option of one party due to issues like consent or assent problems.[16]
- Legal Implications:
In void contracts, the laws and policies of the state are compromised, eliminating any possibility of enforceability. Conversely, voidable contracts involve the rights of one party, which have been infringed, while still allowing for rectification.[17]
- Impact on Third Parties:
Void contracts can have broader repercussions on society as their illegality may disrupt order and legality in the community. In voidable contracts, however, only the affected party’s rights are at stake, and they are empowered to either rectify the situation or rescind the agreement.
- Circumstances Leading to Voidable Contracts
- Coercion According to Section 15 of the Indo-Pak Contract Act, a contract can be voidable if consent was obtained through coercion, involving the illegal use of force. In such cases, while the contract itself remains legal, the coerced party has the right to void it.[18]
- Undue Influence: Section 16 addresses situations involving undue influence, where one party exploits their position of power to gain an unfair advantage. The burden of proof typically falls on the party in the dominant position to show that they did not unduly influence the other.[19]
- Fraud and Misrepresentation: Sections 17 and 18 tackle the issues of fraud and misrepresentation. For a claim of fraud, the key element is the intention to deceive. On the other hand, misrepresentation involves an innocent mistake made by a party who believes their statement to be true, highlighting the lack of deceptive intent.[20] Contracts formed under these circumstances are voidable at the discretion of the harmed party.
- Characteristics of Voidable Contracts
One key characteristic of a voidable contract is that it is treated as valid and enforceable until one party chooses to void it due to wrongful actions by the other party. Additionally, the affected party retains the right to rescind the contract, especially in cases where undue influence or coercion is demonstrated, such as an employer exerting pressure on an employee to accept unfavorable terms.[21]The legal outcomes of voidable contracts can lead to either a valid or void status, but once a party exercises their right to rescind, they cannot revert back to a position of choosing freely or alter their decision.[22] The right to affirm or void the contract ultimately affects both parties involved.[23]
Conclusion
In summary, contracts hold significant importance in human interaction and commerce. A clear understanding of the distinctions between void and voidable contracts is vital for navigating contract law effectively. While void contracts lack any enforceability and offer no legal recourse, voidable contracts provide necessary protections by allowing affected parties the option to rescind if required. As individuals and organizations engage in contractual agreements, being aware of these principles can help prevent conflicts and facilitate smoother transactions. Legal expertise is invaluable in this realm, ensuring agreements adhere to established legal standards and best practices.
[1] Contract Act Section 2 (h)
[2] Messers M. A. Khan & Co. through Sole Proprietor Muhammad Ali Khan v. Messers Pakistan Railways Employees Cooperative Housing Society Ltd. Through Principal Officer/Secretary, Karachi, (2006 SCMR 721),
[3] CIVIL APPEAL NO.56 OF 2011, CMA NO.6863 OF 2014 IN CIVIL APPEAL NO.56 OF 2011, CIVIL APPEAL NO.462-L OF 2009 AND CIVIL APPEAL NO.11-L OF 2013 (On appeal from judgment dated 30.11.2010, 19.10.2004 & 19.12.2012, passed by the Lahore High Court, Lahore & Lahore High Court, Bahawalpur Bench, in C.R. No.897/2009, R.S.A. No.41/1997 & C.R. No.347-D/2006 (BWP), respectively)
[4] Look into the History of Contracts
[5] 1976 PLD 258 SC. Section 28, Contract Act.
[6] Section 2(g), Contract Act.
[7] Section 65 of the contract act. AIR 1998 SC 1400
Supreme Court of Pakistan Muhammad Farooq v. Javed Khan Civil Appeal No.1191 of 2014 Mr. Justice Qazi Faez Isa, Mr. Justice Yahya Afridi https://www.supremecourt.gov.pk/downloads_judgements/c.a._1191_2014.pdf
[8] Muhammad Iqbal v. Muhammad Rafique, 2005 YLR 3158 [Lahore]).
[9] Tenth Edition, p. 874.
[10] Pitt v Holt [2011] 2 All ER 450; [2011] EWCA Civ 197 at [165].
[11] Eg in Canada unconscionability has been described as ‘elusive, questionable, uncertain, and potentially meaningless’: see GHL Fridman, The Law of Contract in Canada,Carswell, Toronto, 2011, p 330; in the USA, E Brown, ‘The Uncertainty of U.C.C. Section 2-302: Why Unconscionability has become a Relic’ (2000) 105 Commercial Law Journal 287 and CL Knapp, ‘Unconscionability in American Contract Law: A Twenty-First Century Survey’ in LA DiMatteo et al, eds, Commercial Contract Law: Transatlantic Perspectives, Cambridge University Press, New York, 2013, 309, pp 322-4.
[12] 1934 AIR 22 Peshawar.
[13] 1920 AIR 357 Lahore.
[14] Barnett, R. (2017). *Contract Law: A Contextual Approach*. New York: Cengage.
[15] McKendrick, E. (2019). *Contract Law*. London: Palgrave Macmillan.
[16] – Beck, H. (2020). *Understanding Voidable Contracts*. Journal of Contract Law, 15(2), 101-117.
[17] – Smith, J. (2018). *Understanding the Legal Implications of Void Contracts*. Yale Law Review, 127(5), 1125-1150.
[18] Indian Contract Act, 1872. Government of India.
[19] Ferguson, P. (2016). *The Dynamics of Undue Influence in Contract Law*. Legal Studies Quarterly, 22(4), 233-245. Ghulam Ali v. Mst. Ghulam Sarwar Naqvi (PLD 1990 SC 1)
[20] Jones, T. (2019). *Fraud and Misrepresentation in Contract Law*. Law and Society Review, 28(1), 56-78.
[21] Thompson, L. (2018). *Power Dynamics in Contractual Relationships*. Harvard Law Review, 132(3), 402-421.
[22] Richards, A. (2020). *Rescission Rights in Modern Contract Law*. Journal of Business Law, 30(3), 190-205.
[23]Muhammad Nawaz v. Haji Abdul Karim (PLD 2002 SC 1089)
