Three main types of agreement under the contract Act
- Void Agreements
An agreement not enforceable by law is said to be void. For eg. an agreement by a minor has been held to be void. Section 24 to 30 of the Indian Contract Act, 1872, makes specific mention of agreements which are void. Those agreements include an agreement without consideration, an agreement, in restraint of marriage, and an agreement in restraint of trade.
- Voidable Contracts
An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other, is a voidable contract.
Thus, a voidable contract is one which could be avoided by one of the parties to the contract at his option.
For eg, when the consent of the party to a contract has been obtained by coercion, undue influence, fraud and misrepresentation, the contract is voidable at the option of the party whose consent has been so obtained.
- Unlawful agreements
There are certain types of agreements that are “unlawful” in the sense that the law forbid the very act, the doing of which is contemplated by the agreement. For eg, an agreement to commit a crime or a tort.
To distinguish an unlawful agreement from other void agreement, it is stated that while in case of void agreement a collateral transaction may not also be avoid, but in case of an unlawful agreement, the collateral transaction is held to be void.
For eg, A gives money to B to enable him to pay his wagering debt.
The wager is the main transaction which is void, but loan given by A is subsidiary to it, which is not void and A can recover his money from B. On the other hand, where A gives loan to B to smuggle goods. Smuggling is the main transaction and loan is subsidiary to it. But, loan transaction is also said to be tainted with the same illegality and A will not be able to recover his money.
Difference between Void Agreement and Voidable Contract
- A voidable contract is voidable at the option of one of the parties thereto. But a void agreement cannot be enforced by any one of the parties thereto.
- The defect in the case of voidable contract is curable and may be condoned, whereas a void agreement is void ab initio, and its defects are not curable.
- A voidable contract does not become void unless the party at whose option it is voidable repudiates it. But a void agreement is void ab initio.
- A voidable contract implies a contract, in which the consent of one of the parties to contract is not free, whereas a void agreement denotes an agreement, which does not fulfill the essentials of a valid contract.
- In case of a voidable contract, a person is entitled to compensation for loss or damages suffered by him on account of the non-performance of contract. But in a void agreement, as it is unenforceable at law there does not arise any question of compensation due to the non performance of the agreement.
Also Read: Essentials of Contract
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