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DISTINCTION BETWEEN VOIDABLE CONTRACT AND VOID AGREEMENT1
. A void agreement has from the very beginning no legal effects. It is unenforceable at law. A
voidable contract is one which one of the parties may affirm or reject at his option. It is valid and enforceable till it is repudiated or rescinded.
2. The defect in the case of voidable contract is curable and may be condoned. But a void agreement is void ab initio and its defects are incurable.
3. In the case of a void agreement even a thnira party cannot acquire any right from person claiming under such contract while in the case of a voidable contract, a third party can acquire a valid title from a person claiming under such a contract.
4 Since a void agreement is unenforceable at law there does not arise any question of
comvensation on account of the no-performance ot the agreement. But in case of a voidable contract, a person is entitled to compensation ror loSs or damages suffered by him on account of the non-performance of the contract.
5. A voidable contract does not affect the collateral transaction. But where the aoroc is void on account of illegality of the object, the collateral transaction will also become void.
Unenforceable Contracts. It is contract which is otherwise valia, of some technical defect like absence of a written form because contracts must be sued upon by one or both of the parties. Such contracts can no absence of a written form or absence of a proper stamp. such court. Such contracts will not be enforced by the courts until contracts cannot be proved in the and unless the defect is rectified.
Example:
A borrows 10,000 from B and makes a promissorv note and a one rupee stamp is paste pronote. ne agreement though complete is unenforceable because of the technical promissory note being understand.
6. Illegal Agreement.
A contract which is either prohibited by law or otherwise against the Pouey of law is an illegal agreement. It is void ab initio.
Thus, a contract to commit dacoity 1s at 5 contract and cannot be entorced at law. An illegal contract should be distinguished from a void contract. All illegal agreements are void but all void agreements or contracts are not necessarly illegal.
Agreement with a minor is void but not illegal. Every void agreement is not illegal unless its object or consideration is
(a) immoral
(b) opposed to public policy etc.
A void contract does not affect
a collateral contract.
An illegal agreement is like an infectious disease and is fatal not only to the main
contract but to collateral contracts as well.
Example: X borrows 50,000 from Y for the purpose of smugling goods. Y knows of the purpose of the loan.
The agreement between X and Y is collateral to the main agreement which is illegal. The collateral agreement is also illegal.
DISTINCTION BETWEEN ILLEGAL AND VOID AGREEMENTS
1. Void Agreements are broader in scope. Such agreements may be void for a reason other than illegality. All illegal agreements are void.
2. Parties to a void agreement may not be punished but parties to an illegal agreement may be liable for punishment.
3. Transactions collateral to void agreements are entorceable by law.
However, transactions collateral to illegal agreements are also tainted with illegality and hence become void because 'Ex turpi causa, non orient active out of illegal agreement no cause of action arises.
CONTRACTS CLASSIFIED ACCORDING TO FORMATION
1. Express contract. An express contract 1s one entered into by words which may be either Spoken or written. Where the proposal and acceptance is made in words, it is an express contract.
For Example,
A tells B to sell his car for Ks. 3,00,000 and B accepts the off a express contract.
2. Implied contract. Where the proposal or acceptance is made otherwica thas
an implied contract. Implied contracts can be smelled out of the surrounding circumstances. Some work the law implies that the former agrees to pay for tho ,pioys another to do It is a contract in which there is no intention on either side
and the conduct of the parties who made them. So where a person surronding circumstances.
3. Constructive or quasi-contract. imposes It is a contract a contract. in which n such a contract rights and obligations to make a contract, but the law imposes a contract. In ss 1s no intention o
arise not by any agreement between
reen the parties but by operations of law. Thus, a finder of lost goods is under an obligation to find out the true owner and return the goods. Similarly, where certain books are delivered to a wrong addressee, the addressee is under an obligation either to pay for them or return them.
4. E-Com Contracts/Contracts over Internet. These contracts are entered into between the parties using internet. In electronic commerce, different parties/persons create networks which are linked to other networks through EDI (Electronic LData Inter-change) This helps in doing business transactions using electronic mode.
These are known as EDI contracts or cyber contracts or mouse click contracts.
5. Standard Form Contracts. Business firms have to enter into large no. of contracts daily. From a practical angle and for the sake of convenience, firms may use standard form of contracts eg an
railways/airport authorities may print various terms and conditions in Time Tables.
Similarly, dry-cleaner receipts, hotel-tickets may have terms and conditions printed on them/their back. The contract in such a case is not made by process of negotiation. Kather one party has prepared draft of the contract, which the other party is enabled or made
to/deemed to agree to. When the other party contracts with those pre-drafted terms is such a contract valid and binding ?
insurance company may draft an insurance policy contract. There is no legal bar on such contracts. If consent is free with full understanding of terms and
conditions of the contract and there is no attempt by one dominating party to take undue advantages at the cost of weaker party.
In order to make terms and conditions binding, it is necessary to draw the attention to them by a sufficient notice e-g. "For conditions see back" or obtaining signatures on the document containing
the terms etc.
CLASSIFICATION ON THE BASIS OF PERFORMANCE
Contracts may be classified on the basis of extent of their performance. Such contracts may be:
1. Executed Contract. An executed contract is one where both the parties have performed their obligations or carried out the terms of the contracts. In other words, it is a completed contract.
Example: A sells a TV set to B for 20,000. B pays the price and A hands over TV set to B.
2. Executory Contract. Where the contract is yet to be performed either wholly or partially or or both the parties have yet to perform their obligations, the contract is executory contract.
Example :
A agrees to make furniture for B for R 5,000 Mr. A has yet to make furniture and Mr. B has not made the payment. So, both A & Bare yet to perform their obligations. Suppose A has made the furniture but B has yet to make payment, it is executed on A's part by executory on B's part.
Thus, excutory contract may be
(1) Unilateral
(2) Bilateral
(1) Unilateral Contract. A unilateral contract is one in which a promise on one side is exchanged for an act on the other side.
and contract is said to be unilateral where one party has discharged his obligation either before or at time of entering into contract.
(a) Contracts of record. These are judgements and recognisances. Such contracts exist by reason of
the entry in the records of the court in which the proceedings are brought.
A judgement gives rights and obligations of litigants as between themselves. A reconisance is a
written acknowledgement of a debt due to the crown. The phrase, "contract of record" is misleading
as it suggests that the obligation springs from agreement, whereas really it is imposed upon the
parties by an outside authority.
(b) Contracts under Seal. These are contracts created by a sealed document which is called a
'deed. Such contracts must be executed with certain formalities. These must be a document, in print
or in writing, and it must be signed, sealed and delivered.
The following contracts must be under seal:
(1) Contracts made without consideration.
(2) Contracts made by corporation or companies.
(3) Contracts of lease relating to land for more than three years.
(4) Contracts relating to transfer of a British ship or any share therein.
2. Simple Contracts. Contracts which are not formal are known as simple contracts. These are
also called parol' contracts. They may be in writing, or made orally, or they may be implied from the
conduct of the parties. All simple contracts must be supported by consideration.
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