CONTENTS

ACKNOWLEDGEMENT ....................................................................................................... 2

STATEMENT OF PROBLEM............................................................................................... 3

REVIEW OF ITERATURE.................................................................................................... 4

OBJECTIVE ............................................................................................................................ 5

RESEARCH METHODOLOGY ........................................................................................... 6

INTRODUCTION.................................................................................................................... 7

WHAT IS A CONTRACT? .................................................................................................... 8

ESSENTIAL ELEMENTS OF A VALID CONTRACT ...................................................... 9

CLASSIFICATION ACCORDING TO ENFORCEABILITY ......................................... 12

FREE CONSENT................................................................................................................... 14

VOIDABLE CONTRACTS .................................................................................................. 18

CASE LAWS .......................................................................................................................... 20

BIBLIOGRAPHY .................................................................................................................. 21

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 ACKNOWLEDGEMENT

I would like to express my special thanks of gratitude to my Teacher Ms. Neha Sharma who
has been a great mentor and has been a constant support throughout, as well as our Director
Prof. (Dr.) V. Vijayakumar who gave me the golden opportunity to do this wonderful project
on the topic Voidable Contracts which also helped me in doing a lot of research and I came to
know about so many new things I am really thankful to them

I am also thankful to the library administration for the provision of necessary books and texts
needed for the completion of this project.

Lastly I would also like to thank my parents and friends who helped me a lot in finalizing this
project within the limited time frame.

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 STATEMENT OF PROBLEM

A contract is a voluntary agreement between two or more parties that is enforceable at law as
a binding legal agreement.

The provisions in the Indian contract act is still inadequate to deal with the day to day
increasing context of void contract.

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 REVIEW OF ITERATURE

1. Contract & Specific Relief, by Avtar Singh.

The dynamic interpretation of the concepts of contracts is well explained with related
case laws. And the growth of the Contract has not affected the application of the basic
principle. These principles are discussed with proper interpretation at proper places in
this book.
2. Mulla Indian Contract and Specific Relief Acts, by Dr RG Padia.
The purpose of this book is to provide a clear guide to contract law, examining the
main principles and areas of the subject. It includes text emphasizing the main issues
of liability.

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 OBJECTIVE

The objective of this project is to:

1. Analyze voidable contract.

2. To study the development of concept of voidable contract.
3. To understand how concept of voidable contract relevant in present time.
4. Study cases related to voidable contract.

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 RESEARCH METHODOLOGY

The present research work is based on doctrinal method of data collection. The data has been
extracted from various sources like books, journals, and websites. It was then organised and
analysed thoroughly and arranged in a logical structure. Hence the objectives of projected
were met and project work was completed.

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 INTRODUCTION

A voidable contract is a formal agreement between two parties that may be rendered
unenforceable for a number of legal reasons. Reasons that can make a contract voidable
include failure by one or both parties to disclose a material fact; a mistake, misrepresentation
or fraud; undue influence or duress; one party's legal incapacity to enter a contract; one or
more terms that are unconscionable; or a breach of contract.

A voidable contract is originally considered to be legal and enforceable, but can be rejected
by one party if the contract is discovered to have defects. If a party with the power to reject
the contract chooses not to reject the contract despite the defect, the contract remains valid
and enforceable. Most often, only one of the parties is adversely affected by agreeing to a
voidable contract in which that party fails to recognize the misrepresentation or fraud made
by the other party.

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 WHAT IS A CONTRACT?

A contract is enforceable when both parties agree to something, back the promise up with
money or something of value, both are in sound mind and intend to carry out their promise
and what they promise to do is within the law.

Most commonly, a contract is written and signed by the parties. However, there are several
other types of contracts that are considered enforceable. There are even some that are not
considered enforceable and serve only as a way for a court to determine the obligation on the
part of either party.

Section 2(h) of the Indian Contract Act, 1872 defines a contract as an agreement enforceable
by law.

Section 2(b) defines promise in these words: “When the person to whom the proposal is made
signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted
becomes a promise.”

Section 2(e) defines agreement as “every promise and every set of promises forming
consideration for each other, is an agreement.”

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 ESSENTIAL ELEMENTS OF A VALID CONTRACT

According to Indian Contract Act, 1872 the two elements of a contract are:

1. An agreement;
2. Legal obligation.

Section 10 of the Act provides for some more elements which are essential in order to
constitute a valid contract. It reads as follows: “All agreements are contracts if they are made
by 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.”

Thus, the essential elements of a valid contract are:

 Agreement

As already mentioned, to constitute a contract there must be an agreement. An agreement is

composed of two elements—offer and acceptance. The party making the offer is known as
the offerer, the party to whom the offer is made is known as the offeree.Thus, there are
essentially to be two parties to an agreement. They both must be thinking of the same thing in
the same sense. In other words, there must be consensus-ad-idem.

 Intention to create legal relationship

As already mentioned there should be an intention on the part of the parties to the agreement
to create a legal relationship. An agreement of a purely social or domestic nature is not a
contract.

 Free and genuine consent

The consent of the parties to the agreement must be free and genuine. The consent of the
parties should not be obtained by misrepresentation, fraud, undue influence, coercion or
mistake. If the consent is obtained by any of these flaws, then the contract is not valid.

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  Parties competent to contract

The parties to a contract should be competent to enter into a contract. According to Section
11, every person is competent to contract if he

(i) Is of the age of majority,

(ii) Is of sound mind, and
(iii)Not disqualified from contracting by any law to which he is subject.

Thus, there may be a flaw in capacity of parties to the contract. The flaw in capacity may be
due to minority, lunacy, idiocy, drunkenness or status. If a party to a contract suffers from
any of these flaws, the contract is unenforceable except in certain exceptional circumstances.

 Lawful Consideration

The agreement must be supported by consideration on both sides. Each party to the
agreement must give or promise something and receive something or a promise in return.
Consideration is the price for which the promise of the other is sought. However, this price
need not be in terms of money. In case the promise is not supported by consideration, the
promise will be nudum pactum (a bare promise) and is not enforceable at law. Moreover, the
consideration must be real and lawful.

 Lawful object

The object of the agreement must be lawful and not one which the law disapproves.

 Agreements not declared illegal or void

There are certain agreements which have been expressly declared illegal or void by the law.
In such cases, even if the agreement possesses all the elements of a valid agreement, the
agreement will not be enforceable at law.

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  Certainty of meaning

The meaning of the agreement must be certain or capable of being made certain otherwise the
agreement will not be enforceable at law. For instance, A agrees to sell 10 metres of cloth.
There is nothing whatever to show what type of cloth was intended. The agreement is not
enforceable for want of certainty of meaning. If, on the other hand, the special description of
the cloth is expressly stated, say Terry cot (70: 30), the agreement would be enforceable as
there is no uncertainty as to its meaning.

 Possibility of Performance

The terms of the agreement should be capable of performance. An agreement to do an act

impossible in itself cannot be enforced. For instance, A agrees with B to discover treasure by
magic. The agreement cannot be enforced.

 Necessary Legal Formalities

A contract may be oral or in writing. If, however, a particular type of contract is required by
law to be in writing, it must comply with the necessary formalities as to writing, registration
and attestation, if necessary. If these legal formalities are not carried out, then the contract is
not enforceable at law.

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 CLASSIFICATION ACCORDING TO ENFORCEABILITY

Contracts may be classified according to their validity as

a) Valid,
b) Voidable,
c) Void contracts or agreements,
d) Illegal or
e) Unenforceable.

A contract to constitute a valid contract must have all the essential elements discussed
earlier. If one or more of these elements is/are missing, the contract is voidable, void, illegal
or unenforceable.

As per Section 2 (i) a voidable contract is one which may be repudiated at the will of one of
the parties, but until it is so repudiated it remains valid and binding. It is affected by a flaw
(e.g., simple misrepresentation, fraud, coercion, undue influence), and the presence of anyone
of these defects enables the party aggrieved to take steps to repudiate the contract. It shows
that the consent of the party who has the discretion to repudiate it was not free.

An illegal agreement is one of the consideration or object of which

 is forbidden by law; or
 defeats 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.

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An unenforceable contract is neither void nor voidable, but it cannot be enforced in the
court because it lacks some item of evidence such as writing, registration or stamping.

For instance, an agreement which is required to be stamped will be unenforceable if the same
is not stamped at all or is under-stamped. In such a case, if the stamp is required merely for
revenue purposes, as in the case of a receipt for payment of cash, the required stamp may be
affixed on payment of penalty and the defect is then cured and the contract becomes
enforceable. If, however, the technical defect cannot be cured the contract remains
unenforceable, e.g., in the case of an unstamped bill of exchange or promissory note.

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 FREE CONSENT

In section 13 of The Indian Contract Act, 1872, consent is defined as when two or more
persons agree upon the same thing in the same sense, they are said to consent.

It is essential to the creation of a contract that both parties agree to the same thing in the same
sense.

In section 14 of The Indian Contract Act, 1872, free consent is defined as Consent is said to
be free when it is not caused by

(i) Coercion
(ii) Undue influence
(iii)Fraud
(iv) Misrepresentation
(v) Mistake.

For a contract to be valid it is not only necessary that parties consent but also that they
consent freely. Where there is a consent, but no free consent, there is generally a contract
voidable at the option of the party whose consent was not free.

 COERCION

According to Sections 15, 19 and 72 of The Indian Contract Act, 1872, Coercion is

a) the committing, or threatening to commit any act forbidden by the Indian Penal Code
or
b) 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.

 UNDUE INFLUENCE

According to Sections 16 & 19-A of The Indian Contract Act, 1872, Undue influence consists
in the improper exercise of a power over the mind of one of the contracting parties by the
other. According to Sec. 16, 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

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dominate the will of the other and uses that position to obtain an unfair advantage over the
other.

 Fraud

According to Sections 17 and 18 of The Indian Contract Act, 1872, ‘Fraud’ means and
includes any of the following acts committed by a party to a contract (or with his connivance
or by his agent) with intent to deceive another party thereto or his agent; or to induce him to
enter into the contract

a) the suggestion, as a fact, of that which is not true by one who does not believe it to be
true;
b) the active concealment of a fact by one having knowledge or belief of the fact;
c) A promise made without any intention of performing it;
d) any other act fitted to deceive;
e) Any such act or omission as the law specially declares to be fraudulent.

 Misrepresentation

According to Sections 18 and 19 of The Indian Contract Act, 1872, like fraud,
misrepresentation is incorrect or false statement but the falsity or inaccuracy is not due to any
desire to deceive or defraud the other party. It is innocent. The party making it believes it to
be true. Section 18 of the Contract Act classifies cases of misrepresentation into three groups
as follows

1) 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;
2) any breach of duty which, without an intent to deceive, gains an advantage of the
person committing it, or any one claiming under him, by misleading another to his
prejudice, or to the prejudice of any one claiming under him;
3) 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.

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  MISTAKE

Mistake may be defined as an erroneous belief concerning something. Mistake is of two

kinds:

(1) Mistake of fact, and

(2) Mistake of law.

A mistake of fact may either be: (a) bilateral or (b) unilateral.

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Voidability of agreements without free consent

When consent to an agreement is caused by coercion, fraud or misrepresentation, the

agreement is contract voidable at the option of the party whose consent was so caused. A
party to contract, whose consent was caused by fraud or misrepresentation, may, if he thinks
fit, insist that the contract shall be performed, and that he shall be put in the positionin which
he would have been if the representations made had been true.

Explanation: -

If such consent was caused by misrepresentation or by silence, fraudulent within the meaning
of section 17, the contract, nevertheless, is not voidable, if the party whose consent was so
caused had the means of discovering the truth with ordinary diligence.

Explanation: -

A fraud or misrepresentation which did not cause the consent to whom such fraud was
practiced, or to whom such misrepresentation was made, does not render a contract voidable.

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 VOIDABLE CONTRACTS

Section 2(i) of The Indian Contract Act, 1872, defines Voidable Contracts as 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 or others, is a voidable contract.

 When consent is obtained by coercion, undue influence, misrepresentation or frauds

voidable at the option of aggrieved party i. e. party whose consent was obtained by
coercion/fraud etc. However, other party cannot avoid the contract.
 Section 53 of The Indian Contract Act, 1872, says when a contract contains reciprocal
promises and one party to contract prevents the other from performing his promise,
the contract becomes voidable at the option of the party to prevent. Obvious principle
is that a person cannot take advantage of his own wrong.
 Section 55 of The Indian Contract Act, 1872, when time is essence of contract and
party fails to perform in time, it is voidable at the option of other party. A person who
himself delayed the contract on account of his own delay.

A voidable contract is valid and enforceable, unless the party who is entitled to avoid it
actually does so. The aggrieved party can claim compensation for loss or damages. However,
if it has obtained some benefits, it should be restored to another party. Even if contract is
voidable (but not illegal), collateral transaction will not be affected i.e. collateral transaction
will be valid.

A voidable contract, unlike avoid contract, is a valid contract. At most, one party to the
contract is bound. The unbound party may repudiate the contract, at which time the contract
is void.

For example, depending upon jurisdiction, a minor has the right to repudiate certain contracts.
Any contract with a minor is thus a voidable contract. If a minor were to enter into a contract
with an adult, the adult would be bound by the contract, whereas the minor could choose to
avoid performing the contract. Therefore, when entering into contracts with a minor, people
often require the co-signature of an adult, preferably apparent legal guardian.

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A contract may be voidable on the grounds of Fraud, mistake, Misrepresentation, lack of
capacity, duress, Undue Influence, or abuse of a fiduciary relationship. A contract that is
based on one of these grounds is not automatically void but is voidable at the option of the
party entitled to avoid it. For example, a person who was induced by fraud to enter into a
contract may disclaim the contract by taking some positive action to disaffirm the contract.
Or the victim of the fraud may ratify the contract by his or her conduct or by an express
affirmation after acquiring full knowledge of the facts. Likewise, a contract between a minor
and another party is generally viewed as voidable by the minor. The minor may legally
decide to ratify the contract or disaffirm the contract.

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 CASE LAWS

 Williams v. Bayley1
A son forged his father’s signature on several promissory notes and paid them into his
banking account. When the truth came to light, the manager of the bank threatened
prosecution of the son and “transportation” if a satisfactory solution were not found.
To avert this threat, the father agreed to give an equitable mortgage to the bank on his
property in return for the promissory notes. Subsequent the father sought to have this
agreement cancelled on the ground that he was influenced by the threat.
The House of Lords held the agreement to be voidable.
 Mannu Singh v. Umadat Pande2
A spiritual advisor (guru), for example, in a case before the Allahabad High Court,
induced the plaintiff, his devotee, to gift to him the whole of his property to secure
benefits to his soul in the next world.
The court held that such a consent is obtained by undue influence.
 Chikkam Amiraju v. Chikham Seshamma3
By threat of suicide, Hindu man induced his wife and son to execute a release in
favour of his brother in respect of certain properties which they claimed as their own.
It was held that the threat of suicide amounted to coercion within Section 15 and the
release deed was, therefore, voidable.

1
(1861-73) All ER Rep227
2
ILR (1888-90) 12 ALL 523
3
ILR (1918) 41 Mad 33,36

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 BIBLIOGRAPHY

STATUTES

 The Constitution of India

 The Indian Contract Act, 1872

BOOKS

 Contract & Specific Relief, by Avtar Singh

 Mulla Indian Contract and Specific Relief Acts, by Dr RG Padia

INTERNET

 https://www.manupatrafast.in/
 http://www.theindianlawyer.in
 http://www.legalserviceindia.com/

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