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We enter into contracts day after day. Taking seat in a bus amounts to
entering to a contract. When you put a coin in the slot of a weighing
machine, its a contract. You go to restaurant and take snacks; you have
entered into a contract. In such cases, we do not even realize that we are
making a contract. While In case of people engaged in trade, commerce
and industry, they carry on business by entering into contracts. The law
relating to contracts is to be found in the Indian Contract Act, 1872.
The law of contracts differs from other branches of law in a very
important respect. It contains rather a number of limiting principles,
subject to which the parties may create rights and duties for themselves,
and the law will uphold those rights and duties. Thus, we can say that the
parties to a contract, in a sense make the law for themselves. So long as
they do not transgress some legal prohibition, they can frame any rules
they like in regard to the subject matter of their contract and the law will
give effect to their contract.
Thus, the word CONTRACT is common to all of us and virtually no
business transactions take place without any contract.
Genesis of a contract lies in an agreement. Every day we enter into so
many agreements, not necessarily in the formal sense of written
agreement but consciously or unconsciously whatever personal, social or
for that matter day to day interactions take place in our life they are
agreement in one way or other. For example in the morning we go to a
milk booth, buy milk and pay for it. It is an agreement whereby we pay
or agree to pay the vendor on delivery of milk. Non-delivery of milk or
non-payment of price to the vendor may amount to breach of contract,
for which remedy can be sought. Suppose you paid for the milk but the
milk turned out to be contaminated. How to deal with such situations.
The way to deal with all these situations is provided in the Contract Act.
In business dealings, offers for sale are made and accepted,
consideration is agreed, and conditions of sale are specified. Disputes
arise when an offer or acceptance is violated, consideration is unpaid,
and conditions of transactions are violated. The Contract Act, 1872 takes
care of all these matters and provides remedies for all such disputes.
Before enactment of Indian Contract Act, 1872, the courts in India used
to apply English Common laws as suited to Indian conditions, customs
and usages. Some difficulties were noticed in using English Common
laws. Accordingly later the courts started deciding cases based on Hindu
personal laws and Muslim personal laws. But the same were still not
found fit to address the business complexities. Accordingly separate
Indian Contract Act, 1872 was enacted. This Act is based on English
Common law, which is to a large extent made up of judicial proceedings.
The Indian Contract Act, 1872 is not an exhaustive Act as it does not
cover all branches of the law of contract. There are other acts to deal
with other types of contract like Sales of Goods Act for Sales of goods,
Partnership Act for Partnership Contract, Transfer of Property Act for
contract relating to Sale of immovable property etc. Again it does not
deal with all types of agreements, it deals with only those agreements
which are enforceable by law or which gives rise to legal consequences.
Section 2 of the Act defines various terms used in the Act.
Section 2:a. When one person signifies to another, his willingness to do or to
abstain from doing anything, with a view to obtaining the assent of
that other to such act or abstinence, he is said to make a proposal;
b. 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;
c. The person making the proposal is called the promisor, and the
person accepting the proposal is called the promisee;
d. When, at the desire of the promisor, the promisee or any other
person has done or abstained from doing, or does or abstains from
doing, or promises to do or to abstain from doing, something, such
act or abstinence or promise is called a consideration for the
promise;
e. Every promise and every set of promises, forming the
consideration for each other, is anagreement;
f. Promises which form the consideration or part of the consideration
for each other are calledreciprocal promises;
g. An agreement not enforceable by law is said to be void;
The term agreement has been defined in section 2(e) as every promise
and every set of promises, forming consideration for each other. Again
another term promise has been used, which has been defined as 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(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.
Thus, Agreement = Proposal or Offer + Acceptance.
1. Agreement.
2. Intention to create legal relationship.
3. Free and genuine consent.
4. Parties competent to contract.
5. Lawful consideration.
6. Lawful object.
7. Agreements not declared void or illegal.
8. Certainty of meaning.
9. Possibility of performance.
10. Necessary Legal Formalities.
(i) Agreement In order to constitute a contract, there must be an
agreement in first place. An agreement in turn is composed of two
elements, offer and acceptance. Thus there must be at least two partiesone making the offer and another accepting it. The terms of offer must
be definite and the acceptance must be absolute and unconditional.
For example, A offers to sell his car to B for 50,000. B agrees to it. Here
there are 2 parties, A (offeror) and B (acceptor). The offer to sell car for
50,000 is a definite offer. This agreement gives to an obligation on part
of A to deliver the car to B and on part of B to pay the price.
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.
Thus, where A who owns 2 cars x and y wishes to sell car x for Rs.
30,000. B, an acquaintance of A does not know that A owns
car x also. He thinks that A owns only cary and is offering to sell
the same for the stated price. He gives his acceptance to buy the same.
The
Indian Contract Act, 1872 has made it clear that there is a thin line of difference
between void and illegal agreement. A void agreement is one which may not be
prohibited under law, while an illegal agreement is strictly prohibited by law
and the parties to the agreement can be penalised for entering into such an
agreement. By learning the distinction between the two types of agreement, you
will be able to understand that which one is void and which is unlawful i.e. illegal.
So, take a read of the given article carefully.
3. Key Differences
4. Conclusion
Comparison Chart
BASIS FOR COMPARISON
VOID AGREEMENT
Meaning
Consequence
Prohibition by IPC
No
Scope
Wide
Penalty
Parties to void agreement are not liable for any penalty under law.
Connected agreements
Certain agreements are void ab initio as per Indian Contract Act, which are
Agreement in restraint of marriage, agreement in restraint of trade, agreement in
restraint of legal proceeding, agreement with minor, agreement whose object or
consideration is unlawful, wagering agreement, etc.
Conclusion
After reviewing the above points, it is quite clear that the void and illegal
agreement are very different. One of the factors that make an agreement void is
the illegality of the contract, such as contract whose object or consideration is
unlawful. Moreover, in both the two agreements loses its enforceability by law.