Void and Voidable contracts

In one minute

The Act uses three similar words for three different things. A void agreement is never enforceable. A voidable contract is valid until the wronged party cancels it. A void contract was valid when made but later stops being enforceable.

These labels decide who can sue and what happens to money already paid. In exams, the three definitions and the table are the marks. In real life they decide whether you can walk away from a deal and get your money back.

Legal provision

• Section 2(g): an agreement not enforceable by law is void.
• Section 2(h): an agreement enforceable by law is a contract.
• Section 2(i): an agreement enforceable by law at the option of one or more of the parties, but not at the option of the other or others, is a voidable contract.
• Section 2(j): a contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.
• Section 19: when consent is caused by coercion, fraud or misrepresentation, the contract is voidable at the option of the party whose consent was so caused. He may instead insist on performance, as if the representations had been true.
• Section 56: a contract to do an act that, after the contract is made, becomes impossible, or becomes unlawful by reason of an event the promisor could not prevent, becomes void when the act becomes impossible or unlawful.
• Section 64: when a person at whose option a contract is voidable rescinds it, the other party need not perform his promises. The rescinding party restores any benefit he received, so far as may be.
• Section 65: when an agreement is discovered to be void, or a contract becomes void, a person who received any advantage under it must restore it or make compensation for it.

Meaning and definition

A void agreement never became a contract. A voidable contract is a contract that one party can choose to end. A void contract was a contract and later lost its force.

The key question is always timing and choice. When did it fail, and who decides?

• Agreement section 2(e)
  • Void agreement section 2(g)Not enforceable from the start. For example a minor's agreement, a wager, an uncertain agreement.
  • Contract section 2(h)
    • Valid contractEnforceable by both parties.
    • Voidable contract section 2(i)Enforceable at one party's option. For example, consent caused by coercion, undue influence, fraud or misrepresentation.
    • Void contract section 2(j)Valid when made, later ceases to be enforceable. For example, a promise that becomes impossible or unlawful (section 56).

Detailed explanation

Step 1: void agreement (section 2(g))

No one can enforce it, and nothing needs to be done to end it.

Step 2: voidable contract (section 2(i))

The contract is binding unless and until the party with the option avoids it. The other party cannot avoid it.

Step 3: the choices under section 19

The party whose consent was caused by coercion, fraud or misrepresentation may avoid the contract. After fraud or misrepresentation he may instead insist on performance and on being put in the position he would have held if the statements had been true. The Act's illustration (c): A fraudulently says his estate is free from debt, and B buys it. The estate is mortgaged. B may avoid the contract, or insist that it be carried out and the mortgage debt redeemed.

Step 4: void contract (section 2(j) and section 56)

A void contract was valid at the start. It fails later, for example when performance becomes impossible or unlawful after the contract is made.

Step 5: restoring benefits (sections 64 and 65)

Section 64 applies when the option-holder rescinds a voidable contract. He restores any benefit received, and the other party need not perform. Section 65 applies when an agreement is discovered to be void or a contract becomes void. The person who got an advantage restores it or pays compensation.

The Act's illustration (d) to section 65: A contracts to sing at a concert for Rs 1,000, paid in advance, and is too ill to sing. A is not bound to compensate B for lost profits, but must refund the Rs 1,000.

Don't confuse: void agreement, voidable contract and void contract

Students lose marks by using the three words as if they meant the same. Three questions separate them: when it fails, who decides, and what is left.

Point	Void agreement (2(g))	Voidable contract (2(i))	Void contract (2(j))
When it fails	From the start	When the option-holder avoids it	After formation, when it ceases to be enforceable
Who decides	No one. The law decides	The option-holder	Events decide
Until then	Not a contract at all	A binding contract	A binding contract
Example	Minor's agreement	Consent caused by fraud	Performance made unlawful by a new law

Common mistakes

• Using "void" and "voidable" as the same thing. Voidable gives one party a choice.
• Saying a void contract was void from the beginning. That is a void agreement. A void contract fails later.
• Forgetting that the other party cannot avoid a voidable contract.
• Applying sections 64 and 65 to a minor's agreement. The Privy Council held they presuppose a contract with a competent party.

Apply it

Leading case laws

• Mohori Bibee v. Dharmodas Ghose (1903)

  Facts. An infant mortgaged houses for Rs 20,000 to a money lender whose attorney knew of his age. The lender asked that he at least repay the money, relying on sections 64 and 65.

  Principle. Whether a contract is void or voidable presupposes a contract within the meaning of the Act. An infant's agreement is not one, so section 64 cannot apply. Section 65 starts from an agreement between competent parties and also does not apply.

  Why it matters. It marks the limit of sections 64 and 65: they work only where there is a contract with competent parties.

How to write this answer in the exam

Key points to remember

• Void agreement: never enforceable (section 2(g)).
• Voidable contract: enforceable until the option-holder avoids it (section 2(i)).
• Void contract: valid when made, later ceases to be enforceable (section 2(j)).
• The wronged party can avoid, or after fraud or misrepresentation insist on performance (section 19).
• Section 64: the party who rescinds restores benefits. Section 65: benefits under a void agreement or contract are restored.

Quick self-test

Related topics

• Effect of Minor's Agreement
• Concepts of Free Consent
• illegal agreements
• Wagering agreements