SESSION

5– CORPORATE & BUSINESS LAW ì

LEGALITY OF OBJECT & CONSIDERATION, VOID
AGREEMENTS, PEFORMANCE OF A CONTRACT

Course Instructor: Shahzeb Shaikh

Course Title: Corporate & Business Law
Email: [email protected]
Cell: 03002151004
Dated: 14th February, 2021

 TOPICS FOR DISCUSSION
ì  Legality of Object and Consideration and Agreements to
Public Policy
ì  Circumstances under which the object or consideration is
deemed to be unlawful
ì  Illegal agreements

ì  Void agreements if consideration or objects unlawful in part

ì  Agreements opposed to Public Policy

ì  Meaning & Essential Features of a Contingent Contract

ì  Wagering Agreement Vs. Contingent Contract

 TOPICS FOR DISCUSSION

ì  Void Agreements

ì  Agreements in restraint of Marriage, Trade and

Legal Proceedings

ì  Uncertain Agreements

ì  Wagering Agreements

ì  Agreements to do Impossible Acts and Events

ì  Restitution (S:64-65)
 TOPICS FOR DISCUSSION
ì  Performance of a Contract

ì  Meaning & Types

ì  Effects, Essentials and types of Tender

ì  Effect of Refusal of Party to perform Wholly

ì  Persons who can demand Performance

ì  Persons who must perform

ì  Time and place of performance

ì  Time as Essence of Contract

LEGALITY OF OBJECT AND
CONSIDERATION, AND
AGREEMENTS OPPOSED TO PUBLIC ì
POLICY
 CIRCUMSTANCES UNDER WHICH THE OBJECT
OR CONSIDERATION IS DEEMED UNLAWFUL
CIRCUMSTANCES EXPLANATION
a) If it forbidden by law (S.23) The agreement is void
Leading Case: C. Srinavas v. Raja Rama Mohana Rao
X granted a loan to the guardian of a minor to
enable him to celebrate the minor’s marriage. It was
held that X could not recover the amount because
the agreement is void because the object (minor’s
marriage) is illegal.
E.g. Agreement for paying money for a government
job

b) If it defeats the provisions of law The agreement is void

Leading Case: Rama Murthi v. Goppayya
X borrowed Rs. 2 Lacs from Y and agreed not to raise
any objection as to the limitation and that Y may
recover the amount even after expiry of limitation
period. This agreement is void because it defeats the
provisions of the Law of Limitation Act.

CIRCUMSTANCES UNDER WHICH THE OBJECT
OR CONSIDERATION IS DEEMED UNLAWFUL

CIRCUMSTANCES EXPLANATION
c) If it is fraudulent It is void if the object of the
agreement is to defraud others.
d) If it involves or implies Leading Case: Clay v. Yates
inquiry to a person or property A contract to publish a libel was
of another. found to be illegal.

e) If the Court regards it as Agreements for immoral
immoral or opposed to Public business, agreements for
Policy divorce
 ILLEGAL AGREEMENTS

ì  Illegal agreements are those agreements, which

are,

q  Void-ab-initio

q  Punishable by the criminal law of the country or

by any special legislation/regulation
 EFEFCT OF ILLEGAL AGREEMENTS
ì  The collateral transactions to an illegal agreement also become illegal and
hence cannot be enforced.

ì  No action can be taken for the recovery of money paid or property

transferred under an illegal agreement and for the breach of an illegal
agreement.

ì  In case of an agreement containing the promise, some part of which is

legal and other part illegal, the legal position is as under:
CASE PROVISION
If the illegal part cannot be separated from The whole agreement is altogether illegal
the legal part
If the illegal part can be separated from The court will enforce the legal part and
the legal part reject the illegal part
 AGREEMENTS OPPOSED TO PUBLIC
POLICY
Following agreements are Void-ab-initio.
ì  Agreements of trading with enemy

ì  Agreement for stifling prosecution

ì  Agreement of sale/transfer of public offices and lands

ì  Agreements in restraint of parental rights

ì  Agreements in restrain of personal liberty

ì  Agreement tending to create monopoly

ì  Agreement interfering with course of justice

ì  Agreement in restraint of marriage, trade and legal proceedings

VOID AGREEMENTS & CONTINGENT ì
CONTRACTS
 VOID AGREEMENTS

ì  A void agreement is an agreement which is not enforceable by law .

These are Void-ab-initio. These include;
1.  Agreements by or with persons incompetent to contract (s.10&11)

2.  Agreement, the object or consideration of which is unlawful (s.23)

3.  Agreement entered through a mutual mistake of fact between the

parties (s.20)

4.  Agreement, the consideration or object of which is partly unlawful (s.24)

5.  Agreement made without consideration (s.25)

6.  Agreements in restraint of marriage and trade (s.26 & 27)

 VOID AGREEMENTS

7.  Wagering agreement (s.30)

8.  Impossible agreement (s.56)

9.  An agreement to enter an agreement in the future

 AGREEMENT IN RESTRAINT OF
MARRIAGE
ì  Every agreement in restraint of marriage of any
person other than minor is void.

ì  Leading Case: Lowe v. Peers

A promised to marry B only and none else, and to pay

Rs.10000 in default. A married C and B sued a for
recovery of Rs. 10000. It was held that B could not
recover anything because the agreement was in
restraint of marriage.

 AGREEMENTS IN RESTRAINT OF TRADE
Onus of Proof
Where an agreement is challenged on the ground of it being in restraint of trade, the party
supporting the contract must show that the restraint is reasonably necessary to protect his
interests, and the party challenging the contract must show that the restraint is injurious to the
public.

Meaning of expression ‘That extent’

The expression ‘that extent’ may be interpreted in the sense that only that portion of such
agreement is void which considered either unreasonable or opposed to public policy being in
restraint of trade. The rest of the agreement would continue to be valid.

Leading Case: Madhub Chandar v. Raj Coomar

X and Y carried on business in a certain locality in Calcutta. X promised to stop business in that
locality if Y paid him Rs.1000. X stopped his business but Y did not pay him the promised money.
Held, X could not recover anything from Y because the agreement was in restraint of trade and
was thus void.

AGREEMENTS IN RESTRAINT OF LEGAL
PROCEEDINGS
ì  Agreement restricting enforcement of
rights
ì  Agreements limiting the period of
limitation
 UNCERTAIN AGREEMENTS

ì  An uncertain agreement means the meaning of which is

uncertain or capable of being made uncertain.

ì  Leading Case: Pushpabala v. LIC of India: X agreed to

pay Rs. 10,000 when he was able to pay. Held, the
agreement was void for uncertainty.

ì  Leading Case: Huthing v. Lynn: X agreed to buy a horse

from Y for Rs. 1000 and to pay Rs.100 if the horse
proved lucky. Held, the agreement was void because
there was no mechanism to determine what luck, bad or
good, the horse had brought to the buyer.
 WAGERING AGREEMENTS
Meaning of Wagering Agreements (S.30)

•  An agreement between two persons under which money or money’s worth is payable, by
one person to another on the happening or non-happening of a future uncertain event is
called a wagering agreement.
•  Such agreements are chance oriented and therefore, completely uncertain
•  E.g. X promises to pay Rs.1000 to Y if it rained on a particular day, and Y promises to pay Rs.
1000 if it did not.

Essentials of a Wagering Agreement

•  Promise to pay money or money’s worth
•  Mutual chances of gain or loss
•  Uncertain event
•  Neither party to have control over the event
•  No other interest in event except for the sum and stake involved

 EXAMPLES OF WAGERING
AGREEMENTS
EXAMPLES

•  An agreement to settle difference between the contract price and market price of
certain goods or shares on a particular day
•  A lottery. Government approved lottery is valid.
•  An agreement to buy a lottery ticket

EXAMPLES WHICH ARE NOT WAGERS

•  Prize competitions which are games of skill, KBC, Crossword puzzle etc
•  Contract of insurance


EFFECTS OF WAGERING AGREEMENT

ì  They are void agreements.

ì  No suit can be filed to recover the amount won any

wager.

 RESTITUTION

ì  It means return or restoration of benefit. (S.64 &

65)

ì  When a contract is voidable, contract becomes void

or agreement is discovered to be void.

ì  The principle doesn’t apply to contract which are

void-ab-initio with the exception of minor where
the minor has entered agreement by
misrepresenting his age.

 CONTINGENT CONTRACT

MEANING (S.31)

It is a contract to do or not to do something if some event,
collateral to such contract, does or does not happen.

E.g. Insurance contract.

ESSENTIAL FEATURES

•  Dependence on a future event.

•  Collateral event

•  Uncertain event
 RULES REGARDING CONTINGENT
CONTRACTS (S.32-36)
KIND OF CONTINGENT CONTRACT RULE OF ENFOREMENT
Contract upon the happening of an Such contracts can’t be enforced by unless
uncertain event and until that event has happened. If the
event becomes impossible, such contracts
become void.
Contracts contingent upon the non- Such contracts can be enforced when the
happening of a certain future event. happening of that event becomes
impossible and not before.
Contracts contingent upon the future
conduct of a living person.
Contracts contingent upon happening of
an uncertain specified event within a fixed
time.

RULES REGARDING CONTINGENT
CONTRACTS
KIND OF CONTINGENT CONTRACT RULE OF ENFOREMENT

Contracts contingent upon the
non-happening of an uncertain
specified event within a fixed time
Agreements contingent upon Always void
impossible events
 WAGERING AGREEMENT V.
CONTINGENT CONTRACT
BASIS OF DISTINCTION WAGERING AGREEMENT CONTINGENT CONTRACT

Reciprocal promises It consists of reciprocal It may or may not consist of

promises. reciprocal promises.

Void/valid Void Valid

Main/collateral future Future event is essential to the Future event is collateral to

event agreement. the contract.

Nature Always of a contingent nature. It may not be of a wagering

nature.

Interest of parties The parties have no other The parties may have other
interest in the subject matter of interests as well.
the agreement except winning
or losing of wagering amount.
 ì
PERFORMANCE OF A CONTRACT
PERFORMANCE OF A CONTRACT

ì  One of the various modes of discharge of contract

ì  A contract is said to be performed when the parties

to a contract either perform or offer to perform
their respective promises.

ì  “The parties to contract must either perform or

offer to perform their respective promises, unless
such performance is dispensed with or excused
under the provisions of this Act, or of any other
law.” (S.37)
 TYPES OF PERFORMANCES
Actual Performance

Where a promisor has made an offer of performance to the promisee and the
offer has been accepted by the promisee.

E.g. X contracted to deliver 100 Kg potatoes to Y at his warehouse. X delivers the
same at the appointed place in the business hour and Y took the delivery.

Attempted Performance/ Tender of Performance

Where a promisor has made an offer of performance to the promisee and the
offer has not been accepted by the promisee.

E.g. In the aforesaid example, Y refused to take the delivery of goods. It is a case of
attempted performance because X has done what he was required to do under
the contract.
 EFFECTS OF TENDER

ì  The promisor is not responsible for non-

performance.
ì  The promisor does not lose his rights under
the contract
 TYPES OF TENDER
TYPE OF TENDER MEANING EFFECTS
Tender of goods or services Where the promisor offers •  Goods or services need
to deliver the goods or not be offered again.
services but the promisee •  Promisor may sue the
refuses to accept the promisee for non
delivery. performance
•  Promisor is discharged
from liability.

Tender of money Where the promisor offers •  Promisor is not

to pay the amount but the discharged from his
promisee refuses to accept liability to pay the
the same amount.
•  Promisor will not be
liable for interest from
the date of a valid tender
ESSENTIALS OF A VALID TENDER

ì  Unconditional

ì  At proper time

ì  At proper place

ì  Reasonable opportunity to promisee

ì  For whole obligation

ì  To proper person

ì  Of exact amount and in legal tender

EFFECT OF REFUSAL OF PARTY TO
PERFORM WHOLLY
ì  When a party to a contract has refused to perform
or disabled himself from perfomring his promise in
its entirety, the promisee may put an end to the
contract, unless he has signified, by words, or
conduct, his consent in its continuance.
 PERSONS WHO CAN DEMAND
PERFORMANCE
ì  Promisee

ì  Legal Representatives

ì  Third Party: E.g beneficiary in a trust

ì  Joint promisee
PERSONS WHO MUST PERFORM

ì  Promisor

ì  Promisor’s Agent

ì  Legal Representatives: Unless a contrary intention

appears or contract is of a personal nature

ì  Third party: by the consent of promisee

ì  Joint Promisors
 TIME AND PLACE OF PERFORMANCE
CASE RULE
Where the time for performance is not The contract must be performed within a
specified in a contract and the promisor has reasonable time. The question ‘What is
undertaken to perform without application reasonable time’ is a question of fact.
by the promisee.

Where the time for performance is The promisor must perform his promise on
specified in a contract and the promisor has that particular day during the usual hours of
undertaken to perform to perform it business and at a place where the promise
without application by the promisee. ought to be performed.

Where the time for performance is The promisee must apply for performance at
specified in contract and the promisor has a proper place and within usual business
not undertaken to perform it without hours.
application by the promisee.
TIME AND PLACE OF PERFORMANCE

CASE RULE
Where the place for performance The promisor must apply to the
is not specified in a contract and promisee to appoint a reasonable
the promise is to be performed place for the performance and to
without application by the perform at such places.
promisee
Where the promisee prescribes the The promise must be performed in
manner or time for performance the manner and at the specified
time.
TIME AS ESSENCE OF CONTRACT

ì  In the following cases, time is considered essence

of contract;
q  Where the parties have expressly agreed to treat
the time as the essence of contract;
q  Where the non-performance at the specified time
operates as an injury to the party
q  Where the nature and necessity of the contract
requires the performance of the contract within
the specified time.
 THANK YOU!

ANY QUESTIONS ?

You can find me at [email protected]