UNIT 6 VOID AGREEMENTS AND

CONTINGENT CONTRACTS
Structure
Objectives
Introduction
Void Agreements
6.2.1 Agreements in Restraint of Marriage
6.2.2 Agreements in Restraint of Trade
6.2.3 Agreements in Restraint of Legal Proceedings
6.2.4 Uncertain Agreements
6.2.5 Wagering Agreements
6.2.6 Agreements to do Impossible Acts
6.2.7 Restitution
Contingent Contracts
6.3.1 What is a Contingent Contract?
6.3.2 Rules Regarding Enforcement of Contingent Contracts
6.3.3 Difference Between a Corrtingent Contract and a Wagering Agreement
Let Us Sum Up
Key Words
Answers to Check Your Progress
Terminal Questions

6.0 OBJECTIVES
After studying this unit, you should be.able to:
describe and, identify agreements which are void-ab-initio o r become void
subsequently
explain the status of agreements in restraint of marriage, trade and legal
proceedings
o describe uncertain agreements and state whether such agreements shall be valid or
not
define wagering agreements, state their legal status and distinguish between such
agreements and other similar contracts
state the effect of 'impossibility' on contracts and their legal status.

6.1 INTRODUCTION

You have already learnt about the term 'void agreement'. In this unit you will study
about the various agreements which have been specifically declared void and the
agreements which (on the face of it) appear to be void but are not treated as such.
This unit also includes detailed discussion on contingent contracts.

6.2 VOID AGREEMENTS

Section 2(g) of the Indian Contract Act defined a void agreement as, "an agreement
not enforceable by law". Some agreements are void-ab-initio which means that they
are unenforceable right from the time they are made. For example, you learnt that
a n agreement with a minor or a person of unsound mind is void-ab-initio. Such a n
agreement does not become a contract at all. There may, however, be some
agreement which, when made, are enforceable (i.e., they are contracts) but later, due
to development of certain circumstances or change in circumstances, the contracts
becomes unenforceable. When they become unenforceable they are called 'void
contracts'. For example, A agrees to sell B a ship load of sugar on its way from Cuba ,
to India. Due t o heavy storm, the sea water enters the ship and the whole sugar gets I
wet. This makes the contract void as A cannot compel B to accept wet sugar in ). oid Agreements and
Contingent Agreements
place of sugar saying it is the same sugar, only its form having changed. So also B
cannot insist A to deliver him the agreed sugar or else pay damages. Then, there are
certain agreements which have been expressly declared void under certain provisions
of the contract Act or any other law.
The following types of agreements have expressly been declared void under various
sections of the Indian Contract Act.
1 Agreements by or with persons incompetent to contract (sections 10 & 11).
2 Agreements entered into through a mutual mistake of fact between the parties
(section 20).
3 Agreement, the object or consideration of which is u~llawful(section 23).
4 Agreement, the consideration or object of which is partly unlawful (section 24).
5 Agreement made without consideration (section 25).
6 ~ ~ r ' e e m e nint s restraint of marriage (section 26).
7 Agreements in restraint of trade (section 27).
8 Agreements in restraint of legal proceedings (section 29).
9 , Wagering agreement (section 30).
10 Impossible agreement (sectio'i 56).
11 An agreement to enter into an agreement in the future.
In Units 3 t o 5 you have already read about agreements in items I to 5 listed above.
Wd shall, now study the rest of the 'void agreements' i.e., items 6 to 12,

6.2.1 Agreements in Restraint of Marriage

According to section 26 of the Indian Contract Act, every agreement in restraifit of
the marriage o j a n y berson, other than a minor, is void. The restraint may be general
or partial. Thus the party may be restrained from marrying at all, or from marrying
for a fixed period, or from marrying a particular person,or a class of persons. For
example, A promised to marry none else except B, and in default pay her a sum of
Rs. 2,000. A married some one else and B sued A for recovery of Rs. 2,000. Held, the
agreement was in restraint of marriage and a s such void (Lowe v. Peers).
However, a penalty upon remarriage may not be construed as a restraint of
marriage. Thus, an agreement between two co-widows that if 'one of them remarried
she should forfeit her right to her share in the deceased husband's property, has been
upheld (Rao Rani v. Culab Rani). Similarly, a provision in Nikah Nama (marriage
,agreement) by which a Muslim husband authorises his wife to divorce herself from
him in the event of his remarrying a second wife is not void. Thus, if the wife .
divorces herself from the husband on his marrying a second wife, the divorce shall be
valid, and she will be entitled to maintenance fiom him (Badu v. Badarannessa).

6.2.2 Agreements in Restraint of Trade

Freedom of trade and commerce is a fundamental right protected by Article 19(g) of
the Constitution of India, Just as the Legislature cannot take away individual
freedom of trade, so also the individual cannot barter it away by an agreement. As
Per Justice James, V.C., "public policy requires that every man shall be at liberty to
work for himself, and shall not be at liberty to deprive himself or the state of his
labour, skill or talent, by any contract that he enters into". Courts, therefore, do not
allow any tendency to impose restrictions upon the liberty of an individual to carry
qn any business, profession or trade.
In India, the law on the subject is contained in section 27 which reads: Every
agreement by which any one is restrained from exercising's lawful profession, trade
or business of any kind, is to that extent void. Thus, all agreements in restraint of
trade, whether general or partial, qualified oc unqualified, are void.
 Ccnerat Law of Contracts 11 Examplcs
1 I n Patna city 29 out of 30 manufacturers of combs agreed with R to supply him
combs and not to any one else. Under the agreement R was free to reject
the goods if he found there was no market for them. Held, the agreement
amounted to restraint of trade arid was thus void (Sheikh Kalu v. Ramasaran
Bhugat).
2 J, an employee of a company, agreed not to employ himself in a similar business
withi11 a distance of 800 miles from Madras after leaving the company's service.
Held, the agreement was void (Oakes & CO. v. Jackson).
3 A and B carried on business of braziers in a certain locality in Calcutta. A
promised to stop business in that locality if B paid him Rs. 900 which he had
paid to his workmen as advance. A stopped his business but B did not pay him
the promised money. Held, the agreement was void and, therefore, nothing could
he recovered on it. (Madhab v. Raj Coomar).

Exceptions
There are two exceptions to this rule: 1) those created by statutes, and
2) those arising from judicial interpretations of section 27.

Statutory Exceptions : Following are the exceptions created by the statutes :

1 Sale of Goodwill: The seller of goodwill of a business may agree with the buyer
thereof not to carry on a similar business within specified local limits. Such a
restraint shall be valid, if limits are reasonable (section 27). Please note that the
reasonableness of restrictions will depend upon many factors, such as the area in
which the goodwill is effectively enjoyed, the price paid for it and above all, the
nature of the business. For example, a seller of immitation jewellery in England,
sold his business to B and promised that for a period of two years he would not
deal (a) in immitation jewellery in England (b) in real jewellery in certain foreign
countries. The first promise alone was held lawful. The second promise is void
and the restraint was unreasonable in point of space and nature of business
(Goldsoll V. Goldairn).
2 Certain restraints in partnership: There are four provisions under th
e
Partnership Act which recognise agreements in restraint of trade as valid.
Accordingly, partners may agree that:
a) A partner shall not carry on any business other than that of the firm while
he is a partner [section 1l(2) of the Indian Partnership Act, 19321.
b) A partner on ceasing ta be a partner will not carry on any business similar
to that of the firm within a specified period or within specified local limits.
The agreement shall be valid only if the restrictions are reasonable [section
36(2) of the Indian Partnership Act, 19321.
c) Partners may, upon or in anticipation of the dissolution of the firm, make
an agreement that some or all of them will not carry on a business similar
to that of the firm within a specified period or within specified local limits.
Such an agreement shall be valid provided the restrictions imposed are
I
.reasonable (section 54 of the Indian Parthership Act, 1932).
d) A partner may, upon the sale of the goodwill of,a firm, make an agreement
that such partner will not carry on any.business similar to that of the firm
,
within a specified period or within specified local limits. Any such
agreement shall be valid if the restrictions imposed are reasonable [section
55(3) of the Indian Partnership Act, 19321.
Exceptions
Under Judicial Interpretations : Following are the exceptions arising under Judicial
interpretation of section 27 of Indian Contract Act.
1 Trade Combinations: Business combinations with the idea of regulating business
and not restraining it have been held to be desirable in public interest. Restraints
imposed by such associations are, therefore, not to be declared void on grounds
of restraint of trade. I n the case of Haribhai v. Sharef Ali, four ginning factories
entered into an agreement fixing uniform rate for ginning cotton and pooling
 their earnings to be divided between them in certain proportions. The Bombay Void Agrccments and
High Court held the agreement to be valid and enforceable. Bur the Courts Contingent A greementr
would not allow a restraint to be imposed disguised as trade regulations. Thus,
*
an agreement between certain persons to carry on business with the members of
their caste only (Vaithelinga v. Saminada), and an agreement to restrict the
business of sugar mill within a zone allotted to it, have been held void (Carew &
Co. Ltd. v. North Bengal Sugar Mills).
2 Exclusive Dealing Agreements: Reasonable agreements to cileal in the products of
a single manufacturer or to sell the whole produce to a single dealer have been
upheld to be valid and not in restraint of trade. Thus, the followi~lgagreements
were upheld as enforceable:
i) An agreement by a manufacturer of dhotis to supply 1,36,000 pairs of
certain description to the defendent and not to sell goods of that kind 10
any other person for a fixed period (Carliles Nephew & Co. v. Ricknauth
Buckte mull).
ii) An agreement by a person to sell all the salt manufactured by hiin to a
firm for five years (Mackenzie v. Srira~niah).
iii) An agreement by a person to sell all the mica produced by him to the
, plaintiffs, and not to any other firm nor to keep any in stock (Subha Nuidu
I v. Haji Badshah Sahb). b

1I iv) An agreement by a buyer of goods for Calcutta Market, not to sell them in
~idras.
However, where a manufacturer or supplier, after meeting all the
4
~ requirements of a buyer, has surplus to sell to others, he cannot be
restrained from doing so (Shaikh Kialu v. Ram Saran Bhagnt). Similarly,
' I
exclusive dealing agreements shall not be valid if their terms are
r'1 unreasonable or they unreasonably check competition (Esso Petroleum Co.
v. Harper's Garage Ltd.).
I
3 Service Agreements: An agreement of service by which a person binds himself
7

I during the term of the agreement not to take service with anyone else or, directly

j or indirectly, take part in or promote or aid any business in direct competitio~~

with that of his employcr is valid (Charles Worth v. Macdonnld). For example, A
agreed to become assistant for three years to B who was a doctor practising at
,
Zanzibar. It was agreed that during the term of the agreement A was no1 to
; practise on his own account in Zanzibar. After one year, A started his own
practice. Held, the agreement was valid and A could be restrained by an
, injunction from doing so,

These days it is a common practice to appoint trainees. A service bond is normally

got signed whereby the trainee agrees to serve the organisation for a stipulated
period. Such agreements, if reasonable, do not amount to restraint of trade and
hence are enforceable. But an agreement to restrain an employee from competing with
, his employer after the termination of his employment may not be allowed by the
courts. Thus, in the case of Brahamputra Tea Co, v. E. Scarth, where an attcmpt
was made to restrain a servant from competing for 5 years after the period of
service, the court disallowed it,
Check Your Progress A
1 Are the following agreements valid?
a) A sells the goodwill of his business in South Delhi to B and agrees with
him not to carry on a similar business within the boundaries of South
Delhi.

b) X,'an optical surgeon, employs Y as his assistant for a term of 3 years and
y agrees not to practise as a surgeon during this period.
General I.nw of Contracts 11 A, a shopkeeper of Hauz Khas Market, agrees to pay B, his rival in
c)
business, a sum of money as compensation if B closes his business there.

2 N sold his business and goodwill by an agreement. The agreement provided that
the company: (i) not to practise the same trade for 25 years, and (ii) not to
engage in any business competing or liable to compete in any way with the
husiness that the company may engage itself in.

3 A and B were rival shopkeepers in the same locality. A agreed to pay B a certain
sum of money : C B closes his business in that locality. B accordingly did so, but
A refused to pay. Can B claim the promised amount.

.............................................................................................................................
4 A, a doctor in Madras, employed another doctor B, as an assistant for a period
of three years on a salary of Rs. 1,000 per month. The agreement between A and
B provided that after termination of his employment B shall not practise as a
doctor in Madras within a radius of one mile of A's dispensary for a period of
one year, and if R did so, B should pay Rs. 10,000 to A as liquidated damages.
Immediately after the termination of his employment B begins t o practise as a
doctor next door to A's dispensary. Shall A succeed if he sue B for the recovery
'of Rs. 10,000?

6.2.3 Agreements in Restraint of Legal Proceedings -.

Section 28 of the Indian Contract Act regards the following two restraints of legal
pioceedings as void.

1. Restriction on Legal Proceedings: An agreement by which a party is restricted

absolutely from enforcing his legal rights under, or in respect o f , any contract by
the usual legal proceedings in the ordinary tribunals. For example, a contract
contains a stipulation that no action should be brought upon it in case of
breach, Such a stipulation would be void because it would restrict both parties
from enforcing their rights under the contract in the ordinary tribunals. But, a
contract whereby it is provided that all disputes arising between the parties
should be referred to the arbitration, whose decision shall be accepted as final
and binding on both parties of the contract, is not invalid. The courts have
power, in spite of such a stipulation, to set aside the decision of the arbitrator on
grounds of misconduct on the part of the arbitrator.

A contract may contain a double stipulation that any dispute between the parties
should be settled by arbitration, and neither party should enforce his rights
under it in a court of law. Such stipulation would be valid as regards its first
branch. (i.e., all disputes between the parties should be referred to arbitration,
because that stipulation itself would not have the effect of oustin8 the
jurisdiction of the courts. But the latter branch of the stipulation (i.e, neither
party should enforce his rights under it in a court of law) would be void
because by that the jurisdiction of the court would be necessarily excluded.
Further, it should be noted that the restriction imposed upon the right to sue
should be absolute in the sense that the parties are precluded from pursuing their
legal remedies in the ordinary tribunals. Thus, where there are two courts, both
 of which have jurisdiction to try a suit, an agreement between the parties that Void Agreements and
Contingent Agreements
the suit should be filed in one of those courts alone and not in the other, does
not contravene the provisions of section 28 (Milton & Co. v. Ojha Automobile
Co.).

2 Limitation of Time: Another type of agreement rendered void by section 28 is

where an attempt is made by the parties to restrict the time within which an
action may be brought so as to make it shorter than that prescribed by the law
of limitation. For example, according to the Indian Limitation Act, an action for
breach of contract may be brought within three years from the date of breach. If
a clause in an agreement provides that no action should be brought after two ,
years, the clause is void.
A clause in a policy of life insurance declaring that "no suit to recover under
this policy shall be brought after one year from the death of the assured" was
held void. However, cases of the above sort are distinguished from those which
provide for surrender or forfeiture of rights if no action is brought within the
stipulated time. A clause in a policy of life insurance provided "if a claim be
made and rejected and an action or suit be not commenced within three months
after such rejection ..., all benefits under the policy shall be forfeited." This clause
was held valid.

6.2.4 Uncertain Agreements

An agreement is called an uncertain agreement when the meaning of that agreement
is not ckrtain or capable of being made certain. Such agreements are declared void
under section 29.
Examples
1 A agrees to sell to B "one hundred tons of oil". The agreement is void for
uncertainty since there is no clearity in the agreement what kind of oil was
intended.
2 A agrees to sell B "my white horse for Rs. 5,000 or Rs. 10,000". There being
J nothing to show which of the two prices was to be given, the agreement is void.

In the case of Guthying v. Lynn, a horse was bought for a certain price coupled with
a promise to give E 5 more if the horse proved lucky. The agreement was held void
for uncertainty. The Court had no machinery to determine wbat luck the horse had
brought to the buyer.
Cases relating to uncertain agreements have generally arisen in connection witli the
sale of goods where uncertainty is related to the price. For example, where goods are
sold, the price being payable subject to 'hire-purchase' terms (Scammell v. Custen) or
at such price as should be agreed upon between the parties (May & Butcher v. The
Kind), the agreement in each case was held void for uncertainty as to price.
However, you should note that where the price is left to be fixed by a third party,
there is no uncertainty and the agreement will be enforceabe. For example, where A
agrees to sell to B one thousand kilograms of rice at a price to be fixed by C , there
is no uncertainty as the price is capable of being made certain. The agreement,
therefore, is not rendered void. Similarly, if the agreement is totally silent as to price,
it will be valid, as in that case, section 2 of the Sale of Goods Act will apply and the
reasonable price shall be payable.

Certain other illustrations where agreements have been declared void for uncertainty :
1 An agreement to grant a lease when no date of commencement is expressly or
impliedly fixed (Giribala Dasi v. Kalidas Bhanga). But when the commencement
of a lease, is dependent upon a contingency, which has occurred, the agreement is
not void (Sitlani v. Viroosing).
2 An agreement to pay a certain amount, after deductions as would be agreed
upon between parties (Kalpana Devara v. Krishna Mitter).
3 A contract to negotiate (Courtney and Fairbaion Ltd. v. Tolani Bors. (Hotels)
Ltd.)
4 A defendant passtd a document to the Apra Savings Bank whereby he promised
 General Law of Contracts 11 to pay to the manager of the bank the sum of Rs. 10 on or before a certain date
and a similar sum monthly every succeeding month. It was held that the
instrument could not be regarded as a promissory note as it was impossible from
its language to say for what period it was to continue and what amount was to
be paid under it (Carter v. Thk Agra Savings Bank).

I Certain illustrations where agreements have been held not to be uncertain:

I A, who is a dealer in coconut oil only, agrees to sell to B "one hundred tons of
oil". The nature of A's trade indicates the meaning of the words, and A has
entered into a contract for the sale of one hundred tons of cocobut oil.
'2 A agrees to sell B "all the grain in my granary at Ramnagar". There is no
uncertainty here to make the agreement void.
3 A agrees to sell B one hundred tons of coconut oil a t a price to be fixed by C,
As the price is capable of being made certain, there is no uncertainty here to
make the agreement void.

I 6.2.5 Wagering Agreements

The Indian Contract Act does not define a wager. A wagering agreement, according
to Sir William Anson, is a promise to give money or money's worth upon the
determination or ascertainrn6nt of an uncertain event. Cockburn C.J. defined it as "a
contract by A to pay money to B on the happening of a given event in consideration
of 9's promise to pay money to A on the event of no happening." Thus, a wagering
: agreement is an agreement 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.
For example, A and B bet a s to whether it would rain on a particular.day or not-A
promising t o pay Rs. 100 to B if it rained, and B promising an equal amount to A, if
it did not. This agreement is a wager.
Essentials of a Wagering Agreement: From the above description of a wagering
agreement, following essentials may be noted.
1 Uncertain event; The first thing essential to wager is that the performance of
the bargain must depend upon the determination of an uncertain event. An event
may be uncertain either because it is yet to take place or it might have'already
happened but the parties are not aware of its result.
2 Mutual chances of gain or loss: The second essential feature is that upon the
determination of the contemplated event each party should stand t o win or lose.
If either of the parties may win but cannot lose, it is not a wagering agreement.
3 Neither party to have control over the event: Neither party should 'have control
over the happening of the eventone way or the other. If one of the parties has
the event in his own hands, the transaction lacks an essential ingredient of a .
wager.
4 No other interest in the event: Further, neither party should have interest in the
happening of the event other than the sum or stake he will win or lose.
5 Promise t o pay money or money's worth: Lastly, to constitute wager, the
promise should be to pay money or money's worth only.

Effects of Wagering Agreement: An agreement by way of wager is void. Section 30

provides: agreements by way of wagcr are void; and no suit shall be brought for
recovering anything alleged to. be won on any wager or entrusted to any person Lo
'abide by the result of any game or other uncertain event on which bny wager is .
#made.Thus, in India, unless the wager amounts to a lottery (it is a crime according
to section 294-A of the Indian Penal Code), it is not illegal but simply void. For
example, A borrows Rs. 500 from B to pay to C, to whom A has lost a bet.
Agreement between A and B is valid. It should be noted that in Maharashtra and
Gujarat they have been declared illegal.
Lotteries: Lottery is an arrangement for the distribution by chance amopg persons
purchasing tickets. The dominant motive of the participants need not be gambling.
Where, however, a wagering transaction amounts to a lottery, it is illegal and comes
24 under section 294-A of the Indian Penal Code. This section reads as follows:
Whoever keeps an)' oJfficeor place.for the purpose of drawing an-p lotter.~~not' Void Agreements and
Cantingerrt Agreements
authorised by Government, slzall be punished with irnpris.vrtnent of eithpr
description for a term whicsh' may extend to six months, o r with flne or with b o ~ h .

And wl?oever published any proposcl to pa-v any surn or lo deliver goods, -or to
do or.forbear doing any-thing for the benefit of an)) person, on any event or
contingency relative or applicable to the drawing of any ticker, lot number offigtrre
in any such lottery, shall be punished with fine wtiich may extend to one thousand
rqpees,
In the case of Universal Mutual Aid and Poor Houses Association v. Thoppa Najdu,
monthly subscriptions were collected to raise a donation fund to carry out charitable
objects. A substantial portion of the interest accruing on the fund s o raised was
utilised in grhnting loans free of interest and cash bonuses to certain subscribers, the
names and amounts to be determined by means of drawings. The court held that the
business carried on by the company was a lottery and, therefore, illegal though there
was a charitable or philanthropic purpose annexed to the lott'ery. The company
was, therefore, o ~ d e r e dto be wound up.
A cycle and gramophone dealer started a chit with 100 subscribers, each subscribing
Rs.: per month, for a period of 20 months. There was t o be a monthly draw in
which the subscriber whose number or name drawn was given a cycle or a
gramophone at his option and relieved from further liability to pay subscriptions. In
the 21st month each of the subscribers who did not draw at any of the previous
.
drawings were given a cycle or gramophone, it was held that the transaction
amounted to a lottery and was, therefore, illegal (Public Prosecutor v. M. Naidu).

Does the permission from the Government to hold lottery make it legal? In the case
of Sir ~ o r a b j Tata
i v. Edward F. Lance, where the Government of India had
sanctioned a lottery called the War Loan Lottery, the plaintiff sued on a contiact to
purchase a ticket bearing a particular number, and for a n injunction restraining the
.Secretary of the Turf Club from proceeding with the drawing. The defence was that,
it being a wagering contract, the suit was not maintainable. The court held that the
permission granted by the Government will not have the effect of overriding section
30 of the Indian Contract Act and making such a lottery legal. Its only effect was
that the person responsible for running the lottery would not be punishable undc:
the'bldian Penal Code.
. .
Is purchasing a lottery ticket an offence? It is not an offence to buy a lottery ticket.
section 294-A of the Indian Penal Code is aimed at promoters of lotteries (Barclay
v. Pearson). In one of the recent judgments, Supreme Court held that sale of a lottery
ticket confers on the purcha'ser thereof two nghts; (a) a right to participate in the
draw, and (b) a right to claim a prize contingent upon his being successful in the
draw (H. Anraj v. Government of Tamil Nadu). Thus this decision of the Supre'me .
Court, by recognising the right of the purchaser of a lottery ticket has reversed' the
earlier outlook on the subject. It may well be said that where a lottery is authorised
by the Government, ii shall not be illegal as was decided in the case of Sir Dorabji
Tata v. Edward F. Lance. Consequently, collateral transactions shall also'be
enforceable. Thus, where A lends Rs. 2,000 to B for purchase of lottery tickets, A
shall be able to recover the same.

Exceptions to Wagering Agreements (Transactions Held 'Not Wagers?: The

following transactions have been held not to becwagers:
1 Transactions for the sale and of stocks and shares or for the sale and
, delivery of goods, with a clear intention to give and take delivery of shares or.
!
goods, as the case may be. You should note- that, where the intehtion is only to
settle'in price differences, the transaction is a wager and hence void.
Prize competitions which are games of skill, e.g., picture puzzles, athletic
competitions, etc. Thus, an agreement to enter 'into a wrestling contest in which
the winner was to be rewarded by the entire sale proceeds of tickets, was held
no+ to be a wagering contract (Babasaheb v. Rajaram). A crossword puzzle in
which prizes depend upon cor1.espondence of the competitor's solution with a
preQiously prepared solution kept with the editor of newspapers is a lottery and
therefore, a wagering trafisaction. According t o Prize Competition Act, L955.
General h w o l Contnctr 11 prize competitions in games of skill are not wagers provided the prize money
does not exceed Rs. 1,000.
3 An agreement to contribute to a plate or prize of the value of above Rs. 500 to
be awarded to the winner of a horse race. (section 30).
4 Contracts of insurance are not wagering agreements even though the payment o
money by the insurer may depend upon a future uncertain event. contracts of
insurance differ from the wagering agreements in the following respects:
a) It is o'nly the person possessing an insurable interest that is permitted to
insure life or property, and not any person, as in the case of a wager.
b) In the case of fire and marine insurance, only the actual loss suffered by
the party is paid by the company and not the full amount for which the
property is insured. Even in the case of life insurance, .the amount payable
is fixed only because of the difficulty in estimating the loss caused by the
death of the assured in terms of money, but the underlying idea is only
indemnification.
C) Contracts of insuranbk are regarded as beneficial to the public and are,
therefore, encouraged. Wagering agreements on the other hand are .
conddered to be against public policy.

6.2.6 Agreements to do Impossible Acts

Section 56 of the Indian Contract Act declares that an agreement to do an act
impossible in itself is void. Thus, where A agrees with B to discover treasure by
magic, the akreement is void. We may say that parties who purport to agree to the
doing of sonlething obviously impossible must be deemed not to be serious or not to
understand *hat they are doing. Moreover, law cannot regard a promise to d o
something ob'biously impossible as of any value and such a promise is, therefore, no
consideration.
An agreement to d o an act impossible in itself should be contrasted from a contract
which becomes impossible of performance. Subsequent impossibility renders a
contract void when the act becomes impossible. Details on subsequent impossibility
and its effect shalll'be discussed in Unit 7.
6.2.7 Restitution
Restitutio~means "return" or "restoration". When an agreement or a contract
becomes void, \he person who has received any benefit or advantage under such
agnement or contract must restore it or compensate for it to the penon from w h o m
he has received it (section 65).

Examples
I A pays B Rs. 1,000 in consideration of 9's promising to marry C, who is A's
dpughter, C is dead a t the time of the promise. The agreement is void. B must
repay Rs. 1,000 ro A.
2 A contracts with B to deliver to him 250 quintals of rice before the first of May.
A delivers 130 quintals only before that day and none after. B retains 130
quintals after the first of May. B is bound to pay A for 130 quintals.
3 A, a singer, contracts with B the manager of a theatre, ro sing at his theatre for
two nights in every week during the next two months and B agrees to pay her a
hundred rupees for each night's performance. On the sixth night, A wilfully
absents herself from the theatre, and B, in consequence rescinds the contract. B
must pay A for the five nights on which she had sung.
4 In the above example, if A receives an advance of Rs. 1,000 and is unable t o sing
due t o illness, A must return the advance. B cannot sue A for the loss he has
suffered due to A's illiiess.
It must be noted thkr toe l a w ol' rezri~utioni!, iipplica'ukc 31-11y PC) those contracts
which become void later on by some event which the promiser could not prevent or
because of supervening impossibility. The principle of restitution does not_apply to
the contracts which are void-ab-initio with the exception where the minor has
entered into agreement by rnjcrepresenting his age.
 -.
.Yoid Agreements and
&ntingent Agreements
I 6.3 CONTINGENT CONTRACTS

, . 6.3.1 What is a Contingent Contract?

A contingent contract is a contract to do or not to do sometl~ingif some event,
collateral to such contract, does or does not happen (section 31). For example, A
* contracts to pay B Rs. 10,000 if B's house is burnt. This is a contingent contract.

The following are the essential features of a contingent contract.

I ?&e performance of a contingent contract is made dependent upon the
happening or non-happening of dome event.
The event on which the performance is made to depend, is an event collateral to
the contract i.e., it does not form part of the reciprocal promises which
constitute the contract. For example, where A agrees to deliver 100 bags of
wheat and B agrees to pay the price only afteryards, the contract is a
conditional contract arid not contingent, because the event on which B's
obligation is made to depend is a part of the promise itself and not a collateral
event. Similarly, where A promises to pay B Rs. 10,000 if he marries C, it is not
a contingent'contract.
3 The contingent event should not be the Inere will of the promisor. For instance,
if A promises to pay B Rs. 1,000 if he so chooses, it is not a contingent contract.
However, where the event is within the promisor's wi!l but not merely his will, it
may be a contingent contract. ,For exarple, if A promises to pay B Rs. 1,000 if
A left Delhi for Bombay, it is a co~~tingentcontract, because going to Bombay is
an event no doubt within A's will, but is not merely his will.

6.3.2 Rules Regarding Enforcement of Contingeit Contracts

The rules regarding contingent contracts are summarised hereunder (sections 32 to 36):

1 Contracts contingent upon the happening of a future uncertain event cannot be

enforced by law unless and until that event has hap'pcned.And if, the event
becomes impossible, such contract becomes void (section 32).

Examples
i) A makes a contract with B t 6 buy B's horse if A survives C. This contract .
cannot be enforced by law unless and until C dies in A's life-time.
ii) A contracts to pay I3 a sum of money.when B marries C. C dies without
being married to B. The contract becomes &id.
2 Contracts contingent upon the non-happening of a certain future event can be
enforced when the happening of that event becomes impossible, and not before
(section 33). F Oexample,
~ A agrees to pay B a sum of money if a certain ship
does not return. The ship is sunk. The contract can be enforced when the ship
sinks.
3 If a contract is contingent upon as to how a person will act at an unspecified
time, the event shall be considered to become impossible when such person does
anything, which renders it impossible that he should so act within any definite
time, or otherwise than under further contingencies. (section 34). For example,
A agrees to pay B a sum of money if B marries C. But C marries D. The marriage
of B to C must now be coi?hidr.red impossible, although it is possible that D may
die and [hat C may afterwards rndrry B.
4 Contracts contingent upon the Ilappening of an uncertain specilied event within a
fixed time become void if, at the expiration of the rime fixed, such event has not
happened or if, before the time fixed, such event becomes impsssible (section 35)
For example, A promises to pay B a sum of money if a certaln ship returns
within a year. The contract may be enforced if :he ship returr~swithin the year,
and becomes void if the ship is burnt within the year.
 General LPWof Contr~acts11 5 Contracts contingent upon the non-happening of a specified event within a fixed
time may be enforced by law when the time fixed .has expired and such event has
not happened, or before the time fixed expired, if it becomes certain that such
event will not happen' (section 35). For example, A promises to pay B a sum of
money if a certain ship d o e s e ~return
t within a year. The contract may be ' .
enforced if the ship does not return-within the year, or is burnt within the year.

6 Contingent agreement to do or not to do anything, if an impossible event

l 1 happens, are void, whether the impossibility of the event is known or not to the
parties to the .agreement at the time when it is made,
*
Examples
i) A agrees to pay B Rs.'1,000 if two parallel straight liaes should enclose a
space. The agreement is void.
ii) A agrees to pay B Rs. 1,000 if B will marry A's daughter C and C was dead
at the t i n e of the agreement. The agreement is void.
4

6.3.3 Difference Between a Contingent Contract and a Wagering

Agreement '
1 A wagering agreement consists of reciprocal promises while a contingent
contract may not consist of reciprocal promises.
2 A wagering agreement is ~f a contingent nature while a contingent contract may
not be of a wagering nature.
3 A wagering agreement is void while a contingent contract is valid.
4 In a wagering agreement parties have no other interest in the subject matter
except for winning or losing of wagering amount while it is not so in contingent
contracts.
5 In a wagering agreement the future event is the sole determining factor whi!e in '

a contingent contract future event is only collateral.

Check Your Progress B
1. Are the following contracts valid and enforceable by law?
a) A contracts to pay B Rs. 10,000 if B's house is burnt.

b) A contracts with B to buy B's horse i f A survives C .

........................................................................................................................
I

c) A ,agrees to pay B Rs, t0,000, if he makes two parallel lines meet.

....................#...........................+......:..............................................................
2 M lost a sum of Rs. 8,500 to 1 & Co. on bets on horsk races and on his failure
to pay was reported to the organising club. M subsequently executed in favaur
of L & Co, a hundi for Rs. 8,500 in consideration of their withdrawing his name
from the club and thereby preventing his being posted as a defaulter. When L &
Co. demanded payment, M pleaded that the consideration was uhlawful. Decide.

6.4 LET US SUM UP

.Void agreements are those agreements which are not enforceable by law. These are
agreements in restraint of marriage, agreements in restraint of trade, agreements in
restraint of legal proceeding, agreements which ate uncertain in their meaning and
wagering agreements. In all the aforesaid cases, law declares such agreements to be
of no legal effect except in certain exceptional circumstances..
I
A wagering agreement is a? agreement to pay rnqney or money's worth o n the Void Agreements and
1 Continent Agreements
rn
happening or non-happening of a specified uncertain event. Wagering agreements are
void in India. However in Maharashtra and Gujarat they are illegal.
1
I
Contingent contracts are a class of conditional contracts. It is a contract to do or
not to do something if some event, collateral to such contract, does or does not
happen.

( The chief characteristic of Contingent Contracts is that their performance depends

i Upon happening or non-happening of certain event in future and such event must be
I uncertain and collateral to the contract.
I

I 1 6.5 KEY WORDS

,I I
~ ~ a i n'public
st Policy : Against the general interest' of the public.
Collatewl Transaction: A transaction which is helping or subsidiary to the main
transaction.
Exclusive Dealing Agreements: An agreement to deal exclusiyely in the products of
1 a single manufacturer or a n agreement to sell the whole to a single dealer.
Insurable Interest: A person is so situated with regard to the thing insured that he
,
I
would have benefit by its existence and loss from its destruction.

. Prima Facie: Latin expression which means 'on the face of iti.
Tribunals: Courts and other judical machinery. \
I , Void-ab-initio: Latin expression which means unenforceable from the beginning.

6.6 ANSWERS TO CHECK YOUR PROGRESS

A 1 a)Yes b) Yes c) No, restraint of trade.
2 The first part of the agreement is valid being reasonal;ly necessary for the
protection of the purchaser's interest. But the second part by which he was
prohibited from competing with the company in any business which the
company might carry on'was unreasonable. and thus void (Nordenfelt v.
Maxim Nordenfelt Gun Co.). ' , t

3 No, the agreement being in restraint of trade is void (Madhab Chander v.

Raj Coomar).
4 A shall not succeed. Any restraint of trade operative after the termination of
employment is bad in law (Oakes & Co. v. Jackson).

B 1 a) Yes. It is a contingent contract

b) Yes. Again it is a contingent contract but can be enforced only if A
survives C.
c) No. Agreement is void (Sections36and Section 56).
2 M shall be liable to .pay the consideration in the form of L & Co's promise
to withdraw. M's name from the club in order to prevent M being posted as a
defaulter was legal. A wagering contract being only void does not affect
collateral transactions. .
(Leicester & Co. v. S.P. Millick)

6-7 TERMINAL QUESTIONS ,

1 "An agreement in restraint' of trade is void''. Examine this statement mentioning

exceptions, if any.
2 is cuss .the law regarding wagering agreements under the Indian Contract Act.
~ e n c iLPW
l of Contrneis II 3 A promises to marry B only and none else and in the event of breach agrees to
pay Rs. 50,000. A marries C, can B claim Rs. 50.000:'
4 What are contingent contracts? State the rules regarding enforcement of such
contracts. Give illustrations.

r
Note : These questions will help you to understand the unit better. Try to write answers -
for them. But do not submit your answers to the university. These are for your practice
only.