5

The Indian Contract Act, 1872: Void Agreement and Contingent Contract

The legality of the object and consideration is an important requirement for a valid contract. Every agreement of which the object or consideration is unlawful is void.

5.1 WHEN AN OBJECT OR A CONSIDERATION IS UNLAWFUL?—SECTION 23

The object or consideration of an agreement is unlawful in following cases:

5.1.1 If It Is Forbidden (Prohibited) by Law

The agreement is unlawful if it involves doing of an act which is forbidden by any law for the time being in force. An act forbidden by a law is punishable by the criminal law or by a special act. The agreement to give bribe if some work will be performed is unlawful and hence unenforceable.

Example

A sold liquor without license to B. The sale is unlawful as the sale of liquor without license is forbidden by the law, i.e. The Excise Act. Hence, A cannot recover the price.

5.1.2 An Act Which Would Defeat the Provisions of Any Law

The agreement is unlawful if it is of such a nature that if permitted, it would defeat the provisions of any law.

Example

A and B agreed to carry on business in partnership with a view to evading of Income Tax and Sales Tax. One of the partners brought an action against the other for recovery of the amount due to him. Held, the agreement aimed at defeating the provisions of Tax laws and therefore, the same was not enforceable.

5.1.3 If It Creates Injury to Any Person or Property of Person

The agreement if it is made for creating an injury to a person or to the property of a person is unlawful. The agreement with such an object or consideration is void.

Example

A agrees to blast a bomb at railway station for ₹ 10,000.

5.1.4 Object or Consideration of an Agreement Is Fraudulent

The agreement is unlawful if it is made to make a fraud on any person. The agreement with such an object or consideration is void.

Example

A, B and C enter into an agreement for the division of gains acquired or to be acquired by them by fraud. The agreement is void as its object is unlawful.

5.1.5 Where Court Consider It As Immoral or Against Public Policy

The agreement is unlawful if the court considers that the object or consideration of such agreement is immoral or against public policy.

5.2 AN AGREEMENT OPPOSED TO PUBLIC POLICY

No person is allowed to act in such a way which is injurious to the public. Therefore, any agreement against the public policy or public welfare is unlawful and void. There is no definition of the public or public policy. If the court holds a consideration or an object as against the public policy, such agreement will be void. Following agreements have been treated as against ‘public policy’ through the various court judgments.

5.2.1 Trading with an Enemy

The agreement to trade or deal with the enemy of the nation is against the public policy as it would give benefit to the enemy and create a danger or threat to the public.

5.2.2 Agreement to Commit Crime

The agreement to commit any kind of crime is against the public policy as public or any part of the public will have damage or loss. The court will not enforce this kind of agreements.

Example

A promises to pay ₹ 10,000 in consideration of his killing C.

5.2.3 Agreement Interfering Course of Justice

The agreement interfering with the course of justice is opposed to the public policy. Every person has the fundamental right to get justice. Creating hurdles in the process of justice, to manipulate with the witness, are considered as interfering course of justice. However, a compromise and a settlement in a civil case is not regarded as interference with the course of justice. Similarly, an agreement to refer to present or future disputes to arbitration is also not void.

5.2.4 Agreement Interfering Admistration

The agreement interfering with the administration or administrative duties is opposed to public policy.

5.2.5 Stifling Prosecution

The agreement for stifling prosecution means to release any criminal or drop any prosecution against any person unreasonably. Public interest requires that criminals should be prosecuted and punished. The agreement to stifle is void.

Example

Promise to restore the stolen property if prosecution is dropped. It is void.

5.2.6 Maintenance Agreement

It is promotion of litigation in which one has no interest but gives money to another to assist in the matter of litigation. However, if the object is to help a needy person to establish his claim or recover damage, it is a valid agreement. In the same manner, helping relatives or friends or guidance by lawyer to his client will not be considered as the maintenance agreement.

Example

A unduly induces B to file a suit against C and A promises B to give ₹ 5000 to maintain in the suit although he has no legal interest in the suit. The agreement between A and B is maintenance agreement and is void.

5.2.7 Champerty Agreement

It is the agreement where one party agrees to assist the other in receiving property with an object of sharing the profit out of litigation. This is a sort of gambling on litigation, and treated as against public policy, the champerty agreement is void.

Example

A agrees to advance ₹ 40,000 to B to enable him to file a suit against D for recovery of his property. B in turn agrees to give one-third share in the property, if recovered. This is a champertous agreement.

5.2.8 Agreement in Restraint of Legal Proceeding

The agreement which curtails or restrains the legal proceeding is void. It is explained in detail in the later part.

5.2.9 Agreement in Restraint of Parental Rights

Parents are natural guardians of the child. They have the rights and duties of guardianship. Any agreement which takes away the right of a guardian for a child is void.

Example

A father having two minor sons agreed to transfer their guardianship in favour of B and agreed not to revoke it. Subsequently, he filed suit for the recovery of boys and the declaration that he was the rightful guardian. Held, that he had the right to revoke his authority and get back the children.

5.2.10 Agreement in Restraint of Personal Freedom

Every person has the right of personal freedom with reference to speech, expression and behaviour. If any agreement takes away the freedom of a person then such agreement is against the public policy and void.

Example

A, debtor, promised with a money lender B that he will not change his residence or his employment or dispose off his property without B’s consent. Held, the agreement was void on the ground of public policy.

5.2.11 Agreement in Restraint of Marriage

Every person has the right to marry a person of his/her choice. Therefore, any agreement which restrains a major person from marriage is void. But an agreement in restraint of marriage of the minor is valid—Section 26.

The agreement in restraint of marriage is void if the restraint is complete or partial. The agreement which prevents a person from marrying a particular person is partial restrain, and thus void. If a person agrees not to marry any person, it is said as complete restraint and it is also void. Every major person has the right to marry a person of his/her choice.

Example

Amar promised to marry no one else except Ms. Bina and in default pay her a sum of ₹ 1,00,000. Amar married some one else and Bina sued Amar for the recovery of the sum. Held, the agreement was in restraint of marriage and as such void.

5.2.12 Marriage Brokerage

It is the agreement whereby one person receives money or money’s worth, in consideration of the negotiating marriage. Such kind of an agreement is against the public policy, and hence void. But marriage will not be void.

5.2.13 Agreements for Sale of Public Offices and Titles

It is also known as trafficking public office. An agreement of trafficking (i.e. to buy, sell, or procure) in public office or title is against the public policy. Hence, such an agreement is unlawful and void. Following agreements have been held to be against the public policy, since they are tantamount to the sale of public offices.

1. An agreement to provide money to a Member of Parliament or Assembly or Minister to influence his opinion and judgment.
2. An agreement intended to induce a public officer to act corruptly.
3. An agreement to procure a public title like ‘Bharat Ratna’ and ‘Padma Vibhushan’ for reward.
4. An agreement for procuring votes in election for consideration.
5. An agreement to sell seat in a medical or an engineering college (except payment seat).

An agreement to create monopolies or eliminate or reduce competition is void on the ground of public policy.

5.3 AGREEMENTS IN RESTRAINT OF TRADE—SECTION 27

Every person has the right to carry on any trade, profession occupation or business activities so far as it is lawful and allowed by law. An agreement which is restrained from doing lawful profession, trade or business of any kind is void to that extent.

5.3.1 Exceptions to the Rule

In the following cases, restraints are considered valid:

1. When the goodwill of the business is sold, the seller may be restrained from carrying on a similar business within specified local limit. But when the seller of the goodwill of a business agrees not to carry on a similar business, the limits and conditions imposed have to be reasonable having regard to the nature of business.
2. The partners’ agreement—restraint on the partner of a firm from carrying on any business is allowed under the Partnership Act. Reasonable restriction can be placed on the outgoing partner by way of agreement.
3. The service agreement may restrain the employees from working elsewhere during the period of employment. But any agreement which prohibits a person not to engage anywhere else, after he has left the employment is not valid.
4. The sole selling agreements are held valid by court.
5. The agreement between the members of a trade union.
6. Regulation, as to the opening and closing of business in the market, licensing of traders, supervision and control of deals are not void. A joint venture agreement, entered into by two companies or two persons are valid as it is not an agreement in restraint of trade. It is the agreement to work and carry on the business with the joint effort.
7. The law relating to the copyright, trade mark, design and patent permit restrictions while entering into the agreement to protect the intellectual property right.

5.4 AGREEMENT IN RESTRAINT OF LEGAL PROCEEDINGS—SECTION 28

It means any agreement, which stops a person from taking a legal action or enforcing his right under any contract. It also includes any agreement which reduces the time for taking the legal action. It is void. But an agreement between the two persons to refer to any dispute to arbitration is not void.

Examples

1. An employee agreed with his employer not to sue for his wrongful dismissal. Held, the agreement was in restraint of legal proceedings and void.
2. A clause in an agreement between the parties provided that all the disputes shall be subject to Mumbai Jurisdiction only. A party filed a suit at Varanasi. The suit was dismissed. The Supreme Court of India held the agreement was not opposed to public policy and therefore, the suit filed at Varanasi was rightly dismissed.

5.5 AGREEMENTS UNLAWFUL IN PARTS

5.5.1 Where Lawful Part Can Be Separated from the Unlawful Part

If a part of the consideration or the object which is unlawful can be separated from the other lawful part, the court will enforce that part which is lawful.

Example

A promises B to maintain accounts of his legal and illegal businesses or a total monthly remuneration of ₹ 3000, being ₹ 1000 for the legal, and ₹ 2000 for illegal business. Here, both the parts of consideration are separable, hence the former is enforceable where as the later is not.

5.5.2 Where Lawful and Unlawful Parts Cannot Be Separated

Where the lawful and unlawful parts of consideration or object cannot be separated, the whole agreement is void.

Example

A promises to superintend on behalf of B, a legal manufacture of Indigo, and an illegal traffic in the other articles. B promises to pay to A, a salary of ₹ 10,000 a year. The agreement is void, the object of A’s promise, the consideration for B’s promise, being in part unlawful but the two cannot be separated.

5.5.3 Reciprocal Promise to Do Things Legal and Also Other Things Illegal

Where persons reciprocally promise, firstly to do certain things which are legal and secondly, under specified circumstances, to do certain other things which are illegal, the first set of promises is a contract but the second is a void agreement.

Example

A and B agree that A shall sell B a house for ₹ 10,000 but that, if B uses it as a gambling house, he shall pay A ₹ 50,000 for it. The first set of reciprocal promises, namely to sell the house and to pay ₹ 10,000 for it, is a contract. The second set is for an unlawful object, namely that B may use the house as a gambling house, and is a void agreement.

5.5.4 Alternative Promise, One Branch Being Illegal

In the case of an alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced.

Example

A and B agree that A shall pay B ₹ 1000 for which B shall afterwards deliver to A either rice or smuggled opium. This is a valid contract to deliver rice and a void agreement as to the opium.

5.6 WAGERING AGREEMENT—SECTION 30

‘A wagering agreement is a promise to give money or money’s worth upon the determination of an uncertain event’—Sir William Anson’. Wager means gambling or betting.

An agreement between two persons is the wagering agreement, if money or money’s worth is payable by one person to another on the happening or non-happening of an uncertain event.

The agreement to pay a prize of ₹ 500 or more to the winner of horse race is also the wagering agreement. It means if the agreement is to pay or the award prize money is less than ₹ 500, it is not wagering agreement. The lottery conducted by the state government is not illegal but the wager and therefore the claim to recover the winning money is not maintainable.

Example

X agrees to pay Y ₹ 500 if it does not rain on 15 August 2011. Y promises to pay ₹ 500 to X if it rains on 15 August 2011.

5.7 ESSENTIALS OF WAGERING AGREEMENT

A wagering agreement has the following features:

5.7.1 Promise to Pay Money or Money’s Worth

There must be a promise to pay money or money’s worth. If the agreement between a party is without a promise to pay money, it is not a wagering agreement. There must be an intention to play a gamble on the part of both the parties. If the intention is only on part of one person, it is not a wagering agreement.

5.7.2 Performance Depend Upon Event

The performance of a promise must depend upon the determination of an uncertain event. An event, on which the performance of a promise is depending, could be related to the past or future. It might have already happened but the parties are not aware about it.

5.7.3 Change of Win or Loss

There must be a chance of win or lose. If both the parties win, or if both the parties lose, it is not a wagering agreement. One party has to win and one party has to lose.

5.7.4 No Interest or Control Over an Event

Neither party should have any control or interest over an event other than the sum or stake he will win or lose. Insurance is not a wagering agreement because the person who obtains insurance has interest in his life or goods covered under the insurance.

If any party can control the event, then the event cannot be considered as uncertain. If any activity where the party can exercise his skill, it is controllable and hence cannot be said as the wagering agreement.

Example

A lottery is a wagering agreement. Therefore, an agreement to buy and sell lottery tickets is a wagering agreement. Section 294 (A) of the Indian Penal Code declares that drawing of lottery is an offence. However, the government may authorize the lotteries. The persons authorized to conduct lotteries are exempt from the punishment. But the lotteries still remain a wagering transaction.

It may be noted that as per the Prize Competition Act, 1955, the prize competitions in the games of skill are enforceable, if the amount of prize does not exceed ₹ 1000.

Examples

1. Crossword competition with entry fees

   Crossword competition involving skill for its solution. If skill plays an important role in the result of a competition, and prizes depend upon the result, the competition is not a lottery and wager. The literary competitions involve applications of skill, and prizes are awarded to the participants on the basis of merit of their solutions, and not on chance. Therefore, such competitions are valid and are not wagers. However, if the crossword puzzle prizes depend upon sameness of the competitor’s solution with a previously prepared solution kept with the organizer or newspaper editor is a lottery and, therefore, a wagering transaction.

2. Share market transaction

   A commercial transaction is done with an intention of the delivery of goods (commodity or security) and the payment of price. Therefore, it is not a wagering agreement. However, when any transaction in any commodity or in shares, with an intention of paying or getting the difference in price, the agreement is a wager.

3. Athletic competitions

   The athletic competitions also fall in the category of games of skill. Therefore, these are also not wagers.

4. A tells B that Wrestler No. 1 will win. B challenges the statement of A. They bet with each other over the result. It is not a wagering agreement, as here the money or money’s worth is not involved.

5. A and B, two wrestlers, agreed to enter into a wrestling contest in Ahmedabad, on a certain day. They further agreed that a party failing to appear on the fixed day was to forfeit ₹ 500 and the winning party will receive a sum of ₹ 1000. Held, it was not a wagering agreement.

5.8 EFFECTS OF WAGERING AGREEMENT

A wagering agreement is void but not illegal. No suit can be filled for any recovery of the amount won on any wager. However, any agreement collateral to the wagering agreement is valid.

However, the wagering agreement is illegal in the state of Maharashtra and Gujarat.

5.9 DISTINGUISH BETWEEN A WAGERING AGREEMENT AND AN INSURANCE CONTRACT

Matter	Wagering Agreement	Insurance Contract
Meaning	If money or money’s worth is payable by one person to another person, on the happening or non-happening of an uncertain event.	It is a contract to compensate the loss.
Legal effect	It is a void contract and not enforceable.	It is a valid contract and can be enforced.
Insurable interest	No party has any insurable interest.	Insurable interest in the property insured.
Amount payable	In a wagering agreement, the amount to be payable is fixed.	The amount to be payable depends upon the loss, and the terms and conditions of the insurance.
Premium	It is not based upon scientific calculation.	It is based upon scientific calculation.
Purpose	The purpose of a wagering agreement is to make profit.	The purpose of an insurance is not to make profit but to safeguard the loss.
Public interest	A wagering agreement is not in public interest.	An insurance is beneficial to public.

5.10 DISTINGUISH BETWEEN A WAGERING AGREEMENT AND A CONTINGENT CONTRACT

Basis	Wagering Agreement	Contingent Contract
Meaning	If money or money’s worth is payable by one person to another person, on the happening or non-happening of an uncertain event. The party may win or lose, depending upon an uncertain event.	The performance of a contract depends upon the future uncertain event, collateral to the main contract.
Nature of uncertain event	The uncertain event may be past or future.	An uncertain event must be related to future.
Legal effect	A wagering agreement is void.	The contingent contract is valid.
Example	Betting on a cricket match.	An insurance contract.

5.11 ILLEGAL AGREEMENT

An agreement which is prohibited by law is an illegal agreement.

Example

Agreement to commit crime.

5.11.1 Effects of Illegal Agreement

1. The illegal agreement is always void. It is void ab initio. It is to be noted here that all void agreements may not be illegal.
2. Any collateral transaction to the illegal agreement is also void.
3. No action is allowed on the illegal agreement. No action or complaint can be made by any party for breach of the illegal agreement by the other party. If a complaint is made for the illegal agreement, the court will not help any party.
4. No restitution can be granted by the court in the illegal agreement.

Example

If Raja pays ₹ 50,000 to Prem to beat Tarun. The money cannot be recovered if Prem does not beat Tarun.

5.12 CONTINGENT CONTRACT—SECTION 31

A contract may be absolute or contingent. The contract is said to be absolute when the promisor binds himself to the performance in any event. While a contingent contract is the contract to do or not to do something, if some event collateral to such contract does or does not happen.

The contingent contract is defined as the contract in which the promisor undertakes to perform the contract upon the happening or non-happening of a specified future uncertain event, which is collateral to the contract.

The contingent contract contains a conditional promise. The contract of insurance, contract of guarantee and contract of indemnity are good examples of the contingent contract.

Examples

1. A contracts to pay B ₹ 10,000 if B’s house is burnt.
2. A agrees to sell 20 computers to B for ₹ 20 lakhs if the ship fetching them reaches safely. The contrast is contingent on happening of the event.

5.13 ESSENTIAL FEATURES OF CONTINGENT CONTRACT

The essential features of a contingent contract are as under:

5.13.1 Event in Future

The performance of the contingent contract depends upon the happening or non-happening of some future events. The liability to perform a promise in the case of contingent contract depends upon the happening or non-happening of an event. This event is specified and agreed in advance by the party at the time of entering into a contract.

5.13.2 Event Must Be Uncertain

The contingent contract is based upon the uncertainty of an event. If the event has already taken place, it is not uncertain. In the same way, if the event is bound to happen or impossible then it is not uncertain.

5.13.3 Event Must Be Collateral

Example

A agrees to deliver 100 TV sets and B agrees to pay the price only after the delivery. These are reciprocal promises. It is not a contingent contract because the event on which B’s promise depends is a part of the promise or consideration of the contract, and not a collateral event.

5.13.4 Event Must Not Depend Upon Act of Party

The contingent contract is a contract to do or not to do something. The contingent event or act must not be the mere will of the promisor. It must not rest upon the pleasure and sweet will of the promisor. However, if the event is within the promisor’s will or control, (not merely at will) it may be a contingent contract.

Example

A agrees to do some work for B if he would feel pleasure in doing so. It is not a contract at all.

5.14 RULES REGARDING ENFORCEMENT OF CONTINGENT CONTRACT

A contingent contract is perfectly valid and can be enforced by the parties on the happening or non-happening of an uncertain event, as the case may be. The rules regarding the enforcement of the contingent contract contained under Sections 32–36 of the Indian Contract Act, which may be discussed as under:

5.14.1 Contingent Contract Dependent on the Happening of Future Uncertain Event

The contingent contract dependent on the happening of a future uncertain event can be enforced only when that uncertain event has happened. However, if the event becomes impossible then such a contract becomes void and cannot be enforced.

Examples

1. A makes a contract with B to sell a horse to B at a specified price, if C, to whom the horse has been offered, refuses to buy him. The contract cannot be enforced by law, unless and until C refuses to buy the horse.
2. A contracts to pay B a sum of money when B marries C. C dies without being married to B. The contract becomes void.

5.14.2 Contingent Contract Dependent on the Non-happening of Future Uncertain Event

The contingent contract dependent on the non-happening of a future uncertain event can be enforced only when that uncertain event becomes impossible as then that event cannot happen.

Example

A agrees to pay B a sum of money if a certain ship does not return. This ship is sunk. The contract can be enforced when the ship sinks.

5.14.3 Contingent Contract Dependent on Happening of Specified Uncertain Event Within Fixed Time

The contingent contract dependent on the happening of a specified uncertain event within a fixed time can be enforced if that event happened within a fixed time. It means if the event does not take place or does not happen within a fixed time or if it becomes impossible then such a contract become void and cannot be enforced.

5.14.4 Contingent Contract Dependent on Non-happening of Specified Uncertain Event Within Fixed Time

The contingent contract dependent on the non-happening of a specified uncertain event within a fixed time can be enforced, if that event does not happen within a fixed time or if it becomes certain that such event will not happen.

Examples

1. A promises to pay B a sum of money if a certain ship returns within a year. The contract may be enforced if the ship returns within the year and becomes void if the ship is burnt within the year.
2. A promises to pay B a sum of money if a certain ship does not return within a year. The contract may be enforced if the ship does not return within the year or is burnt within the year.

5.14.5 Contingent Contract Dependent Upon Impossible Events

The contingent contract dependent upon the happening of an impossible event is void and cannot be enforced. The contract is void because it can never be enforced as the impossible event will never happen.

Examples

1. A agrees to pay B ₹ 1000 if two-straight lines should enclose a space. The agreement is void.
2. A agrees to pay B ₹ 1000 if B will marry A’s daughter C. C was dead at the time of the agreement. The agreement is void.

5.15 UNCERTAIN AGREEMENT

It means an agreement meaning of which is not certain or capable of being made certain. An uncertain agreement is void.

Examples

1. A agrees to sell to B ‘a 100 ton of oil’. It is uncertain agreement as it does not specify which type of oil. In market various types of oils are available.
2. A agrees to sell to B ‘all the grain in my granary at Ahmedabad’. There is no uncertainty here to make the agreement void.

5.16 DISTINGUISH BETWEEN A VOID AGREEMENT AND A VOID CONTRACT

Matter	Void Agreement	Void Contract
Meaning	A void agreement is not enforceable by law.	A contract which ceases to be enforceable by law is known as a void contract.
Status at the time of formation	All essentials of the contract are not satisfied in the case of a void agreement.	All the essentials of a contract are satisfied at the time of formation of the contract.
Restitution	A restitution is not allowed in the case of a void agreement.	A restitution is allowed in the case of a void contract.
Legal obligation	A void agreement does not create any legal obligation.	In case of a void contract, the legal obligation created under a contract becomes come to end subsequently.

LIST OF LANDMARK JUDGEMENTS

1. Charles vs Mcdonald (1899)

   The agreement of service by which a person binds himself during the terms of the agreement not to take service with anyone else is valid.

2. Subba Naidu vs Haj Badsha (1902)

   The sole selling agreement or exclusive dealing agreement which restrains to deal with any other product is valid.

3. K. M. Kamath vs K. R. Baliga and Co. (1959)

   The object or consideration of an agreement is unlawful where it is forbidden by law.

4. Baivijli vs Hamda Nagar (1885)

   The object or consideration of an agreement is unlawful, where it is regarded immoral or opposed to the public policy.

5. Venktaramananya vs J. M. Lobo (1953)

   The agreements which adversely affect the normal working of the government officers are void as they are opposed to the public policy.

6. Kalavanguta vs Laxmi Narain (1909)

   The marriage brokerage contract, being against the public policy is void.

7. Lower vs Peers (1918)

   The agreement in restraint of marriage is void.

8. District Board of Jhelum vs Harichand (1934)

   The agreement which creates monopoly is void.

9. Madhub Chander vs Raj Coomar (1874)

   The agreement which restrains a person from carrying an any lawful business is void.

10. Harward vs Miller’s Timber and Trading Company (1917)

    The agreement, which restricts the personal liberty of an individual, is void as being opposed to the public policy.

11. Niranjan Shankar vs Century Spinning and Mfg. Co. (1967)

    The service agreement which restrains an employee from working elsewhere during the period of an employment is valid.

12. Uphill vs Wright (1911)

    The illegal agreement is void and does not confer any right and obligation on the parties.

13. Giddue Narayanish vs Annie Besant (1915)

    The agreement in restraint of parental rights is void.

14. Babalateb vs Rajaram (1931)

    The cross word competition is not a wager since it involves skills.

15. H. Anand Raj vs Govt. of Tamil Nadu (1986)

    The lotteries with prior permission of the government are legal, and it confers right upon the winner of the lottery to receive the prize money.

16. Brij Mohan vs MPSRT Corporation (1987)

    The agreement to transfer the permit against the provisions of a motor vehicle act was held as not enforceable.

TEST YOUR KNOWLEDGE

1. Under what circumstances an object or a consideration of a contract deemed unlawful? Give examples.

   (Ref. Para-5.1)

2. Enumerate the agreements which have been expressly declared void by the Indian Contract Act.

   (Ref. Para-5.1,5.2)

3. Explain in brief-maintenance agreement and champerty agreement.

   (Ref. Para-5.2)

4. Every agreement in restraint of marriage of any person is void. Discuss.

   (Ref. Para-5.2)

5. What do you understand by the term ‘trafficking public office’.

   (Ref. Para-5.2)

6. What is public policy? Write any seven agreements that are considered opposed to public policy?

   (Ref. Para-5.3)

7. Explain the exceptions of an agreement in restraint of trade.

   (Ref. Para-5.3)

8. When is an agreement in restraint of trade valid?

   (Ref. Para-5.3)

9. An agreement in restraint of legal proceedings is altogether void. Comment.

   (Ref. Para-5.4)

10. How will you decide about the enforceability of agreements which are unlawful in parts?

    (Ref. Para-5.5)

11. Write a short note on wagering agreement.

    (Ref. Para-5.6,5.7,5.8)

12. What are the effects of a wagering agreement? Where a wagering agreement is considered illegal?

    (Ref. Para-5.8)

13. Transactions incidental to wagering agreements are not void. Comment.

    (Ref. Para-5.8)

14. Distinguish between a wagering agreement and an insurance contract.

    (Ref. Para-5.9)

15. Wagering agreements do not cover insurance contracts. Comment.

    (Ref. Para-5.9)

16. What is the difference between a wagering agreement and a contingent contract?

    (Ref. Para-5.10)

17. What is an illegal agreement?

    (Ref. Para-5.11)

18. What are the effects of an illegal agreement?

    (Ref. Para-5.11)

19. No action is allowed on an illegal agreement. Comment.

    (Ref. Para-5.11)

20. Collateral transaction to an illegal agreement also becomes illegal. Explain.

    (Ref. Para-5.11)

21. What is a contingent contract? Give suitable example.

    (Ref. Para-5.12)

22. What are the essential elements of a contingent contract?

    (Ref. Para-5.13)

23. What are the rules regarding the enforcement of a contingent contract.

    (Ref. Para-5.14)

24. Write a short note on an uncertain agreement.

    (Ref. Para-5.15)

25. An uncertain agreement is neither valid nor void. Comment.

    (Ref. Para-5.15)

MULTIPLE-CHOICE QUESTIONS

1. Consideration and object of an agreement is unlawful if it
   1. is forbidden by law.
   2. would defeat the provisions of any law.
   3. either (i) or (ii).
   4. neither (i) nor (ii).
2. Consideration and object of an agreement is unlawful if it
   1. would defeat the provisions of any law.
   2. creates injury to the person
   3. is fraudulent.
   4. all of the above.
3. Which of the following is incorrect?
   1. An agreement to create monopoly is void.
   2. An agreement to defraud others is unlawful.
   3. Both of the above.
   4. None of the above.
4. Consideration and object of an agreement is unlawful if it
   1. is fraudulent.
   2. is possible.
   3. is impossible.
   4. all of the above.
5. A, B and C enter into an agreement for sharing the money obtained by fraud. This agreement is
   1. valid.
   2. wagering.
   3. void.
   4. voidable.
6. Which of the following agreements are valid?
   1. Uncertain agreements.
   2. Wagering agreements.
   3. Agreements to do impossible events.
   4. None of the above.
7. Which of the following agreements are void?
   1. Agreements to do impossible acts.
   2. Illegal agreements.
   3. Both (i) or (ii).
   4. Neither (i) nor (ii).
8. The agreement to create monopoly is
   1. valid.
   2. void.
   3. illegal.
   4. wagering.
9. In which of the following agreements, restraint of trade is valid?
   1. Agreement with buyer of goodwill.
   2. Trade combinations not opposed to public policy.
   3. Partnership agreements.
   4. All of the above.
10. Trade combination agreements like opening and closing of business ventures, licensing of traders, supervision and control of dealers are
    1. void.
    2. valid.
    3. voidable.
    4. immoral.
11. When two companies enter into a joint venture agreement, the agreement is
    1. opposed to public policy.
    2. void.
    3. either (i) or (ii).
    4. neither (i) nor (ii).
12. A service agreement where an employee agrees that he will not service anybody else during service period is a
    1. valid agreement.
    2. void agreement.
    3. illegal agreement.
    4. unlawful agreement.
13. An agreement with the employees to serve the organization for a few years after training is
    1. voidable.
    2. void.
    3. unenforceable.
    4. valid.
14. An agreement not to enforce any legal remedy or enforce the right is
    1. valid.
    2. void.
    3. voidable.
    4. unenforceable.
15. An agreement between two parties to refer to arbitration for any dispute between them is valid
    1. if any party wishes so.
    2. if it is in writing.
    3. either (i) or (ii).
    4. neither (i) nor (ii).
16. An agreement is void, if the meaning of such agreement is
    1. not certain.
    2. not capable of being made certain.
    3. either (i) or (ii).
    4. neither (i) nor (ii).
17. A promised to pay an extra ₹ 5000 to B if the horse he purchased from B proved to be lucky. The promise is
    1. valid.
    2. void.
    3. voidable.
    4. enforceable.
18. All illegal agreements are
    1. void ab initio.
    2. valid.
    3. voidable.
    4. enforceable.
19. All void agreements are always
    1. illegal.
    2. valid.
    3. enforceable.
    4. none of the above.
20. A void agreement is
    1. not punishable.
    2. punishable.
    3. prohibited.
    4. illegal.
21. Which of the following is not a feature of a wagering agreement?
    1. Chances of gain or loss.
    2. Uncertainty of future event.
    3. Neither party have control over future event.
    4. Neither parties should have an interest in the event.
22. An athletic competitions are valid because they are
    1. games of skill.
    2. just games.
    3. game of luck.
    4. all of the above.
23. Any agreements to solve picture puzzles are
    1. wagering agreements.
    2. not wagering agreements.
    3. void agreements.
    4. voidable agreements.
24. Which of these are not opposed to public policy?
    1. Trading with enemy.
    2. Stifling prosecution.
    3. Compromise of compoundable offences.
    4. Agreement to commit a crime.
25. Which of these are opposed to public policy?
    1. Restraint of marriage.
    2. Restraint of personal freedom.
    3. Interference with course of justice.
    4. All of the above.
26. Marriage brokerage contracts are
    1. enforceable.
    2. valid.
    3. void.
    4. voidable.
27. An agreement intended to defraud income tax authorities is
    1. contrary to public policy.
    2. void.
    3. both (i) and (ii).
    4. neither (i) nor (ii).
28. An agreement to remain unmarried is
    1. valid.
    2. void.
    3. voidable.
    4. enforceable.
29. A contigent contract is
    1. illegal.
    2. not contract at all.
    3. wagering in nature.
    4. none of the above.
30. A contract based on the happening or non-happening of a future event is called
    1. a wagering contract.
    2. uncertain agreement.
    3. a contingent contract.
    4. voidable contract.
31. Which of the following is a contingent contract?
    1. Contract of insurance.
    2. Contract for doing impossible acts.
    3. Marriage contract.
    4. Wagering agreements.
32. If A promises to pay B ₹ 10,000 if he so chooses, it is a contingent contract.
    1. True
    2. Partly true
    3. False
    4. None of the above
33. A agrees to pay B ₹ 50,000 if a titanic ship does not return. The ship is sunk. The contract can be enforced
    1. when the ship sinks.
    2. before the ship sinks.
    3. when the ship returns.
    4. when ship does not start its journey.
34. The performance of contingent contract depends upon.
    1. Main event.
    2. Collateral event.
    3. Both (i) and (ii).
    4. Either (i) or (ii).
35. An agreement is said to be opposed to public policy when it
    1. against the welfare of the society.
    2. prejudical to the public interest or public policy.
    3. either(i) and (ii).
    4. is against provision of any law.
36. A agrees to pay ₹ 30,000 to B, a rival shopkeeper, if he closes his business in A’s locality only. This agreement is
    1. valid.
    2. voidable.
    3. void.
    4. none of the above.
37. A partner of a firm, so long as he is partner, can be restrained from carrying on
    1. any business.
    2. similar business.
    3. both of the above.
    4. none of the above.
38. A promises to pay ₹ 500 to B if it rains on the first Monday of the next. It is a
    1. wagering agreement.
    2. contingent contract.
    3. void contract.
    4. voidable contract.
39. A agrees to pay ₹ 5000 to B, if B’s car is burnt. It is
    1. void.
    2. voidable contract.
    3. wagering agreement.
    4. contingent contract.
40. B agrees to sell to A ‘1 kg of gram at a price to be fixed by C’.
    1. the agreement is valid.
    2. the agreement is void.
    3. the agreement is voidable.
    4. the agreement is illegal.

ANSWER KEYS

1. iii
2. iv
3. iii
4. i
5. iii
6. iv
7. iii
8. ii
9. iv
10. ii
11. iv
12. i
13. iv
14. ii
15. ii
16. iii
17. ii
18. i
19. iv
20. i
21. iv
22. i
23. ii
24. iii
25. iv
26. iii
27. iii
28. ii
29. iv
30. iii
31. i
32. iii
33. i
34. ii
35. iii
36. iii
37. iii
38. ii
39. iv
40. i