By Siddharth Dey
In the previous article, we were discussing how a contract is formed. We saw that it starts out with a proposal and a promise, which are supported by a consideration. Together, these make up an agreement.
We noted that an agreement, despite looking almost similar to the naked eye, is quite different from a contract.
Sections 2(g) and 2(h) of the Indian Contract Act, 1872 not only give us valuable information on the law regarding agreements, but also the foundation of the difference mentioned earlier.
Section 2(g) says, “An agreement not enforceable by law is said to be void”.
Section 2(h) says, “An agreement enforceable by law is a contract”.
According to these two clauses, (g) & (h), Agreements can either be:
1. Enforceable by law, or;
Only those agreements which are enforceable by law are called contracts.
Thus, all contracts are agreements; but not all agreements are contracts. Some of them are ‘void’.
What is ‘enforceable by law’ and what is ‘void’?
When you approach the court to seek an order making the other party to the contract fulfill its obligations, it is said that you are enforcing the contract. Enforcement by an authority means to compel a person under its authority to do a certain thing.
It goes without saying that the courts can only enforce what is in accordance with the law or is permitted by the law, even when it comes to Contracts. The Indian Contract Act is the law which will normally apply in such a case.
As already said above, agreements which are not enforceable by law will be void.
Why are such agreements not enforceable by law?
This is because the term ‘agreement’ has a very ordinary usage, i.e., every Tom, Dick, and Harry enters into an agreement, every second of every minute. Therefore, if the Act allowed all of them to be enforceable by the courts, then even the most trivial of matters would have to be decided upon by the Courts!
The word ‘void’ in this context means ‘void ab initio’ or “void from the beginning”. Under the Indian Contract Act, this means that the such an agreement was void or invalid under the Act, from the very moment it was formed.
Void agreements are not necessarily illegal. Such agreements are simply unfit to be recognized as ‘contracts’ under the Act.
You will notice that agreements which are not enforceable by law do not cease to be enforceable in other ways – when your mother asked you to finish homework, you’d either do that or risk the consequences!
Since the Act only deals with contracts, it is neither concerned with such agreements or the ways in which they can be enforced.
So, what makes some agreements void, and others, contracts?
Legal validity or legal intention of the parties
This can be taken straight from the definition of a contract under Section 2 (h) – agreements which can be enforceable by law (contracts) are legally valid. Why? That’s because, logically speaking, a court cannot enforce something which has no legal validity! Those two go hand in hand.
Additionally, an agreement which a court cannot enforce is void.
To understand why such a distinction is made, let’s take an example. If you and your friend decide to go to a movie, you buy two tickets, and your friend doesn’t show up, that’s an agreement which is not legally valid.
It might seem obvious already, but firstly, the court will not bother itself with something as trivial & harmless as this (as already said before). This follows the general principle of law “de minimis non curat lex” which means that the “law does not concern itself with trifles”.
Secondly, in no way did your friend have in mind that you will drag him to court over this issue. The court will point out that there was an absence of what we term as the intention to create legal relations.
Since a contract has lawful or legal validity, both parties must intend or have the willingness to create legal relations between themselves – such an intention will legally bind the parties to the contract. If they do not perform it, then the court can enforce the contract against them.
Your friend would not even dream of looking inside a courtroom in this case! The contract between you and your friend maybe morally or socially binding at best, but not legally. The agreement does not cease to be void in those ways, but only legally.
However, if you are a sweets manufacturer, and place an order with the supplier for 100 kilos of sugar to be delivered on a particular date, you can enforce the agreement in the court if the sugar is not delivered by that date.
N.B. A contract can never be void ab initio. The phrase “void contract” makes little sense since contracts have to be legally enforceable from the moment they are formed, in order to be called “contracts”. That’s why, agreements which are not enforceable by law are called void agreements instead.
Contracts can, however, later become void or invalid, if it is found that certain requirements of contracts were not met, or the parties mutually decide to nullify the contract, etc.