VOID, ILLEGAL AND UNENFORCEABLE CONTRACTS

The spirit of law especially in contracts is to protect the disadvantageous who have been induced to enter into unfair contracts by the advantageous one who seek to benefit from such kinds of contract, and this may largely explain as to why whether be it illegal or void contract will not be enforced before the court of law. This work therefore seek to highlight the main principles regarding the illegal, void and unenforceable contract while confining the discussion to the spirit of the Law in protecting the innocent party to contracts.

Principles relating to Void, Illegal and unenforceable agreements

All agreements may  not  be enforceable at law. Only  those agreements which fulfill the essentials  laid  down in Section 10 of Law of Contract Act , can be enforced.

Void Agreemen

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The Contract Act specifically declares certain agreements to be void. According to  section 2 (1) (g) , an agreement not enforceable by  law is void. Such an agreement does not  give rise  to any  legal consequences and thus void ab initio.

Contract Expressly declared void under the law of Contract Act

The law of Contract Act, declare certain transaction to be void and therefore such agreement cannot be enforced with the intention to protect the innocent party and not benefiting the advantageous ones and this includes the followings:-

Agreement by a minor or a person of unsound mind interms of Section 11, agreement of which  the consideration  or  object is  unlawful interms of Section 23,  Agreement  made  under  a  bilateral  mistake of fact material to the agreement interms of section 20, Agreement of which the  consideration  or  object is  unlawful  in  part and the  illegal  part  can  not be  separated  from  the  legal  part as per Section 24,  Agreement  made without consideration as per Section 25 of the Law of Contract Act .

Also it includes, Agreement in  restraint of  marriage as per Section 26, Agreement in restrain  of  trade as per Section 27, Agreement in  restrain  of  legal  proceedings as per Section 28, Agreements  the  meaning  of  which  is uncertain as per Section 29, Agreements  by way of wager interms of section 30, Agreements contingent on impossible events as per Section 36 and Agreements to do  impossible acts as per Section 56 of the Law of Contract Act .

Some discussion on void agreement and its relating principles

Agreement by a Minor

A person who  has  not the age of majority signifies  as minor. Law acts as  the guardian of  minors  and protects their  rights, because their mental facilities are not mature and thus they do not posses the capacity of  judge what is good and what is bad for them. Accordingly, where is a minor charged with obligations and the  other contracting party seeks to enforce those  obligations  against  the minor, the agreement is deemed  as void .  

In the case of Nash v. Inman , the defendant was an infant college student. Before proceeding to college, his father bought him all the necessary clothing material. However, while in college, he bought additional clothing material from the plaintiff but did not pay for them and was sued. His father gave evidence that he had bought him all the necessary clothing material. The court held that, though the clothes were suitable to the minor’s condition in life, these goods were not necessaries because the minor was well provided with clothes by his rich father.

Agreement by a person of unsound mind

A person who  does not  possess a sound mind or whose mental  powers are  not arranged or  whose mental condition is not  under his  or  her own control. Any agreement by person of  unsound mind is absolutely void because he has  no capacity to  judge, what is good  and  what  is  bad  for  him .

In Imperial Loan Co. Ltd v Stone , the defendant was sued on a promissory note he had signed. He argued that at the time, he was insane and therefore incapable of comprehending the nature or effects of his acts and that he was not liable on the promissory note as the contract was void by reason of insanity. In the words of Lopes L.J. “In order to avoid a fair contract on the ground of insanity, the mental capacity of the one contracting must be known to the other contracting party.

Agreement Made Without Consideration

Within the meaning of Section 25 of the Law of Contract Act , An  agreement  made  without consideration  is  void,  It  is  expressed  in  writing  and  registered  under  the  law  for  the  time  being enforce  for  the  registration  of  (documents),  and  is  made  on  account  of natural  love  and  affection  between  parties  standing  in  a  near  relation  to each  other. This is reflected in the case of Alfi East African v Themi Industries and Distributors Agency Ltd , where the sale of machinery was not supported by a consideration that in price in contracts of sales, therefore the contract was held to be void as an essential element of a contract of sale that is price which is the consideration for a contract was not stated.

Generally, the underlying principle as far as void contract are concerned is that, such contracts will not be enforced as the law acts as  the guardian of those who are disadvantageous and thus protects their rights against those with dirty minds who seek benefit under void contract.

Illegal Agreements

A contract is illegal when it contains unlawful object and consideration and therefore such contract is unenforceable as it is a contrary to the law or public policy. The provision of section 23 of Law of contact Act , declare an agreement with unlawful object and consideration null and void and hence from its very beginning or from its inception was not a contract.

Some discussion on illegal contract and its relating principles

An illegal contract is un-enforceable. This is because for an agreement to be enforceable, it must have been entered into for a lawful purpose. A contract may be declared, illegal by statutes or a court of law . 

Contracts declared illegal by Statutes

Under the employment Act, wages or salaries are payable in money or money’s worth. A contact to pay wages or salary in kind is illegal and void. Such a contract is said to be illegal as formed and is unenforceable. Land laws of particular countries restrict on sale or lease of land to a foreigner, Restriction put by trade laws, no license no trade.  

Contracts declared illegal by courts of law 

A contract to commit a crime, tort or fraud. 

Such a contract is illegal and unenforceable as it is a contrary to public policy to commit crimes, torts or fraud in Bigos v. Boustead , where the object of the contract was to violate the English Exchange control regulations; it was held that the contract was illegal and unenforceable.

Contracts liable to promote corruption in public. 

Such a contract is unenforceable as corruption is contrary to public policy. In Parkinson v. College of Ambulance and Another , the secretary of a charitable organization informed that plaintiff that it was on to it. The plaintiff gave ₤3,000 but was not knighted as only the King could bestow the title. In an action to recover the sum, it was held that it was irrecoverable as the contract was illegal.

Contracts liable to promote sexual immorality. 

These are contracts contra bonos mores (contrary to good morals). Such a contract is unenforceable on account of illegality. The contract may be illegal as performed. In Pearce v. Brooks , the plaintiff owned a beautiful horse drawn carriage which he tent to the defendant for 12 months at stated charges. The plaintiff knew that the defendant was a prostitute and intended to use the carriage to solicit influential customers. In an action to enforce payment of the hiring charges, it was held that that contract was unenforceable as it was illegal as performed as its purpose was to promote sexual immorality.

Generally in this aspect also the court will not enforce the illegal contract with the view of protecting the innocent party and that’s why an illegal contract is said to be beyond the pale of the law and thus such a contract is unenforceable as  it creates no rights and imposes no obligations on the parties. Neither party is bound to perform. Money or assets changing hands under an illegal contract is irrecoverable as gains and losses remain where they have fallen .

Unenforceable agreements

This includes all agreements that basically has not fulfilled some legal obligations or formalities that is the suffer some technical defects like insufficient stamp, lack of signature just to mention a few .

Section 64 of the Land Act , requires the disposition of a right of occupancy be in writing and being signed short of that the agreement becomes unenforceable. The section reads “ A contract for the disposition of a  right of occupancy or any derivative right in it or a mortgage is enforceable in a  proceeding  only if– (a) the contract  is in writing (b) or there is a  written memorandum of its terms; the contract  or the written memorandum is signed by the party against whom the contract  is sought to  be enforced”.

CONCLUSION

Generally, a contract lacking some of legal formalities like a signature will not be enforced and the same extends to both void and illegal contract, and this reflect the intention of the Law to protect the disadvantageous one as the contract might be induced by either fraud or misrepresentation and hence enforcing it will generally be a detriment to the innocent party and a blessing to the advantageous one.