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It is the policy of the law to encourage the formation of contracts between competent
parties for lawful objectives. As a general rule, contracts by competent persons equitably
made are valid and enforceable. Parties to a contract are bound by the terms to which
they have agreed, usually even if the contact appears to be improvident or a bad bargain,
as long as it did not result from fraud or under influence.
The binding force of a contract is based on the fact that it evinces a meeting of minds of
two parties in good faith. A contract once formed, does not contemplate a right of a party
to reject it. Contracts that were mutually entered into between parties with the capacity to
contract are binding obligations and may not be set aside due to the caprice of one party
or the other unless state provides to the contrary.
Contracts can be either void or voidable. A void contract imposes no legal rights or
obligation upon the parties and is not enforceable by a court. It is in effect no contract at
all.
A void contract is a contract which is not enforceable in the court of law. At the time of
formation of the contract, the contract is valid as it fulfills all the necessary conditions
required to constitute a valid contract, i.e. free consent, capacity, consideration, a lawful
object, etc. But due to a subsequent change in any law or impossibility of an act, which
are beyond the imagination and control of the parties to the contract, the contract cannot
be performed, and hence, it becomes void. Further, no party cannot sue the other party for
the non-performance of the contract.
The contract becomes void due to the change in any law or any government policy. Along
with that, the contracts which are opposed to public policy also ceases its enforceability.
Contracts with incompetent persons are also declared void like minor, persons of unsound
mind, alien enemy or convict. Example of void contract is Nash Vs Inman. In this case A
is a tailor and B is a minor and under graduate. In England Court is necessary to graduate
and luxury to undergraduate. By means of that Contract B gets 11 coats from A on Credit
basis. Thereafter B gets failed in the graduation examination and doesn't pay amount to it.
A file was suit. Court decides that coat is not necessary and hence the Contract is Void.
Voidable Contract is the contract which can be enforceable only at the option of one of
the two parties to the contract. In this type of contract, one party is legally authorized to
make a decision to perform or not to perform his part. The aggrieved party is independent
to choose the action. The right may arise because the consent of the concerned party is
influenced by coercion, undue influence, fraud or misrepresentation.
The contract becomes valid until the aggrieved party does not cancel it. Moreover, the
party aggrieved party has the right to claim damages from the other party.
When a contract is voidable, a party to the contract is able to cancel or revoke the
contract.
Contracts can become voidable due to:
Mistake. A contract can be canceled on the grounds of a mutual mistake of fact. But
remember, failure to read the contract doesn't make a contract voidable.
Lack of capacity. A person must have the legal ability to form a contract in the first place.
A person who is unable, due to intoxication or mental impairment, to understand what she
is doing when she signs a contract may lack capacity to enter into a contract.
Coercion, undue influence, misrepresentation and fraud. Getting consent for a contract in
a number of shady ways can make a contract voidable. Contracts entered into based on
coercion, threats, false statements, or improper persuasion can be voided by the party
who was the victim of the unfairness.
Minor. Falling under the umbrella of capacity, a contract entered into by a minor typically
may be voided by the minor or by his or her guardian. After reaching the age of majority
(18 in most states), however, if he or she doesn't cancel the contract within a reasonable
period of time, the contract can become binding and enforceable.
In order to form a contract agreement that is enforceable by law, the following six
elements must be fulfilled:
(1) Coercion, or
(2) Undue influence, or
(3) Fraud, or
(4) Mis-representation, or
(5) Mistake.
An agreement should be made by the free consent of the parties.
6. Lawful Object. The object of an agreement must be valid. Object has
nothing to do with consideration. It means the purpose or design of the
contract. Thus, when one hires a house for use as a gambling house, the
object of the contract is to run a gambling house.
The Object is said to be unlawful if(a) it is forbidden by law;
(b) it is of such nature that if permitted it would defeat the provision of any
law;
(c) it is fraudulent;
(d) it involves an injury to the person or property of any other;
(e) the court regards it as immoral or opposed to public policy.
7. Certainity of Meaning. According to Section 29,"Agreement the
meaning of which is not Certain or capable of being made certain are
void."
8. Possibility of Performance. If the act is impossible in itself, physically
or legally, if cannot be enforced at law. For example, Mr. A agrees with B to
discover treasure by magic. Such Agreements is not enforceable.
9. Not Declared to be void or Illegal. The agreement though satisfying all
the conditions for a valid contract must not have been expressly declared
void by any law in force in the country. Agreements mentioned in Section
24 to 30 of the Act have been expressly declared to be void for example
agreements in restraint of trade, marriage, legal proceedings etc.
10. Legal Formalities. An oral Contract is a perfectly valid contract,
expect in those cases where writing, registration etc. is required by some
statute. In India writing is required in cases of sale, mortgage, lease and
gift of immovable property, negotiable instruments; memorandum and
articles of association of a company, etc. Registration is required in cases
of documents coming within the scope of section 17 of the Registration
Act.
All the elements mentioned above must be in order to make a valid
contract. If any one of them is absent the agreement does not become a
contract.
http://www.lawhandbook.org.au/07_01_02_elements_of_a_contract/
http://www.lawteacher.net/free-law-essays/contract-law/malaysian-contract-lawessay.php
http://www.slideshare.net/phlegmaticraj/free-consent-12606991
https://sol.du.ac.in/mod/book/view.php?id=644&chapterid=365
Coercion
Undue Influence
Fraud
Misrepresentation and
Mistake