 Since we are doing a series on the Indian Contract Act, the facets being understood, Justice Roshan Dalvi has been kind enough to share her insights and knowledge. We are also at sessions with different speakers on this perspective. Since the last session, taking you forward, we had a discussion with Justice Roshan Dalvi. She said that after that speaker session, which we did on the last Sunday, that void-inveritable contract is since so much interval that we should do it very soon. And the passion which I always share, I myself feel that passion, that energy, that night, that matchstick there which Justice Roshan Dalvi has for sharing her knowledge. If each one of us just have it, we will have a much, much brighter future and we are always indebted to Justice Roshan Dalvi for sharing her knowledge. Void-inveritable contracts, we have always read at this time. And what are the distinct wishing factors between them and what is the interplay of the both the sections, both the void-inveritable contracts will be understood today from none other than Justice Roshan Dalvi. I will ask ma'am, share her insights. Okay, good evening Vikas and all my friends. This is a continuation of what we did last time and that was valid contracts. We don't have that concept in the Contract Act but it deals with all the legal and valid contracts. But the Contract Act runs like poetry and in that the second paragraph of the poetry is really void-inveritable contracts because they help us to understand how valid contracts are enforceable at long. So friends, we know that a contract requires free consent. Consent of the parties and that consent must be free. Both the parties must freely form a contract. In fact, it is a basis of democracy in commerce. Now, when that consent is given but it is not free, then what happens the contract becomes voidable at the option of the party whose consent was taken not freely. Okay, so therefore very succinctly what is mentioned in the Contract Act is that free consent, consent is set to be free when it is not caused by five factors. And those are coercion, a new influence, fraud, misrepresentation and mistake. Okay, so each one of this and specially fraud and specially coercion are extremely important to understand in contract law and specially for commercial contracts. So friends, I'll just share my presentation with you in a minute. Now when there is coercion in a contract, coercion is done by one party upon another and what is coercion? It's a kind of threat. It's a kind of duress which comes into the contract and as the contract act says it relates to anything which is forbidden by the Indian Penal Code. So we understand it as something which would be a criminal offense. Maybe say just intimidation, threat, assault or even to tell something, someone about the creation or the commission of an offense under the IPC. This is one part relating to the person and then relating to property which very often we find in commercial contracts is that somebody's property is detained or held up unless a contract is executed. So the poor person executes the contract and then comes to court or comes in our arbitrations and says that I have executed this, I have signed this, but it was under duress and coercion and then that becomes voidable. So friends, those are cases of economic duress and to explain to you the most important and the most frequent of these aspects is in a commercial contract, let us say a construction contract, a big party who has to make payment like a corporation to a contractor who is a small party and something goes wrong of course and maybe the contractor doesn't get all his machines or men or labor power or something goes wrong and he does not get the raw materials or the machines and his contract is not executed as per the terms of the contract. So he delays or he defaults in execution. Now what happens is the corporation cannot wait much longer. So the corporation says that okay, you can go away, we will make payment to you but you go away. If this payment is made fully for all the work that is done, there can be no coercion because then after having paid and the other party not having done any work, the party who makes the payment can call it a day. But if the entire payment is not made and it happens many times in contracts of insurance, when they say that the party has applied for say one lack of rupees, the insurance company says that there are certain defaults, etc., and certain amounts are not payable. Therefore, the insurance company says if you give a receipt in full and final settlement for say 80,000 rupees, then we will pay you 80,000 rupees and otherwise we will not pay you that amount. But this man says, no, I want one lakh rupees. So he has not been fully paid and he executes a receipt in full and final settlement. He thereafter challenges that receipt because it is voidable at his auction because the consent that was obtained for that full settlement was wrong. And therefore a very nice distinction is made and it must be understood. And the test is whether he was paid fully for the work he has done or whether he was paid fully for whatever was the liability of the other side. On that will depend whether there was duress or not. Okay. Now interesting, another aspect is a new influence and we find this quite often in wills, contracts of testamentary dispositions. Under section 16 of the contract act, any person who is in a position to dominate the will of another or who obtains an unfair advantage over another, these are two very good expressions and they will show you when there is a new influence and when there is new influence. New influence is not bad. It is not prohibited under the Indian contract act but under the IPC. Undue influence is bad and therefore it bishops the contract if that person doesn't want it. If that person says that my consent was obtained by undue influence but I want him to now put me in the same position that I was, he would be compensated. Okay. Now what happens is in the case of wills there is a very interesting influence by precedence. Over a period of some 50 years there have been judgments of the court which lay down the parameters of this undue influence. Now let us say a man has got two sons. One son marries and settles abroad or goes out of the house. He doesn't much care for his father but he keeps in touch with his father. The other man remains with the father until the father becomes old and actually cares for the father. Now by doing this he may be exercising some influence over the father because he is a good boy and the father says yes he is a good boy he has done a lot for me, he has cared for me. Now the father gives his property to this son. Okay. This is when the father wants to give the property to his son. So he has exercised influence but not undue influence. But if the father doesn't want to give the son this property, let us say the other son comes into the house and then makes the father make a will because he knows that otherwise he won't get anything. So he exercises undue influence by dominating the father and at that time he obtains an unfair advantage over that father and the father signs the will. This is the will obtained by undue influence. So all the will is wherever there are defenses and wherever they say it was obtained by undue influence because he was staying in my father's house and because he was always there is not undue influence. So that distinction must be very well understood. Then comes the cases of husband and wife. We have realized in many of the cases that there are wives who are not in a position to be able to settle with their husbands when the marriage breaks down specially if the marriage doesn't break down there is no problem much that comes to court at least. So when she applies for maintenance when she says that it is just an equitable to give her maintenance because she has gone out of the house because of various reasons and she gives the reasons the husband is in a position to dominate her and he may not be able he may not be willing to give her the maintenance that she has. It is at that time that the courts determine and determine the maintenance and if the parties actually settle for something which appears to be unconscionable to court the court may refuse to accept it or that party later on can avoid that contract and say I'm still entitled to maintenance. There was one such case before me and which I have written about in my book and it was that the parties agreed and settled that she will be sort of the marriage she will give a divorce to the husband when she receives some 50,000 rupees and I thought that 50,000 rupees is like giving a dog a bone but nevertheless I did not interfere and I said that you have to give it. What I found in the consent terms which were before me was that divorce is granted on the date of the hearing and the husband will pay later after about two months or so so I thought that this appears to be unconscionable this appears to be that the husband is in a position to dominate the wife. Nevertheless I said at least if this matter gets finished and if the wife accepts this 50,000 she can start her life again. I granted the divorce but I kept the matter in my court after the divorce after two months. I wanted to see whether the husband gives or not and sure enough as I had thought the husband did not pay the wife came to my court she was absolutely traumatized she could not even speak because her lawyer had not come the husband said that he will not pay he wants an adjournment because his lawyer has not come in that case I will set aside the degree of divorce and I want the lawyer at that time only and I sent him with my policeman the lawyer came and I said either you pay her now or I am setting aside the divorce so the lawyer said that he will pay and he threw five bundles of 10,000 rupee notes in my court so this was because he could not dominate me but he dominated the wife and he would not have paid if I had allowed it or if I had without thinking granted the adjournment and these are cases which come up for mentors then there are cases of contractors now in this contract system in contracts some commercial contracts there is generally one big corporation and one small man generally and therefore the big company is in a position to dominate the small man and therefore it has been held that when we have got certain contracts which appear to be unconscionable we cannot rewrite any party's contracts but those are I am sorry contracts executed bona fide malefides will misuse everything so if there is something unconscionable then the court will say that we will not enforce it or allow that party to avoid that contract and that has happened in many of the cases in commercial contracts then there are moneylenders cases now these moneylenders are known to of course give some money it may be even by a check but when he gives a check it means that he is going to accept a lot more thereafter by way of interest and if it is not by a check then it is a kind of a presumption a kind of an inkling given to the court and to the other party that the amount which could be written in the promissory note or whatever is the document the bill of exchange executed by a moneylender may contain both the principle and interest these are facts of life and therefore the debtor who has got to pay does not pay anything because it is like bonded labour he has to pay say X amount to 100 rupees but what is written is 150 rupees and it becomes very difficult for him to repay 150 rupees so he doesn't repay at all or he repays 100 and says I won't pay more and then he wants to avoid that contract those are the contracts of undue influence or presumed undue influence then we go to another interesting aspect and of which also there are many cases in court these are relating to fraud fraud means deceit deceit is when one man wants to deceive another party to enter into a contract which he would not have entered into had it not been for that deceit and this is done by two ways what we call suppress your very and suggest your falsely now how is that put in the contract then it is any suggestion of fact which is not true and which he believes not to be true that is one thing and the second is active concealment of a fact having the knowledge and belief that it is there so when a man knows that something is there he wants to sell a house he knows that the roof is leaking but he wants to sell it before the monsoon so that everything is dried up and the roof is leaking is not sure and he doesn't tell the other party that the roof is leaking this is suppress your very and what is suggest your falsely suggest your falsely is to make a make a suggestion so he suggests that when we are getting married we are going to live in a separate residence and he takes his wife to his joint family property and the wife says this was not what was agreed he suggested falsely that I come to your house to meet you but he made me live there and the marriage breaks down now that is when she avoids the contract of marriage so it was avoidable contract by suggest your falsely these are things but then there is one very interesting doctrine fraud which any attempt to deceive which does not deceive is not fraud many of the commercial parties rely on that because they say ok there is an attempt to deceive but they try to show the court that actually he was not deceived entered into the contract nonetheless because of so and so facts ok but that also would be a wrong aspect and that could be could come under the under the explanation of section 17 and that explanation is mere silence as to the facts affecting the willingness of the person may also sometimes tend to move to fraud now suppose for example you are selling a house and there are some leakages some things which can be easily remedied or you are selling a car and it is not working well whatever can be easily remedied if you don't tell them the contract entirely doesn't get frustrated but that party would be entitled to compensation so if you have to repair the car or repair the leakage in the house he would be entitled to compensation on the ground that there was silence as to this fact when I asked for it ok then we go to the fourth aspect that is misrepresentation and this misrepresentation is generally in this insurance contracts because there are contracts you were very feeding contracts of utmost good faith and most of the insurance companies show how there was no utmost good faith or some part was concealed if they find out and if that is true then of course that contract can be reshared but if there is a false representation me then also the contract gets reshared and that happens quite a lot in marriage contracts that a man says or even a woman says that she is a double graduate or something like that and makes the man marry her and it turns out that she is not and at the time of breaking of the marriage when they consider children's rights it is sort of it has to be shown to a third party that she has got nothing or he has got nothing no degree is nothing this would make the marriage contract also voidable so these misrepresentations are of facts and law the things that turn on them are different so how is it put in the contract act one is the positive assertion that is the false representation you positively assert something which you know is false and second is any breach of duty with intent to deceive so you don't want to say anything but you make a breach of duty and you do something else and it feels deceived both these would be misrepresentation and the other party would be entitled to avoid the contract now these are the four sections from 15 to 18 okay but even mistakes may come under this which comes a little later after that the contract act shows 19 and 19A 19 are voidability of agreements without consent which means they are voidable contracts and they relate to coercion fraud and misrepresentation 19A which was brought in by a subsequent act of 1899 that is relating to undue influence so undue influence is taken out from 19 and that part of this section was gone in 1899 so if with ordinary diligence you can find out that there was misrepresentation the either the party will avoid it by being a plaintiff or he will not do anything and when the other party wants to enforce the contract his defence will be that he was guided by misrepresentation or misguided by misrepresentation then comes section 20 which is between voidable and void contracts we will do it slightly later now we must understand that when the contract is avoided avoidable contract is avoided the benefit has to be returned and the other party need not perform it so if one party has got the benefit he returns it, if he has not got the benefit he need not perform it that is section 64 now this void contracts it begins with mistakes, mistake of fact of both parties this is not relating to mistake of law mistake of law doesn't make it void but mistake of fact not of one party but of both parties now these are in sections 2021 and 2022 so suppose the party says that we want goods to be delivered from London to Mumbai and they will be coming by this ship etc the ship itself has caught fire parties don't know about it and they say that the goods which are in that ship will come here and then to make the contract for whatever that they have to do take the goods, pay the price on delivery etc this was a mistake of fact of both the parties the contract only becomes void because it is no longer there the subject matter goes that is important to consider if it is a mistake of one party he cannot avoid it then somebody will say sorry if it is a mistake of law then we have to see whether it is the law enforcement in India or abroad so far as the law of another country is concerned it is on par with question of fact mistake of fact so far as the law of this country is concerned if there is a mistake we have to see how we can remedy it in law then we go to section 23 and section 23 actually deals with contracts which are void why are they void because considerations and objects are unlawful and these are very interesting cases first is a contract forbidden by law it becomes void now most of these contracts are of this nature one are dowry contracts so somebody agrees to pay dowry by way of dowry I will give you a car and he doesn't give the car can that man enforce it no he cannot enforce it of course the aftermath of that the wife may be severe the wife may be set on fire also it may be as severe as that and she may die it may be a homicide or what we now call a femicide but the contract cannot be enforced now if somebody wants a job for example or somebody wants a particular position and pays another person for it doesn't get that position doesn't get the job because it's not livable you cannot get this money back no you cannot get it back because it was forbidden by law you cannot make this kind of a contract by giving somebody a bribe then under al-qa al-sar or al-qa that is the urban land sealing act under the urban land sealing act you cannot transfer property which is more than 500 square meters etc and all that goes to the government pool so that it can be given to others they said that hardly anything has gone under the urban land sealing act it was a complete flop and it has gone now but there were many contracts which were executed of properties larger than this and then they were struck to be transferred now how are they transferred the owner or the owners of a large property would enter into a partnership deal with the developer or the constructor and then after sometime they dissolved the partnership or retire from the partnership these kind of contracts were held to be void because they were forbidden by the urban land sealing act then there are contracts of money lenders money lender without a license cannot contract that is under the money lenders act of 1976 but certain things are excluded those can be taken for example under an account of a check that is allowed because the check would represent the value of the consideration which is passed which is actually presumed under the negotiable instruments act otherwise all money lenders contracts may be avoided because they avoid under the money lenders act when he has no license then between the landlord and tenant there may be contracts of Pagri now it is specifically accepted it was not accepted until the 1999 act the prohibition act the tenancy prohibition act but when there was the Bombay money lenders act there could be no premium that could be paid by the tenant to the landlord and if therefore any premium is agreed to be paid it cannot be enforced of course in most of the cases they do not transfer the property until the premium is received and that premium was received in cash so that was a completely wrong thing but if that is not done then it cannot be enforced because it is void then this is also interesting contracts defeating the provisions of law now most of these contracts are of the taxes taxes may be excised duty income tax etc the contract entered into by any party to defeat the provisions of the income tax act like you give me a receipt showing that I have made this much of money etc and then you claim that but if that man if it is found out of course and if that man says no I have just passed it on like this and I am not going to give him that money the contract is void and cannot be enforced then there are fraudulent acts with a third party these are interesting contracts sometimes court receivers are appointed and what the parties in the suit do they tell that we will be selling out this property at an undervaluation also slightly to a third party without informing him that a court receiver is appointed the third party who is an innocent purchaser takes the property not knowing it this is a fraudulent contract similarly when a suit is filed and in order to defeat the rights of the defendant the rather the plaintiff the defendant enters into an agreement with somebody else and just sells out the property even that agreement is void in law because it is a fraudulent contract and fraud vitiates everything but of course all the particulars of the fraud will have to be mentioned in the pleadings which is the specific provision in the CTC then contracts injurious to person of property is not very important it is relating to construction wherever there could be some damage caused by some accident or any such thing there are not many such contracts immoral contracts also are void but we don't have those kind of contracts of a prostitute being given a space in a taxi and then she not paying the fire of a taxi etc that is what was in the constitution in the Indian contract act of 1872 we don't have those kind of contracts now contracts opposed to public policy are of a lot of great many dimensions stifling prosecution is the biggest that you tell you enter into a contract to say that you will not prosecute me so prosecution is under the criminal law but you enter into a contract and say all right you don't prosecute me and I will see to it that I will marry you or I will give you some compensation or any such thing now unless that criminal offense is compoundable you cannot compound it and if you try to do that was stifling prosecution which is against the policy of India then of course smuggling contracts there is not much of smuggling nowadays but there used to be in days of yore when there used to be a lot of custom duty payable on most of the transactions and all of those contracts are against public policy and are never enforced then if they are discriminatory contracts also can be discriminated they can enter into contracts let us say on the basis of caste or any such thing that we will be giving you this benefit or you will not get a particular benefit those discriminatory contracts cannot be enforced as being against public policy sympathy is when lawyers take a particular amount of fee or if they are going to win the case that was prohibited under the contract and under the public policy of India now this can go on very well in America but not in British law and we have accepted the British law so lawyers have to charge fees whatever they want to whether they win or lose that is the way we charge then marriage broken contracts if there is only a kind of a matchmaking it is not illegal it is not against public policy but when there is a broker and you say that you will marry him and if then you get married you have to pay me this much those kind of payments are not enforced in arbitration awards surprisingly under the statute it says that when the award is against public policy then it is liable to challenge I really don't know how many awards can be against public policy awards can be erroneous manifest error but that is what the arbitration act is now this is the content of section 23 which shows white contracts thereafter we go to section 56 and those are contracts which become impossible to perform or the contracts which get frustrated now if suppose there is a contract with a dancer or a singer and she becomes ill or she dies it becomes impossible to perform and the contract becomes void so there is no problem in that but the impossibility in a contract has to be super meaning impossibility and not commercial impossibility that is very important to consider so in so many contracts we have conferences which say that I have not performed my part of the reciprocal promises or I have so even if you don't get steel you have got to enter into the contract you would be liable unless the other party gives you an extension okay but when there is super meaning impossibility no party can do anything about it we enter into contracts enter into in India with Germany and then the second world war was declared Germany became an alien enemy because we were under the British rule and we were the allied nation so contracts could not be executed this is super meaning impossibility nobody can help it it has super meaning so those kind of contracts are rendered void and they are frustrated now friends this is so far as which contracts the contract act as I told you is like poetry and therefore it goes further under section 24 which comes immediately after 23 agreement is void if consideration or object is unlawful so if the consideration is lawful you have to give not foreign exchange in India that becomes unlawful but you have to give in INR then the contract would have been perfectly fine it was for consideration but that consideration must be good consideration of lawful entity if the object is unlawful also the contract becomes void so otherwise the contract was fine but the object of entering into the contract was unlawful if you construct a building it is a good contract but if you are going to construct a building to house a brothel it is an object which is unlawful because you cannot have brothels in certain localities except in red light areas in those kind of cases the object is unlawful and then what I think can be addressed then comes section 25 which is an exception to all of these sections and specially the section of consideration contracts which are without consideration are invalid contracts that is what we did in section 2D but even without consideration some agreements become enforceable contracts under section 25 which are there one is a gift a gift which is made to a near relative for love and affection will not have any consideration but if it is a registered gift if the donor has accepted the gift if there are two witnesses which is all under the gift tax act and under the income tax act the provisions have to be read together with the transfer of property act and if those provisions are complied without consideration the contract to pass off some property movable or immovable is fine because it is a gift if the gift is given to a creditor it is not fine because nobody gives gifts to the creditor it is payment made to the creditor then there are some quasi contracts quasi contracts are something like half contracts so there is no contract enter into either oral or in writing but there are certain things that parties have done which would tend to a contract for example somebody finds goods of somebody finds a wallet which is laid down and the man says oh thank you so much my wallet had diamonds I will give you two diamonds that contract is enforceable though it is a quasi contract if there is somebody who does work for necessities of somebody else for example there is a person with an unsound mind and he says I will take care of that person he takes care of that person and he is not paid he can enforce that contract though otherwise there is no contract no written contract no oral contract he just does that work and he expects to be paid similarly in commercial contracts when somebody does something not wanting to do it gratuitously then also there is a quasi contract now these are all under sections 69 and 70 finder of goods and necessities those are quasi contracts which are enforceable without consideration and of course if there is an acknowledgement of debt so when there is a contract earlier enter into and there is a debt created and the debtor has to pay the creditor he does not pay he wants more time the creditor gives him more time and there is an acknowledgement written acknowledgement under the limitation act under section 18 so he acknowledges that debt on a given day the limitation period also extends and that may not have any further consideration but without that consideration that agreement becomes an enforceable contract then friends what we must understand is agreements may be part legal and part illegal also the contract act goes so far it takes in everything so if there is something which is legal it is enforceable but then it must be severable the legal part if it is not severable from the illegal part then everything is voided these are very few contracts of that nature then the act goes further of various void contracts contracts in restraint of marriage now we know about the marriage restraint act of 1929 20 years before the constitution that was the first legislation in favor of women and children and whatever were the marriages for minors who are under certain ages and those ages have been different at different times and 21 those marriages they can be avoided by the party who was a minor when he attends majority but if that is not so then any contract which restrains somebody's marriage you cannot marry someone else you cannot marry him because he belongs to another caste or any search team and he agrees that I will marry a person of this caste and not of that caste that kind of marriage is void it is actually against public policy also then contracts in restraint of trade everyone is entitled to trade we are in a vibrant democracy and our GDP depends on trade so there can be nothing in restraint of trade but there are sometimes contracts which are entered into when a party says look I have got copyright over a particular thing these are my confidential requirements in my business and you have seen it and you will not take this to my competitors this is an exception to section 27 it is not in restraint of trade if there is a contract between partners and partnership is dissolved and one partner says I am giving you so and so by way of goodwill one lakh of rupees but you will never carry on this business for your lifetime this is an unconscionable contract this is a contract in restraint of trade but when under the partnership act it is for a reasonable period and it has been held by our courts that about 2 or 3 years is a reasonable period so it is that you cannot carry on that business for 2 or 3 years or you cannot carry on that business in a particular section in a particular place you can go outside and carry on that business you will not be my competitor then for payment of goodwill and partnership act that much restraint is allowed otherwise it is in restraint of trade and therefore what they then contracts in restraint of legal proceedings if parties enter into the contract that if I pay you this much you will never file a suit against me that would be of course against public policy also but it is in restraint of legal proceedings everybody is entitled to legal proceedings and therefore they can file suits and take request to court of law rightly or wrongly that the court will decide but there cannot be a contract to restraint it one exception is the contract of arbitration and that is because there is a different forum provided where you would get relief so it is an alternative dispute resolution and therefore if there is a contract that you will not go to court but you can go to arbitration or mediation also then we can settle the proceedings then it would not be in restraint of trade these are generally used 27 and 28 are very important in commercial contracts then there are vague contracts some contracts where they say I will pay you if you do this work but it is not mentioned how much I will pay you see it becomes vague and when there is some kind of vagueness court will not enforce it it is void but there are not now many contracts like that because there are thousands upon thousands of lawyers then there are wagering contracts wagering contracts are also prohibited wager is prohibited in our Indian contract act so if you enter into anything where you wager that if certain such a thing happens I will get this money it is not enforceable even if that thing happens or even if that thing does not happen the exceptions to them are government lotteries there are some lotteries which are allowed so that people can invest and people can get something those are exceptions to wagering contracts now the party who has received any benefit under such a contract must restore it under section 65 this is all about void and voidable contracts friends it is in a statute which is so clear and precise then except for examples which give you an idea nothing more needs to be stated thank you okay friends good night thank you we can leave the meeting