bl session 6

8/2/2019 BL Session 6

1/24

MERCANTILE LAW

Session 6Law of Contract

Legality of Object & Consideration and Voidagreements

Instructor: Malik Nizar Ali


2/24

Business Law: Legality of Object& Consideration, void agreements

Void Agreements (2g)

A Void agreement is an agreement whichis not enforceable by law.


3/24


Void Agreements

Agreements by parties incompetent to contract (Sec. 10 & 11) Agreement having bilateral mistake of fact (Sec. 20) Agreements, the consideration or object of which is unlawful (Sec.

23 & 24) Agreements without consideration (Sec. 25)

Agreements in restraint of trade (Sec. 27) Agreements in restraint of marriage (Sec. 26) Uncertain agreements (Sec. 29) Agreements in restraint of legal proceedings (Sec. 28) Wagering agreements (Sec.30)

Agreement contingent on impossible events (sec. 36) Agreements to do impossible acts (Sec.56)


4/24


Agreements by parties incompetentto contract (Sec. 10 & 11)

Unsound mind Disqualified by law

Minor

Incompetent


5/24


Agreement having bilateral mistake

of fact (Sec. 20)

Where both the parties to an agreementare under a mistake as to a matter of factessential to the agreement, the agreement

is void.


6/24


Agreements, the consideration or object of which isunlawful (Sec. 23)

Forbidden by law

Defeats the Provision of any law

Fraudulent Involves injury to the person or property of

another

Court regards it as Immoral or opposed toPublic policy


7/24


Considerations or objects unlawfulin part (Sec. 24)

Void

i) if any part of a single consideration forone or more objects is unlawful

or

ii) if any one or any part of any one of

several considerations for a single objectis unlawful


8/24


Agreements Opposed to Publicpolicy

Alien Enemy Stifling Prosecution Maintenance (litigation in which one has no interest of ones own) &

Champerty (bargain whereby one party is to assist other inrecovering property, and is to share in the proceed of the action)

Sale/ Transfer of Public Offices & Titles Restraint of Parental Rights Restraint of Personal Liberty To create Monopoly Interfering with Course of Justice Marriage Brokerage Contracts Restraint of marriage, trade and legal proceedings


9/24


Agreements without consideration

(Sec. 25)

Void unless

1) in writing & registered

2) or is a promise to compensate forsomething done

3) or is a promise to pay a debt, barred by

Limitation Law

A i i f d


10/24


Agreements in restraint of trade

(Sec. 27)

Agreement is void to that extent

if any one is restrained from exercising alawful profession, trade or business of anykind.


11/24


Onus of Proof

Defendant-Restraint is necessary toprotect his interest

Plaintiff- Restrain is injurious to the public


12/24


Exceptions to the rule that an agreement in restraint oftrade is void

Exceptions

Statutory Judicial

Sale of Goodwill Partners agreement Trade combination Sole dealing agreements Service agreements


13/24


Service Agreements

Clause

1. to serve employer for stipulated period

2. to prevent employee to accept any otherengagement during his employment

3. to accept similar engagement afterseparation from services in order to

protect employer from use of tradesecrets acquired by employee in courseemployment


14/24


Sale of Goodwill

Reasonable

local limits

Time limit

Similar business

Sale of Goodwill


15/24


Partners Agreement

Restriction on existing partner- Sec 11(2)

Restriction on outgoing partner-Sec.36 (2)

Restriction on partner upon or inanticipation of dissolution of firm-Sec 54

Restriction in case of sale of goodwill- Sec

55(3)


16/24


Agreements in restraint of marriage(Sec. 26)

Void

other than a minor

A t i t i t f l l


17/24


Agreements in restraint of legal

proceedings (Sec. 28)

Void

1) if any party is restricted absolutely fromenforcing his rights by usual legal

proceedings in the ordinary tribunals2) or which limit the time within which hemay enforce his rights

ExceptionRefer to arbitration dispute that (1)may arise

or (2) question that have already arisen


18/24


Uncertain agreements (Sec. 29)

Void

if the meaning of which is not certain orcapable of being made certain


19/24


Agreements to do impossible acts(Sec.56)

Voidif doing that act is impossible in itselfif contract to do act afterwards becomingimpossible.

Promiser must compensate promisee for anyloss sustained on account of non performance ofpromise.Where promiser knew or with reasonable

diligence that act is impossible or unlawful andpromisee did not know that to be impossible/unlawful.


20/24


Wagering agreements (Sec.30)

Essential elements of a wagering agreement

1) Promise to pay money or money worth

2) Uncertain event3) Mutual chance of gain or loss

4) Neither party have control over the event

5) No interest in the event


21/24


Transactions which are notwagering

Prize competitions which are game of skill

Subscription, or contribution, towards any plate,prize or sum of money, of the value or amount of

Rs. 500 or upwards, to be awarded to thewinner(s) of any horse-race.

Contract of insurance

Share market transactions in which delivery ofshares is intended to be given and taken.


22/24


Distinction between contracts ofInsurance & Wagering

Contract of Insurance Wagering agreement

Insurable interest No insurable interest

Amount may vary Amount is usually fixed

Beneficial to publicpolicy

Against public policy

Involve element ofinvestment & protection

Chance oriented andtherefore is gambling

Agreement contingent on


23/24


Agreement contingent on

impossible events (sec. 36)

Void

contingent agreement to do or not to doanything if an impossible event happens

whether the impossibility of the event is

known or not to the parties to theagreement at the time when it is made.


24/24

Business Law: Legality of Object& Consideration void agreements

Contingent Contract (Sec. 31)

Contract to do or not to do some thing

If some event, collateral to such contract.Does or does not happens.

Essential Elements

1. Dependence on future event

2. Collateral event3. Uncertain event

bl session 6

Documents