Assets Taxable Under Wealth Tax in India

 Void Contract and Voidable Contract

In contract law, the terms void contract and voidable contract refer to two distinct categories of agreements based on their enforceability. Both arise due to defects in contract formation or execution, but their legal implications differ. Below is an analysis of their definitions, characteristics, and differences.

1. Void Contract

A void contract is an agreement that is not enforceable by law and has no legal effect from the beginning (ab initio). It is defined under Section 2(g) of the Indian Contract Act, 1872, as:

“A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable.”

Features of a Void Contract:

• It is invalid from the outset or becomes invalid later due to legal impossibility or illegality.
• Neither party can claim rights or enforce obligations under it.
• It does not create legal relationships.

Examples:

1. Agreement Without Consideration: A contract made without lawful consideration is void (Section 25).
2. Unlawful Object: A contract involving illegal activities, such as smuggling or fraud (Section 23).
3. Impossibility of Performance: A contract to do an impossible act, such as flying to the moon without technology (Section 56).

Legal Implications:

A void contract is treated as if it never existed. Parties are not bound by its terms, and no obligations or liabilities arise from it.

2. Voidable Contract

A voidable contract is an agreement that is valid and enforceable by law at the option of one of the parties. It is defined under Section 2(i) of the Indian Contract Act, 1872, as:

“An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others.”

Features of a Voidable Contract:

• It is valid unless and until it is rescinded by the aggrieved party.
• It arises due to flaws in consent such as coercion, undue influence, fraud, or misrepresentation (Section 19).
• The aggrieved party has the discretion to affirm or rescind the contract.

Examples:

1. Coercion: A person is forced to sign a contract under threats (Section 15).
2. Fraud: A seller misrepresents the quality of goods to the buyer (Section 17).
3. Undue Influence: A person abuses their authority or relationship of trust to gain an advantage (Section 16).

Legal Implications:

• If the aggrieved party affirms the contract, it remains valid and enforceable.
• If the aggrieved party rescinds the contract, it becomes void, and the parties must restore benefits received under it.

 

 Conclusion

Void contracts and voidable contracts differ in their enforceability and legal implications. While a void contract is unenforceable from the outset, a voidable contract remains valid unless the aggrieved party opts to rescind it. The distinction helps uphold fairness in contractual relationships and ensures protection against unlawful or exploitative agreements.