A contract is an agreement that is enforceable by law .In the past, contracts were just simple barter systems, according to which one party would trade something for goods or services of equal value from another party. But things have changed since then. No one can enforce void contracts, but parties can cancel voidable ones if there are problems with consent or errors were made.. Knowing these rules is key for dealing with contracts in Pakistan. The governing law in relation to the contracts in Pakistan is The Contract Act, 1872.
How Void and Voidable Contracts work in Pakistan?
VOID CONTRACTS
A void contract is invalid from its existence. A void contract is disregarded as if it never came into being.
Conditions and legal provisions
Following conditions can lead a contract to be void under the law:
1.Unlawful Object or Consideration:
Under Section 24, any agreement meant for illegal purposes is void. So if someone makes a deal for illegal activities, it won’t hold up in court.
2. Agreements Without Consideration:
Agreements without anything in return are void unless they meet certain exceptions, like being written and registered as per section 25
3. Agreements in Restraint of Trade:
Section 27 states that deals preventing someone from doing their lawful job or business are void.
4. Agreements to Do Impossible Acts:
Section 56 clarifies that promises to do impossible things are void.
5. Wager Agreements:
According to Section 30, bets made this way are out; you can’t recover anything claimed to be won in a wager or given to hold onto based on uncertain events.
Prohibitions on Wagering Agreements:
- Horse Racing:
Betting on races is okay if laws allow it since there’s skill involved.
- Competitions of Skill:
Deals around skill-based competitions, like puzzles, work because they’re not just about
chance.
- Insurance Contracts:
These aren’t bets; they’re protection against loss because there’s a real interest.
- Stock Market Transactions:
Even if risky, these aren’t wagers since informed choices are made.
LEGAL EFFECT
Void contracts carry no weight & can’t be made legal later on. For example: if someone enters into a contract for something illegal right from the start (ab initio), it can’t be validated down the road. If it’s found later that a contract was voided; any gain claimed will need to be returned based on restitution principles. Some common reasons include illegality or lack of capacity (like when minors are involved) and impossibility of doing what was promised.
VOIDABLE CONTRACTS
A voidable contract is where one party can legally enforce it but not the other party—it can either get voided or cancelled by the party who is under pressure ,mislead or is disadvantaged.
Conditions & legal rules
Following conditions can lead a contract to be voidable under the law:
1.Voidability of Agreements Without Free Consent:
According to Section 19, if someone’s consent is gained via coercion or deceit, that agreement can be annulled by the party whose consent wasn’t freely given.
2. Power to Set Aside Contract Under Undue Influence:
Section 19A lets affected party cancel a contract influenced wrongly—this means they need to give back benefits received from that contract.
3. Both Parties Under Mistake Regarding:
Section 20 says if both sides have a misunderstanding about an important fact related to their agreement that contract’s voidable at either party’s choice.
4. Failure of Condition Precedent:
As stated in section 31—if a conditional deal doesn’t meet its required event first (the condition precedent), it might become voidable by the affected person.
5. Breach of Contract:
Section 39 mentions if one party doesn’t keep their end of the deal or breaks their promise; the other side can decide to treat that contract as voidable.
6. Rescission of Voidable Contract:
Section 64 talks about what happens when you cancel a voidable contract—it says anyone with that right must give back any benefits received under the deal to whoever cancelled it.
7. Obligation of Person Who Gained Advantage:
As Per section 65—when an agreement turns out as invalid or nullified and then gets cancelled later on, any party who’s gotten any benefit must return it or compensate who they got it from.
LEGAL EFFECT
Voidable contracts stay valid until one party chooses to cancel them. This gives room for performing the deal unless that aggrieved person decides otherwise and opts out based on any misleading info received during the process—not every twist leads down a dead end!
Relevant CASE LAWS
- 1965 PLD 460
- 1959 PLD 286
- 2015 YLR 2141
- 1953 PLD 410
- 1976 PLD 1192
- 2014 PLD 427
- 1984 SCMR 77
- 2011 PLD 304
- 1964 PLD 143
- 2011 CLD 648
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