VOID AND ILLEGAL AGREEMENT
“All illegal agreements are void but all void agreements are not illegal”. Explain the given statement in light of the provisions of the Indian Contract Act 1872. Also, differentiate between void agreements and illegal agreements.
According to 2(g) of the Indian Contract Act, An agreement that is not enforceable by law is said to be void.
Such an agreement lacks legal consequences, and so, it does not confer any rights to the parties concerned. A void agreement is void from the day, it is created and can never turn into a contract.
Example- Minor’s agreement- Void-ab-initio.
Section 24-30 of the Indian Contract Act, 1872, makes specific mention of void agreements. Such as-
• Section 24- Agreements void, if consideration and object unlawful in part.
• Section 25- Agreement without consideration, void, unless it is in writing and registered or is a promise to compensate for something done or is a promise to pay a debt debarred by limitation law.
• Section 26- Agreement in restraint of marriage, void.
• Section 27- Agreement in restraint of trade, void.
• Section 28- Agreement in restraint of legal proceedings, void
• Section 29- Agreement void for uncertainty.
• Section 30- Agreement by way of wager, void.
An illegal agreement is an agreement that allows one or all parties to break the law or not conform to the norms of society is considered illegal by the court. A contract opposed to public policy is also illegal.
Example- ‘A’ agrees to sell narcotics to ‘B’. Although this contract has all the necessary elements of a valid contract, it is still illegal.
Illegal agreements are considered void and are not enforced by law.
Due to the criminal aspects of illegal contracts, they are punishable under the law. All parties agreeing on an illegal promise are prosecuted in a court of law.
Thus it is said that “All illegal agreements are void but all Void agreements are not illegal”.
Difference between Void agreements and illegal agreements
| Basis | Void agreements | Illegal agreements |
| Meaning | An agreement, which lacks legal enforceability is a void agreement. | An agreement whose creation is forbidden by a court of law or is immoral or against public policy is an illegal agreement. |
| Consequence | An agreement becomes void when it loses its enforceability by law. | An illegal agreement is void ab initio i.e. void from the very beginning. |
| Prohibition | No | Yes |
| Scope | Wide | Narrow |
| Penalty or punishment | Parties to void agreement are not liable for any penalty/ punishment under law. | Parties to illegal agreement are liable to penalty/punishment. |
| Collateral agreements | May not necessarily be void, they may be valid also. | All collateral agreements are void. |
