Case

Defendant a man at whose house Plaintiff, a young girl, was living, promised Plaintiff that he would give her $1000 and a diamond ring, if she would remain in his domestic service for ten years. In reliance upon the promise, Plaintiff remained there and worked for ten years. When suit was brought to enforce the promise, defendant said that he made the promise only in just. The court held the agreement a valid contract, saying that where the young and inexperienced person was thus deceived into giving valuable services, the law would take the joker at his word and give him good reason to smile. Plate v. Durst 1896, 42w.va.63, 24 S. E. 580, 32 LRA 404. Where parties agree merely to take a walk together or to go to a party, it is only a social agreement, and not a contract, Atkin L. J. in Balfour v. Balfour, [1919] 2 K. B. 571.  

KINDS OF AGREEMENT

An agreement, which does not, satisfied the essential elements of contract might be either void or voidable. The definitions of these terms are given below.

1. Void Agreement. “An agreement not enforceable by law is said to be void”. Section 2 (g). A void agreement has no legal effect. It confers no rights on any person and creates no obligation.  

Example of void agreement: An agreement made by a minor, agreement without consideration, certain agreements against public policy etc. These agreements are void from the beginning. 

Agreement which become void: An agreement, which was legal and enforceable when it was entered in to, may subsequently become void due to impossibility of performance, change of law or other reason. When it become void the agreement ceases to have legal effect.

There are certain agreements, which are expressly declared to be void even though they may otherwise satisfy sec. 10 of the Indian Contract Act. They are as follows:

1. Section 26 of the contract Act provides that every agreement is restraint of the marriage of any person, other than minor, is void.

2. Section 27 of the Act states that every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.

3.  According to Section 28 of the act private individuals can not by agreement alter or vary their personal law or the statute law.

4.  Section 29 implies that agreements, the meaning of which not certain or capable of being made certain, are void.

5. Section 30 of the contract Act clearly states that agreements by way of wages are void.

6. Section 56(1) provides that agreements to do an act impossible in itself are void.

7. Section 24, 57 & 58 maintain that agreements whose object or considerations are unlawful are void.

2. Voidable Agreement.  A voidable agreement is one which can be avoided, i.e., set aside by some of the parties to it. Until it is avoided, it is a good contract. “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, is a voidable contract”.-Sec 2(I).

Example of voidable contract: Contracts brought about by coercion, undue influence, misrepresentation etc.

X coerces Y into entering into a contract for the sale of Y’s house to X. This contract can be avoided by Y. X can nit enforce the contract. But Y, if he so desires, can enforce it against X.

Unenforceable agreement: The term unenforceable agreement is used in English law. It means an agreement, which can not be enforced in a court of law, one or both of the parties, because of some technical defect, e. g., want of registration to non-payment of the requisite stamp duty.

Illegal agreement: An illegal agreement is one, which is against a law in force in India. Example, An agreement to commit murder, robbery or cheating.

Distinction between void agreement and illegal agreement: An illegal agreement is also void. But a void agreement is not necessarily illegal. An agreement may not be contrary to law but may still be void. An agreement, the terms of which are uncertain, is void but such a contract is not illegal.
When an agreement is illegal, other agreements which are incidental or collateral to it are void. The reason underlying this rule is that the courts will not enforce any agreement entered into with the object of assisting or promoting an illegal transaction.

If the main agreement is void, (but not illegal) agreements which are incidental or collateral to it may be valid.

Examples: (1) P engages B to kill C and borrows rs.100 from D to pay B, here the agreement with B is illegal. The agreement with D is aware of the purpose of the loan. In this case the loan transaction is void and D can not recover the money. But if D is not aware of the purpose of the loan, it may be argued that the loan transaction is not collateral to the other illegal agreement and is void.

(2) W enters into a wagering agreement and borrows Rs.100 for the purpose. The main agreement is void but the loan transaction being merely collateral to it is valid even though creditor is aware of the purpose of the loan.
 
Valid Contract: An agreement which satisfies all the essential elements of a contract, and which is enforceable through the courts is called valid contract.