2023-06-24 Consulting Engineers Association of India - CEAI Contracts Arbitration Course.pptx

Contracts
void, voidable & terms
HASIT B. SETH
CEAI’s Construction Law Course
24 June 2023
(c) Hasit Seth, 2021

Introduction
♔ Name: HASIT B. SETH
♔ I am a disputes lawyer in India. My practice focuses on
commercial dispute resolution covering IP, construction,
contracts in litigation and arbitrations
♔ I am licensed to practice law in New York and India
♔You are welcome to follow at
https://www.linkedin.com/in/hbs and keep in touch

Outline
♔Void Agreements
♔ Voidable Agreements
♔ Contract Terminology
♕ Notice
♕ Waiver
♕ Estoppel
♕ Contract Terms
♕ Express and Implied Terms
♕ Discharge
♕ Repudiation
♕ Recession
♔ All sections referred to are from Indian Contract Act, 1872

Contract Lifecyle
♔ Formation
♕ Offer, Acceptance, Consideration, Free consent, Capacity, etc.
♔ Performance
♕ Discharge by performance
♔ Breach
♕ Remedies
♞ Damages
♞ Specific relief
♞ Injunction
♞ Restitution

Foundational Problems
♔ Ordinary but dangerous issues
♔ Consortium contracts
♔ Subsidiary Co. contracts
♔ A <> B <> C – privity issues
♔ Capacity issues
♕ The Governor / President problem (A.299)

Enforceability
♔ Central Concern of Contract Law
♔ Should the agreement be enforced by law?
♔ Valid Contract
♕ S.2(h)
♕ An agreement
♕ enforceable by law
♕ is a contract;

Void Agreement
♔ Definition
♕ S.2(g)
♕ An agreement
♕ not enforceable by law
♕ is said to be void.
♔ Void Ab-Initio (From the very start)
♔ Example: A contract to build a bridge in a coastal CRZ
land location where no construction is allowed.

Void Contract
♔ Definition
♕ S.2(j)
♕ A contract
♕ which ceases to be enforceable by law
♕ becomes void
♕ when it ceases to be enforceable.
♔ Example : Mid-contract, use of asbestos or CFC / HCFC
chemicals is banned by government. Contract to supply
such materials becomes illegal. Contract cannot be
enforced.

Void : S.20 Mutual Mistake of Fact
♔ Both parties are under a
♔ Mistake
♔ Of a Common Fact
♔ S.20 - Agreement void where both parties are under
mistake as to matter of fact.
♔ Example: At the time the contract was executed both
sides assumed that FSI / FAR allowed in a location was
1.25. The government had at midnight issued a GR saying
FSI was reduced to 1 in the location in contract. (Q: What if
FSI / FAR was increased as a suprise!)

Void : S.23 Unlawful Consideration
♔ 23. What considerations and objects are lawful, and what
not.—The consideration or object of an agreement is
lawful, unless—
♔it is forbidden by law; or
♔is of such a nature that, if permitted, it would defeat the
provisions of any law; or is fraudulent ; or
♔involves or implies, injury to the person or property of
another; or
♔the Court regards it as immoral, or opposed to public
policy.
♔In each of these cases, the consideration or object of an
agreement is said to be unlawful. Every agreement of
which the object or consideration is unlawful is void.

Void By Law Agreements

Void Agreements - Contingency
♔ 32. Enforcement of contracts contingent on an event
happening.
♕ if the event becomes impossible, the contract is void.
♔ 34. When event on which contract is contingent to be
deemed impossible, if it is the future conduct of a living
person.
♔S.35 - When contracts become void which are contingent
on happening of specified event within fixed time.
♔ When contracts may be enforced, which are contingent
on specified event not happening within fixed time.
♔ S.36 Agreement contingent on impossible events void.

Void - Consequences
♔ 65. Obligation of person who has received advantage
under void agreement, or contract that becomes void.—
♔ When an agreement is discovered to be void, or when a
contract becomes void,
♔ any person who has received any advantage under such
agreement or contract
♔is bound to restore it, or to make compensation for it
♔to the person from whom he received it.

Voidable Contract
♔ S.2(i)
♔ 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;

Voidable – S.19 Free Consent
♔ 19. Voidability of agreements without free consent.—
♔ When consent to an agreement is caused by
♔ coercion, 1***
♔ Fraud or misrepresentation,
♔ the agreement is a contract voidable
♔ at the option of the party whose consent was so caused.

Voidable – Free Consent
♔S.19 …
♔A party to a contract whose consent was caused by fraud
or misrepresentation,
♔ may, if he thinks fit,
♔ insist that the contract shall be performed, and that he
shall be put in the position in which he would have been if
the representations made had been true.

Voidable – Free Consent
♔S.19 …
♔Exception.—If such consent was caused by
misrepresentation or by silence, fraudulent within the
meaning of section 17, the contract, nevertheless, is not
voidable, if the party whose consent was so caused had the
means of discovering the truth with ordinary diligence.
♔Explanation.—A fraud or misrepresentation which did not
cause the consent to a contract of the party on whom such
fraud was practised, or to whom such misrepresentation
was made, does not render a contract voidable.

S.21 Mistake of Law
♔ 21. Effect of mistakes as to law.—
♔A contract is not voidable because it was caused by a
mistake as to any law in force in 1[India];
♔but a mistake as to a law not in force in 1[India] has the
same effect as a mistake of fact.

S.22 Mistake of Fact
♔ 22. Contract caused by mistake of one party as to matter
of fact.—
♔A contract is not voidable merely because
♔it was caused by one of the parties to it
♔being under a mistake as to a matter of fact.

Recession of Voidable Contracts
♔ 64. Consequences of rescission of voidable contract.—
♔When a person at whose option a contract is voidable
rescinds it,
♔ the other party thereto need not perform any promise
therein contained in which he is promisor.
♔ The party rescinding avoidable contract shall, if he have
received any benefit thereunder from another party to
such contract, restore such benefit, so far as may be, to the
person from whom it was received.

Contract Terminology

Contract Terminology
♔ Notice
♔ Waiver
♔ Estoppel
♔ Contract Terms
♔ Express and Implied Terms
♔ Discharge
♔ Repudiation
♔ Recession

Notice
♔ Notice is to bring it to the knowledge of other party
♔ No need to ensure other party acts on the notice
♔ It is other party’s prerogative to act or not to act
♔ Functions
♕ Fairness
♕ Opportunity to Act (e.g., Notice to Cure)
♕ Recording of status of situation
♕ Timing Device – Notice of 28 days to do or not to do something

Waiver
♔ It’s a contract
♔ Agreed to waive certain rights
♔ ”No dues” certificates are waivers
♔ No waiver against statutory rights unless statute allows it.

Estoppel
♔ Once a position is taken
♔ Other party acts on basis of such a position
♔ Then cannot change the original position to the
detriment of the other party

Contract Terms
♔ Obligations under the contracts are terms
♔ Define or affect the rights and liabilities of the parties
♔ Define performance obligations by the parties
♔ Define status, conditions, warranties etc.

Express and Implied Terms
♔ Express Terms
♔ Implied Terms
♕ Courts use this device in their interpretations of contracts.
♕ Sometimes done to fill the gaps.

Discharge
♔ End of the legal duties under the contract
♔ Usually by performance being completed
♔ By operation of law

Repudiation
♔ Messaging by words or actions
♔Indicating an intention to not perform the contract in the
future
♔ or a threatened breach of contract.

Recission
♔ Cancellation
♔ Unwinding of contract
♔ Restoring to a position of not having contracted.

THANK YOU
Happy To Keep in Touch Via LinkedIn.
You can follow my updates at:
https://www.linkedin.com/in/hbs/

Slide
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Thank You.
Questions?
You can reach me on LinkedIn – www.linkedin

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(c) 2021, Hasit Seth
Hasit Seth

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2023-06-24 Consulting Engineers Association of India - CEAI Contracts Arbitration Course.pptx

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