This document discusses the concepts of void and voidable contracts under Nepalese contract law. A void contract is invalid from the time of signing because it violates the law or public policy, such as involving illegal activities. It does not satisfy the requirements for a valid contract and is unenforceable in courts. In contrast, a voidable contract initially satisfies contract requirements but can be voided by one party, such as if they were coerced into signing. While a void contract creates no legal obligations, a voidable contract is valid until voided by a party, who can seek legal remedies in courts. The document provides examples and analyzes the concepts with reference to Sections 13 and 14 of Nepal's Contract Act 2056.

1. CONTRACT
LEGAL ENVIRONMENT FOR BUSINESS IN NEPAL
Submitted to:
Hem Raj Pokhrel Upadhyaya
Submitted by:
Ashraya K. Shrestha
MBA-FALL2014/14129
Kathmandu University School of Management

2. Contract 1
Write the concept of contract. How do you differentiate between void and voidable
contract? If parties conclude these type of contract, what shall be the legal effect of such
contracts? Write critically in the reference of the Contract Act, 2056, Section 13 and 14.
A contract is an agreement which is enforceable by law between two or more competent
parties for performing or not performing any work. A contract can be in writing or verbally made
to be enforceable. Minors (individuals under age 16) and people who are mentally incompetent,
do not have the legal capacity to enter into contracts. All other people are considered to have the
legal capacity to enter into contracts. Corporations can enter a contract through their agents and
officers. In a contract parties are autonomous as they “shall be free to choose the form and content
of contract and to determine consideration and its quantum, the terms and conditions of the contract
and the nature of the remedy in the event of its violation, as well as to determine the measures for
resolving disputes under the contract”1
. Basically, it describes that a party should be free from all
influences when determining the formation and dealing of a contract. The elements of any contract
are:
1. Offer: An offer states the willingness and the ability of a party to perform a work in return of
consideration. An offer is also known as a proposal and it is expressed either verbally or
through writing. Hence, an offer plays a dominant role in the formation of a contract.
2. Acceptance: An acceptance creates a contract and terminates the power of revocation. An offer
or proposal can be accepted, rejected or amended which must be a voluntary act. An amended
offer is known as a counter offer in which the previously offering party is now being offered a
modified offer by the previous offered party. Acceptance of an offer is crucial for determining
the legality of the contract. If a contract is accepted through coercion, undue influence or
misrepresentation the offer can be made voidable2
.
3. Mutual Assent: The parties understand and agree to the basic substance and terms of the
contract. Both parties should agree to be legally obligated to the terms and consideration of the
contract.
1
Contract Act 2056 , Section 4
2
Elements of a Contract. (n.d.). Retrieved November 15, 2014, from http://jec.unm.edu/education/online-
training/contract-law-tutorial/contract-fundamentals-part-2

3. Contract 2
4. Consideration: Consideration is the factor that persuades the parties to enter into the contract.
A consideration is the value promised by a promisor for performing or not performing any
task. It can be in terms of money, services, assets or refraining from performing3
.
Besides the elements of a contract, a contract is valid if both parties willingly accept to be legally
obligated and following legal formalities termed in the contract. A party is termed competent if
he/she is able to bear liability and consequences, understand the rights and ability to perform.
Critical analysis of void and voidable contract, in reference with Contract Act 2056 (2000), Section
13 and 14:
Void Voidable
a) Involves illegal subject matter like smuggling,
prostitution, gambling. If the contract cannot
be executed or is not properly structured is
deemed to be void
It is previously a valid contract, which is
legally obligated by both parties. For
example, a contract involving a providing
goods.
b) It does not suffice the norms for a valid
contract such as meeting of mind, legal
formalities etc
It satisfies all the norms for a valid
contract initially and has made provision
for terminating the contract either by
completion or through dispute
c) A party is prevented from perform activities. A party is tricked into entering the
contract. Misrepresentation
d) A void contract is invalid from the time of
signing as it prevents the legal rights of the
people enforced by the government, provides
unlawful consideration, concluded by an
incompetent party and considered impossible
to fulfill.
A valid contract is voidable when one
party commits coercion, undue influence,
fraud, deceit
e) Unenforceable by law Enforceable by law, any of the two
parties can void the contract at any time
legally.4
3
Calamari, J., & Perillo, J. (2010). Contracts (5th ed.). St. Paul, MN: Thomson/West.
4
Contract Act 2056, Section13 and 14

4. Contract 3
If two parties forward an invalid contract or a void contract, the party will not be able to able to
seek legal justice as the law does not recognize such type of illegal binding. Hence, the party
loses his right to claim on the assets and resources he/she has lost when undergoing the void
contract.
In case of a voidable contract, if a party seeks to void a valid contract he/ she can seek help from
the law or courts. It is recognized by the law and is able to deliver justice to the parties. Hence,
the court decides the verdict. Also, the matters of legal action and compensation is in the hands
of the court.
Conclusion
The question related to the concept of contract and the differences of void and voidable contract
have been put forward in summarized form. The answers are in reference to the topics which are
taught in class and some secondary data collection. As a management student it is essential for
students to understand the working of a contract as many business practices are performed in a
type of contract. A contract helps us define the accountability and responsibility of parties for the
work to be completed. Lastly, a contract is a private legislative which works within the
boundaries of the national law.