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Business Environment and Law-Law Of Contract (Indian Contract Act 1872)

When a voidable contract is rescinded? - Law Of Contract

   Posted On :  06.05.2018 11:14 pm

As regards the party at whose option the contract is voidable, if he has received any benefit from another party to such contract, he must restore such benefit so far as may be, to the person from whom it has been received.

When a voidable contract is rescinded?

 A. As regards the party at whose option the contract is voidable, if he has received any benefit from another party to such contract, he must restore such benefit so far as may be, to the person from whom it has been received. The benefit must have been received under the contract and not otherwise. Security for performance is not the benefit received under the contract.

 B. As regards the other party, he need not perform his promise.

 3. Void Contract: [Sec 2(j)] “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable” E.g A agrees to sell his car to B for Rs.10, 000. All essentials of a contract are fulfilled. If A refuses to sell his car, B can go to the court and the court would enforce A’s promise. But if, before the delivery the car is destroyed by Tsunami, the court cannot enforce anything and hence this contract becomes unenforceable i.e void. Thus, void contract is one which was a valid contract when it was made but becomes void later on. Those agreements which are void ab initio (from the very beginning) are called Void Agreements and those which become void later on are called Void Contracts.

Following circumstances will transform a valid contract into a void contract.

 A. Contingent contract: A contingent contract to do or not to do something on the happening of an uncertain future event becomes void, when the event becomes impossible (Sec 32).

 B. Repudiation of a voidable contract: When a voidable contract is rescinded by the party at whose option it is voidable, the contract becomes void.

 C. Subsequent impossibility (Sec. 56): A contract which becomes impossible to perform, after it is made, becomes void.

 D. Subsequent illegality (Sec. 56): A contract becomes void if it becomes illegal after it is made.

Consequences of a Void Contract: Sec. 65 lays down that when a contract becomes void, the party who has received any advantage under such agreement should restore it or make compensation for it to the party from whom he received it.
 
4. Void Agreement: An agreement not enforceable by law is called a void agreement. If any of the essentials of obligations (enforceability), other than free consent, is missing the agreement cannot be enforced at Courts of Law.



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