Void and Voidable Agreements Questions and Answers

Answer: B

The clause is void, because it restrains a lawful profession after employment ends.

Section 27 of the Indian Contract Act, 1872 makes every agreement by which anyone is restrained from exercising a lawful profession, trade or business void, with only one statutory exception, the sale of goodwill. The Supreme Court in Superintendence Company of India v. Krishan Murgai held that a covenant restraining an employee from competing after the employment ends is void, however reasonable its period or area.

Indian law does not apply the English test of reasonableness, so 'three years is reasonable' fails. Voluntary agreement does not save a void clause, and protecting the employer's interest justifies restraints only during the employment, not after it.

Answer: A

The contract is void, because trading with an enemy in war is prohibited and is against public policy.

Once war breaks out and a country is declared an enemy, contracts with its subjects that involve trade or intercourse with the enemy are unlawful. Under Section 23 of the Indian Contract Act, 1872 an agreement whose object is opposed to public policy is void, and trading with the enemy is a recognised head of such public policy, because it may aid the enemy's war effort.

Routing payment through a neutral bank and supplying humanitarian goods do not change the character of the bargain; any lawful exception would have to come from a government licence, not from the parties. The contract is void from the outset, not merely voidable or valid until cancelled.

Answer: A

The incorrect statement is An agreement made without consideration is void irrespective of the circumstances.

Section 25 of the Indian Contract Act, 1872 makes an agreement without consideration void unless it falls within its exceptions: a written and registered promise made out of natural love and affection between near relatives, a promise to compensate for something voluntarily done for the promisor, and a written promise to pay a time-barred debt.

The other statements are correct: agreements in restraint of the marriage of a person other than a minor are void (Section 26), agreements in restraint of a lawful profession, trade or business are void to that extent (Section 27), and agreements whose meaning is uncertain are void (Section 29).

Answer: D

The answer is All of the above.

The right to rescind a voidable contract is lost in several situations recognised in contract law:

• Affirmation: once the party with the option, knowing the facts, affirms the contract, it can no longer rescind; unreasonable lapse of time may be treated as affirmation.
• Injury to third parties: rescission is barred where a third party has in good faith acquired rights for value before it is exercised.
• Ability to restore: the party rescinding must be able to restore the benefits received (restitutio in integrum); where that is impossible, rescission is not allowed.

Since each option names a real limit, the complete answer combines them.

Answer: B

A voidable agreement is an agreement enforceable at the option of the party whose consent is not free.

Section 2(i) of the Indian Contract Act defines a voidable contract as an agreement which is enforceable by law at the option of one or more of the parties, but not at the option of the other or others. Under Section 19, when consent is caused by coercion, fraud or misrepresentation, the contract is voidable at the option of the party whose consent was so caused. The option's word 'acceptor' stands for that party.

'An agreement enforceable' describes a valid contract, 'not enforceable' describes a void agreement, and 'Both (A) and (B)' fails with A.