MODULE VI:

LIMITATIONS TO FREEDOM OF
CONTRACT
TYPES OF AGREEMENT VALID / VOLD/ ILLEGAL
Agreements against Public Policy Illegal and Void
Agreements with unlawful consideration Illegal and Void
Agreements in Restraint of Marriage Void
Agreements without Consideration (covered under Void
Module III)
Agreements in Restraint of Trade Void
Agreements in Restraint of Legal Proceedings Void
Ambiguous and Uncertain Agreements Void
Wagering Agreements: Its exceptions Void
LEGALITY OF OBJECT
Introduction
• Element of Contract – Parties must contract for a lawful object
• An agreement opposed to law may either be :
Unlawful / Illegal Void

Section
• 23: What consideration 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.
Legality of Object
• Section 23 covers Illegality of Object & Consideration of Contract
• Eg: Borrowing Money for Child Marriage:
 Object of Loan Agreement – Defeat the provisions of Child Marriage
Restraint Act – i.e. Child Marriage – Illegal
 Consideration – Loan
FORBIDDEN BY LAW
• Law – Law for the time being in force in India
 Includes personal & unwritten laws as well
• Violation of License & Permits
 License to Sell Liqour – eg: License given to X and X in partnership
with Y opens the shop to sell liquor.
 Partnership is void as it would defeat the policy of the law if
unapproved person could find their way into working liquor shops
Legality of Object
• Object of Contract – to be tested against the underlying purpose of a legislation /
law Bhikanbhai v. Hiralal [(1900) 24 Bom 622]
Facts
• The plaintiff was a lessee of certain tolls under the Bombay Tolls Act 1875. One of
the conditions of the lease was that the lessee should not sublet the tolls to any other
person without the permission of the Collector.
• A Fine of Rs. 200/- was payable for a breach of the condition.
• The plaintiff contracted with the defendant to sublet the toll to him without obtaining
necessary permission.
Issue: Whether the Sub-Lease was Void?
Held: No
• The object of the Act is not to forbid such transactions.
• It was an Act passed for the benefit of the revenue and not an Act for the protection
of public morals. The transaction may be void as against the Collector but between
the parties it stands.
Legality of Object
DEFEAT ANY LAW
 Sometimes the object of, or the consideration for, an agreement is
such that though not directly forbidden by law, it would, if
permitted, defeat the provisions of any law
 Such an agreement is also void.
Mohinder Singh v. State of Punjab [AIR 2009 NOC 434]
Facts:
• A person who was elected as a sarpanch for a period of 5 years, made an agreement
with another member that the latter would be given two year term and the elected
one, the remaining three years
Held:
• The agreement was held to be void as it would have defeated the purpose and
provisions of the Punjab Panchayat Raj Act 1994.
Legality of Object
DEFEAT ANY LAW OF OTHER COUNTRY
Ragazzoni v. K.C. Sethia [(1956) 2 QB 490]
Facts:
• The Government of India had, by regulations made under the Sea Customs Act 1878
prohibited the export of goods to South Africa.
• The plaintiff and the defendant being aware of the prohibition and in a bid to
overcome the embargo, agreed that a larger quantity of jute bags would be shipped
from India and made available in Genoa for resale to South African buyers.
• The defendant failed to deliver the goods and the plaintiff sued for damages.
Held:
• While the English courts will not enforce foreign revenue or penal laws, they will
not entertain an action based on a transaction which is knowingly intended to
involve a breach of such laws.
Legality of Object
DEFEAT ANY LAW OF OTHER COUNTRY
Surasaibalini Debi v. Phanindra Mohan Mazumdar [AIR 1965 SC 1364]
Facts:
• The plaintiff, an employee of the Court of Wards, started the business of running a
boarding house.
• The Rules of Service prohibited him from engaging in any trade or business.
• The premises were leased nominally in the name of his father-in-law, but the
management and finance was the concern of the plaintiff.
• The business ran for quite a few years. The plaintiff fell ill and had to leave Calcutta
for some time.
• He transaferred the business wholly to the father-in-law under the belief that the
business would be hand back upon his return & would account for its profits.
• Plaintiff came back and the Father-in-law refused to oblige.
• Plaintiff brought an action to recover back his business.
Legality of Object
DEFEAT ANY LAW OF OTHER COUNTRY
Surasaibalini Debi v. Phanindra Mohan Mazumdar [AIR 1965 SC 1364]
Defendant: The business was illegal as it defeated the service rules and also the
Income Tax Act.
Supreme Court:
• Service Rules were not statutory and therefore the violation did not render the
business illegal.
• Justice Ayyangar – As far as the issue of evasion of Income Tax is concerned and
the law doesn’t support it.
• The plaintiff had left the business in the hands of his father-in-law on account of his
illness and not because of the illegality.
• His action was to enforce his ownership interest and for this purpose it was not
necessary for him to rely on the illegal transaction.
• Accordingly he was allowed to recover the possession of his business.
Legality of Object
FRAUDULENT
 An agreement made for a ‘fraudulent’ purpose (defrauding another person) is void.
 Intention to deceive – Important.
INJURIOUS TO PERSON OR PROPERTY
 An agreement between two persons to injure the person or property of another is
unlawful.
IMMORAL
 The law doesn’t allow an agreement tainted with immorality to be enforced.
 Consequently every agreement the object of or consideration for which is immoral is
unlawful.
 Immoral: Standards of morality prevailing at a particular time & as approved by the
courts.
 For eg: Interference in marital relations, dealing with prostitutes, etc.
Legality of Object
PUBLIC POLICY
 An agreement is unlawful if the court regards it as opposed to public policy
 Public Policy – When the courts on consideration of public interest refuse to
enforce certain contracts.
 English Law -Established heads:
Contract of Marriage Contract in restraint of Gaming or Wagering Assisting the enemies of the
Brokerage Trade Agreement Crown.

 Courts (according to Lord Halsbury) – inventing new categories of public

policy are closed. – Subjective Element
 Indian courts – diverging stand
Legality of Object
PUBLIC POLICY - Indian cases adopting English view – SC endorsing this view
Gherulal Parekh v. Mahadeodas [AIR 1958 SC 781]

Doctrine of Public Policy: Public Policy or the Policy of Law is an illusive concept; it
has been described as an ‘untrustworthy guide’ ‘variable quality’ ‘unruly horse’.
The primary duty of a court is to enforce a promise which the parties have made in
certain cases, the court may relieve them of their duty on a rule founded on what is
called the Public Policy.
The principles have been classified under different heads & though it is permissible for
courts to expound and apply them to different situations, it should only be invoked in
clear and incontestable cases of harm to public.
It is advisable in the interests of stability of society not to make any attempt to discover
new heads in these days.
Legality of Object
PUBLIC POLICY - Indian cases adopting English view – SC endorsing this view
Anand Prakash Om Prakash v. Oswal Trading Agency [AIR 1976 Del 24]
• A Contract of Sale of Goods whose tenor shows that the price was intended to be paid out of
black money is not opposed to public policy and is therefore, valid and enforceable.
• The contract involved transfer of goods and payment of price and neither is opposed public
policy
PUBLIC POLICY - TYPES
TRADING WITH ENEMY
• Applicable when a country is in war with another
• A declaration of war = prohibition of commercial intercourse and
correspondence with the inhabitants of the enemy’s country.
TRAFFICKING IN PUBLIC OFFICES
• An agreement by which it is intended to induce a public officer to
act corruptly is contrary to public policy.
INTERFERENCE WITH ADMINISTRATION OF JUSTICE
• Interference with the course of justice:
 Eg: agreement to delay the execution of a decree
 Promise to give money to induce a person to give false
evidence.
PUBLIC POLICY - TYPES
INTERFERENCE WITH ADMINISTRATION OF JUSTICE
• Stifling Prosecution:
 It is in the interest of public that criminals should be prosecuted and
punished.
 Hence an agreement not to prosecute an offender or to withdraw a
pending prosecution is void if the offence is of public nature.
 However the law allows compromise agreements in cases of
compoundable offence.
Narasimharaju v. Gurumurthy Raju [ AIR 1963 SC 107]
Facts:
• In dissolution of accounts of partnership firm, one of the partners filed a criminal complaints
against his co-partners alleging forgery in manipulation of accounts.
• Subsequently, the partners entered into an agreement to refer the matter to arbitration in
pursuance of which the complainant did not offer any evidence and his complaint was
rejected.
PUBLIC POLICY - TYPES
INTERFERENCE WITH ADMINISTRATION OF JUSTICE
• Stifling Prosecution:
Narasimharaju v. Gurumurthy Raju [ AIR 1963 SC 107]
Facts:
• When the question of enforcement of arbitrator’s award was arose, it was alleged that the
reference to arbitration was the result of an agreement to stifle prosecution.
HELD
• Agreement was opposed to Public Policy
• If a person sets the machinery of criminal law into action on the allegation that the opponent
has committed a non-compoundable offence and by the use of the coercive criminal process,
he compels the opponent to enter into an agreement, that agreement would be treated as
invalid for the reason that its consideration is opposed to public policy.
• The citizen who promises to vindicate the criminal law must do so whole-heartedly in the
interest of justice and must not seek his own advantage.
PUBLIC POLICY - TYPES
INTERFERENCE WITH ADMINISTRATION OF JUSTICE
• Maintenance & Champerty:
 Champerty in its essence means ‘a bargain whereby one party is to
assist the other in recovering property and is to share in the proceeds of
the action’.
 Agreements by which a stranger advances money for maintenance of
litigation with a view to obtaining an unconscionable gain are called
champertous agreements.
Harilal Nathalal Talati v. Bhailal Pranlal Shah [AIR 1940 BOM 143]
Facts
• Agreement in issue dealt with a person who had agreed to give half a share of the property to
the financier valued at Rs. 30000/- from such property as he might get whether by aa suit or
by a private settlement or in any manner from his father’s estate.
Held: Agreement – Extortionate & Unconscionable and opposed to Public Policy.
PUBLIC POLICY - TYPES
INTERFERENCE WITH ADMINISTRATION OF JUSTICE
• Maintenance & Champerty:
Kathu Jairam Gujar v. Vishvanath Ganesh Javadekar [AIR 1925 BOM 470]
An agreement by a client to pay his lawyer according to the result of the case is against public
policy.
It is professional misconduct for an advocate to stipulate for or agree with his client to accept as
his fee or remuneration a share of the property sued or other matter in litigation upon the
successful issue therefore.

MARRIAGE BROKERAGE CONTRACTS

• An agreement to procure marriage of a person in consideration of a
sum of money is called marriage brokerage contract – VOID
• Eg: Custom of paying bride price to the parents of a girl
PUBLIC POLICY - TYPES
UNFAIR, UNREASONABLE & UNCONSCIONABLE DEALINGS
• Where parties are not economically on equal footing and there is a
wide gap in the bargaining power of the parties
• Where one of them is in a position to exploit and the other is
vulnerable.
Central Inland Water Transport Corporation v. Brajo Nath Ganguly [(1986) 3 SCC 156]
• Held:
• A Government Corporation imposing upon a needy employee a term that he can be removed
just by 3 month’s notice or pay in lieu of notice and without any ground is an exploitation and
every ruthless exploitation is against public policy.
PUBLIC POLICY - TYPES
UNFAIR, UNREASONABLE & UNCONSCIONABLE DEALINGS
BCCI v. Cricket Association of Bihar [(2015) 3 SCC 251]

• A Rule permitting the administrators of BCCI to have commercial interest in events

conducted by BCCI was held to be capable of defeating the high ideals of fairness
and objectivity in discharge of public functions and therefore opposed to public
policy.
• Court – Principles that ensure justice, fair play, transparency, objectivity and probity
in discharge of public functions are facets of public policy.
AGREEMENTS IN WHICH PART OF CONSIDERATION OR
OBJECT IS UNLAWFUL (Section 24)
Agreements void, if considerations and objects unlawful in part.—If
any part of a single consideration for one or more objects, or any one
or any part of any one of several considerations for a single object, is
unlawful, the agreement is void. 

• Subject to Doctrine of Severability

 Where the legal part of the agreement can be severed from the illegal, the
former would be enforced.
 Where upon severing the legal & illegal part, what remains is of barely any
consequence, then the entire agreement will be declared as Void.
AGREEMENTS IN RESTRAINT OF
MARRIAGE
 AGREEMENTS IN RESTRAINT OF MARRIAGE VOID (Section
26)
Every agreement in restraint of marriage of any person, other than a minor, is
void.

• Policy of Law to discourage agreements which restrain freedom of marriage.

• Restraint –
 General (complete prohibition) or
 Partial (marrying for a fixed period / person)
• Exception – Bigamy
Rao Rani v. Gulab Rani [ILR 1942 All 810]
Issue: Whether forfeiture of a widow’s rights claiming rights over deceased husband’s property
upon re-marriage is an arrangement in restraint of marriage?
Held: No.
No restraint was imposed on the widow for re-marriage. All that was provided that if a
widow elected to remarry, she would be deprived of her rights.
AGREEMENTS IN RESTRAINT OF
TRADE
 AGREEMENTS IN RESTRAINT OF TRADE (Section 27)
Every agreement by which any one is restrained from exercising a lawful
profession, trade or business of any kind is to that extent void.
Exception:
Exception 1.—Saving of agreement not to carry on business of which goodwill is sold.
— One who sells the goodwill of a business may agree with the buyer to refrain from carrying on
a similar business, within specified local limits, so long as the buyer, or any person deriving title
to the goodwill from him, carries on a like business therein, provided that such limits appear to
the Court reasonable, regard being had to the nature of the business.

• Freedom of Trade and Commerce – Article 301 – Indian Constitution

• Public Policy requires every man shall be at liberty to work for himself and shall not be at
liberty to deprive himself or the State of his labor skill or talent.
• Every Man should have the unfettered liberty to exercise his powers and capacities for his
own and community benefit.
AGREEMENTS IN RESTRAINT OF TRADE
Madhub Chander v. Raj Coomar [(1874) 14 Beng LR 76]
Facts:
• Plaintiff and Defendant were rival shopkeepers in a locality in Calcutta.
• The defendant agreed to pay a sum of money to the plaintiff if he would close his business in
that locality.
• The plaintiff accordingly did and the defendant refused to pay.
Held:
• Agreement – Void
• The words ‘restrained from exercising a lawful profession, trade or business’ does not mean
‘absolute restriction’

• England & India – Principle is same i.e. agreements in restraint of trade either
absolute or partial – void.
Exceptions to Agreement in Restraint of Trade
STATUTORY EXCEPTION
• Sale of Goodwill
• Goodwill? – The goodwill which has been the subject matter of sale is nothing
more than the probability that the old customer will resort of the old place.
 Lord Macnaghten: It is the whole advantage, whatever it may be, of
reputation or connection of firm
• Object – to protect the interest of the a purchaser of goodwill.
• It is difficult to imagine that when the goodwill and trade of a retail shop were
sold, the vendor might the next day set up a shop within few doors to draw off all
customers.
• Therefore some restrictions on the liberty of seller becomes necessary.
• Limits of Restraint – The agreement has to specify the local limits of restraint.
Exceptions to Agreement in Restraint of Trade
JUDICIAL INTERPRETATIONS
• Trade Combinations
Kores Mfg Co. Limited v. Kolok Mfg Co Ltd [1959 Ch 108]
Facts:
• Two companies were engaged in manufacturing similar products involving technical process
in which the employees were likely to acquire knowledge of trade secrets and confidential
information.
• The companies agreed that neither would employ, without the written consent of the other any
person who had been the employee of the other for any time during the previous five years.
Held – Agreement - Void
• It prohibited the appointment of any person by any one company or the other who had been in
the service of one or the other for any period, however short and in any manual labourer who
might have been employed even for a single day as to one who might have resigned; as much
to lay an employee as to one who might have acquired confidential knowledge.
Exceptions to Agreement in Restraint of Trade
JUDICIAL INTERPRETATIONS
• Exclusive Dealing agreements
 Where the producer or manufacturer likes to market his goods through a sole
agent or distributor and the latter agrees in turn not to deal with the goods of
any manufacturer
• Restraints upon Employment
 Agreements of service often contains negative covenants preventing the
employee from working elsewhere during the period covered by agreement as
they have ‘objective knowledge’ of Trade secrets, names of customers.
 But an agreement to restrain an employee from competing with his employer
after termination of employment may not be allowed by the courts.
Exceptions to Agreement in Restraint of Trade
JUDICIAL INTERPRETATIONS
• Restraints upon Employment
Niranjan Shankar Golikari v. Century Spinning & Manufacturing Company Limited
[AIR 1967 SC 1098]
Facts:
• A Company manufacturing tyre cord yarn was offered collaboration by a foreign producer on
the condition that the company shall maintain secrecy of all the technical information and that
it should obtain corresponding secrecy arrangements from its employees.
• The defendant was employed for 5 years on the condition that during this period he shall not
serve anywhere else even if he left the service earlier.
Issue: Whether the agreement is valid?
Exceptions to Agreement in Restraint of Trade
JUDICIAL INTERPRETATIONS
• Restraints upon Employment
Niranjan Shankar Golikari v. Century Spinning & Manufacturing Company Limited
[AIR 1967 SC 1098]
Issue: Whether the agreement is valid?
Held: Yes
• Restrictions that are to operate only while the employee is contractually bound to serve his
employer are never regarded as being in restraint of trade, at common law, or under Section
27.
• Therefore, where a clause imposes a partial restraint, prohibiting the employee from
performing services in the same area of business, as that of the employer, during the stipulated
period of the agreement, such restraint would not violate Section 27.
AGREEMENTS IN RESTRAINT OF
LEGAL PROCEEDINGS
Agreement in Restraint of Legal Proceedings
Section 28: Agreements in restraint of legal proceedings, void. — every
agreement—

(a) by which any party thereto is restricted absolutely from enforcing his rights
under or in respect of any contract, by the usual legal proceedings in the ordinary
tribunals, or which limits the time within which he may thus enforce his rights; or

(b) which extinguishes the rights of any party thereto, or discharges any party
thereto, from any liability, under or in respect of any contract on the expiry of a
specified period so as to restrict any party from enforcing his rights, is void to that
extent.
Agreement in Restraint of Legal Proceedings
Exception 1.—
Saving of contract to refer to arbitration dispute that may arise. —This section shall
not render illegal a contract, by which two or more persons agree that any dispute
which may arise between them in respect of any subject or class of subjects shall be
referred to arbitration, and that only the amount awarded in such arbitration shall be
recoverable in respect the dispute so referred. 

Exception 2.—
Saving of contract to refer questions that have already arisen. —Nor shall this section
render illegal any contract in writing, by which two or more persons agree to refer to
arbitration any question between them which has already arisen, or affect any
provision of any law in force for the time being as to references to arbitration.
Agreements in Restraint of Legal Proceedings
• English Law: An agreement to oust the jurisdiction of court is illegal and void on
the grounds of public policy.
• Thus any clause in an agreement providing that neither party shall have the right to
enforce the agreement by legal proceedings is void.
• Section 28 renders void:
 An agreement by which a party is restricted absolutely from enforcement of his
legal rights arising under a contract by the usual legal proceedings in the
ordinary tribunals.
 An agreement which limits the time within which the contract rights may be
enforced.
Agreements in Restraint of Legal Proceedings
RESTRICTION ON LEGAL PROCEEDINGS
• Compromise out of Court ?
 Doesn’t violate Section 28 as a settlement is arrived without the interference of
the court.
 Parties are free to go to court in the event of any concern with the settlement.
• Limitation of Time ?
 An attempt made by parties to restrict the time within which an action may be
brought so as to make it shorter than that prescribed by the law of limitation.
 For eg:
 Limitation Act – Action for breach of contract should be brought within 3 years from
the date of breach.
 An Agreement for cessation of this right post 2 years is void.
Agreements in Restraint of Legal Proceedings
RESTRICTION ON LEGAL PROCEEDINGS
• Amendment of 1997 – All clauses which reduced the normal period of limitation
would be void to that extent.
• Partial Restriction as to Jurisdiction –
 Section 28 applies to absolute or partial restriction imposed upon the right to
sue.
 A partial restriction limiting jurisdiction is valid

Continental Drug & Co Limited v. Chemoids & Industries Limited [AIR 1955 Cal 161]
Facts:
• The contract in question fell under the concurrent jurisdiction of both the Bombay & Alipore
courts, but the contract provided that any dispute shall be decided in Bombay
Held: Clause – Valid – If there are two courts which are equally competent to try the suit an
agreement restricting the jurisdiction will not an absolute restriction from recourse to law.
Agreements in Restraint of Legal Proceedings
RESTRICTION ON LEGAL PROCEEDINGS
• Foreign Jurisdiction – International Commercial Contract often provide for foreign
jurisdiction to resolve disputes.
• Only foreign courts will have exclusive jurisdiction.
Agreements in Restraint of Legal Proceedings
EXCEPTION
• Arbitration
 Sec 28 doesn’t apply to contracts where in parties have agreed to refer their
disputes to arbitration.
 When parties agree – arbitration becomes the first recourse
 Parties can always challenge the arbitral award at the courts.
• Reference of Existing Questions to Arbitration
 Applies to contracts to refer the disputes to arbitration
 Refers to disputes arises after a contract enters into force.
 Saves contracts to refer to arbitration questions that have already arisen.
AGREEMENTS VOID FOR
UNCERTAINITY
Section 29: Agreements void for uncertainty.—Agreements, the meaning of which is not
certain, or capable of being made certain, are void

 Crucial for every agreement in order to be binding must be sufficiently definite to enable the court to
give it a practical meaning.
 Its terms must be so definite or capable of being definite without further agreement of the parties.
 Promises and performances rendered by the parties are reasonably certain.

Guthing v. Lynn [(1832) 2 B & Ad 232]

Facts: A horse was bought for a certain price coupled with a promise to give $5 more if the horse
proved lucky.
Held: Agreement – Void - The court has no machinery to determine what luck, good or bad, the
horse had brought to the buyer.

Partial Uncertainty – Capable of being made certain

• Where only a part or a clause of the contract is uncertain, but the rest is capable of bearing a reasonably
certain meaning, the contract will be regarded as binding.
WAGERING AGREEMENTS
 Wagering Agreements
Section 30 - Agreements by way of wager, void.—Agreements by way of wager
are void; and no suit shall be brought for recovering anything alleged to be won
on any wager, or entrusted to any person to abide the result of any game or other
uncertain event on which any wager is made.
Exception in favor of certain prizes for horse-racing.—This section shall not be
deemed to render unlawful a subscription or contribution, or agreement to subscribe or
contribute, made or entered into for or toward any plate, prize or sum of money, of the
value or amount of five hundred rupees or upwards, to be rewarded to the winner or
winners of any horse-race.
Section 294A of the Indian Penal Code not affected.—Nothing in this section shall be
deemed to legalize any transaction connected with horse-racing, to which the
provisions of section 294A of the Indian Penal Code (45 of 1860) apply. 
Wagering Agreements
 Section 30 doesn’t define ‘wager’.
 Sir William Anson – a Promise to give Money or Money’s worth upon the
determination or ascertainment of an uncertain event
 Carlill v. Carbolic Smoke Ball Company – Elements of a Wager
 Defendants: This agreement by way of wager is void.
 Justice Hawkins – A wagering agreement is one by which two persons professing to hold
opposite views touching the issue of a future uncertain event, mutually agree over to him,
a sum of money or other stake; neither of the contracting parties having any other
interest in that contract than the sum or stake he will so win or lose, there being no other
real consideration for the making of such contract by either of the parties.
 It is essential to a wagering contract that each party may under it may either win or lose.
 Whether he will win or lose is dependent on the issue of the event and therefore remaining
uncertain until that issue is known.
 If either parties may win but cannot lose, it is not a wagering agreement.
Wagering Agreements – Elements
 Uncertain Event –
 Performance of the bargain must depend upon the determination of an uncertain event.
 Mutual Chances of Win or Loss
 Each Party should stand to win or lose.
 Neither Party to have control over the Event
 No other interest in the event
 This element distinguishes a contract of wager from insurance.
 Insurance agreement – have insurable interest i.e. the risk of loss to which the assured is
likely to be exposed by the happening of that event assured against.
 In a wager – neither party is running the risk of loss except that which is created by
the agreement itself.
 Speculative in Nature: But every speculation need not be wager.
Wagering Agreements – Effects
 Void – Cannot be enforced in any courts of law

Gherulal Parekh v. Mahadeodas [AIR 1959 SC 781]

Held:
• Though a wager is void and enforceable, it is not forbidden by law.
• Not unlawful under Section 23.
• Therefore transactions collateral to the main transactions are valid.

 For eg: an agent who paid the losses under a wagering transactions was allowed to
recover the amount paid by him from the Principal.
 Lottery : An agreement for payment of prize money on a lottery ticket comes within
the category of wagering agreement – MP HC
Wagering Agreements – Exceptions
 Horse Race –
 Section 30 doesn’t render void a subscription or contribution or an agreement to
subscribe or contribute towards any plater, prize or a sum of money, of the value or
amount of Rs. 500/- or upwards to the winner or winners of any horse races.
 Crossword Competitions
 English Law: If a skill plays a substantial part in the result and the prizes are awarded
according to the merits of the solution, the competition is not a lottery.
CONTINGENT AGREEMENTS
Contingent Agreement
Section 31 - “Contingent contract” defined.—A “contingent contract” is a contract to
do or not to do something, if some event, collateral to such contract, does or does not
happen.

 Conditional Contract – Condition of which is uncertain in nature

 For eg: A promise to pay a sum if somebody else contracts a disease – Valid
 For eg: a Promise to pay a sum of money upon X’s death – Not a contingent
contract as the event is certain
 Contracts of Insurance
 Contingency to be Collateral to the Contract
 Even though a contract has arisen, its performance cannot be demanded unless
the contemplated event happens or does not happen.
Contingent Agreement
 Contingent Contract v. General offer – acceptance of which depends upon fulfilment
of condition precedent.
 When contingency is dependent on the will of a third person
 Contingency to be Condition Precedent : Condition which is collateral to the
performance of contract is a condition precedent
Section 32: Enforcement of contracts contingent on an event happening.—Contingent contracts
to do or not to do anything if an uncertain future event happens, cannot be enforced by law
unless and until that event has happened.
If the event becomes impossible, such contracts become void.

A Contract
When performance depends
to do an act on on happening
the happening of a Ifofthe
an Event - 2 principles
happening of that event has become
future uncertain condition cannot be enforced impossible, the contract becomes void.
unless & until that event happens
Contingent Agreement
Section 33: Enforcement of contracts contingent on an event not happening.—Contingent
contracts to do or not to do anything if an uncertain future event does not happen, can be
enforced when the happening of that event becomes impossible, and not before. 

 When performance depends on Non-happening of an Event

 The parties have to wait till the happening of that event becomes impossible
 When such circumstances come to show that the event cannot happen any more,
then only the performance of the contract can be demanded.
Contingent Agreement
Section 34: When event on which contract is contingent to be deemed impossible, if it is the
future conduct of a living person.—
If the future event on which a contract is contingent is the way in which a person will act at an
unspecified time, the event shall be considered to become impossible when such person does
anything which renders it impossible that he should so act within any definite time, or otherwise
than under further contingencies. 

 Events linked with Human Conduct

 Where performance or non-performance in a contract depends upon the way certain
person acts in a certain way, the event shall be considered to have become
impossible if that person does something which it makes impossible
Frost v. Knight [(1872) LR 7 Exch 111]
Facts: The defendant had promised to marry the plaintiff upon the death of her father. While the
father was still alive, the defendant married another woman.
Held: Plaintiff was entitled to sue Defendant, as due to this marriage with another woman,
he cannot marry the plaintiff anymore.
Contingent Agreement
Section 35: When contracts become void, which are contingent on happening of specified
event within fixed time.—

Contingent contracts to do or not to do anything, if a specified uncertain event happens

within a fixed time, become void if, at the expiration of the time fixed, such event has not
happened, or if, before the time fixed, such event becomes impossible. 

When contracts may be enforced, which are contingent on specified event not happening
within fixed time.—

Contingent contracts to do or not to do anything, if a specified uncertain event does not

happen within a fixed time, may be enforced by law when the time fixed has expired, and
such event has not happened, or before the time fixed has expired, if it becomes certain that
such event will not happen. 
Contingent Agreement
Section 36 : Agreements contingent on impossible event void.—

Contingent agreements to do or not to do anything, if an impossible event happens, are

void, whether the impossibility of the event is known or not to the parties to the
agreement at the time when it is made.