Bad Contracts etc. Q4


a) Void contracts.
b) Voidable contracts.
c) Illegal contracts.
d) Unenforceable contracts.

(20 marks, 2013 Q4)

Mistake in contract see below links.
2013 D02 Q8,
MIA QE 2012/3 Q1 (b) (iv),
Common and Mutual Mistake.

a) Void contracts.

A void contract cannot be enforced by law. Void contracts are different from voidable contracts, which are contracts that may be (but not necessarily will be) nullified. However, when a contract is being written and signed, there is no automatic mechanism available in every situation that can be utilized to detect the validity or enforceability of that contract. Practically, a contract can be declared to be void by a court of law.[1] So the main question is that under what conditions a contract can be deemed as void?

An agreement to carry out an illegal act is an example of a void agreement. For example, a contract between drug dealers and buyers is a void contract simply because the terms of the contract are illegal. In such a case, neither party can go to court to enforce the contract. A void agreement is void ab initio, i e from the beginning while a voidable contract can be voidable by one or all of the parties. A voidable contract is not void ab initio, rather, it becomes void later due to some changes in condition. In sum, there is no scope of any discretion on the part of the contracting parties in a void contract. The contracting parties do not have the power to make a void contract enforceable.[2]

A contract can also be void due to the impossibility of its performance. For instance, if a contract is formed between two parties A & B but during the performance of the contract the object of the contract becomes impossible to achieve (due to action by someone or something other than the contracting parties), then the contract cannot be enforced in the court of law and is thus void.[3] A void contract can be one in which any of the prerequisites of a valid contract is/are absent for example if there is no contractual capacity, the contract can be deemed as void. In fact, void means that a contract does not exist at all. The law can not enforce any legal obligation to either party especially the disappointed party because they are not entitled to any protective laws as far as contracts are concerned.

An agreement may be void if any of the following:

  • Made by incompetent parties (e.g., under the age of consent, incapacitated) Age of Majority Act.
  • Has a material bilateral mistake, S.21.
  • Has unlawful consideration (e.g., promise of sex), S.24.
  • Concerns an unlawful object (e.g., heroin), S.24,
  • Has no consideration on one side, S.26.
  • Restricts a person from marrying or remarrying, S.27.
  • Restricts trade, S.28.
  • Restricts legal proceedings, S.29.
  • Has material uncertain terms, S.30.
  • Incorporates a wager, gamble, or bet, S.31.
  • Contingent upon the happening of an impossible event, S.37.
  • Requires the performance of impossible acts, S.57.


Wikipedia search 'void contract', available at


b) Voidable contracts.

A formal agreement between two parties that may be rendered unenforceable for a number of legal reasons. Reasons that can make a contract voidable include failure by one or both parties to disclose a material fact; a mistake, misrepresentation or fraud; undue influence or duress; one party's legal incapacity to enter a contract; one or more terms that are unconscionable; or a breach of contract.

A voidable contract can be legally rejected by one party and is said to have a defect. If the party with the power to reject the contract chooses not to reject the contract despite the defect, the contract becomes valid and enforceable.

It is usually only one of the two parties who would be adversely affected by agreeing to a voidable contract if they had recognized the misrepresentation or fraud made by the other party. For example, the first party would not have agreed to the contract originally and has the opportunity to reject it after the fact. In contrast, a void contract is inherently unenforceable. An example would be a contract that violates the law, such as a murder for hire contract.

Investopedia search 'voidable contract', available at

Difference between 'Void Contract' and 'Voidable Contract' here.

c) Illegal contracts.

An illegal agreement, under the common law of contract, is one that the courts will not enforce because the purpose of the agreement is to achieve an illegal end. The illegal end must result from performance of the contract itself. The classic example of such an agreement is a contract for murder.

However, a contract that requires only legal performance on the part of each party, such as the sale of packs of cardsto a known gambler, where gambling is illegal, will nonetheless be enforceable. A contract directly linked to thegambling act itself, such as paying off gambling debts (see proximate cause), however, will not meet the legal standards of enforceability. Therefore an employment contract between a blackjack dealer and a speakeasy manager, is an example of an illegal agreement and the employee has no valid claim to his anticipated wages if gambling is illegal under that jurisdiction.

In Bovard v. American Horse Enterprises (1988),[1] the California Court of Appeal for the Third District refused to enforce a contract for payment of promissory notes used for the purchase of a company that manufactured drug paraphernalia. Although the items sold were not actually illegal, the court refused to enforce the contract for public policy concerns.

In Canada, one cited case of lack of enforceability based on illegality is Royal Bank of Canada v. Newell, 147 D.L.R (4th) 268 (N.S.C.A.), in which a woman forged her husband's signature on 40 cheques, totalling over $58,000. To protect her from prosecution, her husband signed a letter of intent prepared by the bank in which he agreed to assume "all liability and responsibility" for the forged cheques. However, the agreement was unenforceable, and struck down by the courts, because of its essential goal, which was to "stifle a criminal prosecution." Because of the contract's illegality, and as a result voided status, the bank was forced to return the payments made by the husband.

Contracts in restraint of trade are a variety of illegal contracts and generally will not be enforced unless they are reasonable in the interests of the contracting parties and the public.

Contracts in restraint of trade if proved to be reasonable can be enforced. When restraint is placed on an ex-employee, the court will consider the geographical limits, what the employee knows and the extent of the duration. Restraint imposed on a vendor of business must be reasonable and is binding if there is a genuine seal of goodwill. Under common law, contracts to fix prices are legal. Sole supplier ("solus") agreements are legal if reasonable. Contracts which contravene public policy are void.

d) Unenforceable contracts.

An unenforceable contract or transaction is one that is valid, but which the court will not enforce. Unenforceable is usually used in contradistinction to void (or void ab initio) and voidable. If the parties perform the agreement, it will be valid, but the court will not compel them if they do not.

An example of a transaction which is an unenforceable contract is a contract for prostitution under English law. Prostitution is not actually a crime under English law, although both soliciting a prostitute and living off the earnings of a prostitute are criminal offences [1] but so long as the contract is fully performed, it remains valid. However, if either refuses to complete the bargain (either the prostitute after being paid or the payer after receiving the services), the court will not assist the disappointed party.

Sometimes, contracts may only be enforceable one-way, and unenforceable the other way. Again, there is an example from the field of prostitution: In Germany, where prostitution is also legal, a law exists that—once a contract has been entered into—makes a prostitute's demands for payment legally enforceable (even via collection agencies and courts if necessary), while leaving the John's demands for fulfilment of the contract and rendition of sexual services unenforceable. German lawmakers made only the claims of prostitutes enforceable because they intended for the German prostitution law to protect only the prostitutes, without helping or furthering the interests of buyers of sexual services.

To impugn a contract means attacking the integrity of the contract. A way this can be done is by deeming the contract unenforceable. A contract can be said unenforceable when it goes against the statutes of fraud or the Statement of Goods Act.

Wikipedia search 'unenforceable', available at