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Unit 1: Law of Contract

What is a Standard Form Contract? Notes

A standard form contract is a document which is generally printed, containing terms and

conditions, with certain blanks to be filled in. It is prepared by the business people. The customer
has only to sign it. Therefore, from his standpoint, the freedom to contract is restricted. Many of
the contracts now being entered into by consumers are not the result of individual negotiations;
rather they are one-sided contracts. The consumer has to accept them or leave them. Rather than

permit the form to be varied, the firm or industry imposing it simply refuses to deal with anyone
who will not accept its terms. A contract thus is imposed by a party having a strong bargaining
power on a party having a weak bargaining power. Hence, such a contract is known as a contract
of adhesion. Most contracts for photocopier machines, insurance, automobiles, telephone, water
and power connection and a host of other goods and services are contracts of adhesion. In fact,
the process of dilution of the freedom of the parties to contract has started in a big way and a time
might come when it shall only be a myth.

1.5 Illegal and Void Agreements

Sections 25 to 30 refer to cases in which the agreement is only void. Section 23 points out the cases
where the consideration of an agreement is unlawful, and the agreement is also void. Thus, every
illegal agreement is void, but every void agreement may not amount to illegal agreement.
An unenforceable contract is neither void nor voidable, but it cannot be enforced in the court
because it lacks some item of evidence such as writing, registration or stamping or where the
remedy has been barred by lapse of time. For instance, an agreement which is required to be
stamped will be unenforceable if the same is not stamped at all or is understamped. In such a
case, if the stamp is required merely for revenue purposes, as in the case of a receipt for payment

of cash, the required stamp may be affixed on payment of penalty and the defect is then cured and
the contract becomes enforceable. If, however, the technical defect cannot be cured the contract
remains unenforceable, e.g., in the case of an unstamped bill of exchange or promissory note. In
any case the contract may be carried out by the parties concerned; but in the event of breach or
repudiation of such a contract, the aggrieved party shall not be entitled to the legal remedies.

1.6 Distinction between Void Agreement and Voidable Contract

The following points of distinction are worth noting:
1. Legality. A void agreement is without any legal effect and hence cannot be enforced by
either party. A voidable contract, on the other hand, can be enforced by the party at whose
option it is voidable.
2. Enforceability. A void agreement is unenforceable from the very beginning, whereas a
voidable contract become unenforceable only when the party at whose option the contract
is voidable’ rescinds it.

Examples:
(i) A pays B ` 10,000 in consideration of B’s promise to sell him some goods. The goods had
been destroyed at the time of promise. The agreement is void and thus unenforceable.

(ii) A, a doctor, by exercising undue influence over his patient B induces him to sell his car
worth ` 1,50,000 for ` 1,00,000. It is a voidable contract at the option of B. If B rescinds the
contract, it becomes unenforceable; but if he does not, then the contract is enforceable.
3. Compensation. Under a voidable contract, any person who has received any benefi t must
compensate or restore it to the other party. The question of compensation in the event of
non-performance of a void agreement does not arise, as it is unenforceable from the very
beginning.

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