Question

All contracts which are unlawful and void are known as

• A. Illegal contracts
• B. Nugatory contracts
• C. Voidable contracts
• D. None of the above

Hint:

Remember the hierarchy: All illegal agreements are void, but all void agreements are not illegal. Think of it as concentric circles: the inner circle is "Illegal Agreements," and the outer circle is "Void Agreements." An agreement in restraint of marriage (S. 26) is void but not illegal. An agreement to commit a crime is both illegal and void.

Answer 1

The Correct Option is A

Step 1: Understanding the Concept:
The Indian Contract Act distinguishes between agreements that are void and those that are illegal. While all illegal agreements are void, not all void agreements are necessarily illegal.
Step 2: Detailed Explanation:
- Void Agreement (Section 2(g)): An agreement not enforceable by law is said to be void. This can be for various reasons, such as lack of consideration, mistake of fact, or being in restraint of trade. A void agreement is a nullity from the beginning (\textit{void ab initio}) and has no legal effect. For example, an agreement with a minor is void.
- Illegal Agreement: An agreement is illegal if its object or consideration is forbidden by law, is fraudulent, involves injury to a person or property, or is regarded by the court as immoral or opposed to public policy (as defined in Section 23).
The key distinction is that illegal agreements carry a further taint. Not only is the main agreement void, but any collateral transactions associated with it are also void.
The question asks about contracts that are both unlawful and void. The term "unlawful" is synonymous with "illegal". Therefore, an agreement that is unlawful (illegal) is, by its nature, also void. The most precise term for such an agreement is an "illegal contract" or "illegal agreement".
"Nugatory" simply means of no force or effect, which is a synonym for void, but "illegal" is more specific about the reason for its invalidity. "Voidable" (Section 2(i)) means it is valid until repudiated by one of the parties.