Voidable agreement

2012 PLD 324 KARACHI-HIGH-COURT-SINDH Judicial Precedent

S. 9Contract Act (IX of 1872), Ss. 18, 19 & 21Civil Procedure Code (V of 1908), S.152 & O.XXIII, R.3Recovery of bank loanCompromise decree, modification ofIllegality and misrepresentationVoidable agreementDetermination

Defendant's challenge was directed towards compromise agreement on the ground that it was tainted by illegalities amounting to misrepresentations and hence liable to be modified

Validity

Remedy sought, i.e. relief under S.152, C.P.C., was only available against decree

Compromise decree and agreement were not the same thing

Relief under S.152, C.P.C. was available in respect of a compromise decree without compromise agreement being impugned at all

Correction of compromise decree was not the same thing as modification of compromise agreement

Power to "correct" decree did not confer any power to modify agreement, as the two matters were separate and distinct and must be so dealt with

None of the provisions of Ss.18 and 19 of Contract Act, 1872, invoked by defendant were applicable

High Court declined to modify decree passed earlier on the basis of compromise arrived at between the parties

Application was dismissed in circumstances.

2012 PLD 324 KARACHI-HIGH-COURT-SINDH Judicial Precedent

S.19Voidability of agreementPlea of fraud and misrepresen-tation

Aggrieved party is enabled under S.19 of Contract Act, 1872, to insist that contract be performed and that he be put in the position he would have been in, if the representation had been true

Aggrieved party would be interested in invoking S.19 of Contract Act, 1872, if he stands to gain by it.

2012 PLD 324 KARACHI-HIGH-COURT-SINDH Judicial Precedent

Ss. 39 & 40Contract Act (IX of 1872), S.10Voidable agreementEffectCourts, duty ofSuch agreement be avoided in its entirely or not at all, the same either stands or fail as a wholeCourt cannot make agreements for the parties, as that is the matter of parties and for them to decide

Paramount duty of court is to ascertain (on an objective basis) the intent of parties and real terms of agreement actually arrived at

Courts have developed fairly elaborate principle of interpretation of contracts in order to do so; it is the different matter from first finding the agreement voidable and then modify it in order to bring or keep it within the law

Some agreements contain what are known as severability clauses, which provide that if any one or more clauses of agreement is found to be void or illegal, the same does not affect the other clauses

To apply such provision is not to modify the contract, it is simply to give effect to what the parties themselves intended.