Section 65 Contract Act: Obligation of person who has received advantage under void agreement, or contract that becomes void

Section 65 of Indian Contract Act: Obligation of person who has received advantage under void agreement, or contract that becomes void

Official Bare Act Text

Override / Mandate Mens Rea (Intent) Actus Reus (Conduct) Punishment Limitation Monetary

Statutory Defined Terms in this Section: (Click any term for official legal definition)

Agreement Sec 2(e) Contract Sec 2(h) Void Agreement Sec 2(g)

Legal Commentary & Landmark Judgments: Section 65

When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom it was received. This provision codifies the equitable principle of restitution, preventing unjust enrichment when transactions fail for statutory invalidity or supervening impossibility.

Appointment & Institutional Framework: The statute encompasses two distinct commercial scenarios: agreements that were void from inception but only subsequently 'discovered to be void' (such as contracts entered into under a mutual mistake of fact under Section 20, or agreements suffering from undisclosed regulatory disqualifications), and valid contracts that subsequently 'become void' through supervening impossibility or frustration under Section 56.
Core Legal Standard: In commercial infrastructure disputes, terminated government tenders, and annulled corporate acquisitions, Section 65 guarantees the recovery of mobilization advances, advance deposits, and partial performance expenditures, distinguishing the restitution of benefits from the impermissible enforcement of void promises.

Key Landmark Precedents:

Kuju Collieries Ltd v. Jharkhand Mines Ltd (1974) 2 SCC 533: The Supreme Court held that Section 65 does not apply to agreements known to be void ab initio due to illegality under Section 23. Restitution is available only when the agreement is subsequently discovered to be void or becomes void by supervening events.
Tarsem Singh v. Sukhminder Singh (1998) 3 SCC 471: The Supreme Court held that where a sale agreement was discovered to be void due to bilateral mistake under Section 20, Section 65 mandated the refund of the earnest money and advance consideration to the purchaser.

Legal Commentary:

Whenever a commercial contract is struck down by a court for lack of authority, statutory invalidity, or frustrated under Section 56, Section 65 operates as the primary restitutionary vehicle to reclaim advance payments, earnest money, and equipment provided under the invalidated agreement.

Section 65: Obligation of person who has received advantage under void agreement, or contract that becomes void

Section 65 of Indian Contract Act: Obligation of person who has received advantage under void agreement, or contract that becomes void

Legal Commentary & Landmark Judgments: Section 65