Every contract must have a lawful consideration and a lawful object. Sections 23 and 24 of the Indian Contract Act, 1872 specify when the consideration or object of an agreement is unlawful, rendering the contract void.
SECTION 23: WHAT CONSIDERATION AND OBJECTS ARE UNLAWFUL
Section 23 of the Indian Contract Act, 1872 defines following conditions where the consideration is unlawful :
- Forbidden by law- When something is forbidden by law, an agreement to do that is unlawful. An agreement to do what has been prohibited by IPC or any other law cannot be enforced.
Case- Universal Plast Ltd. Vs. Santosh Kumar (AIR 1985 DEL 383)-The plaintiff sold spindles without required permission under the Essential Commodities Act. Court held the contract void and unenforceable.
- Defeat the provisions of any law- If the object or consideration of an agreement is of such a nature that, if it is permitted, it would defeat the provisions of any law, such an agreement is void. Such acts may not be expressly forbidden by law but if they result in circumventing any law, they cannot be encouraged.
Case- Sundara Gownder vs. Balachandran (AIR 1990 Ker 324)- The plantiff, an abkari contractor, was ineligible to participate in the auction. So he contracted with the defendant that the defendant should take some shops at the auction and transfer it to him. The plantiff paid some consideration amount to the defendant for this. The defendant failed to perform the agreement, then the plantiff filed a suit and it was held that it is a void agreement as it was intended to defeat provisions of a law.
- Fraudulent purpose- If the consideration or object of an agreement is to commit fraud, the agreement is void. A,B and C enter into an agreement for the division of profit obtained by them through fraud.
Case- Manni Ram vs Purshottam Lal (AIR 1930 ALL 732)- In this case plantiff knew that maybe railway company would not grant him contract. So, he entered into a contract with B that B should put forward an application for the contract and after the contract was served A will be serve as the real contractor. In this case it was held that, the contract between A and B are void, as the object of it was to commit fraud on railway company.
- Agreement injurious to person or property- If the consideration or the object of an agreement is to cause an injury to the person or property of another, the agreement is unlawful and therefore void.
- Immoral- If the consideration or object of an agreement is regarded by the court to be immoral or opposed to public policy, the agreement is unlawful and the same has also been declared void by Section 23.
Case- Bai Vijli vs. Nansa Nagar [(1885) 10 Bom 152]- In this case it was held that loan given to a woman to help her get a divorce and marry the lender was immoral and void.
- Opposed to public policy- If the court regards that the consideration or object of the agreement is opposing the public policy, the agreement is void. Public policy is not capable of any precise definition. It means the policy of law at a stated time.
Case- N.V.P. Pandian vs. M.M. Roy (AIR 1979 MAD 42)- In this case bribe to secure college admission was ruled void as it was opposed to public policy.
SECTION 24: PARTIALLY UNLAWFUL AGREEMENTS
“If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void.”
Key Principle:
- If lawful and unlawful parts of a contract can be separated, the lawful part may still be enforced.
- If they are inseparable, the entire agreement is void.
Case: Alice Mary Hill v. William Clarke [(1905) 27 All 266]– In this case the plantiff, a married woman, agreed to live in adultery with defendant and to do work as a houskeeper for which he agreed to pay the plantiff Rs. 50 per month. In this case the whole of the agreement is void because both the lawful and unlawful part are not separable from each other .
References:
- Indian Contract Act, 1872
- Contract Law-I by Dr. R.K. Bangia
