Indian Contract Act,
1872
Legality of
Consideration and
Object
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S. 23 What considerations and objects are
lawful, and what not
The consideration or object of an agreement is lawful,
unless1. It is forbidden by law; or
2. Is of such a nature that ,if permitted, it would defeat the
provisions of any law; or
3. Is fraudulent; or
4. Involves and implies injury to the person or property of
another; or
5. The court regards it as immoral, or opposed to public
policy.
In each of these cases, the consideration or object of
an agreement is said to be unlawful. Every agreement of
which the object or consideration is unlawful, is void.
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Illustrations
A agrees to sell his house to B for Rs. 10,000.
Here B's promise to pay the sum of Rs. 10,000 is the
consideration for A's promise to sell the house, and
A's promise to sell the house is the consideration for
B's promise to pay Rs. 10,000.
These are lawful considerations.
A promises to pay B 1,000 rupees at the end of
six months, if C, who owes that sum to B, fails to pay
it. B promises to grant time to C accordingly. Here
the promise-of each party is the consideration for the
promise of the other party.
They are lawful considerations.
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A promises, for a certain sum paid to him
by B, to make good to B the value of his ship if it
is wrecked on a certain voyage. Here A's promise
is the consideration for B's payment and B's
payment is the consideration for A's promise
These are lawful considerations.
A promises to maintain B's child and B
promises to pay A 1,000 rupees yearly for the
purpose. Here the promise of each party is the
consideration for the promise of the 'other party.
They are lawful considerations.
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A, B and C enter into an agreement for
the division among them of gains acquired, or
to be acquired, by them by fraud.
The agreement is void, as its object is
unlawful.
A promises to obtain for B an
employment in the public service, and B
promises to pay 1,000 rupees to A.
The agreement is void, as the
consideration for it is unlawful.
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A, being agent for a landed proprietor, agrees
for money, without the knowledge of his principal,
to obtain for B a lease of land belonging to his
principal.
The agreement between A and B is void. as it
implies a fraud by concealment, by A, on his
principal.
A promises B to drop a prosecution which he
has instituted against B for robbery, and B promises
to restore the value of the things taken.
The agreement is void, as its object is
unlawful.
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A's estate is sold for arrears of revenue
under the provisions of an Act of the
Legislature, by which the defaulter is
prohibited from purchasing, the estate. B,
upon an understanding with A, becomes
the purchaser, and agrees to convey the
estate to A upon receiving from him the
price which B has paid.
The agreement is void, as it renders the
transaction, in effect a purchase by the
defaulter, and would so defeat the object
of the law.
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A, who is B's mukhtar, promises to exercise
his influence, as such, with B in favour of C, and
C promises to pay 1,000 rupees to A.
The agreement is void, because it is immoral
A agrees to let her daughter to hire to B for
concubinage.
The agreement is void, because it is
immoral, though the letting may not be
punishable under the Indian Penal Code. (45 of
1860.)
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Analysis of S. 23
►Object
or Consideration
► The
section covers legality of consideration
and object as well.
► Object and consideration sometimes may be
different – both shall be lawful
► Eg. loan for child marriage – consideration
lawful but object unlawful -defeats the
purpose of CMRA
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Consideration
or object
Forbidden by law
Defeat the provision of any law
Fraudulent
Injury to person or property
Immoral/opposed public policy
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Forbidden by Law
► Object
of an agreement forbidden by law is void
► ‘Law’ – law in force in India, personal laws
unwritten principles of law
► Eg. Sale of liquor without license is void & price
irrecoverable
► Eg. License to run liquor shop – sale, transfer, sublease of license or creation of partnership to run
liquor shop – agreement of partnership void
► Eg. An agreement to by goods (jaggery powder)
above control price is void
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Defeat the provision of any law
► Object
or consideration of an agreement is such that
though it is not directly prohibited, if permitted,
would defeat the provision of any law, such
agreement is also void.
► Sundersingh v. krishnasingh
agreement by the accused with surety for providing
security under Cr. P.C.– void
► Agreement to defeat the law of a friendly country is
also void
► Foster v. Driscoll – Agreement to buy whisky in
Great Britain & to smuggle it in to US
 led to commission of offence in a foreign & friendly
country – breach of international comity – hence void.
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► But
innocent violation of municipal or foreign law which
may not offend public conscience, may not make the
agreement void
Howard v. Shirlaster Container Transport Ltd
Owner of an aircraft agreed with the pt for successfully
removing his aircraft from Nigerian territorial
airspace. Pt did so without permission of the Nigerian
authorities and landed it in Ivory coast. The pt did so
under the belief that there was imminent danger to
lives in Nigeria. Pt sued for fees –
Held: allowed to recover. Although court would not
normally enforce a contract to enable a pt to benefit
from his criminal conduct, because to do so, would
offend public conscience. There are circumstances, it
would be wrong to disqualify a person from
recovering, even though his conduct constituted
statutory offence.
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Fraudulent
► An
agreement made for a fraudulent purpose to
deceive third parties is void
► Eg. Agreement with debtor and creditor that the
creditor would get separate commission for inducing
other creditors to enter into composition of their
debts.
► Eg. Two decree holders - Pt, decree holder with
property attachment brought it to sale – agreed with
the dt to buy for lesser price and then pay him a sum
– property was knocked down to dt for a small price.
Held, agreement void, it deprived the other decree
holder of what he would have got if the sale had been
competitive.
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Injury to person or property
► An
agreement to injure the person or property
of another is unlawful and void
► Eg. A person barrowed a sum of Rs. 100 and
agreed to serve pt for 2 yrs without pay and in
case of default to pay the exorbitant interest
and principal at once.
Held, it involved slavery and unlawful and void
► agreement to commit assault, hurt,
defamation, etc
► Eg. Agreement of insurance – insured
committing suicide to help dependents
 void.
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Immoral
Agreement tainted immorality is not enforced
► “Immorality” depends on standards of morality
prevailing in a society at a given time and as
approved by courts.
► Instances of immorality1. Interference with marital relations
► Eg. Money lent to a married woman to enable her to
get divorce from her husband and promise to marry
the lender
 void
► Promise to marry a woman after her husband’s death
 void
►
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Immoral
Fender v. St. John – dt a married man told a
nurse that he was unhappy with his wife and
enquired whether she would marry him if his
wife divorces him – she consented, sexual
relations took place – dt’s wife secured decree
of divorce on the ground of adultery – dt
committed breach and married another
► HELD: pt was allowed to claim
compensation – circumstances leading to
mischief were absent hence not immoral.
►
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2. Dealings with Prostitutes
►
►
►
►
►
Always considered immoral
Eg. sale/hiring of goods to a prostitute for
enabling her to carry on her business
void
Landlord knowingly letting his house for
carrying on the business of prostitution
void
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3. Illegal cohabitation
►
►
England – past consideration not valid – if
promise in writing to pay for illegal
cohabitation
India – promise to pay for-
Adulterous cohabitation, past/ present/future – void
ii. Future cohabitation – void
iii. Past cohabitation to secure it in future – void
iv. Past cohabitation only – valid
i.
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Opposed to public policy
► An
agreement is unlawful if the court regards its
object or consideration as opposed to ‘public policy’
► ‘public policy’ – vague & unsatisfactory term.
► TEST: “the twin touchstones of public policy are,
 advancement of public good and
 prevention of public mischief.
These questions have to be decided by judges not as
men of legal learning but as experienced and
enlightened members of the community representing
the highest common factor of public sentiment and
intelligence”
► Eg. Surrender of rights, sale of seats in public offices,
etc.
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Heads of
Public Policy
Trading
with
Enemy
Trafficking
in
Public
Office
Interference
with
Course
of justice
Interference
with
Administration
of
justice
Marriage
Brokerage
contracts
Shifting
Prosecution
Maintenance
and
Champerty
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Unfair or
Unreasonable
dealings
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1. Trading with an enemy
► Object
of war is to cripple the commerce of
enemy country
► A declaration of war imports prohibition of
commercial intercourse and correspondence with
the inhabitants of enemy country.
► Illegal except with the permission of the Crown.
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2. Trafficking in Public offices
►An
agreement with a public officer to
act corruptly is contrary to public
policy.
►Agreement to provide money to a
parliamentarian to influence his
judgment
► sale of public offices in consideration
of money .
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3. Interference with Administration
of Justice
Interference
with course of
justice
Shifting
prosecution
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Maintenance &
Champerty
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4. Marriage brokerage contracts
► An
agreement to procure marriage of a person in
consideration of money – void
► Agreement for the sale of girl – void
► Attempt to make any material gain out of
marriage is equally opposed public policy and
void
► Gifts promised at the time of marriage – void
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5. Unfair and unreasonable dealings
Where► Parties economically are not on same footing
► Unequal bargaining power
► One in a position to exploit and the other is
vulnerable
► Bargain is apparently unfair
►Opposed
to public policy
► Eg. Service contracts.
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