INDIAN CONTRACT ACT 1872: LAWFUL OBJECT BUSINESS

REGULATIONS

2.7LEGALITY OF CONSIDERATION AND OBJECT

For a valid contract it is essential that the object or consideration of the agreement must be
lawful. According to Sec. 23 of the Indian Contract Act, the objects and the consideration
of an agreement shall be unlawful in the following cases:
1. Where it is forbidden by law: As a matter of fact, an act is forbidden by law, when it
is punishable by criminal law of the country, or when it is prohibited by special legislation
or by the regulations made by a competent authority under power derived from the
legislature.
2. Where it defeats the provision of any law: It is of such nature that, if permitted, it
would defeat the provisions of law, e.g., purchase of land being sold for arrears of land
revenue by the defaulter, or an agreement by a debtor not to raise the plea of limitation in a
suit by the creditor.
3. Where it is fraudulent: If the two parties agree to practice a fraud on third party, then
the agreement between the parties is unlawful and void.
4. Where it is injurious either to the person or his property: It involves or implies
injury to the person or property of another, e.g., an agreement to indemnify a person
against the consequences of publication of a libel.
5. Where it is regarded as immoral: The term ‘immoral’ depends upon the standard of
‘morality’ prevailing at a particular place and time. If the consideration for the agreement
is an act of sexual immorality, for example, illicit co-habitation and prostitution, the
agreement is illegal.
6. Where it is opposed to public policy: The agreements that are injurious to the public
or which are against the public good or public welfare are void.