NATIONAL UNIVERSITY OF STUDY AND

RESEARCH IN LAW
RANCHI

INDIAN CONTRACT ACT AND MORALITY

SUBMITTED BY- SUBMITTED TO-

Harsh Anmol Ms. Atibha Vijaya Singh
Semester I (Section A) Visiting Faculty
Roll Number- 1106 Contract- I
Table of Contents
Introduction ................................................................................................................................3
The History of Immorality...........................................................................................................3
Immoral Agreements ...................................................................................................................5
Agreements to facilitate divorce ..............................................................................................5
Contracts involving indirect promotion of immorality .............................................................5
Agreements for Cohabitation ...................................................................................................6
Agreements to buy minors for the purpose of prostitution........................................................7
The scope of word ‘immoral’ after N.K. Garg’s case ...................................................................7
Conclusion ..................................................................................................................................8

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Introduction
Section 10 of the Indian Contract Act, 1872 talks about what agreements are contracts. It states,
“All agreements are contracts if they are made by the free consent of parties competent to
contract, for a lawful consideration and with a lawful object, and are not hereby expressly
declared to be void.1”

So, one of the most important essentials, according to the Contract Law, for any contract to be
valid, is the legality of the object and consideration. The contract is based on the 'object' which is
the key purpose of the contract formation between the parties. It is also very necessary for a
‘Consideration’ also forms an important part of the contract and it is necessary that the
consideration upon which both the parties agree should be lawful and not illegal. An agreement
in which the object or the consideration is contrary to any statute and is against the provision of
the codified law, then it is held to be unlawful or void.

Section 23 of the Indian Contract Act, 1872 governs the legality of a contract and lays down the
criteria based on which the object and consideration of an agreement will be deemed to be
lawful. It states the following: “The consideration or object of an agreement is lawful, unless- it
is forbidden by law; or is of such a nature that if permitted, it would defeat the provisions of any
law; or is fraudulent; or involves or implies injury to the person or property of another; or 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.2”

One of the criteria of an agreement is that the object is based on immorality or is itself immoral.
In other words, if an agreement is tainted with immorality as there is either an immoral object or
a consideration, then such agreements in the eyes of the law are considered unlawful and void.

The History of Immorality

The rather subjective word immorality depends on the standards of morality that exist in a given
area and on the approval of court at that time. So there are certain acts once considered unethical
and contradictory to universal standards, and hence held by the courts as unenforceable, but at

1
Indian Contract Act, 1872, § 10, No. 9, Acts of Parliament, 1872 (India).
2
Indian Contract Act, 1872, § 23, No. 9, Acts of Parliament, 1872 (India).

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the same time there are acts which are still viewed as immoral and remain the same, however, as
the time has changed. In Andrew v. Parker3 it was stated that in order to judge the immorality of
an act, the current moral standards which prevail in the community should be used.

Initially, the contracts between the unmarried persons were deemed unenforceable and illegal for
promoting immorality. In Fender v. St. John-Mildmay4 it was held that an unethical and immoral
promise to live together without marriage, between an unmarried man and an unmarried woman
could not be enforced by law. Such agreements were termed as unlawful on the basis of
immorality. But the law has changed over the years and unmarried men and women are now
allowed to live together and have their domestic relationships. However, 'extra-marital'
cohabitation remains immoral and thus unenforceable. Furthermore, the gambling contracts were
traditionally held unenforceable and illegal for the purposes of their immorality. But as time
evolution, changes in current values have occurred and gambling in some parts of India has
become legal with the relaxation in moral values and laws5. Legal gambling is accepted under
some states like Sikkim and Goa to be enforceable, but illegal gambling is still unenforceable.

In the case of Gherulal Parakh v. Mahadeodas Maiya and Ors. 6 the court held that immorality
u/s 23 should be confined to cases of sexual immorality like agreements for concubinage, sale or
hire of things to be used in a brothel, marriage for consideration; agreements facilitating divorce,
etc. are all immoral in nature. This limitation on meaning of word ‘immoral’ as in S.23 is
because of reasons: Firstly, its juxtaposition with equally wide concept of ‘public policy’ in S.23
highlights legislative intent to give it a narrow meaning otherwise it will lead to overlapping of
two concepts; secondly, the phrase “Courts regard it as immoral” as in S.23 highlights
immorality is also a branch of common law and must be confined to principles recognized and
settled by Courts; Thirdly, case law in England and in India confines its operation to sexual
immorality. 7 Thus, the scope of immorality under Section 23 of the Indian Contract Act had been
restricted only to the cases dealing with sexual immorality. After this, only the agreements which
are contradictory to local 'sexual' moral standards were held illegal under immorality.

3
(1973) Qd. R. 93
4
(1938) AC 1, 42
5
Public Gaming Act, 1867, § 2, No. 03, Acts of Parliament, 1867 (India).
6
1959 AIR 781
7
Id at 3.

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Immoral Agreements

Agreements to facilitate divorce

The first types of contracts which fall under the definition of immorality include agreements
which the parties sign to obtain a divorce from a third party. Thus, in the case of Bai Vijali v.
Nansa Nagar 8 in which the plaintiff advanced loan to the defendant who was a married woman,
to enable her to obtain divorce from her husband and then marry the plaintiff, was held to be
unlawful and void for immorality and hence the amount of money lended was held to be
unrecoverable. Similarly, in the cases involving agreements between the parties where one party
has promised to marry the other on the death of their legal spouse or after obtaining divorce from
their partner are held to be immoral and hence considered unlawful.

The case of Shaw v. Shaw 9 is an exception. In this case it was held that if a woman is unaware of
the fact that the man to whom she promised or who has promised her is unmarried then an action
can be brought about by the woman for the breach of promise.

Contracts involving indirect promotion of immorality

Prostitution in India was considered legal in compliance with the Immoral Traffic (Prevention)
Act of 1956, but dealing with the prostitutes in any kind was still seen as immoral. So any deal
entered into by a party with a prostitute to deliver her goods to assist her in the profession is
considered illegal for immorality and the price paid is irrecoverable. In Pearce v. Brookes10 it
was argued that the coachbuilder, who was the plaintiff, was aware of the fact that the defendant
was a prostitute and he expected to be paid from the profits of prostitution. Therefore, he knew
the immoral purpose for which the carriage hired by the defendant was to be used. This was
based on the legal principle of ex turpi causa non oritor actio which means that no action can
arise from an immoral cause. So, it was held that the money to be gained by selling an article to a
prostitute on credit or by supplying them with goods on an incoming basis, which are intended to
support their occupation, cannot be recovered, because the agreement is immoral and therefore
unlawful and the plaintiff could not recover the amount.

8
ILR (1885) 10 Bom 152
9
(1954) 2 QB 429: (1954) 3 WLR 265 (CA)
10
(1866) LR 1 Exch 213

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According to the case of Upfill v. Wright 11 an agreement by which a landowner rents his
property to a prostitute, being aware of her profession, for the purpose of carrying on her
profession, will be regarded as immoral and hence the rent to be paid cannot be recovered. In
Aroomoogum Chitty v. Lim Ah Hang 12 it was held that the agreements entered into for lending
money in order to manage and operate the brothel often were deemed immoral and therefore the
loaned money was considered irrecoverable.

In Bowry v. Bennett13 the seller was refused the price of the clothes sold to a prostitute supposed
to obtain the price from her profession. Similarly in Smith v. White14 in the absence of the rent
payable by the brothel operator, the claim was dismissed because of an immoral contract and was
polluted by immorality. Therefore, knowledge of the other party's prostitution practice and the
reason for which the products he is providing are two crucial elements in making a contract with
a prostitute unlawful, on the grounds of immorality. On the other hand, in the case of Appleton v.
Campbell, a contract to lent residential space to a prostitute for the purpose of her residence and
not for carrying out her profession was considered a lawful contract and hence the owner of the
lodgings was entitled to recover the rent of the lodgings rented to her.

Agreements for Cohabitation

Since time immemorial, cohabitation has been considered immoral. The condition of living
together without any marital connection has always been seen as contrary to society's moral
standards. With the changes in time and social expectations, however, both being unmarried and
free of monetary considerations has become legal in India. This means that cohabitation is
protected by law until the parties enter into an agreement to pay for it. Therefore, any promise to
compensate for unlawful cohabitation is deemed unenforceable as being contradictory to moral
requirements.

The effectiveness of the promise to pay also depends on whether the payment is made for past or
future cohabitation. In Dhiraj Kaur v. Bikramjit Singh15, the difference in enforceability was seen
when the Allahabad High Court allowed a woman to recover arrears of allowance promised to

11
(1911) 1 KB 506
12
(1894) 2 S.S.L.R. 80
13
(1808) EngR 229
14
(1866) LR 1 Eq 626
15
ILR (1831) 3 All 787

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her for past cohabitation. But a few year later, in the case of Husseinali Casam v. Dinbai 16 thw
High Court of Bombay stated that a promise made to pay for past cohabitation and a future
cohabitation, is immoral in the eyes of the law and hence it is unenforceable. A contract to pay
for the immoral cohabitation cannot become correct on the moral grounds just because it was a
past cohabitation.

Agreements to buy minors for the purpose of prostitution

Accords entered into in order to buy or hire or to gain possession of someone younger than
eighteen years of age in order to perform an illicit intercourse with that person for the purpose of
brothel, i.e., are held void because they contravene the moral standards and are therefore illegal.
Accordingly, such deals in the eyes of the law become unenforceable.

The scope of word ‘immoral’ after N.K. Garg’s case

As immorality is a very broad word, it depends on the person's actions, which leads him away
from society's moral standards or norms which change over time. The law itself therefore
observed that no fixed criteria or a specific limit could be set to determine the degree of
immorality, since what is moral at one time can be held immoral at the other clearly because of
shifting social standards. However, the statute cannot at the same time have swept off the
spectrum of immorality and defined what contracts are viewed as immoral and therefore
unenforceable. In the Gherulal Parakh v Mahadeodas Maiya and Ors case of 1959, the only
factors that determined the fundamental scope of immorality are sexually immoral contracts,
because before this landmark case all the cases mentioned in immorality dealt only with sexual
immorality.

However, with the changing time and social standards, the courts felt that the spectrum of
unethical contracts no longer had to be limited solely to sexual immorality. In this way, the High
Court of Delhi passed a judgment that extended immoral contracts to include the agreements
which deprived parties of interest, in violation of the many judgements of the Supreme Court and
provided an example of judicial adventurism. This was the case of Union of India v. M/s N.K.
Garg & Co. in which it was held that illegally detaining other people's money for a very long
time would be absolutely unethical and against public policy.

16
AIR 1924 Bom 135

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With the Interest Act of 1978, the Court ruled that the definition of the immorality cannot be
limited to the instance of only sexually immoral contracts, with the weighing of morality in the
commercial agreements, but must be extended to include the interpretation of immorality in the
commercial contracts. The judge in today's world has not considered the unlawful retention of
money or the refusal to pay interest for a long time justified. Consequently, the Court held all
contractual arrangements which require the detention or interest of the principal money to be
payable to the other party, for very long periods of time, to be immoral.

Conclusion
A shift in the age is often evident when it comes to deciding what is immoral and therefore
unlawful. Consequently, a limitation on the nature of immoral contracts that is generally agreed
by the law is not possible. Immorality is a fluid definition that only the existing principles and
standards and recent judgements can decide. However, the outcome of an arrangement that is
immoral will still be the same, illegal and unenforceable.

Such agreements will never find protection under the law because of the application of Section
23 of the Indian Contract Act, 1872. With the time shift, though, the scope of the immoral
arrangements will remain unchanged, but never beyond the scope of section 23, rendering it
unlawful and unenforceable.

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