Indian Contract Act, 1872

Legality of Consideration
and Object
Sec.10. Essentials to a contract
“All agreements are contracts, if they are made –
 by free consent of the parties, competent to contract,
 for a lawful consideration and
 with a lawful object, and
 not hereby expressly declared to be void.” -

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 S. 23 What considerations and objects are lawful, and what not

The consideration or object of an agreement is lawful,

unless-
1. 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 consideration. Every
agreement of which the object or 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.

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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

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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, sub-
lease of license or creation of partnership to run
liquor shop – agreement of partnership 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 party for
successfully removing his aircraft from Nigerian
territorial airspace. He did so without permission of
the Nigerian authorities and landed it in Ivory coast.
He did so under the belief that there was imminent
danger to the lives of the clients in Nigeria. Later, he
sued the client for fees.
Held: allowed to recover. Although court would not
normally enforce a contract to enable a party to benefit
from his criminal conduct, because to do so, would
offend public conscience.

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Fraudulent

• An agreement made for a fraudulent purpose to

deceive third parties is void

• Eg. Two decree holders - A, decree holder with

property attachment brought it to sale – agreed with B
to buy for lesser price and then pay him a sum –
property was knocked down to B 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 borrowed a sum of Rs. 100 and agreed to serve A 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 with 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 immorality-
1. 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
• Read
 Fender v St John-Mildmay

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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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 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.

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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

Trafficking Interference Unfair or

Trading with Marriage
in Unreaso-
with Administration Brokerage nable
Public
Enemy of contracts dealings
Office
justice

Interference
Maintenance
with Shifting and
Course Prosecution Champerty
of justice 22
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 Maintenance &
justice 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

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