Unlawful consideration

and object
UNDER CONTRACT LAW
 One of the essentials of a valid contract is that the
consideration and the object should be lawful. Under
Section 23 of the Indian Contract Act , 1872 the term
“object” indicates “purpose” and does not imply importance
in a similar sense as “consideration”. It is understood that
INTRODUCTI even if the consideration of the contract is legally valid but
ON the object of that contract is found to be unlawful in nature,
then the contract would be termed as invalid contract.
Similarly, if consideration, which has been defined under
section 2(d) of the Act, is found to be unlawful, then even if
the object of the contract is legally valid, the contract would
be considered as an unlawful contract.
under section 23 of the Indian contract
act 1872 , the consideration of an
agreement is unlawful if THE
CONSIDERATION IS:
……………………………………………
…………………………………………..
1. Forbidden by law
•It is understood that if the consideration in a
contract is prohibited by law then it is considered to
be an unlawful consideration and the contract is said
to become invalid. An agreement to do what has
been prohibited by IPC or by other law can not be
enforced.
•A contract to pay some money if a crime or a tort is
committed is not enforceable.
2. Immoral in Nature

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 been declared void
by section 23.

Illustration: A lent money to B to get

divorced from her husband C. And
there was an agreement between A
and B, that if ‘B’ get divorced then ‘A’
will get married to ‘B’. But the court
ruled that A cannot recover money
from ’B’ as the contract is void due
to unlawful consideration.
3. Fraudulent
in nature
•A contract becomes invalid or
void by nature if the
consideration of the contract is
fraudulent in nature. To
understand the term fraud better
Section 17 of the Indian Contract
Act, 1872, can be referred to
which states that any act
committed by a party to a
contract with the intent to
deceive another party or to
induce that party in entering into
the contract.
•For example: Selling bogus plot
of land
4.   Injurious To Any
Person Or Property

• A Consideration is denied to be considered a

lawful consideration of a contract if the
consideration includes an act which involves
causing harm to any other person or property. It
can be understood with the simple example of a
person taking money as an object and in return as
a consideration killing a third person or
vandalising a third party’s property.  This type of
consideration can be broadly included under an
act forbidden by law as well since the
consideration includes an unlawful act. 
 •A Contract is said to become invalid or void in nature if the consideration of that contract is against
the essence of any rules already implemented in the country or if it intends to defeat the intention of
any rules in effect in the country at that time. Such a consideration is also termed as an unlawful

5. Defeat Any consideration.

•In the case ,Ram Sewak v. Ram Charan, the parties agreed to carry on business in partnership. The

Rules Already agreement provided that they would conceal some part of their business activity and would not
enter certain items in the books of accounts with a view to evading payment of income tax and sales
tax. One of the partners bought an action against others for accounts and also for the recovery of the
In Effect: amount due to him. His action was dismissed and it was held that the agreement was aimed at
defeating the provisions of Tax laws, it was opposed to public policy and, therefore, the same was not
enforceable.
 •The ultimate motive of the Indian judiciary is to maintain the essence of

6.Oppose natural justice in the community. In case the consideration of a contract is

oppressive of the public policy then such a consideration is said to be an
unlawful consideration and the contract becomes an invalid contract or void by
the public nature.
•Various examples can be discussed under this heading to further illustrate this

policies field, like:  Trading with the enemy of the country, or interfering with the courts,
or stifling a prosecution by removing evidence or witness and multiple other
things, etcetera.
Under the section 23 of Indian
contract act , the object of an
agreement is unlawful if The
object is:
……………………………………………
……………………………
1. Forbidden
by the law
•It is understood that if the object in a
contract is prohibited by law then it is
considered to be an unlawful object and the
contract is said to become invalid and void by
nature. It is important to note that for an act
forbidden by law to be counted as an
unlawful object it would generally include
acts that are explicitly punishable by the law
and it can also include those acts that are
prohibited through the medium of either
rules or regulations in the country.
•A simple illustration is sale of liquor without
license.
2.Immoral in Nature
•An object of a contract is considered to be an
unlawful one if it has been regarded as an
immoral act by the honourable court. In the case
of an immoral object, the contract would end up
being invalid and void. The law does not allow an
agreement tainted with immorality to be
imposed . What is “immoral” depends upon the
standards of morality prevailing at a particular
time and as approved by the courts.
•The simple illustration of immoral object is
interference in marital relations , dealing with
prostitutes, and illegal cohabitation.
3.Fraudulent in nature
•An agreement, the object of which is to defraud others is void.
Where the parties comply with practice a fraud on a 3rd
person, not a celebration to the contract, their agreement is
unlawful and void.
•  To render an agreement unlawful and void on the idea of
fraudulent object or consideration, the fraud, must, however,
be established beyond reasonable doubt and can’t be
supported mere suspicion and conjecture.
•For example , if A, B and C enter into an agreement for the
division among them of gains acquired, or to be acquire by
them by fraud. The agreement is void and object is unlawful.
4.Injurious To Any Person Or
Property
•Just as discussed under unlawful consideration an
object of a contract will be denied the status of a
lawful object of a contract if the object includes an
act which involves causing harm to another person
or property. It can be understood with the simple
example of a person taking money as a
consideration for the act of killing another person,
which would make it the object.  This type of an
object can be broadly included under an act
forbidden by law as well since the object here
includes an unlawful act.
5. Defeat Any Rules Already In Effect

•A Contract is said to become invalid or void in

nature if the object of that contract is found to be
against the essence of any rules already
implemented in the country or if it intends to defeat
the intention of any rules in effect in the country at
that time. Such an object is also understood as an
unlawful object.
•A person, who was elected as a sarpanch for a
period of five years, made an agreement with
another member that the latter would be given two
year term and the elected one, the remaining three
years. The agreement was held to be void as it would
have defeated the purpose and provisions of the
Punjab Panchayat Raj Act, 1994.''° An agreement to
secure votes in favour of a per son to enable him to
get elected to a statutory body in consideration of
sharing power or quiting office after specified period
was held to be violation of Section 8 of the
Advocates Act which prescribes a five year term of
office.'*
 ◦ For the betterment of the community, we prohibit certain contracts in the name of public policy. But in this case, we do not use
public policy in the broad sense. If that were the case, it would have motivated the individual’s personal freedom to enter into
contracts. Therefore, public policy is used in a limited scope for consideration and object of the law.

◦ So let’s look at some agreements that are against public policy: –

6. Opposing
◦ Trade with the Enemy: – Entering into a contract with the person of a country with which India is at war is a void
agreement. For example, a businessman who was contracting with a Pakistani citizen during the Kargil War.
◦ Stifling Prosecution: – This is universal that the natural course of law and such contracts are void. For example, A
agrees to sell land to B if he does not participate in criminal proceedings against him.

public
◦ Maintenance and Champerty: – Maintenance agreement is when a person promises to maintain a suit in which he
has no real interest. And when a person agrees to assist another party in litigation for damages or a portion of the
proceeds, then the Chomperty occurs.
◦ An agreement for traffic in public offices

policies ◦
◦
◦
Agreement to create a monopoly
An agreement for brokerage marriage for the rewards
Interference with the Courts: – An agreement which is intended to induce any judicial or state officials to do corrupt
work and interfere in legal proceedings.
 • For a contract to be considered as a valid
contract it is important to have a lawful
CONCLUSIO object and a lawful consideration. If either of
the two is found to be missing, the contract
N is to be found as invalid in total. To maintain
fairness in the society it is important to
follow the norms and in case of an unlawful
object or unlawful consideration, which in
turn would affect the society, this purpose
cannot be pursued.
 HIMANSHI

PRESENTE SIMRAN
SRIJANA
D BY TANYA
UJJWAL