LAWFUL OBJECT & CONSIDERATION

Explain the provisions as to the lawful consideration and lawful object as enumerated under section 23 of the Indian Contract Act 1872.

Meaning of “Object”- The term “object” means the motive, purpose, or design for which it is entered into.
The consideration for a contract may be lawful while its object at the same time may be unlawful.

Definition of “Consideration”-
Section2(d):-When, at the desire of the promisor, the promisee or any other person:
has done or abstained from doing something, or
does or abstains from doing something, or
promises to do or to abstain from doing something.

Such an act or abstinence or promise is called a consideration to the promise.
Example- A promises to sell his house to B for 10000 Rs. The object is the house and the consideration is 10000/-

Section 23 provides that, 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.
Forbidden by law- An act is said to be forbidden by law if-

1. It is punishable by the criminal law of the country.
2. It is prohibited by special legislation or regulations made by a competent authority
   In the case of Gherulal Parakh vs. Mahadeodas Maiya, it was held that the word “forbidden by law” is not the synonym of the word “void”, therefore it is not necessary that whatever is void is forbidden by law.

In the case of Sita Ram vs. Kunj Lal, it was held that agreements for sale or purchase above the standard price fixed by the relevant law (e.g. Essential Commodities Act,1955) with regard to controlled articles are illegal and hence void.

Defeat the provision of any law- Object or consideration of an agreement is of such a nature that, though not directly forbidden by law, it would indirectly lend to a violation of law, whether enacted or otherwise (e.g. Hindu and Mohammedan Laws). Such an agreement is also void.
Example- 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.

In the case of Rama Murthy v. Gopayya (1917), it was held that an agreement by the debtor not to raise the plea of limitation, should a suit have to be filed, is void as tending to limit the provisions of the Limitation Act 1963.

Fraudulent– An agreement whose object or consideration is to defraud others, is unlawful and hence void.
Example- 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.

Injury to a person or property of another– An agreement that involves causing injury to a person or property of a third party is void and cannot be enforced by court and therefore, no claim is sustainable for the breach of such an unlawful agreement.

In the case of Clay v. Yates, it was held that an agreement involving the publication of a libel (Defamatory statement) is unlawful and void as it causes injury to a person’s reputation.

Immoral– An agreement whose object or consideration is immoral, is illegal and therefore void. The definition of the word immoral has been kept limited only to those acts which the court regards as immoral.

• Circumstances where an object or consideration is immoral are-

1. Sexual immorality e.g., illicit cohabitation or concubinage or prostitution-
   Example- A, agrees to let her daughter hire B for concubinage. The agreement is void, because it is immoral, though the letting may not be punishable under the Indian Penal Code.
2. Furtherance of Sexual immorality-
   In the case of Pearce v Brooks 1866, A prostitute was sued for the hire money of a carriage in which she used to go every evening in order to make a display of her beauty and thus to attract customers.
   The suit was dismissed on the ground that the plaintiff contributed towards the performance of an immoral and illegal act and hence he was liable to suffer.
3. Interference with marital relations-
   In the case of Bai Vijli vs. Nansa Nagar, money advanced to a married woman to enable her to procure a divorce and to marry the plaintiff could not be recovered as the object of the agreement was held immoral
4. Acts which are against good public morals-
   In the case of Wilson v Carnley 1908, an agreement for future marriage, after the death of the first wife is against good morals and hence would be void.

Against Public Policy- Public policy refers to the principles and interests that serve the welfare and well-being of the general public.
When an agreement has the potential to harm or directly conflicts with public interest or public welfare, it is considered against public policy, lacks legality of the object and is therefore void.
It has also been described as an “Unruly horse”.

• Circumstances where an object or consideration is against the public policy-

1. Trading with the enemy during times of war.
2. Stifling the prosecution (preventing or obstructing someone from reporting or filing a case).
3. Maintenance and champerty- Maintenance refers to providing financial support to someone to file a lawsuit, even if that person has no legitimate interest in the case. Champerty involves an agreement where a third party provides financial assistance for litigation to gain a share of the proceeds.
4. Agreements that restrain personal liberty
5. Agreements that restrain parental rights.
6. Agreements to create a monopoly.
7. Agreements to interfere with the course of justice.
8. Agreements in restraint of trade.
9. Agreements in restraint of marriage.
10. Brokerage contracts.