LEGALITY OF OBJECT

Section-23 What considerations and

objects are unlawful, and what are not

The considerations or objects of an agreement is lawful,

unless-
It is forbidden by law;
Is of such a nature that, if permitted, it would defeat the
provision of any law; or is fraudulent; or
Involves 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.
Illustrations (a) to (k)
 Unlawful Object And
Consideration
The consideration or an object of an agreement
will be said to be unlawful in the following
circumstances where:
(1) It is forbidden by law;
(2) Would defeat the provision of any law;
(3) Is fraudulent;
(4) Involves or implies injury to the person or
property of another;
(5) Is immoral;
(6) Is opposed to public policy.
(1) It is forbidden by Law
Where the object of an agreement is forbidden
by law the agreement is void. Law for this
purpose means the Law for the time being in
force in India and the law is not restricted to
codified law but also includes principals of
unwritten law. Acts punishable by Indian Penal
Code 1860 and those prohibited by special
legislature, are the ones forbidden by law.
Example –sale of liquor without license is
unlawful.

Similarly carrying on liquor business in

breach of the conditions of license, eg.,by
subletting of license.
▪ Sita Ram v. Kunjlal AIR 1963 ALL206,
▪ a contract for the sale of jaggery powder (a
form of gur) above control price was held to
be unlawful because ‘it was tainted with all
that anti social desire against which the
Control Order attempted to fight.’
2. Defeat the provision of any law

Second clause to section 23 covers the case

where the agreement is not as such forbidden
by law but is of such a nature that, if
permitted, it would defeat the provisions of any
statute, Hindu Law, Mohammedan Law or
other rule of law for the time being in force.
The consideration or the object of such
agreement being unlawful, and hence void.
Illustration (i)
▪ In Narayan v. Gopalrao (1992) 24 Bom L.R
414, it was held that accepting a son in
adoption in consideration of a sum of
money is unlawful as the agreement defeats
the provisions of Hindu Law.
3. If it is Fraudulent

An agreement made with a fraudulent

object is void. Illustrations (e) & (h) to sec
23. Agreements to defraud creditors and
cases of collusive agreements mostly come
under this clause.
 4.If it involves or implies
injury to the person or property
of another
An agreement the object or consideration of which is to
injure the person or property of another is unlawful.
Accordingly, an agreement to commit a crime or civil
wrong is unlawful.

For eg., an agreement to indemnify a person against

the consequences of tortious act like publication of
libel is unlawful under this clause. Similarly an
agreement to commit a crime like assault is unlawful
5.If the court regards it
immoral
An agreement is unlawful if the court regards it
as immoral. It is not required that the act must be
punishable under any law provided it is generally
accepted to be against the morals of the society.
If court regards it as opposed
to public policy
An agreement is unlawful if court regards it
opposed to public policy. It broadly means
public good or public interest. Agreement
having tendency to injure public interest or
public welfare is opposed to public policy.
Injury to public interest or welfare would
depend upon prevailing social values.
Heads of Public Policy-

1. Trading with Enemy- Commercial transactions

and correspondence during the war with
enemy, except with the permission of the
central government ,is illegal.

2. Trafficking with Public Offices- An agreement

which tends to interfere with public offices, is
unlawful. The purpose of this head of public
policy is to discourage agreement which tend
to interfere with the discharge of public duties
and functions. Illust-(f)
3. Interference with Administration of
Justice-A Contract the object of which is to
interfere with the administration of
justice,is opposed to public policy. It may
take any of the following forms:

(a) Interference with the Court of Justice-

An agreement which obstructs the
ordinary process of justice is void. For
example, an agreement to induce a person
to give false evidence is unlawful.
▪ (b) Stifling Prosecution- An agreement to
stifle prosecution,ie.,to prevent proceeding
already running in normal course or to
compromise a prosecution is void. It is in
public interest that criminals should be
prosecuted and punished.
▪ Hence, an agreement not to prosecute an
offender or to withdraw a pending
prosecution is void if the offence is of public
nature. Such agreements are called to stifle
prosecution.
(c ) Abuse of legal process-Maintenance and
Champerty – Maintenance is defined as an
agreement whereby a person promises to
maintain a suit in which he has no interest.
Maintenance is more general term and is
applicable to the cases where a person
renders assistance to another by giving
money or other help for the purposes of
stirring up litigation in which he has no
interest.
▪ Champerty in its essence means ‘a bargain
whereby one party is to assist the other in
recovering property,and is to share in the
proceeds of the action.’
▪ But a fair agreement to assist a person in the
enforcement of his legal rights may be held
valid even if the person providing the
assistance is to be reimbursed out of the
proceeds of the action.
▪ When a person agrees to help the other by
money or otherwise in litigation in which he is
not himself interested, it is called
Maintenance.
▪ When a person helps the other in litigation in
exchange of a promise to hand over a portion
of fruits of the litigation ,if any, it is called
Champerty.
▪ Examples:
▪ A files a suit against B for the recovery of a
house . A did not have the money to pay to the
advocate. X a well wisher lends the required
money to A. this is maintenance agreement.
▪ A files a suit against B for the recovery of a
house. X promises to advance Rs 10000 to A for
the cost of litigation and A promises X a
portion of his house if he is successful in the
suit. This is champertous agreement.
4.Marriage Brokage agreement - An
agreement to procure the marriage of a
person in consideration of a sum of money
is called marriage brokage contract. Such
agreement are void.
▪ 5. Unfair or Unreasonable Dealings- The
basis of this head of public policy is that
where the parties are not economically on
equal footing and there is a wide gap in the
bargaining power of the parties, where one
of them is in a position to exploit and the
other is venerable and the contract made
with that other is apparently unfair, it can in
certain circumstances be regarded as
opposed to public policy.
▪ In Central Inland Water Transport Corp. Ltd
v. Brojo Nath Ganguly one of the conditions of
the service contract was that the services could
be terminated by a three months notice or
salary in lieu of notice period. This clause was
held to be against the public policy since it
enforce conditions on the employees and gave
arbitrary power to the employer of enforcing
naked hire and fire policy.