Legality of Object: Sec.23

The consideration and objects of a contract are lawful, unless it –

(1) is forbidden by law – any act punishable under criminal law or any special legislation or regulations.

Example: (a) A promises to obtain for B employment in public service – B promises to pay Rs.1000 to A – unlawful consideration – void agreement.

(b) A promises to drop prosecution instituted against B for robbery – B promises to restore the value of things taken – unlawful object – void agreement.

Nandlal Vs. Thomas - A licensed under Excise Act to run liquor shop – Act forbade sale, transfer or sub-lease of licence or creation of partnership in running of shop – A took B into partnership - Held, agreement void as it would defeat the policy of the law if unapproved persons could find their way into working liquor shops.

(2) It defeats the provision of any law – though not directly forbidden by law.

Fateh Singh Vs. Sanwal Singh – accused required under Criminal Procedure Code to furnish surety of Rs.5000 for his good behaviour – he deposits sum with defendant and persuades him to become surety – after period of suretyship is over, accused sued defendant for the amount – Held, the intention in requiring a surety is that the surety shall at his own risk see to the appearance of the accused – the purpose of agreement defeated by agreement of above sort – agreement void.

Napier Vs. National Business Agency Ltd. – company employed N - weekly wages of £13 and weekly expense allowance of £6 – Held, the expense allowance a device to evade tax – agreement unlawful.

Alexander Vs. Rayson – A leased flat to R at rent of £1200 a year – two separate agreements entered into, one for lease at £450 and other for services connected with flat at £750 – A sued R for recovery of instalment of £750 – Held, agreement void as object was to deceive the municipal authorities – A could not recover - R entitled to remain in possession of flat for remainder of term of lease.

(3) It is fraudulent.

Example : A, B and C enter into agreement – for division of profits to be acquired by them by fraud – object is unlawful – void agreement.

Ram Nath Misra Vs. Rajendranath Sanyal - two decree-holders against the debtor – one of them, the plaintiff, got debtor’s property attached and brought to sale – agreed with defendant , a prospective buyer, that he would not bid against the defendant and defendant would pay him off – property sold to defendant at very low price – Held, the object of the arrangement was fraudulent as it deprived the other decree-holder of his claim amount which he could have got had the sale been competitive – plaintiff could not recover anything from defendant.

(4) It involves or implies injury to person or property of another – property includes both movable and immovable property.

Ram Swaroop Vs. Bansi Mandar – B borrowed Rs.100 from R – executed bond promising to work for L without pay for two years – in case of default, B to pay principal plus exorbitant interest at once – Held, contract void as it was indistinguishable from slavery which involved injury to person of B.

Gherulal Parakh Vs. Mahadeo Dass – agreement between some persons to purchase shares in a company – intended to deceit to induce other persons to believe that there was bona fide market for the shares – Held, agreement void.

(5) Involves immorality

Baivijli Vs. Nansa Nagar - money given to married woman to obtain divorce from her husband – lender intended to marry the woman – Held, agreement was immoral.

(6) Opposed to public policy – harmful to public welfare.

(i) Agreement of trading with enemy

(ii) Agreement to commit a crime.

W.H. Smith & Sons Vs. Clinton - A promises to indemnify a firm of printers and publishers of newspapers against consequences of any libel which it might publish in the newspaper – Held, it was an agreement to commit a crime and indemnity against it - A’s promise could not be enforced and the firm liable to pay damages for published libel.

(iii) Agreement which interferes with administration of justice – it is opposed to public policy – Examples – agreement to use improper influence of any kind with the judges and officers of justice – agreement not to prosecute an offender is for stifling (oppressing) prosecution.

(iv) Agreement in restraint of legal proceedings - Example - prohibiting any party from enforcing his rights under a contract – curtailing (restricting) the period of limitation prescribed by Law of Limitation – however agreement to refer a dispute to arbitration is valid.

(v) Trafficking in public offices and titles or for procurement of public recognition like Padma Vibhushan etc. for monetary consideration.

NVP Pandian Vs. MM Roy - R paid Rs.15,000 to N who agreed to obtain a medical seat for R’s son – N failed to get the seat – R filed a suit for refund – Held, agreement against public policy – void agreement.

(vi) Agreement tending to create interest opposed to duty – anything against public or professional duty.

Example – A directs his agent B to buy particular house for him – B tells A that it cannot be bought for specific reason - buys the house for himself – against professional duty – A can compel B to sell it to him at the price B paid for it.

(vii) Agreement in restraint of parental rights –

(viii) Agreement restricting personal liberty.

Horwood Vs. Millar’s Timber & Trading Co. – A debtor agreed with money-lender not to leave his job or borrow money or dispose of his property or change his residence without lender’s written consent – held, void agreement as restricting personal freedom.

(ix) Agreement in restraint of marriage, other than a minor, is void.

Lowe Vs. Peers – P promised to marry L only and none else –to pay £.2,000 to L if he married someone else – P married X - Held, L could not recover the agreed sum as agreement in restraint of marriage

(x) Marriage brokerage agreement.

(xi) Agreements interfering with marital status.

(xii) Agreement to defraud creditors or revenue authorities.

(xiii) Agreement in restraint of trade – which interferes with liberty to engage in any lawful trade, profession or vocation – Sec.27.

Shaikh Kalu Vs Ram Saran Bhagat - out of 30 comb-makers in Patna city, 29 agreed to sell their output to R only and none else – R free to reject the goods if no market found for them – Held, the agreement restrained from exercising profession – void.

Madhav Chander Vs. Raj Coomar - M and R rival shopkeepers in a locality in Calcutta – R agreed to pay a sum of money to M if he would close his business in consideration – M closed down his business – R refused to pay and M filed a suit for recovery – Held, the agreement was void even though the restriction was a partial restriction, a restriction limited to some place.