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Unlawful Contracts & Public Policy

The object and consideration of a contract become unlawful when: 1. They are specifically forbidden by law, of such a nature that they would defeat the purpose of the law, fraudulent, defeat any rules in effect, involve injury to any other person or property, or are regarded as immoral by courts. 2. Agreements that are opposed to public policy include trade with the enemy, stifling prosecution, maintenance and champerty agreements, agreements for traffic in public offices, agreements to create a monopoly, agreements for brokerage marriage for rewards, and agreements that interfere with courts. 3. Section 23 of the Indian Contract Act states that the consideration or object of a contract is considered valid unless it is

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158 views2 pages

Unlawful Contracts & Public Policy

The object and consideration of a contract become unlawful when: 1. They are specifically forbidden by law, of such a nature that they would defeat the purpose of the law, fraudulent, defeat any rules in effect, involve injury to any other person or property, or are regarded as immoral by courts. 2. Agreements that are opposed to public policy include trade with the enemy, stifling prosecution, maintenance and champerty agreements, agreements for traffic in public offices, agreements to create a monopoly, agreements for brokerage marriage for rewards, and agreements that interfere with courts. 3. Section 23 of the Indian Contract Act states that the consideration or object of a contract is considered valid unless it is

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Q.No.

1
Briefly state when the object and consideration of contract becomes unlawful?

Two things are necessary for a contract to be a valid contract i.e., a valid object and a valid
consideration. If they are not, hence it is Unlawful consideration.

Therefore the Indian Contract Act provides us with the parameters that make up such legitimate
considerations and objects of contract.

Section 23 of the Indian Contract Act clearly states that the consideration or object of a contract
is considered a valid consideration or object and if they are not, the object and consideration
shall be deemed to be unlawful.

The consideration and objects become unlawful when they are

1. Specifically forbidden by law


2. of such a nature that they would defeat the purpose of the law
3. which are fraudulent
4. defeats any rules in effect
5. involve injury to any other person or property
6. the courts regard them as immoral
7. Opposed to public policy.

Q.No.2
Which agreements are opposed to Public Policy? Explain it.

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.

Agreements that are against public policy: –

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.

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

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.

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