• Which considerations and objects are lawful,

and those which are not (Section 23):

The consideration or object of an agreement is
lawful, unless
1. It is forbidden by law; or
2. Is of such a nature that, if permitted, it would
defeat the provisions of any law; or
LEGALITY OF 3. Is fraudulent; or
4. Involves injury to the person or property of
OBJECT AND another; or
CONSIDERATION 5. The court regards it as immoral; or
6. 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.
In the following examples, the agreement is
void because the object is unlawful:
(1) 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, viz., acquisition of gains by fraud is unlawful.

(2) A promises to B to abandon a prosecution which he had instituted against B for robbery and B
promises in lieu thereof to restore the value of the property robbed. The agreement is void as its object,
namely, the stifling of prosecution, is unlawful.
• Section 10 of the Indian Contract Act provides for the legality of consideration and objects
thereto. Section 23 of the Act also states that every agreement of which the object or consideration is
unlawful is void.
• The following is an example of the agreement which is void because of unlawful consideration.
A promises to obtain for B an employment in the public service and B promises, in return, to pay Rs.
1,00,000 to A. The agreement is void, as the consideration thereof is unlawful. Here A’s promise to
procure for B an employment in the public services is the consideration for B’s promise to pay Rs.
1,00,000. The consideration, being opposed to public policy, is unlawful.
• Under Section 23 of the Indian Contract Act, in each of the following cases the consideration or object
of an agreement is said to be unlawful:

(i) When consideration or object is forbidden by law: Acts forbidden by law are those which are
punishable under any statute as well as those prohibited by regulations or orders made in exercise of the
authority conferred by the legislature.
• (ii) When consideration or object defeats the provision of law: The words ‘defeat the provisions of
any law’ must be taken as limited to defeating the intention which the law has expressed. The court
looks at the real intention of the parties to an agreement. If the intention of the parties is to defeat the
provisions of law, the court will not enforce it.
• Legislative enactment would be defeated by an agreement by a debtor not to plead limitation, as the
object is to defeat the provisions of the Limitation Act. The Hindu Law is defeated by an agreement to
give son in adoption in consideration of annual allowance to the natural parents
(iii) When it is fraudulent: Agreements which are entered into to promote fraud are
void. For example, an agreement for the sale of goods for the purpose of smuggling
them out of the country is void and the price of the goods so sold, cannot be recovered.

(iv) When consideration defeats any rule for the time being in force in India.

(v) When consideration involves injury to the person or property of another: The
general term “injury” means criminal or wrongful harm. In the following examples, the
object or consideration is unlawful as it involves injury to the person or property of
another.
• (1) An agreement to print a book in violation of another’s copyright is void, as the
object is to cause injury to the property of another. It is also void as the object of
the agreement is forbidden by the law relating to copyright.
(2) A promises to repay his debt by doing manual labour daily for a special period
and agrees to pay interest at an exorbitant rate in case of default.
• Here A’s promise to repay by manual labour is the consideration for the loan, and
this consideration is illegal as it imposes what, in substance, amounts to slavery
on the part of A.
• In other words, as the consideration involves injury to the person of A, the
consideration is illegal. Here, the object too is illegal, as it seeks to impose slavery
which is opposed to public policy. Hence, the agreement is void.
• (vi) When consideration is immoral: The following are the examples of
agreements where the object or consideration is unlawful, being immoral.
(1) A landlord cannot recover the rent of a house knowingly let to
prostitute who carries on her vocation there. Here, the object being
immoral, the agreement to pay rent is void.
(2) Where P had advanced money to D, a married woman to enable her to
obtain a divorce from her husband and D had agreed to marry him as soon
as she could obtain the divorce, it was held that P was not entitled to
recover the amount, since the agreement had for its object the divorce of D
from her husband and the promise of marriage given under these
circumstances was against good morals.
• (vii) When consideration is opposed to public policy: The expression ‘public
policy’ can be interpreted either in a wide or in a narrow sense. The freedom to
contract may become illusory, unless the scope of ‘public policy’ is restricted. In
the name of public policy, freedom of contract is restricted by law only for the
good for the community. In law, public policy covers certain specified topics, e.g.,
trading with an enemy, stifling of prosecutions, champerty, maintenance,
interference with the course of justice, marriage brokerage, sales of public offices,
etc. Agreements tending to create interest against duty, agreements tending to
create monopolies and agreements not to bid at an auction are also opposed to
public policy. An attempt to enlarge the scope of the doctrine is bound to result in
the curtailment of individual freedom of contract. Agreements opposed to public
policy Some of the agreements which are held to be opposed to public policy are
• (1) Trading with enemy: Any trade with person owing allegiance to a Government at
war with India without the license of the Government of India is void, as the object is
opposed to public policy. Here, the agreement to trade offends against the public policy
by tending to prejudice the interest of the State in times of war.

(2) Stifling Prosecution: An agreement to stifle prosecution i.e. “an agreement to present
proceedings already instituted from running their normal course using force” tends to be a
perversion or an abuse of justice; therefore, such an agreement is void. The principle is that
one should not make a trade of felony. The compromise of any public offence is generally
illegal. Under the Indian Criminal Procedure Code, there is, however, a statutory list of
compoundable offences and an agreement to drop proceeding relating to such offences with
or without the permission of the Court, as the case may be, in consideration the accused
promising to do something for the complainant, is not opposed to public policy.
• Thus, where A agrees to sell certain land to B in consideration of B
abstaining from taking criminal proceeding against A with respect to
an offence which is compoundable, the agreement is not opposed to
public policy. But, it is otherwise, if the offence is uncompoundable.
(3) Maintenance and Champerty: Maintenance is an agreement in
which a person promises to maintain suit in which he has no interest.
• Champerty is an agreement in which a person agrees to assist another
in litigation in-exchange of a promise to hand over a portion of the
proceeds of the action.
• The agreement for supplying funds by way of Maintenance or Champerty is valid
unless
(a) It is unreasonable so as to be unjust to other party or
(b) It is made by a malicious motive like that of gambling in litigation or
oppressing other party by encouraging unrighteous suits and not with the bonafide
object of assisting a claim believed to be just.
• (4) Traffic relating to Public Offices: An agreement to trac in public office is
opposed to public policy, as it interferes with the appointment of a person best
qualified for the service of the public. Public policy requires that there should be
no money consideration for the appointment to an office in which the public is
interested. The following are the examples of agreements that are void; since they
are tantamount to sale of public offices.
• (1) An agreement to pay money to a public servant in order to induce him to retire
from his office so that another person may secure the appointment is void.
(2) An agreement to procure a public recognition like Padma Vibhushan for reward
is void.
• (5) Agreements tending to create monopolies: Agreements having for their object
the establishment of monopolies are opposed to public policy and therefore void.
(6) Marriage brokerage agreements: An agreement to negotiate marriage for
reward, which is known as a marriage brokerage contract, is void, as it is opposed
to public policy. For instance, an agreement to pay money to a person hired to
procure a wife is opposed to public policy and therefore void.
• Note: Marriage bureau only provides information and doesn’t negotiate marriage
for reward, therefore, it is not covered under this point.
• (7) Interference with the course of justice: An agreement whose object is to induce any judicial
officer of the State to act partially or corruptly is void, as it is opposed to public policy; so also is
an agreement by A to reward B, who is an intended witness in a suit against A in consideration of
B’s absenting himself from the trial. For the same reasons, an agreement which contemplates the
use of under-hand means to influence legislation is void. Similarly, as agreement to induce any
executive officer of the State to act partially or corruptly is void.
• (8) Interest against obligation: The following are examples of agreement that are void as they
tend to create an interest against obligation. The object of such agreements is opposed to public
policy.

(1) An agreement by an agent to receive without his principal’s consent compensation from another
for the performance of his agency is invalid.
• (2) A, who is the manager of a firm, agrees to pass a contract to X if X pays to A Rs. 200,000
privately; the agreement is void.
• (9) Consideration Unlawful in Part: By virtue of Section 24, if any part of a
single consideration for one or more objects, or any one or any part of any one of
several considerations for a single object, is unlawful, the agreement is void.” This
section is an obvious consequence of the general principle of Section 23. There is
no promise for a lawful consideration if there is anything illegal in a consideration
which must be taken as a whole. The general rule is that where the legal part of a
contract can be severed from the illegal part, the bad part may be rejected, and the
good one can be retained. But where the illegal part cannot be severed, the contract
is altogether void.
• Example: A promises to superintend, on behalf of B, a legal manufacturer of indigo
and an illegal traffic in other articles. B promises to pay A salary of Rs. 20,000 per
month. The agreement is void, the object of A’s promise and the consideration for
B’s promise being in part unlawful.