Indian Contract Act, 1872

1. LEGALITY OF OBJECT AND
CONSIDERATION
BUSINESS LAW
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

2. WHAT IS OBJECT / CONSIDERATION
?
•The term object means the purpose for which the agreement is
entered into between the parties.
• Consideration is the payment or reward.
•The object of an agreement and the consideration of an
agreement needs to be lawful.
•An agreement which does not have a lawful object or
consideration will be void and cannot be enforced in the court
of law.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

3. DEFINITION
Sec.23 of the Indian Contract Act, 1872 provides that the
object/consideration of an agreement is not lawful under the
following cases :
Object/Consideration of
agreement is unlawful
If it is
forbidden by
law
If it defeats
the provisions
of any law
If it is
fraudulent
If it involves or
implies injury
to the person
or property of
another
If the court
regards it a
immoral
If it is opposed
to public
policy
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

4. 1. IF IT IS FORBIDDEN BY LAW
Examples:
•A promises to obtain for B an employment in the public services and B promises to
pay Rs. 1000 to A. The agreement is void as the consideration for it is unlawful.
•X sold liquor without licence to Y. The sale is void as the sale of liquor without
licence is forbidden by law.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

5. 2. IF IT DEFEATS THE
PROVISIONS OF ANY LAW
Example:
•A let a flat to B at a rent of Rs.1200 a year. To reduce the municipal taxes, he
entered into two agreements with B, one, by which the rent was stated to be Rs.450
only, and the other, by which B agreed to pay Rs.750 for services in connection
with the flat. In a suit filed against B to recover Rs.750, it was held that the
agreement was made to defraud the municipal authorities and was void. A cannot
recover the money.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

6. 3. IF IT IS FRAUDULENT
Examples:
•A, the agent for a land proprietor agrees for money, without the knowledge of the
principal, to obtain for B a lease of the land belonging to his principal. The
agreement between A and B is void, as it implies a fraud by concealment by A, on
his principal.
•A decides to sell goods to B and smuggle them outside the country. This is a
fraudulent transaction as so it is void. Now B cannot recover the money under the
law if A does not deliver on his promise.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

7. 4. IF IT INVOLVES OR IMPLIES
INJURY TO THE PERSON OR
PROPERTY OF ANOTHER
Examples :
•A contract to publish a book that is a violation of another person’s copyright would
be void. This is because the consideration here is unlawful and injures another
person’s property, i.e. his copyright.
•An agreement to pull down another’s house is unlawful.
•X agrees to pay Y Rs.10000 if he damages the property of Z.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

8. 5. IF THE COURT REGARDS IT AS
IMMORAL
Examples:
•A lends money to B to obtain a divorce from her husband C. It was agreed once B
obtains the divorce A would marry her. When B does not obtain the divorce and
also does not give back the money, A approaches the court. But the court passed
the judgement that A cannot recover money from B since the contract is void
on account of unlawful consideration.
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

9. 6. IF IT IS OPPOSED TO PUBLIC
POLICY
1.Trading with the Enemy: Entering into an agreement with a person from a country with whom India is at
war, will be a void agreement. For example, a trader entering into a contract with a Pakistani national during
the Kargil war.
2.Stifling Prosecution: For example, A agrees to sell land to B if he does not participate in the criminal
proceedings against him.
3.Maintenance and Champerty: Maintenance agreement is when a person promises to maintain a suit in
which he has no real interest. And champerty is when a person agrees to assist another party in litigation
(court case) for a portion of the damages or proceeds.
4.An Agreement to Traffic in Public Offices: For example, A promises to obtain for B an employment in the
public services and B promises to pay Rs. 1000 to A.
5.Agreements to create Monopolies: Agreement not to bid at an auction sale.
6.Agreements in restraint of marriage: An agreement to stop a marriage.
7.Interfering with the Courts: An agreement whose object is to induce a judicial or state officials to act
corruptly and interfere with legal proceedings
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

10. OBJECT/CONSIDERATION OF
AGREEMENT IS UNLAWFUL
1. If it is forbidden by law
2. If it defeats the provisions of any law
3. If it is fraudulent
4. If it involves or implies injury to the person or property of
another
5. If the court regards it a immoral
6. If it is opposed to public policy
S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM

11. S.M. GOLDYN ABRIC SAM, ASST. PROFESSOR, DEPT. OF MANAGEMENT STUDIES, NMCC, MARTHANDAM