Module No-5 Void Agreements
Section 23 of the Indian Contract Act.
Section 23 of The Indian Contract Act states that for a contract to be valid, there
must be the legality of object and consideration. The object is the purpose for
which the parties enter into a contract. The fulfillment of the object leads to the
transfer of the consideration agreed from one party to the other.
Lawful Object and Lawful Consideration:-The legality of the object in contract law
stipulates that the consideration and the object of a contract are considered legal
except when:
- They are specifically forbidden by law.
- They are fraudulent in nature.
- The nature of the object and the consideration is such that it defeats the
purpose of the law.
- They involve injury or harm to a person(s) or property.
- Are considered immoral by the court of law.
- Are against public policy.
- Are forbidden by the Law.
Forbidden by the Law:-An object and/or a consideration prohibited by law are
not considered legal and render a contract void. Unlawful consideration of the
object means unlawful acts that are punishable by the law. The acts disallowed by
the appropriate authority by means of their rules and regulations are also
considered for determining the legality. However, if these rules and regulations are
not in proper with the law, they are not applicable. Forbidden by law provision
renders a contract void but all void contracts may not be illegal.
Fraudulent in Nature:-
The object and the consideration of the contract must not be fraudulent then, the
contract will becomes void. For e.g- A enters into a contract with B where he
agrees to pay B if he embezzles(steal) money from C. This is considered a
fraudulent object and the contract is not valid.
Defeats the Purpose of the Law:-
If the purpose of entering into the contract is against any provisions of law, the
contract will be void. The contract is void if:
The object of the contract is to perform an illegal act.
The object of the contract is explicitly (express) or in an implied manner prohibited
by law.
The completion of the contract is impossible without going against the provisions
of the law.
Example - A enters into a contract with B whereby B promises to not pursue legal
proceedings against A if A commits a robbery in B’s house. This contract is
against the provisions of the IPC law.
Involves Injury or Harm to Another Person or Property.
The object of the contract must not cause any destruction to property or cause
injury to another person.
Examples:
Publishing a book on the life of a person without his consent.
Destruction of a property.
Violation of licenses.
Violation of copyrights.
A enters into a contract with B whereby he agrees to pay a sum of money to B if he
destroys a city landmark. This contract does not have a lawful consideration and
lawful object and it is not deemed legal.
Immoral as Per Law:-
An agreement in which consideration or object of which is immoral is void. For
example, an agreement between husband and wife for future separation is void.
Immoral acts are against the reasonable and acceptable general behavior or
personal conduct accepted by society.
Example - A lends money to B on the condition that B will divorce C, and later get
married to A. If B does not divorce C, then A cannot pursue legal proceedings
against B to recover the money. The basic premise of this contract is immoral so it
will be deemed void.
Against the Public Policy:-
A lawful object in business law means that it should not be against public policy.
The purpose of public policy is not to curtail any individual’s rights but to maintain
and protect the general welfare of the community. Following kinds of contract are
considered to be against the public policy:
For example,agreements of trading with foreign enemy, agreement to commit
crime, agreements which interfere with the administration of justice, agreements
which interfere with the course of justice.
Entering into an agreement with a party that belongs to a country with which India
does not have peaceful relations, makes the agreement void.
Restraining from prosecution:- A contract that prohibits a person from pursuing
legal recourse is considered void.
An agreement to indulge in trafficking in public offices.
Agreements to create monopolies.
An agreement to induce judiciary or state officials to act in a corrupt manner and
interferes with legal proceedings.