Legality of Object &

Consideration
Chapter 6

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 What considerations and objects are lawful,
and what 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
3.Is fraudulent; or
4. Involves and implies injury to the person or property of
another; or
5.The court regards it as immoral, or 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.

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Illegality of consideration or illegality of object
of consideration
The “object” and “consideration” may in some cases be the same
thing but usually they are different.

Object – Purpose or Design of contract

Consideration – Something in Return

Chandra Sreenivasa Rao V. Kovapatti Raja Rama Mohana Rao

AIR1952 Mad 579
Money is borrowed to celebrate the child marriage.

Child marriage Restraint Act 1929; to celebrate the marriage of

child is offence.
Here debt-consideration itself is not illegal but the object of debt
is illegal

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1.Forbidden by law

Law includes: Statutes, Customary law , Precedent,

rules and regulations, etc.

Nandlal V.Thomas J.William,171 IC 948

The plaintiff was licensed under an Excise Act which

forbids its sale, sub-lease, but he took the
defendant in partnership. Partnership held void

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2.Is of such a nature that ,if permitted, it
would defeat the provisions of any law;

Fateh Singh V. Sanwal Singh (1878)1 All. 751

The accused is required under Cr.P.C to surety
bond for Rs.5000 for good behavior for certain
period, he deposits the sum with the defendant
when period is over refused to pay. Held not
recoverable.

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3.Is fraudulent;

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4.The court regards it immoral
Parameters of immorality:

1. Immorality is a relative term in relation to values of

the society at particular time and space.

2. The arbiter of the standard is the court.

3. The survey of the judicial decision reflects that

immorality is limited to sexual immorality as of
now.

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IN THE OPINION OF COURT IT IS IMMORAL:
Immorality is limited to sex outside marriage

Gherulal V. M.Maiya (1959) 2SCA 342

Subba Rao J (after CJ)
The case law in England and in India confines the
doctrine to sexual immorality
D.Nagartnamba v Kunuku Ramayya AIR 1968235:1
SCR 43. BACHAWAT J
Certain properties were gifted my a male of joint
Hindu family for past cohabitation case failed for
incompetency but BACHAWAT J recognised “the
past cohabitation as good consideration.”

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Instances of sexual immorality
1. Interference with matrimonial relations. Bai vijli V.
Nansa Nagar (1885) 10 Bombay 152 :Money
lended to seek divorce, not recoverable.

2. Dealing with prostitutes :Pearce V.

Brookes( 1866)LR 1EX 213.Thing sold and hired
for prostitution.

3. Illegal cohabitation: Past,present,future.?

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 COHABITATION AS CONSIDERATION

PAST COHABITATION.
1. English law under seal valid otherwise it is past consideration.

2. Indian law .1.adulterous or.2. non-adulterous cohabitation.

Dhiraj Kuer V.Bikramji Singh (1831)3All 787 :Past cohabitation held
good consideration.
Pyare Mohan V. Narayani AIR 1982 Raj.43 :Logic different-gift needs
no consideration logic.
Husseinali Casan V.DinbaiAIR1924 Bom.135:Past cohabitation is
illegal consideration.
D.Nagartnamba v Kunuku Ramayya AIR 1968235:1 SCR 43.
Certain properties were gifted my a male of joint Hindu family for
past cohabitation case failed for incompetency but BACHAWAT J
recognised “the past cohabitation as good consideration.”
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In the opinion of the court opposed to public
policy

ENGLISH LAW
1.Public policy
2.Judicial observations on “public policy”
Lord Halsbury in Egertone V.Brownlow (1953)4HLC 123
“I deny that any court can invent new head of public
policy.”

Lord Atkin in Fender V.Johan Mildmay (1938) AC.1

“ The doctrine should be invoked in clear cases in

which the harm to the public is substantially
incontestable, and does not depend upon the
idiosyncratic inference of a few judicial minds”

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Public policy: Indian Law
Subba Rao J( after wards CJI) in Gherulal V.Mahadeodas AIR1959
SC781
Justice Subba Rao blended Halsbury and Atkin to articulate the
Indian position.
“the primary duty of the court is to enforce the promise which
the parties have made and to uphold the sanctity of the
contract which forms the basis of the society : but in certain
cases ,the court may relieve them of their duty on the rule
founded on what is called the public policy; for want of better
words Lord ATKIN describes that something done contrary to
public policy is a harmful thing; but the doctrine is extended
to harmful cases but also to harmful tendencies; the doctrine
of public policy is a branch of common law and just like any
other branch of common law, it is governed the precedents;
the principles have been crystallized under different heads
and though it is permissible for the courts to expound and
apply them to different situations, it should only be invoked
in clear and incontestable cases of harm to the public.
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4. Involves and implies injury to the
person or property of another
1. Ram Swarup V. Bansi Mandar (1915) 42
cal,742:Borrowed Rs.100 with exorbitant interest
and executed a bond or to work for 2 years
without salary. Slavery?

2. Beresford V. Royal Insurance Company Ltd. (1917)

2 All.E.R.243: Suicide to help representative to get
money. The representative not allowed to get
money.

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Agreements Opposed to PUBLIC POLICY

1.Trading with enemy.

2.Traffic related to public offices.
3.Marriage brokerage agreement.
4.Interference with administration of justice.
(a) Interference with the course of justice.
(b) Stifling prosecution.
(c) Maintenance and champerty.

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Agreements Opposed to PUBLIC POLICY
( contd.)
5. Agreements tending to create interest
opposed to public duty
6. Agreements tending to create monopolies
7. Agreements to influence elections to
public offices
8. Agreements in restraint of personal liberty
9. Agreements interfering with marital duties

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VOID AGREEMENTS

1.Illegal agreements.24
2.With out consideration.25
3.Restraint of marriage.26
4.Restraint of trade .27
5.Restraint of legal proceedings.28
6.Uncertain agreements.29
7.Wagering agreements.30
8.Impossible agreements.56

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1. Agreement in restraint of trade is void
Sec.27
Every agreement by which any one is restrained from
exercising a lawful profession, trade or business of any
kind, is to that extent void.
Exceptions:
1.Statutory
(a). Sale of goodwill, limits specified, which is reasonable.
(b). Under Indian Partnership Act.
2.Under Common Law
(a) Service agreements
(b) Trade Combinations
( c) Agreements in restraint of legal proceedings – Void
Sec.28

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Statutory exceptions

A. Under section 27.

1.Sale of goodwill.
Definition of ‘goodwill’: Lord Eldon (Cruttwell V.Lye
Ves.335)
“The goodwill which has been the subject of sale is
nothing more than the probability that the old
customer will resort to old place" (old name of
business)
Local limits are prescribed.
Limit appear to be reasonable, regards being had
to the nature of business.

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Continued….

(B).Under Indian Partnership Act. 1932

1. Section 11:During the continuance…
2.Section 36 : Out going partner….
3.Section 54: In anticipation of dissolution…
For sections 36 and 54,local limits or period be
specified ,which should be reasonable.

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Judicial exceptions

1.Trade combinations.
S.B.Fraser and Co.V. Bombay Ice Mfg.Co. (1904)29 ILR
Bom.107 (Regulation not restrain)
2.Sole or exclusive dealing agreements.
Carliles Nephews and Co.V.Ricknauth Buttermull ILR
(1882) 8 Cal 809
Agreement to sell 1,36,000 dhotis of certain
description to the defendant only for certain
period of time. (Assuring market not restraint)

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Continued….

3.Service agreements with restraint on employees:

(a) Restraint during employment.
Charlesworth V. MacDonald

(b) Restraint beyond employment period.

Niranjan Shanker V.Century Spinning and
Manufacturing (1967) SC 1098

The appellant torn the agreement to pieces only

because he has been offered higher salary by the
other company.

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