Agreements Void in Part, and Severability

In one line

When part of a bargain is unlawful, section 24 asks whether the lawful part can be cut free and saved, and the answer usually depends on whether the price was quoted as one lump or item by item.

In the words a student can write in an exam: section 24 of the Indian Contract Act 1872 provides that "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." The rule is therefore that where the unlawful part cannot be separated, the whole agreement falls; where it can be separated, the lawful part may stand.

Why the law has to answer this

Section 23 tells you when a consideration or object is unlawful. It does not tell you what to do when only some of it is.

Real agreements are rarely all one thing. A person is hired to manage a business, part of which is lawful and part not. A single deed sells a shop and, in the same breath, promises to suppress a prosecution. Somebody has to decide whether the whole document collapses or only the offending part.

Two answers are possible, and each has a cost. Strike everything down, and a party who has done nothing wrong loses a perfectly good bargain because of one bad clause. Save what you can, and a party may draft an unlawful term into an otherwise lawful contract knowing that the worst that can happen is that the term is ignored.

Section 24 chooses the first as its rule and lets severability operate as the qualification, and the test it uses is whether the consideration is single or divisible.

The provision itself

"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."

Its illustration:

"A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in other articles. B promises to pay to A a salary of 10,000 rupees a year. The agreement is void, the object of A's promise, and the consideration for B's promise, being in part unlawful."

Broken down

The section covers two situations, and they are worth separating.

Situation one: a single consideration for one or more objects, part of which is unlawful. One payment is promised, and the things to be done for it are partly lawful and partly not. The illustration is exactly this: one salary of ten thousand rupees a year for superintending both a lawful manufacture and an illegal traffic. Because the salary is a single, undivided consideration, none of it can be attributed to the lawful half alone, and the whole agreement is void.