Unlawful Consideration and Object

In one line

Section 23 is the point at which the law refuses to lend its courts to a bargain, and it lists five reasons for refusing, of which the last is deliberately left open.

In the words a student can write in an exam: section 23 of the Indian Contract Act 1872 provides that "The consideration or object of an agreement is lawful, unless" it is forbidden by law; or is of such a nature that if permitted it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases the consideration or object is unlawful, and every agreement of which the object or consideration is unlawful is void.

Why the law has this at all

Section 10 requires a lawful consideration and a lawful object. Section 23 says what those words mean, and the section is doing something different from everything before it in this module.

Competency, free consent and consideration all protect the parties. Section 23 protects everyone else. It is where the law stops asking whether this bargain is fair between these two people and starts asking whether the state should be enforcing it at all.

That is why the consequence is different. An agreement caught by section 23 is void, and neither party can enforce it. Neither can complain, because neither is being protected: the court is declining, for the public's sake, to be used.

Object and consideration are separate. The consideration is what each side gives. The object is the purpose the agreement is meant to achieve. Either being unlawful is enough. A loan of money is a perfectly lawful consideration; a loan made for the express purpose of funding a smuggling voyage has an unlawful object.

The provision itself

"The consideration or object of an agreement is lawful, unless

it is forbidden by law; or

is of such a nature that if permitted, it would defeat the provisions of any law; or

is fraudulent; or

involves or implies injury to the person or property of another; or

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."

Broken down: the five heads

(a) Forbidden by law

Where the act the agreement contemplates is prohibited by a statute, or by rules or orders having the force of law, or is an offence. An agreement to sell a drug whose sale is banned, or to trade without a licence a statute requires, falls here.