Agreements Void in Part, and Severability
Chapter Thirty-Nine
Syllabus topic 2.5, "Unlawful Object and Consideration"
Pages 189 to 192 of 462
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.
Agreements Void in Part, and Severability
Situation two: several considerations for a single object, one of which is unlawful. There is one thing to be achieved, and several things are given for it, one of them unlawful. Again the agreement is void.
The test: is the consideration single or apportioned?
The words the section turns on are "a single consideration". The practical question in every problem is:
Can the lawful part be paid for separately, on the terms the parties themselves used?
- If the agreement says "ten thousand rupees a year" for both tasks together, the consideration is single and inseparable, and section 24 makes the whole void.
- If it says "six thousand for the indigo manufacture and four thousand for the other traffic", the considerations are apportioned. The unlawful part can be struck out and the lawful part enforced.
Two further limits on severability
The lawful part must be able to stand on its own. Cutting out the unlawful term must leave a complete and workable contract, not a fragment that the parties never agreed to.
The court will not rewrite the bargain. Severance is striking out, not redrafting. Where removing the offending words would change the nature of what was agreed, the whole falls.
Section 24 compared with sections 57 and 58
Three sections deal with mixtures of the lawful and the unlawful, and MU's syllabus places all three within its ranges. They are easily confused, and the distinction is worth a table.
| Section | Situation | Result |
|---|---|---|
| 24 | part of a consideration or object is unlawful, and the consideration is single | the whole agreement is void |
| 57 | reciprocal promises to do things legal, and also, under specified circumstances, to do things illegal | the first set is a contract; the second set is a void agreement |
| 58 | an alternative promise, one branch legal and the other illegal | only the legal branch can be enforced |
The difference between section 24 and section 57 is the structure of the bargain. Section 24 has one consideration covering both; section 57 has two separate sets of reciprocal promises, so the lawful set survives on its own. Sections 57 and 58 are taken up in [Reciprocal Promises to Do Legal and Illegal Things].
A worked example
Meher engages Nitin under a single written agreement. Take four versions.
- "Nitin shall manage Meher's licensed liquor shop and shall also arrange the smuggling of foreign liquor. Meher shall pay Nitin eighteen lakh rupees a year." A single consideration for two objects, one unlawful. Section 24 applies and the whole agreement is void. This is the Act's own illustration in modern dress, and Nitin cannot recover even for the lawful management.
- "Nitin shall manage the licensed shop for twelve lakh rupees a year, and shall arrange the smuggling for six lakh rupees a year." The considerations are apportioned. The smuggling promise is unlawful and void, and the management contract at twelve lakh rupees can be severed and enforced.
- "Nitin shall manage the licensed shop. Meher shall pay him twelve lakh rupees a year, and shall additionally procure a false licence for Nitin's brother." Here there is a single object, the management, and several considerations, one of which is unlawful. This is the second limb of section 24, and the agreement is void.
- "Nitin shall either manage the licensed shop or arrange the smuggling, at Meher's option, for twelve lakh rupees." This is an alternative promise, so section 58 applies rather than section 24, and only the lawful branch, managing the shop, can be enforced.
Agreements Void in Part, and Severability
What it does NOT mean
"A contract with one bad clause is always void." Only where the consideration is single and the bad part cannot be separated. Where the parties apportioned the price, the lawful part may stand.
"Any contract can be saved by severing the offending part." Severance needs the consideration to be divisible on the parties' own terms, and the remaining contract to be complete and workable without redrafting.
"Section 24 and section 57 say the same thing." They do not. Section 24 destroys the whole agreement; section 57 keeps the lawful set of reciprocal promises alive and treats only the illegal set as void.
"The court can apportion a lump sum fairly and enforce part of it." It cannot. Where the parties fixed one undivided sum, the court will not divide it for them, which is precisely why the illustration to section 24 makes the whole agreement void.
Quick revision
- s.24: 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 test is whether the consideration is single or apportioned. One lump sum for a lawful and an unlawful task: whole thing void. Separate sums: sever and enforce the lawful part.
- Illustration: a single salary of ten thousand rupees a year for superintending a legal manufacture of indigo and an illegal traffic. Void.
- Severance requires the remainder to stand on its own; the court strikes out, it does not redraft.
- Compare s.57, separate sets of reciprocal promises, lawful set enforceable; and s.58, alternative promises, only the legal branch enforceable.
Agreements Void in Part, and Severability
Test yourself
1. State section 24 and its illustration. 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 illustration is of A promising to superintend, on B's behalf, a legal manufacture of indigo and an illegal traffic in other articles, for a single salary of ten thousand rupees a year; the agreement is void because the object of A's promise and the consideration for B's is in part unlawful.
2. When can the lawful part of an agreement be saved? Where the consideration is divisible on the parties' own terms, so that the unlawful part can be struck out and a complete, workable contract remains without the court rewriting the bargain. If the parties fixed a single undivided consideration covering both the lawful and the unlawful, section 24 makes the whole agreement void.
3. Distinguish section 24 from section 57. Section 24 applies where there is a single consideration covering lawful and unlawful matter, and it makes the whole agreement void. Section 57 applies where the parties have made two separate sets of reciprocal promises, one to do legal things and one, in specified circumstances, to do illegal things; there the first set is a contract and only the second set is void.
4. A is to be paid six lakh rupees for lawful work and two lakh rupees for unlawful work under one document. Advise. The considerations are apportioned, so the two lakh rupee promise for unlawful work is void under section 23, but the six lakh rupee contract for lawful work is severable and enforceable. Section 24 would have made the whole void only if a single undivided sum had been promised for both.
5. Why does the court refuse to apportion a lump sum itself? Because severance is a matter of striking out what the parties themselves separated, not of remaking their bargain. Where one undivided sum was promised, no part of it can be attributed to the lawful object without the court writing a contract the parties never made, and section 24 therefore declares the whole agreement void.
The rest of this subject
These notes are cut from the University's printed syllabus. Open the syllabus itself, or the past papers, for the same subject.