Introduction #
For a valid contract, the object and consideration must be lawful. Indian Contract Act, 1872 lays down that if the object or consideration is unlawful, the agreement becomes void, and courts will not enforce it.
Section 23, ICA says that consideration or object is unlawful if it is:
- forbidden by law, or
- such that if permitted, it would defeat the provisions of any law, or
- fraudulent, or
- involves or implies injury to person or property, or
- immoral, or
- opposed to public policy.
A. Object or consideration forbidden by law #
If the agreement directly involves doing something prohibited by law (e.g., crime), it is unlawful.
Case: Everet v. Williams (Court of Exchequer, 1725) — “Highwayman’s Case” #
Facts: Two highway robbers agreed to share the loot. One sued the other for not giving his share.
Issue: Can the court enforce an agreement whose object is criminal?
Held: No. The court refused to entertain the claim. An agreement to commit a crime is unlawful and unenforceable.
Principle: Courts will not help a party enforce an agreement based on a criminal object. In tort often described by maxim “Ex turpi causa non oritur actio”.
B. Agreement that defeats the provisions of any law #
Even if the act is not expressly “forbidden,” if the agreement neutralizes the purpose of a legal provision, it is unlawful.
Case: Fateh Singh v. Sanwal Singh (Allahabad High Court, 1878) #
Facts: Fateh Singh was ordered by the Magistrate (under CrPC provisions for security for good behaviour) to furnish sureties. Sanwal Singh agreed to stand surety only if Fateh Singh first deposited with him the same amount for which he was to be surety. Fateh Singh made the deposit. After the period ended without any forfeiture, Fateh Singh asked for his money back; Sanwal Singh refused, and Fateh Singh sued to recover it.
Issue: Is an arrangement where the person bound to give security deposits the whole surety amount with the surety (so the surety runs no real risk) a valid agreement, and can the depositor recover that amount?
Held: No. The agreement was treated as void under Section 23 because it defeats the object of the law requiring sureties—i.e., the law intends that the surety should, at his own risk, ensure the person’s good behaviour; if the accused deposits the whole amount with the surety, the surety becomes “responsible only in name.” Therefore, the court refused to enforce the deposit arrangement and refused a refund through a suit.
Principle: If an agreement defeats the provisions of a law, then it is void.
C. Immoral object #
If the object is considered immoral (commonly, contracts facilitating sexual immorality), courts will not enforce it.
Case: Pearce v. Brooks (Court of Exchequer, 1866) #
Facts: Pearce, a coachbuilder, supplied an expensive brougham (a hourse driven carriage) to Brooks, a woman he knew was a prostitute. He also knew the carriage was required not for ordinary transport, but to help her display herself and attract clients. She didn’t pay the hire charges, so Pearce sued to recover the money.
Issue: If a supplier enters a contract knowing the buyer’s purpose is immoral and that the goods are being taken to further that immoral purpose, can he still enforce the contract for price?
Held: No. The claim failed. Because Pearce supplied the carriage with knowledge that it was to be used to promote prostitution, the contract was treated as connected with an immoral object, and the court would not help him recover under it.
Principle: When the plaintiff knowingly contributes to an immoral purpose, the court will not grant relief.
D. Opposed to public policy (especially “stifling prosecution”) #
Agreements that interfere with administration of justice (e.g., promising to withdraw or stop criminal prosecution) are treated as opposed to public policy.
Case: V. Narasimha Raju v. V. Gurumurthy Raju (SC, 1962) #
Facts: V. Gurumurthy Raju had a dispute with V. Narasimha Raju (arising out of their business dealings). Gurumurthy filed a criminal complaint against Narasimha. Later, both of them signed a written settlement with arbitration clause. The deal was that business disputes would be sent to arbitration and Gurumurthy would withdraw the criminal case against Narasimha. After this, the criminal case was not pursued and the arbitration moved ahead. When arbitration decree was being enforced, Narasimha moved application to set aside the arbitration award.
Issue: Can such an agreement be enforced when Gurumurthy’s promise to withdraw the criminal case forms the consideration for the arbitration?
Held: No. The Supreme Court held it void under Section 23 because it amounts to stifling prosecution (a bargain to obstruct criminal justice). Therefore, the arrangement (and anything founded on it) could not be enforced.
Principle: Agreements that stifle prosecution or obstruct criminal justice are void.
Important clarification: “Void” is not always “forbidden by law” (Public policy applied cautiously) #
Section 23 should not be stretched mechanically. Some agreements may be void under a specific section, but that does not automatically make them illegal under Section 23.
Case: Gherulal Parakh v. Mahadeodas Maiya (SC, 1959) #
Facts: Partnership formed to carry on business in “differences,” connected with wagering transactions. Wagering is void under Section 30. (See complete facts here)
Issues: Does “void under Section 30” mean “forbidden by law” under Section 23? Are wagering transactions per se opposed to public policy/immoral?
Held: Wagering is void, but not necessarily “forbidden by law.” Therefore, it does not automatically become unlawful under Section 23. The Court also cautioned against loosely invoking “public policy.”
Principle: Void ≠ illegal, and “public policy” must be used carefully.
Conclusion #
Section 23 acts as a safeguard to ensure courts enforce only those agreements whose object and consideration are consistent with law and public interest. Agreements are void if they promote crime, defeat legal safeguards, involve immorality, or obstruct justice (public policy). At the same time, courts apply Section 23 with care: merely being “void” under another provision (like wagering under Section 30) does not automatically mean the agreement is “forbidden by law” or illegal. Thus, Section 23 balances contractual freedom with legality, morality, and public welfare.
