LAWFUL OBJECT AND CONSIDERATION
Contractual freedom is not absolute. There are certain limitations. For example, Two persons agree to rob a bank and share the loot. Such an agreement is unlawful as its object is unlawful.
Object of a contract is the reason behind a contract, while consideration refers to what one party gives and other receives. Generally, they are intermingled in a contract.
As far as what are lawful object and consideration, the law is that the consideration or object of an agreement is lawful, unless –
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is of such a nature that, if permitted, it would defeat the provisions of any law; or
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involves or implies injury to the person or property of another, or
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the Court regards it as immoral, or opposed to public policy.
Thus, law has defined lawful in negative manner. That is, it chalks our instances as to what cannot be the object or consideration of a valid agreement.
1. Forbidden by law
Forbidden by law means acts that are punishable under any law, that is, statute, enactment or rules made thereunder. If the object or consideration of any agreement is forbidden by law, the same is void.
For example, an agreement to buy-sell property which parties know to be stolen is void. As dealings in stolen property is an offence punishable under IPC.
2. If permitted, defeat the provisions of any law
Agreement, whose object or consideration is aimed at defeating any provision of law, is void.
For example, A, owner of land, is in land revenue arrears. His land was attached and ordered for auction. A makes an agreement with B, that B shall purchase the land for revenue’s sake and re-convey it to A on receipt of purchase money. The agreement is void as it is intended to defeat the legal provision that prohibits the owner from purchasing the land sold due to his default.
Similarly, an agreement by a Hindu father to give his son in adoption in exchange of annual allowance is in violation of Hindu Law.
3. Fraudulent
There is a difference between consent caused by fraud (refer to free consent) and Fraudulent object or consideration. Here, an agreement is fraudulent, when it is aimed at cheating a third person.
For example, A & B are partners in a firm. They agree to defraud a Government department by submitting a tender in the individual name and not in the firm name. This agreement is void as it is a fraud on the Government department.
4. Involves injury to person or property of another
Injury means infringement of a legal right. An agreement whose object or consideration involves injury to a person of his property, is void.
For example, A agrees to buy a house from B although A knows that B has already executed an agreement to sell in favour of C, which is still in force. Since, the intention of the agreement is to injure C, the agreement is void.
Similarly, where A agrees to print a book in B’s name, which had alreaddy been published by X, the agreement is void. It is not only in violation of the Copyright Act but also intends to cause injury to the property of another.
5. Immoral
Immoral means violating principles of right and wrong or not adhering to ethical or moral principles. An agreement with immoral object or consideration is void.
For example, an agreement in consideration of future illicit cohabitation between the parties is void.
Also, where A lends money to X, a married woman, to enable her to obtain a divorce from her husband. He also promised to marry her after divorce. It was held that A was not entitled to recover the amount from X as the agreement was against good morals.
6. Opposed to public policy
If the object or consideration of an agreement are opposed to public policy, the agreement is void and unenforceable.
Policy means a line of argument rationalizing the course of action. Any institution or association may have its policy, but the term is generally used for the government. Public policy is sum total of ideas, thoughts and visions for a good and orderly society. But what is and what is not a part of public policy is a difficult question. Public policy has to be developed with circumspection. It has been described as “an unruly horse, which if not properly bridled, may carry its rider he knows not where”. The general theme is that, having regard to times and circumstances, whatever constitutes injury to public interest and welfare is regarded as opposed to public policy.
But there are certain activities that are regarded as against public policy. Some of them are as follows –
(a) Trading with enemy
Any trading or business activity with a person who owes allegiance to a country with whom India is at war is void. As such a trade would be against the interest of the people and Government of India.
Also, any agreement made prior to war during peace times would be suspended automatically and cannot be carried on further until hostilities come to an end.
(b) Stifling prosecution
An agreement to stifle or prevent illegally any prosecution is void. That is, felony cannot be traded. It amounts to perversion or abuse of justice. But, if the offence is compoundable, the same may be compounded as per law.
(c) Maintenance and Champerty
Maintenance means promotion of litigation in which the litigant has no interest. Champerty means bargain whereby one party agrees to assist the other in recovering property with a view to sharing the profit of litigation.
Agreements for maintenance and champerty are not opposed to public policy in India. But where such advances are made by way of gambling in litigation, the agreement to share the subject of litigation is certainly opposed to public policy and therefore is void.
(d) Interference with course of law and justice
Any agreement with the object of inducing a judicial or administrative officer of the state to act corruptly or not impartially is void.
(e) Marriage brokerage contract
An agreement to negotiate a marriage for reward is void. Such marriage brokerage contracts are opposed to public policy.
(f) Sale of public offices
While appointing a person to certain important and high public office, merit alone should be the criteria. Any attempt to influence should be seen as an act opposed to public policy. Thus, money consideration in the matter amounts to sale of public office.
For example, A agrees to pay money to B, a public servant, if he opts for voluntary retirement so that A may secure appointment. The agreement amounts to sale of public office.
Similarly, an agreement to procure a public recognition like Padma Vibhushan for reward is void.
