Lawful Object

In one minute

An agreement is a contract only if its consideration and its object are lawful. Section 23 says both are lawful unless a listed ground applies. The grounds are: forbidden by law, defeating a law, fraud, injury to another, and immorality or public policy.

If any ground applies, the whole agreement is void. In exams, the grounds and the Act's illustrations are the marks. In real life, no court will enforce a deal to break the law.

Exam focus

Frequency: Occasionally asked
Usually asked as: Both (long answer and short answer)

Legal provision

Section 10: an agreement is a contract if made by free consent of competent parties, for a lawful consideration and with a lawful object, and not expressly declared void.
Section 23: the consideration or object is lawful unless one of five grounds applies. It is forbidden by law. Or, if permitted, it would defeat the provisions of any law. Or it is fraudulent. Or it involves or implies injury to the person or property of another. Or the Court regards it as immoral or opposed to public policy.
Section 23, last paragraph: in each of these cases the consideration or object is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
Section 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.

Meaning and definition

The object is what the parties set out to achieve. The consideration is what each gives in return. Either may be unlawful. The Act treats them alike: unlawful means void.

Section 23 is worded so that the object and consideration are lawful unless a listed ground applies.

Is the object or consideration lawful? (section 23)How to read this: go down the boxes in order. A "No" answer sends you to the result beside the box.

1. Is it allowed by law (not forbidden)? section 23
No: unlawful, so the agreement is void.
2. Would permitting it leave the provisions of every law intact? section 23
No: unlawful, because it would defeat a law.
3. Is it free from fraud? section 23
No: unlawful.
4. Does it avoid injury to the person or property of another? section 23
No: unlawful.
5. Does the Court regard it as neither immoral nor opposed to public policy? section 23
No: unlawful.
All answers "Yes": the object and consideration are lawful. If any part is unlawful, section 24 makes the agreement void.

Detailed explanation

Step 1: forbidden by law

An agreement to do what a statute forbids is unlawful.

Example. Dinesh agrees to pay Salim to supply banned narcotics. The object is forbidden by law. The agreement is void, and Salim cannot sue for the price.

Step 2: defeating a law

The object may be allowed on its face, yet permitting it would defeat the purpose of a law.

Example. The Act's illustration (i): A's estate is sold for arrears of revenue under an Act that prohibits the defaulter from buying it. B, by an understanding with A, buys it and agrees to convey it to A on receiving the price. The agreement is void, because it renders the transaction a purchase by the defaulter and would defeat the object of the law.

Step 3: fraud

An agreement to commit a fraudulent act is unlawful.

Example. The Act's illustration (e): A, B and C agree to divide among them gains acquired by fraud. The agreement is void, as its object is unlawful. Illustration (g): an agent, for money and without his principal's knowledge, agrees to obtain for B a lease of land belonging to the principal. It implies a fraud by concealment on the principal, so it is void.

Step 4: injury to the person or property of another

An agreement that involves or implies harm to another's person or property is unlawful.

Example. Vikram promises Rs 50,000 to Kiran if Kiran breaks into a rival's godown and spoils his stock. The object involves injury to another's property. The agreement is void.

Step 5: immorality and public policy

The last ground gives the Court a wider power. Immorality and public policy are covered in the note on immoral agreements and heads of public policy.

Step 6: partly unlawful agreements (section 24)

If a part of the consideration or object is unlawful, the whole agreement is void. The Act's illustration: A promises to superintend a legal manufacture of indigo and an illegal traffic in other articles for B. B promises to pay A Rs 10,000 a year. The whole agreement is void. Sections 57 and 58 separate legal and illegal promises in two special cases, covered in the note on illegal agreements.

Don't confuse: unlawful object and unlawful consideration

Section 23 covers both. The unlawful thing may be what is promised, or what is paid for it.

Point	Unlawful object	Unlawful consideration
What it is	The purpose the parties aim at	What one party gives or promises in return
Act's illustration	(e): dividing gains acquired by fraud	(f): paying Rs 1,000 to get public-service employment
Effect	Void	Void

Inside the idea. A promises to obtain a government job for B, and B promises to pay him Rs 1,000. The consideration for A's promise is unlawful. The agreement is void.

Just outside it. A agrees to sell his house to B for Rs 10,000. The promise of each is the consideration for the other. These are lawful considerations (Act's illustration (a)). The agreement is a contract.

Common mistakes

Treating only the object as important. The consideration can also be unlawful.
Saying the agreement is voidable. An unlawful object or consideration makes it void.
Forgetting section 24. One unlawful part makes the whole agreement void.
Calling every void agreement unlawful. An agreement can be void without being unlawful, as in a wager.

Apply it

Problem

Manoj agrees to run a legal textile shop and also an illegal trade in smuggled liquor for Naveen, for a single salary of Rs 10,000 a month. Naveen later refuses to pay. Can Manoj sue?

Issue. Is the agreement enforceable when part of the object is unlawful?

Rule. If any part of a single consideration for one or more objects is unlawful, the agreement is void (section 24). A trade forbidden by law is unlawful (section 23).

Application. The single salary is consideration for both the legal and illegal work. The illegal part taints the whole.

Conclusion. The agreement is void. Manoj cannot sue for the salary.

Leading case laws

Gherulal Parakh v. Mahadeodas Maiya (1959), Supreme Court, AIR 1959 SC 781
Facts. Gherulal Parakh and Mahadeodas Maiya, managers of two joint Hindu families, formed a partnership to enter forward contracts in wheat with two firms at Hapur, sharing profits and losses equally. The dealings were for differences, with no intention to deliver goods, so they were wagers. Mahadeodas sued Gherulal for half of the losses.

Principle. A wagering agreement is void under section 30, but it is not forbidden by law. So the object of the partnership was not unlawful under section 23, and the partnership was not void. Mahadeodas Maiya was allowed to recover half the losses.

Why it matters. It shows that void and unlawful are different. Section 23 grounds must be separately made out.

How to write this answer in the exam

5-mark answer

Quote section 23: lawful unless one of the listed grounds applies.
List the grounds in order.
State the effect: the agreement is void.
Give one illustration from the Act.

10-mark answer

Section 10 and the requirement of a lawful object.
Section 23 and each ground with an illustration.
Section 24: partly unlawful agreements.
Object versus consideration.
Gherulal Parakh v. Mahadeodas Maiya on void versus unlawful.
A short problem answered in Issue, Rule, Application, Conclusion form.

Key points to remember

Section 23 makes the consideration or object lawful unless a listed ground applies.
The grounds are: forbidden by law, defeating a law, fraud, injury to another, and immorality or public policy.
An agreement with an unlawful object or consideration is void.
Section 24: an unlawful part makes the whole agreement void.
Void is wider than unlawful: a wager is void but not unlawful.

Quick self-test

1. When is the object or consideration of an agreement unlawful?

When it is forbidden by law, would defeat a law, or is fraudulent. Also when it involves injury to another's person or property, or the Court regards it as immoral or opposed to public policy (section 23).

2. What is the effect of an unlawful object?

The agreement is void (section 23).

3. What does section 24 say about an agreement partly unlawful?

If any part of a single consideration for one or more objects, or any part of one of several considerations for a single object, is unlawful, the agreement is void.