Lawful Object, Immoral Agreements and Heads of Public Policy — MCQs

All questions with answers and explanations

Read the full set here, or use the practice card above to test yourself one question at a time.

1. Under Section 27, an agreement in restraint of trade is:

   • Always valid if reasonable
   • Void to that extent, except a reasonable restriction in a sale of goodwill (correct answer)
   • Valid only between competitors
   • Punishable as a criminal offence

   Explanation. Section 27 voids agreements restraining a lawful trade, profession, or business, with the sole statutory exception being a reasonable restriction on the seller in a sale of goodwill.

2. In Madhub Chander v. Raj Coomar Doss, the Calcutta High Court held that even a PARTIAL restraint of trade (limited to one locality) is:

   • Valid, since it isn't a total restraint
   • Void under Section 27, unless it falls within the goodwill exception (correct answer)
   • Valid only if registered
   • Enforceable for a maximum of one year

   Explanation. Indian courts read Section 27 strictly — unlike English law's 'reasonableness' approach, even a partial restraint of trade is void unless it falls within the statutory goodwill exception.

3. In Superintendence Company of India v. Krishan Murgai, the majority held that a clause barring the employee from competing for two years after he 'left' the company:

   • Was valid, as it was reasonable in time and place
   • Did not apply to an employee whose services the company itself terminated (correct answer)
   • Was void under Section 27 on the majority's own reasoning
   • Applied equally to resignation and dismissal

   Explanation. Tulzapurkar and Untwalia, JJ. read 'leave' as voluntary departure, so the clause never applied to an employee dismissed by the company. They did not decide the Section 27 question. Sen, J., concurring in the result, held that a post-service restraint is void under Section 27.

4. Which of the following is NOT a ground of unlawfulness under Section 23?

   • Forbidden by law
   • Opposed to public policy
   • The agreement is in a foreign language (correct answer)
   • Fraudulent

   Explanation. The language an agreement is written in has nothing to do with Section 23. Its grounds are: forbidden by law, defeating a law's provisions, fraud, injury to person or property, and the Court regarding the object as immoral or opposed to public policy.

5. Under Section 26, an agreement in restraint of the marriage of any person other than a minor is:

   • Voidable at the option of that person
   • Void (correct answer)
   • Valid if both parties consent
   • Valid only if made before marriage brokers

   Explanation. Section 26 makes any agreement in restraint of the marriage of a person other than a minor void, without exception.

6. Under Section 24, if part of the consideration for a single object is unlawful, the agreement is:

   • Valid for the lawful part only
   • Void (correct answer)
   • Voidable at the option of the promisee
   • Valid if the unlawful part is small

   Explanation. Section 24 makes the agreement void if any part of a single consideration for one or more objects, or any one or any part of several considerations for a single object, is unlawful.

7. Under Section 23, Illustration (k), an agreement to let a daughter to hire for concubinage is void because it is:

   • Fraudulent
   • Immoral, even though the letting may not be punishable under the Indian Penal Code (correct answer)
   • Opposed to a statute
   • Without consideration

   Explanation. The illustration states the agreement is void because it is immoral, though the letting may not be punishable under the Indian Penal Code.

8. A promises to drop a prosecution for robbery against B, and B promises to restore the stolen things. The agreement is:

   • Valid, as both gave consideration
   • Void, as its object is unlawful (correct answer)
   • Voidable at B's option
   • Valid only if the court permits

   Explanation. Section 23, Illustration (h): the agreement is void because its object is unlawful; it interferes with the course of justice.

9. In Gherulal Parakh v. Mahadeodas Maiya, the Supreme Court said the doctrine of public policy should be applied:

   • To any new head the court thinks fit
   • Only to heads already settled (correct answer)
   • Only in criminal matters
   • Only to government contracts

   Explanation. The Court said public policy should be applied only to settled heads and new heads should not be invented.