Legal Guide

What considerations and objects are lawful under Section 23 of the Indian Contract Act?

by Bhavya Choudhary · 3 min read

Section 23 of Indian Contract Act

Introduction

No impure hand should touch the pristine springs of justice.”

Section 23 of the Indian Contract Act outlines three concerns, including consideration for the agreement, the goal of the agreement, and the core of the agreement. Section 23 of the Indian Contract Act restricts the freedom of a person to enter into contracts.

The term “Object” under Section 23 of the Indian Contract Act denotes “purpose” and does not imply significance in the same sense as “consideration”. Therefore, despite the fact that the consideration of an agreement may be legal and genuine, this does not prevent the agreement from being invalid if its intent is unlawful. 

Section 23 of the Indian Contract Act restricts the courts, since it is not led by intent or purpose, to the underlying aim of the agreement or transaction and not to the causes that lead to the equivalent.

Object and importance of Section 23 of the Indian Contract Act

The consideration or purpose of a contract is legal unless it has any of the following conditions as provided under Section 23 of the Indian Contract Act:

  1. Forbidden by law
  • When the subject or consideration of an agreement is forbidden by law, it is no longer a lawful subject or consideration under Section 23 of the Indian Contract Act. Therefore, such an agreement is void.
  • Illegal consideration of an item encompasses behaviors that are expressly prohibited by law. This also includes things that the relevant government prohibits via rules and regulations. However, if the regulations created by such agencies are not consistent with the law, they will not be relevant in any way.
  • Illegal by law is not identical to void, hence it is not always true that everything void is also “illegal by law”.
  • The terms of Section 23 of the Contract Act reveal the governing intent to minimize its significance. Its contrast to a similarly elusive concept, public policy, demonstrates that it is utilized in a restricted meaning; typically, the two concepts would overlap.
  • The third restriction put on the term by the statute, “courts consider immoral”, suggests that it is also an element of customary law, as the teaching of public policy, and should thus be limited to the norms seen and established by the Courts. 
  • The phrase “Law” in Section 23 of the Indian Contract Act refers to government-sanctioned law, therefore, it is not permissible to enter into a guarantee agreement based on a contract that is prohibited by law. 
  • The question as to whether a particular contract is prohibited by an Act or would generally violate its provisions is always one of development of the Act, with the criterion being that it must be read in accordance with the language of the statute and as the legislator intended.
  1. Against the Law
  • The phrase “if authorized, it would violate the provisions of law” that appears in Section 23 of the Indian Contract Act should be interpreted as referring to the performance of a contract that violates the requirements of any law. 
  • The general norm of law followed by the courts is subject to the maxim modus et Convenio vincunt legem. If the specific provisions of any law are violated by an agreement, the parties’ or third parties’ interests would be adversely affected by its fulfillment.
  • The parties to an agreement are permitted to choose their own privileges(rights) and obligations, and the court will only give effect to the parties intentions as stated in the agreement in accordance with the relevant laws of the nation.
  1. Injury to another’s person or property

According to the terms of Section 23 of the Indian Contract Act, an agreement that involves causing harm to a third party’s person or property is invalid and cannot be enforced by the court; thus, no lawsuit is feasible for the breach of such an illegal agreement.

  1. Interference with marital relations in violation of the law; immorality Under Section 23 of the Indian Contract Act
  • Where the court deems the object or the consideration inappropriate, then the object and the considerations are immoral.
  • Consider that ‘A’ lent money to ‘B’ so she may divorce her spouse ‘C’. It had been agreed that after ‘B’ obtains the separation, ‘A’ will marry her. However, the court ruled that ‘A’ cannot collect money from ‘B’ since the agreement is defective due to illegal consideration. This agreement is void under Section 23 of the Indian Contract Act. 
  • If any employment contract is entered into and it is against public policy, that employment contract would be void under Section 23 of the Indian Contract Act. 
  1. Public policy
  • A person who intentionally enters into a contract with an object which is against public policy cannot authorize his rights in relation to that contract, as required by law. An agreement that is against public policy is void under Section 23 of the Indian Contract Act.
  • Notably, Section 23 of the Indian Contract Act does not define the terms “public policy”, “opposed to public policy”, or “contrary to public policy”. Nonetheless, the term “public policy” may refer to matters involving the wider public or for the public good and the support of the public at large.
  • So let us examine a number of agreements that violate public policy Section 23 of the Indian Contract Act:
  1. Masters Service Agreements to Make Monopolies. Such a Masters service agreement is against public policy.
  2. A Consent to Brokerage Marriage for Reimbursement.
  3. Interfering with the Courts: An agreement whose purpose is to induce legal or state officials to behave corruptly and interfere with judicial proceedings.

Conclusion

Section 23 of the Indian Contract Act determines what considerations and objects are lawful in a contract. In order to avoid legal complications, the parties must reach an agreement whose consideration and object are lawful. One can consult a lawyer online.

A lawyer is the best person to be consulted while entering into an agreement. Apart from saving time, an expert lawyer helps you to get the contract drafted in the best possible way. Consult a lawyer online now. 

One of the essentials of entering into the contract is that the consideration and object of the contract must be lawful. An expert lawyer may help you determine whether the consideration and objects of the contract are lawful. Therefore, one must consult a lawyer before entering into any agreement.

Bhavya Choudhary

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Bhavya Choudhary

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