For a valid contract, its object and consideration should be lawful, according to section 10 of the Indian Contract Act, 1872. Both the object and consideration are essential elements of a contract, and which object and consideration are lawful is described under section 23 of the act. Section 24, says that either whole or any part of the object or consideration is unlawful, the agreement is void.
Which objects and considerations are lawful:
According to section 23 of the Indian Contract Act, 1872 an object or consideration is lawful if it is not forbidden by law, defeats the law, fraudulent, injury to a person, property, immoral, or opposed to public policy.
Sujan Singh v. Mohkam Chand was a case of knock-out agreement in an auction sale. Both parties agreed that they will not outbid each other in the auction if either party’s bid was accepted; he will transfer half of the property to the other. Defendant’s bid was accepted, and the plaintiff sued to enforce the agreement. It was observed that the contract is valid and it does not oppose the policy.
The Supreme Court in the case of Brij Mohan v. M.P.S.R.T. Corporation held that the agreement is void. The respondent had a permit to run a bus on a particular road. They have entered into a contract with the petitioner in which they allow the latter to run their bus as a nominee. This violates the provision of the Motor Vehicle Act, which debarred all the permit holders, including the State Road Transport Corporation, from involving in unauthorized trafficking in the permit.
In Jamila Khatoon v. Abdul Rashid, the court has recognized that a contract made before marriage that calls for the husband to pay the wife’s customary maintenance allowance in the event of strained relations between the husband and wife is not void under any statutory provisions.
In Rajat Kumar Rath v. Administration of India,, it was held that an agreement that has no legal effects is void. Even if an agreement is void but not illegal, it can still be upheld as a security understanding if it acts as collateral for another agreement. It cannot be held liable under the agreement and is contaminated by the wrongdoing of the legally forbidden task.
An agreement for the transfer of property to avoid insolvency with a fraudulent purpose is a void agreement, due to a fraudulent object. This was held observed in Ram Lal Misra v. Rajendra Nath Sanyal.
A contract for the construction of a railroad line on land that will be bought for that purpose does not involve injury to people or property, held in Union of India v. Philips Construction.
It is not required for the agreement to specifically declare that injury would be intended. It is sufficient if the object can be determined from the contract or other sources, even if only by implications, as observed in the case of Narayanan v. Rajamany.
In Allen v. Rescous, it was recognized that an agreement that has an object to injure a person is a void contract.
A gift deed for past cohabitation is valid. The object of the gift deed would not consider unlawful because this is in return for her services. It was held in Narayani v. Pyare Mohan.
An object and consideration both are essential elements of a contact. For a valid contract, both of these should be lawful. When either the object or consideration, wholly or any part of these is unlawful the contract becomes void. These are unlawful if oppose the provision of any law, or public policy, immoral, injure person or property, and fraudulent.
Indian Contract Act
Law of Contract Part I by R.K.Bangia; Edition 2006
Law of Contract and Specific Relief by Avtar Singh; Ninth Edition
Sujan Singh v. Mohkam Chand, AIR 1983 P&H 180
Brij Mohan v. M.P.S.R.T. Corporation, AIR 1987 SC 29
Jamila Khatoon v. Abdul Rashid, AIR 1939 Lahore 165
Rajat Kumar Rath v. Administration of India, AIR 2000 Ori 32
Ram Lal Misra v. Rajendra Nath Sanyal, AIR 1933 Oudh 124
Union of India v. Philips Construction, 1980 1 Ker LT 42
Narayanan v. Rajamany. 1995 2 Ker LT 351
Allen v. Rescous, 1677 2 Lev 174: 1 Freem KB 433
Narayani v. Pyare Mohan, AIR Raj 25
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