Lawful Object and Agreements opposed to public policy.
Lawful Object
A contract must not only be based upon mutual assent of competent parties but must also have a lawful object. If the object of an agreement is the performance of an unlawful act, the agreement is unenforceable. Sec. 23 declares that the object' or the 'consideration' of an agreement is not lawful in certain cases. The words 'object' end 'consideration' in Sec. 23 are not used synonymously. They are distinct in meaning. The word object' means purpose or design. In some cases, consideration for an agreement may be lawful but the purpose for which the agreement is entered into may be unlawful. In such cases the agreement is void. As such both the object and the consideration of an agreement must be lawful, otherwise the agreement is void.
WHEN CONSIDERATION OR OBJECT IS UNLAWFUL (Sec. 23)
The consideration or object of an agreement is unlawful
1. If it is forbidden by law.
If the object or the consideration of an agreement is the doing of an act forbidden by law the agreement is void. An act is forbidden by law when it is punishable by the criminal law of the country or when it is prohibited by special legislation or regulations made by a competent authority under powers derived from the Legislature.
2. If it is of such a nature that, if permitted, it would defeat the provisions of any law.
If the object or the consideration of an agreement is such that, though not directly forbidden by law, it would defeat the provisions of any law, the agreement is void.
3. If it is fraudulent.
An agreement which is made for a fraudulent purpose is void. Thus, an agreement in fraud of creditors with a view to defeating their rights is void.
4. If it involves or implies injury to the person or property of another.
'Injury' means 'wrong', 'harm', or 'damage'. Person' means one's body. 'Property' includes both movable and immovable property.
5. If the Court regards it as immoral.
An agreement, the consideration or object of which is immoral, e.g., an agreement between a husband and wife for future separation, is unlawful.
6. Where the Court regards it as opposed to public policy.
Agreements opposed to public policy
An agreement is said to be opposed to public policy when it is harmful to the public welfare. Public policy is that principle of law which holds that no subject can lawfully do that which has a mischievous tendency to be injurious to the interests of the public, or which is against the public good or public welfare.
Some of the agreements which are, or which have been held to be opposed to public policy and are unlawful are as follows:
1. Agreements of trading with enemy.
An agreement made with an alien enemy in time of war is illegal on the ground of public policy. This is based upon one of the two reasons either that the further performance of the agreement could involve commercial intercourse with the enemy, or that the continued existence of agreement would confer upon the enemy an immediate or future benefit Contracts which are entered into before the outbreak of war are either suspended or dissolved according as the intention of the parties can or cannot be carried out by postponing performance till the end of hostilities.
2. Agreement to commit a crime.
Where the consideration in an agreement is to commit a crime, the agreement is opposed to public policy. The Court will not enforce such an agreement. Likewise, an agreement to indemnify a person against consequences of his criminal act is opposed to public policy and hence unenforceable.
3.Agreements which interfere with administration of justice.
An agreement the object of which is to interfere with the administration of justice is unlawful, being opposed to public policy. It may take any of the following forms:
(a) Interference with the course of justice:
An agreement which obstructs the ordinary process of justice is unlawful. Thus, an agreement for using improper influence of any kind with the judges or officers of justice is unlawful. But an agreement to refer present or future disputes to arbitration is valid.
(b) Stifling prosecution:
It is in public interest that if a person has committed a crime, he must be prosecuted and punished. "You shall not make a trade of felony (a grave crime)" Hence, an agreement not to prosecute an offender is an agreement for stifling prosecution and is unlawful. Thus, where A promises to drop a prosecution which he has instituted against B for robbery, and B promises to restore the stolen property, the agreement is unlawful. But a compromise in case of compoundable offences is valid.
(c) Maintenance and champerty:
Maintenance' is an agreement to give assistance, financial or otherwise, to another to enable him to bring or defend legal proceedings when the person giving assistance has got no legal interest of his own in the subject matter.
4. Agreements in restraint of legal proceedings:
Sec. 28 (as amended in 1996) which deals with these agreements renders void two kinds of agreements, viz.,
(a) Agreements restricting enforcement of rights:
An agreement which wholly, or partially, prohibits any party from enforcing his rights under or in respect of any contract is void to that extent.
(b) Agreements curtailing period of limitation:
Agreements which curtail the period of limitation prescribed by the Law of Limitation are void because their object is to defeat the provisions of law.
5. Trafficking in public offices and titles.
Agreements for the sale or transfer of public offices and titles or for the procurement of a public recognition like Padma Vibhushan or Param Veer Chakra for monetary consideration are unlawful, being opposed to public policy. Such agreements, if enforced, would lead to inefficiency and corruption in public life. Similarly, an agreement to pay money to a public servant to induce him to act corruptly or to retire and thus make way for the appointment of the promisor or an agreement with voters to procure their votes for monetary consideration are void on the ground of public policy.
6. Agreements tending to create interest opposed to duty.
If a person enters into an agreement whereby he is bound to do something which is against his public or professional duty, the agreement is void on the ground of public policy.
7. Agreements in restraint of parental rights.
A father, and in his absence the mother, is the legal guardian of his/her minor child. This right of guardianship cannot be bartered away by any agreement. A father is entitled by law to the custody of his legitimate child. He cannot enter into an agreement which is inconsistent with his duties arising out of such custody. If he enters into any such agreement, it shall be void on the ground of public policy.
8. Agreements restricting personal liberty.
Agreements which unduly restrict the personal freedom of the parties to it are void as being against public policy.
9. Agreements in restraint of marriage.
Every agreement in restraint of the marriage of any person, other than a minor, is void (Sec. 26). This is because the law regards marriage and married status as the right of every individual.
10. Marriage brokerage or brokerage agreements.
An agreement by which a person, for a monetary consideration, promises in return to procure the marriage of another is void, being opposed to public policy. Similarly, an agreement to pay money to the parent or guardian of a minor in consideration of his/her consenting to give the minor in marriage is void, being opposed to public policy.
11. Agreements interfering with marital duties.
Any agreement which interferes with the performance of marital duties is void, being opposed to public policy.
12. Agreements to defraud creditors or revenue authorities.
An agreement the object of which is to defraud the creditors or the revenue authorities is not enforceable, being opposed to public policy. A contract by which an employee gets an expense allowance grossly in excess of the expenses actually incurred by him is illegal and a fraud on revenue authorities.
13. Agreements in restraint of trade.
An agreement which interferes with the liberty of a person to engage himself in any lawful trade, profession or vocation is called an agreement in restraint of trade'. Public policy requires that every man should be at liberty to work for himself and should not be at liberty to deprive himself of the fruit of his labour, skill or talent by any contract that he enters into.
Redrafted for Educational Purpose.
Deekshith Kumar,
Assistant Professor of Commerce
Book Reference:
1. Elements of Mercantile Law by N. D. Kapoor
2. Principles of Mercantile Law by Avtar Singh
3. A Textbook of Business Law by Dr. Umesh Maiya
4. Business Law by B.S. Raman
Comments
Post a Comment