Indian Contract Act 1872: Legality of Object and Consideration

 To be valid, two things are absolutely essential in a contract – lawful object and lawful consideration. So the Indian Contract Act gives us the parameters that make up such lawful consideration and objects of a contract. Let us take a look at the legality of object and consideration of a contract.

Lawful Object and Lawful Consideration 

According to Section 23 of the Indian Contract Act the consideration and object of a contract are considered lawful until they are-

1. Forbidden by Law: When the object of a contract or the consideration of a contract is prohibited by law, then they are not lawful consideration or object anymore. They then become unlawful in nature. And so such a contract cannot be valid anymore.

2. Defeats the provision of the law: If the contract is trying to defeat the intention of the law. If the courts find that the real intention of the parties to the agreement is to defeat the provisions of the law, it will put aside the said contract.

EX: A and B enter into an agreement, where A is the debtor, that B will not plead limitation. This, however, is done to defeat the intention of the Limitation Act, and so the courts can rule the contract as void due to unlawful object.

3. Fraudulent: Lawful consideration or object can never be fraudulent. Agreements entered into containing unlawful fraudulent consideration or object are void by nature.

EX: A decides to sell goods to B and smuggle them outside the country. This is a fraudulent transaction as so it is void. Now B cannot recover the money under the law if A does not deliver on his promise.

4. Immoral: If the object or the consideration are regarded by the court as immoral, then such object and consideration are immoral. 

EX: A lent money to B to obtain a divorce from her husband C. It was agreed one B obtains the divorce A would marry her. But the courts held A cannot recover money from B since the contract is void on account of unlawful consideration

5. Involve injury to any person or property: In legal terms, an injury means to a criminal and harmful wrong done to another person. So if the object or the consideration of the contract does harm to another person or property, this will amount to unlawful consideration.