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S.N.D.T WOMEN’S UNIVERSITY LAW SCHOOL

LL.B. 1st Year (A.Y. 2023–24)
SEMESTER I

Subject: CONTRACT LAW – 1

Topic

 UNLAWFUL CONSIDERATION

Submitted by:
Name: Pawar Vanshika Navanath.
Class: LL.B., 1st year
Roll No.: 41

Submission date:22/12/23

Submitted to: Prof. DEEPTI KANORIA

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Acknowledgement

I wish to express my sincere gratitude to my The Indian Contract Act professor DEEPTI
KANORIA who provided me the opportunity to make this project which provided me with a
lot of knowledge and information.
Through this project, I was able to express my thoughts on paper and also learned to research
different topics. I would also like to thank my batch mates and the seniors who guided me in
this project.
Again I would like to thank all those who assisted me in making this project without them I
could not have completed the project.
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INDEX
Sr. no Title Page no .
1 Introduction 4&5
2 Types of contract 5,6 & 7
3 Essential elements of a valid contract 8,9 & 10
4 Consideration 11,12 & 13
5 Unlawful consideration 14 to 22
6 Case laws 23
7 Conclusion 24
8 References 25
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INTRODUCTION

Section 2(h) of the Indian Contract Act of 1872 defines the term "contract" as an agreement
enforceable by law is a contract. Thus, in order to form a contract, there must be (1) an
agreement and (2) the agreement must be legally enforceable.

Agreement

A promise is defined as an accepted proposition, while an agreement is defined as "every

promise and every set of promises forming the consideration for each other." Section
2(6) states: "When a proposal is accepted, it becomes a promise." This is another way of
explaining that an agreement is a proposition that has been accepted. This is what the
defining process boils down to. A contract is an agreement, an agreement is a promise, and a
promise is a proposition that has been accepted. As a result, in the end, every agreement is
made up of a proposal from one side and its acceptance by the other.

Enforceable by law

When an agreement is legally enforceable, it is considered a contract. A contract is an

agreement that the law will enforce. Section 10 outlines the prerequisites for enforceability.
This section defines a contract as one made for a consideration, between competent parties,
with their voluntary permission, and for a legal object.

Difference between contract and agreement

All agreements are contracts if they are made with the voluntary assent of contracting parties,
for a lawful consideration, and with a legitimate intent, and are not specifically declared void.

Nothing in this document shall affect any legislation in force in (India) and specifically
abolished, by which any contract is required to be formed in writing or witnesses must be
present, or any law relating to the registration of papers. As a result, every agreement is a
contract, but every contract is not an agreement. When the following requirements are met, an
agreement becomes a contract:

1. There is some consideration for it.

2. The parties are competent to contract.
3. Their consent is free.
4. Their object is lawful.
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Contract = Agreement + Enforceability

Illustration: A contracted with B for the purchase of 10 bags of cement of a certain quality,
for Rs 1, 00,000. In this case, B promises to provide A with 10 bags of cement of that quality
only for which A has contracted and A’s promise is to duly pay B Rs.1, 00,000. In this case,
both have to perform something for the other, thus it is a case of reciprocal promise.

Contracts in India are primarily governed by the INDIAN CONTRACT ACT,

1872 (“Contract Act”). It contains the basic elements of a contract and several general rules
which apply to contracts. It does not impose any positive duty on the parties rather, it states
various formalities regarding contracts.

TYPES OF CONTRACT

Contracts can be categorized into various types based on different criteria, such as their
formation, enforceability, performance, and specific characteristics. Here are some common
types of contracts:

 Express Contract:

Definition: An express contract is one where the terms and conditions are explicitly
stated, either verbally or in writing.

Example: A written agreement for the sale of goods or services with clearly outlined
terms.

 Implied Contract:

Definition: An implied contract is formed based on the conduct of the parties or

circumstances, even though the terms are not explicitly stated.

Example: A customer ordering food at a restaurant and paying for it without a written
agreement.

 Unilateral Contract:
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Definition: In a unilateral contract, one party makes a promise in exchange for the
other party's performance.

Example: A reward is offered for finding a lost item, where the performance (finding
the item) triggers the promise of a reward.

 Bilateral Contract:

Definition: In a bilateral contract, both parties exchange promises, and each promise
is considered consideration for the other.

Example: A typical sales contract where one party agrees to sell a product, and the
other agrees to pay for it.

 Executed Contract:

Definition: An executed contract is one where both parties have fulfilled their
obligations, and the contract is completed.

Example: Buying a product from a store and paying for it immediately, creating an
executed sales contract.

 Executory Contract:

Definition: An executory contract is one where one or both parties have not yet
fulfilled their obligations.

Example: A contract for the future delivery of goods, where the delivery and payment
are scheduled for a later date.

 Void Contract:

Definition: A void contract is not legally binding from the beginning, and it lacks one
or more essential elements.

Example: A contract to perform an illegal act, such as hiring someone to commit a

crime.
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 Voidable Contract:

Definition: A voidable contract is valid but can be voided by one of the parties due to
factors like fraud, undue influence, or a minor's involvement.

Example: A contract entered into under duress may be voidable if the coerced party
chooses to void it.

 Adhesion Contract:

Definition: An adhesion contract is a standard-form contract with non-negotiable

terms, often presented on a take-it-or-leave-it basis.

Example: Software license agreements or terms and conditions for online services.

 Aleatory Contract:

Definition: An aleatory contract is based on an uncertain event, and the performance

or outcome depends on that event.

Example: Insurance contracts, where the occurrence of an event (e.g., an accident)

triggers the insurer's obligation.

These are just a few examples of the many types of contracts that can exist. The specific type
of contract used depends on the nature of the transaction and the intentions of the parties
involved.
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ESSENTIALS OF A VALID CONTRACT

Section 10 states the conditions which are required for a contract to be valid.

1. Offer Section 2(a): An offer is defined as an offer made by one person to another
expressing a willingness to enter into a contract. A legal contract begins with a
specific and explicit proposition from one party to another. This proposition, known
as an offer, lays the framework for the contract's development.
a. Illustration: A comes across an article in the newspaper in which B offers to
sell his automobile for $10,000. In this case, B’s advertising acts as the offer
in the scenario.

2. Acceptance of the Offer: Section 7(2) specifies that acceptance must be absolute and
unconditional, and must be stated in a normal and fair way. The intended receiver
must accept the offer. Only the party to whom the offer is made has the authority to
accept it, solidifying mutual agreement.
a. Illustration: After seeing the advertisement, A contacts B and expresses his
willingness to buy the car for $10,000. A communication of agreement
constitutes acceptance.

3. Consensus ad-idem (Meeting of Minds): Section 13: Requires parties to reach an

ad-idem consensus, which means that both parties must agree on the same issue in the
same sense. The contract's terms must be understood by both parties. This guarantees
that everyone is on the same page, avoiding misunderstandings or arguments over the
agreed-upon parameters.
a. Illustration: Suppose B intended to sell a blue car, but A thought he was
buying a red car. Here, even though there is an offer and acceptance, there is
no meeting of minds regarding the colour of the car.

4. Competence to Contract: Section 11 states that anybody above the age of majority,
of sound mind, and not barred from contracting by any legislation to which they are
subject is competent to contract. Individuals concerned in the contract must be legally
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capable of entering into such agreements. This entails being mentally sound and not
being under the influence of drugs or alcohol that affect decision-making.
a. Illustration: If A is only 16 years old, he may lack the legal capacity to enter
into a contract for the sale of a car. If B is aware of an age and still proceeds
with the sale, the contract may be voidable at A discretion.

5. Consideration: Section 2(d): Consideration is defined as something given in

exchange for a commitment, and it might be an act, abstention, or forbearance. the
reciprocal exchange of something worth between the parties must validate a contract.
This factor guarantees that both parties have a keen interest in the deal.
a. Illustration: In addition to the $10,000, B agrees to include a set of new tires
with the car. The promise of the new tires and the $10,000 constitute the
consideration exchanged between the parties.

6. Lawful Object and Consideration: T Section 23 states that an agreement's

consideration or object must not be unlawful, and any agreement including an
unlawful object or consideration is null and invalid. The objective of the contract and
the consideration transferred must be lawful. This requirement assures that the
contract serves a legal purpose and does not violate any legal principles.
a. Illustration: If B offers to sell a stolen car to A, the object of the contract is
unlawful. Such a contract would be void because it involves an illegal act.
7. Free Consent: Section 14 emphasises that permission is free if it is not obtained via
force, undue influence, fraud, deception, or error. Contracts must be made voluntarily
and without compulsion or fraud. The parties must enter into the agreement willingly,
without being coerced or misled.
a. Illustration: If Blake threatens A to force him into buying the car, A's consent
is not freely given. In this case, the contract may be voidable due to coercion.

8. Intention to Enter into a Legal Relationship: Section 10 states that agreements are
contracts if they are established with the parties' voluntary assent with the goal of
creating a legal relationship. By entering into the contract, the parties must intend to
form a legal relationship. This distinction is particularly significant in distinguishing
between social or domestic agreements and legally enforceable contracts.
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a. Illustration: If B and A discuss the possibility of exchanging cars as a friendly

gesture without any legal consequences, there is no intention to create a
legally binding agreement.

9. Certainty: Section 29: Declares that agreements whose meaning is not certain or
capable of being determined are null and invalid. The terms of the contract should be
clear and unambiguous. Certainty is crucial to ensuring that both parties have a
precise understanding of their respective obligations and rights.
a. Illustration: If the contract states that B will deliver the car "soon," without
specifying a definite timeframe, the lack of certainty regarding the delivery
time may lead to a dispute.

10. Not Expressly Declared Void: Section 24: Specifies the sorts of agreements that are
expressly declared void, such as those made without consideration or in restriction of
commerce. Under applicable legal laws, the contract must not be explicitly declared
invalid. This emphasises the need to follow legal standards in order to keep the
contract enforceable
a. Illustration: If the contract involves an explicitly illegal act, such as selling a
car used in a crime, it may be expressly declared void under the law.
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CONSIDERATION
There are two types of contracts in English law. They are
(i) Speciality contract or contract under seal: A contract under seal requires no
consideration. Even if it is without deliberation, it is legally binding. The form in
which this sort of contract is expressed determines its legitimacy. A deed is the most
typical example of a transaction under seal. To form a legitimate contract under seal,
four items must be present:
(i) writing.
(ii) signature,
(iii) seal, and
(iv) delivery
This contract does not derive its validity either from the fact of agreement or from
consideration.

(ii) simple contract: A simple contract is also known as a parol contract because it can
also be made by word of mouth. This contract requires:

(i) offer, and

(ii) acceptance.

There must also be a consideration in this contract. There are certain simple contracts
which are by statute required to be made in writing.
Certain basic contracts are not required by laws to be formed in writing, although they are
frequently done in writing to be used as evidence in order to be enforced in law court.
Skynner, C.B. remarked in Rann v. observed if contracts are merely written and not
specialities, they are parol a consideration that must be proved

DEFINITION OF CONSIDERATION

Section 2(d) of the Indian Contract Act, of 1872 defines consideration as follows

"When, at the desire of the promisor, the promisee or any other person has done or abstained
from doing, or does or abstains from doing, promises to do or to abstain from doing,
something, such act or abstinence or promise is called a consideration for the promise .
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RULES RELATING TO CONSIDERATION

Consideration Must Move at the Desire of the Promisor: This means that
consideration must be given in exchange for the promise willingly and voluntarily by the
party making the promise (promisor).

Illustration: Alex promises to pay Ben $500 if Ben paints a mural on Alex's garage.
In this case, the act of painting the mural is the consideration, and it moves at the
desire of Alex, the promisor.

Consideration Moving from Promisee or Any Other Person in India: In India, the
consideration can be provided by the promisee (the person to whom the promise is made)
or any other person. This is in contrast to English law, where traditionally consideration
had to move directly from the promisee.

Illustration: Sarah promises to pay her friend Tom $100 if Tom's brother mows
Sarah's lawn. In this scenario, the consideration (mowing the lawn) can move from
Tom or any other person, and the promise is still valid in India.

Forms of Consideration: Consideration can take various forms:

An act

Promise to do or abstain from doing something

An abstinence from doing something

Consideration may be in affirmative (positive) or negative form.

Examples of Consideration:

Illustration: John promises to give his old guitar to Mary in exchange for her
promise to tutor him in math. Here, the promise to tutor (a promise to do
something) is the consideration for John's promise to give the guitar.

Consideration can include:

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Giving employment

Permitting goods to remain in the promisor's possession

Assignment of a contract

Guarantee of an overdraft

Increased sale of a newspaper

Increased sale of an advertised article

Consideration as Forbearance, Detriment, Loss, or Responsibility: Consideration can

also be Forbearance, Detriment, Loss and Responsibility suffered or undertaken by the
promise.

Illustration: Alice promises not to open a competing business in the same area if Bob
agrees to sell her his customer list. In this case, Alice's forbearance (not opening a
competing business) is the consideration for Bob's promise to sell the customer list.
Examples include surrendering an interest in the business, withdrawing opposition to
a sale, submitting accounts for inspection, enlisting in the army, or accepting a cheque
instead of legal tender.

Past, Present, and Future Consideration:

According to Indian law, consideration can fall into three types:

1. Past consideration (something already done before the promise was made)
2. Present consideration (something being done or given at the same time as the
promise)
3. Future consideration (something promised to be done in the future)
Illustration: Sarah promises to pay Mark $50 as a reward for finding and returning
her lost cat. Mark had already found and returned the cat before the promise was
made. Here, the past act of finding the cat is the past consideration.
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Unlawful consideration

Meaning: A contract must have two elements in order to be legitimate: a valid object and a
valid consideration. If they are not, the consideration is unlawful. The contract is considered
to be invalid if the object and consideration are not valid. Therefore the Indian Contract Act
provides us with the parameters that make up such legitimate consideration and objects of
contract.

Section 23 of the Indian Contract Act says unequivocally that the consideration or purpose of
a contract must be legitimate, and if it is not, the object and consideration are ruled invalid.
Section 23 of the Indian Contract Act of 1872 defines three issues: consideration for the
agreement, the goal of the agreement, and the essence of the agreement. Section 23 restricts
an individual's freedom to enter into agreements and subjecting such individual's rights to the
overriding considerations of public policy and the other requirements outlined under it.
Section 23 derives its meaning from Section 264 as well.

In Section 23, the term "Object" suggests and signifies "purpose" and does not imply
importance in the same way that "consideration" does. As a result, even if the consideration
of an agreement is legitimate and real, the agreement will still be illegal if the goal (object) of
the agreement is illegal. Section 23 restricts the courts because it is not directed by mind or
motivation, to the essential goal of the exchange or transaction, and not to the causes that lead
to the equivalent.

What consideration and object are unlawful?

1. Forbidden by law: According to Section 23(a), the consideration or object of an
agreement is considered unlawful if it is forbidden by law. This implies that if the law
explicitly prohibits a certain type of transaction or activity, any agreement involving
that forbidden consideration or object would be void
 Illegality of Object or Consideration: Section 23(a) declares that if the object or
consideration of an agreement is forbidden by law, the agreement is void. The term
"forbidden by law" encompasses activities that are illegal or explicitly prohibited by
statutes.
 Examples of Forbidden by Law:
a. Criminal Activities: Contracts related to criminal activities, such as agreements to
commit theft, fraud, or any other illegal act.
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b. Illegal Trade: Agreements involving the illegal trade of goods, such as drugs or
contraband.
c. Statutory Violations: Contracts that violate specific statutes or regulations,
including agreements to engage in activities contrary to environmental laws.
 Public Policy Considerations: The provision reflects the broader principle of public
policy. Contracts involving activities forbidden by law are deemed contrary to the
public interest and societal welfare, and the law discourages parties from entering into
such agreements.
 Voidability and Void Contracts: Contracts with considerations or objects forbidden
by law are void ab initio, meaning they are void from the outset. The legal
consequences are severe, as the courts will not recognize or enforce these contracts.
 Role in Upholding Legal Standards: Section 23(a) plays a crucial role in upholding
legal standards. It ensures that contracts adhere to the norms established by the legal
system, promoting the rule of law and maintaining the integrity of contractual
relationships.
 Statutory Prohibitions: The term "forbidden by law" includes both common law
prohibitions and specific statutory prohibitions. It covers a broad spectrum of
activities that legislators have deemed unacceptable or against the public interest.
 Consequences of Illegality: Parties engaging in contracts forbidden by law may face
legal consequences, including fines, penalties, or even criminal charges, depending on
the nature of the prohibited activity.
 Importance of Legal Advice: Due to the severe consequences associated with
contracts forbidden by law, parties are advised to seek legal advice when entering into
agreements, especially when there is uncertainty about the legality of the object or
consideration.
 Illustration - ‘A’ get a license from the Forest Department to cut grass of a certain
area. Department officials told him that he could not pass on such interest to any other
person. But there is no such law in the Forest Act. So ‘A’ sold his interest to ‘B’ and
the contract was deemed valid.
2. Consideration or Object Defeats the Provision of the Law:
 Nature of the Provision: Section 23(b) focuses on the nature of the consideration or
object of an agreement. If allowing such an agreement would defeat the provisions of
any law, it is deemed unlawful.
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 Defeating Legal Provisions: This provision is concerned with agreements that, if

permitted, would directly undermine or circumvent existing legal provisions. It
addresses the potential for contracts to be used as instruments for illegal purposes or
as means to defeat the objectives of established laws.
 Examples of Scenarios:
a. Regulatory Evasion: Agreements designed to evade or bypass regulatory
requirements, such as safety standards or environmental regulations.
b. Tax Evasion Schemes: Contracts structured to manipulate financial transactions
and facilitate tax evasion, contravening tax laws.
c. Fraudulent Practices: Agreements intended to engage in fraudulent practices that
violate legal provisions and protections.
 Public Policy Considerations: This provision aligns with the broader principles of
public policy and legal order. It aims to prevent parties from using contracts as a tool
to subvert the rule of law and the established legal system.
 Voidability of the Agreement: Agreements with considerations or objects that defeat
legal provisions are void. Courts will not enforce such contracts, and they are treated
as if they never existed.
 Legal Harmony and Compliance: Section 23(b) emphasizes the importance of
ensuring that contractual agreements are in harmony with existing legal frameworks.
Parties must act in compliance with the law and should not attempt to use contracts as
a means to circumvent legal provisions.
 Preventing Unlawful Conduct: The provision serves as a preventive measure against
individuals or entities attempting to use contracts for unlawful purposes. It reinforces
the idea that contracts should be instruments of legality and fairness, not tools for
subverting the law.
 Legal Consequences: Engaging in contracts that defeat the provisions of any law
may have legal consequences, including the potential for civil or criminal liabilities,
fines, or other penalties.
 Illustration - ‘A’ and ‘B’ enter into an agreement, where ‘A’ is the debtor and ‘B’ will
not accept any limitation. However, this is done, however, to defeat the intent of the
Limitation Act, and therefore the courts may consider the contract void due to the
unlawful object.
3. Fraudulent Consideration or Object:
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 Nature of the Provision: Section 23(b) focuses on the nature of the consideration or
object of an agreement. If allowing such an agreement would defeat the provisions of
any law, it is deemed unlawful.
 Defeating Legal Provisions: This provision is concerned with agreements that, if
permitted, would directly undermine or circumvent existing legal provisions. It
addresses the potential for contracts to be used as instruments for illegal purposes or
as means to defeat the objectives of established laws.
 Examples of Scenarios:
a. Regulatory Evasion: Agreements designed to evade or bypass regulatory
requirements, such as safety standards or environmental regulations.
b. Tax Evasion Schemes: Contracts structured to manipulate financial transactions
and facilitate tax evasion, contravening tax laws.
c. Fraudulent Practices: Agreements intended to engage in fraudulent practices that
violate legal provisions and protections.
 Public Policy Considerations: This provision aligns with the broader principles of
public policy and legal order. It aims to prevent parties from using contracts as a tool
to subvert the rule of law and the established legal system.
 Voidability of the Agreement: Agreements with considerations or objects that defeat
legal provisions are void. Courts will not enforce such contracts, and they are treated
as if they never existed.
 Legal Harmony and Compliance: Section 23(b) emphasizes the importance of
ensuring that contractual agreements are in harmony with existing legal frameworks.
Parties must act in compliance with the law and should not attempt to use contracts as
a means to circumvent legal provisions.
 Preventing Unlawful Conduct: The provision serves as a preventive measure against
individuals or entities attempting to use contracts for unlawful purposes. It reinforces
the idea that contracts should be instruments of legality and fairness, not tools for
subverting the law.
 Legal Consequences: Engaging in contracts that defeat the provisions of any law
may have legal consequences, including the potential for civil or criminal liabilities,
fines, or other penalties.
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 Illustration - ‘A’ decides to sell goods to ‘B’ and smuggle them out of the country.
This is a fraudulent consideration which makes the contract void. If ‘A’ does not
deliver goods on his promise, then ‘B’ cannot recover the money under the law.
4. Defeats any Rules in Effect :
 Nature of the Provision: Section 23(d) focuses on the nature of the consideration or
object of an agreement. If permitting the agreement would defeat the provisions of
any law or established rules, it is deemed unlawful.
 Defeating Existing Rules: This provision is concerned with agreements that, if
allowed, would undermine or circumvent existing legal rules, regulations, or
established industry standards. It ensures that contractual agreements align with and
do not conflict with the prevailing legal framework.
 Examples of Defeating Rules in Effect:
a. Regulatory Bypass: Agreements designed to bypass or circumvent existing
regulatory requirements, such as safety standards or environmental regulations.
b. Violating Statutory Provisions: Contracts that, if permitted, would lead to a
violation of statutory provisions, contravening the established legal order.
c. Non-compliance with Industry Standards: Agreements that fail to adhere to
industry-specific standards or codes of conduct.
 Voidability of the Agreement:If the consideration or object defeats any rules in
effect, the agreement is voidable. The party adversely affected by the violation of
rules has the right to choose whether to affirm the contract or rescind it.
 Public Policy and Legal Harmony: This provision aligns with the broader principles
of public policy and legal harmony. It emphasizes the importance of contracts being
in harmony with existing rules and regulations, contributing to the overall welfare of
society.
 Importance of Compliance: Parties entering into agreements must ensure that their
contracts comply with the rules and regulations in effect. Attempts to use contracts to
defeat established legal standards are not acceptable.
 Legal Consequences of Non-compliance:Engaging in contracts that defeat any rules
in effect may lead to legal consequences, including the voiding of the contract and
potential civil or regulatory liabilities. Parties may need to rectify the non-compliance.
 Preventing Regulatory Evasion: Section 23(d) serves as a safeguard against
attempts to use contractual agreements as tools for evading or subverting existing
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rules. It reinforces the principle that contracts should not be instruments for achieving
unlawful or prohibited ends.
 Disclosure and Regulatory Compliance: Parties entering into contracts are expected
to disclose all relevant information and ensure that their agreements comply with the
legal and regulatory framework. Non-compliance may result in legal challenges and
penalties.
5. When they cause Injury to another Person or Property
 Nature of the Provision: Section 23(e) is concerned with the impact of the
consideration or object on the person or property of another. If the agreement involves
or implies injury, either physical harm to an individual or damage to their property, it
is considered unlawful.
 Examples of Causes of Injury:
a. Physical Harm: Agreements that involve activities or actions leading to physical
harm, such as contracts involving dangerous activities without proper safety
measures.
b. Property Damage: Contracts that imply or result in damage to another person's
property, for instance, agreements involving negligent handling of goods or services.
c. Personal Injury Claims: Agreements that may lead to personal injury claims, such
as contracts that expose individuals to unsafe conditions or practices.
 Voidability of the Agreement: If the consideration or object causes injury to another
person or property, the agreement becomes voidable. The party suffering harm has the
option to affirm the contract or rescind it.
 Public Policy Considerations: This provision aligns with public policy
considerations by emphasizing the importance of contracts not causing harm to
individuals or their property. Contracts that compromise the safety and well-being of
others are not considered legally acceptable.
 Importance of Safety and Ethics: Parties entering into contracts are expected to
prioritize safety and ethical considerations. Contracts should be structured in a way
that does not pose a threat of injury to individuals or their property.
 Legal Consequences of Harm: Engaging in contracts that cause injury to another
person or property may result in legal consequences. The party responsible for the
harm may be held legally liable and may need to compensate the injured party for the
damages incurred.
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 Preventing Unethical Practices: Section 23(e) acts as a deterrent against agreements

that involve unethical practices leading to harm. It reinforces the principle that
contracts should not be instruments for causing injury to others.
 Disclosure of Risks: Parties are expected to disclose any potential risks or dangers
associated with the contract. Failing to disclose such risks, especially those resulting
in injury, may lead to legal challenges.
 Responsibility and Accountability: Parties entering into contracts are accountable
for the consequences of their agreements. If the contract results in harm to another
person or their property, the responsible party may be held legally accountable
 example: - The contract to publish a book that infringes on the copyright of another
person is null and invalid. This is because the consideration here is illegal and
infringes on the property of another person, i.e., its copyright.
6. When Consideration is Immoral:
 Nature of the Provision: Section 23(f) is concerned with the morality of the
consideration in a contract. It implies that for a contract to be valid, the consideration
involved should not be immoral or against public policy.
 Definition of Immoral Consideration: Immoral consideration refers to actions,
promises, or obligations that are contrary to accepted standards of morality. It
involves conduct that is considered morally wrong, unethical, or offensive.
 Examples of Immoral Considerations:
a. Illegal or Criminal Activities: Agreements involving illegal or criminal activities,
such as contracts related to human trafficking, drug trade, or other unlawful practices.
b. Unethical Business Practices: Contracts that promote or involve unethical business
practices, such as agreements to engage in fraud, deceit, or manipulation.
c. Violating Social Norms: Agreements that go against prevailing social norms and
standards of decency. This could include contracts that promote discrimination,
harassment, or exploitation.
 Voidability of the Agreement: If the consideration is deemed immoral, the
agreement becomes voidable. The party adversely affected by the immoral
consideration has the option to affirm the contract or rescind it.
 Public Policy Considerations: Section 23(f) aligns with public policy considerations
by emphasizing that contracts should not involve considerations that are morally
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objectionable. It upholds societal values and seeks to prevent contracts that could
harm public morality.
 Importance of Ethical Conduct: Parties entering into contracts are expected to
conduct themselves ethically. Contracts that involve immoral considerations are not
legally acceptable, and the law discourages parties from engaging in such agreements.
 Legal Consequences of Immorality: Engaging in contracts with immoral
considerations may lead to legal consequences. The party promoting or benefiting
from the immoral consideration may face civil liabilities, and the contract may be
voided by the affected party.
 Protecting Public Morality: Section 23(f) serves as a safeguard against contracts that
could erode public morality. It reinforces the idea that contracts should not be
instruments for promoting actions that are widely considered immoral.
 Disclosure and Informed Consent: Parties entering into contracts are expected to
disclose all relevant information, especially if the consideration involves potentially
immoral activities. Informed consent is crucial, and parties should be aware of the
nature of the consideration.
 Social Responsibility: The provision promotes social responsibility by discouraging
individuals and entities from engaging in contracts that may harm societal values. It
encourages a collective commitment to upholding ethical standards in contractual
relationships.
 For example, 'A' gave money to 'B' in order for her to divorce her husband 'C,' and
the two agreed that if 'B' divorced, 'A' would marry 'B'. The court, however,
determined that 'A' cannot collect money from 'B' since the contract is defective
owing to illegal consideration.
7. Consideration is opposed to Public Policy
 Certain transactions are prohibited in the name of public policy for the benefit of the
community. However, we do not employ public policy in its broadest sense in this
circumstance. If such were the case, the individual's own freedom to enter into
contracts would have been motivated. As a result, public policy is utilised in a
restricted context for legal evaluation and object.
 So let’s look at some agreements that are against public policy: –
o Trade with the Foreign Enemy: – Entering into a contract with the person of
a country with which India is at war is a void agreement. For example, a
 22

businessman who was contracting with a Pakistani citizen during the Kargil
War.
o Stifling Prosecution: – This is universal that the natural course of law and
such contracts are void. For example, A agrees to sell land to B if he does not
participate in criminal proceedings against him.
o Maintenance and Champerty: A maintenance agreement is when a person
promises to maintain a suit in which he has no real interest. When a person
agrees to assist another party in litigation for damages or a portion of the
proceeds, then the Champerty occurs.
An agreement for traffic in public offices.
Agreement to create a monopoly.
An agreement for brokerage marriage for the rewards.
o Interference with the Courts: – An agreement which is intended to induce
any judicial or state officials to do corrupt work and interfere in legal
proceedings.
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CASE LAWS

Saregama India Ltd. vs. Suresh Jindal and Ors.

Citation: AIR 2006 Cal 340, 2007 (34) PTC 522 Cal

Facts of the Case:

Saregama India Ltd., a prominent music company, filed a suit against Suresh Jindal and
others for copyright infringement and passing off. The dispute involved the unauthorized use
of certain sound recordings and music compositions owned by Saregama.

Legal Issues:

 Copyright Infringement: Saregama alleged that the defendants were infringing on its
copyright by using its sound recordings without authorization.
 Passing Off: Saregama claimed that the defendant's actions amounted to passing off,
as they were using the recordings in a way that could mislead the public into believing
that the products were associated with or endorsed by Saregama.

Court's Decision: The Calcutta High Court, in its judgment, held in favour of Saregama on
both counts—copyright infringement and passing off. The court found that the defendants
had indeed used Saregama's sound recordings without proper authorization, constituting
copyright infringement. Additionally, the court recognized that this unauthorized use could
lead to confusion among the public, thereby establishing passing off.

Significance: This case highlights the importance of protecting intellectual property rights,
especially in the context of the music industry. Copyright infringement and passing off are
serious offenses that can harm the rights and interests of content creators and owners.

Bovard vs. American Horse Enterprises

The California Court of Appeals for the Third District refused to execute an agreement for the
payment of promissory notes used to acquire the drug-making organization and similar
goods. Even though the items sold were not, in fact, illegal, the court refused to honour the
agreement for public policy concerns
 24

CONCLUSION
unlawful consideration serves as a linchpin in the framework of contract law, safeguarding
the legal system's commitment to justice, fairness, and the welfare of society. Recognizing the
boundaries of acceptable consideration is essential for individuals entering into contractual
relationships and is a cornerstone for the ethical and lawful practice of contract law.
 25

REFERENCES
https://legalpaathshala.com/unlawful-consideration-and-object/
Contract Act book by Anirudh Wadhwa
publication – LexisNexis
https://blog.ipleaders.in/contract-as-a-lawful-agreement-an-insight/#Lawful_consideration