INTRODUCTION

The fourth and the last requirement for the formation of a valid contract is that
parties must contract for a lawful object. An agreement the object of which is
opposed to the law of the land may be either unlawful or simply void, depending
upon the provision of the law to which it is opposed.

UNLAWFUL AGREEMENTS
Section 23 of the Indian Contract Act 1872 has specified certain considerations
and objects as unlawful. The consideration or objects of an agreement is lawful,
unless it is forbidden by law; is of such a nature that, if permitted, it would defeat
the provision of any law; or is fraudulent; or involves injury to the person or
property of another; or the court regards it as immoral or opposed to public policy.
In each of the above-mentioned cases the consideration or object of an agreement
is deemed to be unlawful. Every agreement in which the object or consideration is
unlawful is void.

Illustrations
(a) A agrees to sell his house to B for 10,000 rupees. Here B’s promise to pay the
sum of 10,000 rupees is the consideration for A’s promise to sell the house and A’s
promise to sell the house is the consideration for B’s promise to pay the 10,000
rupees. These are lawful considerations.
(b) A promises to pay B 1000 rupees at the end of six months, if C, who owes the
sum to B, fails to pay it. B promises to grant time to C accordingly. Here, the
promise of each party is the consideration for the promise of the other party, and
they are lawful considerations.
(c) A, B, and C entre into an agreement of the division among them of gains
acquired, or to be acquired, by them by fraud. The agreement is void, as its object
is unlawful.
(d) A promises to obtain for B an employment in the public service, and B promises
to pay 1000 rupees to A. The agreement is void, as the consideration for it is
unlawful.
(e) A, who is B’s Mukhtar, promises to exercise his influence, as such, with B in
favour of C, and C promises to pay 1000 rupees to A. The agreement is void,
because it is immoral.
(f) A agrees to let her daughter to hire to B for concubinage. The agreement is
void, because it is immoral, though the letting may not be punishable under the
Indian Penal Code (XLV of 1860).
 OBJECT AND CONSIDERATION
The section covers the illegality of both the object of the contract and the
consideration for it. The “object” and “consideration” may in some cases be the
same thing but usually they are different. For example, where money is borrowed
for the purpose of the marriage of a minor, the consideration for the contract is the
loan and the object, the marriage. In a case of this kind before the Madras High
Court,1 the court found that the marriage in question was hit by the provisions of
the Child Marriage Restraint Act of 1929. “The purpose for which the guardian
borrowed the money is to celebrate the marriage of a child which is an offence
under the Act.” Thus, the object was to defeat the provisions of the Child Marriage
estraint Act. The court relied upon the earlier decision of the Calcutta High Court
in Jaffar Meher Ali v Budge Budge Jute Mills2 where a debtor transferred certain
property to one of his creditors, the object being to give him perference over other
creditors and SALE J stated the difference between “object” and “consideration”.
The word “object” in Section 23 of the Contract Act was not used in the same
sense as “consideration”, but was used as distinguished from consideration and
means”purpose” or “design”. If then the purpose of the parties was to defeat the
provisions of the Bankruptcy Law, there can be no doubt that the transfer would be
inoperative under the provisions of Section 6 of the Transfer of Property Act.

FORBIDDEN BY LAW
Where the object of an agreement is forbidden by law, the agreement is
void. “Law” in this connection means the law for the time being in force in India
and, therefore, includes Hindu and Mohammedan laws also and also principles of
unwritten law.3 A simple illustration is the sale of liquor without licence. The sale
is void and the price irrevocable.4

1
Chandra Sreenivosa Rao v Kowapatti Raja Rama Mohana Roa, AIR 1952 Mad 579. There is no presumption of
illegality. Such a presumption cannot be raised except where it is warranted by rules relating to presumptions. A
presumption of legality-not a presumption of illegality is the rule. The mere possibility of transgression of lawis not
a ground for saying that the agreement offends S. 23. The agreement must be shown to be ex facie illegal or capable
of being performed only through illegal means. Mathai George v Mathew Chacko, (1987) 1 Ker LT 341.
2
(1906)33 Cal 702.
3
Gherulal Parekh v Mahadeo Das, 1959 Supp (2) SCR 406, 417: AIR 1959 SC 781, 786.
4
Boistrub Charan v Wooma Charn, (1889) 16 Cal 436. See also Kateshwar Mittal Kamath v K. Rangappa Baliga &
Co, AIR 1959 SC 781: (1959) 2 SCA 342; Ajit Singh v Kakbhir Singh, AIR 1992 P&H 193, a clog on the equity of
A Contract to pay some money if a crime or a tort is committed is not enforceable.
If the law prohibits bigamy, a promise by a married man to marry another lady is
unlawful. Even if the promise says that a man would marry a woman after his
wife’s death, such a promise is not enforceable because such a promise tends to
break up marriage, encourages immorality and often leads to commission of
crimes.
If the agreement does not satisfy the clear and unequivocal requirements of a
statute it is void.
In Re Mahmoud and Ispahani, (1921) during the war the sale of linseed oil
without a license from the Food Controller had been forbidden. The Plaintiff
agreed to sell linseed oil to the defendant, on a false assurance from the defendant,
that he had such a license. Subsequently, when the oil was supplied the defendant
refused to accept the same on the ground that he had such a licence. In an action
against the defendant for damages for breach of contract it was held that he was not
liable as there was no void contract between the parties.
Merely because a party does not observe certain statutory requirements does not
mean that the agreement is void. The Court has to see the real purpose of the Act.
In Smith v Mawhood, a statute required that a dealer in tobacco must hold a
licence to sell the same and he should also have his name painted outside the place
of his business and the failure to observe this rule attracted a penalty of 200. The
plaintiff, who had sold tobacco without observing the abovestated statutory
requirements, was held entitled to recover the price of the goods. In this case the
real purpose of this Act was to impose a fine on the offending party for the purpose
of the purpose of the revenue, rather than to vitiate the contract itself.

DEFEAT THE PROVISIONS OF ANY LAW

redemption (95 yrs) violates Transfer of Property Act and is, therefore, unlawful under S. 23; Denzyl Winston
Ferries v Abdul Jaleel, AIR 1992 AP 246: (1992) 2 Andh LT 144, sale of excess land without obtaining permission
of competent authority under Urdan Land (Ceiling and Regulation) Act, 1976, held unlawful, to the same effect. Raj
Kumar Tajendra Singh v Dr Sital Raj Mehta, (1988) 1 Raj LR 523; Denzyl Winston Ferries v Abdul Jaleel, (1992) 2
Andh LT 144. Gopal Lal v Babu Lal, (2004) 4 CLT 161 (Raj DB), a kind of compromise which is barred by Order
23, Rules 3, 3- Aand S. 96(1), CPC, not allowed to be enforced.
 If the object or considersation of an agreement is of such a nature that, if it is
permitted, it would defeat the provisions of any law, such an agreement is void.
Certain acts may not be expressly forbidden by law, but if they result in
circumventing any law, they cannot be encouraged.
In Sitaram v Harihur, (1911) the natural father paid a sum of ₹ 8,000/- to a
widow to induce her to adopt his son. It was held that this payment was in the
nature of a bride and as such was illegal according to Hindu Law.
In Abdul Pirojkhan Nabab v Hussenbi (1904), the Plaintiff and the
defendant who married under the Mahomedan law, agreed before marriage that the
defendant (wife) would be allowed to live with her parents after the marriage. The
wife went to her parents and refused to come back to her husband (plaintiff). He
filed a suit for restitution of conjugal rights. Her defence was that she was
permitted by the agreement made before the marriage, to live apart, and also that
the husband has not paid her dower amounting to ₹1,000/-. It was held that the
agreement made before marriage permitting the wife to live separately was void in
law. The Plaintiff was granted the decree for restitution of conjugal rights
conditional upon payment by him of the stipulated dower of ₹1,000/-.
An agreement for the future separation between a Mahomedan husband and wife is
also void because the same is opposed to public policy.
However, an agreement to do a thing not contrary to any provision of law or
contrary to public policy, is not unlawful.
In Sukla v Ninni, it has been held that although according to Mahomedan Law a
man, who has begotten an illegitimate child, does not have a duty to maintain him
but an agreement to maintain an illegitimate child is not unlawful, and is therefore
not void. Maintenance of illegitimate children, it was further observed, is in
consonance with public policy in India.
Another illustration is Foster v Driscoll.5 Here the agreement was to buy whisky
in Great Britain and to smuggle it into the United States against the law of that
country. The Court of Appeal held the agreement to be illegal. It involved the
commisson of an offense in a foreign and friendly country and so a breach of
international comity. It did not matter that the parties had not succeeded in their
attempt and they could have lawfully taken their goods to another country.

5
(1928) All ER Rep 130: (1920) 1 KB 470 CA.
 FRAUDULENT
An agreement made for a fraudulent purpose is void. Where the parties agree
to impose a fraud on the third person, their agreement is unlawful. Where, for
example, a debtor agreed to pay a separate commission, or to give preference to a
creditor in order to induce his consent to a composition which is proposed with
other creditor, the object of the agreement is fraudulent.6 In another case, there
were two decree-holders against the debtor and one of them, the plaintiff, had the
debtor’s property attached and brought to sale. The plaintiff agreed with the
defendant, a prospective buyer, that he would not bid against the defendant and
that the defendant would pay him off. The property was thus knocked down to the
defendant for a very small price. It was held that the whole object of the
arrangement was fraudulent as it deprived the other decree-holder of what he
would have got if the sale had been competitive. Accordingly, the plaintiff could
not recover anything from the defendant.7 Similarly, an agreement to defraud
creditors, or to give fraudulent preference to a creditor8 or to defraud revenue
authorities,9 or investors in a company,10 are illegal. A compromise decree
obtained by practising fraud on the court was held to be void.11
In Jai Ram v Kahna Ram, AIR 1963, H.P., the forest department of Himachal
Pradesh invited tenders for timber. A and B entered into an agreement according to
which both of them were to submit tenders, A’s tender to be for a higher amount
than B. In consideration for A non-competing with B, B gave a postdated cheque
to A for ₹ 15,000/-. It was agreed that if B’s tender was accepted A will get the
cheque cashed, otherwise he will return the cheque to B. B’s tender was accepted,
but he gave instructions to his bank to stop the payment of the cheque to A. A filed

6
Atamal Ramoomal v Deepchand Kessurmal, AIR 1939 Sind 33; Mallalien v Hodgson, (1891) 16 QB 629. Indian
Hostels Co Ltd v Bhaskar Moreshwar Karve, (1993) Cri LJ 3370 Bom, sale of a company’s property at a throw-
away price may be of fraudulent nature and, therefore, against public policy. Munesh v Anasuyamma, AIR 2001
Kant 355, a document containing compromise of martial proceedings on which the wife’s signature was forged was
against law and, therefore, could not be the basis of any matrimonial remedy. Laxman Lahanuji Lende v Harichand
Domaji Kulharkar, (2006) 3 Bom CR 864 (Nag Bench), deed of the family partition, alleged to be fraudulent, Karta
is a necessary party, other coparceners desirable but not necessary
7
Ram Nath Misra v Rajendranath Sanyal, 142 IC 525: (1933) 8 Luck 233. See also Manika Moopanar v Periya,
164 IC 31: AIR 1936 Mad 541; Kedar Nath Motani v Prahlad Rai, (1960) 1 SCR 439, 447: AIR 1960 SC 213, 216.
8
Note 1 above and see Ramlal Misra v Rajendra Nath Sanyal, AIR 1933 Oudh 124.
9
Alexander v Rayson, (1936) 1KB 169.
10
Beghie v Phosphate Sewage Co Ltd, (1876) 1 QBD 679.
11
Ashis Kumar Ghosh v Gopal Chandra Ghosh, (2004) 3 CHIN 146 (Cal), the plaintiffs alleged that they were
never parties to the suit which ended in the compromise.
a suit against B to recover the amount of the cheque. One of the defences pleaded
by B was that the agreement between them was fraudulent and opposed to public
policy and as such void. It was held that in this case the dominant object of the
aforesaid agreement was that the contract by the Forest Department be given to B,
and the object could be said to be aimed at defrauding the Forest Department. The
agreement between the parties was held to be valid and binding. it was also found
that the Forest Department has a discretion even to reject the lowest tender and,
therefore, procuring the acceptance of the tender by submitting lowest rate could
not be considered to be fraudulent abject.it was held that the agreement between
the parties was not void under Section 23 of the Indian Contract Act.

INJURIOUS TO PERSON OR PROPERTY

An agreement between two persons to injured the person or property of
another is unlawful. In the same way, if the object of an agreement is such that it
involves or implies injury to the person or the property of another,12 the agreement
is unlawful and void. A person borrowed a sum of hundred rupees and executed a
bond promising to work for the plaintiff without pay for a period of two years. In
case of default, the borrower was to pay an exorbitant interest and the principal
sum at once. The court held that the contract contained in the bond was
indistinguishable from the slavery, which involves injury to the person and was,
therefore, void.13 Similarly, a bond to pay an exorbitantly high rate of interest, in
case, the borrower left the lender’s service, has been held to be void.14 An
agreement to commit a crime or a civil wrong, for example, to assaults or beat a
person15 or to deceive him16 or to publish a libel against him,17 all fall in this
category.

12
An agreement to construct a railway line on a land to be acquired for the purpose does not involve injury to person
or property. Union of India v Philips Construction, (1980) 1 Ker LT 42 Case No. 78. Narayanan v Rajamany,
(1995) 2 Ker LT 351, it is not necessary that the intention to cause injury should be expressly mentioned in the
agreement. It is enough that the object can be discerned from the agreement or from other materials even if by
implication.
13
Ram Sarup v Bansi Mandar, (1915) 42 Cal 742.
14
Ibid. See also Satish Chandra v Kashi Sahu, (1918) 3 Pat LJ 412: 46 IC 418: cf. Kanakal v Pambayan, AIR 1927
Mad 531: 101 IC 39.
15
Allen v Rescous, (1677) 2 Lev 174: 1 Freem KB 433.
16
Brown Jenkinson and Co Ltd v Percy Dalton (London) Ltd, (1957) 2 QB 621.
17
Clay v Yates, (1856)1 H & N 73: 25 LJ Ex 237.
 IMMORAL
If the consideration of object of an agreement is regarded by the court to be
immoral or opposed to public policy, the agreement is unlawful and void. A
landlord letting his house knowing that the same was to be used for the purpose of
running a brothel cannot recover the rent of the same.
In Bai Vijli v Nansa Nagar, the Plaintiff advanced a loan to the defendant, a
married woman, to enable her to obtain divorce against her husband and then
marry the plaintiff. The object of an agreement was held to be immoral and the
Plaintiff was not entitled to recover the loan so advanced.

PUBLIC POLICY
If the court regards an agreement as opposed to public policy, the agreement
is void. Public policy is not capable of any precise definition. Public policy means
the policy of the law at a stated time. An act which is injurious to the interest of the
society is against public policy. If an agreement is prejudicial to social or economic
interest of the community, it will be against public policy to enforce such an
agreement. On the one hand a persons right of contractual freedom should be
maintained, on the other hand if the contract is against public policy the law must
not allow that to be enforced.

The following agreements have been held to be opposed to

public policy
(1) Agreement to stifle prosecution
An agreement to stifle prosecution has been regarded as opposed to public policy.
The purpose of criminal law is to punish a guilty person and a compromise with a
view to save a guilty person from liability would frustrate this object.
If A promises B tor drop a prosecution, which he has instituted against B for
robbery and B promises to restore the value of the things taken. The agreement is
void, as its objects is unlawful.
(2) Agreement to maintenance and champerty
Maintenance consists in aiding a party in civil proceedings by providing financial
or other assistance without lawful justification. When a person intermeddles in the
litigation between others by providing assistance to one of the parties, and he has
no interest of his own in the litigation, such intermeddling is unlawful.
(3) Trading agreement with an enemy
When there is a war between two countries it is unlawful and against public policy
that a person should trade with a subject of the enemy country. During the war it is
unlawful either to enter into a contract, or to perform a contract entered into before
the war broke out.
(4) Marriage brokage contract
Marriage brokage contracts means such contracts under which a person agrees to
procure a marriage between two persons on some consideration. Such agreements
are opposed to public policy and are void.
(5) Agreement tending to injure the public service
An agreement to buy, sell or procure a public office is against public policy. When
there is a sale of public office, or assignment of the salary of an office, it is
unlawful. Such agreements tend to corrupt public life as they are likely to interfere
in the selection of properly qualified persons for an office, and are, therefore, void.
 VOID AGREEMENTS
According to Section 2(g) of the Indian Contract Act 1872.

An agreement not enforceable by law is said to be void.

The following types of agreement are declared to be void:
(1) Agreements of which consideration and objects are unlawful in
part [S.24]
If any part of a single consideration for one or more objects, or any one or any part
of any one of several considerations for a single object, is unlawful, the agreement
is void.

Illustration
A promise to superintend, on behalf of B, a legal manufacturer of Indigo, and an
illegal traffic in other articles. B promises to pay A, a salary of 10,000 rupees a
year. The agreement is void, the object of A’s promise, and the consideration for
B’s promise, being in part unlawful.
(2) Agreements without consideration [S.25]
Section 25 declares that an agreement without consideration is void. This is of
course, subject to a few exceptions, which have already been considered along
with “consideration”.
(3) Agreement in Restraint of marriage [S.26]
Every agreement in restraint of the marriage of any person, other than a minor, is
void. It is the policy of law to discourage agreements which restrain freedom of
marriage. The restraint may be general or partial, that is to say, the party may be
restrained from marrying at all, or from marrying for a fixed period, or from
marrying a particular person, or a class of persons, the agreement is void. The only
exception is in favour of a minor.18

18
Lowe v Peers, (1768) 4 Burr 2225; Moharrum Ali v Aysha Khatum, (1915) 19 CWN 1226, where a condition in a
marriage arrangement that if the husband married another woman, the first wife would divorce him was upheld;
Jamila Khatun v Abdul Rashid, AIR 1939 Lah 165; Latafatunnissa v Shaharbanu Begam, AIR 1932 Oudh 108.
A penalty upon remarriage may not be construed as a restraint of marriage. Thus,
an agreement between two co-widows that if any of them remarried, she should
forfeit her right to her share in the deceased husband’s property has been upheld,
the court pointing out that no restraint was imposed upon either of the two widows
for remarriage. “All that was provided was that if a widow elected to remarry, she
would be deprived of her rights.”19 Similarly, agreements that upon remarriage, the
widow would lose the right to maintenance20 and upon the husband marrying a
second wife, the first would get the right to divorce him, have been upheld.21
(4) Agreement in Restraint of trade [S.27]
Every agreement by which any one is restrained from excercising a lawful
profession, trade or business of any kind, is to that extend void.

Exception 1- Saving of agreement not to carry on business of which

goodwill is sold.
One who sells the goodwill of a business may agree with the buyer to refrain from
carrying on a similar business, within specified local limits, so long as the buyers,
or any person deriving title to the goodwill from him, carries on a like business
therein:
Provided that such limits appear to the Court reasonable, regard being had to the
nature of the business.
(5) Agreements in Restraint of legal proceedings [S.28]
It is a well-known rule of English law that “an agreement purporting to oust the
jurisdiction of the courts is illegal and void on grounds of public policy”. 22 Thus,
any clause in an agreement providing that neither party shall have the right to
enforce the agreement by legal proceedings is void.23 An arrangement may,
however, stipulate that there is no intention to contract, or that it is only a
gentleman’s agreement. In such a case, no action is possible under the agreement.24

19
Rao Rani v Gulab Rani, ILR 1942 All 810; relying upon Mohd Hasan v Navi Jeham, (1921) 10 All LJ 185.
20
Latafatunnissa v Shaharbanu Begam, AIR 1932 Oudh 108.
21
Babu v Badarnessa, (1919) 29 CLJ 230.
22
HALSBURY’S LAWS OF ENGLAND, Vol 9, 352.
23
See Baker v Jones, (1954) 1 WLR 1005.
24
Rose & Frank v J.R. Crompton Bros, (1925) AC 445.
Section 28 of the Indian Contract Act renders void two kinds of agreement,
namely
(1) An agreement by which a party is restricted absolutely from enforcing his legal
rights arising under a contract, by the usual legal proceedings in the ordinary
tribunals.
(2) An agreement which limits the time within which the contract rights may be
enforced.
(6) Uncertain Agreements [S.29]
Agreements, the meaning of which is not certain, or capable being made certain,
are void.

Illustrations
(a) A agrees to sell to B “a hundred tons of oil”. There is nothing whatever to
show what kind of oil was intended. The agreement is void for uncertainty
(b) A agrees to sell to B one hundred tons of oil of a specified description, known
as an article of commerce. There is no uncertainty here to make the agreement
void.
(c)A, who is dealer in coconut oil only, agrees to sell to B “one hundred tons of
oil”. The nature of A’s trade affords an indication of the meaning of the words,
and A has entered into a contract for sale of one hundred tons of coconut oil.
(d) A agrees to sell to B “all the grain in my granary at Ramnagar”. There is no
uncertainty here to make the agreement void.
(e) A agrees to sell to B “one thousand maunds of rice at a price to be fixed by C’.
As the price is capable of being made certain, there is no uncertainity here to make
the agreement void.
(f) A agrees to sell B” a white horse for rupees five hundred or rupees one
thousand. There is nothing to show which of the two prices was to be given. The
agreement is void.25

Another Illustration

25
See Dhanrajmal Gobindram v Shamji Kalidas & Co, AIR 1961 SC 1285: (1961) 3 SCR 1320, 1035.
 Guthyng v Lynn.26
A horse was bought for a certain price coupled with a promise to give 5 more if the
horse proved lucky. The agreement was held to be void for uncertainty. The court
has no machinery to determine what luck, bad or good, the horse had brought to
the buyer. Such cases have generally arisen in connection with sale of goods, there
being uncertainty as to the price. For example, where goods are sold, the price
being payable subject to “hire purchase terms27 or clause”28 or at such price as
should be agreed upon between the parties, the agreement in each case was held to
be void for uncertainty as to price. Where the price is left to be fixed by a third
party, there is no uncertainty and the agreement will be enforceable. Similarly, if
the agreement is totally silent as to price, it will be valid, for, in that case, Section
9 of the Sale of Goods Act, 1930 will apply and reasonable price shall be payable.
(7) Wagering Agreements [S.30]
Section 30 deals with wagering agreements.
Agreements by way of wager, void.
Agreements by way of wager are void; and no suit shall be brought for recovering
anything alleged to be won on any wager, or entrusted to any person to abide by
the result of any game or other uncertain event on which any wager is made.

Exceptions
(1) Horse race [S.30]
This section shall not be deemed to render unlawful a subscription or contribution,
or agreement to subscribe or contribute, made or entered into for or towards any
plate, prize or sum of money, of the value or amount of five hundred rupees or
upwards, to be awarded to the winner or winners of any horse race.
(2) Crossword competitions and lottery
“If skill plays a substantial part in the result and prizes are awarded according to
the merits of the solution, the competition is not a lottery. Otherwise it is.”29 Thus,

26
(1831) 2 B Ad 232.
27
Scammel v Ousten, (1941) AC 251
28
Bishop & Baxter v Anglo-Eastern Trading Co, (1944) KB 12; British Electrical & Associated Industries v Matley
Pressing Ltd, (1953) 1 WLR 280.
29
Lord HEWARD CJ in Cole v Odhams Press, (1936) 1 KB 416
literary competitions which involve the application of skill and in which an effort
is made to select the best and most skilful competitor, are not wagers.30 But where
prizes depend upon a chance, that is a lottery.31 The Madhya Pradesh High Court
has characterised lotteries as wager. An agreement for payment of prize money on
a lottery ticket came within the category of wagering agreement as contemplated
by Section 30. The court further said that the provisions of neither a Central Act
nor that of a State Act controlling the activities relating to lottery would change the
basic nature of the transaction. A suit for recovery of the prize money was not
allowed. The lottery in question was organised by the Raffle Committees, Indore,
for raising funds for a Table Tennis Trust with due permission from the State
Government.

30
Moore v Elphick, (1945) 2 All ER 155.
31
Boucher v Rowsell, (1947) 1 All ER 155
 ILLEGAL AND VOID
AGREEMENTS
The Contract Act draws a distinction between an agreement which is only void
and the one in which the consideration or object is also unlawful. “Section 23
points out in what cases the consideration of an agreement is unlawful, and in such
cases the agreement is also void, that is, not enforceable at law.”
Section 25 to 30 refers to cases in which the agreement is only void, though the
consideration is not necessarily unlawful. An illegal agreement is one which is
actually forbidden by the law; but a void agreement may not be forbidden, “the law
may merely say that if it is made, the courts will not enforce it.” Thus, every illegal
contract is also void, but void contract is not necessarily illegal. However, the
distinction is not always clear.

Exceptions32
(1) Where the Contract is still Executory
Where the contract is still executory, in the sense that no part of the illegal purpose
has been carried into effect, the money paid or goods delivered under it may be
recovered. “But if he waits till the illegal purpose is carried out, or if he seeks to
enforce the illegal transaction, in neither case can he maintain an action.”33
In that case, a debtor executed a transfer to deceive his creditors, but before any
creditor could be deceived, he repented and sought to recover back the property,
which he was allowed to do. It seems that the repentance of the debtor was due to
the failure of his design. After executing the transfer he had summoned a meeting
of his creditors to effect a compromise, but the creditors did not turn up. In this
principle of locus poenitentiae has been confined to cases where the repentance is
not due to the failure of the illegal object, but occurs much before any attempt is
made to carry out the illegality.
(2) Parties not ‘in pari delicto’

32
The three exceptions to the principle as established by cases as stated by the Supreme Court in Sitaram Agarwal v
Radha Bai, AIR 1968 SC 533, 537: (1968) 1 SCR 805, 810.
33
MELLISH LJ in Taylor v Bowers, (1876)
It is settled law that where the parties are not in pari delicto the less guilty may be
able to recover money paid, or property transferred, under the contract. This
possibility may arise in three situations:
Firstly, the contract may be of a kind made illegal by a statue in the interest of a
particular class of persons of whom the plaintiff is one.
Secondly, the plaintiff must have been induced to enter into the contract by fraud
or strong pressure.
Thirdly, there is some authority for the view that a person who is under a fiduciary
duty to the plaintiff will not be allowed to retain property, or to refuse to account
for money received, on the grounds of an illegal transaction.34
(3) Where recovery possible without relying on illegal contract
Transactions arising out of an agreement to do an illegal act, if they are such that
when taken separately from the illegal act, they would be valid, they would remain
valid and enforceable notwithstanding the illegality of the agreement.
In Mistry Amar Singh v Kulubya35 where the action was to recover
possession of property leased out in violation of a statue, their Lordship of the
Privy Council observed:
He would have presented his claim without being under any necessity of setting up
the unlawful agreements in his plaint. He required no aid from the illegal
transaction in order to establish his case. It was sufficient for him to show that he
was the registered proprietor of the plots of land and that the defendant was in
occupation, and, accordingly, the defendant had no right to occupy.
(4) Collateral transactions
The only material difference between an illegal and void agreement relates to their
effect upon the collateral transactions. A collateral transaction means a transaction
subsidiary to the main transaction. For example, where money is given to a person
to enable him to pay a wagering debt, the wager is the main transaction and loan is
subsidiary to it. If the main transaction is illegal, for example, smuggling, a
collateral transaction like money given to enable a person to smuggle, will also be

34
Fakir Chand Seth v Dambarudhar Bania, AIR 1987 Ori 50.
35
(1963) 3 All ER 499.
tainted with the same illegality and the money will be irrecoverable. But if the
main transaction is only void, its collateral transaction will remain enforceable.
(5) Severance
Where an agreement is only partly illegal, the court will enforce the part which is
not illegal provided that it is severable from the rest of the agreement. Where a
partnership was created in a truck along with a route permit which amounted to a
part sale of both, the court held that the whole agreement was vitiated, although it
was only the sale of permit which was illegal but that was not severable from the
rest of the agreement. A contract to provide money to a person to enable him to
establish his share in an estate in return for a promise to pay back the money, and
also a share in the amount that would be recovered from the estate, has been hed by
the Supreme Court to be a composite contract for one consideration making the
two types of payment not severable.36
In another case,37 the husband promised to his wife separate maintenance, she
agreeing on her part not to sue him as long as he paid, nor to sue for divorce even
if he lived in adultery. The husband defaulted with the payments and contended, as
against the wife’s action, that, owing to the exoneration for adultery, the whole
agreement was unlawful. The court allowed the wife’s action saying that only that
clause of the agreement was unlawful by which the husband had bought his
freedom from the consequences of adultery.38

36
Rattan Chand Hira Chand v Askar Nawaz Jung, (1991) 3 SCC 67.
37
Goodinson v Goodinson, (1954) 2 QB 48: (1954) 2 WLR 1121:(1954) 2 All ER 255.
38
Bennet v Bennet, (1952) 1 QB 249; (1952 1 All ER 413,CA.
 CONCLUSION
On the basis of the above discussed, it can be easily understood that the ambit and
scope of Section 23 is vast and therefore the applicability of its provisions is
subject to meticulous scrutiny by the court of the consideration and object of an
agreement and the agreement itself. Therefore, in order to bring a case within the
purview of Section 23, it is necessary to show that the object of the agreement or
consideration of the agreement or the agreement itself is unlawful.
For the cases coming under Section 23, one has to examine or see whether the
Section invalidates agreement on the ground of the objects or consideration is
being unlawful.

 The three matters, as referred to above, viz.

1. Consideration for the agreement
2. Object of the agreement
3. The agreement is also required to be kept in mind.
Therefore,
 The three principles, arising from the Section- which are:
1. An agreement or contract is void, if its purpose is the commission of an
illegal act
2. If it is expressly or impliedly prohibited by the law
3. If its performance is not possible without disobedience of any law.
 BIBLIOGRAPHY
 Singh Avtar, Law of Contract and Specific Relief (10th edn,
Eastern Book Company 1973)
 Vardhan R. Yashod / Narayan Chitra, The Indian Contract &
Specific Relief Acts (15th edn Lexis Nexis 2011)
 Rai Dr. Kailash, Contract- I General Principles of Contract
(Section 1-75) and Spectific Relief Act (3rd edn Central Law
Publications 2011)
 Beatson J. / Burrows A. / Cartwright J., Anson's Law of
Contract, (29th edn Oxford 1879).
 CONTENTS
 INTRODUCTION
o UNLAWFUL AGREEMENTS
1. Forbidden by Law
2. Defeat any law
3. Fraudulent
4. Injurious to person or property
5. Immoral
6. Public Policy

o VOID AGREEMENTS
1. Agreements in which a part of consideration or object is
unlawful [S.24]
2. Agreements without consideration [S.25]
3. Agreements in restraint of marriage [S.26]
4. Agreements in restraint of trade [S.27]
5. Agreements in restraint of legal proceedings [S.28]
6. Uncertain Agreements [S.29]
7. Wagering Agreements [S.30]
o ILLEGAL AND VOID AGREEMENTS
EXCEPTIONS
1. Where the Contract is still Executory
2. Parties not ‘in pari delicto’
3. Where recovery possible without relying on illegal
contract
4. Collateral transactions
5. Severance

 CONCLUSION
 BIBLOGRAPHY
ABBREVIATIONS
&- And

Ors- orissa