OBJECT OF A CONTRACT
Under Section 23 of the Indian Contract Act, 1872, the consideration or object of an agreement is lawful, unless -It is forbidden by law; or is of such nature that, if permitted it would defeat the provisions of any law or is fraudulent; or involves or implies, injury to the person or property of another; or the
Court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
To summarise, the object of an agreement is unlawful if:
· It is forbidden by law; or
· It is of such a nature that, if permitted, it would defeat the provisions of any law; or
· It is fraudulent; or
· It involves or implies injury to the person or property of another; or
· The court regards it as immoral, or opposed to public policy.
· The word "forbidden by law" is not synonymous with the word 'void' and hence it is not necessary that whatever is void is also "forbidden by law".
· The difference between agreements that are void and agreements those are illegal is very thin or small. According to Anson, "The law may either forbid an agreement to be made, or it may merely say that if it is made, the courts will not enforce it. In the former case, it is illegal, in the latter only void, but in as much as illegal contracts are also void, though void contracts are not necessarily, the distinction is for most purposes not important and even judges seem to treat the two as inter-changeable".
· The immorality mentioned above alludes to sexual immorality.
· If the object is partly lawful & partly unlawful, then the question will arise whether the two can be severed (i.e. separated); if they can, then the illegal portion thereof can be rejected, and the legal portion retained. If, however, the two are inseparable, the entire agreement is void.
What is PUBLIC POLICY?
According to Black’s Law Dictionary:
‘The policies that have been declared by the state that covers the state’s citizens. These laws and policies allow the government to stop any action that is against the publics’ interest. There may not be a specific policy that an action pertains to to but if it is not deemed good for the public it will be quashed.’
Public Policy is ‘the principle that injury to the public good is a basis for denying the legality of a contract or other transaction.’
Examples of Agreements opposed to Public Policy
1. Trading with an enemy.
2. Agreements interfering with the administration of justice: (Interference with the course of justice or Stifling Prosecution or Maintenance and Champerty agreements.)
3. Traffic in public offices.
4. Agreements creating interest opposed to duty.
5. Agreements unduly restraining personal liberty.
6. Agreements interfering with parental duties.
7. Marriage brokerage agreements.
8. Agreements creating monopolies.
9. Agreements to defraud creditors.
10.Agreements to defraud revenue authorities.
11.Agreements interfering with marital duties.
Agreements expressly declared void
Certain agreements have been expressly declared void by Indian contract Act, 1872. According to section 2(g) of Indian contract Act, 1872, “a void agreement is an agreement which is not enforceable by law”. Such an agreement does not give rise to any legal consequence.
The agreements expressly declared void are:
· Agreements in restraint of marriage
An agreement in restraint of marriage of any person, is void. Marriage is the fundamental right of every person. Therefore, an agreement in restraint of this fundamental right of a person is opposed to public policy and void.
· Agreements in restraint of trade(exception is the sale of goodwill, or agreements by partners under the partnership act)
Law has assigned freedom of contract and freedom of trade to every person. Therefore, any agreement depriving a person of this freedom is unlawful and void. Thus, an agreement in restraint of trade of any person is opposed to public policy and void as per Sec. 27.
· Uncertain agreements
According to Section 29 of the Act, Agreements, the meaning of which is not certain, or capable of being made certain, are void
· Agreements in restraint of legal proceedings
According to Section 28 of the Act, 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 is void.
· Curtailing the period of limitations
Similarly, under Section 28 of the Act, an agreement which limits the time within which the contract rights may be enforced is void.
· Wagering agreements
According to Section 30 of the Act, 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 the result of any game or other uncertain event on which any wager is made.
Section 30 of the Act, shall not be deemed to render unlawful a subscription or contribution, or agreement to subscribe or contribute, made or entered into for or toward any plate, prize or sum of money, of the value or amount of five hundred rupees or upwards, to be rewarded to the winner or winners of any horse-race.
What is a WAGER?
According to Black’s Law Dictionary:
A wager is a contract by which two or more parties agree that a certain sum of money or other thing shall be paid or delivered to one of them on the happening of an uncertain event or upon the ascertainment of a fact which is in dispute between them.
A contingent contract is a conditional contract.
According to Section 31 of the Indian Contract Act, 1872:
‘A contingent contract is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen.’
Insurance agreements are best examples of contingent contracts.
According to Section 32 of the Act, Contingent contracts to do or not to do anything if an uncertain future event happens, cannot be enforced by law unless and until that event has happened.
If the event becomes impossible, such contracts become void.
And According to Section 33 of the Act, Contingent contracts to do or not to do anything if an uncertain future event does not happencan be enforced when the happening of that event becomes impossible, and not before.
According to Section 34 of the Act, if the future event on which a contract is contingent is the way in which a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which renders it impossible that he should so act within any definite time, or otherwise than under further contingencies.
Section 35 of the Act states that:
Contingent contracts to do or not to do anything, if a specified uncertain event happens within a fixed time, become void if, at the expiration of the time fixed, such event has not happened, or if, before the time fixed, such event becomes impossible.
Contingent contracts to do or not to do anything, if a specified uncertain event does not happen within a fixed time, may be enforced by law when the time fixed has expired, and such event has not happened, or before the time fixed has expired, if it becomes certain that such event will not happen.
According to Section 36 of the Act, Contingent agreements to do or not to do anything, if an impossible event happens, are void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made
There is no definition given for quasi-contract in the Indian Contract Act. But the Act states that it in the case of a quasi-contract, certain relations are created which are very similar to contracts. But quasi-contract can be defined as a set of rights and liabilities between the parties even when there is no formal contract. The law creates this obligation to maintain justice and fairness between the parties.
These are contracts which are not founded on actual promises. These contracts are created by circumstances & are based on the maxim: no man must grow rich out of other person’s cost.
Since a quasi-contract is a law made by law, there is no statement of consent between the parties. The obligation and rights which are placed on the shoulder of the parties are rather by law than by assent.
· Supply of necessaries.
According to section 68 of the Act, if a person, incapable of entering into a contract, or any one whom he is legally bound to support, is supplied by another person with necessaries suited to his condition in life, the person who has furnished such supplies is entitled to be reimbursed from the property of such incapable person.
The relief contemplated by this section is not dependent on any contract, but is independent of it & therefore, is a quasi contract.
a) A supplies B, a lunatic, with necessaries suitable to his condition in life. A is entitled to be reimbursed from B’s property.
b) A suplies the wife and children of B, a lunatic, with necessaries suitable to their condition in life. A is entitled to be reimbursed from B’s property.
· Payment of lawful dues by interested person.
Section 69 of the Act states that, a person who is interested in the payment of money which another is bound by law to pay, and who therefore pays it, is entitled to be reimbursed by the other.
There are three important ingredients:
a) There must be a person who is bound by law to make a certain payment.
b) There must be a person who is interested in such payment being made.
c) A payment must have actually been made.
· Obligation of a person enjoying benefit of a non- gratuitous act.
According to Section 70 of the Act, where a person lawfully does anything for another person, or delivers anything to him not intending to do so gratuitously, and such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of, or to restore, the thing so done or delivered.
Damodar Mudaliar vs. Secretary of State for India, (1894)
Eleven villages were irrigated by a tank, some of which were Zamindari villages & the Government held the others. The Government effected certain repairs to the tank for its preservation and had no intention to do so gratuitously for the Zamindars. The Zamindars enjoyed the benefit thereof.
Held: They were liable to contribute to the expenses of the repairs.
· Finder of goods.
Section 71 of the Act, states that a person who finds goods belonging to another, and takes them into his custody, is subject to the same responsibility as a bailee.
Subject to the responsibility of the Bailee means:
a) The finder of goods should take care of the goods.
b) The finder of goods should try and find the true owner of the goods.
But the finder of goods is entitled to the possession of the goods as against everyone except the true owner.
· Liability of person to whom money is paid, or thing delivered, by mistake or under coercion.
According to Section 72 of the Act, a person to whom money has been paid, or anything delivered, by mistake or under coercion, must repay or return it.
The Sales Tax Officer (UP) And Ors. vs Kanhaiya Lal Makund Lal Sarraf (1956)
The defendant paid taxes under a section of the UP Sales Tax act which was later struck down as Ultra Vires by the Supreme Court. The defendant then sought a refund of the taxes paid. The lower court granted his plea, but the Sales Tax Dept., appealed to the Supreme Court contending that the taxes paid had been applied for developmental work & hence cannot be refunded. While dismissing the appeal, the Supreme Court observed: ‘Merely because the State of U. P. had not retained the monies paid by the respondent but had spent them away in the ordinary course of the business of the State would not make any difference to the position and under the plain terms of s. 72 of the Indian Contract Act the respondent would be entitled to recover back the monies paid by it to the State of U.P. under mistake of law.’