For the valid agreement, the object and consideration of an agreement must be lawful. If the consideration or object of a contract is unlawful the agreement is illegal and therefore void.
The words ‘object’ and ‘consideration’ are different from each other. The word object means purpose. While the consideration means the price for which the promise of the other is taken. Sometimes the object of a contract may be illegal though its consideration is lawful.
Example
A takes a house from B on rent. It is lawful. If A wants to store illegal arms in the house, the agreement is unlawful due to unlawful object.
According to section 23 the consideration or object of an agreement is unlawful in the following cases
1. Forbidden by law
If the consideration or object of an agreement is forbidden by law, the agreement is unlawful and void. An act is forbidden by law:
a. When it is punishable by the Criminal Law of the country, or
b. When it is prohibited by special act of legislature.
Examples
a. B and C agree to divide the goods obtained by theft. The agreement is unlawful.
b. The sale of liquor without license is illegal and so void.
c. Agreement to sell above the price fixed by the law is illegal and void. (Sita Ram vs. Kunj Lal).
2. Defeats Provisions of Law
If the object or consideration of an agreement is of such a nature that if permitted, it would defeat the provisions of any law, it will be illegal. Such object or consideration may not be directly forbidden by law but it will indirectly violate law and so illegal.
Example
A fails to pay his loan to HBFC. A’s house is sold for recovery of debt. According to law, A is prohibited from purchasing his house. A asks B to purchase the house and transfer it back to him. The agreement is void.
3. Fraudulent
If the object or consideration of agreement is to defraud others is unlawful and so void. Where the parties agree to commit a fraud on third person, the agreement is illegal.
Examples
a. A promises to pay Rs.20, 000 to B, on B’s promise to commit fraud on C. the agreement is illegal and void.
b. A is the agent of X. A agrees to sell the land to his friend B, at a lesser price without knowledge of his principal. The agreement between A and B is void as it is fraud by A against X.
4. Involves Injury to Person or Property
If the object or consideration of agreement is to cause an injury to the person or property of another is illegal and also void. Injury means criminal or wrongful harm.
Examples
An agreement to put certain property on fire is unlawful and void.
An agreement to commit an assault or to beat a man is held unlawful and void. (Allen vs. Rescous).
5. Court regards as Immoral
if the consideration or object of an agreement is such that the court regards is as immoral, the consideration is void. Immoral means acts which are against the moral vaules and also prohibited by law.
Example
A married woman was given money to obtain divorce from her husband and then marry the lender. Woman refused to take divorce. Held, the agreement was immoral and the lender cound not recover the money. (Bai vijli vs. Hamda Nagar)
6. Court consider it against Public Policy
An agreement which is harmful for the welfare of the society or the state is against the public policy. If the court considers the object or consideration of an agreement as opposed to public policy, the agreement is unlawful.
An agreement which leads to corruption, injustice or immorality is considered to be against the public policy. The following agreements are held to be against the public policy:
Examples
a. The agreements to give money to induce a person to give false evidence.
b. The agreements to influence judges.
c. The agreements which disturb the friendly relations of the state.
d. The agreements the purpose of which is to influence over the officers of justice.