Contract Law
Unlawful Consideration and Object
Apply Sections 23 and 24 to unlawful consideration and object, public policy, severability, collateral transactions and restitution.
The short answer
An agreement is void when either what is promised in exchange or the purpose it seeks to achieve falls within Section 23.
Consideration, object and motive
The right classification prevents a vague public policy answer.
Consideration
Consideration is the act, abstinence or promise given at the promisor's desire in exchange for the promise. If that exchange is unlawful, the agreement is void.
Object
Object is the purpose or design that the agreement itself seeks to achieve. A lawful payment cannot save an agreement formed to accomplish an unlawful purpose.
Motive
A party's private reason for contracting is not automatically the legal object. Motive becomes relevant when it forms part of the common design or reveals the true purpose of the bargain.
Knowledge
Where only one party has an unlawful private purpose, the result can depend on whether the other party shared, knew of or participated in that purpose and on the governing statute.
The five grounds in Section 23
Name the exact ground and explain how the facts satisfy it.
Forbidden by law
The promised conduct is expressly or necessarily prohibited by legislation or another binding rule. Check whether the law also specifies a distinct consequence.
Defeats the provisions of law
The transaction is framed to do indirectly what the law prevents directly, or to evade the operation and policy of a legal provision.
Fraudulent
The agreement is designed to deceive a person, court or public authority, or to facilitate another fraudulent transaction.
Injury to person or property
The bargain involves or necessarily implies legal injury to another person or damage to property.
Immoral or opposed to public policy
These grounds are applied cautiously. The court connects the bargain to a recognized principle rather than invalidating it merely because it seems unfair or undesirable.
How public policy is applied
Public policy protects the legal system and public institutions, but it is not an unrestricted judicial discretion.
Recognized concerns include trading with an enemy, stifling prosecution, interference with justice, trafficking in public offices or honours, corruption, certain restraints on personal liberty, and bargains using influence over public authorities for private gain.
Courts may respond to changing social conditions, but Gherulal Parakh requires caution. Central Inland shows that a grossly unfair standard term imposed through serious inequality can also be examined under public policy in its proper context.
Void, illegal and collateral transactions
Every Section 23 agreement is void, but not every void agreement is forbidden or illegal in the wider sense.
Merely void
The law may withhold enforcement without prohibiting the transaction. Section 30 wagers are the classic illustration, subject to special state legislation.
Illegal bargain
A prohibited object can taint a connected claim where enforcing that claim requires the court to assist the unlawful design.
Collateral transaction
Ask whether the connected transaction is independent, whether its party knew of the illegality, and whether the statute or public policy requires it to fail.
Do not use slogans
The statement that collateral transactions are affected by illegality is a starting point. The legal provision, connection and knowledge must still be analyzed.
Severability under Section 24
A court may separate promises only when the lawful bargain can stand independently.
Section 24 makes an agreement void where part of a single consideration for one or more objects, or one of several considerations for a single object, is unlawful. If lawful and unlawful parts form one indivisible exchange, the court does not rewrite the bargain for the parties.
A lawful promise can survive when it is genuinely distinct, supported by separate consideration where required, and enforceable without relying on the unlawful part. The question is one of contractual structure, not merely deleting offensive words.
Can benefits be recovered?
Illegality can restrict restitution, but the rule is not absolute.
In pari delicto
A claimant equally responsible for an unlawful design may be denied assistance because the claim depends on the claimant's own illegality.
Purpose not carried out
Recovery may be possible before the unlawful purpose has been substantially performed, depending on the facts and applicable law.
Unequal fault
Relief may remain available where the claimant belongs to a protected class, was induced by fraud or strong pressure, or is less blameworthy than the defendant.
Independent claim
The bar may not apply where the claimant can establish the right without relying on the unlawful agreement.
Leading cases and what they establish
Read each authority for the proposition it proves, the legal question it answers and the reasoning that supports the result.
Gherulal Parakh v. Mahadeodas Maiya
AIR 1959 SC 781
Held: An agreement that is void is not necessarily illegal or forbidden by law, and public policy should be developed cautiously.
Why it matters: Use it to distinguish void wagers from agreements unlawful under Section 23.
Read the judgmentRattan Chand Hira Chand v. Askar Nawaz Jung
(1991) 3 SCC 67
Held: An agreement to use influence over public authorities for private recovery and a share of the proceeds was held opposed to public policy.
Why it matters: Use it for influence-peddling bargains and the public policy limits on private arrangements involving public administration.
Read the judgmentCentral Inland Water Transport Corporation v. Brojo Nath Ganguly
(1986) 3 SCC 156
Held: A grossly unfair term imposed through severe inequality of bargaining power may be void as opposed to public policy.
Why it matters: Use it carefully for unconscionable standard terms, not as a general power to rewrite every harsh contract.
Read the judgmentSita Ram v. Radha Bai
AIR 1968 SC 534
Held: The Supreme Court recognized exceptions to the in pari delicto bar where the unlawful purpose remains unperformed, the claimant is less guilty, or the claim can be proved without reliance on illegality.
Why it matters: Use it when a problem asks whether money or property transferred in connection with an unlawful purpose can be recovered.
Read the judgmentUsing this topic in a legal answer
A clear answer sequence
- Identify the consideration and object separately.
- Apply the precise Section 23 ground.
- Explain whether the agreement is merely void or involves prohibited illegality.
- Test severability under Section 24 and the independence of collateral transactions.
- Address restitution and relative fault only after classifying the illegality.
Points that are often confused
- Treating every void agreement as illegal.
- Using public policy without a recognized principle.
- Severing terms that form one indivisible bargain.
- Confusing a private motive with the common object of the agreement.
- Assuming Section 65 automatically refunds every payment made under an illegal bargain.
Open the revision and self-check sheet
Rules to retain
- Section 23 contains five grounds: forbidden, defeats law, fraudulent, injury, and immoral or opposed to public policy.
- Consideration is the exchange; object is the contractual purpose.
- Private motive is not automatically the object.
- Void does not always mean illegal.
- Public policy must be tied to a recognized legal concern.
- Section 24 controls indivisible lawful and unlawful parts.
- Collateral transactions require a separate connection and knowledge analysis.
- Restitution can depend on performance of the purpose and relative fault.
Questions to test understanding
- What are the five Section 23 grounds?
- Why is every void agreement not illegal?
- When can a lawful part survive?
Questions students ask
Are object and consideration the same?
No. Consideration is the price exchanged for the promise, while object is the purpose the parties seek to achieve.
Is every void agreement illegal?
No. Some agreements are void because the law withholds enforcement without treating their purpose as forbidden. The distinction affects collateral transactions.
What does defeating the provisions of law mean?
It covers a bargain designed to circumvent the purpose or operation of a law, even where the promised act is not described in the statute as directly forbidden.
Can a court create a new head of public policy?
Courts approach new public policy claims cautiously. The party should connect the bargain to established legal principles, public institutions or a clearly demonstrated public harm.
Can the lawful part of an agreement be enforced?
Only if it is genuinely separable and can stand without rewriting or relying on the unlawful exchange. Section 24 invalidates an indivisible bargain containing unlawful consideration or object.
Can money paid for an unlawful purpose be recovered?
Sometimes. Sita Ram identifies situations involving withdrawal before substantial performance, unequal fault, or a claim provable without reliance on the illegality. The answer depends on the statutory policy and facts.
Primary sources and further reading
- Indian Contract Act, 1872 on India Code
- Gherulal Parakh judgment on the Supreme Court of India website
- Rattan Chand Hira Chand v. Askar Nawaz Jung, Supreme Court of India
- Central Inland Water Transport Corporation v. Brojo Nath Ganguly, Supreme Court of India
- Sita Ram v. Radha Bai, Supreme Court of India
This article is written for legal education. Verify the governing provision, applicable amendments and complete judgment before relying on a proposition in practice.