Under Section 23 of the Indian Contract Act, 1872, the consideration or object of an agreement is unlawful if it falls into any of the following categories:
- It is forbidden by law: e.g., an agreement to buy smuggled goods.
- It defeats the provisions of any law: e.g., a contract designed to evade tax laws or bypass insolvency rules.
- It is fraudulent: e.g., an agreement to divide spoils from a cheat.
- It involves injury to the person or property of another.
- The Court regards it as immoral or opposed to Public Policy.
If any part of the object or consideration is unlawful, the entire agreement is completely Void.
1. What is "Public Policy"?
Public Policy represents the general public interest. While courts are cautious not to invent new categories of public policy, several established heads of agreements opposed to public policy exist:
- Trading with an Enemy: Entering into a contract with a citizen of a country during war.
- Stifling Prosecution: An agreement to withdraw a criminal prosecution for an offense in exchange for money. This is an abuse of justice.
- Sale of Public Offices: e.g., paying money to secure a government job or title.
- Marriage Brokerage Contracts: Paying a broker to arrange a marriage is void as it commercializes a sacred union.