Q. Define consideration. When consideration is deemed to be unlawful?


Note: this post is a part of our important question answer series on Contract Law. You can read other questions by clicking here.

 

Answer

 

Introduction

According to Section 2(d) of the Indian Contract Act, 1872, consideration is defined as follows:

“When at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing something, such act or abstinence is called a consideration for the promisee.”

The concept of consideration is based on the legal maxim ‘Quid Pro Quo” which means something in return.  Consideration for one is the promise for another and vice versa.

 

To read more about the meaning of Consideration, Click here.

 

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When consideration is deemed to be Unlawful

The consideration or object of an agreement is lawful, unless:

1.       Forbidden by Law:

Where the object or the consideration of an agreement is prohibited by law, the agreement is void. Such as: theft, murder, or for that matter any other offence/acts, which are expressly or impliedly forbidden by any law for the time being enforced, comes under this category.

For example: Sale of liquor without a license is prohibited under the Excise Act and is, therefore, illegal.

2.       Defeat the purpose of Provisions of any Law:

Though the thing or consideration for the agreement, sometimes directly not forbidden by law, they’re still forbidden if nature of such act defeats the intend of any particular law. Agreement with such an object or consideration is void.

 

3.       Fraudulent:

An agreement, the object of which is to defraud others is void.

 

4.       Injurious to Person or Property:

Any agreement that suggests or involves injury to person or others property, it’s deemed unlawful, and thus void.

For example: The contract to republish a book that infringes another person’s copyright will be void.

 

5.       Immoral:

If the object or consideration of an agreement is against morality, it’s void.

For example: a landlord, let his house on rent to B, a billboard sex worker, knowing that it might be used for immoral trafficking. the owner cannot recover the rent. Here, the thing being immoral, the agreement to pay rent is void.

 

6.       Agreements against Public Policy:

The term public policy during a wider sense means restriction of freedom of persons from doing something within the larger interest or for the great of the community. within the context of the Indian Contract Act, it restricts the liberty of persons to accept certain areas that are detrimental to public policy. They are:

I.                     Trading with an alien enemy: Entering into a contract with the person of a country with which India is at war, or expressly declared some country as it’s enemy,  is a void agreement.

II.                   Interference with administration of justice,

III.                 Marriage brokerage agreements,

IV.                trafficking publicly offices,

V.                  Agreement to create a monopoly.

 

Case: Gherulal Parakh v. Mahadeodas: Forbidden by law” isn’t synonymous with the word ‘void’ and thus it is not essential that anything that is void is also “illegal by law”.

 

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