This article is written by Sayan Majumder of 1st Year of BA LLB of Symbiosis Law School, Noida, an intern under Legal Vidhiya
ABSTRACT
The topic that this article covers delves into a major and one of the most general areas of a day-to-day law that applies to the people of this county, that is, the Indian Contract Act. The question of enforceability covers a major part of this work. It includes the major areas of the chapter 2 of Indian Contract Act, 1872, that is, Voidable contracts and Void Agreements. Section 23 comprising the part of ‘forbidden by law’ has its explanation in the question about Public Policy. Later it goes on analysing the areas of void agreements that covers unlawful consideration of agreements in parts and objects, agreements without consideration and agreements in restraint of marriage. The work is a research analysis of the intersection of what law says and where unenforceability strikes the ground. The effects of whether the agreement is enforceable or not also gets a space. It is more of an analysis of certain parts of the Indian Contract Act, 1872 which provides a deep insight about what contracts are lawfully enforced by the court of law and what are not. Descriptive analysis has been given under each header which is discussed in the subsequent parts of this article along with illustrations and case laws for each and every section described below.
Keywords
Void Agreements, Enforceability, Public Policy, Unlawful Consideration, Restraint of marriage, Contract.
INTRODUCTION
Indian Contract act is the basic legislation in the Indian Law that deals with the formation, performance as well as the discharge of contractual obligations in the day-to-day sphere of lives and also in contracts involving higher amounts. Therefore, understanding the various nuances to it are also important to get to know about what agreements cannot be made as a contract and what provisions of it can make it void or against public policy. An agreement becomes void when the clauses added to it are unlawful and against the policy of the state, i.e., against Public Policy. Section, 23 of the Indian Contract Act of 1872 deals with the portion of agreements that are opposed to public policy under the heading of what consideration and objects are lawful and what not. And the other kinds of agreements where consideration and objects are unlawful in parts, agreements without consideration and agreements in restraint of marriage are dealt in section 24, section 25 and section 26 respectively. Also including a broad and detailed explanation of the nuances to the agreements that oppose the public policy mentioning about what are these various kinds of agreements. Deling deeper into the meanings of Section 25 and Section 26.
OBJECTIVES
The main aim of doing this research is to analyse and understand the nuances of the ultimate formation and enforceability in a contract and to know which part can be enforced and what agreements become void. To delve deeper into the concept of public policy, analysing the standing in the English as well as in the Indian Law, analysing in which situations the agreements oppose public policy. In particular. Along with this, analysing the sections 24, 25 and 26 of the Indian Contract Act, 1872.
Regardless of legal field, this article is to provide an information about what kinds of agreements that law permits and what is the rightful or particularly, the lawful consideration that renders a contract valid.
SECTION 23 – WHAT PART OF THE CONSIDERATION IS LAWFUL AND WHAT NOT.
It explains that the consideration and objects are lawful unless it is forbidden by any of the laws of the land. The agreements against public policy also comes in this section. The court has been given the power to decide what agreements are against public policy or is immoral also. The agreements whose object or even the consideration is unlawful are void.[1]
Illustrations –
A promise to B to obtain an employment in the public service for the payment of Rs. 1000 to A. This is a void agreement as the consideration is unlawful.
A promise to B to drop the prosecution which he initiation against him for robbery and B promises to restore him the goods he has taken. There is unlawful consideration and thus, the agreement is void.
This section, thus inherently deals with the matter of public policy or agreements that opposes to public policy.
PUBLIC POLICY
The agreements opposed to public policy are considered as void. Public policy means something that is in accordance with the policies enshrined in the laws of the land. Public policy generally can also be regarded as public interest.
English Law and Public Policy –
The English Law considers agreements against public policy to be declared as void. But what constitutes a public policy is a grey area. But the English judges opined that the courts must function within the closed categories of public policy and should not add on to it. They referred to it as an unruly Horse.
Indian Law and Public Policy –
Indian Law also aligns with the English law in this regard and does not allow for much interpretation at the hands of judges. It believes that the courts should in most of its cases enforce the contractual obligations except where the court has to deliver public good or prevent public mischief.
Different types of contracts that are opposed to public policy are as follows –
- TRADING WITH ENEMY –
Trading with an alien enemy is illegal without the licence of the crown. The king’s subjects are not allowed to deal with the subjects of the country with which the Crown has declared war. This is because the motive of the war to put an economic sanction against the enemy country and to capture its properties and resources. Therefore, dealing with the subjects of enemy country is considered to be an illegal act.
- BRIBING IN PUBLIC OFFICES –
An agreement which intends to induce a public officer to act corruptly is an unlawful agreement. Charging extra fees for admission in prestigious institutions is against public policy, giving bribe to police to do an act in the favour of a person. Giving charity as inducement to provide a title of knighthood is also against public policy.
- INTERFERENCE WITH ADMINISTRATION OF JUSTICE –
Interference with the administration of justice is considered as against public policy and is unlawful. There are three categories of interference with Administration of justice. These are –
- Interference with the Course of Justice – The agreements that obstructs the ordinary delivery of justice is considered to be void. It can be delaying the delivery of decree or inducing to give false evidence in any case.
- Stifling Prosecution – Agreements that are made to withdraw the prosecution or not to prosecute the criminal are called Stifling prosecution. These agreements are against public policy and thus void. The permits the compromise only in case of compoundable offences. But any level of compromise in case of non-compoundable offences are not allowed as they concern the public at large.
- Maintenance and Champerty – Champertous agreements are those where any third person comes and offers for maintenance of the litigation expenses just in order to get some unconscionable gains from it. These types of agreements are considered to be against public policy.
- MARRIAGE BROKAGE CONTRACTS –
The agreements that are made to perform a marriage in lieu of consideration are called marriage brokage contracts. These are void agreements. The Punjab, Calcutta and the Madras High Courts have remarked that the agreements of giving monetary benefits to the parents of a minor for their marriage are also void agreements. The courts believes that a primary consideration for marrying a minor to another family is just his or her own happiness and any monetary gain given to the parents are to be considered as invalid.
Case Law –
In judgement of Orissa High Court in the case of A, Suryanarayan Murthi v. P. Krishna Murthy[2], the court observed that voluntary gifts in the marriages are not opposed but when the sole purpose of the marriage is the consideration or monetary gain, it becomes invalid.
- UNCONSCIONABLE DEALINGS –
Where the parties are not in equal footing to one another and one party is clearly in apposition to dominate the will of the other, such dealings results in unconscionable agreements and theses are against public policy.
Case Law –
In the case of Central Inland Water Transportation Corporation v. Brojo Nath Gnguly[3], the court held that the agreement of the government body that it can fire its employees who are needy, just by notice or a payment was considered to be arbitrary and against public policy.
But there is another nuance to it, i.e., the situation where parties with matching bargaining powers. It can be in a situation where both parties are businessperson and arbitration awards in this regard cannot be against public policy.
Now, as we have covered the area of public policy which renders the contract to be void in full-fledged manner, we shall be looking at section 24 which describes the agreements in which considerations and objects are unlawful in part.
SECTION 24 – IF CONSIDERATION OR OBJECT IS UNLAWFUL IN PARTS.
It explains that if the consideration or object of an agreement is unlawful in parts, the agreement stands void. But this section has been interpreted by the court to enforce the lawful parts of the agreement when it can be severed.[4]
Illustration –
A promise to superintend on behalf of B who is a legal manufacturer of indigo but an illegal dealer on some other goods. For this, B has promised A to provide with a salary of 10,000 rupees every month. B’s consideration and A’s promise is unlawful in part.
Case Laws –
Willes J in the case Pickering v. Illfracombe Rly Co.[5], brought the working philosophy behind this section. It tells that where the illegal part cannot be severed from the lawful part, the entirety of the agreement becomes void. But where one can severe the illegal part from the lawful part without disturbing the lawful element in it.
In the case of Poonoo Bibi v. Fyaz Buksh[6], a husband through a registered deed made an agreement to hand over all his earnings to his wife and would not do anything without her permission. Derailment from it allow the wife to claim for divorce. It was held by the court that the later part was unlawful and thus, it was severed from the former part.
SECTION 25 – AGREEMENT WITHOUT CONSIDERATION, VOID.
It states that agreement without consideration is void in general circumstance except for three exceptional circumstances. And these three are when the agreement is made in writing or registered with the authorities. Secondly, when it is a promise to compensate for some act done in past. And the third clause says about a promise to pay a time barred agreement.[7]
Illustrations –
(a) A promise to give B Rs. 1000 without any consideration. This is a void agreement.
(b) A, out of natural over and affection, promises B, his son to pay Rs. 1000 and also registers it by writing. This is a valid contract.
(c) A owes Rs. 2000 to B which is barred by the Limitation act. They make an agreement where A would pay Rs. 1000 to B. This is a valid contract.
Analysing section 25, we come to know that agreements made without any consideration are void but it has several exceptions to it as well. These are –
- NATURAL LOVE AND AFFECTION – The first exception which talks about writing or registered things given as gifts or money. Natural love and affection are not defined in the law as such. But several judicial precedents have given it a shape. This occurs mostly among relatives either in bloodline or in marriage relations.
Case Law – In the case of Rajlukhy Dubee v. Bhoothnath Mookerjee[8], the court held that there was no love or affection was there which tended the husband to give money as maintenance through an agreement.
- PAST VOLUNTARY SERVICES – The second exception is for the promise in consideration for past act done for the promisor. A person who has promised to compensate to someone who has done any past voluntary service is enforceable.
Case Law – In the case of Karam Chand v. Basant Kaur[9], a promise to pay for the goods supplied during minority when the minor attains the age of majority is held valid within this exception. The court said that the promise made by a person of majority to compensate for some service rendered to him in the past must, by law, come under the preview of this section, though an agreement made with a minor is void-ab-initio.
- TIME BARRED DEBT – A time barred debt is a debt which is barred by the laws of the Indian Limitation Act.
Case Law – A promise for paying a time barred debt is enforceable. But the debt must be in writing and signed by the promisor through agent or any authorised person. This was held in A.V. Murthy v. B.S. Nagabasavanna[10].
The promise to pay the debt should also be expressed and it would be insufficient if it goes unexpressed. Time barred debt is regarded as a good consideration for a fresh promise. The payment can be of full debt or a part of the debt too. And also, the promise to pay for the debt must be after the period of limitation but it should be express and not implied.
EXPLANATION I – GIFTS MADE BETWEEN DONAR AND DONEE
Gifts actually made by the donar to the done cannot be questioned on the ground that there was a lack of consideration. A gift of moveable property is complete when there is delivery and an immovable property is complete by a registered sale deed. Therefore, this section does not affect the relationship between a donar and a donee.
EXPLANATION II – INADEQUACY OF CONSIDERATION
If a consent has been freely given, the contract cannot be termed as void just because of the fact that the consideration seems to be inadequate. The court while deciding the case, would look over the inadequacy of consideration to decide whether the contract is valid or void.
SECTION 26 – AGREEMENTS IN RESTRAINT OF MARRIAGE
This section contains agreements that are made in restraint of marriage. The sections mentions that all the agreements that are made in restraint of marriage are void except for the marriage of a minor, where the law itself restraints the marriage of a minor.[11]
The law also discourages agreements that restricts the freedom of marriage be it against any person, group, or a class of person. The exception to it is only the marriage of a minor. But as the claim for maintenance would forfeit if a widow remarries, was held by court as an agreement not in restraint of marriage.
Illustration –
A made an agreement with B to give him Rs. 1 lakh if he restrains from marrying C, who is A’s daughter. This is a void agreement.
Case Law –
In the case of A. Suryanarayan Murthi v. P. Krishna Murthy[12], it was held that an agreement between two co- widows that if any of them remarries, she would forfeit the claim for her share of her deceased husband’s property.
CONCLUSION
The article has covered the various nuances to the question of enforceability of an agreement as well as which agreements are void and what ultimately becomes a valid enforceable contract. The article started with the question of public policy and how on the opinion of the judges helped us to better understand the area of public policy in section 23 of ICA, 1872. Moving from it the discussion moved to as what kinds of contracts are opposed to public policy and the underlying logic of them opposing the public law or the interest of the public at large. After that, the article went on to discuss the nuances of agreements that have considerations unlawful in parts and objects. Subsequently seeing the exceptions to section 25. And lastly analysing the restraint of marriage along with illustration and case laws. All this creates a good picture of what lawful agreements can be made according to the Indian Contract Act, 1872. This also helps to create awareness about the basic laws of the land and giving a deep connection with the social perspective of the law.
REFERENCES
- RAJESH KAPOOR, AVATAR SINGH’S CONTRACT AND SPECIFIC RELIEF, 147-152,286-288, Eastern Book Company,2022
- DR. RK BANGIA, CONTARCT I, 238, Allahabad Law Agency, 2023
- https://indiankanoon.org/doc/1625889/ last visited on 06/01/2024
- https://www.legalserviceindia.com/ last visited on 05/01/2024
- https://www.scconline.com/ last visited on 06/01/2024
- https://www.manupatrafast.com/ last visited on 05/01/2024
- https://blog.ipleaders.in/ last visited on 04/01/2024
- https://www.businesswonder.com/Articles/Time-barred-debt-promise-to-pay-time-barred-Debt-Limitation-Period-Section-25(3)-of-Indian-Contract-Act-1872.htm last visited on 11/ 01/2023.
[1] Indian Contract Act, 1872, § 23. No.9, Act of Imperial Legislative Council, 1872 (India)
[2] A, Suryanarayan Murthi v. P. Krishna Murthy, AIR 1957 Ori 125
[3] Central Inland Water Transportation Corporation v. Brojo Nath Gnguly (1986), 3 SCC 156: AIR 1986 SC 1571
[4] Indian Contract Act, 1872, § 24. No.9, Act of Imperial Legislative Council, 1872 (India)
[5] Pickering v. Illfracombe Rly Co, (1868) LR 3 CP 235,250
[6] Poonoo Bibi v. Fyaz Buksh, 1874 SCC OnLine Cal 59
[7] Indian Contract Act, 1872, § 25. No.9, Act of Imperial Legislative Council, 1872 (India)
[8] Rajlukhy Dubee v. Bhoothnath Mookerjee (1899-00) 4 CWN 488
[9] Karam Chand v. Basant Kaur, 1911 Punjab Rec No 31
[10] A.V. Murthy v. B.S. Nagabasavanna (2002) 2 SCC 642
[11] Indian Contract Act, 1872, § 25. No.9, Act of Imperial Legislative Council, 1872 (India)
[12] A. Suryanarayan Murthi v. P. Krishna Murthy, AIR 1957 Ori 125
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