A contract might have all the technical essentials—offer, acceptance, and consideration—but if its purpose is illegal or immoral, the law will not touch it. Section 23 of the Indian Contract Act, 1872, acts as a filter to stop agreements that are harmful to society.
1. Section 23 Explained
The section states that the consideration or object of an agreement is lawful, UNLESS:
- It is forbidden by law; or
- It is of such a nature that, if permitted, it would defeat the provisions of any law; or
- It is fraudulent; or
- It involves or implies injury to the person or property of another; or
- The Court regards it as immoral, or opposed to public policy.
If an agreement falls into any of these categories, the agreement is Void.
2. What Makes Consideration Unlawful? (The 5 Grounds)
Here is a breakdown of the five conditions mentioned in Section 23 with simple examples.
A. Forbidden by Law
An act is forbidden by law if it is punishable under the Indian Penal Code (IPC) or prohibited by special legislation.
- Example: A promises to pay B ₹10,000 if B sells him liquor without a license. This is void because selling liquor without a license is forbidden by the Excise Act.
B. Defeats the Provisions of Law
The act itself might not be directly criminal, but allowing it would bypass or cheat a legal rule.
- Example: A person is an insolvent. By law, his property belongs to the Official Assignee. If he secretly agrees to transfer his property to his friend to hide it from creditors, this agreement is void.
C. Fraudulent
Any agreement whose object is to cheat or deceive others is void.
- Example: A and B agree to divide the gains acquired by cheating (fraud) on a stock market. This agreement is void.
D. Injury to Person or Property
The term “injury” means criminal or wrongful harm.
- Example: A promises to pay B ₹5,000 if B beats up C (Injury to person) or burns down C’s house (Injury to property). This is void.
E. Immoral or Opposed to Public Policy
This is the widest category. “Immoral” usually refers to sexual immorality. “Public Policy” covers acts that harm the state or society.
- Example (Immoral): A lets out his house to B, a prostitute, knowing she will use it for prostitution. A cannot recover the rent because the object is immoral.
3. Agreements Opposed to Public Policy
“Public Policy” is often called an “unruly horse” because it is hard to define. However, courts have identified specific agreements that are against public policy:
- Trading with an Enemy: Contracts with an alien enemy during war are void.
- Stifling Prosecution: An agreement to drop a criminal case (for non-compoundable offences) in exchange for money is void. You cannot “buy” your way out of crime.
- Marriage Brokerage Contracts: An agreement to pay a middleman to find a spouse is void. Marriage should be free, not a business deal.
- Sale of Public Offices: Paying a bribe to get a government job or a title (like Padma Bhushan) is void.
- Interference with Administration of Justice: bribing a judge or witness.
- Restraint of Personal Liberty: An agreement that unduly restricts a person’s freedom.
4. Landmark Case Law
This case perfectly illustrates the concept of “Immoral Object”.
Case: Pearce v. Brooks (1866)
- Facts:
- The plaintiff (Pearce) was a coach-builder.
- He built and supplied a fancy carriage to the defendant (Brooks), a prostitute.
- Pearce knew that Brooks was a prostitute and that she would use the carriage to attract customers for her profession.
- Brooks failed to pay for the carriage, and Pearce sued her.
- Issue: Can a person recover money for goods supplied if they know the goods will be used for an immoral purpose?
- Section: Section 23 (Immoral Object).
- Ratio Decidendi: If the subject matter of a contract is intended to be used for an immoral purpose, and the plaintiff is aware of this purpose, the court will not help him enforce the contract.
- Judgement: The court held that the contract was Void due to its immoral object. Pearce could not recover the price of the carriage.
5. Summary Table
| Ground | Description | Status |
| Forbidden by Law | Violates IPC or Statutes. | Void |
| Defeats Law | Indirectly violates law. | Void |
| Fraudulent | Purpose is to cheat. | Void |
| Injury | Harm to person/property. | Void |
| Public Policy | Harmful to society/state. | Void |