Section 23 of the Indian Contract Act, 1872: Lawful Consideration and Object
Section 23 determines when the consideration or object of an agreement is lawful and when it is unlawful. If the consideration or object falls within any prohibited category stated in the section, the agreement is void.
Meaning and scope of Section 23
Under the Indian Contract Act, an agreement requires a lawful consideration and a lawful object. "Consideration" broadly refers to what is done, abstained from, or promised at the desire of the promisor, while the "object" is the purpose or design of the agreement. Section 23 tests the legality of both.
Text and legal rule under Section 23
The consideration or object of an agreement is lawful unless it:
- is forbidden by law;
- is of such a nature that, if permitted, it would defeat the provisions of any law;
- is fraudulent;
- involves or implies injury to the person or property of another; or
- is regarded by the Court as immoral or opposed to public policy.
Where the consideration or object is unlawful on any of these grounds, the agreement is void.
Five grounds of unlawful consideration or object
1. Forbidden by law
An agreement cannot be enforced when its consideration or object is expressly prohibited by applicable law. Parties cannot obtain contractual enforcement for a bargain that requires an unlawful act.
2. Defeats the provisions of any law
Even where an act is not expressly prohibited in the wording of a statute, an agreement may be unlawful if allowing it would circumvent or defeat the purpose or operation of a legal provision.
3. Fraudulent
An agreement having a fraudulent consideration or object is unlawful. This includes arrangements designed to deceive another person or improperly secure a benefit through fraud.
4. Injury to person or property
An agreement is unlawful where its consideration or object involves or implies injury to another person's body, rights or property.
5. Immoral or opposed to public policy
The section also covers an object or consideration that a court regards as immoral or opposed to public policy. Application of these concepts depends on the legal context and judicial interpretation; they are not a general licence to invalidate a contract merely because it appears unfair or undesirable.
Effect of unlawfulness
Section 23 expressly provides that every agreement whose object or consideration is unlawful is void. Section 24 should also be considered where part of a single consideration or part of one of several considerations or objects is unlawful.
| Issue | Section 23 rule |
|---|---|
| Law prohibits the bargain | Consideration or object is unlawful. |
| Bargain circumvents a law | Unlawful if permitting it would defeat the law. |
| Fraud is the purpose or consideration | Unlawful. |
| Injury to another person or property | Unlawful. |
| Immorality or public policy | Unlawful where the court so regards it. |
| Result | The agreement is void. |
Statutory illustrations
The Act uses illustrations to explain how the rule operates. In substance, they include ordinary lawful exchanges, a guarantee supported by giving time to a debtor, insurance-type promises and maintenance arrangements as lawful examples. They also illustrate unlawful arrangements involving division of gains obtained by fraud, payment for procuring public employment, an agent secretly profiting against the principal, an agreement to suppress a robbery prosecution, an arrangement designed to evade a statutory prohibition on purchase, improper influence for payment and an immoral object.
Important: The statutory illustrations assist in understanding Section 23, but any present-day dispute must be assessed under the current law applicable to the transaction and the facts of the case.
Related provisions
Section 23 should be read with Section 24 on partly unlawful consideration or objects and Section 25 on agreements without consideration. The surrounding provisions form part of the Act's rules governing validity and void agreements.
Official text
For the authoritative statutory text and current central legislation record, see the Indian Contract Act, 1872 on India Code.