Chapter 6

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The consideration or object of an agreement is lawful, unless1.It is forbidden by law; or 2.Is of such a nature that ,if permitted, it would defeat the provisions of any law; or 3.Is fraudulent; or 4. Involves and implies injury to the person or property of another; or 5.The court regards it as immoral, or opposed to public policy.
In each of these cases, the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful, is void.
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The object and consideration may in some cases be the same thing but usually they are different. Object Purpose or Design of contract Consideration Something in Return Chandra Sreenivasa Rao V. Kovapatti Raja Rama Mohana Rao AIR1952 Mad 579 Money is borrowed to celebrate the child marriage. Child marriage Restraint Act 1929; to celebrate the marriage of child is offence. Here debt-consideration itself is not illegal but the object of debt is illegal

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Law includes: Statutes, Customary law , Precedent, rules and regulations, etc. Nandlal V.Thomas J.William,171 IC 948

The plaintiff was licensed under an Excise Act which forbids its sale, sub-lease, but he took the defendant in partnership. Partnership held void

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Fateh Singh V. Sanwal Singh (1878)1 All. 751 The accused is required under Cr.P.C to surety bond for Rs.5000 for good behavior for certain period, he deposits the sum with the defendant when period is over refused to pay. Held not recoverable.

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Parameters of immorality:
1.

Immorality is a relative term in relation to values of the society at particular time and space.

2.

The arbiter of the standard is the court.

The survey of the judicial decision reflects that immorality is limited to sexual immorality as of now.

1.

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Gherulal V. M.Maiya (1959) 2SCA 342 Subba Rao J (after CJ) The case law in England and in India confines the doctrine to sexual immorality D.Nagartnamba v Kunuku Ramayya AIR 1968235:1 SCR 43. BACHAWAT J Certain properties were gifted my a male of joint Hindu family for past cohabitation case failed for incompetency but BACHAWAT J recognised the past cohabitation as good consideration.

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1.

Interference with matrimonial relations. Bai vijli V. Nansa Nagar (1885) 10 Bombay 152 :Money lended to seek divorce, not recoverable. Dealing with prostitutes :Pearce V. Brookes( 1866)LR 1EX 213.Thing sold and hired for prostitution. Illegal cohabitation: Past,present,future.?

2.

3.

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PAST COHABITATION.
1. 2.

English law under seal valid otherwise it is past consideration.

Indian law .1.adulterous or.2. non-adulterous cohabitation. Dhiraj Kuer V.Bikramji Singh (1831)3All 787 :Past cohabitation held good consideration. Pyare Mohan V. Narayani AIR 1982 Raj.43 :Logic different-gift needs no consideration logic. Husseinali Casan V.DinbaiAIR1924 Bom.135:Past cohabitation is illegal consideration. D.Nagartnamba v Kunuku Ramayya AIR 1968235:1 SCR 43. Certain properties were gifted my a male of joint Hindu family for past cohabitation case failed for incompetency but BACHAWAT J recognised the past cohabitation as good consideration.
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ENGLISH LAW 1.Public policy 2.Judicial observations on public policy Lord Halsbury in Egertone V.Brownlow (1953)4HLC 123 I deny that any court can invent new head of public policy. Lord Atkin in Fender V.Johan Mildmay (1938) AC.1

The doctrine should be invoked in clear cases in which the harm to the public is substantially incontestable, and does not depend upon the idiosyncratic inference of a few judicial minds

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Subba Rao J( after wards CJI) in Gherulal V.Mahadeodas AIR1959 SC781 Justice Subba Rao blended Halsbury and Atkin to articulate the Indian position. the primary duty of the court is to enforce the promise which the parties have made and to uphold the sanctity of the contract which forms the basis of the society : but in certain cases ,the court may relieve them of their duty on the rule founded on what is called the public policy; for want of better words Lord ATKIN describes that something done contrary to public policy is a harmful thing; but the doctrine is extended to harmful cases but also to harmful tendencies; the doctrine of public policy is a branch of common law and just like any other branch of common law, it is governed the precedents; the principles have been crystallized under different heads and though it is permissible for the courts to expound and apply them to different situations, it should only be invoked in clear and incontestable cases of harm to the public.
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1.

Ram Swarup V. Bansi Mandar (1915) 42 cal,742:Borrowed Rs.100 with exorbitant interest and executed a bond or to work for 2 years without salary. Slavery?

2.

Beresford V. Royal Insurance Company Ltd. (1917) 2 All.E.R.243: Suicide to help representative to get money. The representative not allowed to get money.

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1.Trading with enemy.

2.Traffic related to public offices.

3.Marriage brokerage agreement.

4.Interference with administration of justice.

(a) Interference with the course of justice. (b) Stifling prosecution. (c) Maintenance and champerty.
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5. 6. 7. 8. 9.

Agreements tending to create interest opposed to public duty Agreements tending to create monopolies Agreements to influence elections to public offices Agreements in restraint of personal liberty Agreements interfering with marital duties

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1.Illegal agreements.24 2.With out consideration.25 3.Restraint of marriage.26 4.Restraint of trade .27 5.Restraint of legal proceedings.28 6.Uncertain agreements.29 7.Wagering agreements.30 8.Impossible agreements.56

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27.Agreement in restraint of trade void-Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void. Exceptions: 1.Statutory (a). Sale of goodwill, limits specified, which is reasonable. (b). Under Indian Partnership Act. 2.Under Common Law (a) Service agreements (b) Trade Combinations ( c) Agreements in restraint of legal proceedings Void Sec.28

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One is restrained from exercising lawful 1.Profession 2.Trade or 3.Business 4.Occupation amounting to business 5.Occupation is not covered

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Nordenfelt V.Maxim Nordenfelt Guns and Ammunition Co Ltd (1894) AC 535 1.Not to practice the same trade for 25 years (Reasonable) 2.Not to engage in any business for the time being carried on by the company.( unreasonable) 3.He afterwards enters into agreement with another manufacturer of guns and an action for restrain was filed. 4.New law laid down (a) In the interest of parties. (b) In the interest of society as well.
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Two parameters: 1.Reasonable with reference to the interest of parties. 2.Reasonable with reference to the public interest. The restriction should be framed and guarded as to afford adequate protection the party in whose favor it is imposed while at the same time it is no way injurious to the public interest
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Madhub Chander V.Raj Coomar (1874)14 Bengal Law Reporter 76. Two rival shopkeepers in a locality case. COUCH J held;

The words restraint from exercising a lawful profession, trade or business, do not mean an absolute restriction, and are intended to apply to a partial restriction limited to some place.

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1.Rewashanker Samji V. Vedji AIR 1951 Kutch 56: agreement to monopolize the work to perform the religious services: held void? Religious services if trade, business or profession ?

2.Pothi Ram V.Islam Fatima AIR 1915 All.94 Two landlord in the neighbourhood,in order to avoid competition agreed to hold cattle mela on different dates in the same neighborhood . Held binding.? If occupation?

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A. Under section 27. 1.Sale of goodwill. Definition of goodwill: Lord Eldon (Cruttwell V.Lye Ves.335) The goodwill which has been the subject of sale is nothing more than the probability that the old customer will resort to old place" (old name of business) Local limits are prescribed. Limit appear to be reasonable, regards being had to the nature of business.

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(B).Under Indian Partnership Act. 1. Section 11:During the continuance 2.Section 36 : Out going partner. 3.Section 54: In anticipation of dissolution For sections 36 and 54,local limits or period be specified ,which should be reasonable.

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1.Trade combinations. S.B.Fraser and Co.V. Bombay Ice Mfg.Co. (1904)29 ILR Bom.107 (Regulation not restrain) 2.Sole or exclusive dealing agreements. Carliles Nephews and Co.V.Ricknauth Buttermull ILR (1882) 8 Cal 809 Agreement to sell 1,36,000 dhotis of certain description to the defendant only for certain period of time. (Assuring market not restraint)

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3.Service agreements with restraint on employees: (a) Restraint during employment. Charlesworth V. MacDonald (b) Restraint beyond employment period. Niranjan Shanker V.Century Spinning and Manufacturing (1967) SC 1098 The appellant torn the agreement to pieces only because he has been offered higher salary by the other company.
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