Author - Vastu Sharma , Research Intern at kaalecoatwale.com
Introduction:
The word consideration is described as follows in Section 2(d) of the Indian Contract Act:
In a nutshell, consideration means "something in exchange," or "QUID PRO QUO."
Pollock- “the price for which the promise of the other is bought, and the promise thus given for value is enforceable”.
Blackstone- “the recompense given by the party contracting to the other”
In Currie v. Misa, Lush J. define the term consideration as follows-
“A valuable consideration, in the sense of the law, may consist either in some right, interest, profit or benefit accruing to the party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by other”.
Under what circumstances, the object and consideration of a contract are deemed unlawful :
According to the Indian Contract Act of 1872, section in the following situations, the consideration and objects are illegal:
1. If it's against the law: If the object (or) consideration of an agreement is prohibited by law, the agreement is deemed void and unenforceable. If, according to the law, an act is prohibited,
• It is punishable under the country's criminal law, or
• It is prohibited by special legislation and regulations enacted by competent authorities with legislative authority.
For example, ‘A' promises to find ‘B' a job in the public sector, and ‘B' promises to pay ‘A' Rs.1000/-. The agreement is null and void because the consideration is illegal.
2. If it violates the terms of any law: If the object (or) consideration of an agreement is of a nature that, while not directly prohibited by law, would defeat the law's provisions, the agreement is deemed to be unlawful and void.
For example, a separation agreement between a husband and wife is void because it violates Hindu law.
3. If it is a forgery: An agreement with the purpose (or consideration) of defrauding others is illegal and thus void.
For example, ‘A', ‘B', and ‘C' agree to divide gains obtained (or to be acquired) through fraud among themselves. Because the agreement's object is illegal, it is null and void.
4. If it involves (or implies) harm to another's person (or property): An agreement is void if the object (or) consideration is to injure the person (or) property of another. In this case, the object (or) the consideration is considered illegal.
Example: Ram Saroop (vs.) Bansi Mandar (1915):
Facts: “B” borrowed Rs.100 from “L’ and executed a bond promising to work for “L” without pay for a period of two years. In case of default, “B” was to pay interest (at a very exorbitant rate) and the principal amount at once.
Judgment: The contract was void as it involves injury to the person of “B”.
5. If the court finds it to be unethical: An agreement is deemed illegal and void if the consideration and object are immoral. Sexual immorality is included in the term immoral. As a result, its object (or) consideration is illegal.
Pearce vs. Brooks (1866) as an example:
Facts: A coachbuilder rented a carriage to a prostitute with the knowledge that it would be used to attract men.
The Judgement: builders were unable to recover the hire because the agreement was illegal.
6. Where the court considers it to be against public policy: An agreement with a consideration (or) object that is incompatible with public policy. As a result, it becomes null and void, and it is deemed illegal.
How does public policy affect the consideration?
“Public Policy is a high horse to mount, and is difficult when you have mounted it.”
If a contract violates public policy, it is not considered legal. The rule of public policy is founded on the principle ‘ex turpi causa non oritur actio,' which means that any contract, that contradicts public policy is null and void. Since public policy is inherently fluctuating and ambiguous, it lacks a comprehensive concept. The court has complete latitude in interpreting public policy. If the terms of a contract are in breach of public policy, they cannot be applied even if all parties have agreed to them.
In basic terms, public policy refers to government policies that benefit society. It can also be argued that any arrangement that goes against the established interests of society or the morals of the moment is considered to be against public policy, and the agreement becomes void. An arrangement should not be followed if it was against the public good or in violation of the law's general policy. The Supreme Court of India held in P. Rathinam v. Union of India that the word "public policy" can be modified and expanded.
The Supreme Court observed in the case of Gherulal Parekh v. Mahadevdas Maiya:
‘Public policy’ is a vague and unsatisfactory term, and calculated to lead to uncertainty and error, when applied to the decision of legal rights; it is capable of being understood in different senses; it may, and does, in its ordinary sense, mean ‘political expedience’, or that which is best for the common good of the community; and in that sense there may be every variety of opinion, according to education, habits, talents, and dispositions of each person, who is to decide whether an act is against public policy or not. To allow this to be a ground of judicial decision, would lead to the greatest uncertainty and confusion. It is the province of the statesman, and not the lawyer, to discuss, and of the Legislature to determine, what is best for the public good, and to provide for it by proper enactments. It is the province of the judge to expound the law only; the written from the statutes; the unwritten or common law from the decisions of our predecessors and of our existing Courts, from text writers of acknowledged authority, and upon the principles to be clearly deduced from them by sound reason and just inference; not to speculate upon what is the best, in his opinion, for the advantage of the community. Some of these decisions may have no doubt been founded upon the prevailing and just opinions of the public good; for instance, the illegality of covenants in restraint of marriage or trade. They have become a part of the recognized law, and we are therefore bound by them, but we are not thereby authorised to establish as law everything which we may think for the public good, and prohibit everything which we think otherwise.
Conclusion:
Consideration is a benefit which must be bargained for between the parties, and is the essential reason for a party entering into a contract. Consideration must be of value and is exchanged for the performance or promise of performance by the other party (such performance itself is consideration). In a contract, one consideration (thing given) is exchanged for another consideration. Acts which are illegal or so immoral that they are against established public policy cannot serve as consideration for enforceable contracts.
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