lecture-09 - Learning Outcomes LESSON 9: LEGALITY OF OBJECT...

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Learning Outcomes After todays class you should be able to answer the following questions: · The legality of object and consideration · The consequence of the unlawful object or consideration · The effect of illegal agreement on collateral transaction Introduction In today’s lecture we shall study about another essential element of a contract that is legality of object and consideration The object of consideration of an agreement must be lawful, in order to make the agreement a valid contract, for, Section 10 lays down that all agreements” are contracts if made for lawful consideration and with a lawful object. Section 23 declares what kinds of considerations and objects are not lawful. If the object or consideration is unlawful for one or the other of the reasons mentioned in Section 23, the agreement is ‘illegal’ and therefore void (Sec. 23). The use of the word ‘illegal’ is somewhat a misnomer here. It usually connotes a punishable offence, but the parties to a so called “illegal agreement,” unless it is expressly punishable by law or amounts to a criminal conspiracy are not liable to punishment. They have committed no offence. They have merely concluded a transaction that will be spurned by the courts.’ The words ‘object’ and ‘consideration’ used in Section 23 are not synonymous. The word ‘object’ here means ‘purpose or design.’ Thus, where a person, while in insolvent circumstances, transferred his property to one of his creditors with the object of defrauding his other creditors, it was held that the agreement was void and the transfer was inoperative (Jajlar Meher Ali vs Budge Budge Jute Mills Co. ). The court observed that although the consideration of the contract was lawful but the object was unlawful because the purpose of the parties was to defeat the provisions of the Insolvency Law. What Considerations and Objects are Unlawful? According to Section 23, every agreement of which the object or con- sideration is unlawful is void, and the consideration or the object of an agreement is unlawful in the following cases: 1. If it is forbidden by law . This clause refers to agreements which arc declared illegal by law. If the consideration or object for a promise is such as is forbidden by law, the agreement is void. An act or an undertaking is forbidden by law: a. When it is punishable by the criminal law of the country, or b. When it is prohibited by special legislation or regulations made by a competent authority under powers derived from the legislature. Illustrations a)Agreements for sale or purchase above the standard price fixed by the relevant law (e.g Commodity’s Act. 1955) with regard to “a controlled article are illegal and hence void (Sua Ram vs Kunj LaI). b)An agreement to pay consideration to a tenant to induce him
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This note was uploaded on 09/27/2011 for the course BUS 100 taught by Professor Sherry during the Spring '11 term at Faculty of English Commerce Ain Shams University.

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lecture-09 - Learning Outcomes LESSON 9: LEGALITY OF OBJECT...

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