What considerations and objects are lawful, and what not
Section 23 of the Indian Contract Act, 1872 deals with what considerations and objects are lawful, and what not. The consideration or object of an agreement is lawful, unless— it is forbidden by law1 ; The Act came into force on 01 Sep 1872.
The consideration or object of an agreement is lawful, unless—
it is forbidden by law1 ; or
is of such a nature that, if permitted, it would defeat the provisions of any law; or
is fraudulent ; or
involves or implies, injury to the person or property of another; or
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.
Illustrations
(a) A agrees to sell his house to B for 10,000 rupees. Here Bs promise to pay the sum of 10,000 rupees is the consideration for As promise to sell the house, and As promise to sell the house is the consideration for Bs promise to pay the 10,000 rupees. These are lawful considerations.
(b) A promises to pay B 1,000 rupees at the end of six months, if C, who owes that sum to B, fails to pay it. B promises to grant time to C accordingly. Here, the promise of each party is the consideration for the promise of the other party, and they are lawful considerations.
(c) A promises, for a certain sum paid to him by B, to make good to B the value of his ship if it is wrecked on a certain voyage. Here, As promise is the consideration for Bs payment and Bs payment is the consideration for As promise, and these are lawful considerations.
(d) A promises to maintain Bs child, and B promises to pay A 1,000 rupees yearly for the purpose. Here, the promise of each party is the consideration for the promise of the other party. They are lawful considerations.
(e) A, B and C enter into an agreement for the division among them of gains acquired or to be acquired, by them by fraud. The agreement is void, as its object is unlawful.
(f) A promises to obtain for B an employment in the public service and B promises to pay 1,000 rupees to A. The agreement is void, as the consideration for it is unlawful.
(g) A, being agent for a landed proprietor, agrees for money, without the knowledge of his principal, to obtain for B a lease of land belonging to his principal. The agreement between A and B is void. as it implies a fraud by concealment, by A, on his principal.
(h) A promises B to drop a prosecution which he has instituted against B for robbery, and B promises to restore the value of the things taken. The agreement is void, as its object is unlawful.
(i) As estate is sold for arrears of revenue under the provisions of an Act of the Legislature, by which the defaulter is prohibited from purchasing the estate. B, upon an understanding with A, becomes the purchaser, and agrees to convey the estate to A upon receiving from him the price which B has paid. The agreement is void, as it renders the transaction, in effect, a purchase by the defaulter, and would so defeat the object of the law.
(j) A, who is Bs mukhtar, promises to exercise his influence, as such, with B in favour of C, and C promises to pay 1,000 rupees to A. The agreement is void, because it is immoral.
(k) A agrees to let her daughter to hire to B for concubinage. The agreement is void, because it is immoral, though the letting may not be punishable under the Indian Penal Code (45 of 1860).
Section 23, The Indian Contract Act, 1872 (Act 9 of 1872).
Related judgements & precedents
These are some judgments that construed this section, and hold precedence value. They hold authority on how to read, interpret and use this section.
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Zoroastrian Co-operative Housing Society Ltd. v. District Registrar Co-operative Societies (Urban)
Court's Decision & Legal Precedent
Judgment of Main Case order-5.pdf 2005-04-15 DATE VERIFIED (not same-date ROP order-6). CA 1551/2000. Agrawal/Balasubramanyan. A Parsi-only cooperative housing bye-law is not opposed to public policy under Contract Act 23 / Gujarat CS Act s.4 proviso; public policy of a cooperative statute is searched within that statute. Open-membership s.24 still requires the applicant to be qualified under the Act, Rules and bye-laws. Restriction on transfer is partial, not an absolute TPA 10 restraint. Do not remap contract 27 (already filled).
On this section: s.23 public policy, in the cooperative-society context, is searched within the four corners of the parent statute; a community-restricted bye-law is not ipso facto an unlawful object (Zoroastrian Cooperative).
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Phulchand Exports LTD vs Ooo Patriot
Court's Decision & Legal Precedent
In a CIF contract, when a seller breaches fundamental terms regarding shipment timing and vessel destination (loading goods on a vessel not bound to the contract destination as first port of discharge), the prima facie rule of risk and property transfer under Section 26 of the Sale of Goods Act, 1930 is rebutted. The seller remains liable for non-delivery even after shipment of goods or delivery of shipping documents. A reimbursement clause in a CIF contract requiring the seller to reimburse the price paid if goods do not arrive within a specified period is a legitimate contractual term and not an unenforceable penalty under Section 74 of the Indian Contract Act, 1872, nor an unconscionable bargain under Section 23, when agreed between experienced businessmen with equal bargaining power in conformity with international trade practices. The expression 'public policy of India' under Section 48(2)(b) of the Arbitration and Conciliation Act, 1996 must be given a wider meaning to include awards that are patently illegal, in addition to awards violating fundamental policy of Indian law, interests of India, or justice and morality.
On this section: Cited to argue the reimbursement clause is an unconscionable bargain contrary to public policy; Court held that between experienced businessmen with equal bargaining power, agreed terms must be respected and the clause is neither unreasonable nor unjust
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Shailadevi Pooranraj vs The State of Gujarat State of Gujarat Secretary
Court's Decision & Legal Precedent
Sections 43 and 63 of the Bombay Tenancy and Agricultural Lands Act, 1948 bar transfer of agricultural land to non-agriculturists through testamentary disposition (will). The expression 'assignment' in Section 43 includes testamentary disposition. Although Section 63 does not contain the word 'assignment', it bars testamentary disposition of agricultural land to non-agriculturists because such disposition would defeat the legislative intent to preserve agricultural lands for actual tillers and prevent concentration of holdings. A testamentary disposition of agricultural land to a non-agriculturist is opposed to public policy and void ab initio. The State Legislature has competence under Entry 18 of List II of the Seventh Schedule to restrict testamentary disposition of agricultural land, and such restriction does not violate the Indian Succession Act, 1925.
On this section: Cited for principle that agreements opposed to public policy are void.
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Commr. of Cen. Excise, Vadodara vs Ballash Nedam International
Court's Decision & Legal Precedent
Service tax cannot be lawfully levied on indivisible composite works contracts prior to June 1, 2007, because the Finance Act, 1994, while containing general service tax charging provisions, contains no express charging section specifically addressing works contracts, and provides no machinery or valuation provisions for segregating the goods element from the service element of such contracts as required by the second Gannon Dunkerley judgment. The identification of works contracts as a separate species of contract known to law and commerce means that such contracts must be expressly charged to tax with specific machinery for computation; the constitutional division of taxation powers between Centre (services) and States (goods) requires complete bifurcation with detailed rules, which were entirely absent from the 1994 Act. The Finance Act, 2007, by explicitly introducing service tax on works contracts for the first time with an express definition and prescriptive valuation rules, confirms that Parliament recognized no such charge existed pre-2007.
On this section: Revenue argument that post-1994 works contracts to evade tax were contrary to public policy; Court rejected as irrelevant given no valid pre-2007 tax charge existed
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Bank of India vs K. Mohandas
Court's Decision & Legal Precedent
Employees who have completed 20 years of service and were pension optees and offered voluntary retirement under VRS 2000 and whose offers were accepted by the banks are entitled to addition of five years of notional service in calculating the length of service for the purposes of pension as per Regulation 29(5) of the Pension Regulations, 1995. The amendment to Regulation 28 in 2002 (with retrospective effect from September 1, 2000) applies only to employees with 15-20 years of service and does not affect employees with 20+ years of service who are entitled to benefits under Regulation 29(5). Employees are not entitled to interest on unpaid pension.
On this section: The banks argued that any contract contrary to statutory law would be hit by Section 23. The Court rejected this argument, holding that reading Regulation 29(5) into the VRS 2000 scheme does not amount to alteration or amendment of statutory regulations.
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Andhra Pradesh Indu. Infrastructure CORP vs K. Veerabhadra Rao
Court's Decision & Legal Precedent
Once a registered sale deed is executed transferring absolute ownership of immovable property from the seller to the buyer, the seller cannot enforce conditions stipulated in the allotment letter or demand additional payment based on such conditions. The Transfer of Property Act, 1882, particularly Sections 5, 8, 10, 11, and 55, establishes that upon transfer of absolute interest through a registered sale deed, prior conditions cease to have effect and the buyer acquires absolute marketable title which cannot be unilaterally revoked by the seller.
On this section: Cited in support of the principle that consideration of contracts and enforceability of terms are governed by contract law principles
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Shehammal vs Hasan Khani Rawther
Court's Decision & Legal Precedent
When an expectant heir under Mohammedan law executes a deed of relinquishment of his future inheritance rights in exchange for consideration, and conducts himself in a manner so as to mislead the property owner regarding disposition of the property, he shall be estopped from subsequently claiming his statutory share in the inheritance upon the death of the owner, notwithstanding the doctrine of spes successionis embodied in Section 6(a) of the Transfer of Property Act, 1882, and paragraph 54 of Mulla's Principles of Mahomedan Law. The applicability of such estoppel depends upon the surrounding circumstances and the whole course of conduct of which the relinquishment forms a part. Public policy considerations, derived from principles incorporated in the Indian Contract Act, 1872, support the application of estoppel doctrine to prevent unjust enrichment where an heir has accepted consideration for future relinquishment.
On this section: Public policy consideration invoked to argue that allowing an heir to relinquish consideration but still claim inheritance would be opposed to public policy.
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Empire Industries LTD vs State of Maharashtra
Court's Decision & Legal Precedent
When a lock-out is in connection with multiple matters, the Government can issue a prohibition order under Section 10(3) of the Industrial Disputes Act, 1947 based on the disputes that have been referred for adjudication, provided: (1) the unreferred matters do not constitute genuine crystallized industrial disputes; (2) the unreferred matters are either barred from reference by other statutory provisions or are matters within the employer's unilateral control fully regulated by statute (such as retrenchment under Section 25N); and (3) at least one genuine dispute has been properly referred for adjudication. The statutory scheme for retrenchment under Sections 25N and 25O is imperative and cannot be circumvented by raising retrenchment as an independent demand for reference under Section 10(1). Retrenchment disputes can only arise after the statutory procedure under Section 25N has been followed.
On this section: Public policy limitations on contracts; applied to settlements in industrial disputes
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Binny LTD vs V. Sadasivan
Court's Decision & Legal Precedent
A writ of mandamus under Article 226 of the Constitution of India is a public law remedy and cannot be issued to enforce a purely private contract of employment unless there is a public law element involved in the action challenged.
On this section: Whether termination clauses in employment agreements are void as being against public policy.
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Kanak vs U. P. Avas Evam Vikas Parishad
Court's Decision & Legal Precedent
When a statutory body statutorily required to pay land acquisition compensation has not been served formal notice of reference proceedings before the Tribunal despite being a necessary party with recognized interest in determining compensation amount under Section 50 of the Land Acquisition Act, and the statutory appeal remedy available under the procedural law is technically unmaintainable because the body was not party before the Tribunal and therefore cannot obtain the mandatory certificate prerequisite to appeal, the statutory body is entitled to invoke writ jurisdiction under Article 226 of the Constitution to challenge the award through writ petition. The alternative remedy doctrine does not bar such writ petition because: (1) the statutory appeal remedy was genuinely not available due to procedural prerequisites impossible to satisfy, and (2) once the writ petition is entertained and heard on merits by the High Court, it becomes too late to challenge its maintainability based on alternative remedy. The writ petition, though maintainable, should be allowed in limited scope for judicial review on grounds of breach of natural justice and procedural fairness, with remittal to the original tribunal for fresh determination after impleading the statutory body as proper party.
On this section: Respondent contended deeds of assignment were illegal but Court did not address this substantively
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Dharampeth Grihanirman Sahakari Sanstha vs Nagpur Improvement Trust
Court's Decision & Legal Precedent
When parties have entered into a clear, unambiguous development agreement without objection, been fully aware of its terms and conditions, and have substantially acted upon its beneficial provisions, they cannot later selectively repudiate clauses they find disadvantageous. In the context of land development agreements between private land owners and government planning authorities, where the agreement provides for composite consideration including abandonment of statutory acquisition, permission to commercially develop and exploit land, and reciprocal transfer of public utility land, such agreements are binding and enforceable. Courts should read such agreements in their totality rather than in isolation, and may not unilaterally rescind clauses on grounds of unconscionability merely because one party is a government agency, particularly where the non-governmental party has enjoyed substantial benefits and does not challenge the agreement contemporaneously. The principle 'qui approbat non reprobat' (one who approbates cannot reprobate) applies with full force to prevent a party from accepting beneficial terms while rejecting onerous ones from the same agreement.
On this section: Consideration and lawful objects - cited by appellant to argue that free transfer of land cannot be valid consideration; court held that development agreement's consideration is composite and lawful
The holding above is the ratio decidendi as extracted from the judgment by eCourts India, reproduced unaltered — it is a rendering of the court's reasoning, not a substitute for its words. Read the order itself before relying on it.
Questions about Section 23
What have the courts held on Section 23 of the Indian Contract Act?
Zoroastrian Co-operative Housing Society Ltd. v. District Registrar Co-operative Societies (Urban) (15 Apr 2005) is the leading judgment on this section among those set out below: s.23 public policy, in the cooperative-society context, is searched within the four corners of the parent statute; a community-restricted bye-law is not ipso facto an unlawful object (Zoroastrian Cooperative). Another 10 judgments on this section are set out below, all of them from the Supreme Court. They run from 2003 to 2020.
How do I find court cases under Section 23 of the Indian Contract Act?
In judgments and charge sheets this section is written several ways, and each form finds a different set of orders. These search the full text of every order eCourtsIndia holds, best matches first: Contract Act 23, section 23 Contract Act, section 23 of the Indian Contract Act. People searching for it also type contract act cap 23 laws of kenya. Each opens the full list of orders on eCourtsIndia, where it can be narrowed by court, year and outcome. 11 reported judgments on this section are set out on this page, beginning with Zoroastrian Co-operative Housing Society Ltd. v. District Registrar Co-operative Societies (Urban) (15 Apr 2005).
When did Section 23 of the Indian Contract Act come into force?
Section 23 of the Indian Contract Act, commonly called void agreement, and cited as Contract Act 23, came into force on 01 Sep 1872, having been enacted on 25 Apr 1872. It is in force as at the date shown on this page.
Other sections of this Act
- 73. Compensation for loss or damage caused by breach of contract1822 words
- 74. Compensation for breach of contract where penalty stipulated for577 words
- 28. Agreements in restraint of legal proceeding void512 words
- 25. Agreement without consideration, void, unless it is in writing and registered, or is a promise to compensate for something done, or is a promise to pay a debt barred by limitation law423 words
- 16. "Undue influence" defined397 words
- 133. Discharge of surety by variance in terms of contract393 words
Source and method. Compiled from the enactments of Parliament and of the State legislatures as published on India Code, and republished together with commentary and other original matter under section 52(1)(q)(ii) of the Copyright Act, 1957. Structured, cross-referenced and maintained by eCourtsIndia. Text as in force on 15 Oct 2026. This page is not a substitute for legal advice.