LAWFUL OBJECT - PART II
For Part I, click here
IV.
An
agreement that involves or implies any injury to a person or his property is
unlawful and void. For example, a contract that requires the parties to pay a
very high-interest rate in case of default is unlawful as it causes injury to
the defaulter’s property. Another example would be a slavery contract wherein
one party is made to work for the other at a very low price. Such contract
involves injury to the person and is thus void. (Ram Sarup Bhagat v Bansi
Mandar, ILR (1915) 42 Cal 742.) However, a contract to construct a railway
track at a property acquired by the state even though it involves injury to the
previous owner is not unlawful or void (Union of India v Philips
Construction, AIR 1989 Ker 152)
V.
The
contract act does not allow immoral agreements i.e. agreements that have an
immoral consideration or object to be enforceable. What constitutes as
immorality has been a question that the courts in India and England have
attempted to answer for years. The Supreme Court of India explained the scope
of the term ‘immortality’ in the case of Gherulal Parakh v. Mahadeodas
Maiya(AIR 1959 SC 781). The court restricted the general meaning of the
term to ‘sexual immorality’ for the purposes of this act. The court said that-
“The
case-law both in England and India confines the operation of the doctrine to
sexual immorality. To cite only some instances: settlements in consideration of
concubinage, contracts of sale or hire of things to be used in a brothel or by
a prostitute for purposes incidental to her profession, agreements to pay money
for future illicit cohabitations, promises in regard to marriage for
consideration or contracts facilitating divorce are held to be void on the
ground that the object is immoral… the provisions of the Indian Contract Act
1872 s 23 indicate the legislative intention to give it a restricted meaning and
its juxtaposition with an equally illusive concept, public policy, indicates
that it is used in a restricted sense; otherwise there would be overlapping of
the two concepts.”
Example-
A married woman is lent money so that she can pay her husband to divorce her.
The object of such an agreement of loan is immoral and thus the money cannot be
recovered. (Baivijli v. Nansa Nagar, ILR (1885) 10 Bom 152)
VI.
An
agreement with an object which is opposed to public policy according to the
court is unlawful. The term ‘public policy’ does not have a single hard and
fast definition. The courts have attempted to interpret the term and take it
into consideration while enforcing contracts. Being against public policy
generally refers to something which involves being opposed to the public good
or public interest. The doctrine of public policy has evolved through the years
by the English Courts through certain heads. According to the English courts
these heads cannot be enlarged by the court. The following paragraph from the
case of Gherulal Parakh v. Mahadeodas the court explains the scope of the
doctrine of public policy in India -
“The
doctrine of public policy may be summarised thus: Public policy or the policy
of the law is an illusive concept; it has been described as an
"untrustworthy guide", "variable quality", "unruly
horse", etc.; the primary duty of a court of law is to enforce a promise
which the parties have made and to uphold the sanctity of contract which forms
the basis of society; but in certain cases, the Court may relieve them of their
duty on a 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 not only to harmful cases but also
to harmful tendencies; this doctrine of public policy is only a branch of
common law, and just like any other branch of common law, it is governed by
precedents; the principles have been crystallised under different heads and
though it is permissible for courts to expound and apply them to different
situations, it should only be invoked in clear and incontestable cases of harm
to the public; though the heads are not closed and though theoretically it may
be permissible to evolve a new head under exceptional circumstances of a
changing world, it is advisable in the interest of stability of society not to
make any attempt to discover new heads in these days.”
Further, the Supreme Court while interpreting the meaning of 'public policy' in the case of ONGC Ltd. v. Saw Pipes Ltd. observed that "it has been repeatedly stated by various authorities that the expression 'public policy' does not admit of precise definition and may vary from generation to generation and from time to time. Hence, the concept 'public policy' is considered to be vague, susceptible to narrow or wider meaning depending upon the context in which it is used".
To sum it up, injuring public interest or public welfare is opposed to public policy. And, public policy should be given a wider meaning by the courts.
The
heads of public policy enlisted by the courts are as follows-
1. Agreement
with enemy-
Any
agreement i.e. commercial intercourse with any inhabitant of an enemy country
is against the public policy. (Janson v. Driefontein Consolidated Mines Ltd,
1902 AC 484, 499; Espostio v. Bowden, 110 RR 822, 823)
2. Grabbing
of privileges in public office-
An
agreement that induces a public officer to corrupt his services is opposed to
public policy. For example, an agreement with a judicial officer and a party of
the case to give a decision in his favour is against public policy. Appointment
in a public office in consideration for money is against public policy (Ranjitsingh
Murlisingh v. Ramlal Shivlal, AIR 1951 MB 113; Narasimma Thatha
Acharya v. Anantha Bhatta, ILR (1881) 4 Mad 391). Admission obtained in a
public institution like a medical college in consideration for money is also
against public policy and thus void. It has been described by the Supreme Court
has unjust, unreasonable, unfair, arbitrary, and violative of Article 14 of the
Indian Constitution. (Mohini Jain v. State of Karnataka, (1992) 3 SCC
666: AIR 1992 SC 1858).
3. Interfering
with the administration of justice-
An
agreement with an object which is to interfere with the administration of
justice in any of the following forms is opposed to public policy and hence
void.
i. Interfering
with the course of justice -
Any
agreement which interferes with the course of justice by obstructing the
natural route is opposed to public policy. For example, an agreement with a
witness to not show up for trial for a certain amount of money or an agreement
with the counsel of the other party to win the case in consideration for half
the award amount. An agreement to provide false evidence in court is also an
example of such type of contracts.
ii. Stifling Prosecution -
An
agreement that involves not prosecuting a criminal for a public offence as
opposed to public policy since punishing criminals for their crime is the best
court for the interest of the general public. These kinds of agreements are
referred to as agreements to stifle prosecution.
“No
court of law can countenance or give effect to an agreement which attempts to
take the administration of law out of the hands of the judges and put it in the
hands of the private individuals.”
An
illustration of this type can be seen in the case of Narasimharaju v.
Gurumurthy Raju, AIR 1963 SC 107. In this case, one of the partners of a
partnership firm during its dissolution filed criminal complaints against his
other partners for forgery and manipulating accounts. It was consequently
decided that the dispute will be decided through arbitration. The complainant
wasn’t able to produce evidence during the arbitration proceedings. The
enforceability of the arbitration award was challenged on the ground that the
dispute was referred to arbitration as the result of an agreement to stifle
prosecution. It was held by the court that “If a person sets the machinery
of criminal law into action on the allegation that the opponent has committed a
non-compoundable offence and by the use of the coercive criminal process, he
compels the opponent to enter into an agreement, that agreement would be
treated as invalid for the reason that its consideration is opposed to public
policy.”
However,
where an agreement is made before the complaint is filed then the agreement may
be held valid by the courts. The case of Ouseph Poulo v. Catholic Union
Bank Ltd, AIR 1965 SC 166 is an illustration of this exception. In this
case, the respondents found that goods in a certain godown in their possession
against a loan were being overvalued or being withdrawn with the help of some
bank officials. The debtors made an agreement with the bank to make up for this
fault by pledging more property. There was some issue in the process succeeding
which the bank filed a complaint against the debtors only to withdraw it later
after the hypothecation was completed.
The
court held that the object of the agreement was not to stifle prosecution. The
court said that “The agreement was entered into before the complaint was
filed, and so, it would be unreasonable to suggest merely from the sequence of
subsequent events that the documents in question was executed with the object
of stifling the criminal prosecution.”
iii. Marriage
Brokage agreements -
An
agreement of marriage in consideration for money is a marriage brokage
agreement. The agreement entered into by the parents of a minor girl and the
groom to let her marry the groom in exchange for money is an example of this
type of agreement. Such agreements are opposed to public policy. An Orissa High
Court case, A. Suryanarayan Murthi v P. Krishna Murthy (AIR
1957 Ori 125) throws light on such cases. In this case, the plaintiff was
offered gold, jewels, and land by the defendant in consideration for marrying
his widowed niece. The plaintiff married the widowed niece but the defendant
defaulted on the promise. The plaintiff initiated action subsequently. The
court held that “We would like to make it clear at the outset that if gifts
or presents to the groom or the bride are made voluntarily it cannot be
attacked as anything immoral or opposed to public policy. But if pecuniary gain
is made the consideration of marriage, it is bound to be condemned as
reprehensible to all sense of decent morals. In the present case, monetary gain
was the sole consideration for the marriage between the two.”
iv. Unconscionable
bargains -
An
agreement where one party is in an advantageous position and the other is in a
vulnerable position is an unfair unconscionable agreement. Such agreements are
opposed to public policy and hence void. For example, an agreement between a
needy employee and the employer which states that the employee will have to pay
an unreasonably hefty amount if he wants to leave before three years or a
similar type of agreement which says that the company can terminate the
employee’s contract whenever they want by giving three months’ notice without
any ground (Central Inland Water Transport Corpn v. Brojo Nath Ganguly,
(1986) 3 SCC156).
However,
where the parties are equally matched and the agreement had been entered into
by them willingly then such agreement is valid. (Phulchand Exports (P) Ltd
v. O.O.O. Patriot, (2011) 10 SCC 300)
BY
LAWVASTUTAH
Comments
Post a Comment