Unit III:

• 3.1 Legality of object and consideration

• 3.1.1 What consideration and objects are unlawful

• 3.1.2 Object and consideration unlawful in part

• 3.1.3 Effect of illegal agreement on collateral transactions

• 3.2 Void agreements (Expressly declared void agreements)

• 3.2.1 Agreements in restraint of marriage

• 3.2.2 Agreements in restraint of trade

• 3.2.3 Agreements in restraint of legal proceedings

• 3.2.4 Uncertain agreements

• 3.2.5 Wagering agreement

• 3.2.6 Agreements contingent on impossible events

• 3.2.7 Agreements to do impossible events

• 3.3 Contingent contracts

• 3.3.1 Definition

• 3.3.2 Essentials

• 3.3.3 Rules regarding performance of contingent contracts

• 3.3.4 Distinction between contingent and wagering agreement

 

Unit III: Legality, Void Agreements & Contingent Contracts

1. The “Plain English” Intro

Even if you have an offer, acceptance, and money, the court will refuse to help you if the Object (the goal) or the Consideration (the payment) is illegal or against society’s interests. Furthermore, Contingent Contracts are “waiting” agreements—they only come alive if a specific event happens (or doesn’t happen).

2. Day-to-Day Analogy

Legality: If a hitman sues his client because he wasn’t paid for a “job,” the court will throw him out. Why? Because the object (murder) is unlawful. Wagering: If you bet your friend ₹500 that it will rain tomorrow, that is a Wager. If it rains and he doesn’t pay, you cannot sue him because the law considers betting a “Void Agreement”.

3. The Legal Backbone

Section (Indian Contract Act)	What it says in Simple Terms
Section 23	Unlawful Objects: Lists when a contract is “dirty” (e.g., it’s forbidden by law, fraudulent, or immoral).
Section 24	Partly Unlawful: If the illegal part cannot be separated from the legal part, the whole thing is dead.
Section 26	Restraint of Marriage: You cannot pay someone to stay single (except a minor).
Section 27	Restraint of Trade: You cannot stop someone from practicing a lawful profession or business.
Section 30	Wagering Agreements: Simple bets on chance are void and unenforceable.
Section 31	Contingent Contract: A contract to do or not do something if some event happens or does not happen.
Section 56	Impossible Acts: An agreement to do an act impossible in itself is void (e.g., magic).

4. The “Checklist” (Essentials)

Consideration/Object is Unlawful if it is:

• Forbidden by law (e.g., selling drugs).
• Defeats the provisions of any law.
• Fraudulent.
• Involves injury to a person or property of another.
• Immoral or against Public Policy (e.g., trading with an enemy).

Essentials of a Contingent Contract:

• Performance depends on an event (Future/Uncertain).
• The event must be collateral (It’s not the main performance, but a side-condition).
• Event must not be at the mere will of the promisor.

5. Landmark Case Laws (The Story Method)

Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. (1894)

• The Conflict: A world-famous gun maker sold his business and promised not to make guns anywhere in the world for 25 years. He later broke this promise, claiming the restriction was a “restraint of trade”.
• The Verdict: The court held that while general restraints are void, this one was Reasonable because the buyer paid a lot for “goodwill” and the business was global. This is an exception to Section 27.

Gherulal Parakh v. Mahadeodas Maiya (1959)

• The Conflict: Two partners entered into an agreement to bet on the rise and fall of prices. One partner sued the other for his share of the loss.
• The Verdict: The Supreme Court held that while a Wager is void, it is not “illegal” under Section 23. Therefore, Collateral Transactions (the partnership agreement to share the losses) were still valid.

6. Comparison Table: Contingent Contract vs. Wagering Agreement

Feature	Contingent Contract (Sec. 31)	Wagering Agreement (Sec. 30)
Nature	Valid contract.	Void agreement.
Interest	Parties have a real interest in the event (e.g., Insurance).	No interest other than winning or losing money.
Reciprocal Promises	No reciprocal promises.	Always consists of reciprocal promises.
Example	Marine insurance (valid).	Betting on a horse race (void).

7. Visual Flowchart Description

1. Step 1: Identify the Object → Is it for something legal?
   • If NO → Agreement is Void.
2. Step 2: Check for Restraints → Does it stop someone from marrying or working?
   • If YES → Usually Void.
3. Step 3: Check for Contingency → Is performance waiting for a future event?
   • If YES → It’s a Contingent Contract.
4. Step 4: Check Possibility → Is the event or act impossible? (Sec 36/56)
   • If YES → Agreement is Void.

8. Exam “Golden Key”

Concluding Sentence: “Public policy is an unruly horse, and once you get astride it, you never know where it will carry you.” Use this powerful quote when discussing Section 23 to explain why the courts are careful about declaring contracts void based on “Public Policy”—it’s a flexible but dangerous concept.

Master Tip: Every Insurance contract is a Contingent contract, but not every Contingent contract is Insurance!