Lawful Object and Public Policy in Contracts

📑 On this page

⚡ The short answer

An agreement is void if its object or consideration is unlawful: forbidden by law, designed to defeat a law, fraudulent, injurious to another's person or property, immoral, or opposed to public policy. Public policy means the public good, not the government's agenda. It also voids restraints on adult marriage and clauses that shut a party out of the courts.

🎬 The 30-second story

The receipts that weren't

“500 fee receipts with the university seal. Make them look real.”

🖨️

Aarav

Aarav wants to fake refund claims.

“₹8,000. I know what they're for.”

📦

Kabir

Kabir prints and delivers.

“Pay for those? Sue me.”

🙅

Aarav

Aarav refuses to pay.

“I did the work!”

⚖️

Kabir

Can Kabir recover his ₹8,000?

Tara's ruling: No. The object was to cheat the university: forbidden and fraudulent. Kabir knew the purpose, so no court will help him. Had he printed ordinary letterheads, unaware of the plan, he could sue.

What does ‘lawful object’ actually mean?

The law inspects two things in every deal: the consideration (what each side gives) and the object (what the deal is meant to achieve). If either is unlawful, the agreement is void, however freely it was made.

An object is presumed lawful, and the illegality must lie in the deal itself, not in what one side privately does later. Selling a kitchen knife is lawful; selling it to help a known attack is not.

The consideration or object of an agreement is lawful, unless it is forbidden by law; 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.

— How a CLAT passage will usually state the rule

🧩 At a glance

The six heads that make an object unlawful

🚫Forbidden by law

The act itself is banned: liquor in a dry state, smuggling, bribes.

🕳️Defeats a law

Looks innocent but is built to sidestep a legal rule.

🎭Fraudulent

The purpose is to deceive someone.

🩹Injury to person or property

The deal aims to harm another's body, goods or reputation.

🔞Immoral

Read narrowly: essentially sexual immorality.

🏛️Opposed to public policy

Harmful to the public good; the court's open-ended head.

🧭 Decision flow

Is the object lawful?

❓ Is the promised act banned, or is the deal built to dodge a law?

Yes →

Void: forbidden or defeats a law

No ↓

❓ Is the aim to deceive someone or harm their body, goods or reputation?

Yes →

Void: fraudulent or injurious

No ↓

❓ Is it sexually immoral, as courts read that word?

Yes →

Void: immoral object

No ↓

❓ Does it fit a public-policy head: buying public office, stifling a prosecution, restraining an adult's marriage, shutting out the courts, a grossly one-sided term?

Yes →

Void: opposed to public policy

No ↓

❓ Is only one separable part tainted?

Yes →

Cut the bad part; enforce the rest

No →

Lawful object

When is an object forbidden by law, or designed to defeat it?

Forbidden is the easy case: the promised act is a crime or banned by a statute, rule or notification.

Defeating the law is subtler. A defaulter's land is auctioned, and the law bars him from buying it. Rohan buys it, secretly promising to pass it to the defaulter at cost. Each step looks lawful; together they do what the law forbids. Void.

⚔️ Side by side

Forbidden vs defeats the law

⛔Forbidden

Breaks the rule head-on

•The promised act itself is banned
•Visible on the face of the deal

🕳️Defeats the law

Walks around the rule

•Each step looks lawful
•The combined effect beats the law's purpose

Courts look at substance, not labels. CLAT tell for the right side: ‘on an understanding’, ‘in his name’.

⚠️ Lawful deal, unlawful performance

A deal that can be performed lawfully isn't void because one side performs it unlawfully. An overloaded truck is an offence; the carriage contract stands.

What do ‘fraudulent’, ‘injurious’ and ‘immoral’ mean here?

✓Fraudulent: the purpose is to deceive, often a third party. Friends agreeing to split the takings of a fake-investment scheme; an agent secretly taking money to lease out his employer's land.
✓Injury to person or property: paying someone to vandalise a rival's shop or publish lies about him.
✓Immoral: the Supreme Court confined it to sexual immorality, like paying for future cohabitation. Gambling or greed don't count.

Watch for knowledge. A landlord who unknowingly rents to an illegal business can claim rent; one who rents for it cannot. In Pearce v Brooks (1866), coachbuilders who knowingly hired a carriage for a prostitute's trade couldn't recover the hire.

What is public policy, and who decides it?

Public policy lets a court refuse a deal that harms the public good, even if no statute bans it. It is not the government's policy. Judges call it an ‘unruly horse’: hard to control once mounted.

⚔️ Side by side

Two views on public policy

📚Narrow view

Stick to the settled heads

•Apply only recognised heads
•Only for clear, incontestable harm

🧭Broad view

Grow with public conscience

•Old heads stretch to new facts
•Constitutional values guide the court

Test	Narrow view	Broad view
Leading Indian case	Gherulal Parakh (1959)	Brojo Nath Ganguly (1986)
Effect	Wagers not against public policy	One-sided job clause struck down

Both are good law: the heads aren't closed, but new ones open rarely.

🧩 At a glance

Heads of public policy CLAT can build a passage around

💼Buying a public post

Paying for a government job or an official's favour.

🤐Stifling a prosecution

Dropping a serious criminal case for money.

💍Marriage brokerage

A third party charging a fee to arrange a marriage.

⛓️Restraint of personal liberty

A debtor barred from moving or working without the lender's nod.

⚖️Unconscionable terms

Grossly unfair clauses forced on a weaker party.

Stifling a prosecution vs a lawful settlement

Zoya files a theft case; Rohan offers ₹50,000 if she withdraws it. If the law doesn't let that offence be settled privately, this is trading on a crime: void. Where it can be compounded, a genuine settlement is lawful.

Which restraints does the law strike down?

Three public-policy heads grew their own rules: restraint of marriage, trade (its own page) and legal proceedings.

✓Marriage: restraining an adult's marriage is void, even partly, like ‘never marry outside the community’. A restraint on a minor's marriage isn't caught.
✓Legal proceedings: you can't sign away your right to sue, or shorten the time the law gives you.

🎚️ The scale

Dispute clauses: from safe to void

← ValidVoid →

Arbitration

Disputes go to an arbitrator.

e.g. expressly allowed

Pick one proper court

Two courts are competent; parties choose one.

e.g. ‘only Pune’ when Pune and Patna qualify

Pick a court with no link

Consent can't create jurisdiction; every proper court is shut out.

e.g. ‘only Kolkata’ for that deal

Shorter time to sue

Cutting the legal period to sue.

e.g. ‘claims barred after 90 days’

No forum at all

Neither court nor arbitration allowed.

e.g. ‘no claims anywhere’

What if only part of the deal is unlawful?

Shape of the deal	Result	Mini-example
One price for a lawful and an unlawful task	Whole deal void	One salary to run a tea stall and smuggle cigarettes
Separate promises, separate prices	Lawful part survives	A separate fee for each task
One bad clause that cuts out cleanly	Clause struck, rest enforced	A sale with a clause barring all courts

→ scroll to see more

💡 Who loses the money?

Neither side can sue, and money paid usually stays put: in equal fault, the defendant wins. An outsider who funded the deal unaware of its purpose can recover.

Which cases shaped the rule?

🎲

Landmark case · 1959 · Supreme Court

Gherulal Parakh v Mahadeodas Maiya

📋

What happened

Two partners bet on commodity prices, sharing profit and loss. One paid the whole loss and sued for half.

❓

The question

Was the partnership void because wagers are forbidden, immoral or against public policy?

🔨

What the court held

No on all three. Wagers are void but not prohibited; ‘immoral’ means sexual immorality; and new public-policy heads shouldn't be invented lightly. The partner paid his share.

What CLAT takes from it: The heads are read narrowly. ‘Feels wrong’ isn't enough.

📄

Landmark case · 1986 · Supreme Court

Central Inland Water Transport Corp v Brojo Nath Ganguly

📋

What happened

A government company's rules let it sack even a permanent employee on three months' notice or pay, with no reason. Staff had to accept the rules to get the job.

❓

The question

Is such a term, accepted on paper, enforceable?

🔨

What the court held

No. Between grossly unequal parties, where the weaker must sign on the dotted line, an unfair, unreasonable term is opposed to public policy and void. Constitutional values guide the court.

What CLAT takes from it: Public policy can shield the weaker party from a one-sided standard-form term.

How has CLAT asked it?

📝 Asked in CLAT 2019 · Q63 Forbidden by law

Principle: Sale of liquor is illegal. All agreements relating to prohibited items do not exist in the eyes of law. Facts: ‘A’ entered into an agreement with ‘B’ for the sale of liquor. ‘A’ failed to supply the agreed quantity of liquor to B.

Choose the correct answer.

AB can bring a legal action against A.

BB cannot bring any legal action against A.

CA can bring a legal action against B.

DA and B can initiate appropriate legal proceeding against each other.

Reveal answer + reasoning

Answer: B

Our solution (no official key for 2019). Selling a prohibited item is forbidden by law, and the principle says such agreements do not exist. No contract, no breach: B has nothing to sue on.

Why the others fail

A — assumes a valid contract that A breached.
C — A is the defaulter, and nothing exists to sue on.
D — no one can sue on a non-existent agreement.

📝 Asked in CLAT 2025 · Q68 Public policy

… Void agreements, are fundamentally invalid making them unenforceable by default. These agreements cannot be fulfilled as they consist of illegal elements and they cannot be enforced even after subjecting it to both parties…

Which of the following scenarios would most likely result in a void agreement?

AAn agreement signed by someone under duress

BA contract with mutually agreed terms to sell a house

CAn agreement to pay 10 lakhs on getting a government job

DA contract with a minor who understands the terms

Reveal answer + reasoning

Answer: C

Paying money to land a government post is the classic public-policy case: public jobs go on merit, not to the highest bidder. Unlawful object, so void.

Why the others fail

A — duress means consent wasn't free: voidable, not void.
B — a fair, agreed house sale is valid.
D — settled law calls a minor's agreement void too (Mohori Bibee), so D is arguably right. The key, which called it voidable in Q67, chose C, which is void on any view.

📝 Asked in CLAT 2021 · Q83 Restraint of legal proceedings

It is a well settled principle of contract law that parties cannot by contract exclude the jurisdiction of all courts. Such a contract would constitute an agreement in restraint of legal proceedings… Every agreement by which any party is restricted absolutely from enforcing his rights… by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights… is void to the extent. Parties cannot by agreement confer jurisdiction on a court which lacks the jurisdiction to adjudicate.

‘A’ of Agra and ‘B’ of Bhubaneswar make a sale-and-supply deal performed partly in each city. A clause says that in a dispute neither can approach a court of law or any alternative dispute resolution mechanism. Which statement is true?

AThe clause relating to jurisdiction is not valid as it is in restraint of legal proceedings.

BThe clause relating to jurisdiction is not valid as the clause is vague and ambiguous.

CThe clause relating to jurisdiction is valid as they have not restricted the choice of either party regarding choice of jurisdiction.

DThe clause relating to jurisdiction is valid as no court’s has been ousted by the clause.

Reveal answer + reasoning

Answer: A

No court, no arbitration: an absolute bar on enforcing rights, the textbook restraint of legal proceedings.

Why the others fail

B — the clause is perfectly clear.
C — it removes every choice.
D — every court is ousted, not none.

💥 Myth vs fact

Traps students fall for

🙅 Myth

Anything morally dodgy is ‘immoral’ and void.

Tap to bust it →

✅ Fact

Courts read ‘immoral’ narrowly: essentially sexual immorality.

🙅 Myth

Public policy means the government's current policy.

Tap to bust it →

✅ Fact

It means the public good, not a minister's preference.

🙅 Myth

Any clause choosing one court restrains legal proceedings.

Tap to bust it →

✅ Fact

Choosing one of several competent courts is valid. Shutting out every proper forum is void.

🙅 Myth

One illegal clause kills the whole contract.

Tap to bust it →

✅ Fact

Only if it can't be separated; a clean bad part is simply cut.

🎯 Quick quiz

Lawful or not? 5 fact patterns

0 / 5

Zoya rents her shop to Kabir for a café. Unknown to her, he sells banned e-cigarettes there, then stops paying rent.

Q1. Can Zoya recover the rent?

Kabir promises Rohan ₹50,000 to get his uncle, a ministry officer, to steer a tender Kabir's way. Rohan does; Kabir won't pay.

Q2. Can Rohan recover?

Assume: an agreement restraining the marriage of anyone but a minor is void. Kabir offers Zoya, 25, ₹5 lakh to stay unmarried for five years. She does and claims it.

Q3. Is the bonus enforceable?

A Patna–Pune supply contract bars any claim not filed within 60 days of breach, though the law allows three years.

Q4. Is the clause valid?

Aarav pays Rohan one salary of ₹30,000 a month to run his tea stall and deliver smuggled cigarettes. Aarav stops paying.

Q5. Can Rohan sue for the salary?

Spot the unlawful object under the clock

Timed Contracts passages in the real CLAT screen, with option-by-option solutions.

Start a Contracts drill

📌 What CLAT actually expects

The passage will state the rule. Match the facts to it, check knowledge and separability, and never add a head the passage doesn't give you.

🎯 In a nutshell

Object and consideration must both be lawful, or the agreement is void.
Six heads: forbidden, defeats a law, fraudulent, injurious, immoral, against public policy.
‘Immoral’ is narrow; public policy means the public good.
Restraints on adult marriage or on suing are void; arbitration and one competent court are fine.
One price for lawful and unlawful work sinks the deal; separable parts survive.

📎 Good to know, not to memorise

Indian Contract Act, 1872: lawful object s.10; heads of unlawfulness s.23 (its illustrations include buying public employment and dropping a robbery prosecution); partly unlawful object s.24.
Restraint of marriage s.26, trade s.27, legal proceedings s.28 (arbitration saved); severable promises ss.57–58.
Gherulal Parakh, AIR 1959 SC 781; Brojo Nath Ganguly, (1986) 3 SCC 156; Pearce v Brooks (1866) LR 1 Ex 213; Hakam Singh v Gammon, AIR 1971 SC 740.

Frequently asked questions

What is a lawful object in contract law?

The object is what the agreement is meant to achieve. It is lawful unless forbidden by law, designed to defeat a law, fraudulent, injurious to another's person or property, immoral, or against public policy. An unlawful object or consideration makes the agreement void.

Is motive the same as object?

No. A motive one side keeps private doesn't usually taint the deal. The object turns unlawful when the purpose is shared or known, as when a supplier knowingly provides goods for an illegal use. An innocent supplier can still recover.

Can courts create new heads of public policy?

Rarely. Gherulal Parakh urged caution and stability; Brojo Nath Ganguly accepted that public policy evolves with constitutional values. Both are good law. For CLAT, apply whatever head the passage states.

Is an agreement to pay for getting a government job void?

Yes. Paying someone to procure a public post, or to sway an official, is a classic agreement against public policy: public offices must go on merit. Neither side can enforce it. CLAT 2025 tested exactly this.

Is an arbitration clause a restraint of legal proceedings?

No. Arbitration is expressly allowed, as is choosing one of several courts that already have jurisdiction. A clause is void if it shuts out every proper forum, picks a court with no jurisdiction, or cuts the time to sue.