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Agreement Involving Injury To A Person: Jurisprudential Aspects of Section 23 Of Indian Contract Act

Agreement Involving Injury To A Person: Discussion On The Jurisprudential Aspects Of Section 23 Of Indian Contract Act, 1872

Businesses and transactions around the globe are based on just a common thing; mutual trust. And in this mutual trust, if anything illegal and unlawful makes way, then such activities get hampered. For example, for a personal gain if a group of people agree to kill a person or destroy any kind of property, then such an agreement may not be treated as a quintessential agreement of trade and business. And in a proper agreement, if any of the clauses or statements has anything which does not correspond to the existing laws or by any means, defeats any provision of law, then such an agreement will not hold valid in the eyes of law.
The consideration implied is unlawful when it involves injury to a person or property.

The general term injury means criminal or wrongful[1]. Hence, there is nothing unlawful in agreeing to carry on a business lawful in itself, though the property of rivals in that business may, in a wider sense, be injured by the consequent and intended competition. As for example, let us take that all competing bidders at an auction sale agreed to form a ring and peg down the price and purchase the property at the knock out price and share the property, the agreement was unlawful, as it implied injury to the debtor[2]. But the ambit of such injurious agreements does not restrict itself till here only. It also includes any type of agreement or consideration which might be tortious in nature, or opposed to public policy, or fraudulent in nature.[3]

In this paper, by invoking Section 23 of the Indian Contract Act, we try to establish a judicial approach: how to deal with any sort of cases which contains any illegal and unlawful object or consideration. We go into depth with cases involving any type of agreement where it may give furtherance to any illegal act, cause injury to a person or property, or causes losses of pecuniary form to any person.

2. Meaning And Elements of A Valid Contract

An agreement leads on further to become a contract. So before we move on to contracts it is obligatory to understand what an agreement is. An agreement may be defined as a mutual understanding between two or more legally competent individuals or entities about their rights and duties regarding their past or future performances and consideration as manifested by their language (oral or written) or by implication from other circumstances such as the usage of trade and course of performance.[1]

A contract on the other hand may be defined as any agreement enforceable by law. All agreements may be contracts if enforceable by law.[2]

The essentials of forming a valid contract are:[3]

  1. There must be free consent.
  2. There must be lawful consideration.
  3. The parties to a contract must be competent in the eyes of law.

When a contract is said to be formed it is said to be bound by some basic elements. The elements can be enumerated as:

  1. Offer and Acceptance

    For an agreement there must be a lawful offer by a party and lawful acceptance of that offer from the other party. The term lawful means that the offer and acceptance must be in conformation with the requirements of the Indian Contract Act. The offer must be made with the intention of creating legal relations otherwise, there will be no agreement. For example if a says to B that he will sell his car for Rs. 50000, then it is an offer made. If B agrees to buy it for the stated price, then he is said to have made an acceptance.[4]
  2. Legal Relationship

    The parties to an agreement must intend to create a legal relationship to form a legally binding contract. Agreements of a social or domestic nature does not create a binding legal relationship. For example a mother promising her child to buy a chocolate if he does well in exams. Agreements of commercial importance are generally turned to contract of binding legal relationship between the two parties. For example A offers to buy B’s house for Rs. 2 lakh. If B accepts then a legal relationship is formed. The legal relationship so holds that one party may be held for the failure of the contract if such happens.
  3. Lawful Consideration

    Another essential of a valid contract is presence of a consideration. In literal terms, it means something in return. It may be of some benefit to a party. It need not be adequate but must have some value in the eyes of law. It must be lawful, i.e., it should not be defeating any provisions of law. For example, A agrees to sell his house to B for Rs.10 Lac is the consideration for A’s promise to sell the house, and A’s promise to sell the house is the consideration for B’s promise to pay Rs.10 Lac. This is a consideration.[5]
  4. Free Consent

    It means that the parties may have agreed upon the same thing in same sense. For the formation of a valid contract, it is necessary that the consent obtained is free, i.e., obtained without any undue influence or coercion. For example, if A compels a person to enter into a contract at gunpoint, then such a contract is not valid as the consent is not free.[6]
  5. Lawful Object

    It is also necessary that the contract is made for lawful object. If a the motive of the contract is anything which is illegal or defeats the provisions of IPC. It must also not be immoral, fraudulent or something which is opposed to public policy or health. Every such agreement will be considered void in the eyes of law. For example, if A gives Rs 5 lakhs to B for assassinating any politician, then such an agreement will be considered void as the object is unlawful.[7]
  6. Writing and Registration

    According to the Indian Contract Act, a contract may be in oral or in writing. Although in practice, it is always in the interest of the parties that the contract should be made in writing so that it may be convenient to prove in the court. However, a verbal contract in existence, if proved in the court will not be considered invalid merely on the ground that it is not in writing. It is essential for the validity of a contract that it must be in writing signed and attested by a witness or witnesses and registered if so required by the law.
  7. Certainty

    Agreements, the meaning of which are not certain or capable of being made certain are void[8].
    In order to provide validity to a contract, the terms of the contract must be certain and not vague or uncertain. For example, A promised to sell 20 books to B. It is not clear which books A has promised to sell. Hence, the agreement is void because the terms are not clear.[9]
  8. Possibility of Performance

    An agreement to do an act impossible in itself is void. lays down Section 56[10].
  9. Not Expressly Declared Void

    An agreement must not be one of those, which have been expressly declared to be void by the Act. Section 24-30 explains certain types of agreement, which have been expressly declared to be void. An agreement in restraint of trade and an agreement by way of wager have been expressly declared void.[11]

3. Section 23: A Look Into Unlawful Agreements And Unlawful Considerations

Section 23 says that the consideration or object of an agreement is lawful, unless- it is forbidden by law; or is of such nature that, if permitted it would defeat the provisions of any law; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy.[1]

In each of these cases, the consideration or object an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful, as void.[2]

Unlawful Agreements

  1. Agreement involving injury to a person

    In legal terms, injury means any harm done to a person. So if the object or consideration does cause harm to any person, then such a consideration is known as unlawful consideration. Any agreement involving such a consideration is void. In Ram Sarup Bhagat v. Bansi Mandar[3], a person borrowed a sum of hundred rupees and executed a bond promising to work for the plaintiff without pay for a period of two years. In case of default , the borrower was to pay exorbitant interest and the principal sum at once. The court held that the contract contained in the bond was indistinguishable from slavery, which involves injury to a person and was, therefore, void.[4] To assault a person, beat him, deceive him or publish a libel against him
  2. Agreement involving injury to property

    The type of injury caused to a person in an agreement bound by such unlawful consideration, the same type of principle is applicable to agreements involving injury to property. If any agreement containing consideration as to cause harm to the property of oneself or any third party, then such an agreement will be void[5]. And by the term ‘property’, we don’t really confine ourselves to tangible property but also to intangible (intellectual) property.

Unlawful Consideration
Section 23 of the Indian Contract Act clearly states that the consideration and/or object of a contract are considered lawful consideration and/or object unless they are[6]:
  • Forbidden by law- involves murder, violence or any other crimes or unlawful Act.
  • Are fraudulent- Involves any such act which keeps one party in a dominating position and the other, submissive by pecuniary means. Undue influence and coercion may be applied as well.
  • Courts regard them as immoral- Acts like promoting slavery, racism, communalism, etc.
  • Defeats any provision of law- When a consideration to an agreement does not lie in conformity with the existing law, or tends to defeat the provision of such law. For example, sedition as a consideration for some business agreement.
  • Against Public Policy- If any agreement expects consideration, such oppression towards women, testing of nuclear materials in a residential area, etc.

4. Cases on Agreement Involving Injury To A Person And Property

Ramsarup Bhagat v. Banshi Mandar & Ors.[1]

Facts:
Bansi Mandar, borrowed Rs13 lakhs in cash for household expenditure from Ramsarup Bhagat, an inhabitant of Bandara. They made an agreement which said that in satisfaction of interest, that Mandar has to in daily attendance plough the field of Bhagat. Other work including planting seedlings and threshing crops were also included. He promised to repay the loan in the month of Baisakh of the coming year, along with the principal sum. On being absent, the interest would increase be 4-6 percent of the principal sum. Banshi worked for two years without any pay and unfortunately defaulted. He was now asked to pay the principal sum and an exorbitant interest all at once. Banshi was in no position to pay the amount. Bhagat initiated a case of breach of contract against Banshi.

Held:
The question came up that whether this bond was enforceable by law and whether it was a valid contract or not. It was held that such an agreement was not enforceable. The executant expected more interest on absence and full payment. The executor, Mandar, was too poor to do so. He was subjected to human labour without any pay which was indistinguishable from slavery, which in fact lead to injury to a person. The agreement was declared void and no amount was asked to be exacted from the defendant.

Clay v. Yates[2]

Facts:
The plaintiff, a printer, verbally agreed to print for the defendant 500 copies of a treatise, to which a dedication was to be prefixed at certain price per sheet including paper. The treatise called Military Tactics was printed and after the proof of sheet of dedication was revised by the defendant and returned to the plaintiff. There was also a dedication to Sir William Napier. He, for the first time, realised that it contained libellous matter. He refused to print it. The defendant brought charge against him that there was an agreement between them and the plaintiff breached it by the means of denial. The defendant asked for compensation from the plaintiff.
Held:
It was held that on the very first place that it was not a contract of sale of goods. And second, the dedication contained libellous matter and things which were not fit enough to be printed. The court laid down that even the agreement for use or publication of libellous matter falls in the category of injury to a person and hence this agreement was declared void.[3]

Gherulal Parakh v. Mahadeodas Maiya & Ors.[4]

Facts:
The facts lie in a small compass. They, omitting those not germane to the controversy before us, are as follows: The appellant, Gherulal Parakh, and the respondent Mahadeodas Maiya managers of two joint families entered into a partnership to carry on wagering contracts with two firms of Hapur, namely, Messrs. Mulchand Gulzarimull and Baldeosahay Surajmull. It was agreed between the partners that the said contracts would be made in the name of the respondents on behalf of the firm and that the profit and loss resulting from the transactions would be borne by them in equal shares.

In implementation of the said agreement, the first respondent entered into 32 contracts with Mulchand and 49 contracts with Baldeosahay and the nett result of all these transactions was a loss, with the result that the first respondent had to pay to the Hapur merchants the entire amount due to them. As the appellant denied his liability to bear his share of the loss, 'the first respondent along 'With his sons filed O. S. No. 18 of 1937 in the Court of the Subordinate Judge, Darjeeling, for the recovery of half of the loss incurred in the transactions with Mulchand.

In the plaint he reserved his right to claim any further amount in respect of transactions with Mulchand that might be found due to him after the accounts were finally settled with him. That suit was referred to arbitration and on the basis of the award, the Subordinate Judge made a decree in favour of the first respondent and his sons for a sum of Rs. 3,375. After the final accounts were settled between the first respondent and the two merchants of Hapur and after the amounts due to them were paid, the first respondent instituted a suit, out of which the present appeal arises, in the Court of the Subordinate Judge, Darjeeling, for the recovery of a sum of Rs.5,300 with interest thereon. Subsequently the plaint was amended and by the amended plaint the respondents asked for the same relief on the basis that the firm had been dissolved. The appellant and his sons, inter alia, pleaded in defence that the agreement between the parties to enter into wagering contracts was unlawful under S. 23 of the Contract Act.[5]

Held:
The agreement was deemed as an agreement against public policy. Any agreement which tends to be injurious to/against interest or conscience of public at large is said to be opposed to public policy.[6] It is a branch of common law and unless a particular principle of public policy is recognized by that law, Courts cannot invent a new head of public policy. The ordinary function of Court is to rely on the well settled heads of public policy and to apply them to varying situations unless harm to public interest is substantially incontestable. So by invoking Section 23 of the ICA, the agreement against public policy was placed parallel to any agreement involving injury to a person. Hence the agreement was rendered void.[7]

Allen v. Rescous[8]

Facts:
Allen made an agreement with Rescous to beat up a third party. For this, Allen was given money. It was also agreed that if Rescous failed to beat the third party, then he would have to pay back double the amount that was paid to him. Rescous could not beat the third party and hence was bound to pay the amount. But he refused to pay the amount as he was not in a stable financial position. Allen filed a suit claiming breach of contract.[9]

Held:
The agreement made was actually of assault, which was illegal and fell in the domain of injury to a person. The court held the agreement void, as the object of the agreement was unlawful. The court dismissed the agreement due to its tortuous character.

Brown Jenkinson & Co Ltd. v. Percy Dalton Ltd.[10]

Facts:
The claimants owned a vessel on which the defendants shipped a cargo of orange juice, packed in barrels which were old, frail and leaky. The claimants said they would issue a claused bill of lading stating the defects in the barrels. The defendants could only sell the juice with a clean bill of lading stating that the cargo was shipped in apparent good order and condition. The defendants offered an indemnity to the claimants for any losses that might result from the issue of a clean bill. It was found at trial that the claimants believed that the issue of clean bills in such circumstances was an acceptable practice permitting the question of the condition of the cargo to be litigated later. Upon receiving the indemnity, the claimants issued a clean bill. The claimants had to pay damages to the buyers of the orange juice for the loss occasioned by the poor barrels, and they claimed on their indemnity from the defendants.[11]

Held:
The contract was unenforceable because it had as its object the commission of the tort of deceit. The position was that, at the request of the defendants, the plaintiffs made a representation which they knew to be false and which they intended should be relied upon by persons who received the bill of lading, including any banker who might be concerned. In these circumstances, all the elements of the tort of deceit were present. Someone who could prove that he suffered damage by relying on the representation could sue for damages. A promise to indemnify the plaintiffs against any loss resulting to them from making the representation is unenforceable. The claim cannot be put forward without basing it upon an unlawful transaction.[12]

6. Conclusion
It is quite clear from the research that object and consideration if unlawful, illegal or opposed to public policy, then it may be struck down as void.

In Gherulal Parakh v. Mahadeodas Maiya & Ors.[13],it was found that any agreement which was against public policy, such an agreement will be seen as an agreement injurious to person and will be deemed as void.

In the other hand, Ram Sarup Bhagat v. Banshi Mandar[14], it was held that any agreement based on the lines of slavery was also deemed to be an injury against person and struck down as void.

In Clay v. Yates[15], it was held that printing libellous statement about someone, a condition in a mutual agreement was also unlawful and also consisted injury to person and property. In the case of Brown Jenkinson & Co Ltd. v. Percy Dalton Ltd.[16], a new paradigm emerged as a wagering agreement was looked upon as an agreement involving injury to person.

The plaintiffs in the case made some false representation, and wanted to get indemnified for such an occurrence by the defendant. Relying upon such allegations, anyone would be subject to indemnify even when there are no losses. All elements for the tort of deceit were present. Hence, the agreement being tortuous was held as unlawful, and thus was rendered as void.

In the case of Allen v. Rescous[17],the object of the agreement was assault which was illegal, and had the intent to cause injury to a person. Hence it was dismissed and the agreement was rendered void.

These cases helped us look at Section 23 Of Indian Contract Act in a different manner. Various interpretations of the provision of the statute are at our disposal now to understand the Act better. It is now evident, that no agreement can sustain if any of its provisions or clauses are illegal, or tend to defeat any provision of law. It doesn’t really matter if all the other elements in the agreement satisfy and validate a contract but one illegal or unlawful input may render it void.

In proximity to the cases related, a judgement came out such that – If the thing stipulated for is in itself contrary to law, the action by which the execution of the illegal act is stipulated must be held as intrinsically null: pactis privatorum juri publico non derogatur[18].

End-Notes:
  1. Ram Sarup Bhagat v. Bansi Mandar, ILR (1915) 42 Cal 742
  2. Clay v. Yates (1856), I H2N 73:156 ER 1123
  3. (Jan 08, 2019, 12:36 AM) http://www.commonlii.org/int/cases/EngR/1856/477.pdf
  4. Gherulal Parakh v. Mahadeodas Maiya & Ors. (1959) AIR 781
  5. Ibid
  6. Indian Contract Act, 1872, Section 23
  7. ( Jan 08, 2019, 01:29 AM) https://indiancaselaws.wordpress.com/2013/01/29/gherulal-parakh-v-mahadeodas-maiya-and-ors/.html
  8. Allen v. Rescous (1676) Lev 174
  9. Beatson et al., ANSON’S LAW OF CONTRACT, 30th ed., p.416
  10. Brown Jenkinson & Co Ltd. v. Percy Dalton (London) Ltd. (1957) 3WLR 403CA
  11. (Jan 08, 2019, 01:49 AM) https://swarb.co.uk/brown-jenkinson-and-co-limited-v-percy-dalton-london-limited-ca-1957/.html
  12. Ibid
  13. Gherulal Parakh v. Mahadeodas Maiya & Ors. (1959) AIR 781
  14. Ram Sarup Bhagat v. Bansi Mandar, ILR (1915) 42 Cal 742
  15. Clay v. Yates (1856), I H2N 73:156 ER 1123
  16. Brown Jenkinson & Co Ltd. v. Percy Dalton (London) Ltd. (1957) 3WLR 403CA
  17. Allen v. Rescous (1676) 2 Lev 174
  18. Arg., 4 Cl. & F. 241; Broom's Legal Maxims, p. 541
  19. Stephen D, Contract Law in Hong Kong: An Introductory Guide, Hong Kong L.R., 11 (2017)
  20. Pollock & Mulla, INDIAN CONTRACT ACT, 1872 ,14th ed., p.3.
  21. Ibid
  22. Indian Contract Act,1872, Section 2(a);(b)
  23. Indian Contract Act, 1872, Section 23
  24. Indian Contract Act, 1872, Section 13; 14
  25. Indian Contract Act, 1872, Section 24
  26. Indian Contract Act, 1872, Section 29
  27. Indian Contract Act, 1872, Section 29
  28. Indian Contract Act, 1872, Section 56
  29. Essentials of a Contract (Jan 06, 2019, 07:33 PM) https://freebcomnotes.blogspot.com/2016/04/essentials-of-valid-contract_9.html
  30. Mulla, INDIAN CONTRACT ACT, 14th ed., p.415.
  31. Ibid
  32. Ibid[1] Beatson et al., ANSON’S LAW OF CONTRACT, 30th ed., p. 409-411
  33. Ibid
  34. Ram Sarup Bhagat v. Banshi Mandar, ILR (1915) 42 Cal 742
  35. Pollock & Mulla, INDIAN CONTRACT ACT, 1872 ,14th ed., p.3.
  36. Ibid
  37. Ibid

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