Lawful and Unlawful Considerations and Objects

A.
[This is in fact the most important part of a contract. It is Section 24, and when a contract contravenes the basic principle of this section, it becomes void. It is void ab initio.

To make a comparison - a mistake can be voidable provided that it is mutual, but not necessarily when it is unilateral. S.21 states agreement void where BOTH parties are under mistake as to matter of fact. Hence, a contract cannot be legal binding when there is wrong in the agreement. Meaning, there is a defect in meeting the minds. Sort of similar is S.24 on lawful and unlawful - when the consideration and object of the agreement are illegal, there is gross wrong and thus the contract cannot be binding. How can the society and government legalise something which is wrong? Both moral and fairness, unlawful acts are to be prohibited.

In this respect, what are considerations and objects that are lawful and unlawful? Below are examples given in Section 24, Contracts Act 1950.]

What considerations and objects are lawful, and what not
24. The consideration or object of an agreement is lawful, unless—

(a) it is forbidden by a law;

(b) it is of such a nature that, if permitted, it would defeat any law;

(c) it is fraudulent;

(d) it involves or implies injury to the person or property of another; or

(e) the court regards it as immoral, or opposed to public policy

In each of the above 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.

(a) A agrees to sell his house to B for RM10,000. Here, B’s promise to pay the sum of RM10,000 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 the RM10,000. These are lawful considerations.

(b) A promises to pay B RM1,000 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 A’s promise is the consideration for B’s payment, and B’s payment is the consideration for A’s promise, and these are lawful considerations.

(d) A promises to maintain B’s child, and B promises to pay A RM1,000 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 RM1,000 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) A’s estate is sold for arrears of revenue under a written law, 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 B’s advocate, promises to exercise his influence, as such, with B in favour of C, and C promises to pay RM1,000 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 Penal Code.

[Unlawful can be criminal, immoral or fraud. However, unless it is very clear in writing, concealment can be difficult to prove. Thus, in real life, fraud and misrepresentation are sometimes difficult to prove as it may be concealed and silent.

Furthermore, as long as there is any unlawfulness, despite being parts of the whole contract, the contract is void. This is stated in Section 25 as below.]

Agreements void if considerations and objects unlawful in part
25. If any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object, is unlawful, the agreement is void.

A promises to superintend, on behalf of B, a legal manufacture of indigo, and an illegal traffic in other articles. B promises to pay to A a salary of RM10,000 a year. The agreement is void, the object of A’s promise and the consideration for B’s promise, being in part unlawful.

Ref:
[x] Own account.
S.24 & 25 Contracts Act 1950.