Lawful Consideration and Object.pptx

Legality of Object and Consideration:  A lawful contract need not only to have consideration, it also needs to have an object.  Object means purpose of the contract.  Consideration means, “something in return for something given”.  The word “lawful” means permitted by law. Types of...

Legality of Object and Consideration:  A lawful contract need not only to have consideration, it also needs to have an object.  Object means purpose of the contract.  Consideration means, “something in return for something given”.  The word “lawful” means permitted by law. Types of object and consideration: a. Lawful object and consideration:  The object and consideration permitted by law or not restrained by the law. Eg: A contract to buy a noodles. b. Unlawful object and consideration:  The object and consideration not permitted or restrained by the law is called unlawful object and consideration. Unlawful: not mentioned in law but prohibited to do so. (Broader concept) Illegal: Mentioned in law and prohibited to do. Unlawful(Illegal) Agreement 1. Object and consideration forbidden by law 2. Object and consideration defeating provision of law 3. Fraudulent Object 4. Immoral object and consideration 5. Object and consideration injuring person or property 6. Object and consideration opposed to public policy: a. Agreement of trading with alien enemy b. Agreement interfering with parental right c. Agreement restraining personal freedom d. Agreement to obtain or for sale of public title/office. (post ko buy-sell) e. Agreement in restrain of marriage f. Marriage brokerage agreement  Unlawful(Illegal) Agreement 7. Agreements interfering with administration of justice: a. Interference with court of justice b. Stifling prosecution c. Champerty agreement d. Maintenance agreement 8. Agreement to create monopoly 9. Agreement creating interest against obligation 10. Agreement restricting personal freedom Exceptions: e. Sale of goodwill f. Existing partner agreement g. Agreement with outgoing partner h. Agreement not accepting services i. Trade combination j. Sole-dealing agreement 1. Object and consideration forbidden by law:  If the consideration or object of a contract is illegal or forbidden by law, it makes the contract void. Eg: If the consideration of a contract is to physically harm or kill a person, it is an illegal consideration which is forbidden by law. 2. Object and Consideration Defeating provision of law  Any agreement made with the intention of overriding the provision of law are considered at the agreement with an object or consideration defeating the provisions of law EG: As per the Income tax act, it is necessary to pay 10% tax on rental income. To avoid the tax if the rental agreement is made of lesser amount such agreement is considered as agreement defeating the provisions of law. Actual rent = 1 lakhs Tax = 10,000 But agreement made is of only 30,000 to pay 3,000 and avoid the tax.   If the object of a contract is to defraud or cheat a person, it is 3. Fraudulent deemed to be void. Object Eg: A and B enter into an agreement for the division of the gains among the two acquired through fraud. 4. Object and  The word “injury” means criminal or wrongful consideration harm. Eg: A asks an editor of a newspaper to publish a injuring defamatory article against B and promises to pay Rs. 4000 for the work, The agreement is void as it person or involves injury to B. Therefore, a suit cannot be brought to recover Rs. 4000 by the editor. property: 5. Immoral Object or Consideration: Where the consideration or object of an agreement is such that the court regards it as immoral, the agreement is void. Eg: P advanced money to D a married woman to enable her to obtain a divorce from her husband and D agreed to marry her as soon as she obtained a divorce. After divorce D refused to marry P. It was held that P was not entitled to recover back the amount as the agreement had for its object the divorce of D from her husband. (Bai Vijli vs Nansa Nagar) 6. Object and  Public policy is that principle of law which holds that no citizen can lawfully do that which has a Consideratio tendency to be injurious to the public. n opposed to  We can define all government policies as public policies in broader sense. Eg: the budget, the Public Policy: constitution, the health policy, etc. Agreements opposed to public policy 1. Agreement of trading with alien enemy:  The person who is domiciled in a country against which our country has declared a state of war is the alien enemy. 2. Agreement interfering with parental right  It is the right of every person to exercise his parental right. Any agreement which prohibits the person from exercising the parental right is a void agreement.  Eg: A transferred his parental rights to B whereby A’s son is to live with B for which B shall take the entire responsibility. The agreement provided that A shall not revoke this agreement during his lifetime. Later on A claimed back his son. It was held that A could recover the rights and claim back his son because the agreement between A and B was in the nature of the agreement interfering parental rights. Therefore, B couldn’t enforce the agreement against A. ( Annie Besant vs. Guddu Narayaniah ) 3. Agreement in restrain of personal freedom  The agreements cannot restrict the personal freedom of the person.  Eg: A borrowed money from B and B tell him not to borrow from other, not to go office, etc. without B’s permission. Here, agreement between A and B was void as it is in restrain of personal freedom. 4. Agreement to obtain or for sale of public title:  Public post or public title are meant for the benefit of the public at large. Any such agreements that are made for the sale or transfer of public offices, post or title are against the public policy and hence void.  Eg: Ramesh agreed to provide a job for Suresh in the government organization for Rs. 50000. Here, Ramesh has entered into an agreement which is for the sale of public office. Hence, the agreement is void. 5. Agreement in restraint of marriage  Every person within the scope of law have the right to get married.  It is a fundamental right of the person.  An agreement to stop a person from getting married other than restrained by law is opposed to public policy and is void. 6. Marriage Brokerage Agreement  The act of negotiating or arranging a marriage contract between a man and women in return for consideration is called marriage brokerage agreement.  Where a marriage brokerage agreement is concluded against the fundamental freedom of a person, it’s opposed to public policy and is void. 7. Agreement interfering with administration of Justice: a. Interference with Justice: (court ma case gayexi paisa khuwayera wrong evidence diney) Any agreement that interfere the normal court of justice are the agreement with interference of justice. Interference includes delaying the time of judgement, resulting in false judgement, etc. The interference may be due to the false evidence, tempering the evidence, etc. b. Stifling Prosecution(cancelling legal procedure) (paisa paila diyera court ma case jana nadiney)  It is the right of the person to get justice if he has been deprived of his rights. Any agreements that stop the prosecution(process) against the guilty party are in the nature of stifling prosecution. Such agreement are void.  Eg: A saw B killing C. A agreed not to tell anyone for which B has to provide 5 lakhs. The agreement is stifling prosecution because it prevent B from sueing in the court. So it is a void agreement. c. Champerty(Bargain) Agreement (directly interested on court result)  The agreement where a person promises to assist the other person to defend against the third party for which the other person shall share the proceeds obtained from result of the judgement. Here, the party assisting has a direct interest in the litigation of the other party.  Eg: A promise to help B by depositing the money in the court for the case against C, for the piece of land which B claims to be his. For this arrangement B agreed to provide the part of piece of land that he will obtain as a result of judgement. Here, the agreement between A and B is in the nature of champerty agreement because A has direct interest in B’s litigation. d. Maintenance Agreement (interested only in his money, not the result of court)  An agreement to provoke someone to take legal action, in which he is not interested is known as maintenance agreement.  Eg: A promises to pay B Rs. 5000 if B filed a suit against C. 8. Agreement creating interest against obligation.  The person is morally bound to fulfil their obligations. Any agreements which the person creates for the interest against the obligation are void agreements.  Eg: A policemen agreed to search the missing bike of Mr. N for Rs.50,000. Here, it is an agreement which creates the interest against obligation because a policemen is already obliged to search the bike. 9. Agreement to create monopoly  Monopoly is a situation whereby a single person have the exclusive right to deal with the product or the services.  These type of agreements disturb the healthy competition as well as create undue power for a single person/ entity (company).These are in the nature of agreement against public policy, hence void. 10. Agreement in restraint of trade  Any agreement which restricts the rights of the person to do lawful business is in the nature of an agreement in restraint of the trade. Eg: Ram has entered into an agreement with Shyam to not to do any business within Nepal for which Shyam will pay Rs. 2 lakhs. Here, the agreement between Ram and Shyam is in the nature of agreement in restraint of trade which is void agreement. Exceptions to the rule of agreement in restrain of trade 1. Sale of Goodwill:  Goodwill is something paid in the excess of the net assets value acquired in business purchase.  If the person has paid for goodwill, it is his right to exercise the benefit of goodwill. Therefore, the agreement that restrict the seller of goodwill to conduct similar business within a specified area for a specified period of time is valid agreement. 2. Existing partners agreements:  The agreements made between the existing partner to not to engage in similar business within the specified area singly or with any other person during the partnership period is a valid agreement and doesn’t constitute restraint of trade. Eg: If Ram entered into a partnership with Shyam and Hari and started a momo shop, he cannot open momo shop with another person. 3. Agreement with outgoing partner:  The agreement made with exiting partner not to engage in similar business or trade within the specified time or place is not in the nature of agreement in restraint of trade. Therefore, these agreements are valid agreements. Eg: A retired worker of Nepal Rastra Bank cannot work in commercial bank for two years. 4. Existing service agreement:  The agreement made with the existing employer to not to accept services or not to engage in services elsewhere during the course of employment is a valid agreement. 5. Trade Combination:  The agreement which are made with the objective of regulating certain rights regarding the price, quantity, mode of payment while dealing with the goods and services are valid agreements and donot constitute agreements in restraint of trade. Eg: To regulate the price of cooking gas, the gas dealers agreed to not to sell the gas above Rs. 1500. This agreement is valid as the objective is to regulate the price of the gas without being biased. 6. Sole dealing agreements:  Sole dealing agreements restrict the person to carry out any other activity other than those mentioned in the agreements.  In sole dealing agreements the party is allowed only to deal in specific product or within a specific place. If such restriction is reasonable it wouldn’t amount to agreement in restraint of trade.