Problem Based on Contract and Solution-9

Indian Contract Act, 1872

TANMOY MUKHERJI INSTITUTE OF JURIDICAL SCIENCE

Dr. Tanmoy Mukherji

Advocate

Problem Based on Contract and Solution-9

Tanmoy Mukherji

Advocate

Question-

A knows that the railway company will not give him the contract. Thus, A makes an agreement with B under which B is to apply for the contract and after the contract being obtained A will work as actual contractor. A file a suit to enforce the agreement. Will he succeed? Decide.

Fact-

A knows that railway company will not give him the contract. Therefore, A makes an arrangement with B under which-

→ B will apply to the railway company for the contract, and

→ After the contract is obtained; A will work as the actual contractor.

→After B gets the contract from the railway company, A wants to enforce the agreement between him and B.

→B refuses.

→A files a suit.

Issue-

Is the agreement between A and B enforceable, when the purpose of agreement is to circumvent railway rules and obtain a contract through another person?

Legal principles-

Agreement with unlawful/immoral object is void, [Sec. 23 ICA, 1872]- An agreement is void if its object or consideration is-

→Fraudulent

→Opposed to public policy

→Meant to defeat a law.

Hence, A used B as a front man to obtain a railway contract fraudulently.

This a classic example of an Agreement opposed to public policy.

Principle:

Parties involved in an illegal agreement cannot seek court help.

 Courts don't assist a person who is part of an illegal or fraudulent arrangement.

[EX TURPI CAUSA NON ORITUR ACTIO]

Reference cases-

→Sita Ram v. Radha Bai (1968)-

A party to an illegal agreement cannot seek enforcement.

→Gherulal Parekh v. Mahadeo Das (1959)-

Agreements made to defeat the provisions of law or public policy are void.

Application of law to the given problem:

→A knew he could not get the railway contract legally.

→So, he used B as a proxy which is fraudulent and against railway rules.

→The object of the agreement is illegal and opposed to public policy.

→Therefore, the agreement is void ab initio.

A, being part of the illegality, has no right to enforce the agreement.

Conclusion-

-A will not succeed.

-The agreement between A and B is void under Section 23 because its object is fraudulent and opposed to public policy.

-Courts will not enforce such an illegal arrangement.