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CMA Foundation · Fundamentals of Business Laws and Business Communication · Consideration and Legality of Object

Gupta & Sons agrees to pay Neha ₹12,000 a month to supervise its lawful packaging unit and also to help conceal its sales from the tax authorities, which is fraudulent. Neha later sues for the unpaid salary for the packaging work alone. Which view is consistent with Sections 23 and 24?

The suit fails because the agreement is void. A fraudulent object is unlawful under Section 23, and under Section 24 an agreement whose object is partly unlawful is void as a whole. The single salary covers both lawful and unlawful work, so it cannot be enforced even for the packaging work.

  1. AThe suit fails, because the agreement is void as part of the object is unlawfulCorrect
  2. BThe suit succeeds, because the packaging work is a separate lawful object
  3. CThe suit succeeds for the packaging salary only, as the Court can sever the unlawful part
  4. DThe suit succeeds, because the unlawful part is only a minor term

Explanation

Under Section 23 a fraudulent object is unlawful. Under Section 24 a partly unlawful object or consideration makes the agreement void. The salary is one consideration for both lawful and unlawful work, so no part of the agreement is enforceable. Severance and the minor-term argument find no support in Section 24.

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