Every promise and every set of promises, forming the consideration for each other, is said to be an Agreement. If Agreement is contrary to public policy, then it is not legally binding. The public policy doctrine is based on a legal maxim ‘ex turpi causa non oritur actio,’ which means that a public policy Agreement is ineffective. The word public policy has no exhaustive description and is exceedingly vague as to its fluctuating existence. The Court shall have the discretion to interpret public policy. The contract terms cannot be enforced even if both parties have agreed to it in breach of government policy.
Simply stated, Pubic Policy applies to government policies for the benefit of people, it can also be said that if any Agreement violates any established welfare of society or morality of time, it can be said that it is as against public policy and the Agreement becomes void.
In Collins v. Blentern, It has been held that an Agreement could not be enforced if it was against public good or in violation with general policy of the law.In the case of P. Rathinam v. Union of India, the apex court held that the term public policy is open for modification and expansion.
In the case of Gherulal Parekh v. Mahadevdas Maiya, the apex court observed:
“ ‘Public policy’ is a vague and unsatisfactory term, and calculated to lead to uncertainty and error, when applied to the decision of legal rights; it is capable of being understood in different senses; it may, and does, in its ordinary sense, mean ‘political expediency’, or that which is best for the common good of the community; and in that sense there may be every variety of opinion, according to education, habits, talents, and dispositions of each person, who is to decide whether an act is against public policy or not. To allow this to be a ground of judicial decision, would lead to the greatest uncertainty and confusion. It is the province of the statesman, and not the lawyer, to discuss, and of the Legislature to determine, what is best for the public good, and to provide for it by proper enactments. It is the province of the judge to expound the law only; the written from the statutes; the unwritten or common law from the decisions of our predecessors and of our existing Courts, from text writers of acknowledged authority, and upon the principles to be clearly deduced from them by sound reason and just inference; not to speculate upon what is the best, in his opinion, for the advantage of the community. Some of these decisions may have no doubt been founded upon the prevailing and just opinions of the public good; for instance, the illegality of covenants in restraint of marriage or trade. They have become a part of the recognized law, and we are therefore bound by them, but we are not thereby authorized to establish as law everything which we may think for the public good, and prohibit everything which we think otherwise.”
Section 23 of the Indian Contract Act, 1872 states that “What considerations and objects are lawful and what not The consideration or object of an Agreement is lawful, unless- It is forbidden by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to public policy. In each of these cases, the consideration or object of an Agreement said to be unlawful. Every Agreement of which the object or consideration is unlawful is void” and lists three things, i.e. understanding of the Agreement, the purpose of the Agreement, and the Agreement as such. Section 23 establishes a limitation on a person’s freedom to enter into contracts and subjects such person’s rights to the abiding considerations of public policy and the others set out therein.
Agreements against public policy which are affirmed by Courts
● Trading with an enemy-
If any deal is signed with a foreign opponent without authorization from the government, it is considered to be illegal. Any foreign enemy is an individual holding a country’s citizenship, having warfare against India. These kinds of Agreements are deemed illegal on public policy grounds because their success would entail contact with the enemy and it may confer an advantage.
● Champerty and Maintenance-
Champerty is a form of dealing in which a third party provides assistance in the recovery of property and requests a share of the property recovered in exchange. Maintenance involves supporting a third party in lawsuits or by financial aid and there are no benefits attached. In English law both Champerty and Maintenance are illegal but in India it relies on the facts of the matter.
In the case of Raja Venkata Subhadra Amma Guru v. Sree Pusapathi Venkapathi Raju, court held that only refuse to enforce such Agreements when the court sees that it is not made with a bonafide object or reward seems to be extortionate and held that champerty and maintenance are not illegal in India.
● Stifling prosecution-
It applies to making money from crime, which is deemed to be violation of law. According to rule, if the charges against him are proven by the law court, a person will be prosecuted for committing an offence. An Agreement to do away with criminal charges is null and void.
In the case of Veerayya v. Sobhanandri, a person entered into an Agreement for taking back the charge of S. 420 of Indian Penal Code, 1860 against the accused. It was observed that since the offence was compoundable, permission of court is required and hence the Agreement was declared as void. Also, in the case of Ouseph Poulo v. Catholic Union Bank Ltd., two parties entered into an Agreement to discontinue the criminal proceedings on a certain consideration, it was held that these kinds of transactions are opposed to public policy.
● Interference in the pursuit of justice-
Intervention with judicial process is not permitted. That can be declared void if an Agreement is found to do so.
Illustration 1: A person ‘X’ is found guilty of murder. His friend ‘Y’ goes to judge in favor of ‘X’ to make an Agreement to give order. The same contract is invalid.
Illustration 2: A person ‘L’ is convicted of murder and ‘M’ witnesses it. It is illegal and invalid if an Agreement is made with ‘M’ to amend his statement / not appear in court.
● Sale / transfer of titles and public offices:
Trafficking Agreements through the selling or transfer of seats of selection to public offices hamper the interests of eligible candidates and are illegal in the eyes of law. The same holds true of titles. Titles represent achievement in every area and the entire meaning and goal is lost by means of selling it. In the case of Sushil Kumar Yadunath Jha v. Union of India, a person agreed to transfer his post in government office in lieu of Rs. Five thousand. The Agreement was declared as void.
● Agreement establishing corrupt public life-
An Agreement that induces corruption in government offices is against public policy. If such Agreements are allowed, the amount of corruption will undoubtedly increase, and the employees will become cumbersome. An Agreement that leads to a different personal interest than duty is unlawful. In the case of Rattan Chand Hira Chand v. Askar Nawaz Jung, two parties entered into an Agreement in which one party has to use his influence as the minister, it was held to be void as it tried to corrupt the decision making machinery. It was also observed that the nature of an act can be against public policy based on consideration or acts to be performed.
● Limiting personal freedom-
Under Indian Constitution personal liberty is guaranteed. Any Agreement that triggers limitation of the right to personal freedom is not lawful in the eyes of law. In the case of Sitaram Deokaran v. Baldeo Jairam, an Agreement in which a party agreed to serve at Rs. two per month for a period of one hundred twelve months was declared as void. Also, in the case of Harwood v. Millers Timber & Trading Co., an Agreement between borrower and money lender and in which he could not change his employment, residence or accept reduction in salary without his permission was declared as void.
● Parental rights restrictions-
According to the statute, the right of guardianship is vested in the father when a child is minor and it is transferred to mother as soon as the child is major. Any sale or transfer of guardianship rights Agreement is declared null and void. In Re Carroll Case, it was held that an Agreement purporting alienation of father’s right irrevocably is void. In the case of Giddu Narayansih v. Annie Besant, a father-son agreed to pass the guardianship of his two minor sons to Mrs. Annie. Later he went to court to take back the custody of children, but it was said that if the adoption as per Hindu Adoption and Maintenance Act, 1956 is valid then children can’t be taken back.
What does not include into Public Policy
⮚ Validity of Agreement of lease between landlord and tenant-
In the case of M.K. Usman Koya v. C.S. Santha, the court laid down the principle that “allowing the tenants to continue living can’t be considered as against public policy or illegal. There is no such law which prohibits keeping tenants against whom an order of eviction is there.”
⮚ Copyright Agreement-
In the case of Prentice Hall India Pvt. Ltd. v. Prentice Hall Inc., it was held that an Agreement where a party assigns certain copyrights in the favour of others, there is no obligation to the public and it can’t be said as unlawful as assigning copyrights is allowed under the Copyright Act.
⮚ Consideration and Objects unlawful in Part-
The other part is true in the Agreements where there are two / more sets of distinct guarantees where the void element can be isolated from the rest. In the case of Alice Mary Hill v. William Clarke, a woman agreed to live with a man in adultery in lieu of a monthly consideration of Rs. fifty. The Agreement was declared as void as the lawful part can’t be separated from the unlawful one.
It is evident that the scope and explanation of public policy is enormous, and this is applicable on the pretext of Agreement and object, at the discretion of the court itself. When an Agreement is decided to declare to be contrary to public policy, the same becomes null and void under Section 23 of the Indian Contract Act, 1872. All transactions that impair or hinder the administration of justice shall be considered void pursuant to Section 23 of the Indian Contract Act 1872. For reasons of public opinion development and morality, the courts must look carefully into the matter before applying public policy doctrine.
- Where is Agreement defined?
- What do you mean by Agreement against public policy?
- What is Section 23 of the Indian contract act?
- What does not include public policy?
 Section 2(e) of Indian Contract Act, 1872.
 (1767) 2 Wils KB 341.
 Lowe v. Pars (1768) 4 Burr 225.
 AIR 1994 SC 1844.
 AIR 1959 SC 781.
 48 Mad. 230 (P.C.)
 (1937) 1 MLJ 489
 AIR 1965 SC 166
 AIR 1986 SC 1636
 AIR 1976 AP 112
 AIR 1958 MP 367
 (1917) 1 KB 305
 (1931) 1 K.B. 307
 (1915) 38 Mad. (P.C.)
 AIR 2003 Ker 191
 AIR 2003 Del 236
 (1905) ILR 27 All 266