Ans.An illegal agreement is
one, which is contrary to law. According to section 23 an agreement is illegal
and void if its object or consideration.
a) is forbidden by law, or
b) is of such a nature that,
if permitted, it would defeat the provisions at any law, or
c) is fraudulent, or
d) involves or implies injury
to the person or property of another, or
e) the court regards it as
immoral or opposed to public policy (Sec. 23)
An illegal agreement may
attract punishment and prosecution under criminal law. An agreement which is
collateral to an illegal agreement also becomes illegal. It is like an
contagious disease and is fatal not only to the main contract but to collateral
transactions as well.
Difference between Void
& Illegal agreements
Scope: An illegal agreement is narrower in scope than a void agreement. All
illegal agreements are void but all void agreements are not necessarily
illegal. E.g. an agreement with a minor is void, but not illegal.
Collateral
Transactions: When an agreement is illegal, other agreements
which are incidental or collateral to it are also tainted with illegality,
hence void.
Example: India and Pakistan are playing test match in
Nagpur. Divit of Nagpur, agrees to pay ₹ 1 lac to Ehan, if India wins. The match is
won by India and in order to pay Ehan, Divit borrows ₹ 1 lac from Harin, who is aware of
the purpose.
The agreement between Divit and Ehan is void being wagering (betting) agreement and it is also illegal in
Maharashtra. The agreement between Divit and Harin being collateral agreement is also
void because the main agreement is between Divit and Ehan is illegal.
Restitution: In the case of illegal agreement, no
right/remedy is available to either party. Hence money paid under an illegal
agreement cannot be recovered. Under sec. 65 if an agreement is discovered to
be void any person who has received advantage/benefit must restore it or make
compensation for it.
Punishment: In case of an illegal agreement the parties may be
punished under the criminal law, in case of a void agreement (which is not
illegal) there is no such punishment.
