In this CLAT preparation series, we publish detailed answers to old CLAT exam questions well substantiated with statutory provisions, supporting judgments and easy illustrations.
Legal Aptitude: The section contains 50 questions. Each question contains legal principles based on statutory enactments and facts related to the same. These propositions may not be the true ones. The student has to presume that it is true for reaching the conclusion to the given problem. Four answer choices are given in each question from which the student has to select the most appropriate and reasonable conclusion based on the given principle. The section is aimed to test one’s ability in legal aptitude, awareness of the law, research aptitude and problem-solving ability. It may be noted that the most reasonable conclusion may be absurd or unacceptable for any reason, yet the student must adhere to the principle given to arrive at the same in the question.
Question 113. Principle: Sale of liquor is illegal. All agreements relating to prohibited items do not exist in the eyes of law.
Facts: A entered into an agreement with B for the sale of liquor. A failed to supply the agreed quantity of liquor to B.
(A) B can bring legal action against A.
(B) B cannot bring any legal action against A.
(C) A can bring legal action against B.
(D) A and B can initiate appropriate legal proceedings against each other.
Answer Detailed
As per Indian Contract Act(hereinafter referred to as “ICA”), a contract means an agreement enforceable by law. Similarly, an agreement which is not enforceable by law is termed void agreements as per Section 2(g) of the Act. Various sections in the Act have instances of void agreements.
There must be a lawful object and lawful consideration for being a valid contract in the eyes of law. Otherwise, it will be a void contract. Contracts with unlawful object and consideration are illegal and hence void. Illegal contract is one made for an illegal purpose and all terms related to it are illegal only and it is a void one which cannot be enforced in any court of law.
‘Lawful object’ simply means that the object or aim of the contract should be within the bounds of the law. Any consideration for the satisfaction of an illegal promise/agreement is unlawful. Illustration: A wanted to kill B and he promises to C to give him money to kill B. Here the object is unlawful. Money is the consideration which is illegal in this case.
More legal provisions:
Section 23 of the ICA deals with lawful objects and consideration.
Section 23. 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 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 is said to be unlawful. Every agreement of which the object or consideration is unlawful is void.
In the above question, the given fact is that A and B agreed for the sale of liquor. In the proposition, it is mentioned that the sale of liquor is illegal. However, we know that the sale of liquor is not illegal in most parts of India. There are rules and regulations relating to the sale of liquor and for the establishment of breweries, distilleries, bars, and liquor shops. Any sale in consensus with those regulations is not illegal. But as said above, we must accept the proposition to be true to answer the question in the legal aptitude section. Hence we must construe that the sale of liquor is illegal. It is also clear from the above legal provision that the above proposition is not having a lawful object and lawful consideration as it is forbidden by law.
The second line of proposition says that any agreement relating to prohibited items do not exist in the eyes of law. This line really completes the idea in the first line. Hence we must construe that liquor is a prohibited substance as its sale is made illegal. Therefore, no rights and duties relating to an agreement can be enforced where the subject matter is liquor trade.
We can now peruse the answer choices for its correctness.
Option A) B can bring legal action against A.
Here A entered into an agreement with B for the sale of liquor which is illegal. A failed to supply the agreed quantity of liquor to B. We now know that the agreement itself does not exist in the eyes of law. Now B cannot enforce a void contract against A. So this answer is wrong. B cannot bring legal action against A for not supplying the agreed quantity of liquor to him.
Option B) The second choice: B cannot bring any legal action against A.
If the sale of liquor is illegal and it is a prohibited substance, then any agreement for its sale can be said to be without a lawful object and any consideration in the contract is said to be unlawful. Hence the contract/agreement is void in the eyes of law being illegal. The proposition and ICA say that the contract does not exist in the eyes of law. Thus, if A and B agreed for sale of a prohibited substance and A failed to deliver it to B, B cannot bring any sort of legal action against A.
This answer choice B is the correct one.
Option C) A can bring legal action against B.
Notwithstanding the legal proposition stated above, A has no rights whatsoever against B in the illegal contract. In other words, we are not given adequate details regarding the contract/agreement between A and B by which we can conclude that any sort of legal liabilities by B against A. Hence this answer choice is wrong.
Option D) A and B can initiate appropriate legal proceedings against each other.
Since we have already concluded that the agreement is an illegal one neither party has any rights to be established against each other. So this answer choice is wrong.
Case law
Commissioner Of Income Tax, Gujarat vs M/S. S. C. Kothari [1972 AIR 391, 1972 SCR (1) 950]
Supreme Court held that contracts that are prohibited by statute, the prohibition being either express or implied, would be illegal and unenforceable if they are entered into in contravention of the statute. If the business is illegal, neither the profits earned nor the losses incurred would be enforceable in law.
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