Question

During an India - Country X war, India declares X an enemy. A (an Indian citizen) enters into a contract to supply medicines to B (a citizen of X) via a neutral intermediary and a bank. Which of the following is most accurate under the Indian Contract Act, 1872?

• A. Valid - goods are humanitarian and payment is via a neutral country.
• B. Valid unless the Government expressly cancels.
• C. Voidable only the Government of India can cancel.
• D. Void - trading with an enemy in war is prohibited and is against public policy.

Hint:

For Section 23 questions, remember the classic examples of public policy: trading with an enemy, stifling prosecution, interference with justice, and restraint of marriage. These agreements are void regardless of the parties' intentions.

Answer 1

The Correct Option is D

Concept: Section 23 of the Indian Contract Act, 1872 declares that an agreement is void if its object or consideration is unlawful. An object is unlawful when it is forbidden by law, defeats the provisions of law, is fraudulent, causes injury, or is opposed to public policy. One of the well-recognized heads of public policy is

trading with an enemy during wartime. Such transactions are considered contrary to national security and public interest.

Step 1: Understanding the concept of an alien enemy. When war is declared between two countries, citizens of the opposing nation become alien enemies for legal purposes. Commercial dealings with an enemy country or its citizens are generally prohibited because they may indirectly strengthen the enemy's economy or war effort.

Step 2: Effect of war on contractual relations. The law treats trading with an enemy as contrary to public policy. Consequently:

• Existing commercial relations are generally suspended.

• New contracts with enemy citizens become unenforceable.

• Courts refuse to recognize transactions that facilitate trade with the enemy.

Step 3: Application to the present facts. In the given case:

• A is an Indian citizen.

• B is a citizen of an enemy nation.

• The contract involves supply of goods during wartime.

• The use of a neutral intermediary or foreign bank does not change the true nature of the transaction.
The substance of the arrangement remains trade with an enemy citizen.

Step 4: Why other options fail.

• Option (A) is incorrect because humanitarian goods do not automatically validate a private contract with an enemy citizen.

• Option (B) is incorrect because such contracts are void due to public policy, not merely because of government cancellation.

• Option (C) is incorrect because the contract is void ab initio rather than merely voidable.

A contract involving trade with an enemy during wartime is void because it is opposed to public policy and national interest.