Model Answer
0 min readIntroduction
Section 28 of the Indian Contract Act, 1872, deals with agreements that restrain legal proceedings, essentially outlining when contracts attempting to limit access to courts are considered void. The fundamental principle underlying this section is to ensure that parties have unfettered access to justice and are not unduly restricted from seeking legal remedies. However, recognizing the practical needs of dispute resolution, the section carves out certain exceptions to this general rule. This answer will explore the core principle of Section 28 and delve into the specific exceptions permitted under the law, supported by relevant case precedents.
Section 28: General Rule
Section 28 of the Indian Contract Act, 1872, declares every agreement which restrains any party from enforcing his legal rights in any court of law to be void. This means any contract that prevents a party from going to court to seek redress for a grievance is unenforceable. The rationale behind this provision is to uphold the public policy of ensuring access to justice. A complete bar on legal proceedings is generally considered against public policy.
Exceptions to the Rule
However, Section 28 itself provides for certain exceptions, allowing for agreements that restrain legal proceedings under specific circumstances. These exceptions are:
1. Dispute Resolution Clauses (Arbitration)
Agreements to refer disputes to arbitration are explicitly exempted. This reflects the growing recognition of Alternative Dispute Resolution (ADR) mechanisms. Section 89 of the Code of Civil Procedure, 1908, further encourages ADR methods like arbitration, mediation, and conciliation. The Arbitration and Conciliation Act, 1996, governs arbitration in India.
Example: A construction contract containing a clause stating that any disputes will be settled through arbitration, and not through civil courts, is valid.
2. Restriction on Taking Legal Action within a Specified Time
An agreement restraining a party from taking legal action for a specified period, allowing time for negotiation or other forms of dispute resolution, is valid. This is often seen in commercial contracts where parties want to attempt amicable settlement before resorting to litigation.
Example: A contract stating that no legal action can be initiated for 3 months after a dispute arises, to allow for mediation, is enforceable.
3. Restriction on Legal Proceedings in a Particular Forum
Agreements specifying a particular forum (court or location) for resolving disputes are valid. This is common in contracts involving parties from different jurisdictions. It doesn’t restrain the right to sue, but merely specifies *where* the suit must be filed.
Example: A contract between an Indian company and a US company stating that all disputes will be settled in courts in London is valid.
4. Agreements to Refer to a Person for Expert Opinion
Agreements to refer disputes to a person possessing special knowledge or skill for their opinion are also exempted. This is often used in technical or specialized fields where expert assessment is crucial.
Example: A contract requiring disputes related to the quality of goods to be referred to an independent quality control expert is valid.
Relevant Case Laws
- V. Raghavan v. S. Seshachalam (1979): The Madras High Court held that an agreement restraining a party from challenging the validity of an award in court is valid, as it only restricts the forum and not the right itself.
- Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly (1986): The Supreme Court affirmed the validity of arbitration agreements, emphasizing their importance in commercial disputes.
| Exception | Description | Validity |
|---|---|---|
| Arbitration | Agreement to resolve disputes through arbitration. | Valid |
| Time Restriction | Restriction on initiating legal action for a specified period. | Valid |
| Forum Restriction | Specifying a particular court or location for dispute resolution. | Valid |
| Expert Opinion | Referring disputes to an expert for opinion. | Valid |
Conclusion
In conclusion, Section 28 of the Indian Contract Act, 1872, aims to protect access to justice by generally voiding agreements restraining legal proceedings. However, the exceptions provided within the section acknowledge the practical benefits of ADR mechanisms and the need for flexibility in commercial agreements. These exceptions, supported by judicial precedents, demonstrate a balanced approach between upholding the right to sue and facilitating efficient dispute resolution. The increasing emphasis on arbitration and other ADR methods suggests a continuing evolution in this area of contract law.
Answer Length
This is a comprehensive model answer for learning purposes and may exceed the word limit. In the exam, always adhere to the prescribed word count.