Contract Final Draft.docx

Agreements Opposed to Public Policy : Judicial Approach 2.1 Law of Contract -I

Submitted By Paras Nagrare B.A.LL.B. (Hons.) Semester-II UID NO: UG17-69 Submitted to Dr. Manish Yadav Assistant professor of law Dr. Anirban Chakraborty Associate professor of law

Maharashtra National Law University, Nagpur

1

Table of contacts Chapter I Introduction 1.1 Aim and Objective

….4

1.2 Research Questions

….4

1.3 Research Methodolgy

….4

Chapter II 2.1 Agreements which have been declared against public policy by the Courts 2.2 Trading with Enemie

…. 5

2.3 Traffic in Public Offices

…. 5

2.4 Stifling Prosecution

…. 5

2.5 Marriage Brocage or Brokerage Agreements

….5

2.6 Agreement to Commit a Crime

….5

Chapter III Judicial Approach of Agreements opposed to Public Policy

....8

Conclusion

….10

Bibliography

….11

2

Chapter I Introduction Public Policy is an unruly horse, and when you get astride it you never know where it will carry you.1 An agreement that is against “Public Policy” can't be enforced by either of the parties to that. Public Policy is the “Policy of Law”2. The question on whether an agreement is critical public policy or not is to be selected general principles only and not by considering the terms of any specific contract. In simple words, it may be said that an agreement which conflicts with morals of the time and contravenes any established interest of society, it is void as being against public policy. Thus, an agreement which tends to be injurious to the public or against the public good is void as being opposed to public. “Agreements may offend against the public policy, Judges have always been involved with public policy3. And judges, in their role either in the interpretation of statutes or in the selective application of precedent, have always been involved in the development of law. Judicial precedent is, of course, the major interpretive guide, but a judge can always choose from among different ratio decidendi in any given precedent. The outcome will depend on which ratio is selected. The same is true for the principle of stare decisis. In stare decisis, we draw legal conclusions by analogy, not mimicry. Julius Stone has built an academic career on demonstrating compellingly that law is full of indeterminate categories, that the application of stare decisis is selective, and that all adjudicators reflect in their decisions partly precedent, partly their experience and partly their own notions of justice. It is not enough that the terms of contract have been brought to the knowledge of the other party by a sufficient notice before the court is entered into, it is also necessary that the terms of the contract themselves should be reasonable.

1

Mr Justice Burrough noted "Public Policy is an unruly horse, and when you get astride it you never know where it will carry you. It may lead you from sound law. It is never argued at all but when other points fail” Richardson v Mellish (1824) 2 Bing 228. 2 advodheeraj.blogspot.in/2014/06/agreements-opposed-to-public-policy.html(Visited on 30/1/2018). 3 accountlearning.com/15-agreements-opposed-to-public-policy-explanation-examples/(Visited on 30/1/2018).

3

If the terms of the contract are unreasonable and opposed to public policy, they will not be enforced merely because they were printed on the reverse of a bill or a receipt or have been expressly or impliedly agreed upon between the parties4.

1.1 Aims and Objectives  To study the various aspects of the public policy  To study agreement that opposed to public policy.  To study Judicial Approach of agreement which opposed to public policy.

1.2 Research Questions  What is Public Policy?  What is agreement which opposed to public policy?  What should be judicial approach that opposed public policy?

1.3 Research Methodology The researcher has gathered information through various secondary sources of data regarding this topic as the primary sources were not directly available. During the research the researcher has gone through several books like the Pollack & Mulla. As the analysis work for this subject is confined to the library conjointly books and monition has been done. The available as the secondary sources for my project as primary source for my project is unavailable. The information extracted is mainly from secondary sources as the scope to gather any direct source on the comparative analyses of the agreements opposed to public policy in judicial approach is difficult.

4

www.lawctopus.com/academike/public-policy-contracts-recent-trends/(Visited on 30/1/2018).

4

Chapter II Agreements opposed to public policy An agreement which is opposed to “Public Policy” cannot be enforced by either of the parties to it. Public Policy is the “Policy of the Law”. The question as to whether an agreement is opposed to public policy or not is to be decided on general principles only and not by considering the terms of any particular contract. Agreements which have been declared against public policy by the Courts are as follows: 1) Trading with Enemies-All trade with enemies is against public policy. Thus it is unlawful and is void. However, if a contract is made during peace times and later on war breaks out, one of the two things may result, Either the contract is suspended or it stands dissolved depending upon the intention of the parties to contract.5 For ex- At the time war of two countries, citizens of those countries become alien enemy to each other. An agreement made with an alien enemy is opposed to public policy. 2). Traffic in Public Offices-Agreements entered into for using corrupt influence in procuring Government jobs, titles or honours are unlawful and therefore are not enforceable. This is because, if such agreements are valid, corruption will increase and lead to inefficiency in public services. For ex- A paid B, a public servant a certain sum of money inducing him to retire from service, thus paving the way for A to be appointed in his place. The agreement was held to be void.6 3). Stifling Prosecution-An agreement in which one party agrees to drop criminal proceedings pending in a court in consideration of some amount of money, is unlawful. Therefore, such an agreement cannot be enforced except where crime is compoundable. For ex- A had committed a robbery and so B had instituted prosecution against A. The prosecution cannot be dropped against A in consideration of his restoring the stolen property. 4). Marriage Brocage or Brokerage Agreements-It is an agreement, in which, one or other parties to it or third parties, receive a certain money, in consideration of marriage. Such agreements being opposed to public policy are void. For ex- A, a purohit was promised Rs.50 in consideration of procuring a second wife for B. Subsequently, A filed a case against B to recover the said amount. It was held that such a promise amounted to a marriage brokerage contract, which are illegal and that the agreement was unenforceable. Hence the suit was dismissed. 5).Agreement to Commit a Crime- If in an agreement, the consideration is committing a crime, the agreement is opposed to public policy and is void. Similarly, an agreement to indemnify a person against consequences of his criminal act is unenforceable being opposed to public policy. For ex- A promises to indemnify a firm engaged in printing and publishing 5

www.accountlearning.com/15-agreements-opposed-to-public-policy-explanation-examples/ www.gradestack.com/Mercantile-Law-for-the-CA/Legality-of-an-Object/Agreements-opposed-to/22683-447355925-study-wtw 6

5

a paper against the consequences of any libel that it might publish in its paper. Here, A’s promise could not be enforced where the firm was forced to pay damages for libel published. It is trite law that one who knowingly enters into a contract with improper object cannot enforce his rights in relation to such contract. Notably, the Act does not anywhere define the expressions "public policy" or "opposed to public policy" or "contrary to public policy". However, one may note that the term "public policy" could plainly mean issues concerning the public or public benefit and the interest of public at large. 'Public Policy' is ".... a vague unsatisfactory term 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 ordinary sense means political expediency or that which is best for 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..." According to Lord Atkin.7 The above principle has been followed by the Hon'ble Supreme Court of India in Gherulal Parekh v. Mahadevdas Maiya,8 wherein Hon'ble Justice Subba Rao, referring the observation of Lord Atkin observed: "... Public policy or the policy of the law is an illustrative concept. It has been described as an 'untrustworthy guide', 'variable quality', 'unruly horse', etc.; the primary duty of a court of law is to enforce a promise which the parties have made and to uphold the sanctity of contract which forms the basis of society but in certain cases, the court may relieve them of their duty of a rule founded on what is called the public policy. For want of better words. Lord Atkin describes that something done contrary to public policy is a harmful thing; but the doctrine is extended not only to harmful cases; but also to harmful tendencies. it is governed by precedents. The principles have crystalised under different heads.... though the heads are not closed and though the oretically, it may be permissible to evolve a new head under exceptional circumstances of the changing world, it is advisable in interest of stability of society not to make attempt to discover new heads in these days". In Kedar Nath Motani v. Prahlad Rai,9 the Hon'ble Court held that "the correct view in law .... is that what one has to see is whether the illegality goes so much to the root of the matter that the plaintiff cannot bring his action without relying upon the illegal transaction into which he had entered. If the illegality be trivial or venial..... and the plaintiff is not required to rest his case upon that illegality, then public policy demands that defendant should not be allowed to take advantage of the position. A strict view, of course, must be taken of the plaintiff's conduct, and should not be allowed to circumvent the illegality by restoring to some subterfuge or by misstating the facts. If, however, the matter is clear and the illegality is not required to be pleaded or proved as part of the cause of action and the plaintiff recanted before the illegal purpose was achieved, then, unless it be of such a gross nature as to outrage the conscience of the court, the plea of the defendant should not prevail." 7

Fender v. St. John Milday, 1983 AC 1 (HC). AIR 1959 SC 781. 9 AIR 1960 SC 213. 8

6

The Hon'ble Supreme Court of India has dealt with certain cases under section 23 holding that some actions of entering into contract are void. In the matter titled "ONGC Ltd. v. Saw Pipes Ltd."10 while interpreting the meaning of 'public policy' in this case, the Hon'ble Court observed that it has been repeatedly stated by various authorities that the expression 'public policy' does not admit of precise definition and may vary from generation to generation and from time to time. Hence, the concept 'public policy' is considered to be vague, susceptible to narrow or wider meaning depending upon the context in which it is used. Therefore, it was held that the term 'public policy' ought to be given a wider meaning. The Hon'ble Court placing reliance on "Central Inland Water Transport Corporation Limited and Anr. v. Brojo Nath Ganguly and Anr." [(1986) IILLJ 171 SC] held that what is good for the public or in public interest or what would be harmful or injurious to the public good or interest varies from time to time. However, an award, which is on the face of it, patently in violation of statutory provisions cannot be said to be in public interest. Such an award is likely to adversely affect the administration of justice. Hence, the award should be set aside if it is contrary to (i) fundamental policy of Indian Law; (ii) the interest of India; (iii) justice or morality; (iv) in addition, if it is patently illegal. The illegality must go to the root of the matter and if the illegality is of a trivial nature, it cannot be held that the award is against the public policy. An award can also be set aside if it is so unfair and unreasonable that it shocks the conscience of the court.

10

2003 (2) RAJ 1 (SC).

7

Chapter III Judicial Approach of Agreements opposed to Public Policy When India became independent, the drafters of the Constitution took every step to draw Montesquieu’s philosophy of independence of organs of the State in the Indian Constitution. Though no specific provision was maintained in the Indian Constitution, the State under the cover of Article 50 of the Indian Constitution was obligated to maintain independence of the judiciary from the executive. The judiciary, the executive and the legislatives were given different fields in the Indian Constitution and their functions were demarcated. The narrative of their domains runs across different sketches of the Indian Constitution. It was the executive and the legislature, who were dictated to respect and prosper the cause of fundamental rights. The Indian judiciary was given the uphill task of upholding the right of constitutional remedies. Chairman of the Drafting Committee of the Constitution, Dr B.R. Ambedkar, aptly quoted this recourse to judicial authorities for upholding the right to constitutional remedies as the heart and soul of the Indian Constitution.11 Keeping the mandate of the Indian Constitution, the Indian judiciary time and again has also held that wield of judicial review forms the basic structure of the Constitution.12 In this light, what remains essential to be demarcated is that when, how and in what stretch, the power of judicial review should be exercised by the judiciary. Policies set down by the legislature and the executives lie in the domain of both the organs. On the yardstick of constitutional law, what is the limit, which the Indian judiciary has been exercising while foraying into the unchartered territories of judicial review, so as to canalise the domain of the other two organs of the State, has been confabulated across different tables. The magic wand of judicial review calls for an interference only when patently manifest farce is played on the Indian Constitution. Powers, when used on the stilts of justification, result in redefinition of its ambit, whereas, inappropriate use of its refulgence departs the sheen of its glory. The stories of indulgence with the powers of judicial review have also been as igniting as has been the growth of Supreme Court of India. From “Supreme Court of India” to “Supreme Court for India”, the Court has shown immaculate balance on the tightrope of equity, justice and good conscience, for delivering to “we the people”. Baton 11 12

H.R. Khanna, Making of India’s Constitution, Eastern Book Company (2008), 74. L. Chandra Kumar v. Union of India, (1997) 3 SCC 261.

8

of illumination passed by the Supreme Court on the appreciation of demarcation between the different streams of State, has undoubtedly delineated, what, where and how its interference becomes necessitated, to constitutionalise the policy initiatives taken by the other two organs of the State. Conceptual basis of judicial review emerges from the perennial debate between constitutionalism and democracy. Constitutionalism presumes that Constitution can override the decision-making process. Whereas, “democracy” is pillared on the principle that the elected body of people has the right to make decisions for the polity.13 Indian Constitution, however, by declaring India as a “democratic republic”, in its reach engraves the supremacy of the Constitution over the legislature and guarantees that the human rights are protected not only by self-restraint of the majority, but also by constitutional control over the majority.14 Decisive role to interpret the Constitution, being entrusted with the judiciary; the question to be answered in this article is the determination of its limits. The pith of this article rests on the appraisal of the powers of judicial review of the Indian Courts. Obligation binds all the three organs of the State. This obligation is founded for all the three on the benchmark of Indian Constitution. Moreover, the values seeping in the Indian constitution solicit a clear demarcation of the State machinery.

13

Arthur Dyevre, Technocracy and Distrust: Revisiting the Rationale for Judicial Review, SSRN Electronics Journal 04/2012; DOI: 10.2139/ssrn.2043262 (Accessed on 10-7-2014). Also, Eugene V. Rostow: The Democratic Character of the Judicial Review, (1952) 66 Harv LR 193. 14 Pran Chopra, The Supreme Court Versus the Constitution, SAGE Publications (2006).

9

ConclusionIt is quite clear that if the thought or the item of the thought is, within the opinion of the court, hostile public policy, the agreement becomes invalid underneath the provisions of section 23 of Indian Contract Act, 1872. the liberty of national, as so the liberty of the professional, to enter into a contract is usually subject to the paramount concerns of public policy as enunciated underneath section 23. In different words, if the contract is hostile public policy, it might be treated as invalid in courts of India and its conclusion can't be challenged on the bottom that in involves encroachment on the citizen’s freedom to enter into any contract he likes. The city tribunal has same, that the term Public Policy is somewhat obscure and th0e courts mustn't be shrewd to create newer and newer grounds of public policy. however on the opposite hand, the development of the clause “opposed to public policy” in context of administration of justice doesn't gift any problem. Therefore, all agreements that hinder or have an effect on the administration of justice would be treated invalid underneath section 23 of Indian Contract Act, 1872.

10

BibliographyIndian Contract and specific Relief Act (Pullock and Mulla) Vol I , Fifteenth Edition , Delhi 2001.

www.scconline.com/post/

11