Short essay on Agreements Opposed to Public Policy of ligality

An agreement is unlawful if the Court regards it opposed to public policy. What is public policy? Public policy means policy of the law or the Government for the public good or welfare.

Every Government tries to maximize the welfare of its citizens. Therefore, it makes a policy to discourage or prohibit any thing which is against the welfare or interest of society. For example, trading with enemy, selling of public offices, agreement restraining people from carrying on lawful trade, etc. are injurious to society. Hence, they are considered as opposed to public policy and have been declared void.

The concept of public policy has invited a lot of criticism. The reason is that this concept is very vague. There is a danger of it being misused. It is for this reason it has been remarked by Lord Halsbury that categories of public policies are closed and a Court cannot invent a new head of public policy.

In the case of Richardson v. Mellish “…It is a very unruly horse, and when once you get astride it you never know where it will carry you.” Again Lord Davy in the case of Janson Driefontein Consolidated Mines Ltd. remarked “…public policy is always an unsafe and treacherous ground for legal decision.” According to Lord Atkin “The doctrine should only be invoked in clear cases in which the harm to the public is substantially incontestable, and does not depend upon the idiosyncratic inference of a few judicial minds.” [Fender v. St. John Mildmay],

Agreements which have been declared against public policy by the Courts are as follows:

1. Agreements for trading with an enemy:

We have already seen earlier that an agreement made with an alien enemy is void. This is based on the ground of public policy. An agreement with an enemy is likely to benefit the enemy. It is for this reason such contracts, during war, are either suspended or dissolved. If they are not likely to benefit the enemy, these may be suspended during the war and can be revived after the hostilities are over.

2. Agreements interfering with administration of justice:

No one is allowed to interfere with administration of justice. These are of the following types:

(a) Agreements stifling prosecution:

Stifling implies abuse of law. The law does not permit a person to make money out of a crime. You shall not make a trade of a felony. It is based on the noble doctrine that if a person has committed a crime, he must be tried by a Court of law and if found guilty, must be punished.

Example:

A promises to drop prosecution which he has instituted against B for robbery, and B promises to restore the stolen property, the agreement is unlawful.

However, compoundable offence under the Indian Penal Code can be compromised. Again, there is no bar to refer a dispute to arbitration if it is of civil nature.

(b) Maintenance and Champerty:

These two terms are used in English Law. Maintenance implies assisting or financing of suits by third parties having no real interest, for its prosecution or defense. Champerty implies a bargain by which one party is to assist the other in recovering property, and is to share in the proceeds of the action. Thus maintenance and champerty are likely to encourage purposeless, mis-chievous and retaliatory litigation. Hence both of these are illegal under English Law.

In India, maintenance and champerty are not necessarily void. An agreement to be champertous in India must be grossly unfair on unconscionable ground or opposed to public policy. Thus an agreement to share the proceeds of litigation if recovered in consideration of other party’s supplying the funds in good faith to continue the litigation is not in itself opposed to public policy. However, where the advances are made by way of gambling in litigation, the agreement to share the proceeds of litigation is opposed to public policy and hence void.

Example:

An agreement to transfer % share in the property, if recovered, has been held to be champertous and hence void. [Nuthaki Venkatswami v. Katta Nagi]

(c) Agreements which interfere with administration of justice:

No one is allowed to interfere with the course of justice. Hence an agreement which interferes with administration of justice is unlawful.

Examples:

(1) A agrees to pay a bribe of Rs. 1,000 to a judge. It is unlawful and hence void.

(2) A agrees to pay fee to a holy man to pray for the success of his suit. It is not interference with the administration of justice. Hence it is valid and binding. [Balasundara Mudaliar v. Mohd. Usman],

3. Agreements to vary period of limitation:

An agreement to defeat the object of any law is unlawful. Hence an agreement to vary the period of limitation will be void as it would defeat the object of the law of limitation. According to the law of limitation, an action for breach of a contract must be brought within three years from the date of its breach. Thus an agreement to make this period longer or shorter than three years will be void. However, in practice this has not been applied strictly by law Courts in India. For example, a clause providing that “no suit shall be brought against the company in connection with the said policy later than one year after the time when the cause of action accrues” was up held.

[Hirabhai v. Manufacturers’ Life Insurance], There are conflicting judgements on this point. Hence least said the better.

4. Traffic in public offices:

It implies transfer of public office for some consideration or inducing public officers to act for consideration in cash or kind. Such agreements are contrary to public policy as these are likely to encourage corruption or inefficiency among the officials. Hence such agreements are void.

Examples:

(1) A agrees with B to procure a job in Union Public Service Commission for a consideration of Rs. 1,000. It is void.

(2) A agrees to transfer to B his post in a Government office for Rs. 5,000, it is void.

5. Agreements creating interest opposed to duty:

Duty must be done. Therefore, such agreements are also likely to increase corruption and inefficiency among the officials. Hence such agreements are void.

Example:

A agrees to pay Rs. 500 to a Municipal Engineer not to report unauthorized construction to the Municipal Authorities. The agreement is void as it will create interest opposed to duty.

6. Agreement restraining personal freedom:

Under contract act personal freedom has been guaranteed by our Constitution. The law will not allow an agreement which takes away the personal liberty of a person. Recently, Government has done away with bonded labour to ensure this freedom.

Examples:

An agreement by a borrower with a money-lender that he will not change his residence, employment or agree to a reduction of his salary without the written consent of the money­lender was declared void. [Harwood v. Millers Timber & Trading Co.]

An agreement by a borrower to do manual work for the creditor so long as the debt was not paid in full is void.

7. Agreements interfering with parental rights and duties:

Guardianship rights cannot be allowed to be sold away or transferred in public interest. Children’s/ward’s interest should be properly protected. Accordingly, law has vested this authority in the parents of children. Father is the lawful guardian of his .minor child. In the absence of father, this right is transferred to the mother.

Example:

A father agreed to transfer the guardianship of his two minor sons permanently. Later on, he filed a suit to recover their custody. The Court allowed the father to get back his sons. [ Giddu Narayanish v. Mrs. Annie Besent],

However, a child validly adopted by a Hindu under the Adoption and Maintenance Act, 1956, cannot be taken back.

8. Agreement interfering with marital status:

Agreements interfering with marital status or duties are immoral Hence these have been declared void.

Example:

A lends Rs. 1,000 to a married woman to file a suit against her husband to get divorce and marry him after the divorce. Agreement is void.

9. Agreement of marriage brokage or brokerage:

Everyone has a liberty to marry according to his free choice. This free choice should not be disturbed by monetary consideration or engaging paid brokers to procure matches.

Example:

A engaged a Panda from Hardwar to pay him (panda) Rs. 500 if the Panda procures him a beautiful wife. It is void.