Agreements Opposed to Public Policy

  • Post last modified:12 December 2021
  • Reading time:12 mins read

What is Agreements Opposed to Public Policy?

Public policies are those policies that are made by the government authorities for the welfare of the common people. If an agreement is made which is against public policy, that agreement will be void.

Agreements Opposed to Public Policy

The Contract Act does not define the expression ‘public policy or ‘as opposed to public policy. Section 23, however, leaves it open to the Court to hold any contract as unlawful on the ground of being opposed to public policy.

The agreements which have been declared against public policy by Courts can be described under the following heads:

  1. Agreements for Trading with Enemy
  2. Agreements for Stifling Prosecution
  3. Agreements of Champers and Maintenance
  4. Agreements Interfering With Course of Justice
  5. Agreement for Marriage Brokerage
  6. Agreements Tending to Create Interest Against Obligation
  7. Agreements for Sale for Public Officer, Titles and Appointments
  8. Agreement Tending to Create Monopolies
  9. Agreements not to Bid
  10. Agreements Waiving an Illegality
  11. Agreements to Commit a Crime or to Indemnify a Person for His Criminal Act
  12. Agreements Restraining Personal Liberty
  13. Agreements in Restraint of Parental Rights
  14. Agreements Interfering with Marital Duties
  15. Agreements to Influence Public Servants to Act Opposed to Their Duty
  16. Agreements in Restraint of Marriage
  17. Agreements in Restraint of Trade
  18. Agreement in Restraint of Legal Proceedings
  19. Other Agreements Opposed to Public Policy

Agreements for Trading with Enemy

All agreements made with an alien (foreign) enemy, unless made with the permission of the Government, are illegal on the ground of public policy. Agreements that are entered into before the outbreak of war are either dissolved or suspended till the end of the hostilities as per the intentions of the parties.

Agreements for Stifling Prosecution

Agreements for stifling or hushing up prosecutions are bad in law. When an offence has been there are mainly two types of litigation in India: (in) civil, and (ii) criminal. In the case of civil litigation, compromise is allowed and encouraged. The criminal offences are of two types – (in) compoundable, and (ii) non-compoundable.

In cases of compoundable offences, compromises are allowed by the Court. Under the Code of Criminal Procedure, 1973 in a Table of Section 320, a list of compoundable offences and persons by whom such compromise can be made has been laid down. It contains offences such as causing hurt, assault, mischief, criminal, trespass, house trespass, adultery, defamation, insult, criminal intimidation, wrongful confinement, theft, cheating, etc.

In such cases, criminal prosecution can be compounded. On the other hand, there are some criminal offences that cannot be compounded. In such cases, public policy requires that the accused should be tried in the law court and if found guilty be punished according to law.

In such cases, the principle is that “you shall not make a trade of a felony (major serious crime, for example, murder, armed robbery, arson etc.)” It has been observed by the Court that no court of law can approve or give effect to an agreement that attempts to take the administration of law out of the hands of the judges and put it in the hands of private individuals. Thus, an agreement to stifle (suppress) prosecution is void on the ground of being against public policy.

Agreements of Champers and Maintenance

‘Maintenance’ means the act of promoting that litigation in which a person has no interest of his own. In other words, where a person agrees to maintain a suit in which he has no personal interest, such proceeding is known as maintenance.

Thus, maintenance tends to encourage speculation. On the other hand, ‘champers’ is a bargain whereby one party agrees to assist the other in recovering property and, in turn, is to share in the proceeds of the action. In England, both these agreements are declared illegal and void. However, in India, the position is quite different.

Here, all agreements of maintenance and champerty are not void, and only those agreements which are opposed to public policy are void. It has been held by the Privy Council in India that champerty and maintenance are not illegal in India.

The Courts will refuse to enforce such agreements only when they are found to be extortionate (i.e., demanding much too great or high) and unconscionable (i.e., unreasonable or shocking) and not made with the bonafide (genuine) object of assisting the claims of the person unable to carry on litigation himself.

In other words, only those agreements which appear to be made for purposes of gambling in litigation and for injuring or oppressing others by encouraging unrighteous litigation so as to the contrary to the public policy shall not be enforced.

Agreements Interfering With Course of Justice

Any agreement whose purpose or effect is to use the improper influence of any kind with judges or officers of justice is void. In other words, an agreement whose object is to induce any judicial officer of the Judiciary so as to make him act partially or corruptly is not enforceable because it is opposed to public policy.

For Examples:

  1. R agrees to pay ₹500 to K who is intended witness in a suit against R. K. promises, in return, for absenting himself from the trial. This is a void agreement.
  2. J promises to pay a very good reward amounting to ₹10,000 to C, an influential officer in the Court for the purpose of influencing the judge in a case to be heard against J. The agreement is void. However, an agreement to pay a fee to a holy man for prayers for the success of a suit is not an interference with the course of justice.

Agreement for Marriage Brokerage

A reward for negotiating marriage is known as marriage brokerage. An agreement to pay money in consideration of producing or bringing out marriage is void. Thus, dowry is a marriage brokerage and hence unlawful and void.

For Example

An agreement to pay money to the parent or guardian of a minor in consideration of his (parent’s or guardians) consenting to give the minor in marriage is void as being opposed to public policy. Similarly, an agreement to pay a penalty if a minor daughter is not given in marriage to a particular person is void. Again, an agreement by a person to pay money to a stranger hired to procure a wife is opposed to public policy and will not be enforced by any of the Indian Courts.

Agreements Tending to Create Interest Against Obligation

An agreement to reward a person for an act that is obligatory on his part, i.e., which is the duty of the person to perform it, is opposed to public policy and hence void.

Examples:

  1. An agreement to reward parents for giving their children in marriage is contrary to public policy.
  2. An agreement by an agent to receive without his principal’s consent some compensation from a third party for the performance of his agency is invalid.
  3. A promise by an officer to do something in violation of his duty on the reciprocal promise by the other party to reward the officer, is opposed to public policy and hence void.
  4. M is the manager of a firm having a duty to pass tenders of items to be purchased. He agrees to pass the tender of P if P pays to him ₹1,000 privately. This agreement is void.

Agreements for Sale for Public Officer, Titles and Appointments

An agreement to traffic (i.e., do unlawful trading) in public offices (i.e. vacant posts in government officers or enterprises, or religious officers, or public initiations) is opposed to public policy because it interferes with and debars or prevents the appointment of a person best qualified for the service of the public.

The public policy requires that there should be no money etc. consideration for the appointment to an office in which the public is interested and which is the property of the public. Sale of public titles like Padma Vibhushan, Padma Shri etc. is also invalid.

Examples:

  1. The sale of office of the Temple Management Committee is invalid.
  2. An agreement to pay money to a public servant to induce him to retire and thus make way for the appointment of the prayer (promisor) is virtually a trafficking with reference to an office and is void.
  3. An agreement to procure Padma Shri or Param Veer Chakra award in consideration of a house to the procurer is void.
  4. X pays money to Y who promises to use his influence and to secure for the son of X an appointment in Home Ministry. The son does not secure the appointment because Y fails to use his pulls and pressures. X cannot recover the money from Y because the agreement is void being opposed to public policy.

Agreement Tending to Create Monopolies

The agreements tending to create monopolies or exclusive personal rights are void as being opposed to public policy. For example, a local grant to Mohan an absolute right to sell vegetables in a particular locality. This is void.

Agreements not to Bid

An agreement between two parties not to bid against one another at an auction sale, with the object to defraud a rival decree-holder is unlawful. However, if the object of such an agreement is merely to make a good bargain, it is not unlawful.

Agreements Waiving an Illegality

The agreement which seeks to waive illegality is void on the ground of public policy. Whenever illegality appears, whether from the evidence given by one side or the other, the disclosure is fatal to the case. An agreement in any form to waive the objection will be illegal and void.

Agreements to Commit a Crime or to Indemnify a Person for His Criminal Act

An agreement whose consideration is to commit a crime or to indemnify (i.e., to compensate) against the consequence of his criminal act, is opposed to public policy and hence void. For example, X promises to pay ₹5,000 to Y in consideration of his (X) assaulting Z.

This is void. For further example, K promises to indemnify a firm of printers and publishers against the consequences of any statement damaging the reputation of M which is published in their daily paper Public Herald’. The firm was compelled to pay damages for the published libel (i.e., statement damaging reputation). Here, K’s promise cannot be enforced by the Court as it is opposed to public policy.

Agreements Restraining Personal Liberty

An agreement that unduly restrains the personal liberty or freedom of the parties to the agreement, is void as being against public policy.

For Example

X borrowed money from Y, the moneylender on the promise that X will not, without the written consent of Y, leave his job, not borrow money from any other source, not dispose of his property, not change his residence, or not spend money lavishly on his luxuries. Here, the agreement is void as it unduly restricts the personal freedom of X.

Agreements in Restraint of Parental Rights

A father, and in his absence the mother, is a legal guardian of a minor child. The right of guardianship over the children cannot be exchanged for money by any agreement. Any agreement purporting to do so is void.

For Example

A father having two minor sons agreed to transfer their guardianship in favour of Mrs. Annie Besant and also agreed not to revoke the transfer. Subsequently, he filed a suit for the recovery of the children and filed a declaration that he was the rightful guardian. The Court held that he had the right to revoke the transfer of guardianship’s authority and to get back the children.

Agreements Interfering with Marital Duties

An agreement that interferes with the performance of a marital duty is opposed to public policy and hence void.

For Example

A promise by a married person to marry, during the lifetime or after the death of a spouse, i.e., the life-partners is void. For another example, an agreement that the husband and wife shall always stay at the wife’s parents house and that the wife will never leave her parental house is void.

Agreements to Influence Public Servants to Act Opposed to Their Duty

Where an agreement discloses a tendency to corrupt public servants to decide matters otherwise than on the merits of the case, the agreement is void. The public servants in such cases are included to violate rules and regulations and to act in contradiction to their professional duty. Owing to their unwarranted favour to one party, the other meritorious cases are spoiled. This is against public policy.

For Example

X agrees to pay ₹2,000 to an Excise Officer for not reporting irregular production records to higher authorities. The agreement is void and the Excise Officer cannot realise the money through the Court. For further example, an agreement to pay ₹50,000 to the Secretary of a Medical Board to secure a seat against merit in a Medical College is against public policy and void.

Agreements in Restraint of Marriage

Agreements in restraint of marriage: An agreement in restraint of marriage of any person other than a minor is void.

Agreements in Restraint of Trade

Agreements in restraint of trade: An agreement in total or partial restraint of trade is void.

Agreement in Restraint of Legal Proceedings

Agreement in restraint of legal proceedings: An agreement that restraints in any way a legal proceeding is void.

Other Agreements Opposed to Public Policy

The following agreements are treated as opposed to public policy and are void:

  1. An agreement which is to change the period of limitation to make it different from what is prescribed in the Limitation Act.

  2. An agreement to defraud revenue authorities.

  3. An agreement to defraud creditors. For example, to give preference to a friend creditor to the prejudice of other creditors in case of insolvency proceedings.

  4. An agreement to influence election to public officer. For example, to influence voters by money or other indirect means, such as threats etc.

  5. An agreement to waive a natural legal benefit attached to an action or thing. For example, to waive benefit of transfer by a railway servant in consideration of some favour by his officer.

  6. An agreement to sub-let a right without proper written permission from the concerned authorities in this regard. For example, to sub-let a telephone connection or to sub-let a licence for production of liquor without the required permission.

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