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Unlawful Agreements I

Something of the agreements which have been held to be opposed to public policy and are unlawful are as follows:

Trading With Enemy:

An agreement with an alien enemy in time of war without the licence of the Government of India is void on the ground of being opposed to public policy.


Stifling Prosecution:
An agreement to stifle prosecution is an abuse of justice; therefore, such an agreement is void. Thus, an agreement to suppress criminal charges, for offences of a public nature is illegal and void.

Champerty And Maintenance:

‘Champerty’ is an agreement whereby one party is to assist another to bring an action for recovering money or property, and is to share in the proceeds of the action.

‘Maintenance’ is an agreement to give assistance, financial or otherwise, to another to enable him to bring or defend legal proceedings when the person giving assistance has got no legal interest of his own in the subject matter.

If the object of the contract is just to assist the other party in making a reasonable claim arising out of a contract, them ‘Maintenance’ and ‘Champerty’ is valid otherwise void.

Interference With The Course Of Justice:
An agreement which obstructs the ordinary process of justice is unlawful. An agreement whose object is to induce any judicial officer of the state to act partially or corruptly is void as it is opposed to public policy. Also an agreement to pay money to a witness in a suit for changing his statement or absenting himself from the trial is void.

Marriage Brokerage Agreements:
An agreement to negotiate marriage for reward, known as marriage brokerage contract, is void, as it opposed to public policy.

Interest Against Obligation:
An agreement to do something which is against one’s public and professional duty is void on ground of being opposed to public policy.

Sale Of Public Officers:
An agreement to pay money to another for securing job in public officer is void as it is opposed to public policy. Public policy requires that there should be no money consideration for the appointment to an office in which the public is interested.

Creation Of Monopolies:
An agreement for establishment of monopolies is opposed to public policy and is therefore void. It is also hit by MRTP Act.

Unlawful Agreements II

Restraint Of Marriage:

Every agreement in restraint of marriage of any person other than minor is void.

Restraint Of Parental Right:
An agreement which prevents parents to exercise his right of guardianship is void on the ground of opposed to public policy.

Agreement Restricting Personal Liberty


Restraint Of Legal Proceedings:

An agreement in restraint of legal proceedings is void. Following our agreements in restraint of legal proceedings
a. An agreement which any party thereto is restricted absolutely from enforcing his rights under a contract through a court.
b. An agreement which curtails the period of limitation Act 1963 prescribed by within which the legal rights may be enforced is also void.

However, there are certain exceptions to the above rule:
A contract by which the parties agree that any dispute between them in respect of any subject shall be referred to arbitration.
A contract, by which the parties agree to refer to arbitration any question between them which have already arisen or which may arise in future, is valid; provided it should be in writin

Restraint Of Trade:

An agreement, by which a person is restrained from any lawful trade, profession and vocation is called an agreement in restraint of trade. Such agreements are void. However, there are certain exceptions to the above rule:

a. Sale of Goodwill: Where a person sells the goodwill of a business and aggress with the buyers to refrain from carrying on a similar business, within specified local limits, so long as the buyer or his successor in interest carries on a like business therein, such an agreement us valid. However, the local limits within which the seller of the goodwill agrees not to carry on business should reasonable.

b. Partners agreements: The following agreements between partners are valid:

    i. An agreements not to carry on ANY business other that of the firm while he is the partner.

    ii. An agreement, by an outgoing partner with continuing partners, not to carry on any business SIMILAR to that of firm within a specified period or within specified local limits.


Service Contracts:
i. An agreement of service by which an employment binds himself, during the term of his agreement, not to compete with his employer is valid.
ii. An agreement which restricts an employee from accepting a similar engagement after the termination of his services is void. But if the restriction is with the intention to protect the employer against the employe4e making use of trade secrets learned by him in the course of his employment, then the agreement is valid provided the time limit and the local limits must be specified.

Trade Agreements:

(i) An agreement by a manufacturer to sell during a certain period his ENTIRE production to a wholesale merchant is valid.

(ii) An agreement among the sellers of a particular commodity not to sell the commodity for less than a fixed price is valid provided these agreements do not give rise to monopolistic practices.

(iii) Similarly, manufacturers or traders in the same line often create associations to regulate business. Regulations made by these associates are valid and binding on the parties.

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