NATIONAL UNIVERSITY OF STUDY AND

RESEARCH IN LAW

RANCHI

LAW OF CONTRACTS

AGREEMENT OPPOSED TO PUBLIC POLICY

SUBMITTED BY: DEEPAK SEN

SUBMITTED TO: PRAGYA AISHWARYA (ASSISTANT PROFESSOR)

SEMESTER: I

ROLL NO. – 988

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 ACKHOWLEDGEMENT

My Law of Contracts Project was based on the topic “Agreement opposed/against

public policies with English and Indian case laws” .

I would really like to thank Ms. Pragya Aishwarya (Asst. Professor Law, NUSRL) for
giving me such wonderful topic to research on and prepare a research paper. She also
guided me throughout the process of the making of the draft.

I would also like to thank God for giving me strength to complete my final draft. I
would like to thank my mother for encouraging me to work on the topic. Last but
not the least I would like to thank my friends who helped me to find more on the
topic and prepare a research paper of my best efforts.

Deepak Sen.

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 TABLE OF CONTENTS

1. INTRODUCTION______________________________________________4
2. RESEARCH QUESTION 5

3. CATEGORISATON____________________________________________5
• Trading with Enemy 5
• Trafficking in Public Offices 6
• Interference with Administration

Of Justice 6

➢ Interference with course

Of justice 6
➢ Stifling prosecution 7
➢ Maintenance and Champerty 8
• Marriage Brokerage Contracts 9
• Unfair and Unreasonable Dealing 10

4. CONTRIBUTION____________________________________________11

5. CONCLUSION______________________________________________12

6. BIBLIOGRAPHY____________________________________________12

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 INTRODUCTION

According to the sec. 2(g) of the Indian Contracts Act 1872 “An agreement
enforceable by law is a contract”. The contract has to be valid and should have
fulfilled certain requirements before it is called a contract. One of the essentials of a
valid contract is that the consideration and the object should be lawful. Every
agreement of which the object or consideration is unlawful is void1. Section 23 of the
contracts act states the conditions under which a contract is lawful.

If a contract which is formed is against the public policy, the contract is deemed to
be void. If the court regards an agreement as opposed to public policy, the agreement
is void. Public policy is not capable of any precise definition. Public policy means the
policy of the law at a states time. An act which is injurious to the interest of the
society is against public policy.

The courts do play a great role in interpreting whether the agreement is in

consonance with the recognised public policy or not. The laws against public policy
have different notions in different countries like the laws in India and England are
different.

This project is made to categorise these unlawful; laws under different heads and also
to differentiate between the laws in England and India.

1
Sec. 23. Indian Contracts Act. 1872

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Under legality of object the agreement which are void can be categorised under
following heads.

RESEARCH QUESTION:
What Is Public Policy And What Agreements Are Opposed To Public Policy?

CATEGORISATION

The agreements which are termed to be void or against the public policies are
categorised as under:-

HEADS OF PUBLIC POLICY2 –

1. Trading with enemy;

2. Trafficking in public offices;
3. Interference with administration of justice;
4. Marriage brokerage contracts;
5. Unfair or Unreasonable Dealings.

Some other agreements, which are opposed to public policy, like an agreement in
restraint of marriage3, an agreement in restraint of trade4 have also been declared void
by the Indian Contracts Act.

1. TRADING WITH ENEMY -

When there is a between two countries, it is unlawful and against public policy
that a person should trade with the subject of the enemy country. A person
from one country cannot trade with the people of other country which is in
war with the first country.

2
Singh, Avtar. “Law of Contract and Specific Relief”. Lucknow : Eastern Book Company, ed. 5, 2009.
3
Sec. 26 Indian Contracts Act.
4
Sec 27 Indian Contracts Act.

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 Suppose country A is in war with country B, then any person of country A
cannot give effect to any trade or vice versa.5
The reason for such restriction in the field of trade and commerce is that if
such agreements are allowed between countries then it would be taken as if
such transactions between or more countries are done to promote economic
interest to such country and overlook the interest of individuals.

2. TRAFFICKING IN PUBLIC OFFICES –

An agreement by which it is intended to induce a public officer to act
corruptly is termed as a contract which is against public policy. For example, in
Parkinson v. College of Ambulance case6 an agreement by which a sum of
money was provided to a charity for the procurement of knight in return was
deemed to be a void agreement. The aforesaid case is a precedent in English
case law.
According to Indian case law, in the case of Kuju Colleries Ltd v. Jharkhand
Mines Ltd.7 , money paid to a public officer to procure a mining right was not
permitted to be recovered.
Such law is prevalent in Indian and English laws.

3. INTERFERENCE WITH ADMINISTRATION OF JUSTICE –

A contract whose object is interfere with the administration of justice is void
in the eyes of law as it is opposed to the public policy. With reference to
such administration this heading can be categorised further as -
• Interference with the course of justice – Any agreement which
obstructs the ordinary process of justice is void. An agreement to delay
the execution of a decree and a promise to give money to induce a
person false evidence, have been held void.

5
Case Janson v. Driefontein Consolidated Mines, (1902) A.C. 484
6
[1925] 2 KB 1.
7
AIR 1974 SC 1892.

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 ILLUSTRATION
In N.V. P. Pandian v. M. M. Roy8 case, the respondent paid a sum of
Rs. 15,000 to the appellant and the appellant in return promised to use
his influence with the selection committee in order to get a seat for the
respondent’s son in Madras Medical College. The respondent’s son could
not have the seat and she filed a suit against the appellant claiming
back the sum of Rs. 15,000 paid by her. It was held that the agreement
tended to injure public service and was against public policy and
therefore, the same was void. Hence, she was held not entitled to claim
the refund of Rs. 15,000.9

• Stifling prosecution – An agreement to stifle prosecution has been

regarded as opposed to public policy. Under criminal law it is been
termed as non – compoundable offence. In other words, by accepting
some consideration to make a compromise in a criminal case, one is
deemed to have accepted bribe, i.e., a crime under I. P. C.
A case is been discussed so as to explain this category as per Indian
law –
In case of Ouseph Poulo v. Catholic Union Bank10, some goods had
been pledged with the respondent bank as a security for a loan. On an
inspection it was found that there was a deficiency in the quantity of
good with the consideration of the goods. It was thought that either the
goods were fraudulently removed from the place or there was no pledge
taken to deliver such goods.
As a result there was a complaint lodged with the police about the said
deficiency of the goods. As promised by the appellant before the
complaint was lodged they now executed two hypothecation deeds in
favour of the bank. As a result the complaint was withdrawal by the
appellant. Then the appellant sought the cancellation of the hypothecation
deeds on the ground that the same was done to stifle criminal

8
AIR 1979 Mad. 42
9
Bangia, R. K. “Indian Contract Act”. Allahabad : Allahabad Law Agency, ed. 12, 2005.
10
AIR 1965 S.C. 166.

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 prosecution. It was held that such hypothecation was valid as such was
contemplated before the complaint was lodged.
In this case SC said –

“It is well settled that agreements which are made for stifling
prosecution are opposed to public policy and as such, they cannot be
enforced. The basis for this position is that the consideration which
supports such agreement is itself opposed to public policy.”11

• AGREEMENT OF MAINTENANCE AND CHAMPERTY -

Maintenance as per law is, aiding a party in civil proceeding by
providing financial or other assistance without lawful justification. In
other words, of a person intermediates in the proceedings of a case of
any two parties without having any interest is termed to be an unlawful
interference by the third party.
Champerty is a kind of maintenance in which the person assisting in
the proceedings is to receive a share in the gain made in the
proceedings is to receive a share in a gain made in proceedings
maintained by him.
In the country of England, the offences of maintenance and champerty
were considered to be obsoleteand were abolished by the Criminal Law
Act, 1967.
The English law or the common law have no application in the Indian
laws because of the peculiarity in the Indian system.
As per Indian laws, the Indian courts tend to see whether the party
which provided with the assistance took the advantage of the
helplessness of the other party to enter into the case with such
assistance, if the party had taken any such advantage then such type of
assistance is termed as champerty. If the party which has intervened in
any such proceedings have no such selfish interest then such type of
agreements are valid in the eyes of law.

11
Ouseph Poulo v. Catholic Union Bank, AIR 1965 SC 166.

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 For example, in the case of Ram Sarup v. Court of Wards12 the
decision was that
“if the agreement stipulates that the financier is to bear all the
expenses of litigation, and in return he is to get 3 anna(3/16) share of
the property recovered if the suit terminates at the High Court level,
and 4 anna(4/16) share if the case goes upto the Privy Council, such
an agreement has been held to be valid, by the Privy Council.”13

ILLUSTRATION
Taking the case of Khaja Moinuddin v. S.P. Ranga Rao®14 into view
as another illustration for the same law in Indian context.
[In this case there was an agreement according to which the plaintiff
agreed to finance defendant’s litigation and in return the defendant
agreed to pay 40% of the total compensation to be paid to suit
scheduled land in case of its acquisition or in the alternative 40% of
the sale proceeds of land property, if sale was by private negotiation.
This was in addition to the repayment of the amount agreed to be
advanced. The agreement was held to be unconscionable and extortionate
in nature. It was held that the said agreement was champertous in nature
and void ab initio under Sec. 23 of Indian Contracts Act.]15

4. MARRIAGE BROKERAGE CONTRACT –

Marriage brokerage contracts mean such contracts under which a person agrees
to procure a marriage between two persons on some consideration. Such
agreements are opposed to public policy and are void.

12
AIR 1940 P.C. 19
13
ibid.
14
AIR 2000 A.P. 344.
15
Bangia, R. K. “Indian Contract Act”. Allahabad : Allahabad Law Agency, ed. 12, 2005.

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 As per Indian laws marriages are those sacre ceremonies which should be
commenced by both the parties independently agreeing to form such relation
rather than by involving intermediaries who try to procure such marriages for
their own selfish motives.
The common law governing the English law forms precedent for the Indian
law as well under this rule.
A popular in English law forms precedent in Indian law.
The case is Hermann v. Charlesworth16, in this case Charlesworth promised to
introduce young men to Miss Hermann and in return she was to pay 52
pounds in advance and 250 pounds on the day of marriage. He was
unsuccessful to procure the marriage, so Miss Hermann who had paid the
advance, brought an action against Charlesworth to recover back the money
which she paid in advance, and she was successful.

5. UNFAIR OR UNREASONABLE DEALINGS –

When the parties are not economically on equal footing with respect to the
bargaining power of the two parties and one party is in a position to exploit
the other party and the other party is vulnerable in such respect then the
agreement is termed to be as opposed to the public polcy and may be termed
to be void in the eyes of law.
In the case of Central Inland Water Transport Corpn v. Brojo Nath
Ganguly17 case, the decision was that, a Government Corporation imposing upon
a needy employee a term that he can be removed just by three months notice
or pay in lieu of notice and without any grounds is an exploitation and such
ruthless exploitation is against public policy.
While on the other hand if the bargaining power of the two parties are fairly
matched then and al the clauses has been duly signed then the law will
presume such contract to be fair.

16
(1905) 2 KB 123
17
AIR 1986 SC 1571

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 CONTRIBUTION

The research paper made on the topic “agreements against public policy with respect
to Indian and English laws” contains the categories under which this law is
distributed and the cases which have formed milestones in the development of this
law.

My contribution to this research paper is that I tried to elaborate this law under al
the headings and tried to discuss all the milestone cases which have formed the
precedents in the recent past. I have gone through the books written by great authors
like Mr. R. K. Bangia and Avtar Singh and tried to bring out, where possible the
common law which has formed precedents in the Indian law.

I tried to discuss the cases of the common law and cases of the Indian law
separately and tried to draw out how they formed the counterparts of each other by
discussing the decision passed by the court.

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 CONCLUSION:

Public policy is the principled guide to action taken by the administrative executive branches
of the state with regard to a class of issues, in a manner consistent with law and institutional
customs. some agreements have been made void by law for the welfare of the common
people. As time passed such agreements were declared void by statues in public interest.
Agreements that are opposed to public policy.

BIBLIOGRAPHY

• Avtar Singh, contract and specific relief [12th edition 2017]

• Pollock and mullah, the Indian contract act specific relief acts [14th edition2014]

• Anson’s law of contract J. Beatson, A. Burrows, J. Cartwright [30TH edition 2016]

• www.manupatra.com

• www.scconline.com

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