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.
The Courts ought to be very cautious in deciding a question of public policy. The doctrine must be applied with necessary variation. Each case has to be decided on its own facts. Some of the agreements which are opposed to public policy are briefly explained below with examples.
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.
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.
Example: 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.
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.
Example: 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.
However, if a compromise agreement is made before any complaint is filed, it would not amount to stifling prosecution even if it is implemented after the filing of a complaint which is then withdrawn.
Example: A obtained a loan from a bank by pledging certain goods with bank as security. Subsequently, it was found that the goods were either fraudulently over valued or withdrawn in collusion with bank employees. A agreed to make up the deficiency by giving more goods as security in the form of hypothecation. But in hypothecating goods, some delay occurred. So the bank filed a complaint. However, the complaint was withdrawn by the bank after the hypothecation was completed. Here, the agreement to make up the deficiency was valid because the compromise agreement was made before the filing of any complaint.
4. Maintenance and Champerty
Maintenance and champerty agreements are against public policy. So they are void. Maintenance agreements are those agreements whereby a person promises to maintain a suit in which he has no interest. Champerty agreement is one whereby a person agrees to share the results of litigation.
The difference between maintenance and champerty agreements lies in their object. The object of maintenance agreement is to encourage or foment litigation, whereas the same in Champerty agreement is sharing the proceeds of the litigation.
In England, both of these agreements are illegal and unenforceable. However, in India, only those agreements which appear to be made for purposes for gambling in litigation and for injuring or oppressing others, by encouraging unholy litigation, will not be enforced but not all maintenance and champerty agreements.
5. Agreements Creating Interest Against Duty
If an agreement is entered into by a person whereby he is bound to do something which is against his public duty, the agreement is void on the ground of public policy. For e.g., an agreement by an agent to get secret profits shall be void as it is opposed to public policy. Similarly, an agreement by a Government servant for the purchase of land situated within his circle is illegal as opposed to public policy.
6. 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.
Example: 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.
Similarly, an agreement to pay money to the parent/guardian of a minor in consideration of his or her acceptance to give the minor in marriage is void, as it is opposed to public policy.
Example: A, a father of a girl promised to give a certain sum of money to B, a father of a minor boy and B agreed to marry his minor son with A’s daughter. Here the agreement is void, as it is opposed to public policy.
It is to be noted here that though an agreement to procure the marriage is void, the marriage will be a valid marriage.
7. Agreements Tending to Create Monopolies
Agreements tending to create monopolies are against public policy and hence are void. However, in matter like vegetables, monopoly rights can be given to one person excluding others.
8. 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.
Example: A promises to indemnify a firm engaged in printing and publishing 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.
9. Agreements in Restraint of Legal Proceedings
Two kinds of agreements are dealt with under this head. They are-
1) Agreements Restricting Enforcement of Rights
These are the agreements which prohibits wholly or partly any party to the agreement to enforce his rights in respect of any contract is void to that extent.
2) Agreements Curtailing Period of Limitation
If an agreement curtails the period of limitation which is prescribed by the law of limitation is void. This is so because, its object is to defeat the provisions of law.
10. Agreements in Restraint of Parental Rights
For minor children, their father is the legal guardian and in his absence, their mother will be the legal guardian. A father by law is entitled to the custody of his minor child and so cannot enter into an agreement which is not consistent with his duties arising out of such custody. If such an agreement is made, it shall be void as it is against the public policy.
Example: A, a father, having two minor boys, agreed to transfer the guardianship of those boys in favour of B and also agreed not to revoke the transfer. But subsequently after the boys had left for England for higher studies, he changed his mind and instituted a suit for custody of the boys and for a declaration that he was the proper and lawful guardian. The Privy Council, while agreeing that the father was the rightful and proper guardian held that among the Hindus the father is the natural guardian of his children during their minorities but his guardianship is in the nature of a sacred trust and he cannot therefore, during his life time, substitute another to be the guardian of his minor children in his place.
11. Agreements Restricting Personal Liberty
Agreements restricting personal liberty of the parties to it are void as being opposed to public policy.
Example: A obtained a loan from B, a money lender and agreed with B that, without B’s consent in writing, he would not leave his job, or borrow money, or dispose of his property, or change his residence. It was held that the agreement was void.
12. Agreements in Restraint of Marriage
An agreement in restraint of the marriage of any person, other than a minor is void. Law does not make it compulsory for every person to marry. But if any person agrees not to marry at all it is opposed to public policy and is therefore void. Further, an agreement in which a person agrees not to marry a particular person is also void as it is against the public policy
To sum up, in India, the rule is that any restraint of marriage, whether partial or total is absolutely void except, of course, restraint on the marriage of a minor.
Example: N promised to marry only M and none else and to pay M a sum of Rs.5,000 if he married someone else. N married O. In this case the contract was in restraint of marriage and therefore it is void.
13. Agreements Interfering with Marital Duties
Agreements interfering with marital duties are against the public policy and are void.
Example 1: A, a married person promises to marry, during the life time or after the death of spouse. Held, it was void.
Example 2: A entered into an agreement with B in consideration of her getting a divorce and marrying A. Held, it was void.
14. Agreement to Defraud Creditors
An agreement which is made with an intention to defraud the creditors or revenue authorities is not enforceable as it is opposed to public policy.
15. Agreement in Restraint of Trade
By law, every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is void to that extent.
Example: A and B were rival shop-keepers in a locality in Calcutta. B agreed to pay A, a sum of money if he would close his business in that locality. A did so but B refused to pay him the money. Held, the agreement was void, and therefore, money could not be recovered.
However, total restraint of trade is valid provided
- it is reasonable to both parties, or
- it is reasonable to the public.