This article has been written by Abhay Gulani pursuing a Diploma in Technology Law, Fintech Regulations and Technology Contracts from LawSikho.

This article has been edited and published by Shashwat Kaushik.

Introduction

Public policy, as defined in the doctrine “Ex turpi causa non oritur actio,” means that any agreement that is opposed to public policy is considered void ab initio. Public policies are those policies of the government that are made for the welfare of the public and protect the public from unfair practices. The law allows its citizens to make contracts for multiple reasons, for example, an agreement of sale and purchase of goods, a contract for a job position, a contract for a service, etc. These are agreements that are enforceable by the law and bind the parties to perform their legal obligations, as defined in Section 2(h) of the Indian Contract Act of 1872. There are some types of agreements that are opposed to public policies, i.e., agreements that violate or are opposed to the policies made for the welfare of the public and society are void-ab-initio i.e., void from the start of the formation of the contract. In the formation of a contract, the consideration and the object of the contract should be lawful This means that the contract should be considered legal and lawful in the eyes of the court. If the court considers the object of the contract or the intention of the contract as unfair and that object is opposed to the welfare of society, then the court will consider it void, as defined in Section 23 of the Indian Contract Act of 1872. Now, we will discuss the various types of agreements opposed to public policy.

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Agreements opposed to public policy

As discussed above, agreements opposed to public policy are considered void. But now the question arises of what kinds of agreements oppose public policies. Agreements such as trading with alien enemies, stifling prosecution, agreements in restraint of trade or restraint of marriage, etc. are opposed to public policy. Let’s discuss these types of agreements.

Agreement with an alien enemy

An agreement of trade that is made with the alien enemy during the time of war, for example, if an agreement of sale of any goods is made with a person of a certain country and there is a war going on with that particular country, then the agreement will be considered void. It is because an agreement made with an alien enemy will be a threat to society and will oppose public policy; hence, the court will consider the agreement void. But if a contract was made during peacetime or before the commencement of war, then the contract will be suspended till the war gets over or it can be declared void by the court considering the nature and object of the contract.

Stifling prosecution

As per the law, if a person commits a crime, then that person should be prosecuted. For example, if A commits a crime and B witnesses the crime but, A asks B not to file a case for which A will pay B a certain amount, this kind of contract will be considered illegal and void. If the crime is compoundable, then it can be done, but if the crime is non-compoundable then prosecution is necessary. No person can make a contract to protect a criminal, as it is a threat to society. Therefore, this type of contract is against public policy and will be considered void ab initio.

Agreement interfering with the administration of justice

The Judiciary is considered an important pillar of Indian democracy. It helps in the interpretation of the law and ensures the proper functioning of law and order. If any person commits an offence, then the judicial system, with a proper investigation and prosecution, punishes the person for his offences. Agreements that interfere with the administration of justice are considered unlawful, illegal, and void. For example, A bribes the judge to give judgement in favour of B, or in another case, A bribes B to change his statements in court. These types of agreements are against public order and public policy; hence, these agreements are considered void.

Agreement for sale/transfer of public office or title by bribe

Government jobs and degrees are the most important assets in the country. The more qualified a person is, the more human resources will be available in the country. The titles and the jobs should be available for the most deserving candidate, but for example, if a person A bribes another person B for the sale and purchase of a government job position, buys rank for a certain amount or buys a degree, then these kinds of contracts will be considered void. As per the law, the sale and purchase of public offices and titles are unlawful and illegal. Moreover, the most deserving candidate will lose the opportunity and the less deserving candidate will acquire the job. Hence, these types of agreements are opposed to public policy as they hinder the growth and development of the nation and are declared void ab initio.

Marriage brokerage agreement

Marriage is an eternal bond between a male and female that is unbreakable, according to various scripts. Marriage allows the male and female to live together under one roof and perform various marital functions, such as, financially having to look after their family, giving birth, continuing their legacy, etc. As marriage is an essential part of a person’s life, it is the right of the person to choose his/her life partner. However, an agreement for arranging a marriage for a price or brokerage is void as it is against public policy. The person asking for the brokerage cannot sue the party for not giving money, as it is against public policy. 

Agreement in restraint of parental authority 

As per the law, parents are the natural guardians of a child. They have the right to look after the child’s needs. A child until he attains the age of 18 needs a guardian, the father is the legal guardian of the minor, and in the absence of the father, the mother can make decisions for the benefit of the child. The right of guardianship of the parents cannot be taken away through an agreement. If an agreement is made against parental rights, it will be against public policy and will be considered void.

Agreement in restraint of personal liberty

As it is mentioned in Article 21 of the Indian Constitution, the right to life and personal liberty. Every person has the right to enjoy his/her liberty and life. A person cannot be denied his rights, but if an agreement is made against personal liberty, it will be against public policy and will be considered void. For example, if an agreement is made denying a person the right to shift his/her residence, change his/her employment, etc., these kinds of agreements are against the constitution, are against public policy and will be considered void.

Agreements opposed to public policy as mentioned in the Indian Contract Act

Agreement in restraint of marriage

Suppose an agreement is made restraining a person from marrying someone, for example. In that case, if person A agrees with another person B restraining B to marry C for a certain amount, this kind of agreement will be considered void, as mentioned in Section 26 of the Indian Contract Act. Except in the case of minors, these agreements will not be considered void, as minor marriages are illegal in India.

Agreement in restraint of trade

As per Section 27 of the Indian Contract Act, if an agreement is made prohibiting another person from exercising a business, trade, or profession of his own choice, it will be considered void. Every person in this country is free to exercise the profession of his choice. This will enable the development of society and increase the human resources in our country. However,  an agreement restraining a person from exercising the profession of his choice, trade or business will be considered void as it is against public policy.

Agreement in restraint of legal proceedings

Every person has the right to move to court if his/her rights are being violated. If an agreement is made in restraint of legal proceedings, for example, if an agreement is made restricting the aggrieved party from enforcing his/her rights or an agreement for discharging any party from any liability will be considered void as it is against public policy. As mentioned under Section 28 of the Indian Contract Act, an agreement in restraint of legal proceedings will be void ab initio as it is unlawful and illegal.

Agreements not opposed to public policy

Copyright agreements

As per the Copyrights Act, Copyright agreements are not opposed to public policy as they allow certain copyrights to be transferred to another person. It does not create any obligation for the general public.

Separation of the void part

When an agreement is formed, if there are more than two distinct promises and one of them is against public policy, then that part of the promise will be separated from the agreement and the rest will be considered valid.

Public policy in relation to contracts

Public policy holds significant sway over the realm of contracts, shaping their formation, interpretation, and enforceability. In recent years, several noticeable trends have emerged in the interplay between public policy and contracts.

  1. Increased scrutiny of unfair contract terms:
    • Public policy has become increasingly vigilant in scrutinising contract terms that are deemed unfair or unconscionable.
    • Courts have exhibited a greater willingness to strike down or modify such terms, particularly those that create an imbalance of power or exploit vulnerable parties.
    • Legislative efforts have also been made to regulate unfair contract terms, such as the introduction of “unfair contract terms” laws in various jurisdictions.
  2. Heightened focus on consumer protection:
    • Public policy has placed a heightened emphasis on safeguarding consumers from potentially harmful or deceptive contract practices.
    • Regulatory bodies have implemented stricter rules to ensure fair and transparent dealings in consumer contracts.
    • Legislation such as the Consumer Financial Protection Act in the United States has provided consumers with enhanced rights and remedies against unfair or abusive contract terms.
  3. Balancing contractual freedom with public interest:
    • Public policy has sought to strike a delicate balance between upholding contractual freedom and protecting the broader public interest.
    • Courts have recognised that certain types of contracts may have far-reaching societal implications, justifying increased scrutiny to ensure they align with public policy objectives.
    • Examples include contracts involving essential services, natural resources, or matters of public health and safety.
  4. Growing importance of good faith and ethical considerations:
    • Public policy has emphasised the importance of good faith and ethical considerations in contract formation and performance.
    • Courts have placed greater weight on parties’ conduct during the negotiation and execution of contracts, assessing whether they acted in a fair and reasonable manner.
    • Ethical considerations, such as environmental sustainability or social responsibility, have also gained prominence in shaping public policy’s approach to contracts.
  5. International harmonisation of contract law:
    • In an increasingly interconnected global economy, public policy has recognised the need for harmonisation of contract law across different jurisdictions.
    • Efforts have been made to develop uniform contract laws and principles, such as the United Nations Convention on Contracts for the International Sale of Goods (CISG).
    • Harmonisation aims to facilitate cross-border trade and reduce legal uncertainty for businesses operating in multiple jurisdictions.

These trends in public policy reflect a dynamic and evolving legal landscape where the interplay between public interests, contractual freedom, and ethical considerations is constantly being recalibrated. As society’s values and priorities shift, public policy continues to shape the contours of contract law, ensuring that it remains responsive to the changing needs and demands of the modern world.

Conclusion

In this article, we have studied the concept of public policy concerning contracts. We have discussed various types of agreements that are against public policy. Agreements that are against public policy are considered void ab initio or void from the beginning of the contract. Some types of agreements are against public policy, such as an agreement with an alien enemy, agreement in restraint of parental authority, etc. With this article, we can identify what agreements are against public policy. We can observe the interpretation of Section 23 of the Indian Contract Act and how an agreement can be declared void if it violates the policies made for the general public. 

References

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