Agreements Opposed to Public Policy
Agreements Opposed to Public Policy
1. Meaning of Public Policy
Public Policy is a broad, flexible principle aimed at safeguarding the welfare, safety, and interests of the community as a whole.
It refers to the principles and standards regarded by the courts as being of fundamental concern to the state and society.
An agreement opposed to public policy is one that injures the public good or violates societal norms or morality.
2. Legal Position under Indian Contract Law
The Indian Contract Act, 1872 does not define "public policy" explicitly but enshrines the principle in Section 23, which states:
"The consideration or object of an agreement is lawful, unless it is forbidden by law or is of such a nature that, if permitted, it would defeat the provisions of any law or is fraudulent or opposed to public policy."
Thus, any agreement that is opposed to public policy is void.
3. What Constitutes Agreements Opposed to Public Policy?
These include agreements:
That injure the public or society.
That are immoral or fraudulent.
That promote illegal or unethical acts.
That interfere with the administration of justice.
That restrain trade or promote monopoly unlawfully.
That defeat the provisions of any law.
4. Types of Agreements Opposed to Public Policy
| Type of Agreement | Explanation | Example |
|---|---|---|
| Agreements in restraint of trade | Agreements that restrict freedom to carry on business or profession. | Non-compete clauses without reasonable limits. |
| Agreements injurious to the state | Agreements against national interest or security. | Secret treaties undermining government. |
| Agreements interfering with administration of justice | Agreements obstructing courts or legal processes. | Contract to bribe a judge. |
| Agreements promoting immorality | Agreements promoting immoral acts or behavior. | Contract for prostitution services. |
| Agreements defeating the provisions of law | Agreements that violate statutory provisions or fundamental rights. | Contract to evade tax. |
| Agreements prejudicial to public safety | Agreements causing danger to public safety or health. | Manufacturing and sale of hazardous goods without safety measures. |
5. Important Case Laws
Case 1: Rustom Cavasjee Cooper v. Union of India (1970 AIR 564)
Facts: The court struck down government regulations that violated the right to property.
Held: Legislation or agreements that violate fundamental rights or are against public policy are invalid.
Case 2: Nair Service Society Ltd. v. K.C. Alexander (AIR 1968 SC 1161)
Facts: The Supreme Court struck down a law that discriminated based on religion for educational institutions.
Held: Any law or agreement contrary to constitutional provisions and public policy is void.
Case 3: M.C. Chockalingam v. Indian Bank (AIR 1962 Mad 107)
Held: Agreements restraining trade without reasonable restrictions are void as against public policy.
Case 4: Dr. Shamsher Singh v. Delhi Administration (1974 AIR 2192)
Held: Agreements that are immoral or opposed to public policy are void.
6. Distinction Between Public Policy and Legality
Legality means conformity with laws.
Public policy is broader and includes morality, social welfare, and justice, not merely statutory compliance.
Some agreements may be legal but still opposed to public policy if they violate societal norms or justice.
7. Doctrine of Public Policy in Indian Contract Law
The courts have the discretionary power to declare a contract void if it is injurious to public interest.
Public policy evolves with societal changes; thus, it is a dynamic concept.
Examples: Agreements to commit crimes, contracts in restraint of marriage, contracts encouraging corruption, contracts interfering with judiciary.
8. Summary Table
| Feature | Details |
|---|---|
| Legal basis | Section 23, Indian Contract Act, 1872 |
| Effect on agreement | Agreement opposed to public policy is void |
| Scope | Injurious to public, immoral, illegal, oppressive |
| Examples | Restraint of trade, bribery contracts, immoral agreements |
| Judicial approach | Courts look at evolving societal values |
9. Conclusion
Agreements opposed to public policy are fundamentally unlawful and unenforceable. This doctrine serves to protect society’s welfare, morality, justice, and the general interest of the community. Courts have a broad and evolving mandate to interpret public policy in the light of changing social and moral norms, ensuring contracts do not harm public good.
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