Understanding The Indian Section 28 Contract Act, 1872
The Indian Section 28 Contract act 1872, governs the legal framework for contracts in India. Among its provisions, Section 28 holds significant importance. This section deals with agreements that impose restrictions on parties’ rights to enforce contracts through legal proceedings.
What Does Section 28 Contract Act Say?
- Section 28 states that any agreement that absolutely restricts a party from enforcing their rights under a contract through legal proceedings in ordinary courts or limits the timeframe within which they can enforce those rights is void to that extent.
- In simpler terms, parties cannot include clauses in a contract that prevent them from going to court if a dispute arises or shorten the legal time limit for filing a lawsuit beyond what is prescribed by general limitation laws.
Exceptions to Section 28 Contract Act:
There are two important exceptions to Section 28:
- Agreements to Refer Disputes to Arbitration: This exception allows parties to include a clause in their contract that mandates referring any disputes that may arise to arbitration instead of court. Arbitration is a faster and often less expensive alternative to litigation.
- Agreements with Banks and Financial Institutions: Banks and financial institutions can include clauses in guarantee contracts or agreements that extinguish a party’s liability or discharge them from obligations after a specified period, provided the period is not less than one year from the occurrence or non-occurrence of a specific event.
Latest Judgement:
In recent years, courts have consistently upheld the principles outlined in Section 28. Notably, they emphasize the importance of preserving access to justice and, furthermore, preventing unfair restrictions on parties’ rights.
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