Agreements in restraint of legal proceedings void

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Agreements in restraint of legal proceedings void

Unread postby Admin » Thu Mar 10, 2016 7:32 pm

Agreements in restraint of legal proceedings void.
Under section 28 of contract Act 1872 Every agreement, by which any party thereto is res­tricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights, is void to that extent.

Exception 1. Saving of contract to refer to arbitration dispute that may arise.­ This section shall not render illegal a contract by which two or more persons agree that any dispute which may arise between them in respect of any subject or class of subjects shall be referred to arbitration, and that only the amount awarded in such arbitration shall be recoverable in respect of the dispute so referred.

Suits barred by such Contracts.2When such a contract has been made, a suit may be brought for its specific performance, and if a suit, other than for such specific performance, or for the recovery of the amount so awarded, is brought by one party to such contract against any other such party in respect of any subject which they have so agreed to refer, the existence of such contract shall be bar to the suit.

Exception 2. Saving of contract to refer questions that have already arisen.­ Nor shall this section render illegal any contract in writing, by which two or more persons agree to refer to arbitra­tion any question between them which has already arisen, or affect any provision of any law in force for the time being as to references to arbitration3.
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