Public Policy

Whenever an agreement is harmful to the public welfare or interest, it would be void as being against public policy. When any agreement conflicts with the morals of the time and contravenes any established interest of society, political, economical or social, it is void as being against public policy. In other words, an agreement which is injurious to the public or is against the interest of society is said to be opposed to public policy.

Public policy cannot be precisely defined. Public policy cannot be considered as being always the same. It is a vague term. Many things which have been held as contrary to public policy are not so held now. Public policy is always an unsafe and treacherous ground for legal decision. Law refuses to recognize certain class of contracts on the ground that they have a mischievous tendency so as to be injurious to the interest of the State or the public.

Supreme Court in a case has held that a contract which has a tendency to injure public interests or public welfare is one against public policy. What constitutes an injury to public interest or welfare would depend upon the times and climes. The social milieu in which the contracts is sought to be enforced would decide the factor, the nature and the degree of the injury. It is contrary to the concept of public policy to contend that it is immutable, since it must vary with the varying needs of the society. A bargain whereby one party is to, assist another in receiving property and is to share in the proceeds of the actions and such assistance is by using the influence with the ,administration irrespective of the fact that the persons intended to be influenced are not amenable to such influence is against protection and promotion of public welfare. It is opposed to public policy. Plea that an agreement is nullity being opposed to, public policy, can be taken even by a person who has earlier consented to the agreements.

Wife gave an undertaking by way of an agreement that if her husband paid her Rs 500/- in lump sum she would not ask for any future maintenance from him, there Madras High Court held that the object of ensuring the wife suitable maintenance cannot be void as opposed to public policy because it will not defeat any principal of law or equity that may vitiate the interest of the public.

It has been held that unless the Court is satisfied on the pleadings and the evidence led, that the bargain contained in a contract is so irrational, unconscionable, illegal and avoidable, the normal course of a contract ought not to be stemmed. The foundation on which the principle of public policy is based is that no Court will lend its aid to a man who finds his cause of action upon an immoral or illegal act.

Agreements against public policy:

The following agreements have been held to be against public policy:

Trading with an enemy: All agreements made between the citizens of alien countries, or where two countries are at war with each other, are considered void, illegal and inoperative. Even purchase of goods from an enemy country is considered as unlawful. It applies to all contracts which involve intercourse with the enemy or tend to assist the enemy. Only when such agreements are permitted by the Government, they are considered valid. These agreements are held to be against public policy in natural interest as their existence may benefit the enemy.

In cases where agreement is, entered into at the time of peace and subsequently war breaks out between the two countries, the obligation of performance of the contract is suspended till the end of hostilities

When a person agrees to maintain a suit in which he has no legal interest for its prosecution or defense, the proceeding is known as maintenance. For example, A files a suit against B to recover Rs 10,000 and C promises to maintain the suit knowing fully well that B has to pay the amount to A. Such a suit where C has no interest is called maintenance.

Where a person bargains for a share in the proceeds to be ultimately decreed in suit in return for assisting another to bring an action is known as Champerty. For example, A files a suit against B to recover Rs 10,000. C promises A the cost of litigation and in turn demands 50% of the amount of A succeeds in the suit. This is champerty. —