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Report No. 97

3.9. Possible arguments in support of the present position considered.-

The question at issue now is not whether such clauses are valid under section 28, but rather, whether the present position requires reform in the interests of justice. We shall deal with the above propositions, in so far as they could be relied upon as supporting the justice of the present position. Now, the first proposition in the Punjab judgment summarised above1 is a general statement which, of course, is sound. A court must enforce a promise which is not rendered void by a specific legal provision. The question, however, still remains whether such clauses are beneficial or harmful. In this context, let us scrutinise proposition (2).2 At the first sight, a cogent reason is given in that proposition, based as it is on considerations of business convenience, (the exigencies of insurance).

But the problem here is, that if the prompt settlement of claims under insurance policies is to be treated as on overriding consideration where the rights are extinguished under the clause, then why is it that clauses (including clauses in insurance policies) which limit the time for filing a suit are treated as objectionable? What applies to a limitation clause must apply to an extinction clause also (and vice versa). The exigencies of insurance business require that the remedy should also be allowed to be barred after a time limit. But this is not the law.

Proposition (3) above3 is, if we may say so with respect, a bit technical one; waiver of the time limit is hardly met with in practice. As to propositions (4) and (5) above,5 the freedom of parties to set a limit for the duration of rights so created by contracts may (for the sake of argument) be accepted as the basis of the present position. But it would be a weak argument when one has regard to the other aspects of economic justice and unequal bargaining power, set out earlier in this Chapter.

1. Para. 3.8, supra.

2. Para. 3.8, supra.

3. Para. 3.8, supra.

4. Para. 3.8, supra.

Section 28 of the Indian Contract Act, 1872 - Prescriptive Clauses in Contracts Back

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