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Report No. 97

3.12. American Law.-

It has been stated that in U.S.A., condition in a policy against the maintenance of an action unless commenced within 12 months after the loss is valid. There the theory is that statutes of limitation prescribe what is supposed to be a reasonable period, so as to ensure promptness in the prosecution of remedies, but "there is nothing in their language or object which inhibits parties from stipulating for a shorter period within which to assert their respective claims".1

We would, however, like to observe that the analogy of American Law-assuming that the position there is as has been putforth in this paragraph-is of no use. If a legal system permits time limit clauses (in contracts) which bar the remedy, there is nothing illogical if it also permits time limit clauses (in contracts) which extinguish the substantive rights. No anomaly would arise in that case, since, whatever be the form of the contractual stipulation, it would be recognised as valid. The position in India (under the present law) is different. A party is not allowed to provide for the period of limitation by a contractual stipulation but he can provide for the period of prescription.

This is obviously anomalous. Moreover, such a distinction encourages the parties of the contract to putforth arguments to the effect that the particular clause in contract is one which extinguishes the right, or that it is one which merely affects the remedy. A party interested in affirming the validity of the clause would argue for the former while a party interested in denying its validity would argue for the latter. The confusion, hardship and disputes arise because the law is illogical and irrational by permitting a contractual stipulation that makes a bigger inroad on the general law, while not permitting a contractual stipulation that makes a lesser inroad on the general law.

1. Cf. Ridglesharger v. Hertford Fire Ins. Co., (1872) 19 L Ed 257, cited in Pearl Ins. Co. v. Atma Ram, AIR 1960 Punj 236.



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




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