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Report No. 97

2.5. Reasoning.-

The reasoning underlying these decisions is that section 28 is aimed at prohibiting agreements which could operate only so long as the rights were in existence.1 The section is aimed only at-

(a) covenants not to sue at any time; and

(b) covenants not to sue after a limited time.

A condition in a contract providing for a forfeiture of all benefits unless an action is brought within a specified period does not therefore violate the section. As per the contract itself, the rights that might have accrued to the party cease to exist on the expiry of the period provided in the contract. What is hit by section 28 is an agreement relinquishing the remedy only, by providing that if a suit is to be filed, then it should be filed within the specified time limit (the time limit being shorter than the period of limitation provided by the Limitation Act). Under such a clause, though the rights accrued continue even beyond the time limit and are not extinguished, yet there is a limiting of the time to sue as prescribed by the Limitation Act. It is such a clause that is regarded as void by reason of section 28. But if the rights themselves are (under the contractual clause as widely worded) extinguished, then there is no violation of limitation law. How tar this distinction is supportable or workable is a matter to which we shall presently address ourselves.

1. Baroda Spinning Mills v. Satyanarayan Marine Ins. Co., AIR 1914 Born 225(2), followed in Shakoor v. Hind & Co., AIR 1932 Born 330.

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

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