BUSINESS LAW

An INTRODUCTION
 INTRODUCTION TO LAW
• Law comprises a set of rules that regulate human behavior

• “A binding custom or practice of a community : a rule of

conduct or action prescribed or formally recognized as binding
or enforced by a controlling authority”.

• Commercial law refers to those legal rules which arose the

customs of the merchants or relate to business activity
 Classification of Law
• Constitutional Law
• International Law
• Administrative Law
• Criminal Law
• Civil Law
• Business Law/ Commercial Law/Law Merchant/ Business
Regulatory Framework
 SOURCES OF LAW
• Customary law
These are habits or practices observed by individuals in a given society
It is generally unwritten
The following must be met before customary law will be recognized:
 It must be reasonable
 It must have existed for a long time
 It must be generally recognized and observed by the community
 It must be certain and clear
 SOURCES OF LAW
• Legislation

It refers to the law validly enacted by the legislative authority

of Country

This authority vests in the president and parliament of

Country
 SOURCES OF LAW
• Case law/Judicial precedent

It refers to past decision of superior courts.

Supreme court decisions in country are binding on all inferior

courts
 SOURCES OF LAW
• Advantages of judicial precedent
Consistency, law is not subject to whim
Certainty and predictability, if the law becomes unpredictable
it is not serving its purpose
Flexibility, law can be created without waiting for legislation
 SOURCES OF LAW
• Disadvantages of judicial precedent
 Uncertainty due to the large number of cases that can be reported
 Fixity resulting in injustice being executed
 Unconstitutionality, judges are then seen as making law instead of
merely applying it
 Bias arising from judges especially under conditions of rapid
change
 Judicial Reform may be stifled
 SOURCES OF LAW
• Justice, Equity
According to the justness, fairness, or good concise.

The judges apply their common sense and act in accordance with
justice, equity, and good concise and deal with the cases.
 SOURCES OF LAW
• Conventional Law - International Treaties/Agreements
/Conventions

A requirement for world countries to be bound by a single set of

laws. Such laws are made by way of treaties, agreements, etc.
Countries who are members of the United Nations have to accept
such rules or norms laid down by the organization.
International conventions have an important role in framing new laws
or making amendments to existing laws.
INTRODUCTION: COMMERCIAL/BUSINESSLAW
• “Ignorantia Juris Non-Excusat”, Latin words
– “Ignorance of Law is no-excuse”
• Commercial Law: “The branch of Law which deals with the
rights and obligations of mercantile persons arising out
mercantile transactions in respect of mercantile
property/goods”
• “Mercantile: related to trade and commerce”
INTRODUCTION: COMMERCIAL/BUSINESSLAW
• Acts related to Business.
– Indian Contract Act, 1872
– The Negotiable Instrument Act, 1881
– The Sale of Goods Act, 1930
– The Indian Partnership Act, 1932
– The Essential Commodities Act, 1955
– The Companies Act, 1956, 2013
– The Consumer Protection Act, 1986
– Miscellaneous Acts
• Right to information
• Bankrupty Code etc. (Bankruptcy is a legal proceeding involving a person or business that is
unable to repay their outstanding debts.)
 PURPOSE AND FUNCTION OF LAW
• Preservation of peace and order

• Justice

• To enforce morality
 Forms of Business/Organizations
• Sole Proprietorship
• Partnership
• Joint Stock Family Business
• Cooperative Societies
• Company (Types on the basis of: Incorporation; Liability; and
Control)
The Indian Contract Act 1872
 The Indian Contract Act 1872

• The general principles of the law of contracts are covered

in 75 sections.

• That branch of law which determines the circumstances in

which promises made by the parties to a contract shall be
legally binding on them is governed by the Indian Contract Act,
1872
 THE LAW OF CONTRACT

• A contract intends to formalize an agreement of two or more

parties in relation to a particular subject
• Contract = An agreement + Enforceable by law

• Agreement= Promise + Reciprocal Promise +

Consideration

• Promise = proposal by one person + its

acceptance by another person

• Proposal is offer

• Parties : Promisor and Promisee

Contract Act 1872
Nature & Kind of contract
• A and B of sri-nagar entered into a
contract on 1st September, 2006 as per
the provisions of the Indian Contract Act.
Can they enforce the contract ?
Case analysis
• No they can’t enforce contract
– Indian Contract Act is applicable
to whole of India except to the
state of Jammu and Kashmir.
Contract Act 1872
Nature & Kind of contract
• A promises to deliver his watch to B and, in return, B
promises to pay a sum of Rs.2,000. Is it agreement or
contract?
Case analysis
• It is contract
– A offers while B accepts offer by
agreeing to deliver his watch. Rs.
2,000 and watch are
consideration. Thus all elements
of valid contracts are present.
Contract Act 1872
Nature & Kind of contract
• A promised to pay his son B a sum of Rs. 1 lakh if B
passed C.A. exams in the first attempt. B passed the
examination at first attempt, but A failed to pay the
amount as promised. B files a suit for recovery of the
amount. State whether B can recover the amount under
the Indian Contract Act, 1872.
Case analysis
• B can’t recover anything from A.
– Promise by A is not with an
intention to create legal relation.
Social agreement is created.
Social agreement is not
enforceable.
Contract Act 1872
Nature & Kind of contract
• Varun promises to Natasha to give real pearl necklace
at the time of his marriage. Varun fails to give it at the
time of marriage. Can Natasha complain about non-
fulfillment of promise against Varun at any court ?
Case analysis
• Natasha can’t complain in any
court
– Promise by Varun is not with an
intention to create legal relation.
Social agreement is created.
Social agreement is not
enforceable.
Contract Act 1872
Nature & Kind of contract
• State with reason in brief, whether any contract is made in
following cases :
1. You have invited your business partner for launch.
No contract made
Invitation for launch is social agreement. Intention to create
legal relation is missing.
2. When you eat meals at restaurant.
Yes contract is made
Order for meal is offer while serving meal is an acceptance.
It is agreement with all elements of contract.
Case analysis
1. When you board a public bus.
Yes contract is made
You agree to pay to bus company for taking you at the
agreed stop or place. It is enforceable agreement.

2. When you call a taxi on telephone.

Yes contract is made
You agree to hire service from taxi company. It is acceptance
to your offer to pay money to taxi company. It is enforceable
agreement.

3. When you put an coin in the slot of weighing machine.

Yes contract is made
It is enforceable agreement with all essential of valid contract
is presence.
Contract Act 1872
Nature & Kind of contract
• A, a tradesman, left certain goods at B’s house by
mistake B treated and used the goods as his own. Can
trade men recover money of goods used by B?
Case analysis
• Yes trade man can recover money
of goods from B
– When B treated and used the
goods of his own in spite of
having knowledge that it does
not belong to him, he has given
acceptance. Thereby valid
contract is made.
Contract Act 1872
Nature & Kind of contract
• Mohan agrees to pay Sohan dada Rs. 50,000 to kill
business competitor. Mohan has borrowed this money
from his friend but now refuse to pay back. Can his
friend claim it by approaching court ?
• Would your answer be different in any manner if his
friend do not have knowledge about purpose of
borrowing ?
Case analysis
• His friend can’t recover the money
provided if he has knowledge about
purpose of use of fund. Contract to
be valid must have lawful object.
Contract Act 1872
Nature & Kind of contract
• A agrees to sell his DVD player to B promising to deliver
it on the date of payment. B promises to pay the amount
with in one month. What kind of contract it is ?
Case analysis
• It is bilateral contract
– In bilateral contract both parties
exchange a promise to each
other to be performed within
stipulated time.
 THE LAW OF CONTRACT
• The essential elements of a valid contract
Agreement- clear, certain and communicated agreement
Contractual capacity-parties must be legally capable of
contracting
Serious intent-parties intend to make their agreement binding
Necessary formalities-such as writing
 Agreement

• Agreement = offer + acceptance

 Offer and Acceptance
• Essential elements of offer
• Two Parties
• Communication
• Willingness: Offer must be made with the intention of being
accepted by some other person
• With Intention to obtaining assent
• Offer may be positive or negative
 Offer and Acceptance
• Legal Rules as to offer
• Offer should not bind the other party to reply
• Offer should be definite, unambiguous and certain
• Offer must be made to create legal relationship
• Invitation to offer is Not an offer
• Terms and Conditions communicated along with the offer.
 Contract Act 1872
Offer & acceptance of offer
• A asks B, the shopkeeper- “What is price of apple?”. B
says, “10 Rs. Kg.” Is there any valid contract between A
and B ?
Case analysis
• No contract between A and B
– When B says Rs. 10 Kg. It is
invitation to make an offer. It is
not an offer and therefore it can’t
be said as contract.
Contract Act 1872
Offer & acceptance of offer
• A offered to take a house on lease for a period of 3
years if the house was handsomely decorated. Is it valid
offer ? Why ?
Case analysis
• No it is not valid offer
– Offer to be valid must be certain
and unambiguous. The word
“handsomely decorated” is not
showing certainty. What should
be considered as handsomely
decorated is always questionable.
Contract Act 1872
Offer & acceptance of offer
• An auctioneer advertised in a newspaper that a sale of
office furniture would be held on a certain date. A
person, with the intention to buy furniture, came from a
distant place for the auction, but the auction was
cancelled. Can he file a suit against the auctioneer for
his loss of time and expenses ?
Case analysis
• Person can’t file suit for any loss
against auctioneer.
– Advertisement by auctioneer in
newspaper is an invitation to
make an offer. Hence it does not
create any obligation or
responsibility on part of
auctioneer.
 Classification Of Contract
• Express Contract
• Implied Contract
• Executed Contract
• Executory Contract
• Unilateral Contract: one sided
• Bilateral Contract
• Valid Contract
• Voidable Contract
 Void Vs Voidable
• Enforceability:
- a void contract is illegal and unenforceable
- a voidable contract is legal and enforceable.
Void Contract:
A contract can be void from the beginning or become void due to
certain circumstances, including:
• It involves illegal activity
• It is against public policy
• It is impossible to perform
• It involves a party who is not legally competent
 Void Vs Voidable
Voidable Contract:
• A voidable contract can still be performed under the law;
however, one party has the option to cancel the contract if
the contract has one or more legal defects, such as:
• Fraud or misrepresentation
• Terms are unconscionable
• Duress or undue influence
• Mutual mistake
Contract Act 1872
Offer & acceptance of offer
• A says to B - “I offer to sell my car to you for Rs. 2 Lakhs
and B accepts the offer by saying clearly “I accept your
offer”. Is it valid offer ? If so, which kind of offer it is ?
Case analysis
• Yes it is valid offer.
– It is express offer as it is carried
out by use of words. At the same
time, it can be said as specific
offer – Because A has made offer
to B, specific offer.
Contract Act 1872
Offer & acceptance of offer
• B makes to memories’ a proposal to his parrot and
sends him to A to recite the proposal. The parrot does
so. Is it valid proposal ?
Case analysis
• It is not valid proposal
– Proposal to be valid must be
certain and possible in the eye of
law. Parrot can’t speak.
Contract Act 1872
Offer & acceptance of offer
• A advertises in paper that any person who found his lost
dog can get a reward of Rs.5000. Can advertisement be
said as general offer/ unilateral ? If any person who
finds lost dog claim the reward money ?
Case analysis
• Yes, advertisement is general offer
– General offer is made to public at
large which can be accepted by
any one.
– Any person who found lost dog
can claim reward if he has
knowledge about the offer.
Person can’t accept the offer
without its knowledge.
 Assignment 1
• Explain using appropriate eg. Different types of Contracts on
the basis of
A. Mode of Formation
B. Performance
C. Validity or Enforceability
 Essential elements of a Valid Contract.

1. Proposal & Acceptance.

2. Consideration.
3. Capacity of parties to contract.
4. Free Consent.
5. Agreement should not be expressly
declared void.

55
 Continued

6. Writing & Registration, if so required by law.

7. Legal Relationship.
8. Certainity.
9. Possibility of Performance.
10. Enforceable by law.

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 Classification Of Offer
• Express offer
• Implied Offer: understood by the conduct of
parties and performance
• Specific Offer
• General Offer: world at large
• Cross Offer: Two parties make same offer
simultaneously in ignorance
• Continuous Offer/ open offer: a tender to supply
goods as and when required
• Counter Offer
 Essentials of Proposal

1. Beyond expression of willingness, there must be something in

the nature of a request.
2. Proposer cannot dictate terms.
3. An offer must be intended to create & capable of creating legal
relations.

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 Communication of proposals.

• The communication of a proposal is complete when it comes

to the knowledge of the person to whom it is made.
• Eg - A proposes, by letter, to sell a house to B at a certain price.
The communication of the proposal is complete when B
receives the letter.

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 Acceptance

• When one person to whom the proposal is made signifies his

assent thereto, the proposal is said to be accepted.
• Proposal when accepted becomes promise.
• The person making the proposal is called the Promisor and
person accepting the proposal becomes Promisee.

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 Essentials of Acceptance

1. Acceptance must be absolute and

unqualified.
2. It must be expressed in some usual &
reasonable manner.
3. Mental Acceptance is not sufficient in Law.
4. Acceptance must be communicated to the
offerer.
5. Acceptance must be by a certain person.
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6. Acceptance must be given within a
reasonable time.
7. Acceptance must be given before the offer
lapses or is revoked or is withdrawn.
8.Acceptance of proposal is acceptance of all
terms.

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Communication of an acceptance
The communication of an acceptance is
complete, -
as against the proposer, when it is put in a
course of transmission to him, so as to be
out of the power of the acceptor; as against
the acceptor, when it comes to the,
knowledge, of the proposer.
Eg : B accepts A's proposal by a letter sent by
post. The communication of the
acceptance is complete, as against A when
the letter is posted as against B, when the
letter is received by A. 63
 Revocation of proposals and acceptances

• A proposal may be revoked at any time before the

communication of its acceptance is complete as against the
proposer, but not afterwards.
• An acceptance may be revoked at any time before the
communication of the acceptance is complete as against the
acceptor, but not afterwards

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• Termination of offer
• By acceptance
• By rejection
• By revocation before acceptance
• Death
• Failure of condition attached to offer
Contract Act 1872
Offer & acceptance of offer
• Amar Posts a letter of offer to Kamla on 1st January
2011 which is received by kamla on 5th January 2011.
Kamla posts letter of acceptance to Amar on 12th
January 2011 which is received by Amar on 17th January
2011.
– When communication of offer is completed ?
– When Amar is bound by an acceptance ?
– When kamla is bound by an acceptance ?
Case analysis
• Communication of offer completed on 5th
January
– Communication of offer is said to be
completed when offer comes to
knowledge of offeree.
• Amar is bound by acceptance on 12th
January.
– Acceptance is bound to offeror when
the letter of acceptance is posted by
the offeree (i.e. 12th January)
• Kamla is bound by acceptance on 17th
January.
– Acceptance is bound to offeree when
the letter of acceptance is received by
the offeror. (i.e.17th January)
Contract Act 1872
Offer & acceptance of offer
• Further assume that Amar revokes his offer by posting a letter on 7th
January 2011, which is received by kamla on 13th January 2011.
– Is revocation of offer by Amar is binding on Kamla ?
– Would your answer be different in any manner if Kamla has received the said
letter on 11th January 2011 ?
• Further assume that if Kamla revokes her acceptance by posting letter
on 14th January 2011 which is received by Amar on 16th January 2011.
– Is revocation of letter of acceptance binding on Amar ?
– Would your answer be different if kamla revokes her acceptance by posting
letter on 18th January 2011?
Case analysis
• Revocation of offer by Amar is not binding on
Kamla as it is received to Kamla on 13th January.
– Kamla has accepted offer on 12th January. Once offer is
accepted, it becomes contract and there is no possibility
to withdraw offer.
• But if revocation of offer by Amar is received by
Kamla on 11th January:-
– Offer is considered as withdrawn. Letter of revocation of
offer is received by Kamla on 11th January before he has
accepted offer. Kamla has accepted offer on 12th January.
• Revocation of letter of acceptance is binding to
Amar.
• But if Kamla post her revocation of letter of
acceptance after she gets bound by acceptance,
it is not binding to Amar.
 Contractual capacity
• It is the capacity the law grants a person to perform valid acts
• Only the person with the required capacity may conclude
contracts
• Person who has Attained age of Majority
• Person who is of sound mind
• Person who is not qualified by law (Body Corporate or
Company or Corporation/ Alien/Insolvent/Convicted/Foreign
representative etc.)
 Contract Act 1872
Capacity & Consideration
• A, a Minor, entered into a contract for borrowing a sum
of Rs. 40,000 out of which lender paid him a sum of Rs.
18,000 A executed mortgage of property in favour of the
lender. Is mortgage of property valid ? Can lender
enforce contract ?
 Case analysis

• Mortgage of property is not valid in

favor of lender. Lender can’t
enforce contract against minor.
– Minor can’t be promisor. Any
agreement entered into by minor
is void ab-initio. Loan taken by
minor is void from the beginning.
Mortgage of property is created
as part of this agreement and
therefore it is not valid or
enforceable.
QUASI/CONSTRUCTIVE
CONTRACTS
• Based on Principle “Unjust enrichment of one person at the cost of another
person”
• Because of Obligations, parties enter into these Quasi contacts, not
because of their intentions
• Implied by laws: Defined in Sec. 68-72
– Sec. 68: Basic necessities supplied to a person incompetent to enter into a contract
(eg with a Minor)
– Sec. 69: Payment made by interested person/party
– Sec. 70: Payment of non-gratuitous (with consideration) act
– Sec. 71: Finder of lost goods/true owner
– Sec. 72: Payment made under mistake
Contract Act 1872
Capacity & Consideration
• Amit, 16 years of age, fractures his leg while playing
cricket. He goes to a doctor and gets his leg plastered.
The doctor demands a fees of Rs. 1,000/- but amit
refuses to pay on the ground that he is a minor. The
doctor files a suit against amit. Will the doctor succeed ?
Give reason.
 Case analysis
• Yes doctor has valid claim for his
service.
– Minor can enter into contract for
necessity. Medical services are
considered as necessity. But
doctor can’t claim anything
against minor but he can recover
it from property of minor if any.
– QUASI CONTRACT
Contract Act 1872
Capacity & Consideration
• Anurag promises to pay Rs. 11,000 to the management
committee of a school by way of donation. The
management committee on the basis of anurag’s
promise, gets a water purifier system installed in the
school at the cost of Rs. 8,000 on credit. Now, anurag
refuses to pay the donation. What is the remedy
available to management committee of the school? Give
reason.
 Case analysis

• The contract is binding on Anurag

– Gratuitous promise can’t be
enforced as it is without
consideration. But if the
promisee is put to some loss, as
a result of his citing on the faith
of the promisor and promisor
know the purpose, promisor
would be bound by promise.
Management committee has
undertaken liability on the faith
of anurag’s promise.
 Free Consent
"Free consent" - Consent is said to be free when
it is not caused by –
1) coercion,
2) undue influence
3) fraud,
4) misrepresentation,
5) mistake.
Consent is said to be so caused when it would
not have been given but for the existence of
such coercion, undue influence, fraud,
misrepresentation or mistake.
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 Coercion

Coercion is the committing, or threatening to

commit, any act forbidden by the Indian
Penal Code, or the unlawful detaining, or
threatening to detain, any property, to the
prejudice of any person whatever, with the
intention of causing any person to enter into
an agreement.
Eg - A, on board an English ship on the high seas,
causes B to enter into an agreement by an
act amounting to criminal intimidation under
the Indian Penal Code. 79
 Undue influence

A contract is said to be induced by "undue

influence” where the
relations subsisting between
the parties are such that one of the parties is
in a position to dominate the will of the other
and uses that position to obtain an unfair
advantage over the other.
Eg - A had given advance money to his son B during
his minority, upon B's coming of age obtains, by
misuse of parental influence, a bond from B for a
greater amount than the sum due in
respect of the advance. Here A employs undue
influence.

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 Fraud

"Fraud" means and includes any of the following

acts committed by a party to a contract, or with
his connivance, or by his agent, with intent to
deceive another party thereto of
his agent, or to induce him to enter into the
contract –

1) the suggestion, as a fact, of that which is

not true, by one who does not believe it to be
true; 81
 Continued
2) The active concealment of a fact by one
having knowledge or belief of the fact.
3) A promise made without any intention of
performing.
4) Any other act fitted to deceive;
5) Any such act or omission as the law
specially declares to be fraudulent.

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 Misrepresentation
"Misrepresentation" means and includes –
1) the positive assertion, in a manner not
warranted by the information of the person
making it, of that which is not true, though he
believes it to be true.
2) any breach, of duty which, without an intent
to deceive, gains an advantage to the person
committing it, or any one claiming under him,
by misleading another to his prejudice or to
the prejudice of any one claiming under him. 83
 Continued…
3) causing, however innocently, a party to an agreement to
make a mistake as to the substance of the thing which is the
subject of the agreement.

84
 THE LAW OF CONTRACT
• Mistake
It is a misunderstanding or misapprehension by one or both
parties regarding facts, events or circumstances in the contract
A mistake must be reasonable and it must concern material
facts regarding the contract
Types: unilateral, common, and mutual mistake
A mistake makes the contract void
 THE LAW OF CONTRACT
• Misrepresentation
• It is a false statement made by one party to induce the other to
enter into a contract
• The misrepresentation must: be a false statement of facts
• Be material
• Be made by the contracting party
• Be made with the intention of persuading the other party to
conclude the contract
• Be made in such a way that the other party believes the facts to be
represented and concludes the contract on the faith thereof
 THE LAW OF CONTRACT
• Kinds of misrepresentation
Fraudulent misrepresentation: if a person making the
statement knows that what he said is false, he will be liable for
fraud
Negligent misrepresentation: the person making the false
statement has reasonable grounds for believing it to be true
Innocent misrepresentation: is a false statement made by a
person who had reasonable grounds to believe that it was true,
up to when the contract was entered into.
 THE LAW OF CONTRACT
• Duress
• It is when a party to a contract or his family is subjected to threats
of violence
• The requirements are as follows: the fear must be reasonable
• The fear must be caused by a threat of considerable evil directed
at the contracting party or his family
• It must be a threat of immediate danger which cannot be averted
• The moral pressure exerted must cause damage
 THE LAW OF CONTRACT
• Undue influence
• It is a situation where the relationship between the two parties is such that one
occupies a position of dominance or influence over the other
• Such as doctor and patient, solicitor and client
• Requirements are as follows: one party obtains the influence over the other
• The influence weakens the other party’s resistance and renders his resolve
malleable
• The party exerting the influence uses his influence in an unscrupulous manner
• The influence leads to the conclusion of a contract, which is to the detriment of
the other party
Void Agreement and Contingent Contract
• When an object or consideration is Unlawful
 Forbidden by law
 Defeat the provisions of any law
 Creates injury to any person or property
 Consideration of agreement is fraudulent
 Contract Act 1872
Void agreement & Contingent Contract

• A enter into agreement on behalf of her minor daughter

that her daughter will act in adult movie. Is agreement
valid ? Why ?
Case analysis
• Agreement is void.
– Agreement which is immoral or
against public policy is void.
Agreement to act for adult movie
by minor is immoral.
Contract Act 1872
Void agreement & Contingent Contract

• A agrees to pay Rs. 20,000 to B if he produces false

evidence in his favour. Is it enforceable agreement ?
Why ?
Case analysis
• It is not enforceable agreement as
it is not valid agreement.
– Any agreement which is in
restraint of legal proceeding is
against the public policy and
therefore void. An agreement to
purchase witness is in restraint
of legal proceeding.
Contract Act 1872
Void agreement & Contingent Contract

• A agrees to sell his mobile phone to B if B pays Rs.

3000. Is it enforceable agreement ? Why ?
Case analysis
• Yes it is enforceable agreement.
– The said agreement satisfy all
the requirements of valid
contract and not included within
list of agreements declared by
government as void.
Contract Act 1872
Void agreement & Contingent Contract

• Point out with reasons whether the following agreements are valid or void:
(i) Kamala promises Ramesh to lend Rs. 50,000 in lieu of consideration that
Ramesh gets Kamala’s marriage dissolved and he himself marries her.
Void Agreement: As per Section 23 of the Indian Contract Act, 1872 an
agreement is void if the object or consideration is against the public policy.

(ii) Sohan agrees with Mohan to sell his black horse. Unknown to both the parties,
the horse was dead at the time of agreement.
Void Agreement: As per Section 20 of the Indian Contract Act, 1872 the contract
caused by mistake of fact are void. There is mistake of fact as to the existence of
subject-matter.

(iii) Ram sells the goodwill of his shop to Shyam for Rs. 4,00,000 and promises
not to carry on such business forever and anywhere in India.
Void agreement: As per Section 27 of the Indian Contract Act, 1872 an
agreement in restraint of trade is void. However, a buyer can put such a condition
on the seller of good will, not to carry on same business. However, the conditions
must be reasonable regarding the duration and the place of the business.
Case analysis
(iv) In an agreement between Prakash and
Girish, there is a condition that they will not
institute legal proceeding against each
other without consent..
Void agreement: An agreement in restraint
of legal proceedings is void as per Section
28 of the Indian Contract Act, 1872.

(v) Ramamurthy, who is a citizen of India,

enters into an agreement with an alien
friend.
Valid agreement: An agreement with alien friend is valid,
but an agreement with alien enemy is void.