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It is a. well settled principle of Contract Law that parties cannot by contract…

CLAT 2021 · Legal Reasoning · 5 questions

It is a. well settled principle of Contract Law that parties cannot by contract exclude the jurisdiction of all courts. Such a contract would constitute an agreement in restraint of legal proceedings and contravene Section 28 of the Indian Contract Act, 1872. However, where parties to a contract confer jurisdiction on one amongst multiple courts having proper jurisdiction, to the exclusion of all other courts, the parties cannot be said to have ousted the jurisdiction of all courts. Such a contract is valid and will bind the parties to a civil action. Section 28. Agreements in restraint of legal proceedings, void-Every agreement, (a) by which any party thereto is restricted absolutely from enforcing his rights under or in respect of any contract, by the usual legal proceedings in the ordinary tribunals, or which limits the time within which he may thus enforce his rights; or (b) Which extinguishes the rights of any party thereto, or discharges any party thereto, from any liability, under or in respect of any contract on the expiry of a specified period so as to restrict any party from enforcing his rights, is void to the extent. Parties cannot by agreement confer jurisdiction on a court which lacks the jurisdiction to adjudicate. But where several courts would have jurisdiction to try the subject matter of the dispute, they can stipulate that a suit be brought exclusively before one of the several courts, to the exclusion of the others,

Question 1

'A', a resident of Mumbai, and 'B' a resident of Delhi, enter into an agreement for sale and supply of goods. The transaction takes place partly in Mumbai and partly in Delhi. There is a clause in the agreement which stipulates that in the event of a dispute between 'A' and 'B', the courts in Kolkata would have exclusive jurisdiction to decide the dispute. 'A' and 'B' agreed to the said clause in order to avoid dispute over choice between the two proper places of jurisdiction- Mumbai and Delhi. In the given situation, which of the following statements is true?
  1. A. The clause relating to jurisdiction is in restraint of legal proceedings.
  2. B. The clause relating to jurisdiction is not in restraint of legal proceedings.
  3. C. The clause relating to jurisdiction is valid as 'A' and 'B' have mutually agreed to the same.
  4. D. The clause relating to jurisdiction is valid as its object is lawful.

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Question 2

'A' a resident of Chennai, and 'B' a resident of Bengaluru, enter into an agreement for sale and supply of goods. The transaction takes place partly in Chennai and partly in Bengaluru. There is a clause in the agreement which stipulates that in the event of a dispute between 'A' and 'B', the courts in Chennai would have exclusive jurisdiction to decide the dispute. 'A' and 'B' agreed to the said clause in order to avoid dispute over choice between the two proper places of jurisdiction- Chennai and Bengaluru. In the given situation, which of the following statements is true?
  1. A. The clause relating to jurisdiction is in restraint of legal proceedings.
  2. B. The clause relating to jurisdiction is void.
  3. C. The clause relating to jurisdiction is valid as 'A' and 'B' have mutually agreed to the same.
  4. D. The clause relating to jurisdiction is valid as courts in Chennai have jurisdiction to decide the dispute.

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Question 3

'A', a resident of Agra, and 'B', a resident of Bhubaneswar, enter into an agreement for sale and supply of goods. The transaction takes place partly in Agra and partly in Bhubaneswar. There is a clause in the agreement which stipulates that in the event of a dispute between 'A' and 'B', neither of them can approach the court of law or take recourse to any alternative dispute resolution mechanism to settle the dispute. In the given situation, which of the following statements is true?
  1. A. The clause relating to jurisdiction is not valid as it is in restraint of legal proceedings.
  2. B. The clause relating to jurisdiction is not valid as the clause is vague and ambiguous.
  3. C. The clause relating to jurisdiction is valid as they have not restricted the choice of either party regarding choice of jurisdiction.
  4. D. The clause relating to jurisdiction is valid as no court's has been ousted by the clause.

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Question 4

'A', a resident of Ahmedabad, and 'B' resident of Ranchi, enter into an agreement for sale and supply of goods. The transaction takes place partly in Ahmedabad and partly in Ranchi. Clause 6 of the agreement stipulates that in the event of a dispute arising between 'A' and 'B' within six months of the entering into contract, they can approach a court in either Ahmedabad or Ranchi (as both are proper places of jurisdiction), or take recourse to any alternative dispute resolution mechanism to settle the dispute. Clause 7 of the agreement stipulates that in the event of a dispute arising between 'A' and 'B' after the expiry of six months of entering into contract, the courts in Chennai would have exclusive jurisdiction to decide the dispute. In the given situation, which of the following statements is true?
  1. A. Clause 6 is void and Clause 7 is valid.
  2. B. Clause 6 is valid and Clause 7 is void.
  3. C. Both Clause 6 and Clause 7 are valid.
  4. D. Both Clause 6 and Clause 7 are void.

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Question 5

According to the given passage, which of the following statements is true?
  1. A. Parties cannot by contract make a choice of jurisdiction.
  2. B. Parties cannot by contract exclude the jurisdiction of all courts.
  3. C. Parties can by contract confer jurisdiction on any court.
  4. D. Parties can by contract extinguish their rights under any contract.

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