Question

An agreement in restraint to legal proceedings is void. It does not cover an agreement which ________________.

• A. restricts absolutely the parties from enforcing their legal rights
• B. cuts short the period of limitation
• C. discharges a party from liability or extinguishes the rights of a party
• D. provides for a reference to arbitration instead of court of law

Answer 1

Answer: (D)

provides for a reference to arbitration instead of court of law

Section 28 of the Indian Contract Act, 1872 states that an agreement which prevents a person from enforcing his legal rights in the court of law is void. But exception 1 to the provision states that parties to contract agree that in case of dispute it is referred to arbitration and not court, such agreement is valid. Arbitration is only an alternative way of resolving disputes and thus enforcing legal rights. The Arbitration and Conciliation Act of India also allows such resolution through an arbitration clause and excludes all jurisdiction of courts.