Consists of legal proposition(s) principle(s) (herein after referred to as 'principle') and facts. Such principle may or may not be true in the real and legal sense, yet you have to conclusively assume them to be true for the purposes of this Section. In other words, in answering these questions, you must not rely on any principle except the principles that are given herein below for every question.
Further, you must not assume any facts other than those stated in the question. The objective of this section is to test your interest towards study of law, research aptitude and problem-solving ability, even if the 'most reasonable conclusion' arrived at may be absurd or unacceptable for any other reason. It is not the objective of this section to test your knowledge of the law.
Therefore, to answer a question, the principle is to be applied to the given facts and to choose the most appropriate option.
Principle: Every agreement, by which any party is restricted absolutely from enforcing his right in respect of any contract, by the usual legal proceedings in the ordinary Tribunals, is void to that extent. The law also provides that nobody can confer jurisdiction to a civil court by an agreement between parties.
Facts: A and B entered into a valid contract for rendering certain services. A clause in the contract was that in case of any dispute arose out of the contract; it shall be referred to for Arbitration only. Is the contract valid?

The parties were trying to confer jurisdiction to some authority to decide a dispute and hence the clause would be invalid

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Arbitration is also a valid dispute settlement machinery recognized by law and hence the entire contract is valid

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The contract is valid but the clause regarding Arbitration is void

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Arbitrator cannot be termed as an ordinary Tribunal. Hence, the agreement is void and would be unenforceable

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Solution

The correct option is A Arbitration is also a valid dispute settlement machinery recognized by law and hence the entire contract is valid
Arbitration is also a valid dispute settlement machinery recognised by law and hence the entire contract is valid.
Arbitration is a procedure in which a dispute is submitted, by agreement of the parties, to one or more arbitrators who make a binding decision on the dispute. The parties opt for a private dispute resolution procedure (Arbitration) instead of going to court.
The contract between A and B provided that in case of a dispute, it would be resolved through an Arbitration only. The contract is valid because Arbitration is a valid dispute settlement means and sis recognised by the Indian legal system.

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