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.
‘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?
Correct Answer :
The clause relating to jurisdiction is valid as courts in Chennai have jurisdiction to decide the dispute.
Solution :
Correct Answer: The clause relating to jurisdiction is valid as courts in Chennai have jurisdiction to decide the dispute.
Step-by-Step Explanation:
1. Understanding the Legal Principle:
According to Section 28 of the Indian Contract Act, 1872, agreements that absolutely restrict a party from enforcing their legal rights through ordinary tribunals are void. Therefore, parties cannot completely oust or exclude the jurisdiction of all courts by an agreement.
2. Application to Multiple Competent Courts:
However, as highlighted in the passage, parties cannot confer jurisdiction on a court that naturally lacks jurisdiction. But when multiple courts have competent jurisdiction to try a dispute (such as the place where cause of action arises or where parties reside), parties can legally agree to exclude all other competent courts and confer exclusive jurisdiction on one specific court among them.
3. Analyzing the Situation:
- 'A' resides in Chennai and 'B' resides in Bengaluru.
- The transaction took place partly in Chennai and partly in Bengaluru.
- Therefore, both the courts in Chennai and Bengaluru naturally possess proper jurisdiction to adjudicate the dispute.
- The clause selects the courts in Chennai to have exclusive jurisdiction, excluding Bengaluru courts.
4. Conclusion:
Since Chennai courts already possess natural jurisdiction over the subject matter (as part of the transaction took place in Chennai), the agreement to restrict dispute resolution exclusively to Chennai courts does not oust the jurisdiction of all courts, nor does it create jurisdiction where none existed. Hence, the jurisdiction clause is legal, valid, and binding upon the parties.
Access expert-curated educational resources and study materials—completely free.
Create, conduct, and manage professional online assessments with Mindyard. Perfect for teachers and institutes.
Copyright © 2026 Mindyard. All Rights Reserved.
