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BLUE PENCIL RULE-CONCEPT OF SERIOUSNESS

BLUE PENCIL RULE-CONCEPT OF SERIOUSNESS



WHAT IS‘BLUE PENCIL’ RULE?

According to the Oxford Dictionary of English, blue pencil means to censor or cut a manuscript, film, or other work. Blue pencil was previously used by editors to improve copy.

According to Black's Law Dictionary, the Doctrine of Blue Pencil is a judicial standard to decide whether to invalidate the entire contract or just objectionable terms. Under this standard, only offensive words are invalidated if it is possible to remove them by running a blue pencil through them, as if to change, add, or reorder words. The Blue Pencil Rule only allows courts to eliminate the offending provisions and enforce the rest of the agreement.

 


SCOPE OF BLUE PENCIL RULE

·        The general rule of contract law is that illegal parts of a contract are illegal and therefore inaccessible. But many contracts are in the form of a part or a clause which are illegal and legal as the rest of the other parts.

 

 

·        In such cases, the court attacks the illegal part and enforces it legally when the parts are serious. This is known as the concept of seriousness. "This is done when the rest of the contract affects the intention of the parties."

 

 

·        THE DOCTRINE OF SOLEMNITY has created some problems, that is, it does not give the court the power to modify a restrictive covenant in its jurisdiction.

 

 

·        2 Based on the doctrine of solemnity, a new concept was developed in 1843 in the case of Mallan v. May. Which later came to be known as Blue Pencil. The Blue Pencil Principle is mostly applied in cases where a non-settlement agreement is a matter of dispute.

 

 

·        Any contract in moderation of business is void. But courts have begun to take different approaches and validate such contracts when appropriate. If a section is overbroad, the court drops the part down by running a blue pencil. Under the Blue Pencil rule, the first way is to read the separable improper clauses of the contract and then separate the part by running a blue pencil over it. The courts had widened the scope of application of the blue pencil rule by rewriting the overbridge clauses.

 

 

·        The blue pencil rule can only be "applied" if the valid stipend is not affected by the illegality of the other part then the valid part remains intact.

 

 

·        "In Halesbury's Law of England (4th ed. Vol.9), p.297, para 430, it is stated that a contract will rarely be completely invalid or void and parts of it in itself are completely Can be legalized from. Hence the question arises as to whether illegal or void parts can be separated or 'severed' from the contract and the rest of the contracts are enforced without them. Almost all cases arise in the context of restraint of business but the following principles apply to contracts in general.

 

·        Courts have begun to use the blue pencil test in contracts whereby courts can strike a portion of non-reasonable covenants to justify the covenant. This was done to enforce an unattainable covenant.

 

APPLICATION OF BLUE PENCIL RULE IN INDIA

·        The Indian Contract Act, 1872 provides that any part of an idea or object is unlawful, and then the contract becomes void. This section also includes the application of the Blue Pencil Rule.

 

·        In the case of Babasaheb Rahismaheb v. Rajaram Raghunath. The court noted the application of blue pencil in Indian contracts and stated that "if different clauses in an agreement are different, the fact that one clause is void does not necessarily fail the other clause" . The court has applied this principle, stating that "The sub-clause making the award final and conclusive was clearly different from the main clause which was made in the context of the arbitral arbitrator. The sub-clause or the fact that the sub- Existence of clause. The nullity does not seem to affect the parties' right to arbitrate in any way and does not refer to any alternative remedy to the arbitrator.

 

·        D.S. Akara Vs Union of in India The principle of seriousness was applied so that the beneficial part of the related memorandum could be maintained and applied to the pensioners irrespective of the date of their retirement.

 

·        In India, the blue pencil principle applies not only to covenants dealing with trade restraints or unlawful covenants, but also to arbitration clauses.

 

·        Sunil Kumar Singhal and another v. Vinod Kuma it was held, The objectionable part in the arbitration clause can be distinguished or marked with a blue pencil. Courts have applied this principle to contracts where some clause was unnecessary, contrary to public policy, and unnecessary. The court stated that if the contract for the sale of property with eight flats is illegal and the rules and master plans Unlike construction, the agreement is enforceable for the sale of property with a small number of flats, if permitted.

 

·        In the case of Jain Studios Ltd. Vs Shin Satellite Public Company Ltd., the Supreme Court held that "the proper test is 'sufficient seriousness' to decide the validity or any agreement or order and not a 'textual division'". For the technical part to solemn or sever the duty of the court or to maintain the main or substantial part and to give effect to it later legal, lawful and otherwise applicable. In such cases, the court should consider the question whether the parties. Valid terms of the agreement could be agreed upon, they knew that the other terms were invalid or unlawful. If the answer to the said question is affirmative, then the principle of seriousness will apply and valid terms of agreement can be applied.

 

 

 

DOCTRINE OF BLUE PENCIL RULE IN COMMON LAW COUNTRIES

The blue pencil doctrine is a legal concept in common law countries, where a court finds that portions of a contract is void or unenforceable, but other portions of the contract are enforceable. The Blue Pencil Rule allows the legally-valid, enforceable provisions of the contract to stand despite the nullification of the legally-void, unenforceable provisions. However, the revised version must represent the original meaning; the rule may not be invoked, for example, to delete the word "not" and thereby change a negative to a positive.

A contract will rarely be totally illegal or void and certain parts of it may be entirely lawful in themselves. Therefore, the question that arises is whether the illegal or void parts may be separated or severed from the contract and rest of the contract enforced without them.

 

The general rule as regards severability was recognised in Pickering vs. Ilfracombe Railway co. (1868) LR 3 CP 235as  “ .. where you cannot sever the illegal from the legal part of a covenant, the contract is altogether void; but where you can sever them, whether the illegality be created by statute or by common law, you may reject  the bad part and retain the good”

 

In Carney vs. Herbert (1985) AC 301 the court laid down two principles as regards the doctrine of severance:

·        the court will not make a new contract for the parties by re-writing the existing contract or by basically altering the nature; and

·        the courts will not sever unenforceable parts of a contract unless it accords with the policy to do so.

 

 

IN UK LAW

·        The principle was established by the House of Lords in the case of Nordenfelt v Maxim, Nordenfelt Guns and Ammunition Co (1894).

·        Other statutory provisions such as the Sale of Goods Act 1979 and the Unfair Terms in Consumer Contracts Regulations 1999 have established the Blue Pencil principle in statute law.

·        In Rose & Frank Co v JR Crompton & Bros Ltd, the Blue Pencil Rule was used to strike out an unacceptable clause in a memorandum of understanding agreement which appeared to try to exclude the jurisdiction of the courts. The unenforceable part having been excised, the remainder of the agreement was valid, and served to establish that the MOU agreement was not intended by the parties to be binding at law.

·        The Blue-Pencil Rule allows legally valid, enforceable provisions to stand even if legally void, unenforceable provisions are void. However, the caveat is that the revised version represents the original meaning; The rule cannot be applied, for example, to remove the word "no" and thereby turn a negative into a positive one.

 



INDIAN CONTRACT LAW REGIME:

A PART OF THE IDEA / OBJECT OF A CONTRACT IS ILLEGAL AND UNLAWFUL, NULLIFYING THE ENTIRE AGREEMENT. THIS IS A CLEAR MANDATE OF SECTION 24 OF THE INDIAN CONTRACT ACT, 1872 ("ICA").

 

·        SECTION 24 AGREEMENTS are void, if ideas and objects are unlawful. - If any idea is invalid for one or more objects or any one or any one or any part of one idea for any one object, the agreement is void. "

 

·        Illustration: A promise to the Superintendent on behalf of B, A legal manufacturer of indigo, and an illegal traffic in other articles. B promises A a salary of Rs 10,000 per year to A. This agreement is void, the purpose of A's promise, and the consideration for B's promise is illegal.

 

However, is not a complete offer and without exception. In the above parable, good (legal) cannot be distinguished from bad (illegal) because they are so spontaneously interlinked.

 


THE RANGE OF CASES THAT CAN BE CONSIDERED TRULY SERIOUS AND, THEREFORE, CASES CAPABLE OF BEING BLUE-PENCILED, INCLUDE U / S 57 OF THE INDIAN CONTRACT ACT. THE ILLUSTRATION ATTACHED TO THE SECTION IS INSTRUCTIVE IN THIS REGARD:


·        SECTION 57 IS AS FOLLOWS:

Mutually promised to make things legal, and other things also illegal. - Where individuals mutually promise, firstly to do certain things which are legal, and secondly, under specified circumstances, to do certain other things which are unlawful. Promises are one contract, but the other is a void agreement.

 

Illustration :A and B agrees that A will sell B a house for Rs 10,000, but if B uses it as a gambling house, he will pay A 50,000 for it. . The first set of mutual promises, namely, to sell the house and pay Rs 10,000 for it, is a contract. The second set is for an unlawful item, namely, that B can use the house as a house of gambling, and there is a null agreement.


llustration, and an example of the inclusion of the 'Blue Pencil Rule' within the statute, can be found in section 58 of the ICA, which states:

 

Section: 5 Alternative promise, one branch illegal: In the case of an alternative promise, one branch of which is legal and the other illegal, the legal branch alone can be enforced.

 

Example: A and B agree that A will pay B Rs 1,000, for which B will later deliver rice or smuggled opium to A. It is a valid contract to distribute rice, and a void agreement for opium.

 


OBVIOUS CASES OF SERIOUS POTENTIAL, AREN'T THEY?

·        In addition to the above, the blue-pencil rule is most often applied in cases of 'agreements dealing with restrictions on trade, occupation and profession'; Or in the modern parliament 'non-competition agreements', where a restraint that is clearly unlawful is suitably excused for and affects the rest of the contract.

 

·         In fact, the blue pencil rule is very lenient to cases where employers have attempted to impose unfair restrictions on employees / ex-employees / good-sellers, etc., and the courts have worked out a balance, and Well separated and defended.

 

 

POSSIBLY, THE FIRST REPORTED CASE ON BLUE-PENCIL IS THE LANDMARK CASE — NORDENFELT V MAXIM, NORDENFELT GUNS AND AMMUNITION CO (HOUSE OF LORDS).

·        The facts of the case are very simple: Nordenfelt, a manufacturer specializing in armament manufacturing, sold its business to Hiram Stevens Maxim. They agreed that Nordenfelt 'would not manufacture guns or ammunition anywhere in the world, and would not compete in any way with Maxim for a period of 25 years'.

 

·        The House of Lords, in relation to the fact that Nordenfelt had received a handsome sum for sale, did not find the entire ban to be bad. Saying that, the Court found the latter of the ban unfair and set it aside to read: "For the next 25 years, no guns or ammunition will be produced anywhere in the world." And will not compete with Maxim in any way ”. The latter part is very wide-brushed / all-encompassing and is, therefore, an unreasonable restriction.

 

·        In another popular decision (Rose & Frank CO v JR Crompton & Brothers Ltd), the Blue Pencil Rule was invited to implement an unacceptable clause in a Memorandum of Understanding, which operated to exclude the jurisdiction of the courts.

 

 

·        In the case of Shin Satellite Public Company Limited v. Jain Studios Limited, (2006 SC),the Indian SC expanded slightly on the principle.

 

LIMITATION

While doing so, the Court recognized the limitations of this rule: the contract would have to be terminated with caution (lest the courts be accused of bargaining). Only if capable Sustainability 'is potentially possible and able to survive after a surgical operation, should this exercise of running a blue pencil be undertaken.

 

The court said: "The proper test to decide the validity or any agreement or order is 'sufficient seriousness' and not merely 'textual division'. It is the duty of the court to uphold the main or substantial part and subsequently When it is legal, valid and otherwise enforceable, separate the effective and trivial or technical part.

 



WHEN ASKED TO CHOOSE A SCALPEL OR BLUE PENCIL TO EXCISE / CUT-OFF A PORTION OF THE CONTRACT, (THE COURT MAY BE GUIDED BY THE FOLLOWING CONSIDERATION, WHICH ARE NOW WELL ESTABLISHED):

 

A) Inaccessible provision can be set aside without the need to add or amend the wording of what remains. (Ideas not being cut-off and re-written or modified).

 

(B) The seriousness of the inaccessible provisions does not so distort the bargaining of the parties that it materially diverges from the contract that was entered into ("does not change the character of the contract so much that it does not become the type of contract that all Entered parties ”).

(C) The court cannot overcome the very heart and soul of the contract under the guise of the blue pencil rule. Only one organ can be disjoint, not the heart and brain!

 

(D) The contract, post-surgical operation, must have been a party that, acting as a people of general discretion, must have entered (even struck out with the offending part).


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