Can a Contract Stop You From Going to Court?

What does Section 28 of the Indian Contract Act say?

Section 28 of the Indian Contract Act, 1872 provides that every agreement is void to the extent that it does one of two things. The first is restricting a party absolutely from enforcing rights under or in respect of a contract by the usual legal proceedings in the ordinary tribunals, or limiting the time within which the party may enforce those rights. The second, added by an amendment that took effect in 1997, is extinguishing the rights of a party, or discharging a party from liability, under or in respect of a contract on the expiry of a specified period, so as to restrict that party from enforcing its rights.

Note the words "to that extent". Section 28 does not usually make the whole contract void. It strikes out the offending restriction and leaves the rest of the agreement in place.

The section has exceptions. Exception 1 saves a contract to refer future disputes to arbitration. Exception 2 saves a contract in writing to refer existing questions to arbitration. Exception 3, added in 2012, saves certain guarantee terms used by banks and financial institutions. Referring a dispute to arbitration is choosing a forum, not removing the remedy.

Is a six-month deadline to bring a claim valid?

In commercial contracts the common form is a time-bar clause: any claim must be brought within six or twelve months of the event giving rise to it, failing which it is waived or the other party is released. That is much shorter than the ordinary limitation period.

The Limitation Act, 1963 supplies the ordinary periods. Article 55 of its Schedule gives three years for compensation for breach of contract, generally running from when the contract is broken. A clause compressing that period limits the time within which rights may be enforced, which is the first limb of Section 28.

Before 1997, Indian courts drew a fine distinction between clauses that merely shortened the time to sue, which were void, and clauses that extinguished the right itself after a period, which were often upheld. Insurance policies and contracts with government bodies frequently relied on the second kind. The 1997 amendment was designed to close that gap, so a clause saying that rights are extinguished if no claim is made within six months is now also caught, for contracts made after the amendment came into force.

A worked example

A Pune manufacturer subscribes to a SaaS inventory platform at ₹50,000 a month. The vendor's terms say that any claim must be made within six months of the event, failing which it is permanently waived. In month eight, the manufacturer discovers that the platform has been double-billing it for an add-on module since month one, a total of ₹1,60,000 in overcharges.

The vendor points to the six-month clause and refuses to refund anything older than six months. The manufacturer's position is that the clause limits the time to enforce its rights, and extinguishes rights on the expiry of a specified period, both of which Section 28 makes void to that extent. The ordinary three-year limitation period would then apply.

That argument has a good basis, but the safer course is not to rely on it alone. The manufacturer should notify the claim in writing immediately, within whatever contractual notice period still runs for the recent months, and take advice on the older ones. Whether a particular clause is caught depends on its exact wording and the facts.

What Section 28 does not catch

It is worth being clear about the limits. An arbitration clause is not caught, because Exceptions 1 and 2 preserve it. A clause requiring notice of a claim within a reasonable period, as a procedural step that does not destroy the right, is different from one extinguishing the right. Courts have generally been willing to enforce sensible notice requirements, though a notice clause drafted so narrowly that it operates as a time bar may be treated as one.

A clause selecting one of several courts that would otherwise have jurisdiction is generally treated as a choice of forum rather than a restraint. The Supreme Court in A.B.C. Laminart Pvt Ltd v. A.P. Agencies (1989) accepted that parties may agree to confine disputes to one of two or more courts that have jurisdiction, but cannot confer jurisdiction on a court that has none.

That distinction matters in practice, because exclusive jurisdiction clauses are extremely common in Indian contracts and are usually enforceable where the chosen court is one that would in any event have jurisdiction. The concern with such clauses is usually cost and travel, not validity.

Is a liability cap the same as a bar on going to court?

No, and the difference is important for anyone reviewing SaaS or vendor terms. A limitation of liability clause, such as one capping the vendor's total liability at the fees paid in the previous twelve months, does not stop you suing. It limits how much you can recover if you win. Section 28 is concerned with restraints on enforcing rights through legal proceedings and with time limits, not with the amount recoverable.

Liability caps and exclusions of indirect loss are therefore generally treated as ordinary commercial terms, open to negotiation, and they are commonly enforced between businesses. Their fairness is a commercial question: a cap of one month's fees on a platform that holds your customer data may leave you badly exposed, and that is worth negotiating on its own merits.

The two kinds of clause often appear together in the same section of standard terms, which is why they are easy to confuse. Read them separately. A cap you can live with is a business decision; a clause that extinguishes your claim after ninety days is a Section 28 question.

Where else these clauses show up

• Vendor and SaaS terms stating that all claims are waived unless notified within 30, 60 or 90 days.
• Terms providing that failure to object to an invoice within a few days waives all objections to it.
• Provisions purporting to bar a party from approaching any court or tribunal at all.
• Clauses requiring a claim to be notified in a specific form as a precondition, drafted so narrowly that ordinary notice fails.
• Insurance policies and older government contracts with claim windows, which have been the subject of much of the case law.
• Terms in consumer-facing agreements restricting recourse, which may also be challenged as unfair contract terms under the Consumer Protection Act, 2019.

What to ask for in negotiation

Ask for the clause to be removed, or for any time limit to track the ordinary limitation period rather than a shorter contractual one. In most negotiations this is a small ask, because the counterparty rarely has a strong reason for the compressed window beyond template habit.

If the other side wants prompt notice of problems for operational reasons, offer a notice clause that does not destroy the right. Sample wording: "Each party shall notify the other in writing of any claim within a reasonable time after becoming aware of it. Failure to give such notice shall not bar the claim, but may be taken into account in assessing any loss that could have been avoided by earlier notice. Nothing in this Agreement limits the period within which either party may enforce its rights under applicable law."

For invoice disputes, a common compromise is a 30-day window to raise queries on an invoice, with a statement that paying an invoice does not waive the right to dispute it later.

If a deadline in your contract is approaching

• Do not assume the clause is unenforceable and let time run. Treat the contractual deadline as real until an advocate has looked at it.
• Send a written notice of your claim within the contractual period, describing the problem and the amount, even if the details are incomplete.
• Follow any required form or address for notices exactly, and keep proof of delivery.
• If the contract has an arbitration clause, check any time limits for invoking it, and send a notice invoking arbitration where needed.
• Keep a note of the ordinary limitation period, generally three years for breach of contract, so you do not miss that either.
• Take advice on whether the clause is caught by Section 28, which depends on its wording, the date of the contract and the facts.