An Insight Into the Blue Pencil Rule

Introduction - Taking into factor to consider the wide variety of clauses and terms in agreements, it is presumable that typically are they struck by some section of the Indian Contract Act, 1872 or other associated statutes. The concern then emerges whether such prohibited or objectionable part in the contract will render the whole agreement unenforceable.

 

Established in the case of Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co Ltd. (where "would not compete with Maxim in any method" was severed from "would not make weapons or ammo throughout the world, and would not take on Maxim in any way for a period of 25 years"), the Blue Pencil Rule says where severance is permitted, it must be possible merely to start out the angering parts, as though by running a blue pencil through irs whistleblower .

 

Etymology - The term 'blue-pencil' comes from publishing and stems from the act of an editor or a sub-editor making corrections or revisions to a written copy. The response to why 'Blue' is that the colour does not reveal in some lithographic or photographic reproduction procedures.

 

Principles Underlying and Conditions of the Test - According to heaven Pencil test, for a contract containing unenforceable arrangements in order to remain reliable, the following conditions are to be pleased:.

 

The unenforceable part of the arrangement can be gotten rid of without the need to contribute to (or customize) the continuing to be wording. The continuing to be guarantee is supported by sufficient consideration.


The elimination of the unenforceable part does not alter the character of the contract so that it becomes a various sort of agreement to the one that the parties concurred. Also, the Courts will not make a new contract for the celebrations by rewriting the existing contract or by altering its nature; will not rewrite or reorganize the contract; will not sever the unenforceable parts of a contract unless it accords with public law or where whole deal is specifically forbidden by a statute or includes serious immorality.

 

Application of the Rule - The rule discovers its application in a various legal arenas:.

 

Non-Compete Agreements are contracts in which the covenanter agrees for a particular period of time to refrain from competitors with the covenantee within a particular area. It is not controvertible that such non-compete contracts are nearly usually drafted in favor of companies wherein employees are restricted to work for business rival to the previous employer. In many jurisdictions, the Courts blue-pencil such unreasonable non-compete agreements as identified by multipart tests.

 

Arbitration - In a number of arbitration cases, the Courts have actually described that the Blue Pencil Rule applies to arbitration likewise and have actually put into use the stated rule. The Court said that the upsetting part as to the finality and restraint in approaching a court of law can be separated and severed by using a blue pencil.

 

General Contracts - Especially within the province of Section 23 of the ICA, the guideline can be used in basic agreements; for instance a contract of bailment with regard to gold and gems.
Legal Position in India - The legal position in India is no various. In Babasaheb Rahimsaheb v. Rajaram Raghunath and other cases, when the question about enforceability came up before the court, the Court utilized the rule to separate the unenforceable parts from the enforceable ones. When it comes to M/s. Parekh Brothers v.

 

Kartick Chandra Saha and Others, the Court observed that incorrect grammar or spelling might be corrected: words that are merely insensible or that are repugnant or that have actually been undoubtedly left in by error or that have actually been immaterial and surplus age and even entire arrangements might be rejected. But at the same time effect need to be given to every word which does not seem left in by error. Modifications can be done just when plainly needed to prevent absurdity, repugnancy or inconsistency.

Rejection of the Rule - Many Courts has promoted the guideline of 'Reasonableness' against the 'Blue-Pencil' guideline. It differs in that it enables modification and permits courts to fashion a contract affordable in between the parties, in accord with their intent at the time of contracting.

Latest News

  • The Blue Pencil Rule
  • Quality Standard
  • Non-Compete Agreements
  • General Contracts

The rule discovers its application

Non-Compete Agreements are contracts in which the covenanter agrees for a particular period of time to refrain from competitors with the covenantee within a particular area. It is not controvertible that such non-compete contracts are nearly usually drafted .