Drafting a legal contract can sometimes result overlooking mistakes or including terms which may not be legally sound or even just inappropriate. Over the years, the Courts have tried to pacify trivial mistakes without abandoning the entire existence of the contract. This leads to the Doctrine of ‘Blue Pencil.
According to the Black Law Dictionary, the Doctrine of Blue Pencil is a judicial standard for deciding whether to invalidate the whole contract or only the offending word(s). Herein, only the offending words are invalidated if it would be possible to delete them simply by running a ‘blue pencil’ through them, contrary to changing, adding, or rearranging words.[1] In simple words, under this doctrine, only the offending/illegal words are omitted while retaining the contents of the rest of the document. The term ‘blue pencil’ finds its origin in censoring/cutting or editing a manuscript, etc.
The Indian law
Contracts in India have to be in accordance with the Indian Contract Act. In the case of the Doctrine of Blue Pencil, the following provisions are relevant:
Section 24 of the ICA
The section lays down that an agreement is void, if the considerations and objects in it are unlawful in part, which means that if any part of a single consideration for one or more objects, or any one or any part of any one of several considerations for a single object is unlawful, the agreement becomes void.
Section 57 of the ICA
The section states that where persons reciprocally promise, firstly to do certain things which are legal, and secondly, under specified circumstances, to do certain other things which are illegal, the part which is legal (first) becomes a binding contract while the rest is void.
Section 58 of the ICA
This section lays down that in the case of an alternative promise, if one branch of is legal and the other is illegal, the former alone can be enforced.
Section 24 is not absolute in nature especially in cases where parts of the contract are ‘separable’. Hence the cases which are capable of this separability are covered under section 57 and 58 of the Act. The provisions provide contractual recognition to only those promises in an agreement that are legal while other promises under the same agreements that are illegal are rendered void and therefore, not a contract within the meaning of the Act.
Different Approach to the Doctrine
The Doctrine can be applied in two forms. It is applied strictly which means that the Court strikes off the illegal/offending words from the contract while the rest of the content remains as is. On the other hand, the Doctrine is applied liberally when the Court rewrites the offending/illegal in such a manner so as to comply with the rest of the provisions without the element of illegality. Therefore, in the latter case, the Court interferes with the wording of the contract while in the previous case, only the disputed part of the contract is ‘blue-pencilled’.
Indian Judicial Pronouncements
1. Babasaheb Rahimsaheb v. Rajaram Raghunath[2]
This was the first case in India to give validity to the Blue Pencil Doctrine stating that “In an agreement if different clauses are separable, the fact that one clause is void, does not necessarily cause the other clauses to fail.”
Herein, the Court made a distinction that the sub-clause making the award final and conclusive was clearly separable from the main clause which made reference to arbitrator imperative. Thus, the same could be blue-pencilled without affecting the rest of the contract.
2. Beed District Central Co-op. Bank Ltd. v. State of Maharashtra[3]
The Supreme Court in this case held that “A contract will rarely be totally illegal or void and certain parts of it may be entirely lawful in themselves. The question therefore arises whether the illegal or void parts may be separated or ‘severed’ from the contract and the rest of the contract enforced without them.” The court upheld the Doctrine of Blue Pencil or that of Severability by distinguishing the illegal parts of the contract from the lawful ones.
3. E.P.I. of Cleveland, Inc. v. Basler[4]
In this case, the Court held that according to the Doctrine if Courts can render an unreasonable restraint reasonable by scratching out the offensive portions of the covenant, they should do so and then enforce the remainder. Traditionally, the doctrine is applicable only if the covenant in question is applicable, so that the unreasonable portions may be separated. Herein, the Court wilfully states the applicability of the Doctrine in cases only if the rest of the contract is appropriate.
4. Attwood v. Lamont[5]
One of the earliest judgments which mentioned ‘blue pencil’ simply stated that the severance of a clause can be effected when the part severed can be removed by running a blue pencil through it without affording the remaining part. The court here refers to the Doctrine in its ‘strict’ sense, wherein the rest of the contracts remains untouched and the illegal/offending portion is struck off.
5. Shin Satellite Public Co. Ltd. v. Jain Studios Ltd.[6]
This is one of the landmark judgements in the sphere of Doctrine of Blue Pencil. The Court in this held that the proper test for deciding validity or otherwise of an agreement or order is ‘substantial severability’ and not ‘textual divisibility’. Further, it is the duty of the Court to sever and separate trivial or technical parts by retaining the main or substantial part and by giving effect to the latter if it is legal, lawful and otherwise enforceable. In such cases, the Court must consider the question whether the parties could have agreed to the terms of the contract if they were in the knowledge that the other terms were illegal/unlawful. If yes, then the doctrine of severability would apply and the valid terms of the agreement could be enforced by blue-pencilling/editing out the invalid terms.
An important element in this judgement is the caution that the Court put forth which is to ensure that the contract retains its essential elements even after the removal of the alleged illegal/offending words. The Court commented that throwing away the whole contract for a trivial line in the contract would be tantamount to ‘throwing the baby away with the bathwater’.
6. Afcons Infrastructure Ltd. v. Rail Vikas Nigam Limited[7]
The Delhi High Court in this reiterated that the Blue Pencil Doctrine (or the doctrine of severability) would apply to cross out (by running a blue pencil across) that part of the contract, which is invalid and unenforceable without affecting the other part of the contract. It is also trite law that only that part, which is void or unenforceable (and no more) would be deleted in order to save the validity of the contract, without affecting the substantial bargain between the parties. Under the Blue Pencil Doctrine, it is only the bare minimum, which is necessary to make the contract reasonable, is to be deleted or ignored.
7. Halsbury's Laws of England[8]
It has been observed that a contract will rarely be totally illegal or void and certain parts of it may substantively remain lawful in themselves. The question, therefore, arises whether the illegal or void parts may be separated or ‘severed’ from the contract and the rest of the contract can be enforced without the dead part.
8. Beckett Investment Management Ltd & Ors v Glyn Hall & Ors[9]
In this case, the Court laid down a 3-fold test which should be applied in order to see the applicability of the blue pencil rule.
(a) The unenforceable provision can be severed without the necessity of adding or modifying the wording of what remains.
(b) The remaining terms continue to be supported by adequate consideration.
(c) The severance of the unenforceable provisions does not distort the parties' bargain so much that it materially differs from the contract the parties entered into.
Conclusion
It can be reasonably concluded that the Doctrine is a saviour in cases of large contracts which may have trivialities which have been overlooked by the drafter while the rest of the contract remains sacrosanct. However, caution should be measured while using the Doctrine liberally so as to not damage the essence of any legal contract.
[1] Black’s Law Dictionary, 9th Edition [2] (1931) 33 BOMLR 260 [3] (2006) 8 SCC 514 [4] 230 N.E.2d 552 [5] (1920) 3 KB 571 [6] (2006) 2 SCC 628 [7] 2017 SCC OnLine Del 8675 [8] (4th Edn, Vol. 9) in para 430 [9] [2007] EWCA Civ 613
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