When the three Courts of Calcutta, Bombay and Madras were established, the English Common Law and statute law relating to contracts were introduced, suited to Indian conditions, by the Charters’ Application of English law to the Muslims and the Hindus, which led to many further inconveniences. To remove this difficulty and bring in uniformity, the statute of 1781 empowered the Supreme Court (the then Court of Calcutta) and the statute of 1797 the Recorders Court; i.e., Court of Bombay and Madras to determine all matters of contract in case of Muslims by the laws governing them and in case of Hindus by the laws and usages they follow. The effect of the statutes was to supercede English law so far as regards to the Hindus and the Muslims in case of contracts. In spite of bringing in these changes, by the Statutes of 1781 and 1799, the problems being faced were not effectively resolved. A comprehensive law was strongly felt to be necessary, especially in regard to contracts. Accordingly, the Indian Contract Bill was introduced in the legislature and eventually passed to give rise to The Indian Contract Act of 1872.
WHAT IS A CONTRACT?
In the terms of a layman, a contract means an agreement that is legally binding on the parties. An offer has to pass through the stages of promise, consideration, acceptance and agreement before it finally becomes a contract. The Law of Contracts is based on a Latin maxim, ‘pactasuntservanda’ which roughly translates to ‘agreements must be kept’. Contracts are an indispensable part of our everyday life and The Indian Contract Act,1872 helps protect the rights of the parties involved in the contract. It helps in carrying out the businesses smoothly and effectively and ensures the parties to receive the benefit of law on its breach.
With every contract, the parties enter into an agreement under which they are subjected to certain rights and duties which are legally enforceable by the court of law. If the provisions are breached/violated by any one of the party/parties, the other party/parties can file a suit in the court of competent jurisdiction (as provided under the Code of Civil Procedure) and claim the damages, if any. As such, the law of contracts is very important for any person in the society. The knowledge of contract laws, is very important so as to know the rights that have been bestowed to us by the Constitution and the remedies we can avail of in case of the breaches.
THE INDIAN CONTRACT ACT, 1872
The Indian Contract Act, 1872, lays down the basic framework under which all the contracts in India are legally bound. Presently, the Act is divided into two major parts – The First part deals with the General Principles of Contract (Sec 1-75); and the second part deals with the special kinds of contract which include the contracts of Indemnity and Guarantee; Bailment and pledge; and Agency. Each part deals with its respective issues as defined under their subsections and spells out the remedies in case of a breach in any one of its clauses. In the famous case of MohoriBibee V DharmadasGhose (1903) 30 Cal.539, where an agent of defendant advanced a sum of money to the plaintiff, an infant, who is incompetent to contract, against the mortgage of the property of the plaintiff, the court upheld the sections 10,11,2(g),2(h), and declared the contract void ab initio (from the very inception). It was on the basis that the parties were not competent to contract (Sec 11) and hence was not enforceable by law (Sec 2(h)).
Another requisite for a valid contract is free consent which is defined under Section 14, which reads, ‘Consent is said to be free, when it is not caused by 1) Coercion, 2) Undue influence, 3)Fraud,4)Misrepresentation,5)Mistake’. Thus, it lays down the clauses which defines each of the above and gives the recourses of law, to take, in case of a violation. In the case of Hi- Tech Gears Ltd. Vs Yogi Pharmacy Ltd. And Ors (1997), it was ruled that the agreement was not a contract as there was no free consent. Instead there was a proof of the use of coercion and undue influence, used by the petitioner as they were in a dominant position.
The basic objective, as such of the contract law is to ensure that the rights and obligations arising out of contracts are duly respected and honored, and that there are remedies available in the course of law to an aggrieved party against the guilty party.Thus, the knowledge of contract laws will help in understanding the rights that we are able to enjoy and the courses in law we can avail of in case we face a violation of the aforementioned rights. They help us maintain a dignified life in society where our rights are protected by the court of law.