COMPARING INDIAN CONTRACT LAW AND ENGLISH CONTRACT LAW

INTRODUCTION

The Law of Contract is the most important branch of commercial law. How people trade among themselves, what obligations are applied on people if they do not obey their trade for which they agree with other, all these things are prefixed in the contract so both parties aware of the terms. It affects everybody, more so, trade, commerce, and industry. People live with each other for fulfilling their demand for resources. People usually trade among themselves for fulfilling their lack of resources that others have. The people want to trade in a fair and civilised manner. So, they make a prewritten document that prescribe the terms and condition for trade. This document is said a contract.

DIFFERENCES BETWEEN BRITISH LAW AND INDIAN CONTRACT LAW

Indian contract act is different from the British contract law in many factors. Many of them are as:-

Intention

In English contract law it is required from the side of parties that an offer or acceptance is to be made with intention of creating a legal relationship. It is important for parties who wish to form a legally binding contract must properly write down terms so there will be no disagreement as to the intention of parties.[1] While no provision is there for the same in Indian law. In an Indian contract, the intention of parties is to be ascertained from the term of the agreement and surrounding circumstances.

Exception to consideration

According to the Indian contact act, strangers to contract can’t sue in case of any breach. While in English law stranger to contract as well as a stranger to consideration both can’t sue in case of any breach.

Illustration: suppose there are three parties A, B and C. A offers to B sell is a pen. C promises to give 10 Rupees to A as consideration of his offer of selling the pen to B. Here A is a party to contract as well as a party to consideration.

B is a party of contract but a stranger to consideration (because B is a participant of contract but instead of him C is giving consideration C is stranger to contract but a party of consideration. Now if these are the facts if A refuse to give pen after taking consideration from C, then according to the Indian contact act only B(party to a contract) can sue for the breach of contract, C as a stranger to contract can’t sue A. but if this case is in English court then both stranger to contract and a stranger to consideration can’t sue.

The second condition is if the consideration is not given, then in the Indian context only A(a Party to the contract) can only sue against B (another party of contract) and according to British law also A can sue only B.

Capacity

English law has developed the Doctrine of restitution to deal with matters of minors unjustly enriched themselves. In Leslie (R) Ltd. v. Sheill, 1914[2], the court stated the three main points of this doctrine:

  • If a minor misrepresents his age, then the unjust enrichment can be restored as long as the same is traceable in his possession.
  • If a minor sold the good or converted them, then he cannot be made to repay for good, if it is done then it would amount to enforcing a void contract.
  • This doctrine is not applied in the case of minors benefitting from cash instead of goods. In India, this doctrine applies with a little modification.

In Mohoribibi v. Dharmodas Ghose[3], the court observed that Section 64[4] and section 65[5] of the Indian Contract Act which deals with the restoration of the benefits taken by a party in a voidable and void contract starts from the basis of there being a contract between competent parties, while in a minor’s case there never was and never could’ve been any contract. While in Khan Gul v Lakh a Singh[6]  case, the court observed that the doctrine of restitution would not be of any help unless it was extended in India to cover money cases also.

Acceptance

As we know for making a contract in postal mode, a contract is complete when a letter of acceptance is reached to the proposer. In the Indian contract act, chances are given to both parties to revoke the contract on their specific case. According to the Indian contract act[7]– If a proposer sends an offer letter to propose and then he can revoke it before it reaches to propose. Similarly, after getting an offer proposee after sending a letter of acceptance can revoke it before the letter of acceptance reaches to the proposer. According to English law, a proposer can revoke a letter of acceptance before reaching proposee, but in case of a letter of acceptance, the proposee have no right to revoke it once the letter of acceptance is sent.[8]

Limitation on liability

 According to Section 73 of the Indian Contract Act[9]: The party which bears the loss must show that such damage naturally arose in the usual course of things from the breach or was damage which the parties knew would be likely to result when they made the contract, to recover damages in breach of contract. It also says that if there is any breach of contract damages should not be given to indirect loss. While it is different in English law, according to the British sugar case[10], ‘consequential loss’ also has to be given when arises as a direct result of the breach of contract (indirect loss).

Liquidated Damages

English law draws a distinction between a valid liquidated damages provision and an invalid penalty clause, but the same is not distinguished in Indian law. Indeed Section 74[11] refers to both “a sum named in the contract as the amount to be paid in case of such breach”, and “any other stipulation by way of penalty”. It says that both liquidated damages and pen should be treated equally as in both cases a reasonable compensation is determined. Under English law, of course, any use of the expression ‘penalty clause’ is to be avoided in drafting due to fear of invalidity. According to English law, if parties agree for a pre-estimated sum for any breach of duty, the sum is awarded generally, if the act is clear then the plaintiff does not have to show any proof for it, but the plaintiff must show the legal injury, and the defendant can contend for reasonable compensation for claimant less than what is stated, however, it all depends on the court. Maula Bux v Union of India (1969)[12] and Oil & Natural Gas Corporation v Saw Pipes (2003)[13], are the cases in which the principle of liquidated damages applied. From these cases, we get an idea that liquidated damages provisions must be clearly drafted. The claimant ought to prepare to prove to the court the pre-estimated sum for recovery.

Conclusion

Indian contract act is a mixture of various contract laws which Brought to India for proper implementation of agreement among the parties. ICA is mainly made up of English law which is not written in any book. Britishers made the law according to the circumstances of Indian culture. The acumen of the maker is seen in the act as the act is still working in the best way after 148 years of its formation. The act maker tries to remove all the parts from the old contract law of their state which they think will not help in India. Indian contract law is still can be said as a good law but as time changes people changes. India is now not the one which it is before 150 years back. Now India is one of the important Nations of the world. The need for changes is required as India grow both population-wise and economically in this period. Also, as technology advances, the need of new laws related to the contract will be needed. Our government is working on it and will come up with the required legislation for the best of all.

Author(s) Name: Abhay Shankar Yadav (National University of Study and Research in Law, Ranchi)

References:

[1] Blue v Ashley (2017) EWHC 1928

[2]Leslie (R) Ltd. v Sheill [1914] 3 [KB] 607

[3]Mohoribibi v Dharmodas Ghose [1903] ILR 30 Cal 539 [PC]

[4]Indian Contract Act,1872, s 64

[5]Indian Contract Act,1872, s 65

[6]Khan Gul v Lakh a Singh AIR 1928, Lah 609

[7]Indian Contract Act,1872 , s 4

[8]Avtar Singh, Contract and Specific Relief(12th Edition Eastern Book company)

[9]Indian Contract Act,1872, s 72

[10]British sugar PLC v James Robertson and Sons (1996) EWHC 387(CH)

[11]Indian Contract Act,1872, s 74

[12]Maula Bux v Union of India1970, AIR 1955, SCR (1) 928

[13]Oil & Natural Gas Corporation v  Saw Pipes Ltd AIR 2003, SC 2629

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