ASSIGNMENT ON CONTRACT

A study of the salient features of the contract law in

India

SUBJECT
Contract-I

SUBMITTED BY

Name: Shantam Basu

Roll no.: 92

1ST Semester (3 Year LLB Course)

UNDER THE SUPERVISION OF

Prof. Mr. Bhaskar Choudhury
 ASSIGNMENT ON CONTRACT

A study of the salient features of the contract law in

India

SUBJECT
Contract-I

SUBMITTED BY

Name: Shantam Basu

Roll no.: 115

1ST Semester (3 Year LLB Course)

UNDER THE SUPERVISION OF

Prof. Mr. Bhaskar Choudhury
A study of the salient features of the contract law in
India

Assignment submitted in fulfilment of the requirement of

submitting one assignment for the assessment of core course:
“Contract-I” in the first semester of the degree of 3-year LLB,
Indian Institute of Legal Studies, Darjeeling

Submitted by

Name: Shantam Basu

Roll no.: 92
Semester: 1st
Course name: Contract-I
Under supervision of: Prof. Mr. Bhaskar Choudhury
A study of the salient features of the contract law in
India

Assignment submitted in fulfilment of the requirement of

submitting one assignment for the assessment of core course:
“Contract-I” in the first semester of the degree of 3-year LLB,
Indian Institute of Legal Studies, Darjeeling

Submitted by

Name: Shantam Basu

Roll no.: 115
Semester: 1st
Course name: Contract-I
Under supervision of: Prof. Mr. Bhaskar Choudhury
 ACKNOWLEDGEMENT

At first, I would like to thank my guide Prof. Mr. Bhaskar Choudhury for helping me
implement the information with the necessary guidance in my assignment titled “A study of
the salient features of the contract law in India”. My guide has used her experience that
she has gathered from his/her teaching career to help me write this assignment. I would like
to thank further the principal of my college Prof. (Dr.) Pradeepta Kishore Sahoo and other
teaching and non-teaching staff who have lent me their valuable time and assistance and
inspired me to complete my assignment. Without their valuable inputs and help I would not
have been able to complete this task within the given time.
 Table of contents

1. List of cases………………………………………………………………………….Page 1
2. List of abbreviations…………………………………………………………………Page 2
3. Introduction…………………………………………………………………………Page 3-6
4. Conceptual context…………………………………………………………………Page 7-8
5. Analysis…………………………………………………………………………....Page 9-12
6. Conclusion and suggestion…………………………………………………….…Page 13-15
7. Bibliography…………………………………………………………………………Page 16
 LIST OF CASES
Satyabrata Ghose v. Mugneeram Bangur & Co., AIR 1954 SC 44
Tata Engineering and Locomotive Co. Ltd. v. John Francis D'Costa, AIR 2001 SC 1302
Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, AIR 1979 SC 621
Union of India v. Raman Iron Foundry, AIR 1974 SC 1264
N. Radhakrishnan v. Maestro Engineers, AIR 2010 SC 1860
Dharani Sugars and Chemicals Ltd. v. Union of India, AIR 2007 SC 2120
Steel Authority of India Ltd. v. Gupta Brother Steel Tubes Ltd., AIR 2009 SC 688
 LIST OF ABBREVIATIONS

ADR: Alternative Dispute Redressal

AIR: All India Reporter
SC: Supreme Court
 INTRODUCTION
Contract law is a fundamental component of any legal system, providing a framework for
individuals and businesses to enter into binding agreements. In India, contract law has a rich
historical background that has evolved over centuries, shaping the way commercial
transactions and personal agreements are conducted and enforced in the country. We will
delve into the introduction and historical development of contract law in India, tracing its
evolution from ancient times to the present day as follows:

Ancient India: Contract law in India finds its roots in the ancient legal systems of the
subcontinent. Ancient texts such as the Manusmriti and the Arthashastra contained provisions
that recognized the importance of contracts and trade. In these texts, various forms of
contracts, such as loans, sales, and partnerships, were discussed, along with principles of
fairness and enforcement.

British Colonial Influence: The modern Indian contract law owes much of its structure to
British colonial rule, which lasted for nearly two centuries. During this period, the British
introduced common law principles and the English legal system to India. In 1872, the Indian
Contract Act was enacted, which served as the foundational legislation for contract law in
India. It was based largely on English contract law and aimed to provide a uniform legal
framework for contract formation, performance, and enforcement throughout the country.

The Indian Contract Act, 18721: The Indian Contract Act, 1872, remains the cornerstone of
contract law in India. It defines and regulates contracts, laying down the essential elements of
a valid contract, such as offer, acceptance, consideration, and legality of purpose.
Additionally, it contains provisions that deal with various types of contracts, including
contracts of guarantee, indemnity, bailment, and agency. The Act has undergone several
amendments over the years to adapt to changing societal and economic conditions. The
Indian Contract Act as applied today's was drafted originally by the third Indian Law
Commission in the year 1861 in England. The Indian Contract Bill tried to defined laws
relating to Contracts, Sale of movable properties, Indemnity, Guarantee, Agency, Partnership
and bailment.
1. Indian Contract Act, 1872, Acts of Parliament, 1872 (United Kingdom)
The bill was not the complete law of contract, but the aim of the bill was to suffice the need
of the country for a considerable period of time and during that period, judges of the courts
were taking the help of English laws in determining the case when they failed to arrive at the
judgments by considering the justice, equip and good conscience. once a person made a
promise he has to perform it the last day of your life.

Though it may seem that a rigid principle like this would make sense, some exceptions have
to be provided or else it would be a gross injustice to the community. Even with the vice-like
this, the contract law came into effect. The drafter of the bill knew that different religious
people followed personal laws and for them it will be difficult to abide the new rules so that
the special customs of the personal laws governing any aspect of the contractual relationship
would not be affected by new rules, unless or until they are nit contrary to the new rules.

The act came into effect in 1872 but soon afterwards amendments were made in that regard,
which repealed section 76 to 123 dealing with the sales of goods act and separate legislations
were enacted called Sales of Goods Act 1930' to govern that area. Also, section 239 to 266
dealing with partnership was repealed and new legislation was enacted called Indian
Partnership Act 1932.

Post-Independence Era: After gaining independence in 1947, India continued to refine its
contract law to meet the evolving needs of its people and its growing economy. Several
amendments were made to the Indian Contract Act, 1872, and new statutes were introduced
to address specific aspects of contracts, such as the Sale of Goods Act, 1930 2, and the
Specific Relief Act, 1963. These legislations brought greater clarity and specificity to the law,
ensuring better protection for the rights of contracting parties.

Globalization and Economic Reforms: In the late 20th century and early 21st century, India
witnessed significant economic reforms and globalization. These changes had a profound
impact on contract law, as international trade and foreign investments necessitated more
sophisticated contractual arrangements. Indian courts began interpreting contracts in a
manner that facilitated business growth and international commerce, aligning the country's
legal framework with global standards.
2. The Sales of Goods act, 1930, Acts of Imperial Legislative Council, 1930 (India)
Recent Developments: In recent years, India has continued to modernize its contract law to
keep pace with rapid economic growth and technological advancements. The government
introduced the Goods and Services Tax (GST) in 2017, which required businesses to revise
their contracts to comply with the new tax regime. Additionally, electronic contracts and
digital signatures have gained prominence, necessitating legal recognition and regulation.

The Supreme Court of India has delivered several landmark judgments over the years that
have had a significant impact on the interpretation and application of the Indian Contract Act,
1872. Here are some notable judgments:

Satyabrata Ghose v. Mugneeram Bangur & Co. (AIR 1954 SC 44) 3: This case clarified
the concept of frustration of a contract under Section 56 of the Indian Contract Act. It
established that a contract may be discharged if it becomes impossible to perform due to an
unforeseen event.

Tata Engineering and Locomotive Co. Ltd. v. John Francis D'Costa (AIR 2001 SC
1302)4: This judgment dealt with the doctrine of promissory estoppel and reiterated its
significance in Indian contract law.

Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh (AIR 1979 SC 621) 5: In
this case, the Supreme Court discussed the principles of a valid contract, including the
element of certainty and the requirement that terms should not be vague.

Union of India v. Raman Iron Foundry (AIR 1974 SC 1264) 6: This judgment addressed
the issue of unilateral mistakes in contracts and provided clarity on when a contract can be
voided due to such a mistake.

N. Radhakrishnan v. Maestro Engineers (AIR 2010 SC 1860) 7: This case focused on the
enforceability of arbitration agreements and emphasized the importance of respecting such
agreements in commercial contracts.
3. Satyabrata Ghose v. Mugneeram Bangur & Co., AIR 1954 SC 44
4. Tata Engineering and Locomotive Co. Ltd. v. John Francis D'Costa, AIR 2001 SC 1302
5. Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, AIR 1979 SC 621
6. Union of India v. Raman Iron Foundry, AIR 1974 SC 1264
7. N. Radhakrishnan v. Maestro Engineers, AIR 2010 SC 1860
Dharani Sugars and Chemicals Ltd. v. Union of India (AIR 2007 SC 2120) 8: This
judgment clarified the concept of frustration of contract and held that if a contract becomes
commercially impracticable, it may be discharged.

Steel Authority of India Ltd. v. Gupta Brother Steel Tubes Ltd. (AIR 2009 SC 688) 9:
This case highlighted the importance of good faith in the performance of contracts and
discussed the consequences of acting in bad faith.

These landmark judgments have played a crucial role in shaping the interpretation and
application of the Indian Contract Act, 1872, and continue to serve as precedents for future
contract law cases in India.

Contract law in India has evolved significantly over time, drawing from its ancient roots and
incorporating influences from British colonial rule, post-independence reforms, and
globalization. The Indian Contract Act, 1872, remains the central legislation governing
contracts in the country, while additional statutes address specific contractual matters. As
India continues to grow as a global economic powerhouse, its contract law will likely
undergo further reforms and adaptations to meet the demands of a dynamic and
interconnected world. Understanding the historical background of contract law in India is
crucial for comprehending its current legal framework and its role in shaping the nation's
economic and social landscape.

This assignment will aim to break down and analyse the salient features of the contract law in
India, it’s development throughout the years and the way it has had its effect on the legal
spectrum of the country.
8. Dharani Sugars and Chemicals Ltd. v. Union of India, AIR 2007 SC 2120
9. Steel Authority of India Ltd. v. Gupta Brother Steel Tubes Ltd., AIR 2009 SC 688

CONCEPTUAL CONTEXT

Contract law in India is governed by the Indian Contract Act, 1872. It outlines various
concepts, propositions, and doctrines that form the foundation of contract law in the country.
Here are some key concepts, propositions, and doctrines of contract law in India:

Contract: A contract is an agreement enforceable by law, which means it must have all the
essential elements of a valid contract, such as offer, acceptance, consideration, capacity of
parties, free consent, legality of object, and certainty of terms.

Offer and Acceptance: A contract starts with an offer made by one party and accepted by
another. The offer must be clear, specific, and communicate the intention to be legally bound.

Consideration: Every contract must involve something of value exchanged between the
parties. This is known as consideration and is essential for the validity of a contract.

Free Consent: Parties must enter into a contract with free and genuine consent. Any
coercion, undue influence, fraud, or misrepresentation can render a contract voidable.

Capacity of Parties: Parties entering into a contract must have the legal capacity to do so.
Minors, persons of unsound mind, and those disqualified by law cannot enter into contracts.

Legality of Object: The object of a contract must be lawful. Contracts with illegal, immoral,
or uncertain objects are void.

Certainty of Terms: A contract must be certain and capable of being performed. Vague or
uncertain terms can render a contract void for uncertainty.

Void and Voidable Contracts: Contracts that lack essential elements are void ab initio
(from the beginning). Contracts with defects in consent are voidable at the option of the
aggrieved party.
Performance of Contract: Parties must perform their contractual obligations as per the
terms of the contract. Non-performance or breach of contract can lead to legal remedies.

Quasi-Contracts: In cases where there is no valid contract but one party has received a
benefit from another, the law implies a quasi-contract to ensure justice.

Doctrine of Privity of Contract: Under this doctrine, only parties to a contract can enforce
its terms. Third parties generally cannot enforce or be held liable under a contract.

Doctrine of Frustration: If an unforeseen event makes the performance of a contract

impossible or radically different from what was originally contemplated, the contract may be
discharged.

Doctrine of Contingent Contracts: Contracts based on the happening or non-happening of a

future uncertain event are known as contingent contracts.

Specific Performance: In certain cases, the court can order specific performance of a
contract, which means the party in breach must perform its obligations as agreed.

Remedies for Breach: Parties have various remedies for breach of contract, including
damages, injunctions, and specific performance, depending on the circumstances.

These concepts, propositions, and doctrines form the basis of contract law in India and are
used to determine the validity and enforceability of contracts, as well as the rights and
obligations of the parties involved. It's important to consult legal experts or refer to the Indian
Contract Act, 1872, for detailed and up-to-date information on contract law in India.
 ANALYSIS
The Indian Contract Act, 1872, was and still remains to be a fundamental piece of legislation
that governs contracts and agreements in India. Its impact on the country has been significant
and enduring, shaping the way business and transactions are conducted in India. Here are
some of the key impacts and contributions of the Indian Contract Act in India:

Legal Framework for Contracts: The Act provides a comprehensive legal framework for
forming and enforcing contracts. It defines essential elements of a valid contract, such as
offer, acceptance, consideration, capacity, and free consent, ensuring that contracts are legally
binding and enforceable.

Clarity and Certainty: The Act brings clarity and certainty to contract law. It lays down
rules and principles that help parties understand their rights and obligations when entering
into contracts, reducing ambiguity and disputes.

Protection of Parties: The Act safeguards the interests of contracting parties by establishing
rules against fraud, misrepresentation, and coercion. It ensures that contracts are entered into
freely and without undue influence.

Enforceability of Agreements: It defines various types of contracts, such as valid, void,

voidable, and illegal contracts, and specifies the consequences of each. This helps in
determining the enforceability of agreements in different situations.

Remedies for Breach: The Act outlines remedies available to parties in case of a breach of
contract, including damages, specific performance, and injunctions. This promotes fairness
and provides options for parties to seek redress.

Regulation of Certain Contracts: The Act regulates specific types of contracts like
contracts of sale, agency, partnership, and indemnity. It sets out rules and principles
governing these specialized areas of commerce.
Promotion of Business Transactions: By providing a legal framework for contracts, the Act
promotes business transactions and trade in India. It instills confidence in the business
community and encourages investment.

Adaptability and Relevance: The Indian Contract Act has proven to be adaptable and
relevant over time. It has been amended to accommodate changing business practices and
societal needs.

Influence on Case Law: The Act has been a significant influence on Indian case law, with
numerous court judgments and decisions referring to its provisions to interpret and apply
contract law principles.

Impact on Legal Education: It has had a profound impact on legal education and is a core
subject in law schools across India. It serves as the foundation for understanding contract law
principles.

Consumer Protection: The Act contains provisions related to unfair and deceptive trade
practices, which are crucial for protecting the rights of consumers.

International Trade: The Act plays a role in regulating international trade contracts
involving Indian parties, providing a familiar legal framework for international business
transactions.

This legislation, which is more than a century old, lays down the legal framework for the
formation, execution, and enforcement of contracts in the country. While the Act has been
amended over the years to reflect changing societal and economic conditions, it still faces
several challenges and criticisms such as:

Outdated Provisions: The Indian Contract Act, 1872, contains provisions that are rooted in
the socio-economic and legal realities of the 19th century. Many argue that it hasn't kept pace
with the complexities of modern commercial transactions, which often involve intricate
clauses and digital communication. There is a need for comprehensive reform to address
these issues.
Lack of Clarity: The Act is often criticized for its lack of clarity and precision in defining
crucial terms and concepts. This ambiguity can lead to disputes and lengthy legal battles,
ultimately discouraging efficient contract enforcement.

Inadequate Protection for Weaker Parties: The Act doesn't adequately protect the interests
of the weaker party in a contract. It assumes parties have equal bargaining power, which is
not always the case, especially in consumer contracts and standard form contracts where one
party dictates terms.

Inefficiency in Dispute Resolution: The legal system in India is notorious for its backlog of
cases and delays in dispute resolution. This inefficiency can hinder the enforcement of
contracts and discourage investment, as businesses may be reluctant to enter into contracts
when they are uncertain about timely resolution of disputes.

Need for Digitalization: In an increasingly digital world, there is a growing need for contract
laws to address the challenges posed by electronic contracts, e-signatures, and online
transactions. While amendments have been made to recognize electronic contracts, more
comprehensive provisions are required to ensure their smooth functioning.

Inconsistent Enforcement: Contract enforcement can be inconsistent across different states

in India. The interpretation and application of contract law can vary significantly, leading to
uncertainty for parties engaged in interstate transactions.

International Contracts: With the globalization of trade and commerce, there is a need for
India to harmonize its contract law with international standards, making it easier for foreign
investors and businesses to operate in the country.

Arbitration and Alternative Dispute Resolution (ADR): Although India has made some
efforts to promote arbitration and ADR mechanisms for contract dispute resolution, there are
still challenges related to enforcing arbitral awards and the high costs associated with
arbitration. Streamlining ADR procedures and reducing costs could enhance contract
enforcement.
Inadequate Consumer Protection: Consumer contracts often involve unequal bargaining
power. There's a need for stronger consumer protection laws that address unfair contract
terms, deceptive practices, and provide remedies for consumers.

Contract Law and Public Policy: Sometimes, contracts may be contrary to public policy.
While the Indian Contract Act recognizes this, there's room for debate regarding how the law
is applied in practice and whether it effectively prevents contracts that are detrimental to the
public interest.

In summary, the Indian Contract Act, 1872, has had a far-reaching impact on the legal
landscape in India but, it faces various criticisms and challenges. It has provided a stable and
well-defined framework for contracts, promoting business transactions, protecting parties,
and ensuring the enforcement of agreements. Its principles continue to guide and govern
contractual relationships in India today. However, the law needs comprehensive reforms to
adapt to the complexities of modern commerce, protect the interests of weaker parties, and
ensure efficient and consistent contract enforcement. Additionally, promoting alternative
dispute resolution mechanisms and harmonizing the law with international standards would
help India remain competitive in the global business arena.
.
 CONCLUSION & SUGGESTION

In conclusion, while the Indian Contract Act, 1872, forms the backbone of contract law in
India but improving contract law in India requires a comprehensive approach that addresses
both substantive and procedural aspects of contract formation, enforcement, and dispute
resolution. Here are some critical suggestions to enhance contract law in India:

Clarity and Simplicity of Language: Contracts should be written in clear, simple language
to ensure that all parties understand their rights and obligations without the need for extensive
legal interpretation.

Online Contracting: Recognize and regulate electronic contracts to accommodate the

growing use of digital platforms for contract formation.

Standardized Templates: Develop standardized contract templates for common transactions

to reduce the burden of drafting and negotiating contracts from scratch.

Legal Education and Awareness: Promote legal education and awareness programs to
educate the general public about contract law, their rights, and the consequences of entering
into contracts.

Alternative Dispute Resolution (ADR): Encourage the use of ADR mechanisms such as
arbitration and mediation to expedite contract dispute resolution and reduce the burden on
courts.

Enforceability of Contracts: Strengthen the enforceability of contracts by streamlining and

expediting the judicial process for contract-related disputes.

Good Faith and Fair Dealing: Introduce a statutory obligation of good faith and fair dealing
in contracts to prevent unfair practices and enhance trust between parties.
Consumer Protection: Implement robust consumer protection laws to safeguard the interests
of consumers in contracts and prevent exploitative clauses.

Online Dispute Resolution (ODR): Develop and promote online dispute resolution
platforms to provide an accessible and efficient means of resolving contract disputes,
particularly for e-commerce transactions.

Foreign Investment and International Contracts: Align contract law provisions with
international best practices to attract foreign investment and make India a more attractive
destination for international business transactions.

Statute of Frauds: Clarify and modernize the Statute of Frauds to specify which contracts
must be in writing to be enforceable.

Time Limits for Enforcement: Implement reasonable time limits for initiating legal action
on contract breaches to prevent prolonged disputes and encourage timely resolution.

Specific Performance: Make specific performance a more readily available remedy to

ensure that contractual obligations are fulfilled as agreed upon.

Contract Review and Audit: Encourage businesses and individuals to periodically review
and audit their contracts to ensure compliance and to update them as necessary.

Government Contracts: Implement transparent and efficient procedures for awarding and
executing government contracts to promote fairness and reduce corruption.

Contract Law Training for Judges and Legal Professionals: Provide specialized training
to judges and legal professionals in contract law to ensure consistent and informed decision-
making.

Harmonization with Other Laws: Ensure that contract law is harmonized with other
relevant laws, such as competition law and intellectual property law, to prevent conflicts and
promote coherence.
Periodic Review and Reform: Establish a mechanism for periodic review and reform of
contract law to keep it up-to-date with evolving business practices and societal needs.

Public Consultation: Seek input from legal experts, businesses, consumer organizations, and
the public when making significant changes to contract law.

Access to Legal Aid: Enhance access to legal aid and support for individuals and small
businesses to ensure they can protect their interests in contract negotiations and disputes.

Improving contract law in India is a complex and ongoing process that requires collaboration
among policymakers, legal experts, businesses, and civil society to create a fair, efficient, and
accessible legal framework for contract formation and enforcement.

However, the pivotal role that Contract law plays in modern Indian society is irreplaceable. It
facilitates economic growth by providing a stable legal framework for businesses and
individuals to enter into agreements. Additionally, it helps resolve disputes through the
enforcement of contracts, thereby contributing to the overall rule of law and social stability.
 BIBLIOGRAPHY
1. The Sales of Goods act, 1930, Acts of Imperial Legislative Council, 1930 (India)
2. The Sales of Goods act, 1930, Acts of Imperial Legislative Council, 1930 (India)
3. Satyabrata Ghose v. Mugneeram Bangur & Co., AIR 1954 SC 44
4. Tata Engineering and Locomotive Co. Ltd. v. John Francis D'Costa, AIR 2001 SC 1302
5. Motilal Padampat Sugar Mills Co. Ltd. v. State of Uttar Pradesh, AIR 1979 SC 621
6. Union of India v. Raman Iron Foundry, AIR 1974 SC 1264
7. N. Radhakrishnan v. Maestro Engineers, AIR 2010 SC 1860
8. Dharani Sugars and Chemicals Ltd. v. Union of India, AIR 2007 SC 2120
9. Steel Authority of India Ltd. v. Gupta Brother Steel Tubes Ltd., AIR 2009 SC 688