THE INDIAN CONTRACT ACT, 1872: INTRODUCTION

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The Indian Contract Act, 1872 is one of the oldest laws in India. Contracts were entered from times immemorial and the mercantile transactions were governed by customs. Back then personal laws were applied in mercantile laws before one could have the codified law. There was no issue when both the parties to the contract professed the same religion but the issue arose when the transactions involved people from different religions. Especially, when any disagreement arose between the parties then there was a need for uniform principles of law that could be applied between the parties to resolve the issues.

 

During the British regime an attempt was made to codify and establish uniform principles of mercantile laws resulting in the enactment of the Indian Contract Act, 1872. The Contract Act does not purport to codify the entire law relating to contracts as it specifically preserves any usage or custom of trade or any incident of any contract not inconsistent with the provisions of the Act. In simple words contract can be understood as an agreement which is enforceable by law.

Everyday in our lives we enter into agreements and contracts in some form or the other and there can be no one who has never entered into an agreement or any contract in their lifetime. We enter into agreements and various contracts in different forms either knowingly or unknowingly e.g., while buying a house we enter knowingly whereas while boarding a bus there is an implied contract that we would be taken to the destination that we pay for.

Agreement in simple words would mean to agree on something where one person offers to do something while the other person agrees to that offer. Whereas as per the Indian Contract Act, 1872 an agreement which is enforceable by law is a contract.

One can enter into any kind of agreement such as legal, impossible one’s etc. All agreements may not be enforceable in the Court of law if a particular person fails to fulfill his agreement. E.g., L fails to come to K’s party despite agreeing to be present. On the other hand, contract is an agreement which is enforceable in the Court of law if a party to the contract backs out of fulfilling their obligation.

Generally, in a contract each party to the contract agrees to do something voluntarily for which they expect something back in return but at times there may be instances where parties may not have entered into contracts but due to certain circumstances one party gets the benefit even without having to give anything in return and this would definitely result in being unfair to the other party.

E.g., K orders a pizza and pays for it but by mistake it is delivered to D. Here either D has to pay for it or return it or else it would be unjust and unfair. Quasi-Contract is based on the principle that there must be no unjust enrichment. These contracts have the attributes or features of a contract where the parties are put in a position as if there was a contract between them.

The Indian Contract Act, 1872 does not purport to codify the entire law relating to contracts as it specifically preserves any usage or custom of trade or any incident of any contract not inconsistent with the provisions of the Act.

The Preamble to the Act states : Whereas it is expedient to define and amend certain parts of the law relating to contracts.

The Act can be divided into two heads namely: 1. General Principles of Contracts and 2. Specific Kinds of Contracts. With the passage of time Sale of Goods and Partnership topics were repealed and separate Acts on these topics were legislated as the Indian Contract Act, 1872 was insufficient to meet the intricacies of these topics. Hence, these topics were created into separate Acts.

The term damages in law would mean the monetary compensation paid to the claimant for any loss or injury caused. This is a Common law remedy which can either be liquidated or unliquidated.

Liquidated damages are provided when there is a breach of contract as loss or injury incase of contract is quantifiable whereas unliquidated damages are provided in case of Torts where the actual monetary loss is not determined or foreseen before the wrong occurs. 

Tort is a civil wrong which is independent of any contract or breach of trust. Though breach of contract and breach of trust too come under the branch of civil law but they are different from torts. The remedy in the form of unliquidated damages in case of a Tort owes its origin to Common law action which has its basis on justice, equity and good conscience. 

These are the five important suggestions that I would want to highlight so that one can be cautious before signing any agreement, contract, acknowledgement or document in any form.

Always make it a point to read each and everything that is mentioned in writing and do not sign any agreement, contract, acknowledgement or any document in any form, without reading it entirely. Not just reading it at a glance but make it a habit to read it well because it is very important to read and understand what you are signing.

Never sign without understanding what you have read. If there is any paragraph you do not understand pertaining to what has been mentioned then make it a point to get it clarified or cross-checked so that you understand each and everything before you sign.

If at any point you are unable to read or understand any word or meaning of the word then always get it checked or rectified. If understanding the language is difficult then always get it translated with the right interpretation of the words and the meanings.

Never hesitate to ask questions pertaining to anything that you would be signing. Do not sign with any doubts, queries or questions in mind. Get your every doubt, query or question answered till you are satisfied with the answer.

Always make it a point to keep a copy of what you have signed. These days due to the technological advancement one can even scan and store it in a virtual form. Thus, these are some of the important points that one needs to consider before signing anything.