HISTORICAL BACKGROUND OF INDIAN CONTRACT ACT, 1872 – AN OVERVIEW

 

HISTORICAL BACKGROUND OF INDIAN CONTRACT ACT, 1872 – AN OVERVIEW:

 

v INTRODUCTION:

 

Indian Contract Act brought a new era of rights of the citizens of India with concerning Contractual action. It provides the rights, duties and obligation on the contracting parties and hence can successfully conduct contractual activities. The Indian Contract Act, 1872 was enacted in 25^th of April 1872 and subsequently came into force on the 1^st day of September 1872.

 

The essence of the Indian Contact Act has been shaped on that of the English Common Law. It is one of the most important legislations that has been drafted by Britishers and has enacted various principles therein which are nothing but the codification of general principles those were governing transactional relationship.

 

Prior to enactment of the act, the contractual relationship used to govern by personal laws of different religious communities, respectively, laws of Hindus and Muslims. In order to understand the purview of present Contract Act we have to understand the historical evolution of Contract Law, by focusing on the practices that was prevalent prior to present contract law enacted.

 

v EVOLUTION OF CONTRACT ACT:

 

The evolution of contract law can be trace back from different time periods, such as –

1.   Vedic and Medieval period

2.   Roman period

3.   Islamic period

4.   Hindu period, and

5.   British period

 

1. Law of Contract in Vedic and Medieval period:

 

There no general code governing the contractual relationship in entire ancient and medieval period referring the human history of India. In such, principles were hence derived from numerous references, respectively, the sources of Hindu Law, namely, the Vedas, Dharmashastras, Smritis and Shrutis gave profound assertion of law similar to contract in that time. The rules governing contracts from a part of law called Vyavaharmayukha.  

 

In Chandragupt’s period contract prevalent in the form of ‘bilateral transactions’ between two individuals. Indeed, the essentials of these transactions were an open contract and openly arrived at.

 

It has mentioned the following contracts, which were considered as to be void-

 

§  Contracts made during night

§  Contracts entered into the interior compartment of the house

§  Contracts formed in a forest

§  Contracts formed in any other secret place

§  There were certain exceptions to concealed contracts, such as

§  Contracts made to ward off violence, attack and affray

§  Contracts formed in celebration of marriage

§  Contracts made under order of government

§  Contract formed by trader, hunters, spies and other who would roam in the forest frequently.

 

Also, the rights and duties of a Bailee in a Bailment as mentioned in Section-151 and 152 of the Indian Contract Act 1872, has its root to the Katyaynassmriti containing a special provision called the Silpinyasa dealing with the deposit of raw materials with an artisan-talking about the degree of care attached. The text laid down that if an artisan does not return the things deposited with him during the stipulated time, he should be made to pay its price even in cases, where the loss is due to acts of God or King.

 

The artisan, however, is not responsible for the loss of an article which was defective at the very time of bailment unless the loss is due to his own fault.

 

There was no time barred for bringing a suit for money lent. This happened due to rule of ‘damdupat’ which laid down that the number of principles and interest recoverable at one time in a lump sum cannot be more than double the money lent.

 

The result of damdupat is still prevalent in Calcutta and Bombay as it has been upheld to be a valid custom and thus enjoys enforceability under the saving clause, section-1.

 

2. Law of Contract in Roman Period:

 

In early Rome, the Law of Contracts developed with the recognition of a number of categories of promises to be enforced rather than creation of any general criteria for enforcing promises. Thus, the notion that promise itself may give rise to an enforceable duty was an achievement of Roman Law.

 

i. Stipulation:

 

Stipulation (stipulation) had sanction formalities and dates from a very early time in Roman Law. A party could make a binding promise called stipulation in which the party observed a prescribed from of questions and answers. Though the participation of both parties was required, only one party was bound.

 

ii. Real Contracts:

 

This were those contracts that suited to executed exchange of promises. For example: the contract of loan, in which the recipients promise to restore the subject matter was binding.

 

iii. Consensual Contract:

 

These were the form of contracts which were more flexible and did not hold a legal basis for enforcing purely executory exchanges of promises. They deviated from the formalities in stipulation and in agreement alone, without delivery, sufficed to make the promises binding. Although they were limited into four types of contracts such as – sale, hire, partnership and mandate.

 

iv. Innominate Contracts:

 

These were the agreement under which one party had promised to give or do something in exchange for a similar promise by the other party. A part from both Real and Consensual Contracts they were not limited to specific classes of transactions and were therefore called in nominated.

 

In order to enforceability of promise there is required some performance given in exchange and was called quid pro quo i.e., the modern concept of consideration in the Contract. But these contracts were limited because they were binding only when one of the parties had completed the performances and until that happen either party could escape liability.

 

 v. Dotis diction:

This used to be associated to dowry settlement between bride and groom. In this contract, the father of bride or the bride herself set forth amount and nature of dowry to be governed to be groom and its declared in presence of the groom. Since this was a social agreement. There used to be no longer any punishment in case of breach of contract, the solely treatment that the groom household, in case of breach, is to compel the bride's household in fulfilling the contract.

vi. Lex Mancipi:

 

This contract used to be equal to the modern days contract of transfer of property.

 

3. Law of Contract in Islamic Period:

 

During the Muslim period in India, all matters relate to contract used to governed by the Mohammedan Law of Contract. The meaning of word Contract in Arabic is Conjunction. It connotes conjunction of proposal is Ijab and acceptance which is Qabul.

 

Requirement for the contract is there should be two parties one will propose and other will accept the proposal and mind of both must agree that is their declaration must relate to same subject matter and the object of contract must be to produce a legal result.

 

Unlawful transactions were considered void under Muslim laws:

 

i. Riba Al-Fadl:

 

It is a contract which produced unlawful excess in exchange of counter values in a contemporary transaction.

 

ii. Riba Al-Nasi`a:

 

It means contract which produced unlawful gain without completing the exchange of counter values.

 

ii. Riba Al-Jahilyyah:

 

It’s also called pre-historic riba. Where the lender asks the borrower whether he will settle the debt or increase the debt.

 

Another type of transaction that was prohibited under Muslim laws and the same stance was taken under the Indian Contract Act were the contract related to gambling, contingent contract or wagering contract.

 

There is not requirement of any kind of formality for the formation of a contract according to Islamic law, the only requirement is that the express consent of both parties, the proposal and acceptance must be made of the same thing in the same sense. Furthermore, the Islamic classifies as per their special features and following are the type of contract.

 

Alienation of property:

 

•     i.        for an exchange like sale
•    ii.        without exchange like giving a simple gift
•  iii.        to create succession namely request

 

Alienation of usufruct:

 

•    i.    In exchange for property, where the movable and immovable things are given for hire, contracts for giving service like carriage for goods, safe custody of property.
•    ii.           Not being exchange of property like an accommodate loan and deposit

 

There are two modes for invalidation of contracts as Islamic laws provide, first the right of either party to rescind the contract unilaterally without any legal cause and the second one is to terminate the contract on the ground of frustration.

 

The ground of destruction of contracts are as follow:

 

•     i.                 Invalidation of mutual agreement
•    ii.          Cancellation of contract by death of either party or destruction of subject   matter or expiry of time period.
•  iii.             Cancellation by termination by either party
•   iv.              Dissolution by termination of the contract

 

Under Islamic Law even marriages (Nikah) were treated as contracts and till date the situation remains the same. Parties to the marriage makes a proposal to the other party and it becomes a contract if the other party accepts, and the husband either at the time of marriage or after the marriage it has to pay an amount to the wife as a symbol of respect known as Mahr.

 

Also, the concept of divorce was first recognised by the Mahommedans. This way, a party to marriage could absolve itself of the contractual obligations under marriage. Muslim marriages are thus considered contracts for these reasons.

 

4. Law of Contracts in Hindu period:

 

The Jurisprudential aspect of the Hindu law is fundamentally different from that of English law's jurisprudence. Hindu law is the result of the compilation of numerous customs and works of Smritikaras, who interpreted and analysed Vedas to develop the various aspect of Hindu law. Manu smriti in regarding the contract law dealt with the incompetence to contract.

 

There is various principle under Indian Contract Act which laid down in Hindu jurisprudential aspects and that covers a contract entered by a minor, or intoxicated person or an old man or the cripple is not valid contract.

 

5. Law of Contract in British period:

 

Before the emergence of the Indian Contract Act, The English Law was applied in the Presidency Towns of Madras, Bombay and Calcutta under the Charter of 1726 issued by king George to the East India Company. Now, since no system can afford to make all promises enforceable, the English tried out two assumptions:

 

One, the assumption that promises are generally enforceable, and then create exceptions for promises considered undesirable to enforce.

 

Secondly, the assumption that promises are generally unenforceable, and then create exceptions for promises thought desirable to enforce.

 

In the case where one of the parties is from any of the religion like if one party is from Hindu and other is from Muslim then, in that case, the law of the defendant is to be used. This was followed by the presidency towns, but in cities outside the presidency towns, the matter was governed by justice, equity and good conscience.

 

This procedure was prevailed till the time Indian Contract Act was implemented in India. In the years 1862, the installation of the High Courts took place in the town of Bombay, Calcutta, and Madras and the charter of these High Courts also contained the same provision as pervious law that High Courts to apply the personal laws of the referred religions before passing any judgment in respect to the contract cases.

 

The emergence of The Indian Contract Act- The Indian Contract Act as prevailing today had drafted originally by the third Indian Law Commission in the year 1861 in England. The Indian Contract Bill had tried to defined laws relating to Contracts, Sale of movable properties, Indemnity, Guarantee, Agency, Partnership and bailment.

 

The bill was not the complete law of contract, but aim of the bill was to suffice the need of the country for an important period of time and during that period, judges of the courts were taking the help of English laws in adjudging the case when they failed to arrive at the judgments by concept of justice, equip and good conscience. once a person made a promise, one is duty bound to perform on it.

 

The drafter of the bill aware that the different religious people obeyed by personal laws and for them it would be complex 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 properly contrary to the new rules.

 

The act came into force in 1872. 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 and also, section 239 to 266 dealing with partnership was repealed and formed new legislation called Indian Partnership Act 1932.

 

v CONCLUSION:

Everything changes with the call of requirement and eventually got a new shape likewise, Indian Contract Act 1872 come into being with gradual development. By analyzing the gradual development of Indian Contract Act it can be concluded that the Indian Contract Act brought a new era in the contractual relationship and plays a vital role in monitoring the contractual rights. But this law is not exhaustive code of law. It deals with general principles of contract and contract relating to indemnity, guarantee, bailment, pledge and agency but it does not deal with the contracts relating to the Sale of Goods, Partnerships, Negotiable Instruments, Insurance etc.