By Vinod K. Jacob/DailyFT
Colombo, May 3: This year marks the 150th anniversary of the Indian Contract Act which entered into force in September 1872, having been enacted in April that year. The fact that the legislation has held sway, albeit with significant revisions to adjust to the demands of the times, for such a long period is testimony to its inherent worth.
In fact, the Preamble itself did not profess the Act of 1872 to be a complete Code dealing with the law relating to contracts, which at that time was principally based on English Common Law (with appropriate application of justice, equity and good conscience in specific cases) with its roots in real property law. It is interesting to remember that prior to the passing of the Act of 1872, courts in British India adjudicated on contract cases by the laws and customs of the Hindus where the parties were Hindus, by those of Muslims when the parties are Muslims, and by those of the defendant in cases where one of the parties was a Muslim and the other a Hindu. The Act of 1872 has influenced the development of contract law in other countries in South and Southeast Asia and also in parts of Africa.
The Indian Contract Bill, which became the Act of 1872 was drafted by the Indian Law Commission which was constituted in December 1961 which addressed the law relating to contracts, sale of movables, indemnity and guarantee, bailment, agency and partnership. Subsequent to 1872, separate Acts were enacted in 1930 and 1932 dealing with sale of goods and partnership respectively. Under the Constitution of India of 1950, the subject of the law of contract has been placed as item 7 of the Concurrent List (List III) in the Seventh Schedule to the Constitution.
In recent decades, Governments (both at the Centre in Delhi and at the capitals of the states) have become significant protagonists in the sphere of contract making and application. This is governed by Articles 298 and 299 of the Indian Constitution which respectively (a) confers power on the Government to make contracts and (b) provides for the mandatory formalities like execution on behalf of the President or Governor to be complied with while making such contracts. Separately, Governments can enter into statutory contracts that are governed by specific laws.
In the contemporary world, the conclusion of contracts in the cyber space has added a fresh layer to the application of contract law. In particular, Section 10 A of the Information Technology Act which was adopted in 2000 and significantly amended in 2008 is relevant. According to this Section, “Where in a contract formation, the communication of proposals, the acceptance of proposals, the revocation of proposals and acceptances, as the case may be, are expressed in electronic form or by means of an electronic record, such contract shall not be deemed to be unenforceable solely on the ground that such electronic form or means was used for that purpose.” The Ministry of Electronics & Information Technology in India is responsible for the satisfactory application of the Information Technology Act.
Ease of doing business
Substantial progress on the parameter of “enforcing contracts” has played an important role in India improving its ranking in the World Bank’s Ease of Doing Business rankings to 63 in 2020, a meteoric rise of 79 ranks from 142 in 2014. In the case of the report released in 2021, the following were pertinent: (a) faster resolution of commercial disputes; (b) dedicated commercial courts established in Delhi and Mumbai, (c) adoption of technology for case management by lawyers and judicial officers leading to speedier dispute resolution, and (d) eCourts Services Portal and eCourts Service App offering 7 case-related services for litigants and lawyers.
Contracts are present everywhere in the modern-day world and impact all strata of society. The law of contracts needs to be properly enforced if an economy has to bring prosperity to and create wealth for its participants – be they individuals, companies, trusts, governments, religious institutions and the like. The course charted by the progressive development of the law in India through the Act of 1872 has played its due role in contributing to the strength and vibrancy of economic growth, thereby serving a useful social role as well.
(The writer is Deputy High Commissioner of India to Sri Lanka since September 2019. Views expressed are personal)