CHAPTER-2

HISTORICAL BACKGROUND, MEANING

AND THEORIES OF CONTRACT

2.1 Historical Background and Evolution of Contract

The contract law begins with practical and simple beginnings. Law does not
progress by rendering unwanted remedies. In the late codes law, in Rome, Assyria and
Babylonia, in England, china and India, in Islamic law and Hebrew, still say
transactions not of contract, which is to talk, transfers. The marriage or marital
relationship and barter system in the primitive age can be recognized as origin of
transaction or contract.91

Early marriage was borne of ancient societies' ought to secure a safe

surroundings during which to breed, handle the granting of property rights, and protect
bloodlines. The word marriage can also be engaged to imply the action, formality or
ceremony or contract by which the marital status union is created or the union as an
eternal condition. The earliest humans, those that lived between 5 and 1.8 million
years past, had little use for marriage. Using the behavior of bonobos because the basis
for the way early humans would have behaved; it's plausible that early males and
females had sex with several partners. Food sharing was principally in exchange for
sexual favors, together with sexual favors between same-gender pairs. As a result of
females may collect food (fruits, nuts and insects) whereas still carrying and protective
their babies, males weren't required as protectors or suppliers. This meant that during
the period neither partner obtained from being for the period of a committed couple.
In the period between around two million and approximately 23,000 years ago, the
men and women whose Childs were the almost certainly to survive were those which
formed the first marriage. 92

91 Diamond, Arthur Sigismund, “Primitive law, past and present”, Routledge, (2013), p.379.
92 Marina Adshade, “The Origin of Marriage (And the Evolution of Divorce)”, available online at:
http://bigthink.com/ the-origin-of-marriage-and-the-evolution-of-divorce, accessed date on (13.11.2015) 15:37
pm.

45
 These may not are marriages within the means that think of marriages
nowadays, however couples during this period would most likely have stayed together
for regarding three or four years before one, or the opposite, would wander to start out
another family. This is the era in which marriage became the union between two
people that was recognized by their community. The creation of marriage as a legal
contract between men and women came into being over time as communities settled
on what was a “normal” manner for them to arrange a family and so codified that
normalcy into law. So, the origin of marriage was not to create a legal contract that
made it possible for men to acquire female slaves.93

One of the primary common sorts of marriage was it’s by capture or force go
back to initial culture once tribal community were normally aggressive to every other.
At the fact, marriage was done because the groom captures a desired woman within
the process of capture and hostility a rival tribe. The custom of having a "best man"
presence at the marriage could be an extension from the times period that the grooms’
best man renders as a fellow-warrior. Once a person desirable to capture a woman
from other tribe, he would normally bring on his "best man" to aid him within the
following battle, thus helping the bridegroom capture and get away the engaged. In
this times and even if tribes were on good relations, women may be swapped easily;
even if not, they were only abducted and raped.94

Marriage by contract or purchase most likely evolved from marriage by force.

The bride was first purloined, and later compensation was provided to her family or
tribe to flee their revenge. The custom of buying a partner began with the will to pacify
furious parents, and additionally to avoid tribal warfare that may result if such
compensation weren't forthcoming. Within the earliest stages of marriage by
purchase, an exchange was created rather than a price being paid. Imagine that might
be bridegroom, having recently purloined his bride far from her family, is overtaken
by her angry family and is ordered to get her. Unable to try and do so, he offers instead
to exchange his own sister, his chattels, or his land for her. During this approach he's

93 Chintan Shah, “Which culture originated the concept of marriage?”, available online at:
https://www.quora.com/Which-culture-originated-the-concept-of-marriage, accessed date on (13.11.2015)
15:37 pm.
94 “A Compilation of Customs and Traditions Regarding Marriage.”, available online at:
http://www.limarriages.com/customs.html, para. 3., accessed date on (14.11. 2015), 10:08 am.

46
along with his daughter and provides her in marriage. 97 There was a period of time
during the roman republic once the wedding ceremony was a solemn religious
ordinance. Later, however, religion fell into contempt and wedding became virtually
a civil contract. By slow degrees, Christianity gave wedding back its religious
character as couples paired off along to ask for the blessings of their pastor. By the
middle Ages, the religious aspect of wedding had become most vital. The priest was
even known as in to bless the wedding bed! The custom of religious marriage,
performed within the church or by a priest within the home, became widespread
throughout the middle Ages and survives to the current day. 98

Among the hunters and early agriculturists, can found some animals and goods
(mainly natural produce) surplus to the immediate needs of subsistence, and some
trade in this almost everywhere. It takes place by barter, that is to say
contemporaneous exchange of one thing for another – though in a few places there
are imperishable articles in use as a medium of exchange. Barter system is that
underneath that merchandise area unit directly changed with goods. 99 In other words,
barter consists within the direct exchange of on goods or services for one more. In the
beginning, when the needs were few and simple, everyone produced all that was
necessary to sustain one’s life, such as, food, flesh, meat and etc. But with the
development of society, needs multiplied, exchange came into being. One person who
had enough food but no cloth exchange a part of his food with one who had enough
cloth and no food. Thus, a system of exchange where transactions are done without
the use of money is called barter. Trade takes many forms, sometimes it is between
individuals, sometimes between permanent partners belonging to different tribes or
other social groups.

In the peoples of Second Agricultural Grade Trade has largely increased both
in barter and sale, and now includes a quantity of partly manufactured goods. 100 Again
there are individual transactions between a man and his trade friend, and also

97 Jon Carroll, “Scenes from a marriage”, available online at:

http://www.sfgate.com/entertainment/carroll/article/Scenes-from-a-marriage-3191557.php, para. 6., accessed
date on (14.11.2015), 11:10 am.
98 Ibid
99
Smith, Joseph Carman, and David N. Weisstub, “The Western idea of law”, Butterworth-Heinemann, (1983), p.
20.
100 Supra note. 91. p.380.

48
law, and he be taken by me with the copper and copper balance’ – and he strikes the
balance with the copper and gives it to transferor.114 The Roman was then still
generally illiterate, but this transaction in later days remained an oral transaction long
after writing was in general use. The Sumerian, Babylonians and Assyrians, and to a
lesser extent the Hebrews and Egyptians, used writing to evidence their important
transactions. In 12th and 13th century England, and among all these peoples who used
writing, the general form of the document was the same. The parties were illiterate
and the document was written by a scribe, witnessed and sealed by party. This is still
the form of modern English deed. The Roman mancipium was an oral deed. Both
finally became conveyances, the form of which gave them their validity. In England
slavery now takes the form of serfdom and there is no separate selling of slaves, and
the deed is mainly used for sales of land.115

There is little barter of specific valuables, either in Rome or Babylon or

elsewhere: these are normally disposed of in the towns and by way of sale. There is
no sale of a large quantity of non-specific goods – that is to say, of produce; such
transactions usually take place in country and by barter. When a large estate disposed
of its produce, say, its present produce of oil, to another estate which would deliver a
quantity of its produce of corn after next harvest, this credit-barter was recorded in a
loan-tablet. It was not a sale. In Rome, indeed, the transaction retained the name of
mutuum (exchange, barter) in classical time.116

So much for cash sale, but less commonly there are also sales (of specific
goods) on credit, where the purchaser is to pay in the future. There were so much less
common that the Babylonians did not regard them as mere sales: they drew up two
tablets, one a sale-tablet recording a cash sale, and second a tablet recording that the
seller has lent the buyer such-and-such a sum (the amount of the price), which the
buyer will repay on such-and-such a date; or recording a deposit by the seller with the
buyer of the amount of the price, or an account declaring the buyer to be debit to the
seller in that amount, and recording that he will repay on a certain date. Similarly if
the transaction were one under which the buyer paid in advance and the seller agreed

114 Diamond. op. cit., p.384.

115 Ibid
116 Supra note. 91. p.385.

52
to deliver in the future, a sale-tablet was drawn up recording a cash-sale, and a second
tablet recorded a seller’s debt in respect of the goods. In Rome in 200 B.C. they had
arrived at the practice-book rule (which survives in the fragments of the Twelve
Tablets) that any of these extra terms, if orally stated at the time of the mancipium,
would be binding.117

There were no mere agreements to sell, in which payment and delivery were
both to take place in the future what the English law calls an executory agreement of
sale the peoples of this stage do not do business in that way. There is quite a little here
and there of the giving of ‘earnest’. For example; (X) may want to consider whether
he will buy a certain article from (Y). (Y) lets him consider the matter till, say, the
following day, on condition that he pays him a small sum which he will forfeit if he
decides not to buy.

There are the bailments of goods which will be returned in the future, free
loans of goods to friends for use, deposit (in the East especially of silver) and hire of
ploughs, wagons and oxen, with or without delivers. In the central codes the ordeal
by oath is brought into use to meet the case where the borrower or hirer says the ox
has died or was eaten or the property destroyed without his privity. 118 There has been
a large-scale development in branch of law, and there are now a good many types of
transactions, but there is not yet nearly enough of this in Babylon, Rome, England or
elsewhere, to call for a general theory of contract. For example, a contract is made be
offer and an acceptance in the same terms, or not that it must be carried out, or a
branch compensated by the amount of the loss incurred. It is not these peoples do not
think that a promise should be performed, but that at this stage commerce dose not
proceed on that basis; no one relies on a mere agreement on both sides to do something
in the future, and consequently no one can be damaged by the failure to carry it out. 119

Contract is perhaps the foremost familiar legal sense in our society as a result
of it's so central to a deeply held conviction regarding the essence of our political,
economic, and social life. In common sense, the term contract is employed

117 Ibid
118 Diamond, op. cit., p.386.
119 Diamond, op. cit., p.387.

53
 The law of contracts forms the oldest branch of the law relating to business
transactions. It affects every person in one way or the other, as all of us enter into
some kind of contract every day. 124 The law of contracts is applicable not only to the
business community but also to others. Every one of us enters into a number of
contracts almost every day. When a person takes a seat in a bus or deposits his luggage
in a railway clock room or entrusts his car to the mechanic for repairs etc., he enters
into a contract, though he may not be aware of this fact. Such contracts create legal
rights and obligations. The law of contracts is primarily concerned with self-imposed
obligations.125 The parties to a contract do enjoy freedom of contract and therefore the
rights and duties created by them may be enforced even if the terms of the contract
are harsh or unfair to at least one party. When people entered into a contract they made
a piece of private law binding on each other and beneficial to themselves and in a
wider sense to the community at large.126

The parties to a contract, in a sense, make the law for themselves. It does not
lay down a number of rights and duties which the law will enforce; it consists rather
of variety of limiting principles, subject to that the parties might create rights and
duties for themselves that the law will uphold. 127 Thus, we can say that the parties to
a contract, in a sense, create the law for themselves. When contracts were entered into
voluntarily and freely they would be held enforceable by courts of justice.128 The law
of contract determines the circumstances under that a promise or an agreement shall
be legally binding on the person creating it. It also provides the remedies which are
available in a court of law against a person who fails to fulfil his contract and other
conditions, under which the remedies are available. Legally enforceable promises
termed contracts.129 The object and function of law of contract is to see that, as far as
it is possible, expectations created by promises of the parties are fulfilled and
obligations prescribed by the agreement of the parties are enforced.130

124 Pillai, R. S. N. and Bagavathi, “Legal Aspect of Business (Mercantile Law)”, S. Chand, (2011), p.8.
125 Ibid
126 Nirmal Singh, “Business Laws”, Deep and Deep Publications PVT. LTD., (2009), pp.39-41.
127
Young, Max, “Understanding Contract Law”, Routledge-Cavendish, (2009), p.75.
128 G. K. Kapoor S. and S. Gulshan, “Business Law Including Company Law”, New Age, (2008), p.2.
129 Ibid
130 Pillai, R. S. N. and Bagavathi, “Business Law”, S. Chand, (1999), p.5.

56
promise and every set of promises, forming the consideration for each other, is an
agreement. Some agreements cannot be enforced thought he courts of law, e.g., an
agreement to play cards or go to a cinema an agreement, which can be enforced
through the courts of law, is called contract. The law of contract deals with agreements
which can be enforced through courts of law. The law of contract is the most important
part of commercial law because every commercial transaction starts from an
agreement between two or more persons.138 Contracts as defined by Eminent Jurists;
according to Pollock “Every agreement and promise enforceable at law is a
contract.” Halsbury defined that: “A Contract is an agreement between two or more
persons which is intended to be enforceable at law and is contracted by the acceptance
by one party of an offer made to him by the other party to do or abstain from doing
some act.”139

According to Salmond a contract is an “agreement creating and defining

obligations between the parties”. According to Sir William Anson, “A contract is an
agreement enforceable at law made between two or more persons, by whom rights
are acquired by one or more to acts or forbearances on the part of the other or
others”. Sir William Anson observes as follows: “As the law relating to property had
its origin in the attempt to ensure that what a man has lawfully acquired he shall
retain, so the law of contract is intended to ensure that what a man has been led to
expect shall come to pass; and that what has been promised to him shall be
performed”.140 In Rose & Frank Co. v/s Corruption Bros141, there was an agreement
between R Company and C Company by means of which the former was appointed
as the agent of the latter. One clause in the agreement was: “This agreement is not
entered into....as a formal or legal agreement and shall not be subject to legal
jurisdiction in the law courts.” The court held that, there was no binding contract as
there was no intention to make legal relationship. In the case Jones v/s Vernon’s Pools
Ltd.142, an agreement contained a clause that it “shall not give rise to any legal

138 G.H. Trieitel, “The law of contract”, London Stevens and Company id, (1983), p.1-2.
139 Sujeet Jha, “Indian Contract Act, 1872”, available online at:
http://www.educonz.com/download/law_audit.pdf, p. 1, accessed date on (17.11.2015), 18:24 pm.
140“Concept of Contract in Indian Contract Act, 1872”, available online at:
http://shodhganga.inflibnet.ac.in:8080/jspui/bitstream/10603/43089/11/11_chapter%202.pdf, p. 44, accessed
date on (17.11.2015), 18:24 pm.
141 (1925) AC 445, www.Indiankanoon.org.
142 (1938) 2 All E.R. 626, www.Indiankanoon.org.

59
terms altered in the same manner as a contract is made, and is subject to the same tests
for enforceability as a contract. These cannot be done unilaterally; it requires the
consent of both or all parties. A promisee under the contract can, however, unilaterally
dispense with or remit the performance of any promise partly or fully or can accept
any satisfaction from the promisor.148

Although an intention to create legal relations is not expressly stated in the Act
as a requirement f contract, the necessity of such intention is implicit in the
requirement of a valid proposal, which when accepted becomes a promise. A proposal
will result in a contract if it is made with an intention to be legally bounded by the
acceptance, if given.149

In section 10 of the ICA 1872 defines a valid contract. According with this
section, “all agreements are contracts if they are made by the free consent of the
parties competent to contract, for a lawful consideration and with a lawful object and
are not expressly declared to be void.”150 Thus, in order to create a valid contract, the
following elements should be present:

I) Intention to make legal duty and obligation by offer and acceptance must be present.
II) Free consent of the parties is essential. III) Capacity or Capability of parties to
enter into agreement should be ensured. IV) Lawful object and Consideration must be
present, and V) Agreement not expressly or explicitly declared to be void. The above
important elements may be further analyzed as under:

1. Offer and Acceptance: In the first place, there must be an offer and the said offer
must have been accepted. Such offer and acceptance should create legal obligations
between parties. This should result in a moral duty on the person who promises or
offers to do something. Similarly this should also give a right to the promise to claim
its fulfillment. Such duties and rights should be legal and not merely moral. 151

148
Ibid
149 Ibid
150 Bhardwaj A.P, “Legal Aptitude and Legal Reasoning for the CLAT and LLB Examinations”, 2nd edition, New
Delhi, Dorling Kindersley (India) Pvt. Ltd., (2011), p.83-4.
151 Available online at: http://www.icaiknowledgegateway.org/littledms/folder1/chapter-1-the-indian-contract-
act-1872-2.pdf

61
intervals) and (c) person who are otherwise disqualified like an alien enemy,
insolvents, convicts etc. from entering into any contract.156

4. Consideration: The fourth element is presence of a lawful ‘consideration’.

‘Consideration’ would generally mean ‘compensation’ for doing or omitting to do an
act or deed. It is also referred to as ‘quid pro quo’ viz ‘something in return for another
thing’. Such a consideration should be a lawful consideration. For example; A agrees
to sell his books to B for `100, B’s promise to pay `100 is the consideration for A’s
promise to sell his books and A’s promise to sell the books is the consideration for
B’s promise to pay `100.157

5. Not expressly declared to be void: The last element to clinch a contract is that the
agreement entered into for this purpose must not be which the law declares to be either
illegal or void. An illegal agreement is an agreement expressly or impliedly prohibited
by law. A void agreement is one without any legal effects. For Example; Threat to
commit murder or making/publishing defamatory statements or entering into
agreements which are opposed to public policy is illegal in nature. Similarly any
agreement in restraint of trade, marriage, legal proceedings etc. is classic examples of
void agreements.158

Under the English Contract Law 1950, contract defined in section 2, according
with this section contract specific and reflect the agreement between the parties.
Contracts are obviously is a promise or a set of promises for the breach of which the
law gives a remedy, or the performance of which the law in some way recognizes as
a duty.159 Contracts should be project key part of every business and it is therefore
fundamental that all parties to a contract understand the terms included in a contract
and the rights and responsibilities of the parties under that contract.160 Every contract
should have: Offer, Acceptance, Consideration, Intention to create legal relations,
Certainty and Capacity of the parties.

156 Available online at: https://www.slideshare.net/binitbhura/indian-contract-act-1872-15959134

157
http://studylib.net/doc/9621652/the-indian-contract-act-1872, p.2.
158 Available online at: http://www.icaiknowledgegateway.org/littledms/folder1/module-1-chapter-1-2.pdf,
accessed date on (18.11.2015), 20:37 pm.
159
Kelleher Jr, Thomas J., & et al., “Smith, Currie and Hancock's Common Sense Construction Law: A Practical
Guide for the Construction Professional”, John Wiley & Sons, (2014), p.765.
160 Ibid, pp.3-4.

63
 An offer in section 2(a), “when one person signifies to another, his/her
willingness to do or to abstain from doing anything with a view to obtaining the assent
of that other to the act or abstinence, he/she is said to make a proposal”. In section 9
Acceptance of an offer occurs when there is an unqualified acceptance of all the
offered terms. However, this is unusual and there will normally be a period of
negotiation. New terms and conditions introduced through negotiation in effect
amount to a series of counter offers to the original offer, cancelling the terms of the
original offer. A contract offer has only been accepted when the acceptance is brought
to the attention of the offeror.161 This applies in the case of instantaneous
communication, such as by telephone, where the party giving acceptance will often
know at once if a communication is unsuccessful so will have the opportunity of
making a proper communication. The exception to this rule is when the acceptance is
posted. The offer is deemed to be accepted when the offeree posts their acceptance.
The now commonplace use of email raises the question of whether the postal
acceptance rule applies to emailed acceptances. Currently there is no statutory law on
this point. The contract could be formed when the email acceptance is read or when
the email acceptance is sent.162

In section 2(d) defined consideration is something done or given by one party

to the act or promise of another. Consideration is the requirement of reciprocal
obligations on the parties to a contract. Both parties must receive valuable
consideration for performance of their side of the contract. However, it is extremely
unlikely that a commercial organization would provide goods or services for free. An
intention is a mental attitude with which an individual act, it can proved but must be
inferred from the circumstance. A certainty is both of parties must have a clear
understanding of their rights and duties in the transaction for there to be consensus.
Capacity of the parties is an otherwise valid contract may be defeated by the lack of
contractual capacity of one of the contracting parties. It presumed that each party to
contract has legal capacity to enter into it.163

161 Jasna Geric, “Course of Legal English”, published by Wolters Kluwer, (2014).
162 Richard TA, “Professional Business Law Essays”, Clearing House Publisher, (2014), p.85.
163 Ibid.

64
 An agreement is a legally expressed commitment between two or more
parties that thy commit to doing or accepting something with or without terms or
conditions. It may or may not have to be witnessed by another party who has no gain
by sealing the commitment. Usually agreements are in writing and they can carry
implied conditions. It is for this reason that standard or cultured legal forms are used
for and agreements or the committing parties may choose to have a lawyer or lawyers
draft/write the agreement and explain implied obligations of the agreement and also
advise if there are laws which will affect the agreement in any way. An agreement is
usually drawn up to seal over or protect the individuals concerned because there is a
lack of trust/integrity. A contract is a legally binding agreement reached between two
parties, the terms of which the courts have the authority and obligation to enforce. An
agreement is a less formal creation of an obligation between the two parties. An
agreement usually lacks one or more of the essential elements that are required to be
present in order to form a valid contract that will be considered legally enforceable by
a court of law.

Contracts outline the terms of the relationship that should be formed between
the two parties to the contract. An agreement also outlines the terms of the relationship
between the two. However, the difference is that the contract’s outline is far more
rigid than that of a contract. The essential difference between an agreement and a
contract is that typically an agreement will only modify a contract that is already in
place but does not place an obligation on either one of the parties to provide
consideration to the other party, which a contract requires. A contract can involve the
exchange of promises between the parties to the contract, while an agreement may
simply involve one party accepting the offer from another party. 171

2.5 The Social Roots of Contract

The movement of the progressive societies has been uniform in one respect.
Through its entire course it has been distinguished by the gradual dissolution of family
dependency, and the growth of individual obligation in its place. The Individual is
steadily substituted for the Family, as the unit of which civil laws take account. 172 The

171
“Contract v/s Agreement”, available online at: http://contract-law.laws.com/contract-law/contract-vs-
agreement, accessed date on (15.12.2015) 19:51 pm.
172 Tonnies, Ferdinand, and Charles Price Loomis. “Community and society”, Courier Corporation, (1957), p.182.

67
advance has been accomplished at varying rates of celerity, and there are societies not
absolutely stationary in which the collapse of the ancient organization can only be
perceived by careful study of the phenomena they present. But, whatever its pace, the
change has not been subject to reaction or recoil, and apparent retardations will be
found to have been occasioned through the absorption of archaic ideas and customs
from some entirely foreign source.173 Starting, as from one terminus of history, from
a condition of society in which all the relations of Persons are summed up in the
relations of Family, we seem to have steadily moved towards a phase of social order
in which all these relations arise from the free agreement of Individuals. In Western
Europe the progress achieved in this direction has been considerable. 174 Thus the
status of the Slave has disappeared it has been superseded by the contractual relation
of the servant to his master. The status of the Female under Tutelage, if the tutelage
be understood of persons other than her husband, has also ceased to exist; from her
coming of age to her marriage all the relations she may form are relations of
contract.175 So too the status of the Son under Power has no true place in the law of
modern European societies. If any civil obligation binds together the Parent and the
child of full age, it is one to which only contract gives its legal validity. The apparent
exceptions are exceptions of that stamp which illustrate the rule. The child before
years of discretion, the orphan under guardianship, the adjudged lunatic, has all their
capacities and incapacities regulated by the Law of Persons. The reason is differently
expressed in the conventional language of different systems, but in substance it is
stated to the same effect by all.176 The great majority of Jurists are constant to the
principle that the classes of persons just mentioned are subject to extrinsic control on
the single ground that they do not possess the faculty of forming a judgment on their
own interests; in other words, that they are wanting in the first essential of an
engagement by Contract.177

173 Bruni, Luigino, “The genesis and ethos of the market”, Palgrave Macmillan, (2012), p.14.
174 Weisberg, D. Kelly, and Susan Frelich Appleton. “modern Family Law: cases and materials”, 6th edition,
Wolters Kluwer Law & Business, (2015).
175 Szasz, Thomas, “Faith in freedom: Libertarian principles and psychiatric practices”, Transaction Publishers,
(2011). Also see Bell, Susan G. and Karen M. Offen, “Women, the Family, and Freedom: 1750-1880”, Vol. 1,
Stanford University Press, (1983), p.374.
176 Tonnies, Ferdinand, and José Harris, “Tonnies: Community and civil society”, Cambridge University Press,
(2001), p. 140.
177 Brewer, Holly, “By birth or consent: Children, law, and the Anglo-American revolution in authority”, UNC
Press Books, (2012), p.7.

68
progressive societies the individual in the progressive societies became a free thinking
and free willing one with all powers to enter into contract. 185

2.5.2 The Status to Contract Theory Questioned

Ever since Henry Maine wrote his Ancient Law on 1861, it has been a common
place among jurists and some who are not jurists that “the movement of progressive
societies has hitherto been a movement from status to contract.” The formula has
generally been gratefully accepted as a very useful summary of many phenomena
encountered in legal history. Usually, its original meaning is extended so as to accept
within the concept of “status” the immediate or the remote results of agreement. Now
the formula has been modified or restricted186 or exceptions to it have been noted187,
then the universality of the doctrine began to be questioned188 and finally its
applicability to Anglo-American law has been categorically denied.189

Viewed as an event in the history of Anglo-American juristic thought, the

rejection of a fundamental concept in current jurisprudence is no more academic
quibble. The Dean Roscoe Pound seems an essential person of the sociological
jurisprudence which has remarks upon the importance of theory: “The legislative
development whereby duties and liabilities are imposed on the employer, in relation
of employer and employee not because he has so willed, not because he is at fault, but
because the nature of the relation is deemed to call for it.”190

It is not only significant; it represents the settled trend of the present. For such
status the new jurisprudence speaks “the sympathetic judicial development which all
statutes require in order to be effective”. The new school denies the soundness of the
historical views of those courts that have been speaking of freedom of contract in such
matters.191

185 Maine, Henry Sumner, "Ancient Law (1861)", Reprint, London: JM Dent, 1917.
186 Edward Jenks, “Law and Politics in the Middle Ages”, (1867), p.34-38.
187 William G. Miller, “Lecturers on The Philosophy of Law”, Рипол Классик, (1884), p.73
188 Maine, H. J. S., “Ancient Law”, edited by F. Pollock, London: John Murray, (1908), p.442. .
189 Stephen Nayak-Young, “REVISING THE ROLES OF MASTER AND SERVANT: A THEORY OF WORK
LAW”, U. of Pennsylvania Journal of business Law, Vol. 17:4,(2015), pp.1223-1256.
190 Roscoe Pound, “Liberty of Contract”, Yale Law Journal 18, (1909), p.454.
191 Nathan Isaacs, “The Standardizing of Contracts”, Cincinnati Law School, Yale Law Journal 27, (1917), p .34.

71
2.5.3 Reversion from Contract to Status

Most recently, it is being freely said that there is a reversion from contract to
status, but this is not an accurate description of the process. In many ways, status has
become more important as a source of rights and obligations than it was in 1861, when
Henry Maine propounded his famous dictum. National citizenship is today a more
important legal status than it was in 1861, when there was hardly any obstacle to
migration. It must not be forgotten that Maine was mainly writing of personal status.
The pattern of economic relationship has been undergoing a change from a free market
negotiated contract between individuals vis-à-vis a particular transaction, one to one
relationship to long term continuous relationship between organizations inter-se or
consumer and an organization or Government and supplier.192

Sometimes, the relationship is not even governed by a contract, the

relationship between various Government Departments or between a Government
Department and Government Corporation. These developments led to the virtual
destruction of atomistic theory of society193 in which each individual was perceived
as entering into free choice relationship with others and in which the overall social
structure was made by large number of such one-to-one relationships. The role of the
individual as the center of the network of relationships has largely disappeared. This
is the sense in which it is correct to speak of enormous decline in the role played by
contract in the modern society. A contract must not become a disguised form of status.

The economic pattern has been changing since the latter half of the nineteenth
century where small business has been turns to big business. This development has
been characterized by big business concerns and public utility undertakings entering
into contract with the users or consumer on the same pattern on standardized terms
and conditions evolving form of a standard contract. This was initially adopted by
bankers and insurers and subsequently taken over by public-utility undertakings,

192 Maine, Henry Sumner, “Ancient law, its connection with the early history of society and its relation to modern
ideas”, Cambridge University Press, J. Murray, (2012), p. 304.
193 The atomistic theory emphasized the autonomy of the individual and his inherent reason as the determinants of
behavior. Individuals were conceived of as independent and self-sustaining units and the community was
defined as their mechanical summation. The foundations of social life as the product of reason were natural
rights. The organismic theory, on the other hand, saw society in a holistic manner, with a reality in its own right,
something distinct from and opposing the individual. Strasser, Hermann, “The Normative Structure of Sociology
(RLE Social Theory): Conservative and Emancipatory Themes in Social Thought”, Vol. 47, Routledge, (2014),
p.150.

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“man’s theory”.197 There can be no doubt that common sense does generally find
something revolting about the breaking of a promise, and this, if a fact, must be taken
account of by the law, though it may be balanced by other factors or considerations.
In any case, let us not ignore the fact that judges and jurists, like other mortals do
frequently express this in the feeling that it would be an outrage to let one who has
broken his promise escape completely. But while this intuitionist theory contains an
element of truth, it is clearly inadequate. No legal system does or can attempt to
enforce all promises. Not even the cannon law held all promises to be sacred.198

When we came to draw a distinction between those promises which should be

and those which should not be enforced the intuitionist’s theory, that all promises
should be kept, gives us not light or guiding principle. Similar to the intuitionists
theory is the view of Kantians like Reinach that the duty to keep one’s promise is one
without which rational society would be impossible. There can be no doubt that from
an historical or imperial point of view. The ability to depend on the promises of others
adds to the confidence necessary for social enterprise and intercourse. But as an
absolute proposition this is indefensible.199

The actual world, which certainly is among the possible ones, is not one in
which all promises are kept, and there are many people - not necessarily diplomats -
who prefer a world in which they and others occasionally depart from the truth and
go back on some promise.200 It is indeed very suspicious whether there are many who
would prefer to live in an entirely rigid world in which one would be obliged to keep
all one’s promises instead of the predetermined more viable system, in which a
vaguely fair proportion is sufficient. Some freedom to change one’s mind is necessary
of free intercourse between those who lack omniscience. For this reason we cannot
accept Dean Roscoe Pound’s theory that “all promises in the course of business
should be enforced”. He is surely right in his insistence that promises constitute
modern wealth and that their enforcement is thus a necessity for keeping wealth as a

197 Epstein, Richard Allen, ed, “Contract--freedom and Restraint”, Vol. 4. Taylor & Francis US, (2000). Also
Beale, Hugh G., & et al., “Contract”, 5th edition, Oxford University Press, (2007), p.759.
198 Epstein, Richard A., ed. “Contract-Freedom and Restraint: Liberty, Property, and the Law”, Routledge,
(2013), 572.
199
Ibid, 84.
200 Beale, Hugh G., William D. Bishop, and Michael Philip Furmston. “Contract”, 5th edition, Oxford University
Press, (2007), p.759.

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stepped in to fill the gap in the common law writ system to fulfill the moral demands
of individuals and society.

Though the king’s court refused to ratify a pledge of faith and the constitution
of Clarendon (1164) also would not allow ecclesiastical courts from enforcing them,
yet the later courts would not allow moral lapses in the shape of breach of faith. In
medieval times the obligations of religion and law were almost indiscernible, and
despite the constitutions of Clarendon, the common lawyers would press for the moral
basis of contract and their performance. The court of chancery here forth offered
remedies where good faith and honest dealing demanded promises being enforced.
Gradually, this influenced the common law courts also to give suitable remedy for a
breach of contract.213 The writ of Assumpsit was the result. The doctrine of
consideration had not yet then fully developed but the judges felt a duty to enforce
moral obligations.

The theory of moral basis was further developed by Lord Mansfield in case of
Hawks v/s Saunders,214 wherein he expressed, “Where a man is under a moral
obligation which no court of law or equity can enforce any promises, the honesty and
accuracy of the thing is consideration. Though, go against such a common doctrine in
cases; Littlefield v/s Sheek215 and Rann v/s Hughes216. In the last case Lord Tenderden
C. J. stated: “The doctrine that a moral obligation is a sufficient consideration for a
subsequent promise is one which should be received with some limitation.” The moral
theory had to meet the challenge in later years of the doctrine of consideration. 217

The theory of sufficiency of consideration put the theory of moral obligations

more and more remote. The moral theory still lingered on in case Lee v/s
Muggeridge218 but in Eastwood v/s Kenyan219 it got its final deathblow, with Lord
Denman declaring: “The doctrine would destroy the necessity for any consideration

213Holdsworth, William Searle, “A history of English law”, Edited by Arthur Lehman Goodhart, and Harold
Greville Hanbury, 7th edition, Vol. 1, Methuen, (1969), p.456.
214 (1775) 1 COWP. 284. 289, http://www.leagle.com.
215 (1881) 2B and Ad. 811,818, http://caselaw.findlaw.com.
216
(1778) 1 COUP. 289.
217 Swain, Warren, “The Law of Contract 1670–1870”, Cambridge University Press, (2015), p.146.
218 (1813) 5 Taunt. 36.
219 (1840) 11 Ad. E.438. https://lancaster.rl.talis.com/items/E8A6C9F9-874C-4B71-9871-FEB1311DB8A9.html

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to bring into being a contract. Agreement, though, is not a mental state but an act, and
as an act is a matter of inference from conduct. The parties are to be judged, not by
what is in their minds, but by what they have said or written or done.223 If one party
makes to other a promise which is reasonably understood by that other to be intended
to effect legal relations and the promise, acts upon it to his detriment, the promisor
will be contractually bound by the promise although he does not intended to contract,
or to contract in those terms. In the 18th century the property trend of the community
led to the law being paternalistic and protective about the fairness of an exchange. The
subsequent doctrine, that sufficiency of consideration is for the parties alone, gained
in the 19th century, and was not present in the 18th. The stress on the will theory of
the 19th century was not present in the law of the 18th century. In the 19th century
law of contract was of regulative nature, leaning it to the parties to enter into any
contract they liked within the permissible limits of the law and such a contract had to
be enforced by the courts regardless of the question whether it was fair or
reasonable.224

Law of part executed contract was slowly but surely yielding place to the law
of executory contract225, which was adopted as the classical model of contract. In an
executory contract, a party was liable not because of anything done at the time of
entering into the contract but because of his intention or promise to do something in
the future.226 For instance; on 1st of June, Adam agrees to buy a bicycle from Bob.
The contract is to be performed on 15th of June. The executory contract becomes an
implemented when wholly performed. If both Adam and Bob perform their
obligations on 15th of June, the contract becomes executed. Though, if in the terms of
the contract, performance of promise thru one party is to precede performance thru
other party then the contract is still executory, however it has been performed thru one
party. The significance of the contract led to the formulation of the Will Theory.
Mansfield while stating emphasis on intention in the interpretation of the contract had
also emphasized the significance of intention in the formation of the contract by

223
Chitty, Joseph, “Chitty on contracts: General principles”, Vol. 1. Sweet & Maxwell, (2012), p.15.
224 Paton, George Whitecross, "A textbook of jurisprudence", Oxford, Clarendon Press, (1972).
225An executory contract is a contract made by two parties in which the terms are set to be fulfilled at a later date.
The contract stipulates that both sides still have duties to perform before it becomes fully executed.
The contract is often in place between a debtor or borrower and another party.
226 Mulcahy, Linda and John Tillotson, “Contract law in perspective”, 5th edition, Psychology Press, (2008), p.28.

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difficulty, provision would have been made for in the beginning when the contract
was drawn up. When courts thus proceed to interpret the terms of the contract they
are generally not merely seeking to discover the actual past meanings (though that
may sometimes be investigated) but more generally they decide the “equities” the
rights and obligations of the parties, in such circumstances; and these legal relations
are determined by the courts and the jural system and not by the agreed will of the
consenting parties.230

Planial and others have argued that while certain effects of a contract may not
have been foreseen by the parties, nevertheless these are effects following from the
original objective and are, therefore, the will of the two contractors. But to argue that
because the law fixes certain obligations you did foresee something that in fact you
did not see is a confusion which would be too ridiculous to criticize, were it not so
common in juristic decisions. So in contracts men are liable for things that they did
not actually foresee; and to say that they willed or intended these results are a fiction
designed to save the will theory. 231

The will theory leads to such a subjective view of mistake that the security of
transaction is thereby hazard. Where the mistake is due to A’s carelessness and the
other contracting party is unaware of A’s error, the real will of the parties cannot be
regarded as ad idem, but to avoid the contract would frequently be very unjust.
Modern law tends to take rather a narrow view of the kinds of mistake which void a
contract. The obvious limitations of the will theory of contract have caused a reaction
that takes the forms of position. Away with the whole notion of will, the only realities
are specific acts to which the law attaches certain consequences, that is, if you do
something orally, by writing or by any other act that someone else takes a promise,
then latter can under certain conditions, bring an action. In its extreme form, this
appears in what Dean Roscoe Pound calls the state of strict law, which like everything
called primitive, is always with us. A developed system of law, however, must draw
some distinction, between voluntary and involuntary acts. Mr. Justice Holmes thinks

230 Ibid, p.577

231 Ibid

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dynamic security in that it facilitates the speed of transactions. But Domogue is
analyzing the problem from the angle of the owner of property, Roscoe Pound from
the approach of a contracting party who desired to know if he may rely on the conduct
of another. Security, in terms of the injurious reliance theory, can mean only ability
to rely on expectations reasonably aroused by the conduct of another.

There can be no question about the soundness of the injurious reliance theory
in accounting for a dominant phase of the law of contract, and the foregoing
difficulties may thus seem petty. But they do call attention to fundamental obscurities
in the very idea of “reliance” as well as in the criteria of “injury”. 242 The injurious
reliance theory, like others terms attention to a necessary element but does not give
an adequate account of the whole of the law of contract. Its merits are clearer when
its claims are properly restricted.243

The theories of reliance were overshadowed by the consensus theory. By the

end of the nineteenth century, academicians had to face the problem regarding the
place of consideration in the classical concept of contract. One school advocated the
concept that detriment or benefit could be the consideration for the contract, while the
other school advanced the idea that only detriment could be considered as sufficient
consideration. It was only the beginning of the twentieth century that the clouds
cleared and the concept of the first school obtained prominence.

2.6.6 The Modern Developments

In modern days the old respect of the individuals for their contractual
obligations is not so much in evidence. We cannot say that the sphere of individual
claim is increasing and should be increased. For different reasons the law has
interfered seriously with contractual liberty, sometimes in the hope of regulating an
industry to support it from foreign competition, sometimes in the interest of the
economically weaker party. Non-performance of obligations found support in the
development of the doctrine of frustration. The demand for the relaxation of the strict
letter of the contract to relieve difficulties and the importation in terms of performance

242
Epstein, Richard A., ed. “Contract-Freedom and Restraint: Liberty, Property, and the Law”, Routledge, (2013),
p.580.
243 Supra note. 174.

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 The imposition of statutory duties in the interest of social justice largely
sacrifices mobility for security and stability. The increasing participation of public
authority in contract creates the wider and as yet generally unknown problem of the
dual function of the state, as a superior and as an equal. The standardization of the
contract greatly restricts the freedom of the weaker party, and is usually along with
inequality of bargaining power. They are too common in a highly commercial
society.247 Customer is negatively drawn into these contracts by force of
circumstances. He is amazed later when he is told that he cannot get from the court
the relief he wants on account of the “exemption clauses” placing the promissory in
an undesirably advantageous position. The abstract legal theory of contract as an
agreement arrived at through discussion and regulation must be complemented by area
list study of its operation in the world today. 248

247 Ibid. 155.

248 Supra note. 175.

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