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The Indian Contract ACT, 1872
The Indian Contract ACT, 1872
The Indian Contract ACT, 1872
ACT, 1872
Development of Contract Law
• Contract law is a branch of commerce.
• In 1756, Blackstone’s Commentaries on the Laws of England.
380 pages on law of property and 28 pages to contracts
• From 1760, 1820, 1840 – structural changes from agriculture towards industrial
revolution.
• By mid of 18th century, Britain controlled colonies in North America, Caribbean,
Indian subcontinent (through the activities of East India Company).
Sources of law
• Customs
• Precedents
• Legislation
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An agreement enforceable by law in a contract 2 (h)
Agreement Enforceable
Contract
6
Indian Contracts Act, 1872
Contracts can be both written and oral
• Formation
• Performance
• Discharge
Written Contracts
• (a) A negotiable instrument, such as a bill of exchange, cheque, promissory note
(The Negotiable Instruments Act, 1881).
• (b) A Memorandum and Articles of Association of a company, an application for
shares in a company; an application for transfer of shares in a company,
mortgages and charges (The Companies Act, 2013).
• (c) A promise to pay a time-barred debt (Sec. 25 of the Indian Contract Act, 1872).
• (d) A lease, gift, sale or mortgage of immovable property (The Transfer of Property
Act, 1882).
• (e) The arbitration clause or arbitration agreement in the contract (Arbitration and
Conciliation Act, 1996).
Registration
The following contracts in addition to being written are also required to be registered:
(a) Documents coming within the purview of Sec. 17 of the Registration Act, 1908.
(b) Transfer of immovable property under the Transfer of Property Act, 1882.
(c) Contracts without consideration but made on account of natural love and affection
between parties standing in a near relation to each other (Sec. 25, The Indian Contract
Act, 1872).
• Instruments are chargeable to stamp duty. However there are few instruments which
are exempted from stamp duty. Instrument executed in India must be stamped before
or at the time of execution . An instrument not duly stamped cannot be accepted as an
evidence in civil court.
Contents of a written contract :
• Details of contracting parties
• The goal or objectives that the parties intend to achieve through the transaction;
• The scope of work to be performed by a service provider in case of a services
agreement and by parties in case of a cooperation agreement;
• The description of the goods to be sold (in case of a contract for the sale of goods) and
terms governing the manner in which such sale is to be executed (such as delivery
terms;
• The consideration agreed to be paid and terms of payment;
• The indemnities which each party would give the other as applicable;
Cond…
• The limit of the liability of each person vis-à-vis the other party or a third party (for
whom the project is to be performed, for instance)
• Grounds of termination of the contract;
• Jurisdiction;
• Governing law;
• Arbitration, if necessary;
• Depending on the nature of the contract, a contract also has to also be looked into
from the perspective of applicable Indian laws, such Foreign Direct Investments,
Companies Act, 1956, Foreign Exchange Management Act, 1999, Indian Contract
Act, 1872, and applicable tax laws, if necessary.
ARBITRATION
CONCEPT OF ARBITRATION
1. The concept of arbitration means resolution of disputes
between the parties at the earliest point of time without getting into the procedural technicalities associated with the functioning of a civil court.
2. Arbitration is a legal mechanism encouraging settlement of disputes between two or more parties mutually by the appointment of a third party whose decision is binding on the parties
referring the said dispute.
4. Arbitration is an effective way of expediting resolution of disputes in these modern times when there is scarcity of time.
ADVANTAGES OF ARBITRATION
a) Minimalization of court intervention.
b) Reduction in costs of dispute redressal and resolution.
c) Expeditious and timely disposal.
d) Enforcement of awards through neutrality of arbitrator.
e) Encouragement of foreign investment by recognising the country as that having a sound legal
framework.
f) Effective conduct of and maintaining sound foreign relations.
g) Choice of language, venue and time of the proceedings.
HISTORY OF ARBITRATION
The second Schedule Recognizing the flaws in the act The Government Decided to accept
of CPC, 1908 was of 1940 post the 1991 reforms, almost all the recommendations and
Completely devoted to the arbitration and Conciliation Act, subsequently, the Amendment Bill
Arbitration 1908 1996 was Passed was introduced in the Rajya Sabha
1996 2003
Arbitral Award is final and binding It is not binding upon parties until A binding settlement is reached
they signed the decision only if parties arrive at a mutually
acceptable agreement
Arbitrator is bound with the The conciliator is not bound by the Procedure and settlement are not
statutory provision rules of procedure and evidence governed by statutory provision
Award is enforceable and Not enforceable Not appealable
appealable on specific ground
Adversarial in nature Non- Adversarial in nature Collaborative in nature
No opportunity for parties to Parties can directly involves with Optimal Opportunity to
communicate directly with each each other communicate with each other
other
a) Criminal offences
b) Guardianship matters
DISPUTES WHICH FALL
c) Insolvency and winding up proceedings
OUTSIDE CATEGORIES OF
ARBITRABLE DISPUTES ARE d) Matters of probate, letters of administration,
succession certificate etc
Booz Allen Hamilton v SBI Home
Finance (2011) 5 SCC 532 e) Eviction proceedings
f) Patents, trademarks, copyright
g) Anti Trust/ competition laws
h) Bribery/Corruption Laws
i) Fraud
ARBITRATIONS IN INDIA ON THE BASIS OF
JURISDICTION
A. DOMESTIC ARBITRATION: It happens in India, wherein both parties must be Indians and the
conflict has to be decided in accordance with the substantive law of India. The Term domestic
Arbitration is not defined in the Act. However, Section 2 (2) (7) of the Act 1996 together, it is implied
that the arbitral proceedings must necessarily be held in India, and according to Indian substantive and
procedural law, and the cause of action for the dispute has completely arisen in India, or in the event
that the parties are subject to Indian jurisdiction.
B. INTERNATIONAL ARBITRATION: When arbitration happens within India or outside India
containing elements which are foreign in origin in relation to the parties or the subject of the dispute, it
is called as International Arbitration.
C. INTERNATIONAL COMMERICAL ARBIRATION: The term ‘International Commercial
Arbitration’ has been defined in Sec. 2(f) of the Arbitration and Conciliation Act 1996. International
Arbitration is ‘commercial’ if it relates to disputes arising out of a legal relationships, whether
contractual or not, considered as commercial under the law in force in India and where at least one of
the parties is-
CONTD…
(1) An individual who is a national of, or habitually resident in, any country other than
India or
(2) A body corporate which is incorporated in any country other than India, or
(3) A company or an association or a body of individuals whose central management and
control is exercised in any country other than India or
(4) The government of a foreign country.
TYPES OF ARBITRATIONS (1) When an arbitral Institution conducts
THAT ARE PRIMARILY arbitration, it is called Institutional
RECOGNIZED IN INDIA ON Arbitration.
THE BASIS OF PROCEDURE
AND RULES: (2) If the parties agree among themselves and
arrange for arbitration, it is called Ad hoc
Arbitration without having an institutional
proceeding.
1.Institutional arbitration
(3) Fast track arbitration is a method, which is
2.Ad hoc arbitration time dependent in the provision of the
3.Fast track arbitration arbitration and conciliation act. Its
procedure is established in a way that it
has abandoned all the methods, which
consume time, and uphold the simplicity
which is the originally the prime purpose
of such arbitration.
PROCESS OF ARBITRATION
Arbitration works as under: while entering into a contract, parties agree that in case of a conflict the matter would be
sought to be resolved by an arbitrator.
Often the name of the potential arbitrator, agreed upon by both the parties, is mentioned in the contract itself.
In case a dispute arises, the first step is issuing of an arbitration notice by either of the parties.
This is followed by response by the other party and subsequently appointment of an arbitrator, decision on rules and
procedures, place of arbitration and language.
Once the arbitration proceedings commence, there are formal hearings and written proceedings.
The arbitrator, if the matter so requires, issues interim reliefs followed by a final award which is binding on both parties.
The tricky part arises if either of the parties, unhappy with the award, challenges it before the court. This can be before the
appellate court or the Supreme Court depending upon the matter.
STAGES OF ARBITRATION PROCEEDING
Chapter I-
Notice for invoking Arbitration & Reply by the other Party
General Provisions- Sec.3
Chapter III-Composition of
Arbitral Tribunal-Sec. 10,11
Appointment of Arbitrator/s
Chapter V –Conduct of
Arbitral Proceedings-Sec. 18,19,20,22.
Equal Treatment of Parties, Determination of Rules and Procedure,
place of Arbitration, Language
Chapter V –Conduct of
Commencement of the Arbitral Proceedings & Hearing and Written
Arbitral Proceedings- Sec. 21,24. proceeding
Chapter VI Making of Arbitral Award and Arbitral Award and Termination of Proceedings
Termination of Proceedings- Sec. 31, 32
•Appointment of Arbitrator;
•Confidentiality;
The Oriental Insurance Co. Ltd. and Brahmani River Pellets Limited Vs.
Ors. Vs. Dicitex Furnishing Ltd Kamachi Industries Limited
Judgment dated 13 November 2019 in Civil Judgment dated 08 August 2019 in Civil
Appeal No. 8550 of 2019. Appeal No. 5850 of 2019
Valid Contract
Valid offer sec 2(a)
According to Sec 2(a) when one person signifies to another his willingness to do or to
abstain from doing something with a view to obtaining the assent of that other to such
act or abstinence, he is said to make a proposal thereby,
An offer is a proposal made with an intention of entering into an agreement.
Acceptance
• An acceptance is a final and unqualified assent to all the terms of the offer.
• Sec 2(b) When the person to whom the proposal is made, signifies his assent there to, the proposal
is said to be accepted. A proposal, when accepted, becomes promise.
Definitions
• Agreement 2(e)- Every promise and set of promises forming the consideration
for each other.
Compliance to Section 10
• According to Sec 10 - “All agreements are contracts, if they are made –
All agreements are contracts if they are made by the free consent of parties competent to contract,
for a lawful consideration and with a lawful object, and are not here by expressly declared to be
void.
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Some common examples of contracts
• A contract to watch online sessions.
• Buying goods through vending machine.
• A contract of carriage (travel by bus or train).
• A contract for the sale of goods (the purchase of groceries).
• A contract for the supply of services (a haircut).
• A contract involving both sale and the supply of services (having a meal at a restaurant).
Types of offers
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Sec 2(g) An agreement not enforceable by law What is a
is said to be void
Contract,
Sec 2(h) An agreement enforceable by law is a
contract agreement,
Sec 2(i) An agreement which is enforceable by promise and
law at the option of one or more of the parties
Insert or Drag and Drop
your Photo Here proposal ?
thereto, but not at the option of the other or
others, is a voidable contract
Sec 2(j) A contract which ceases to be Section 2:
enforceable by law becomes void when it Important definitions
ceases to be enforceable.
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