CONCEPT OF CONTRACT

B-5/a/14 feb

THIS IS A SEQUEL TO MY LAST BLOG NUMER B-5/07 FEB, TITILED" WHAT CONTRACT IS"

There is no doubt that the meaning and interpretation of contract has been changing over the centuries,right from the time of Chandragupta Maurya till date.The evolution of contract has been a interesting journey. In the era of King Maurya the essential element of contract were free consent and consensus on all material terms and conditions. The voidability of contract was governed by-a) contract formed during night, b) contract entered into the interior compartment of a house, c)contract made in a forest ,d) contract made in any other secret place. There were certain exceptions to clendestine contracts like to ward of voilence, in connection with marriage, under orders of government & by purdahnashin women.

During the Mohammedan rule the essential element of contract were that one party should make a proposal and other should accept it which means that minds of both must agree. The Muslim Law of contract were further reviewed after the grant of regulations and charters by the Britsh Crown to the East India Company. This eventually led to the enactment of Indian Contract Act of 1972 which is being followed till date.Indian Contract Act was drafted in England whereby Englih Law of Contract permeates it.This can be understood easily by Blackstones commentary on the laws of England when he treated contract as one method among others of acquiring a title to property. To blackstone, the law of contract was rather a subdivision of the law of property than an independent branch of law.

During 15th century the concept of contract had primarily evolved arround the action on DEBT. The writs were centered arround the claims for the price of goods sold and delivered. The essential feature of the that writ was that the claim was for money compensation for benefits derived. During the 16th century the concept of breach of contract was derived though it was not in terms of todays interpretation and it was primarily focussed on the disputes arousing out of claim for money compensation. Most of the general principles of English Law of contract were generated in 18th & 19th century. The judges in 18th century interpreted the theory of natural law to mean that men had an inalienable right to make their own contract for them selves and the freedom of contract was a prime idea into this.

The noteworthy feature of English Law of Contract is that it ia SINGULAR. This means that all contracts irrespective of their content or subject matter are governed by the same rules which interalia brought the need of uniform civil code for all citizens irrespective of their caste & creed.
The journey of English Law of contract has been through CONSENSUS theory and WILL theory by the end of 19th century. The Consensus theory emhasized that the source of the contract as the will of the parties, the contract depended entirely on the intention of the parties which means court does not make the contract for the parties it merely enforces that. The court had no power in making of contract which means court had no role in judging the fairness in construction of contract. The Will theory got ingressed in concept of contract in 19th century end whereby it was accepted that every promise made intentionally is binding and enforceable. The examination of the construction of promise in a contract empowered the courts to judge the fairness of contract also which was missing in the Consensus theory. Now the contract was executionary in nature wherein a party was liable not because of anything done at the time of entering into the contract but because of his promise or intention to do something in future. The importance of intention in the formation of contract had led to the formulation of WILL theory.

WE should not forget that the Indian Contract Act, 1872 contains the principles of English Law which are frozen . It means that that these are incorporated in the act as these were in 1872 at the time of drafting of the act. This is where the interpretation of contract in terme of its meaning becomes of prime importance. During 20th and 21st century the various judgements delivered by judges has altogather has given a different meaning to the concept of contract. In this era a contract can be defined as a combination of agreement and obligation. A contract is an agreement made between two or more parties which is intended to be enforceable at law and is constituted by the acceptance by one party of an offer made to him by the other party to do or abstain from doing some act.

The evolution of free market in the current economy and in the society has altogather added new concept to the meaning of contract.The classical concept which can be termed as original concept of Indian Contract Act or English Law did not take into account the inequalities in the bargaining power between parties entering into contract.Though parties are assumed to be equal before the law but in reality thay are not. The economic power plays are vital role in creating inequality among the parties.The increasing gap between theory and reality of developing society had its particular effect on the meaning & interpretation of law of contract.

There is a pathetic contrast between the law of contract as it is and the modern contract as it functions in society today.In todays society it is a accepted fact that the agreement should be binding and must create legal relationship of contract. e.g. acceptance of an invitation to dinner is not a binding enforceable contract as it does not create a legal relationship. Take another example where some situations are considered as contractual even though genuine assent is missing like cases of appending signatures on unread documents.

AS OF TODAY the law of contract does not prescribe the rights and obligations of the parties but imposes a number of resrictions subject to which the parties may create, by their contract, such rights and obligations as thay may agree as long as they do not infringe the legal prohibition. Here we see that the meaning of Freedom of Contract has again changed in todays world as compared to the meaning which was prevalent in 18th century.The law is now viewed as a positive instrument to achieve justice.The enshrined principle of contract that one should abide by ones agreements and fullfils ones promises is now being governed by another principle ,i.e. ONE SHOULD NOT TAKE ADVANTAGE AF AN UNFAIR CONTRACT WHICH ONE HAS PERSUADED ANOTHER PARTY TO MAKE UNDER ECONOMIC OR SOCIAL PRESSURE BECAUSE IT PROFOUNDLY AFFECTS MORAL & LEGAL IDEAS ABOUT FREEDOM OF CONTRACT AND SANCTITY OF CONTRACT.

THE GOVERNMENT CONTRACTS primarily falls in this category and are subject to scrutiny by courts on the abovesaid principles. Not only the construction of contracts are subject to judicial reviews but in case of disputes the arbitrators are also guided by this very foundation of the concept of contract as it is today.

To be continued