AUTHOR-Vidit Lohia
Agreements and contracts entered in India are governed by Indian Contract Act, 1872 (ICA). ICA is one of the oldest acts in India and is based on the English Common Law. All the aspects of contracts, right from offer, communication of offer, acceptance, performance, enforceability etc. are dealt under ICA.
It is said that a law which does not incorporate social change, turns infructuous, merely into a piece of paper, without any legal significance. ICA being such an old legislation, some of the provisions of ICA have still not evolved with time. There are flaws with some of the provisions of ICA which must be resolved as soon as possible by the legislation.
Contracts entered into by minors:-
According to section 10 of the ICA, a valid contract must be entered into by the free consent of parties who are competent to contract, for a lawful consideration, for a lawful object and section 11 of ICA, specifically declare minors, as persons who are incompetent to contract. Although, section 19, 19A, 20 talks about validity of contracts entered into without free consent, but none of the sections of the contract specifically talks about the legal consequences of the contract entered by minors. There is no specific provision in the act specifically declaring them to be void or voidable or void ab initio. A ruling as pronounced by the Privy Council in 190, in the case of Mohori Bibi v. Dharmodas Ghosh has stated that contracts entered into by minors are void ab initio and are hence, unenforceable by either party. The decision of the Privy Council about a century ago has been applied in all the cases as if though it is an unamendable axiom and no provision of ICA specifically talks about this. This is one of the major flaws in ICA and this situation must be cleared as soon as possible through an amendment to the legislation.
Non-recognition of non-compete clause:-
Section 27 of ICA declares agreements in restraint of trade, saving those agreements, not to carry on business of which good will is sold, void. Thus, any contract with a non-compete clause will be declared as being in restraint of trade and hence, void. One of the primary advantages of a non-compete clause is that it provides business and the employers with a degree of protection. ICA should specifically recognize such non-compete clauses.
Provisions as regards electronic or digital contracts:-
E-commerce has become as one of the indispensable part of our lives. As the name suggests, it is the practice of trading, i.e. buying and selling goods and offering services through internet. The e-commerce system works basically by entering into various contracts over the internet, referred to as e-contracts. The Information Technology Act, 2000 is the legislation that legalizes e-contracts in India. As, ICA was enacted almost a century and a half ago, with a very few, handful, insignificant amendments to it, ICA does not statutorily recognize and deal with e-contracts. Various aspects like rights, liabilities, jurisdiction in e-contracts are not at all covered separately under ICA. The same clauses which apply to pen & paper contracts continue to apply to e-contracts. There is a need for a specific chapter dealing with electronic contracts under ICA.
Unfair agreements or contracts:-
The ICA has no specific provision dealing with unfair agreements or contracts. The courts have no power as of now under the act, suo moto declaring an agreement as unfair. ICA should be amended so as to specifically include provisions as regard this and the courts must have the power to declare an agreement as unfair, even though a plea about the same has not been raised by either of the parties of the contract.
Enforcement of contracts in India:-
One of the fundamental flaws as regards contracts in India is as regards enforcement of contracts in India. According to study done, a few years back by the World Bank, India was ranked awfully low, that is as low as 186th among 189 countries as regards enforcement of commercial and infrastructural contracts. As per “The Ease of Doing Business Index Report”, contract enforcement in India on an average takes 1445 days and 30% of the value of the claim as cost. This can be attributed to India’s absolutely slow judicial system. A massive numbers of civil cases are pending before the civil courts in India. Huge court fees, expensive lawyers, and then a patient wait for years, is involved in almost every civil case in India. This has left the aggrieved parties under a contract with practically no judicial remedy. Referring the case to arbitration is one of the alternatives, but that too in India is affected by high costs, huge delays as compared to other countries like Singapore, Dubai. This makes arbitration out of reach of common citizen and big corporations often prefer to arbitrate their disputes in jurisdictions such as mentioned above, where disputes are dissolved within a matter of days, weeks or a maximum of few month.
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