Law as a means of upholding social interest: Contract law (General principles)

Share & spread the love

Introduction

The term “social interest” was coined by Alfred Adler in the early 1900s. It could be defined as a person’s responsibility towards society and its service to the human community. A person’s connection to the society they live in is referred to as having a social interest. Adler emphasized the value of social interest and said that he believed it to be essential for a person to lead a healthy, happy life.

In this assignment, we will be analysing the role of law in the social interest. A thorough discussion of what is law and how does it influence the course of society will definitely play an indispensable role in this assignment.

Speaking about law, we will be looking at the contribution towards society from the perspective of contract law, specifically the general provisions in India. Citing various journals and the interpretation of judgements of the Supreme court, we would get an insight into contract laws and their interpretations by the judiciary in this country.

What is law and how does it serve society?

According to Austin, “Law is the command by the sovereign backed by sanctions[1].” Aristotle said, “law is inherent in the nature of man and woman and can be discovered through reason. It is immutable, reasonable, and universal by nature and capable of growth.”

Law is a set of rules and regulations that ensured uniformity in behaviour and rules of action. Law is the group of principles, that aims at delivering standards, maintaining order, resolving disputes, guarding liberties and rights, and the ultimate aim of delivering justice.

According to Hans, “Law not only seeks to describe what must occur but rather only defines certain rules to abide by”. From the view of the legislature, law exists in the form of statutes, rules, directives, orders, ordinals, etc. From the view of the judiciary, the law exists in the form of judgments, precedents, decrees etc.

From the view of contract law is in the form of duties, liabilities, obligations etc. As for society law means, justice, morality, equity, order, righteousness etc. It’s quite conclusive that law exists almost in every dimension of society.

According to Justice Brandeis, “values like liberty play an indispensable part in creating a free society which is the ultimate goal of a democracy”[2]. Especially in a country like India, governance and order could never be imagined without values like equality and fraternity. Then one might question who ensures the imposition of these values.

There is where the role of law begins in society. Law ensures the imposition and enforcement of these values in legislation, policy-making, and in the lives of the people. People abide by the law not only out of fear of punishment but what the law does for them, that is, conferring values of durability, stability, and resilience to the institutions governing them.

Rule of Law is a crucial factor to establish order and a standard of morality in a free society. It was also created to maintain the balance between the three parts of government and to give all individuals adequate instructions and order regarding their behaviour. One can easily determine or imagine the condition of a society by looking at the laws governing it.

What this means to say is, the laws governing a society play an indispensable role in shaping the culture and lifestyle of people and their relationships among themselves. It is highly acknowledged that people in Scandinavian countries enjoy a higher degree of liberty and freedom when compared to authoritarian republican countries. The humongous difference is also reflected in the legislation of these countries.

Agreeing that this was an extreme sort of an example, it is not always the law that is in a position of dominance in the relationship with society, after all, in modern society, one can say that the reverse is the fact. Today, the law ought to be something that is entirely dynamic in nature.

What laws were a century ago are vastly different from what it is today. Rejuvenation and transformation of society are factors in the development of laws. It also divulges the nature of societal convolution and the incorporation issues it brings with it.

Besides, the upholding of our faith in the traditional panchayat system and the banning of the contemptible stereotypes of untouchability, gender discrimination, female foeticide, etc. are examples of how laws have influenced social transformation in the nation.

Laws are changing every moment; it is the needs of society that determine the direction in which law evolves today. The provisions that cater to the affairs of the citizens and everyday life ought to evolve in the way the citizens want, however, some things are not subject to change, per se, for significant reasons.

For example, the definition of ‘murder’ is still similar to what it was half a century ago. Hence, it is also the duty of the law to balance the needs of this rapidly changing world and to also retain and preserve those values that simply cannot be amended frequently, even to the most negligible extent.

There are numerous legal systems that are enforced across the globe and different dimensions of law governing various aspects of society like criminal law, civil laws, banking laws, commercial laws, etc. Law appears in society as judicial decisions and legal standards.

These guidelines and judgments are based on context. Law does not operate in a vacuum, apart from society. The socio-cultural situation is deeply embedded with legal regulations.

In the next chapters, we will be primarily discussing contract law with respect to how this law and its general principles serve the interests of society from the perspective of Indian legislation and judicial pronouncements, and other concepts of common law.

What are contracts?

The simplest definition of a ‘contract’ is a ‘promise enforceable by law’[3]. According to the Cambridge dictionary, “a contract is a formal agreement between two different parties or groups”[4].

Contracts aren’t something that was created consciously at a particular time. Historically, it wasn’t created at one given instance.

Contracts were something that was born on a very random basis solely out of the needs of people, merchants, traders, businessmen, etc predominantly in the industrial era between the 16th and 18th centuries with commercialisation of agriculture, fisheries, blooming trade, flourishing of the economy, evolution of cities, urbanisation and industrialisation.

It can be said that contracts were created out of the necessity for the society[5]. With the inception of industrialisation, people realised that performance of vital trade exchanges and transactions needed to be formalised as losses, non-uniformity, unreliability, and unrest occurred in society.

Contracts were created as a response to changing conditions in the market but gradually formalised in the course of disputes in the field of the Judiciary. Today, modern capitalism cannot imagine its very existence without contracts. Today contracts exist from, people hiring cabs on a daily basis, to multimillion-dollar agreements between the government and companies.

The most frequent cause of contractual legal issues is when one party doesn’t keep its end of the arrangement. When one party fails to uphold their half of the arrangement, the other party typically seeks monetary damages or, in exceptional cases, may approach the court to order the party at fault to fulfill their obligation.

The main purpose of a contract is to formally establish new relationships and to specify all of the various legal duties that each party has to the other. Most contracts are negotiated by businesses rather than by individuals.

While some people occasionally sign straightforward contracts to accept a job offer or sell a piece of property, businesses routinely do the same with partners, customers, and suppliers. Every corporate relationship is, in fact, backed by legal contracts.

With the creation of contracts, laws had to be legislated to preserve the rights of the ‘parties’, define their duties and obligations to ensure uniformity, and fairness, and prevent offenses like fraud, misrepresentation etc. while protecting the interests of the involved parties. These set of rules and regulations governing a contract were said to be known as ‘contract laws’.

Contract law general principles (as per Indian Contract Act, 1872)

In India, the Indian Contract Act 1872[6] serves as the governing statute of all formal contracts. India with a colonial past derives a bunch of legislations from the English common law. However, it has been modified to suit the conditions of our society.

Proposal

According to chapter I of the Indian Contract Act 1872, when a person signifies his will to someone to do or refrain from doing something with an intention to obtain his/her assent for the same purpose, he is said to make a “proposal” to the other person.

Acceptance

When the person, to whom the proposal is made, signifies his approval of the person with the proposal, he is said to have ‘accepted’ the proposal. This is what is called “acceptance”.

However, for an agreement to be valid, there are some conditions for acceptance to be valid. The acceptance must be absolute and unqualified. This means that the acceptance needs to be expressed in an understandable and reasonable manner unless the proposal prescribes a particular mode of expression.

Secondly, the acceptance must be communicated to the proposer in a reasonable period of time, or else, the acceptance stands cancelled.

Consideration (quid pro quo)

After the proposal is accepted, it qualifies to be termed as a “promise”. Now the person with proposal is known as the ‘promisor’ and the person who is said to have accepted the promise is known as the ‘promisee’.

When, at the willingness of the promisor, the promisee or any other person has done or abstains from doing, or does or abstains from doing, or promises to do or to abstain from doing, something, such act or abstinence or promise is called a “consideration” for the promise.[7]

For consideration to be valid, it has to be recognised as lawful and reasonable by society. Here the ‘object’ involved in the consideration of the contract needs to be lawful in order to be recognised as valid.

Lawful means that that object should not be something forbidden by the law of the land during the formation of the contract. A considered is considered unlawful when it is forbidden by the law; is fraudulent or injurious to the other party in nature; is seen as immoral by the court and is opposed to public policy.

Agreement and consent

Every promise forming a consideration is said to be known as an “agreement”. An agreement enforceable by law is said be to known as a contract. Those agreements which are not enforceable by the law are said to be ‘void’.

When the contract stands enforceable only at the hand of a single party and not the other, then the contract is said to be voidable at the option of the part who did not have the option to enforce the contract.

When accepting an offer of employment or selling a piece of land, some people will occasionally sign a simple contract. However, corporations frequently do the same when dealing with partners, clients, and suppliers. In reality, all business dealings are covered by formal contracts.

Free Consent is defined by the Supreme Court in Tarsem Singh vs. Sukhminder Singh[8] case as when “two or more persons agree to the same thing, in the same sense”.

Consent is said to be ‘free’ when it is free from the following factors:-

  1. Coercion: A person is said to commit coercion when he forcefully induces/threatens, in a manner forbidden by the law (for example to threaten to detain a property or a person), another to commit an act without his/her wish or to enter into an agreement.
  2. Undue influence: When a person entering into an agreement with another person, is in a position of unfair advantage or at a position where he/she can highly influence the will of the other person.

The Supreme Court in the case A.P. TRANSCO vs. Sai Renewable Power (p) Ltd[9]   declared that a contract is voidable at the discretion of the party who was the subject of undue influence when the consent to an agreement was obtained through undue influence.

The court would still issue rulings about the voidability of the contract even if a party obtained benefits under its terms and conditions, but only under the terms and conditions the court would find just.

  • Fraud: A party is said to have committed fraud, when he does any act, with an intent to deceive a party to a contract. This can be in the form of a false suggestion, an active concealment of fact which the other party needed to know before coming to the contract, a promise without the intention to perform it or any act or an omission declared as fraudulent by the law.

The Supreme Court in the Bhaurao Dhagdu Paralkar vs. State of Maharashtra[10] According to the case, a fraud is an intentional act of deception with the goal of obtaining something by unfairly taking advantage of another. Gaining from the unjustified loss of another is a deceit.

  • Misrepresentation: This is an innocent act in the form of a suggestion without any credibility with an intent to induce a party to a contract or gain an advantage.

The Supreme Court in the Ganga retreat & Towers Ltd. vs. State of Rajasthan [11]case, ruled that in the event of a misrepresentation, the injured party may cancel the agreement, seek compensation, or uphold the contract without compromising its right to sue for damages through the restitution of the resulting loss.

In any other case, such a party would forfeit its right to avoid the contract after having used its option to stand by it.

  1. Mistake: An agreement stands void if parties to a contract agree to the same thing but not in the same sense. Here they are said to be under ‘mistake of fact’. The person agreeing to terms and condition of an agreement is under the misconception of facts relevant to the agreement.[12]

There is also another type of mistake where parties entering into an agreement with the consideration of an object forbidden by the law of the country during the time of agreement, however, the parties not being aware of the same. This mistake is known as a ‘mistake of law’ (ignorantia juris non excusat)

Conclusion

Analysing the details, and reading judgments on each and every general principle of contract law, it was conclusive how deep the complexities exist in order to create not perfect but one of the most viable forms of contract that deems suitable for almost every member of society.

The research involved in the assignment gave an insight into how each and every detail of the provisions take care of the interests of the parties involved in the contract. One could easily think of contract law as something that only favours industrialists or businessmen for the matter, however, by citing cases where even people belonging to the middle class were involved, we proved that this dimension of law is capable of serving every section of the society.

It was also discussed in the assignment how Contract law and its general principles were one of the rare dimensions of law that was actually a product of the needs of an ever-evolving society.

Finally, the most conclusive aspect of this assignment was that the relationship between law and society was never a one-way path in the eyes of the law, but rather a two-way path just like any social relationship where even society has played a humongous role in the creation of provisions of law; the biggest evidence being Contract Law itself.

 

References:

[1]‘Web Login Service’ (Shibbolethsp.jstor.org, 2022) <https://shibbolethsp.jstor.org/start?entityID=https%3A%2F%2Fidp.nluo.ac.in%2Fidp%2Fshibboleth&dest=https://www.jstor.org/stable/795466&site=jstor> accessed 12 October 2022.

[2] “Arthur J. Goldberg, ‘The Role of Law in a Free Society’ (1973) 7 Ga L Rev 403”

[3] ‘Arthur Taylor von Mehren, ‘Contract | Definition, History, & Facts’ (Encyclopedia Britannica, 2022) <https://www.britannica.com/topic/contract-law> accessed 4 October 2022’.

[4] ‘Contract’ (Dictionary.cambridge.org, 2022) <https://dictionary.cambridge.org/dictionary/english/contract> accessed 4 October 2022.

[5] “W Friedman (2022) <https://www.jstor.org/stable/824195?searchText=role+of+contract+law+in+the+society&searchUri=%2Faction%2FdoBasicSearch%3FQuery%3Drole%2Bof%2Bcontract%2Blaw%2Bin%2Bthe%2Bsociety&ab_segments=0%2Fbasic_search_gsv2%2Fcontrol&refreqid=fastly-default%3Aa505cf238ebabab6500f87c808c32303&seq=7#metadata_info_tab_contents> accessed 5 October 2022.”

[6]  “The Indian Contract Act, 1872 Arrangement of Sections – Legislative” <https://legislative.gov.in/sites/default/files/A1872-09.pdf> accessed October 7, 2022

[7] “(Legislative.gov.in, 2022) <https://legislative.gov.in/sites/default/files/A1872-09.pdf> accessed 10 October 2022.”

[8]Tarsem Singh v. Sukhminder Singh, (1998) 3 SCC 471”

[9] “A.P. TRANSCO v. Sai Renewable Power (P) Ltd., (2011) 11 SCC 34”

[10]Bhaurao Dagdu Paralkar v. State of Maharashtra, (2005) 7 SCC 605”

[11]Ganga Retreat & Towers Ltd. v. State of Rajasthan, (2003) 12 SCC 91”

[12] Deelip Singh v. State of Bihar, (2005) 1 SCC 88


This article has been authored by Dibyanshu Dash and Digvijay Khatai, students at National Law University, Odisha.


Share & spread the love

Important Note: In case students have any issue/feedback for the internships and other opportunties posted on the LawBhoomi, Students can write to us by sending an email to [email protected]

Leave a Reply

Your email address will not be published. Required fields are marked *

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.