The parties during the course of the

 

The Indian
Contract Act, 1872, is a legislation governing the contractual relationship
between two or more parties – individuals, companies, governments. The Act
deals with multiple aspects of contract, such as formation, performance,
enforceability of contracts, indemnities and guarantees, bailment and pledge
and agency et al.

Being one
of the oldest laws in India, legal experts note that The Indian Contract Act’s
is one of the oldest laws in India. It’s relevance has multiplied in the
current business environment with significant number of contracts being entered
into between various parties, and the ensuing disputes.  Many legal experts feel that the time has
come to take a close look at The Indian Contract Act to bring it in line with
the changing business environment and more so , make it relevant in the global
context.

The Indian
Contract law is derived out of the contract law of the United Kingdom and is a
comprehensive piece of legislation. Today, good corporate governance demands
well-defined and executed contracts, where the Indian Contract Act plays a
vital role. 

However,
certain provisions of the act needs amendment

 The Section 73 of The Indian Contract Act
provides for compensation for loss or damage caused by breach of contract,
arising in the usual course of business . However ,the remote and indirect loss
or consequential damages sustained by reason of the breach are not  well defined.

The Indian
Contract Act provides for liquidated damages and other penalties to the party
that suffers from breach of a contract. Contract laws of many countries
restrict total compensation to the amount of liquidated damages i.e. the amount
agreed upon between both parties during the course of the contract. The
restraint clauses under the Indian Contract Act like; any contract that
restrains one from conducting legitimate profession, trade or business of any
kind, is considered void as per Indian contract law. But, there are no
provisions  for apportionment of losses
in the contracts which are considered void.

Further,
unlike the laws of many other countries any contract without ‘consideration’ is
void subject to certain exceptions (  out
of love and affection , repayment of past deed etc.) as provided in Section 25
of the Act. The British law recognises contracts without consideration in
certain cases. The contract law in the United States, although evolved from the
English common law is more of a S et-all tate subject . There is no federal
contract law in the United States and each state has its own contract law.
In    Europe – Germany and France –
follow a different system of law known as the civil law system where the
contract law is more detailed and exhaustive

Many legal
experts feel that there are three primary areas where Indian contract laws need
to get an update :

The Indian
Contract law should recognise non-compete restrictions where parties are
agreeable to enter into such provisions, as prevalent most international
contracts . .Normally , post-termination of a contract any non-compete clause
in the contract is void as they are treated as “restraint of trade”
under Section 27 of the Indian Contract Act, 1872.  Further parties should have the freedom to
enter into contracts which also contain the dispute settlement mechanism, and
such contracts should not be treated as “contracts in restraint of legal
proceedings” under Section 28, say many legal experts.

With the
growing number of transactions undertaken online, there is well felt need to
include the provisions for digital contracts Although e-contracts are
considered legal in terms of the Information Technology Act but there is some
uncertainty while dealing and executing e-contracts online. “There is a
need for a specific chapter to govern all electronic contracts. 

The Indian
contract law does not provide clear restrictions against including unfair terms
in a contract. Evolve such general principles regulating unfairness in
contracts will have widespread consequences in a range of contracts that
includes lending agreements, builder-developer agreements, debt instruments,
landlord-tenancy agreements, government contracts, arbitration agreements and
others The Indian Contract Act is a well-drafted legislation however, certain
amendments would enable it to keep it up to date with current international
business practices. This would in turn provide business confidence for foreign
entities in their intent to conduct business in India .

 

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