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An Era of Performance Ushered in Enforcement of Co...

World Bank’s The Ease of Doing Business rankings; an annual release ranks India at 163 at the moment in enforcing contracts. The current Indian administration has been focusing on the performance of enforceable contracts in view of the fact that India’s overall contract performance has been deplorable lately the government is compelled to undertake several initiatives in the area of contract enforcement in particular. The Indian Contract Act, 1872 (Contract Act) and the Specific Relief Act, 1963 (Act) are legislative watchdogs overseeing the implementation of contracts amongst parties. Although the Contract Act mentions the overall principles of contract administration and damages levied for violations thereof, it provides for awarding specific relief through the specific performance of contracts.The common law position of the Act originally provided for specific performance as relief granted at the discretion of the Courts once the inadequacy test results are satisfactory which means that the damages would not adequately compensate the breach. Claiming damages continued to be the usual, natural, and normal remedy for breached contracts and could be paid in lieu of, or even as an add-on to the execution of the contract.Change is needed Compensating damages is the general rule except for telltale evidence of specific performance in one-of cases, is a situation where the vast majority of occurrences of contractual breaches led to or resulted in lawsuits to compute the damages in total. With the pandora’s box open, it's not surprising that adjudication of similar breaches should take years, as India’s rankings reflect in the World Bank report. As a remedial measure, an Expert Committee was formed for analyzing the alterations required in the Act for enhancement of contract enforcement in India and as a result, enhance India’s position as a destination that is inviting to investors.Through an Amendment of the law the concept of the substituted performance was introduced, commonly known as the right to cover, which the unsuspecting party has the option of arranging for execution of third party contract and recover from the defaulter to mitigate the damage hardwired in the Contract Act. Substituted performance, would enable claiming losses only after the execution of the contract by a third party or by the agency of the innocent party. The maneuver is aimed at ensuring that execution of civil/commercial contracts is not suspect, rather, execution of the contract is compelling in most cases, a usage predominant in civil law systems.Besides, the Amendment’s emphasis is the completion of public utility projects on time and without any stumbling blocks to granting injunctions in infrastructure project contracts including transport, energy, water, sanitation, and social infrastructure sectors. The Amendment has been musing on establishing special courts for adjudication of similar matters. Weighing the optionsThe change brought about by the Amendment for common law jurisdictions is a commendable maneuver towards instilling a culture of execution of contracts. As specific performance is mandatory, parties will not have as many reasons for the breach of contracts resulting in settlement of disputes in court.The Amendment also steers clear of the associated risks of compensating more or less than the losses incurred owing to contract breaches. The fact that the execution of contracts is a top priority is further emphasized through substituted performance. Awarding compensation for damages even when there have been proven acts of specific performance acts as a deterrent in cases of breaches. An innocent party is protected by the Contract Act while claiming damages. However, if specific performance is prayed then the applicable provisions would be effective. Besides, the focus being on timely completion of contracts in regards to a public utility is a step in the right direction where numerous infrastructure projects remain in limbo as a result of long drawn litigation.Granting specific performance may be severely restricted by the courts owing to the Amendment if the instances are (a) substituted performance has been granted by the courts (b) contracts in relation to court’s unsupervised performance of continuous duties (c) contracts that depend on the parties personal qualifications so on and so forth. Although the Amendment has effectively limited instances of parties reneging on the performance of contracts, the Amendment, does not consider unforeseeable hardship as a possibility in driving specific performance. Another concern that persists is applying the amendment to current contracts. While remedies can be found in the amendments, it neither declares nor clarifies any particular stance in the matter. On the contrary, the amendments change the substantive entitlements of the remedies as a recourse for contractual breach. Typically, the right of seeking remedies comes into play as and when the breach occurs. Hence, the execution of the contract may occur before the Amendment, however, the breach may occur after the amendments, and therefore the Amendment would be applicable to those contracts. M&A ContractsIn the M&A domain, the courts’ emphasis on specific performance of contracts is notable; those that involve acquisitions or investments in particular. Often damages as a remedy in case of breach of such contracts are inadequate. Hence, since time immemorial, the vast majority of M&A contracts specifically declare that damages, as a remedy would be inadequate, for any breach and the specific contract would be enforceable, replacing the historical requirement for evidence that damages are inadequate. With the complexities surrounding investments involving time sensitivity, personal qualifications of the parties, and so on, it remains to be seen how specific performance can be enforced in M&A contracts. Yet another area of concern is applying the new concept of substituted performance of statutory M&A contracts. As M&A contracts are specific to a  party, the feasibility of substituted performance as an alternative may be irrelevant, but ought to be explored for each contract.Besides, its the Court’s prerogative for refusal of specific performance on the plea that the contract, for example, in relation to a joint-venture agreement, requires the party performing duties continuously, without the Court’s supervision, results in impediments.It's truly a relief that the amended Act permits damages beyond enforcement specifically for preventing losses as a result of time passing by, as the resolution of the dispute within a stipulated timescale, may prove to be delayed action in specific circumstances.ConclusionThe Act threw light on the financial situation of the defaulter, who has only one thing to consider and that is the cost of performance of the contract as opposed to non-performance. On the whole, the amendments seem to be focusing on the effective performance of the contract aimed at improving how business is conducted in India.While industries across the board are impacted by the amendments, the heightened focus on infrastructure will act as an impetus to enhancing India’s widespread development goals. Furthermore, it's in the infrastructure sector that damages usually turn out to be an insufficient remedy. Once specific and substituted performance are Implemented by the judiciary, in regards to M&A contracts, and its acceptance and actual dependence by parties to the contract, however, is yet to be witnessed.Call 7604047601 for consultation with registered expert Government Contracts Lawyers on Vidhikarya.

Posted By

Avik Chakravorty

2 weeks ago

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E-signing is the tip of the iceberg: Smart E-Contr...

It’s a frustrating experience for anyone waiting for follow up after a proposal for a contract has been sent to a client and what may seem like an eternity is, in fact, a protracted timescale for the client to respond. Sending a contract to a client is a harrowing experience that entails following up with clients to ensure they receive, read, agree, sign and send the contract back signed and sealed. After the vendor gets the signed contract back from the client there are a few internal formalities including obtaining internal approvals that the vendor has to follow or comply with and then the signed and sealed contract can be filed away in a safe and secure place. The entire process may take several weeks to conclude. The entire process is time-consuming and that time could be dedicated to pursuing and closing newer business deals. The control over the contract workflow beginning with drafting and finalizing the proposal to signing the contract can be done in no time at all. The major reasons for opting for E-contracts over static contracts are as follows:Counterparts are impressedCommon contracts aren’t time savers rather they are time-consuming and are pesky as well. Clients are unimaginably delighted owing to the fact that they don’t have to print, read, retype alterations in an email or jot down in the margins of one’s contract, scan and email the contract back to the sender; all of this is a lot of hassle when one could seamlessly manage negotiations directly through their live E-contract document.Professional, bespoke, hi-tech e-contracts are impressive with branding and even attaching a video greeting would create a positive impact on one’s client. The screen and audio recording features are available as well for walking clients through certain sections of one’s proposal.Close deals It's hard to imagine working for months on coming to fruition on a client and the client ultimately agreeing on accepting a proposal. One may work for a few days on drafting and perfecting the proposal only to lose it in transit. Upon contacting one’s client after about a week to inquire whether the client received the proposal, the reply may not be what one may ideally want to hear i.e. the client indeed did not receive the proposal, let alone see it, resulting in a negative effect on one’s credibility  and one may lose one’s precious deal forever. Electronic contracts are delivered electronically by clicking a button. The live editing feature enables instant feedback on proposals and in turn reaching an agreement is faster. Following up with clients via emails, phone calls, missing person reports, and so on isn’t required any longer to ensure that they have seen the updated version of a proposal. Owing to E-contracts one can ensure that one’s proposal is in the hands of the intended recipient the very moment one is through with drafting the proposal. One would be notified or intimated as to when the intended recipient received and read the proposal and also get notifications in real-time each time one’s counterpart recommends an alteration and signs.Eliminate hinders to signEvolution is the key to survival in the tech age. The good old days of static contracts are history. E-contracts are not only state-of-the-art and cutting edge technology but are also essential now more than ever before when almost any item that one may require can be accessed instantly and would be at one’s fingertips. The aspect of e-contracts that stands out is that one can sign anytime, anywhere. Research reveals that the vast majority of contracts are typically signed on Fridays and during weekends. Static contracts only permit business transactions Monday to Friday, which eliminates 2 days in a week that one could very well use to come to fruition on deals. This is the trend throughout the year but is particularly vital during closing weeks at month’s end. The motivation for the Sales team with feedback in real-time without any learning curveAny standard E-contract management tool will integrate seamlessly with one’s current systems thereby it's not a steep learning and adoption curve at all. Rather the learning curve is little to none. If one’s sales team uses Salesforce or HubSpot for example, E-contract systems permit one’s sales team to draft and deliver proposals from their preferred CRM interface itself.Successful integrations, even populate data automatically from one’s CRM system into one’s contracts directly. One’s sales team would be able to expedite sending proposals with proposal templates thereby eliminating pesky follow-ups that require a lot of time. Vendors can follow the contract’s lifecycle and get updates from the CRM that they prefer. There is a dashboard in Smart Contract Management systems enabling sales teams to have a comprehensive overview of all generated leads, opportunities, negotiations and deals won from the dashboard view itself.Don't be left on the waysideIn the digital ecosystem, it's one of two things; adaptability or fading away. Obviously, there is a reason behind working with smart contracts that so many brands ranging from top fashion brands and car manufacturers to SMEs are opting for E-contrcats and smart contract management tools. Call 7604047601 for consultation with registered expert contracts and agreements lawyer on Vidhikarya.

Posted By

Avik Chakravorty

3 weeks ago

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Consult Top Contracts and Agreements Lawyers in India

Tejasv  Anand

Tejasv Anand

Advocate
Exp
Delhi , Delhi

Specialization

  • Contracts and Agreements
  • Commercial
  • Arbitration And Mediation
  • Bankruptcy And Debt
  • Debt Collection
I am a lawyer practicing on the commercial, civil, economic crimes, corporate and regulatory field of law in the courts in Delhi, including the District Courts, Hon'ble Delhi High Court and the Hon'ble Supreme Court along with other Tribunals including the NCLT, DRT, APTEL etc. View Full Profile
PRADEEP  MATHUR

PRADEEP MATHUR

Advocate
Exp
Delhi , Delhi

Specialization

  • Contracts and Agreements
  • Civil
  • Arbitration And Mediation
  • Landlord And Tenant
  • Mergers And Acquisition
I have been practicing in Delhi/NCR courts and High Court of Delhi for over 9 yrs. Being from a family of lawyers and Judges, had opportunity to work for both Civil and Criminal cases & various Tribunals. Also since worked for engineering Indusrtries, I undertake Arbitrations & Corporate litigations View Full Profile
Abhijit  Banerjee

Abhijit Banerjee

Lawyer
Exp
South Delhi , Delhi

Specialization

  • Contracts and Agreements
  • Arbitration and Mediation
  • Cheque Bounce
  • Civil
  • Commercial
19 years of experience in Litigation in Supreme Court, various High Courts, NCDRC, Trial Courts, Forums and Regulatory Authorities. Have successfully handled numerous Matrimonial Disputes, Civil Cases & Criminal Cases. View Full Profile
PRASHANT KUMAR  KUSHWAHA

PRASHANT KUMAR KUSHWAHA

Practicing in Civil Court
Exp
Ranchi , Jharkhand

Specialization

  • Contracts and Agreements
  • Civil
  • Criminal
  • Cheque Bounce
  • Divorce
Rhea  Luthra

Rhea Luthra

Independent Practising Lawyer
Exp
South Delhi , Delhi

Specialization

  • Contracts and Agreements
  • Commercial
  • Administrative Law
  • Arbitration And Mediation
  • Advertising
I completed my law in the year 2017 from Jindal Global Law School and have been providing services in various fields of law, that is, Family, Property, Cheque Bounce, Civil, Consumer Court, Recovery and drafting and vetting of various agreements and documents. View Full Profile
ASHISH  KUMAR

ASHISH KUMAR

Proprietor
Exp
South West Delhi , Delhi

Specialization

  • Contracts and Agreements
  • Civil
  • Arbitration And Mediation
  • Bankruptcy And Debt
  • Debt And Lending Agreement
Highly exp. Law Professional having wide experience in litigation, corporate, Real Estate & Hospitality Matters. After successful career with large reputed Corp. e.g. Khaitan & Khaitan, SN Gupta & Company, Lemon Tree Hotels & Accor Group founded KNA Legal - firm advising large banks & corporate. View Full Profile
Shivaleela  Gujare

Shivaleela Gujare

lawyer
Exp
Pune , Maharashtra

Specialization

  • Contracts and Agreements
  • Cheque Bounce
  • Banking
  • Adoption
  • Civil
Total Answers Given : 2
RANPAL  AWANA

RANPAL AWANA

Advocate
Exp
Gautam Buddha Nagar , Uttar Pradesh

Specialization

  • Contracts and Agreements
  • Cheque Bounce
  • Civil
  • Consumer Protection
  • Criminal
Total Answers Given : 1
Neeraj  Kumar

Neeraj Kumar

Advocate
Exp
Patna , Bihar

Specialization

  • Contracts and Agreements
  • Cheque Bounce
  • Employment and Labour
  • Bankruptcy and Debt
  • Consumer Protection
I am a practicing Advocate at Patna High Court & Delhi High Court having experiences in handling the cases related with Family Disputes, Property Disputes, Service Matters and also the matter related under SARFAESI Act. Apart from the above I am having experiences in Consumer and Labor Cases too. View Full Profile
Total Answers Given : 129
Randheer  Bahadur

Randheer Bahadur

Advocate
Exp
Lucknow , Uttar Pradesh

Specialization

  • Contracts and Agreements
  • Employment and Labour
  • Property
  • Civil
  • Family
Hi all, I am Adv Randheer from Lucknow, I practice in High Court, Lucknow Bench. I have experience in various areas of law like family matters, land laws, consumer law, civil, criminal, labour, service law as well as constitutional law . I also counsel &mediate in family matters especially marriage. View Full Profile
Total Answers Given : 74
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  • What is contract law?
  • What are the main features of contract law?
  • What is the definition of a valid contract?
  • What does it take for a contract to legally binding?
  • What are the elements of a valid contract?

What is contract law?


Contracts are basically agreements that have the power of legal enforceability and protection. As per Section 2(e) of the Indian Contract Act 1872 (hereinafter referred to as the ICA), agreements refer to ‘every promise and every set of promises, forming consideration for each other’. As per Section 2(h) of the ICA, a contract is “an agreement enforceable by law”.

The basic gist of what contract is the following:

Proposal + Acceptance = Promise

Promise + Consideration = Agreement

Agreement + Enforceability = Contract

Therefore, Contract = Promise + Consideration + Enforceability.

*ICA is applicable to whole of India barring the state of Jammu and Kashmir.

Essentials of a contract:


  • Offer –

    When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. An offer is the penultimate act leading to an agreement. Once an offer is accepted, both parties are bound by the agreement. An offer must be clear, definite, and unambiguous.
  • Acceptance –

    When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise. Acceptance can happen through speech, writing, conduct/performance, etc. Acceptance must be unqualified, absolute, clear and definite.
  • Consideration-

    Consideration can be defined as the price of the promise made. Both parties must be giving and receiving consideration in order for the agreement to be supported by consideration. Consideration need not be adequate, it just needs to be valid in the eyes of law.
  • Capacity to Contract-

    Minors, people of unsound mind, and/or people who are disqualified from contracting by some law to which they are subjected to, are considered incompetent to contract. The Indian Contract Act does not explicitly state whether a contract with a minor is void or voidable. However, in the case of ‘Mohri Bibee v. Dharmodardas Ghose’ observed that contracts with a minor are void ab initio, and that no restitution of benefits can be claimed by the parties. However, a party entering into a contract with a minor can seek reimbursement for supplying ‘necessities’ to the minor.
  • Consent-

    For a contract to be legal, parties must have exercised their consent freely without unlawful manipulation. Consent is not considered to be free consent when there is presence of Coercion, Undue Influence, Fraud, Mistake, Misrepresentation(for eg. Active concealment of relevant facts). In absence of ‘consensus ad idem’ or meeting of minds, contract stands void.
  • Lawful motive and object-

    An agreement even if it satisfies all the above conditions would not be a contract if it is for an unlawful motive like selling prohibited narcotics or has an unlawful consideration like the promise of murdering someone in exchange of a particular amount of money.

Miscellaneous facts about Contract Laws:


  • Wagering contracts are illegal in India, however some states allow restrictive betting, for example casino is allowed on certain conditions in Goa and Sikkim. Horse racing also enjoys legality as there are several factors to it like the kind of training given, nutrition provided etc. which don’t make it a game of luck or chance. Case of ‘Dr. K.R. Lakshmanan v. State of Tamil Nadu’ observed that horse racing is a game of skill and cannot be deemed to be a game of pure chance, hence it is legal to bet on horse racing.
  • Balfour v. Balfour – An agreement cannot be enforced if the parties did not intend on creating a binding agreement.
  • Carlill v. Carbolic Smoke Ball Co. – Any person can accept a general offer that was made to the public at large, and the execution of the conditions for the offer will be considered as acceptance.
  • Mohori Bibee v. Dharmodas Ghose – Contract with a minor is void ab intio (void from the beginning)
  • Kedar Nath v. Gorie Mohammad – An agreement in absence of consideration can be binding provided the promise took certain steps in furtherance of the object on the basis of the promise made by the promisor. (Rule of Promissory Estoppel)

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