This article is written by Lakshmi Pillai, who is pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho
Contract law is a law that can be found in every country. The general meaning of ‘contract’ is a legally binding agreement wherein parties’ rights and duties are covered. The basic essentials of the contracts will be more or less similar in all countries. However, in this article, we will try to discuss some common aspects of contracts found in South African (SA) and Indian contracts.
Origins of contract law
The Indian Contract Act, 1872 is a codified act that prescribes laws relating to contracts in India. The origin of the Act, 1872 is based on the principles of English Common Law. It applies to all states in India, whereas the South African contract law is not a codified law. The law of contract in South Africa is essentially considered as the modernised version of the Roman-Dutch law.
Definition of contract
In the 1872 Act, under Section 2(h), the ‘contract’ has been defined as ‘an agreement which is enforceable by law’. However, in the SA contract law, ‘contract’ is not defined, but the broadest definition of ‘contract’ is as ‘an agreement with two or more persons who can transact business and exchange resources, secure in the knowledge which will be upheld by the government and if necessary, will enforce them.’
Requirements of a valid contract
The requirements of the valid contract are almost similar in both the laws. The requirements in Act 1872 are laid down under Section 11. However, one difference is that in the ICA 1872 the requirements are laid down from the individual person’s perspective, but in the SA contract law, it is based on a contractual perspective. Considering both laws we can point out certain important aspects which need to be considered for the validity and binding of the contract. They are as follows:
– Consensus ad idem between the parties who are entering into a contract.
– The intention, consideration, and purpose of the agreement must be lawful.
– The parties entering into a contract must be major, solvent, and sound mind.
– The agreement must be certain and contractual obligations must be possible.
We will consider each essential of the contract deeply to understand the similarity between both laws.
Sections 13–19A of the Indian Contract Act explicitly put the requirements of the Consensus ad-idem. If such requirements are not fulfilled then the agreement will be considered invalid. The same aspects are covered under the South African law wherein threats of harm, bribery, undue influence and false impression all will be considered as a violation of the law and the process through which the agreement concluded will be considered as unlawful. And hence, the contract will be considered invalid and not enforceable.
Capacity to enter into a contract
In both laws, an individual who is a minor and of unsound mind cannot enter into an agreement. The individual who is below 18 years will be considered a minor in both laws. The individual who is between the age of 7 and 18 can enter into a contract with a parent or guardian. The parent or guardian would need to act on their behalf under such circumstances.
- For example – If a 16-year-old purchases a scooter from a dealership, they would need their Parents’ consent to validate the purchase agreement. In this age bracket, we can see that the law allows individuals the ability to contract, but only with the required consent, showing an appreciation for a person with a reasonably developed state of mind.
In South African law, the unsound mind individual can enter into a contract through curators or at the time when they are at a lucid stage. However, in India that is not accepted fully, but disposal of property of the unsound mind is possible through the Indian Lunacy Act, 1912.
Another important concept which is recognised under the SA law is marriage. If a matrimonial property is the subject matter of the contract then both the spouses of the community have to sign the document. If the spouse is married outside of the community then there is no such contractual obligation on the parties. The reason behind not having such an obligation is in the eyes of the law that they both are considered as being married persons but with two separate estates. However, nothing similar to this can be seen in the Indian Contract Act.
An insolvent person is not allowed to enter into a contract under both laws. An individual who is under the intoxication effect of any drug or alcohol is also not allowed to enter into an agreement.
Certainty of the contract
The laws of both countries ask for the certainty of the contract. Under Section 29 of the Indian Contract Act agreements are not considered if they are uncertain in nature. For example, if person A agrees with person B to sell “hundred tons of oil”, as per the Indian Contract Act this clause will be considered as uncertain. But if the same clause specifies the type of oil then it will be certain, A agrees to sell B “hundred tons of coconut oil.”
The same principle is applicable in South African law. The South African law recognises a famous Roman saying in this context “ id certum est quod certum reddi potest” (“Something sure as it certainly can be”). The South African contract law asks for commitments. With commitments, it means that if in the contract parties make certain commitments one after another, all commitments can be separable in nature and all remain operational individually as well.
Formalities required to be fulfilled
Every law expects certain formalities which need to be fulfilled to enforce the agreement legally. The laws of the two countries put forward some formalities to make agreements valid. Both laws consider the written agreement as a more valid agreement. Even verbal or oral agreements are also considered valid. However, it is difficult to prove the binding of the verbal agreement in conflict situations. Therefore, it is always advisable to have a written agreement in hand so that it can easily be held valid and legally enforceable. It is noted that for certain agreements like sale deed, lease deed, etc., written agreement and registration of the agreement is a must.
The laws of both countries want the agreement to be lawfully a possible act. Under Section 56 of the Indian Contract Act, 1872 an agreement that has an impossible act in it will be considered void. The same principle is applicable in the SA contract law wherein the parties need to perform the undertaken commitments, otherwise, the contract will not be considered as a valid contract.
- For eg: A promises B to discover a treasure by the means of magic. As per requirements of the law, this will be considered as a void agreement ab initio. Let’s take another example, P contracts with Q and states that he will marry Q on a fixed date. Before the marriage P turns out to be unsound. Herein the contract becomes void.
- On the same point if the law restricts polygamy and if P’s marriage to Q is second marriage wherein the first of P is still alive, then under such circumstances also the marriage will be considered void because as per the Indian Acts polygamy is considered illegal.
The legality of the contract
The legality of the contract is required in both countries’ contract law. As per the Indian Contract Act under Section 23, an agreement can only be considered lawfully valid if the consideration and object of the contract to be lawfully valid. That means the agreement shall not be forbidden by any law, it shall not defeat any provisions of any law, not fraudulent in nature, shall not injure any individual, not oppose the public policy and the court shall not regard it as immoral.
Let’s take an example to understand it in the proper sense; A, who is the agent of B, gives the property to C for lease taking a lawful amount of money. However, A did not inform B regarding the lease thereby this contract will be legally invalid and turn out to be fraud by concealment in nature.
Remedies for breach of contract
The remedies provided under both laws are almost similar. Identifiable remedies in both laws are:
- Specific performance – Specific performance is claimed when the damages are not adequate to remedy for the breach of the contract. The court will order the party to perform the specific act.
- Damages – Damages are monetary compensation that is awarded by the court to the injured party for the loss then incurred due to the breach of the contract. Section 73 of the Indian Contract Act specifically deals with the compensation for loss or damages caused by the breach of the party.
The difference lies in the fact that the Indian Contract Act provides other means of remedies like injunction, quantum merit, and rescission of the contract. However, under South African law Cancellation, Interdict, and declaration of the rights are the other remedies provided.
Indian Contract Act and South African contract of law are quite similar in nature. So even if an Indian agreement needs to be worked on South Africa or vice versa, there would not be big issues in implementing the same agreement in both lands, except the point of spousal land issues.
- https://www.schoemanlaw.co.za/limitations-contractual capacity/
Students of LawSikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.