This article is written by Amarnath Simha, pursuing a Diploma in Advanced Contract Drafting, Negotiation and Dispute Resolution from Lawsikho.com. Here he discusses “What is Common to Contracts in South Africa and India?”.
There are many similarities between the contractual law in South Africa and India. Before entering into similar aspects of the contractual law, it is relevant to understand the background of the contractual law in India and South Africa.
Background of the Contractual Law
The contractual law in India is based on the common law of English and is in the statutory form i.e., the Indian Contract Act, 1872. This statute is the mainstay of the contractual law in India even though the saving clause in Section 1 thereof saves usages, customs of trade and incidents of contracts as long as they are not inconsistent with the provisions of the Indian Contract Act, 1872. Many specific contracts which were part of the Indian Contract Act, 1872 have now been legislated into separate Acts by themselves like the Partnership Act and the Sale of Goods Act. Some of the specific contracts like Agency, bailment, Indemnity, Guarantee and Pledge are still retained in the Indian Contract Act, 1872. However, the entire basis of the contracts in India is still referable to the Indian Contract Act, 1872.
Background of the South African Contract Law
South Africa has a ‘hybrid’ or ‘mixed’ legal system, formed by the interweaving of a number of distinct legal traditions: a civil law system inherited from the Dutch, a common law system inherited from the British, and a customary law system inherited from indigenous Africans (often termed African Customary Law, of which there are many variations depending on the tribal origin). These traditions have had a complex interrelationship, with the English influence most apparent in procedural aspects of the legal system and methods of adjudication, and the Roman-Dutch influence most visible in its substantive private law. As a general rule, South Africa follows English law in both criminal and civil procedure, company law, constitutional law and the law of evidence; while Roman-Dutch common law is followed in the South African contract law, law of delict (tort), law of persons, law of things, family law, etc. With the commencement in 1994 of the interim Constitution, and in 1997 its replacement, the final Constitution, another strand has been added to this weave. (https://en.wikipedia.org/wiki/Law_of_South_Africa#:~:targetText=As%20a%20general%20rule%2C%20South, things%2C%20family%20law%2C%20etc.)
There is no statute in South African law which is similar to the Indian Contract Act, 1872. There are a few statutes which deal with specific aspects/transactions like the National Credit Act, 2005 which regulate the credit agreements but the contractual law is mostly non-statutory. Hence, the general system of law requires to be looked into.
South Africa was ruled by the Dutch (Netherlands) from the 17th Century to the 19th Century and later by the Britishers. South Africa adopted the Roman-Dutch law as its system of law and continued with it even though the Netherlands itself adopted the Napoleonic Code as the system of law. The Roman-Dutch law was basically a civil law system i.e., the application in Holland province of the Netherlands of the modified Roman Law represented by the compilations of the Justinian and also modified by the Germanic customs. Due to the influence of the Britishers, many aspects of the common law of England were also incorporated into the South African system of law. Since many sources of law existed, the system of law was called the South African Law, based on Roman-Dutch Law. These aspects are gathered from The Hamlyn Lectures Series (The contribution of the English Law to South African Law; and the Rule of Law in South Africa at https://socialsciences.exeter.ac.uk/media/universityofexeter/schoolofhumanitiesandsocialsciences/law/pdfs/The_Contribution_of_English_Law_to_South_African_Law.pdf).
However, opinions vary as to the applicability of the common law of England to the contracts in South Africa. The contractual law is said to be the modernised version of the Roman-Dutch law of contract (https://en.wikipedia.org/wiki/South_African_contract_law#Nature). The South African common law of contract is a blend of uncodified Roman Dutch law and English law. This is the historical legacy of two successive colonial powers. When one refers to the “common law of contract” in South Africa, one refers not just to the branch of the law made by the courts, but also to the underlying sources of the old Roman Dutch authorities, which remain a binding source of law. (https://www.journalofcommonwealthlaw.org/article/7441-good-faith-in-contract-a-uniquely-south-african-perspective).
Requirements of a Valid Contract in South Africa
The basic contractual law is non-statutory. Hence, reliance is placed on published articles which have relied upon the textbooks on the contractual law in South Africa.
A contract, in South African Law, is said to be an agreement between the two parties containing a serious intention to create legally enforceable obligations (animus contrahendi). A contract, in Indian Law, is an agreement enforceable under the law. Hence, there is not much difference in the definition of the contract except for the specific aspect of the requirement of a serious intention. The intention to enter into a legal relationship is also a requirement but is examined objectively in Indian Law as to the existence of that intention.
The requisites of a valid contract in South Africa are denoted to be the following:
- Contractual capacity
If the above-mentioned requirements are met, a valid and binding contract with a particular content comes into being. The terms or content of a contract are determined by the contractual parties. These contractual terms represent the intentions and options of the parties and may be categorised as essential, naturalia or incidencialia. (https://repository.up.ac.za/bitstream/handle/2263/45988/Mbhele_South_2015.pdf?sequence=1&isAllowed=y) The rest of the reference to South African Contractual Law is sourced from this article.
Similarities between South African and Indian Contractual Law
Consensus is a process whereby an agreement has been reached between two or more parties. If the consensus is obtained under a false impression, threats of harm, undue influence or by bribery. In those circumstances, the contract can either be null and void or voidable.
Consensus ad-idem is one of the primary requirements of a contract and without it, there is no agreement itself. Sections 13-19A of the Indian Contract Act deal with the same situations. Hence, there is a similarity in this respect.
Contractual capacity is the ability to execute a juristic act. It is composed of competence to formulate a will and the competence to act with a sober mind with regards to that will. Minors below 7 years cannot contract but between 7 to 18 years can do so with the assistance of the guardians. Mentally-ill people can be represented by their curators or they can do so when are experiencing a lucid moment.
The capacity to contract is also required in Indian Law. Sections 11 and 12 of the Indian Contract Act, 1872 deal with it. The only difference would be that there is no difference between minors of 7-18 years as is allowed in South Africa. Hence, a minor cannot enter into a contract even though a guardian, except for necessaries as allowed under law, even if above 7 years of age. There is no concept of an unsound mind person contracting through his guardian/curator but certain powers of disposal of the property of the unsound mind person are given by the Indian Lunacy Act, 1912.
A contract must create certainty regarding its legal outcomes and performance. The courts will attempt to interpret the contract as valid but if not possible, the contracts would be declared void.
Section 29 of the Indian Contract Act, 1872 contains a similar provision. It states that the agreements, the meaning of which is not certain, or capable of being made, are void.
It is a general requirement that at the time of conclusion of the contract, it must be possible to render the performance. If it is objectively not possible to do so, then no legal obligations are created and hence the agreement is void.
Section 56 of the Indian Contract Act, 1872 states that an agreement to do an act impossible in itself is void.
It is stipulated that the performance of the contractual obligations must not lead to any contravention of a statute or the common law.
Section 23 of the Indian Contract Act, 1872 makes any agreement containing an unlawful consideration or an unlawful object void. It includes immorality or being opposed to public policy or fraudulent acts.
There are no specific formalities required for the contract to be entered into unless specific transactions are treated differently by statutes.
The situation is similar in case of Indian contractual law also. An oral agreement is also valid. In certain cases, certain agreements must be registered for it to take effect like mortgage etc.,
Hence, it can be seen that all the basic ingredients of a contract are similar in both the South African system of law and Indian system of law even though they have different sources and origins.
The similarities are many but there are also many differences also. In the opinion of many practitioners in South Africa, there is a general trend off late to remove the common law elements as it is perceived to be inequitable and more formalistic. (https://www.journalofcommonwealthlaw.org/article/7441-good-faith-in-contract-a-uniquely-south-african-perspective). One element of ‘good faith’ as being one of the requirements of the contract is generally being considered in the South African contractual law field to be essential, while the same element is not required in the Indian system of contractual law except in the contracts of insurance. Hence, it can be said, apart from a few similarities, a person knowing the Indian Contract Act cannot claim to know the South African Contractual law.
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