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This article is written by Gurpreet Singh, from the Faculty of Law, Delhi University. The article explores the similarities between International treaties governed by the Vienna convention and contracts under the Indian Contract Act, 1872.

Introduction 

India and Pakistan, considered to be arch-rivals, decide tomorrow to agree to facilitate free trade. How would they go about it? What laws would be applicable? What will be done to ensure compliance? International law offers the States a Convention that regulates international agreements known as Vienna Convention on treaties. The article explores the similarities between principles governing international agreements regulated by the Vienna Convention on treaties and domestic agreements regulated by the Indian Contract Act.

Definitions 

Treaty 

A treaty is defined as a written agreement between states, governed by international law and possessing an international character. It doesn’t imply that oral treaties are not valid. 

Contract 

Section 10 of the Contract Act is as follows: 

All agreements are contracts, if:

  1. There is free consent of parties.
  2. Parties are competent to contract.
  3. The contract is being entered into for lawful consideration and with a lawful object.
  4. The contract is not expressly declared void by the Act. 

Agreement 

Section 2(e) of the Act lays out requirements to constitute an  agreement that is as follows:

  • There should be a promise or set of promises,
  • Formation of consideration for each other.

A promise is defined under Section 2(b) of the Act as follows:

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.

What is a proposal?

According to Section 2(a) of the Act When one person signifies to another his willingness to do or abstain from doing anything, to obtain the assent of the other to such act or abstinence, he is said to propose.

Consideration

According to Section 2(d) of the Act, when at the desire of the promisor, the promisee or any other has done or abstained from doing, or promises to or abstain from doing, something, such act or abstinence or promise is called a consideration for the promise.

Formation of an agreement: its requirements 

Valid offer and acceptance

The first essential condition for the formation of an agreement is a valid offer and acceptance. 

Conditions of a valid offer

Expression of willingness to do/abstain from doing anything to obtain other’s assent – A person may signify his willingness to sell certain goods for a certain price, a person may signify not to sue when he has a case to sue. An offer must be made to obtain the assent of the other. When a person says he may buy a product for a certain sum, it is not an offer.

Offer can be either express or implied

Section 9 of the Act provides that a valid proposal may be made by words(written or spoken) or by conduct (implied offer). For example, eating at a restaurant and stepping into a taxi both are implied offers to pay for the services availed.

Communication of offer

Human beings are not robots and do not communicate through cables, therefore Section 3 of the Act requires a proposal must be communicated to the other party and the communication of a proposal is complete when it comes to the knowledge of the person to whom it is being made: 

  • For example, B proposes to sell his Television set to C at a certain price. The communication is complete when C receives the letter. 
  • In  R v. Clarke, it was held that even if the acceptor had previous knowledge of the offer but had forgotten about it at the time of acceptance, it would not be considered as valid communication.

Offer and invitation to offer

An offer is the willingness to agree on certain terms and conditions by the parties. Before an offer is being made there might be some statement or propagation of information to invite offers from others. For example, a shopkeeper sends his catalog of products to various people indicating the prices of his products. This is considered to be an invitation to offer. In  Grainger & Sons v. Gough  it was held by the court that “The transmission of a price list does not amount to an offer to supply an unlimited quantity of the wine described at the price named.” In Harris v Nickerson,  it was held that “An offer can be withdrawn before it is accepted.”

Conditions of a valid acceptance

Communication of Acceptance

The acceptance by the offeree must be communicated to the other party. Acceptance may be in the form of express words (written or spoken) or maybe signed through conduct. There should be an overt act of acceptance. In Brogden v Metropolitan railway company, it was held that the company’s agent in keeping the agreement in his drawer was evidence of acceptance. 

Silence per se is no acceptance but as it was held in Re Selectmove Ltd  that an acceptance by silence would be sufficient “if the offeree suggested that their silence would be sufficient.” Acceptance must be communicated to the offeror himself. Communication with any other person is considered null in the eyes of law. In Felthouse v. Bindley, the court laid down the following conditions: 

(1) Acceptance of an offer should be communicated to the offeror himself or his authorized agent. Communication with others is not acceptable. 

(2) An offeror cannot impose upon the offeree the burden of refusal or duty to reply. The offeror cannot imply that failure to reply will be an acceptance of the offer. 

Another condition for acceptance is that the communication should be made in the manner prescribed by the offeror. If the condition is not fulfilled it doesn’t invalidate the acceptance, the offeror has to reject such acceptance within a reasonable time When no mode of acceptance is being prescribed acceptance should be expressed in some usual and reasonable manner as mandated by Section 7 of the Act. 

Absolute and unqualified acceptance

The acceptance must be absolute and unqualified, free from any qualifications. The valid acceptance must adhere to the principle of consensus ad idem that means both the parties agree on the same thing in the same sense. In M.T.N.L v. SPS RANA,  a party entered into a contract on a misconception that the clauses were similar to a previous contract entered into by parties. The court held that consensus ad idem was not present and held acceptance to be bad in terms of the law. In General Assurance Society Ltd v. LIC, it was held that “Acceptance must be total. No contract arises if only a part of the offer is accepted. “

Consideration

The second essential requirement for the formation of an agreement is a valid consideration. A consideration is a basic requirement to constitute an agreement. According to Section 25 of the Act, an agreement without consideration is null and void. Pollock defined consideration as “the price for which the promise of the other is bought, and the promise thus given for value is enforceable.”

In Curie v. Misa, the court defined ‘consideration’ as “Something which may either consist of some right, interest, profit or benefit accruing to the one party, or some forbearance, detriment, loss or responsibility given, suffered or undertaken by another.’ ‘Consideration follows the principle of Quid pro quo (Something for something in return). In Fazaladdin v. Panchanam consideration was defined by the court  as ”something of value received by the promisee as inducement of the promise.” 

Similarities between the Contract Act And Vienna Convention  

Consent

Contract Act

Section 13 of the Act defines consent when parties to the contract agree upon the same thing in the same sense. Consent can be either explicit or implied. The consent additionally should be free. According to Section 14, consent is said to be free when it is not influenced by the following:

Where consent to an agreement is caused by coercion, undue influence, fraud, or misrepresentation the agreement is a contract voidable at the option of the party whose consent was so caused. when the consent is caused by mistake, the agreement is void. A void agreement is not enforceable at the option of any party.

Coercion

If consent is obtained by pointing a pistol at someone’s head or threatening to beat someone, or by intimidation, it would amount to coercion. In Chikham Amiraju v. Chikham Seshamma, a Hindu man threatened to commit suicide and forced his wife and son to execute a release in favor of his brother in respect of certain properties. The court held that threat of suicide as coercion:

  1. Undue influence – When the power structures are unequal and one person can dominate the will of the other and uses the power to obtain an unfair advantage, there is said to be undue influence. In Mannu Singh v. Umadat Pandey [2], where a spiritual guru induced his follower to give up all his property to him to secure the salvation of the soul, The consent is to be taken through undue influence
  2. Fraud –  It has a wide connotation and cannot be assimilated into a definition. In simple terms when a contract is entered into with an intent to deceive the other party, It is said that the party has committed fraud.
  3. Misrepresentation – It means misstatement of a fact material to a contract. Misrepresentation should be of facts vital to the contract. Mere ”commendatory expressions will not amount to misrepresentations
  4. Mistake – It has not been defined in the act but can be understood as “erroneous errors”. The contracts entered into by mistakes are null and void.

Vienna Convention

Article 11 of the Convention specifies that consent can be expressed by the following means: 

  • Signature; 
  • Exchange of instruments constituting a treaty; 
  • Ratification; 
  • Approval or Accession by any means.

By Signature

Consent by signature can bind a state in the following circumstances:

  • When the mode of signature is accepted and mentioned in the treaty. 
  • When it isn’t mentioned, the contracting states are in agreement about the signature.

Exchange of Instruments constituting consent 

Exchange of instruments will constitute consent for the states: 

  • When the instruments provide that its exchange will be deemed to be consent.  
  • When the states agree that the exchange will amount to consent to be bound by the treaty. 

By ratification

 Ratification will constitute the consent: 

  • When the treaty mentions that ratification will constitute consent to be bound by the treaty. 
  • When the states agree that ratification will be the means of depicting consent.
  • The representative of the state has signed the treaty, subject to ratification. 

By accession 

Accession will constitute consent when: 

  • When the treaty mentions that consent to be bound would be through accession. 
  • When the states agree that consent would be depicted by accession. 

Free Consent 

Free consent under the Vienna Convention is based on the principle of  good faith and   pacta servanda (agreements must be kept) and the following articles deal with the same: 

  1. Fraud: Article 49 of the Convention implies that if any defaulter state enters into any treaty with a state through fraudulent means, The plaintiff state can invoke fraud to invalidate the consent for the treaty.
  2. Coercion: Article 51 of the Convention states that any can claim coercion if it is being exercised by any defendant state official to coerce the plaintiff to enter into a treaty.
  3. The threat of force: Article 52 of the Convention gives a way for a state to invalidate a treaty that is being entered into by exercising threat on the opposite party. 

Competency

Vienna Convention 

According to Article 6 of the Convention, every State possesses the capability to conclude treaties. A state refers to sovereign independent territories with settled populations run by sovereign governments. A treaty can be entered by heads of the state, heads of diplomatic missions, or representatives accredited by states to an international conference. 

Contract Act 

According to Section 11 of the Contract Act, a person who is above the age of majority is of a sound mind and is not disqualified by any law is competent to enter into a contract. 

Similarities that govern the breach of treaties and contracts 

Provisions of breach under the Contract Act

Breach occurs when the party fails to fulfil their part of the promise in the contract or the treaty. It provides a right to legal action. Section 37 of the Contract Act mandates the parties to perform or offer to perform their part of the promise. Section 39 provides a situation when one party refuses to perform their duty and gives an option to the other party to put an end to the contract.

Remedies in case of breach of a contract 

Breach of contract results in hardship and losses to the opposite side, there are some remedies available to the affected party that is described as follows: 

    • Suit for damages or compensation – The defendant is liable to pay for all the damages that arose on the plaintiff due to breach of their duty to abide by the terms of the contract.
    • Suit for specific performance –  A decree of specific performance is as  such in which the court directs the defendant to perform their obligation towards the plaintiff.
    • Suit for injunction – A decree of injunction is passed by the court to compel a person to perform an act or omit from performing a particular act. It is used in extraordinary circumstances where a court is seeking to maintain the status quo to prevent further injustice. 
    • Suit for rescission – The contract is abrogated and parties are restored to the position when there were no contracts between the two. 
    • Punitive damages – These damages are levied on the wrongdoer to punish him for his wrongdoings. These damages are an extension of the compensation that is being granted to the defendant. This acts as a deterrence for the defendant against breaching future contracts.

Breach under the Vienna Convention 

A breach under Vienna Convention is a dereliction of duty and is considered an international wrong, which sanctions will ensue on the offending state which is under customary international law. The remedies available apart from that are mentioned  in the treaties are as follows: 

Cessation of the guilty conduct 

The defendant State is under an obligation to put a hold of the conduct that is causing the breach of the treaty. This will not absolve the defending state of their responsibilities instead of breach 

Non-repetition guarantees 

A guarantee of non-repetition is a remedy among other sought remedies. 

Satisfaction 

The plaintiff state will seek an apology and notional damages in case of ordinary circumstances and exemplary damages in extraordinary circumstances. 

Restitution 

This refers to restoring the position that the states were in before the treaties were entered upon. 

Compensation 

It is the most sought-after remedy. The State affected by the breach demands compensation for the losses suffered by their nationals. 

Conclusion

From the above discussion, it can be inferred that the Vienna Convention on treaties and the Indian Contract Act are similar in their principles. The Indian Contract Act aligns with the international law that depicts its sanctity and relevance. 

References


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