This article has been written by Lalremruatfeli Pulamte pursuing a Certificate Course in Introduction to Legal Drafting: Contracts, Petitions, Opinions & Articles at LawSikho, and has been edited by Shashwat Kaushik.
It has been published by Rachit Garg.
Table of Contents
In India, the Indian Contract Act of 1872 was enacted on April 25, 1872 (9 of 1872), and it came into effect on September 1, 1872. It extends to India except for the state of Jammu and Kashmir. The Act has been going through different amendments and phases since it came into the form we see it today. Consider a scenario in which a promise, despite lacking the strict formality of a contract, has the power to bind parties morally and legally. This is where promissory estoppel enters the picture. Unlike traditional contractual doctrine, which frequently requires consideration and mutual assent, promissory estoppel protects promises made without these formalities. It embodies the notion that a promise if relied upon to one’s detriment, should be upheld in the eyes of justice, even when the traditional elements of contract formation are absent.
Evolution of Contract Law
Contract Law in Ancient India
The evolution of legal systems is a reflection of the complex social, economic, and cultural dynamics of a society. As we journey back in time to ancient India, we uncover a rich set of legal principles and contractual practices that laid the foundation for the modern concept of contract law. From the Vedas to the Dharmashastras, the ancient Indian legal landscape offers us a glimpse into the intricate web of agreements, obligations, and ethical considerations that governed interpersonal relationships and commerce. The Dharmashastras, ancient Indian legal treatises, emerged as comprehensive sources of ethical and legal guidance. Manusmriti, for instance, outlined various forms of agreements and the corresponding duties of the parties involved. Contracts were often categorised based on their nature, ranging from gift exchanges to sale transactions.
The fundamentals of the Law of Contract were present in ancient India, and they were well recognised under Hindu Laws. In ancient times, the Law of Contract was based on adherence to the truth, and it was invariably connected with the religious notions of society. The doctrine of offer and acceptance preceding an agreement was recognised under Hindu Law. It was also recognised that there should be consideration in a contract of sale or a debt, while no consideration is required for a gift. In short, we may say that the fundamentals of the Law of Contract existed in Ancient India.
Contract law under British Period
India’s legal system under British colonial rule underwent significant change, including in the area of contract law. As the British East India Company established its influence and governance over India, it introduced a new legal framework that significantly impacted contractual relationships, commercial transactions, and the broader socio-economic fabric of the region. After the establishment of British Rule in India, English common law and statute law were introduced by the Charters of the Eighteenth Century in the Presidency towns of Calcutta, Madras, and Bombay. In the case where one of the parties was Hindu and the other Muslim, the law of the defendant was to be applied. Thus, Hindus who, during Muslim rule, were governed by the Muslim Law of Contract were now governed by Hindu law and usage. Hinduism and Islam were governed by their respective laws and usages. This practise continued up until the passing of the Indian Contract Act, 1872.
The Indian Contract Act, 1872
The second report of the Third Law Commission was devoted to the Law of Contract. The Law Commissioners submitted a draft on July 28, 1866, which, after several amendments, was finally adopted by the Legislature in 1872 in the form of The Indian Contract Act, 1872. The Indian Contract Act, comprising 266 sections, delves into the core facets of agreements—what constitutes a valid contract, how contracts are formed, the rights and liabilities of parties, and the remedies available in case of breaches. Beyond the legal jargon, this act reveals the complexities of human intentions, trust, and keeping promises.
What is estoppel
The word “Estoppel” is derived from the French word ‘estoupe’, which means ‘stopper’. The rule of estoppel is based on the maxim “allegans contraria non est audiendus,” which means that a person alleging contrary facts should not be heard. The term was adopted from English jurisprudence, which has assigned it a special and technical connotation of its own. The object of estoppel is to prevent fraud and secure justice between parties by promoting honesty and good faith.
The Indian Evidence Act of 1872 deals with the subject of estoppel in Sections 115, 116, and 117. We can see “Estoppel” in Indian Evidence Act Section 115. There it was defined as – “When one person has, by his declaration, act or omission, intentionally caused or permitted another person to believe a thing to be true and to act upon such belief; neither he nor his representative shall be allowed in any suit or proceeding between himself and such person or his representative, to deny the truth of that thing.”
The main ingredients of this Section can be:
- One party should make representations to the other party;
- The representation must be made with the intention of being acted upon;
- The other party should rely on the representation; and
- There must be an action arising out of the representation.
This principle is classified into three types under English Law:
- Estoppel by matter of record;
- Estoppel by deed or writing; and
- Estoppel by conduct.
Different Acts other than The Indian Evidence Act also mention estoppel; they are:
- Section 234, Indian Contract Act, 1872;
- Section 18, Specific Relief Act, 1877;
- Sections 40, 41, and 43, Transfer Property Act, 1882;
- Sections 27 and 53, Indian Sales of Goods Act, 1930;
- Section 28 of the Indian Partnership Act, 1932; and
- Sections 120, 121, and 122, Negotiable Instruments Act, 1881.
Doctrine of promissory estoppel
The doctrine of promissory estoppel is also called ‘new estoppel’, ‘equitable estoppel’ or ‘quasi- estoppel’. The doctrine is guided by the principles of justice, fair play, and good conscience. According to the legal dictionary, promissory estoppel is the doctrine that provides that if a party changes his or her position substantially, either by acting or forbearing from acting in reliance upon a gratuitous promise, then that party can enforce the promise, although the essential elements of a contract are not present.
The essential ingredients of the doctrine of promissory estoppel are:
- A party should have, by his word or conduct, given to the other party a clear and unequivocal promise or assurance.
- The promise, representation, or assurance was intended to affect the legal relations of the parties and to be acted upon accordingly.
- The promisee has in fact acted upon such a promise.
The doctrine of promissory estoppel and ‘estoppel’ mentioned in Section 115 of The Indian Evidence Act is different. In Dr. Ashok Kumar Maheswari vs. State of Uttar Pradesh and Anr. (1998), it was held that, the doctrine of promissory estoppel can be invoked even where a case does not satisfy the requirements of estoppel enshrined in Section 115 of The Indian Evidence Act. Even though the promise was not recorded in the form of a formal contract, it would be possible for a party that relied on the government’s representation to assert that the government should be obligated to uphold the promise made by it.
In M/S Shree Sidhbali Steels Ltd. and Anr. vs. State of Uttar Pradesh and Ors. (2011), it was mentioned that the doctrine of estoppel cannot be invoked for enforcement of a promise made contrary to law because no one can be compelled to act against the statute. In M. Deva Narayana Reddy and Ors. vs. Government of Andhra Pradesh and Ors. (2004), it was held that the doctrine of estoppel is not applicable to an ultra vires decision.
There are certain exceptions to promissory estoppel:
- It is not applicable to minors.
- It cannot be used to compel someone to do an act that is prohibited by law.
- It cannot be used against the government if it jeopardises its constitutional powers.
- It cannot be applied unless both parties have the knowledge .
In conclusion, the estoppel doctrine is a cornerstone of equitable principles in all major legal systems. It serves as a safeguard against unfairness and injustice, promoting the stability of transactions, contracts, and relationships. By preventing parties from reneging on their words or actions when detrimental reliance has been placed on them, estoppel maintains a sense of trust and integrity in various legal contexts. We can say that promissory estoppel is also a part of estoppel, but it has its own distinctiveness. The promissory estoppel is also different in some ways from the estoppel we saw in The Indian Evidence Act, 1872.
- Contract and Specific Relief Act by Rajesh Kapoor (13th Edition)
- Law of Contract by Dr Ashok Jain
- Law of evidence by Mayank Madhaw
- The Indian Contract Act, 1872
- The Indian Evidence Act, 1872
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