Indian Contract Act 1872

 

Competition or unlawful contractual interference

In a recent decision, the Delhi High Court dealt with the tort of unlawful interference in contractual relationships and inter alia held that the said tort has no place in India in view of Section 27 of the Indian Contract Act, 1872 (“Contract Act”).[1]

Background

The developer of a certain property at Amritsar agreed to lease the said property to the Plaintiff for fifteen years, by way of a term sheet. The Plaintiff paid a security deposit to the developer as per the term sheet and proceeded to draw up the main transaction document.

Upon learning that the Defendant (a competitor of the Plaintiff) had been pursuing the developer for the purpose of entering into an agreement with respect to the same property, the Plaintiff informed the Defendant about the term sheet executed by the developer with the Plaintiff and requested the Defendant to desist from pursuing the developer. However, the Plaintiff learnt that the developer had entered into an agreement with the Defendant with respect to the said property. Soon thereafter, the Plaintiff was informed by the developer that the term sheet stood terminated on account of the Plaintiff’s failure to execute the main transaction document within the stipulated time. The developer refunded the security deposit, which was accepted by the Plaintiff without protest. The Plaintiff alleged that (a) the Defendant induced the developer to terminate the term sheet with the Plaintiff; and (b) the Defendant had similarly attempted to interfere with transactions between the Plaintiff and developers of other properties in different cities.

The Plaintiff filed a suit against the Defendant inter alia seeking a permanent injunction to restrain the Defendant from inducing a breach of any agreement between the Plaintiff and third parties in respect of non-functional properties of the Plaintiff across India.
Continue Reading Competition or unlawful contractual interference: The line continues to remain blurred

unfettered right to exclude or limit their liability for breach of contract Part 2

In Part I of this post, we had discussed the concept of exclusion or limitation of liability clauses and the position in India. In this part, we will examine the position of such clauses in England and provide our views on such clauses. 

Position in England 

The application of clauses excluding or limiting liability in England is more consistent. When faced with standard form contracts or contracts where there is inequality of bargaining power, English courts apply the test of fairness or reasonableness of clauses in such contracts and refuse to enforce provisions of contracts that are unconscionable or exploitative.[1]
Continue Reading Do parties have an unfettered right to exclude or limit their liability for breach of contract? – Part II

Do parties have an unfettered right to exclude or limit their liability for breach of contract – Part 1

Introduction

The law of damages in India is codified in Sections 73 and 74 of the Indian Contract Act, 1872 (“Contract Act”). Section 73 of the Contract Act provides that a party that suffers breach of contract is entitled to receive from the party that has broken the contract, compensation for any loss or damage caused to him thereby, which naturally arose in the usual course of things from such breach or which the parties knew, when they made the contract, to be likely to result from a breach. Section 73 of the Contract Act bars the grant of compensation for remote and indirect loss or damage sustained on account of breach of contract.

This bifurcation between damages towards losses, which naturally arise in the usual course of things (first limb) and losses that the parties knew, when they made the contract, to be likely to result from a breach of the contract (second limb), appears to be borrowed from the principle laid down in the celebrated English decision of Hadley v. Baxendale.[1] The first limb is popularly referred to as general damages, whilst the second limb is referred to as special damages i.e. additional loss caused by a breach on account of special circumstances, outside the ordinary course of things, which was in the contemplation of the parties.
Continue Reading Do parties have an unfettered right to exclude or limit their liability for breach of contract? – Part I

To Pay Rent or Not To Pay Rent - The Delhi High Court rejects plea for suspension of rent during lockdown

The COVID-19 outbreak and the resultant nationwide lockdown have severely impacted performance of obligations, whether contractual or otherwise, across the country. Most entities/individuals are exploring the option of pleading frustration of contract[1] or invoking force majeure[2] clauses to suspend or obtain a relaxation on their contractual obligations. In this post, we examine the recent decision in Ramanand & Ors. v. Dr. Girish Soni & Anr.,[3] where the Delhi High Court rejected an application for waiver or suspension of rent on account of the lockdown.
Continue Reading To Pay Rent or Not To Pay Rent? The Delhi High Court rejects plea for suspension of rent during lockdown

FRUSTRATION (OF CONTRACT) IN THE TIME OF SARS-CoV-2

Overview

On March 11, 2020, the World Health Organization (WHO) declared the novel coronavirus disease a pandemic. On the same day, the Government of India imposed visa and other travel restrictions. Soon thereafter, many states in India declared a ‘lockdown’, an emergency measure [under the Epidemic Diseases Act, 1897 and the Disaster Management Act, 2005 (“Disaster Management Act”)] to prevent and contain the spread of SARS-CoV-2, and also issued prohibitory order(s) under Section 144 of the Code of Criminal Procedure, 1973. A stricter lockdown was then imposed by the Central Government, which will presently remain in effect till May 3, 2020. During the lockdown, whilst certain commercial activities have been classified as essential and are permitted to continue operations, subject to following preventive measures (including social distancing), several others remain stalled and suspended.
Continue Reading FRUSTRATION (OF CONTRACT) IN THE TIME OF SARS-CoV-2

Enforcement of Foreign Awards in India – Have the brakes been applied

In NAFED v. Alimenta S.A.,[1] the Supreme Court held a foreign award to be unenforceable, on the basis that the transaction contemplated would have violated Indian law, and was therefore contrary to the public policy of India. 

The narrow scope of public policy:

Over the last decade, the judiciary and the legislature have been at pains to change the .existing judicial discourse and legislative intent to make India a regional hub for arbitration. A logical corollary has been a concerted effort to minimise judicial interference. Particularly in the context of foreign awards (where even after a ruling of enforceability, actual recovery may take years), Indian courts have to the most part, refused to interfere.
Continue Reading Enforcement of Foreign Awards in India – Have the Brakes been Applied?

Real Estate’s ride through Covid-19 and way forward

The outbreak of the novel coronavirus, referred to as Covid-19, has struck at the roots of some of the world’s largest countries. After WHO declared Covid-19 a Pandemic (the “Pandemic”), many countries announced measures to contain its spread. In what is considered as a timely step, Government of India on March 24, 2020 imposed a 21-day nationwide lockdown (“Lockdown”) under the provisions of Disaster Management Act, 2005 (“DMA”) (which is likely to get extended further), during which various establishments including malls, offices etc., were directed to suspend their operations.
Continue Reading Real Estate’s ride through Covid-19 and way forward

COVID-19 - Impact on Real Estate

With a lot of disruption and backlog due to coronavirus, all industries, along with the real estate sector, have taken a massive hit. The year 2019 was not such a progressive year and everyone was counting on 2020 to recover and improve from last year’s lows. However, the real estate sector is in a deep standstill on the back of the global economic crisis, coupled with the COVID-19 situation.

This scenario calls for anyone to take precautions and due to restrictive movement because of the travel ban and the stock market crash, developers for one are not looking to take any chance in blocking their money in launching any new projects. At this point, one of the challenges being faced by them is the impact on contracts/agreements due to COVID-19, which are currently in motion/existence. The question being raised is whether the COVID-19 pandemic calls for a force majeure consideration in the existing contracts. Force majeure clause acts as a protection to parties wherein due to any unforeseen circumstances, either of the parties are unable to fulfil their commitment as per the agreed terms and conditions of the contract. To put it simply, due to any acts of god such as fire, flood, war, etc., parties are unable to perform their part as it is not reasonably within the control.
Continue Reading COVID-19: Impact on Real Estate

IRDAI clarification Written Mandate under the IRDAI (Insurance Brokers) Regulations, 2018

The Insurance Regulatory and Development Authority of India (IRDAI) notified the IRDAI (Insurance Brokers) Regulations, 2018 (Brokers Regulations) on January 12, 2018, repealing the erstwhile brokers regulations of 2013. This continues what is now considered an eventful financial year for the insurance regulatory space in India.

The Brokers Regulations improved upon the existing framework for the governance and regulation of insurance brokers- who act as significant intermediaries in the insurance sector. IRDAI, under these new Regulations, prescribed that all insurance brokers are required to comply with the code of conduct (Code of Conduct) set out in Schedule I – Form H of the Regulations.
Continue Reading IRDAI Issues Clarification on Form of Written Mandate under the IRDAI (Insurance Brokers) Regulations, 2018

Contract Enforcement Laws

The Ease of Doing Business rankings released annually by the World Bank currently ranks India at 163 in Enforcing Contracts.[1] The importance placed by the Modi Government on these, and India’s overall dismal performance has forced the government to take several measures, especially in the field of enforcement of contracts.

The Indian Contract Act, 1872 (Contract Act) and the Specific Relief Act, 1963 (Act) are the two primary legislations governing the enforcement of contracts between parties. While the Contract Act lays down the general principles governing contracts and levy of damages for breach thereof, it also provides for an exception of awarding specific relief in the form of specific performance of contracts.
Continue Reading Contract Enforcement – Ushering In an Era of Performance