‘Time is the essence of the contract’

 ‘Time is the essence of the contract’. Discuss. What would be the effect of breach of covenant as to time?

In some contracts, the parties fix time for performance of contract which is considered to be the basis of the contract. If the obligations are not performed at time, the whole purpose of contract fails and after that fixed time the performance of such contractual obligation will be meaningless. In such circumstances, it is said that time is essence of contract. In this regard section 55 is relevant which is divided into three parts.

Effect of Failure to Perform at Fixed Time, In Contract in which Time is Essential:

When a party to a contract promises to do a certain thing at or before a specified time, or certain things at or before specified times, and fails to do any such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of the essence of the contract.

Effect of Such Failure when Time is not Essential:

If it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure.

Effect of Acceptance of Performance at Time other than that Agreed Upon:

If, in case of a contract voidable on account of the promisor’s failure to perform his promise at the time agreed, the promisee accepts performance of such promise at any time other than that agreed, the promisee cannot claim compensation for any loss occasioned by the non-performance of the promise at the time agreed, unless, at the time of such acceptance he gives notice to the promisor of his intention to do so.

Reading the first paragraph of Section 55, it is apparent that when a party to a contract promises to do a certain thing at or before a specified time and foils to do such thing at or before the specified time, the contract, or so much of it as has not been performed, becomes voidable at the option of the promisee, if the intention of the parties was that time should be of essence of the contract.

The second paragraph of Section 55 provides that if it was not the intention of the parties that time should be of the essence of the contract, the contract does not become voidable by the failure due to do such thing at or before the specified time; but the promisee is entitled to compensation from the promisor for any loss occasioned to him by such failure.

The above section deals with the effect of failure to perform at a fixed time, in contracts in which time is essential. The question whether time is the essence of the contract, with reference to the performance of a contract, what generally may arise for consideration either with reference to the contract as a whole or with reference to a particular term or condition of the contract which is breached.

Viscount Haldane delivering the judgment for the Judicial Committee of the Privy Council in Jamshed Khodaram Irani v. Burjorji Dhunjibhai, (1915-16) 43 I.A. held that Section 55 of the Indian Contract Act does not lay down any principle.

The agreements, the meaning of which is not certain or capable of being made certain, are void.

 As certainty of terms of agreement is also an essential ingredient of the agreement, hence those agreements which are uncertain are void. In simple terms, the terms of agreement should be clear, and unambiguous. In this regard, section 29 says that-

Agreements Void for Uncertainty:

Agreements, the meaning of which is not certain, or capable of being made certain, are void.

Illustrations:

(a) A agrees to sell to B “a hundred tons of oil”. There is nothing whatever to show what kind of oil was intended. The agreement is void for uncertainty.

(b) A agrees to sell to B one hundred tons of oil of a specified’ description, known as an article of commerce. There is no uncertainty here to make the agreement void.

(c) A, who is a dealer in cocoanut-oil only, agrees to sell to B “one hundred tons of oil”. The nature of A’s trade affords an indication of the meaning of the words, and A has entered into a contract for the sale of one hundred tons of coconut oil.

(d) A agrees to sell to B “all the grain in my granary at Ramnagar”. There is no uncertainty here to make the agreement void.

(e) A agrees to sell B “one thousand maunds of rice at a price to be fixed by C”. As the price is capable of being made certain, there is no uncertainty here to make the agreement void.

(f) A agrees to sell to B “my white horse for rupees five hundred or rupees one thousand”. There is nothing to show which of the two prices was to be given. The agreement is void.

The text and (with one addition) the illustrations of this section follow the draft of the Indian Law Commissioners with only formal variation.

Where the defendants, describing themselves as residents of a certain place, executed a bond and hypothecated as security for the amount “our property, with all the rights and interest”, it was held that the hypothecation was too indefinite to be acted upon.

The mere fact that the defendants describe themselves in the bond as residents of a certain place is not enough to indicate their property in that place as the property hypothecated. If they had described themselves as the owners of certain property it would then have been reasonable to refer the indefinite expression to the description.

In Ramasami v. Rajagopala, (1887) 11 Mad. 200 the Court held that a stipulation in a patta (lease) whereby the tenant agreed to pay whatever rent the landlord might fix for any land not assessed which the tenant might take up (presumably without permission) is void for uncertainty. Under such a patta, the landlord might fix any rent he liked, and the tenant might be liable for an unreasonable rent beyond the value of the land.

Under Section 29 of the Indian Contract Act, an agreement would be deemed to be void only when its terms are vague and uncertain. The general rule is that if the terms of an agreement are so vague or indefinite and that it cannot be ascertained with reasonable certainty regarding the intention of the parties, then the said contract becomes unenforceable in law.

But, a contract will not become void, if its terms are capable of being ascertainable with precision and the intentions of the parties to the contract could be ascertained. Ultimately, the object of the court is to do justice between the parties and the court will do its best if satisfied that there was ascertainable and determinate intention to contract, to give effect to that intention looking at substance and not mere form.

Therefore, the requirement that an agreement in order to be binding, must be sufficiently definite to enable the court to give it a practical meaning.

In Uttam Singh Dugal & Co. Pvt. Ltd. v. Hindustan Steel Ltd., Bhilai, AIR 1982 MP 206 the Division Bench of Madhya Pradesh High Court observed that solemn contracts entered into between the parties are not to be readily declared invalid for uncertainty as to certain terms, at any rate in those cases where the parties have acted upon the contracts which have been fully executed.

While construing a contract the object of the court is to do justice between the parties and the court will do its best if satisfied that there was an ascertainable and determinate intention to contract to give effect to the intention, looking at substance and not mere form. It will not be mere difficulties of interpretation difficulty is not synonymous with ambiguity so long as any definite meaning can be extracted.

Madras High Court in M.Ramasamy v. K.K.Ponnusamy, on 23 November, 2010 observed that under Section 29 of the Indian Contract Act, an agreement would be deemed to be void only when its terms are vague and uncertain.

The general rule is that if the terms of an agreement are so vague or indefinite and that it cannot be ascertained with reasonable certainty regarding the intention of the parties, then the said contract becomes unenforceable in law. But, a contract will not become void, if its terms are capable of being ascertainable with precision and the intentions of the parties to the contract could be ascertained.

Ultimately, the object of the court is to do justice between the parties and the court will do its best if satisfied that there was ascertainable and determinate intention to contract, to give effect to that intention looking at substance and not mere form.

“Agreement of restraint of trade is void”

 

State and explain the law relating to agreement in restraint of trade or profession in the light of leading cases.

“Agreement of restraint of trade is void”. Examine this statement stating exceptions

“Agreement of restraint of trade is void”. Discuss.

Write short note on agreements in restraint of trade.

The Constitution of India guarantees to all citizens fundamental right to practise any profession, or to carry on any occupation, trade or business under Article 19(1) (g). In tune of this provision, the Contract Act in section 27 has provided as under-

27. Agreement in Restraint of Trade, Void- Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.

Exception 1:

Saving of Agreement not to Carry on Business of which Goodwill is Sold. One who sells the good-will of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the good-will from him, carries on a like business therein, provided that such limits appear to the Court reasonable, regard being had to the nature of the business.

Pollock and Mulla said that this section, like the last, unfortunately follows the New York draft Code, which has been the evil genius of this Act. The first paragraph is taken almost word for word from s. 833 of that production.

The original draft of the Indian Law Commission did not contain any specific provision on the subject. The New York draftsmen were of opinion that “contracts in restraint of trade have been allowed by modern decisions to a very dangerous extent.”

Anson said that ‘the law concerning restraint of trade has also changed from time to time both in form and spirit in response to changes to in conditions of trade’.

In Nordenfelt v. Maxim Nordenfelt Guns and Ammunition Co. Ltd., [1894] AC 535 Thorsten Nordenfelt had established a valuable business in the manufacture of machine guns, operating in Sweden and England. His customers included most national governments across the world. He sold the business to a company, which then transferred it to Maxim Nordenfelt. At that time Thorsten Nordenfelt entered into an agreement with Maxim that he (Thorsten) would not for a term of 25 years engage in the manufacture of guns, explosives, etc, other than on behalf of the company.

Thorsten broke this covenant, alleging that it was unenforceable as being in restraint of trade. The House of Lords affirmed the decision of the Court of Appeal that the covenant, though operating as a world-wide ban, was not wider than was necessary to protect the interests of Maxim Nordenfelt. Lord Macnaghten stated that the public have an interest in every person’s carrying on his trade freely- so has the individual.

All interference with individual liberty of action in trading, and all restraints of trade of themselves, if there is nothing more, are contrary to public policy, and therefore void. That is the general rule.

But there are exceptions: restraints of trade and interference with individual liberty of action may be justified by the special circumstances of a particular case. It is a sufficient justification, and indeed it is the only justification, if the restriction is reasonable, that is, in reference to the interests of the parties concerned and reasonable in reference to the interests of the public.

In Schroeder Music Publishing Co. Ltd. v. Macaulay, [1974] 3 All ER 616 the plaintiff was a young and unknown songwriter who entered into a standard form agreement with music publishers (the defendants). The copyright in all the plaintiff’s compositions for the next five years was assigned to the defendants, with an automatic extension for a further five years if royalties exceeded £5,000.

The defendants could terminate the agreement on one month’s notice, but there was no similar power for the plaintiff. The defendants were under no obligation to publish any of the plaintiff’s work. The plaintiff sought a declaration that the agreement was in restraint of trade and void.

The House of Lords held that, where there was unequal bargaining power, a standard form agreement has to be looked at to see if, amongst other things, the restrictions it contains only go so far as is reasonably necessary to protect legitimate interests. In this case, the contract was in unreasonable restraint of trade because, whereas the plaintiff was totally committed to the defendants, the defendants were not obliged to publish anything.

Exceptions of Agreement in Restraint of Trade, Void:

The above rule that agreement in restraint on trade is void does not apply all the time. There are certain cases in which restraint of trade is valid in India. These are called the exceptions of the above rule which are as under-

Sale of Goodwill:

The seller of the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer or any one deriving title to the goodwill from him carries on a like business, provided that such limits are reasonable.

This provision is contained in Exception 1 attached to Section 27. For example- A, a seller of Care & Lovely in Guwahati, after selling the goodwill of his business to B promises not to carry on similar business “only in Guwahati for five years only.” As the restraint is reasonable the agreement is not void.

This exception deals with a class of cases which had a leading part in causing the old rule against agreements in restraint of trade to be relaxed in England.

Note on abetment

Explain the ingredients of abetment? What is the consequence when one offence is committed and another offence is abetted?

Write short note on abetment

What is abetment? What are different modes of abetment? Is silence equivalent to abetment? Illustrate with example.

When several persons take part in the commission of an offence, each one of them may contribute in a manner and degree different from the others to the commission of it. The offence may be committed by the hands of one person at the instigation of another person, while some others may only be present for offering help at the time of commission of it, and still others may help the principle culprit in procuring the tools.

It is necessary, therefore, to mark the nature and degree of participation of each of the persons to determine their degree of culpability. However, several gradations of action do not necessarily imply different measures of guilt with a view to distinctions in punishment.

Abetment is the act of instigating, inciting and encouraging of an offence. A person abets the doing of a thing, who instigates any person to do that thing or engages with one or more other person or persons in any conspiracy for the doing of that thing, if an act or illegal omission takes place in pursuance of that conspiracy and in order to the doing of that thing or intentionally aids, by any act or illegal omission, the doing of that thing.

The Indian Penal Code makes a broad distinction between principals and abettors but does not recognize the accessory after the fact except that harboring of offenders has been made substantive offence in some cases.

Under the IPC abetment constituted in the following ways:

(i) By instigating a person to commit an offence; or

(ii) By engaging in a conspiracy to commit an offence;

(iii) By intentionally aiding a person to commit an offence.

Abetment is an offence only if the act abetted would itself be an offence punishable under the IPC or under any other law for the time being in force.

1. Instigation:

Instigation means the act of inciting another to do a wrongful act. One may abet the commission of an offence by counseling, suggesting, encouraging, procuring or commanding another to do an act.

To instigate means to actively suggest or stimulate by any means or language, direct or indirect, whether it takes the form of express solicitation or of hints, insulation or encouragement. In order to constitute abetment by instigation some active proceeding towards the preparation of the crime is necessary.

2. Abetment by Conspiracy:

Abetment of conspiracy is committed when two or more persons encourage in conspiracy for the doing of a thing. And an act or illegal omission takes place in the presence of the conspiracy and in order to the doing of that thing. Thus in order that abetment by conspiracy maybe constituted, three things are necessary:

(i) A conspiracy between two or more persons

(ii) An act or illegal omission must take place in the presence of that conspiracy

(iii) Such an act or illegal omission must also take place in order to the doing of the thing conspired.

3. Abetment by Aid:

A person abets the doing of a thing who intentionally aids, by doing any act or illegal omission, by doing of that thing. Clause 3 of section 107 must be with explanation two of the section and if read together, it becomes clear that person cannot be held guilty of aiding the doing of an act when the act has been done at all.

In Emperor v. Faiyaz Hussain, a zamindar lent a house to a police officer who was investigating a case knowing that house would be used for torturing a suspected thief. He was guilty of abetment.

Section 108 of IPC defines the term abettor. A person abets an offence, if committed by a person capable by law of committing an offence with the same intention or knowledge as that of the abettor.

In Faguna Kantwath v. State of Assam, 1959 SCR Supl. (2)1 the Supreme Court held that the offence of abetment may be committed by instigating commission of an offence or by engaging in a conspiracy to commit an offence or by intentionally aiding the commission of an offence.

In Queen v. Mohit it was held that the persons who followed a women preparing herself for sati to the pier and cried “Ram Ram” were guilty of abetment by instigation to lead that women to commit suicide

When one offence is committed and another offence is abetted, in this condition the abettor shall be liable for the abetment of the offence:

(a) The act done was a probable consequence of the abetment and

(b) The act was committed under the influence of the instigation or with the aid or in pursuance of the conspiracy which constituted the abetment.

In this regard, section 111 of the IPC provides that-

When an Act is abetted and a different act is done, the abettor is liable for the act done, in the same manner and to the same extent as if he had directly abetted it:

Provided the act done was a probable consequence of the abetment, and was committed under the influence of the instigation, or with the aid or in pursuance of the conspiracy which constituted the abetment.

For example – If A instigates B to burn Z’s house. B sets fire to the house and at the same time commits theft of property there. A, though guilty of abetting the burning of the house, is not guilty of abetting the theft; for the theft was a distinct act, and not a probable consequence of the burning.

The President of India in relation to His Council of Ministers

 The Constitution of India has adopted the parliamentary system or the Cabinet form of Government on the British model. The principle of English Constitutional Law that the King does not act on his own but on the advice of Council of Ministers is embodied in the Indian Constitution.

The President of India is a constitutional executive head but the real executive authority of the Union is exercised by the Prime Minister and his Council of Ministers. He is constitutionally obliged to act as per the advice of the Ministers in exercise of all his functions and there is no more discretion given to him.

Article 74 (1) grants a special privilege to the President mentioning that he may require the Council of Ministers to reconsider such advice, either generally or Otherwise, and the President shall act in accordance with the advice tendered after such reconsideration. According to Dr. Ambedkar, President is “the head of the State but not of the Executive”.

Article 74 of the Constitution lays down that there shall be a Council of Ministers with the Prime Minister at the head to aid and advice the President who shall in the exercise of his functions act in accordance with such advice.

The President has thus been made a formal or constitutional head of the executive and the real executive powers are vested in the Ministers or the Cabinet. The question whether any, and if so what, advice was tendered by Ministers to the President shall not be inquired into in any court.

The expression “aid and advise” appearing in Article 74 is a constitutional phrase used besides the Constitution of India in other constitutional documents, viz., North America Act. Consistently, the expression “aid and advise” has been taken as a single phrase.

Even in the matter of executive functions, the President is to be aided and advised. In relation to his executive functions, the President has both to be aided and advised. In U.N. Rao v. Smt. Indira Gandhi, (1971) Supp SCR 46 the Court held that Article 74(1) is mandatory and, therefore, the President cannot exercise power without the aid and advice of the Council of Ministers.

In Praveen Jain v. Union of India, on 10 August, 2015 Delhi Central Administrative Tribunal said that Article 74 of the Constitution provides for the Council of Ministers to aid and advise President, as also issues like the constitutional requirement to act according to the advice of some other authority, the veto power, appointment of Governors, etc., take effect from this Article.

Article 74 is all pervasive in its character and does not make any distinction between one kind of function and another. It applies to every function and power vested in the President, whether it relates to addressing the House or returning a Bill for reconsideration or assenting or withholding assent to the Bill.

It will be constitutionally improper for the President not to seek to be guided by the advice of his Ministers in exercising any of the functions legally or technically vested in the President. The expression aid and advise’ in Article 74 cannot be construed so as to enable the President to act independently or against the advice of the Cabinet.

Article 22 of the Constitution of India protect the personal liberty of a citizen?

 Article 22 of the Indian Constitution is one of the fundamental rights discussing about protection against arrest and detention in certain cases. It guarantees certain fundamental rights to every arrested person. 

Article 22(1) and (2) lay down the provisions of protection against arrested and detention in certain cases.

Article 22(1) is in two parts and it gives to persons arrested it two-fold protection. The first is that an arrested person shall not be detained in custody without being told the grounds of such an arrest and the other is that he shall be entitled to consult and to be defended by a legal practitioner of his choice.

Article 22(2) gives a third protection and it is that every person arrested and detained in custody must be produced before the nearest Magistrate within 24 hours excluding the time necessary for the journey from the place of arrest to the court of the Magistrate.

Article 22 (2) of the Constitution enjoins that every person who is arrested and detained in custody shall be produced before the nearest Magistrate within a period of twenty-four hours of such arrest excluding the time necessary for the journey from the place of arrest to the Court of the Magistrate and further mandates that no person shall be detained in custody beyond the period of 24 hours of such arrest without the authority of the Magistrate. This is the constitutional obligation on the State, which must be complied with by all those who have to make arrests in discharging their legal duties.

In Nandini Satpathy v. P. L. Dani, (1978) 3 SCR 608 Krishna Iyer, J. said that the spirit and sense of Article 22(1) is that it is fundamental to the rule of law that the services of a lawyer shall be available for consultation to any accused person under circumstances of near-custodial interrogation.

The above safeguards are not available to an enemy, alien or a person arrested or detained under a law providing for preventive detention. The Fundamental Rights, guaranteed by clauses (4) to (7) to persons detained under any law for prevention detention, relate to the maximum period of detention, the provision of an Advisory Board to consider and report on the sufficiency of the cause for detention, the right to be informed of the grounds of detention and the right to have the earliest opportunity of making a representation against the order of detention.

But the protection available in Article 22 (1) and (2) is not available to a citizen who is arrested or detained under any law providing for preventive detention. Article 22(5) provides certain safeguards to a citizen arrested under the preventive detention laws, mentioning that When any person is detained in pursuance of an order made under any law providing for preventive detention, the authority making the order shall, as soon as may be, communicate to such person the grounds on which the order has been made and shall afford him the earliest opportunity of making a representation against the order.

Clause (4) of Article 22 says that no law providing for preventive detention shall authorise the detention of a person for a longer period than three months unless-

(a) an Advisory Board consisting of persons who are, or have been, or are qualified to be appointed as, Judges of a High Court has reported before the expiration of the said period of three months that there is in its opinion sufficient cause for such detention: Provided that nothing in this sub-clause shall authorise the detention of any person beyond the maximum period prescribed by any law made by Parliament under sub-clause (b) of clause (7); or

(b) Such person is detained in accordance with the provisions of any law made by Parliament under sub-clauses (a) and (b) of clause (7).

Rajasthan High Court in Ram Singh v. State of Rajasthan, 1987 (2) WLN 394 held that the provisions relating to the detention of a citizen without trial is Draconian as it clips and trims his wings of personal liberty guaranteed to him under the Constitution.

Such a provision, being Draconian, has to be strictly constructed and levers-invented to check its misuse should be freely applied where they are available.

The framers of the Constitution, while granting these Draconian powers to the State in the shape of preventive detention laws under Article 22(2)(b), were keen to provide levers against its hasty and hurried use. It is why Clause (5) was inserted in Article 22 of the Constitution.

In State of Bombay v. Atma Ram Sridhar Vaidya, 1951 SCR 167 the Court held that Article 22 sets forth certain procedural requirements which, as a matter of constitutional necessity, must be adopted and included in any procedure that may be enacted by the legislature and it accordance with which a person may be deprived of his life or personal liberty.