Contracts & Arbitration

Disputes that may arise Disputes which normally arise in respect of contracts for supply of goods can be brought under three broad heads. Proof of conclusion of contract Quality not conforming to specification Dispute in quantity.

In cotton business, the trade practice has been to confirm the contract verbally which is invariably executed.But with advancement of technology, one can easily confirm the contract within seconds through e mail. This electronic form is well recognised and therefore signing of contract may not arise henceforth.

We are all still dealing with the statutory provisions contained in the Indian Contract Act of 1872. It is nearly 150 years and still the provisions are very relevant. The Sale of Goods Act is comparatively new as it was passed in 1930. The provisions of both these statues are legacies left behind by the British Rule. Provisions of the Indian Law pertaining to Contract and Sale of Goods Act are borrowed from English Law. Significantly, no worthwhile amendment has been brought about to the statues as the rights and liabilities are so well defined that our legislature cannot venture into tinkering with the basic provisions of these enactments.Like the Indian Penal Code which was drafted by Lord Macaley more than 100 years ago remains untouched, the reason being the impeccable language used in the statute dealing with very kind of offence conceivable. It is a literature worth reading and the manner in which words are used and penal consequences are enacted, are stunning, leaving all these enactments masterpieces. Quite rightly, we have not ventured into tinkering with these old enactments which are relevant even today.

Issues that may crop up Makes the provisions of Terms of Contract If concluded If Breach is Committed Who is Guilty of Breach of Contract Quality Disputes Scientific and Technical Evidence Quantity Disputes Simple Procedure Sec.3 of Sale of Goods Act Makes the provisions of Contract Act applicable To sale of goods.

Indian contract Act 1872 Contract - Definition Section 2 When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal; (b) 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; Offer can be revoked before acceptance.

Section 10 of The Indian Contract Act, 1872 10. What agreements are contracts.— All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.

Sale of Goods Act Sale of Goods Act deals with stipulations as to conditions and warranties. Section 12 - provides for right to claim damages when there is breach of warranty Section 13 - deals with cases where conditions can be treated as warranty. Section 15 - deals with sale by description Section 16 - Implied conditions as to quality of fitness Section 17 - sale by sample

There may also be cases where goods may be lost in transit and in the absence of insurance cover, who is to bear the value whether the Seller or the buyer? This can be ascertained only on the basis of the contract as Section.19 of the Sale of Goods Act. Section 19- provides that property passes when intended to pass. Rules of delivery and payment are also set out in the Sale of Goods Act.

Cases may also arise where goods may not conform to quality but appropriated without protest. In such cases, Courts lean in favour of the Seller and once protest is made and samples are tested then based on evidence quantification of damages will be assessed and in those cases, Courts lean in favour of the buyer. Ultimately it is a question of fact depending on the contractual terms and the circumstances of each case.

There are certain other rights which are available to unpaid vendor of goods which are recognised in the form of sellers lien under Section 47 and the right of the Seller is to stop the goods in transit. The statute also deals with right to sue for price by the unpaid vendor and damages as also interest payable on the value of goods sold irrespective of whether there is a contract to pay interest or not.

Arbitration and Conciliation Act 1996 With the advent of Arbitration and Conciliation Act 1996 and adopting of UNCITRAL model by India, we have now got into international arbitration also, where contracts are concluded between an Indian company and a foreign company. It is always desirable to resolve disputes which arise in commercial transactions through arbitration though involving the Court still becomes necessary if an award is passed for the purpose of execution. Part I of the Act deals with domestic arbitration. Part II of the Act deals with enforcement of foreign awards

Guidelines to safeguard and protect your interest Please ensure the following if you are to avoid a long drawn litigation and you are to safeguard and protect your interest Have a proper contract for supply containing all relevant terms and conditions. Reserve the jurisdiction to your place of business in contracts. Provide for interest clause adequately. Incorporate Arbitration Clause in your contract and reserve your right to appoint Arbitrator of your choice.