Contract as Equitable Instrument - Sensibility in Indian Contract Act

Abstract

Equity, which means equalization or levelling down any arbitrary preferences or denial of justice, is derived from a Roman term ‘aequitas’. According to Sir Henry Mane, equity is fresh body of rules by the side of the original founded on distinct principles and claiming to supersede the law by virtue of a superior sanctity inherent in those principles. Inadequacy of the remedies at law and the elastic willingness of equity to use its discretion directly with reference to the conscience of the individual were two main foundations of equitable belief. Equity is aimed at preventing a defendant from acting unconscionably (literally, contrary to conscience) in circumstances otherwise where the common law would have allowed to do so. In layman’s language it can be said to interfering to protect some underlying right of the victim either because of a contract with the shyster, or because the shyster has control over some property which is rightfully theirs or because one may feel that the actions of the shyster may affect the victim in the future in some way or the other. Most of the equitable principles and rules have, in India, been embodied in the statute law and has been made applicable to the extent of the provisions made therein. That, the provisions of equity in Indian statute books might have their source in common law or in equity or in an adjustment between the two, is immaterial.The equitable doctrines featuring in the Indian Contract Act are mainly, the doctrine of penalties and forfeiture, stipulations as to time in a contract, equitable relief on the ground of misrepresentation, fraud and undue influence.The statutory recognition of the principles of equity in the Specific Relief Act is regarding injunction, specific performance, cancellation, rectification and recession etc. Incorporation of the maxim in Indian Laws Aequitas sequitur legem i.e. equity follows the law – Equity does not claim to override the law. Equity generally operates by recognising the legal rule and adding some further rule, remedy or the other machinery of its own. The Court of Chancery, which developed equitable law never wanted to give the equity an overriding effect to the common law. The jurisdiction of equity is debarred from overreaching the boundaries established by the prior course of adjudication.Another maxim which needs a mention in this discussion is 'Aeguitas nunquam contravenit leges' i.e., equity never counteracts law. In India, since there is no distinction between a legal interest and equitable interest, therefore, in all matters relating to legal as well as equitable interests, the statutory provisions shall apply if there are any.Section 38 of the Specific Relief Act provides that on adjudging recession of a contract, the Court may require the party to whom such relief in granted, to make any compensation to the other which justice may require. Section 30 and 38 also provide that on adjudging the cancellation of an instrument, the Court may require the party to whom such relief is granted, to make compensation to the other which justice may require.Though equity was faced with conflict with the laws in England in the earlier stages, it has always played a major role in the Law of Contracts. The Indian Contract Act lays that consent to an agreement is caused by undue influence, the argument is a contract voidable at the option of the party whose consent was so caused. Any such contract may be set aside either absolutely or, if the party who was entitled to avoid it, has received any benefit there under, upon such terms and conditions as the court may deem first. (Section 19A) Further section 64 and 65 of the Indian Contract Act are also based on the doctrine ‘he who seeks equity must do equity’. The maxim, however, does not apply when relief sought by the plaintiff and equitable right or relief secured to or sought by the defendant belongs to or originates from two entirely separate and distinct matters. Further, it is not applicable where the plaintiff seeks to enforce purely legal rights. Other provisions giving effect to the maxim Equity delights in equality are section 42 of the Indian Contract Act that applies the principle of tenancy-in-common, section 43, 63-70,146-147 of the Indian Contract Act.