LLM Group 2 Business Law Fundamental Principles of Law of Contract and Allied Laws 2015 Question Paper with Solutions

For full marks, cover: laissez faire and the individualist premises behind it; the two instruments named in the quotation with their statutory footprint; then the consensus theory at length, since the question ends by asking for it in terms, taking its origins, its Indian enactment, its critics and its present condition.

The paper prints "Lassiez Faire" in the opening line and "laissez faire" correctly in the quotation. The misspelling is the University's and is reproduced as set.

Laissez faire and individualism

Laissez faire, "let do", is the doctrine that the State should not interfere in economic life beyond keeping order and enforcing bargains. Its classical source is Adam Smith's An Inquiry into the Nature and Causes of the Wealth of Nations (1776), and it was carried into nineteenth century English legal thought by the Benthamite utilitarians and the political economists.

The two instruments named in the quotation

Freedom of contract is the liberty to decide whether to contract, with whom, and on what terms; the court's function, on the quotation's account, is to foster it.

The Act fosters it in four ways. It imposes no general requirement of writing, the second paragraph of section 10 preserving only such formalities as another statute requires. It refuses to price the bargain: Explanation 2 to section 25 provides that inadequacy of consideration does not void an agreement, and Illustration (f) treats a horse worth a thousand rupees sold for ten as a contract. It supplies default rules which the parties may displace, as sections 46 to 50 do for the time and manner of performance. And it protects the freedom not to contract, which is why a shop display is an invitation to offer and not an offer: Pharmaceutical Society of Great Britain v. Boots Cash Chemists (Southern) Ltd., [1953] 1 Queen's Bench 401.

Sanctity of contract is the principle that an agreement once made must be performed and will be enforced as made; the court's function is to vindicate it.

Its origins are in the natural lawyers and in the nineteenth century pandectists. Grotius, in De Jure Belli ac Pacis (1625), derived the binding force of promises from natural law. Savigny and the German pandectists made the declared will the source of the obligation, so that the law's task is to identify what the parties willed and give effect to it. In English writing the same idea appears as the "meeting of the minds"; in the Indian syllabus and in these papers it appears as the consensus theory.

Its Latin tag is consensus ad idem, and section 13 of the Indian Contract Act, 1872 enacts it in those very words: two or more persons are said to consent when they agree upon the same thing in the same sense.

Its statutory footprint is the largest of any theory in the Act, and the answer should trace it provision by provision.

Sections 3 to 9 are a machinery for locating the moment two wills coincided. Section 4 fixes when the communication of a proposal and of an acceptance is complete; section 5 permits revocation until that moment; section 7 requires the acceptance to be absolute and unqualified, because a qualified acceptance shows that the minds have not met, and a counter-offer destroys the proposal: Hyde v. Wrench, (1840) 3 Beavan 334.

The critics of the consensus theory

Four criticisms are standard and a good answer gives all four.

First, the law does not in fact inquire into the actual will; it applies an objective test. A party who did not intend what his words conveyed is bound if a reasonable person would have understood him to mean it. Smith v. Hughes, (1871) Law Reports 6 Queen's Bench 597, is the classical statement: if whatever a man's real intention may be, he so conducts himself that a reasonable man would believe he was assenting to the terms proposed by the other party, and that other party upon that belief enters into the contract, he is equally bound as if he had intended to agree. The consensus the law requires is therefore an apparent consensus, ascertained from what was said and done.

Third, the theory cannot explain obligations that arise without any agreement. Sections 68 to 72, headed "Of certain relations resembling those created by contract", impose liability for necessaries supplied to an incapable person, for payment by an interested person, for a non-gratuitous act whose benefit was enjoyed, for the responsibilities of a finder and for money paid by mistake or under coercion. State of West Bengal v. B.K. Mondal and Sons, AIR 1962 SC 779, applied section 70 because there was no valid contract at all.

Fourth, it cannot explain why the law enforces some agreements and not others for reasons unconnected with consensus. A wager under section 30 is made by competent parties with free consent for a consideration, and it is not a contract because Parliament said so. So is an agreement in restraint of trade under section 27. Those are legislative judgments of public policy, and no theory of consent explains them.

The present condition of the model

The statement in the question describes the law of 1872 accurately and the law of today only partly, and the discussion should end there.

Conclusion. Laissez faire is the doctrine that the State should hold the ring and not interfere in the terms of private bargains, and it rests on an individualist ideology whose premises are that each person is the best judge of his own interest, that the autonomous will is the source of obligation, and that self-interested exchange maximises welfare. Its two legal instruments are freedom of contract, which the Indian Contract Act fosters by requiring no general form, refusing under Explanation 2 to section 25 to inquire into adequacy, and supplying displaceable default rules; and sanctity of contract, which it vindicates through section 37, the expectation measure in section 73, the narrowness of section 56 as applied in Alopi Parshad, and the enforcement of a stipulated sum up to the cap in section 74.

The consensus theory is the doctrinal method by which a court performs both functions. It holds that the obligation is created by the parties' agreement, it is enacted as consensus ad idem in section 13, and it is worked out in the offer and acceptance machinery of sections 3 to 9, in the negative definition of free consent in section 14, and above all in section 20, which makes a bilateral mistake of fact void rather than voidable because the minds never met, with section 22 confirming the reasoning for a unilateral mistake.

For full marks, cover: this question has two limbs and the first has a false premise which must be dealt with. Take the appointing power historically, from the 1940 Act through the 1996 Act and the Konkan Railway and SBP and Co. line to the 2015 substitution and the unnotified 2019 scheme, since that history is what explains both the circumstances and why the Chief Justice is named. Then take disqualification and removal in their three layers.

Why the question names the Chief Justice, and why it is now wrong

The Chief Justice has had no power to appoint an arbitrator since 23 October 2015. The Arbitration and Conciliation (Amendment) Act, 2015 substituted, throughout section 11, "the Supreme Court or, as the case may be, the High Court or any person or institution designated by such Court" for the earlier references to the Chief Justice. The question was set in 2015, before or about the time of that change, and it must be answered by stating both the position it assumes and the position that now obtains.

SBP and Co. v. Patel Engineering Ltd., (2005) 8 SCC 618, overruled it. A Bench of seven judges held that the power is judicial, that the Chief Justice must decide his own jurisdiction, the existence of a valid arbitration agreement, whether the claim is a live claim and whether the conditions for exercise of the power are satisfied, and that his order is amenable to a petition for special leave under Article 136. National Insurance Co. Ltd. v. Boghara Polyfab (P) Ltd., (2009) 1 SCC 267, then catalogued the issues the Chief Justice must decide, those he may decide and those he should leave to the tribunal.

The 2015 amendment responded in two ways. It moved the power from the Chief Justice as persona designata to the Court itself, which is consistent with the power being judicial. And it inserted section 11(6A), providing that the Court, while considering an application, shall confine its examination to the existence of an arbitration agreement, notwithstanding any judgment, decree or order of any court, which was intended to reverse the wide inquiry SBP and Co. and Boghara Polyfab had permitted.

Circumstance one, section 11(4)(a): a party's failure in a three-member reference. Where the parties have not agreed a procedure and a party fails to appoint an arbitrator within thirty days from the receipt of a request to do so from the other party.

Circumstance two, section 11(4)(b): the appointed arbitrators' failure. Where the two appointed arbitrators fail to agree on the third arbitrator within thirty days from the date of their appointment.

Circumstance three, section 11(5): failure to agree on a sole arbitrator. Where the parties have not agreed a procedure and, in an arbitration with a sole arbitrator, they fail to agree on the arbitrator within thirty days from receipt of a request by one party from the other.

Circumstance four, section 11(6): failure of an agreed procedure. Where an appointment procedure has been agreed and a party fails to act as required under it, or the parties or the two appointed arbitrators fail to reach an agreement expected of them under it, or a person, including an institution, fails to perform any function entrusted to him or it under it, a party may request the Court to take the necessary measure, unless the agreement on the appointment procedure provides other means for securing the appointment.

Disqualification and removal: the three layers

Layer one, ineligibility under section 12(5). Notwithstanding any prior agreement to the contrary, any person whose relationship with the parties or counsel or the subject matter of the dispute falls under any of the categories specified in the Seventh Schedule shall be ineligible to be appointed as an arbitrator; the proviso permits waiver only by an express agreement in writing entered into after the dispute has arisen.

The Seventh Schedule, inserted in 2015 and drawn from the IBA Guidelines on Conflicts of Interest in International Arbitration, covers among others an arbitrator who is an employee, consultant or adviser of a party or has a past or present business relationship with it; who has a controlling influence on an affiliate of a party directly involved; who regularly advises a party and derives significant financial income from it; who is a manager, director or part of the management of a party; who has a close family relationship with a party or with counsel; and who has previously been involved in the case.

Layer two, challenge under sections 12 and 13. Section 12(1), as substituted in 2015, requires a person approached in connection with a possible appointment to disclose in writing, in the form of the Sixth Schedule, any circumstances such as those in the Fifth Schedule likely to give rise to justifiable doubts as to his independence or impartiality, and any circumstances likely to affect his ability to devote sufficient time and in particular to complete the arbitration within twelve months. The duty is continuing under section 12(2).

Section 12(3) states the two grounds of challenge: circumstances exist that give rise to justifiable doubts as to independence or impartiality, or the arbitrator does not possess the qualifications agreed to by the parties. Section 12(4) provides that a party may challenge an arbitrator appointed by him, or in whose appointment he has participated, only for reasons of which he becomes aware after the appointment.

Section 15 covers the wider cases and the consequences: the mandate terminates where the arbitrator withdraws for any reason or by agreement of the parties; a substitute arbitrator shall be appointed according to the rules that were applicable to the appointment of the arbitrator being replaced; unless otherwise agreed, where an arbitrator is replaced any hearings previously held may be repeated at the discretion of the tribunal; and an order or ruling made before the replacement is not invalid solely because there has been a change.

Section 29A(4) adds a fourth route which is often forgotten. Where the award is not made within the twelve month period, or the extended period of six months, the mandate of the arbitrator shall terminate unless the Court has extended the period, and the Court may while extending substitute one or all of the arbitrators.

The relationship between the three layers closes the second limb. Because a person within the Seventh Schedule is ineligible de jure, the correct route is a section 14 application to the Court and not a section 13 challenge before the tribunal, and that has been settled practice since TRF Ltd. A challenge on justifiable doubts falling short of the Seventh Schedule goes first to the tribunal under section 13 and reaches a court only through section 34 after the award.

Disqualification and removal operate in three layers. A person within the Seventh Schedule is ineligible under section 12(5) whatever the parties agreed, and TRF Ltd., Perkins Eastman and Central Organisation for Railway Electrification have made the consequence a nullity extending to any nomination made under such a clause. A person outside that Schedule may be challenged under section 12(3), and section 13 sends the challenge first to the tribunal, with a section 34 application after the award as the only route to a court. And a mandate terminates under sections 14, 15 and 29A(4) where the arbitrator is unable or fails to act without undue delay, withdraws, is replaced by agreement, or overruns the statutory timetable, with a substitute appointed by the rules that governed the original appointment.

English law had first to explain how a party could escape an obligation he had undertaken absolutely. Paradine v. Jane, (1647) Aleyn 26, had held that where a party creates a duty upon himself by his own contract he is bound to make it good notwithstanding any accident. The escape was found in Taylor v. Caldwell, (1863) 3 Best and Smith 826, where a music hall hired for concerts burned down before the first performance, and Blackburn J. held that the contract was subject to an implied condition that the parties should be excused if performance became impossible from the perishing of the thing without the fault of the contractor. That is the implied term theory.

The second English theory is that the foundation of the contract has disappeared. Krell v. Henry, [1903] 2 King's Bench 740, where a room hired to view the coronation procession lost its purpose when the procession was cancelled, is usually explained on this basis: the room could still be occupied, but the basis on which both parties contracted had gone.

Section 56 has three paragraphs and only the second is the doctrine. The first voids an agreement to do an act impossible in itself, which is initial impossibility. The second provides that a contract to do an act which, after the contract is made, becomes impossible, or by reason of some event which the promisor could not prevent becomes unlawful, becomes void when the act becomes impossible or unlawful. The third gives the promisee compensation where the promisor knew, or with reasonable diligence might have known, of an impossibility the promisee did not know.

The grounds

Destruction of the subject matter, as in Taylor v. Caldwell.

Death or incapacity of a party where the contract is for personal service, since performance depends on a personal qualification which has ceased to exist.

Supervening illegality, which the second paragraph names in terms: performance becoming unlawful by reason of an event the promisor could not prevent. A change in the law, a prohibition on export or import, or a governmental order are the usual instances.

Non-occurrence of an event which formed the basis of the contract, as in Krell v. Henry.

An event provided for by the contract is not a frustrating event, because a force majeure clause is the parties' own allocation of that risk and the contract governs. Section 56 operates only in the absence of such provision.

A completed conveyance of land is not frustrated, the estate having already passed.

A partial or temporary interruption does not frustrate unless it strikes at the root, which is precisely what Satyabrata Ghose decided.

The effect

Discharge is automatic and total. The contract becomes void at the moment the act becomes impossible or unlawful. It is not voidable at a party's election, and no notice or act of avoidance is required; the parties are discharged from further performance from that moment.

Rights accrued before the frustrating event survive, since the section operates prospectively, and section 65 then requires restoration of advantages received, which leads into the second limb.

Channel one: restitution on the rescission of a voidable contract, section 64. When a person at whose option a contract is voidable rescinds it, the other party need not perform, and the party rescinding must, if he has received any benefit thereunder from another party to the contract, restore such benefit so far as may be to the person from whom it was received. The obligation lies on the rescinding party alone, because he is the one electing to undo the transaction. Section 19A adds, for undue influence, that the Court may set the contract aside either absolutely or upon such terms and conditions as to the Court may seem just where the party entitled to avoid has received a benefit.

Channel two: restitution where the agreement is void or the contract becomes void, section 65. When an agreement is discovered to be void, or when a contract becomes void, any person who has received any advantage under such agreement or contract is bound to restore it, or to make compensation for it, to the person from whom he received it. This is the channel that operates after frustration under section 56 and after a bilateral mistake under section 20.

Section 68, necessaries. A supplier of necessaries suited to the condition in life of a person incapable of contracting, or of anyone he is legally bound to support, is entitled to be reimbursed from the property of the incapable person. The liability is on the estate and not personal, which reconciles it with Mohori Bibee.

Section 69, payment by an interested person. A person interested in the payment of money which another is bound by law to pay, and who pays it, is entitled to reimbursement; he must not himself be bound.

Section 70, non-gratuitous act. Where a person lawfully does anything for another, or delivers anything to him, not intending to do so gratuitously, and that other enjoys the benefit, compensation or restoration is due. State of West Bengal v. B.K. Mondal and Sons, AIR 1962 SC 779, is the leading case: construction work done for the State at an officer's request under an arrangement failing the constitutional formalities for a government contract was compensable under section 70, which applies precisely because there is no valid contract, its object being to prevent unjust enrichment.

Section 71, finder of goods. A finder taking goods into custody bears a bailee's responsibility, owes the care required by section 151, and has a lien under section 168 and a limited power of sale under section 169.

The theoretical basis, stated briefly to close the limb, is unjust enrichment. The three conditions are that the defendant was enriched, that the enrichment was at the plaintiff's expense, and that its retention is unjust on a ground the law recognises, such as mistake, failure of consideration, compulsion, necessity or incapacity. Restitution is gain based, measured by what the defendant received; damages for breach under section 73 are loss based, measured by what the plaintiff lost.

Restitution operates through three separate channels: section 64, requiring the party who rescinds a voidable contract to restore benefits received, with the additional power in section 19A for undue influence; section 65, requiring restoration where an agreement is discovered to be void or a contract becomes void, a channel Mohori Bibee closed to a lender who knew of the minority throughout; and sections 68 to 72, headed "certain relations resembling those created by contract", where obligation arises without any agreement at all, as B.K. Mondal shows for section 70 and Kanhaiya Lal for section 72, subject to the principle in Mafatlal Industries that unjust enrichment is applied against the claimant as readily as for him.

The comparison with the other sources of civil obligation makes the point sharper than a definition can. In tort the duty is imposed by law, owed to persons generally, and the wrongdoer never consented to it. In status the obligation attaches to a relationship such as parent and child, and its content is fixed by law regardless of what the parties want. In restitution, which the Indian Act calls relations resembling those created by contract, the obligation follows the receipt of a benefit. Only in contract do the parties write the terms of the duty the State will enforce.

A second comparison, between legal traditions, is worth making in an LLM answer. The civil law systems treat a contract as an agreement productive of obligations and require a cause or lawful ground rather than consideration, so a gratuitous promise seriously made can bind. The common law treats a contract as a bargain and filters by consideration. India codified in 1872 at a moment when the common law rule was at its strictest, and it adopted the bargain filter in section 25 while softening it in three ways: consideration may move from any other person under section 2(d), it may be past, and by Explanation 2 its adequacy is irrelevant. The Indian Act therefore sits between the two traditions, and that is its distinctive character.

To allocate risk in advance. Much of the Act is a set of default rules on who bears a loss, which the parties may vary. Section 56 allocates the risk of supervening impossibility; section 73, restating Hadley v. Baxendale, (1854) 9 Exchequer 341, allocates the risk of unusual consequential loss to the party who knew of it, which is an information forcing rule; section 74 allocates the risk of quantifying loss.

To reduce the cost of transacting, by supplying terms the parties would probably have agreed had they thought about them: sections 46 to 50 on time and manner of performance, sections 51 to 58 on reciprocal promises, and the implied conditions and warranties in sections 14 to 17 of the Sale of Goods Act, 1930.

To protect the weaker party against misuse of the contractual form. This object was not prominent in 1872 and has grown steadily. It appears in section 16(3), shifting the burden of disproving undue influence where a transaction is unconscionable; in the section 23 public policy jurisdiction as used in Central Inland Water Transport Corporation Ltd. v. Brojo Nath Ganguly, (1986) 3 SCC 156; and in the whole of modern consumer legislation.

The remedial statutes: the Specific Relief Act, 1963, substantially rewritten by the Specific Relief (Amendment) Act, 2018, which substituted section 10 so that specific performance is enforceable as of right; the Limitation Act, 1963; and the Indian Stamp Act, 1899 and Registration Act, 1908.

The dispute resolution statutes that give this paper its title: the Arbitration and Conciliation Act, 1996, whose arbitration clause section 28 of the Contract Act expressly saves; the Legal Services Authorities Act, 1987; the Family Courts Act, 1984; the Mediation Act, 2023, which substituted sections 61 to 81 of the 1996 Act; and section 12A of the Commercial Courts Act, 2015.

The modern regulatory statutes: the Consumer Protection Act, 2019, which defines an unfair contract in section 2(46) and empowers the commissions to declare such terms void; the Competition Act, 2002; the Insolvency and Bankruptcy Code, 2016; and section 10A of the Information Technology Act, 2000, which gives legal recognition to contracts formed by electronic means.

Intention to create legal relations, not stated in the Act and supplied by the courts: Balfour v. Balfour, [1919] 2 King's Bench 571; Merritt v. Merritt, [1970] 1 Weekly Law Reports 1211.

Lawful consideration, section 2(d), moving at the desire of the promisor as Durga Prasad v. Baldeo, (1880) Indian Law Reports 3 Allahabad 221, requires; section 25 voiding an agreement without consideration subject to three exceptions.

Capacity, sections 11 and 12, on which Mohori Bibee v. Dharmodas Ghose, (1903) 30 Indian Appeals 114, holds a minor's agreement void ab initio, so it cannot be ratified and supports no estoppel, the supplier of necessaries being relegated to section 68.

Free consent, sections 13 to 22, where coercion, undue influence, fraud and misrepresentation produce a voidable contract under sections 19 and 19A, while bilateral mistake of fact produces a void agreement under section 20.

Lawful object, section 23, with severability under section 24; Gherulal Parakh v. Mahadeodas Maiya, AIR 1959 SC 781, on the caution required before inventing a new head of public policy.

Not expressly declared void, sections 26 to 30, section 36 and the first paragraph of section 56.

Its scope runs in seven layers from the general principles in sections 1 to 75, through the special contracts retained and those carved out into the Acts of 1930 and 1932, the remedial statutes headed by the Specific Relief Act, 1963 as amended in 2018, the dispute resolution statutes that give this paper its title, the modern regulatory statutes led by the Consumer Protection Act, 2019, to the constitutional dimension in Article 299 and the Article 14 control of State contracting. The essentials are those enumerated in section 10, and their failure produces a void agreement in most cases and a voidable contract where consent was vitiated by coercion, undue influence, fraud or misrepresentation.

Ineligibility, section 12(5). Notwithstanding any prior agreement to the contrary, a person whose relationship with the parties, counsel or the subject matter falls within the Seventh Schedule is ineligible to be appointed, and the proviso permits waiver only by an express agreement in writing after the dispute has arisen. The Schedule, inserted in 2015 and drawn from the IBA Guidelines on Conflicts of Interest in International Arbitration, covers an employee, consultant or adviser of a party, a person with a past or present business relationship with a party, a person who regularly advises a party, a manager or director of a party, a person with a close family relationship with a party or counsel, and a person previously involved in the case.

Challenge, sections 12 and 13. Section 12(1) requires written disclosure in the form of the Sixth Schedule of circumstances such as those in the Fifth Schedule likely to give rise to justifiable doubts as to independence or impartiality, and of anything likely to affect the ability to complete the arbitration within twelve months; the duty continues under section 12(2). Section 12(3) makes justifiable doubts, or want of the agreed qualifications, grounds of challenge; section 12(4) prevents a party challenging its own appointee except for reasons discovered afterwards. Section 13 requires a written statement of reasons within fifteen days; the tribunal itself decides the challenge; and if it fails the tribunal continues and makes an award, the remedy being an application under section 34.

2. Recourse against Arbitral Tribunal

There is no such thing as recourse against an arbitral tribunal, and the first mark is for saying so. The Arbitration and Conciliation Act, 1996 provides recourse against an award, under section 34, and an appeal against certain orders, under section 37. What a party dissatisfied with the tribunal itself may do is challenge an arbitrator under sections 12 and 13 or apply to terminate his mandate under section 14. The item as printed appears to be a slip for recourse against an arbitral award, and it is answered on that footing.

Section 34(1) is deliberately worded: recourse to a Court against an arbitral award may be made only by an application for setting aside in accordance with sub-sections (2) and (3). Section 5 reinforces it by excluding judicial intervention in matters governed by Part I except where the Part provides for it. There is therefore no appeal on the merits, no revision, no review and no suit.

The case law is one arc: Renusagar Power Co. Ltd. v. General Electric Co., 1994 Supplement (1) SCC 644, narrow; ONGC Ltd. v. Saw Pipes Ltd., (2003) 5 SCC 705, adding patent illegality; ONGC Ltd. v. Western Geco International Ltd., (2014) 9 SCC 263, wider; the 2015 amendment on the Law Commission's 246th Report reversing that; and Ssangyong Engineering and Construction Co. Ltd. v. National Highways Authority of India, (2019) 15 SCC 131, confirming the narrowing while setting an award aside for reliance on material not shown to one party.

Section 34(3) bars an application after three months, with a further thirty days on sufficient cause "but not thereafter", excluding section 5 of the Limitation Act, 1963. Section 34(4) permits an adjournment so that the tribunal may cure the defect. Section 37 allows an appeal against listed orders with no second appeal.

Gayatri Balasamy v. ISG Novasoft Technologies Ltd., 2025 INSC 605, decided 30 April 2025, added a power the statute does not contain: five judges held by four to one that a court under sections 34 and 37 may modify an award where the invalid portion is severable, to correct clerical, computational or typographical errors apparent on the face of the record, in relation to post-award interest, and, in the Supreme Court, under Article 142.

Section 16(2) fixes the time for the plea: a plea that the tribunal does not have jurisdiction shall be raised not later than the submission of the statement of defence, and a party is not precluded from raising it merely because he has appointed, or participated in the appointment of, an arbitrator. Section 16(3): a plea that the tribunal is exceeding the scope of its authority shall be raised as soon as the matter alleged to be beyond the scope is raised during the proceedings. Section 16(4) permits the tribunal to admit a later plea if it considers the delay justified.

Section 16(5) and (6) fix the consequence. If the tribunal rejects the plea it shall continue with the proceedings and make an arbitral award, and the party aggrieved may then apply under section 34 to set that award aside. There is no immediate appeal from a rejection. If the tribunal accepts the plea, an appeal lies at once under section 37(2)(a), because the effect is to end the arbitration.

4. U.N. Convention on Sales

The reference is to the United Nations Convention on Contracts for the International Sale of Goods, adopted at Vienna on 11 April 1980 and in force from 1 January 1988, prepared by the United Nations Commission on International Trade Law and replacing the Hague Conventions of 1964. More than ninety States are parties, including the United States, China, Japan, Germany and France.

India is not a party. It has neither signed nor acceded, so the Convention does not apply to an Indian contract by force of Article 1(1)(a), which requires both parties to have places of business in Contracting States. It reaches an Indian party only where the parties choose it as the applicable law or where a foreign forum's rules of private international law lead to the law of a Contracting State under Article 1(1)(b). Indian sale contracts are otherwise governed by the Indian Contract Act, 1872 and the Sale of Goods Act, 1930.

On breach, Article 25 defines a fundamental breach as one substantially depriving the other party of what he is entitled to expect under the contract, unless the result was unforeseeable, and avoidance is available only for a fundamental breach. The remedies are specific performance subject to Article 28, under which a court need not order it unless it would do so under its own law; avoidance; price reduction under Article 50, a civilian remedy unknown to the common law; and damages under Article 74, limited to the loss the party in breach foresaw or ought to have foreseen at the time of conclusion. Article 77 imposes a duty to mitigate and Article 79 exempts a party prevented by an impediment beyond his control.

5. Standard Form of Contract

A standard form contract is one whose terms are settled in advance by one party and offered to the other on a take it or leave it basis. The French name, contract of adhesion, is the better description: the weaker party adheres to terms rather than agreeing to them. The insurance policy, the bank account form, the bill of lading, the airline ticket, the electricity supply agreement, the software licence and website terms of use are the standard examples.

A rule of notice. A term is not part of the contract unless reasonable steps were taken to bring it to the other party's attention before or at the time of contracting: Olley v. Marlborough Court Ltd., [1949] 1 King's Bench 532, where a disclaimer in a hotel bedroom came too late; Thornton v. Shoe Lane Parking Ltd., [1971] 2 Queen's Bench 163, where the more onerous the clause the greater the notice required. Where the document is signed the rule is stricter: L'Estrange v. F. Graucob Ltd., [1934] 2 King's Bench 394.

A rule of construction. An exception clause is read contra proferentem, and clear words are needed to exclude liability for negligence. The doctrine of fundamental breach, once a rule of law, was reduced in Photo Production Ltd. v. Securicor Transport Ltd., [1980] Appeal Cases 827, to a rule of construction.

Statute, now the most important control. The Consumer Protection Act, 2019 defines an unfair contract in section 2(46) by reference to terms causing a significant change in the rights of the consumer, including manifestly excessive security deposits, a disproportionate penalty for breach, refusal of early repayment, unilateral termination without reasonable cause, assignment to the other party's detriment and unreasonable charges, and empowers the State and National Commissions to declare such terms null and void. Sectoral regulation supplies the rest, through the Insurance Regulatory and Development Authority, the Reserve Bank of India's fair practices code and the Real Estate (Regulation and Development) Act, 2016, while section 10A of the Information Technology Act, 2000 is what makes click-wrap terms enforceable at all.