From the looks of Pakistan's Contract Act, one would expect the sails of Red Dragon and Hector to whip up at the sea ports any moment. After all, our law has not evolved much since the British first landed on Indian soil. The process of colonialism was deeply rooted in the formalization and propagation of English-style contracts – applied to utterly different social systems.
We may say that such contracts – formal, written, executed by an entirely neutral body of law – were the root of exploitation, rooted in market individualism as they were. Their forms, when contextualized in a communally embedded society, with diverging notions of person and property, turned monstrous. Perhaps – or definitely, that was part of the plan.
However, what alternate reality could look like is a debate for another day. Today’s ground reality is that every country is forced to stand and compete in the global financial system based on similar principles of market individualism and capitalist development. For better or worse, these are the rules of today's world, and our task is not to look at the means of their destruction. Rather, the matter’s urgency pushes us to examine loopholes amidst the current law and identify appropriate amendments so to make commerce contractually viable.
Today’s ground reality is that every country is forced to stand and compete in the global financial system based on similar principles of market individualism and capitalist development.
It is fundamental to note here that the jurisdiction Pakistan takes its written law from has no such Act of its own. Penning down legislation was more of a social and political experiment in India, obviously stemming from the white man’s burden to civilize the barbaric masses. In England, however, most of the law of contracts was developed by the common law – or judge-made law. That is to say, in the shape of judicial precedent. For this purpose, the English theory of contracts has been said to follow a ‘dog-wagging-tail’ approach, i.e., the practice came before the theoretical extrapolation.
Clearly, in British India, the opposite was true – as it is in most cases of legal transplants.
No matter history, the trajectory of the world’s global economic system has been such. What makes Pakistan unique in this regard is that its Contract Act, first penned in 1872, has been barely amended since. Old, outdated and on the verge of crumbling, its provisions are struggling to stand the test of time – and the reality of commercial activities on ground.
First and foremost, the formation of a contract under the law is quite painful in itself. For a contract to exist, simply put, an offer must be made and accepted. The parties must be aware of such a phenomenon so that the contents of the contract may be performed thereafter. One might ask, at what point, legally, does this execution ought to start? Is it after the acceptor (also the offeree, i.e. the person to whom the offer was initially made) notifies the offeror? Or is it after the offeror has been notified of the acceptor’s acquiescence?
The English case law is very clear on this: First, the parties must agree – or agree to not agree – on a particular mode of communication. If by post, the execution of the contract is to start right after the acceptance letter has been sent. It does not matter if the letter gets lost on the way or is intercepted or falls victim to some misfortune; the acceptor is entitled to the benefits and obligations specified within the contract.
The case is quite different in Pakistan. The Contract Act specifies the agreement to be held enforceable against the acceptor as when he has posted the mail and enforceable against the proposer when he has received aforementioned mail.
This is problematic for the sole reason that cases may arise where there is no objective metric to adjudicate when a contract is held to be formally in execution. The realities may be very different for both parties, and thus beholden to subjectivity. In a field of law where certainty is held to be the ideal, even when the price is benevolence towards the disadvantaged party, Pakistan certainly strays very far from the metric. This is compounded by the changing nature of means of communication where email and other instantaneous means of communication are the norm. The contract act fails to address any of these changes.
This leaves many such disputes to the discretion of the Courts, which may vary from time to time – and therefore create a legal commotion in a common law jurisdiction as Pakistan, which follows the principle of stare decisis. Very simply put, this is a doctrine which holds that law must be developed according to prior precedent – if for no other reason than uniformity and precedence. The result of falling into a series of such legal convolutions is the development of haphazard case law that seems to confound lawyers and disputing parties alike.
It does not end here. Another integral part of forming a contract is providing due consideration. For a layperson, it is sufficient to understand this as exchanging anything of value (money being a prime, but not the only, example) for a particular promise to do or not do something.
The purpose of such a notion finds its roots in market individualism from which contract law emerges – the notion that individuals are free and owe no legal communal obligations to one another except for what they privately contract amongst themselves. Through consideration, it becomes possible to distinguish between a gift – or at least, its mutated form in Western capitalism (societies all over the world have historically engaged in contractual Maussian prestations with supreme legal weightage, but that is discussion for another day) – and a contract.
Pakistan is operating in very different dynamics as opposed to the rest of the world. And this does not merely pertain to the elements of a contract: remaining rooted in our ancient rites has taken away our ability to be flexible enough to adapt.
For instance, if A mows B’s lawn out of the goodness of his heart, and B does not pay A for the generosity, A cannot ask the Court to enforce a benefit for which no thing of value was exchanged. That would be a kind of past consideration, which is no consideration under the English jurisprudence. On the other hand, if B asks A to mow his lawn and promises to pay him Rs50 for the service, A and B have entered a contract. In this event, if A does not get paid, then a Court of Law can enforce this agreement. This is why consideration is also known as ‘the badge of enforceability.’
In England, it is understood that consideration can only be offered in present. One cannot claim benefits for performing a service rendered in the past without any kind of contractual agreement.
Under the Contract Act in Pakistan, past consideration is perfectly legal.
The consequences are clear; despite having never entered into a formal contract or agreement, it is entirely possible for a person to be held liable for a service a third party once rendered them, even if they were not contracted by the aforementioned party. This is also aided by the fact that there is no ‘privity of contract’ in Pakistan i.e. as per the Act, third parties may intervene and be party to a contract negotiated between two other persons. This liability may exist even if the defendant was a minor at the time – the case of Sindha vs Abraham where the minor could not have truly consented to the contract.
All over the world, nation states are coming up with unique legal innovations to deal with nascent commercial practices. A Canadian court recognized emojis as a legally valid mode of communicating assent to an offer.
It is clear, then, from our analysis thus far that Pakistan is operating in very different dynamics as opposed to the rest of the world. And this does not merely pertain to the elements of a contract: remaining rooted in our ancient rites has taken away our ability to be flexible enough to adapt.
The rise of cryptocurrencies, the proliferation of social media and instantaneous forms of communication such as email, WhatsApp, text messaging etc., and the digitalisation of commercial activity all present new challenges to existing law – and not merely to our jurisdiction.
All over the world, nation states are coming up with unique legal innovations to deal with nascent commercial practices. A Canadian court, for instance, recognized emojis as a legally valid mode of communicating assent to an offer.
This therefore brings us to the biggest twist in our writing so far: that all the critique we have pointed out thus far is also redundant. Conversations around the world are not happening on postal rules when social media exists; they are not examining modes of consideration. As we shift towards the digitalisation of the commercial and physical space, solutions rendered in 1872 are obsolete.
When even criticism of an outdated Act also becomes dated, it is clear there is a yawning chasm of uncertainty awaiting us. What, then, is the solution?
Apt or not, it is the struggle which matters: legal solutions need not always be clear right at first. It is only through development and evolution of law in line with the rest of society that real solutions can be devised for real problems. Surely, the law of the land is primarily societal norms in action
The problem here is that our own nation’s commercial realities have bulleted ahead – and yet, our law seems frozen in time.
A series of amendments – and heartfelt amendments – seem to be the only way forward. The solution is not copy-pasting solutions of other jurisdictions, but examining thoroughly the realities and ambitions of our own nation. What do we, as Pakistanis, want from commerce today?
And what needs to change for us to realize our capital dreams?