| dc.description | CANDIDATE’S DECLARATION ......................................................................................... iii
Statement of Thesis Preparation ...............................................................................................iv
Abstract......................................................................................................................................v
Acknowledgements................................................................................................................ viii
Table of Contents.......................................................................................................................x
List of Cases............................................................................................................................xvi
List of Statutes and Notifications........................................................................................xxxiv
List of Tables .....................................................................................................................xxxvii
List of Figures...........................................................................................................................xl
List of Abbreviations ............................................................................................................. xlii
CHAPTER 1: INTRODUCTION..............................................................................................1
1.1. Default Rules Doctrine: Meaning ...................................................................................1
1.2. Literature Review on Default Rules Doctrine in India ...................................................4
1.2.1. Historical, Conceptual and Philosophical Perspectives...........................................4
1.2.2. Default Rules Doctrine in India .............................................................................12
1.3. Statement of the Problem..............................................................................................14
1.4. Objectives of Research .................................................................................................17
1.5. Hypothesis.....................................................................................................................18
1.6. Research Questions.......................................................................................................18
1.7. Research Methodology, Design and Sources................................................................19
1.7.1. Doctrinal Legal Research and Justification for Adopting it ..................................19
1.7.2. Use of Quantitative/ Empirical Methods ...............................................................20
1.7.3. Research Design for Empirical Research ..............................................................23
1.7.4. Primary and Secondary Sources and Legal Databases ..........................................25
1.8. Scheme of Chapters ......................................................................................................26
1.9 Significance and Utility of the Research .......................................................................29
1.10. Scope and Limitations of Research.............................................................................30
1.10.1. Scope....................................................................................................................30
1.10.2. Limitations...........................................................................................................31
CHAPTER 2: DEFAULT RULES DOCTRINE IN CONTRACT LAW: AN OVERVIEW.36
2.1. Introduction...................................................................................................................36
2.2. Default Rules ................................................................................................................37
2.2.1. Meaning of Default Rules......................................................................................37
2.2.2. Contract Incompleteness........................................................................................41
2.2.3. Explicit and Implicit Default Rules .......................................................................53
xi
2.2.4. Types of Default Rules ..........................................................................................54
2.2.5. Justification for Default Rules...............................................................................61
2.2.6. Designing of Default Rules....................................................................................62
2.2.7. Importance of Default Rules..................................................................................64
2.2.8. Critique of Default Rules.......................................................................................65
2.2.9 Default Rules in Various Contexts .........................................................................65
2.2.10. Personalisation of Default Rules..........................................................................70
2.3. Mandatory Rules...........................................................................................................72
2.3.1. Mandatory Rules- Meaning ...................................................................................73
2.3.2. Substantive and Procedural Mandatory Rules.......................................................73
2.3.3. Objectives of Mandatory Rules .............................................................................77
2.3.4. Designing Mandatory Rules ..................................................................................78
2.3.5. Justification for Mandatory Rules..........................................................................80
2.4. Altering Rules...............................................................................................................81
2.4.1. Altering Rules: Meaning........................................................................................81
2.4.2. Function of Altering Rules.....................................................................................86
2.4.3. Types of Altering Rules.........................................................................................88
2.4.4. Strategies towards Error Reducing Function of Altering Rules ............................91
2.4.5 Altering Penalties....................................................................................................92
2.4.6. Altering Rules and Contract Interpretation............................................................93
2.5. Blurred lines in the Default Rules Doctrine..................................................................94
2.6. Types of Rules other than the Triumvirate ...................................................................95
2.7. Relationship between Default Rules Doctrine and Statutory Interpretation.................97
2.8. Default Rules Doctrine and Legal Education ...............................................................97
2.8.1 Gaps between Taught Law and Law-in-Practice ....................................................97
2.8.2 Gaps between Taught Law and Law-in-Practice in Contract Law Context ...........99
2.8.3 Bridging the Gap between Theory and Practice: Role of DRD............................102
2.8.4. Simulation Based Teaching and Learning ...........................................................110
2.8.5. Role of the Legal Academia and the Default Rules Doctrine..............................112
2.9. Contracting Practices and the Default Rules Doctrine ...............................................112
2.10. Designing Rules of Contract Law and DRD.............................................................115
2.11. Adjudication and the Default Rules Doctrine...........................................................117
2.12. Findings and Conclusion...........................................................................................117
CHAPTER 3: DEFAULT RULES DOCTRINE: INTERNATIONAL PERSPECTIVES ...120
3.1. Introduction.................................................................................................................120
3.2. Default Rules Doctrine in International Contract Law Instruments...........................120
3.2.1. Default and Mandatory Rules in CISG................................................................121
xii
3.2.2. Default and Mandatory Rules in the Model Law on International Commercial
Arbitration......................................................................................................................122
3.2.3 Default and Mandatory Rules in UNIDROIT PICC.............................................122
3.2.4. Use of Default Rules Doctrine by International Bodies and International Tribunals
........................................................................................................................................124
3.3. Default Rules Doctrine and International Arbitration Rules ......................................126
3.4. Jus Cogens- The Conceptual Counterpart of Mandatory Rules..................................130
3.5. Default Rules Doctrine in EU.....................................................................................131
3.5.1. Draft Common Frame of Reference ....................................................................131
3.5.2. Default Rules Doctrine in EU Courts ..................................................................133
3.6. Default Rules Doctrine in USA ..................................................................................135
3.7. Default Rules Doctrine in UK.....................................................................................139
3.8 Findings and Conclusion..............................................................................................142
CHAPTER 4: DEFAULT RULES DOCTRINE IN INDIA: A JURISPRUDENTIAL STUDY
................................................................................................................................................143
4.1. Introduction.................................................................................................................143
4.2. Framework of Contract Law in India..........................................................................143
4.2.1. Evolution of Law Prior to Enactment of Indian Contract Act, 1872 ...................143
4.2.2 Prelude to the Contract Act...................................................................................145
4.2.3. The Contract Act and its Structure.......................................................................146
4.3. Default Rules and Statutory Rules in India.................................................................151
4.3.1. The Arbitration and Conciliation Act, 1996 ........................................................151
4.3.2. Guidelines on Charging Infrastructure for Electric Vehicles, 2022 ....................152
4.3.3. Opt-Out and Opt-in Tax Regime .........................................................................152
4.4. Judicial Approaches to the Default Rules Doctrine in India.......................................154
4.4.1 Default Rules Doctrine in Indian Courts ..............................................................154
4.4.2. Default Rules Doctrine in Dyna Technologies v. Crompton Greaves.................155
4.4.3. Subsequent Decisions ..........................................................................................157
4.5. The Conceptual Distinction between Immutable and Mutable Rules in India ...........158
4.6. Jurisprudential Analysis of Decisions on Distinction between Immutable/ Mandatory
and Mutable/ Default Rules...............................................................................................178
4.7. Default Rules Doctrine and Indian Legal Academia ..................................................182
4.7.1. Default Rules in the Economic Survey of 2018-19 .............................................184
4.7.2. Default Rules in Contract Act..............................................................................185
4.7.3. Default Rules in “Contra Proferentem: A Necessary Evil” .................................186
4.7.4. Default Rules Doctrine in Indian Legal Education: A Summary ........................187
4.8. Findings and Conclusion.............................................................................................188
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CHAPTER 5: DEFAULT RULES DOCTRINE: CLASSIFICATION OF GENERAL
CONTRACT LAW INTO DEFAULT, MANDATORY & ALTERING RULES ...............190
5.1. Introduction.................................................................................................................190
5.2. Identifying Default, Mandatory and Altering Rules in Indian Contract Law.............191
5.3. Structure, the Contract Act .........................................................................................195
5.4. Preliminary Chapter, the Contract Act........................................................................195
5.5. Provisions relating to Contract Formation..................................................................198
5.6. Provisions relating to Void and Voidable Contracts ..................................................202
5.7. Provisions relating to Contingent Contracts...............................................................207
5.8. Provisions on Contract Performance ..........................................................................208
5.9. Provisions relating to Quasi-Contracts .......................................................................214
5.10. Provisions relating to Remedies................................................................................217
5.11. Provisions relating to Indemnity...............................................................................221
5.12. Provisions relating to Guarantees .............................................................................222
5.13. Bailment....................................................................................................................225
5.12. Pledge........................................................................................................................228
5.13. Agency ......................................................................................................................231
5.16. The Specific Relief Act.............................................................................................242
5.16.1 Preliminary Aspects............................................................................................244
5.16.2 Recovering Possession of Specific Immovable Property ...................................245
5.16.3 Power to Order Specific Performance in Agreements........................................246
5.16.4. Situations when Instruments could be Rectified................................................250
5.16.5. Rescinding Contracts.........................................................................................251
5.16.6. Cancelling Instruments ......................................................................................254
5.16.7. Situations when Declaratory Decrees can be Passed.........................................255
5.16.8. Preventive Relief and Perpetual Injunctions......................................................257
5.17. Findings and Conclusion...........................................................................................258
CHAPTER 6: DEFAULT RULES DOCTRINE: ABSENCE OF A SYSTEMATIC
APPROACH IN INDIA.........................................................................................................261
6.1 Introduction..................................................................................................................261
6.2. Enforceability of Time-as-Essence Clauses in Construction......................................261
6.2.1. Time as Essence in the Contract Act ...................................................................262
6.2.2. Earlier Authorities................................................................................................263
6.2.3 Dilution of Time-as-Essence.................................................................................267
6.2.4 Problems with Time-as-Essence Clauses..............................................................274
6.3. Relevance of Whether Time if of Essence for Determining Liquidated Damages.....280
6.3.1. Facts in Brief........................................................................................................281
xiv
6.3.2 History of the Case................................................................................................282
6.3.3. Arguments of the Parties......................................................................................283
6.3.4. Decision of the Court...........................................................................................284
6.3.5. Critique of the Supreme Court’s Decision...........................................................286
6.3.6. Welspun Specialty v. ONGC vis-à-vis Liquidated Damages Clause .................293
6.4. Disability on Unregistered Partnerships and Arbitration............................................295
6.4.1. Statutory Scheme of Section 69 Partnership Act.................................................295
6.4.2. Rationale for Section 69 Partnership Act.............................................................296
6.4.4. Applicability of Disability under Section 69 to Arbitration Proceedings............298
6.4.3. Decisions on Section 69: Previous Position.........................................................300
6.4.5. Critique of Umesh Goel v. Himachal Pradesh Co-operative Group Housing .....304
6.4.6. Reassessment of Mandatory Rules ......................................................................310
6.5. Enforceability of Standstill Agreements.....................................................................311
6.5.1. Standstill Agreements and Their Purposes..........................................................312
6.5.2. Standstill Agreements: International Perspectives...............................................313
6.5.3. Section 3(1), Limitation Act as a Mandatory Rule ..............................................317
6.5.4. Assessment of Enforceability of Standstill Agreements and Limitation Law.....326
6.6. Findings and Conclusion.............................................................................................326
CHAPTER 7: DEFAULT RULES DOCTRINE IN INDIA: EMPIRICAL PERSPECTIVES
................................................................................................................................................328
7.1. Introduction.................................................................................................................328
7.2. Universe, Population, Sampling and Structure of Empirical Study............................328
7.2.1. The Universe........................................................................................................328
7.2.2. The Population.....................................................................................................328
7.2.3. Sampling Methodology........................................................................................329
7.2.4. Structure and Descriptive Analysis of the Questionnaire ....................................331
7.2.5. Preliminary Aspects.............................................................................................332
7.3. About the Respondents...............................................................................................333
7.4. Awareness About the Default Rules Doctrine ............................................................341
7.4.1. Responses on the Awareness of Various Aspects of the DRD............................341
7.4.2. Meaning of Default Rules....................................................................................342
7.4.3. Meaning of Mandatory Rules ..............................................................................343
7.4.4. Meaning of Altering Rules...................................................................................344
7.5. Teaching of Default Rules Doctrine in Law Schools .................................................345
7.5.1. Whether Default Rules Doctrine was Taught? ....................................................346
7.5.2. Subjects in which DRD was Taught ....................................................................348
7.6. Analysis and Inferences on Awareness of Default Rules Doctrine ............................349
xv
7.6.1 Analysis and Inferences on Awareness of Meaning of Default Rules..................349
7.6.2 Analysis and Inferences on Awareness of Meaning of Mandatory Rules............350
7.6.3 Analysis and Inferences on Awareness of Meaning of Altering Rules................351
7.6.4. Inferences on the Meaning of Default, Mandatory and Altering Rules...............352
7.6.5. Inferences on Awareness of Types of Default Rules, Mandatory and Altering Rules
........................................................................................................................................354
7.7. Learning about the Default Rules Doctrine ................................................................355
7.8. Teaching Default Rules Doctrine................................................................................356
7.9 Analysis and Inferences on Usefulness of the DRD....................................................359
7.10. Findings and Conclusion of the Empirical Study .....................................................366
CHAPTER 8: CONCLUSION AND SUGGESTIONS ........................................................372
8.1 Conclusion ...................................................................................................................372
8.1.1. Answer to Research Questions ............................................................................381
8.1.2 Testing of Hypothesis...........................................................................................391
8.2. Recommendations and Future Work on the Default Rules Doctrine and the Way
Forward..............................................................................................................................397
8.2.1. Recommendations for Courts/ Arbitral Tribunals, Contracting Parties and Counsels
on the Default Rules Doctrine........................................................................................398
8.2.2. Recommendations for Law-Makers on the Default Rules Doctrine....................401
8.2.3. Recommendations for Teaching on Contract Law ..............................................403
8.2.4. Recommendations on Future Research on Default Rules Doctrine.....................407
Appendix 1: Questionnaire of the Empirical Study on the Awareness and the Usefulness of the
Default Rules Doctrine in India .............................................................................................414
Appendix 2: Default Rules in UNCITRAL Model Law........................................................422
Appendix 3: Default Rules Doctrine in Various Jurisdictions ..............................................423
Appendix 4: Increase in Knowledge of DRD and Increase in Appreciation of Utility of DRD
................................................................................................................................................428
BIBLIOGRAPHY..................................................................................................................441
A. Primary Sources............................................................................................................441
B. Secondary Sources: Books and Journals.......................................................................442
C. Secondary Sources: Newspaper Reports and Other Materials.....................................469
Profile of Supervisor..............................................................................................................472
Profile of Candidate ...............................................................................................................479
List of Publications................................................................................................................485 | en_US |
| dc.description.abstract | The view that contract law can be looked at as default, mandatory and altering rules (Default
Rules Doctrine) has been in vogue for more than three decades. The evolution of contract law
in the West can be seen in three stages from the perspective of the Default Rules Doctrine. In
the first stage, the question was whether a rule should be mandatory or not. Contract law
scholars (and practitioners) engaged in a discussion as to whether a particular rule should be
designed as a mandatory rule or freedom should be given to parties to contract around it. At
the cost of reductionism and generalisation, if a period could be pointed out, contract law
scholars engaged in this debate up to 1989. The inflection point was the paper penned by Ian
Ayres and Robert Gertner and published in 1989 in the Yale Law Journal.
Thereafter, contract theory was occupied with the question that if a rule should not be
mandatory how should it be designed? Several hundreds of articles were written on how default
rules should be designed. The third stage, being the current one, is concerned with how contract
parties should contract around the default rule. This stage was concerned with the question as
to the design of altering rules. The inflection point was Ian Ayres’ paper “Regulating Opt-Out;
An Economic Theory of Altering Rules” published in 2012.
This trifurcation has immense practical significance is clear in the amount of literature it has
produced in these thirty five years and the way statutes have been drafted in the recent past.
Unfortunately, the Default Rules Doctrine has not permeated contract law in India, either in
policy or judicial discourse or in legal education. In fact, the term “default rule” has been used
for the first time, and that too in the passing recently, in Dyna Technologies v. Crompton
Greaves, 2019 SCC OnLine SC 1656. The impact of failure to view contract law in terms of
the Default Rules Doctrine has made Indian lawyers (judges, counsels, law academicians and
law students) view contract law as a black-letter legal instrument and without the sophisticated
understanding of contract law and the legal system that the Default Rules Doctrine offers. To
the extent the theory is used, it is employed by academicians in an ad hoc manner. Therefore,
there is a lack of systematic analysis of contract law through the lens of the Default Rules
Doctrine. Empirical evidence suggests that legal educational institutions to not teach default
rules systematically and lawyers, law academicians and law students in India are not aware of
the Default Rules Doctrine.
vi
The failure to appreciate this view of contract law has resulted in a not-so-sophisticated view
of the field of law that could be classified as contract law. Another problem is the lack of
certainty in contract law. Some of the typical examples include the law regarding time being
the essence in construction contracts, the relevance of time-as-contractual-essence for
determination of liquidated damages, disability of unregistered partnerships vis-à-vis
arbitrations, and the law regarding enforceability of standstill agreements. Using these
examples various insights in the Default Rules Doctrine were highlighted.
The larger point is that asking the questions whether a rule was a default or a mandatory rule
and if, it was a default rule, what are the conditions for contracting around the default, provide
considerable insight on the nature of the rule, and failure to ask those questions could lead to
misunderstanding of the real purport of the rule.
The absence of a systematic use and analysis of Default Rules Doctrine in India and the adverse
consequences thereof can be looked at two ways: one approach is to look at the negative
consequences of the lack of integration of the Default Rules Doctrine in India and the other
approach is to look, given the absence of the theory, at the potential of the theory in contributing
to developing the Indian legal system. The aforesaid four examples looked at it from the
negative perspective. From a positive angle, there are several benefits that could be reaped by
the legal system.
Key areas where the theory could contribute to the legal industry were also noted, such as:
• Default Rules Doctrine provides insights on when and how parties could validly
contract around a particular rule and this skill is important both for transactional and
dispute resolution lawyers.
• The theory enables a finer understanding of various rules in contract law.
• It creates a duty on courts to guide future contracting parties as to how to contract
around a default rule.
• Faulty design of rules could be identified through the theory to reorient such rules
towards better effectiveness and efficiency.
vii
• The role of academia becomes critical in analysing various contract law rules and
critique the laws, whether legislature or judge made, and recommend remedial
measures. This role of academia is considerably furthered through the use of the theory.
• The theory also helps law teachers focus not only on the ratio decidendi of a particular
decision but also on facts, which are crucial for understanding various contract law
doctrines and for law practice.
• By reorienting the focus to facts, the theory enables law students gain practical
understanding on the contractual clauses in dispute in a decision and helps them better
understand the practicalities of drafting contracts.
The entire legal system stands to benefit by the systematic use of the Default Rules Doctrine.
An empirical study conducted points out at the lack of awareness of the Default Rules Doctrine
and that the theory is not taught either in undergraduate or postgraduate law courses in most
law schools in India. This needs to change. Further, most respondents were of the view that if
Default Rules Doctrine is employed, the legal system would stand to benefit. This is applicable
in several spheres of the legal industry- be it law-making, legal education, transactional
lawyering, or adjudication.
All these aspects led to the conclusion that effective utilisation of the Default Rules Doctrine
in law practice and legal education would considerably improve clarity and certainty in Indian
contract law. | en_US |
