Meaning and development of contract Law

What is contract?

Contract is an agreement made between two or more parties to do or not to do something that is enforceable by law.

The law that regulates the contract is called the contract law/ law of contract. It lay down the information that what the party to the contract can do or cannot do. It also deals about the obligation of performance of duty emerging out the contract and give remedy for the violation of obligation.

• Basically the development of contract law could be seen in two ways i.e.

1. International perspective
2. National perspective

1. International perspective

Before 18^th century there was no concept of law of contract and state doesn’t recognize the contract and enforce by the law. In 19^th century there is the dominance of Laissez faire principle ( it is the principle that gives more freedom to the person and state doesn’t intervene peoples affair regarding the business, state only made certain law that are essential to run the state affair.) and state has made free to the parties to the contract to do any sorts of contract as they like.

This adoption of Laissez faire principle later result terrible bad effect in the society and in a state as a whole like it effect upon the health, environment, welfare of the worker and public policy too. Thus states realizing the need to regulate the contract were made laws on contract.

2. National Development of law of contract

Regarding Nepalese development, before 2018 there were no recognition of contract by the law, even though, people used to make contract in good faith, reliance and believe. In 2018 with the formulation of Rasan Thhekka Regulation-2018 Nepal has started to give recognition to the contract by law. But that law is only invoked if there is state as a party to the contract.

Later the Muluki Ain 2020 also incorporated some of the provision regarding the contract on bailment and pledge. The specific law regarding the contract law was made by the state in 2023 that is Contract Act 2023. Contains

1. Definition of contract, offer and acceptance
2. Void and Voidable contract
3. Performance of contract
4. Remedy for breach of contract etc

The Contract Act 2023 couldn’t cover the emerging concept like Globalization, Privatization, and Foreign Investment etc. Thus the government has promulgated another law that is Contract Act 2056 that is applicable till the date

• Major provisions of Nepalese Contract Act 2056

1. General principle of contact – section 2-14
2. Special Contract – section 15-70
3. Performance of contract - section 71-81
4. Breach of contract and remedy 82-87
5. Miscellaneous section 88-90