Legal Complexities for UK and US Businesses Regarding Breach of Contract and its Enforcement-2 | Sector Wise Contractual Disputes | Interpretation by Indian Courts | Latest News & Updates
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Sectoral-Wise Contractual Dispute
Technology and Software Development Contracts
While advising UK and US-based clients, I have witnessed issues related to IPR, quality standards, and milestone deliverables. In this regard, placing reliance upon Satyam Infoway Ltd. Vs Sifynet Solutions Pvt. Ltd. High Court of Delhi established key precedents over Intellectual Property Rights in software development contracts. The High Court of Delhi. Post Satyam Scandal, 2009, which was a corporate governance case, had lasting impacts on how technology contracts should be structured and crafted. As the case involves serious allegations and proof of financial fraud the Hyderabad court sentenced 9 years of imprisonment to Ramalinga Raju and nie others.
Manufacturing and Supply of Goods and Services
Agreements related to manufacturing and supply units should include quality standards, deliverables, payment timelines, and inspection frameworks. These are certain points which may turn into a brutal and contentious situation. Recently, I had represented a UK manufacturing unit in a dispute with an Indian Counterpart where procedures related to quality testing became a point of contention.
Banking and Financial Disputes
It is pertinent for foreign entities to get familiar with recent amendments in the Arbitration and Conciliation Act, 1996. The 2024 bill proposed amendments regarding the transformation of the financial disputes resolution mechanism by minimising court intervention in cases related to financial transactions is controversial. Recent proposals under the Arbitration and Conciliation Act will enhance efficient procedure, which may be beneficial for banking and financial disputes.
Interpretation of various High Courts regarding Contractual Enforcement
High Court of Delhi
Particularly, the High Court of Delhi is vigilant and proactive in raising standards of the contract enforcement process. Recently, the Delhi High Court issued involving a UK retail chain, the High Court sensibly and readily resolved the dispute which has arisen regarding the interpretation of the Force majeure clause in the context of disruption in the supply chain. As a corporate lawyer, I’ve witnessed the courts drastically granting specific performance of contracts instead of granting damages, where such damages were found to be inadequate and insufficient.
High Court of Bombay
The High Court of Bombay deals with cases pertaining to contractual disputes between commercial entities, particularly in banking, shipping, and International trade. The High Court of Bombay seems efficient in resolving cross-border disputes, though their interpretations of contracts are more practical and literal than those seen in the High Court of Delhi or Bangalore. For foreign entities, I suggest one has to be very well-equipped with detailed documentation and expert witness reports on industry standards, which will provide you with a margin of error or extra space to put forward your claim.
High Court of Karnataka
Bangalore is known as the Silicon Valley of India and has prominence in the technology industry. The High Court of Karnataka has developed expertise in software development and IT contracts. For foreign business entities with tech-partners based in India, it is crucial to ace the technology litigation in the state of Karnataka, one has to be well-versed with the milestones-based contracts.
Comparison between Indian Vs UK/USA Contract Law
It is crucial for foreign entities to understand the difference between contract law practised in the UK/USA and Indian Jurisdiction for efficient navigation:
Privity of Contract
The UK courts established the doctrine of privity to restrain third parties from enforcing contracts for their own benefit. Conversely, the apex court in Durga Prasad Vs Baldeo, 1975 showed a more readily and sensible approach, thereafter relaxed this doctrine and permitted a third-party beneficiary for the enforcement of the contract.
Requirement of Consideration
Both UK/USA and Indian law require valid consideration for the enforcement of contracts. However, Section 25 of the Indian Contract Act, 1872 recognised certain exceptions which make contracts enforceable even if consideration is not there. Like Contracts made from love and affection, which need no consideration for enforcement.
Unconscionability and Undue Influence
The US/UK courts’ judgment, like Lloyds Bank Limited Vs Bundy, 1975, clearly demonstrates how undue influence can turn contracts unenforceable and voidable at the option of the party whose consent was not free. Similarly, Indian Courts in Shree Hanuman Cotton Mills & others Vs Tata AirCraft Limited, 1969 reiterated fraud and misrepresentation as a ground to void the contract. Additionally, such misrepresentation and fraud must be corroborated with enough evidence. A mere allegation is sufficient.
Assessment of Damages
Indian courts are usually construed in terms of the contract while granting any damages, as Indian courts are comparatively more conservative than US/UK courts. In this regard, placing reliance upon the Sahakar Maharshi Bhausaheb Thorat Case, reiterated this principle and categorically held that damages should be calculated in accordance with the terms under the contract, also envisaged under Section 74 of the Indian Contract Act, 1872.
Why in News: Latest updates on India-USA/UK Legal Transactions
UK-India Free Trade Agreement (FTA)
UK and India concluded a Free Trade Agreement (FTA) on 6th May, 2025 that aims to 2x bilateral trade by the succeeding Financial Year, currently at $21.33 billion in FY-25. FTA recognises significant provisions including digital contracts and recognition of electronic contracts, as well as safeguards against forced transfer of source code. This agreement will play a vital role for business in both jurisdictions, though experts have concerns regarding its impact on UK’s Carbon Border Adjustment Mechanism (CABM) and the unresolved bilateral treaty.
Source:https://economictimes.com/small-biz/trade/exports/insights/india-uk-fta-the-two-big-issues-that-could-derail-indias-120-billion-trade-ambition/articleshow/121201964.cms
Modern Dispute Resolution Mechanism under the Free Trade Agreement between the UK and the USA
Recently, the UK and India entered into an FTA that includes a detailed and comprehensive dispute resolution mechanism, ensuring that disputes between the countries will be resolved in a fair, consistent, transparent, and cost-effective manner. The mechanism will facilitate and provide a balance between enforcement and encouragement of dispute prevention and prompt resolution in cross-border arrangements.
Source:https://www.gov.uk/government/publications/uk-india-trade-deal-conclusion-summary/uk-india-trade-deal-conclusion-summary
Proposed amendment under the Arbitration and Conciliation Bill, 2024
The Arbitration and Conciliation (Amendment) Bill, 2024 willing to formulate and transform dispute resolution in the banking and financial services industry by mitigating litigation, minimising court intervention in dispute resolution, and managing cases on per priority basis in a prompt manner, impacting contractual dispute resolution between foreign entities involved in the Financial sector.
Source:https://www.prnewswire.com/in/news-releases/proposed-arbitration-and-conciliation-amendment-bill-2024-a-transformational-shift-for-financial-dispute-resolution-in-bfsi-302322236.html
Conclusion
With my 15 years of experience in providing legal advice in cross-border transactions and arrangements to UK and US businesses addressed certain smaller issues which may turn into bigger disputes. It is highly advised that one be very vigilant when it comes to smaller issues; it has to be resolved promptly and at the threshold. It is highly recommended for lawyers assisting foreign clients to get a better understanding of the Indian Contract Law, 1872. With the proper contractual safeguards, effective dispute resolution mechanisms, and payment terms documentation, foreign entities can effectively minimise the risks and protect their businesses in the Indian market. It is better to invest a certain buck in proper documentation and hiring legal professionals for better drafting and review instead of paying dollars to cure any defect which is caused due to such failure.
Authored by: Adv. Anant Sharma
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