Visual contracts and their enforcement in India
Bharucha & Partners, Mumbai
A picture speaks a thousand words. Over the years, the use of visual or partially visual contracts to simplify or clarify the terms of commercial contracts has increased. This article explores the validity and scope for use of such contracts in India.
The movement toward simplifying contracts is not new and visual contracts are an innovative step in that direction. A visual contract is a representation of the agreed terms using images, charts and figures, rather than legal verbiage.
Businesses in jurisdictions like Australia, South Africa and the United Kingdom have adopted visual contracts or include visuals in their standard form contracts. A popular example is that of Royal Dutch Shell which has standardised the use of images depicting the obligations of parties in its maritime contracts.
Are visual contracts enforceable at Indian law?
The enforceability of a visual contract in India depends on whether it has the elements of a valid contract as set out in the Indian Contract Act, 1872 (‘Contract Act’).
The Contract Act defines an agreement as ‘every promise and every set of promises, forming the consideration for each other’ and Section 10 of the Contract Act states, ‘All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void.’
The key elements of a valid contract are:
- a clear and definitive offer. An offer is said to have been made ‘when one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence.’ The Contract Act does not, therefore, require that an offer be made in writing;
- unqualified acceptance of the offer by the offeree. Indian law recognizes various modes of acceptance (eg, oral acceptances, electronic acceptance and acceptance through performance). In Aloka Bose v Parmatma Devi & Ors AIR 2009 SC 1527, the Supreme Court, while recognising that acceptance can be through various modes, observed that, ‘An agreement of sale comes into existence when the vendor agrees to sell and the purchaser agrees to purchase, for an agreed consideration on agreed terms. It can be oral. It can be by exchange of communications which may or may not be signed. It may be by a single document signed by both parties. It can also be by a document in two parts, each party signing one copy and then exchanging the signed copy as a consequence of which the purchaser has the copy signed by the vendor and a vendor has a copy signed by the purchaser’; and
- the contract is supported by lawful consideration.
Other elements for a valid contract are inter alia the intention to create a legal relationship, competent parties’ free consent to contract and a lawful object.
Based on the above, it may be argued that visual contracts are valid at Indian law as long as the essential elements under the Contract Act are present, and the parties agree on the terms set out in the contract.
Are visual contracts admissible as evidence at Indian law?
The Indian Evidence Act, 1872 (‘Evidence Act’) recognises electronic records as documentary evidence.
Further, under the Evidence Act, ‘figures’ also fall within the scope of a ‘document’. The Evidence Act defines ‘document’ as ‘any matter expressed or described upon any substance by means of letters, figures or marks, or by more than one of those means, intended to be used or which may be used for the purpose of recording that matter.’ Illustrations in the relevant Section of the Evidence Act also include caricatures.
As visual contracts are matters expressed by the parties as inter alia letters and figures and are prepared for recording the terms of the contract, they fall within the scope of documentary evidence under the Evidence Act.
Why go visual?
Indian courts recognise the common law defence of non est factum (ie, where the defendant contends that he was mistaken about the character of an agreement when signing it). The Kerala High Court in Mathu v Cherchi 1990 (1) KLJ 265 and Jose Mathew & Ors. V James Avirah and Ors RSA Nos 850 of 2015,held that this defence enables ‘illiterate persons to contend that the documents executed by them under mistake as to its nature and contents are not their documents.’ The Courts have also extended this defence to persons who are blind, infirm or otherwise incapacitated.
Under India law, persons who are, in essence, unable to understand the terms of a contract are entitled to claim that the contract is voidable on the basis of the non est factum defence. This is particularly relevant in a country like India where approximately 21.09 per cent of the population is illiterate.
While persons who are illiterate would not ordinarily enter into complex legal agreements of their own volition, they are often forced to do so where the acquisition of goods or services is contingent on them acceding to certain standard form contracts (eg, for opening of bank accounts, purchase of sim cards, etc). Converting contracts, particularly standard form contracts, to visual or partially visual contracts could go a long way towards mitigating the risk of contracts being voidable on the grounds of non est factum. That said, visual contracts are unlikely to be a quick and easy fix. There is an inherent risk that different persons may have divergent or conflicting interpretations of the images and figures used in a visual contract. Therefore, visual or partially visual contracts are unsuited to complex transactions or arrangements. Even while preparing visual or partially visual contracts for simpler matters, creators should carefully determine the rules of interpretation and ensure that there has been a genuine meeting of minds.
 Annual Report for the period July 2018 – June 2019, Periodic Labour Force Survey, National Statistical Office, Government of India, June 2020, available at http://mospi.nic.in/sites/default/files/publication_reports/Annual_Report_PLFS_2018_19_HL.pdf, last accessed 29 September 2020.