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Report No. 13

22. Section 1.-

In section 1, we suggest that the word "Indian" be dropped from the title of the Act.

In conformity with the recommendation in our previous Report, we have omitted all the Illustrations from the Act.

23. Both the expressions 'usage of trade' and 'custom of trade' have been used in the Act. There being a vital difference between the two expressions, it is necessary to retain both. Usage is habitual practice which is not a source of law, although it has some legal effects. Custom, provided that it fulfils the necessary conditions, is a source of law. The effect of usage, however, is to add a term to the contract, which either expressly or impliedly was entered into with that usage in view. The usage, thus, can be excluded by a provision in the contract to the contrary.1

1. Keeton Elementary Principles of Jurisprudence, p. 81.

24. Another difference between usage and custom is that usage need not be immemorial.1 Usage cannot change a rule of law, but usage may so affect the meaning of a contract that a rule of law which would be applicable in the absence of the usage becomes inapplicable. Long continued usage may develop a rule of law in accordance with the usage.2 Neither usage nor particular custom can be incompatible with the statute law.3 We, therefore, think that in the last clause of section 1, the comma was rightly put by the legislature between the expressions 'nor any incident of any contract' and 'not inconsistent with the provisions of this Act'.

The latter expression also governs 'nor any usage or custom of trade' also. The view of the Privy Council in Irrawaddy Flotilla Co. v. Bugwandas, 18 Cal 620 (627) does not appear to us to be correct. The section which was read by the Privy Council did not contain the comma between the aforesaid two expressions. Further, Counsel conceded in argument that the words 'not inconsistent with the provisions of this Act' were not connected with the clause 'nor any usage or custom of trade'. Usage or custom, whether particular or general, must yield, wherever in conflict with statute, unless expressly saved thereby.

"It is a self-evident contradiction to my mind to say that the general law does not allow the deduction and that there is a universally established usage to allow it. A universal usage which is not according to law cannot be set-up to control the law.4" We are of the view that usage and custom are operative only if not inconsistent with provisions of the Act and this should be made clear by a suitable amendment of section 1.

1. Dalby v. Hirst, 21 RR 577 (580).

2. Restatement of the Law on Contract, section 249(a),p. 355.

3. Ketton; Op. cit., p. 81

4. Earl C.J. in Meyer v. Dresser, 143 Er 1280 (1286).



Indian Contract Act, 1872 Back




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