Origin and Development of Contract Law

By Prashansa Shah

About 144 years old is our Indian Contract Act, and since then, it has been very much active and developing. The contracts and contract making today, reaches new dimensions with numerous variations and innovations, but still holding on to the prime purpose of safeguarding the parties’ interests and expectations.

As we analyse the origin and development of laws of contract, one of its core purposes has always been to facilitate and ensure smooth functioning of business and exchange.

The emergence and development of contract law derives most of its history from the industrial revolution. Since ancient times, it was the growth of trade and commerce that enhanced the need to have contracts.

After the inception of civilization, eventually people realised, that performing activities that involved exchange and transactions with each other, was is a very vital and unalienable part of their livelihood. As commerce flourished through this idea, the need to safeguard the same from false practices and non fulfilment of promises also arose.

However, the scenario was such that there was lack of a formal and systematic mechanism to rule over the transactions and abide the parties to perform and fulfil their duties and promises. Absence of any such rule, created disharmony, quarrels and disputes, leading to increase in losses, frauds, non-uniformity and thus non reliability and unrest in the society.

In order to avoid the unnecessary chaos and such unpredictability, laws were formulated. The frequency of people approaching the courts for breach of contracts increased, as everyone wanted to secure their commercial interests and expectations. Consequently, a huge collection of caselaws developed with the courts and the inception of specific laws eventually took place.


Widespread encouragement was given to the recognition of contractual obligations and towards the evolution of ‘rights of parties’, by virtue of contracts rather than by status. Evidently, the development of laws of contract was seen as an ideal development of the whole society where it was absorbed. This is because binding promises and contracts gave rise to contractual obligations governed by laws and conferred rights and remedies to the parties. All this eradicated some of the ill-terms of the society which perpetuated inequality in the name of status and superiority. A sense of equality was developed with the freedom of contracts, and at the same time, certain restrictions upheld by the law also prevented misuse of such powers and freedom.

“The movement of all progressive societies has hitherto been from status to contract.”[1] Is indeed very well observed, as we see the positive changes in the society with the emergence of contract law.



The Indian Contract Act, 1872, governs the contractual affairs within the jurisdiction of India. India being a country with colonial history, the English Law of Contracts has been a major source of derivation and inference for the formation of Indian contract laws. However, owing to the difference of situations and circumstances, the Indian contract law suits itself, to the Indian scenario and at various places differs from the English rule.

[1] Quoted by Sir Henry Maine. He holds some of the splendid and widely noted works on study of societies and their development.

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