"I realise that some of my criticisms may be mistaken; but to refuse to criticize judgements for fear of being mistaken is to abandon criticism altogether... If any of my criticisms are found to be correct, the cause is served; and if any are found to be incorrect the very process of finding out my mistakes must lead to the discovery of the right reasons, or better reasons than I have been able to give, and the cause is served just as well."

-Mr. HM Seervai, Preface to the 1st ed., Constitutional Law of India.

Thursday, May 26, 2011

Arbitration and Contract Law: Some Judgements & Links

Contract Law Theory:
Contracts Profs blog calls these set of podcasts the hottest download ever. Check out the post in Contracts Prof that gives links to papers relating to Contract Law Theory. Contract Law Theory lovers would definitely enjoy these.Some of the podcasts are available as papers in SSRN and can be accessed from here.

Randy Barnett (Georgetown), "Contract is Not Promise; Contract is Consent"

Jean Braucher (Arizona), "The Sacred and the Profane Contract Machine: The Complex Morality of Contract Law in Action"

Gregory Klass (Georgetown), “Promises, Etc.”

Avery W. Katz (Columbia), "Virtue Ethics and Efficient Breach"

Tenancy Agreements
Mohamad Ahmed v Atma Ram Chauhan (MANU/SC/0614/2011) is an important decision on Lease Agreements. The decision starts off with a statement made by Deepak Verma, J:, which reads:
"One half of the lis between landlord and tenant would not reach courts, if tenant agrees to pay the present prevalent market rate of rent of the tenanted premises to the landlord."
Empirical legal scholarship aficionados might get upset for the fact that the judge's number is just an estimate and is not backed by data. But the judge is probably right in opining that it is not right on the part of the tenant in paying a rent that was fixed quarter of a century ago. The court stated that "majority" of the cases were filed by landlords because they did not get fair rent from the tenants. So the court, in the guise of laying down some guidelines "for such type of litigation" introduced judiciary made legislation (what are the state legislatures doing?).

The first guideline is in the form of a default rule. According to the Supreme Court, if parties have not agreed for any escalation in their agreement, the default escalation rate would be 10% every three years. The first guideline is in the form of a direction to the authority deciding on fair rent under the Rent legislation to go by a valuation report or on the basis of reliable estimates of building materials in surrounding ares let out on recent in the recent past.

The second guideline is akin to Section 64A of the Sale of Goods Act, 1930 which reads:
"(1) Unless a different intention appears from the terms of the contract, in the event of any tax of the nature described in sub-section (2) being imposed, increased, decreased or remitted in respect of any goods after the making of any contract for the sale or purchase of such goods without stipulations as to the payment of tax where tax was not chargeable at the time of the making of the contract, or for the sale or purchase of such good tax- paid where tax was chargeable at that time.-
(a) if such imposition or increase so takes effect that the tax or increased tax, as the case may be, or any part of such tax is paid or is payable, the seller may add so much to the contract price as will be equivalent to the amount paid or payable in respect of such tax or increase of tax, and he shall be entitled to be paid and to sue for and recover such addition, and
(b) if such decrease or remission so takes effect that the decreased tax only, or no tax, as the case may be, is paid or is payable, the buyer made deduct so much from the contract price as will be equivalent to the decrease of tax or remitted tax, and he shall not be liable to pay, or be sued for, or in respect of, such deduction."

The second guideline states that
  1. property tax, water tax, maintenance charges, electricity charges would be borne by the tenant and
  2. any enhancement in the rates of the above would be borne by the tenant alone.
The purpose of giving this guideline seems to give the landlord a rent free from any deduction. While this guideline is in accord with the standard practices, the issue is whether this rule is a mandatory rule or a default rule (that is, subject to agreement between the parties). According to this blawgger, this should be subject to an agreement to the contrary.

The third and the fourth guidelines allocate the responsibility of maintenance between the tenant and the landlord. Major repairs is the responsibility of the landlord and the usual maintenance is the responsibility of the tenant. In case the tenant wants to do major repairs, he is to seek written permission from the landlord and both of them should agree on the modalities of cost-sharing. 

Another radical guideline is that in case the tenant pays market rate as rent, he cannot be evicted for at least five years. Now, what if the landlord wants to get the tenanted premises for his own purpose? This might cause major hardships to the landlord.Two more guidelines deal with the determination of rent.

This blawgger is of the opinion that some of these guidelines seem to take a wrong approach. The five year immunity guideline is an example.

Class Action Waivers, the Canadian and the American Supreme Courts:
What is with phone services companies and class action waivers? The Canadian and the Supreme Courts had to decide validity of class action waivers in arbitration clauses contained in phone services contracts. The Canadian Supreme Court held in Michelle Siedel v. TELUS Communications Inc. that the Consumer Protection Law (CPL) of the province allowed a "public interest plaintiff" to sue to enforce the CPL's standards. Therefore, class action waivers in such cases are, according to the Canadian Supreme Court, not valid. (Link to the Judgement)

The United States Supreme Court had to consider in AT & T v Concepcion if class action waivers in arbitration clauses were valid. Like the Canadian case, this case was also against a phone services company. The arbitration clause provided that the customer was deemed to have his right to invoke arbitration against AT&T only under his individual capacity and not as a representative of any class action. The Supreme Court had to decide whether such a clause was valid. The Court held, to the consternation of many consumer rights activists, that a class action waiver was valid and enforceable. We had analysed the Court of Appeal judgement in an earlier post. Access it from here. The Supreme Court's decision can be downloaded from here.

Booz Allen:
In Booz Allen Hamilton v SBI Home Finance, the court held that a suit for enforcement of a mortgage by sale is not arbitrable. The court also stated some general rules to decide on questions pertaining to non-arbitrability. We'll deal with this case in a detailed post. Apart from arbitrability, this judgement is also interesting for one another issue. In this case, the Supreme Court held:
"While considering an application under section 11 of the Act, the Chief Justice or his designate would not embark upon an examination of the issue of `arbitrability' or appropriateness of adjudication by a private forum, once he finds that there was an arbitration agreement between or among the parties, and would leave the issue of arbitrability for the decision of the arbitral Tribunal."
Thus, according to the court, arbitrability questions would only be decided by the arbitral tribunal under Section 11. This, on the face of it, appears to be contrary to the justifications given in SBP  Co. v. Patel Engineering. We will have a small series of posts on the decision. For now, check out Lex Arbitri Blog's descriptive comment on the case.

1 comment:

Anonymous said...

This is about the SC guidelines on tenancy agreements (Mohd Ahmed vs Atma Ram Chauhan) What if the terms in a lease deed are contrary to the guidelines? Do the guidelines overule such an agreement?