Written agreements – validity and contradictions

Written contracts are increasingly becoming important with the rise in the complexity of agreements. The Annual Judicial Report 2019 indicated that more than half of the civil disputes were linked to agreements.

Section 19 of the Contract Act of Bhutan recognises that it is not mandatory to have any format but if there are other laws requiring prescribed format, then such requirement must be followed. For example, the Tenancy Act of Bhutan 2015 requires that the tenancy agreement must be in writing, “signed by parties with two independent witnesses, legal stamp affixed.” This means, if these requirements are not fulfilled, the tenancy agreement becomes invalid.

Interestingly, the ultimate deciding factor in determining the validity of the written agreements in Bhutan is governed by the Evidence Act and not the Contract Act. Section 35 of the Evidence Act, the agreement becomes admissible evidence if it is made in the presence of one witness of each party, signed by all parties or authorised persons and legally executed with a legal stamp. Section 36 makes a written agreement (invalid) inadmissible evidence if the agreement has erased word, defective seal or signature, does not have the legal stamp, illegal or against the law, and where the agreement was entered by a mentally unsound person or minor and entered under duress, or if the agreement is objected within ten days any party after it was executed.”

Thus, Section 35 of the Evidence Act impacts every written agreement as it nullifies if the three requirements are not fulfilled in the case of written agreements. This section defeats every other law pertaining to written agreements if that other law does not require these three conditions such as consumer contracts or e-commerce transactions or other standard form contracts. This is further aggravated by Section 36 where parties have the right to challenge the written agreement “in a Court within 10 days.” In Short, if the written agreement becomes inadmissible evidence under this Section, such agreement holds no value or becomes useless.

As a result, there are confusions and contradictions between the Contract Act and Evidence Act. Section 32 and 33 of the Contract Act states that agreement without free consent shall be voidable which is “caused by coercion, undue influence, fraud or misrepresentation.” But Section 36 (f) of the Evidence Act declares if the contract was “entered into while a party was under duress” as invalid.

Section 16 of the Contract Act states that “an agreement shall amount to a contract and shall be enforceable at law if it is not declared to be void or illegal by this Act or by any other law.” This means Section 36(f) declaring contract obtained under duress is valid under Section 16 of the Contract but contradicts Section 32 and 33 of the Contract Act.

Further, Section 3 of the Contract Act states: “…if any other law in force is, in any way, inconsistent with this Act, the provisions of this Act shall prevail.” This means Section 32 and 33 of Contract Act, 2013 overrides Section 36(f) of the Evidence Act. If that is the case, then every written agreement becomes admissible in the court if it is in line with Section 16 and 19 of the Contract Act. Such contradicting provision creates a dilemma for both the courts and the public.

Sonam Tshering

Lawyer, Thimphu

Disclaimer: The views expressed in this article are author’s own.

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