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Legislations, The Law

Uttar Pradesh Temporary Exemption From Certain Labour Laws Ordinance, 2020

CHANGING FACE OF INDIAN LABOUR. Uttar Pradesh government immunes industries with power to hire and fire: 35 out of 38 labour laws adjourned.

By: Pallavi Kumari, 2nd Year LLB Student, Symbiosis Law School, Pune.

To contain the spread of coronavirus in India, a nationwide lockdown was imposed by the central government. Apart from essential activities, all other economic activities were suspended. To put the economic activities back on the track, the central and the state government brought about relaxations to the manufacturing industries and factories from the existing labour laws. Also, the government took the step to attract investment in the state as the labour inflow increased during the lockdown.

In an official release, based on the decision of the Uttar Pradesh Council of Ministers, the suspension of labour laws has been justified by stating that it is the need of the hour to give concessions to ongoing and new industrial establishments, businesses and factories.

How is labour regulated in India?

Regulation of labour and safety in mines and oilfields falls under Union List and the Labour falls under the Concurrent List of the Constitution. Therefore, both the Parliament and State Legislatures can make laws regulating labour. States can formulate their own laws but would come into force only when it is passed by both the houses of the state legislature and gets the assent of both the Governor and the President. Presently, there are more than  100 state laws and 40 central laws regulating various facets of labour.

The Ordinance 

Yogi Adityanath led Uttar Pradesh government, through an ordinance, suspended all the labour laws applicable on industries, manufacturing units and companies for a period of 3 years subjected to the accomplishment of certain conditions.  These conditions consist of:

Wages: The Ordinance lays down that workers cannot be paid below the minimum wage. Also, workers must be paid within the time limit as stated in the Payment of Wages Act, 1936.

  • The Act specifies that: 
    1. establishments with less than 1,000 workers must pay wages before the seventh day after the last day of the wage period 
    2. all other establishments must pay wages before the tenth day after the last day of the wage period and  
    3. Wages must be paid into the bank accounts of workers. 
  • Health and safety:   The Ordinance states that provisions of health and safety enshrined in the Building and Other Construction Workers Act, 1996 and Factories Act, 1948 will continue to apply.  These provisions regulate the usage of dangerous machinery, inspections, and maintenance of factories, amongst others. 
  • Work Hours:  Workers cannot be forced to work beyond eleven hours a day and the spread of work may not be more than 12 hours a day. 
  • Compensation:  In case of mishaps like accidents leading to death or disability, workers will be compensated as per the Employees Compensation Act, 1923. 
  • Bonded Labour: The Bonded Labour System (Abolition) Act, 1976 will remain in force.  It provides for the eradication of the bonded labour system. Bonded labour means the system of forced labour where a debtor enters into an agreement with the creditor under certain circumstances such as to reimburse his or his family members debt, due to his caste or community, or due to a social compulsion.  
  • Women and children:  Provisions of labour laws relating to the employment of women and children will continue to apply.  

However, all labour laws associated with Labour Unions, settling work Disputes, Regulations for working conditions and Contracts will cease to exist for a period of 3 years. These laws include:

  1. The Apprentices Act 1961;
  2. The Beedi and Cigar Workers Act 1966;
  3. The Cine Workers and Cinema Theatre Workers Act 1981;
  4. The Contract Labour (Regulation and Abolition) Act, 1970;
  5. The Dookan Aur Vanijya Adhisthan Act, 1962;
  6. The Factories Act, 1948 (barring provisions relating to safety and security of workers);
  7. The Industrial Disputes Act, 1947;
  8. The Industrial Employment Act, 1946;
  9. The Minimum Wages Act, 1948;
  10. The Motor Transport Workers Act, 1961;
  11. The Payment of Bonus Act, 1965;
  12. The Payment of Gratuity Act, 1972;
  13. The Payment of Wages Act ,1936 (barring Section 5);
  14. The Public Liability Insurance Act,1991;
  15. The Sales Promotion Employees Act, 1976;
  16. The Indian Boiler Act, 1923;
  17. The Trade Unions Act, 1926;
  18. The Weekly Holidays Act, 1942;
  19. The Working Journalists Employees Act, 1955;
  20. The Dangerous Machines Act, 1983;
  21. The Sick Industrial Companies Act, 1985;
  22. The Building and other construction workers (Regulation of Employment and Conditions of Services) Act, 1996 (barring provisions relating to safety and security of workers);
  23. The UP Shops & Establishments Act, 1962;
  24. The UP Welfare Fund Act;
  25. The UP Industrial Peace (Timely Payment of Wages) Act, 1961;
  26. The UP Industrial Housing Act 1955;
  27. The Industrial Establishment (National Holidays) Act 1961;
  28. The UP Industrial Undertakings Special Provisions for Prevention of (Unemployment) Act 1966;
  29. The UP Employment of Substitute Workmen Act 1978; and
  30. The UP Sugar & Power Alchohol Industries Labour Welfare & Development Fund Act 1950.

With the Ordinance the state will have 3 active laws:

  1. Building and Other Construction Workers Act, 1996: As the name states this Act aims to  protect the workers and the interests of those employed in construction activities of any type be it a building, street, road, railways, tramways, airfields, irrigation, drainage, embankment and navigation works, generation, transmission and distribution of power, water works, oil and gas installations, electric lines, wireless, radio, television, telephone, etc. This Act regulates the hours of work, welfare measures, and other service conditions of such workers.
  2. Workmen Compensation Act, 1923: This act provides for payment of compensation to workmen and their dependents in case of injury and accident including certain occupational disease arising out of and in the course of employment resulting in disablement or death.
  3. Bonded Labour Act, 1976: It is the Act which deals with abolishment of bonded labour, or in other words, that no labour shall be obligated to provide bonded labour under any contract, agreement or social custom in existence. 

Industries covered

The Ordinance covers all the existing industries and manufacturing units as well as the new ones that are coming up in the next few years.

Analysis

Arguments in Favour to The Ordinance

This ordinance will provide employment opportunities to the migrant workers who have migrated back to the state during the pandemic, by providing flexibility to the business and industry.

  • The workers will remain to be protected, as some of the labour laws have still been untouched and kept intact.
  • It will help to reskill and map the workers who have been displaced. And help to employ them as per the needs of the industry.
  • The flexibility provided to the industry and manufacturing units will help to bring back the economy on track.
  • The ordinance promotes investments and ease of doing business.
  • Indian regulations make labour “more costly”. So, suspension of laws will ultimately reduce labour cost.
  • 90 per cent of India’s labourers did not have the legal protections in the first place. The laws only served only 10% of the Indian workers including unionised labour, small segment of Indians in the formal sector, labour inspectors, middlemen, and champagne socialists. The cost of keeping this small work force in business has left the other 90 per cent in the informal sector, totally unregulated, and with no legal protection.

Arguments Against the Ordinance

  • Considering the size of the population, even the formal sector is made up of several lakhs of workers, who will be affected by the ordinance.

It will give a liberty to the business and industries to operate the way they wish and boost hire and fire rules at a time when job security and wage security issues are facing a bigger challenge.

  • If the state wanted to protect the unorganised workers, a legislation was already there- The Unorganised Workers Social Security Act, 2008.

But this legislation has not been implemented by any state till date.

  • The ordinance could ultimately result in the termination of the services of all the permanent employees and they could be replaced with contract workers.
  • It has randomly and absolutely unfairly infringed the very basic rights and fundamental rights of all those covered under labour laws.
  • The power of the worker is diluted and the power of the contractor is enhanced.
  • The state government could have also resorted to adopting certain features of the consolidated labour code, if it felt the need to balance the interests of employer’s vs employees/workmen.

While this ordinance has been appreciated by many industrial executives but the trade unions on the other hand have criticised it for diluting the labour rights of workers.

Even the International Labour Organisation has requested States in India to go for proper consultation prior to enforcing any such changes that adheres to the global standards. However, it appears that other States are likely to follow in a similar direction to suspend/relax labour laws in order to attract investment.

After Uttar Pradesh, Gujarat, Madhya Pradesh, Rajasthan and Himachal Pradesh had also announced sweeping changes in labour laws with the intention of giving some relief to the industry reeling under the lockdowns.

Legislations, The Law

Essential Commodities Act Amendment (Ordinance), 2020

The Central government’s effort to have greater powers relating to the regulation of the necessary commodities needed to maintain normalcy in people’s lives, made them push for an amendment in the Essential Commodities Act of 1955 through an ordinance on June 5, 2020.

By: Nishtha Srivastava, UPES, Dehradun.

Owing to the ill-effects of Covid-19 across the world which has managed to bring the entire country down, this particular ordinance has made the 1955 law come at par with the changing times as objects such as face masks and hand sanitizers found their place as an essential commodity after the sudden outbreak of the virus.

However, as the situation normalized, it was removed as on July 1, 2020.

What does the word “essential commodity” actually mean?

Section 2A of the Essential Commodities Act of 1955 defines it as a commodity that has been mentioned in the ‘Schedule’ of the Act[i]. Also, the power to add or remove any of the commodities to or from the Schedule, lies with the Central government in consultation with the State government, if such addition or removal is as per the public interest.

Therefore, when we look at the Schedule, it comprises of a range of commodities across diverse fields such as fertilizers, drugs, food items inclusive of oilseeds and oils, hank yarn made wholly from cotton, petroleum and petroleum products, raw jute and jute textiles and seeds belonging to food crops, fruits, and vegetables, cattle fodder, jute, and cotton.

Why was this amendment ordinance needed?

The purpose of the parent act was to let every citizen of India have access to all the essential commodities at fair prices without any discrimination. However, the year 2020 brought with itself the outbreak of the deadly Coronavirus which completely changed the lives of everyone, forcing even the government to adapt itself to the new changes.

This is why, the Essential Commodities Amendment (Ordinance), 2020 got promulgated to insert the new “essentials” in the terms of the Act.

Therefore, through this Act, the government can monitor and manage the production, supply, and distribution chain of the items mentioned in the Schedule of the Act.

New Changes[ii]

As the pandemic COVID-19 broke out across the world in March 2020, it forced all the countries to be put up under lockdown, which got back to normal only last month in August. Due to this, every industry right from agriculture, manufacturing, education, distribution to service sectors, etc came to a halt, causing huge losses. However, the burden of it fell majorly on the poor sector of the country who were rendered jobless without a single penny, in a helpless state.

Keeping this in mind, the changes brought in by the government in the Essential Commodities Amendment Ordinance 2020 are significant.

1)   Certain regulations only under “extraordinary circumstances”

Regulation of commodities includes their production, supply, distribution, trade, and commerce.

With the 2020 ordinance, the Act has now created a category of items that will be regulated only in the case of extra-ordinary circumstances such as, war, famine, extraordinary price rise, and natural calamity. It includes cereals, pulses, oilseeds, edible oils, onion, and potatoes.

2)   Imposition of stock limits: Before this amendment, issuance of excessive control orders had managed to put a blanket limitation on the stockholding of the agricultural produce by different sectors irrespective of whether they had been held by an organization or an individual.

However, with this ordinance, now the imposition of the stock limit will be based on two factors:

a) If there is a 100 percent increase in the retail prices of horticulture produce or

b) 50 percent increase in the retail prices of non-perishable agricultural foodstuffs.

The increase will be calculated upon: the price prevailing immediately preceding twelve months, or the average retail price of the last five years, whichever is lower.

Apart from this, two categories have been added who are exempted from such imposition: a) Processor of agricultural produce; b) Value chain participant of any agricultural produce.

3)   Paving the way for private players: Through the earlier act, the government from time to time managed to disrupt the free flow of the commodities as there were discouraging investments in the warehousing and storage sectors and excessive limitations on stockholdings which promoted more and more hoarding of essential commodities by the traders to maintain the price as well as supply stability.

However, with the promulgation of this ordinance, the entry of private players has been eased. This will not only help in increased competition in the agricultural sector but also help in gaining more investors who were earlier afraid of the unpredictable imposition of limits.

4)   Betterment of export – Due to the issuance of multiple control orders, restricting the conditions and movement of essential commodities time, and again in the past years, there has been a fluctuation of prices ultimately making India a non-reliable country for export. However, with the new amendment, better economic freedom will be provided to the farmers.

Ground reality:

How much is this Act analogous to the idea of the betterment of the agricultural sector?

1) Use of ambiguous terms like “extraordinary circumstance”, “natural calamity”, “horticultural produce”, “perishable agricultural foodstuff” etc in the provisions can create confusion in the minds of the people while dealing with these commodities.

In other words, due to the ambiguous words, a dispute regarding the correct interpretation of these words may arise in the future.

2) This change is a part of the Central government’s policy to deal with the pandemic “Atma Nirbhar Abhiyan” through which agriculture has become the focal point for the government. However, it should be kept in mind that these unprecedented times have had a major effect on other sectors such as textiles, petroleum, etc. Such blind focus may have a detrimental effect on them as well.

3) Such a step was taken to handle the unaware and unknown virus that took the whole world by storm causing humongous loss of opportunities, health, and productivity in all the sectors be it goods, commerce, or service. However, now that the restrictions have been lifted and the country is almost halfway through normalcy (pre-COVID scenario), the basic purpose of preventing hoarding up of essentials and providing ease of working to agriculturists seems outdated and not of much use.

Conclusion

Today, the world is in a precarious condition wherein any mishap can happen at any time due to this pandemic. Though the government, through this, has put up efforts to help the farmers by opening up opportunities for private players to buy the stock in case of excess production and likewise, it is pertinent to understand that the helpless and starved poor sector is on an alarming high. In such a situation, the government needs to work towards less violation and greater implementation of the provisions to provide maximum benefit to the citizens. Moreover, it will be interesting to see how this new change will be able to directly prove advantageous to the farmers.               

End Notes:

[i] Section 2A, Essential Commodities Amendment Ordinance, 2020

[ii] Siraj Hussain, The Fine Print of the Essential Commodities Amendment Ordinance must be carefully parsed (Sept. 16, 2020, 09:17 PM), https://thewire.in/agriculture/the-fine-print-of-the-essential-commodities-act-ordinance-must-be-carefully-parsed.

Legislations, The Law

Consumer Protection Act, 2019

Consumer Laws have been protecting the interests of the consumers since dim and distant. The new act directs a time-based effective administration and settlement of consumer disputes, to protect consumer rights.

By: Anshika Singh, 3rd Year, LLB (Hons), Department of Law, PIMR.

Introduction

On 20th July 2020, the new Consumer Protection Act 2019, came into force after replacing the three-decades-old Consumer Protection Act, 19861. The consumer protection bill received the President’s assent on 9th August 2019. The Union Minister of consumer affairs, Mr. Ramvilas Paswan introduced the act, which was later passed by both the houses. The new Consumer Protection Act is a result of the changing needs of the consumers. It has fixed the accountability and has created a definite structure for redressal of consumer complaints. In an attempt to safeguard the interests of the consumers, the legislature bestowed upon the consumer’s various rights and enacted a mechanism for the due enforcement of these rights. However, the apparent lacunae and the radical introductions in the nature of business transactions over the past three decades are believed to have outworn these laws.2

Key Features

The key features of the new act are provided below:

1. Mediation-As a medium to settle

To provide a quick and speedy resolution for the consumer dispute, the new act, as an Alternative Dispute Resolution Mechanism provides Mediation. It will reduce the pendency of the cases, and also there will be a strict timeline fixed in the rules. The court can now refer to settlement through Mediation, which will facilitate the process of adjudication.

2. Imposing Strict Penalties

The new act consists of a provision for a jail term and fine for the manufacturer on giving misleading advertisements and adulteration. The penalty which can be imposed is up to Rs 10 lac, on the manufacturer or an endorser, and can be sentenced for imprisonment up to 2 years. For subsequent doing of such an offense, the fine can be expanded up to Rs 50 lac. The authority may also ban the endorser (of misleading advt.) in case of endorsing the product, for a period of 1 year, and for every subsequent offense, it may extend to 3 years. From the various instances of the past, it has become important that the endorser must exercise due diligence, and verify the product before endorsing. In the case of adulterating the products and errant businesses, such manufacturers, or seller/distributor can be awarded punishment –

• When Consumer is not injured –Rs 1lac fine or 6 months imprisonment.
• When Consumer is injured – Rs 5lac and 7 yrs imprisonment.
• If Consumer dies- Rs 10lac and 7 yrs imprisonment extended up to Life imprisonment.3

3. E-Filing and Jurisdiction

Unlike the present practice of filing a consumer complaint, the e-filing feature has bought flexibility to the consumers within the jurisdictional consumer forum, located at the place where the consumer is residing or working. Accordingly, to provide procedural ease and reducing inconvenience, the hearings and/or examination of parties can also be done through video conferencing.

4. Product liability

Along with all the features, the Consumer Protection Act 2019, has become an exclusive law dealing with product liability. Product liability is a wide concept that includes, within its ambit, the product manufacturer, product service provider, and product seller, for any compensation claim.

Earlier, there was a shield that has protected the commercial platforms (including e-commerce platforms) stating that ‘they are merely platforms or aggregators’, but unfortunately this defense will not work in the new act.

The product liability clause levies a heavy liability on the manufacturer even though there was no negligence or fraud in making the express warranty of a product (with a few exceptions). There are a few exceptions for the product seller too, to protect him from liability, such as in the cases where the product has been misused, modified, or changed.

5. E-commerce

The definition of consumers, under its ambit, will now include any commercial transactions of goods, or buying of goods, through both offline or online mode.

The previous act did not include e-commerce transactions specifically.

To increase transparency, the online platforms such as Amazon, Flipkart, etc., will need to disclose their seller’s details, address, website, etc., and other conditions such as refund, exchange, warranty, etc., on the website. This move will expose the fake products sold on the E-Commerce and teleshopping sites. The e-commerce platforms will have to acknowledge receipt of any consumer complaint within 48hrs, and the redressal should be completed within one month from the date of receipt.

6. Central Consumer Protection Authority [CCPA]:

Under the new act, a separate regulatory authority known as the Central Consumer Protection Authority is established4, which consists of wide powers for the enforcement of the act. It will address the issues relating to unfair trade practices, misleading advertisements, selling fake and faulty products, etc.

The authority also has an investigation wing that will conduct inquiry or investigation in case of violation of any consumer law.5

The wing will be headed by Director General, appointed for such purposes. It will have powers to take Suo Motu actions, cancel licenses and file class-action suits, etc.

7. Pecuniary Jurisdiction stretched

Under the aegis of the new act, the pecuniary limits of the district, state, and national commission have been extended. The revised limits are-
District forum – upto Rs 10,000,000 (i.e.,1cr)
State forum – above Rs 10,000,000 but cannot exceed Rs 100,000,000
National Commission – Above 100,000,0006

According to the new act, Class action suits can also be bought.

Conclusion

The new consumer protection act, if executed effectively, may solve and protect the interest of the consumers speedily, as compared to the earlier times. Due to the dynamic nature of the market, various new techniques of marketing, buying, and selling, have evolved in the previous decades, which required huge changes in the redressal system also. There are still some challenges from the future perspective as, the circumstances or the criteria under which National Commission shall entertain such cases is not clear yet. The position regarding this is unclear whether the existing cases will be transferred or not, on account of change in pecuniary jurisdiction. The new act will set up legal accountability as well as speedy recovery of the damages, of the public. The introduction of class action suit and legal accountability for the endorser, are some of the key changes which were needed, from the present, general & e-commerce perspective.

Endnotes:

1.Shipra Singh, ET Bureau, Here’s how consumers will benefit under the new Consumer Protection Act, 19 August 2019,https://economictimes.indiatimes.com/wealth/spend/heres-how-consumers-will-benefit-under-the-new-consumer-protection-act/articleshow/70711304.cms

2.Ministry of Consumer Affairs, Food and Public Distribution, Ninth Report on Consumer Protection Bill, 2015 (Standing Committee on Food, Consumer Affairs and Public Distribution 2015-16) paras 1.4-1.5.

3.The Consumer Protection Act, NO. 35 OF 2019, http://egazette.nic.in/WriteReadData/2019/210422.pdf

4.Supra 

5.StutiGaliya, Khaitan& Co., Consumer Protection Act, 2019-Key Highlights,20 August 2019, https://www.mondaq.com/india/dodd-frank-consumer-protection-act/838108/consumer-protection-act-2019-key-highlights

6.Ibid 3

Case Reviews, The Law

Neelam Gupta V. Mahipal Gupta & Anr

A three-judge bench, comprising of Justice UU Lalit, Justice Indu Malhotra, and Justice Krishna Murari, at Supreme court, in an appeal arising out of the common judgment and order passed by High Court of Delhi, disposed of a matrimonial dispute on settlement. Previously the HC affirmed the order passed by the Mahila Court in proceedings under section 12 of the DV Act and an order passed by Additional sessions judge-2, Rohini Courts, Delhi.

By: Anshika Singh, 3rd Year, LLB (Hons), PIMR, Department of Law.

FACTS OF THE CASE:

The Respondent no.1 Shri Mahipal Gupta (R1), was married to Ms. Geeta Gupta and from their lawful wedlock, they had two children’s i.e. a son, Arnab Gupta and a daughter, Garima. After the demise of Ms. Geeta Gupta, the Respondent no. 1 got married to Ms. Neelam Gupta, the appellant, in the present case.

But after sometime of the marriage, the relations between the appellant and Respondent no. 1 started to deteriorate. Because of which the appellant filed a petition under Section 12 of the Protection of Women from Domestic Violence Act, 2005 for protecting her rights of residence, and also a civil suit against her husband obtaining interim injunction, so that she cannot be dispossessed from the premises in question. 

The son Arnav Gupta, respondent no. 2, filed a partition suit for the same premises which got decreed and was made executable subject to the variation/vacation of the order in the domestic violence act.

The appellant got relief as her possessory right cannot be disturbed unless the alternative accommodation has been provided by her husband. 

Application for variation of the protection was disposed of by Mahila High Court stating that the appellant is not comfortable with the premises that the respondent has offer and is entitled to the same standard of living as she had during her marriage. In this view, it was directed that the respondent can provide a similar accommodation in the locality or lieu pay the rent of Rupees 15000/- per month. 

After this, the appellant in the partition suit prayed to reside in the property in dispute as “shared household”, but it was not allowed. The appellant then settled for the suggestion made on behalf of respondent no.1 to get 1/3rd share in the value of the apartment. The affidavit indicated that the market value would be in the range of 1.85 to 2.25 crores and thus the reasonable amount which the A would get is 65 Lakh as 1/3rd  share by way of Permanent settlement. The Respondent no.1 along with his son and daughter gave no response which made the court assume there willingness to the sale of the apartment. The aforesaid offer was given by R1 subject to the divorce between both the parties.

ISSUES INVOLVED:

  1. Whether the appellant, in a partition suit, entitled to a ‘shared residence’ or suitable accommodation provided by her husband?
  2. Whether the vacation/variation order contemplated can distribute the possessory right of the appellant?

JUDGMENT:

The apex court accepted the appeal and gave the appellant options to come to a settlement with the respondent and held that in case the husband does not deposit money, the appeal stands allowed, the said orders under the appeal will stand set aside.

REASONING BEHIND THE JUDGMENT:

About the first issue, the apex court held that property belonged to the deceased wife (Ms. Geeta Gupta) of R1 and the children received their shares, and therefore the Appellant has no right of ‘Shared Household’ in that property.

  • Therefore the Appellant has the right of possession only against R1. She can claim alternative accommodation only from her husband as under the Protection of Women from Domestic Violence Act, 2005, ‘the appellant was certainly entitled to a shared residence being her matrimonial home or in lieu thereof her husband to provide her with suitable reasonable accommodation in accordance with law’.    
  • In the second issue, the vacation/variation contemplated by the impugned order would mean the appellants’ possessory rights cannot be disturbed concerning the premises in dispute unless the husband offers an alternative accommodation by an order obtained from Metropolitan Magistrate. 
  • The Supreme Court further allowed the order given by the HC that the Husband should provide the alternate residence of Appellant’s Choice near to that area by giving suitable accommodation and rental amount. The Appellant may file an application for rejecting such orders if she thinks fit. 

The court directed:

  •  If the Respondent no. 1 is not in the condition to provide the alternate residence and rental amount, then he must sell the property, and with the total amount received after the sale is effected 1/3rd share of the total amount is to be provided to the Appellant. 
  • The court directed the R1 to Deposit Rs 5 lakh as an interim consideration for 1/3rd share and Rs 1 Lakh as rent for 6 months (at the rate of 15000/- per month. And 10000 for other expenses.)
  • After the sale is effected, the parting of a sum of Rs. 60 lakh is to be done and should be given to the registry and the leftover amount should be distributed between the son and daughter of the Respondent No. 1 in equal shares, from his first wife.
  • If for any reason the flat is not sold the A shall be entitled to re-enter in the property and if the A chooses not to re-enter R1 would be obliged to give her 30k per month for rents. 

After passing through all the circumstances the court reached a balanced approach. The court also mentioned the repercussions if the party does not oblige to its direction. The court in deciding the alimony and discharging the judgment kept in mind the conditions of the appellant and her choices. In the appeal court majorly explored the possibilities of settlement between both the parties. The court worked on a No-harm principle and directed to give effect to the sale in a way that it shall not create any third party rights with respect to premises and no such dealings should be done which prejudices the interest of the appellant.


Case Reviews, The Law

Bernkrant V. Fowler

The instant case deals with the application of private international law or the conflict of laws following the law of contracts between two states as both the states follow a different set of rules when it comes to the validity of oral contracts.

By: Melena Janet Jeen R, 4th Year, BBA LL.B, Alliance University.

Facts of the case

  • The trial court found that on July 1, 1951, plaintiffs were the owners of certain real property in Las Vegas, Nevada.
  • The property was subject to the first deed of trust in favor of David O. Parks and Lenabel Parks given to secure a note of $17,820, payable in monthly installments, and that the then unpaid balance was approximately $11,000. That at the same time the property was subject to a second deed of trust in favor of John Granrud given to secure a note issued by the plaintiffs dated July 25, 1952 and payable to John Granrud for $32,871.61, payable in monthly installments, and that the then unpaid balance of the said note was approximately $24,000. 
  • On July 1, 1954, in Las Vegas, Nevada, the deceased, John Granrud, orally stated to the plaintiffs that he would ‘make a sporting proposition and provide in his Will that any debt at the time of his death which remained on the purchase price’ of the John Granrud Garden Apartments would be forgiven and canceled in exchange for a partial payment and refinancing of the second trust deed note. That at the said time, the deceased, John Granrud, requested plaintiffs to refinance to enable him to purchase a trailer park. 
  • The plaintiffs did refinance by obtaining a new first trust deed loan of $25,000 for $800.90. Then the plaintiff paid off the note in favor of David O. Parks and Lenabel Parks and applied the balance of the new loan for $13,114.20 in part payment of the second trust deed note. 
  • Then on October 27, 1954, plaintiffs executed a note in favor of John Granrud for the then balance of the loan of $9,227 payable in monthly installments and secured by a second trust deed. That the deceased subsequently used the part payment made on or about October 27, 1954, for the purchase of a trailer park.
  • The court further found that John Granrud died testate on March 4, 1956, and that at the time of his death was a resident of the County of Los Angeles; that he left a will be dated January 23, 1956; that said will be duly admitted to probate in the Superior Court of the State of California, in and for the County of Los Angeles on April 9, 1956, and that Dorothy Black Fowler was named in said will as executrix, and that at all times since April 9, 1956, she has been and now is the executrix of the Estate of John Granrud, Deceased. 

Finally, the court found that the will of said deceased contained no provision for the cancellation of the said note executed by the plaintiffs and that the balance due on March 4, 1956, was $6,425.

Matters in issue

A. Does the basic policy of enforcing lawful contracts made under the law of the state of execution prevent the application of the forum’s Statute of Frauds when the application arises because contracting parties move across state lines?

B. Was the action barred by both Nevada and the California statute of frauds?

C. Which choice of law will be followed: the place where the contract took place or the place where parties of contract reside?

D. Did the plaintiffs have enough proof to their case that the defendant’s father was staying in Nevada while the contract was executed?

Judgment

The trial court concluded that the action was barred by both Nevada and the California statute of frauds; that to remove the bar of the statutes, the action must be one for quasi-specific performance in which an heir or beneficiary under the will would be an indispensable party; and that defendant was not estopped to rely on the statutes of frauds.

From the foregoing findings of fact, the Supreme court concluded: 

(1) That the action is barred by the Statute of Frauds of both the State of Nevada and the State of California unless removed from the operation thereof by estoppel or performance; 

(2) That to remove the bar of the Statute of Frauds the action must be founded in quasi-specific performance and to maintain such an action an heir or beneficiary under the will is an indispensable party; 

(3) That the oral agreement upon which the action is based is not of such nature as to estop the defendant-executrix from asserting the Statute of Frauds or to cause a court sitting in equity to enforce the oral agreement quasi-specifically; and 

(4) That the defendant is entitled to judgment against the plaintiffs with costs.

Judgment was thereupon entered that plaintiffs take nothing and the defendant has a judgment for her costs. Thereafter, the plaintiffs’ motion to vacate the judgment and to enter a new and different judgment was denied.

The contract is valid under the laws of Nevada where it was executed and performed but invalid under the California Statute of Frauds if that Statute is applicable.

There is no doubt that California’s interest in protecting estates being probated here from false claims based on alleged oral contracts to make wills is constitutionally sufficient to justify making our Statute of Frauds applicable to all contracts such as this. 

However, the legislature is usually concerned with enacting laws to govern purely local transactions, and it has not spelled out the extent to which the Statute of Frauds is to apply to a contract having substantial contacts with another state. In this case, Plaintiff and the others were residents of Nevada; the contract was made in Nevada and performed in Nevada. If Granrud were a resident of Nevada at the time of the contract’s inception, the California Statute of Frauds would not apply even though Granrud moved to California afterward. 

The basic policy of upholding the expectations of the parties by enforcing contracts valid under the law of the state where the transaction occurred would prevent an interpretation of the Statute of Frauds that would make it apply to and therefore invalidate the contract because of the movement of one or more of the parties across state lines.

In this case, however, there is no finding regarding where Granrud was domiciled at the time the contract was made and therefore the plaintiffs could not be expected to have been alerted to the Statute of Frauds. 

The judgment is reversed from that of the Trial Court Judgment.  

Conclusion

In this article, we have discussed the application of private international law or the conflict of laws following the law of contracts between two states. Both states follow a different set of rules when it comes to the validity of oral contracts. This article analyses the case of Bernkrant V. Fowler to understand the application of private international law. The plaintiffs did not have enough proof as to that the defendant’s father was residing in Nevada at the time of contract. If only the plaintiffs had enough proof as to the residence, the Nevada laws would have been applied as it was applied in the trial courts.

According to the Court, protection of the buyers’ rights under a valid contract precluded interpreting the general language of the statute of frauds to destroy such rights despite possible applicability of the statute arising from the movement of one or more of the parties across state lines. 

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