1. Anuradha Maheshwari
MUMBAI
OCT,2010
NMIMS-MBA
03/22/12

2.  Discussions on Contracts
Formation, performance, discharge, &
remedies
 Case solving exercises
 Special contracts
 Sale of goods
 Question time
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3.  Mundane every day activities involve a
contract- except that we don’t realize it.
 We enter into contracts all the time
Boarding a bus, buying drinks, putting money
in a bank, investing in shares or licensing your
patent or giving someone the rights to
distribute your product like a movie.
 Contract is of essence to our society,
dominated by transactions of goods and services.
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4. LAW COMES INTO BEING FROM ORDINARY
PRACTICES!
 Contract law developed through common law - the
decisions of the courts while settling disputes amongst
merchants and traders.
 Contract law like the rest of the commercial laws rose
from the practices of the merchants, traders and
mariners in Europe.
 It concerns everybody, more so in trade, commerce and
industry
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5.  In commercial and ordinary life promises are
made some of which are performed and some
of which are breached.
 Contract law deals with those promises, which
create legal obligations.
 So contract law deals with 2 ‘Ps’- creation of
Promises and their Performances.
 Contracts controls and regulate the market
place
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6.  It is ‘An agreement enforceable by law - Section2 (h)
of the Indian Contract Act 1872
 Agreement + enforceability = Contract
◦ Set of promises + Legal recognition= Contract
 Formation: whatever the contract how it comes into
existence is the same
 It requires communication-one person initiates the dialogue
and the other responds.
 No fixed formality unless specified under the law under
which it is made
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7.  Sale/Transfer- goods, immoveable property
 Deeds- Partnership, Conveyance
 Formation of a Company, Society
 Negotiable Instruments
 Technology transfer agreements
◦ Assignment
◦ Licensing
◦ Pledge
◦ Know-How contracts
 Franchise
 Consultancy, Joint Venture, Turnkey Projects
etc.
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8.  Formation
 Performance
 Discharge
 Remedies
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9.  All agreements are contracts if they are made
with the free consent of parties competent to
contract for a lawful consideration and with a
lawful object and not expressly declared to be
void -Sec 10 of ICA
 An agreement in order to constitute a contract must
possess following elements:
◦ Lawful offer and acceptance
◦ Lawful consideration with a lawful object
◦ Capacity to contract
◦ Free consent
◦ Agreement not expressly declared to be void
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10.  When one person signifies to another his
willingness to do or not to do something with a
view to obtain the assent of the other to such
act or abstinence he is said to make a
proposal.
 Offer is like a ‘gun powder’- unless ignited it does
not create an explosion.
 So offer is made with a view to it being accepted.
 Offer is not valid unless it contemplates the
creation of a legal relationship.
 Balfour V Balfour, Kalai Haldar V Shaikh
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11.  Offer is different from invitation to offer- Tenders, auction
sales, advertisements..
 Offer may be made to a definite person, class of persons
or the general public.
 An offer may be express or implied.
 Terms of an offer must be definite.
 Offer remains open till it has been accepted, rejected,
revoked or lapsed.
 Offer must be communicated to the offeree
 Lalman Shukla V GauriDutt 1913
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12. Who can accept an offer?
 Only the person to whom it is made.
 Acceptance must be unqualified.
 Qualified acceptance amounts to a counter offer.
 Mental acceptance is no acceptance.
 Acceptance must be made in prescribed/reasonable
time and mode.
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13.  When an agreement is made will decide its future.
 Time is important when deciding jurisdiction, legality
of contract and application of taxation laws.
 The purpose of the parties is to communicate and
come to an understanding.
 An understanding can only be reached when each
get to know what the other intends.
 Cycle of communication between parties is
completed when the acceptance or rejection of the
offer reaches the offeree.
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14.  Communication of proposal is complete when it comes to
the knowledge of the person to whom it is made.
 Thus the place of formation of the contract would be the
place where the offeror is situated.
 The communication of acceptance is complete as against
the proposer when it is put in a course of transmission to
him so as to be out of the power of the acceptor
 As against the acceptor, it is complete when it comes to
the knowledge of the proposer
 WE GET INTO CONTRACTS KNOWINGLY – express or
implied.
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15.  No consideration no contract!
 The material things that two sides promise each
other are called the consideration of the contract.
 Consideration means something in return for
something, the price of the promise.
 Broadly defined it means the rights, benefits,
interests, profits accruing to one party or some
forbearance, detriment, loss or responsibility given,
suffered or undertaken by the other.
 Consideration must be real.
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16.  Consideration must move at the desire of the
promisor and may be given by the promisee or
any other person- Kedarnath v Gorie Mahomad,
Carbolic smoke ball case
 There must be a privity of contract- a stranger
to the contract cannot sue upon it.
 Tweddle v Attkinson, Dunlop v Selfridges
 Consideration must be lawful.
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17. INCAPACITY
 Contracts made by parties lacking the capacity/
competency to contract cannot be enforced by law.
 Minors, persons of unsound mind, and those
specially disqualified by the law from contracting are
considered incompetent.
p Incompetent persons by reason of judgment or
circumstances cannot be made liable.
 Contracts with incompetent persons are VOID-AB-
INITIO
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18.  Two people can contract only if there is a meeting of
minds.
 Consent means agreeing upon the same thing in the
same sense.
 But CONSENT MUST ALSO BE FREE
 Consent is not free when it is caused by coercion,
undue influence, fraud, misrepresentation, and
mistake.
 Contracts without free consent, become VOIDABLE
and can be set aside at the option of the sufferer.
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19.  Coercion- Criminal threat & unlawful detention of
property- Voidable
 Undue Influence- Unfair advantage by dominant
party - Voidable
 Fraud- Acts to deceive- Voidable
 Misrepresentation- False statement- Voidable
 Mistake- Unilateral, bilateral - Void
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20.  Forbidden by the law.
 Object is fraudulent.
 Causes injury to person/property of another
 Immoral & opposed to public policy.
 Agreements made without consideration.
 Agreements in restraint of marriage, trade, legal
proceedings.
 Agreements where meaning is uncertain-
ambiguous.
 Wagering agreements & contingent contracts.
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21.  Implied/ express contract
 Bilateral/ unilateral contracts
 Void/ voidable contracts
 Executed/executory contracts
 Contingent contracts
 Wagering agreements
 Quasi contracts
 Contracts of record, specialty & simple
 Special Contracts
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22.  Discharge means termination of contractual
relationship – rights & duties created by contract comes
to an end
 Discharge by performance-when parties to a contract
fulfill their obligations in time and manner prescribed
 Discharge by agreement- by novation, alteration,
accord
and satisfaction, remission & waiver, merger & recission
 Discharge by frustration- by destruction of subject
matter, death or physical incapacity of party, changes in
the law, war, change in the state of things( Krell
v Henry).
 Discharge by operation of law- insolvency, death etc
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23.  Discharge by Breach- party refuses to perform his
promise
 Actual breach- On due date party fails to perform
 Anticipatory breach -when a party refuses to perform
before the actual time of performance
(a) Express repudiation - where party communicates
inability
(b) Impossibility of performance-party does some act,
makes performance impossible
 Consequences of anticipatory breach is to either rescind
the contract or to treat it as still operative and wait for
the time of performance
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24.  Rescission of contract- cancellation of all or
some of the terms of the contract-In case of
mutual consent, anticipatory breach, voidable
contracts
 Suit for specific performance- damages are
not an adequate remedy or where actual
damage or loss caused by breach is impossible
to ascertain
 Suit for an injunction -is a preventive relief. It is
an order of the court directing the other party to
do or refrain from doing some act which is the
subject matter of the contract
-Temporary or permanent
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25.  Suit for damages- means monetary
compensation to the injured party for the
financial damage or loss suffered by him due to
breach of contract
 Object of damages is to put the party in the
same financial position he would have been if
the contract had not been broken.
 Damages should be fair and reasonable and for
actual loss in natural and usual way and not for
remote or indirect losses.- Hadley V Baxendale
1854
 Suit for Quantum Meruit- means as much as is
merited or deserved - Sumpter V Hedges, Cutter
V Powell
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26.  One party promises to save another from loss.
 Loss must be caused by conduct - of the
promisor or any other person.
 Does not include events or accidents like an
insurance contract.
 Contingent contract- only on condition of loss.
 Promisee acting within scope of authority is
entitled to recover form the promisor.
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27.  Contract to perform promise or discharge liability of
‘another’.
 Guarantor called –surety, to whom it is given-
creditor and for whom it is given – principal debtor.
 Surety undertakes obligation at request of PD.
 Consideration- past/future benefit to PD.
 Surety’s liability coextensive with that of PD.
 Surety’s rights-to be indemnified by the PD, to be
subrogated to rights of creditor, to be reimbursed by
other co-sureties.
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28.  Agent- person employed act for another or
represent him in dealings with third persons.
 The person represented is called the Principal
 Any person who can contract may employ an agent.
 Any person may become an agent.
 No consideration required to create agency.
 Authority of an agent may be express or implied-
necessity or ratification.
 Different kinds of agents- subagents.
 Rights & duties of agents & principals.
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29.  Sale- where a seller transfers or agrees to
transfer the property in the goods to the buyer
for a price.
 Sale only of moveable goods, from an owner
(title) and against payment of money.
 Differences between sale & agreement to
resale- former ownership transferred.
 Risk follows ownership.
 Time when property in the goods transferred.
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30.  Terms of sale- conditions & warranties.
 Conditions- essential to main purpose of the contract-
breach gives right to repudiation.
 Warranties-collateral to main purpose- breach gives rise
to suit for damages.
 Whether condition or warranty breached depends upon
construction of contract.
 Conditions- express or implied-right to title, specific
purpose, sale by description, sample, right to goods of
merchantable quality.
 Caveat Emptor- Buyer beware!
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31.  Rights against goods-
- right to lien
- right to stoppage in transit
- right to resale
 Rights in case of agreement to sale
- withhold delivery, right to stoppage
 Rights against buyer
- suit for damages
- suit for price
- suit for non-acceptance
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32. Introductions
Definitions Signatures
Grant Miscellaneous terms
Royalties Assignments & Transfer
Representations & Warranties Terms & termination

33.  Money! Activity creates revenues- royalties
 Cross licenses-no royalties-exchange of
rights- Dell & IBM
 Licenses –vehicle to enter new geographic or
product markets
 Sometimes licenses strengthen the licensors
market position
 Licenses provide variety & choice of product
line
 Helps to strengthen the licensed patent

34.  In the US-royalties from patent licensing
increased from $15 billion in 1990 to > $ 110
billion.
 Recent survey found that 2/3rds of US co’s own
IP that is neither used nor licensed.
 Investors value a dollar of royalty income 4 or 5
times over a dollar of operating earnings
 IP was deemed an important factor driving M&As
by 51% of surveyed business execs.
 Experts say that a well managed IP portfolio
should yield 1% of a firm’s revenues & 5% of its
net profits.

35. Thank You !!!
email: anuradha@rediffmail.com
03/22/12