CORPORATE LEGAL

ENVIRONMENT

BY – PRAVEEN KUMAR JAISWAL

 Contracts
What is a Contract ?

A legally enforceable promise by one party do something

or to refrain from doing something

To be legally enforceable the agreement must comply

with Common Law requirements for a valid contract
 Essentials of a Valid Contract
Intention for the parties to enter into a legal relationship
enforceable by law

Offer & Acceptance

Valuable Consideration or execution under seal

Legal Capacity to Act

Genuine Consent

Legality of the Objects of the Contract

 Intention
Is there an intention to enter into a legally binding agreement
Social Agreement are presumed no
Business Agreement are presumed yes
Intention can be expressly excluded

Offer
Offer may be in writing, verbal or implied by conduct
Offer must be communicated
The Offer can be withdrawn at any time before acceptance (Postal Rule)
An offer will lapse if
- not accepted with in a stated time
- not accepted within a reasonable time
- a counter offer is made by the other party
Acceptance
Must be final and not qualified (other wise it is a counter offer
Only person who offer has made to can accept
Silence is ineffective
Conduct can constitute acceptance
Once accepted no other negotiations can be conducted
Method of Acceptance can be specified (See Postal Rule)

Valuable Consideration
Is there an intention to enter into a legally binding agreement
Social Agreement are presumed no
Business Agreement are presumed yes
Intention can be expressly excluded
 Legal Capacity
Minors generally do not have legal capacity except
-Items of necessity
-Items that are beneficial
Mentally ill do not have capacity
An intoxicated person does not have capacity
- but on sobering up can affirm the contract
Corporations are treated as individual entities and have
capacity to contact – beware who you are contracting to
Alien Enemies capacity is reduced
Convicts have capacity
Married Women – Unfortunately are allowed to contract to
receive credit cards
 Genuine Consent
The consent must not be induced by deception of fraud
Contract can not be formed under duress
Contract cannot be formed by Unconscionable Conduct

Legality
The object of the contract cannot violate Statute law
- you can not contact to kill someone and then expect a
court to enforce payment
Illegal under Common Law
- Contract to commit a tort
- Promote Corruption
- Prejudicial to Administration of Justice
- Prejudicial to Public Safety
 Forms of Contract
Simple Contracts
 Can be either Verbal or Written
 Implied
 Can evidenced by Written Communication

Express Contract
 Normal Type of Contract
 Conditions & Warranties documented
 Supporting Documents i.e. Drawings, Spec etc
 Dispute Resolution Process?
 Time For Completion
 Liquidated Damages Spelt out

Implied Contract
Contact constructed by the courts
Actions or Inactions by the parties indicate a contract exists
Conditions & Warranties to be determined by the court at a later date
 Contract Terms
Condition
Major requirements of the Contract
Fundamental to the contract
Breach allows innocent party to either Terminate the Contract or Sue for Damages
Warranties
Minor Term of the contract
Contract is not substantially different
Breach allows innocent party to sue for Damages
Termination will be a breach of contract and innocent party may be liable
for damages
Innominate Terms
May either be a warranty of Condition
(Paint one door the wrong colour v’s the whole building)
Is a subjective assessment
Most terms will fall in this area
Must take care in dealing with these breaches
 Discharge of Contract
Discharge of Contract – Conclusion
By performance
By agreement before completion
Operation of Law
-Bankruptcy - Liquidation
-Merger ?
-Fraud

Impossibility of Performance - Frustration

Absolute Impossibility- contract to renovate house, house burns down

Radical Difference – Change of Council or Government Conditions, Court Injuctions

Supervening Illegality –Law is Changed after contract is formed to make it illegal?

Futility –Where purpose of the contract is no longer valid?

Time - Unless time is a Condition of the contract a contract will not lapse.
 Damages
Unliquidated
- Determined by Court
Liquidated Damages
- Genuine Estimate of loss agreed to in contract
Penalty
- if loss is not Genuine classed a penalty and will be reduced to genuine loss

Types of Contracts
Lump Sum
Cost, plus a fee
Cost plus a percentage
Schedules of Rates
Labour Only
Do and Charge
Design & Construct
 Breach of contract

If a contracting party fails to perform an absolute duty

owed under a contract.

If a contractual duty has not been discharged or excused,

the contracting party owes an absolute duty (covenant) to
perform the duty.
Types of Performance

Complete
Performance

Substantial
Performance

Inferior
Performance
Copyright © 2004 by Prentice-Hall. All rights reserved.
Anticipatory Breach
A breach that occurs when one contracting party informs the
other that he or she will not perform his or her contractual duties
when due.

Monetary Damages

A non-breaching party may recover monetary damages

from a breaching party.

Monetary damages are available whether the breach was

minor or material.
 Types of Monetary Damages

Compensatory Consequential
Damages Damages

Nominal Damages Liquidated

Damages

Copyright © 2004 by Prentice-Hall. All rights reserved.

 Torts Associated With Contracts
Intentional Interference with Contractual Relations
Breach of the Implied Covenant of Good Faith and Fair
Dealing
Under this covenant:
The parties to a contract are held to the express terms
of the contract, and
They are also required to act in good faith and deal
fairly in all respects in obtaining the contract.
A breach of this implied covenant is a tort for which
tort damages are recoverable.
B holds factory in West Bengal, on a lease
granted by A, the factory owner

 A person who is interested in the payment of money

which another is bound by law to pay, and who therefore
pays it, is entitled to be reimbursed by the other.

B holds land in Bengal, on a lease granted by A, the

zamindar. The revenue payable by A to the Government
being in arrear, his land is advertised for sale by the
Government. Under the revenue law, the consequence of
such sale will be the annulment of B's lease. B, to prevent
the sale and the consequent annulment of his own lease,
pays to.
 P appoints A as his agent to sell his
estate
Agent’s duty to disclose all material circumstances & his
duty not to deal on his own.
account without principal’s consent. (Sections 215 and 216
of the Indian Contract Act,1872): The problem is based on
Sections 215 & 216 of the Indian Contract Act,
1872.According to Section 215, if an agent deals on his own
account in the business of theagency, without obtaining the
consent of his principal and without acquainting him with
allmaterial circumstances, then the principal may repudiate
the transaction. On the otherhand, Section 216 provides
that: if an agent, without the knowledge of his principal,
actson his own account in the business of the agency, then
the principal may claim anybenefit which may have accrued
to the agent from such a transaction.
THANK YOU