What is a Contract ?

Contract
Agreement + Enforceability
How is an agreement
formed?
• Agreement is about two people coming to a
consensus.
• The formation of an agreement is about meeting
of minds. People agree when their minds meet,
that is, when two minds come to be one on an
issue or point.
• This happens through communication. One
person initiates communication and another
person responds.

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 There must be an offer
Formation
of an An offer is an expression to contract
without further negotiations.
agreement It requires only acceptance from the
other party to form a contract.
Formation of an
agreement
• An advertisement/notice inviting tender is simply an
invitation to offer.
• Similarly, advertisement for auctions is an invitation to
offer.
• Invitation to offer is a useful concept to describe
advertisements and communications soliciting business.
• Example:
• An invitation to attend an auction is only inviting
persons to participate and make bids.
Formation of an
agreement
• Is display of goods in a shop window an offer?

• The display of goods in a self-service store is also an

invitation to offer.
Formation of an
agreement
• There must be unqualified acceptance of the
offer

• An offer should be accepted without changing its

terms.
• Changing the terms of the offer amounts to
an implied rejection of the offer.
• An acceptance changing the terms of an offer
is a counter-offer.
Formation of an
agreement
• Provisional acceptance is no acceptance.
• The last line of a written lease agreement
stated: This agreement is made subject to
the preparation and approval of a formal
contract. Whether a binding agreement
was formed by the written agreement?
Court held ‘there is no binding contract’….
Formation of an agreement
• Silence can only imply rejection, not
acceptance.
 When the offer is in writing, it
reasonable to assume that the
acceptance should also be in writing.
If the offer is oral, one could say that
oral acceptance would be adequate.
Formation of an
agreement Encashing a cheque is only realising
the consideration in advance and
cannot be construed as
communication of acceptance.
 All contracts are agreements, but
all agreements are not contracts.

Social Agreements
Agreements +
Enforceability

Domestic agreements

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Criteria for a valid contract

• There must be an intention to create legal relationships

• The requirement of intention to create legal relations in contract law is aimed at sifting out
cases which are not really appropriate for court action. Not every agreement leads to a
binding contract which can be enforced through the courts. For example you may have
an agreement to meet a friend at a restaurant. You may have a moral duty to honour that
agreement but not a legal duty to do so. This is because in general the parties to such
agreements do not intend to be legally bound and the law seeks to mirror the party's wishes.
In order to determine which agreements are legally binding and have an intention to create
legal relations, the law draws a distinction between social and domestic
agreements and agreements made in a commercial context.
 Every contract should be supported by lawful consideration.

Consideration is the benefit accruing to the parties to a

contract.

Consideration can be ‘right, interest, profit or benefit’ for one

Criteria for a party. It can also be ‘some forbearance, detriment, loss or
valid contract responsibility given, suffered or undertaken’ by the other.
Agreements without consideration are not enforceable.

Consideration does not have to be commensurate or

sufficient.
 • The parties must be competent to enter
into a contract.
• The following persons are incompetent to
contract:
1. Minors
2. Persons of unsound mind
• Idiot
Criteria for a • Lunacy or insanity
• Drunkenness or intoxication
valid contract 3. Disqualified persons
• Alien enemies
• Foreign sovereigns & ambassadors
• Convicts
• Undischarged insolvent
 • Free & genuine consent:

Consent is said to be free when it is not caused by:

Criteria for a 1.
2.
Coercion,
Undue influence,
valid contract 3. Fraud,
4. Misrepresentation or
5. Mistake.
 • Lawful object: The object of an
agreement is unlawful if: it is forbidden
by law; or it is of such a nature that, if
permitted, it would defeat the
Criteria for a provisions of any law; or it is
fraudulent; or it involves or implies
valid contract injury to the person or property of
another; or the court regards it as
immoral, or opposed to public policy.
 • The agreement should not be expressly
declared void
1. Agreements in restraint of marriage
2. Agreements in restraint of trade (exception is the
sale of goodwill, or agreements by partners
Criteria for a under the partnership act)
3. Uncertain agreements (the meaning of which is
valid contract uncertain)
4. Agreements in restraint of legal proceedings
5. Curtailing the period of limitations
6. Wagering agreements
Why do we need written contracts?
• Basic lack of trust
• Clearly establishes the risks and obligations of each party
• Provides means by which performance can be assessed and measured
• Provides means by which breaches can be identified
• Provides means by which default can be established
• Establishes the owner’s means of control
• Establishes the contractor’s scope of work

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What does a written
contract do for us?
• A written contract provides the document by which
risks, obligations, and relationships of both parties
are clearly established, thus ensuring the
performance of these elements in a disciplined
manner.

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Present Position

1. Expression of interest
(prequalification)
2. Request for proposal (invitation to
tender/bid)
3. Pre-bid conference
4. Submission of bids
5. Technical & commercial evaluation
6. Selection of the lowest technically
acceptable bid
7. Letter of Award (LOA)
8. Signing of the contract
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 1. Preamble
2. Interpretation & definitions
3. Scope, technical specifications & performance
parameters
4. Price
Structure of a 5. Terms & mode of payment

Contract 6.
7.
Price variation
Taxes & duties
8. Scheduled delivery date
9. Force majeure
10. Export license

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 10. Defaults & liquidated damages
11. Inspection & acceptance
12. Shipment
13. Passing of title & risk
Structure of a 14. Warranty

Contract 15. Patents & copyrights

16. Indemnities
17. Spares
18. Options
19. Assignments

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 19. Termination
20. Resolution of disputes
21. Confidentiality
22. Survival
23. Amendments
Structure of a 24. Applicable Laws

Contract 25. Effective Date

26. Notices
27. Contract Signatures
28. Forms

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•Thank you!

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