The Law of Contract in Pakistan

1. THE ELEMENTS OF THE LAW OF CONTRACT

The general law of contract in Pakistan is contained in the Contract Act 1872. English decision’s
(where relevant) are also cited in the courts. The Act defines “contract” as an agreement
enforceable by law. The essentials of a (valid) contract are:
(a) Intention to create a contract;
(b) Offer and acceptance;
(c) Consideration;
(d) Capacity to enter into a contract;
(e) Free consent of the parties;
(f) Lawful object of the agreement;
Writing is not essential for the validity of a contract, except where a specific statutory provision
requires writing. An arbitration clause must be in writing.

 Offer and acceptance

It is an essential ingredient of a contract, that there must be an offer and its acceptance. If there is
no offer, there is no contact, because there is no meeting of minds. Again, if there is an offer by
one party, but it is not accepted by the other party or if the ostensible acceptance of the offer is
defective, then also, there is no agreement and therefore no “contract”.
These propositions may appear to be elementary. A large bulk of commercial litigation, however,
requires the parties to deal with the basic questions, which are:
(a) Whether there has there been an offer at all in the particular case, or whether there is
something less than an offer;
(b) If there is an acceptance; whether it is in the proper form;
(c) Whether there has been an acceptance of the offer;
(d) Whether the acceptance has been communicated to the offeror.
Concept of offer
An offer (or a “proposal”) is not defined by statute. It is generally understood as denoting the
expression, by words or conduct, of a willingness to enter into a legally binding contract as soon
as it has been accepted, usually, by a return promise or an act on the part of the person (the
offeree), to whom it is so addressed.
An acceptance, in relation to an offer, is a final and unqualified expression of assent to the terms
of the offer.
Offer, followed by acceptance, is an “agreement”, if an agreement is enforceable by law, it is a
“contract”.
Offer by and to whom
An offer must be made by a person legally competent to contract or on his behalf, by someone
authorized by him to make the offer. It is usually made to a person (or to a number of persons),
but it can be made to the entire world, as happened in Carlill v. Carbolic-Smoke Ball. Co.,
[(1893) 1 QB 256: (1881-94) All ER 127]. In that case, the defendants (manufacturers of
medicinal smoke balls) promised to pay £100 to anyone who, after having bought and used their
smoke balls, caught influenza. Plaintiff did so and caught influenza. Plaintiff was held entitled to
recover. It was no defence that there was no particular individual to whom the announcement
was addressed. Such contracts are sometimes called “unilateral contracts” – not a very happy
term, because a contract can never be “unilateral”. There must be two parties. It is really a case
of innumerable offers, made to all potential readers of the announcement.
Statements which are not offers
Every statement of intention is not an offer. A statement must be made with the intention that it
will be accepted and will constitute a binding contract. Following are not offers:–
(a) Statement made during negotiation, without indicating that the maker intends to be bound
without further negotiation.
(b) A statement which invites the other party to make an offer (e.g., a notice inviting tenders).
(c) Statement of lowest price. [Harvey v. Facey, (1893) A.C. 552]. It is regarded as an invitation
to make offers. [Re Webster (1975) 132 CLR 270 (Australia)].
(d) Display of goods in a ship with price tags. (It is merely an invitation to make an offer, so that
the trader may not accept the offer, if the price is incorrectly marked. [Fisher v. Bell, (1960) 3
All ER 731].
Intention to be bound
A definite intention to be bound is highlighted in Gibson v. Manchester City Council, [(1979) 1
All ER 192]. In 1970, M adopted a policy of selling council houses to tenants. In February, 1971,
the City Treasurer wrote to G, stating that council “may be prepared to sell the house to you at
£2,180 (freehold)”. The letter asked G to make a formal application. This he did, and the council
took the house off the list of council-maintained properties. Before the completion of the normal
process of preparation and exchange of contracts when property is sold, control of the council
changed hands and the policy of selling council houses was reversed. The new council decided
only to complete those transactions where exchange of contracts had already taken place. In the
UK Court of Appeal, it was held (by a majority) that a contract had been made between G and
M. Lord Denning suggested that “there is no need to look for strict offer and acceptance” in
every case; a price had been agreed and the parties intended to carry through the sale. However,
the House of Lords held that the February letter was (at the most) an “invitation” of treat. G’s
application was an offer and not an acceptance. (Informal agreements for the sale of houses are
not likely to be held as binding contracts, because, otherwise, buyers may find themselves
committed before securing mortgage finance).
Termination of offer
Some parties clearly indicate that their statements or documents do not constitute offers, e.g.,
estate agents.” These particulars do not form, nor constitute any part of an offer, or a contract, for
sale”. Until an offer is accepted, it creates no legal rights and it may be terminated at any time in
a variety of ways. Principal modes of termination of an offer are:
(a) By the offeror revoking (or withdrawing) it before acceptance;
(b) By the offeree rejecting the offer outright or by making a counter-offer;
(c) By lapse of time, if the offer is stated to be open only for a fixed time;

In Great Northern Rly. Co. Ltd. v. Witham, [(1873) LR 9 CP 16]. Great Northern Railway
advertised for tenders for the supply of such stores as they might require for one year. W
submitted a tender to supply the stores in such quantities as Great Northern Railway might order
from time to time and his tender was accepted. Orders were given for some time, but eventually
was given an order which he refused to carry out. It was held that W was in breach. A tender of
this kind was a standing offer which was converted into a series of contracts as Great Northern
Railway made their orders. W might revoke his offer for the remainder of the period covered, but
must supply the goods already ordered. Revocation of an offer is effective, only when
communicated to the offeree.
Quality of acceptance
Acceptance of an offer must be absolute and must correspond with the terms of the offer. This
rule a key constituent of the basic premise, does not always accord with the realities of complex
business contract negotiations today. Such negotiations may indeed proceed through a series of
proposals, counter-proposals, withdrawals, variations and qualifications, before agreement (or
otherwise) is reached. When parties carry on lengthy negotiations, it may be hard to say exactly
when an offer has been made and acceptance. Butler Machine Tool Co. Ltd. v. The Ex Cello
Corp. (Eng) Ltd. (1979) 1 WLR 401]. The court must look at the entire correspondence to decide
whether an apparently unqualified acceptance did, in fact, conclude the agreement.
A conditional offer, if accepted, must be accepted along with all the conditions.
However, in regard to international agreements governed by the U.N. Convention on contracts
for international sale of goods, there is a slight qualifications, in as much as, article 19 of the
Vienna Convention provides that non material variations between offer and acceptance do not
make a difference.

 Consideration

As a rule, an agreement without “consideration” is void. The s.2 (d) of the Act defines
“consideration” as follows:
“When, at the desire of the promisor, the promisee or any other person has done or abstained
from doing, or does or abstains from doing, or promises to do or abstains from doing, something,
such act, abstinence, or promise is called a consideration for the promise.”
A mere promise to give a donation, either orally or in writing, is not enforceable. Settlement of
bona fide but doubtful claims involves a bargain between the contracting parties and is,
therefore, based on consideration. Money is not the only form of consideration. A consideration
may consist sometimes in the doing of a requested act, and sometimes in the making of a
promise by the offeree. Forbearance to sue at the promisor’s desire constitutes good
consideration.
Consideration is not required for a promise to compensate, wholly or in part, a person who has
already voluntarily done something for the promisor or something which the promisor was
legally compellable to do. It is also not required for a written and signed promise by the debtor
(or his duly authorized agent) to pay a time-barred debt to the creditor.

 Capacity of the parties

Section 11 of Contract Act specifies that every person is competent to contract provided: A
person is competent to contract if, at the time of making it, he is of sound mind, major and not
disqualified from contracting under law.
As per Majority Act, 1875 age of majority is 18 years and in case of Ward the age will be 21
years. Agreements made by minors are void. Minors cannot, on attaining majority, ratify
agreements entered into during their minority. But if a minor makes a fraudulent
misrepresentation about his age and obtains a loan, he can be required (at the discretion of the
court) to refund it or to make compensation for it.

 Consent

According to Section 13, "two or more persons are said to be consented when they agree upon
the same thing in the same sense (Consensus-ad-idem).
When consent of a party to a transaction is procured by coercion, undue influence, fraud or
misrepresentation, the agreement is voidable at the option of the party whose consent was so
procured. Cases of undue influence arise where the transaction is ex facie unconscionable and
one party was in a position to dominate the will of the other. Where parties are bound by a
fiduciary relationship, (as in the case of father and son, doctor and patient, master and servant,
advocate and client), the law protects the weaker party, throwing on the other party the burden of
proving that no undue influence was exercised.
Mutual mistake in respect of material facts in the formation of a contract renders the agreement
void. A unilateral mistake, however, does not render an agreement void. Nor does a mistake of
law affect its validity.

 Unlawful agreements

An agreement whose consideration or object is unlawful, is void. The consideration or object of

an agreement is unlawful, if it is forbidden by law or it would defeat the provisions of any law or
is fraudulent, or involves or implies injury to the person or property of another or the court
regards it as immoral or opposed to public policy.
A party to an illegal agreement who has advanced money under it to the other party is entitled to
recover it, if the illegal purpose has not been partly or wholly carried out.
Agreements in restraint of marriage, trade and legal proceedings are void. The seller of the good-
will of a business may, however, validly agree with the buyer to restrain from carrying on a
similar business within specified local limits, provided the limits are reasonable.

1. Types of contracts under the Contract Act 1872

 A valid contract s.2 (h) is one which satisfies all the elements as discussed above necessary
to constitute a contract hence, is enforceable.

 s.2 (g) “An agreement not enforceable by law is said to be void.”

 s.2 (j) “A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable.”

 s.2 (i) “An agreement which is enforceable by law at the option of one or more of the
parties thereto, but not at the option of the other or others, is a voidable contract.”
All the contracts made in the interest of minor will be enforceable at law, and contracts made by
minor which damage or injure the interest or benefit of the minor will be void. Simply on the
ground of the minority contracts cannot be void.

Void Contracts: Ab initio (void right from the time of formation or by the change of law of
government.)
1. Unlawful at Law: Consideration and objects are unlawful in part. An agreement of
manufacturing of indigo, DOP, and Heroin against salary of Rs. 100,000/- is void, because it
involves unlawful object in part that is prohibited at law.

2. Without consideration: If there is no consideration, there is no contract. For instance, A

promise to give Rs. 100/- to B, without consideration other than natural affection, is a void
contract.

3. Restraint of Marriage: Everyone has liberty of marriage with his own option except minor.
If any contract restrains anybody who is major, from marriage, is void contract.

4. Restraint of Trade: Restriction on any lawful business, profession, or trade is void except
where the goodwill has been sold. He can be refrained to carry on the similar business within
special local limit.

5. Restrain of Legal Proceedings: Everyone has right of legal proceedings upon dispute in the
Court of law. But there is an exception. If dispute arises, then they will be bound before going to
Court, to decide by way of arbitration. Decision by way of arbitration is called award. When it
comes to the rule of Court, then it is enforced.

6. Uncertain Agreements: All the agreements meaning of which are not certain, are void.
Example: A agrees to sell B, 100 tons oil. This agreement is void on the ground of uncertainty
because kind of oil is not specified. But if A has only one kind of oil for which he is popular,
then there is no uncertainty to make the agreement void.

7. Agreement by Way of Wager: It means contract by A to pay money B on the happening of a

given event, in consideration of B paying to him money on the even not happening. A promise to
give money or money’s worth upon the determination of an uncertain event.
8. Agreement to do impossible act: It is itself void. Agreement of magic is void.

9. Contract to be married becomes void when one of them becomes mad. Contract of second
marriage where polygamy is forbidden is void. Trade with the country against, which war has
been declared, is void.

10. Contrary reciprocal contract: All contracts which have promise, one set of which is legal,
and other one is illegal is void. For instance, A agrees to sell to B and a car against an amount of
Rs. 50,000/- and 1 kilogram heroin. Set of first contract is valid but second one is void.

11. Alternative promise, one branch being illegal: Promise in which one branch is legal and
other one is illegal, the legal branch can be enforced. Example, A agrees to deliver to B for Rs.
50,000/- either wheat or wine. First branch of this contract can be enforced while second one is
void.

12. If there is provision in contract that promisor will provide facilities for the execution of
contract to promisor, contract will become void upon refusal of such facilities. If, for the
purpose of whitewash, promisor fails to provide ladder and brushes to promisee, under the
provisions of the contract, contract will become void. Promisee may claim damages against the
breach of contract.

13. If time is essential as per contract then other party is at liberty to get the contract revoked and
can claim damages and if time factor is not important than other party cannot repeal the contract
and cannot claim damages.
For example, A agrees to B for the supply of 100 Books on February 01, 2000, and he fails to do
so. It now on B to claim damages or compels A to perform the contract. It does not matter that
the price of the books have been increased or decreased.

14. Obligation of a person, who has received advantage under void agreement or contract,
that becomes void. For instance, Ali pays to Zahid Rs. 100,000/-, in consideration of Zahid’s
promising to marry Najma, Ali’s daughter. Najma died at the time of promise. The agreement is
void, and Zahid is bound to repay Rs. 100,000/- to Ali.

15. Collateral agreements are those which are related to others. For example, A makes an
agreement with B for the construction of a home without mentioning the mode of payment. A
makes another agreement stating as to how the payment of the work done in first agreement will
be made. This agreement is called collateral agreement. This is dependent agreement. This
agreement is also void if the principal agreement is void. Past collateral agreement are those fact
of which for both parties is uncertain. Receiving of the amount of the agreement made by way of
wager is void. Legal representative, guardian, executor, successor are not liable for the
compliance of the agreement having nature of wager. It will be void. Where there is no right and
obligations are created, there is no liability. All the agreements that are ab initio, are void right
from that time/formation. Ab initio are those which become void by an act of God or State.

Void-able Contracts:

1. Consents, which are obtained under coercion defined in s.15 as the consents obtained without
willingness, on gun point, forcefully, by the threat of evil consequences, unlawfully commission
of acts, are coercion. Abuses, lowing, beating, and all the acts forbidden by the Pakistan Penal
Code are coercion.
Two Pakistanis form a contract for the purchase of a piece of land situated in Lahore with no free
consents in Iraq. Both reaches Lahore and buyer insist the compliance of the contract and the
seller refuses to enforce the contract claiming the consents under coercion are void-able contract.

2. Undue influence defined in s.16 as the dominating role of a party over other and uses the
position to obtain an unfair advantage over the other. Relationship of two in which one is
superior and second one is subordinate, i.e., employer and employee, master and servant, father
and issues. Orders that are according to law passed by the superior to subordinate are not under
influence. But the orders that are not according to law are undue influence. If a Pir orders to his
disciple (Murid) to give his land to him is called dominating authority. Person should be in
position who can dominate others and obtain advantages which is undue. Where a person holds
an authority or making a contract with a person whose mental capacity temporarily or
permanently affected by the age factor, illness, and mental or bodily distress.
A person who is affected with a disease is forced by a doctor to enter into a contract for the
medical treatment on unreasonable sum of amount for his professional services. Doctor employs
undue influence.
Dominating role of a party also constitutes a contract under influence.
Also it is a kind in which advantage is obtained that is undue. If the higher authority by using
influence pays market price to purchase of a piece of land from subordinate, will not be
considered an undue influence. Who has onus/burden to prove whether undue influence has
used. As a general matter of principle onus of proof lies on the person who alleges or claims the
undue influence, whose consents are taken by dominating party, and who alleges the existence or
non-existence of the agreement. But S. 16, which has special provision to establish evidence,
provides, that onus of proof lies on the person who takes consents with undue influence. He has
to prove that he has not exercised the undue influence. Special law prevails on general law.
Special laws are preferred on general law and exclude the law of evidence. Special law is
applicable on coercion and undue influence cases only. General law will deal all the rest cases.

1. Fraud (Section 17): "Fraud" means and includes any of the following acts committed by a
party to a contract, or with his connivance, or by his agent, with intent to deceive another
party thereto of his agent, or to induce him to enter into the contract.

Where the consents are obtained fraudulently, that is not contract being no free consents. A & B
enter into contract while A obtains consents from B fraudulently. B alleges/claims consents are
obtained fraudulently.
Active Concealment of Fact: A thing, which, is intends to be sold having defects, is called active
concealment of fact. A is going to sell piece of land, which is already mortgaged. Seller is
responsible to disclose this fact to buyer before it is sold. All the consents, which depend on the
disclosure of fact, if not disclosed, are active concealment of fact.
If a seller intends to sell a piece of land worth of which is Rs. 1,500,000/- in market on a price of
Rs. 1,200,000/- which is less than actual rate, with an intention that he will run away after
receiving of token money or full payment, is fraud. All the consents, which are obtained with an
intention that the purpose would not be fulfilled, are fraud. All such acts constitute fraud.
Coercion and fraud are also offence and are liable to start criminal proceeding against offenders.
These contracts are void-able.

4. Misrepresentation: Consents that are obtained on the base of wrong statement. How the
misrepresentation is constituted? What are its ingredients? We are referred to S. 18 that define
misrepresentation. For example, a man passes a statement, he has belief on its truth, he has no
intention of misleading, deceives, but there is moral fault in it and second party for which
statement is passed, mis-leaded. In other words it is a pure accident. If a party willfully makes a
wrong statement about the subject matter for the purpose of other party to give consents, this
conduct amount a fraud, and if this representation is passed innocently, this amounts
misrepresentation. Generally speaking it is an untrue statement but one believes it to be true.
This statement is passed without solid source of information. All the given information is
supposed true but actually they are untrue.

Two parties are going into contract. If there is no relationship or trust, other party will go to
investigate the authentic statement, but if the first party is trustworthy then it is moral obligation
on the part of first party to disclose whether any flaw exists in the matter. If the defects are not
disclosed then first party constitutes the breach of duty, which it is also, an offence. A man was
going to elsewhere by air, and there was short time. Another person brought a document for
signature, he signed the document being in hurry without checking it which beard some mistakes
or faults. Held that it was breach of duty. Where there is no disclosure of faults or defects, that is
called misrepresentation.

If a party commits mistake even innocently regarding the subject matter to obtain consents for
agreement is also a misrepresentation. In a case party gone into contract for the purchase of a
boiler. Seller was responsible to deliver the boiler at the destination of buyer. Buyer innocently
represented that there is practicable road all the way, while, as a matter of fact, at one point there
was a suspended bridge not capable of bearing the load of boiler. Held void-able agreement on
the option of seller or defendant.

5. Mistake of fact (Section 20): "Where both the parties to an agreement are under a mistake as
to a matter of fact essential to the agreement, the agreement is void".
Illustration: A, makes an agreement in Japan for the purchase of 100 Suzuki Cars. He receives
documents of contract in Lahore on January 05, 1999, that ship has been departed from Japan on
January 01, 1999, and will reach at Karachi port on January 10, 1999. A agrees to sell B 100 cars
that are in transit. Later it comes to know that ship was sink before making agreement. The
agreement is void because both the parties were under mistake of fact. It is important to mention
that there are two types of mistakes of facts, i.e., Unilateral mistake of fact in which only one
party commits mistake of fact, and Bilateral mistake of fact, in which both the parties commit
mistake of fact. A makes an agreement with B to sell the goods to be imported from Japan. Later
importer comes to know that he has to pay a certain tax in Japan and he is not going to fulfill the
agreement. This is unilateral mistake of fact which do not makes agreement void. A has to bear
such loss. Consents of B are free so contract will be lawful.
A, purchases a cloth from a shop which seemed to be made in England, but later disclosed it was
made in Pakistan, is unilateral mistake of fact. Seller has not sold the cloth claiming made in
England, so it is valid contract.
A is going to make contract with B for the sale of a certain horse. It turns out that the horse was
dead at the time of bargain and both the parties were unaware of fact. This contract is void.
A, son of B, make an agreement to sell his father’s property to C, but father of A dies before
making agreement will make it void.

Mistake of Law: It is presumed that every man knows the law and does not commit mistake
upon its execution. Mistake of law is culpable negligence on his part. It is generally said that
ignorance of law is no excuse. A person commits a mistake of law and later says I was unaware
and if I had knowledge I must refrain to commit it. It is not a defence. This is not acceptable and
maintainable. Consents are given without knowledge of law is considered free consents.
A makes an agreement with B. At the time of execution of agreement seller says that at the time
of agreement I was unaware that I have to pay certain tax which is not affordable for me, so my
consents were not free. This contract is no void and A is liable to pay damages. Onus of proof
upon who alleges/claims. Since foreign law is not enforceable in our country so all contracts on
the base of mistake on foreign law would be treated as mistake of fact rather than mistake of law.

Upon the mistake of fact both parties are provided opportunity for plea. If one party decide to
remain continue the contract and other one decides contrary, it will come void.

2. THE REQUIREMENTS OF A CONTRACT UNDER THE LAWS OF PAKISTAN

A contract is a result of mutual understandings between two parties on any subject matter, where
two parties agree to enter in an contract and to finalize the terms and conditions for such
contract they brings a soft copy, or orally discussed terms and condition into hard copy. They
make two original hard copies for their record and for any evidence where it may require. The
process for making hard copies and for making a perfect evidence for future reference, following
steps shall be taken carefully.

1. Stamp Paper

Stamp paper shall be used in each hard copy of the contract according to value scribed in Stamp
Act 1889, the purpose of the Stamp Act is to protect the public revenues and not to interfere with
commercial life by invalidating instruments vital to the smooth flow of trade and commerce. If a
document has been executed without the stamp paper, for which it was required, such document
can’t be admitted in the evidence. It shall be deemed the discrepancy of the document. However,
merely because an instrument can’t be admitted in evidence, does not mean that such instrument
is invalid. The stamp duty chargeable on a document shall be decided on the date of the
execution of the document, but the penalty levied is to be determined at the time of its
presentation for being used as evidence. In this regard two things shall be important.
The vendor should be registered and licensee of revenue department under the Pakistan Stamp
Rules 1925, Punjab Stamp Rules, 1939 and Supply and Distribution of Stamps Rules 1954
enacted under Section 74 of the Stamp Act 1899.

The Stamp paper which has been issued by vendor, should be registered with vendor i.e it should
be entered in his register and has been affixed with a specific serial number, in addition to this it
should be proper stamped by such vendor and signed by him.

In smooth business relationship no party shall care these things however in case of any dispute,
at time of evidence these thing have much effect. Most probably court called that stamp vendor
for verification who has issued the stamp paper for the document which has been presented in the
evidence. Some time while examining the contract it appears that issuance date of the Stamp
paper does not match to the date of execution of contract. For example if Stamp Paper has been
issued on 8 of a month the execution should be exact same date or any date after 8, not earlier
date i.e 7 or 6. This may create conflict in document.

2. Initials on each Page with stamp of the Company

The purpose behind this requirement is that, it prevents one of the parties from later inserting a
false or modified page. It prevents fraud in the enforcement of contract. It makes difficult for a
party to change the contents of an agreement once. In case of change of modification or
correction even in a single word or letter both parties shall have to initialize on the place where
they have changed or corrected the word or letter and affix the stamp of the company. If the
contract is signed between two individuals then both parties have to affix their initials and thumb
impression son each page. This act parties further protect the documents from any forgery. This
preemptive becomes much helpful when a dispute arises between parties and matter come in
litigation. As per settled principle Court can verify thumb impressions and signatures on its own
motion [PLJ 2005 Lahore 1011]

3. Signatures of Authorized Persons

An authorized signatory is officer or representative who is vested with powers to commit the
authorizing organization to a binding agreement. He is also called signing officer or singing
authority, which has been delegated legal power by authoritative body to organizational positions
appointing them as agents of the organization for general or specific purposes. The signature of
the authorized person basically executes the agreement, which is called final execution. It should
be noted that, if a signatory at the time of signing the agreement writes the date of signing it shall
be the execution date. If he only signs the agreement without writing any date then both parties
with mutual consent shall write the date of execution in the agreement, however the execution
date shall be the date after the issuance of the stamp paper. A simple mistake cans create the
conflict in the document.

4. Witnesses

As per Islamic principle of evidence Qanun-e-Shahadat Order 1984 provides that two
witnesses shall be required in matters pertaining to financial or future obligations. Any type of
contract/ agreement shall be attested by two witnesses and following information regarding the
each witness shall be provided in the contract i. name and signature ii. Thumb Impression iii.
CNIC No. and iv. Addresses

For the purpose of managing the contracts a tracking number or an identification number should
be displayed on the document for reference and verification purpose.

5. Registration

If the contract/agreement is related to the sale or purchase of immovable property or lease of

immovable property, The Registration Act, 1908 shall be applicable to all such documents. If a
document/Agreement for lease has been executed between parties for one year or more than one
year it should be registered; otherwise it is not effective unless it is registered with concerned
Authorities. Many times it has been assumed that using a stamp paper in a contract is registration
of the agreement, but the registration of stamp paper with vendor does not mean the registration
of agreement it is misunderstanding in applicability of stamp act 1899 and The Registration Act,
1908. For the clarification purpose the difference in applicability of these Acts should be noted
that,

The Stamp Act confirms the validity of a stamp paper

The Registration Act confirms the Validity of the document registered under the Registration
Act.
The Purpose of the Stamp Act to raise and protect the Public revenue and the purpose of the
Registration Act is to protect the public property or interest of parties.
The Authorized vendors are responsible to maintain the record of Stamp papers, distributed or
sold by them, for the protection of public from fraud or any type of cheating etc. They attend the
Court t in the evidence if any time called by any honorable court for the verification of stamp
paper which has been used for the execution of the document which has been presented in the
evidence. The Registrar under the Registration Act maintains the record of the documents related
to the immovable property in his territory which may verify the true ownership of the person
when it is required in case of any dispute . This is for the safety of property of the public.

The vendor of a Stamp paper who registers it, only verify the stamp paper which has been issued
by him, he can’t verify the document for which it has been used. The Registrar under
Registration Act verifies the document which has been executed between the Parties.

The vendor of stamp papers get license for such work under the Stamp Rules, he is not public
servant and a registrar under the Registration Act appointed by Provincial government and he is
a public servant.

The purpose of all requirements is to make a document as perfect as practicable and possible
that, it may be used for any time in case of dispute as evidence. These are not legal requirements
which may invalidate the document; however the registration of stamp vendor and in case of
immovable property document the registration is legal requirement. The purpose to bring an
understating into written form is to keep proof and evidence of that understanding in
documentary form, so keeping a perfect document is a perfect evidence which has always vital
role in case a dispute arises.

3. BOILER PLATES CLAUSES OF CONTRACT AND RELEVANT LAW OF

PAKISTAN

There are five (05) Standard Clauses of a contract which are called Boiler Plates, these clauses
are incorporated in every type of a contract irrespective of its nature, subject matter, strength,
value, or level of interest.

1. FORCE MAJEURE: Force majeure literally means "greater force." When used in a contract,
the force majeure clause is one of five boilerplate clauses, which clauses normally are written
using standard, universal language.
Force majeure is a doctrine that operates to excuse a party from performance of a contractually
imposed obligation when "unforeseen occurrences, subsequent to the date of the contract render
performance either legally or physically impossible, or excessively difficult, impractical or
expensive, or destroy the known utility which the stipulated performance had to either party."
Intervention of such an event relieves the obligor from the obligation to perform, and the contract
is terminated. The existence and operation of force majeure as an "excuse" doctrine assumes that
the purpose of a contract is to ensure both enforcement of obligations and certainty in
commercial transactions. The force majeure doctrine serves to mitigate this goal of strict contract
enforcement with notions of justice and fairness. [1]

Relevant Law

“Force majeure is a civil law concept that has no real meaning under the common law. However,
force majeure clauses are used in contracts because the only similar common law concept - the
doctrine of frustration”. [2]

Force Majeure is a term of Civil law and is sometimes referred to in its Latin form as “Vis
major.” [3]

“Force majeure is present in common law as the doctrine of frustration of contract. This doctrine
says that a contract will be frustrated if its fundamental purpose is destroyed.” [4]

“The common law equivalent of force majeure is usually said to be the doctrine of frustration of
contract.” [5]

It is well understood that the Term Force Majeure is basically used in civil law countries,
however its equivalent term in common law is doctrine of frustration of contract. Pakistan is
based on English common law with some provisions of Islamic law, this principal the doctrine of
“Frustration of Contract” has been laid down in section 56 of the Contract Act 1872 (the “Act”),
that may be defined as premature determination of an agreement between parties, lawfully
entered into and in course of operation at the time of its premature determination, owing to the
occurrence of an intervening event or change in circumstances so fundamental as to be regarded
by law both as striking at the roots of the agreement and as entirely beyond what was
contemplated by the parties when they entered into the agreement. [6]
Case Law
The doctrine of frustration comes into play in two types of situation first where the performance
is physically cut off and second where object has failed.

Justice Wajihuddin Ahmed adjudicating upon the case of Pakistan Industrial Credit and
Investment Corporation Ltd. Vs Habib Enterprises Ltd. has held that the Doctrine of
Frustration comes into play on account of unfolding of events subsequent to contract, and such
turn of events were not in the contemplation of parties [1989 CLC, PLD 1980 SC]. [7]

After the parties have made the contract, unforeseen contingencies not contemplated by parties
as force majeure, may occur which prevent the attainment of purpose that they had in mind.
Under the circumstance parties are discharged from further liability. Starting with the case of
Taylor Vs Caldwell in 1863, a substantial and comprehensive doctrine has gradually been
evolved by courts providing that “if the further fulfillment of the contract is brought to an abrupt
stop by some irresistible and extraneous cause for which neither party is responsible, the
Contract shall terminate forthwith and the parties stand discharge.” [8]

Effect of frustration is result of termination of contract as to the future only, unlike one vitiated
by mistake, it is not void ab initio. It starts life as a valid contract, but comes to an abrupt &
automatic end the moment that the common adventure of parties is flustered. Every party must
fulfill his contractual obligation so far as they fallen due before the frustrating event, but he
excused from performing those that fall due later.

Plea of frustration is maintainable in law only when:

The intervening circumstance are such that they are so fundamental as to destroy the bases of
contract;
The terms of contract show that the parties did not contemplate the possibility of such an
intervening circumstances.
None of the parties has deliberately brought about the supervening event by own choice.
International Chamber of Commerce (ICC) has produced a hardship clause that can be
incorporated into a contract to provide for the introduction of export restrictions. The clause
comes into play where continued performance by a party under the contract becomes
“excessively onerous due to an event beyond its reasonable control which it could not
reasonably”

The Parties of a contract almost invariably include the language in their charters concerning
situations which would otherwise fall to be determined by the courts to be or not to be events of
frustration or, in civil law context, force majeure. Such clauses are called Force Majeure even in
common law countries i.e Canada, U.K.

However a flexible language of Force Majeure clause in a contract is prevents the contract from
automatically termination, in case where the subject matter of contract is available but the
circumstance, conditions are too hard to perform the obligations under it.

2. CONFIDENTIALITY
It has been argued that the confidentiality clauses keep the company safe from disclosing
information, particularly provided in contracts. This argument is circular, of course, because
companies put the clauses into the agreements themselves. However, in most cases,
confidentiality clauses are not the major barriers to disclosure that parties claim. Parties can
generally disclose by consent or unilaterally, pursuant to law. As it turns out, there is
considerable margin for action if and when contract parties decide to make disclosures.

Perhaps the most widely made and unchallenged claim for confidentiality is that it protects
commercially sensitive information. But this claim is only the beginning of an analysis, not the
end. There is no technical definition of commercially sensitive information.

Based on the general confidentiality clause used in most contracts, contracts can generally be
disclosed in most cases. However, if both parties are unwilling to disclose a contract, they can
rely on the confidentiality clause to avoid disclosure.

Confidentiality Agreements/Nondisclosure Agreements

confidentiality agreements, sometimes called secrecy or nondisclosure agreements, are contracts

entered into by two or more parties in which some or all of the parties agree that certain types of
information that pass from one party to the other or that are created by one of the parties will
remain confidential.
Confidentiality agreements or a clause in an agreement performs several functions. First and
most obviously, they protect sensitive technical or commercial information from disclosure to
others. One or more participants in the agreement may promise to not disclose technical
information received from the other party. If the information is revealed to another individual or
company, the injured party has cause to claim a breach of contract and can seek injunctive and
monetary damages. However, there is no consensus definition of “commercially sensitive
information.” The term is not in the authoritative legal dictionary, Black’s Law Dictionary, nor
were we able to find a settled definition in other legal documents. It is generally understood to be
any information that has economic value or could cause economic harm if known. What
constitutes “commercially sensitive information” varies in different industries and in markets
within those industries.

Second, the use of confidentiality agreements can prevent the forfeiture of valuable rights. A
properly drafted confidentiality agreement or clause in agreement can avoid the undesired and
often unintentional forfeiture of valuable rights.

Third, confidentiality agreements or clauses define exactly what information can and cannot be
disclosed. This is usually accomplished by specifically classifying the non-disclosure
information as confidential or proprietary. The definition of this term is, of course, subject to
negotiation. As one would imagine, the company or individual disclosing the confidential
information (the "discloser") would like the definition to be as all-inclusive as possible; on the
other hand, the company receiving the confidential information (the "recipient") would like to
see as narrowly focused a definition as possible.

Relevant Law

There is no law related to the confidentiality of information which makes obligatory or fix the
criteria of confidential information which is exchanged between Parties through a contract. It is a
moral duty, for which they legalize through a contract. Some statutory public organizations have
been obligated to maintain the confidentiality of sensitive information and private companies
have been directed through their regulating bodies to maintain confidentiality of their costumers’
information.

For example the rule of duty of confidentiality owed by banker to its customer had been given
the status of legal duty in case of Tournier Vs National Provincial and Union Bank of
England. Before that presumption was that it is a moral duty, as the same was argued by the
defendant in Tournier case that it is the moral obligation, but the court of appeal clarified that
beside the moral duty it is also a legal duty and the breach of it will give the claim for damages.
the qualifications can be classified under four heads:(a) where disclosure is under compulsion by
law; (b) where there is a duty to the public to disclose; (c) where the interests of the Origination
require disclosure;(d) where the disclosure is made by the express or implied consent of the
customer”

The most important public interest at stake is the right to information, which enables democratic
accountability. The public’s right to government-held information has been recognized by
international human rights courts and implemented in national “sunshine” and freedom of
information (FOI) laws.

In Pakistan, the 18th Amendment, adopted in April 2010, inserted a new Article 19A in The
Constitution of Pakistan states: “Every citizen shall have the right to have access to information
in all matters of public importance subject to regulation and reasonable restrictions imposed by
law."

In conclusion, there is no law which specifically makes obligatory to insert the confidentiality
clause in a contract, or fix the terms. In case the confidentiality clause has not been incorporated
in the Contract it will be moral duty of both parties to maintain the confidentiality of the
information which has been shared between them. If the clause has been incorporated, than
obligations and rights of both parties regarding the duty of confidentiality shall be governed
under theses contents of the clause.

3. ARBITRATION

The concept of arbitration is not new, it is being used since centuries in different civilizations. It
is an old method that was known and used in old times during successive civilization's epochs.
Aristotle said that disputed parties might prefer the arbitration than judicature, because the
arbitrator perceives the justice while judge considers only the full application of the legislation
[9].
In Hindu Civilization, there was a concept of “Panch Parmeswar” (meaning, decision of five
learned persons when dispute referred to them, is equal to decision of God), which is widely
accepted and applied since ages in Indian traditional life. Even in ancient Rome and Greek
civilizations, arbitration was prevalent since sixth Century B.C. Pound (1959) states that Roman
law does not prohibit submission of disputes relating contracts to the decision of the persons and
since the rules exists to their effect and enforcement (Paranjape, 2006).[10]
The concept of arbitration has also roots in Islamic history and Muslim civilization, before Islam
the arbitration was widely used by the Arabs, and many prominent arbitrators came out whereas
every tribe has its own arbitrators. The most famous case (conflict) before Islam was, placing the
Honorable Holy Black stone of the Kaaba, when the tribes of a Quraish disputed on which tribe
had the right to place the Honorable stone back to its original place after the reconstruction of the
Holy Kaaba. On this critical moment, the arbitrator was the holy Prophet Mohamed (S.A.W).
[11]

A legal process which takes place outside of the courts includes two types
i. Arbitration
ii. Mediation

Arbitration
It is a method of dispute resolution in which a neutral third party, an arbitrator, conducts an
evidentiary hearing and/or reviews written submissions from the parties. Upon consideration of
the evidence, the arbitrator makes a legally binding decision which can be enforced in the same
manner as a civil court judgment.

Parties involved in arbitration are effectively opting out of the court system and submitting their
case for resolution by a neutral, third party. The reasons for selecting vary from case to case.
Arbitration is generally faster, less expensive and more informal than going to court. It also has
the advantage of being private and confidential. Within the limits permitted by law, parties are
free to negotiate the ground rules under which they want the arbitration to take place, such as the
number of arbitrators or whether formal rules of evidence will apply. Binding arbitration clauses
can be written into most kinds of contracts, requiring that in the event a dispute arises in
conjunction with the contract, the parties will go to binding arbitration instead of to court. The
cost of arbitration is generally shared by the parties.

The decision of an arbitrator is as binding on the parties to the arbitration as a court judgment,
and it can be enforced by the courts, if necessary.

Mediation
It is a process in which a neutral third person, the mediator, encourages and facilitates the
resolution of a dispute between two or more parties. It is an informal and non-adversarial process
which has the objective of helping the disputing parties reach a mutually acceptable and
voluntary agreement. With non-binding mediation, decision-making and authority rest entirely
with the parties. The mediator acts as a facilitator, guiding the parties in identifying issues,
engaging in joint problem-solving, and exploring creative settlement alternatives. Although the
process is voluntary and nonbinding, it results in a strikingly high settlement rate. There are a
variety of reasons to select mediation, rather than litigation or arbitration, and it has become
increasingly common for courts to order parties to mediate in cases in which they have not
engaged in settlement negotiations prior to trial.

Difference between Arbitration and Mediation

Arbitration differs from mediation in that once you enter the arbitration process, you are bound
by the arbitrator's decision. Mediation is a negotiation process, in which the mediator helps the
parties negotiate a mutually acceptable solution

Mediation differs from arbitration or trial because the mediator does not make a decision or force
any party to accept a settlement. When you agree to mediate a dispute, you are only agreeing to
attend the mediation session and participate in a good faith effort to settle the matter.

Relevant Law

Arbitration clause in a contract or arbitration agreement is an essential requirement for an

arbitration which clearly state that the dispute must be referable as an arbitration dispute under
the contract. There is no requirement that the Arbitration Clause is mandatory to be inserted in a
contract; however in case of dispute between the Parties, it is essential that the parties should
have been agreed through written agreement or a clause in agreement to refer the dispute to
arbitration. Pakistan adopted by consolidating and amending the Arbitration Act 1940, which
lays down the rules to be followed by the Parties. In year 2000, section 89-A was incorporated
in the code of Civil Procedure, which empowers the court to decide or refer to matter through
Alternative Dispute Resolution (ADR) mechanism.[12]

In the year 2002, the Small Claims & Minor Offences Court Ordinance, was promulgated
Section 14 of the Ordinance empowers the court to refer any pending adjudication to a notified
Salis (Arbitrator).
4. SEVERABILITY (SAVINGS)

The severability clause states that the terms of the contract are independent of each another, so
that if a term in the contract is deemed unenforceable by a court, the contract as a whole will not
be deemed unenforceable. It may contain two parts: (a) savings language to preserve the validity
of all other terms in the event that one provision is determined to be unenforceable; and (b)
reformation language to scale back overly broad provisions to terms and scope that are
enforceable (such as limiting the time and geographic scope of non-compete covenants).

Relevant Law

The function of law and role of court is not to write a contract between parties but the law is to
fix boundaries and lines for a contract and the court has to bring parties in these fixed lines. That
is their matter, and for them to decide, however, the paramount duty of the court is to ascertain
(on an objective basis) the intent of the parties and the real terms of the agreement actually
arrived at. The courts have developed fairly and elaborated the principles of Severability in
voidable agreements. The Principal of Law is that “where a contract consisted of several parts
non-performance of one does not necessarily indicate an intention to put an end to the contract”
[AIR 1914 Bom.312 (DB. 2012 CLD 1136]

Section 39 and 40 of the Specific Relief Act, 1877, indicates to implement the principal of
Severability where an instrument is evidence of different rights or different obligations.

This principal has been applied by the Supreme Court of Pakistan in Mehram Ali v. Federation
of Pakistan (PLD 1998 SC 1445).

In conclusion, there is no provision of law which makes obligatory to write the Severability
clause in a contract, in case of invalidity of any clause of the contract, the court apply this
diligently, however, in case of writing such clause in a contract assist the Parties and the court to
settle matter accordingly.

5. WAIVER OR NO- WAIVER

“Waiver” means to abandon or to relinquish non-vested right by express or conduct.

It is is an international relinquishment of a non-vested right, or such conduct as warrants an
inference of the relinquishment of such right, it implies consent to dispense with or forego
something to which a person is entitled. It is an agreement to release a right for some time does
not amount to waiver of the right. Waiver is a conscious act on the part of a sui juris person
abandoning his legal right.

The expression” waiver” implies the international forbearance to enforce a right and necessarily,
therefore, assumes the existence of an opportunity for choice between the relinquishment and the
enforcement of right. [2982 CLC 772; PLD 1979 Kar.300; 1980 CLC 664]

The main element of the Waiver is “Consent” it is a means of waiving rights in many areas of
law, these areas vary in their standards of consent. For example, in family law consent to
adoption is a means of waiving parental rights and in tort law, consent to bodily touching is a
means of waiving rights against battery

The waiver, abandoned or lapsed or consent may either be expressly made by the person
concerned, or it may be inferred from his conduct (implied) and all other attending circumstances
of the case. [11981 CLC 339]

Legal Principles

Waiver follows from positive act and not from mere omission to act unless there be a duty cast
by law to act in particular way. [1986 CLC 1183]
To prove wavier there should be some clear and justified act or conduct beyond mere silence.
[1997 CLC 1186]
There must be some conscious giving up of a right and a person cannot be held bound unless he
is aware of what exactly he is waiving and what right he is giving up with a knowledge of all the
facts.
Where a person, despite of having full knowledge of violation of his rights of personal nature,
remains silent and does not take any measure for safeguarding same, then such person is deemed
to have impliedly waive his such right. [2002 CLC 166]
The purpose of waiver or non-waiver clause or language in a contract is to protect a party who
excuses the other party's non-compliance with contract terms, and to prevent the parties' course
of conduct under the contract from resulting in the loss of enforceability of the actual terms of
the contract.

Relevant Law

Section 63 of the Contract Act 1872, allows a party to a contract to dispense with the
performance of the contract by the other party, or extend the time for performance or to accept
any other satisfactions instead of performance. To “dispense with” means that the party entitled
to claim performance may waive it. The courts already have lead down the principles as have
been mentioned above that waiver is the abandonment of a right which normally everybody is at
liberty to waive.

[1] Rivkin, David R., Lex Mercatoria and Force majeure, in: Gaillard (ed.), Transnational Rules
in International

Commercial Arbitration (ICC Publ Nr. 480,4), Paris 1993, at 161 et seq.[ www.trans-
lex.org/116100}

[2] Damian McNair. (2012). FORCE MAJEURE CLAUSES. Available:

http://www.dlapiper.com/. Last accessed 24th Jan 2013.

[3] John O'Conner. (2010). Force Majeure, Frustration and Exceptions Clauses. Available:
http://www.docstoc.com/docs/47977184/FORCE-MAJEURE-FRUSTRATION-AND-
EXCEPTIONS-CLAUSES. Last accessed 24 Jan 2013.

[4]Vandana Jaiswal. (2013). Force Majeure Clauses & Doctrine of Frustration of Contract.
Available: http://legalservicesindia.com/article/article/force-majeure-clauses-&-doctrine-of-
frustration-of-contract-1211 1.html. Last accessed 24 Jan 2013.

[5] ibid

[6] Law of Contract by Avtar Singh (6th edition) 1994 Pg.300

[7] Business Laws by Sajid A.Qureshi (1st edition) 2001, Pg 110

[8] Ibid

[9] Dr. Ali Khalil Al-Hudaith (2012) The Arbitration and its Importance.

[10] Dr. Pankaj Kumar Gupta, Sunil Mittal. (2011). Commercial Arbitration in India. 2010
International Conference on Economics, Business and Management. IPEDR Vol.2 (1), 186.

[11] Dr. Ali Khalil Al-Hudaithi (2012) The Arbitration and its Importance. 0

[12] Muhammad Afzal Kahut. (2007). Alternate Dispute Resolution – Mediation. PPMU, Sindh
– AJP, Ministry of Law, Justice & Human Rights. 0 (0), 2.

4. BESPOKE CLAUSES

Bespoke contracts are contracts that are tailored to fit the specific requirements of a project.
Bespoke contracts are often used when boilerplate or standard form contracts are not suitable.
The complexity of the project is one of the main factors that determines which type of contract
makes the most sense. For very complex projects, drafting a bespoke contract may be the best
way to properly create the desired agreement. Bespoke contracts may also be the best fit for
simple supply agreements since standard boilerplate form contracts might include unnecessary
terms and may be too inflexible to achieve the desired result.

Non-Standard Bespoke Forms of Contract

While bespoke contracts are useful under certain circumstances, these contracts might not fairly
or adequately include sufficient provisions for all possible circumstances. Additionally, there can
be many issues with bespoke contracts that are not supported by a history of case law. This is
because the specific issues with various terms have not been ruled on by a court of law and may
be too ambiguous to accurately accomplish the goals of the contract.
Bespoke contracts can be time consuming to create, and disputes regarding the contract's terms
are also difficult to defend and costly to bring into court for resolution. For these reasons, you
must carefully consider whether to use a bespoke contract or a standard form contract for your
agreement.

The Perils of Bespoke Contracts

For engineering projects, the terms in bespoke contracts may be well-intentioned but may also
unintentionally increase the duty of care owed by the engineer or team in question beyond the
common law standard duty of care. Using a term such as “expert duty of care” or “best practice”
can project a higher duty of care on the engineer and adversely determine whether or not the
engineer properly performed his duties.

Additionally, bespoke contracts may inadvertently expose engineers to unlimited liability when
the terms are silent or unclear on the question of liability. If an engineer agrees to a provision for
third-party indemnity, he agrees to compensate his client for any damages caused by himself or
any other party involved. As a result, the engineer ends up taking on much more liability for the
project than may have been intended.

Self-Drafted Contracts Versus Bespoke Contracts – What Is the Difference?

For businesses who want to control and manage their liability, self-drafted contracts are
generally inadequate. Self-drafted contracts might not properly manage the risks of the business
and may include terms that are unenforceable.

Suppliers must make sure that the standard terms used in their boilerplate contracts accurately
reflect their contract and sale process. For example, any discrepancies between the processes
outlined in the contract and the implementation of said processes may result in a finding that the
clause or clauses impacted are unenforceable. For this reason, it is important that both the
standard terms and the contract processes are reviewed on a regular basis with the company's
legal advisors in order to make sure all necessary terms are enforceable.
Choosing Standard Contracts
There are multiple arguments in favor of the use of standard form contracts. These arguments
include:

Standardizing contract terms throughout the industry

A balance between contract terms
Standard form contracts end up including more fair terms that benefit both parties
Standard form contracts are generally provided with instructions and include guidance notes for
proper use.
Bespoke Versus Standard Form of Contracts
When projects are simple, standard form contracts can be useful for both parties. However, when
there are several different parties involved or the projects are extremely complex, a bespoke
contract may be better than the standard form used to accommodate the uniqueness of the
project. It is also important to consider the scope of the project and location, as standard form
contracts that are developed for general international use do not necessarily include or take into
account the laws and customs of individual countries.

Benefits of standard form contracts include greater cost-effectiveness, familiarity to the parties,
and fewer unanticipated anomalies. Additionally, standard form contracts allow the parties
flexibility, as they can include a vast range of variations on the terms, schedules, and options.
These terms can be specifically tailored to ensure the needs of a particular project are properly
met.