Internal Assessment 1

Contracts II (BBA LLB 2018 (Sec A & Sec B))

August 22, 2018

Lannister LLP (Party 1)

Stark Industries Private Limited (Party 2)

Starship Enterprises Limited (Party 3)

Lannister Distribution Private Limited (Party 4)

BARBEQUE TV (Party 5)

I. Lannister LLP with its management team of Darth and Harry has been a leader and pioneer in
the pharmaceutical industry. The business of Lannister LLP over three decades since its
inception involves, manufacturing, development and distribution.

II. Lannister LLP is in the process of developing a product that will put an end to the suffering to
chronic blood diseases. The product prototype is named as ‘Rakamello’. A key component of
Rakamello development has been clinical trials which are heavily regulated by the Government
of Yoda. Lannister LLP is incorporated, registered and has operations in the Republic of Yoda1.

III. One of the regulatory requirements of clinical trial testing is to set down a detailed
representation of the risks that are involved in the testing. Phase 1 of testing to be done by
Lannister LLP requires 50 different samples to be administered to 2 individuals each (100 in
total).

IV. Upon looking into the specifications of the samples presented by Lannister LLP, the
governmental authorities offered a nine month period provisional approval upon the condition
that there shall be a definitive progress report that will be provided one month before the
expiry of the provisional approval and a corporate guarantee be furnished in favour of the
individuals. The grant date of the ‘Provisional Approval’ is August 21, 2018. Should the
governmental authorities, upon review, not confirm the renewal or extension of the certificate
on the expiration date, the approval will be said to have been revoked, expired or terminated, as
the case maybe.

V. For laboratory testing, Lannister LLP has various facilities that are developed by Stark Industries
Private Limited (“Stark Industries”), who are known for its state-of-the-art infrastructure and
developmental capabilities. Stark Industries has clinical trial experience and also developed
specific chambers for testing and containment of all different samples. The purchase price of the
contract of development between Lannister LLP and Stark Industries is 400,000 galleons2 (the
currency of Yoda). The contract is valid for a period of 5 years and is granted on March 01, 2018.
The product is to be developed in four phases3 – Development (Phase 1), Testing (Phase 2),
Disqualifying (Phase 3), Manufacturing (Phase 4) and Distribution (Phase 5). The Testing
commenced on September 01, 2019.

1
It is assumed that all parties are incorporated, reside at and are regulated by the laws of the Republic of Yoda.
2
You can assume that the value of 1 galleon = 100 Pounds.
3
Phase 1 is development of the samples, Phase 2 is the testing of all samples. Phase 3 is separating and discarding
all failed samples. Phase 4 is manufacturing of successful product. Phase 5 is distribution and sale to market.

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VI. Given the sensitivity and containment, Government of Yoda requests that a corporate
guarantee be furnished to reassert the quality of the product. Lannister LLP requests Stark
Industries to jointly offer the corporate guarantee to the individuals to show value to the
product. The total value of the corporate guarantee is 120,000 galleons.

VII. The contract between Stark Industries and Lannister LLP sets out a specific indemnity clause in
favour of Stark Industries towards any damages that may arise out of any amounts lost owing to
non-procurement and renewal of the governmental licenses. Furthermore, the indemnity clause
states that at least 5 of the samples will qualify for Phase II. Should this test fail, Lannister LLP
will agree to paying Stark Industries 35% of the contract price as liquidated damages.

VIII. Starship Enterprises Limited (“Starship”) is a joint venture partner with Lannister LLPs in
Lannister Distribution Private Limited (“LDPL”), with a shareholding of 51% in LDPL. The object
of LDPL is distribution. The remaining 49% is owned by Lannister LLP.

IX. The operational arrangement for LDPL has Starship to infuse capital into LDPL as and when
required and Lannister LLP to take care of the ‘day to day affairs’. The ‘day to day affairs’ which
includes authorizing distribution and marketing contracts, signing off on content, determining
the manner of distribution and authorizing officers of LDPL to represent on behalf of Lannister
LLP. Starship agrees to offer a corporate guarantee of 150,000 galleons in favour of Lannister
LLP to Stark Industries. Further, the joint venture agreement between Starship and Lannister LLP
which is valid for a period of 3 years from 01.11.2017 includes an indemnity clause which is as
follows:

INDEMNITY

1.1 Lannister LLP and LDPL (“Indemnifying Persons”) agree to jointly and severally
indemnify, defend and hold harmless Starship, and its respective directors,
officers, managers, employees and agents (“Indemnified Persons”) promptly
upon demand at any time and from time to time, from and against any and all
losses to which any Indemnified Persons may become subject, insofar as such
losses arise out of, in any way relate to, or result from:
(i) Any mis-statement or any breach of any of representations, or
(ii) any actual or threatened claim, legal action, proceeding, suit, litigation,
prosecution, mediation, arbitration or enquiry by or against any
Indemnified Person, arising out of any act, deed or omission by the
Lannister LLP and /or LDPL and/or any event, matter or circumstance
arising or existing in relation to LDPL, and/or
(iii) any and all third party claims.

1.2 Any loss suffered by Starship and/or LDPL as a result of a breach of any
representations and/or covenants under this agreement shall be deemed to be a
loss for Starship.

1.3 Claim Procedure and Period

1.3.1 Notwithstanding anything contained in this clause, a claim may be
brought by the Indemnified Person, by giving a notice of the claim to the

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Indemnifying Persons, as applicable, before the expiry of the Claim

Period (as defined below). The notice of such claim shall give the
Indemnifying Person a period of 30 (thirty) days to cure the breach or
default referred to in the claim, if capable of cure in the reasonable
opinion of the Indemnified Party and no liability shall be incurred by the
Indemnifying Persons unless such party has failed to remedy such breach
or default within the said 30 (thirty) day period. In the event that the
breach is incapable of cure, or, to the extent so capable, has not been
cured within the aforesaid 30 (thirty) day period, the relevant
Indemnifying Persons shall promptly make payment in respect of such
claim to the Starship as soon as practicable.

1.3.2 For the purpose of this agreement, the “Claim Period” shall be unlimited
(i) in relation to claims arising out of breach of any representations, (ii)
in relation to claims arising out of breach of any representations that
could be open to assessment and scrutiny by any governmental
authority; (iii) in relation to all other claims arising out of breach of any
other representations and (iv) in relation to all other claims (including
third party claims), within the time period specified under law.

1.4 Limitation of Liability

1.4.1 Subject to the provisions of this clause, the Indemnifying Persons shall
not be liable in respect of any claim by Starship for a breach of a
representation:

(i) unless the amount in respect of all claims (i.e. the aggregate
amount of any claims that qualify in terms of De-Minimis Loss)
exceeds a total sum of 15000 galleons (“Liability Threshold”) (in
which event Starship shall be entitled to claim the whole amount
of such claims and not merely the excess); and

(ii) unless and until the amount in respect of any individual claim (or
a series of similar Claims) that shall be calculated towards the
Liability Threshold exceeds 5000 galleons (“De-Minimis Loss”).

1.5 Additional Remedies

The rights of an Indemnified Person pursuant to this clause shall be in addition to

and not exclusive of, and shall be without prejudice to, any other rights and
remedies available to such Indemnified Persons at equity or law including the
right to seek specific performance, rescission, restitution or other injunctive
relief, none of which rights or remedies shall be affected or diminished thereby.
Further, the Indemnified Persons shall be intended third party beneficiaries of
this clause and notwithstanding any other provisions of this agreement, the
Indemnified Persons shall be entitled to enforce the provisions hereof.

Starship agrees and undertakes to Lannister LLP and LDPL that it shall not make

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any claim against them in respect of any of the indemnification payments to be

made by LDPL to Starship under this clause in respect of a misrepresentation,
inaccuracy or omission in or from information or advice provided by LDPL in
relation to the representations.

Without prejudice to the rights available to it hereunder, Starship may cause

LDPL to take all necessary actions and make claims for loss in its own name to
the extent a breach of any of the representations has, in the reasonable opinion
of Starship, affected LDPL.

X. LDPL engages Boward Balone, a renowned personality who is sought after for brand
endorsements to make early product announcements as a part of the marketing campaign.
Jeffery Musk who is the head of marketing at Lannister LLP, while informed that there is no
ready product which could be sold yet, devises this campaign as a strategy to build hope and
knowledge to enable sales at a later stage. Many experts and advertising monies have been paid
to ensure that a successful launch to market possible.

XI. BARBEQUE TV has been in the business of running pharmaceutical advertisements. The
management of BARBEQUE TV is strict in terms of conducting detailed due diligences on the
products and their authenticity. A ‘quality approved internal certificate’ is issued before any
product is launched. Given the market reputation and sheer size of Lannister LLP, BARBEQUE TV
agrees to waive this right and gives a go ahead to advertising Rakamello. The management of
BARBEQUE TV is also swayed by the fact that Boward Balone is known to endorse only those
products that are of superior quality. However, since Jeffery Musk and Boward Balone have
known each other for over twenty years, Boward has agreed to lend his reputation for the
product.

XII. BARBEQUE TV has agreed to run the adverts giving it credibility. As internal practice, BARBEQUE
TV has asked for two irrevocable and unconditional bank guarantees, which could be invoked
and encashed should Rakamello be faulty and not make it to market. Starship has been a client
of VoldeBank for over a decade and has been also a high quality and credit rated customer.

XIII. VoldeBank on the representation of Starship, specifically in relation to the standard of the
product and the reputation of LDPL being a run and operated with the highest standard of
ethics, offers the necessary bank guarantees to the amount of 60,000 galleons, upon any
reputational damage suffered to BARBEQUE TV as a result of pre-marketing Rakamello. The
period of the guarantee is from 25.11.2018 to 01.05.2019.

XIV. The marketing of Rakamello also includes pre-orders where LDPL obtains a reserve fee of 50
galleons from each purchaser. This revenue is distributes equally between LDPL, BARBEQUE TV,
Lannister LLP and Boward Ballone. On December 01, 2018, as a holiday cheer breakthrough
innovation, the adverts have commenced. In a span of four months of adverts, 700 persons have
pre-ordered the product.

XV. All profits on Rakemello sale are shared as 50:50 by Lannister LLP and LDPL. Jeffery Musk has
been pocketing 10% of the profits earned on the pre-orders on a monthly basis and has also sold

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200 of the samples that were a part of Phase 2 to the general public. As on March 25, 2019, 5
samples have said to have failed at Phase 2. The Government of Yoda does not renew the
‘Provisional Approval’ and has barred Stark and Lannister LLP from further pharmaceutical sale.
BARBEQUE TV has lost its broadcasting rights. 70 individuals who had opted for the clinical trials
are suffering from after-effects of Rakamello.

Build a case on behalf of your Client (party that you are allotted) based on the principles of indemnity,
guarantee and agency.4 Please note that your arguments must explicitly: (i) identify the party you
choose to make claims against / sue and (ii) detail the remedies that you claim against parties5.

4
It is assumed that the principles of the Contract Act, 1872 and case laws / regulations of Indian laws apply to the
Republic of Yoda.
5
It is at the discretion of the student to create options in the form of remedies (monetary or otherwise). This
would replace a prayer or a relief sought in court.