Contract Law & Management

Dr. D. S. Sengar
Professor and Chairman, Legal Management Group
Indian Institute of Management Lucknow
 Why Law of Contract?

• To ensure expectations created by promise

• To develop confidence that rights existing today will be
enforced tomorrow
• To protect and enforce contractual rights
• To regulate the behavior of other parties
• To ensure that freedom of contract is not misused

Where to apply ?

• Every activity of the commercial world

• Foundation for other branches of commercial law
• What is idea behind the contract ?

• Meeting of mind through offer and acceptance

• Common consensus/ mutuality of mind

 CONTRACT : LAW & MANAGEMENT

• Modern Economy rest in law

• In today’s business world contracts are a necessity

• Numerous laws, regulations and unforeseen events make contracts

complicated

• Business, government and organizations need to understand:

intricacies involved in contract formulation, interpretation, review,
negotiation, performance, enforcement & the remedies in case of
breach

• Parties need to know the strengths, weaknesses, risks and missing

terms before signing an agreement

• Thus, final agreement should be effective and enforceable

 Contract management

• Process which ensures that both parties to a contract

fully meet up their respective obligations in order to
deliver business and operational objectives

• An understanding of legal issues in contract formulation

and management will helps:

• To avoid the pitfalls in contracting

• To make it easier to deal with lawyers and arbitrators
• To guarantee for avoiding loss and profitability to the
organization.
 What is a Contract?
• An agreement enforceable by law is contract

• An agreement is set of promises forming the

consideration for each other

• A Contract is an agreement which is intended to be

enforceable at law and

-is constituted by acceptance of an offer

-to do or to abstain from doing some act.
• A contract is an agreement between two
or more persons:
• (individuals, businesses, organizations or
government agencies)
• to do, or to refrain from doing, a particular
thing in exchange for something of value.

• Contracts generally can be written, using

formal or informal terms, or entirely verbal.
• The terms of the contract - the who, what,
where, when, and how of the agreement -
define the binding promises of each party
to the contract.

• If one side fails to live up to his/her part of

the bargain, there's a "breach" and certain
remedies for solving the differences are
available.
 Key elements of a binding contract

• A meeting of the minds between the parties

demonstrating they both understand and agree to the
essentials of the deal -rights and obligations : not only
communication of intention

• Competent Parties - Legal competency- A drugged or

mentally-impaired person and Minors cannot, generally,
enter into a binding contract

• Consideration - something of value in exchange. No

side can obtain something without providing something
in exchange.
• Intension to create Legal relationship:
• No obligation if parties never intended to create legal relationship.
even there is acceptance and consideration

• Lawful object: Agreement fulfilling all conditions must not be

unlawful object

• Putting the deal down on paper : to avoid future

misunderstandings and disputes (although oral contracts are also
valid)

• Every agreement and promise enforceable at law is contract

 Why Contract Management :

• Allow the parties an opportunity to:

• Clearly define their obligations to and expectations from each

other

• Limit their liability

• Lay out payment terms

• Divide up business risks

• Make sure each side understands its responsibilities

 Management of Contract

After contract is concluded, It is important to comply

legal and contractual requirements

• Monitor performance:
• Both parties should check that the other is fulfilling its
obligations - timescales and payment plans are being
adhered to.

• Have regular project meetings: to ensure that

everything is going according to plan and to solve any
problems as they arise.

• Avail Contract management advice : for most effective

contract management job in the most effective
manner possible.
• Identify yourself whether a legal issues is involved
before resorting court and hiring an advocate and
manage them before they legal problem

• Maintain Records to avoid business and reputation

loss : have contact document , mails and other
documents evidences you need should things
deteriorate into a breach of contract and
enforcement actions become necessary.

• Do not change contract conditions unilaterally, it will

amount to counter offer , not enforceable
Formation of Contract
 Formation of A Contract
• Offer and Acceptance – Invitation to make offer
General Offer, Counter Offer
• Negotiation is not offer
• Communication of offer may be express or
implied
• Communication must intend legal relationship
• Communication must be clear and definite
• Performance may amount to acceptance
• An acceptance of an offer, in ignorance , is no
acceptance.
 Formation of Contract
Generally Involves :

• Making of a proposal
• When one person signifies to another his willingness to do or to
abstain from doing anything, with a view to obtaining the assent of
that other to such act or abstinence, proposal is made

• Process of Negotiation to reach Consensus-ad-idem

• Parties apply their minds to make offer and acceptance and create
contract

• Acceptance of proposal to perform

• When the person to whom the proposal is made signifies his assent
thereto, the proposal is said to be accepted
• Preparing Draft Agreement with relevant clauses
(include all terms and conditions)

• Ensuring all legal requirements and Prohibitions

• Under Contract Act - section 10, 29 and 56 etc. are met

• Signing the Agreement for performance - Proposal is

communicated and accepted

• Signed document is a enforceable

agreement- A Contract