Contract law

Mukundhan Srinivasan
Flashcards by Mukundhan Srinivasan, updated more than 1 year ago
Mukundhan Srinivasan
Created by Mukundhan Srinivasan almost 5 years ago


1 Business law Flashcards on Contract law, created by Mukundhan Srinivasan on 10/22/2015.

Resource summary

Question Answer
Contract - Basic features An agreement - when legally enforced becomes a contract; Even an oral agreement can enforced legally! Quality of contract has nothing to do with enforcement ; enforcement is more a systemic process
Contract law framework contract law is pretty facilitative: -Simple -Easy to use -Direct
How do you determine if you are contractually bound? Clear proposal - Definite Acceptance - Matching (all elements of proposal are accepted) Consideration / Value - Commensurate (relative sense of value to each other)
Standard form contract A standard form contract (sometimes referred to as an adhesion or boilerplate contract) is a contract between two parties, where the terms and conditions of the contract are set by one of the parties, and the other party has little or no ability to negotiate more favorable terms and is thus placed in a "take it or leave it" position. Ex., Acknowledgment on the website rules and regulations on back of the film ticket
Performance of Contracts: RFP MoU EoI SoW RFP : request for proposal is a solicitation made by an agency,intending to procure a service,good or commodity, to potential suppliers to submit business proposals ; RFPs are not contracts ...RFPs are not legally binding as it does not create an obligation
Performance of Contracts: MoU MoU: is a formal agreement between 2 or more parties to establish official partnerships. Whether an MoU is a contract or not depends on how it is formulated...
Performance of Contracts: EoI EoI : Expression of Interest is the process of seeking an indication of interest from potential service providers who are capable of undertaking specific work. Not a contract...
Performance of contracts: SoW SoW:A statement of work (SOW) is a formal document that captures and defines the work activities, deliverables, and timeline a vendor must execute in performance of specified work for a client. The SOW usually includes detailed requirements and pricing, with standard regulatory and governance terms and conditions SoW is a contract and enforcible An SoW takes precedence over MoU because SoW is the latest document and usually more detailed than MoU
What is "Discharge of Contract"? Discharge means , the termination of contractual relations between the parties to a contract... All the rights and obligations of the parties under the contract come to an end
4 different ways of "Discharge of contracts" 1) By performance 2) by Agreement 3) by Breach 4) by Impossibility
What is Discharge of contract - by performance? A contract becomes discharged thru performance , when all the parties of the contract have fully performed their contractual obligations!
What is Discharge of contract - by agreement? Parties agree to terminate the contract;
Different methods of Discharge by agreement : Novation Novation: Novation creates a new contract; It discharges and extinguishes the original contract. For example, X borrows Rs. 5,000 and writes a promissory note in favour of Y for 3 months. After 3 months, X goes to Y and expresses his inability to pay the amount. X writes a new promissory note for Rs. 5,000, the old promissory note is discharged by the new one. This novation is between the old parties i.e. X and Y. The following are the essential characteristics of novation: 1. Novation occurs with the consent of both the parties. 2. The new contract must be capable of enforcement at law. If it is not enforceable, the parties shall be bound by the old contract. 3. The agreement to substitute the new contract for the old must be made before the expiry of the time of the performance of the original contract and must not be made after the breach of the old contract.
Different methods of Discharge by agreement : Rescission When all are some of the terms of the contract are cancelled, it is called Rescisson of the Contract... rescission can be Total or Partial .. For example, X agrees to supply 100 tons of rice to Y. X and Y agree that no rice need be supplied. The contract is rescinded. But if before the date of delivery, they agree that only 40 tons of rice may be delivered, the contract is rescinded partially.
Different methods of Discharge by agreement : Alteration When one or more of the terms of contract are altered by mutual consent of all of the parties to the contract, it is said that a contract has been altered. In alteration, only the terms of the contract are charged without affecting any change in the parties to the contract. When any alteration is made to the contract with the consent of the parties the original contract is discharged and need not be performed.
Different methods of Discharge by agreement : Remission Remission means acceptance of a lesser performance that what was actually due under the contract. According to section 63, a party may dispense with or remit, wholly or in part, the performance of the promise made to him. He can also extend the time of such performance or accept, instead of it, any satisfaction which he deems fit. A promise to do so will be binding even though there is no consideration for it.
Discharge by Impossibility Performance of contract by one of the parties is rendered impossible~ Ex., Act of God - Force Majeure
Discharge by Impossibility What is Force Majeure clause? An exculpatory clause that excuses performance upon the occurrence of an event beyond a party's control. A typical such clause might read: "The Company shall not be liable for any failure in the performance of its obligations under this agreement which may result from strikes or acts of labor unions, fires, floods, earthquakes, or acts of God, war or other contingencies beyond its control. Govt controls and regulations (such as stop export to China) also come under Force Majeure
Discharge by Impossibility Monsoon Failure and Locust attacks are Force Majeure...(say True/False) False.. They are Risks and not impossibilities similarly macroeconomic variables such as Exchange rates are Risks...and not impossibilities
Discharge by Performance What are the rules for Performance? COOPERATION – by the other Party mandated by inference even if not required particularly by the Contract – ‘best endeavour’ clauses SPECIFIC PERFORMANCE – may be mandated on certain special conditions: If involving only payment of money; or performance is of an exclusively personal character HARDSHIP – not an excuse; unless due to: Contingent events – recession in the economy? Reasonably unforeseen and unassumed factors Circumstances beyond the control of the Party concerned Force majeure is of a different objective – impossibility
Discharge by Performance: When Time is of Essence: Time is one particular characteristic that is contested: Stipulation of Time : mere mention is insufficient; clause of criticality need to be added ! for ex., in rental agreement, need to add why 5th April is a critical date!!! Reasonable time standard , if no stipulation is mentioned Effect of violation: voidable,compensatory,waiver
Discharge by Breach: 3 scenarios Either by - Failure - Repudiation - Voluntary disablement
Discharge by Breach: Liability and Damage Fair & reasonable damages; and not for remote or indirect losses Liquidated Damages – stipulated to deter breach Considered as the maximum limit Unliquidated = reasonable basis Unlimited scope of liability = statutory; and tortious Indemnity clause – to cover third party claims – could have limitations, unless prohibited by law Factors considered – loss incurred or inevitable; profits denied; unfair gains of other Party
Case scenario: Contract between A & B A ---product----B B produced an assembly of 4 components for A; B outsourced 4th component to C 3 years later D claimed that product of A violated its patent rights on component 4; What should A do now?
What is indemnity and liquidated damage? Indemnity and Liquidated damages are the Remedies available to the non-breaching party in a Contract;
What is Liquidated damage? LD is a genuine "presestimate"of the damages likely to flow from the breach of contract; Thus, ThNon-defaulting party can claim compensation for only direct or foreseen losses
A 's course of action depends on contract with B; Contract typically need to have clause of IP dilligence; (even though strictly not necessary) Is there a liquidated damage clause? If issue arises, there should be indemnification, that mentions the liquidated damage amount (Limited indemnification) Damage amount should be determinable Damage amount cannot be speculative (such as Brand, reputation)
What is indemnity? Indemnity is the promise made by one party (indemnifier) to protect the other party (indemnified party) from any loss caused due to an act of indemnifier or a third party; Indemnity provides for a protection against all unforeseen and indirect losses ,claims and liabilities arising from the specific transaction
3 options to deal with contract breach Unliquidated damage Liquidated damage Indemnification
What is Liquidated damage In case of a breach of contract, if a sun is named in the contract in case of such a breach, the party complaining of the breach is entitled to ,whether or not the actual damage or loss is proved to have been caused; compensation entitled is a reasonable amount not greater than the amount mentioned in the contract
Unliquidated damage Compensation sum for breach of contract, not established in the contract, but determined by court after such a breach occurs. Damages may be categorized as unliquidatable when the amount of damages is unidentifiable or subject to an unforeseen event that makes the amount not calculable.
Solution to the Case B can take over the litigation (generally to protect credibility) Ex. QualComm fighting case for patent infringement in Apple phone In case of compensation that is pretty high for B, A needs to pay up or take over litigation
Is D right in claiming the compensation after 3 years of product release? Nothing wrong legally to claim violation after 3 years..D might have waited strategically to claim compensation
Are Alternate dispute resolution mechanisms applicable for Criminal law? No is applicable for Civil law only
what are strategic factors to go for ADRs? ADRs are : ---> Confidential approach ---> Mindful approach ---->Complexity of dispute ---->Courts are incapable of dealing with complex issues; ----> need exists for creative solutions
Types of ADRs => Arbitration => Mediation =>Concilliation =>Negotiation
What are ADRs? Alternative to Litigation; refers to a variety of streamline resolution techniques designed to resolve issues more efficiently
What is Mediation? neutral third party, assists two or more parties to help negotiate an agreement , with concrete efforts on a matter of common interest;
What is concilliation? Parties to the dispute agree to utilize the services of a Conciliator, who then meets the parties separately in an attempt to resolve their differences; Conciliation is more formal than Mediation; in Conciliation, parties seldom face each other , in the presence of conciliator Conciliator helps each party to come up with a : to develop a list of objectives, the outcomes they desire to accomplish ask the parties to rank the objective from least to most important begin with the least important and work toward the most important objective; Build a string of successes and help the parties create an atmosphere of Trust; If the conciliator successful in negotiating an understanding between the parties, said understanding will be committed to in writing, and signed by parties , at which time it becomes equivalent of civil court judgment @ District level
What is Negotiation? Negotiation is a process whereby interested parties resolve disputes, agree upon courses of action, bargain for individual & collective advantage, and/or attempt to craft outcomes which serve their mutual interest; In the advocacy approach, a negotiator serves as advocate for one party to the negotiation and attempts to obtain the most favorable outcomes possible for that party. In this process, Negotiator attempts to determine the minimum outcome acceptable to the other party and then adjust the demands accordingly. Traditional negotiations were called Win-lose due to the hard-ball style of the Negotiators; Later, the Win-Win style of negotiation evolved If settlement arrived after negotiation, it is equivalent of a Contract
What is Arbitration? Form of ADR-where parties submit their respective positions (thru agreement o or hearing) to a neutral 3rd party (arbitrators) for resolution Most contracts these days have arbitration clause Just short of litigation Cannot be mandated
Arbitration panel Usually a 3-member panel : 2 Technical members 1- legal member Subject matter expertise ; Neutrality; Generally have impeccable records;
Arbitration award International Chamber of Commerce Court of Arbitration is the most important arbitration forum; American Arbitration Association is a popular arbitral body in US In India, FICCI & CII host Arbitration bodies Awards Recognized as judgment; Award is binding on the parties Awards are generally of High standards Award is accepted in 80% of the situations; not generally appealed against If an Indian party disagrees to the Award, it needs to go to the high court to appeal against;
Criticism of Arbitration Elaborate & Expensive Aims @ "Compromise decision" rather than "Decisive determination"
How is Out-of-Court settlement different from ADRs? Parties went to court at first; Later, settled the issue out-of-court; prudent step would be to go back to the court and convey the settlement to the court; Court issues the settlement as a Judgment
Show full summary Hide full summary


Contract Law
Exemption clauses
Negligence & Strict Liability Ch9
Intentional Torts & Business Torts. Ch8
Midterm 2
Madison Shields
Chapter 3
Chapter 10 Flash Cards
Misrepresentation Quiz
Contract Law
Chris Scearce
Understand Contract Law
Understanding Terminating