 form, though not exactly they, we offered that Mr. Nanth Kumar should come and deliver his session and he accepts that what that would come within the definition of the contract as such under the contract act in 1972 or it is a simplicity offer in a business agreement that where there is an offer made and there is an acceptance just let's assume there's a share market you offer a particular price and the market in the market you accept the share is bought at that price or what that be a combination of the contract or whether if there's an offer at the other party this kind of midway whether that would be a contract or the risk end of the agreement whether they contract there has to be an offer in writing or it can be an order these are some broad ideas which keep on coming in the mind of a common man because contract is such where the common man to the corporate corporate world everybody's interested to understand those this is one topic which not only it I would say it reaches beyond the lawyers students of law judicial aspects in the faculty of law as well as the common man into the corporate field keeping in view this various aspects we requested Mr. Sikyanandakumar who is a well-known legal entity as such and as a human being also and he was kind enough to share his knowledge on a topic which everybody would love to understand and while we go for request Mr. Sikyanandakumar to take things forward an eminent name under the Karnataka Bar Association on his civil law corporate law and what all and before we do that since there is as we all keep on saying during all those webinars since the COVID is on rise kindly wear your mask contain your social distancing and those who have not gone for the vaccine kindly to go for the vaccination if the first dose is over go for the second it's not the first if you're not even gone for the first one you should go first one as well is doing wonders and it's doing well meanwhile we will continue with our continuum of the series of virtual knowledge sharing with speakers of immense knowledge just like Sikyanandakumar and without taking much time I would request Mr. Sikyanandakumar to unmute himself and take things forward and meanwhile you can all like share subscribe and comment upon our different series of the beyond our series. Thank you Mr. Vikas Chhatrat and I also need to thank Mr. Trivikram for facilitating this opportunity because he started by asking if him asking me to speak to you and my accepting is a contract well we will discuss that perhaps at the end of the session and see how effective the session has been but before anything else I think he starts with a very very sensible and right warning that we all have to be careful we all have to get a vaccination as soon as is possible and the only thing I would add to that is that merely because you have had a vaccine doesn't mean you can take life easy or take things lightly please still wear a mask and maintain social distancing even after that please be careful do not step out unless it is absolutely necessary this actually brings me to something that's a wonderful opportunity that that this COVID has created as many leaders have said out of every misery arises an opportunity out of the misery of COVID has arisen these opportunities of having webinars and an opportunity to share our collective knowledge I hope to gain as much as I am able to share today this is an excellent example of how technology has a role to play and is the future of what we are and what we will be technology has an important role in our profession and the sooner we accept it and and adopt the better it is for all of us it's a matter of time before we are left behind speaking of being left behind brings me neatly to the contract act now I am familiar and I'm conscious of the fact that many of you are familiar with the contract law many of you may be practitioners some maybe even students I think it's fair to say that the law of contract is one such that is the foundation of very large sections of law it's the very very basic foundational element of the law of corporate affairs and corporate law company law it's the basis for arbitration it is the basis for commercial litigation it's perhaps very important when it comes to property law so you will see that corporate law or property law or arbitration would essentially not be possible or not exist but for the foundational basis in contract law now what I propose to share with you today are some thoughts on the very very basics of that basic which is offer acceptance and how the communication of such offer and acceptance takes place which to my mind is the foundation of contract law which as I said is the foundation of very many aspects of law there are two parts to the genesis of contract law the first is that there is an element of morality the second is that there is an element of economics these are two fundamental tenets that you will find a repetitive narration of or the underlying theme of the law of contract you will find to be both the the moral element as well as the economic element most aspects of contract law have either a moral moral element or a economic element or both combined with one another I will make good what I say as time goes by during the course of the session today but it's important to understand that there is some greater basis to this statement the reason I say that is even before the Indian contract act of 1872 under the ancient norms of Hindu law there is a concept of contract that was available there was unfortunately or fortunately that is the way things were then the certain restrictions or who could contract women were not readily allowed to contract there were only in certain limited cases permitted to do so there is an excellent treatise by professor kane on dharma shastras and the law of contract which may be useful to take a look at as commerce evolved and then you had the British rule in India what was happening was that the English law of contract as it then stood was sought to be applied even to transactions between Indians and this caused a lot of difficulty and confusion very interestingly in 1781 there was a statute that was promulgated which primarily was applicable in Calcutta which was I think then the supreme court from the mistaken and then the Madras and Bombay regions where the Hindu law relating to contract would apply to Hindus contracting Muslim law of contract would apply to Muslims contracting and it was only when one was a Hindu or a Muslim and the other wasn't then the law relating to the defendant would normally be applied all of this led to a lot of confusion I'll skip several steps in history and then we come to the Indian contract act now the Indian contract act is not meant to be a complete code what do I mean when I say this what I mean is that the there may be cases which fall outside the scope or the ambit or more importantly the contemplation of the Indian contract act there must be several situations which have arisen since 1872 which don't fall within the four letters of the Indian contract in such cases the law relating to justice equity and good conscience would apply now obviously when the whole concept of e-commerce evolved there were questions asked as to whether the Indian contract act was sufficient to deal with these situations or you needed a new law after all this law was over 130 years old give or take and there were a lot of questions that were raised about whether this is still good law but I think somewhere the beauty of the Indian contract act is in its simplicity unlike modern day statutes which are verbose and tell you a lot of things including about how the tribunal should be constituted and what salaries the members should be paid what the contract act does is essentially prescribe the parameters within which a contract could be formed and then perform or if not performed the remedies for it it is in this background that I'd like to just share some thoughts and observations on what is an offer what amounts to an acceptance and some other aspects of the law relating to the formation of a contract now when it comes to an offer and I must point this out very often what happens is as practitioners of law you end up directly going to the provisions relating to a breach or damages or undue influence or something else but very very often we skip through and just do not pay attention to the foundational elements of a contract which is offer acceptance and how a contract is indeed formed now this is the endeavor today to try and share some thoughts on that the first aspect that may be important is what an offer is now interestingly the term offer is not used in this part of the statute which is in section 2 it uses the term proposal now I know we have many young lawyers and law students with us it's not the kind of proposal that you have in mind and we will also examine if that kind of a proposal can translate into a contract we will deal with that in some time but the slightly more boring kind of a proposal is what the contract act contemplates what are the elements of it now if you read the provision of the contract act in section 2 a it says and these are the key elements that you must bear in mind one you need to signify to another person two there has to be a willingness to do something or to abstain from doing something what does this mean this means that you must either say that I will do this I will dig six pits for you in your garden I will supply you with three bags of rice I will write your you know school or your college project for you or abstain from doing it I will not practice law in the same area as you are residing I will not tell your mother that you had alcohol last evening this is abstaining to do something now the third element is that this has to be with a view of obtaining assent in other words it's not simply that you say something that oh I'm going to climb Mount Everest one day so what go ahead and do it how does it make a difference to me you don't need my permission in order to climb Mount Everest what your proposal should be should correlate to the intention of obtaining my assent or obtaining someone else's assent or acceptance of that so whatever you say be it to do something or not to do something should be with the intention of or with a view to obtain the assent of the person to who such a proposal is made now you should seek to obtain the approval or the assent of the act that you propose to do or the acts that you propose to abstain from do now what is very interesting here in just the reading of that the definition of proposal now just for our convenience we normally use the word offer when in common parlance the term offer and proposal and are really one in the same now the contract act uses the term proposal that's the reason I suggested that term right now now the definition of the word proposal which is for all intents and purposes the definition of an offer does not talk about consideration this is very interesting what this means is that the consideration is not necessarily divorced from the proposal in other words and we will see this a little later it's not as if there can't be consideration in the proposal that's not the intent at all what I'm trying to explain here is that a proposal when it is made and the definition of the term proposal does not really take into account the significance of what we normally call consideration but once you read the entirety of all these definitions it will become manifest and clear that consideration is very much a part of the proposal that is made and the acceptance that is conveyed to it the second aspect moving quickly on to acceptance. Acceptance is the person to who you propose has to make signify the an ascent there too there has to be a conveyance or you signify in some form or the other that you have accepted the proposal that has been made this once accepted the proposal when accepted results into a promise. Now how do you signify you have to signify that the proposal that has been made has been accepted now how that how you can signify whether it is by words or by silence or not all that we will come to in a little bit of time. Section 2c deals with the definitions of promissor and promissy I'm not going to spend too much time on it because they're fairly obvious promissor is the person who makes the I mean the person making the proposal and promissy is the person who accepts the proposal. Now the next aspect which is important which I said was not really forthcoming in the definition of a proposal is that of consideration. Now this comes up in section 2d this is again important because without this a contract is void at the desire of the person making what are the elements of this at the desire of the person making the promise okay that's the promissor when one does or does not do something when you do something or do not do something or you agree to do something or agree not to do something now it need not be that it's already done it can be that okay you send me four bags of rice I will see if it is alright and one week thereafter I'll pay you if the if the rice has not gone bad that is I agree to do something I agree to do something at a later point in time or I say that if you pay me 10,000 rupees I will not tell your mother that you had alcohol last night for another one month so I promise not to do something in the future now the proposal has to be such that the promise is essentially a handshake with it now the important thing is when there is an intermingling of these two when the desire at the desire of the promise or the promisey or any other person has done or not done something or agrees to do or agrees not to do something such act or agreement to do some act or not do something that is called the consideration in other words if in exchange for what you are offering to do to for me when I agree to do something for you that becomes the consideration this also becomes a reciprocal promise why is this important it's important because it's these sets of promises and reciprocal promises that when all together are taken become the agreement every promise or set of promises forming the consideration for one another become an agreement I will just take one step further and then I'll come back to this agreement in a minute an agreement which is enforceable in law there's a contract an agreement that is not enforceable void voidable is simply left to be an agreement now coming back to a contract what does it mean when they say that every promise or set of promises forming the consideration for one another become an agreement this is quite important and quite interesting now it's often when one is learning the law of contract in college or whatever it is one is given these very very simple examples like I just did you know bag of rice and so on and so forth but you see the point is that very often and in the real world when you see contracts that are drawn up by especially by companies or in businesses they're very very long and complicated they'll have very many clauses they'll have very many things to do and not to do and all of these together have to be taken to form the agreement and or as being the promises that are made to one another now for example let us say that there is a shareholders agreement a shareholders agreement is typically and I think yesterday or day before there was a session by my friend Ajai on perhaps on disputes arising over shareholders agreements but shareholders agreements typically are agreements entered into by shareholders of a company where they say that they will do certain things or not do certain other things they say that in order that the company grows forward we will all try that the company goes in for an initial public offer however me being the minority shareholder or me being the promoter without the consent of the majority investor or the financier or whatever it is I will not alter the nature of the company's business I will not sell away the assets of the company I will not employ key managerial personnel various other covenants that I will make now each one of this is a promise each one of these aspects which I which I point out say that I will not without your consent sell away the assets of the company I will not without your consent say for example employ any key managerial personnel I will not without your consent take anything any liability more than a crore onto the company now these are examples of what each of these promises is now all of these together when taken in consideration for that the investor says all right I will invest around say 10 crore rupees in your company and I will be given 70 percent of the shareholding of your company now I will invest 10 crores is one promise in return for which I say I will give you 70 percent of the shareholding now the investor then says I will make sure that at no point my shareholding drops below 50 that is another promise so there can be in one single contract or in one single agreement multiple mutual promises all of these together when taken together when taken as one form one agreement now this brings me to another question which I will try to answer and address at a slightly later point in time the question is what happens when there is a situation where a part of the agreement is sort to be severed there is this clause which which you will find in very many contracts which is called the severability clause which means that a part of the contract which is which the court finds to be not enforceable need not be enforced but the other parts can be enforced now I will take a step back and tell you that in that 30 page contract there were 20 things that party A had to do and 40 things party B had to do it did not be one is to one party A can say that I will do one thing provided you do three things in return that's perfectly fair perfectly possible so in this contract of 30 pages there are 20 things that A says that A will do 40 things that B says that B will do the court finds that one such clause which is that B will not do anything that is say a non-compete clause that is in competition to the business of the company a court subsequently holds that to be invalid and removes that clause what happens as a consequence is that there is one particular promise out of the 40 made by B which is not capable of being enforced what is the effect on the original promises and acceptance that were made or the proposals and acceptance made the proposal that was made was that if you do this also only then I will agree to put in the money into your company or whatever it may have been but now one of those promises that you had made is no longer good what is the consequence of that this is something that you have to remember when you are dealing with the enforceability of a contract a particular clause not being enforced or not being capable of being enforced is not quite the same as the formation of the contract when the contract is formed at that time what are the promises made and what are the uh acceptances that are there those are the promises that are relevant those promises and counter promises or reciprocal promises are what are important at a subsequent time if a court finds that the part that is to be severed the part that is to be removed is so intrinsic to the contract that the main contract can't be performed at all then the whole thing goes but if that is not so and the main contract can still be saved the court can find a way in order to save so this is the reason I point this out is that when it comes to making offers and acceptance and these mutual promises all of which together form an agreement it's very important to remember that in the isolated and simple cases that you're often told when you're being taught law which is you know a trader agrees to sell you four bags of rice you agree to pay 100 rupees per bag one bag has a little bit less you pay that much less be done with it but that is a very that's an oversimplification of the law of contract in the real world you will find very many contracts which are far more complicated which again are dependent on other contracts there may be a situation where there are eight ten contracts that are entered into amongst the two companies to do various things each one of them can be a separate agreement or a separate contract each one of them contain mutual promises that are made to one another and it's possible that there are agreements which are also what are known as court terminus that is one agreement will upon the termination of one agreement the other agreement will also stand terminated therefore can you then say that this contract is also a part of the consideration of the other contract these are questions that can arise and perhaps one may have to look at the specific language of each of those agreements in order to ascertain that but the important aspect here to bear in mind is that when a contract is formed what goes into that contract is very very important those proposals those promises are important because that forms that particular contract if that has if there are contingencies in it there are conditions precedent in it conditions subsequent in it these are all aspects that do not directly impact the formation of the contract as far as formation is concerned it's the proposals the acceptances the promises the consequent reciprocal promises that is what is really important now acceptance typically has to be absolute what does this mean this means that when a proposal is made and that proposal has various conditions say it has certain conditions precedent that this proposal will come into force only upon your doing something else a typical example is an agreement to purchase an immobile property an agreement to purchase immobile property when I make an offer to you and say I am ready to purchase your house at a price of say 50 lakhs provide it you make good the title valid marketable title for the property before I execute the sale deal so this is a condition precedent the counter condition that may be imposed on me is to say that I will put down the money within a period of two months so there may be mutual conditions in the proposals that have made to one another at the point in time that the acceptance takes place those conditions also form a part of the proposals and those proposals have to be accepted as such for example if I say that I am ready to purchase your house at a price of 50 lakhs provided you make good the clear and marketable title to the property you can't accept only one part of it and leave the rest of it you can't say okay I will accept for the sale at a price of 50 lakhs but I am not going to make good clear and marketable title if you say that I am not going to make good clear and marketable title but I will only accept sale at 50 lakhs what is the consequence the consequence is simple the consequences that this is not an acceptance that translates into promise and consequently an agreement acceptance has to be unequivocal absolute clear and unambiguous so also a proposal has to be clear for example I can't make a proposal which is vague I can't make a proposal which is unclear so even as much as the proposal has to be clear the acceptance has to be clear if I turn around and give you something else in return that is a counter of that is not the same as an acceptance if I say I will agree to sell my house for 50 lakhs but I am not going to make good the title you are you have to do it independently that is a counter offer then it is up to me once again to either accept that or not accept that if I accept that then that becomes the contract that becomes the agreement if I say no then we enter into a negotiation a negotiation is a situation where parties are not able to agree on some of the integrities or the or the finer points of what the proposal and the acceptance is and therefore they have entered into a discussion on what goes on in the real world and in very many contracts you will find that there is a lot of written suggestions that are made by email there are phone discussions and so on and so forth or there is a draft of a particular agreement that is sent by one party the other party then makes changes and sends it back this at this stage there are this is not acceptance yet now when it comes to a proposal and acceptance there are essentially two or three kinds I would say in the real I mean this is not really so much a point of law but as this is a point of practice one is the discussion on the commercial elements which is by and large what is it that you are trying to either sell or buy or do or whatever it is what are the services you are offering and so on and so forth suppose you say that I will develop a particular software for you and that software will generally take care of the banking requirement that your company has and you will in turn pay me one million dollars for it that those are the commercial terms there will be a lot of discussion on whether it should be one million it should be 80,000 800,000 dollars or whatever it is but that is a commercial discussion second comes the legal discussions where all those clauses the lawyers then get involved and then there is a lot of negotiation that takes place on no no no no this language does not say this this is not what we agreed to or there will be new clauses which nobody had even discussed for example where the arbitration should be should it be in India should it be in Singapore if in India should it be in Bangalore should it be in Delhi should it be in Mumbai somewhere else so these are clauses that might not have been negotiated but till all of these are typically done and dusted and the parties then start exchanging drafts of the agreements that is still the face of negotiation at that stage the question that you ask yourself is can that agreement be enforced the answer is typically no you can't enforce that so therefore your acceptance being absolute and clear is important that will come in in one of many forms which I will address a little later the accept how the acceptance has to be done is also something that there is a sufficient law relating to now how do you say when an offer has been made and how that acceptance should be there is this Hannah Blumenthal case which lays down the law relating to the objective test of intention did I intend making an offer did I intend making a proposal and what is the consequence of that this has been developed further to say that if I conducted myself in a way that I would reasonably make you believe that I intended making a proposal then that also amounts to a proposal but under the Indian contract that some of these British tests may not have a direct bearing unless the contract provides the important aspect under Indian law is very clear a proposal has to be clear unequivocal and acceptance has to be clear and ambiguous unequivocal if it is anything else it's negotiation or a counter offer and that will go on till such time that the parties are able to see eye to eye now in this context one practical aspect that very many of you may have seen in corporate transactions is something called a term sheet you would also come across something called an MOU or a memorandum of understanding very often people ask if a memorandum of understanding is enforceable in law well the answer is that it really depends on that MOU there may be MOUs which are not not yet a contract they just signify the intention of the parties to enter into a subsequent contract they signify the intention of the parties to do something more in order that a contract is arrived at between them there may well be a document which is termed as a memorandum of understanding but for all intents and purposes is a contract and can be enforced if the intention of the parties is forthcoming from that document there have been cases where even a cheat of paper specific performance has been ordered on so therefore I think it's really the test of the intention of the parties more than the form that it takes so whether it is called an MOU or something else should not matter much similarly term sheets often term sheets are a means to signify what the broad commercial terms are so that then there is further discussion and negotiation based on which there can be a final written contract that is drawn up but a term sheet there are cases where term sheets are also enforceable there are cases where term sheets have clauses that are binding on the parties there are term cases where term sheets as a whole are binding there are some cases where the term sheet specifically says this is non-binding and is subject to contract which means that today as the term sheet has been signed there is nothing that's binding within the parties so really this is something that's a matter of construction of each document and therefore it's not the name or the nomenclature that you afford but the real text of the document that is important to look at the next concept that's very important is something called an invitation to treat and this is a sort of a subset of a counter offer as it were now what is the difference between an offer and an invitation to treat it's it's like the test is in the intention but before that I'll just try and give you an illustration of what this invitation to treat is there was a very very famous case which many of you would have come across perhaps very many of you would have come across in one of the first classes on contract law in some of your colleges this is the case of Carlyle versus Carbolic Smokeball Company that is a very interesting case now what happened there was that somebody said this Carbolic Smokeball Company said that they had a cure for influenza if you bought their particular canister and then you inhaled it now in the days of Corona this inhalation is something that all of us can immediately relate to they said that it'll cure you of influenza now Mrs. Carlyle purchased it tried it out but said that no I did not work I contacted influenza subsequently and she sued them for back in the day for a grand sum of 100 pounds and interestingly the matter went up all the way on appeal and finally the court said that if the elements in order to constitute a contract in order to constitute an offer are present that it can be treated as contract so they felt that offer and acceptance both were made out of the essential elements of what was conveyed between the parties Carbolic Smokeball Company tried to take all kinds of defenses they said it's only an advertisement we meant it as a joke they said all kinds of things but finally the court of appeal held against them and directed damages to be paid now this and another case in Harvella cheat investment company versus Royal Trust and Canada are very important because both of these form in many ways the genesis or the basis of modern law relating to tenders and it's a very important aspect to bear in mind in Royal Trust Bank's case what happened was that there was a proposal that was invited for a certain bid now one bidder had put in a particular price and said you know say for example a million dollars the second bidder put in a fixed price and said either this amount or $100,000 more than what the other person is bidding now this was held to be by the court in that case it was held to be a referential bid and this is something that has gone into a lot of tender law relating to tender the reason is that what happens is when you are asked to bid for a government project or for any tender in the public sector you will be told that you have to place a financial bid now your financial bid can't say that you know whom your other three competitors are your financial bid if it says whatever he says 100 more than him or her then you will always succeed suppose both of you say whatever the other person says 100 more then there is really no valid offer that is being made so therefore the there are two three questions here the first is in the case of a tender is it an offer or is it an invitation to treat secondly in the case of something like Carbolly smokeball company's case is where an offer is made to the public at large through your advertisement does that constitute an offer or not third in the case of a tender again suppose you say that whoever is the highest bidder will typically be awarded the contract the minute somebody is the highest bidder does that automatically make them the successful contractor and they are they entitled to the contract now to answer this I just wanted to highlight a little bit about how modern law relating to tenders have evolved taken into account some of these aspects first is that in today's day and age what typically happens is that there are there is first of all this you know either an electronic bidding or an online bidding in many cases so you don't know each other's bid and there is no way to find out also till that is actually opened through a password mechanism and so on secondly there are two stages the technical bid and the financial bid now this is again very important the reason it's important is let us say that it is for construction of a particular building or it is for supply of certain medical equipment now I may be purchasing say a Philips make machine say a CT scan machine somebody else may be purchasing a Wipro made machine or a GE made or some other company there is a technical difference between the two now the let's say for example hypothetically the Philips make can do certain things the GE make machine can do certain other things which then leads to the question of what is it that the tendering authority has asked for and the important question is are these in technical compliance with those specifications or not therefore the question still remains is a person who's answering a tender answering a request for proposal making an offer or not now if you notice I used a specific phrase a request for proposal what that automatically means is that a request is made inviting proposals from the general public or from anybody who's qualified and that goes through two or three stages like I said first is the technical evaluation and then the financial bid now if on technical parameters and there are often detailed parameters that are set out both qualify then comes a financial bid to see who's cheaper who's not very often now the public sector has wisened up and they also have something called a negotiation stage and then finally the contract is awarded now all of these processes are to ensure that a person who's the lowest bidder doesn't automatically say that he or she is entitled to that contract under the tender therefore the clarity on what is an offer and what is an acceptance is of utmost importance in a case like this now as I said public sector undertakings and various other entities which call for tenders have now become wise and they have started using all the phrases that are necessary to make it very clear that their request calling upon you as a person who's qualified to supply say for example it could be nuclear reactors or it could be simply supplying rice or anything else that you are only making a proposal and that such proposal when made to the tendering authority is subject to either acceptance or rejection by them therefore the whole principle has been turned on its head and very often there may be some exceptions where the tendering authorities are not following this but by and large this is our experience in most cases where the tendering authority have turned it on its head to say that you if you feel you're qualified please make a proposal to us we will then examine it and either accept it or not accept it so therefore the person who's bidding becomes the person who's making the proposal and the government entity which is called for the tenders will either accept it or not accept it and convey its significance accordingly. Now therefore just to reiterate proposal must be certain and clear question is who can make that proposal obviously when it comes to say a matter of sale it has to be the person who's either the owner or the agent I can't propose the sale of you know Rashtrapati Bhavan because I am not the owner of it I wish I were but I'm not therefore the question of who can make the proposal also entails am I competent to contract now competence to contract also has to mean an excess with the contract I can't make enter into a proposal or make a proposal which has nothing to do with me for example I can't make a proposal without taking the consent of Vikas G to say that Vikas G will perform you know or run around the stadium 10 times if you pay me 100 rupees now I have nothing to do with Vikas G has nothing to do with this proposal I have not taken him to confidence before making such a proposal therefore this proposal that's the reason why who can make that proposal is very important you can't make a proposal which has nothing to do with you so you must be competent to contract insofar as that proposal is concerned clarity on the terms this is the next aspect that's very important to who is that proposal made this is where I was telling you about whether it's an offer made to the general public or it's an invitation for offers to be made to me this is important or I make a proposal to X but why says that they will accept it is it binding am I now into a contract with Y well I can always say no I had nothing to do with Y I never agreed but let me give you another scenario suppose I enter a movie theater and at the entrance I purchase a ticket is it fair to say that there is no specific person with who the contract was proposed to be entered into the contract between me and the movie theater owner where a ticket for me to be able to go and see the latest movie is made I mean of course before the lockdown and so on when theaters were open the point here is that there is this is again an offer that's made to the public at large by the theater owner to say anybody who wants to purchase or watch the movie please purchase a ticket that means you pay 100 rupees or whatever the amount is and then you'll be entered into the theater provided you abide by rules and regulations you can't do you know you can't drink there you can't smoke there and so on and so forth those are our rules and regulations those are the conditions provided you abide by that this is an offer that's made to anybody they did not say only lawyers are allowed they did not say only doctors are allowed they did not say only students are allowed this is an offer that is made to anybody anybody who wants you can come and watch is this an offer or is it not or do you make the offer when you actually purchase the ticket when you go there and then say no no no I will not pay 100 rupees I am ready to pay only 80 rupees what happens these are questions that really depend on each case and the facts of each case but what is important to bear in mind is that very often there is a distinction between an offer a counter offer negotiation or an invitation to the general public or an invitation to treat these are all aspects that you have to bear in mind the next aspect which is very very important is communication and this is something that is again of vital importance when it comes to the formation of a contract the aspect relating to who the proposal is made is important when it comes to privity of contract but the aspect of communication is important for the completion of the formation of the contract and to say when the contract comes into force now many of you may be familiar with the fact that it is not mandatory to have a written contract the written contract is only a matter of convenience very often of course it is also the norm in most cases but you will find very often that there is no written contract when it comes to say matters of employment when it comes to matters of you know purchase and sale sale of goods things like that so in cases like that the intention of the parties is important and there the question of competence to contract becomes important the question of privity becomes important as to who can perform who needs to perform who can sue you etc so these are aspects these are the slightly crucial aspects that one has to bear in mind when it comes to contract formation now coming to communication I will try to wrap up in another 10 minutes so that we can then have another about 15 minutes of questions and answers communication is again quite important what are the key elements here proposals acceptance and the revocation of a proposal or an acceptance all have to be communicated communication can be either by an action or by an omission it has to be by the person making that proposal or making the acceptance or making the revocation of such proposal or acceptance you must intend to communicate or it must have the effect of communicating the most obvious question that arises is is silence acceptance you there was a very famous case in the UK where an uncle told a nephew that if you if I do not hear back from you I will take it that you will give me your horse for I don't know 50 pounds or whatever it was and the question was the nephew did not say anything the question was is it a contract or not well normal rule would be that you silence cannot be acceptance you need to do a little more than the reason for that is suppose I go to your go to you and tell you all right you sell me your house for 10 lakh rupees and if you don't say no within a week I will deem it that you have accepted and you don't say anything then I say look here I agreed you were to sell me your house it is it may be worth 20 lakhs but I wanted for 10 lakhs because you did not say no see this leads to a lot of confusion and that's the whole purpose of contract which is that there should be clarity therefore silence is normally not desirable as a means of conveying acceptance normally it should be by an overt act or some some a reasonable gesture which is reasonable and well somewhat evident to say that communication is made one other example here which I can give you is that of your shrink wrap contracts for software purchase let's say you go to a store and purchase a Microsoft word software license for a new computer that you purchased or a new laptop that you purchased of course with iPad some of that may not be relevant but still you go to the store they give you a you know a package you pay for it you purchased it the minute you open that packet that the shrink wrap cover you're deemed to have accepted the contract but you never signed any agreement with Microsoft so what is the consequence how did you even though you are silent how are you deemed to have accepted well the answer is buy your action and going to that store and purchasing that software and perhaps using that software on your system or whatever it is you are deemed to have accepted it so also click wrap contracts which are on the internet now you know yuki everybody purchases things on amazon or big basket or wherever else when you finally go now of course even those companies have gotten that much more sophisticated in these contracts where they ensure that there is a further process in so far as a credit card payments or whatever else or online banking and so on and so forth concern but leaving that aside for a minute your typical scenario where you click on a particular link and then you accept a particular contract it could be typically for your you know for downloading software on a mobile phone or a new app or whatever else it is now you don't have a chance to negotiate with them but there will be a link which will say these are the terms and conditions if you want to read it it will be 30 pages and I can tell you that 90 percent of the lawyers also never bother reading it those who read it typically read it because some other client has asked them to prepare terms and conditions and they want an example of it most often nobody bothers reading it is that also a contract because you've not done anything well here because it is on the internet and there is no other means easily available to form that contract generally by simply clicking you are deemed to have done that act to show your acceptance now the earlier rule before all this internet and so on and so forth is what is called the post office rule where you put the proposal beyond your reach in order for it to be deemed to be binding on you but coming back to the internet scenario what happens when this this is a fairly common scenario where you lose either your internet connectivity or you lose power just as you clicked it so you don't know whether the contract is formed or not which is why you will notice that like I said many of these companies have gotten sophisticated they will then send you an email or a message or something else conveying to you clearly that look your order on it could be swiggy for example has not been completed please redo it or you will get a refund of your money and you know that's the end of the matter so that communication now has become much more sophisticated in the internet era in today's day and age with e-commerce but if you go back to the post office rule the rule is very simple before acceptance you can revoke your proposal the revocation of acceptance has to be before the communication is completed revocation the communication of revocation lap it can be in four ways typically communication of a revocation of the proposal or your whatever else it is laps in time suppose that proposal is valid only for 10 days and you don't respond for 10 days you have not accepted it then you fail to fulfill certain conditions present now I say that you I this is the proposal I made but you have to do A, B, C, D as conditions present and you don't do it that automatically means that you've not accepted and that that is deemed revocation the other thing is of course insanity or death or something of that sort which hopefully we don't have to go into too much detail on acceptance has to be absolute and unqualified and it normally has to be expressed in some usual or reasonable manner unless there is a specification as to how that acceptance should be in the proposal itself now there was one case if I recollect again in the UK where the acceptance had to be by taking out a public ad in the newspaper and suppose you have to take it out in times and you don't and you take it out in some other newspaper like The Guardian the question is then what happens is it acceptance or not well I think that's why the in under the Indian contract act the acceptance has to be absolute and unqualified and it should be in a reasonable and usual manner so it can't be I mean I can't say it can't be but it's normally not be in some unreasonable manner therefore typically in a case like that if it is substantial performance of acceptance and thereafter you act in furtherance to it you can say that look I performed and this is what it is now then comes the other way of accepting a proposal which is performing certain conditions or accepting some consideration this is very often the most difficult way couple of thoughts I will leave for you because I've completely run out of time one is when it comes to arbitration agreements the courts have held that an arbitration agreement within a contract is virtually an independent agreement which the parties can act upon even if the main contract is terminated now parties may or may not have paid much attention to it but this is something that happens so therefore this is one that's important second is severability which I point out the third thing that may be of importance when it comes to acceptance of an offer offer and acceptance is in international contracts where one party is not in India or one party is based outside of India or is a foreign company now in cases like this the question is what is the law relating to the contract more importantly what is the law relating to the formation of the contract that you have to bear in mind now very often the contract would tell you what the law is the governing law is Indian law English law Singapore law whatever else it is but in cases where it does not do so the question of what is the law relating to the formation of a contract can become important and there one may need to either go by the conduct of the parties or that intention as to which law they subject themselves to should hopefully be manifest by some of their actions so this is one other aspect that is of some importance especially given the fact that today a lot of businesses transacted with companies that are overseas and this is an issue that's increasing when it comes to even arbitration or commercial disputes so I just thought I would leave those questions as well open for you thank you and if there are any questions I will try my best to answer it I hope the question and answer session is also as fruitful as the other webinar series that have been organized that thank you so much thank you for your audience should answer we never sometime with them they never prop up because the buffet is such that people have a hand them straight from the pudding from the starters to the swedish so it's not necessary that one has to correlate the question answers to the what quantum of questions come because if the buffet is full then they don't look upon the other things on the on the lighter vein while you were saying on the clip that agreements it is also in the lighter vein always said that they are just like the marriage walls that people don't understand it is only subsequently they realize what they're actually bored on the well that is why I said that the proposal has to be very clear and the acceptance also has to be clear like they say kaboolay kaboolay kaboolay now Naveen says could you please explain the difference between just one yeah can you please tell something about the difference between the privity of consideration and privity of contract well what do you mean by privity of consideration Naveen kindly unmute yourself mean wise reikram has joined and deeming with the gleam of spice yeah good evening sir yeah see do you mean this whoever has given the consideration only that person can seek performance is that what you typically mean by privity of consideration the reason I asked you is that privity of consideration can be understood to mean one of two things that's why I'm asking you please please if you can just explain what you have in mind I will try to answer so I think privity of consideration is who can give the consideration for the agreement whether it is the promisey only or any person else on behalf of promisey okay so on on a lighter vein it is like tax whoever pays tax on your behalf the government will happily collect but jokes aside you see the point is this privity of consideration often means the question of who can sue or who can enforce the contract and that is an important distinction that's the reason I asked you the question of who can enforce and the reason I also mentioned arbitration clause I will I will refer to in a minute see who can enforce often it is the person who is the contracting party that changes when there is either an assignment or a novation or where the contract itself provides for an agent or someone else to be able to enforce privity of contract again is as to who is seeking who the parties to the contract are and consequently who the contract is binding on now one easy example I can give you is that of a shareholder a shareholder can be a person who knows about the agreement might even have approved the agreement in a general meeting but can't say that he's privy to the contract in the sense that a shareholder cannot really in the normal circumstances seek to enforce a contract on behalf of the company because the assets of the company are distinct from the assets of the shareholders as has been held in Bacha Guzdar and other judgments therefore this distinction sometimes is only academic in that a person who can enforce the contract would normally be the person who's entered into the agreement or any person claiming through that person or under that person when it comes to consideration or paying the consideration which is the point that you made now if it is a monetary consideration obviously if that is paid by someone else that is perfectly fine as far as you know the receiving party is concerned they normally would not bother but today with GST and all there may be some issues and why they might push back and say that is not okay another example that I can think of is where that it is not a monetary consideration but a non-monetary consideration I have to perform something and I then say someone else will do it on my behalf well at that point under the contract act if I as the person to who you are now saying that I am unable to do it but someone else on my behalf will do it and I accept it that has the effect of my accepting the performance from that person I can't then also seek performance from you I can choose from only one of the two of you I can't have a double dip and say that I will seek performance from both of you but so in the later example that you have just given in that example the third person should have been a party to this contract unless he is a party to this contract how can I seek a performance of contract from him well let us let me give you an example for let us say that you are to set up some plant you know or to supply some machinery and you aren't able to do so I've given you an advance and whatever else has happened the you can either with my permission assign it or another subsidiary or somebody else comes forward and says I will take this over provided whatever else condition so it may have the effect of innovation but you are right without my consent typically it can't happen that consent that I give to a third party performing either has to be expressed or implied for example if I accept the performance from the third party then also it might have the effect of saying that you know the original party need not perform if you look up there are this is a case of where either I can accept performance from X or from Y but perhaps not from both okay sir thank you thank you thank you Mr. Vikas Mr. Amit Mandi he is raising his hand he has a question Chetan says normally companies issue an offer of letter with basic commercial terms joining data etc which the employee accepts data at the time of joining and employment agreement is entered in sorry is this the question from Mr. Girish on Fiddik this is I will post it in the group itself sorry sorry Chetan has posted it personally yes sir now sir there is an agreement entered into between a builder A and his customer B where the builder agrees to deliver a fully furnished flat to his customer which measures carpet area of let us say 800 square feet it is accepted there where the agreement has been entered into as a binding contract now what happens if at the end of the day it is found that the area of the apartment that was agreed to be sold or that is to be constructed is not 800 square feet but is a little lesser than that would then would it be right to say that there was no consensus add idiom between the parties or is there a breach well I would say that the answer lies again in the contract itself if there is a mistake on the part of the parties where they factually and truly believed that it was 800 square feet but they found after the construction was made or when they actually did the measurement that it's only 700 square feet at that point the it's the option of the parties to either continue with the contract or to walk away so also if it were a misrepresentation they can well have they either have to choose to continue or walk away if I started by putting up 800 and there is a specific and clear breach then perhaps you have some option to sue if I then tell you that look I intended putting up 800 but I have been able to put up only 750 720 whatever and consequently instead of paying me say 8 lakhs pay me only 7,000 or 7,000 as the case may be just as an example and you accept it that is valid performance for both parties because the contractor provides for such a scenario where there is a substantial performance or where there is performance which both parties accept as being satisfactory that puts a quietest to it and parties can move on there is also this principle of accord and satisfaction but as I was as I began the talk I was trying to say that the focus today is really more on the formation of a contract as against what happens at a subsequent point in time so some one of these four or three or four scenarios are possible but I don't think typically that would affect the formation of a contract I don't think there are the agreement I don't think there is anything unless like I said there is a misrepresentation or fraud then the consequence fold follow but it's not a case of the formation. Prior to that the hotels had contracted with the guest for a marriage now they are refusing the advance as the contract says money is not refundable. Well again this is you need to go look at the terms and see if there's a suitable force major clause or not etc I suppose if there was an impossibility to perform by one of the parties that again you know it doesn't affect the formation of the contract for sure is there a question over the offer or the acceptance I do not think so I think what I hope today's session has taught all of us that we must all look at the fine print a little more carefully on a lighter way and again I had a case where the person before the consumer for him was a lawyer and said that he had not he or she had not I don't even want to mention any more detail had not read that the boarding pass and the ticket specifically said that the boarding gate would close say 40 minutes prior to the departure time or 45 minutes whatever it was and the court in its order the district forum specifically said that as a lawyer you have no business not to read the fine print so I think this is only a reminder for all of us that we have to read the fine print and be careful I don't think from what you've told me the formation of the contract is affected in any way but as to whether or not you'll get your money back you'll have to really look at the contract and the force major clause this is a very very common situation that has arisen whether it's also worthwhile please look at because there are very many people who say that they'll pay you back you know 70% 80% if the differential is 10,000 or 20,000 is it worth fighting over you need to think it over. Is there a question Nandakumar? It's normally companies issues and offer later. Yeah with basic commercial terms the employee accepts later the time of actual joining and well not necessarily I think what happens and this is a very good question I mean this is again somewhat similar to what I was telling you about say a term sheet and then a more detailed agreement you have an offer letter is made which is accepted subsequently can you have an employment agreement there is really no reason why not I think what happens is that your offer letter will normally say that there will be a this is subject to the terms and policies of the company or whatever else and those terms and policies are often captured in the formation and permit agreement just for clarity. I don't really think that this changes the enforceability because even with an offer letter or let us imagine a scenario where you are not even given an offer letter it's an oral assurance given to you to work and you are you know you are told that this will be the salary and you continue working there for a while and then there is a dispute obviously you have some records available to you it's not as if there is none so therefore you are this is a very good point that you make but I don't think it really makes a very big difference if and this is important from the terms of the offer made and the acceptance the vital aspects are clear what is the salary to be paid what is typically the role to be performed and so on now obviously the offer letter need not contain all the details or the employment agreement also may not contain all the details it will not tell you things like oh whenever your boss asks you to you'll have to send an email and reply obviously it's not going to say things like that it will by and large say that you are in charge of sales for you know north india south india east india whatever else it is so the details of a contract are not necessarily the same as the offer and the acceptance being clear my sense is that you are right in saying that an offer letter followed by a more detailed one are both infosible I don't think there should be a serious problem in that yeah I have it here the consideration by both parties are agreed by email but states subject to contract no formal contract is executed can email exchange be termed as a concluded contract well I suppose it depends on if there is sufficient clarity it it really also depends on the intention of the parties as is manifest from those email communications there are cases where such emails are said to be completed contracts which are infosible we've had a very interesting case in where we suit for specific performance on the basis of some such email the party's defense was that he or she thought that there would be a more detailed agreement later on and this was not the agreement or this was just a negotiation so that like I said the intention of the parties as is manifest from their conduct or from their correspondence that's what is important to bear in mind somebody else has asked a question I think Mr. Girish about Fidic and why India doesn't have standard forms of contract well first of all Fidic there are some forms of Fidic that are used in India I have come across many such secondly India and in some Indian you know entities do have standard form contracts your CPW Public Works Central Public Works Department CPWD has a standard form NHAI has some standard forms they may not be as robust as your Fidic forms of contract are I don't know if you've had a chance to look at the latest suite of contracts from Fidic they're excellent and quite comprehensive and give you unlike some of the earlier forms of Fidic give you enough opportunity to do your own thing Railways is another example of standard form contracts which are easily available so India does have those I didn't go too much into that because I actually ran out of time but this may be a good chance for me to just make a couple of remarks about it standard form agreements often have two aspects to them general conditions of contract and special conditions of contract and when you sign up and typically after a tendering process or a detailed negotiation what happens is that there could be a scenario where the general terms and the special terms are inconsistent or contrary to one another or whatever then the question of which one would apply is a question that does arise from time to time but again that's not so much a question of contract formation so I don't want to go into that today thank you the social distancing this message we have to hammer it time and again the way it has been the spikes of the overt is there and the way it is now this time it's not just fear like last time it was said that it is more like we are saying in the way but there's no COVID but this time it's also taking the death tolls so again there's a request that you should maintain social distancing and like what Mr. Nantumar had said that despite having vaccination don't think that you are like a Shikhandi of Mahabharat that you cannot be killed or you cannot die still you have to maintain all the norms of safety over to you Dr. Ekram thank you so much Mr. Vikas Chakrat of course thank you so much sir it's been a wonderful experience here and very academically enriching session it is and you have cleared so many doubts not only my personal doubts in fact we have we have got very good chunk of participants today so we have got good number of questions as well so you have answered it and you have given us more clarity thank you so much I must take this opportunity to thank both of you Mr. Vikas Chakrat as well as Mr. Dr. Vikram your enthusiasm in being able to organize these webinars is fantastic and I hope it's infectious because we have to despite all the negativity around us and all of us are facing people who we know who are either facing the infection or have succumbed to it despite all this to be positive and to continue this knowledge learning and sharing modules is a fantastic effort please keep up the good work and please stay safe thank you for this opportunity once again and thanks to the audience which on a Sunday evening has chosen to sit and listen to me and I'm very grateful for all of that thank you all once again thank you. Tomorrow we have a session on the changing compass of judicial review under article 226, 227 and article 32 that is by Mohan Katkari a senior advocate from Supreme Court of India so do join us tomorrow at 4.30pm and thank you everyone like share and subscribe the channel of Beyond Law CLC so that if you have missed any of the sessions you can connect with that and the comments will help us understand what things can be done better and thank you to Mr. Nadakumar and for the program to becoming a connecting point for such a wonderful session and the speaker thank you everyone stay safe.