Contract Management

“CONTRACT
MANAGEMENT”
By RAHAT AZIZ

IBA - CEE
WORKSHOP SCHEDULE
ON
CONTRACT MANAGEMENT
DAY - 1
SESSION
START

TIMINGS
9:00 - 09:30 AM

TOPICS
REG./INTRODUCTION

SESSION 1

9:30 - 11-00 AM

CREATION OF CONTRACT
(LEGAL ASPECT)
*Annexures Attached

TEA & PHOTO-SESSION

11:00 - 11:30 AM
DISCHARGEMENT OF
CONTRACT
(LEGAL ASPECT)
*Annexures Attached

SESSION 2

11:30 – 01:30 PM

LUNCH & PRAYER

01:30 – 02-30 PM

SESSION 3

02:30 – 03:30 PM

SPECIALIZED CONTRACT

SPECIAL SESSION
(BY TAHIR SARTAJ)

03:45 -04:45 PM

FINANCIAL RISK
*Annexures Attached

Rahat Aziz

Contract Management Workshop– Sep 2013

IBA-

IBA - CEE
WORKSHOP SCHEDULE
ON
CONTRACT MANAGEMENT
DAY - 2
SESSION
SESSION 4

TIMINGS
9:00 – 11:00 AM

TEA BREAK

11:00 - 11:30 AM

SESSION 5

11:30 – 01:30 PM

LUNCH & PRAYER

01:30 – 02-30 PM

SESSION 3

02:30 – 03:30 PM

TERMS (CONTINUED)

SPECIAL SESSION
(BY JUSTICE (R) SHAHID
ANWER BAJWA)

03:45 -04:45 PM

ENFORCEMENT ASPECT

Rahat Aziz

TOPICS
SPECIALIZED CONTRACT
(CONTINUED)
*Annexures Attached

SGA 1930 + TERMS OF
CONTRACT
*Annexures Attached

*Annexures Attached

Contract Management Workshop– Sep 2013

IBA-CEE

SURAT AL-BAQARAH 2:282
“O you who have believed, when you contract a debt for a
specific term, write it down. And let a scribe write [it] between
you in justice. Let no scribe refuse to write as Allah has taught
him. So let him write and let the one who has the obligation
dictate. And let him fear Allah, his Lord, and not leave anything
out of it. But if the one who has the obligation is of limited
understanding or weak or unable to dictate himself, then let his
guardian dictate in justice. And bring to witness two witnesses
from among your men. And if there are not two men [available],
then a man and two women from those whom you accept as
witnesses – so that if one of the women errs, then the other can
remind her. And let not the witnesses refuse when they are called
upon. And do not be [too] weary to write it, whether it is small or
large, for its [specified] term. That is more just in the sight of
Allah and stronger as evidence and more likely to prevent doubt
between you, except when it is an immediate transaction which
you conduct among yourselves. For [then] there is no blame upon
you if you do not write it. And take witnesses when you conclude
a contract. Let no scribe be harmed or any witness. For if you do

CONTRACT ACT
1872
Rahat Aziz

Contract Management Workshop– Sep 2013

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CREATION OF CONTRACT
DEFINITION:
‘An agreement enforceable by law is a contract.’
Contract = Agreement + Enforceability
Promise S.2(b)
Consideration
Ss.2c/25

Capacity S.11
Consent S.13
Lawful Object S.24
Writing & Registration

Classification of contract on the basis:
(a) Creation S.9
(b) Execution
S.10

Expressed
Implied
Executed
Executory

Valid S.2 (h)
(c) Enforceability S2(g) Void S.24
Voidable S.2(i) 23

Contingent Contracts
S.31
Quasi Contracts S.68-72

PROMISE/AGREEMENT
PROMISE = OFFER + ACCEPTANCE
LEGAL RULES REGARDING A VALID
OFFER

LEGAL RULES REGARDING
ACCEPTANCE

-An offer may be expressed or
implied.

-Acceptance must be given only by a
person to whom offer is made

- Terms of the offer must be certain
and not loose or vague.
- An invitation to offer is not an
offer.

- Acceptance must be absolute and
unqualified
- Acceptance must be expressed in
some usual and reasonable manner,
unless the proposal prescribes the
manner in which it is to be accepted

- An offer may be Specific or
General.
- An offer should not contain any
such term, non-compliance of which
would amount to acceptance.
Rahat Aziz

Note: two identical cross offers do not make a
contract
Contract Management Workshop– Sep 2013

Nature of Consideration:
 
Goods: Deals in Sale of Goods Act,
1930.
 
Goods: Definition:
“Means
every
kind
of
moveable
property
other than actionable claims
and money; and
includes electricity,
water, gas, stock and shares, growing
corps, grass and things attached to or
forming part of the land which
are
agreed to be severed before sale or
under the contract of sale”
Rahat Aziz

Contract Management Workshop– Sep 2013

IBA-CEE

Electricity Electricity Act, 1910.
Water
WAPDA Act, 1958.
(PEPCO + NEPRA)
Gas
 
Stock & shares: Securities & Exchange Ordinance,
1969
Companies Ordinance, 1984.
Actionable claims: Contract Act, 1872.
Property:
(Immovable Property) The Transfer
of
Property Act, 1882
Services:
Contract Act, 1872
(All professionals have their associations
and are bound by their statutes and by
laws, like for Doctors: Pakistan Medical
Association for Engineers: Pakistan
Rahat Aziz Engineering
Contract
Management Workshop– Sep 2013
IBA-CEE
Council).

TRIPS:
Trade related intellectual
properties.
Copy Right:
The Copy Right Ordinance,
1962.
Trade Mark:
The Trade Marks Ordinance,
2001.
Patents:
The Patents Ordinance, 2000.
Registered
Design: Registered
Design
Ordinance,
2000.

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Contract Management Workshop– Sep 2013

IBA-CEE

LOANS: Banking Companies Ordinance,
1962
Prudential Regulations.
(Agricultural Financing, Corporate
Commercial Banking, SMEs Financing,
Consumer Financing Micro Finance
Banks)
NBFC Rules 2007 – Leasing Co.

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Contract Management Workshop– Sep 2013

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CAPACITY
 S.11 lays down that a person is incompetent to

conduct under the following circumstances:
 If he is a minor.
 If he is of unsound mind, and
 If he is disqualified from contracting by law to
which he is subject.
PERSON
Natural
Age

Artificial

Disqualification
Registered

Object

Soundness of mind
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Contract Management Workshop– Sep 2013

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FREE CONSENT
 ‘The complainant must prove that if he had known the truth, or had

not been forced to agree, I would not have entered into the
contract.’
Forced consent has two further vitiating elements:
In all these 4
 Coercion (Section 15)
cases, there is
no “free
 Undue influence (Section 16)
consent” and
the contract is
Truth has two further vitiating element.
voidable at the
 Fraud (section 17)
option of the
party whose
 Misrepresentation (Section 18)
consent was so
cause.
> When the consent is caused by bilateral mistake, the agreement is
void (section 20)
> A contract is not voidable merely because it was a unilateral
mistake as to matter of fact (Section 22).

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Contract Management Workshop– Sep 2013

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LEGALITY OF THE OBJECT
 The word object in the context of Contract Act 1872 means “Purpose or

Design”.

When does the object of agreement become unlawful?
 When it is punishable by the criminal laws.
 When it is prohibited by special legislation.
 If it is of such a nature that, if permitted, it would defeat the





provisions of any law.
If it is fraudulent.
If it involves or implies injury to the person or property of
another.
If the Court of law regards it as ‘immoral’.
If the Court of law regards it as “opposed to public policy.

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Contract Management Workshop– Sep 2013

IBA-CEE

WRITING AND REGISTRATION
Generally, a contract can be concluded in writing,
verbally or even through general practice/conduct. It
can either be expressed or implied.
In practice, there are certain areas in which contract
requires specific mode of formulation and sometimes
registration.
Few such examples are:
 Contract relating to land.
 Banking contracts.
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Contract Management Workshop– Sep 201

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CLASSIFICATION OF CONTRACT
On the basis of creation, a typical contract can
be classified as:
Express
Creation

Implied
Creation

Section 9 of Contract Act 1872 elaborates:
‘In

so far as the proposal or acceptance of any
promises made in words, the promise is said to
be expressed. In so far as such proposal or
acceptance is made otherwise than in words, the
promise is said to be implied.
Rahat Aziz

Contract Management Workshop– Sep 2013

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CLASSIFICATION OF CONTRACT
BASED ON ‘EXECUTION’
Execute
d

Executor
y

Executed Contract:
A Contract in which the task or action has been
completed by one or both the parties. The parties
are said to be ‘discharged’ of the contract.
Executory Contract:
A contract in which a task or action is yet to be
completed or partially completed.
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Contract Management Workshop– Sep 2013

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ENFORCEABILITY OF A
CONTRACT
C. A of 1872 S.2(g)
An agreement not enforceable
by law is to be ‘void’.
C. A of 1872 S.2(h)
An agreement not enforceable
by law is a ‘Contract’.
VOID CONTRACTS

VOIDABLE CONTRACTS

• A Void Contract is, a as matter of law,
no Contract at all. For example, if we
imagine that A and B enter into a
contract for the sale of illegal drugs,
that contract would be void. It means
that the purported contract has no
legal effect.

• Voidable means that there is a
contract, but one of the parties has an
option to ‘avoid’ that contract, at which
point it becomes void. If the party
choose not to exercise that option, then
the contract continues normally.

Rahat Aziz

Contract Management Workshop– Sep 2013

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CONTINGENT CONTRACTS
S. 31 of CA 1872 defines:
“A contingent contract is a contract to do or
not to do something, if some event, collateral to
such contact does not happen.”
Example
A Contract to sell B 10 gadgets for Rs. 10,000/-, if
the ship by which they are coming returns safely.

Rahat Aziz

Contract Management Workshop– Sep 2013

IBA-CEE

QUASI - CONTRACTS
Under certain special circumstances obligations
resembling those created by contract are
imposed by law although the parties have never
entered into the contract. Such obligations
imposed by law are referred to as ‘Quasi Contracts’.
‘S. 68 -72 of CA 1872 further elaborate such
contract and gives guidelines about its
applications ’

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Contract Management Workshop– Sep 2013

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Discharge:
(Ways)

DISCHARGEMENT
By Performance
By Mutual Agreement
By Supervening
Impossibility
By Operation of Law

Ss 37-63

By Lapse of Time
By Breach of Sec. 73

Contractual Remidies
Damages
Specific
Performance.
Injunction

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Ss 73-75

Quantum Meruit. Section 76-123
Condified into Sales of Goods Act,
1930

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DISCHARGEMENT

A Contract is said to be discharged
when the rights and obligations are
a r i s i n g o u t o f a c o n t r a c t a re
extinguished/ eliminated .

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Contract Management Workshop– Sep 2013

IBA-CEE

A Contract may be discharged in the
following ways:
By
Performanc
e
By Breach
of Contract

DISCHARGEMEN
T

By Lapse of
Time

Rahat Aziz

By Mutual
Consent

By
Supervenin
g
Impossibilit
y or
illegality

Contract Management Workshop– Sep 2013

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PERFORMANCE
 As the word itself is self- explanatory, when both

parties involved in the contract fulfill their
obligation, the contract is said to be discharged by
due performance.

Example:
(1) Transfer of Property in case of sale agreement.
(2) Delivery of goods in case of shipment contracts.

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Contract Management Workshop– Sep 2013

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MUTUAL AGREEMENT
 Again the word being self-explanatory, a contract

may be discharged by another agreement by the
parties involved.
S. 62 & 63 of C A 1872 ascribes three methods of
dischargement by mutual agreement.REMESSION
‘Acceptance of lesser
sum than what was
originally agreed’

NOVATION

ALTERATION

‘A new Contract substituting
the old one’

‘Changing one or more
terms of Contract’

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RESCISSION
‘In other words Cancellation
of existing Contract’

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SUPERVENING IMPOSSIBILITY
 As per S. 56 CA 1872, any agreement which

enters an act impossible in itself is void.
Application of Doctrine of SI
APPLICATION VALID

APPLICATION INVALID

1. Destruction of object matter

1. Difficulty of performance

2. Failure of ultimate purpose

2. Commercial impossibility

3. Death/ Personal incapability of
promissory

3. Impossibility due to the default
of 3rd person

4. Change of Law

4. Strikes & Lockouts

5. Outbreak of War

5. Failure of one of the objects

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Contract Management Workshop– Sep 2013

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BY OPERATION OF LAW

MERGER
When an inferior
Contract merges
into a Superior
one

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OPERATIO
N OF LAW

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INSOLVANCY
When one of the
parties become
insolvent and
court passes
‘order of
discharge’

IBA-CEE

LAPSE OF TIME
Contract may be
discharged by

By operation of
Limitation Act.

If contract is not
performed within
prescribed time,
provided that time is
of essence in that
particular contract.

When any of the above possibility comes into play, the
performance / execution of contract becomes ‘time - barred’.

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Contract Management Workshop– Sep 2013

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BREACH
 Breach brings an end to the obligations created by the

contract on the part of each party.
Breach may be of two
kinds

ANTICIPATORY
It occurs before the time
fixed for performance of
Contract.

Rahat Aziz

ACTUAL
It occurs when a party fails
to perform his/ her
obligations upon the date
fixed for performance by
Contract.

Contract Management Workshop– Sep 2013

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CONTRACTUAL REMEDIES
SPECIFIC
PERFORMANCE

NON- FINANCIAL
Remedies
(Specific Relief Act
1877)

Whenever
there is a
Breach of
Contract
agreed party
may be
entitled to

INJUNCTION

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DAMAGE
S
FINANCIAL
REMIDIES
(Contract Act
1872)
QUANTUM
MERIUT

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DAMAGES
 Damage is an award of money that is intended to

cure a wrongful event / breach of Contract.
 They may be categorized as:
Ordinary Damage
Special Damages
Nominal Damages
Liquidated Damages
Preventive Damages

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Contract Management Workshop– Sep 2013

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REMOTENESS OF DAMAGE
Remoteness of damage is tested by the

two limb rule in HADLEY
BAXENDALE 1854.

Vs

Loss must arise naturally from the
breach.

Remoteness

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Manner be supposed to have
contemplated.

Contract Management Workshop– Sep 2013

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QUANTUM MERIUT
Literal Meaning: ‘as much as earned or in
proportion to the work done’
Sometimes the C goes for the protection of
his reliance interest. This refers to the
position he would have been IN had not
relied on the Contract.

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Contract Management Workshop– Sep 2013

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SPECIFIC PERFORMANCE
→ It is an equitable relief/ remedy.
→ It occurs when the court orders the D to fulfill a

contractual obligation to do something.
→ if the D refuses to obey the court’s order, it can

be held in contempt of court, and therefore be
subject to a fine, or imprisonment .

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Contract Management Workshop– Sep 2013

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INJUNCTION
→ It is also an equitable relief/ remedy.
→ Injunction occurs when the court orders

the
defendant to refrain from doing
something that is prohibited by the
contract.

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Contract Management Workshop– Sep 2013

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SPECIALISED CONTRACTS
(Have their own characteristics)
*
*
*

Indemnity & Guarantee
Bailment & Pledge
Agency

 
Indemnity
Insurance Concepts Sec. 124
 
Guarantee
Banking Concepts Sec. 126
 
Bailment Sec. 148
Carriage of Goods
Bill of lading
Charter party agreement
 
Pledge Sec. 172
Mortgages & Charges
 
Agency Sec.182
Partnership Concepts
Corporate Entity Concepts
Corporate Governance Concepts
 
 
 
BOD are the agents of the Company
Section 239 onwards
Codified into Partnership Act, 1932
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Contract Management Workshop– Sep 2013

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SPECIALIZED CONTRACT
Indemnity & Guarantee Ss 124 - 147
Bailment & Pledge Ss 148 - 181
Agency Ss 182 – 238
Indemnity
Guarantee
Bailment

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Insurance Concepts
Banking Concepts
Carriage of Goods
• Bill of Lading
concepts
• Charter party agree:

Contract Management Workshop– Sep 2013

Continue
d. IBA-CEE

Pledge
Agency

Mortgages & Charges
Concepts
Partnership Concepts
Corporate Entity Concepts
Corporate Governance
Concepts

BOD is the agent of the
Co.

Section 239 onwards
Codified into Partnership Act,
1932.

Rahat Aziz

Contract Management Workshop– Sep 2013

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CONTRACT OF INDEMNITY
Indemnifier

Indemnified

“A contract by which one party promises to save the other from loss caused

to him:
By the conduct of the promisor himself or
By the conduct of any other person:
Called A Contract Of Indemnity”
Examples:
Insurance
Indemnity Bond
Implied Indemnity

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Contract Management Workshop– Sep 2013

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CONTRACT OF GUARANTEE:
Principal Debtor,

Creditor

Guarantor / Surety

“A contract of guarantee in a contract is:
To perform a promise or
Discharge the liability if a third person IN CASE OF HIS
DEFAULT.”
Offer + Acceptance
Consideration

Cr.

Pr.
Db

Capacity
Free – consent
Lawful object

Surety /
Guarantor
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Contract Management Workshop– Sep 2013

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DISCHARGE OF SURETY
FROM LIABILITY
(1)
(2)
Any change in (1) contract will discharge the liability of
guarantor.
• Variance
•Release or Discharge of Pr. Db.
•Arrangements by Cr. – Db.
•Cr. Act or Omission.
•Loss of Security
•Invalidation.
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Contract Management Workshop– Sep 2013

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DIFFERENCE B/W INDEMNITY
& GUARANTEE
INDEMNITY

GUARANTEE

— Liability of indemnifier is
‘Primary’.

— Liability of Surety is
‘Secondary’.

— Two parties are involved.

— Three parties are involved.

— It is a contract for
reimbursement
of loss.

— It is a contract for a security
of
debt. etc.

— Indemnifier acts
independently , without any
others request.

— Surety gives guarantee at
the request of debtor

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Contract Management Workshop– Sep 2013

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BAILMENT & PLEDGE
“ A bailment is the DELIVERY OF goods by one person to another for some
purpose (TEMPORARY) upon a contract that they (Goods) shall, where
the purpose (TEMPORARY) is accomplished, be returned or otherwise
disposed of according to the direction of the person delivering them.”
Person delivering the goods
To whom goods are delivered

Baile
rBaile
e

Types:
 Safe Custody: Commercial

Commodatum.

 Rentals (Car - Generator):
 Carriage:

By Sea, Air, Railways & Road
 Pledge./ PAWN
 Repairs
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Contract Management Workshop– Sep 2013

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PLEDGE OR PAWN
“The bailment of Goods as SECURITY for
PAYMENT of a DEBT or PERFORMANCE of a
promise is called PLEDGE”.
The Bailer here is called
The bailee here is called

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‘Pawner or Pledger’
‘Pawnee or Pledgee’

Contract Management Workshop– Sep 2013

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DISTINCTION B/W PLEDGE &
BAILMENT
PLEDGE

BAILMENT

— The pledgee has no right of
using the goods pledged.

— There is no such restriction for
a bailee.

— Pledgee has a right of sale of
goods on default (by going
notice).

— No such right of sale to the
bailee exists.

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Contract Management Workshop– Sep 2013

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AGENCY
“An agent is a person employed to do any act for another on
to represent another in dealing, with third person. The
person for whom such act is done is called the principal”.
TEST OF AGENCY:
“Whenever a person has the authority to act on behalf of
the other and to create contractual relations b/w that other
& 3rd persons. ”
PRINCIPA
L

PRIVITY OF
CONTRACT

Rahat Aziz

AGEN
T
3RD
PARTY

Contract Management Workshop– Sep 2013

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PRINCIPAL’S LIABILITY FOR THE
ACTS OF THE AGENT
1.
2.
3.
4.
5.

When Agent acts within the scope of his actual
and apparent authority.
When agent exceeds his actual as well as
apparent authority.
Liability for agents mis-representations or Fraud.
Notice given to agent as notice to Principal
Liability based on the doctrine of estoppels.

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Contract Management Workshop– Sep 2013

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PERSONAL LIABILITY OF
AGENT TO THIRD PARTY
1.
2.
3.
4.
5.
6.
7.
8.
Rahat Aziz

Where
Where
Where
Where
Where
sued.
Where
Where
Where

agent
agent
agent
agent
agent

expressly agrees.
acts for a foreign Principal.
acts for an unnamed principal.
acts for an undisclosed principal.
acts for a principal who cannot be

agent exceeds his / her authority.
there is a trade usage or custom.
agent’s authority is coupled with interest.
Contract Management Workshop– Sep 2013

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CREATION
Expressed
Written
Oral
By Estoppel

Implied

By Holding out
By Necessity

Ratification
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Contract Management Workshop– Sep 2013

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Termination of
Agency
By act of Parties
By operation of
Law
Completion of the business of agency.
Expiry of Time.
Death of the Principal of the agent.
Insanity of the principal of agent.
Insolvency of the principal.
Destruction of subject.
Dissolution of Company.
Principal or agent becomes alien enemy.
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Contract Management Workshop– Sep 2013

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LAW FROM DIFFERENT DIMENSION
La
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Law

Judge

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Rahat Aziz

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Law Teacher

Li
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Contract Management Workshop– Sep 2013

ts

IBA-CEE

CONCEPTUAL POINTS
Goods S. 2 (7), 6 -8
 
Price as “consideration” S.9
 
Sale & Agreement to Sell S.4
 
Auction sale S. 64
 
Caveat Emptor
(Buyer Beware)

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Contract Management Workshop– Sep 2013

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TERMS OF THE CONTRACT
•

Express & implied terms

•

Condition & warranties Ss. 11 – 17

•

Other terms (Boilerplate)
Condition as to title S. 14
Condition in a sale by description S. 15
Condition in a sale by sample S. 17
Condition as to fitness or quality S. 16

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Contract Management Workshop– Sep 2013

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TRANSFER & PERFORMANCE
•

Transfer of Property

•

Delivery

•

Remedial Measures
In unascertained & future Goods Ss. 18 - 23
Rules as to delivery of Goods Ss. 33 - 44
Rights of unpaid seller Ss. 45 – 61

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Contract Management Workshop– Sep 2013

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In commercial world, we normally come
across with two type of contracts.
 
Transactional contract.
Relationship contract.
 
Transactional Contract:
“Where Consideration is offered and
accepted”

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Contract Management Workshop– Sep 2013

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Relationship Contracts:
 
By sponsors of
a Company: Memorandum and
Articles of Association.
 
By Partners: Partnership Deed.
 
By Author &
Trustee:
Trust Deed.
 
By Principle &
Agent: Agency Agreement.
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Contract Management Workshop– Sep 2013

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TERM:
Classification of Terms:
BY PARTIES

OTHERWISE

SGA

Express

By Court

Condition

Implied

By Statute

Warranty

By Customs & Trade Innominate Term

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Contract Management Workshop– Sep 2013

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EXCLUSION CLAUSES
Construe
BOILER PLATE TERMSBe Interpreted in a particular
way.
Purports
appear to be or do especially
falsely.
Exclude liability altogether
Restrict it by limiting damages
Imposing other onerous condition

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Contract Management Workshop– Sep 2013

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BOILER-PLAT TERMS:
Exclusion Clause.
Force Majeure Clause.
Confidentiality Clause.
Arbitration Clause.
Jurisdiction Clause.
Entire Agreement Clause.

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Contract Management Workshop– Sep 2013

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Importance of Contract Law.
 
“The law of contract forms the foundation of
Business Law. Virtually every aspect of
business involves contracts as does much of
a persons normal life. When you rent an
apartment, you sign a contract known as a
lease, when you take job, you enter a
contract of employment any purchase of
goods, services or real estate involves some
form of contract. Loan are evidenced by a
type of contract known as a promissory note.
Even the marital relationship is a type of
Contract.”
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Contract Management Workshop– Sep 2013

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Situation

Law

Jurisdiction

 
Lease
Rent Laws
Rent Courts
 
Employment
Labour Laws
Labour Courts under
(IRA, FA, CA)
IR Laws
SSA, EOBI
 
Sale/Purchase of Goods Sale of Goods Act,
Territorial &
1930
Pecuniary
 
Services
Contract Act, 1872 Territorial &
(relevant laws of
Pecuniary
Respect Associations)
 
Real Estate
Transfer of Property Territorial &
Act, 1882
Pecuniary
Loan
 
Marital
Rahat Aziz

Banking Laws
Banking Courts
Negotiable Instrument
Family Laws

Family Courts

Contract Management Workshop– Sep 2013

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SCENARIO:
 
Face to Face

V

At distance

One to One

V

Standard

 
 
 

STANDARD CONTRACTS:
 
COMPARABLE Bargaining Strength
Court will not usually,
interfere.
 
One Party is weak
Court will protect the
weaker party.

Rahat Aziz

Contract Management Workshop– Sep 2013

IBA-CEE