THE LAW OF

CONTRACT IN
PAKISTAN
(Contract Act 1872)
Key Terminologies of Contract Act

Please Refer to Reading Material 1

Communication & Acceptance of Proposals

 By an act or omission by the party

proposing
 Comes to the knowledge of Promisee
 Communication of an acceptance/
revocation is complete when it is put
into a course of transmission out of
power of the Promisor/Promisee.
Revocation & Acceptances of Proposal

 A proposal may be revoked any time

before the communication of its
acceptance
 Methods of Revocation:
 Communication of Notice
 Lapse of Time
 Failure of the Acceptor to fulfill a condition
precedent to acceptance
 By the death or insanity of the Proposer, if
comes to the knowledge of Acceptor before
acceptance.
 Acceptance
 Must be Absolute and unqualified
 Expressed in usual and reasonable manner
 In accordance with the prescribed method
of the proposal
 If the acceptance is not made in the
prescribed manner then the proposer may
insist on the prescribed manner ONLY in a
reasonable time.
 Acceptance by performance of the
conditions
 Acceptance of any consideration
Essentials of a Valid Contract
 Intention to create a contract
 Offer and Acceptance
 Consideration
 Capacity to enter into a contract
 Free consent of the parties
 Lawful object of the agreement
 Parties competent to contract
Parties Competent to Contract
 Age of Majority
 Person of Sound Mind
 Not disqualified by any law to which
he is subject
Is Writing a Contract Necessary?
 Statutory Provision
 Arbitration Clause
Essential Elements of a Contract
 Proper offer and proper acceptance
 Lawful consideration (quid pro quo)
 Competent to contract or capacity
 Free Consent
 Lawful Object and Agreement
 Agreement not declared void or illegal
 Intention to Create Legal
Relationships
 Certainty, Possibility of Performance
 Legal Formalities
 Competent to Contract
 The person has reached the age of
majority.
 The person is of sound mind.
 The person is not disqualified from
contracting by any law.
 Free Consent – Consensus-ad-Idem

 Coercion
 Undue Influence
 Fraud
 Misrepresentation
 Mistake
 Fraud
Acts committed by a party to a contract, or
with his connivance, or by an agent, with
intent to deceive another party thereto or his
agent, or to induce him to enter into
contract:
 The suggestion as a fact, of that which is not true, by
one who does not believe it to be true
 The active concealment of a fact by one having
knowledge or belief of the fact
 A promise made without any intention of performing it
 Any other act fitted to deceive
 Any such act or omission as the law especially declares
to be fraudulent.
 Misrepresentation
 The positive assertion in a manner, not
warranted by the information of the
person making it, of that which is not
true, though he believes it to be true
 Any breach of duty, without an intent
to deceive, gains an advantage to the
person (or anyone claiming under him)
committing it by misleading other
 Causing a party to an agreement to
make a mistake
 Lawful Consideration/Object
 Not forbidden by law
 Permission may defeat provision of a
law
 Not fraudulent
 Doesn’t involves or implies to the
person or property of another
 Types of Contract
 On the basis of validity
 On the basis of formation
 On the basis of performance
 On the Basis of Validity
 Valid contract
 Void contract
 Voidable contract
 Illegal contract
 Unenforceable contract
 On the Basis of Formation
 Express contract
 Implied contract
 Tacit contract
 Quasi contract
 On the Basis of Performance
 Executed contract
 Executory contract
 Unilateral contract
 Bilateral contract
 Offer Defined
When one person signifies to another
his willingness to do or to abstain
from doing anything with a view to
obtaining the assent of that other to
such act or abstinence, he is said to
make a proposal/offer.
 Offer and Acceptance
 Whether there has been an offer at
all in the particular case, or whether
there is something less than an offer
 If there is an acceptance; whether it
is in the proper form
 Whether there has been an
acceptance of the offer
 Whether the acceptance has been
communicated to the offeror.
 Classification of Offer

 General Offer: Which is made to public

in general.
 Special Offer: Which is made to a
definite person.
 Cross Offer: Exchange of identical offer
in ignorance of each other.
 Counter Offer: Modification and
Variation of Original offer.
 Standing, Open or Continuing Offer:
Which is open for a specific period of
time.
 Invitation to Offer
An invitation to offer is only a
circulation of an offer; it is an attempt to
induce offers and precedes a definite
offer. Acceptance of an invitation to an
offer does not result contract and only
an offer emerges in the process of
negotiation. A statement made by a
person who does not intend to bound by
it but, intends to further act, is an
invitation to offer.
 Concept of Offer
 An offer (or a "proposal") is not defined by
statute. It is generally understood as denoting
the expression, by words or conduct, of a
willingness to enter into a legally binding
contract as soon as it has been accepted, usually,
by a return promise or an act on the part of the
person (the offeree), to whom it is so addressed.
 An acceptance, in relation to an offer, is a final
and unqualified expression of assent to the
terms of the offer.
 Offer followed by acceptance, is an "agreement"
 If an agreement is enforceable by law; it is a
"contract".
 Offer by and to Whom
An offer must be made by a person
legally competent to contract or on
his behalf, by someone authorized by
him to make the offer. It is usually
made to a person (or to a number of
persons), but it can be made to the
entire world.
Statements Which are Not Offers
 Statement made during negotiation,
without indicating that the maker
intends to be bound without further
negotiation
 A statement which invites the other
party to make an offer
 Statement of lowest price
 Display of goods in a ship with price
tags
 Intention to be Bound
 Gibson VS Manchester City Council
Agreement only exists when there is
a clear offer mirrored by a clear
acceptance.
 Termination of Offer
 By the offeror revoking (or
withdrawing) it before acceptance
 By the offeree rejecting the offer
outright or by making a counter-
offer
 By lapse of time, if the offer is stated
to be open only for a fixed time
 Acceptance
 Acceptance must be absolute and
unqualified
 Communicated to offeror
 Acceptance must be in the mode
prescribed
 Acceptance must be given within a
reasonable time before the offer lapses
 Acceptance by the way of conduct
 Mere silence is no acceptance
 Unlawful Consideration
 Forbidden by law
 Is of such nature that, if permitted, it
would defeat the provisions of any law
 Is fraudulent ,or involves or implies
injury to the person or property of
another
 The court regards it as immoral ,or
opposed to public policy
 Consideration may take in any form-
money, goods, services, a promise to
marry, a promise to abstain etc.
 Revocation of Offer
 By the communication of notice of revocation
by the proposer to the other party
 By the lapse of the time prescribed in such
proposal for its acceptance, or, if no time is so
prescribed, by the lapse of a reasonable time,
without communication of the acceptance
 By the failure of the acceptor to fulfill a
condition precedent to acceptance
 By the death or insanity of the proposer, if the
fact of the death or insanity comes to the
knowledge of the acceptor before acceptance.
Persons Bound by the Contract
Promises bind the promisors and in
case of death of promisor (before
performance) their legal
representatives, unless there is
contract to the contrary, or the
nature of the contract is such that it
depends upon the personal
qualifications of any party.
Remedies for Breach of Contract
 Damages
 Specific performance of the
contract
 Injunction

Restriction
Principal Agent Relationship
Ten Commandments of Drafting a Contract

1. Think of the contract as a trip plan

2. Write down all specific commitments, and prerequisites,
and exceptions
3. Write down “Plan B” for various contingencies
4. Write down all of the other side’s statements on which
your client is relying
5. Write down any necessary disclaimers
6. Write short paragraphs
7. One topic per paragraph
8. Write short sentences
9. D.R.Y.: Don’t Repeat Yourself
10. Remember that contracts are about persuasion
 Some Practical Tips
 Validity of clauses after termination
 Give and take in negotiation
 Take time before committing
 Identification of the parties
 Arbitration clause
 Validity period
 Exceptions
 Damages
 Right & Duties
 Registration
 Legal requirements
FIVE NEGOTIATION STYLES
 SOFT

 HARD

 COMPROMISER

 PRINCIPLED

 EVOLUTIONARY
THE “DIRTY DOZEN” HARDS MOVES

 Extreme Initial Offer.

 Personal Insult.
 Deliberate Deception.
 Lock In Tactic.
 Laundry List.
 Take It or Leave It And Threats.
 Demanding A Specific Solution.
 Good Guy /Bad Guy.
 Manipulating Not To Comply.
 Escalating Demands.
 Absent Partner Or Limited Authority.