Unit 1 - Importance of Arbitration As Adr Mechanism

MH5351 – ARBITRATION AND
ADVANCED PROFESSIONAL
PRACTICE
UNIT 1 – IMPORTANCE OF ARBITRATION AS AN ALTERNATIVE DISPUTES
RESOLUTION (ADR) MECHANISM
MH5351 – ARBITRATION AND ADVANCED
PROFESSIONAL PRACTICE
UNIT 1 – IMPORTANCE OF ARBITRATION AS AN
ALTERNATIVE DISPUTES RESOLUTION (ADR)
MECHANISM
• UNIT 1 - IMPORTANCE OF ARBITRATION AS AN ALTERNATIVE DISPUTES RESOLUTION (ADR)
MECHANISM – Importance of arbitration – Role of arbitration in any contract agreement – Arbitration
clause in any contract agreement – Rate of architects in arbitration – Contract Act 1872, Limitation Act
1963, Arbitration and Conciliation Act 1996 – its terms and provisions – Costs involved for arbitration
• UNIT 2 – APPOINTMENT OF ARBITRATORS – THEIR ROLES & RESPONSIBILITIES, TECHNICAL
TERMS & COMMENTS – How arbitration proceedings are initiated – Reasons leading to arbitration –
Procedures and communication – composition of arbitral tribunal – appointment of arbitration and
umpire – interim measures by court/arbitral tribunal – jurisdiction of arbitral tribunal – conduct of
arbitral proceedings – determination of rules and procedure
MECHANISM
• UNIT 3 – ARBITRAL PROCEEDINGS – Place and language of proceedings – Claim statements
and counter claims – hearings and written proceedings – experts and assistance from courts – form
and content of arbitral awards – setting aside arbitral awards – appeals, insolvency and
limitations – misconduct of arbitrator
• UNIT 4 – PROJECT MANAGEMENT CONSULTANCY – Introduction – practices and strategic
issues related to construction project management – understanding of issues related to
management of clients and other stakeholders involved in the delivery of a project
• UNIT 5 – PRACTICE AND CASE STUDIES – Emerging trends in arbitration in India through cases –
Landmark awards and judgments by the various courts and judiciary – Case studies in PMC
MECHANISM
• REFERENCES
• Abdul Razzak Rumane, Quality tools for managing construction projects, Taylor & Francis Group;
ISBN13-9781466552142
• Dr. Roshan H. Namavati, Professional Practice, 2001 edition
• K.G. Krishnamurthy, S.V. Ravindra: Professional Practice, Prentice Hall India Learning Private Limited
(2014)
• Prof. Madhav Deobhakta and Architect Meera Deobhakta, Architectural Practice India, 2nd Edition,
2008
• Prof. Madhav Deobhakta, Arbitration for Architects and Project Managers, 2011
MECHANISM
• ARBITRATION AND ITS IMPORTANCE
• Arbitration - a procedure in which a dispute is submitted, by agreement of the parties, to one or more
arbitrators who make a binding decision on the dispute. In choosing arbitration, the parties opt for a
private dispute resolution procedure instead of going to court [World Intellectual Property
Organization]
• Arbitrator – a person chosen to decide a dispute or settle differences, especially one formally
empowered to examine the facts and decide the issue
MECHANISM
• ARBITRATION AND ITS IMPORTANCE – PRINCIPAL CHARACTERISTICS
• Arbitration is CONSENSUAL
• Only when both the parties agree to it and neither of the parties can withdraw unilaterally
• The PARTIES CHOOSE the arbitrator
• Parties select the sole arbitrator together
• If it’s a three member arbitral tribunal, each party appoints one of the arbitrators and these two persons agree to the
presiding arbitrator
• Arbitration is NEUTRAL
• Parties are able to choose important elements such as applicable laws, language and venue thus no party enjoys home court
advantage
• Arbitration is a CONFIDENTIAL procedure
• Confidentiality of the procedure and the award
• Decision of the arbitral tribunal is FINAL & EASY TO ENFORCE
MECHANISM
• ARBITRATION AND ITS IMPORTANCE – SCENARIOS
• International Arbitration Case – like border disputes
• Personal Injury Case – medical negligence or malpractice claims
• Architecture Design Disputes – breach of responsibilities
• Real Estate Disputes – fragmentation of responsibilities coz of multiple parties
MECHANISM
• Behavioral Theory and Problems faced by the parties in Construction Contracts [Prof Dr Ajit
Patwardhan, Contract Management Expert to World Bank, ICJ, January 2018]
• Stage 1: Concept and Feasibility > Stage 2: Scope & Tender Preparation > Stage 3: Tendering &
Bidding > Stage 4: Award of Contract > Stage 5: Design & Engineering > Stage 6: Planning &
Execution > Stage 7: Revised Planning & Execution > Stage 8: Change Requests & Variation
Order > Stage 9: Claims & Dispute Resolution > Stage 10: Arbitration & Litigation
MECHANISM
• Stage 9: Claims & Dispute Resolution
• When claims are raised, but cannot be settled due to disagreement, proper mechanism is generally
provided in the contract document, consisting of Engineer’s determination and/or Dispute Board’s
decision
• The Engineer’s determination, though provided, is rarely invoked due to lack of faith in the
determination by the Engineer, who is appointed and paid by the client
• Dispute Board mechanism does provide decisions on disputes but never honoured by the parties
• The affected party prefers arbitration under law; rather than trusting the Dispute Board’s decision
MECHANISM
• Stage 10: Arbitration and Litigation
• When disputes are brought to arbitration, due process is started to resolve them
• Though Arbitration takes a long time, it is supposed to end with an award on disputed matters
• The Arbitration award, though final and binding, can be challenged and brought to the Court on technical
ground or on partiality and bias to avoid implementation of the award
• The court, though not supposed to easily admit the challenge to the Arbitration award, readily agrees and
admits the cases for review, which takes years for conclusion damaging the interests of the affected party,
mainly the contractor
• Contractors are asked to provide a BG to get 75% amount released pending litigation, which they cannot
manage coz of financial constraints
MECHANISM
• Arbitration is very often used to resolve high value disputes in international construction contracts,
engineering, procurement and construction (EPC) contracts and drilling contracts. The primary
reasons for this are:
• A tangible and common apprehension about local courts
• A shared desire to have the dispute resolved on a final and binding basis by an experienced, specialist
and partly party-nominated tribunal
• A perception that tribunals are more likely to make awards based on a consistent and uniform
understanding of how major construction contracts operate
MECHANISM
• Arbitration awards are binding and enforceable
• Arbitration is a decision making process in which the arbitrator makes orders. Although every case is different,
most arbitration will work their way through the same steps
• Arbitration is not burdened by the backlog of cases in the courts which results in faster resolution of the
disputes referred to litigation
• Faster hearing and lesser paperwork mean lower costs in comparison to litigation
• Arbitration is a flexible process which permits parties to organize procedures and schedule hearings and
deadlines to meet their objectives and convenience
• Arbitral hearings are held in private settings and are attended only by those designate by the parties and
their counsel
• A great benefit of arbitration is that the parties can select their arbitrators with needed expertise
MECHANISM
MECHANISM
• ARBITRATION AND ITS IMPORTANCE – ARBITRATION AGREEMENT FOR CONSTRUCTION
• Arbitration is a form of dispute resolution and it is therefore a pre-requisite for arbitration to proceed
that the parties must consent to refer their dispute to arbitration. Such consent is called the arbitration
agreement
• Arbitration agreements, like most agreements, can be either oral or written. However, if arbitration were
to come under the purview of the 1996 act, the arbitration agreement must be in writing
• An arbitration agreement does not need to be a separate and distinct agreement from the main
agreement between the parties, it can be in the form of a single clause within the main contract itself in
fact in most standard forms of construction contracts this is the case
MECHANISM
• ARBITRATION AND ITS IMPORTANCE – ARBITRATION AGREEMENT FOR CONSTRUCTION
• Arbitration agreement consisting of documents signed by both the parties, an exchange of letters,
telegrams or other means of telecommunication
• This provides a record of the agreement or an exchange of statements of claim and defense in which
the existence of the agreement is alleged by one party and not denied by the other
• Their reference in a contract document containing an arbitration clause constitutes an arbitration
agreement if the contract is in writing and the reference is such as to make that arbitration clause part
of the contract
MECHANISM
• ROLE OF ARBITRATION IN ANY CONTRACT AGREEMENT
• The special features of the construction industry can be enumerated as:
• The industry itself is a specialised one, with its own patterns and practices
• Planning and execution of a construction project involves numerous parties and organisations, who must work in
unison - though temporarily. A small deviation (real or alleged) affects numerous parties
• A construction project is a continuous one, usually spread over a number of years. A dispute that operates as
an impediment at any single stage may upset the entire time-table, unless the dispute is speedily resolved
• Some of the problems that arise in the working of the project are not foreseeable or, even if they are
foreseeable, their magnitude may not be foreseeable. If litigation is resorted to, then such problems may
increase (rather than resolve) the tension generated by the emergence of various problems
MECHANISM
• Theoretically, any legal issue that can arise under a contract (in general) can arise in relation to a
construction contract also
• These include issues relating to formation of the contract, legal validity of the contract, performance of
the contract, effect of force majeure, assignment of the contract, damages and so on
• However, in the case of construction contracts, some of these issues, arising as they do against the
background of a contract of some magnitude or complexity, present a few peculiar features, requiring
special attention
MECHANISM
• Quantity of work and escalation
• Change of drawings and designs during the course of work leading to abnormal increase in the quantum of work
• Escalation claimed for increase in wages

• Increase in the wage of labors but depend on the contractual language that may lead to proportionate increase to the
contractor
• Unjustifiable claim
• Arbitrator cannot grant unjustifiable claim which will be held by the court of law
• Acting without jurisdiction

• An arbitrator who acts in disregard of the express terms of the contract may be held to have acted without jurisdiction
MECHANISM
• Appreciation of evidence
• It is a well-established proposition that when an arbitral award is challenged on the ground of factual errors
and no issue of law or breach of natural justice is involved, the court cannot re-assess the evidence
• Reasons and conclusion

• Where the arbitrator has given reasons for the amount determined by him, the award cannot be set aside,
even if the court disagrees with his actual conclusion
• View of the site

• Trivial objections are raised (during arbitration) as to minor points of procedure - such as, questions relating to
view of the site by the arbitrator. Subject to agreement to the contrary, the arbitrator has a discretion as to
whether he will view the site and, if so, on what date
MECHANISM
• Documents and their incorporation of documents
• A works contract includes a lot of documents namely, main agreement, general conditions, specifications,
BOQ, drawings, schedule of rates, form of tender and bond
• Reference in the work order (or in the agreement), to a particular document, suffices to incorporate that
document in the contract
• This is subject to two important qualifications:
• Intention to incorporate the document should exist
• A document incorporated for one purpose will be treated as incorporated for that purpose only
MECHANISM
• Implied Terms
• In a contract for work and materials, three warranties are implied:
• The material used in the works, and also the completed works, shall be reasonably fit for the purpose for which they
are required
• The materials will be of good quality
• The work will be carried out in a good and workman-like manner
• Subcontractors and Suppliers

• A "sub-contractor" is one who agrees with the contractor to carry out a part of the works
• A "supplier" is one who supplies those fabricated parts and materials, which are necessary for completion of
works. Where the employer himself nominates the sub-contractor, such a sub-contractor is called a "nominated
sub-contractor"
MECHANISM
• Architects
• Contracts for works commonly give the architect or engineer jurisdiction to determine certain disputes and to
issue certain certificates. In exercising this duty, the architect or engineer must act fairly
• Issues: Certification
• How far the certificate of the architect is binding on the arbitrator, will depend on the terms of the contract
• On the one hand, one comes across contracts in which the certificate itself cannot be questioned before the
arbitrator
• On the other hand, there are cases where the contract gives the arbitrator absolute power to override or
modify any such certificate
• Generally, a certificate does not have the status of an award
MECHANISM
• Clerk of Works
• The clerk of works is usually employed on behalf of the employer, to supervise the works. He may assist
the architect in the supervision of the works, but the architect cannot delegate to him duties of the
architect
• Claims under the contract
• Contracts entered into in connection with buildings and other construction projects are drawn elaborately
on standard forms, seeking to provide for various contingencies
• Nevertheless, legal disputes about payment of the contractor's claims thereunder do arise from time to
time, occupying a considerable time of arbitrators and courts
• Some legal principles have been evolved as to the quantification as well as the validity of such claims
MECHANISM
• Types of claims
• Claims by a building contractor (or other contractors engaged in construction work) are principally of
two types
• Claims under the contract
• Claims for payment for work which is done outside the contract, for which, the contractor seeks payment as a
matter of justice
• The first category is contractual. The contractor claims payment on the basis of the contract
• Such claims usually involve questions of assessing the work (seeing that it is according to contract) and
questions of interpretation of contractual terms
MECHANISM
• Types of claims
• The second category of claims mentioned above is extra-contractual
• In legal parlance, they are known as claims quantum meruit
• Such claims do not derive their source only from this or that particular term of the contract, as originally
entered into
• The contractor claims that he should, in justice, be compensated for the work done, even if the terms of
the contract do not cover such work
MECHANISM
• Quantum Meruit
• Compensation quantum meruit is awarded for work done or services rendered by the contractor when
the price thereof is not fixed by contract
• Quantum meruit is a right which arises dehors (outside) a contract
• The party is not proceeding on contract, but upon quasi-contract
• A quantum meruit claim arises, where work is done or services performed by one person for another, in
circumstances which entitle the person doing the work or performing the services to receive a reasonable
remuneration, the situation being one where either there is no contract or (though there is a contract), the
particular situation is not covered by the contract
MECHANISM
• There are many cases why amicable settlement may not be favoured:
• One party may be claiming a big sum of money and simply be looking for the final and enforceable
decision which can be obtained by resorting directly to arbitration or litigation
• A party against whom a claim is made may owe money and seek to use amicable settlement as a delay
and discovery mechanism. The other party may therefore be concerned about the delay, and the
likelihood of incurring extra costs and of being disadvantaged in subsequent arbitration or litigation.
• Adjudicative methods may be the most appropriate for resolving some situations, such as, frivolous
claims, outrageous claims, claims which compromise a particular principle, cases which involve bodily
injury or alleged criminality, and claims to which there is an adequate legal defence
MECHANISM
• ROLE OF ARBITRATION IN ANY CONTRACT AGREEMENT – DISPUTE REVIEW BOARDS
• Dispute review boards are very useful in construction contracts
• A dispute review board visits the job site regularly during construction and is kept advised of contract as it
progresses
• If a dispute arises, the board recommends settlement, soon after the dispute occurs and before any
adversarial attitude grows
• Normally, the dispute review board consists of three members. One member is appointed by each party. The
third member (who becomes the chairman) is selected by the two members and approved by the parties
• The members are expected to have:
• Experience with the type of construction
• Familiarity with interpreting contract documents
• Adequate background in the construction industry with no affiliation to any of the parties involved
MECHANISM
• ARBITRATION CLAUSE IN ANY CONTRACT AGREEMENT
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• ARBITRATION CLAUSE IN ANY CONTRACT AGREEMENT – FROM A PMC/IPC
MECHANISM
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• RATE OF ARCHITECTS IN ARBITRATION
MECHANISM
• RATE OF ARCHITECTS IN ARBITRATION
• From Appendix B – Conditions of Engagement and Scale of Professional Fees & Charges – The Indian
Institute of Architects
MECHANISM
• COSTS INVOLVED IN ARBITRATION – DELHI HC ARBITRATION CENTER
In addition to the foregoing, the parties shall be required to pay a sum of INR2,500 per day for use of facilities of
the DAC on the days the tribunal holds its sittings
MECHANISM
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• COSTS INVOLVED IN ARBITRATION – MADRAS HC ARBITRATION CENTER
MECHANISM
The arbitrators are

classified into three
categories on the basis
of their fees – Tier 1, 2
and 3 Arbitrators
MECHANISM
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• COSTS INVOLVED IN ARBITRATION – INDIAN COUNCIL OF ARBITRATION
In addition to the
above the ICA will be
entitled to receive a
Special Fee of Rs.2,
500/- per hearing for
providing facilities of
hearing rooms, for
arbitration hearings
and secretarial
assistance etc. at the
arbitration hearing
MECHANISM
• COSTS INVOLVED IN ARBITRATION
• You may also refer to the following website to know more about the costs involved in arbitration
with another governing body..
• HTTP://WWW.ARBITRATIONINDIA.ORG/PDF/ARBITRATION_FEE.PDF
MECHANISM
• CONTRACT ACT 1872 – OBJECTIVE
• The objective of the Contract Act is to ensure that the rights and obligations arising out of a contract are
honoured and that legal remedies are made available to an aggrieved party against the party failing
to honour his part of agreement
• The Indian Contract Act makes it obligatory that this is done and compels the defaulters to honour their
commitments
• CONTRACT ACT 1872 – EXTENT & COMMENCEMENT
• It extends to the whole of India except the State of Jammu and Kashmir
• It came into force on the first day of September 1872
• The Sale of Goods was repealed from this Act in 1930 and contracts relating to partnerships were
repealed in 1932
MECHANISM
• CONTRACT ACT 1872 – PRESENT CONTRACT ACT
• Basic principles of contract (Sections 1 to 75)
• Sale of Goods (Sections 76 to 123) – REPEALED
• Indemnity and Guarantee (Sections 124 to 147)
• Bailment (Sections 148 to 181)
• Agency (Sections 182 to 238)
MECHANISM
• CONTRACT ACT 1872 – PROPOSAL
• When one person signifies to another his willingness to do or to abstain from doing anything, with a view
to obtaining the assent of the other to such act or abstinence, he is said to make a proposal
• CONTRACT ACT 1872 – PROMISE

• When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be
accepted
• A proposal when accepted, becomes a PROMISE
• The person making the proposal is called the “Promisor” and the person accepting the proposal is called
the “Promisee”
MECHANISM
• CONTRACT ACT 1872 – CONSIDERATION
• When at the desire of the promisor, the promisee or any other person has done or abstained from
doing, or does or abstains from doing, or promises to do or to abstain from doing something, such act or
abstinence of promise is called a consideration for the promise
• CONTRACT ACT 1872 – AGREEMENT

• Every promise and every set of promises, forming the consideration of each other is an agreement
• An agreement not enforceable by law is said to be “void”
• CONTRACT ACT 1872 – CONTRACT

• An agreement enforceable by law is a contract
MECHANISM
• CONTRACT ACT 1872 – STEPS INVOLVED IN CONTRACT
• Proposal and its communication
• Acceptance of proposal and its communication
• Agreement by mutual promises
• Contract
• Performance of contract
MECHANISM
• CONTRACT ACT 1872 – ESSENTIAL REQUIREMENTS OF A VALID CONTRACT
• Offer and its acceptance
• Free consent of both the parties
• Mutual and lawful consideration for agreement
• It should be enforceable by law. Hence, intention should be to create legal relationship. Agreements of
social or domestic nature are not contracts
• Parties should be competent to contract
• Object should be lawful
• Certainty and possibility of performance
• Contract should not have been declared as void under Contract Act or any other law
MECHANISM
• CONTRACT ACT 1872 – OFFER
• May be express or implied
• May be positive or negative
• Must intend to create legal relationship
• Terms of offer must be certain
• May be made to a specific person or class of persons or to any one in the world at large
• Must be communicated to the offeree
• Must be made with a view to obtain assent
• May be conditional
MECHANISM
• CONTRACT ACT 1872 – TERMINATION OF OFFER
• By notice of revocation
• By lapse of time
• By failure of the acceptor to fulfil a condition precedent to acceptance
• By failure to accept according to the mode prescribed
• By death or insanity of the offerer
• By rejection
MECHANISM
• CONTRACT ACT 1872 – TERMINATION OF OFFER
• By notice of revocation
• By lapse of time
• By failure of the acceptor to fulfil a condition precedent to acceptance
• By failure to accept according to the mode prescribed
• By death or insanity of the offerer
• By rejection
MECHANISM
• CONTRACT ACT 1872 – ESSENTIALS OF A VALID ACCEPTANCE
• Acceptance must be absolute and unconditional
• Acceptance by usual mode as desired by the offeror
• Acceptance cannot precede the offer
• Acceptance may be express or implied
• Acceptance must be given within a reasonable time
• Acceptance must be by an ascertained person (offeree)
• Offer cannot be accepted after it was rejected unless it is renewed
• Silence does not imply acceptance
• Acceptance must be made before the lapse or revocation of the offer
• Acceptance of offer means acceptance of all terms attached to the offer
MECHANISM
• CONTRACT ACT 1872 – LEGAL RULES REGARDING CONSIDERATION
• Consideration is required both for formation and discharge of an agreement or contract
• Consideration may be past, present and future
• Consideration may be either positive or negative
• Consideration must be done at the desire of the promisor
• Consideration may be furnished by the promisee or any other person
• Consideration must be lawful
• Consideration must be real and not illusory
• Consideration need not be adequate
• Consideration must not be the performance of existing duties
• Consideration must be of some value in the eyes of law
MECHANISM
• CONTRACT ACT 1872 – CONTRACTUAL CAPACITY
• Every person is competent to contract who is of the age of the majority according to the law to which he
is subject and who is of a sound mind, and is not disqualified from contracting by any law to which he is
subject
• MENTAL DEFICIENCY
• Sound mind (he is capable of understanding it and of forming a rational judgement as to its effects upon his
interests)
• Mental incompetents
• Idiots, lunatics and insane persons
• Minor (<18 years)
• Drunkenness
• LEGAL DISABILITY (Alien enemy, insolvent, imprisonment)
MECHANISM
• CONTRACT ACT 1872 – FREE CONSENT
• Agree upon the same thing in the same sense
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• CONTRACT ACT 1872 – OBJECT AND PUBLIC POLICY
• Not be forbidden by law
• Should not defeat provisions of any law
• Not be fraudulent
• Should not injure a person / property
• Should not be immoral
• Should not be opposed to public policy
MECHANISM
• CONTRACT ACT 1872 – VOID & VOIDABLE CONTRACT
• An agreement which is enforceable by law at the option of one or more of the parties thereto, but not
at the option of the other or others, is a voidable contract
• A contract which ceases to be enforceable by law becomes a void contract
MECHANISM
• CONTRACT ACT 1872 – TYPES OF CONTRACT – ON THE BASIS OF VALIDITY
• Valid contract: an agreement which has all the essential elements of a contract is called a valid contract. A
valid contract can be enforced by law
• Void contract [Section 2(g)]: A void contract is a contract which ceases to be enforceable by law. A contract
when originally entered into may be valid and binding on the parties. It may subsequently become void. --
There are many judgments which have stated that where any crime has been converted into a "source of
profit" or if any act to be done under any contract is opposed to "public policy" under any contract— than
that contract itself cannot be enforced under the law
• Voidable contract [Section 2(i)]: an agreement which is enforceable by law at the option of one or more of the
parties thereto, but not at the option of other or others, is a voidable contract. If the essential element of free
consent is missing in a contract, the law confers right on the aggrieved party either to reject the contract or to
accept it. However, the contract continues to be good and enforceable unless it is repudiated by the aggrieved
party
MECHANISM
• CONTRACT ACT 1872 – TYPES OF CONTRACT – ON THE BASIS OF VALIDITY
• Illegal contract: A contract is illegal if it is forbidden by law; or is of such nature that, if permitted, would
defeat the provisions of any law or is fraudulent; or involves or implies injury to a person or property of
another, or court regards it as immoral or opposed to public policy. These agreements are punishable by
law. These are void-ab-initio [from the beginning]
• “All illegal agreements are void agreements but all void agreements are not illegal”
• Unenforceable contract: where a contract is good in substance but because of some technical defect
cannot be enforced by law is called unenforceable contract. These contracts are neither void nor
voidable
MECHANISM
• CONTRACT ACT 1872 – TYPES OF CONTRACT – ON THE BASIS OF FORMATION
• Express contract: where the terms of the contract are expressly agreed upon in words (written or spoken)
at the time of formation, the contract is said to be express contract
• Implied contract: an implied contract is one which is inferred from the acts or conduct of the parties or
from the circumstances of the cases. Where a proposal or acceptance is made otherwise than in words,
promise is said to be implied
• Quasi contract: A quasi contract is created by law. Thus, quasi contracts are strictly not contracts as there
is no intention of parties to enter into a contract. It is legal obligation which is imposed on a party who is
required to perform it. A quasi contract is based on the principle that a person shall not be allowed to
enrich himself at the expense of another
MECHANISM
• CONTRACT ACT 1872 – TYPES OF CONTRACT – ON THE BASIS OF PERFORMANCE
• Executed contract: an executed contract is one in which both the parties have performed their respective
obligation
• Executory contract: an executory contract is one where one or both the parties to the contract have still to
perform their obligations in future. Thus, a contract which is partially performed or wholly unperformed is
termed as executory contract
• Unilateral contract: A unilateral contract is one in which only one party has to perform his obligation at the time
of the formation of the contract, the other party having fulfilled his obligation at the time of the contract or
before the contract comes into existence
• Bilateral contract: A bilateral contract is one in which the obligation on both the parties to the contract is
outstanding at the time of the formation of the contract. Bilateral contracts are also known as contracts with
executory consideration
MECHANISM
• CONTRACT ACT 1872 – PERFORMANCE
• Section 37, para 1, of the contract act lays down that, “the parties to a contract must either perform, or
offer to perform, their respective promises, unless such performance is dispensed with or excused under
the provisions of this act, or of any other law”
• The offer to perform the contract is called tender
• Offer to perform or tender may be called attempted performance
• A tender, to be legally valid, must fulfil the following conditions
MECHANISM
• CONTRACT ACT 1872 – PERFORMANCE
• It must be unconditional
• A tender money, must be in legal tender money, not by any foreign money, or by promissory note or cheque
• The tender must be made at a proper time and place
• The person to whom a tender is made must be given a reasonable opportunity of ascertaining that the person
by whom it is made is able and willing there and then, to do the whole of what he is bound by his promise to
do
• If the offer is an offer to deliver anything to the promisee, the promisee must have a reasonable opportunity
of seeing that the thing offered is the thing which the promisor is bound by his promise to deliver
• When there are several promisees, an offer, to any one of them is a valid tender
• Must be in proper form
• Must be willing and ready to fulfil the obligations
MECHANISM
• CONTRACT ACT 1872 – PERFORMANCE MADE BY WHOM?
• Personal performance : in cases involving personal skill, taste, or credit, the promisor must himself perform the
contract
• Performance by representative : in all other cases the promisor or his representatives may employ a competent
person to perform it
• Performance by a third person : when a promise accepts performance of the promisee from a third person, he
cannot afterwards enforce it against the promisor
• Death of promisor
• Contracts involving personal skill or volition, come to an end when the promisor dies. His heirs or legal representatives
are not bound to perform such contract
• In cases not involving personal skill or volition, the legal representatives of a deceased promisor are bound to perform
the contract. Liability of the legal representatives is limited to the assets obtained from the deceased
MECHANISM
• CONTRACT ACT 1872 – PERSONS ENTITLED TO DEMAND PERFORMANCE
• Promisee
• Legal representative
• Third party (eg. Trust : A & B enter into a contract in favor of C; C can demand performance)
• Joint promisees
• CONTRACT ACT 1872 – TIME FOR PERFORMANCE

• When no time is specified – Reasonable time
• When time is specified – it has to be followed
• On application for performance by promisee
MECHANISM
• CONTRACT ACT 1872 – PLACE FOR PERFORMANCE
• Applies to delivery of goods
• Applies to payment of money
• CONTRACT ACT 1872 – PERFORMANCE OF RECIPROCAL PROMISES

• Mutual and dependent
• Mutual and independent
• Mutual and concurrent
MECHANISM
• CONTRACT ACT 1872 – CONTRACTS THAT NEED NOT BE PERFORMED
• When a new contract is substituted
• A person rescinds it (who has the option of ‘voidable’)
• Promisee neglects or refuses to afford the promisor circumstance for performance
• Impossibility or illegality
• If one person has right to rescind a contract
MECHANISM
• CONTRACT ACT 1872 – DISCHARGE OF CONTRACT BY NEW AGREEMENT
• Substitution
• Of old contract by new contract
• Of a party to the contract by a new one
• Alteration (change in terms of contract
• Rescission (by mutual consent/non- performance/voidable)
• Waiver (abandonment of a right which a person is entitled to)
• Remission (promisee may give up a part of his claim at his own will)
• Whole / in part
• Extend the time of performance
• Accept any other satisfaction than performance
• Merger (superior right and inferior right coincide and meet in one and the same person) eg. Person buys the
land which he has taken for lease before
MECHANISM
• CONTRACT ACT 1872 – DISCHARGE OF CONTRACT BY OPERATION OF LAW
• Insolvency
• Merger
• Death
• Lapse of time
• Material alteration/unauthorized alteration
• CONTRACT ACT 1872 – DISCHARGE OF CONTRACT BY IMPOSSIBILITY
• Destruction of object necessary for performance
• Change of law
• Personal incapacity
• Non-existence or non-occurrence of an event necessary for performance
• Outbreak of war
MECHANISM
• CONTRACT ACT 1872 – BREACH
• If a party breaks his obligations which the contract imposes; contract is no longer binding on the other
person
• Actual breach of contract
• At the time when the performance is due
• One party fails or refuses to perform his obligation
• During the performance of the contract
• Express repudiation (by word or act refuses to continue to perform his obligation)
• Implied repudiation (makes by his own act the complete performance of the contract impossible)
• Anticipatory breach of contract (done before the time for performance arrives)
• By renunciation (express repudiation) [ denial/rejection]
• By creating some impossibility (implied repudiation)
MECHANISM
• CONTRACT ACT 1872 – REMEDIES IN CASE OF BREACH
• Suit for damages (dealt by Indian Contract Act)
• Dealt by Specific Relief Act, 1963
• Bring an action for specific performance
• Suit for injunction
• Claim for quantum meruit
• Restitution [restoration of something lost or stolen]
• Suit for cancellation or rescission
MECHANISM
• CONTRACT ACT 1872 – REMEDIES FOR BREACH OF CONTRACT
• Suit for damages (loss or damage suffered by breach of contract)
• Ordinary or general damages (damages which arise on a breach; parties know it at the time of
entering into contract; eg. Difference in contract price and market price)
• Special damages (breach of contract under some special circumstances)
• Exemplary damages (shows the court’s strong disapproval of the conduct of the defendant in committing
the wrong; eg. Refusal to honor a cheque in spite of having funds)
• Nominal damages (breach involved is of technical nature, so some nominal damages (1 rupee) may be
awarded)
• Remote damages (not to be given for any remote and indirect loss or damage sustained by reason of
the breach)
MECHANISM
• CONTRACT ACT 1872 – REMEDIES FOR BREACH OF CONTRACT
• Rules regarding determination of amount of damages
• Restoration of parties to a position where they would have been if the contract had been performed and not
where they would have been if they never made the contract
• Damages are recoverable in 2 cases
• When they arise naturally in the usual course of things from such breach
• Loss or damage which the parties knew, when they made the contract is likely to result from the breach of it
MECHANISM
• CONTRACT ACT 1872 – SUIT FOR INJUNCTION
• Preventive relief
• This is an order of the court restraining the wrong doer from doing or continuing the wrongful act
complained of
• Usually granted to enforce negative stipulations in cases where damages are not adequate relief
• CONTRACT ACT 1872 – SUIT FOR QUANTUM MERUIT

• Quantum Meruit means as much as is earned
• Right to Quantum Meruit : right to claim the compensation for the work already done
MECHANISM
• LIMITATION ACT 1963 – PREAMBLE
• An act to consolidate and amend the law for the limitation of suits and other proceedings and for
purposes connected therewith
• LIMITATION ACT 1963 – OBJECT

• To fix or prescribe period for barring legal actions
• Section 2 (j) of the limitation act, 1963, ‘period of limitation’ means the period of limitation prescribed
for any suit, appeal or application by the schedule and ‘prescribed period’ means the period of
limitation computed in accordance with the provisions of the act
MECHANISM
• LIMITATION ACT 1963 – CONTENTS
• Limitation act of 1963 contains
• First division deals with suits (Articles 1 – 113)
• Second division deals with appeals (Articles 114 – 117)
• Third division deals with applications (Articles 118 – 137)
MECHANISM
Description of Suit Period of Time from which
Limitation period begins to
run
MECHANISM
• LIMITATION ACT 1963
MECHANISM
• LIMITATION ACT 1963
MECHANISM
• ARBITRATION AND CONCILIATION ACT 1996
• CLASSROOM DISCUSSION/SELF LEARNING
• HTTP://ICADR.NIC.IN/FILE.PHP?123?12:1461580854
MECHANISM
END OF UNIT 1

Unit 1 - Importance of Arbitration As Adr Mechanism

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Unit 1 - Importance of Arbitration As Adr Mechanism

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MH5351 – ARBITRATION AND

• Escalation claimed for increase in wages

• Acting without jurisdiction

• Reasons and conclusion

• View of the site

• Subcontractors and Suppliers

The arbitrators are

• CONTRACT ACT 1872 – PROMISE

• CONTRACT ACT 1872 – AGREEMENT

• CONTRACT ACT 1872 – CONTRACT

• CONTRACT ACT 1872 – TIME FOR PERFORMANCE

• CONTRACT ACT 1872 – PERFORMANCE OF RECIPROCAL PROMISES

• CONTRACT ACT 1872 – SUIT FOR QUANTUM MERUIT

• LIMITATION ACT 1963 – OBJECT

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