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Aviation Contracts and Tenders-2020.Pdf Centre for Aerospace & Defense Laws (CADL) Directorate of Distance Education NALSAR University of Law, Hyderabad Course Material M.A. (AVIATION LAW AND AIR TRANSPORT MANAGEMENT) 2.3.9. - Aviation Contracts & Tenders Compiled by: Prof. (Dr.) V. Balakista Reddy (For private circulation only) TABLE OF CONTENTS I. MODULE I: FUNDAMENTALS OF LAW OF CONTRACTS 1.1. Essentials of Law of Contracts 1.1.1 Introduction to Indian Contract Act 1872 1.1.2 Agreement & Contract – Meaning 1.1.3 Essential Elements of Valid Contract – An Overview 1.1.4 Kinds of Contracts 1.1.5 Government Contracts 1.2. Offer and Acceptance 1.2.1. Offer 1.2.2. Acceptance 1.3. Consideration 1.3.1. Concept and Meaning of Consideration 1.3.2. Essentials of a Valid Consideration 1.3.3. Exception to Consideration Rule 1.4. Capacity to Contract 1.4.1. Minor 1.4.2. Unsound Mind 1.4.3. Other Incompetent Persons 1.5. Consent 1.5.1. Meaning and Concept 1.5.2. Elements which affect the Consent of the Parties 1.5.3. Mistake 1.5.4. Misrepresentation 1.5.5. Fraud 1.5.6. Coercion 1.6. Discharge and Breach of Contract 1.6.1. Discharge by Mutual Agreement or Consent 1.6.2. Discharge by Impossibility of Performance 1.6.3. Discharge by Lapse of Time 1.6.4. Discharge by Operation of Law 1.6.5. Discharge by Breach of Contract 1.6.6. Remedies for Breach of a Contract II. MODULE II: INTERNATIONAL CONTRACT LAW: NORMS AND DRAFTING GUIDELINES 2.1. Tenders and Tendering Procedures 2.1.1. Tender Concept and Procedures 2.1.2. Tendering Procedures 2.1.3. Bidding Process 2.2. International Contractual Negotiations 2.2.1. Pre-Contractual Liability 2 2.2.2. Ascertaining Creditworthiness of the Foreign Party 2.2.3. Choices to be made by the Parties 2.3. Principles for Drafting of International Commercial Contracts 2.3.1. Important Norms and Conditions of International Trade Contracts 2.3.2. Standard Form Contracts 2.3.3. Commercial Contracts 2.3.4. Engineering Contracts 2.3.5. International Transfer of Technology Agreements 2.3.6. International Commercial Agency / Franchise Contracts 2.4. Norms for Drafting International Commercial Contracts 2.4.1. Role of International Contracts in International Commerce 2.4.2. Parties to the transactions 2.4.3. Drafting of International Contracts for Sale of Goods 2.4.4. Sample draft of International Contract for Sale of Goods III. MODULE III: AIRLINE CONTRACTS 3.1. Aviation Insurance Contracts 3.2. Airline Lease Agreement 3.3. Airline Purchase and Sales Agreement 3.4. Contract of Carriage by Air 3.5. Aircraft Maintenance, Repair and Overhaul Agreement 3.6. Ground Handling Agreement 3.7. Code-Sharing and Interline Agreement IV. MODULE IV: AIRPORT CONTRACTS 4.1. Airport Lease Agreement 4.2. PPP in Airport Infrastructure 4.3. Airport In-Terminal Concession Agreement 3 MODULE I FUNDAMENTALS OF CONTRACT LAW 4 ESSENTIALS OF CONTRACT LAW Law of Contracts constitutes the most important branch of mercantile law. It is the backbone of trade and commerce, creating legal rights and obligations. The main purpose of law of contracts is to ensure the element of definiteness in mercantile transactions. The test of contractual intention is objective, not subjective with the reasonable man test used to arrive at intention. The Indian Contract Act, 1872 lays down the general rules regarding the contract. There are other important Acts relating the special types of contracts, The Negotiable Instruments Act 1881, The Indian Companies Act 1956, The Indian Partnership Act 1932, and The Sale of Goods Act 1930 etc. It is not only the business community, which is concerned with the law of contracts, but it affects every person. Contract is considered as the foundation of the civilized world. Since every one of us enters into a number of contracts from sunrise to sunset. When a person drinks a cup of coffee, or rides a bus, etc. he enters into a contract though he may be unaware of it. Such contracts create legal rights and obligations. The law of contract is mainly concerned with the enforcement of these rights and obligations. It determines the circumstances in which a promise or an agreement shall be legally binding on the person making it. It is concerned with rights in personam as distinguished from rights in rem.1 INTRODUCTION TO INDIAN CONTRACT ACT 1872 The laws of contract in India are contained in the Indian Contract Act, 1872. This Act is based mainly on English Common Law which is to a large extent made up of judicial precedents. The Structure of the Indian Contract Act is broadly classified as follows: General principles of the law of contract are expressed by sections 1 to 75 The contracts of Indemnity and Guarantee are given under Section 124-147 Principles of Contract regarding Bailment and Pledge – Section 124 – 147 Principles of Contract regarding Contracts of Agency – Section 182 - 238 The provisions of Indian Contract Act are subject to some assumptions: (i) Subject to certain limiting principles, there shall be freedom of contract to the contracting parties and the law shall enforce only what the parties have agreed to be bound. The law shall lay down only the essentials of a valid contract and the rights and obligations it would create between the parties in the absence of anything to the contrary agreed to by the parties; and (ii) Expectations created by promises of the parties shall be fulfilled and their non-fulfillment shall give rise to legal consequences. AGREEMENT & CONTRACT – MEANING 1 For example, if X is entitled to receive a sum of money from Y, this right can only be exercised by X and not by others. This is a right in personam. On the other hand, if X owns a plot of land and Y is the immediate neighbor, the right of X to have complete possession and enjoyment of land is available not only against Y but against the whole world. This right of X is known as the right in rem. 5 A legally binding agreement enforceable by law is called a contract. Salmond defines contract as, "an agreement creating and defining obligation between the parties". Section 2(h) of the Indian Contract Act defines a contract as, "An agreement which is enforceable at law." This definition has two important components which constitute the basis for a contract. They are: (1) An agreement, and (2) Legal obligation. We shall now examine these elements in detail. Agreement: Every promise and every set of promises, forming the consideration for each other, is an agreement [Sec. 2 (e)]. Thus, it is clear from this definition that a promise forming consideration is an agreement. What is a promise? The answer to this question is contained in Section 2(b) which defines the term: "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". An agreement, therefore, comes into existence only when one party makes a proposal or offer to the other party and that other party signifies his assent (i.e., gives his acceptance) thereto. In short, an agreement is the sum total of 'offer' and 'acceptance'. On analyzing the above definition, the following characteristics of an agreement become evident: (a) Plurality of persons: There must be two or more persons to make an agreement because one person cannot enter into an agreement with himself. (b) Consensus-ad-idem: Both the parties to an agreement must agree about the subject-matter of the agreement in the same sense. Legal Obligation: As stated above, an agreement to become a contract must give rise to a legal obligation. Obligation is an undertaking to do or to abstain from doing some definite act. The obligation must be such as is enforceable by law, i.e. a legal obligation and not merely moral, social or religious. To take an example, "Please, come to my house", says Ram to Mohan, "and we shall go out for a walk together". Mohan came to the house of Ram but wasn’t home. Mohan cannot sue Ram in damages for his not fulfilling the promise, as there had been no intention between Mohan and Ram to create any legal obligation by the agreement as made between them. In the circumstances, there was, in eye of law no contract between Ram and Mohan. Agreements which are not Contracts Agreements in which the idea of bargain is absent and there is no intention to create legal relations are not contracts. These are: agreements relating to social matters or domestic arrangements between husband and wife. The Leading case on this point is Balfour v. Balfour (1919) The court held that it was a mere domestic agreement and that the promise made by the husband in this case was not intended to be a legal obligation. Hence the suit filed by Mrs. Balfour was dismissed since there was no contract enforceable in a court of law. Decision of the Case (a) Agreements which do not create legal relations are not contracts. (b) Agreements between husband and wife in domestic affairs is not a contract. 6 It may be noted that the law of contract deals only with such obligations which spring from agreements. Obligations which are not contractual in nature are outside the scope of the law of contract. For example, obligation to maintain wife and children, obligation to comply with the orders of a court and obligation arising from a trust do not fall within the scope of The Contract Act.
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