CONTRACT MANAGEMENT

Contract management, sometimes referred

to as contract administration, refers to the
processes and procedures that companies
may implement in order to manage the
negotiation, execution, performance,
modification and termination of contracts
with various parties including customers,
vendors, distributors, contractors.
 OBJECTIVES OF CONTRACT MGT.
Creating Value
The need to enter into contracts with vendors, employees
and even customers is the result of a business' desire to
sell the best products and services. Creating value for the
organization is a key objective of contract management.
Managing the contract is concerned with how well the
other party is helping the business create and maintain
this added value. If you hire a contractor to handle your
payroll, for example, you want that contractor to
manage your finances accurately, to pay employees on
time and to provide you with periodic progress reports.
Failure to do this may result in you revoking(cancel) the
contract, as the payroll contractor simply isn't adding
value to your operations.
Ensuring Quality
Ensuring quality is related closely to the concept of
adding value but has more to do with the
employees you have on contract than it does with
the vendors you take on board. The contract
management process is essential in making sure
employees respect the company's policies and
procedures and, in turn, are welcoming, friendly
and open to communication with customers. This
is important from the financial perspective of the
company as well. Customers who are happy come
back, so contract management has a huge role to
play in the financial stability and profitability of
the firm.
Managing Productivity
Managing productivity is related both to the
creation and maintenance of value with
vendors and to the process of ensuring quality
of employees. Productivity is about being able
to serve the wants and needs of the business,
including its customer, in a timely and
effective way. It is about balancing efficiency
with quality. The terms of a contract often
numerically lay out conditions regarding how
much a vendor or employee must produce.
Ensuring Compliance
The compliance objective of contract
management is concerned largely with legal
implications. Failure to follow the terms and
conditions as they are laid out in the contract -
- on the part of either side of the agreement --
constitutes a breach of contract and may lead
to legal action by one or both parties. This is a
costly process and may put the business at
serious financial risk.
 LAW OF CONTRACT
• It determines the circumstances in which
promises made by the parties to a contract
shall be legally binding and the enforcement
of these rights and duties.

• DEFINITION : Under Section 2(h), Indian

Contract act defines Contract as an
agreement which is enforceable by law.
 ELEMENTS OF CONTRACT
A contract is a legal document between two
parties. In order to be enforceable, the
contract must contain seven elements.
While more specific requirements may differ by
state, the basics of contract law require that
these seven elements exist regardless of
where the contract is formed.
If even one is missing, a contract may be voided
and the parties will be excused from any
obligations.
• Offer
An offer is the beginning of a contract. One party must
propose an arrangement to the other, including definite
terms. For example, if the proposal is an offer to purchase
shirts, it must include quantity, price and a delivery date.
When the offer is communicated to the other party, he has
the right to accept, reject or amend the offer. If he rejects
it, the offer dies. If he amends the offer, the original offer
dies and his amendments become a new counteroffer that
the other party can accept or reject.
• Acceptance
An offer can be accepted in writing, in person or over the
phone. The acceptance must simply be communicated to
the offering party, with an obvious declaration that the
accepting party intends to be bound by the buyer's terms.
Under the "Mailbox Rule" used in most states, an offer is
deemed accepted when the accepting party places it in a
mailbox or sends an email, even if the offering party never
actually receives it.
• Consideration
Consideration is something of value that the parties are
contracting to exchange. Generally, one party exchanges
money for property or services, but the parties can both
exchange property or services, as long as a court would find
that each party's consideration has sufficient value.
• Competence/Capacity
Competence, also called legal capacity, is a party's ability to
enter into a contract. The most common reason for
incompetence is age. A party must be at least 18 years old
to enter into a contract. If a minor signs a contract, she has
the right to cancel it. Another reason for incapacity is
mental illness. A person incapacitated by a disease or
disability, who does not understand the terms of a contract
he entered, has the right to rescind his acceptance of an
offer, voiding the contract. Lastly, a person under the
influence of drugs or alcohol may be considered
incompetent if the other party knew or should have known
that the person's impairment affected his ability to
understand and freely consent to the contract.
• Mutual Consent
Generally, the law assumes that a competent
party freely consents to a contract. However, if
consent was obtained on the basis of frayed, due
to duress or because of the exercise of undue
influence, a party's consent is considered
involuntary and the contract is void.
• Legality
A contract is only enforceable if the activity in the
contract is legal. For example, a person cannot
contract with someone to commit assault,
murder or another criminal act. Additionally,
contracts to split lottery winnings in states where
gambling is illegal have been delayed
unenforceable.
• Writing
Not all contracts need to be in writing, but
under the Statute of Frauds, certain contracts
must be in writing in order to be enforceable.
A written contract is required for all
transactions involving real estate (i.e., lease or
sale of a home), any promises to marry, any
agreements to pay a third party's debt and
any transaction in which performance cannot
be completed within one year of the contract
signing.
 Contract Life Cycle Management
(CLM)
It simply means effectively managing
contracts or agreements and relationship
between entities by properly planning all the
contract management stages resulting in
reducing, eliminating or mitigating financial,
legal and procurement risks.
Stage 1: Contract Request:
Contract Life Cycle Management starts with the Contracts
Requesting process where one party requests for or
initiates the contracting process and subsequently uses
that information for drafting or authoring the contract
document. This is usually the first step in Contract Life
cycle Management.
Stage 2: Contract Authoring, Review and Red lining,
Contract Negotiation
In the Contract Authoring or Drafting stage , contract or
agreement document is created or generated which
includes all clauses, terms and conditions. It is usually
in this stage Contract Approvers and Signing parties are
determined and approver and signing details are
captured in the contract document.
Stage 3: Approval and Lawyer or Legal Review
Agreement document prepared in previous step
is submitted to internal or external approvers
and then once they approve the document to
proceed further, Contractual document moves
to the next step in the CLM life cycle.

Stage 4: Execution or Agreement Signing

Contract document which is approved is sent to
respective parties for signature either online
or using manual process.
Stage 5: Contract Database or Repository Storage
Once the contract document is signed it is stored
permanently in a easy to retrieve agreement
database. Both contractual meta data and
documents are indexed and saved for future
reference.
Stage 6: Records Management
This stage enables complete control of all critical
business documents through reliable storage of
records with backups and retention policy
enforcement policies providing confidence that
your critical records are in secure for global
information management with high compliance.
Stage 7: Easy Search and Retrieval
This stage enables business users to quickly
search , apply filters and retrieve relevant
documents from the contract system
Stage 8: User Activity and Reporting
Every stage captures user activity logs and the
contract meta data and documents are
properly indexed for easy retrieval. This stage
ensures business users can quickly and
efficiently retrieve and mine contract data and
produce in depth reports
Stage 9: Contract Renewal , Amendments and
Disposition
Once the contract reaches its end date , it must
be renewed to stay in active status. If the
contract is not renewed on time it could cause
financial risk for the parties involved in the
contract
TYPES OF CONTRACT
 Express Contract
• The Section 9 of the Act defines what is meant by the term
express: “Promises, express and implied —In so far as the proposal
or acceptance of any promise is made in words, the promise is said
to be express.”
• This means that if a proposal or a promise is expressed by listing the
terms in words – in writing or orally is said to be an Express
Contract as long as it gets acceptance from the other party.

• The terms of the Express Contract are clearly stated either orally or
in writing. So the main aspect of the Express Contract is that the
terms of the contract are expressed clearly. For example, consider
the following:
• A person A sends a text from his phone to person B, proposing to
sell their bike for a cost of Rs. 10,000/-. The person B calls the first
person and agrees to the terms of the promise. This is an Express
Contract as the terms have been stated clearly in oral as well as
written form. Note that the communications could be entirely oral
or written.
 Implied Contracts
• The second part of section 9 of the Act defines what is
meant by an implied contract: “In so far as such
proposal or acceptance is made otherwise than in
words, the promise is said to be implied.”
• Going by the definition we can say that a contract in
which the terms of the agreement are not expressed in
written or oral form is an implied contract. Let us see
an example to understand this.
• For example, you board a rickshaw and the driver starts
to drive. You tell the driver the address where he has to
drop you. The driver stops and you pay him. As you can
see this is a contract but did you and the driver express
any of the terms in written and oral form? No, the
intent was implied by your conduct and thus there was
an implied contract.
 Quasi-Contract
• They are not contracts in the sense that no agreements are
made between any of the parties. In fact, there is no
contract prior to some court order. Let us first see an
example and then we will get a clear idea of what we mean
by Quasi-Contract.
• For example, a bank mistakenly transfers a large amount of
money into your account. Now there is no written or oral or
any sort of agreement between you and the bank but the
money doesn’t belong to you. You will have to return the
money even if you don’t want to. The bank will approach
the court and the court will issue an order to return the
money, which is becoming a quasi-contract.
• So here we see that a quasi-contract is not agreed upon by
the two parties but it comes into existence by a court order.
It is thus enforced by the law which also creates it. Most of
the times the quasi-contract is created to stop any of the
parties from taking an unfair advantage of the other.
• Consider this example. You have a yard and you
commission a person to build a small door for
your car. You come home one day to find out that
the mason has made a big door which is very
expensive and at the same time very good for the
value of your property. Now, what would happen
if you both approach the court?
• The courts usually enforce what is known as the
“Quantum Merit” which means “as much as is
deserved.” Since the work was done also
increased the value of your property, it would be
immoral if the worker doesn’t get paid for the
extra work and materials. The payment might be
lesser than the normal cost but the quantum
merit will apply. This is a quasi-contract.
 E-Contract
• When a contract is formed by the use of
electronic devices and means, it is called an
electronic contract or an e-contract. The
electronic means and devices may include
emails, tests, telephones, digital signatures
etc. They are also known as the Cyber
contracts, the EDI contracts or the Electronic
Data Interchange contracts. The terms of the
contract are listed by electronic means or
implied by the actions of the users.
FACTOR AFFECTING CONTRACTING
1. INTRODUCTION
A contract can be defined as ‘a promise or set of promises which the law will enforce’
(Pollock Principles of Contract (13th Edn)
The agreement will create rights and obligations that may be enforced in the courts.
However there are situations where the parties have reached agreement but the
question arises whether the existence or non-existence of some fact, or the
occurrence or non-occurrence of some event, destroys the basis upon which that
agreement was reached so that the agreement is discharged or in some other way
vitiated. There are five vitiating factors, misrepresentation, mistake, duress, undue
influence, and illegality.

2. MISREPRESENATTION
A misrepresentation is a false statement of fact or law which induces the other party
to enter in to the agreement. Generally speaking such statements have to be made
before the contract is entered in to. Thus the requirements of an action for
misrepresntaion are that it must purport to be statement of fact or law, it must
have induced the other party to enter the contract and it must have been a false
statement.
Statements of opinion or of intention are not misrepresentations, as long as the
opinion or intention is genuinely held at the time.
3. MISTAKE
Mistakes can be split in to those mistakes which nullify the agreement
(common mistake) and those which negate the agreement (mutual
mistake)
At common law, a common mistake will nullify the agreement where the
mistake is to the existence of the subject matter (res extincta), a party
buys property which he already owns( res sua) or if there has been a
mistake as to the quality which renders the contract impossible to perform
or if it is rendered radically different.
Mutual mistake where the parties are at across purposes but neither is ware
of this prevents the contract from arising as there is no consensus ad
idem.
4 .DURESS
The parties must enter in to a contract willingly if it is to be enforceable
however there are situations where this may be in question. This is the
case where Duress or Undue Influence may have been exerted over one of
the contracting partys.
Duress was originally based on threats of physical violence, however the
modern doctrine requires that the victim be subjected to pressure
amounting to compulsion of the will and that the pressure was illegitimate
,taking in to account the nature and of the threat.The modern doctrine
maifests itself as economic duress covers situations where there are more
subliminal threats rather than overt thrests of physical violence.
5. Undue INFLUENCE

Equity recognizes that contracts may be set aside for undue influence.
Undue influence may be actual or presumed.
If undue influence is to be presumed there must be a relationship which gives
rise to the presumption and something about the transaction which
requires an explanation.
Undue influence will be presumed irrebuttably where certain relationships
exist. Examples include solicitor/client, doctor/patient, and parent/child. A
rebuttable presumption will apply in other relationships if it can be shown
one party dominated the other.
Where a loan is secured by a person who is not in a commercial arrangement
with the debtor, the lender is put on notice that undue influence may be
presumed. The contract of security will in such a situation may be set
aside if there has been any undue influence or misrepresentation by the
debtor, unless the lender has made sure that the person providing the
security has received independent legal advice before entering in to the
contract. CCA 1974 provides protection in relation to extortionate credit
agreements.
The remedy for undue influence is rescission however the remedy is lost if
restitution is impossible, the contract has been affirmed, there has been
delay in seeking the remedy or where third party rights may be affected.
6. ILLEGALITY

Public policy dictates that illegal contracts are unenforceable and the courts
should be vigilant not to enforce any contract with an illegal purpose.
Thus contracts such as those tending to corruption in public life, promoting sexual
immorality, prejudicial to the administration of justice, trading with an enemy
in war time, for future separation, in restraint of marriage, marriage
brokerages and contracts attempting to oust the jurisdiction of the courts will
all be illegal and unenforceable.
However the scope of the term illegality is not always transparent. Contracts to
commit a criminal act are always unenforceable as in the case of Bigos v
Boustead (1951) where the defendant attempted to evade exchange controls.
However a contract to commit a civil wrong will only be unenforceable where
the commission of the tort or breach of contract is deliberate or if only one
party is aware of the wrong by that party.
The effect of illegality is unclear but will depend on the intention of the parties as
only an innocent party may be able to enforce after consideration of whether
the contract is illegal per se or only in the manner of its performance.
Withdrawal will result in restitution of any property transferred under the
illegal contract provided withdrawal takes place before the unlawful act is
carried out and it is voluntary. Where the parties are not pari delicto (equally
at fault) restitution may be ordered only for the innocent party. The courts can
sever only that part of the contract that is illegal and allow the rest of the
contract to stand (blue pencil test).