It deals with the various types of contract law. Essential components of a valid contract.

1. OBSERVE THE PICTURES?

2. LAW OF CONTRACT Bishow Raj Joshi
Advocate

3. BRAINSTORMING
• What is contract?
• an agreement concluded between two or more than two parties to do or
abstain from doing any work which must be enforceable by law (Contract
Act, 2056 BS)
• There is Muluki Civil (Code) Act, 2074 provides the provisions related to
contract and other liability in Part (Bhag) -5. Eighteen chapters are
mentioned about the contract covering the provisions of former contract Act
of Nepal. The civil code is expected is said to come into force from Bhadra,
1st of 2075.
• an agreement enforceable by law (Indian Contract Act, 1872)
• Classwork: Search definitions of contract and present your own definition
incorporating the ideas from the collected definitions.

4. DIFFERENCE BETWEEN AGREEMENT AND
CONTRACT
 Basis for
Difference
 Agreement  Contract
 Creation  The union of offer and
acceptance creates agreement
 The union of agreement
and its enforceability
creates contract
 Legal
obligation
 Agreement alone does not
create legal obligation
 Contract alone creates
legal obligation to
perform
 Binding nature  Agreement is not binding on
the parties to it
 Contract is binding on
the parties to it
 Scope  Agreement is a vague term  Contract is a
specific/limited term
 Inclusion  Agreement does not include
contract
 Contract includes
agreement.

5. ESSENTIAL ELEMENTS OF A VALID
CONTRACT
 Two parties
 Offer and Acceptance
 Intention to create legal
relationship
 Meeting of minds or consent
 Consideration
 Free consent
 Capacity of parties
 Legality of object and
Consideration
 Not expressly declared void
 Possibility to perform
 Certain and clear
 Fulfilment of legal formalities

6. TWO PARTIES
 Every contract creates obligation which binds together two or
more determinate individuals.
 To form a contract there must be one party making offer and
other party accepting it.
 Example: A makes an offer to B to buy a car for Rs.500000 and B
agrees to sell his car for Rs. 500000. Here, A is the offeror and B
acceptor.

7. OFFER AND ACCEPTANCE
 Offeror: offers the his/her willingness to anther to do or not to do
something
 Offeree: gives his/her consent or acceptance to the terms of offer
 Out of two parties, one has to express his willingness to anther to do or not
to do something which is known as an offer and the other party has to give
his consent or acceptance to the terms of offer.
 Example: A writes to B that he is willing to sell his car. If B is willing to
pay Rs.500000. A is said to make an offer and if B writes agreeing to A’s
offer, it is called an acceptance.

8. INTENTION TO CREATE LEGAL
RELATIONSHIP
 Intention to create legal relationship in the communication of
offer and acceptance
 A promised to transfer a house to B after B pays the whole
instalment dues. Accordingly, B performed her/his obligation
on full scale. But A rejected to comply with the promise.
Afterwards, B sued against him/her. It was held that A was
bound to perform the promise, as there was the intention to
create legal relationship between them.

9. MEETING OF MINDS OR CONSENT
 When two or more parties are convinced or agreed to do or not to do
something in the same sense, there is an agreement between them.

10. CONSIDERATION
 consideration = something in return or something for something
 In a contract one must get something if he provides something.
 Example: When a hotel advertises a specific rate for the rental of a room,
that rate is the consideration to be exchanged for the overnight use of the
room.

11. FREE CONSENT
 If the party gives his consent freely or knowingly or voluntary, it is
termed free consent. But if the consent is induced by coercion (a
contract accepted under threat or physical, mental or economic
harm), fraud (mainipulating the truth for one’s benefit), undue
influence (because of power imbalance), misrepresentation or
mistake, such consent is not said to be free.
 Example: A beats and threatens to shoot B if he does not buy his
car worth Rs. 300000 for Rs. 600000. B agrees to do so. Here, B’s
consent is not regarded free because A has obtained B’s consent
by means of coercion.

12. CAPACITY OF PARTIES
 Contractual capacity of the parties = the reasonable ability of the parties to
calculate the effect of the contract upon his/her own interest.
 Section-506 of Civil Code 2074 BS mentions the minors and lunatic as
incapable to enter into the contract with some exceptions.

13. LEGALITY OF OBJECT AND
CONSIDERATION
 The subject matter of agreement as well as the object and
consideration must be legal or lawful.
 The parties cannot enter into a contract for unlawful purposes or
objectives.

14. NOT EXPRESSLY DECLARED VOID
 The parties cannot enter into an agreement that is expressly declared by the contract law
and other law-in-force as void.
 Chapter 3, Section 517, 518 and 519 of civil code 2074 BS provides the provisions of
void, voidable and unenforceable contracts.
 Agreement for restraint of business, trade and profession not restricted by law
 Agreement for restraint of marriage not restricted by law
 Agreement for restraint of public facilities that are being used by the people
 Agreement for restraint of legal proceeding to achieve rights given by law
 Agreement against the law in force or prohibition made by the law
 Agreement for immoral objectives or against public order or welfare
 Unenforceable contracts
 Impossible contracts
 Contracts made by incapable parties
 Contracts made for illegal objectives

15. POSSIBILITY TO PERFORM
 Possibility to be performed in near future in real/practical life
 If parties of a contract agreed to do or abstain from doing
anything which cannot be performed by the parties, that
agreement cannot be a contract.

16. CERTAIN AND CLEAR
 Must be certain and not vague or indefinite
 Must not have multiple meanings of the words or sentences written in
the contract

17. FULFILMENT OF LEGAL
FORMALITIES
 A contract can be formed by words written or spoken and even by
conduct of the parties.
 As regard the legal effects, there is no difference between contracts
writing and contracts made by words of mouth. It is however in the
interest of the parties that the contract should be in writing.
 Under the Nepalese law if loan is provided by an agreement without
written document, such contracts cannot be enforced by law. Similarly,
a contract for sale of land, contract for partition between co-heirs,
contract of agency and partnership etc. must be in writing, stamped
and registered in the concerned office. Otherwise, these agreement
cannot be contract and enforceable by law.

18. PROJECT WORK
 There are different types of contracts. What are they? Present an
example from hospitality for each type of contract.
 Submission Date:

19. SPECIAL FORMS OF CONTRACT IN
HOSPITALITY: 1. FRANCHISE
AGREEMENTS:
The owner of a hospitality facility = the franchisor
The person or corporation that operates or runs business using the
trade-mark and business model system licensed from the franchisor
= Franchisee
Franchise Agreement means:
An agreement to operate facility in a specific manner in exchange for
a franchise between Franchisor and Franchisor

20. FRANCHISE AGREEMENT
 A franchise can take many forms, but is generally the name, trademark,
and procedures established by the franchisor for the sale of a product or
service in a specific geographic area.
 An owner gives some part of his or her freedom to make operational
decisions in exchange for the franchisee’s expertise and the marketing
power of the franchisor’s brand name.
 Example: The owner of a doughnut franchise gives the right to make
doughnuts according to any recipe she chooses, but gains the national
recognition of a well-known “name” for her doughnut products.
 Franchise agreements are extremely common in the hospitality industry.
They are also very complex. Here, what is important to remember as a
future hospitality manager is that franchise agreements are simply a
variation of a normal contract, and while often complicated they are
governed by the same legal system that governs all contracts.

21. 2. MANAGEMENT CONTRACT
Management Contract means:
A contract in which the owner of a hospitality allows another party to
assume the day-to-day operation of that facility

22. MANAGEMENT CONTRACTS
 Many of the groups or individuals who own hospitality facilities
have neither the time nor the expertise to efficiently operate them.
 In many cases, the owners of food and lodging operations are not
experts in the management of their own facilities, thus, hospitality
management companies are an integral part of the industry.
 Hospital foodservices, school foodservices, campus dinning
operations, and business dining facilities are commonly operated
under management contract.
 The facility owner allows the management company to make the
operational decisions that are required in order for the facility to
effectively serve its clientele.
 It will set forth the time frame that the agreement will be in effect,
the payment term, the responsibilities of each party, and the terms
by which the arrangement can be ended, as well as a variety of
legal and operational issues.

23. 3. GROUP ROOMS CONTRACTS
 When to Develop GRC?
 When an individual or organization requires a large number of
hotel rooms
 May be drawn up one or two years before the rooms will
actually be used if large conventions
 For example:
 A group convention
 A family weeding
 Any request exceeding a total of 10 sleeping rooms per night
 Reasons:
 When a guest requests a large number of rooms, he or she may
expect a discount for each room purchased. This is often
agreeable to the hotel, but the precise condition under which
the discount is to be offered are best confirmed with a written
contract.

24. 4. CONVENTION OR MEETING SPACE CONTRACT
 Similar to the group room contract
 Sometimes a part of the same document
 While hotel primarily contracts for the sale of sleeping rooms, many hotels
also offer guests the ability to reserve meeting rooms or exhibition halls.
 For example, a large hotel may contract with a state association to provide
sleeping rooms, meeting space, and an exhibit hall for the use during the
association’s annual convention.
 In such contracts:
 The price of the meeting space is often tied to the number of sleeping
rooms used by the group.
 The meeting space is not related to the use of sleeping rooms, so a
separate contract must be prepared.
 Since most hotels have limited meeting space, and that space is used
primarily as an enticement to sell sleeping rooms, the effective hospitality
manager must carefully contract for the sale of this space. The convention or

25. 5. PURCHASING AGREEMENTS
 Employees who purchase goods for hotels and restaurants are unique
in that they have the ability to bind their employers to contracts that
often have values of thousand or hundreds of thousands of dollars.
 These agreements can cover even the simplest of tasks, such as the
daily delivery of milk, bread, or product.
 In this case, the restaurant may agree, either verbally or in writing, to
buy a certain product at market (current) price from a vendor who is
trusted to provide high-quality products and services.
 In other situations, the contract may entail the delivery of many
products at agreed-upon prices to thousands of outlets. Purchase
agreements may have an expiration date, or may continue on a day-
to-day basis until changed by one of the parties. Because the monetary
value of these contracts can be very high, purchase agreements are
best committed to writing and reviewed on a regular basis.

26. ESSENTIAL HOSPITALITY CONTRACT
CLAUSES
1. Essential Clauses for Providing Products and Services to
Guests
2. Essential Clauses for Receiving Products and Services
3. Exculpatory Clauses

27. 1. ESSENTIAL CLAUSES FOR
PROVIDING PRODUCTS AND
SERVICES TO GUESTS
 Length of time that contract price terms are in existence
 Identification of who is authorized to modify the contract
 Deposit and cancellation policies
 Allowable attrition (discount)
 Indemnification (compensation) for damages
 Payment terms
 Performance standards related to quantity

28. 2. ESSENTIAL CLAUSES FOR
RECEIVING PRODUCTS AND
SERVICES
 Payment terms
 Delivery or start date
 Completion date
 Performance standards
 Licence and permits
 Indemnification (compensation)
 Non-performance clauses
 Dispute resolution terms

29. EXCULPATORY CLAUSES
 In addition to other clauses, sometimes while providing products
and services to guests the clauses that seek exculpate, or excuse,
from blame in certain situations are added.
 Example:
 A sign in a pool area that states “Swim At Your Own Risk”,
 A clause in a group room contracts that states “Operator not
responsible for materials left in meeting rooms overnight”.
 While these clauses may help reduce litigation, it is important to
understand why this is so.
 Exculpatory clauses generally cause guests to exercise greater
caution. Warning signs or contract language that may cause guests
to be more careful truly. It will work in the favour both guests and
the hospitality organization.

30. PERFORMANCE OF CONTRACTS
 The term performance refers the fulfilment of contractual obligation
by the parties of it in accordance with the terms and conditions of
the agreement.
 The general rule of performance is that the performance of contract
must be exact and precise.
 It follows that a party performing and obligation under a contract
must perform that obligation exactly within the time frame set by
the contract and exactly to the standards required by the contracts
either as agreed by the parties themselves while entering into the
contract or as fixed by the law required to comply with the standard
while performing a particular type of contract.
 It is necessary to fulfil the contractual obligations as per the
agreement for the discharge or termination of the contract.

31. PERFORMANCE OF CONTRACT IS IMPORTANT BECAUSE OF
TWO REASONS
1. To the very existence of the contract
2. To create the healthy legal environment

32. TYPES OF PERFORMANCE OF CONTRACT
 Actual
 Performing all the promises and fulfilling all the liabilities by all
the parties.
 Partial
 A owes USD 1,000,000 to a bank and it has been agreed that A
will pay back USD 100,000 on the first day of each month,
starting in January. On 1 April, A offers to reimburse only USD
50,000, and the balance two weeks later. In principle, the bank
is entitled to refuse A’s proposal.
 Substantial (considerable):
 A degree of performance of a contract which isn't full and
complete performance, but is so nearly equivalent that it would
be unfair to deny the contractor the payment agreed upon in
the contract.
 Attempted or Tender to Perform
 When the performance has become due, it is sometimes

33. RULES REGARDING PERFORMANCE OF CONTRACT
 Time and procedure of performance
 Place of performance of contract
 Person to perform or execute the contract
 Who is entitled to demand performance
 Things to be performed
 Contract which need not be performed

34. TERMINATION OF CONTRACTS (1)
By performance
 Actual
 Attempted performance or tender to perform

35. TERMINATION OF CONTRACTS (2)
By agreement
 By novation (it is replacement of initial contract between the parties by a
new contract. The new one prevails when there is novation)
 By rescission (when contracting parties agreed to cancel all or some of
the terms of contract, it is called rescission)
 By alteration (when some of the terms of original contract are changed
by the mutual consent of the parties, it amounts to alteration)
 By remission (it is partial waiver of rights under a contract where one
party can give some discount to another party)
 By waiver (it is mutual abandonment of rights by the parties to a
contract)
 By merger (it takes place when inferior right according to a party under a
contract inserts into a superior right accruing to the same party under
the same or some other contract. In order to operate as merger, the two
contracts creating rights between the same parties must not be equal or
same degree)

36. TERMINATION OF CONTRACTS (3)
By supervening impossibility
 An excuse (destruction of subject matter, non-occurrence of an
event, death or incapacity, outbreak of war, failure of all
objectives)
 Not an excuse (difficulty of performance, commercial difficulty,
failure of one/few of the object, strikes, lockouts and civil
disturbances)

37. TERMINATION OF CONTRACTS (3)
 By lapse of time
 By operation of law
 By death
 By merger
 By insolvency
 By alteration
 Rights and liability vested in the same person
 By breach of contract
 Actual (at the due date of performance, during the
performance)
 Anticipatory (express breach, implied breach)

38. BREACH OF CONTRACT
Actual breach (At the due date of performance and during the of
performance)
Anticipatory breach (Express and Implied breach)

39. REMEDIES IN BREACH OF CONTRACT
 Sue for specific performance
 Liquidated damages: Liquidated damages are presented in
certain legal contracts as an estimate of otherwise intangible or hard-to-
define losses to one of the parties. It is a provision that allows for the
payment of a specified sum should one of the parties be in breach of
contract.
 Economic loss
 Alternative dispute resolution
 Negotiation: participation is voluntary and there is no third party
who facilitates the resolution process or imposes a resolution
 Mediation: A process in which a neutral third party, i.e. a mediator,
facilitates and guides the parties in negotiating a mutually
acceptable settlement to their dispute.
 Facilitation: The process or fact of making something possible or
easier
 Arbitration: Participation is typically voluntary, and there is a third
party who, as a private judge, imposes a resolution

40. References
 https://accountlearning.com/performance-of-contract-meaning-
types-of-
performance/#:~:text=repairing%20defective%20workmanship.-
,Attempted%20Performance,or%20more%20commonly%20as%20te
nder.
 http://www.lawcommission.gov.np/en/wp-
content/uploads/2021/01/Constitution-of-Nepal.pdf
 http://www.lawcommission.gov.np/np/wp-
content/uploads/2021/01/%E0%A4%AE%E0%A5%81%E0%A4%B2%E0
%A5%81%E0%A4%95%E0%A5%80-
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%80-
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%BE-%E0%A4%90%E0%A4%A8-
%E0%A5%A8%E0%A5%A6%E0%A5%AD%E0%A5%AA.pdf