Introduction to Testamentary terms

Testate : When a person dies leaving a Will.

Intestate Succession : When a person dies without leaving a Will.

Testator : Testator is a person who makes a Will.

Legatee/ Beneficiary  : Legatee/ Beneficiary is a person who inherits the property under a Will.

Executor : An executor is a person who is appointed by a testator to execute his Will. An executor is duly bound to distribute the assets of the testator as per provision of Will.

Probate

‘Probate’ means the copy of a Will certified under the seal of a court of competent jurisdiction with a grant of administration of the estate of the testator. A probate can be granted only to the executor appointed under the Will. Further, a probate is essential if the Will is for immovable assets in multiple states. The executor is the most important person in the Will. An executor has a duty to collect and realize the estate of the deceased, pay his debts and distribute the legacies as mentioned in the Will by the testator. The duty of the executor is to probate the Will in a manner known to law. The court shall grant probate only to an executor who has been named in the Will.

Letter of Administration

Letters of Administration are usually issued to the persons entitled under the rules of intestacy (or their guardians if they are minors) where the deceased without a Will.

When someone dies without a will, it’s called dying intestate. Even though a person dies intestate, they still will likely have assets and debts that need to get resolved. The person’s remaining assets are distributed to their heirs, who are determined by state law. Assets go as per class heirs.

Even though there is no will, someone must still do the work of winding up the estate’s affairs and distributing the assets. The court appoints an administrator, who fulfills basically the same role as an executor. The administrator normally must be the deceased’s spouse or next of kin, but it could be anyone with an interest in the estate.

The laws about this are different in each state. A letter of administration is issued to the administrator, giving them the legal authority to act on behalf of the estate.

Succession Certificate:

A Succession Certificate establishes who the legal heirs are and the authenticity of the successor. It is a Certificate given to the successor of a deceased person who dies without leaving a will. The list of debts, securities and assets of the deceased is mentioned. It indicates the relation of the petitioner with the deceased. Along with providing details of other surviving legal heirs and that the deceased died intestate. And the information about the time, date and place of death of the deceased. It means that the certificate holder has authority over the deceased person’s assets of the deceased. The assets may include Insurance, Mutual Funds, Pension (in Employees Provident Fund or otherwise), Retirement Benefits or any other service benefits. In other words, it helps the grantee or the receiver, to recover the debts due to the deceased person.

When the relation between all the partners of the firm comes to an end, this is called dissolution of the firm. Section 39 of the Indian Partnership Act, provides that “the dissolution of the partnership between all the partners of a firm is called the dissolution of a firm.” It implies the complete breakdown of the relation of partnership between all the partners.

Dissolution of a partnership firm merely involves a change in the relation of partners; whereas the dissolution of firm amounts to a complete closure of the business. When any of the partners dies, retires or become insolvent but if the remaining partners still agree to continue the business of the partnership firm, then it is dissolution of partnership not the dissolution of firm. Dissolution of partnership changes the mutual relations of the partners. But in case of dissolution of firm, all the relations and the business of the firm comes to an end. On dissolution of the firm, the business of the firm ceases to exist since its affairs are would up by selling the assets and by paying the liabilities and discharging the claims of the partners. The dissolution of partnership among all partners of a firm is called dissolution of the firm.

Dissolution of a Partnership firm may be effected in the following ways:

• Dissolution without the intervention of the Court.

• Dissolution by Court.

Dissolution without the intervention of Court:-

1. By Agreement (Section 40):- A partnership firm can be dissolved any time with the consent of all the partners whether the partnership is at will or for a fixed duration. A partnership can be dissolved in accordance with the terms of the Partnership Deed or of the separate agreement.

2. Compulsory Dissolution (Section 41):- In case, any of the following events take place then it becomes compulsory for the firm to dissolute;

• Insolvency of Partners:- In case all the partners or all the partners except one become insolvent.
• Unlawful Business:- In case the firm’s business become unlawful on the happening of a subsequent event. e.g. trading with enemy country

3. Dissolution on the happening of contingent event (Section 42) A firm may be dissolved on the happening of any of the following contingent event:-

1. Expiry of Fixed Period:- If the firm is constituted for fixed period, then the firm is dissolves automatically.
2. On achievement of specific task:- If the firm has been constituted for the achievement of specific task, on achievement of that task, firm ceases to exist, unless there is an agreement to the contrary.
3. Death of Partner:- Death of any of the partner dissolves the partnership.
4. Insolvency of Partner:– in the absence of a contract to the contrary, the insolvency of any of the partner may dissolve the firm. The rule shall apply even though the partnership has been constituted for a fixed term and the term has not yet expired or has been constituted for particular venture and the same has yet not been completed.
5. Resignation of Partner:- Resignation by any of the partners dissolves the partnership.

4. Dissolution by notice (Section 43) :–In case of partnership at will, a partner can dissolve it by giving written notice of dissolution to other partners duly signed by him. Notice must be very clear and certain. A notice once given cannot be withdrawn without the consent of other partners. Banarsidas v. Kanshi Ram A.I.R. (1963) S.C. 1165 In those cases where a partner has given notice of dissolution at a time when dissolution will give him some advantage over the other partners, he may be held in the firm till the pending transactions are completed.

Dissolution by Court:-

The court may order for the dissolution of the firm on the following grounds:-

• Insanity of Partner:- On the application of any of the partner, court may order for the dissolution of the firm if a partner has become of an unsound mind. Lunacy of a partner does not itself dissolve the partnership but it will be a ground for dissolution at the instance of other partners. It is not necessary that the lunacy should be permanent. In the case of a dormant partner the court may not order dissolution even on the ground of permanent insanity, except in special circumstances.
• Incapacity of Partner:- If a partner has become permanent in capable of discharging his duties and obligations then court may order for the dissolution of firm on the application of any of the partner. Where a partner is imprisoned for a long period of time the court may dissolve the partnership.
• Misconduct of Partner:- If any partner other than partner suing is responsible for any loss to the firm, which amounts to misconduct and prejudicially affects the carrying on of business then the court may order for the dissolution of the firm.
• Constant breach of agreement by partner:- The court may order for the dissolution of the firm if the partner other than the suing partner is found guilty for constant breach of agreement regarding the conduct of business or the management of the affairs of the firm and it becomes impossible to continue the business with such partner.
• Transfer of Interest:- When any of the partner other than the suing partner transfers whole of its share to the third party for permanently.
• Continuous Losses:- The court may order for dissolution if the firm is continuously suffering losses and there is no more capital available for the future growth of the firm.
• Just and Equitable:- The court may order for dissolution on any other ground which court think is just, fair and equitable. e.g. loss of total confidence between the partners.

Definition: – Dying Declaration is defined in Section 32 (1) of the Indian Evidence Act

When the statement is made by the person as the cause of his death, or as any of the circumstances of the transaction which resulted in his loss of life, in cases in which the cause of that person’s death comes into question. Such statements made by the person are relevant whether the person who made them was alive or was not, at the time when they were made, under the expectation of death, and whatever may be the nature of the proceeding in which the cause of his death comes into question.

Thus, it is the statement made by the person who is going to die, and that statement will be considered as evidence in court, how his death caused and who is the mugger. There are many conditions that relied upon the dying declaration that it should be in an adequate manner as dying declaration is the weapon who convicted the accused and stood as strong evidence.

The statement made by the deceased person will be treated as Evidence and Admissible in a Court of law. The reason behind this can be followed by Latin maxim Nemo Mariturus Presumuntur Mentri which means that “Man Will Not Meet His Maker With Lying On His Mouth.” More precisely in our Indian law, it is the fact that the dying man can never lie or Truth sits on the lips of dying man. Hence, the Dying Declaration is Admissible and considered as Evidence in Court, and can be used as a weapon to punish the culprit.

• It can be Oral, Written, Gestures & Signs, Thumb impression, Incomplete and can also be in the form of Question Answer.
• The Supreme Court has found this to be true in law, at least in cases where the person dies of burn injuries. Court hold the opinion that “The law on the issue can be summarized to the effect that law does not give any direction that who can record a dying declaration but just provided that magistrate is above all the person in subject for recording the statement, nor is there any definite form, format or procedure for the same,” said a bench of Justices B S Chauhan and Dipak Misra while quashing the high court order in the case of dowry death acquittal case.
• As far as the language of the statement is concerned, it should be recorded in the language of the deceased in which he is fluent or may possible than in Court language.
• Dying person speaks the truth because, if he does not die than still declaration can be used as evidence against the accused. Moreover, dying declaration can be considered as relevant evidence in both criminal and civil proceedings.

In the recent “Nirbhaya’s Rape Case,” Dying Declaration was made by her in the form of sign and gesture. Thus, Dying declaration made through signs, gestures or by nods are also admissible as evidence.

In Khulshal Rao Vs. State of Bombay – Apex Court laid down the following principles related to dying declaration : –

• There is no absolute rule of law that a dying declaration cannot be the sole basis of conviction unless corroborated. A true & voluntary declaration needs no corroboration.
•  A dying declaration is not a weaker kind of evidence than any other piece of evidence;
• Each case must be determined on its own facts keeping in view the circumstances in which the dying declaration was made.
• A dying declaration stands on the same footing as other pieces of evidence & has to be judged in the light of surrounding circumstances & with reference to the principle governing the weight of evidence.
• A dying declaration which has been recorded by a competent Magistrate in the proper manner, that is to say, in the form of questions and answers, &, as far as practicable in the words of the maker of the declaration stands on a much higher footing than a dying declaration which depends upon oral testimony which may suffer from all the infirmities of human memory & human character.

Case Laws:-

1. Lakhan Vs. State of M.P.:- The supreme court provides that, when the condition is satisfied that the dying declaration made by the deceased is true and can be relied upon, as the declarant is found to be conscious and mentally fit while making the statement, and the statement made by him proven to be voluntarily and no compulsion was there while making the statement and can be put for the sole basis of conviction. In that situation there is no need for corroboration is necessary.
2. Surajdeo Oza v. State of Bihar :- It does not give an affirmative answer to the question and held that merely because the dying declaration is a brief statement it is not to be discarded. On the contrary, the length of the statement itself guarantees the truth.
3. State of Punjab Vs. Parveen Kumar:- the Supreme Court set forth some measure to test the veracity in the case when there is more than one dying statement. The court provides that there must be a series of examinations in order to determine the truth. If the statements provide different versions and do not couple with given facts, then the court must opt for other evidence in their record to clarify the things so that truth can be inferred. 
4. Sudhakar Vs. State:- the Supreme Court while deciding the issue of multiple dying declarations, which varying from other statements and have no series related to each other, this will raise a doubt in the eyes of court to whether the statement should be believed or not, in order to clear the issue the Court has given some directions which help to guide while exercise the judgment by court in such matters, examined.
5. Natha Shankar Mahajan Vs. State of Maharshtra:- the Supreme court ruled that if there is a doubt about the statement made by the deceased, in that case, the gain will transfer to the accused. As this is the correct Law preposition. Moreover on the other was round if the statement found to be true and reliable ten it can be used solely as the purpose of the convection.

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Conclusion:-

Dying declaration is the statement made when a person is at death bed, as the word “dying declaration” itself signifies its meaning. A person having a serious apprehension of death and there shall be no chances for his survival. At this point, the court assumed that whatever the statement made by the declarant is purely true as the man will never meet his maker with a lie on his lips and person will speak only truth.

Probate is the court-supervised process of authenticating a last will and testament if the deceased made one. It includes locating and determining the value of the person’s assets, paying their final bills and taxes, and distributing the remainder of the estate to their rightful beneficiaries. 

Application for Probate

The application for probate shall be made by Petition. There shall be annexed to the petition a copy of the last will and testament of the deceased. If the will be not in the English language, an official translation thereof shall be annexed.

The original will shall be filed separately and kept by the Prothonotary and Senior Master in the strong room of his office in Bombay High Court.

There shall also be annexed to the petition:-

• A schedule of the property and credits which the deceased died  possessed of or entitled to at the time of his death which have or are likely to come to the petitioner’s hands,
• A schedule showing the debts of the deceased and all other items which by law the petitioners is allowed to deduct for the purpose of ascertaining the net estate of the deceased, and
• A schedule of property ,if any, held by the deceased is trust for another and not beneficially or with general power to confer a beneficial interest. The petition shall be in such variations as the circumstances of each case may require and shall be accompanied by-
• The vakaltnama signed by the petitioner, unless the petitioner appears in person;
• The executor’s oath;
• The affidavit of one of the attesting witnesses, if available; and
• A copy of the estate duty return, if filed with the Controller of Estate Duty.

Verification of petition. – The petition for probate shall be subscribed by the Petitioner and his Advocate on record (if any), and shall be verified by the petitioner in the manner prescribed for verification of plaints.

Payment of Court fess

The Court-fees of the notice issued by the Prothonotary and Senior Master shall be paid within three days after receipt of such notice.

Delay in application

In any case where an application for probate is made for the first time after the lapse of three years from the death of the deceased, the reason for the delay shall be explained in the Petition. Should the explanation be unsatisfactory, the Prothonotary and Senior Master may require such further proof of the alleged caused of delay as he may deem fit.

Unsigned or unattested will

 In cases in which it is not necessary that a will should be signed by the testator or attested by witnesses to constitute a valid testamentary disposition of the testator’s property, the testator’s intention that it should operate as his testamentary disposition shall be clearly proved by affidavit or otherwise.

Notice of next-of-kin

1.  In all applications for Probate notice of the application shall be given to all the heirs and next-of-kin of the deceased mentioned in the Petition except to those whose consent has been filed in the proceedings.
2. In all applications for probate the citation shall be affixed on some conspicuous part of the Court house and also in the office of the Collector of Bombay.
3. No grant of probate shall be made until after the expiry of fourteen clear days from the date of the service of the citation or notice, and from the publication there of in newspapers, if any, and from the affixing thereof on the court house and in the Collector’s Office as the case may be, unless the Judge in Chambers otherwise directs.

Issue and return of processes

All processes and citations shall issue from and be returnable to the office of the Prothonotary and Senior Master and shall be prepared, signed and dated by him or one of his assistants and sealed executed and returned, in the same manner as processes in suits on the Original Side of the Court.

Service of citations

Citations shall be served personally when possible. Personal service shall be affected by leaving a true copy of the citation with the party cited and taking his acknowledgement on the original.

Caveat

Any person intending to oppose the grant of probate shall file a caveat in within fourteen days from the service of the citation upon him or within such shorter time as the Judge in Chambers may direct. Notice of the filing of the caveat shall be given by the Prothonotary and Senior Master to the petitioner or his Advocate on record.

Affidavit in support of Caveat

An affidavit in support of aCaveat shall be filed within eight days from the date of the filing of theCaveat, notwithstanding the Court vacations. Such affidavit shall state theright and interest of the caveator, and the grounds of the objections to theapplication.

A copy of the said affidavit shall be served by the caveator onthe petitioner or his advocate on record. If such affidavit be not filed withinthe prescribed time, the caveat shall not prevent the grant of probate. No such affidavit shall be filed after the expiry ofthe said eight days without an order of the Judge in Chambers.

Procedure on affidavit in support of caveat being filed

• Upon the affidavit in support of the Caveat being filed, the Petition shall be numbered as suit in which the Petitioner shall be the Plaintiff and the Caveator shall be Defendant. Notice of the fact that the Petition has been renumbered as a suit shall be given by the Prothonotary and Senior Master to the petitioner or his Advocate on record. The Petition shall be treated as the plaint and the affidavit in support of the Caveat shall be treated as the written statement of the caveator. The procedure in such suit shall, as nearly as may be, be according to the procedure applicable to civil suits on the Original Side of the Court.
• Where there are two or more caveators and each of them has filed an affidavit in support of his caveat, separate suit numbers shall not be given to the petition, but all the caveators shall become party defendants in one suit.

Certified copies

Certified copies of wills and other documents furnished by the office shall be signed by the Prothonotary and Senior Master or one of his assistants and shall be sealed with the seal of the Court.

Registers of grants

Grants of probate issued during a calendar year along with the wills and their translations, if any, shall be copied out in registers to be maintained by the Prothonotary and Senior Master.

Introduction

An absolute contract is a one where the promisor performs the contract without any condition. Contingent contracts, on the other hand, are the ones where the promisor performs his obligation only when certain conditions are met.

A contract is an agreement enforceable by law. [Section 2(h) of The Indian Contract Act, 1872]. For every contract, there should be an agreement that is made by the free consent of parties competent to contract, for a lawful consideration and with a lawful object. The agreement should not be declared void hereby to form a contract. This definition of contracts as per Indian Contract Act, 1872 is based on Sir Pollock’s definition which states that every agreement and promise enforceable at law is a contract. Thus for the formation of a contract, there must be an agreement and something in addition to that, i.e., an agreement, and its enforceability at law.

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Section 31 of the Indian Contract Act, 1872 defines the term ‘Contingent Contract’ as follows:

‘A contingent contract is a contract to do or not to do something, if some event collateral to such contract does or does not happen’.

In simple words, contingent contracts are the ones where the promisor performs his obligation only when certain conditions are met. The contracts of insurance, indemnity, and guarantee are some examples of contingent contracts.

Illustration:- A contracts to pay to B Rs. 20,000 if B’s house is burnt. This is a contingent.

Chandulal Harjivandas v. CIT – In this case, it was held that all contracts of insurance and indemnity are contingent.

How is it different from wagering agreement?

• A wagering agreement is absolutely void (Section 30) while on the other and contingent contract is a valid contract.
• In a contingent contract, the future uncertain event is merely collateral whereas in a wagering agreement the uncertain event is a sole determining factor of the agreement.
• In a wager, the parties are not interested in the occurrence of the event except for winning or losing the best amount while in a contingent contract the parties have a real interest in occurrence or non-occurrence of the event.
• All wager contracts are contingent contracts, but all contingent contracts are not by way of the wager.

Essential elements of the contingent contract

After examining the definition of the contingent contract given under section 31 of the Act, the essentials of the term contingent contract are as follows:

There must be a valid contract to do or abstain from doing something

Section 32 and 33 of the Act talks about enforcement of the contingent contract on the happening or not happening of the events respectively. The contract will be valid only if it is about performing or not performing an obligation.

Performance of the contract must be conditional

The condition for which the contract has been entered into must be a future event, and it should be uncertain. If the performance of the contract is dependent on an event, which is although a future event, but certain and sure to happen, then it’ll not be considered as a contingent contract.

The said event must be collateral to such contract

The event on whose happening or non-happening of the event on which the performance of the contract is dependent should not be a part of the consideration of the contract. The happening or non-happening of the event should be collateral to the contract and should exist independently.

Illustration: X enters into a contract with Y and promises to deliver 10 books to him. Y promises to pay Rs. 2000 upon delivery. This is not a contingent contract since Y’s obligation depends on the event which is a part of the contract (delivery of 10 Books) and not a collateral event.

The event should not be at the discretion of the promisor

The event so considered as for contingency should not at all to be dependent on the promisor. It should be totally a futuristic and uncertain event.

Illustration: X promises to pay Y, Rs. 10,000 if Y leaves Delhi for London on 31st March 2019. This is a contingent contract. Going to London can be within Y’s will but is not merely his will.    

Enforcement of contingent contract:

Provisions related to the enforcement of the contingent contract are given under section 32 to 36 as follows:

Condition #1- enforcement of contract contingent on the happening of an event

The contingent contracts to do or abstain from doing something if an uncertain future event happens. However, the contract cannot be enforced by law unless the event takes place. If the event becomes impossible, such contracts become void.[Section 32]

Illustration: X promises to pay Y, Rs. 100,000 if he marries Z, the prettiest girl in the neighborhood. This is a contingent contract. Unfortunately, Z dies in a car accident. Since the happening of the event no longer possible, the contract is void.

Condition #2 – enforcement of contract contingent on an event not happening

The contingent contracts to do or abstain from doing something if an uncertain future event does not happen can be enforced when the happening of that event becomes impossible. If the event takes place, then the contingent contract is void.[Section 33]

Illustration: X promises to pay Y a sum of money if a certain ship does not return. The ship is sunk. The contract can be enforced when the ship sinks. On the other hand, if the ship returns, then the contract is void.

Condition #3 – when an event on which contract is contingent to be deemed impossible if it is the future conduct of a living person

If a contract contingent upon how a person will act at a future time, the event shall be considered impossible when such person does anything which makes it impossible for the event to happen. (Section 34)

Illustration: X agrees to pay Y, Rs. 100,000 if Y marries Z. However, Z marries A. The marriage of Y to Z must now be considered impossible, although it is possible that A may die and that Z afterward marry Y.

Condition #4 – contracts contingent on an event happening within the fixed time

Contingent contracts to do or not to do anything if a future uncertain event happens within a fixed time. Such a contract is void if the event does not happen and the time lapses. It is also void if before the time fixed, the happening of the event becomes impossible. (Section 35)

Illustration: X promises to pay Y a sum of money if a certain ship returns before 1st April 2019. The contracts may be enforced if the ship returns within the fixed time. On the other hand, becomes void if the ship sinks.

Condition #5 – contracts contingent on an event not happening within the fixed time

Contingent contract to do or not to do anything if an uncertain event does not happen within a fixed time may be enforced by law when the fixed time has expired, and such event has not happened, or before the time fixed has expired, if it becomes certain that such event will not happen.[Section 35]

Illustration: X promises to pay Y a sum of money if a certain ship does not return before 31st March 2019. The contract may be enforced if the ship does not return before 31st March 2019. Also, if the ship burnt before the given time, the contract is enforced by law since the return is impossible.

Condition #6- contract contingent of impossible event void

If an agreement to do or not to do is based on the impossible event, then such agreement is void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.[Section 36]

Illustration: X promises to pay Y, Rs 500 if two straight lines should enclose a space. The agreement is void.

Conditions when a contingent contract becomes void

• Section 32- if the event on the happening of which the contract is contingent becomes impossible, the contract becomes void.

Illustration: Mohan contracts to pay Ram a sum of Money when Ram marries Geeta. Geeta dies without being married to Ram. The contract becomes void.

• Section 35- contingent contract to do or not to do something, if a specified uncertain event happens within a fixed time, becomes void if, at the expiration of the time fixed, such event has not happened, or if, before the time fixed, such event becomes impossible.

Illustration: Saurbh promises to pay Servesh if a certain ship returns within the year. The contract becomes void if the ship is burnt within the year.

• Section 34 – if the future event on which a contract is a contingent is the way in which a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which renders it impossible that he should so act within any definite time, or otherwise than under further contingencies.
• Section 36– contingent agreement to do or not to do anything, if an impossible event happens, are void, whether the impossibility of the event is known or not to the parties to the agreement at the time when it is made.

Illustration: X agrees to pay Y, Rs. 10,000 if Y will marry X’s daughter P. P was dead at the time of the agreement. The agreement is void.

Commercial applications of contingent contracts

• Insurance is a contract to do something if the future event occurs that will be contracted by the parties and liability will be taken by the offeror. In all Insurance like Life Insurance, Marine Insurance, Fire Insurance, and other Insurances, the offeror promises to take the risk of the offeree against the incident to do or not to do something and for that the offeree agrees to pay a certain amount of money.
• The contingent contract can be used in the contract of guarantee as well as the contract of warranty. Contingent guarantees generally are used when a supplier does not have a relationship with counterparty.
• We can use a contingent contract in negotiation. Contingent contracts normally occur when negotiating parties fail to reach an agreement.
• We can use the contingent contract in mergers and acquisitions (M&A) as well. Depending on the M&A deal, contingent payments such as earn-outs, Seller notes, and Buyer stock may be part of the Seller’s proceeds. After the deal is finalized, these contingent payments will need continuous contact between Buyer and Seller.
• It can also be used in the contract of indemnity.

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Conclusion

For a contract to be a contingent contract, certain essential elements have to be there. These elements form a contingent contract and without them, a contract will not be contingent. There must be a valid contract to do or not to do something. The performance of the contract must be conditional. The said event must be collateral to such contracts and the event should not be at the discretion of the promisor. These are some rules that have to be followed for a contingent contract to be enforceable. For instance, on the happening of an event, on the event not happening and on the event not happening within a specified time. There are some situations when a contingent contract becomes void. Some of them are: the event being impossible, not happening of event within fixed time, agreements contingent on impossible events and on the conduct of a living person.

Indian Contract Act, 1872

The Indian Contract Act, 1872 defines the term “Contract” under its section 2 (h) as “An agreement enforceable by law”. In other words, we can say that a contract is anything that is an agreement and enforceable by the law.

This definition has two major elements in it viz – “agreement” and “enforceable by law”. So in order to understand a contract in the light of The Indian Contract Act, 1872 we need to define and explain these two pivots in the definition of a contract.

Agreement

The Indian Contract Act, 1872 defines what we mean by “Agreement”. In its section 2 (e), the Act defines the term agreement as “every promise and every set of promises, forming the consideration for each other”.

Promise

Section 2(b) which defines the term “promise” here as: “when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. Proposal when accepted, becomes a promise”.

In other words, an agreement is an accepted promise, accepted by all the parties involved in the agreement or affected by it. This definition thus introduces a flow chart or a sequence of steps that need to be triggered in order to establish or draft a contract. The steps may be described as under:

• The definition requires a person to whom a certain proposal is made.
• The person (parties) in step one have to be in a position to fully understand all the aspects of a proposal.
• “signifies his assent thereto” – means that the person in point one accepts or agrees with the proposal after having fully understood it.
• Once the “person” accepts the proposal, the status of the proposal changes to “accepted proposal”.
• “accepted proposal” becomes a promise. Note that the proposal is not a promise. For the proposal to become a promise, it has to be accepted first.

Thus, in other words, an agreement is obtained from a proposal once the proposal, made by one or more of the participants affected by the proposal, is accepted by all the parties addressed by the agreement. To sum up, we can represent the above information below:

Agreement = Offer + Acceptance.

Enforceable By Law

Agreement to change into a Contract as per the Act, it must give rise to or lead to legal obligations or in other words must be within the scope of the law. Thus we can summarize it as Contract = Accepted Proposal (Agreement) + Enforceable by law (defined within the law)

Communication when complete

Section 4 provides that, the communication of a proposal is complete when it becomes to the knowledge of the person to whom it is made. 

The communication of an acceptance is complete – as against the proposer, when it is put in a course of transmission to him so at to be out of the power of the acceptor; as against the acceptor, when it comes to the knowledge of the proposer. 

The communication of a revocation is complete – as against the person who makes it, when it is put into a course of transmission to the person to whom it is made, so as to be out of the power of the person who makes it; as against the person to whom it is made, when it comes to his knowledge.

Difference Between Agreement And Contract

Agreement	Contract
A promise or a number of promises that are not contradicting and are accepted by the parties involved is an agreement.	A contract is an agreement that is enforceable by law.
An agreement must be socially acceptable. It may or may not be enforceable by the law.	A contract is only legally enforceable.
An agreement doesn’t create any legal obligations.	A contract has to create some legal obligation.
An agreement may or may not be a contract.	All contracts are also agreements.

What is Conciliation?

Conciliation is dispute resolution machinery in which a third neutral party facilitates settlement of dispute amicably. Conciliation in India is governed ad regulated by Arbitration and Conciliation Act, 1996.

Why to use conciliation over litigation?

It is cost and time effective to amicably settle disputes between the parties wherein, once the settlement agreement is signed by the parties as provided under section 73 (3) of Arbitration and Conciliation Act 1996, it acquires the character of an arbitral award as provided under section 74 of the Act. Thus it becomes final and binding.

What is difference between Conciliation and Arbitration?

• Arbitration refers to a method of resolving commercial disputes, wherein the management and their respective positions approaches to the neutral third party, who takes a decision and imposes it.
• Arbitration is an adjudicatory process which results in binding decision. For Arbitration there need to be prior written Agreement for Arbitration between the parties.
• Conciliation is a method of resolving the dispute, wherein an independent person, who meet the parties jointly and severally and helps them to arrive at, negotiated settlement or resolve their differences.
• It is cost and time effective to amicably settle disputes between the parties wherein, once the settlement agreement is signed by the parties as provided under section 73 (3) of Arbitration and Conciliation Act 1996 its acquire the character of an arbitral award as provided under section 74 of the Act. Conciliation proceeding can be started on the invitation in writing by a party to the other party and on the acceptance, in writing, by other party, the procedure may continue.  

How does a Conciliation proceeding commences?

Conciliation proceedings can be initiated only by a written invitation. The party sending the invitation shall identify the dispute or disputes in respect to which it is felt that the dispute could be resolved. The invitation shall also contain the necessary particulars, with proper jurisdiction of the same, so that the matter to be considered by the Conciliation is self- explanatory to other party. Either party can initiate conciliation proceedings. The Conciliation proceeding commence only when the other party accepts the invitation in writing. On the receipt of the invitation for Conciliation, the other party has two options:

• Either to accept the invitation
• Reject the invitation

Whether it is acceptance or rejection, the other party has to communicate the same in writing within 30 days, if no time period is specified in the invitation. If any other time limit is specified is specified in the invitation, then the acceptance or rejection should be sent within specified time.

Appointment and Number of Conciliators

Once it is agreed that the dispute will be settled through conciliation, the conciliators are appointed through mutual agreement between the parties in accordance with section 63 and 64.

Section 63 provides as under:-

• There shall be one Conciliator unless the parties agree that there shall be two or three Conciliators.
• Where there is more than one Conciliator, they ought, as a general rule, to act jointly.

Section 64 provides for appointment of Conciliators as under:

• Subject to sub section (2),
  • In Conciliation proceedings with one Conciliator, the parties may agree on the name of a sole conciliator;
  • In Conciliation proceedings with two Conciliators, each party may appoint one Conciliator;
  • In Conciliation proceedings with three Conciliators, each party may appoint one Conciliator and the parties may agree on the name of the third conciliator who shall act as the presiding Conciliator.

• The Parties may enlist the assistance of suitable intuition or person in connection with the appointment of Conciliators, and in particular:-
  • A party may request such an intuition or person to recommend the names of suitable individuals to act as a Conciliator; or
  • The parties may agree that the appointment of one or more conciliators be made directly by such an institution or person:

Provided that in recommending or appointing individuals to act as Conciliator, the institution or person shall have regard to such consideration as are likely to secure the appointment of an independent and impartial conciliator and, with respect to sole or third conciliator, shall take into account the advisability of appointing conciliators of a nationality other than the nationalities of the parties.

Can Court appoint Conciliators or not?

No, a Court can not appoint conciliators on its own. They are appointed with the consent of the parties.

What is Role of Conciliator?

Under section 67:

1. The conciliator shall assist the parties in an independent and impartial manner in their attempt to reach an amicable settlement of their dispute.
2. The conciliator shall be guided by principles of objectivity, fairness and justice, giving consideration to, among other things, the rights and obligations of the parties, the usages of the trade concerned and the circumstances surrounding the dispute, including any previous business practices between the parties.
3. The conciliator may conduct the conciliation proceedings in such a manner as he considers appropriate, taking into account the circumstances of the case, the wishes the parties may express, including any request by a party that the conciliator hear oral statements, and the need for a speedy settlement of the dispute.
4. The conciliator may, at any stage of the conciliation proceedings, make proposals for a settlement of the dispute. Such proposals need not be in writing and need not be accompanied by a statement of the masons therefor.

Can Conciliation proceedings be terminated or not?

Under Section 76, Conciliation proceedings can be terminated at any time by any party.

The Conciliation proceedings shall be terminated:-

• By the signing of the settlement Agreement by the parties on the date of the agreement; or
• By a written declaration of the Conciliator, after consultation with the parties, to the effect that further efforts at Conciliation are no longer justified, on the date of the declaration; or
• By a written declaration of the parties addressed to the Conciliator to the effect that the Conciliation proceedings are terminated, on the date of the declaration; or
•  By a written declaration of a party to the other party and the Conciliator, if appointed, to the effect that the Conciliation proceedings are terminated, on the date of the declaration.

Can an Arbitrator act as Conciliator or not?

Arbitrator can act as Conciliator only if agreed by the parties.

Evidence before Conciliators

Section 81 deals with admissibility of evidence in other proceedings and reads that:

The Parties shall not rely on or introduce as evidence in arbitral or judicial proceedings, whether or not such proceedings relate to the dispute that is the subject of the Conciliation proceedings:-

• Views expressed or suggestions made by the other party in respect of a possible settlement of the dispute;
• Admissions made by the other party in the course of the Conciliation proceedings;
• Proposals made by the Conciliator;
• The fact that, the other party had indicted his willingness to accept a proposal for settlement made by the Conciliator.

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Conclusion

The conciliation as a means of alternate dispute resolution in the Act is definitely a positive step towards encouraging parties to opt for it. Taking into consideration the time, effort and money involved in pursuing cases before a court or an arbitrator in India, conciliation should act as the perfect means for resolving disputes, especially those of commercial nature. Hence, parties should prior to initiating arbitration or judicial proceedings, opt for conciliation as a means for resolving disputes. In case conciliation proceedings fail, only then should the disputants look at arbitration or litigation to resolve the dispute.

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