Legal Question in Business Law in India

minimum guarantee

What is the definition of minimum guarantee in a contract for supply of concreting machines for construction of a dam?


Asked on 12/08/08, 9:02 am

3 Answers from Attorneys

Aniruddha Pawse Aniruddha.P.Pawse Advocates

Re: minimum guarantee

The contract terms need to be perused to ascertain meaning of the term minimum gurantee

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Answered on 12/09/08, 7:41 am
Homi Maratha N.N. Maratha & Co.-Advocates

Re: minimum guarantee

Essential Ingredients of a contract - As per Contract Act,

an agreement enforceable by law is a contract. [section 2(h)]. Hence, we have to understand first what is �agreement�.

Every promise and every set of promises, forming the consideration for each other, is an agreement. [section 2(e)]. - - A person makes a proposal (offer). When it is accepted by other, it becomes a promise. However, promise cannot be one sided. Only a mutual promise forming consideration for each other is �agreement�. - - For example, A agrees to pay Rs 100 to B and B agrees to give him a book which is priced at Rs 100. This is set of promises which form consideration for each other. However, if A agrees to pay Rs 100 to B, but B does not promise anything, it is not �set of promises forming consideration for each other� and hence not an agreement.

It should be noted that the term �agreement� as defined in Contract Act requires mutual consideration. - - Thus, if A invites B to dinner and B agrees to come, it is not an �agreement� as defined in Contract Act.

Meaning of �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 that other to such act or abstinence, he is said to make a proposal. [section 2(a)].- - Thus, a �proposal� can be to do a positive act or abstinence from act (i.e. negative act). [English Act uses the word �offer�, while Indian Contract Act uses the word �proposal�. Generally, both words are used inter-changeably. This is not technically correct, as the word �offer� is not used in Contract Act].

Meaning of �Promise� - When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A pro�posal, when accepted, becomes a promise. [section 2(b)]. - - Thus, when a proposal (offer) is accepted, it becomes a �promise�. As is clear from the definition, only person to whom proposal is made can signify his assent. Other person cannot accept a proposal.

Promisor and promisee - The person making the proposal is called the �promisor�, and the person accepting the proposal is called the �promisee�. [section 2(c)].

Reciprocal promises - Promises which form the consideration or part of the consideration for each other are called reciprocal promises. [section 2(f)].

Consideration for promise � The definition of �agreement� itself states that the mutual promises should form consideration of each other. Thus, �consideration� is essential for an agreement. A promise without consideration is not �agreement� and hence naturally, it is not a �contract�.

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Answered on 12/15/08, 6:44 am
Sudershan Goel India Law Offices of Sudershan Goel - Advocate

Re: minimum guarantee

The definition can be explained to you better after reading the document.

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Answered on 12/10/08, 12:19 am


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