ELEMENTS OF CONTRACTS:

a) Agreement Contractual Obligation

b) Enforceability by Law
c) Offer and acceptance,
d) Legal obligation,
e) Lawful consideration,
f) Valid object,
g) Agreement not being declared void by Law.
h) Free consent,
i) Agreement being written and registered,
j) Capacity to contract,
k) Possibility of performance.

VOID AGREEMENTS: An agreement not enforceable by law is said to be void”. [Sec. 2(g)].

Thus a void agreement does not give rise to any legal consequences and is void ab-initio. In the eye
of law, such an agreement is no agreement at all from its very inception.

a) Agreements by a minor or a person of unsound mind (Sec. 11).

b) Agreements made under a bilateral mistake of fact material to the agreement (Sec. 20).
c) Agreements of which the consideration or object is unlawful (Sec. 23).
d) Agreements of which the consideration or object is unlawful in part and the illegal part
cannot be separated from the legal part (Sec. 24).
e) Agreements made without consideration (Sec. 25).

1. ON THE BASIS OF CREATION:-

a) EXPRESS CONTRACT:
b) IMPLIED CONTRACT:
c) QUASI CONTRACT: A quasi-contract is one, which is created by law. In the quasi-contract,
there is no intention on either side to make a contract. In a quasi-contract, rights and
obligations arise not by an agreement but by operations of law. EXAMPLE: where certain
letters are delivered to a wrong addressee, the addressee is under an obligation to return
the letters
2. ON THE BASIS OF EXECUTION:-

a) EXECUTED CONTRACT: is one which wholly performed, nothing remains to be done in terms of
contract. Example: A buys a laptop from a dealer, A pays cash. The dealer delivers the laptop.

b)EXECUTORY CONTRACT: An executory contract is one which remains wholly unperformed, or in

which there remains something further to be done. Example: On June 1, A enters into a contract
with a dealer to buy a bicycle. The contract is to be performed on June 15. In terms of the contract
performance of promise by one party is to precede performance by another party, then the contract
is still executory, though it has been performed by one party.

c).UNILATERAL CONTRACT: A unilateral contract is one wherein at the time the contract is
concluded there is an obligation to perform on the part of one party only. Example: A makes
payment for bus fare for his journey form Chennai to Delhi. He has performed his promise. It is now
for the transport company to perform its promise.

d).BILATERAL CONTRACT: A bilateral contract is one wherein there is an obligation on the part of
both to do or to refrain from doing a particular thing. In this sense, bilateral contracts are similar to
executory contracts.

e).CONTINGENT CONTRACT: Contingent contract is one, which is collateral to do or not to do

something, if some event collateral to such contract, does or does not happen. For example, A
agrees to sell a certain piece of land to B, in case he succeeds in his litigation concerning that land.
This is a contingent contract.

The essential elements of a contingent contract are:

a) There is an uncertain event,
b) The uncertain event is collateral to the contract,
c) The performance of the contract depends upon the contingency.

Contracts of insurance, indemnity and guarantee are the commonest instances of a contingent
contract.
FIXED PRICE CONTRACTS: Fixed price contracts involve a buyer and seller agreeing on a fixed price
to be paid for a project. Also known as lump sum contracts, these contracts entail a great deal of risk
for the seller, since if the project takes longer or is more extensive than anticipated, they will still
only be paid the agreed-upon price.

OPTION CONTRACTS: Option contracts allow a party to enter another contract with another party at
a later time. Entering into a second contract is called exercising the option. EXAMPLE: of this is in
real estate, where a prospective buyer will pay a seller to take a property off the market, then, at a
later date, have a new contract made to buy the property outright, should they choose to do so.

ALEATORY CONTRACTS: Aleatory contracts are agreements that are not triggered until an outside
event occurs. Insurance policies would be examples of this, as they are agreements involving fiscal
protection in the face of unpredictable events. In such contracts, both sides assume risks: the
insured that they are paying for a service they will never receive, and the insurer that they must pay
out potentially more than they receive from the insured.
 LEASING
1. DRY LEASE: A dry lease is a leasing agreement where airplane funding entity (lessor, provides an
airplane without aircrew, ground staff, etc. A dry lease is normally utilized by renting companies and
banks, requiring the renter (lessee) to put the airplane on its own AOC and provide aircraft
registration.
2. WET LEASE: A wet lease means that the organization or person who owns the aircraft will provide
that aircraft as well as one or more crew members to the lessee.
3. AIRCRAFT LEASE AGREEMENT: An aircraft lease agreement is a document used when an
individual or company leases an aircraft. The document is created to set out the terms and
conditions under which the individual or company leases the aircraft (''Lessee'') from
the aircraft owner (''Lessor'')
4. AIRCRAFT LEASE CONTRACT:
5. SALE AND BUY BACK: The term buyback agreement refers to an arrangement whereby one party
sells inventory to another with the promise to repurchase in the future.
6.LEVERAGE: Leverage is a business term that refers to how a business acquires new assets for start-
up or expansion. ... When a business is "leveraged," it means that the business has borrowed money
to finance the purchase of assets. Businesses can also use leverage through equity, by raising money
from investors.
7.TAX BENEFITS: As per Income Tax Act-1961, section 10(15A) any payment made, by an Indian
company engaged in the business of operation of aircraft, to acquire an aircraft or an aircraft engine
(other than a payment for providing spares, facilities or services in connection with the operation of
leased aircraft) on lease from the Government of a foreign State or a foreign enterprise under an
agreement 75[76[, not being an agreement entered into between the 1st day of April, 1997 and the
31st day of March, 1999,] and] approved by the Central Government in this behalf : 77[Provided that
nothing contained in this clause shall apply to any such agreement entered into on or after the
78[1st day of April, 79[2007]].] Explanation.—For the purposes of this clause, the expression “foreign
enterprise” means a person who is a non-resident;].
GENERAL TAXATION AND REVENUE OF THE GOVERNMENT OF UAE(TAX FREE COUNTRY)

THE UNITED ARAB EMIRATES:

(The country, Dubai is its most famous city) is mostly a tax-free country, Locals and
expatriates are not subjected to income or sales taxes. However, there are some
circumstances in which companies are required to pay some form of taxation.

Corporate tax

Each emirate has its own laws on corporate taxes for companies operating within the
emirate, but in reality taxes are imposed only on the following entities:

Foreign gas or oil producing companies dealing in oil or hydrocarbon production within the
UAE. Although the tax rates are generally 55% of the company’s operating profits, they vary
based on individual agreements between the company and the emirate in which it is
operating. These agreements are usually confidential and rates may range from between
55% to 85%.

Branches of foreign banks operating within each emirate are subject to corporate tax,
although not all emirates enforce this law. In Sharjah, Dubai, Abu Dhabi and Fujairah,
foreign banks are subject to tax rates of 20% on their taxable income. There may be slight
variations in the rate from emirate to emirate.

Indirect Taxes

Contrary to popular belief, there are many other taxes levied in Dubai and these are taxes
that individuals who live here would pay on a regular basis. The emirate of Dubai levies a
10% municipal tax on hotel revenues and entertainment. So whenever you visit a hotel in
Dubai for a stay or even a meal, 10% is added to your bill. Alcohol imports are heavily taxed
– you pay 50% to bring alcohol into the country and a further 30% on purchase of alcohol
(legally with a liquor license) for home consumption, which is why many people choose to
purchase alcohol illegally. All the emirates, with the exception of Abu Dhabi, levy a tax on
income from rentals – municipal tax of 10% is levied on the rental of commercial premises
and 5% on the rental of residential premises. Abu Dhabi does not levy tax on rental incomes,
but landlords do have to pay annual license fees. Taxes are also levied by DEWA (Dubai
Electricity and Water Authority) on utility bills. In addition to this, Dubai has a system of
road toll known as Salik, which has been set up on all major roads leading into and out of
Dubai. Every time you drive across a toll road, you pay AED 4; up until a year ago there was a
cap of AED 24 that could be paid out in Salik on any given day, but this cp has since been
removed; you now pay toll as many times as you use the road.

Fines:
The United Arab Emirates has one of the most efficient and most expensive fines system.
There are literally traffic radar cameras everywhere in the UAE, and they are among the
smartest systems in the world. The fines paid for violations of traffic laws are expensive, and
since people here love to drive fast, traffic fines contribute very well to the government
funding. Besides traffic fines, there are also other fines imposed on people who overextend
their stay in the United Arab Emirates beyond the expiry the date of their resident visa.
Furthermore, Abu Dhabi, Dubai, and Sharjah have metered parking slots everywhere, the
amount you pay per hour is different from one city to another, and if someone parks his/her
car without paying for the right amount of hours of his/her parking stay, he/she will be fined
accordingly.

Businesses and Government Services

Business licenses here are very expensive and can easily cost up to thousands of dollars.
These business licenses have to be renewed annually, and of course it is very costly to
renew them. In addition, government services in the United Arab Emirates are very
expensive, a mere stamp on a paper can cost some absurd amount of money.
Letters Of Credit – Definition, Types & Process
A letter of credit is a document that guarantees the buyer’s payment to the sellers. It is Issued by a
bank and ensures the timely and full payment to the seller. If the buyer is unable to make such a
payment, the bank covers the full or the remaining amount on behalf of the buyer. A letter of credit
is issued against a pledge of securities or cash. Banks typically collect a fee, ie, a percentage of the
size/amount of the letter of credit.

Importance of letters of credit

Since the nature of international trade includes factors such as distance, different laws in each
country and the lack of personal contact during international trade, letters of credit make a reliable
payment mechanism. The International Chamber of Commerce Uniform Customs and Practice for
Documentary Credits oversees letters of credit used in international transactions

Parties to a letter of credit

 Applicant (importer) requests the bank to issue the LC

 Issuing bank (importer’s bank which issues the LC [also known as the Opening banker of LC])
 Beneficiary (exporter)

Types of a letter of credit

The letters of credit can be divided into the following categories:

Sight Credit: Under this LC, documents are payable at the sight/ upon presentation of the correct
documentation.
For example, a businessman can present a bill of exchange to a lender along with a sight letter of
credit and take the necessary funds right away. A sight letter of credit is more immediate than other
forms of letters of credit.

Acceptance Credit/ Time Credit :The Bills of Exchange which are drawn and payable after a period,
are called usance bills. Under acceptance credit, these usance bills are accepted upon presentation
and eventually honoured on their respective due dates. For example, a company purchases
materials from a supplier and receives the goods on the same day. The bill will be delivered with the
shipment of goods, but the company may have up to 30 days to pay it. This 30 day period marks the
usance for the sale.

Revocable and Irrevocable Credit: A revocable LC is a credit, the terms and conditions of which can
be amended/ cancelled by the Issuing Bank. This cancellation can be done without prior notice to
the beneficiaries.
An irrevocable credit is a credit, the terms and conditions of which can neither be amended nor
cancelled. Hence, the opening bank is bound by the commitments given in the LC.
Confirmed Credit: Only Irrevocable LC can be confirmed. A confirmed LC is one when a banker other
than the Issuing bank, adds its own confirmation to the credit. In case of confirmed LCs, the
beneficiary’s bank would submit the documents to the confirming banker.
Back-to-Back credit: In a back to back credit, the exporter (the beneficiary) requests his banker to
issue an LC in favour of his supplier to procure raw materials, goods on the basis of the export LC
received by him. This type of LC is known as Back-to-Back credit. Example: An Indian exporter
receives an export LC from his overseas client in the Netherlands. The Indian exporter approaches
his banker with a request to issue an LC in favour of his local supplier of raw materials. The bank
issues an LC backed by the export LC.
Transferable Credit: While an LC is not a negotiable instrument, the Bills of Exchange drawn under it
are negotiable. A Transferable Credit is one in which a beneficiary can transfer his rights to third
parties. Such LC should clearly indicate that it is a ‘Transferable’ LC