Ebl - Tata Jaguar Presentation Semifinal

HEADING – Calibri 20 Bold Underline Sub Heading- Calibri 18 B Body – Calibri 18

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INDIAN CONTRACT ACT, 1871

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A contract is an exchange of promises between two or more parties to do or refrain from doing an act which is enforceable in a court of law. Section 2(h) defines a contract as an agreement enforceable by law.

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Contract= Agreement + Enforceability at law

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MERGER

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Merger is defined as: 1. combination of two or more companies into a single company where one survives and the others lose their corporate existence. 2. The survivor acquires all the assets as well as liabilities of the merged company or companies. Generally, the surviving company is the buyer, which retains its identity, and the extinguished company is the seller.

The acquisition process can be divided into a planning stage and an implementation stage. The planning stage consists of: 1. development of the business and the acquisition plans. The implementation stage consists of: 1. search 2. screening 3. contacting the target 4. negotiation 5. integration.

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Documents required completing the transaction of a merger or an acquisition are:-

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Loan agreements, trademarks and trade names Supplier and customer contracts Distributor and sales representative agreements Insurance policies and claim pending Articles of incorporation, bylaws and corporate seals. Employee incentive programs

INTRO ABT DEAL • Tata Motors Ltd announced a $2.3 billion deal to buy Jaguar and Land Rover from Ford Motor Co, a transaction that gives the Indian automaker a line-up ranging from the world's cheapest car to some of its more expensive. • • Acquisition of these brands resulted in stamping their authority as a takeover tycoon. • • They beat compatriot Mahindra and Mahindra

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For Tata, which plans to launch the ultra-cheap Nano or "People's Car," the addition of the profitable Land Rover brand provides an edge against Indian rival Mahindra & Mahindra Ltd which had also pursued a deal with Ford. Ford, for its part, gets to shed the money-losing Jaguar brand and gains a cash infusion at a time when the U.S. market is slumping and it is attempting to bounce back from combined losses of more than $15 billion over the past two years. The sale price is roughly 40 percent of what Ford paid for the two brands. Ford acquired Jaguar for $2.5 billion in 1989, but failed to turn the British nameplate into a higher-volume brand. Ford paid $2.75 billion for Land Rover in 2000. The all-cash deal, which was agreed in March, includes all necessary intellectual property rights, manufacturing plants, two advanced design centers in the UK and a worldwide network of sales companies. Included in the deal were the rights to three other British brands, Jaguar's own Daimler, as well as two dormant brands Lanchester and Rover.

Company Profile - TATA • • •

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Tata Motors Limited, established in 1945, is India's largest automobile company, with consolidated revenues of Rs.70,938.85 crores (USD 14 billion) in 2008-09. It is the leader in commercial vehicles in each segment, and among the top three in passenger vehicles with winning products in the compact, midsize car and utility vehicle segments. The company is the world's fourth largest truck manufacturer, and the world's second largest bus manufacturer. The company's 23,000 employees are guided by the vision to be "best in the manner in which we operate, best in the products we deliver, and best in our value system and ethics.“ The company's manufacturing base in India is spread across Jamshedpur (Jharkhand), Pune (Maharashtra), Lucknow (Uttar Pradesh), Pantnagar (Uttarakhand) and Dharwad (Karnataka). The company’s dealership, sales, services and spare parts network comprises over 3500 touch points; Tata Motors also distributes and markets Fiat branded cars in India. True to the tradition of the Tata Group, Tata Motors is committed in letter and spirit to Corporate Social Responsibility. It is a signatory to the United Nations Global Compact, and is engaged in community and social initiatives on labour and environment standards in compliance with the principles of the Global Compact.

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1945 - Tata Engineering and Locomotive Co Ltd (TELCO) set up as a locomotive maker at the end of World War Two 1954 - Company shifts to making trucks in a joint venture with Germany's Daimler Benz

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1961- Company starts exporting of commercial vehicles. 1977 - Commences production of commercial vehicles 1994 - Enters venture with Daimler to make Mercedes Benz cars in India 1998 - Launches fully indigenous passenger car, the Indica 2001 - Ends joint venture with Daimler 2002 - TELCO renamed Tata Motors Ltd 2003 - Announces plan to build world's cheapest car, to sell for 100,000 rupees 2004 - Acquires South Korea's Daewoo Commercial Vehicle Co, and lists on the New York Stock Exchange. Launches Indigo sedan 2005 - Buys 21 percent stake in Spanish bus maker Hispano Carrocera SA, launches mini-truck Ace in India 2006 - Signs manufacturing and distribution agreement with Fiat, enters venture with Brazilian bus maker Marcopolo 2008 - Unveils the Nano at Delhi Auto Expo - Buys Jaguar and Land Rover from Ford Motor Co for $2.3 billion

Company Profile - Ford • The Ford Motor Company is an American multinational corporation and the world's fifth largest automaker • Based in Dearborn, Michigan, a suburb of Detroit, the automaker was founded by Henry Ford and incorporated on June 16, 1903. • In addition to the Ford, Lincoln and Mercury brands, Ford also owns Volvo Cars, and a small stake in Mazda and Aston Martin. Ford's former UK subsidiaries Jaguar and Land Rover were sold to Tata Motors. • Ford introduced methods for large-scale manufacturing of cars and management of an industrial workforce using elaborately engineered manufacturing sequences typified by moving assembly lines. These methods came to be known around the world as “Fordism”.

Jaguar and land rover • • • • • •

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Jaguar Cars Ltd., better known simply as Jaguar is a British luxury car manufacturer, headquartered in Coventry, England. Jaguar was founded as the Swallow Sidecar Company by Sir William Lyons in 1922, originally making motorcycle sidecars before switching to passenger cars. The name was changed to Jaguar after World War II. Following several subsequent changes of ownership since the 1960s, Jaguar was listed on the London Stock Exchange and became a constituent of the FTSE 100 Index, which ended when Ford acquired Jaguar in 1989. Jaguar also holds Royal Warrants from HM Queen Elizabeth II and HRH Prince Charles. Land Rover is a 4x4, SUV and all-terrain vehicle manufacturer. based in Solihull, West Midlands, England. Originally the term Land Rover referred to one specific vehicle , a pioneering civilian all-terrain utility vehicle launched on 30 April 1948, but was later used as a brand for several distinct models, all capable of four-wheel drive. Starting out as a model in the Rover Company’s product range, the Land Rover brand developed, first as a marquee, then as a separate company, developing a range of four-wheel drive capable vehicles under a succession of owners, including British Leyland, British Aerospace and BMW. In 2000, the company was sold by BMW to the Ford Motor Company. Land Rover is one of the longest surviving four-wheel drive (4WD) brands. The use of Land Rovers by the British and Commonwealth military, as well as on long term civilian projects and expeditions, is mainly due to the marquee's off-road

MARKET SPECULATIONS & ANALYSIS Fo rd b o u g h t Ja g u a r fo r £ 1 . 6 b n in 1 9 8 9 a n d it is b e lie ve d th a t Fo rd h a ve in ve ste d a b o u t $ 1 0 b n in Ja g u a r sin ce it b o u g h t, Fo rd b o u g h t th e La n d R o ve r fro m B M W fo r £ 1 . 7 b n in 2 0 0 0 . A n a lyst exp e ct a n yth in g b e tw e e n $ 2 . 5 b n to $ 3 b n fo r Ja g u a r a n d La n d R o ve r. A M e ryllLyn ch a n a lysts su g g e st th a t Ja g u a r a n d La n d R o ve r m a y fe tch a b o u t $ 1 . 5 b n e a ch ( £ 7 3 5 m ). E a rlie r a p riva te e q u ity firm ca lle d A lch e m y Pa rtn e rs w a s sa id to b e lin in g u p a £ 3 b n o ffe r fo r th e tw o lu xu ry b ra n d s. “ If yo u lo o k a t th e fin a n cia lp o sitio n , [ Ja g u a r a n d La n d R o ve r] a re w o rth so m e $ 1 b n to $ 1 . 5 b n ,” M r D o rris a n a n a lyst sa id . “A d d a co n tro l p re m iu m , a n d th e fin a lsa le s p rice co u ld co m e in a t a b o u t $ 2 . 5 b n .”

PROBLEMS FACED BEFORE Jaguar’s sales were down nearly 32 percent for 2006 in ACQUISITION the United States, the company’s largest market. Jaguar lost more than $715 million in 2006 and is expected to lose $550 million in 2007. According to the analysis, Jaguar is projected to lose more than $300 million in 2008 and is not expecting a profit for several years. These losses are mainly because of extremely high manufacturing costs in Britain and Ford has not earn a profit from jaguar since it bought. Union Leaders of Jaguar and Land Rover had raised concerns about the job security because of the sale. The worried jaguar ’s workers, they told “if the two companies are sold together, then there was no guarantee “that a new owner would not shut down most of Jag’s manufacturing capacity”.

European Commission O n 2 6 th April 2008 , T h e E u ro p e a n C o m m issio n ( E C ), th e exe cu tive p a n e lo f th e 2 7 m e m b e r E u ro p e a n U n io n , cle a re d th e a cq u isitio n o f th e Ja g u a r a n d La n d R o ve r b u sin e ss ( JLR ) o f U S -b a se d Fo rd M o to r C o m p a n y b y In d ia ’ s Ta ta M o to rs Ltd . T h e E C a n n o u n ce d h e re Frid a y th a t it h a s g ra n te d cle a ra n ce u n d e r th e E U M e rg e r R e g u la tio n . Ta ta M o to rs m a n u fa ctu re s p a sse n g e r ca rs, co m m e rcia lve h icle s a n d b u se s p rim a rily in In d ia a n d se lls lig h t co m m e rcia l ve h icle s a n d p a sse n g e r ca rs in th e E u ro p e a n e co n o m ic a re a . Ja g u a r m a in ly m a n u fa ctu re s lu xu ry p a sse n g e r ca rs a n d La n d R o ve r p ro d u ce s sp o rts u tility ve h icle s. T h e o p e ra tio n w a s exa m in e d u n d e r th e sim p lifie d m e rg e r re vie w p ro ce d u re , n o te d a n E C sta te m e n t.

O T H E R C O M P E T IT O R S

M&M which wants to be global SUV maker should have an interest, at least, in Land Rover, says the brand is attractive. Even so, it will not help Mahindra become an independent global sports utility vehicle, or SUV, brand. Moreover, Land Rover, which is about six times as big as M&M, might simply be unaffordable.   M&M says they have interest in Land Rover, SUV maker, but they say that Ford wants to package both brands together. Actual reason is M&M cannot afford both the brands together.. Among the PE firms named as potential bidders said to have approached Ford were Ripplewood Holdings, and One Equity Partners, one of whose senior partners included Jacques A Nasser, the former chief executive of Ford. From India utility vehicles maker Mahindra & Mahindra was keen on acquiring Land Rover and had joined One Equity to put in a bid for it.

E AFord S O which N F Ohas R become S A L Estruggling o f B R Aautomaker N D S in recent years posted a full-year 2006 net loss of $12.7 billion, the largest single-year loss in the company’s history. Also Ford lost its No. 2 ranking worldwide to Japan’s Toyota. Ford Chief Executive Officer Alan Mulally, who took over the top post in September 2006 from Bill Ford has been restructuring Ford to counter losses. As a part of restructuring Ford has been selling assets in a bid to offset falling sales and profits. Premier Group, which includes Aston Martin, Volvo, Land Rover and Jaguar is the main cause for Ford continuing losses. Earlier this year Ford sold its UK based sports car division Aston Martin for $848 million. Ford reported a loss of $282m for the first three months of 2007.

REASON FOR TATA GOING FOR THE ACQUISITION Ta ta w a n te d to m a ke a g lo b a l im p a ct a n d it th in ks th a t b u yin g th e se b ra n d s a t a lo w e r ra te n o w , w ill g ive b e tte r va lu e la te r o n . T h is a cq u isitio n a lso e a se s th e e n try o f Ta ta in E u ro p e a n m a rke t w h ich it h a s b e e n e ye in g fo r lo n g . A p re vio u s JV w ith FIA T to o k p la ce , th is w ill fu rth e r h e lp th e m p e n e tra te E U m a rke t. - Long term strategic commitment to automotive sector. - Opportunity to participate in two fast growing auto segments ( premium and small cars ) and to build a comprehensive product p o rtfo lio w ith a g lo b a l fo o tp rin t im m e d ia te ly. -In cre a se d b u sin e ss d ive rsity a cro ss m a rke ts a n d p ro d u ct se g m e n ts -U n iq u e o p p o rtu n ity to m o ve in to p re m iu m se g m e n t w ith a cce ss to w o rld cla ss ico n ic b ra n d s -La n d R o ve r p ro vid e s a n a tu ra l fit a b o ve T M L ’ s U tility V e h icle s/ S U V / C ro sso ve r o ffe rin g s fo r th e 4 x4 p re m iu m ca te g o ry -Ja g u a r o ffe rs a ra n g e o f “ Pe rfo rm a n ce / Lu xu ry ” ve h icle s to b ro a d e n th e b ra n d p o rtfo lio -S h a rin g o f b e st p ra ctise s b e tw e e n Ja g u a r, La n d R o ve r a n d Ta ta M o to rs in th e fu tu re

Tata is very famous for acquisitions of companies going in losses or JV’s with companies, primarily in BUS Divisions… In 2004 it acquired Tata Daewoo Commercial Vehicle and in late 2005 it acquired 21% Aragonese Hispano Carrocera giving it controlling rights of the company. It has formed a Joint Venture with Marcopolo of Brazil and introduced low-floor buses in the Indian Market. Recently it had acquired British Jaguar Land Rover (JLR) business, which also includes Daimler and Lanchester brand names

backbone of Ford’s luxury stable. This surprise move from Ford is to ease the pressure mounting on it by trade unions and the British government. Ford is already seeking assurances that whoever buys the two firms will keep all the UK factories, Coventry, Birmingham, Liverpool for Jaguar and West Midlands for Land Rover—open for at least five years to safeguard UK jobs. It also mirrors similar deals that global car makers have announced in recent months. When Ford sold Aston Martin in May this year to a Kuwait-based consortium of bankers for $925 million, it chose to retain a 15% stake. Daimler too retained a 20% stake in Chrysler when it was sold to private equity firm Cerberus Capital Management for $7.5 billion the same month. Real cause: * But Ford’s new move is seen as an effort to keep private-equity buyers involved and ratchet up competition. Since current turmoil in the debt markets, where private-equity firms often turn to fund their deals would result in lesser interest from them. * Also the important reason is to woo several private-equity firms participated in the first round of bidding who are now wary of stricter European Union emission norms scheduled to take effect in 2012. Jaguar and Land Rover — niche makers of sports cars and sport-utility vehicles, respectively — will be hurt because they don’t have broader fleets including more-fuel-efficient cars to offset their less-efficient models. Also since unlike another car company, private-equity bidders likely won’t have other auto operations, especially any with more-efficient vehicles that could bring down a fleet fuel-economy average. The commission enacting emission norms has said it intends to require Europe’s car makers to reduce the average carbon-dioxide levels of new cars by roughly 20% over current levels to 130 grams per kilometer by 2012, it hasn’t specified how this will be enforced. The EU could apply its 2012 target to the industry as a whole, with some car makers compensating for others, or it could make the target binding on each company’s fleet of vehicles. A binding mandate could challenge niche brands such as Jaguar and Land Rover. By retaining a stake, Ford might be able to assuage the concerns of prospective buyers, as the relatively low emissions levels of Ford’s small cars sold in Europe could offset the higher emissions of Jaguar and Land Rover models, depending on how the new rules are crafted. Bidders way: OAO Russian Machines, which owns the OAO GAZ car group, said in a statement on its website that it is not interested in acquiring the Ford Motor Co’s Land Rover and Jaguar brands. GAZ appeared in a number of press reports as one of the parties that expressed interest in buying

TATA’s Indica Launch To compete with global competitors Tata Motors launched their so called India's first indigenously designed and manufactured car in 1998. Contrary to popular belief, the car was not designed in India. The outer body styling was done by an Italian design house called IDEA Institute, under contract from Tata Motors. Though the company created a record by received nearly 115,000 bookings in the 1 week, The car that was inadequately tested for quality went through a near-death experience with more than 50,000 customers cancelling their orders immediately thereafter due to teething quality problems before it was revived around 19992001. Indica’s global debut as CityRover In 2003 the TATA’s Indica was launched in Britain in tie up with MG Rover, The car dubbed as CityRover was a quick and inexpensive way to access the city car market. However MG Rover's great hopes on Tata’s CityRover were dashed on the rocks by buyer apathy. The company refused to provide a test car to the BBC's Top Gear programme, so presenter James May went to a showroom in disguise (with a camera hidden on his tie) and took a CityRover for a test drive. He later stated it was "the Worst Car he had ever driven on Top Gear," with "a ride that is harsh yet bouncy at the same time" and "a quick but needlessly loud engine". In the summer of 2004, just one year after the CityRover's launch, MG Rover announced to replace it with an all-new model.

Deal Process • • •

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Citigroup and JPMorgan are the lead advisors to the deal, which is the largest cross-border auto acquisition by an Indian company. The deal is expected to close by the end of June 2008, subject to regulatory approvals and the achievement of financial closure. The transaction is significant for a number of reasons. Coming as it does amidst a global freeze in credit markets; it shows that top-notch Indian companies have the ability to raise large amounts of money at reasonably low rates of interest. Besides the two US banks, the bridge loan is being underwritten by a consortium of eight banks — State Bank of India, Bank of Tokyo-Mitsubishi UFJ, BNP Paribas, ING, Mizuho and Standard Chartered. The loan has been structured in the form of step-up financing: for the first six months, the interest charge would be Libor (London Inter-Bank Offered Rate) plus 70 basis points and for the next six months, it would be 140 basis points over the benchmark rate. The six-month Libor is currently at 2.63%. The bridge loan is being raised by a special purpose vehicle — Tata Motors UK, which will own these two brands, banking sources said. Tata Motors UK is 100% owned by Tata Motors. On 18 March 2008, Reuters reported that American bankers Citigroup and JP Morgan shall be due underwriting a loan of

After the acquisition of British Jaguar Land Rover (JLR) business, which also includes the Daimler and Lanchester brand names Tata Motors became a major player in the international automobile market. Tata has gained the rights to the Daimler, Lanchester, and Rover Company. In addition to the brands, Tata Motors has also gained access to 2 design centres and 2 plants in UK. The key acquisition would be of the intellectual property rights related to the technologies. The rumor that Ford will contribute to pension funds associated with the brands is also true, as it confirmed that $600 million will be dropped into the retirement coffers of the brands once the deal closes. It is, of course, subject to regulatory approval in a number of countries, but the automaker expects the deal to be done by the end of the following quarter. As part of the deal, Ford will continue to supply powertrains, stampings and other unnamed vehicle components to Tata for "differing periods", as well as R&D research, environmental and platform technologies, and even accounting services, among others. Clearly the ties that bind Jaguar Land Rover to Ford are strong and will take some time to undo. Judging from the press release, it seems all parties involved, including the employees of Jaguar Land Rover, are pleased with how the deal went down, and for the time being both brands will be run business as usual during the transition period. The key challenge for the new owner of Jaguar and Land Rover will be to grow and maintain sales of the two brands in a global downturn and credit crunch. Tata Motors will have to commit significant managerial and financial resources to engineer a turnaround. It will have to significantly step up its R&D budget as well as increase operating expenditure and capital expenditure to meet JLR’s requirements. Auto analysts tracking the development say the acquisition was just the first step; the real challenge lies in running JLR.

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27th July 2009 The steep downturn of the world's luxury automotive markets has taken a toll on Jaguar/Land Rover, and the company's bottom line has taken a huge hit as a result. Financial Times report that says Tata Motors' British luxury brands lost 673.4 million pounds ($1.11 billion U.S.) in 2008. That's a $2 billion swing from the 641.5 million pound ($1.05 billion) profit the British brands earned in 2007. Tata Motors said last month that Jaguar/Land Rover lost 306 million pounds ($504 million) for the fiscal year ending March 2009. Tata Motors reported a net loss of Rs3.29bn ($67 million) for the quarter to end-June, compared with a Rs7.2bn profit a year ago. It said it made a standalone profit of Rs5.14 billion, up 58 per cent on a year ago, not including the losses at JLR. The Financial Times report comes as Tata Motors is working out a deal with the British government to provide short-term financing for the cash-strapped automaker. The report that says the U.K. government is willing to provide a 175 million pound ($288 million) commercial bridge loan to keep operations running. The reports says Tata Motors would like a 12-month loan, while the British government would like a six-month term,

The fact that Jaguar Land Rover accounted for $504 million of that $520 million total loss means that more job cuts and plant shutdowns are in store for the ailing British duo. Says Tata Vice Chairman Ravi Kant: “We have sent people on sabbatical, gone for cheaper low-cost country sourcing and tight control in cash flows, and are assisting JLR (Jaguar Land Rover) for a major belt tightening.” Earlier this month, it was reported that Tata was in search of some £1 billion ($1.5B) in cash and underwriting help to pump into the JLR operations. Jaguar's bail-out Published: December 19 2008 02:00 | Last updated: December 19 2008 02:00 Peter Mandelson, Britain's business secretary, is contemplating a bail-out of Jaguar Land Rover. It is hard to imagine a less deserving candidate. The luxury carmaker fails the public interest test on two key grounds. First, its products are of questionable social utility. For the government to allocate scarce funds to prop up the production of the 4.2 Litre V8 Petrol Supercharged Jaguar is a nonsense. It has a top speed of more than 150mph, emits 299g of carbon dioxide per kilometre and costs about three times the average annual wage. True, the UK car industry employs 190,000 people directly and supports several hundred thousand more once components and retailing are taken into account. But if Mr Mandelson wants the government to underwrite this £50bn industry, he should harness such public funds as are available to develop the green cars of the future, not pander to vested interests. The second reason Mr Mandelson should refuse to bail out JLR is that Tata Motors, the Indian company that paid $2.3bn for it, is capable of doing so itself, if it wishes. Tata Motors, let it not be forgotten, is a subsidiary of Tata Group, one of the wealthiest companies on the subcontinent, with revenues of $62.5bn and profits of $5.4bn last year. The argument that thousands of jobs are at stake is weak: sectors employing many more, such as retail, receive no special treatment. If job protection starts to drive government policy, then the UK would bar Tata Consulting Services, a sister company, from offering the type of business process outsourcing services that have sucked back-office jobs to India in their hundreds of thousands during the past decade. But that would be nutty. Manufacturers are now leaner precisely because they now manage their inventory, process warranty claims and order spare parts through TCS's offshore centres . The simple truth is that Tata Motors overpaid for a trophy asset with poor prospects. It must sort it out itself.

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Mr Kant said that Tata Motors was finalising the £100m of loans from commercial banks including Standard Chartered, Bank of Baroda, ING, GE Capital, and Bank of Ireland subsidiary Burdale. Analysts said it would take much more than £100m to turn around JLR’s fortunes, given the depressed state of the global premium car market. Tata’s core commercial vehicles market in India is also suffering from slower sales. “We’ve seen the bottom of the luxury market, but the road to recovery will be slow,” said Ashvin Chotai, director of consultancy Intelligence Automotive Asia. “JLR will continue to be a drain on Tata’s financial resources for a while.” JLR has been a burden for Tata since its carmaking arm bought the two brands from Ford Motor for $2.3bn last year, just as demand for large and expensive vehicles began to plummet. Since then, Tata has poured more than £1bn into the carmakers, which have three plants and employ 14,500 people. It has eliminated more than 2,200 jobs, and in July said it had appointed KPMG and Roland Berger to advise it on cost-cutting and cash management. Last month Tata and JLR ended long-running discussions with the UK government over emergency financing for the two carmakers. Tata had been seeking government guarantees for a £340m European Investment Bank loan to finance JLR’s investments in lower-emission products, including a planned compact Land Rover model, plus guarantees for up to £500m of commercial bank loans. At the time, JLR said it had lined up commercial lending to meet its needs, including the EIB loan, and that it would no longer need UK government guarantees. Tata had balked at conditions attached to any lending by the

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OFFER AND ACCEPTANCE The deal was offered by Tata and finally accepted on 2nd June 2008 by William Clay Ford (Chairman of Ford) and Allan Mulally (CEO of Ford)  OFFER BY TATA  ACCEPTANCE BY FORD

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LEGAL RELATIONSHIP  Both the parties have the intention to create legal Relationship between them and were agreed to legalize the deal in written

  • LAWFUL CONSIDERATION    Consideration is lawful in the deal. Mr. Ratan Tata (Chairman of Tata) gets the Ford Company as his consideration. • • LEGALITY OF OBJECTS  In Tata Ford deal nothing was illegal, immoral or opposed to public policy hence legality of object criteria also got fulfilled. 

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CAPACITY OR COMPETENCY OF PARTIES  There are three conditions that are required for a party to become competent to contract were fulfilled: -Both the parties attains the age of majority at the time of contract.  -Both the parties are of sound mind  -Both Tata and Ford were not disqualified by any law from signing any contract.  FREE CONSENT  In this case the consent of both the parties are free i.e. It is not caused by Coercion Undue Influence Fraud  Misrepresentation Mistake    

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POSSIBILITY OF PERFORMANCE   In this deal both the parties were able perform there respective promises.

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LEGAL FORMALITIES