Published on


Published in: Education, Business
  • Be the first to comment

  • Be the first to like this

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide


  1. 1. Business Law
  2. 2. IntroductionWhat is business?(Business is as old as civilization. Over theperiod of time it has gained enormous powerover customers/employees/shareholders)Environment of BusinessFactors Constituting the BusinessEnvironment
  3. 3. Meaning & Nature of LawWhat is Law? ( Legally Accepted Ways) Law to ;a) A Citizenb) A Lawyerc) A Legislatord) A Judge “A set of rules derived by the State to regulate the conduct of its people, recognized by the State and enforced by it on its people termed as Law” “Business Law represents all those legal rules which are connected with Trade, Industry & Commerce” Nature of Law -- Changing (Non Static) Objective – Establishing Order
  4. 4. Characteristics of LawA body of rulesFor the guidance and conduct of personsImposedEnforced by the executiveContents are non-staticDevelop Social Order & Compel SocialMember to remain in orderServes Social/Political/Economic purposeLaw & Morality
  5. 5. Law of Contract“ The law of contract is that branch of law which determines the circumstances in which promises made by the parties to a contract shall be legally binding on them. Its rules define the remedies that are available in court of law against a person who fails to perform his/her contract and conditions under which the remedies are available”
  6. 6. Nature of Indian Contract Act, 1872 Provides for remedies against failure The conditions under which remedies are available Ensures realization of reasonable expectation of the parties Not as exhaustive act (deals with the general principles of law of contract and some special contracts only) Doesn’t lay down limits & duties rather create limiting principles The act is neither the whole law agreements nor whole law of obligations jus in rem v/s jus in personem (privity of contract)
  7. 7. Agreement & Contract“A contract is an agreement made betweentwo or parties which the law will enforce” -Section 2 (h)Agreement = Offer + Acceptance >>Promise (Promisee & Promisor)Consensus ad idem (Identity of minds)Legal Obligation should be created
  8. 8. What is a Contract ? – An Agreement• Enforceable by law• Made between at least two parties• By which rights are acquired by one, &• Obligations are created on the part of another• And on failure, the other party has a remedy.
  9. 9. AGREEMENT & ENFORCEABILITYEvery promise and Enforce by lawvery set of promises forming consideration for each other. “All agreements are not contracts, but all contracts are agreements”
  10. 10. Essential Elements of a Valid ContractOffer & AcceptanceIntention to create a legal relationshipLawful consideration – (advantage/benefitsmoving to & from - between the two parties)Capacity (Competency) of Parties – (age/soundmind/not disqualified to enter)Free & Genuine consent of the parties –(undue influence, fraud, misrepresentation maycause absence of free consent)Lawful ObjectsMust not have been expressly declared VoidCertainty & possibility of performanceLegal Formalities
  11. 11. Kinds of Contract1. Classification according to Legal Effects:a. Valid Contracts : enforceable at lawb. Void Contracts: A contract when it ceases to be enforceable by law Valid at beginning (e.g. X offer to marry y is valid, but later on x dies )c. Voidable Contract: (absence of free consent)d. Illegal Contracts Consideration/object is illegale. Unenforceable Contract Cannot be enforced in court due to technical defects (absence of stamp)
  12. 12. Kinds of Contract2. Classification according to Formationa. Express Contract In writing (e.g. car sell)b. Implied Contract Not in writing ( e.g. went a hotel for tea)c. Quasi Contract no intention to create contract but law imposed a contract( e.g. finder of lost goods)
  13. 13. Kinds of Contract3. Classification according to Performancea. Executed Contract (delivery has given but price has paid)b. Executory Contract (e.g. delivery has given but price not paid)c. Unilateral Contract one party yet to perform obligations (e.g. Coolie)d. Bilateral Contract obligation for both the parties( e.g. sell after 10days)
  14. 14. Kinds of Contract4. Classification according to Forma. Formal Contract: required to satisfy some legal formalitiesb. Simple Contract: all others are simple contracts
  15. 15. Offer & Acceptance“A person is said to have made anoffer/proposal, when he “signifies toanother his willingness “to do” or “not todo” (i.e. abstain from doing) anything,with a view to obtaining the ascent ofthat other to such act or abstinence”– Section 2 (a) Offerer/Proposer/Promisor Offeree/Proposee/Promisee/Acceptor
  16. 16. Essentials of a Valid OfferOffer must be such that is capable to be accepted inlaw and gives rise to legal relationship (e.g. Dinning)Terms of offer must be definite, unambiguous andnot loose & vague (.e.g. House on rent)Offer must be communicated ( D& P to trace his son)An offer must be distinguished from(i) an invitation to make an offer (display)(ii) declaration of intention to offer(iii) Open offerOffer must be made with a view to obtaining theassent (e.g. advertisement)Offer should not contain a term the non-complianceof which may be assumed to amount to acceptanceAn offer may be conditional (* condition apply)
  17. 17. AcceptanceThe assent given to a proposal may be understand as acceptance. In other words, offer + acceptance = contract. An acceptance once completed can not be revoked. Acceptance is the act of assenting by the Offeree to the offerorDefinition: “Acceptance is the manifestation by the offeree of his assent to the terms of the offer”
  18. 18. Essentials of valid AcceptanceAcceptance must be by the OffereeAcceptance must be absolute andunconditional (e.g. H sell to P rs.1000 P pay Rs. 950)Must be given before the offer lapsesIt must be communicated to the offeror - silence cannot - must to offeror - acceptance by post or telegram - acceptance is complete when it comes to the knowledge of the offeror
  19. 19. Revocation or Lapse of OfferAn acceptance in English law cannot berevoked.An acceptance may be revoked at any timebefore the communication of theacceptance is complete as against theacceptor, but not afterwards.
  20. 20. Completion of Communication Offer or Acceptance Revocation of Offer or OFFER : when it comes to Acceptance the knowledge of the Offeree (i) As against the ACCEPTANCE : (i) As person who makes it -- against the offeror : when when putted into course putted into course of of transmission. transmission (out of acceptors’ power) (ii) As against the(ii) As against the acceptor : person to whom it is when it comes to the made -- when it comes knowledge of the offeror to his knowledge
  21. 21. ConsiderationWhen A promises to do ‘something’ A must get ‘something’ in return – this something is known as ‘consideration’ (Affirmative Act / Abstinence / Promise)Affirmative act: doing somethingAbstinence: refrain from doing (X pay 1000 for not suit by Y)Promise: A return promiseSec. 2(d) of contract Act thus “ when at the desire of the Promisor, the Promisee or any other person has done or abstained from doing or does or abstains from doing or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise”.Definition: “Consideration is the price for which the promise of the other is bought”.
  22. 22. ConsiderationConsideration is Essential:Consideration must move at the desire ofthe promisor( eg. A sees B drowning and saves his life.A cannotdemand the payment for his sevices because b neverasked him to do so )( e.g. mosque: no repair, no money in returnby promisor)Consideration may move from Promisee orany other person ( Eg of XYZ)
  23. 23. ConsiderationConsideration Need not be adequate (eg MRP of a house is 10 lakh but owner is selling for only 3 lakh) Consideration must be competent: it must be real, competent and not illusory.(eg of magic)
  24. 24. Conti… Consideration may be past, present, future (eg. X render service to y in month of May,X pay him in month of June) “Consideration must be lawful(Eg : X says to Y ,If you beat Z ,I will pay you 10000)
  25. 25. Contract without Consideration (Exceptions)Love & Affection -- A registered agreementbetween near relatives based on natural love &affection is enforceable.Compensation for Voluntary ServicesPromise to pay a time barred debtCompleted giftAgencyCharitable subscription
  26. 26. Capacity to ContractAs per Sec. 10 an agreement becomes acontract if it is entered into between theparties competent to contract.As Sec. 11 declares following persons tobe incompetent to contract;a) Minorsb) Persons of unsound mindc) Persons disqualified by fromcontractingAlien Enemies / Corporations / Insolvent /Convicts
  27. 27. MinorMinors: below 18 years, guardian and ward act he 21Contract with a minor is absolutely Void(Case: Mohri Bibi vs dharmo das (1903))Minor can be a Promisee or Beneficiary (eg: insurance)No Estoppel against a Minor: rule of evidence by which aperson is not allowed to go back upon earlier representations but minornot e.g. carPositions of minor’s parentsPartnership (accord sec30.can be a partner)Liability for trots (tort is a civil wrong)Minor as agent (but not liable for his acts)Joint contract by minor and adult.(adult will beliable only for the contract not the minor)
  28. 28. Person of Unsound MindWhen the person is incapable of understandingthe agreementIt may arise from: 1 Idiocy: lack of development of brain 2.Lunacy: disease of brain due to somemental stress 3.Drunkness 4.Hypnotism 5.Mental decay: old age
  29. 29. Person disqualified from ContractingIncapacity Arising from Status – Foreign Sovereigns, Ambassadors etc. unless they voluntarily submit to its jurisdiction (they cant be sued in local courts) – Alien Enemies (living not in India, .they can enter into contract during peace time ,but not during war time) – Insolvents ( when a person’s debt exceed his assets) – Convicts ( A convict while undergoing imprisonments is incapable to enter into a contract) – Corporations (it enter into a contract through its Agents)
  30. 30. Free ConsentSec. 13 “two or more persons are said to beconsented when they agree upon the same thingin the same sense”Definition “ free consent which is secured by the freewill of the parties out of their own accord”.A consent is said to be free when it is notcaused by;a) coercion – sec 15;b) undue influence – sec 16;c) fraud – sec 17;d) misrepresentation – sec 18;e) mistake – sec 20, 21 & 22 …void agreement
  31. 31. Coercion – sec 15; when a person is compelled to enter into a contract by the use of force by the other party, coercion is said to be employed. A contract entered into under coercion is voidable at the option of the coerced. Example: By threat of suicide a person induced his wife and son to execute a release in favour of his brother in respect of certain properties it was held that the contract is under coercion and voidable at the option of wife and son.Effects of coercion: contract is voidable and can be void at the option of the aggrieved party
  32. 32. Undue influence – sec 16Undue influence is the improper exercise of authority over the mind of one of the contracting parties by other.Indian Contract Act “ a contract is induced by undue influence where the relationship subsisting between the parties are such that one of the parties is in a position to dominate the will of other and use that position to obtain an unfair advantage over the other. Such as – Parent and Child – Guardian and Ward – Doctor and Patient Effects of undue influence: contract is voidable and can be void at the option of the aggrieved party
  33. 33. Fraud – sec 17Fraud is the willful misrepresentation made by one party of the contract to the other with an intention to deceive.The essential elements of fraud are: – The suggestion by a person that a fact is true when it is not true ( Eg: X sells to y locally manufactured goods as imported goods charging a higher price,it amounts to fraud) – The active concealment of fact by a person who believe s it to be true (eg: X a furniture dealer,conceals the cracks in furniture sold by him using some packing material and polishing and the buyer after examination cannot trace the defect,then it is fraud) – A promise made without intention of performing it. (marriage by a person with an intention to go abroad)
  34. 34. Misrepresentation – sec 18A misrepresentation is a representation that is falsely made. Representation always means a statement of fact made by one party to the other before or at the time the contract is made with regards to some existing fact or some past events which materially induces the formation of the agreement. In simple words a representation when wrongly made either innocently or willfully is a misrepresentation. Thus , misrepresentation may be innocent or willful. The former is called ‘misrepresentation and latter ‘fraud’. Effects of Misrepresentation The aggrieved party has the right to rescind the contract
  35. 35. ExampleA intends to sell his horse to B and says“my horseis perfectly sound”.although hedoes not know that the horse has fallen illyesterday.B there upon buy the horse.There is misrepresentation on the part ofA
  36. 36. Mistake– sec 20,21,22 The next vitiating elements of consent is mistake. The terms mistake may be defined as an incorrect belief about something. Mistake may be either of law or of fact:Mistake of Law: Mistake of law may be of the law of land or foreign law. Mistake of law does not vitiate a contract as expressed in the ignorance of the law is no excuse.Mistake of Fact: Mistake of fact may be either bilateral mistake or unilateral mistake.
  37. 37. Mistake– sec 20,21,22Bilateral Mistake Here both the parties of the contract make a mistake, which may be either common mistake or mutual mistake. Common mistake (same mistake) Mutual mistake (different mistake)1. Mistake as to the Subject matter : here both the parties to an agreement are working under a mistake relating to the subject matter it falls as under
  38. 38. Mistake– sec 20,21,22a). Existence of the Subject matter: (The horse is dead at the time of agreement)b). Identity of the Subject matter: (Maruti and santro)c). Title of the Subject matter: (A wants to buy a particular horse from B which is already by him)
  39. 39. Conti….d). Price of the Subject matter: (seller A by mistake writes the price 2500 instead 1500 in front of B)e). Quantity of the Subject matter:(A writes to B ‘”send me horses”)f). Quality of the Subject matter:(race horse but it is cart house)
  40. 40. Mistake– sec 20,21,222.Mistake as to the possibility of Performing the contract:a). Physical Impossibility: a & C contract about movie show. Show already cancelledb). Legal Impossibility: something which cant legally be done ( the person cannot lease the land of his own)
  41. 41. Mistake– sec 20,21,22Unilateral Mistake In this case of mistake, only one of the party is mistaken, but the other is awarea). Nature of the Contract: (A blind man signing a document read over to him wrongfully will not bind him )b). The Identity of the party contracted with: (A enter into contract with believing him C)
  42. 42. Legality of Object & ConsiderationIn agreement the term ‘object’ and ‘consideration’ are notsynonymous. The object indicates purpose or design of anagreement. It implies the manifestation of intention. Theconsideration is some act or abstinence or reciprocal promises.In all agreement, both the and the consideration should belawful, otherwise the agreement is void. In certain casesconsideration for an agreement may be lawful but the object forwhich the agreement was entered into may be unlawful.Example: X executes a promissory note for Rs.5000 in favourof Y. Y has paid Rs.5000 to X. This payment by Y is theconsideration. X wants to utilize the money for the marriage ofhis son who is a minor. This is the object is forbidden by thechild Marriage Restraint Act as it is unlawful.
  43. 43. Legality of Object & ConsiderationConsideration & object could be unlawful: a) If it is forbidden by law: E.g. Money paid for getting a job 2nd marriage while the wife is alive b) If it is of such a nature that, if permitted, it would defeat the provisions of any law: E.g X borrowed 10000 from y and y agreed not to raise any objection and that the y may recover the amount even after the expiry of limitation period. its void as it defeat the provision of Law of Llimitation
  44. 44. Conti…c) If it is fraudulent: if the object is to defraud the others.d) If it involves or implies injury to the person or property of another: E.g X promised to pay 10,000 to Y when he agreed to publish a libel (defamatory article against someone)
  45. 45. Conti…e) If the court regards it as immoral or opposed to public policyE.g X gave 1 lakh to a married women to obtain a divorce from husband and agreed to marry her. As X could not recover the money
  46. 46. Unlawful & Illegal AgreementAn agreement is said to be unlawful when the objectfor which it is made is forbidden by law. An unlawfulagreement renders the transaction between theimmediate parties void, but has no effect on collateraltransaction. The term illegal agreement is definedas the agreement which is expressly or impliedlyprohibited by law.An illegal agreement is not only void as between theimmediate but has further effect that the collateraltransactions to it also become tainted with illegality.
  47. 47. Agreement Opposed to Public Policy An agreement which is harmful to the public welfare is said to be an agreement opposed to public policy Agreement in Restraint of Marriage (x promised to marry none else except miss y and to pay her a sum of 10000)• Trading with enemy• Agreement relating to public offices : ( A pay to B to retire from public service)• Marriage brocage agreement: (Dowry system)
  48. 48. Agreement Opposed to Public Policy Restraint of Personal Freedom Agreement in Restraint of Trade (A agreed to B not to carry the same business after the expiry of service anywhere within 800 miles)Exceptions:-Partnership Agreement: any business-Partner Agreement: Same business within local limits
  49. 49. Contingent Contracts Contract may be Absolute OR Contingent. Absolute contract is one in which the promisor binds himself to performance in any event unconditionally. 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 (Sec 31) Essential characteristics of Contingent Contract;i) Its performance depends upon happening or non- happening of some event in future.ii) The event must be uncertain.iii) The event must be collateral, i.e. incidental to the contract.iv) There must be valid contract.
  50. 50. Wagering Contracts A wagering is an agreement to pay money or money’s worth on the happening of a specified uncertain event. A wagering contract is one in which reciprocal promises are made to give money or something of value upon the result of a future uncertain event with regard to which parties hold opposite views.Wager is a bet. It is game of chanceE.g. Suppose X & Y take a bet that if it rains tomorrow Y pay to X Rs.500.X & Y bet loose apply for loan from Z .. Bombay is illegal Z cannot recover money from X. other parts of India such transactions are void. Z could recover from X. if X refuses to pay Y. Y cannot sue anywhere.
  51. 51. Quasi Contracts Law of Quasi Contract – Law of Restitution As a matter of fact Quasi Contract is not a contract at all. It is rather created by Law. It is an obligation which the law creates in the absence of any agreement. Sec. 68-72 deals with following kinds of quasi- contractual obligations;1. Supply of necessaries: reimbursed from property2. Suit for Recovery of Money: - By Mistake - Payment of money to a third party. E.g. arrears of Govt.3. Obligation to pay for non-gratuitous: leaves good at Y house by merchant.4. Responsibilities of finder of goods:5. Quantum meruit >> ‘as much as earned’
  52. 52. Void AgreementsThe following agreements have been expresslydeclared to be void by the Contract Act;Agreements by incompetent parties-(Sec11)Agreements made under a mutual mistake of fact(Sec 20)Agreements, the consideration or object of whichis unlawful (Sec 24)Agreements made without consideration (Sec 25)Agreements, meaning of which is uncertain (Sec29)Agreements to do impossible acts (Sec 56)
  53. 53. Performance of ContractPerformance of contract takes place when the parties to a contract fulfill their respective obligations. Performance may be actual or attempted.Actual performance occur when a party has done what he undertook to do.An offer to perform obligation is called ‘ attempted performance’ or tender of performance. A contract need not be actually performed.Section 37. “ the parties to a contract must either perform, or offer to perform their respective promises, unless such performance is dispensed with or excused under the provision of this act or any other law”.In case promisor dies before the performance of a contract, his promises are binding to his representative. Special qualification required he himself must perform.EX. X promise to paint a wall for Y. X dies before cannot be enforced by representatives of X or Y.
  54. 54. Offer of Performance or TenderTender is an offer of performance.EX. A party who has entered into contract to deliver goods or to pay money to another is deemed to have performed it if he has offered the goods or money to the party to whom the delivery or payment was to be made.Sec 38 says “where a promisor has made an offer to perform as per the contract and the promisee does not accept that, the promisor is not responsible for non performance, nor does he thereby lose his rights under the contract”.Conditions of a Valid Tender It should be unconditional It must be made at a proper time and place Opportunity should be given to inspect good; goods must be identical with the sample The person tendering should have the ability to perform the promise. Tender to one of several joint promisees is tender to all of them
  55. 55. Who can Demand PerformancePromisee or Agent or his legal representative in case of death.By whom the contract must be performed; Promisor himself, Non-personal -Agent - Legal Rep. Joint contract - Third Person -Joint Promisors.
  56. 56. Devolution of joint liabilitiesWhen 2 or more Promisors have made the promise, All of them must fulfill the promise jointly. If anyone dies then the legal representative.In case of joint promises any one of the promisors may be enforced to perform the whole performance. In such cases, joint promisor may compel every other joint promisor to contribution equally to the discharge of the promise.EXAMPLE X, Y, and Z jointly promise to pay Rs. 5000 to W. W may compel either X,Y or Z to pay him. X, Y, and Z jointly promise to pay Rs. 3000 to W. Z is compelled to pay whole. X is insolvent but his assets are sufficient to pay one half of his debt. Z is entitled to receive Rs. 500 from the estate of X and Rs.1250 from Y.
  57. 57. Discharge of ContractDischarge of contact means termination of the contractual relationship between the parties. A contract may be discharged by;1. Performance:2. Agreement of Consent: when to parties are mutually discharge of contract. The following are the various modes - Novation: by new contract X owes Y Rs.5000. X gives mortgage - Recission: mutually agree to terminate eg X promise to deliver goods to Y . And Y does not want to be performed. - Alteration: term of contarct varied by mutual consent. - Remission: acceptance of lessor sum than the contractual amount, eg Rs.400 For Rs.300 - Waiver: X promises to paint for Y but later Y forbids. - Accord & Satisfaction: satisfaction of any other than performance agreed - Merger: Change the inferior right to superior right. Eg Leasee later buy assets.
  58. 58. 3.Impossibility: may exist unknown at the time of contract- Destruction of Subject matter: is destroyed. E.g.. Music hall latter took fire.- Death or Disablement of Parties: Ill or death- Subsequent Illegality: law changes, E.g.. Land for building latter railway acquired land.- Declaration of War:4. Lapse of time: E.g. where debtor has failed to repay the loan creditor can sue but before three year. After that he can not sue.
  59. 59. 5. Operation of law:- By merger- By insolvency- By unauthorized alteration; without knowledge6. Breach of contract: where the promisor neither performs his contract nor does he tender performance, or where the performance is defective, there is a breach of contract.a. Actual Breach: at the time when performance is due or performingb. Anticipatory Breach: it indicates a breach before the performance is due.
  60. 60. Remedies for Breach of ContractA remedy is the means given by law for the enforcement of right. When a there is breach of contract, the injured party has one or more of the following remedies;1. Rescission of contract: is revocation of a contract. It is the way by which contract may be discharged. Where one of the parties to contract commits breach, the other party may treat the contract as rescinded. EG. A singer contract with B, to sing at his theatre for two nights in every week. Willfully absent one night. B rescinds and sue for compensation.2. Suit for damages: A person who commits a breach of contract must make compensation therefore to the injured party. A). General Damage: general damages are those which arises naturally in usual course of things for breach of contract. Eg. A to B supply Sugar. Price. B). Special Damage: are those which are the result of unusual circumstances affecting the plaintiff. These are the damages which a party knew, when they made the contract. Building house A and B. will be rented to C. C). Exemplary Damages: they are awarded with a view to punish the wrong doer and not primarily with the idea of awarding compensation to the injured party. D). Nominal Damages: nominal damage are awarded where the injured party has sustained damage of a short.
  61. 61. 3. Suit upon quantum meruit: The phrase ‘ quantum damage’ means payment in proportion to the amount of work done. A right to sue on a quantum meruit arise where a contract, partly performed by one party, has become discharged by other party.4. Restitution: it means return of the benefit received by one party to the contract from the other party under a void contract.5. Suit for injunction: An aggrieved party can sue for an injunction i.e., an order of the court restraining the wrong doer from doing or continuing the wrongful. Eg hotel6. Specific Performance.
  62. 62. Contracts of Indemnity & GuaranteeChapter VIII (sec. 124- 147) of Indian Contract Act 1872 covers these provisionsContract of Indemnity: A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is called a ‘contract of indemnity’. (sec 124) Promisor >> indemnifier & the Promisee >> indemnifiedEg. X contracts to indemify Y for Z proceedings. Rights of indemnity holder when sued (sec 125) (all damages/all expenses-costs/all sums) Rights of indemnifier (the act is silent)
  63. 63. Guarantee(Sec. 126) A contract of guarantee of a contract to perform the promise or discharge the liability of a third person in case of his default. The person who gives – ‘surety’ or ‘ Guarantor Who defaults – ‘principal debtor’ To whom it is given – ‘creditor’ It may be oral or written; express or implied Essential features; Concurrence/Primary & Secondary liability/Essentials of a Valid Contract (in case of principal debtor being a minor, the surety is regarded as principal debtor)
  64. 64. Types of Guarantees:1. Retrospective Guarantee2. Prospective Guarantee3. Fidelity Guarantee: for good or honesty conduct of a person4. Specific Guarantee: for single transaction5. Continuing Guarantee
  65. 65. Contract of Indemnity V/s Contract of Guarantee CoI >> CoG Two parties >> Three PartiesLiability is Primary >> Liability is SecondaryOnly one Contract >> Total three contractsIndemnifier not to >> Surety to give guaranteeAct on the request upon debtor’s requestOf IndemnifiedLiability arises only >> Debt/duty already exists theIn case of performance of which hasContingency been guaranteed by the surety
  66. 66. A few features Nature of surety’s liability (coextensive/limitation)Rights of Surety1. Rights against the creditor -Right before payment - Right when paying - Right of set off2. Right against the Principal debtor - Right to subrogation - Right to be Indemnified -Right against securities3. Right against the Co-Sureties - Right to contribution - Liabilities of Co- sureties bound in different sums
  67. 67. Bailment Ch. IX (sec 148 - 181) of Indian Contracts Act 1872‘Bailment’ means ‘delivery of goods’ by one person to another for some purpose upon a contract, that they shall, when the purpose is accomplished be returned or disposed off as per the directions given by the person delivering them. One who delivers called ‘Bailor’ and to whom delivered called ‘Bailee’. >>> (sec. 148)Bailment TypesGratuitousNon- GratuitousEssential of Bailment Delivery of Possession Delivery of Goods must be for a Specific Purpose Contract Return of Goods
  68. 68. Bailee’s lien; Lien means right of a person to retain possession of some goods until the claims are satisfied. These could be of two types; i) Particular Lien: Only those goods against which services Have been renderedii) General LienAll the goods which are in possession (bankers/attorneys)
  69. 69. Duties of Bailee Take care of bailed goods Not to make unauthorized use Duty not to Set up Adverse Title Not to mix the bailed goods with his own To return the goods Duty to Return any Accretion of the GoodsDuties of Bailor Disclose known faults Bear extraordinary expenses of the bailee Receive back the goods Indemnify bailee in case of premature termination
  70. 70. PledgeBailment of goods as security for payment of a debt for performance of a promise is called ‘pledge’; in this caseThe bailor is called >> pledger or pawnorThe bailee is called >> pledgee or PawneePledge is bailment of goods as security, bailment is for a purpose of any kindEssentials of Pledge Delivery of goods The delivery of good should be by the way of security The security being for the payment of debt or promise
  71. 71. Rights and Duties of Pawnee Right of retainer Right of Retainer for Subsequent Advances Right to extraordinary expenses
  72. 72. Contract of AgencyCh. X (sec. 182-238) of Indian Contract Act 1872An Agent is a person employed to do any act for another, or to represent another in dealings with third person(s) --- [sec. 182] Person who represent called “Agent” Person who is represented called “Principal”Who can Employ an Agent: Any person who is of the age of majority according to the law to which he is subjected, and who is of sound mind, may employ an agent.Who can be Agent: Essentials of Agency Relationship;1. Agreement between Principal and the Agent (no consideration is necessary to create agency) &2. Intention of the Agent to act on behalf of the Principal
  73. 73. Classification of Agents1. Factors: a factor is a mercantile agent to whom goods or bills of lading or other documents of title are consigned for sale by a merchant.2. Brokers:3. Auctioneers:4. Bankers:5. Partners:6. Del Credere Agents:
  74. 74. Duties of Agent Duty to follow instructions Duty to follow custom in the Absence of instructions Duty to Exercise Skill and Diligence Duty to render accounts Duty to communicate Duty not to deal on his own account Duty to pay sums received for the principal Duty to protect & preserve interest of the principal in case of his death or insolvency Duty not to use the information obtained in the course of agency against the principal Duty not to make secret profit Duty not to delegate authorityRights of Agent Right of Retainer Right to Remuneration Right of Lien Right of Indemnification Right to compensation
  75. 75. Unit II
  76. 76. Sale of Goods Act 1930Sale of goods is a contract whereby theseller transfers or agrees to transfer theproperty in goods to the buyer for a price.Sale contract may be absolute andconditional: - Sale - Agreement to SellEssentials of Contract of Sale: Valid contract Two parties-Buyer & Seller Transfer of Property Goods Price
  77. 77. Cont….. Sale & Agreement to SellNature of contractTransfer of propertyRisk of lossConsequence of breachInsolvency of buyerInsolvency of sellerRight of re-sale
  78. 78. Cont…..Sale & Hire Purchase AgreementSale & barter or exchangeSale & bailment
  79. 79. Subject Matter of Contract: A). Goods: not actionable or money 1. Existing Goods: - Specific Goods - Ascertained Goods - Unascertained Goods 2. Future Goods 3. Contingent Goods Goods Perishing Before Sales but After Agreement to Sell B). Price
  80. 80. Conditions and WarrantiesA condition is a stipulation essential to the mainpurpose of the contract. If one party breaches acondition then the other party may terminatethe contract and claim damagesOn the other hand, a warranty is a stipulationcollateral to the main purpose of the contract. Ifone party breaches a warranty then the otherparty can only continue with the contract andthen sue for damages
  81. 81. Conditions Vs WarrantiesDifference as to ValueDifference as to BreachDifference as to Treatment
  82. 82. Implied Conditions and WarrantiesImplied Conditions1. Conditions as to Title: Seller has the right to sell the goods as agreed to be sold e.g.2. Sale by Description:  Goods must correspond to Description  Conditions as to Merchandability  Condition as to Wholesomeness( for eatables)  Condition as to Fitness for a Particular Purpose1. Sale by Sample: – Bulk of the goods corresponds to sample – Reasonable opportunity of comparing – Free from any defect1. Sale by Sample as well as by Description:Implied Warranties1. Warranties of Quiet Possession2. Warranties of Encumbrances: not subject to third party right.
  83. 83. Caveat EmptorIt means “ let the buyer beware” i.e. the seller is under no duty to reveal the defects in the goods he is selling. So it is not the part of seller’s duty to give to the buyer, an article suitable for a particular purpose unless such purpose is made known to the seller.Caveat Emptor does not apply: – Sale under fitness for buyer’s purpose – Sale under merchandable quality – Consent by fraud
  84. 84. Passing of Property of Transfer of OwnershipThe primary objective of the sale is the passing of ownership of the property from the seller to the buyer.For determining the time passing the ownership1. Specific or ascertained goods - Deliverable state - Non- deliverable state1. Generic or uncertained goods2. Goods delivered on sale or returnPassing of Risk in the Goods:1. When the parties agrees to contrary provision2. When delivery is delayed through the fault of any one party
  85. 85. Unpaid Seller- When the whole of the price has not been paid or tendered- When negotiable instrument is conditional or dishonorRight of an Unpaid Seller:A. Rights against the Goods1. Right of Lien( sec.47-49) Linked with possession - where the goods have been sold without any stipulation of credit - Where the goods have been sold credit, but term expired - where the buyer becomes insolvent.Termination of lien (sec. 49) - By delivery to carrier - By delivery to buyer - By Waiver - By tender of price
  86. 86. Unpaid Seller2. Right of Stoppage in Transit (Sec. 50-52) - Seller must be unpaid - The seller must have parted with the possession and seller must not acquired - The buyer must be insolvent - The property must have passed from the seller to buyer3. Right of re-sale(sec.54) Perishable nature Exercised the right of lien or stoppage Right expressly reserved by seller
  87. 87. Unpaid SellerB. Right against the Buyer- Suit for Price (Sec. 55)- Suit for Damages for Non- Acceptance ( sec. 56)- Suit for Interest (Sec. 61)
  88. 88. Negotiable Instrument Act 1881A negotiable instrument means a promissory note, constituted from two words Negotiable + Instrument.Negotiable means transferable from one person to another person in return for consideration.Instrument means written document by which right is created in favour of some person.A negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer.Justice Wills “ a negotiable instrument is one, the property in which is acquired by anyone who takes it bona fide and for value notwithstanding any defect of title in person from whom he took it”E.g. A bought some goods from a shop and paid stolen cheque.
  89. 89. A few Characteristics;Freely transferableTitle of holder free from all defectsDishonorContract to pay moneyTypes;Negotiable i) negotiable by statute(promissory notes, bill of exchange and cheques)Non- negotiableii)negotiable by custom or usage (Bankers draft or pay order, hundis, delivery orders and railway receipt for goods)
  90. 90. NegotiationMeans transfer of instrument from one person to another in such a manner so as to convey the title and constitute the transferee the holder thereof.Negotiable by Mere Delivery:E.g. X, the holder of a negotiable instrument payable to bearer delivers it to the agent of Y to keep it for Y.Negotiable by Endorsement and Delivery: means sign itHolderHolder in Due Course
  91. 91. Endorsement:Means writing on the back of an instrument.Kind of Endorsement: Blank or General Endorsement: Sd/- D.Mohan Special or Full Endorsement: Pay to Ram Sd/ Mohan Restrictive Endorsement: not for further i.e. only Conditional or Qualified Endorsement: (a). Sans Recourse: not liable for dishonor. (b). Liability upon a contingency: Partial of Endorsement: for part of amount
  92. 92. Notes, Bills and chequesA promissory note is an instrument in writing (notbeing a bank note or a currency note) containingan unconditional undertaking, signed by themaker, to pay a certain sum of money only to or tothe order of certain person, or to the bearer of theinstrument [sec 4] two parties Maker and PayeeElements– Writing– promise to pay– definite & unconditional– signed by the maker– signed by the maker– certain parties– certain sum of money– promise to pay money only– formalities like number, date, place etc.)
  93. 93. A bill of exchange is an instrument in writingcontaining and unconditional order, signed bythe maker, directing a certain person to pay acertain sum of money only to, or to the order of, acertain person or to the bearer of the instrument[sec 5]Parties to the bill >>> three (drawer, drawee,payee)Elements– Writing– contain an order to pay– order must be unconditional– requires 3 parties– sum payable must be certainA cheque is a bill of exchange drawn upon aspecified banker and payable on demand [sec 6]
  94. 94. Dishonour of a Negotiable InstrumentA bill may dishonoured by non-acceptance(sinceonly bill required acceptance) or by non payment.A promissory note or a cheque are dishonouredby non payment only. (sec 91 & 92)When a negotiable instrument is dishonouredeither by non-acceptance or non-payment, theholder of the instrument must give notice to allconcerned.(sec 93)Notice of dishonour could be oral or written andmust be sent within a reasonable time.A drawer of dishonoured cheque shall be deemedto have committed an offence. For which withoutprejudice to any other provision of this act, bepunished with imprisonment for a term which mayextend to one year OR with a fine which extend totwice the amount of the cheque OR with both
  95. 95. Law of Insurance Insurance is “a means of shifting the risks to insurers in consideration of nominal cost called the premium. Insurance is “ a either to indemnify against a loss which may arise upon the happening to the person insured”.Fundamental Principles/ Elements of Insurance• Utmost Good Faith• Insurable Interest• Indemnity• Subrogation• Contribution• Mitigation of Loss• Causa Promixa
  96. 96. The Consumer Protection Act, 1986 The act seeks to provide better protection to consumers’s rights. Such as rights to;1. Be protected against mktg. of products hazardous to life & property2. Be informed about the qlty, qty, ptency, purity, standard and price of products against unfair trade practices3. Be assured access to products at competitive prices4. Be heard and to be assured that the consumers’ interest will receive due consideration5. Seek redressal against unfair trade practices6. Consumer education The act provides for establishment of quasi- judicial machinery at district, state & centre level for speedy & simple addressel.
  97. 97. The Consumer Protection Act, 1986 The act seeks to provide better protection to consumers’s rights. Such as rights to;1. Be protected against mktg. of products hazardous to life & property2. Be informed about the qlty, qty, ptency, purity, standard and price of products against unfair trade practices3. Be assured access to products at competitive prices4. Be heard and to be assured that the consumers’ interest will receive due consideration5. Seek redressal against unfair trade practices6. Consumer education The act provides for establishment of quasi- judicial machinery at district, state & centre level for speedy & simple addressel.
  98. 98. The Consumer Protection Act, 1986 The act seeks to provide better protection to consumers’s rights. Such as rights to;1. Be protected against mktg. of products hazardous to life & property2. Be informed about the qlty, qty, ptency, purity, standard and price of products against unfair trade practices3. Be assured access to products at competitive prices4. Be heard and to be assured that the consumers’ interest will receive due consideration5. Seek redressal against unfair trade practices6. Consumer education The act provides for establishment of quasi- judicial machinery at district, state & centre level for speedy & simple addressel.
  99. 99. Disputes Redressal AgenciesConsumer Disputes Redressal Forum (TheDisctrict Forum) ---- [sec 10 to 15]A person who is, or has been, or is qualified to bea District Judge, shall be its PresidentTwo other members of proven track record (one ofwhom shall be woman)Term of office (5 yrs or 65 yrs of age whichever isearlier)Jurisdiction : To entertain complaints where thevalue of the products and the compensation, ifany, claimed do not exceed Rs. 500,000/-
  100. 100. Consumer Disputes Redressal CommissionThe State Commission [Sec 16 to 19] A person who is or has been a Judge of a High Court, shall be its President >>State Govt. appoints under consultation with CJ of HC Term is 5 yrs or 67 yrs of age, whichever is earlier Jurisdiction: 1. >5 lac but not more than 20 lac, 2.Appeals against the order of District ForumNational Commission [Sec 20 to 23] A person who is or has been a Judge of Supreme Court, shall be its President>>Central Govt. appoints under consultation of CJ of SC Term 5 yrs or 70 yrs of age, whichever is earlier Appeal against National Commission can be done in SC within 30 days
  101. 101. MRTP Act 1969The act aims at; Preventing concentration of economic power Prohibiting monopolistic trade practices Prohibiting restrictive/unfair trade practicesConstitution of MRTP Commission: Sec 5 of the Act requires Central Govt. to constitute a commission (MRTPC) act mgmt. The commission will have a Chairman & min. 2 or max. 8 members Term is 5 yrs, can be reappointed for 2nd term only OR 65 yrs of age whichever is earlier
  102. 102. Powers of MRTPCPowers Of a Civil Court To enquiry and pass final order To make enquiry & express opinion To grant temporary injunction To award compensation To enforce orders of MRTPC To investigate whether the orders are being implemented To punish for contempt To regulate the procedure
  103. 103. Foreign Exchange Mgmt. Act 1999 FEMA replaced FERA 1973 and came into being w.e.f. June 1st, 2000Authorized Person & its Duties: RBI may, on an application made in this regard, authorize a person to deal in ForexDuties: To comply with RBI direction To ensure compliance of FEMA To produce books of accounts RBI may issue instructions time to time RBI may inspect the authorized person
  104. 104. FEMAContravention & Penalties: Penalties Enforcement of orders of Adjudicating Authority Power to compound contraventionAdjudication & Appeal: Adjudicating authority Appeal to Special Director Appeal to Appelate TribunalAppelate Tribunal:Constitution/Chairperson & Members/Term (5yrs/65+62 yrs age bar respectively)
  105. 105. Powers of Tribunal and SDShall not be bound by the Code of CivilProcedureThey will have same powers as are vested ina Civil CourtTheir order shall have same decree as that ofa Civil CourtAll proceedings under these shall be deemedto be judicial proceedingsPower to inter-bench transferAppeal against their decision may be filed inHC within 60 days of the receipt of suchdecision.
  106. 106. Information Technology Act, 2000 Digital Signature Electronic Governance Certifying Authorities;1. Appointment of Controller & other officers2. Functions of Controller3. Controller as repository4. Licence to issue digital signature certificates5. Application/Renewal/Suspension of Licence6. Power to delegate and investigate Penalties & Adjudication;1. Penalty for damage,2. Penalty for failure to furnish information,3. Residuary Penalty,4. Power to adjudicate
  107. 107. Cyber Regulations & TribunalEstablishment of tribunal (by center govt.)Composition of tribunal (shall consist of onlyone member termed as Presiding Officer)Qualification & Terms of Presiding Officer (a HCJudge OR Indian Legal Service Grade I officerfor at least 3 yrs; term shall be for 5 yrs OR 65yrs of age whichever is earlier)Resignation / RemovalProcedure & Powers of the TribunalCivil Court not to have jurisdiction/Appeal to HC
  108. 108. The Patent Act 1957 (The act describes the procedure for grant of patent and protect his rights against infringement) Application for Patents:A patent application can be made by-1. Any person claiming to be the true and first inventor of the invention2. Any person being the assignee of the above person3. The legal rep. of any deceased person, who immediately before his death was entitled to make such an application The Specification [sec 10]: A description of the invention is called the specification. Examination of Applications Exclusive Marketing Rights (Application & Grant) Opposition to Grant of Patent (within 4 mnths of ad) Working of Patents
  109. 109. The Copyright Act, 1957The govt. has established a copy right office underthe control of Registrar of Copyrights.The govt. has also constituted a Copyright Board.The registrar of copyrights is the Secretary of theBoard. The board shall be deemed to be a civilcourt.The board will have a Chairman, who is or hasbeen a Judge of a HC or is qualified to be a Judgeof a HC.The copyright subsists in; a)original, literary,dramatic, musical and artistic works;b)cinematograph films and c) sound recordingsMeaning of Copyright
  110. 110. contg..>>>Registration of Copyright [sec 44-50]Infringement of Copyright [sec 51]Civil Remedies for Infringement [sec 55]
  111. 111. The Companies Act, 1956An artificial person – has no body, no soulA voluntary association of personsIt is not seen in physical form, but it exists and isnot fictitious entityA separate legal entity, a limited liability, can becreated & put to an end only by lawIt has its nationality and residence but is not acityzenCompany v/s PartnershipChartered/Statutory/Registered Co.Private & Public Limited Cos.Formation of Co. (Name approval/submission ofdocs.)Certification of IncorporationThe Promoter
  112. 112. Memorandum & Articles of Association Memorendum of Assoication shall consists of;1. Name of the Co.2. State in which the registered office of the co. is situated3. Object of the Co. within which the Co. shall keeps its business The Articles of Association are the rules, regulations and bye-laws for the internal management of the affairs of a Co. Distinction between Memorandum & Articles of Association Doctrine of Ultra Vires (Ultra-Beyond & Vires – Power)A co. has the power to all such things as are:- 1.authorized by Co.Act.1956, 2. essential to achieve its object given in Memorandum & 3.Reasonably and fairly incidental to its objects. Everything else is UltraVires the Co. The purpose of this doctrine is two fold; 1. To protect investors inthe company & 2. To protect creditors to ensure appropriation of funds.
  113. 113. IPO Prospectus (Invitation to public, dating, registration) Contents of Prospectusi) General Informationii) Capital Structureiii) Terms of the present offer (objects, project cost, means of financing (including contribution of promoters)iv) Co., mgmt & projectv) Particulars in regard to the co. and other listed companies under the same mgmtvi) Outstanding litigationvii) Mgmt.’s perception of risk factors Liabilities for mis-representation in prospectus (against the co., directors, promoters & experts) Underwriting Commission & Brokerage
  114. 114. Contg. >>>Register of Members [sec 150] (Index, Place ofkeeping the register, Power to close)Annual Return (Every co. having sharing capitalshall file this within 60 days of AGM)Authorized, Registered or Nominal CapitalIssued & Subscribed CapitalCalled-up CapitalPaid-up CapitalUncalled CapitalReserve CapitalReduction of Share Capital (Under sec 100 aco. may do so subject to confirmation by the court)
  115. 115. Contg. >>> Procedure of reduction fo share capital;1. Special Resolution [sec 100]2. Application to the court3. Registration of court-order with Registrar Conversion of debentures or loan into shares Stock & Shares (Distinction) Application & Allotment of Shares Share Certificate Share Warrant Distinction between Share Warrant & Share Certificate Buy Back of Securities Transfer of Shares
  116. 116. Contg. >>> Surrender of Shares (Sec 77 prohibits) Forfeiture of Shares Purchase by Co. of its own shares Dividends Debentures Appointment of Directors;1. First Directors, 2.Appointment by Co., 3.By the Board, 4.By third parites, 5.By proportional representation, 6.By the Central Govt. Removal of Directors;1. Shareholders[284], 2.Central Govt., 3.Co. Law Board Reconstruction & Amalgamation [394]
  117. 117. Contg. >>> Winding up OR Liquidation >>Last stage in a Co.’s life A Process in which the Co. is dissolved Official Liquidator & His Duties Dissolution of Company [481] Defunct Company [560] Restoration