Introduction to law

INTRODUCTION TO LAW
PreparedbyDr.SeemaH.Kadam,Associate
Prof.,TMES-MBA,GTU

INTRODUCTION TO LAW
 Law includes all the rules and principles which regulate
our relations with other individuals and with the State.
 Law is not static
 Object of law: “to establish socio-economic justice and
remove the existing imbalance in the socio-economic
structure." in the context of new emerging India
 Need for the knowledge of law: ‘Ignoriantia juris not
excusat’this means ignorance of law is no excuse.
 Merchantile Law: the aggregate body of those legal
rules which are concerned with trade,industry and
commerce.
PreparedbyDr.SeemaH.
Kadam,AssociateProf.,TMES-MBA,GTU

LEGAL ASPECTS OF BUSINESS-WHY
TO STUDY?
Because law permeates every aspects of firm’s existence.
For example
 Regulates production
 Set quality standard
 Deters unfair trade practices
 How finance should be raised,deployed,managed and
accounted for.
 Law regulates the font size of the declaration on a
package

SOUCES OF MERCHANTILE LAW
1. English Merchantille Law: the principal source of the
English Mercantile Law is the Common Law of England as
modifies and supplemented by Equity and Statute Law.
2. Statute Law: In India bulk of Mercantile Law is Statute
Law based largely on English Law. The law making power
in India is vested in Parliament and the State Legislatures.
3. Judicial deacons or the system of pecedents:this is the
source of law based upon previous judicial decisions which
have to be followed in similar future cases.
4. Customs and usages: customs and usages established by
long use and constantly put into practice become binding on
the parties entering into commercial transactions.

INDIAN CONTRACT ACT 1872
Prof.,TMES-MBA,GTU

CONTRACT
 Contract may be defined as an agreement which creates
rights and obligations between the parties. These rights
and obligations must be of such a nature that these can
be claimed in the court of law.
 The Act deals with the general principles of law of
contract (Sec.1 to 75 ), and some special contracts only
(Sec. 124 to 238).
 The Indian contract Act is not exhaustive.
 Act does not affect any usage or custom of trade.

NATURE OF THE LAW OF
CONTRACT
 Law of contract is not the whole law of agreement nor
the whole law of obligations.
 Law of contract creates jus in personam as
distinguished from jus in rem.Eg:
1. A owes a certain sum of money to B. B has a right to
recover this amount from A. this right can be exercised
only by B and by none else against A. This right of B is a
jus in personam.
2. X is the owner of a plot of land. He has a right to have
quiet possession and enjoyment of that land against
every member of the public. Similarly every member of
the public is under an obligation not to disturb X’s
possession or enjoyment. The right of X is a jus in rem.

THREE MAJOR COMPONENTS
1. Agreement
2. Obligation
3. Enforceability by law

AGREEMENT
 The Contract is formed only on the basis of
agreement. It is a combined effect of offer and
acceptance.
AGREEMENT= OFFER+ACCEPTANCE
According to section 2(e) Agreement is a
promise or a set of promising consideration for
each other.

ESSENTIALS OF A VALID CONTRACT
1. AGREEMENT
2. CREATION OF LEGAL RELATIONSHIP- Legal
relationships consists of rights and obligations which
can be claimed by the parties in the court of law. The
parties make an agreement with an intention to create
legal relationships.
3. LAWFUL CONSIDERATION – Agreement is a
mutual exchange of promises between parties.
Each party making a promise gets something in
return of his promise. It constitutes a consideration for
his promise.

4. CONTRACTUAL CAPACITY
 The person to have contractual capacity must
satisfy the satisfy the following conditions-
1. He must be a major age and not a minor.
2. He must be of sound mind and not lunatic.
3. He must not have been declared disqualified by
law.

5. FREE CONSENT OF THE PARTIES
 The consent is said to be free if it has not been
induced by any one of the following factors:-
1. Coercion
2. Undue influence
3. Misrepresentation
4. Fraud
5. Mistake

6. LAWFUL OBJECT OF AGREEMENT
 The object of an agreement must be to do some
act which is legal. Contrary to it, agreements
made for doing something illegal, immoral or
against public policy, cannot be enforced in the
court of law.

7. AGREEMENTS NOT DECLARED
EXPRESSLY VOID
 There are certain agreements which have been
expressly declared void by the law. Thus an
agreement made by parties should not fall in this
category.

8. CERTAINTY IN THE MEANING OF
AGREEMENT
 Agreement made by the parties must be certain
or capable of being made certain in its meaning.
Agreement with uncertain meaning will bring
uncertainty in the rights and obligations created
by it and these rights and obligations cannot be
enforced in the court of law.

9. OTHER LEGAL FORMALITIES
 Agreement to be enforced, needs to satisfy other
conditions of being in writing, registered and duly
stamped.

CLASSIFICATION OF CONTRACTS

ON THE BASIS OF FORMATION
1. EXPRESS CONTRACT-
Express Contacts results from express
agreements and express agreement is formed
by making offer and giving acceptance in the
words spoken or writing.

2. IMPLIED CONTRACT
In this type of contract one of the party conduct
himself or does some act which is being
accepted by other party either by his conduct or
course of his dealings or circumstances.

3. QUASI CONTRACTS
These contracts are based on the principle of
justice and equity. In spite of not having contract
between parties, the rights and obligations are
created by operation of law rather than offer and
acceptance.
4. E-COMMERCE CONTRACT-
An E-Commerce is one which is entered into
between two parties via internet.

ON THE BASIS OF PERFORMANCE
 EXECUTED CONTACT- On the complete
discharge of the obligations by the parties, the
contract is said to have been executed.
 EXECUTORY CONTRACT- The contract has
not been yet performed.
 UNILATERAL CONTRACT-A contract in which
only one party has yet to perform his
obligations.
 BILATERAL CONTRACT-A contract in which
both parties have yet to perform their
obligation.

ON THE BASIS OF VALIDITY
1. VALID CONTRACT- Contract is said to be valid if it
satisfies all conditions required for its enforceability.
2. VOID CONTRACT- A contract which ceases to be
enforceable by law becomes void when it ceases to be
enforceable [SEC.2(f)]
3. VOID AGREEMENT- Agreement which is not
enforceable by law is void agreement [SEC.2(g)].In
other words if it lacks any one of the essentials of valid
contract it is called void.

4. VOIDABLE CONTRACT- Agreement which is enforceable
by law at the option of one or more parties , but not at
the option of other or others is a voidable contract[sec
2(i)].
5. ILLEGAL AGREEMENT- It is one which transgresses
some rule of basic public policy or which is criminal in
nature or which is immoral.
6. UNENFORCEABLE CONTRACT- If due to some technical
reasons the contract may not be allowed to be enforced
in the court of law. It is unenforceable contract

PRACTICAL PROBLEMS
a) Over a cup of coffee in a restaurant, A invites B to a dinner
at his house on Sunday hires a taxi and reaches A’s house at
the appointed time, but A fails to perform his promis.Can B
recover any damages from A?
b) A forced B to enter into a contract at the point of pistol.
What remedy is available to B.If he does not want to be
bound by the contract?
c) C orally offered to pay A, an auto mechanic,Rs. 50 for
testing a used car which C was about to purchase from D.A
agreed and tested the car. C paid A Rs. 50 in cash for his
services. Is the agreement between C and A
1. Expressed or implied
2. Executed or executory
3. Valid,void,voidable or unenforceable.

OFFER AND ACCEPTANCE
Prof.,TMES-MBA,GTU

OFFER
 An offer is an undertaking by the offeror to be
contractually bound in the event of a proper acceptance
of the offer by the offeree.
 Express offer-It may be made by express words spoken
or written.
 Implied offer-It is inferred from the conduct of the
offeror or from the circumstances of the cases.
 Specific offer-It is made to a particular person.
 General offer-It is made to the world at large.

LEGAL RULES AS TO OFFER
 It must be intended to create legal relations.
 It must be certain.
 It must be distinguished from:-
a) A declaration of intension,
b) and invitation to make an offer.
 It must be communicated to offeree.

CONTD..
 It must be made with a view to obtain the assent
of the offeree.
 It must not contain a term the non-compliance of
which would amount to acceptance.
 A statement of price is not an offer.

CONTD.
 TENDERS- A tender (in response to an invitation) is an
offer and may be either-
1. a definite offer to supply specified goods or services,
each tender submitted is an offer.
2. Tender as an standing offer.
 Special terms in contract- these must be duly brought
to the notice of the offeree at the time when proposal
made.
 Cross offers-when to parties make identical to each
other, in ignorance of each other’s offer.

ACCEPTANCE
 Acceptance is the act of assenting by the offeree to an offer.
 An offer when accepted become a promise[Sec.2(b)].
 Acceptance may be express or implied.
 E.g. – at the auction sale ,S is the highest bidder. The
auctioneer accepts the offer by striking hammer on the table.
This is an implied acceptance.
 Acceptance of an offer requires more than a implied
formation of intention to intent.
 Acceptance of particular offer-when an offer is made to a
particular person, it can be accepted by him alone. If it is
accepted by any other person, there is no valid acceptance.
 Acceptance of general offer – when an offer is made to
world at large, any persons to whom the offer is made can
accept it.
PreparedbyDr.Seema
H.Kadam,Associate
Prof.,TMES-MBA,GTU

LEGAL RULES AS TO ACCEPTANCE
1. It must be absolute and unqualified, i.e., it must conform
with the offer. E.g. A says to B, “I offer to sell my car for
Rs. 50,000.”B replies, "I will purchase it for Rs.
45,000.”.This is no acceptance and amounts to cross offer.
2. It must be communicated to the offeror. E.g.A tells B that
he intends to marry C,but tells C nothing of his
intention.There is no contract,even if C is willing to marry A.
3. It must be according to the mode prescribed or usual and
reasonable mode.E.g. A makes an offer to B and says: “ If
you accept the offer. Reply by wire.”B sends the reply by
post.It will be a valid acceptance unless A informs B that the
acceptance is not accordiing to the mode prescribed.
4. It must be given within a reasonable time.

CONTD..
5. It cannot precede an offer.E.g. in a company shares were
allotted to a person who had not applied for them.
Subsequently when he applied for shares, he was unaware of
the previous allotment. The allotment of shares previous to
the application is invalid.
6. It must show an intention on the part of the acceptor to
fulfill terms of the promise
7. It must be given by the party or parties to whom the offer is
made.
8. It must be given before the offer lapses or before the offer
is withdrawn.
9. It cannot be implied from silence. E.g. A wrote B,”I offer
you my car for Rs. 50,000.If I don’t hear from you in seven
days, I shall assume that you accept.”B did not reply at all.
There is no contract.

CONTD..
 Acceptance subject to contract: Where an offeree
accepts an offer "subject to contract” or “subject to
formal contract” or “ subject to contract to be approved
by solicitors", the matter remains in the negotiation stage
and the parties do not intend to be bound until a format
contract is prepared and signed by them.
 E.g. C and D signed an agreement for the purchase of a
house by D”subject to a proper contract "to be prepared
by C’s solicitors. A document was prepared by its
solicitors and approved by D’s solicitors, but D refused
to sign the document. Held there was no binding contract
as the agreement was only conditional.

CONTD..
 Agreement to agree in future: If the parties have not
agreed upon the terms of their contract but have made an
agreement to agree in future, there is no contract.
 “An agreement to be finally settled must comprise all the
terms which the parties intend to introduce into the
agreement.
 E.g. An actor was engaged by a theatrical company for a
certain period. One of the terms of the agreement was
that if the play was shown in London, she would be
engaged at a salary to be mutually agreed
upon.Held,there was no contract.

COMMUNICATION OF OFFER,
ACCEPTANCE AND REVOCATION
 Mode of Communication (Sec.3) the communication of
offer, its acceptance and their revocation respectively are
deemed to be made by any(a) act, or (b) omission, of the party
offering, acceptance or revoking.
 E.g. installation of a weighing machine at a public place is an
offer, putting of a coin in the slot of the machine is the
acceptance of the offer, and switching off the machine
amounts to revocation of the offer.
 When is Communication Complete (Sec 4)?
 Communication of an offer is complete when it comes to the
knowledge of the person to whom it is made.
 Communication of an acceptance is complete "as against
the proposer when it is put into a course of transmission to
him, so as to be out of the power of acceptor. "as against the
acceptor when it comes to the knowledge of the proposer.

CONTD..
 Communication of revocation ( sec.4,para).
Revocation means “taking back””recalling” or
“withdrawal". It may b a revocation of offer or
acceptance. The communication of revocation is
complete-
As against the person who makes it, when it is put into
a course of transmission to the person to whom it is
made, so as to be out of the power of the person who
makes it;
As against the person to whom it is made , when it
comes to his knowledge.

TIME FOR REVOCATION OF OFFER
AND ACCEPTANCE (SEC. 50
 Time for Revocation of Proposal (Sec. 5, para 1).A proposal
may be revoked at any time before the communication of its
acceptance is complete as against the proposer but not
afterwards.
 Time for revocation of acceptance (Sec. 5, para 2).An
acceptance may be revoked at any time before the
communication of the acceptance is complete as against the
acceptor, but not afterwards.
 E.g. A proposes by a letter sent by post to sell his house to
B.The letter is posted on the 1st
of the month. B accepts the
proposal by a letter sent by post on the 4th
.The letter reaches A
on the 6th
.
A may revoke his offer at any time before B posts his letter
of acceptance, i.e.,4th
, but not afterwards.
B may revoke his acceptance at any time before the letter of
acceptance reaches A, i.e.,6th
but not afterwards.

 Loss of Letter of acceptance in postal transit:
acceptance is complete as against the offeror as soon as
the letter of acceptance goes astray or is lost through an
accident in the post. It is important that the letter of
acceptance is correctly addressed, sufficiently stamped
and posted. If it is not done properly communication of
acceptance is not complete.
 Contacts over telephone or telex or oral
communication: It has the same effect as an oral
agreement entered into between the parties when they
are face to face. But the offeree must make sure that his
acceptance is properly received, i.e., heard and
understood by the offeror

WHEN DOES AN OFFER COME TO
AN END?
 Revocation or lapse of offer-
1. By communication of notice of revocation by the
offeror
2. By lapse of time
3. By non- fulfilment by the offeree of a condition
precedent to acceptance
4. By death or insanity of the offeror provided the offeree
comes to know it before acceptance.
5. If a counter offer is made to it.
6. If an offer is not accepted according to the prescribed
or usual mode.
7. If the law is changed.
 Rejection of offer-Expressed or Implies rejection

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