Business Law

By: Sukhjeet Singh Dhaliwal

Introduction
What is business?
(Business is as old as civilization. Over the period of time it has gained enormous power over customers/employees/shareholders)

Environment of Business Factors Constituting the Business Environment

Meaning & Nature of Law

What is Law? ( Legally Accepted Ways)
Law to ;
a) b) c) d)

A Citizen A Lawyer A Legislator 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

Characteristics of Law
A body of rules For the guidance and conduct of persons Imposed Enforced by the executive Contents are non-static Develop Social Order & Compel Social Member to remain in order Serves Social/Political/Economic purpose Law & Morality

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

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) Doesnt 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)

Agreement & Contract

A contract is an agreement made between two 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

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.

AGREEMENT & ENFORCEABILITY

Every promise and very set of promises forming consideration for each other. Enforce by law

All agreements are not contracts, but all contracts are agreements

Essential Elements of a Valid Contract

Offer & Acceptance Intention to create a legal relationship Lawful consideration (advantage/benefits
moving to & from - between the two parties) Capacity (Competency) of Parties (age/sound mind/not disqualified to enter)

Free & Genuine consent of the parties

(undue influence, fraud, misrepresentation cause absence of free consent) may

Lawful Objects Must not have been expressly declared Void Certainty & possibility of performance Legal Formalities

Kinds of Contract
1. Classification according to Legal Effects: a. Valid Contracts b. Void Contracts:
Valid at beginning (e.g. Marriage)

c. Voidable Contract d. Illegal Contracts

Consideration/object is illegal( for beating)

e. Unenforceable Contract
Cannot be enforced in court due to technical defects.

Kinds of Contract
2. Classification according to Formation a. 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, merchant leaves goods etc.)

Kinds of Contract
3. Classification according to Performance a. Executed Contract 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)

Kinds of Contract
4. Classification according to Form a. Formal Contract:
required to satisfy some legal formalities (e.g. bailment)

b. Simple Contract:
all others are simple contracts

Offer & Acceptance

A person is said to have made an offer/proposal, when he signifies to another his willingness to do or not to do (i.e. abstain from doing) anything, with a view to obtaining the ascent of that other to such act or abstinence Section 2 (a) Offerer/Proposer/Promisor Offeree/Proposee/Promisee/Acceptor

Essentials of a Valid Offer

Offer must be such that is capable to be accepted in law and gives rise to legal relationship (e.g. Dinning) Terms of offer must be definite, unambiguous and not 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 offer Offer must be made with a view to obtaining the assent (e.g. advertisement) Offer should not contain a term the non-compliance of which may be assumed to amount to acceptance An offer may be conditional (* condition apply)

Acceptance
The 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 offeror
Definition: Acceptance is the manifestation by the offeree of his assent to the terms of the offer

Essentials of valid Acceptance

Acceptance must be by the Offeree Acceptance must be absolute and unconditional (e.g. H sell to P rs.1000 P pay Rs. 950) Must be given before the offer lapses It 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

Revocation or Lapse of Offer

An acceptance in English law cannot be revoked. An acceptance may be revoked at any time before the communication of the acceptance is complete as against the acceptor, but not afterwards.

Completion of Communication
Offer or Acceptance OFFER : when it comes to the knowledge of the Offeree ACCEPTANCE : (i) As against the offeror : when putted into course of transmission (out of acceptors power) (ii) As against the acceptor : when it comes to the knowledge of the offeror

Revocation of Offer or Acceptance (i) As against the person who makes it -when putted into course of transmission. (ii) As against the person to whom it is made -- when it comes to his knowledge

Consideration
When A promises to do something A must get something in return this something is known as consideration (Affirmative Act / Abstinence / Promise) Affirmative act: doing something ( XYZ) Abstinence: refrain from doing (X pay 1000 for not suit by Y) Promise: A return promise Sec. 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.

Consideration
Consideration is Essential: Consideration must move at the desire of the promisor ( e.g. mosque) Consideration may move from Promisee or any other person ( Consideration may be past, present, future Something Consideration Need not be adequate ( Rs.1) Consideration must be competent: it must be real, competent and not illusory. Consideration must be lawful

Contract without Consideration (Exceptions)

Love & Affection
-- A registered agreement
between near relatives based on natural love & affection is enforceable.

Compensation for Voluntary Services Promise to pay a time barred debt Completed gift Agency Charitable subscription

Capacity to Contract
As per Sec. 10 an agreement becomes a contract if it is entered into between the parties competent to contract. As Sec. 11 declares following persons to be incompetent to contract; a) Minors b) Persons of unsound mind c) Persons disqualified by from contracting Alien Enemies / Corporations / Insolvent / Convicts

Minor
Minors: below 18 years, guardian and ward act he 21 Contract with a minor is absolutely Void No Ratification: cant ratified when major Minor can be a Promisee or Beneficiary No Estoppel against a Minor: rule of evidence by which a
person is not allowed to go back upon earlier representations but minor not e.g. car

Positions of minors parents Partnership Liability for trots Minor as agent

Capacity to Contract
Person of Unsound Mind Incapacity Arising from Status
Foreign Sovereigns, Ambassadors etc. unless they voluntarily submit to its jurisdiction Alien Enemies Insolvents Convicts Corporations

Free Consent
Sec. 13 two or more persons are said to be consented when they agree upon the same thing in the same sense Definition free consent which is secured by the free will of the parties out of their own accord. A consent is said to be free when it is not caused by; a) coercion sec 15; b) undue influence sec 16; c) fraud sec 17; d) misrepresentation sec 18; e) mistake sec 20, 21 & 22

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: a railway company refuses to deliver certain goods to the consignee, except upon the payment of illegal charge for carriage. The consignee pays the sum charged for obtaining the goods. He is entitled to recover as much of the charges as was illegally excessive.

Undue influence sec 16

Undue 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 Trustee and Beneficiary Doctor and Patient

Fraud sec 17
Fraud 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. The active concealment of fact by a person who believe s it to be true A promise made without intention of performing it. Any other act intended to deceive.

Misrepresentation sec 18
A 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.

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.

Mistake sec 20,21,22

Bilateral 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

Mistake sec 20,21,22

a). Existence of the Subject matte: ship goods b). Identity of the Subject matter: (plot at Delhi and Mumbai) c). Title of the Subject matter: (not owned by seller) d). Price of the Subject matter: e). Quantity of the Subject matter: two invoice was sent quantity different f). Quality of the Subject matter: race horse it is cart house

Mistake sec 20,21,22

2.Mistake as to the possibility of Performing the contract:

a). Physical Impossibility: a& C contract about movie show. Show already cancelled b). Legal Impossibility: something which cant legally be done( lease the land to own)

Mistake sec 20,21,22

Unilateral Mistake In this case of mistake, only one of the party is mistaken, but the other is aware or ought to be reasonably aware of the mistake. (MRP) a). Nature of the Contract: (bill as guarantee) b). The Identity of the party contracted with: (A enter with believing him C)

Legality of Object & Consideration

In agreement the term object and consideration are not synonymous. The object indicates purpose or design of an agreement. It implies the manifestation of intention. The consideration is some act or abstinence or reciprocal promises. In all agreement, both the and the consideration should be lawful, otherwise the agreement is void. In certain cases consideration for an agreement may be lawful but the object for which the agreement was entered into may be unlawful. Example: X executes a promissory note for Rs.5000 in favour of Y. Y has paid Rs.5000 to X. This payment by Y is the consideration. X wants to utilize the money for the marriage of his son who is a minor. This is the object is forbidden by the child Marriage Restraint Act as it is unlawful.

Legality of Object & Consideration Consideration & object could be unlawful: a) If it is forbidden by law: E.g. Paid for fire. b) If it is of such a nature that, if permitted, it would defeat the provisions of any law: c) If it is fraudulent: d) If it involves or implies injury to the person or property of another: e) If the court regards it as immoral: f) If the agreement opposed to public policy:

Unlawful & Illegal Agreement

An agreement is said to be unlawful when the object for which it is made is forbidden by law. An unlawful agreement renders the transaction between the immediate parties void, but has no effect on collateral transaction. The term illegal agreement is defined as the agreement which is expressly or impliedly prohibited by law. An illegal agreement is not only void as between the immediate but has further effect that the collateral transactions to it also become tainted with illegality. E.g. Rs. 500 from Y to purchase prohibited goods.

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 Agreement in Restraint of Parent Rights Agreement which Interfere with Administration of Justice - Interference with the Court of Justice -Stifling Prosecutions -Maintenance Restraint of Personal Freedom Marriage Brokerage Agreement Agreement in Restraint of Trade Exceptions: -Sale of Goodwill -Partner Agreement: any business -Partner Agreement: Same business with in local limits

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 nonhappening 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.

Wagering Contracts
A wagering is an agreement to pay money or moneys 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 chance E.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.

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. 2.

3. 4. 5.

Supply of necessaries: reimbursed from property Suit for Recovery of Money: - By Mistake - Payment of money to a third party. E.g. arrears of Govt. Obligation to pay for non-gratuitous: leaves good at Y house by merchant. Responsibilities of finder of goods: Quantum meruit >> as much as earned

Void Agreements
The following agreements have been expressly declared 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 which is unlawful (Sec 24) Agreements made without consideration (Sec 25) Agreements, meaning of which is uncertain (Sec 29) Agreements to do impossible acts (Sec 56)

Performance of Contract
Performance 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.

Offer of Performance or Tender

Tender 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

Who can Demand Performance Promisee 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.

Devolution of joint liabilities When 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.

Discharge of Contract
Discharge 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.

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.

5. Operation of law: By merger By insolvency By unauthorized alteration; without knowledge 6. 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 performing b. Anticipatory Breach: it indicates a breach before the performance is due.

Remedies for Breach of Contract

A 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.

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 hotel

6. Specific Performance.

Contracts of Indemnity & Guarantee

Chapter VIII (sec. 124- 147) of Indian Contract Act 1872 covers these provisions Contract 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 >> indemnified Eg. 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)

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)

Types of Guarantees: 1. Retrospective Guarantee 2. Prospective Guarantee 3. Fidelity Guarantee: for good or honesty conduct of a person 4. Specific Guarantee: for single transaction 5. Continuing Guarantee

Contract of Indemnity V/s Contract of Guarantee

CoI
Two parties Liability is Primary Only one Contract Indemnifier not to Act on the request Of Indemnified Liability arises only In case of Contingency

>>
>> >> >> >>

CoG
Three Parties Liability is Secondary Total three contracts Surety to give guarantee upon debtors request Debt/duty already exists the performance of which has been guaranteed by the surety

>>

A few features
Nature of suretys liability (coextensive/limitation)

Rights of Surety 1. Rights against the creditor -Right before payment - Right when paying - Right of set off 2. Right against the Principal debtor - Right to subrogation - Right to be Indemnified -Right against securities 3. Right against the Co-Sureties - Right to contribution - Liabilities of Co- sureties bound in different sums

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 Types
Gratuitous Non- Gratuitous

Essential of Bailment
Delivery of Possession Delivery of Goods must be for a Specific Purpose Contract Return of Goods

Bailees 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 rendered ii) General Lien All the goods which are in possession (bankers/attorneys)

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 Goods Duties of Bailor Disclose known faults Bear extraordinary expenses of the bailee Receive back the goods
Indemnify bailee termination in case of premature

Pledge
Bailment of goods as security for payment of a debt for performance of a promise is called pledge; in this case The bailor is called >> pledger or pawnor The bailee is called >> pledgee or Pawnee Pledge is bailment of goods as security, bailment is for a purpose of any kind
Essentials 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

Rights and Duties of Pawnee Right of retainer Right of Retainer for Subsequent Advances Right to extraordinary expenses

Contract of Agency
Ch. X (sec. 182-238) of Indian Contract Act 1872 An 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

Classification of Agents 1. 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:

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 authority

Rights of Agent
Right of Retainer Right to Remuneration Right of Lien Right of Indemnification Right to compensation

Unit II

Sale of Goods Act 1930

Sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. Sale contract may be absolute and conditional: - Sale - Agreement to Sell Essentials of Contract of Sale:
Valid contract Two parties-Buyer & Seller Transfer of Property Goods Price

Cont..

Sale & Agreement to Sell

Nature of contract Transfer of property Risk of loss Consequence of breach Insolvency of buyer Insolvency of seller Right of re-sale

Cont.. Sale & Hire Purchase Agreement Sale & barter or exchange Sale & bailment

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

Conditions and Warranties

A condition is a stipulation essential to the main purpose of the contract. If one party breaches a condition then the other party may terminate the contract and claim damages On the other hand, a warranty is a stipulation collateral to the main purpose of the contract. If one party breaches a warranty then the other party can only continue with the contract and then sue for damages

Conditions Vs Warranties Difference as to Value Difference as to Breach Difference as to Treatment

Implied Conditions and Warranties

Implied Conditions 1. Conditions as to Title: Seller has the right to sell the goods as agreed to be sold e.g. 2. Sale by Description:
3. Goods must correspond to Description Conditions as to Merchandability Condition as to Wholesomeness( for eatables) Condition as to Fitness for a Particular Purpose

Sale by Sample:
Bulk of the goods corresponds to sample Reasonable opportunity of comparing Free from any defect

Sale by Sample as well as by Description: Implied Warranties 1. Warranties of Quiet Possession 2. Warranties of Encumbrances: not subject to third party right.
4.

Caveat Emptor
It 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 sellers 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 buyers purpose Sale under merchandable quality Consent by fraud

Passing of Property of Transfer of Ownership

The 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 ownership 1. Specific or ascertained goods
- Deliverable state - Non- deliverable state

2. 3.

Generic or uncertained goods Goods delivered on sale or return

Passing of Risk in the Goods:

1. When the parties agrees to contrary provision 2. When delivery is delayed through the fault of any one party

Unpaid Seller
-

When the whole of the price has not been paid or tendered When negotiable instrument is conditional or dishonor

Right of an Unpaid Seller: A. Rights against the Goods 1. 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

Unpaid Seller
2. 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 buyer 3. Right of re-sale(sec.54) Perishable nature Exercised the right of lien or stoppage Right expressly reserved by seller

Unpaid Seller
B. Right against the Buyer
-

Suit for Price (Sec. 55) Suit for Damages for Non- Acceptance ( sec. 56) Suit for Interest (Sec. 61)

Negotiable Instrument Act 1881

A 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.

A few Characteristics; Freely transferable Title of holder free from all defects Dishonor Contract to pay money Types;
Negotiable

i) negotiable by statute(promissory notes, bill of exchange and cheques)

Non- negotiable

ii)negotiable by custom or usage (Bankers draft or pay order, hundis, delivery orders and railway receipt for goods)

Negotiation Means 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 it Holder Holder in Due Course

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

A promissory note is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to or to the order of certain person, or to the bearer of the instrument [sec 4] two parties Maker and Payee Elements
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.)

Notes, Bills and cheques

A bill of exchange is an instrument in writing containing and unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain 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 certain

A cheque is a bill of exchange drawn upon a specified banker and payable on demand [sec 6]

Dishonour of a Negotiable Instrument

A bill may dishonoured by non-acceptance(since only bill required acceptance) or by non payment. A promissory note or a cheque are dishonoured by non payment only. (sec 91 & 92) When a negotiable instrument is dishonoured either by non-acceptance or non-payment, the holder of the instrument must give notice to all concerned.(sec 93) Notice of dishonour could be oral or written and must be sent within a reasonable time. A drawer of dishonoured cheque shall be deemed to have committed an offence. For which without prejudice to any other provision of this act, be punished with imprisonment for a term which may extend to one year OR with a fine which extend to twice the amount of the cheque OR with both

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

The Consumer Protection Act, 1986

1. 2.

3. 4.

5. 6.

The act seeks to provide better protection to consumerss rights. Such as rights to; Be protected against mktg. of products hazardous to life & property Be informed about the qlty, qty, ptency, purity, standard and price of products against unfair trade practices Be assured access to products at competitive prices Be heard and to be assured that the consumers interest will receive due consideration Seek redressal against unfair trade practices Consumer education The act provides for establishment of quasijudicial machinery at district, state & centre level for speedy & simple addressel.

The Consumer Protection Act, 1986

1. 2.

3. 4.

5. 6.

The act seeks to provide better protection to consumerss rights. Such as rights to; Be protected against mktg. of products hazardous to life & property Be informed about the qlty, qty, ptency, purity, standard and price of products against unfair trade practices Be assured access to products at competitive prices Be heard and to be assured that the consumers interest will receive due consideration Seek redressal against unfair trade practices Consumer education The act provides for establishment of quasijudicial machinery at district, state & centre level for speedy & simple addressel.

The Consumer Protection Act, 1986

1. 2.

3. 4.

5. 6.

The act seeks to provide better protection to consumerss rights. Such as rights to; Be protected against mktg. of products hazardous to life & property Be informed about the qlty, qty, ptency, purity, standard and price of products against unfair trade practices Be assured access to products at competitive prices Be heard and to be assured that the consumers interest will receive due consideration Seek redressal against unfair trade practices Consumer education The act provides for establishment of quasijudicial machinery at district, state & centre level for speedy & simple addressel.

Disputes Redressal Agencies

Consumer Disputes Redressal Forum (The Disctrict Forum) ---- [sec 10 to 15] A person who is, or has been, or is qualified to be a District Judge, shall be its President Two other members of proven track record (one of whom shall be woman) Term of office (5 yrs or 65 yrs of age whichever is earlier) Jurisdiction : To entertain complaints where the value of the products and the compensation, if any, claimed do not exceed Rs. 500,000/-

Consumer Disputes Redressal Commission

The 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 Forum

National 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

MRTP Act 1969

The act aims at;
Preventing concentration of economic power Prohibiting monopolistic trade practices Prohibiting restrictive/unfair trade practices

Constitution 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

Powers of MRTPC
Powers
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

Foreign Exchange Mgmt. Act 1999

FEMA replaced FERA 1973 and came into being w.e.f. June 1st, 2000

Authorized Person & its Duties:

RBI may, on an application made in this regard, authorize a person to deal in Forex

Duties:
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

FEMA
Contravention & Penalties:
Penalties Enforcement of orders of Adjudicating Authority Power to compound contravention

Adjudication & Appeal:

Adjudicating authority Appeal to Special Director Appeal to Appelate Tribunal

Appelate Tribunal:
Constitution/Chairperson & Members/Term (5yrs/65+62 yrs age bar respectively)

Powers of Tribunal and SD

Shall not be bound by the Code of Civil Procedure They will have same powers as are vested in a Civil Court Their order shall have same decree as that of a Civil Court All proceedings under these shall be deemed to be judicial proceedings Power to inter-bench transfer Appeal against their decision may be filed in HC within 60 days of the receipt of such decision.

Information Technology Act, 2000

Digital Signature Electronic Governance Certifying Authorities;
1. 2. 3. 4. 5. 6.

Appointment of Controller & other officers Functions of Controller Controller as repository Licence to issue digital signature certificates Application/Renewal/Suspension of Licence Power to delegate and investigate

Penalties & Adjudication;

1. 2. 3. 4.

Penalty for damage, Penalty for failure to furnish information, Residuary Penalty, Power to adjudicate

Cyber Regulations & Tribunal

Establishment of tribunal (by center govt.) Composition of tribunal (shall consist of only one member termed as Presiding Officer) Qualification & Terms of Presiding Officer (a HC Judge OR Indian Legal Service Grade I officer for at least 3 yrs; term shall be for 5 yrs OR 65 yrs of age whichever is earlier) Resignation / Removal Procedure & Powers of the Tribunal Civil Court not to have jurisdiction/Appeal to HC

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 by1. 2. 3.

Any person claiming to be the true and first inventor of the invention Any person being the assignee of the above person 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

The Copyright Act, 1957

The govt. has established a copy right office under the control of Registrar of Copyrights. The govt. has also constituted a Copyright Board. The registrar of copyrights is the Secretary of the Board. The board shall be deemed to be a civil court. The board will have a Chairman, who is or has been a Judge of a HC or is qualified to be a Judge of a HC. The copyright subsists in; a)original, literary, dramatic, musical and artistic works; b)cinematograph films and c) sound recordings Meaning of Copyright

contg..>>>

Registration of Copyright [sec 44-50] Infringement of Copyright [sec 51] Civil Remedies for Infringement [sec 55]

The Companies Act, 1956

An artificial person has no body, no soul A voluntary association of persons It is not seen in physical form, but it exists and is not fictitious entity A separate legal entity, a limited liability, can be created & put to an end only by law It has its nationality and residence but is not a cityzen Company v/s Partnership Chartered/Statutory/Registered Co. Private & Public Limited Cos. Formation of Co. (Name approval/submission of docs.) Certification of Incorporation The Promoter

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 situated 3. 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 Ultra Vires the Co. The purpose of this doctrine is two fold; 1. To protect investors in the company & 2. To protect creditors to ensure appropriation of funds.

IPO
Prospectus (Invitation to public, dating, registration) Contents of Prospectus i) General Information ii) Capital Structure iii) Terms of the present offer (objects, project cost,
means of financing (including contribution of promoters)

iv) Co., mgmt & project v) Particulars in regard to the co. and other listed

companies under the same mgmt vi) Outstanding litigation vii) Mgmt.s perception of risk factors Liabilities for mis-representation in prospectus
(against the co., directors, promoters & experts)

Underwriting Commission & Brokerage

Contg. >>>

Register of Members [sec 150] (Index, Place of

keeping the register, Power to close) Annual Return (Every co. having sharing capital shall file this within 60 days of AGM)

Authorized, Registered or Nominal Capital Issued & Subscribed Capital Called-up Capital Paid-up Capital Uncalled Capital Reserve Capital Reduction of Share Capital (Under sec 100 a co.
may do so subject to confirmation by the court)

Contg. >>>

Procedure of reduction fo share capital;

1. 2. 3.

Special Resolution [sec 100] Application to the court 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

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]

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