Post Graduate Programme in Management

(PGPM)
1

LEGAL ASPECTS OF BUSINESS

(LAB)

Prof Parul V Gupta

PhD (Faculty of Law-JMI, New Delhi), LL.M., PGDBM

Dr. Parul Gupta

 Course Overview
2

This course is designed to enhance the legal

literacy of the participants by developing a
body of legal knowledge and honing legal
instincts to help business leaders attain a
competitive edge and promote long-term
success of the business firms.
 Indian Contact Act, 1872,
 Sales of Good Act, 1930,
 Arbitration and Conciliation (Amendment) Act,
2015 and
 Companies Act, 2013
Dr. Parul Gupta
 Evaluation Scheme
3

S.NO. ACTIVITY NUMBER WEIGHTAGE TOTAL

WEIGHTAGE
1 Quiz Test 5 5% 20% (Best Four will
be considered)
2 Group Project 1 10% 10%
3 Group 1 10% 10%
Assignments
4 Mid Term 1 30% 30%
examination
5 End Term 1 30% 30%
Examination

Total 100%
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 INDIAN CONTRACT ACT,1872
4 Session Details

 Session 1 - Indian Contract Act, 1872

 Formation of contracts, Its’ kinds and Essential
Elements of a valid Contract

 Session 2 - Indian Contract Act, 1872

 Legal Insights Of Offer, Acceptance And Capacity
Of Parties

 Session 3- Indian Contract Act, 1872

 Legal Insights of Consideration And Free Consent

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 INDIAN CONTRACT ACT,1872
5 Session Details

 Session 4 – Indian Contract Act, 1872

 Quiz Test One – Session 1 to 3
 Modern Categories of Contract - Tenders, Swiss
Challenge Method of Tendering, Standard Form
Contracts, Letter of Intent & Memorandum of
Understanding

 Session 5- Indian Contract Act, 1872

 Void Agreements, Wagering Agreements And
Contingent Contracts

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 INDIAN CONTRACT ACT,1872
6 Session Details
 Session 6
 Performance, Discharge of Contract &Remedies
for the Breach of Contract
 Session 7-Sale of Goods Act, 1930
 Meaning and Essential Elements of Contract of
Sale and Meaning of Goods, Conditions and
Warranties, Transfer of Ownership
 Quiz Test Two – Session 4 to 6

 Session 8- Sale of Goods Act, 1930

 Doctrine of Caveat Emptor and its exceptions,
Transfer of Title by Non-Owners, Rights of an
Unpaid Seller, Auction Sale
Dr. Parul Gupta Announcement – Group Assignment
 INDIAN CONTRACT ACT,1872
7 Session Details
 Session 9- The Arbitration and Conciliation
(Amendment) Act, 2015
 Meaning and Definition Of Arbitration, Arbitral
Agreement, Effect of Arbitration, Law of
Arbitration
Quiz Test Three – Session 7 & 8
 Session 10- The Arbitration and Conciliation
(Amendment) Act, 2015
 Appointment of Arbitrator, Conduct of Arbitral
Proceedings, Arbitral Award,
 Arbitration on Fast Track
MID TERM EXAMINATION
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 COMPANIES ACT, 2013
Session Details
8
 Session 11- Legal Status of a Company
 Announcement - Group Project
 Definition of a company, Nature & essential characteristics
of a company, Lifting of Corporate Veil

 Session 12- Types of Companies

 Classification of Companies on the basis of incorporation,
liability, number of members, control and ownership, One
person company, Associations not for profit

 Session 13- Incorporation of a Company

 Process of incorporation of a company, Promoter Duties and
responsibilities of promoter, Process of Registration, Important
documents – Incorporation, Floatation, Certification, Pre-
incorporation contracts, Provisional contracts
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Submission– Group Assignment
 COMPANIES ACT, 2013
Session Details
9
 Session 14- Incorporation of a Company
 Quiz Test Four - Session 11 to 13
 Nature of the document, Content of the document,
Alteration of the document, Doctrine of ultra vires

 Session 15- Memorandum of Association

 Nature of the document, Content of the document,
Alteration of the document, Doctrine of ultra vires

 Session 16- Articles of Association

 Nature of the document, Content of the document,
Alteration of the document, Articles and Memorandum – the
relationship, Legal effect of the Article & Memorandum
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 COMPANIES ACT, 2013
Session Details
10
 Session17- Board of Directors And Company
Management & Administration
 Directors and their appointment, Positions of directors,
Number of directorship, Disqualification of directors,
Vacation of office and removal of directors, Managerial
remuneration, Loans to Director
 Session18- Board of Directors And Company
Management & Administration
 Quiz Test Five - Session 14 to 17
 Submission- Group Project
 Meeting of board, Powers and duties of director Contracts in which
directors are interested, Liabilities of directors, Validity of acts of directors,
Disabilities of director, Managing director and Manager, Meetings, General
meeting of shareholders, Requisites of a valid meeting, Proxies, Voting and
poll, Resolutions, Company management, Accounts and auditors,
Prevention and oppression of mismanagement
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 Session Details
11

 Session 19 & 20

GROUP ASSIGNMENT PRESENTATIONS

WRAPPING UP & QUERY SESSION

END TERM EXAMINATION

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 SESSION 1
12

Indian Contract Act, 1872

 Formation of contracts,
 Its’ kinds and
 Essential Elements of a valid
Contract

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 Indian Contract Act, 1872
13

 Introduction
 The Act does not lay down so many precise rights and
duties which the law will protect and enforce;
 It contains a number of limiting principles, subject to
which the parties may create rights and duties for
themselves and the law will uphold those rights and
duties.
 The Act is not exhaustive since it does not take into its
purview all the relevant legislations.
 It does not override customs or usages.

Jus in Personam/ Jus in Rem

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 CONTRACT
14

A contract has been defined in

Section 2(h) as
"an agreement enforceable
by law"
1. An Agreement
2. Enforceability or legal obligation

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 Agreement
15
Agreement -Section 2(e),
"Every promise and every set of promises, forming
the consideration for each other, is an agreement."

What a ‘Promise'? -Section 2(b)

"When the person to whom the proposal is made
signifies his assent thereto, the proposal is said
to be accepted. A proposal, when accepted,
becomes a promise."
Offer + Acceptance = Agreement

1. Plurality of Parties
2. Consensus ad idem
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 Legal Obligation
16

A Duty Enforceable by Law

Only that obligations which

are arising out of an
agreement, are concerned
with the law of contract

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 Contract
17

"All contracts are agreements but

all agreements are not
contracts.”

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 Contract
18

Acc to Sec. 10 of Indian Contract Act,

"All agreements are contracts if they are

made by the free consent of the parties
competent to contract, for a lawful
consideration and with a lawful object, and
are not hereby expressly declared to be
void."

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 Essential Elements of a Valid Contract
19

1. Intention to create legal

relations
legal consequences

a) Treatment of Domestic and social

relationships

b) Treatment of Commercial Agreement

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 Essential Elements of a Valid Contract
20

Intention to Create Legal Relations

Case 1: Domestic Relationships

A resident of India invited her daughter who
lived and worked in the United States to
move to England to study. They agreed that
the mother would let the daughter stay in
the house rent free. A dispute arose and the
mother brought an action to evict the
daughter from the house.
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 Essential Elements of a Valid Contract
21

Intention to Create Legal Relations

Case 2: Domestic Relationship
An elder brother invited his sister and her
husband, who gave up paid employment,
to come to Australia to live with him and
care for him until his death in which he
agreed to give consideration of this of an
income for life provided by the elderly man
and his property upon his death. A dispute
arose and the couple sued for breach of
contract.
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 Essential Elements of a Valid Contract
22

Lawful Object & Lawful Consideration

Lawful Object
 Must not be fraudulent or illegal or immoral or
opposed to public policy or must not imply injury
to the person or property of another.

Case
A, being agent for a landed proprietor,
agrees for money, without the knowledge
of his principal, to obtain for B a lease of
land belonging to his principal.

Dr. Parul Gupta

 Essential Elements of a Valid Contract
23

Lawful Object & Lawful Consideration

Lawful Consideration (Sec. 2(d))

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.
Case 1
X agrees to buy books from Y for Rs. 50. Here the
consideration of X is books and the consideration
of Y is Rs.50.
Case 2
X agrees to Kill Z for Y for Rs. 50, 000/- . Here the
consideration of Y is killing and the consideration
of X is Rs.50,ooo/-.
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Essential Elements of a Valid Contract
24

Agreement not expressly declared void

(Sec. 24 to 30)

Case: Carew Co Ltd. v North Bengal etc

Two sugar manufacturers entered into an
agreement allocating zones to procure
sugar for meeting the needs of their
respective factories and each of the
manufacturers under took not to draw any
cane from the zones allotted to the other
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factory.
 Essential Elements of a Valid Contract
25

Valid Offer and Valid Acceptance

Valid Offer or Proposal (Section 2(a) )
“When one person signifies to another his willingness to do or
to abstain from doing anything, with a view to obtaining
the assent of that other to such act or abstinence, he is said
to make a proposal".

Case 1
X proposes, over telephone, to sell a house to Y at a
certain price.
Case 2
X owns a motor boat for taking people from
Bombay to Goa. The boat is in the waters at the
Gateway of India. the boat owner does need not
speak or call the passengers.
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 Essential Elements of a Valid Contract
26

Valid Offer and Valid Acceptance

Acceptance : Sec 2(b),

"when the person to whom the proposal is

made signifies his assent thereto, the
proposal is said to be accepted."

Case 1
P offers to sell his camera to Q for Rs.1000.
Case 2
P advertised in a Newspaper that he would give
Rs. 2000 to anyone who finds and returns his
lost dog.
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 Essential Elements of a Valid Contract
27

"Consent"
Two or more person are said to consent when
they agree upon the same thing in the same
sense.

Free consent
Consent is said to be free when it is not caused by
(1) coercion, as defined in section 15, or
(2) undue influence, as defined in section 16, or
(3) fraud, as defined in section 17, or
(4) misrepresentation, as defined in section 18,
or
(5) mistake, subject to the provisions of section 20,21,
and 22
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 Essential Elements of a Valid Contract
28

Capacity of Parties
Sec. 11
"Every person is competent to contract who has
attained the age of majority according to the law
to which he is subject, and who is of sound mind
and is not disqualified from contracting by any
law to which he is subject."

Incompetent to contract
I. if he is a minor, according to the law to which he is
subject,
II. if he is of unsound mind, and
III. if he is disqualified from contracting by any law to which
he is subject.
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 Essential Elements of a Valid Contract
29

Certainty of Meaning (Sec. 29)

• Wording of the agreement must be clear and not uncertain or
vague.
• Agreements, the meaning of which is not certain or capable
of being made certain, are void.

Case1
Jatin agrees to sell 500 tones of oil to Marium

Case 2
Jatin, the sole trader of coconut oil agrees to sell
500 tones of oil to Marium
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 Essential Elements of a Valid Contract
30

Possibility of Performance (Sec. 56)

 If the act is impossible of performance, physically or
legally, the agreement cannot be enforced by law.
 There must be possibility of performance of the agreement.

Case 1
A agrees with B to put life into B’s dead wife
Case 2
A agrees with B to produce treasure by magic
Legal Formalities
The contract act does not insist that the agreement must be in
writing, it could be oral.

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 KINDS OF CONTRACTS
31

Contracts can be classified on

the following basis;

On the basis of validity

On the basis of formation

On the basis of performance

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 KINDS OF CONTRACTS
32

A. On the basis of validity

1. Valid contract
2. Void contract
3. Voidable contract
4. Illegal contract
5. Unenforceable contract

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 KINDS OF CONTRACTS
33

B. On the basis of Formation

Case 1 Mr. A, a student called Mr. B on the
phone and agreed to buy his textbooks from
last semester for Rs. 300.
Case 2 If A enters into a bus for going to his
destination and takes a seat.
Case 3 ABC Company Ltd. a TV Company
delivers a new television to Mrs. Z that she
did not order and she keeps the television
and does not attempt to return it to the
company that mistakenly shipped it to her.
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 KINDS OF CONTRACTS
34

B. On the basis of Formation

1. Express contracts
2. Implied Contracts
3. Quasi Contracts
4. E Commerce Contract

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 KINDS OF CONTRACTS
35

C. On the basis of Performance

Case
J Inc., agreed to buy ten tons of coal from the
Northern Coal Company. Northern delivered
the coal to J's steel mill, where it is being
burned.

1. Executed Contracts
2. Executory Contracts
 Unilateral
 Bilateral
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 NEXT SESSION
36

SESSION 2
 Legal Insights to valid Offer
 Legal Aspects of Acceptance
And
 Legal Aspects Capacity of
Parties

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 37

Dr. Parul Gupta