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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) A Citizen
b) A Lawyer
c) A Legislator
d) 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)
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)

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

“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 may
cause absence of free consent)
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 : enforceable at law
b. 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 illegal

e. Unenforceable Contract
Cannot be enforced in court due to technical defects (absence of
stamp)

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)

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

Kinds of Contract
4. Classification according to Form
a. Formal Contract:
required to satisfy some legal formalities
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 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

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
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
( eg. A sees B drowning and saves his life.A cannot
demand the payment for his sevices because b never
asked him to do so )
( e.g. mosque: no repair, no money in return
by promisor)
Consideration may move from Promisee or
any other person ( Eg of XYZ)

Consideration
Consideration 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)

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)

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
(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 a
person is not allowed to go back upon earlier representations but minor
not e.g. car
Positions of minor’s parents
Partnership (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 be
liable only for the contract not the minor)

Person of Unsound Mind
When the person is incapable of understanding
the agreement
It may arise from:
1 Idiocy: lack of development of brain
2.Lunacy: disease of brain due to some
mental stress
3.Drunkness
4.Hypnotism
5.Mental decay: old age

Person disqualified from Contracting
Incapacity 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)

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 …void agreement

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

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
– Doctor and Patient

Effects of undue influence:
contract is voidable and can be void at the option of
the aggrieved party

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
( 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)

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’.
Effects of Misrepresentation
The aggrieved party has the right to
rescind the contract

Example
A intends to sell his horse to B and says
“my horseis perfectly sound”.although he
does not know that the horse has fallen ill
yesterday.
B there upon buy the horse.
There is misrepresentation on the part of
A

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.

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

a). 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)

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)

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 ( the person cannot lease the
land of his own)

Unilateral Mistake
In this case of mistake, only one of the
party is mistaken, but the other is aware
a). 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)

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. 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

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)

Conti…
e) If the court regards it as immoral or
opposed to public policy

E.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

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.

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)

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

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.

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 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. Supply of necessaries: reimbursed from property
2. 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’

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 >> CoG
Two parties >> Three Parties
Liability is Primary >> Liability is Secondary
Only one Contract >> Total three contracts
Indemnifier not to >> Surety to give guarantee
Act on the request upon debtor’s request
Of Indemnified
Liability arises only >> Debt/duty already exists the
In case of performance of which has
Contingency been guaranteed by the
surety

A few features
Nature of surety’s 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

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 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 in case of premature
termination

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

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:
 Goods must correspond to Description
 Conditions as to Merchandability
 Condition as to Wholesomeness( for eatables)
 Condition as to Fitness for a Particular Purpose
1. Sale by Sample:
– Bulk of the goods corresponds to sample
– Reasonable opportunity of comparing
– Free from any defect
1. 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.

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 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

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
1. Generic or uncertained goods
2. 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

Notes, Bills and cheques
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.)

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
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 & property
2. Be informed about the qlty, qty, ptency, purity,
standard and price of products against unfair
trade practices
3. Be assured access to products at competitive
prices
4. Be heard and to be assured that the consumers’
interest will receive due consideration
5. Seek redressal against unfair trade practices
6. Consumer education
The act provides for establishment of quasi-
judicial 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. Appointment of Controller & other officers
2. Functions of Controller
3. Controller as repository
4. Licence to issue digital signature certificates
5. Application/Renewal/Suspension of Licence
6. 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

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 by-
1. Any person claiming to be the true and first inventor of the invention
2. Any person being the assignee of the above person
3. 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. Special Resolution [sec 100]
2. Application to the court
3. 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

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