Business law

INTRODUCTIONNATURE AND SCOPE OF BUSINESS LAW,[object Object],Business comprises all profit seeking activities and enterprises that provide goods and services necessary to an economic system.,[object Object],Law refers to the principles and regulations established by a Government , applicable to people and enforced by judicial decision.,[object Object]

Meaning and Definition,[object Object],Business law is that portion of the legal system which guarantees an orderly conduct of business affairs and the settlement of legitimate disputes in a just manner. It establishes a set of rules and prescribes conduct to order to avoid misunderstandings and injury in our business relationships,[object Object]

Sources of business law,[object Object],Legislations.,[object Object],Customs.,[object Object],Case Law.,[object Object],Natural Law.,[object Object],English Law.,[object Object]

Scope of Business law,[object Object],The Indian Contract Act,1872,[object Object],The Sale of Goods Act,1930,[object Object],The Partnership Act,1932,[object Object],The Negotiable Instruments Act,1881,[object Object],The Companies Act,1956,[object Object],The Patents Act,1970,[object Object],The Trade and Merchandise Marks Act,1958,[object Object],The Consumer Protection Act,1986.,[object Object]

Objectives of Business Law:,[object Object],[object Object]

To facilitate industrial growth

To define the rulesRequirements of effective Business law:,[object Object],[object Object]

Rules must be just and reasonable

Rules must be knowable,[object Object]

The Indian Contract Act,1872,[object Object],An agreement is defined as every promise and every set of promises forming consideration for each other.[Sec.2(e)],[object Object],When the person to whom proposal is made signifies his assent, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.[Sec2(b)].,[object Object]

Essentials of a valid contract,[object Object],According to Sec2(h), a contract is an agreement enforceable at law.,[object Object],Essentials:,[object Object], 1.Offer and Acceptance,[object Object], 2. Free consent,[object Object], 3. Contractual capacity,[object Object], 4. Lawful consideration,[object Object], 5. Lawful object ,[object Object], 6. Agreement not expressly declared void,[object Object], 7. Possibility of performance,[object Object], 8. Certainty of terms,[object Object], 9. Intention to create legal relationship,[object Object], 10. Legal formalities.,[object Object]

Classification of Contracts,[object Object],According to validity:,[object Object],1.Valid contract,[object Object],2.Void contract,[object Object],3. Void agreement,[object Object],4.Voidable contract,[object Object],5.Illegal agreement,[object Object],6.Unenforceable contract,[object Object],Note:,[object Object],An agreement not enforceable by law is said to be void.,[object Object],A contract which was valid when first entered into but subsequently becomes unenforceable is called void contact.eg: war breaks out.,[object Object],A voidable contract is one which can be set aside at the option of one of the parties.,[object Object]

Classification of Contracts,[object Object],According to formation:,[object Object],1.Express contract,[object Object],2.Implied contract,[object Object],3.Quasi contract,[object Object],According to Performance:,[object Object],1.Executed contract,[object Object],2.Executory contract,[object Object],3.Unilateral contract,[object Object],4.Bilateral contract,[object Object]

Quasi contract- refers to certain transactions which create peculiar obligations like a)supplier of necessaries to minors, lunatics, married women, b)person paying money owed by another, c) finder of goods,d)person receiving money or goods belonging to another by mistake or under coercion.,[object Object], Here the person receiving the benefit has an obligation to compensate the person paying the benefit although there is no explicit contract between the giver and the receiver of benefit.,[object Object]

Offer and Acceptance,[object Object],According to Sec 2(a),”when one person signifies to another his willingness to do or abstain from doing anything, with a view to obtain the assent of the other to such act or abstinence, he is said to make a proposal.” ,[object Object],Essentials of a valid offer:,[object Object], 1.Intention to create legal relationship,[object Object], 2. Definite terms,[object Object], 3. Statement of intention and invitation to offer.,[object Object], 4. Offer must be communicated.(LalmanShuklaVs.GauriDutt.(1913).,[object Object]

Offer and Acceptance,[object Object],5. Offer can be specific or general.(CarlillVs.Carbolic smoke ball Co.(1892).,[object Object],6. Offer can be conditional,[object Object],7. Cross offer and counter offer.,[object Object], When parties make identical offers to each other in ignorance of each others offer, the offers are said to be cross offers. When a new offer is made after the rejection of the original offer, it is called a counter offer.,[object Object],8.Offer should not contain a term, the non-compliance of which would amount to acceptance,[object Object]

Example:,[object Object],A writes to B, “ I offer to sell my house for Rs.8 lacs. If I do not receive a reply by coming Monday , I will assume that you have accepted the offer to buy my house”. ,[object Object],If B does not reply there is still no contract.,[object Object],Lapse of an offer : An offer lapses if : a) either offeror or offeree dies before acceptance b) it is not accepted within the specific time or a reasonable time c) the offeree does not make a valid acceptance d) by notice of revocation.,[object Object]

Essentials of a valid acceptance,[object Object],Acceptance must be communicated,[object Object],Acceptance must be absolute and unqualified,[object Object],Acceptance can be express or implied,[object Object],Acceptance by a definite person,[object Object],Acceptance must be through reasonable or prescribed mode,[object Object],Mental acceptance is no acceptance,[object Object],Acceptance must be preceded by offer,[object Object]

Termination of offer,[object Object],By notice of revocation,[object Object],By lapse of time,[object Object],By failure of the acceptor to fulfill a condition precedent to acceptance,[object Object],By failure to accept according to the prescribed mode,[object Object],By death or insanity of the offeror,[object Object],By rejection,[object Object],By subsequent illegality or destruction of subject-matter.,[object Object]

Communication of offer and acceptance,[object Object],Methods:,[object Object],By Act: It includes conduct, words.(written or oral) It can also be through letter, telegram or telephone.,[object Object],By Omission: It includes an abstinence or forbearance on the part of one person.,[object Object],Communication of acceptance not necessary:,[object Object],When there is a prescribed mode and the offeree follows it, b) when the offeror has acted in a certain conduct on the part of the offeree as equivalent to acceptance. ,[object Object]

CONSIDERATION,[object Object], Section 2(d) of Indian Contract Act defines consideration as –,[object Object],When at the desire of the promisor,[object Object],The promisee or any other person,[object Object],Has done or abstained from doing ,or does or abstains from doing , or promises to do or abstain from doing something,[object Object],such act or abstinence or promise is called a consideration for the promise. ,[object Object]

Essentials of valid consideration,[object Object],It must move at the desire of the promisor,[object Object], (Kedarnath Vs. Gorie Mohamed)1886,[object Object],It must move from the promisee or any other person (ChinnayaVs.Ramaya)1882,[object Object],Consideration may be an act or abstinence.,[object Object],It may be past , present or future,[object Object],It need not be adequate-The court can hardly assume the role of setting what should be the appropriate consideration for a promise.,[object Object]

Essentials of valid consideration,[object Object],It must be real and not illusory- a promise by a man to make two parallel lines meet is no good consideration.,[object Object],It must be lawful.The consideration of an agreement is lawful unless - ,[object Object], a)it is forbidden by law. b)fraudulent c) it involves or implies injury to person or property of another d) the court regards it as immoral or opposed to public policy e) it defeats the provision of any law.,[object Object],Discharge of a pre-existing obligation is no consideration.,[object Object]

Exceptions to the rule “no consideration no contract”,[object Object],Natural love and affection,[object Object],Compensation for past voluntary service,[object Object],Time barred debt- but the promise must be in writing and duly signed by the promisor or his authorized agent.,[object Object],Completed gifts,[object Object],Agency-no consideration is required to create an agency,[object Object],Guarantee,[object Object],Remission- no consideration is required for an agreement to receive anything less than what is due.,[object Object]

Contractual Capacity Of Parties,[object Object],“Capacity to contract” means the competence or capability of the parties to enter into a valid contract.,[object Object],Section 11 of the Contract Act says that “every person is competent to contract who is of the age of majority and who is of sound mind and is not disqualified from contracting by any law to which he is subject”,[object Object]

MINOR,[object Object],Minor is a person who has not completed the age of 18 years. ,[object Object],However, a minor for whom a guardian has been appointed by the court or when his property is managed by the court of wards, becomes a major only on completing 21 years of age.,[object Object]

Effect of minor’s agreement,[object Object],An agreement with or by a minor is void. A minor is not competent to contract and a contract by minor is void ab initio. (Mohoribibi vs.Dharmodas ghose)1903,[object Object],No ratification. A minor cannot ratify the agreement on attaining majority because a void agreement cannot be ratified.,[object Object],Minor can be a promisee or beneficiary.,[object Object], Thus in case of goods sold by a minor he is entitled to recover the price from the buyer. He can be a payee in a contract.,[object Object], (Raghava Chariar Vs.Srinivasa),[object Object]

Effect of minor’s agreement,[object Object],No estoppel against a minor. A minor can always plead minority and will not be prevented from doing so even when he has entered into a contract falsely representing himself to be a major. ,[object Object],Contract by guardian. A contract can be entered into by the guardian or manager of a minor only if a) the contract is within the authority of the guardian or manager b) it is for the benefit of the minor.,[object Object]

Effect of minor’s agreement,[object Object],Liability for torts. Where the tort is directly connected with the contract the minor is not liable, (Mohoribibi Vs.Dharmodas Ghose)but where the tort is independent of the contract, the minor cannot escape his liability.(Burnard v. Haggis.1863) ,[object Object],Doctrine of restitution. If an infant has obtained goods or property by misrepresenting his age , he can be compelled to restore it as long as it is traceable in his possession.,[object Object]

Effect of minor’s agreement,[object Object],Beneficial contracts : Agreements entered into by a minor for his/her benefit are valid and enforceable. They are –,[object Object],a) Contracts of marriage- such contracts can be enforced against the other enforcing party at the instance of the minor but the same cannot be enforced against the minor.,[object Object],b) Contracts of apprenticeship- such contract can be made by the guardian on behalf and for the benefit of the minor.(Roberts v. Gray),[object Object]

Effect of minor’s agreement,[object Object],Minor as an agent- Although a minor is not entitled to employ an agent, he can be an agent for someone else.,[object Object],Minor as a Partner- A minor cannot make a contract of partnership although he may be admitted to its benefits with the consent of all the partners.,[object Object],Minor as a shareholder-A minor cannot be a member of a company because membership arises out of a contract.,[object Object],Insolvency-minor cannot be declared insolvent as he is incapable of entering into valid contract.,[object Object]

Free Consent,[object Object],Coercion: According to Section 15 “Coercion is the committing or threatening to commit, any act forbidden by the Indian Penal Code, or the unlawful detaining, or threatening to detain, any property, to the prejudice of any person whatever, with the intention of causing any person to enter into an agreement”,[object Object],Ranganayakamma v. AlwarSetty. (1889).,[object Object]

Undue Influence,[object Object],According to Section 16 “ A contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other “,[object Object],Manu Singh V. Umadat Pandey. (1890) ,[object Object],Lloyds Bank V.Bundy.(1975),[object Object]

Distinction between Coercion and Undue Influence,[object Object], Coercion,[object Object], Undue Influence,[object Object],Consent is obtained under the threat of offence.,[object Object],It involves the use of physical or violent forces.,[object Object],It attracts the provision of Indian Penal Code (IPC).,[object Object],It may proceed from a stranger to the contract.,[object Object],Consent is obtained by the dominant will of another.,[object Object],It involves the use of moral or mental forces.,[object Object],There is no criminal liability in this case.,[object Object],There must be certain relationship between the parties to the contract.,[object Object]

Misrepresentation,[object Object],Misrepresentation refers to the misstatement of fact material to the contract. ,[object Object],According to Section 18 of the Act “Misrepresentation means and includes –,[object Object],1. the positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true,[object Object],2. Any breach of duty which, without any intent to deceive, gains an advantage to the person committing it by misleading another to his prejudice,[object Object]

Misrepresentation,[object Object],3. Causing ,however innocently, a party to an agreement, to make a mistake as to the substance of a thing which is the subject matter of the agreement.”,[object Object],Types Of Misrepresentation:,[object Object],Unwarranted Statements-,[object Object],When a party to a contract positively asserts that a particular fact relating to the subject matter of the agreement is true, when his information does not warrant it to be so, he is guilty of misrepresentation.,[object Object]

Misrepresentation,[object Object],Breach of Duty – When a person commits a breach of duty without any intention to deceive the other party, and thereby gains an advantage to himself to the prejudice of the other party, the person committing the breach of duty is said to be guilty of misrepresentation. Oriental Banking Corporation V. John Fleming (1879),[object Object]

Misrepresentation,[object Object],Inducing mistake about subject-matter : If a party to an agreement induces the other party, although innocently, to commit a mistake as to the nature or quality of the subject-matter of the agreement, he becomes guilty of misrepresentation.,[object Object],Eg: Concealment of information relating to company in prospectus.,[object Object]

FRAUD,[object Object],The other party acted,[object Object],and suffered False The representation representation must relate to a fact,[object Object],Promise with no,[object Object], intention to ,[object Object],perform,[object Object],Active,[object Object], concealment of fact.,[object Object],Any act which law ,[object Object], considers to be fraud,[object Object],FRAUD,[object Object]

VOID AGREEMENTS,[object Object],Agreement made by incompetent parties.,[object Object],Agreement made under a mutual mistake of fact.,[object Object],Agreement , the consideration or object of which is unlawful.,[object Object],Agreements , the consideration or object of which is unlawful in parts.,[object Object],Agreements made without consideration.,[object Object], (subject to exceptions to the rule “No Consideration No Contract”).,[object Object]

VOID AGREEMENTS,[object Object],6.Agreements in restraint of marriage- An agreement in restraint of marriage of any person , other than a minor is void. Example:P promised to marry L only and no one else and to pay a definite sum if he married someone else.P married X.,[object Object],7. Agreements in restraint of trade- An agreement restraining a person from exercising a lawful profession, trade or business of any kind is void. However there are two types of exceptions to this rule.,[object Object]

VOID AGREEMENTS,[object Object],Statutory Exceptions:,[object Object],1.Sale of goodwill,[object Object],2.Partnership Act,[object Object],B.Exceptions under the common law:,[object Object],1.Trade combinations. Traders and manufacturers in the same line of business normally form associations to regulate, promote and carry out business in an organized way.,[object Object],2.Exclusive Dealing Agreements,[object Object],3.Restraints on employees.,[object Object]

VOID AGREEMENTS,[object Object],8. Agreements in restraint of legal proceedings- An agreement which prohibits a person from taking judicial proceedings, in respect of any right arising from a contract, is void. ,[object Object],9. Agreements the meaning of which is uncertain. Exception: A horse was purchased for a certain price together with a promise to give $5 more if the horse proved lucky.,[object Object],10.Agreements in respect of wager (Sec 30) An agreement becomes a wager when it has the following features:,[object Object]

VOID AGREEMENTS,[object Object],a) Uncertain event,[object Object],b) Mutual chances of gain or loss,[object Object],c) Neither party to have control over the event,[object Object],d) No other interest in the event.,[object Object],Exceptions: a)Horse race b)Crosswords competitions c)Share market transactions d)Chit funds.,[object Object],11.Agreements to do impossible acts. Example: A agrees with B to put life into a dead man,,[object Object], the agreement is void.,[object Object]

DISCHARGE OF CONTRACT,[object Object],A contract may be discharged in either of the following ways:,[object Object],By performance,[object Object],By agreement,[object Object],By impossibility,[object Object],By bar of limitation,[object Object],By operation of law,[object Object],By breach of contract,[object Object]

Rules relating performance,[object Object],1.Tender of performance- It refers to the offer made by the promisor to the promisee to perform his obligation under the contract. The tender must be : a) unconditional, b)made at a proper time and place,[object Object],2. Party to perform- If the contract requires personal skill of the promisor e.g. painting, singing, then death of the promisor puts an end to the contract. Otherwise the promisor or his representative may employ a competent person to perform the promise.,[object Object]

Rules relating performance,[object Object],3. Time and place of performance- ,[object Object],when day is specified then the promisor must perform at ant time during the usual hours of business of such day and place at which the promise ought to be performed.,[object Object],When no time is specified then the promisor must perform his obligation within a reasonable time.,[object Object],The performance of any promise may be in any manner or at any time which the promisee prescribes or sanctions.,[object Object]

Rules relating performance,[object Object],4.Performance of reciprocal promises- when a contract consists of an exchange of promises, they are called reciprocal promises. Sec 54 lays down that where the nature of the reciprocal promises is such that one cannot be performed unless the other party performs his promise first, then if the latter fails to perform, he cannot claim performance from the other, but make compensation to him for his loss.,[object Object],5.Appropriation of payments – It arises when a debtor owes several debts to a creditor and makes a payment insufficient to clear all debts. ,[object Object]

Discharge by Agreement,[object Object],It may happen in any of the following ways:,[object Object],1. Novation- When the parties to a contract agree to substitute the existing contract with a new one, it is called novation.,[object Object],2. Remission- It means acceptance of less than what was agreed for.,[object Object],3. Waiver- It means deliberate abandonment of the rights by the parties to a contract.,[object Object],4. Rescission- It takes place when all or some of the terms of the contract are cancelled.,[object Object],5.Merger- It takes place when an inferior right merges into a superior right accruing to the same party under the same or some other contract. ,[object Object]

Discharge by Impossibility,[object Object],Impossibility of performance may be –,[object Object],At the time of entering into the contract,[object Object],Subsequent impossibility (also called the doctrine of frustration),[object Object],Grounds of frustration: ,[object Object],Destruction of subject-matter,[object Object],Change of law,[object Object],Non-occurrence of an event,[object Object],Death or incapacity of party,[object Object],Outbreak of war.,[object Object]

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