Slide 1

BUSINESS LAW

Presented by

Prof. Sanjay Deshpande MBA@GIT

1Prof. Sanjay DeshpandeMeaning and Nature of Business Law2Mercantile (Or Business) LawMeaning and Nature. Business Law may be defined as that branch of law which prescribes a set of rules for the governance of certain transactions and relations between: (i) business persons themselves, (ii) business persons and their customers, dealers, suppliers, etc., and (iii) business persons and the state.

Meaning and Nature of Law Negotiable instruments, Patents, trademarks and copyrights, Actionable claims, factoring and forfeiting, Import and export regulation, Regulation of stock exchange and financial securities, Regulation and development of industries, Economic offences, Regulation of foreign contributions, foreign capital, Excise, import and export duties, tax on income, wealth, etc.

2Prof. Sanjay DeshpandeINDIAN CONTRACT ACT ,1872 3Section 1 The Act extends to the whole of India except the State of Jammu and Kashmir; It was enacted on 25th April 1872 and came into effect on 1-9-1872.

Prof. Sanjay Deshpande3CONTRACT 4A contract is an agreement made between two parties which the law will enforce,

Pollock's definition: Every agreement and promise enforceable at law is a contract. Sir William : A legally binding agreement between two or more persons by which rights are acquired by one or more to acts or forbearances (abstaining from something) on the part of others. Salmond : An agreement creating and defining obligations between the parties.Important Terminologies 5I. Contract=Agreement + Enforcement by Law ( All contracts are agreements but not all the agreements are contracts). II. Agreement = It may be a social agreement or a legal agreement . Offer + Acceptance.III. Obligation = It is defined as a legal tie which imposes upon a definite person or persons the necessity of doing or abstaining from doing a definite act or acts.IV. Consensus ad idem = This means that the parties to the agreement must have agreed about the subject matter of the agreement in the same sense and at the same time.IMP Terminologies 6 V. Jus in rem : it means a right against or in respect of a thing.( a property owner has the right on his property this is called just in rem )

VI. Jus in personam : right against or in respect of a person A owes some money to B, so that B has a right to recover this amount only against A this is called as jus in personam.

IMP Terminologies7VII. Proposal - 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.Vlll. Promise - 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. Agreement8Agreement. Section 2(e) defines an agreement as every promise and every set of promises forming consideration for each other. In this context, the word promise is defined by s.2(b). In a contract there are at least two parties. One of them makes a proposal (or an offer) to the other, to do something, with a view to obtaining the assent of that other to such act.

Essential elements of a Valid Contract.

91. Offer & Acceptance.2. Intention to create legal relationship.3. Lawful consideration4. Capacity of parties to contract.5. Free and genuine Consent.

Essential elements of a Valid Contract.10 6 . Lawful object ( Sec 29) the object should not be Illegal, Immoral, Opposed to public policy 7. Agreement should not be expressly declared void.( Sec 24 to Sec 30)8. Certainty and Possibility of performance.( Sec 29)9. Legal formalities(Written form or spoken).Classification according to validity11An agreement becomes a contract when all the essential elements all present.

If one or the more elements of an essential contract are missing it becomes illegal, void or avoidable or unenforceable.

TYPES OF CONTRACT12 ContractsPerformanceFormationValidityVoidable contractVoid contractIllegal contractUnenforceable contractExpress contractImplied contractQuasi contractE- CommerceExecuted contractExecutory contractUnilateral/One sided contractClassification according to validity13Voidable Contract A contract is voidable when one of the parties to the contract have not exercised their free consent Sec 2 i. Void contract A contract which ceases to be Unenforceable by law becomes void as per Sec 2(g).Illegal contract An illegal agreement is a one which transgresses some rule of the public policy or which is immoral or criminal in nature.Unenforceable contract- an unenforceable contract is one which cannot be enforced in a court of law because of some technical defect such as absence of writing or where the remedy has been barred by the lapse of time.

Classification according to Formation14 A contract may be (a) made in writing or by word of mouth, or (b) inferred from the conduct of the m parties or the circumstances of the case. Expressed contract : If the terms of a contract are expressly agreed upon( words or written) at the time of formation of the contract, the contract is said to be an express contract Classification according to formation15Implied Contract The terms of a contract are inferred from the conduct or dealings between the parties. When proposal or acceptance of any promise is made otherwise than in words, the promise is said to be implied. Such implied promise leads to Implied Contract. Ex: When a person boards a train or a bus.Quasi Contract Certain relations resemble those created by a contract. It resembles a contract , that a legal obligation is imposed on a party who is required to perform it. It rests on the ground that one party is not permitted to enrich itself unjustly at the expense of another.Classification according to Performance.16Executed contract Where both the parties have performed their obligations, it is executed contract.

Executory Contract - Where neither of the parties have performed their obligations, i.e. both the parties are yet to perform their promises, the contract is executory.

Unilateral contract- A unilateral or one- sided obligation is one in which only one party has to fulfill his obligation at the time of formation as the other party has already fulfilled its obligation before the contract comes into existence. Such contracts is also called as contracts with executed considerationContinued17Contingent Contract - It is a contract to do or not to do something, if some event, collateral to such contract, does or does not happen. Specialty Contract It is a contract which is in writing, signed, sealed & delivered by the parties.Waggering Contracts.18 It is agreement by mutual promises, each of them conditional on the happening or not happening of an unknown event.

All wagers are contingent but all contingent contracts are not wagers.Proposal of offer19The term proposal has been defined in section 2(a) as follows:When one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of that other to such act or abstinence.Offer 20Proposal and offer are interchangeably used but technically its not right. English law uses the word offer, where as the contact law uses proposalThe person making the offer is known as offeror, proposer , or promisor and the person to whom the offer is made is called offeree or proposee. When the person accepts such an offer he is called promisee or acceptorWhat constitues an OFFER/PROPOSAL21Offer must be such as in law is capable of being accepted and giving rise to legal relationship.Terms of offer must be definite ,unambiguous ,certain not loose and vague. The offeror must make the offer with a view to obtain the asset of the offeree to such act or abstinence.Must be communicated to the offeree.Offer must be distinguished from intention, announcement.Offer must be distinguished from invitation to the offer Offer should not contain a term of non-compliance which may amount to acceptance21Prof. Sanjay DeshpandeTypes of Offer22Implied offer : An offer may also be implied from the conduct of the parties or the circumstances of the case.Expressed offer: When an offer is expressed in the form of writing or oral representation.Specific offer: when the offer is mage to a specific person.General offer: when an offer is to made to general public or world at large it is called as general offerOFFER/PROPOSAL23Offer gets terminated by:RejectionLapse of timeSpecified EventDeathRetraction/Withdrawal of OfferIf counter offer is made

23Prof. Sanjay DeshpandeACCEPTANCE24A proposal when accepted, results in an agreement. It is only after the acceptance of the proposal that a contract between the two parties can arise.According to 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.The person making the proposal does not become bound thereby until acceptance. As soon as his proposal is accepted that is known as promise whereby both the parties become bound.Acceptance25 Acceptance may be implied or express .Implied acceptance can be gathered from the circumstances or the conduct of the parties.Expressed acceptance requires more than implied formation of intention to accept, to give the evidence of acceptance, It should be overt through spoken wordsAgreement to agree in future26Agreement to agree in future is not a contract, such contracts fail to have certainty and conclusive occurring is not a contract.Essentials of a valid acceptance27It must be absolute & UnqualifiedIt must be communicated to the OfferorIt must be according to the mode prescribedIt must be given in specified timeIt must be in response to the Offer/Must not precede an offerIt must be made before the offer lapses, terminated, withdrawn or revokedIt must be given to the offeror or his Authorized Agents.It cannot be implied from the silence.

CONTRACT ACT28COMMUNICATION of Offer, Acceptance & Revocation thereof.Offer :The communication of offer is complete when it comes to the knowledge of the person to whom it is made.Acceptance : The communication of Acceptance is complete :Against the proposer when it is put into a course of transmission so as to be out of power of the acceptorAgainst the Acceptor when it comes to the knowledge of the Proposer.

28Prof. Sanjay DeshpandeCommunication of offer29An offer when accepted results in a contract. An offer can be accepted only after the same has come to the knowledge of the offeree. It means that the offer has to be communicated to the offeree in order that the offeree can accept it. According to section 4, the communication of a proposal is complete when it comes to the knowledge of the person to whom it is made.Acceptance by post30Section 4 of the Act mentions the following rules when the communication of acceptance is made by post :1. The communication of acceptance is complete as against the proposer, when it is put in the course of transmission to him, so as to be out of the power of the acceptor.2. The communication of acceptance is complete as against the acceptor, when it comes to the knowledge of the proposer.

IllustrationB accepts As proposal by a letter sent by post. The communication of the acceptance is complete, --As against A , when the letter is posted ;As against B, when the letter is received by A.Loss of letter in Transit31If there is a loss of letter in transit despite addressed stamped and dispatched, The sender shall not be responsible for any losses.Acceptance by Telephone or telex or oral communication32A contract by Telephone or telex has the same effect as an oral agreement entered into between the parties.But the offeree must make sure that his acceptance is properly received i.e. heard and understood by the offeror.In case the line goes dead during the conversation, the circumstances does not hold the parties accountable.However, if the parties intend the have a contract they need to get through again.Consideration33Consideration is a technical term used in the sense of quid pro quo( i.e. something in return) when a party to an agreement promises to do something, he must get something in return. This Something in return is defined as consideration . A contract made without consideration is nudum pactum (Null effect) is void. A valuable consideration in the sense of the law may consist either in some right, interest, profit or benefit accruing to one party or some forbearance, detriment, loss or responsibility given, suffered or undertaken by the other.Need for consideration34 The reason why the law enforces consideration is to ensure mutually beneficial relationship, dual party benefits . Legal rules for consideration35It must move at the desire of the promisor It may move from the promisee or any other person.It may be act, abstinence or forbearance or a return promise.It may be past , presence of future.It need not be adequate.It must be real and not an illusory.It must be something which the promisor is not already bound to do.It must not be illegal, immoral or opposed to public policy

Exceptions to consideration36The following are the exceptions to a contract without considerations, Sec25 and 185 of IC Act 1872, deal with exceptions.Love and affection [Sec 25(1)].Compensation to voluntary services[Sec 25(2)].Promise to pay a time-barred debt[ Sec25(3)].Completed gift ( expl. 1 to Sec25) .Agency ( Sec185). Charitable subscription.

Doctrine of privity of contract37 It is general rule of law that only the parties to a contract may sue and be sued on that contract, this rule is called as the doctrine of privity of contract or privity of contract. There are two consequences of privity of contract.A person who is not a party to a contract cannot sue upon it even though the contract is for his benefit and he has provided consideration. A contract cannot confer rights or impose obligations arising under it on any person other than the parties to it.Exceptions to doctrine of privity38Trust or charge( beneficiary).Marriage settlement.Acknowledgement or estoppel.Assignment of a contract.Contracts entered through and agent.Covenants running with the land ( transfer of immovable property).Capacity of parties to Contract.39 An agreement becomes a contract if it is entered between the parties who are competent to Contract.

Every person is Competent to contract1. Who is of the age of majority according to the law.2. Who is of sound mind.3. Who is not disqualified by any law. Parties incompetent to contract40Sec. 11 of the Indian contract declares the following persons are incompetent to contract.Minors,Persons of unsound mind, andPersons disqualified by any law to which they are subject.

Free Consent41"Free consent" - Consent is said to be free when it is not caused by 1) coercion, 2) undue influence3) fraud, 4) misrepresentation, 5) mistake. Consent is said to be so caused when it would not have been given but for the existence of such coercion, undue influence, fraud, misrepresentation or mistake.

Free consent42Meaning of Coercion (Ss. 15 and 72). Coercion is (i) the committing or threatening to commit any act forbidden by the Indian Penal Code or (ii) the unlawful detaining.Meaning of Undue Influence (s.16). Undue influence consists in the improper exercise of power over the mind of one of the contracting parties by the other.Meaning of Misrepresentation (Ss.18-19). Misrepresentation is also known as simple misrepresentation whereas fraud is known as fraudulent misrepresentation.43Meaning of Mistake [Ss.20-21]. Mistake may be defined as an erroneous belief on the part of the parties to the contract concerning something pertaining to the contract. Meaning and Effect of Unilateral Mistake. There is a unilateral mistake where only one party to a contract is under a mistake as to a matter of fact. Mistake of Law. It may be (i) mistake of law of the land, or (ii) mistake of foreign law. In the first case the rule is Ignorantia juris non-excusat.

Coercion

44 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. Eg - A, on board an English ship on the high seas, causes B to enter into an agreement by an act amounting to criminal intimidation under the Indian Penal Code.

Undue influence

45 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.Eg - A had given advance money to his son B during his minority, upon B's coming of age obtains, by misuse of parental influence, a bond from B for a greater amount than the sum due in respect of the advance. Here A employs undue influence. Fraud46 "Fraud" means and includes any of the following acts committed by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto of his agent, or to induce him to enter into the contract 1) the suggestion, as a fact, of that which is not true, by one who does not believe it to be true; 2 )The active concealment of a fact by one having knowledge or belief of the fact. 3)A promise made without any intention of performing. 4)Any other act fitted to deceive; 5)Any such act or omission as the law specially declares to be fraudulent.

Misrepresentation47"Misrepresentation" means and includes 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.2) any breach, of duty which, without an intent to deceive, gains an advantage to the person committing it, or any one claiming under him, by misleading another to his prejudice or to the prejudice of any one claiming under him.3) causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement.

Contingent contract48"Contingent contract" defined 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. Waggering Contracts.49 It is agreement by mutual promises, each of them conditional on the happening or not happenning of an unknown event.

All wagers are contingent but all contingent contracts are not wagers.Quasi Contracts50Quasi Contract is an obligation resembling that created by a contract.It is implied Contract.The essentials of formation of contracts are absent.There is no agreement at all.Types of Quasi Contracts.51Where a person supplies necessaries to a person incapable of contracting, he is entitled to be reimbursed from that property of such incapable person.A person who is interested in the payment of money which another is bound by law to pay is entitled to be reimbursed by other.A person to whom money is paid by mistake or under coercion, must repay or return it.Continued52When a person lawfully does anything not intending to do so gratuitously & other person enjoys benefit thereof, the later is bound to make compensation to the former.A person who finds the goods belonging to another is subject to the same liabilities as a bailee of goods. He is entitled to retain the goods until he receives the lawful charges or compensation.Legality of object53 A contract must not only be based upon the mutual assent of the parties of competent parties but must also have a lawful object. When consideration or object is unlawfulIf it is forbidden by law. if it is of such a nature that, if permitted, it would defeat the provisions of any law. If it is fraudulent.If it involves or implies injury to the person of property of another. If the court regards it as immoral.Where the court regards it as opposed to public policyAgreements opposed to public policy541 Agreements of trading with enemy.2. Agreements to commit a crime.3. Agreements which interfere with administration of justice.

Performance of contract55Contract must either perform, or offer to perform, their respective promises, unless such performance' is dispensed with or excused under the provisions of this Act, or of any other law.By whom must the contracts be performed?.Promisor himself.AgentLegal representatives. Third representatives.Joint promiser

Discharge of Contract.56Discharge means termination of a contract. The contract may be discharged in any of the following ways 1. By performance.2. By death.3. By refusing tender of performance.4. By breach of Contract.5. By impossibility of performance.Continued576. By agreement or by consent.7. By promisee failing to offer facilities for performance.8. By operation of law.9. By unauthorized material alteration of a contract.10. Discharge by lapse of time.Breach of Contract58 Breach of contract is non performance of contract. Remedies for breach of contract to Aggrieved party.

Rescission of the contract.Suit for damages.Suit upon quantum meruit. Suit for specific performance for contract.Suit for injunction.

BREACH OF THE CONTRACT59RemediesInjunctionTemporary (interim)Permanent DamagesNominalCompensatoryPunitive/ExemplaryAccount of ProfitsSpecific performance (where subject matter is unique and money will not adequately compensate.)DeclarationRectificationRecission/Substitution/Novation59Prof. Sanjay Deshpande