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MB0051 Legal Aspects of Business

MB0051 Legal Aspects of Business

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Published by Bhavesh Nikumbh

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Published by: Bhavesh Nikumbh on May 14, 2013
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MB0051: Legal Aspects of Business
1 |Page 
Q1. What are the sources of Indian law? Discuss any one important source of law and justify why it is important.Ans.
The main sources of modern Indian law may be divided into two broad categories:
Primary sources
Secondary sources
Primary sources of Indian Law
The primary sources of Indian Law are:
Judicial precedent
(stare decisis)
Personal law
Customs have played an important role in making law and therefore are also known as customarylaws. In the words of Keeton, customary law may be defined as “those rules of human action,established by usage and regarded as legally binding by those to whom the rules are applicable,which are adopted by the courts and applied as sources of law because they are generallyfollowed by the political society as a whole or by some part of it”. In simple words, it is a generallyobserved course of conduct by people on a particular matter. When a particular course of conduct isfollowed again and again, it becomes a custom.
 Judicial precedent
Judicial precedent is another important source of laws. It is based on the principle that a rule of law that has been settled by a series of decisions generally should be binding in court andfollowed in similar cases. Only those rules that lay down some new rules or principles are treatedas judicial precedents. Thus, where there is a settled rule of law, it is the duty of the judges tofollow the same; they cannot substitute their opinion for the established rule of law. This isknown as the doctrine of ‘stare decisis’. The literal meaning of this phrase is “standing by thedecision”. Statute Statutory law or legislation is the main source of law. This law is created bylegislation of bodies such as the Parliament. It is called statute law because it is the writ of thestate and is in written form (jus scriptum). In India, the Constitution empowers the Parliament andstate legislatures to promulgate law for the guidance or conduct of people to whom the statuteis made applicable, either expressly or by implication. It is sometimes called enacted law because itis brought into existence by passing acts in the legislative body.
MB0051: Legal Aspects of Business
2 |Page 
Personal Law
Many times, a point of issue between the parties to a dispute is not covered by any statute orcustom. In such cases, courts are required to apply the personal law of the parties. Thus, incertain matters, we follow the personal laws of Hindus, Mohammedans and Christians.
According to Section 2 (h) of the Indian Contracts Act, 1872, a contract is an agreement enforceableby law made between at least two parties as per which rights and obligations are mutually createdfor both parties. If the party who had agreed to do something fails to do that, then the other partyhas a remedy in law.
D Airlines sells a ticket on 1 January to X for the journey from Mumbai toBangalore on 10 January. The airline is under an obligation or duty to take X from Mumbai toBangalore on 10 January. In case the airline fails to fulfil its promise, X has the right to sue theairlines for breach of contract.
Section 2 (e) of the Contracts Act defines an agreement as every promise and every set of promisesforming a consideration for each other”. For an agreement, a promise becomes essential. Theword promise is defined by Section 2 (b) of the Contracts Act. In a contract, there are at leasttwo parties. One of them makes a proposal (or offer) to the other to do something with a viewof getting approval of the other to such an act. When the person to whom the proposal is madeprovides his/her assent, the proposal is said to be accepted. A proposal, when accepted,becomes a promise according to Section 2 (b).
 Enforceability by law:
The agreement must be enforceable by law to become a contract. Thus,there are certain agreements that do not become contracts as the element of enforceability by law isabsent.
Essentials of a contract
Section 10 of the Contracts Act provides that all agreements are contracts if they are made by freeconsent of parties competent to contract for a lawful consideration with a lawful object and are notexpressly declared by law to be void. To constitute a contract, there must be an agreement betweentwo or more parties. One cannot enter into a contract with oneself. An agreement is composed of two elements – offer or proposal by one party and acceptance thereof by the other party. Effect of 
Q2. What is a contract? Which test would you apply to ascertain whether an agreement is acontract?
MB0051: Legal Aspects of Business
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absence of one or more essential elements of a valid contract: If one or more essentials of a validcontract are missing, then the contract may be voidable, void, illegal or non-enforceable.
Classification of contracts
Contracts may be classified as follows:Classification according to formation: A contract may be made:In writing (express)By spoken words (implied)Inferred from the conduct of parties or circumstances of the case.Contracts are also classified as formal or informal on the basis of their formation. A formalcontract is one in which the law gives special effect because of formalities or special languageused in creating it. The best example of formal contracts is negotiable instruments such ascheques. Informal contracts are those in which the law does not require formalities or speciallanguage. Classification according to validity: Contracts may be classified according to theirvalidity as follows:• Valid• Voidable• Void• Non-enforceableValid means that the contract possesses all the elements of a contract as mentioned in Section10 of the Contracts Act. If one or more of the essential elements are missing, the contract isvoidable, void, illegal or non-enforceable. As per Section 2 (i), a voidable contract is one whichmay be repudiated (i.e., avoided) at the wil of one or more parties, but not byothers. In the next section, we wil discuss offer and acceptance.

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