Legal and Tax Aspects of business

• Introduction to Law

• Law implies ‘Rules’ and as such

includes different sets of rules
which govern or regulate
various external human actions
and conduct of individuals,
institutions and the Government
with each other
 Characteristics of law
• 1. Law is related to external human
actions
• 2. Law is rule of conduct imposed
and enforced by the sovereign. Law
is the command of the sovereign and
is enforced by the state.
• 3. These rules of conduct are
essential for peaceful and prosperous
living of the people in the country.
• Law is supreme and is applicable to
all.
 BUSINESS LAW
1 Business Law includes laws concerning industry, commerce and
trade.
2.Business Law and Mercantile Law are synonymous terms.
3. Business law can be defined as that branch of law which is
concerned with or applicable to industry, commerce, trade, or
business in connection with various business or mercantile
transactions.
4.Object of BL is to regulate and control increasing business or
commercial transactions and activities.
5. BL includes Laws relating to contracts, sale of goods,
partnerships, companies, negotiable instruments, patents,
designs, TM, insurance, contracts of guarantee & indemnity etc.
 The Indian Contract Act 1872
• INTRODUCTION
• Definition: Salmond “ An agreement creating and
defining obligations between the parties.
Sir Federic pollock “ Every agreement and promise
enforceable at law is a contract.”
S-2(h) of Indian contract Act “ An agreement
enforceable by law is a contract.
 Essential Requirements of a
contract

1. AN AGREEMENT
1. Two parties
2. Consensus-ad-idem
2. LEGAL OBLIGATIONS
 AN AGREEMENT

• S-2(e) every promise and every set of

promises, forming the consideration for
each other, is an agreement. And when,
at the desire of the promisor, the promisee
or any other person has done or abstained
from doing, something, such act or
abstinence or promise is called
consideration for the promise.
 PROMISE
• S-2B ‘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’
• An agreement therefore, comes into
existence only when one party makes a
proposal or offer to the other party and that
the other party signifies his assent thereto,.
• Inshort, an agreement is the sum total of
‘offer’ & ‘acceptance’.
 TWO PARTIES : PROMISOR AND
PROMISEE
• When the person to whom the proposal is made
signifies his assent thereto, the proposal is said
to be accepted.
• The person who makes the proposal is called the
promisor and the person to whom the proposal is
made called the promisee (2c).
• A proposal, when accepted, becomes a
promise(2b) and 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 order to such act or abstinence, he
is said to make a proposal (S-2a)
 Legal Obligation
1. For formation of any contract, an agreement
should give rise to a legal obligation and the
obligation must be enforceable at law.
2. Legal obligation is distinct from that of a
moral, religious or social obligations.
3. The LOC is not the whole law of agreements
nor it is the whole law of obligations. It is the
law of those agreements which create
obligations, and those obligations which have
their sources in agreements.
AGREEMENT VS. CONTRACT
 Essentials of valid contract
• There must be an agreement
• Parties to a contract must be competent
• There should be an intention to create a legal
relationship
• There must be free consent of parties to the
agreement
Consent is free when it is not caused by (i) Coercion
(ii) Undue influence (iii) Fraud (iv) Misrepresentation
(v) mistakes
• Lawful consideration
• Legal or lawful object
• Agreement not expressly declared void by law
• Compliance with legal formalities
• Certainty and possibility of performance
 Classification of contracts
1. On the basis of mode of formation or creation
a. Express contracts b. Implied contracts
c. Quasi contracts
2. On the basis of extent of execution or performance
d. Executed contracts e. Executory contracts
3. On the basis of parties to the contract
f. Unilateral contracts g. Bilateral contracts
4 On the basis of the form of contracts
h. Formal contracts i. Simple contracts
5. On the basis of validity of enforceability
j. Valid contracts k. Void contract
voidable contract- void agreement
6. Enfrocibility- unenforceable contract
Illegal or unlawful contract
• A. Check Your Progress T/F
• Law of contracts is not the whole law of
agreements
• An agreement of social nature is not a
contract
• A void contract is one which is void ab
–initio
• All void agreements are not necessarily
illegal
• Collateral transactions to an illegal
agreement are not void
 Offers and Acceptance
• Offer or Proposal : S-2(a) defines a proposal as ‘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 an act or abstinence
, he is said to make a proposal. Offer /proposal consist
A promise by the promisor to do or abstain from doing something ,&
• A request to the promisee for giving his acceptance. Until and unless the
promisee accepts the promise unconditionally, the promisor is not bound by
the promisee.
• Lawfull offer:1. An offer may be express or implied
2.An offer must contemplate to give rise to legal consequences & be capable of
creating legal relation
3. The terms of the offer must be certain & not loose or vague
4.An invitation to offer is not an offer
5. An offer may be specific or general
6. An offer must be communicated to the offeree
7. An offer should not contain term the non-compliance of which would amount
to acceptance
8. An offer can be made subject to any terms & conditions
9. Two identical cross-offers do not make a contract
 Types of proposal 1.Express or Implied
2.Specific or General 3.+ve or - ve
Essentials or Rules of a valid offer

a)Terms of an offer must be clear,specific or definite, certain & no loose or

vague.
b)An offer must create legal relationship
c)An offer must be communicated to the person to whom it is made
d) Intention of offer must be obtain the consent or assent
e)Offer may be express or implied, Gen. or Specific , + ve or -ve
f)An offer should not include any term or
(s) of non-compliance which may be assumed to lead
acceptance
g)A statement of price is not an offer
h)An Offer is different from an invitation to an offer

i)Two identical cross offers do not constitute a contract

j)An offer can be made subject to any terms and conditions

 Lapse of an offer
An offer lapses
• If not accepted in the mode prescribed by an offeror
• After stipulated or reasonable time
• By revocation- R.of standing offer or tender –
R. by non-fulfillment of a condition precedent to
acceptance
• B’coz of subsequency illegality or destruction of
subject matter
• By rejection
• By the death or insanity of the offeror/offeree before
acceptance
 Acceptance
• S-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
• S-2(e)Every promise & every set of promises, forming
the consideration for each other,is an agreement &
An Agrmt. enforceable by law is a contract (s-2h)
• Who can accept an offer? Person /(s) to whom it is
made
 Valid acceptance
• Acceptance must be given only by the person to
whom the offer is made
• Acceptance must be absolute & unqualified
• Acceptance may be express or implied
• Acceptance must be communicated to the offeror
• Acceptance may be given for the offer which has been
communicated
• Acceptance must be in the mode prescribed or usual
& reasonable mode
• Acceptance must be communicated within a
reasonable time
• Silence is not considered as a mode of acceptance
• Rejected offers can be accepted only, if renewed
 Communication of proposal,
Acceptance & Revocation
• When the contracting parties are face to face & negotiate in
person, there is instantaneous communication of offer &
acceptance, But where services of the post office are utilised
for communicating among themselves by the contracting
parties, it is not easy to ascertain the exact time at which an
offer or/& an acceptance is made or revoked.
1. Communication of an offer
2. Communication of an acceptance
3. Communication of a revocation
4. Time during which an offer or acceptance can be revoked
5. Effect of delay or loss of letter of acceptance in postal transit
6. Contracts over the telephone
 Check Your Progress T/F
1. A proposal when accepted always
becomes a contract.
• 2. A quotation of price is an offer or
proposal
• 3. Acceptance can be made even without
the knowledge of the offer.
• 4. If the offeree does not accept the offer
according to the mode prescribed by offeror,
the offer does not lapses
automatically.
• 5. An offer may be revoked by the offeror
before the posting of the letter of
acceptance by the acceptor.
 Practical problems
• A invites B to a dinner. B accepts the invitation . A made
elaborate arrangement but B failed to turn up. Can A sue B
for the loss he has suffered?
• M agrees to pay N Rs 100 & in consideration N agrees to
write for him 100 pages within five minutes. Is it a valid
contract?
• Harish says in conversation to Suresh that he will give Rs.
10,000/- to a person whosoever marries his daughter. Alok
marries Harish’s daughter & files a suit to recover Rs.10000.
Will he succeed?
• X sees a book displayed in a shelf of a book shop with a price
tag of Rs. 85. X tenders Rs. 85 on the counter & asks for the
book. The bookseller refuses to sell saying that the book has
already been sold to someone else & he does not have another
copy of that book in the stock. Is the bookseller bound to sell
the book to x?
•
 problems
• 5. B offered to sell his car to A for Rs 95000/- A accepts to
purchase it for Rs.
• 94500/- B refused to sell the car for Rs. 94,500/-
Subsequently A agrees to
• Purchase the car for Rs. 95,000/- but B refused to sell the
car. A sues B for the
• Specific performance of the contract. Will he succeed?
• P sold his busi. To Q without disclosing this to his customers.
M, an old cust. Sent an order for goods to P by name. Q, the
new owner, executed the order. Is M bound to accept the
goods?
• B offered to sell his house to A for Rs. 50,000/- A accepted the
offer by post. On the next day A sent a telegram revoking the
acceptance which reached B before the letter is the revocation
of acceptance valid? Would it make any difference if both the
letter of acceptance & the telegram of revocation of acceptance
reach B at the same time?
 CONSIDERATION
• Sir.Pollock ‘Con. Is the price for which the
promise of the other party is brought.
• S-2d ‘When, at the desire of the promisor, the
promisee or any other person has done or
abstained from doing or does or abstain from
doing, or promises to do or to abstain from
doing something, such act or promise is called
a consideration for the promise & 2f ‘promises
which form the con. Or part of con. For each
other, are called reciprocal promises.
• Def. consists- a) the act or abstinence or
promise which forms the consideration for the
promise, must be done at the desire of the
promisor
• b) it must be done by the promisee or any
other person
• c) it may have been already executed or is in
the process of being done or may be still
executory
• d) It must be something to which the law
attaches a value
 Essentials of a valid
consideration
a) Con. may be an act to do something or abstinence or
forbearance of doing something
b) Con. May be past, present or future
c) Con. Must be real & not illusory
d) Con. Should move at the desire of the promisor
e) Con. may move from the promisee or any other person
Chinyya V. Ramayya / A stranger to contract cannot sue
a) For supporting each independent promise, there must be an
independent consideration
b) Con. need not be adequate
c) Con. Must be something which the promisor is not already
bound to do
d) Con. must be valuable in the eyes of law
 Exception to the rule of ‘No
consideration No contract’
• Promise made on account of love & affection
S-25(1)If it is(i) expressed in writing (ii) registered under
the law for the time being in force for the registration of
documents,& is (iii) made on a/c of natural love &
affection
• Promise for compensation of voluntarily services(S25-2)
• Promise to pay time barred debt (S-25-3)
• Contribution to charity
• Contract of Agency
• Completed gifts
• Remission by the promisee, of performance of the
promise
 Check your progress T/F
• An act constituting consideration for the
promise must be done at the desire of the
promisor or any other person.
• Past consideration is no consideration
• A stranger to a contract cannot sue thereon.
• Consideration need not be adequate to the
promise for the validity of an agreement
• No consideration is necessary to create an
agency.
 Practical problems
• M offered a reward to anyone who would rescue his
wife dead or alive from a burning building. A fireman
risking his life brought out the wife”s dead body. Is
he entitled to recovery of the reward?
• A & B are friends, B treats A during A’s illness. B
does not accept payment from A for the treatment &
A promises B’s son- ‘X’ , to pay him Rs. 1000/- A
being in poor circumstances, is unable to pay. X
sues A for the money. Can X recover?
• X a social reformer, promised Y a reward of Rs.
1000/- if he refrained from smoking for two years. Y
does so. Is he entitled to the reward?
• A writes to B, “ at the risk of your own life, you saved
me from a serious motor accident. I promise to pay
you Rs. 1000/- “ A does not pay. Advise B as to his
legal rights.
 Capacity of parties
• S-11 lays down that “Every person is competent to
contract who is of the age of majority according to the
law to which he is subject, and who is of sound mind,
and is not disqualified from contracting by any law to
which he is subject.’
• S-11declares the foll. persons to be incompetent a)
Minors b) Persons of unsound mind c) persons
disqualified from contracting by The Law
 Minor’s Agreements
• An agreement by a minor is absolutely void &
inoperative as against him
• Beneficial agreements are valid contracts
• Contracts of apprenticeship and service by a minor
• No ratification on attaining the age of majority
• The rule of estoppels does not apply to a minor
• Minor’s liability for necessaries
• Specific performance
• Minor partner
• Minor agent
• Minor & insolvency
• Contract by minor and adult jointly
• Surety for a minor
• Position of minor’s parents
• Minor shareholder
• Minor’s liability in tort
 Person of unsound mind
• What is sound mind? S-12-”A person is said to
be of sound mind for the purpose of making a
contract, if at the time when he makes it, he is
capable of understanding it and of forming a
rational judgment as to its effects upon his
interests.”
• Effects of agreements made by persons of
unsound mind
 Disqualified persons
• Alien enemies
• Foreign sovereigns and ambassadors
• Convict
• Married women
• Insolvent
• JSC & corporation incorporated under a spl.Act
 Check your progress
• 1. A Minor is a person who has not
completed the age of 21 years
• 2. An agreement conferring some benefit
upon the minor is a valid contract?
• 3. A minor cannot be adjudged insolvent
• 4. A minor is personally liable for necessaries
supplied to him.
• 5. A person who is usually of unsound mind
may enter into a contract when he is of sound
mind.
• 6. A rule of estoppels does not apply to minor
• A, an infant, obtains a loan from B. Can A be asked to repay
the money?
• A , a minor lends Rs. 1,000/- against a Promissory Notes
executed in his favour. Is the borrower liable to repay the
money?
• A minor fraudulently represented to a money lender that he
was of full age, & obtained a loan of Rs. 500. Has the
moneylender any right of action against the minor for the
money lent, or for damages for fraudulent misrepresentation?
• A, an infant, borrows Rs. 2000/- from B & executes a
Promissory note for the amount in favour of B. On his
attaining majority, the minor executes another promissory
note in lieu of the first which is then cancelled . Is the second
PN valid?
• A renders some service to B during his minority at the request
of B. B, on attaining majority, enters into an agreement with
A to compensate A for services rendered during B’s minority.
Is the agreement valid?
 Free consent
• S-13 –defines the term ‘consent’ as “two or more persons are
said to consent when they agree upon the same thing in the
same sense’
• S-14 ‘Consent is said to be free’ when it is not caused by 1.
coercion 2. undue influence 3. misrepresentation
4. fraud 5. mistake
• Coercion –S-15 “coercion’ is the committing, or threatening to
commit, any act forbidden by the IPC 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”(Ranganayakamma v
Alwar Setti)
1. Coercion implies 2. the act constituting coercion, may be
directed at any person 3. It does not matter whether IPC is or
is not in force
a)Threat to file a suit b) threat to commit suicide c) duress
Effects:
 Undue Influence
• S-16 (1)A contract is said to be induced by ‘undue
influence’ where the relations subsisting bet’n the
parties are such that (i) one of the parties is in a
position to dominate the will of the other and (ii) uses
that position to obtain an unfair advantage over the
other.
• In parti. & without prejudice to the generality of the
forgoing principle a person is deemed to be a
position to dominate the will of another
a) Where he holds a real or apparent authority over the
other or b) where he stands in a fiduciary relation to
the other ; or c) where he makes a contract with a
person whose mental capacity is temporarily or
permanently affected by reason of age, illness ,or
mental or bodily distress
• 3. Where a person who is in a position to dominate the
will of another, enters into contract with him, and the
transaction appears, on the face of it or on the
evidence adduced to be unconscionable, the burden
of proving that such contract was not induced by
undue influence shall lie upon the person in a position
to dominate the will of other.
• Effects of UI- 1.S-19A - contract is voidable at the
option of the party whose consent was so caused
• Unconscionable transactions
• Pardanashin woman
 Fraud
• S-17 ‘Fraud’ means & includes any of the foll. acts
committed by a party to a contract, or with his
connivance, or by his agent, with intent to deceive
another party thereto or his agent , or to induce him
to enter 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 or the fact
3. A promise made without any intention of performing
it ;
4. Any other act fitted to deceive
5. Any such act or omission as the law specially
declares to be fraudulent.
 Can silence be fraudulent?
• 1.(i) the circumstances of the case are such that, regard
being had to the, it is the duty of the person keeping silence
to speak, or
• 9ii) silence is, in itself, equivalent to speech . It therefore
follows that
1. As a rule mere silence is not fraud b’coz there is no duty cast
by law on a party to a contract to make a disclosure to the
other party
2. Silence is fraudulent, if the circumstances of the case are
such that ‘ it is the duty of the person keeping silence to
speak
a. Fiduciary relationship b. contracts of insurance
c. Contract of marriage engagement d. contracts of family
settlements e. share allotment contracts
3. Silence is fraudulent where the circumstances are such that ‘
silence is, in itself , equivalent to speech.
 Essential elements of Fraud
• There must be false representation
• It must be done by the party or his agent
• The representation must relate to a fact
• The other party must have been attracted to act
upon the representation leading to a fraud
• The representation intentionally done to commit
a fraud must have been done before the
conclusion of the contract
• The other party must have relied upon the
representation intentionally done to commit a
fraud & thereby must have been deceived
 Misrepresentation
• S-18 ‘MR 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
agrmt.,to make a mistake as to the substance of
the thing which is the suject of agrmt.
Mistake 0f law & Mistake of fact
• S-20 ‘Where both the parties to an agrmt.
are under a mistake as to a matter of fact
essential to the agrmt., the agrmt.is void
• S-21 ‘a contract is not voidable b’coz it was
caused by a mistake as to any law in force
in India; but a mistake as to law not force in
India has the same effect as a mistake of
fact.
• S-22 ‘ a contract is not voidable merely
b’coz it was caused by one of the parties to
it being under mistake as to a matter of fact
Mistake of law & Mistake of fact
Mistake of Law
• Mistake of Law of the country
• Mistake of Law of the foreign country
Mistake of Fact:
a) Unilateral b) Bilateral :i) Mistake to possibility
of performing the contract
ii) Mistake as to the subject matter regarding : 1)
Existence 2) Identity 3) Quantity 4) Quality
5) Subject Matter 6) Title 7) Price
 Check Your progress-T/F
1. In the absence of free consent, the contract is
voidable at the option of either party.
2. A threat to commit suicide amounts to coercion.
3. There is no presumption of undue influence
between n husband & wife.
4. Silence as to facts likely to affect the willingness
of a person to enter into a contract is fraud.
5. Where both the parties to an agreement are
under a mistake as to a matter of fact essential to
the agreement, the agreement is void.
 Practical Problems
1.A, sells a horse to B knowing fully well that the horse is vicious. A does not
disclose the nature of the horse to B. Is the sale valid?
2. A, who is trying to sell an unsound horse, forges a veterinary surgeon’s
certificate, stating that the horse is sound & pins it on the stable door. B
comes to examine the horse but the certificate goes unnoticed by him. He
buys the horse and finds later on the horse to be unsound. He wants to
avoid the agreement under the plea that he has been defrauded. Will he
succeed?
3. X, offers to sell Y a painting which X knows is a copy of a well known
masterpiece. Y, thinking that the painting is an original one & that X must
be unaware of this, immediately accepts X’s offer, Does this result in a
contract?
4. X buys from Y a painting which both believe to the work of an old master &
for which X pays a high price. The painting turns out to be only a modern
copy. Discuss the validity of the contract.
5. X, falsely representing herself as the wife of a millionaire takes a ring from a
jeweler's shop for the approval of her husband. She pledges it with a pawn
broker who in good faith & without notice of the fraud pays her Rs. 10,000/-
Can the jeweler recover the ring from the pawn broker?
6. M, an old man of poor sight endorsed a bill of exchange for Rs.3000/-
thinking that it was a guarantee. Is M liable to pay the amount?
 Legality of object &
consideration
• S-23 ‘the consideration or an object of an
agreement is lawful,unless
1. It is forbidden by law; or
2. It is of such nature that, if permitted, it would
defeat the provisions of any law,or
3. It is fraudulent or
4. It involves or implies injury to the person or
property of another; or
5. The court regards it as immoral; or
6. The court regards it as opposed to public
policy
 Void Agreements:2(g)The
agrmt.,which is not enforceable
Agreement:
by law
1. By incompetent parties(s-11)
2. Made under mutual mistake of facts(s-20)
3. The consideration or object of which is unlawful(s-23)
4. The con. Or object of which is partly unlawful (s-24)
5. Entered into without any consideration(s-25)
6. Made in restraint of marriages(s-26)
7. Made in restraint of trade,Busi.,Occupation(s-27)
8. In restraint of legal proceedings(s-28)
9. All agrmts.,the meaning of which is not certain(s-29)
10. Wagering agrmts.(s-30)
11. Agrmts. Contingent on impossible events(s36)
12. Agrmts. To do an act impossible in itself. (s-56)
 Performance of contract
• Contract creates some sort of legal obligation which
continues till the contract is either performed or
discharged.
• Performance of a contract implies fulfillment of the
terms and conditions or obligation of the contract by
the respective parties to the contract within the time
and in the manner prescribed
• S-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 provisions of this Act, or of any other law.
Thus 1. Actual performance 2. Attempted
performance
 Performance of a contract
• Actual performance : A party to a contract is said
to have actually performed his promise when he
has done something that he has undertaken or
promise to do
• Attempted performance: the promisor offers to
perform his obligation under the contract as per
terms of the contract, but the performance is not
complete unless the offer of performance is
accepted by the promisee . Attempted
performance is of two kinds 1) Tender of goods
2. Tender of money
 Contract which need not be
•
performed
When performance become impossible(s-56)
• When there is n agrmt.,bet’n the parties to a contract to
substitute a new contract /rescind the old/ alter it (s-62)
• When every promisee may dispense with or remit, wholly or in
part, the performance of the promise made to him, or may
extend the time for such performance, or may accept instead of
it any satisfaction which he thinks fit,
• When a person, at whose option a contract is voidable,
rescinds it, the other party thereto need not perform any
promise contained therein in which he is promisor. Such
contract need not be performed(s-64)
• If any promisee neglects or refuses to afford the promisor
reasonable facilities for performance of his promise , the
promisor is excused by such neglect, or refusal as to
nonperformance caused thereby.
 WHO CAN DEMAND
PERFORMANCE
• It is only the promisee who is entitled to demand
performance of the promise.
• When the promise is made with two or more
promisees jointly and unless a contrary intention
appears from the contract made ,the right of
claiming performance of the contract rests with
all the joint promises jointly.
• Legal representatives of such deceased persons
jointly
 By Whom must contracts be
performed
• Promisor
• Agent
• Legal Representation
• Third person-Lata Kapoorchand V.Mir
Nawab
• Joint Promisor
 Reciprocal promises & Rules
regarding their performance
• Mutual and Independent promises Mutual and Concurrent promises

• Conditional and dependent promises

• Rule I-S-51- When a contract consist of reciprocal promises to be
simultaneously performed, no promisor need to perform his promise unless
the promisee is ready & willing to perform his RP
• According to order expressly fixed by the contract/nature of the transaction
require
• When a contract contains RP, and one party to the contract prevent the
other from performing his promise, the contract becomes voidable at the
option of the party so prevented & entitle for compensation for any loss
sustain by non-performance of contract
• RP are such of nature that one of them cannot be performed till the other
party has performed his or her promise. If the other party fails to perform
his/her promise , the other party cannot claim performance of RP from Ist
party. Other party has to compensate to Ist party
• Where persons R’lly promise, I stly to do certain things which are legal and 2
ndly , under sepcified circumstances to do certain other things which are
illegal , I st is a contract & 2 nd is a void agreement
Time & Place of performance of
a contract
• Within reasonable time
• Where time and place is specified
• On certain day & place
• Promisor to apply to promisee to appoint a place for
performance of promise
• Manner or time by promisee to perform a promise
• Time of performance of contract
a) Where time is the essence of the contract
b) When time is not the essence of the contract
 Discharge of contract
• By performance of the contract
• By agreement 1)By novation(s62)2) By recession (s-
62) 3) By alteration(s-62)
4) By remission(s-63) 5)By Waiver
6)By merger 7) By owing to the occurrence of an event
 By Lapse of time
 By operation of law-death, insolvency, Merger
 By breach made by any party to contract
 By assignment
 By impossibility of performance
 By Material alteration w/o the consent of the
concerned party
 Remedies for breach of a
contract
• Recession of the contract
• Suit for damages
• Quantum meruit
• Suit for specific performance
• Suit for injuction
 Quasi contracts
• S-68-72 “Certain relations resembling those
created by contracts”or” quasi contracts”
• Kinds of quasi contracts
a) Supply of necessaries(s-68)
b) Reimbursement of payment by an interested
person (s-69)
c) Liabilities of payment for non-gratuitous act(s-
70)
d) Responsibility of a finder of goods(s-71)
e) Payment of money by mistake or coercion(s-
72)
 Contract of Indemnity
• S-124”A contract by which one party promises to
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 COI
• Nature-1.Express promises to indemnify
2.Liability of indemnifier depends upon
contingency
3.It does not include implied promises
4.S-69 also implies a promise to indemnify
5.It is species of gen. contract
 Rights of Indemnity Holder and
of an Indemnifier
• Promisee in a COI, acting within the scope
of his authority , is entitled to recover from
the promisor- 1. damages 2. costs 3.All
sums 4. Suit ro specific performance
• Rights of Indemnifier = rights of surety
 Contract of Guarantee
• S-126”A COG is a contract to perform a
promise, or discharge the liability, of a
third person in case of his default. The
person who gives the guarantee is called
the “surety”,the person in respect of whose
default the guarantee is given is called the
‘principal debtor’ & the person to whom the
guarantee is given is called the ‘creditor’.
A gurantee may be either oral or written.
 Essential features of a COG
• all essentials of valid contract
• Existence of three parties-Principal debtor,
surety, and creditor
• There must be a debt existing & it should be
recoverable
• Liability of PD is primary one and liability of
surety is secondary one. It arises only in case of
default of the PD
• The Liability Undertaken by surety must be
legally enforceable
• S-127-A COG without consideration is void
• There should not be any misrepresentation
 Types of Guarantee
• Retrospective & Prospective Guarantee
• Fidelity Guarantee
• Specific Guarantee
• Continuing Guarantee
• Revocation of continuing Guarantee
1.By notice 2. By death of surety(s-131)
3. By variation of contract w/o Knowledge and consent of
surety(s-133)
4. By release of PD W/o K & C of surety(s-134)
5. By compounding with PD(s-135)
6. By Creditors Act(S-139)
7. By creditor losing security against the PD(S-141)
8. By invalidation of contract which inc. contract by
misrepresentation (s-142)& contract by concealment(s143)
9. By failure of co-surety or(s) joining in the COG
 Extent of liability of surety/Guarantor
• Always contingent & Secondary
• If COG is silent , creditor may file a suit against the surety on the
default of the PD w/o suiting him or w/o making the PD as co-
defendant
• Unless otherwise provided in the COG, a surety is not discharged
from his liability in the case of death of the PD
• In continuing guarantee, a guarantee extends to a series of
transaction, until the revocation of the guarantee
• When creditor holds some security from PD, it is not necessary
for the creditor first to resort to the security before suing the
surety, unless otherwise provided in the contract
• When the PD is discharged by operation of law & not by any
voluntary act of the creditor, the surety is not discharged thereby
and remains liable for the whole amount of debt.
• A surety is not liable for cost of fruitless action by creditor
• A surety is not liable, if guarantee is obtained by
misrepresentation, concealment
• Contract bet’n creditor and surety is not collateral contract but an
 Rights of surety
• Against the PD-1)Right of subrogation
2)Right to claim indemnity
3)Right to be relieved of liability
• Against the creditor-
1) Right to benefit of Creditor’s security
2) Right to claim set-off, in any
3) Right of Exoneration & Subrogation
• Against co-sureties
• Co-sureties-Rights & Liabilities
1. Liable to contribute equally
2. liab. When they are bound to pay different amount
3. On the release of one of them
4. Lia. Of surety when other surety does not join
5. Lib. Of two persons primarily liable, when some
 Discharge of surety from his
liability
• By revocation-By notice, Death of surety
• By the conduct of the creditor- By making variations in
the terms of contract, By releasing PD, compounding by
the creditor with PD, By an act of the creditor, by loss of
security
• By invalidation of contract-Gnte. Obtained by
misrepresentation/concealment, failure of joining any
person as a co-surety, failure of consideration
 Contract of Agency
Agent & Principal
• The persons who act in place of others are called
agents. Agent
is the connecting link bet’n the principal & third party.
 S-182-An agent is a person employed to do any act
for another, or to represent another in dealings with
third persons. The person for whom such act isw
done or who is represented, is called the principal.
 Who May Employ an Agent- S-184 “any person who is
of age of majority according to the law to which he is
subject, & who is of sound mind, may employ an
agent’
 Essential elements of
Relationship of Agency
• Relation bet’n two parties created by an
express or implied agreement
• 2 Imp. general rules-
1. Whatever a person can do himself
personally, he can do the same through
another person i.e. his agent.
2. The acts of an agent are considered the acts
of principal.
 A person under any legal or natural disability
or incapacity cannot appoint an agent.
• Principal should As an agent is only a connecting link
bet’n his principal & the third party & he is not bound
personally by his acts performed on behalf of his
principal, the law requires the principal & the third
party to be competent to contract
• confer authority on his agent to act for him & the
authority, thus conferred should be such so as to
make the principal answerable to third person.
• The relationship of agency is basically based on
confidence bet’n a principal & his agent.
• S-185, no consideration is necessary in order to
create an agency. Acceptance of the office is
regarded as a sufficient consideration for the
appointment
 Creation of Agency
• By express agreement
• By implied agreement- conduct, situation, ,
circumstances of the case, from the
relationship of the parties concerned
Cl. Of IA-By Estoppel , By holding out & By
necessity
• By operation of law &
• By ratification
 Ratification– Effects of
ratification
• S-196 ‘Where acts done by one person on
behalf of another, but without his knowledge or
authority, he may elect to ratify or disown such
acts . If he ratifies them, the same effects will
follow as if they had been performed by his
authority.’
• Rat.may be express or implied
• Rat. Is Tantamount to prior authority
 Requisites of valid ratification
• Existence of principal
• The capacity of the principal
• Full K’ledge of Facts is essential
• The act must be done for or on behalf of the principal
• Rat. Of the whole transaction
• Unauthorized act injuring third person or party cannot
be ratified
• The act to be ratified must be legal
• Rat. Can be done by the principal if he has the power
to do so
• Rat. Must be done within a reasonable time
• Rat. Must be communicated to the concerned party
• Rat. Relates back to the date of the act of the agent
• The act ratified must be relate to an existing thing
 Ratification cannot be valid
• When the existence of a principal is not there at the
time of the act which is to be ratified
• Where the principal is incompetent to enter into a
contract
• Where the act is not done for or on behalf of the
principal
• The principal does not have full K’ledge of the fact
• When rat Is not done of the whole trasc.
• Where unauthorized act or acts injuring the third party
or person is/are ratified
• Where the act to be ratified is illegal
• When the rat. Is done of the acts which the principal
has no power to do
• Rat. Is not communicated to concerned party
•
 Classification/types of agents
1.Special 2.General 3.Universal
4.co-agents 5. substituted 6.Sub-Ag.
7.Factors 8. Brokers 9. Auctioneers
10.Commission 11.Del Credere
12.Forwarding 13. clearing
14. Indenting
 Authorities of an agent
• The agents capacity to bind the prin. Is known
as his authority
• When an agent is authorized to carry on busi.,
he can do every lawful thing or act necessary
for that purpose
• Actual authority of an agent
• Apparent or ostensible authority
• Agents authority in an emergency
• Delegation of Authority by agent
 Rights, Duties & liabilities of agent
to his principal
• Rights to do all lawfull things
• Right in emergency
• Right appoint sub-agent & substitute agent
• To renounce his agency
• Right to receive remuneration
• Right to receive compensation for premature revocation
• Agent’s right of retainer
• Agent’s right of lien on principal’s property
• Agents right of indemnification against the consequences of
lawful or legal act /acts
• ARIAC of all the acts done in good faith
• Agents right of stoppage in transit
• AR of compensation for injury caused by his principal’s neglect
or want of skill
 Duties and liabilities
• To conduct principal’s busi. According to his instruct.
• On termination of agency by his principal’s death or
insanity
• To conduct /carry on the work with reasonable
care,skill and diligence
• to render a/c properly to his prin.
• Not to delegate his authority
• To communicate with prin. In cases of difficulty
• Not to do deal on his own a/c in the busi. Of agency
• Not to earn or make secret profit from agency busi.
• Not to use information obtained In course of the
agency busi. Against his prin.
• To pay sum received from the principal
• Not to set up advance adverse title
• Duty in naming an agent for his principal
• Agents liability in respect of damages and
misconduct
• Personal liability of an agent where fixed by
trade custom or usage
• Agent agrees expressly to be liable
• Agents liability for his wrongful acts
• Liability of an agent for the acts of sub-agents
 Rights, Duties and liabilities of
principal to his agent
• Rights-1. To demand accounts
2.To repudiate contract when agent deals in the
busi. Of agency on his own a/c
3.To benefits gained by his agent dealing on his
own a/c in busi. Of busi.of agency
4. To recover damages
5.To refuse remuneration to his agent when he is
guilty of misconduct
6. To revoke agent’s authority
To ratify/disown his agent’s acts
 Duties & Liabilities of principal
• To pay remuneration & dues
• To indemnify his agent against the consequences of
all legal or lawful acts
• IAC of all acts done in good faith
• To compensate his agent for injury caused
• Liability of prin.in respect of contracts entered by his
agent with third parties
• Lop. When the notice is properly given to his agent
• Lop. When he induces 3 rd parties or persons to
believe that his agents unauthorized acts were
authorized
• Pl on a/c of agent’s misrepresentation or fraud
• Termination of Agency-S-201- ‘An agency is
terminated by the principal revoking his
authority, or by the agent renouncing the busi.
of agency, or by the Boa being completed, or
by either the prin. Or agent dying or becoming
of unsound min, or by the prin. Being
adjudicated an insolvent under the provisions
of any Act for the time being in force for the
relief of insolvent debtor.’
• Modes of termination of an agency
A. By act of the parties to the contract of agency
B. By operation of law
 ToA by act of parties to the con.of agency
• By agreement between prin. & his Agent
• By revocation of agency by the prin
• By renunciation of bus.by an agent
1.By completion of the agency of busi
2.By expiry ofperiod or time
3. By destruction of subject matter
4. By insolvency of the prin.& in some cases that of the
agent
5. By death of agent/principal
6. By insanity of either party
7. By prin. Becoming an alien enemy
8. By object of agency becoming illegal or unlawful
10. By incapacity of principal or agent
11. By termination of sub-agents authority
 SALE OF GOODS ACT 1930
• When under a contract of sale, the property in
goods is transferred from the seller to the
buyer(at once) the contract is called a sale
• But where the transfer of the property in the
goods takes place at a future time or subject to
condition thereafter to be fulfilled , the contract
is called an agreement to sell. An agreement to
sell becomes sale when the time elapses or the
conditions are fulfilled subject to which the
property in goods is to be transferred.
 Essentials of valid contract
1.Two parties 2.Goods 3.Transfer of property
4. Monetary consideration price 5.elements of valid
contract
FORMALITIES OF A CONTRACT OF SALE
1.Goods –Existing , Future , contingent
2. Effects of destruction of goods or perishing of goods
3. Ascertainment at price
Stipulation as to time a) Stipulations relating to time of
payment & b) Stipulations not relating to time of
payment but to other things like delivery of goods etc.
Contract of sale and agreement to sell a) nature of
contract b) transfer of ownership of property
c)Types of goods or nature of property transferred
d) General and particular property
e) Consequences of breach f) Risk of loss
g) Sellers”s right of re-selling the goods
h) Seller’s Insolvency i) Buyer’s insolvency
SALE & HPA, BAILMENT AND BARTER EXCHANGE
Difference bet’n sale & HPA-
a) Nature of contract & Ownership
b) Termination of a contract
c) Implied conditions and warranties
d) Payment in installments
e) Insolvency of the buyer and risk of loss
f) Sale and bailment
g) Sale and barter exchange
 Conditions and warranties
• S-12-(1)A stipulation with reference to goods which
are subject there of may be a condition or warranty
• S12-(2) A condition is a stipulation essential to main
purpose of the contract, the breach of which gives rise
to a right the contract as repudiated
• S-12(3) A warranty is a stipulation collateral to the
main purpose of the contract, the breach of which
gives right to a claim for damages, but not a right to
reject the goods & treat the contract repudiated.
• S-12(4) Whether a stipulation in a contract of sale is a
condition or a warranty depends in each case on the
construction of the contract. A stipulation may be a
condition, though called a warranty in the contract.
 When a condition is treated as a
warranty
A) Voluntary waiver of condition
B) Acceptance of goods by buyer
Warranty Condition
1.Stipulation collateral stipulation essential to the
to the main purpose main purpose of COS
2. A breach of W-right A breach of C-right to sue
to sue for damages for Dam. & repudiate con.
3.BOW cannot be BOC may be treated as
treated as BOC BOW
4.IN BOW buyer cannot In BOC buyer can claim Dam.
repudiate the con. instead of repudiation of con.
 Express & Implied con.& warranties
• Implied conditions in a contract of sale
a)S-14a con. As to title
b) Con. to sale by description(S-15)
c) con. As to sale by description as well as by
sample(s-15)
d) Con as to sale by sample (s-17)
e) Con. As to quality or fitness( s-16(1)
f) Con. As to merchantability (s-16(2)
g) Con. As to wholesomeness
h) Con. Implied by custom (s-16(3)
 Implied warranties in a con. Of sale
1. Implied warranty of quiet possession(s-14b)
2. Iw of freedom from encumbrance (s-14c)
3. IW as to quality or fitness by usage of trade(s16(3))
4. IW to disclose dangerous nature of goods
 Inclusion of express conditions & warranties
 Exclusion of implied conditions & warranties in a
contract of sale
 Doctrine of ‘ caveat emptor’-Exceptions
 Implied con. As to quality or fitness for buyers’
purpose(s-16(1)
 Merchantable quality or sale of goods by
description(s-16(2)
 Usage by trade(s-16(3)
 Consent by fraud
 Transfer of property or ownership
• Passing of property from seller to the buyer
• POP in a contract for sale of specific or Ascertained
Goods –i) intention of parties S-19
ii) POP at the time of con.s-20
iii)POP in the case of specific goods where the goods
are to be put into deliverable state s-21
iv) POP ICSG when the price is to be ascertained by
weighing (s-22
• POP in the con. Of sale of Unascertained goods(s-23)
• POP in Goods sent on Approval or “on sale or
return(s-24)
• Reservation of Right of Disposal(S-25)
• Passing of Risk(S-26)
 Transfer of title by Non-owners
1. Sale by a person not the owner or title by estoppel
2. Sale by mercantile agent
3. Sale by one of joint owner
4. Sale by a person in possession under voidable
contract
5. Sale by the buyer or the seller as possession after
sale
6. Sale by unpaid seller
7. Exceptions in other acts
• Sale by official Assignee or Liquidator of theco.
• Sale by a person who finds the lost goods under
certain circumstances
• Sale by a pawnee of pledge under certain circum.
 Performance of the contract of sale
Delivery of goods-Actual, Symbolic, Constructive
Rules regarding delivery of goods-
• Mode of delivery(s-33)
• DoG & Payment of price are concurrent conditions (s-
32)
• Effect of part DoG (s-34)
• Buyer to apply for delivery(s-35)
• Place of DoG(s-36)
• Risk of delivery (S-40)
• Time of delivery (S-36(2) & (4)
• Goods in possession of a third person or party
• Cost of DoG(S-36(5))
 Delivery of wrong quantity(s-37)
• DOG less than contracted for/ In excess
• DoG contracted for mixed with other goods
• Installment deliveries of goods
• Delivery to carrier or wharfinger
• When an acceptance is complete on DoG
• Buyer not bound to return rejected goods
• Liability of buyer for neglecting or refusing DoG
Rights of unpaid seller & Remedial
measures
• A seller is deemed do be an unpaid seller –when (a) the whole of
the price has not been paid or tendered (b) the bill of exchange
or other negotiable instrument has been received as conditional
payment, and the condition on which it was received has not
been fulfilled by reason of the dishonour of the instrument or
otherwise
• Rights- a) Against goods & b) Against the buyer Personally
RAG-i) Where property in goods has passed- Right of a) lien (b)
stoppage of goods in transit (c) Resale
ii)Where PiG has not passed (a) Withholding the delivery of goods
(b) Stoppage in Transit
RAB- 1)Suit for price 2)Suit for damages 3) Repudiation of contract
4) Suit for contract
AUCTION SALE
 RESTRICTIVE TRADE PRACTICES
Trade practice(S-2(u)-TP means any practice
relating to the carrying on of any trade &
includes: (i) anything done by any person which
controls or affects the price charged by, or the
method of trading of, any trader or any class of
traders (ii) a single or isolated action of any
person in relation to any trade;
• S-2(s)Trade means any trade busi.,ind.,
profession or occupation relating to the
production, supply, distribution, or control of
goods & includes the provision of any services
 What is restrictive trade practice?
• S-2(o) –A RTP means a TP which has or may
have the effect of preventing, distorting or
restricting competition in any manner and in
particular-(i) which tends to obstruct the flow of
capital or resources into stream of production ;
or (ii) which tends to bring about manipulation
of prices or conditions of delivery or to affect
the flow of supplies in the market relating to
goods or services in such manner or to impose
on the consumers unjustified cost or restrictions
• A RTP shall be deemed to be prejudicial to the
public interest
 What is price? / What is goods?
• S-2(e)-Price in relation to sale of any goods or to the
performance of any services includes every valuable
consideration, whether direct or indirect & includes
any consideration which in effect relates to the sale of
any goods or to the performance of any services
although obstensibly relating to any other matter or
thing.
• S2(e)Goods may be existing or future; specific or
unascertained or generic goods. The follow. Are also
included within the meaning of the term”goods” (i)
Products manufactured ,processed or mined in India
(ii) shares & stocks including issue of shares before
allotment (iii) goods imported into India wherever ref.
is made to goods supplied, distributed or controlled in
In India.
 What is service?
• Service means service which is made available
to potential users & includes the provision of
facilities in connection with banking, financing,
insurance, chitfund, real estate, transport,
processing, supply of electrical or other energy,
boarding or lodging or both, entertainment,
amusement or the purveying of news or other
information. Service does not include the
rendering of any service free of charge or under
a contract of personal service.
 Registration of Agreements relating to
RTP
• AGREEMENT REGISTRABLE (S-33)-
• DEEMED RTP AGREEMENTS-
I) Any Agrmt. by any method, which restricts, or is likely to
restrict, the persons or classes of persons to whom goods
are sold or from whom goods are bought.
II) Any agrmt. Requiring a purchaser of goods, to purchase
some other goods as a condition of such purchase
III) Any agrmt. Restricting in any manner the purchaser in the
course of his trade from acquiring or otherwise dealing in
any goods other than those of the seller or any other
person.
IV) Any agrmt. to purchase or sell goods or to tender for the
sale or purchase of goods only at prices or on terms or
conditions agreed upon bet’n the sellers or purchasers. An
agrmt. May have the effect of forming either a buyer’s cartel
or a seller”s cartel. Cartel must carry out RTP in India or its
actions must have the effect of a retrospective TP being
carried out in India to attract jurisdiction of the commission.
v) Any agrmt. To grant or allow concessions or
benefits, including allowances, discounts, rebates or
credits in connection with, or by reason of dealings
vi) Any agrmt. to sell goods, on condition that the prices
to be charged on resale by the purchaser shall be
the prices stipulated by the seller unless it is clearly
stated that prices lower than those prices may be
charged
vii) Any agrmt. to limit, restrict or withhold the output or
supply of any goods or allocate any area or market
for the disposal of the goods
viii) Any agrmt.not to employ or restrict the employment
of any method, machinery or process in the
manufacture of goods
ix) Any agrmt. For the exclusion from any trade asso. of
any person carrying on or intending to carry on,in
good faith the trade in relation to which theTAformed
x) Any agrmt. to sell goods at such prices as would have the effect
of eliminating competition or a competitor
xi)Any agrmt. Restricting in any manner, the class or number of
wholesalers, producers or suppliers from whom any goods may
be bought
xii) Any agrmt. As to the bids which any of the parties therto may
offer at an auction for the sale of goods or any agrmt. whereby
any party thereto agrees to abstain from bidding at any auction
for the sale of goods
xiii) Any agrmt. Not referred to above, which the CG may,(by
notification) specify for the time being as being one relating to a
RTP pursuant to any recommendation made by the
Commission in this behalf
xiv) Any agrmt.to enforce the carrying out of any such agreement
(s-33(1)
xv) Any agrmt making provision for services as they apply in
relation to agreements connected with the production, storage,
supply ,distribution or control of goods (s-33(2)
• Agreements which do not require registration(s-
33(3)-(i) agreements expressly authorized by or
under any law for the time being in force, or
(ii) Agreements which have the approval of the CG
or(iii)if the govt. is a party to any agreement The
above exclusions are on a/c of public policy
Procedure for Registration of Agreements(s-35R-
12&14)
1.Time limit for registration
2.In case of variation or determination of any
agrmt.
3. In case of agrmt. Made by trade association
4.Where one person is party to numerous agrmts.
5. Terms in one or more instruments
• Examination & recording of agrmts (R13)
• Register of agreements –parti. To be entered in the register &
its maintenance-The director General shall –i) enter the parti.
Of agrmts registrable in the register maintained in accordance
with form X
ii)Maintain a spl.sec. of the register for entering therein such parti.
As may be directed by the commission
iii)Maintain an alphabetical index of the names of the parties to the
agrmts other than those reserved to be entered in the spl.sec.
of the register.
iv) Also maintain an AI of the agrmts in relation to the goods or
services covered by such agrmts, as far as practicable, on the
lines of the classification specified in the Sch. To the MRTP
(classification of Goods)Rules 1971
v) All agrmts & other documents furnished shall be kept in
separate folders arranged in alphabetical order accoring to the
name of the first contracting party.
vi) Also maintain in separate registers, particulars in respect of
RTP,Monopolistics TP & UTP investigated by him or inquired
into by the Commission, in accordance with form XI,XIA & form
XIB respectively of the sch. To the rules
• Inspection & extracts of the register
• Presumption as to the public interest –The practice
shall not be prejudicial to the PI where the
Commission is satisfied-a) that the restriction is
reasonably necessary, having regard to the character
of the goods to which it applies, to protect the public
against injury in connection with consumption,
installation or use of those goods ( b) that the removal
of the restriction would deny to the public as
purchasers, consumers or users of any goods, other
specific & substantial benefits or advantages enjoyed
or likely to be enjoyed by them as such, whether by
virtue of the restriction itself or of any arrangements or
operations resulting therefrom .
c) That the restriction is reasonably necessary to
counteract measures taken by any one person not party to the
agreement with a view to preventing or restricting competition
in or in relation to the trade or busi. In which the persons
thereto are engaged
d) TRRN to enable the person party to the agrmt. to negotiate
fair terms for the supply of goods to, or the acquisition of
goods from, any one person not party thereto who controls a
preponderant part of the trade or busi. Of acquiring or
supplying such goods, or for the supply of goods to any
person not party to the agrmt. & not carrying on such a trade
or busi. who, either alone or in combination with any other
such persons, controls a preponderant part of the market for
such goods
e) That having regard to the conditions actually obtaining or
reasonably foreseen at the time of the application, the removal
of the restriction would be likely to have a serious & persistent
adverse effect on the general level of unemployment in an
area, or in areas taken together, in which a substantial
proportion of the trade, or industry to which the agrmt. relates
is situated
f)_____ To cause a reduction in the volume or earnings of the
export busi. Which is substantial either in relation to the whole
export busi. of India or in relation to the whole busi. (including
export busi.) of the said trade or industry
g) That the restriction is reasonably required for purposes in
connection with the maintenance any other restriction accepted
by the parties, whether under the same agrmt.or under any
other agrmt. Bet’n them, being a restriction which is found by
the Commission not to be contrary to the public interest, or has
been so found in previous proceedings before the Commission
h)That the restriction does not directly or indirectly restrict or
discourage competition to any material degree in any relevant
trade or industry & is not likely to do so
i)That such restriction has been expressly authorised & approved
by the CG
j) That such restriction is necessary to meet the requirements of
the defence of India or any part thereof, or for the security of
the State ; or
k) That the restriction is necessary to ensure the maintenance of
supply oof goods & services essential to the community.
 Control of certain RTP
Inquiries & Investigations into RTP by Commission
The com. may inquire into-a)any RTP (i)upon
receiving a complaint of facts which constitutes
such practice from any trade association or from
any consumer or a Regd. Consumer Association,
Whether such consumer is a member of that CA
or not; or (ii) upon a ref. made to it by the CG or a
SG; (iii)upon an application made to it by the
Director General ; or (iv)upon its own Knowledge
or information(s-10) b) any MTP, upon a ref.
made to it by the CG or upon an application made
to it by the DG or upon its own K’ge or Information
 Procedure(s-11)
• A complaint shall contain the facts complained of ,
which constitute RTP
• A ref. made by CG or a SG shall similarly contain the
facts which constitute a RTP & shall be signed &
verified
• An application by DG shall contain the facts which
constitute a RTP & if it is in relation to any Agrmt.
Registrable, shall set out such protions of the agrmt.
As may be necessary to bring out the facts
complained of & signed & verified by the DG.
• The DG may, upon his own K’ge or information or on a
complaint made to him make a preliminary
investigation in such manner as he may think fit to
enable him to satisfy himself as to whether or not an
application should be made by him to the Comm.
 DG should file the application along
with
i) A copy of the application of the party
concerned
ii) A copy of the agreement in quadruplicate; &
iii) Comments of the DG on the application
On the receipt of the application, the comm. May,
give an opportunity to the applicant & the DG
of being heard.
Investigation by DG
a) Powers of DG(s-42)
b) Duties & Functions of the Director General
• Notice of enquiry
• Acceptance & reply by respondent
• Powers of Comm(s-12)- have same powers as are
vested in a civil court under the Code of Civil
procedure,1908, while trying a suit, in respect of the
follow. matters , namely
a) The summoning & enforcing the attendance of any
witness & examining him on oath
b) The discovery & production of any document or
other material object producible as evidence;
c) The receiving of evidence on affidavits
d) The requisitioning of any public record from any
court or office
e) The issuing of any Comm. For the examination of
witnesses
f) The appearance of parties & consequences of non-
appearance
Any proceeding before the Comm. Shall be
deemed to be a judicial proceeding & the
Comm. shall be deemed to be a Civil Court
The Comm. shall have power to require any
person- a) to produce before the Comm. Such
books, a/cs or other documents in the custody
or under the control of the person, being
documents relating to any TP, the examination
of which may be required ; &
b) To furnish to an officer so specified such
information as respects the TP as may be
required or such other information as may be in
his possession in relation to the trade carried
on by any person.
• Protection to persons making statements(s-59)
• Restrictions on disclosure of information(s-60)
• Directions-Comm. may give any of the foll.
Directions –i) the amendment of the notice of
enquiry or any representation, answer or reply
ii)The delivery of further & better particulars
iii) The delivery of interrogatories
iv) Admission of any facts or documents
v) The discovery or further discovery of any
documents & inspection thereof
vi) The admission , in evidence of any document
vii) The mode in which the evidences to be given
viii) The taking & recording of any events
including the appointment of a Commissioner
for that purpose
ix) The investigation of the cause in respect of
any class of goods in producing or supplying
any goods or in applying any process of
manufacture to goods & the manner in which
the result of such investigation is to be brought
before the Comm. at the final hearing; &
x) Any other matter, as may be considered
necessary or proper for the purpose of enquiry
 Interlocutory applications
 Proving of facts
 Power to grant temporary injunctions(s-12A)
 Final hearing (S-17)
• The FH shall take place in the open court/shall be in public. If
the commission is satisfied by reason of the confidential nature
of any offence or matter or for any other reason, the Comm.
May- a) hear the proceedings or any part thereof in private; b)
give directions as to the persons who may be present threat c)
prohibit or restrict the publication of issuance given before the
comm. Or of matters contained in the documents filed before
the Comm. Comm. shall order hearing to take place in camera
if- (i) the Comm. Is satisfied that it is the public interest that the
hearing or part thereof should not take place in the open court;
or
• ii) that evidence may be given as to a secret process or other
deposits; or
• (iii)as to the presence, or ab. Or situation of any mineral or
other deposits; or
• (iv) as to any similar matter, the publication of which is likely to
damage substantially the legitimate busi. Interest of any
person.
 Determination of issue in a summary
way
• When matter is substantially similar to those
considered in previous proceedings before the
comm., it may direct that the issue be referred
for determination in a summary way
(a) determine the issue in a summary way W/O
hearing the evidence or on such evidence
whether oral or documentary as it may think
fit;& (b) by order give any direction if the issue
had been determined after final hearing in the
ordinary way or defer making of any such order,
giving any direction, until all other issues in the
proceedings have been disposed of.
 Final order(s-19)
• After hearing Comm. Shall pass final orders on the
complaint, application, ref. etc.
• If the comm. Is of the opinion that the practice is
prejudicial to the public interest , the comm. Amy, by
order direct that- a) the practice shall be discontinued
or shall not be repeated
(b) The agreement relating thereto shall be void in
respect of such RTP or shall stand modified in respect
thereof in such manner as may e specified in the
order.
A copy of such order shall be served on the complainant
, applicant, Govt., making the ref., the respondent &
other persons permitted to take part in the
proceedings.
 Power to award compensation (s12b)-If as a result of
UTP carried on by any U’taking or any person, any loss
or damage is caused to CG/SG or any trader or any
consumer, such aggrieved may make application to the
Comm. For an order for recovery, such Amt. as comm.
may determine as compensation for the loss or damage
so caused comm. may, after an inquiry , make an order
directing to concern person
• Enforcement of the order –every order made by the comm.
granting a temporary injunction or directing the owner of
U’taking or other person to make payment of any amt., may be
enforced by the comm. In the same manner as if it were a
decree or order, made by a court in a suit pending therein.If the
comm.has any reasonable cause to believe that any person
has omitted or failed to comply with any order, in that event
comm. May authorise DG or any officer of the Comm. To make
investigation into the matter. A report of investi. Enable the
comm. To take such action in the matter as he may think fit.
 UNFAIR TRADE PRACTICES(S-36A)
• A TP, which, for the purpose of promoting the
sale, use or supply of any goods or for the
provision of any services, adopts any unfair
method or unfair or deceptive practice is an UT
P. Trade means any trade,busi.,ind., profession
or occupation relating to the production, supply,
Distribution, or control of goods & includes the
provisions of any services (s-2s)
False representations or statements
• A TP of making any statement, whether orally or in writing or
by visible representation which-
i) Falsely represents that the goods are of a parti. Std. quality,
quantity, grade, composition, style or model
ii) FR that the services are of a parti. SQG
iii) FR any rebuilt ,second-hand, renovated, reconditioned or old
goods as new goods;
iv) Represents that the goods or services have sponsorship,
approval, performance, characteristics, accessories, uses or
benefits which such goods or services do not have
v) Represents that the seller or the supplier has a sponsorship
or approval or affiliation which such seller or supplier does
not have
vi) Makes a false or misleading rep’tion concerning the need
for ,or the usefulness of, any goods or services;
vii) Gives to the public any warranty or guarantee
of the performance, efficacy or length of life of a
product or of any goods that is not based on an
adequate or proper test thereof;
viii) Makes to the public a rep.’tion in a form that
purports to be- a) a warranty or guarantee of a
product or of any goods or services; or
 THE COMPANIES ACT 1956
• Def. & Meaning of company-S-3 A co. means a co.
formed & registered under this Act or an existing co.
as defined in clause (ii)*(S-3(1)(i).
• While Cl.(ii) of S-3(1) implies that an existing co.
means any co. formed & registered under any of the
previous companies Act.
• Lord Justice Lindley-”By a co. is meant an association
of many persons who contribute money or money’s
worth to a common stock & employ it for a common
purpose.
• The common stock so contributed is denoted in
money & is the capital of the co.
• The persons who contribute it or to whom it belongs
are members
• The proportion of capital to which each member is
entitled is his share.
 Characteristics of a company
• incorporate association
• Separate legal entity
• An artificial person but not a citizen
• Common seal
• Limited liability
• Perpetual succession
• Separate name
• Separation of ownership & Mngt.
• Transferability of shares
• Separate property
• Number of members
• Shareholders are actual owners
• Raising of capital on the large scale
• Capacity to sue
• Rigidity of objects
• Statutory requirements * corporate body
 Types of companies
• Classification on the basis of liability
a)Ltd. By shares b) Ltd.By Guarantee c) un-ltd co
• CoB Mode of incorporation- a) Chartered Co.
b) Statutory co. c) Registered co. under the Act
• CoB if Ownership- a) Private b) Public c)Govt.
• CoB of Jurisdiction of Functioning- a) National
b) Multinational c) Foreign co.
• CoB of control & on share holding
a) Holding co. b) Subsidiary company
• Other types-one man co., Association not for profits,
Existing co.
 FORMATION OF A COMPANY
Stages- a) Promotion b) Registration
c) floatation or raising of the capital
d) commencement of busi.

Procedure of Registration of a co.-

1. Mode of forming Incorporated co.
2. Registration of
a) Memorandum & Articles b) A letter of approval
c) Declaration d) List of directors
e) Sanction of the Controller of Capital Issue f) Challan
3. Certificate of incorporation
4) Effects of incorporation
 Practical Problems
• A husband & wife who were the only two
members of a Private Co. died in an accident.
Does the co. also come to an end.
• A, a trader, carries on busi. Under the name of
‘A & Co. Ltd.’ without being incorporated as a
co, with ltd. Liability. Discuss the
consequences of the act of A.
• During a war all the members of a pvt. co.,
while in GM, are killed by a bomb. Does the co.
cease to exist because all the members die?
State reasons.
 Directors of the co.
1)Elected Directors 2) Managing Director
3)Whole time Director 4) Director in vacancy
5)Additional director 6) Nominal Director
Appointment & Termination of Directors
Rights & Duties ,Powers & liabilities of Directors
Appointment & Termination of MD
Rights & Powers of MD
 Company Meetings
• Different types - a) Board Meeting
• b) Meetings of committees of the board
• c) Meetings of debenture holders
• d) Meeting of creditors
• e) Meeting of contributors
• f) Shareholders Meetings-1)Statutory 2)AGM
3)Extra-ordinary General Meeting 4) Class Meet.
Essentials of a valid Meeting-a) Proper authority to
convene & hold a co. meeting b) notice
c) Agenda d) Chairman e) Quorum f) Proxy
g) Ascertainment of sense of Meeting (vote)
h) Resolutions i) Minutes
 Account and Audit

• Books of a/c to be kept by co.

• Persons responsible for keeping proper BoA &
penalty for failure to take necessary steps to
secure compliance with the requirements of S-
209
• Inspection of BoA, other books & Papers etc.
• Provisions of S-210Relating to Annual a/c & B/s
• Form & contents of B/s & P&L(s-211)
• Filing of copies of a/cs of a co. with registrar of
co.
 Auditor of the company

• Appointment & Remuneration

• Qualifications & disqualifications
• Powers & Duties , liabilities
• Audit of a/c of branch office of co.
• Audit Report