LEGAL ASPECTS OF BUSINESS

LAW   

Law is a system of rules, usually enforced through a set of institutions. It shapes politics, economics and society in numerous ways and serves as the foremost social mediator in relations between people. Law governs a wide variety of social activities.

  

Contract law regulates everything from buying a bus ticket to trading on derivatives markets. Property law defines rights and obligations related to the transfer and title of personal and real property. criminal law offers means by which the state can prosecute the perpetrator

INDIAN CONTRACT ACT-1872 

The Indian contract act, 1872 lays down the law relating to contracts.

It is a binding legal agreement. . an act which is enforceable in a court of law. or refrain from doing.CONTRACT   A contract is an exchange of promises between two or more parties to do.

.AGREEMENT  Every promise or set of promises forming consideration for each other.

ESSENTIALS OF A VALID CONTRACT           AGREEMENT FREE CONSENT CONTRACTUAL CAPACITY LAWFUL CONSIDERATION LAWFUL OBJECT NOT EXPRESSLY DECLARED VOID POSSIBILITY OF PERFORMANCE CERTAINITY OF TERMS INTENTION TO CREATE LEGAL OBLIGATION LEGAL FORMALITIES .

CLASSES OF CONTRACTS      Valid Contracts Void Contracts Voidable contracts Illegal contracts Unenforceable contracts .

10 .Valid Contract  It is a contract which satisfies all the requirements provided for under sec.

is not actually a contract. It creates no rights or obligations.Void Contract   A void contract. also known as a void agreement. . A void contract cannot be enforced by law.

  An agreement to carry out an illegal act is an example of a void contract or void agreement. a contract between drug dealers and buyers is a void contract simply because the terms of the contract are illegal. For example. .

Any contract with a minor is thus a voidable contract. depending upon jurisdiction. a minor has the right to repudiate certain contracts. .Voibable Contract   A voidable contract. For example. unlike a void contract. one party to the contract is bound. At most. is a valid contract.

the adult would be bound by the contract. If a minor were to enter into a contract with an adult. . whereas the minor could choose to avoid performing the contract.

Illegal Contract  An illegal agreement. under the common law of contract. . is one that the courts will not enforce because the purpose of the agreement is to achieve an illegal end.

Which is valid but for certain reasons such as want of proof. expiry of period within which enforceable etc it becomes unenforceable. is one that the courts will not enforce because the purpose of the agreement is to achieve an illegal end.Unenforceable Contract  An illegal agreement. under the common law of contract. .

Offer Or Proposal  When one person signifies to another his willingness to do or to abstain anything from doing he is said to make proposal. .

The terms and conditions of offer should also be communicated Two identical offers do not make a contract An offer should not contain any term the noncompliance of which amounts to acceptance .Essentials of a Valid Offer         An offer may be general or specific An offer should be made with an intention of creating legal obligation An offer must be definite and certain A statement of intention and an invitation to offer are not offers. An offer must be communicated to the offeree.

.Acceptance  When one person to whom the proposal is made signifies his willingness thereto the proposal is said to be accepted.

.Rules Regarding Acceptance      An offer can be accepted only by the person to whom it is made. Acceptance should be communicated Acceptance should be according to the prescribe form Acceptance must be provoked by an offer. Acceptance should be unconditional and absolute.

.  Acceptance must be given before the offer lapses or is revoked. Provisional acceptance is no acceptance.

Indian law lays down that communication of acceptance is complete as against the proposer when it is put in a course of transmission to him so as to be out of the acceptor. stamped and mailed even through it is delayed or lost in transit. . as against the acceptor when it comes to the knowledge of proposer. addressed.Contract By Post   Under English Law. the proposer is legally bound by acceptance effected through postal medium when the letter is prepared.

TERMINATION OF OFFER      Lapse Failure to fulfill a condition procedent Rejection Destruction of subject matter revocation .

.Contractual capacity  Section II 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.

. Age of 18 years is a major.Minor   Minor is a person who has not attained the age of majority.

Principles governing minors contracts       No estoppels against minor No liability in contract or tort arising out of contract Doctrine of restitution Beneficial contracts Ratification Liability for necessaries .

Free consent  Section 13 of the act defines consent as two or more persons are said to consent where they agree upon the thing in the same sense . .

.Coercion  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.

Undue Influence  Undue influence refers to the unconscious use of power over another person. . such power being obtained by virtue of a present or previously existing dominating control arising out of relationship between the parties.

Presumptions as to undue influence        Parent and child Guardian and ward Trustee and beneficiary Religious advisor and disciple Doctor and patient Solicitor and client Fiancé and fiancée .

  Contracts with pardanashin woman Unconscionable or catching bargains .

In undue influence the consent is obtained by dominating the will of other.Difference between undue influence and coercion   In coercion. . contract is obtained by committing or threatening to commit an act punishable under Indian Penal code.

  Coercion involves physical force whereas undue influence involves moral force. . Coercion may proceed from a stranger and may be directed against a stranger whereas undue influence must proceed from a party to the contract.

. The offence may be committed in or outside India in order to render it coercion whereas undue influence may be exercised in India.

Fraud is a crime and is also a civil law violation .Fraud   In the broadest sense. a fraud is a deception made for personal gain or to damage another individual.

A promise made without performing it. . The active concealment of a fact by a person who has knowledge or belief of the fact. Active concealment of the facts amounts to fraud.Essentials of Fraud      Making a false suggestion. The party acting on the representation should have been deceived and suffered damage.

Silence.whether fraud?   Silence is fraud under two circumstances: There is no general duty cast upon a party to a contract to disclose to the other party material facts within his knowledge but are unknown to the other party. .this principle is known as caveat emptor (let the buyer beware).

he may become guilty of the fraud by non-disclosure. When a person is under no duty to speak. if he voluntarily discloses something and then stops half the way. .

under certain circumstances. . false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. which has the effect of inducing that party into the contract. For example.Misrepresentation  It means a false statement of fact made by one party to another party.

Essentials of Misrepresentation    Positive assertion of the fact Breach of duty Causing mistake about the subject matter .

Mistake may be mistake of fact( unilateral or bilateral) Mistake of law .Mistake    Mistake refers to mis-understanding or wrong thinking or wrong belief.

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