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"Bangladesh is the third easiest country in which to do business in South Asia," reported
a World Bank-International Financial Corporation report of 6th September 2006. There
are many century old laws in Bangladesh. That is why it is easier for some companies to
find a way out considering their fault. But recently the situation is changing. New rules
and regulations have been introduced. There are many controlling authority for keeping
the business environment clean.
Here we will not discuss about the laws as well as about those organizations and
processes, those are responsible for enforcing the laws. Its not necessary that they are all
government organization; some of them are very powerful organization by businessmen
and experts. If we want to know how laws affecting business then we need to think
internationally. This is the reason of discussion for international business.


Common Law System
The legal system of Bangladesh is based on a common law system.However, unlike other
common law jurisdictions, Bangladeshs Supreme Court has the power to not only interpret
laws made by the Parliament but to also declare them null and void and enforce fundamental
rights of the citizens. Although founded on the English common law system, the laws of
Bangladesh take a statutory form which are enacted by the legislature and interpreted by the
higher courts.
Supreme Court
The Constitution of Bangladesh created the Supreme Court of Bangladesh with two
divisions, the High Court Division and the Appellate Division. As the apex court, the High
Court division has been vested with the power to hear appeals and revisions from subordinate
courts and also to issue orders and directives in the nature of writs to enforce fundamental
rights and to grant other relief available under the writ jurisdiction. The Appellate Division
shall have power to issue such directions, orders, decrees or writs as may be necessary for
doing complete justice in any cause or matter pending before it, including orders for the
purpose of securing the attendance or any person or the discovery or production of any
Special Courts
a) Labour Courts decide labour disputes.
b) Administrative Tribunals decide service disputes of public servants.
c) Income Tax Appellate Tribunals decide income tax disputes, custom and excise matters.
VAT Appellate Tribunals decide disputes regarding custom and excise duties and VAT.
d) Court of Settlement decides disputes relating to abandoned properties.
e) Artha Rin Adalats decide money claims of banks and other financial institutions.
f) Insolvency Courts declare defaulting borrowers as insolvent.

Alternative Dispute Resolution

a) Civil Procedure Code (Amendment) 2002
The Civil Procedure Code (Amendment) Act 2002 has been enacted to introduce Alternative
Dispute Resolution (ADR) system for early and consensual disposal of civil suits.Section
89A and 89B have been inserted to allow parties to settle their disputes in suits through
mediation or arbitration.
b) Arbitration
Arbitration is increasingly being employed as a means of getting around the judiciary and the
length of time it can take to resolve cases. Arbitration in Bangladesh has proved to be a
successful and efficient means of resolving disputes arising out of commercial matters.
Businesses, especially those with foreign concerns, have now begun to insert arbitration
clauses into their standard contracts.
Environmental Considerations
Investors need to conform to certain environmental safety standards to get clearance
certificates from the Department of the Environment (DOE).
Environmental Clearance Required for:
(i) Appropriate water-treatment plants
(ii) Air-pollution-controlling devices
(iii) Noise-pollution
(iv) Safety measures
Project Proposals Must Contain:
(i) Appropriate environmental impact assessment
(ii) Pollution-control measures
Corrective Measures
Existing industries with possibly negative implications for the environment or public health
will be required to take corrective measures.
Intellectual Property Rights
The Government recognizes the importance of intellectual property rights (IPRs) for
attracting foreign investment and is currently in the process of updating legislation in order to
ensure better enforcement of such rights.
International Obligations
a) Member of the World Intellectual Property Organization (WIPO) since 1985.
b) Signatory to the Paris Convention on Intellectual Property from 1991.
The existing Bangladeshi legislation in this area, however, dates mostly from the period of
British rule. The legislation in force are as follows:
a) Patent and Design Act of 1911
b) Patent and Design Rule of 1933
c) Trademark Act of 1940
d) Copyright Act of 1999
e) Trademarks Act 2009
Permission for Royalties
No prior permission is required for entering into agreements for remitting fees for royalties,
technical know-how and technical assistance.



A. Workforce
Bangladesh offers an abundant supply of disciplined, easily trainable and low-cost work force
suitable for any labor- intensive industry. Furthermore, there is an increasing supply of
professionals, technologists and other middle and low level skilled workers who have
received technical training from universities, colleges, technical training centers and
polytechnic institutions.

B. Employment Conditions
1 Minimum Age
The minimum age for workers in Bangladesh is 16 years in factories and establishments.
2 Contracts
Contracts are made in the form of a letter of offer but workers may also be engaged on verbal
3 ILO Convention
Bangladesh is a member to ILO and both the private and public sectors are encouraged to
observe the principles so enunciated in the ILO Convention and Recommendations.
C. Labor Laws
1. The Labor Act 2006
The labor Act 2006 consolidated and amended previous laws relating to employment of
workers, relationship between workers and employers, determination of minimum wages,
payment of wages, compensation for injuries arising out of and in the course of employment,
formation of trade unions, raising and resolving industrial dispute, health, safety, welfare and
environment of employment of workers and apprentice and related issues.
2. Settlement of labor Disputes
The process for settlement of industrial disputes is stipulated under section 210 - 211 of the
labor Act 2006, a summary of which detailed below:
(i) If the collective bargaining agent or the employer finds that an industrial dispute is likely
to arise between the employer and the workers, the employer or the collective agent shall
communicate his or its views in writing to the other party.
(ii) Within fifteen days of the aforesaid communication, the party receiving the
communication shall arrange a meeting with the other party for collective bargaining of the
issue raised with a view to reaching an agreement thereon through the procedure of a

(iii) If the parties reach a settlement on the issues, a memorandum of settlement shall be
recorded in writing and signed by both parties and a copy shall be forwarded to the
Government, Director of labor and Conciliator.
(iv) If the meeting is not arranged within fifteen days or the parties fail to reach a settlement
within one month of the first meeting held for settlement, report thereof may be referred to
the Conciliator requesting him in writing to settle the dispute through conciliation.
(v) If there is a settlement of the dispute through conciliation, the Conciliator shall send a
report thereof to the Government. If the conciliation fails, the Conciliator shall try to
persuade the parties to refer the dispute to an Arbitrator for settlement. If the parties fails to
agree to an Arbitrator within three days, the Conciliator will issue a certificate of failure.
(vi) Within fifteen days of issuance of the certificate of failure, the party who has raised the
dispute may opt for strike or lock-out. Such an action may be prohibited by the Government
if it relates to essential services such as electricity, gas, emergency services, airports and

D. Wages and Fringe Benefits

Wages may be determined through collective bargaining processes. However, in instances
where collective bargaining procedure is unable to determine wages, it may be referred to the
Minimum Wages Board. The Minimum Wages Board strives to ensure a balanced view of
both the interests of the management and the workers.
E. Weekly Working Hours
An adult worker shall be required to work in an establishment for no more than forty-eight
hours in any week. If a worker works for more than the prescribed hours in any day or in any
week, he shall be entitled to overtime at the rate of twice of the average of his/her basic
wages, dearness allowance and ad-hoc or interim wages, if any. Workers can work in an
establishment up to 9 hours a day but not more than 10 hours a day.
F. Leave and Holidays
1. Weekly Holidays
Every worker working in any establishment, in case of shop, commercial or industrial
establishment will be entitled to one and half day weekly holiday and in case of factories and
other establishments, one day weekly holiday.
2 Annual Leave with Wages
Every adult worker who has completed one year continuous employment shall be entitled to
leave with full wages in the subsequent period of twelve months for a number of days. In the
case of a shop, commercial or industrial establishment or factory, or transport establishment,
a worker is entitled to one day leave for every eighteen days of work.
G. Social Security

The Labor Act 2006 contains provisions on compensation for workers injured in the course of
employment,1 maternity benefit 2 and provident funds for workers of non-Government
establishments.3 The Act also requires certain industrial undertakings to establish a Workers
Participation Fund and a Workers Welfare Fund. 4
H. Labor Union
The Labour Act 2006 lays down the provisions on formation of trade unions and its
registration requirements.5
1. Right to Form an Association
Any worker has the right to form an association/union primarily for the purpose of regulating
the relations between workers and employers or workers and workers. However, such an
association union can only function as a trade union if registered under the law.
2. Formation
In any industrial and commercial establishment, a trade union may be formed with 30%
membership of the total number of workers employed.


The Bangladesh Taka was declared convertible for current account transactions in March
1994. As a result, payment settlements against trade in goods and services have been freely
A. The Role of Authorized Dealers (AD)
(i) ADs can settle payments for all imports inconformity with the Import Policy.
(ii) ADs can settle payments abroad for freights and passages, technical service fees and
royalties and issue foreign exchange for travel abroad by residents.

B. Remittances
Before effecting remittances, ADs must scrutinize the remittance request to be satisfied that
these represent bona fide current transactions and are not disguised attempts to circumvent
capital transfer restrictions.
1. Remittance of Profits
The repatriation of sale proceeds (including capital gains) of shares of companies listed in a
Stock Exchange in Bangladesh may be made through an AD if such investment takes place
through Non-Resident Investors Taka Account operation. Remittance of sale proceeds of
shares of companies not listed in a Stock Exchange requires prior Bangladesh Bank
permission, which is accorded to for amounts not exceeding the net asset value of the shares.
Transfer of shares and securities from non- resident loc quires no prior Bangladesh Bank
2. Remittance of Salaries and Savings by Expatriates

Foreigners employed in Bangladesh with the approval of the Government may remit 50% of
salary, actual savings and admissible retirement benefits through an AD. Net salary of foreign
nationals payable for the period of leave admissible to them as per their service contract duly
approved by the Government will be remittable.
C. Convertibility on Trade Accounts
The Bangladeshi Taka is fully convertible for current account transactions. All current
transactions including trade and investment as well as investment related transactions may be
conducted by individuals-firms through authorized dealers (banks) without prior permission
of Bangladesh Bank.
D. Exchange Facilities for Exporters
1. Merchandise Exporters
Merchandise exporters may retain up to 50 per cent of the realized FOB value of their exports
in foreign-currency accounts.
2 Exporters with High Import Items
For export items with high import contents (such as naphtha, furnace oil, bitumen, readymade
garments etc.), the retention quota is 10%.
3. Service Exporters
Service exporters may retain 5% of their repatriated income in foreign currency accounts.
Funds may be drawn from these accounts to meet expenses for business expenses abroad.
This quota may also be kept in interest bearing renewable term deposit accounts.


General Incentives for Foreign Investment
The government has been keen in promoting foreign investment and continues in its efforts to
attract such investment as a means of alleviating the economy. Furthermore, the government
has liberalized the industrial and investment policies in recent years by reducing bureaucratic
control over private investment.
1. Tax Exemptions
2. Duty
3. Tax Law
4. Remittance
5. Exit
6. Ownership
Incentives for Export Oriented Businesses
Bangladesh has enabled Export Processing Zones (EPZ) to encourage and facilitate the
functioning of export-oriented enterprises. Industries which fall within an EPZ benefit from
fiscal, non-fiscal and infrastructure facilities. Bangladesh Export Processing Zones Authority
(BEPZA) approves all projects to be located in the EPZs.
Access to the Sectors and Industries

Foreign investment is encouraged in all industrial activities. Such investment may be
undertaken either independently or through joint ventures with the local private or public
Reserved Industries
Foreign direct investment is not encouraged in the following five industries:
(i) Arms, ammunitions and other defense equipment and machinery;
(ii) Production of nuclear energy;
(iii) Forest plantation and mechanized extraction within the bounds of reserved forests;
(iv) Security printing (currency notes) and minting; and
(v) Air transportation and railways.
If foreign investment is aimed at one of these sectors, then Pre- Registration Clearance would
need to be obtained
There is no barrier to the acquisition of local enterprises by foreign investors. Foreign
investors may also buy enterprises reserved for privatization.
Investment Protection for Foreign Investors
The Foreign Private Investment (Promotion and Protection) Act of 1980 guarantees
protection against expropriation. If a foreign investor becomes subject to a legal measure that
has the effect of expropriation, adequate compensation will be paid and it will be freely
repatriable. The amount of the compensation will be determined in accordance with the
market value of the investment immediately before the measure went into effect. (As noted
earlier, Bangladesh is also a signatory in good standing of the Multilateral Guarantee Agency
which insures investors against political risk. There has been no instance of expropriation of
foreign property since the Foreign Investment Act was passed in 1980.

A contract is an agreement made between two or more parties which the law will enforce
Sec. 1 the of the Indian Contract Act defines it as An agreement enforceable by law Sec
10 lays down that All agreements are contracts if they are made by the free consent of
parties competent to contract for a lawful consideration and with a lawful object and are
not hereby expressly declared to be void.
A valid contact must have the following essentials
1. Two parties : for a valid contract, there must be two parties
2. Offer and acceptance: There must be an offer and acceptance One party has to
make an offer and the other party has to accept it.
3. Consensus-ad-idem or Identity of Minds: The parties to the contract must have
agreed about the subject matter of the contract at the same time and in the same

4. Consideration: It means Something in return Every contract must be supported
by consideration.
5. Capacity; The parties to the contract must be competent to contract. For example
a contract by a minor is void
6. Free Consent: The consent of the parties must be free from any flow it must not
be caused by a mistake or coercion or undue influence
7. Lawful consideration: The consideration to a contract must be lawful
8. The objects of the contact must be lawful


Discharge of contract means termination of the contractual relationship between the
parties. A contract is said to be discharged when it ceases to operate, i.e. when the rights
and obligations created by it come to an end.
A contract may be discharged
1. By Performance
2. By Agreement or Consent
3. By impossibility
4. By Lapse of Time
5. By operation of Law
6. By Breach of Contract

Section 182 of the Indian Contract Act defines an agent as person employed to do any act
for another or to represent another in dealings with third persons. The person for whom
such act is done, or who is so represented is called the principal.
1. The principal and third parties must be competent into contracts
An agent may be even a minor who can effectively bind his principal. But the principal
cannot make the minor agent liable for misconduct or negligence.
Example: P, a principal gives M, a minor, a jewel worth Rs. 100 and instructs fgdgdf to
sell it on credit or for less than Rs. 500. M sells the jewel on credit for Rs. 400. P cannot
make him liable while he is bound by the sale..

Consideration is not essential. That the principal gives his consent to be represented by
the agent is sufficient consideration for the agent gdg dfgd dfgd.
An agency may be created in the following ways:
1. By Express Authority: The authority of any agency may be expressed in words
spoken or written. For example, a contract of agency can be written by means of
power of attorney.
2. By Implied Authority: The authority of an agent can be interred from the
circumstances of the case.
Illustration: A living in Bombay, owns a shop in Madras and he occasionally visits it.
B is managing the shop and is in the habit of ordering goods from C in the name of A
for the purpose of the shop and of paying to them out of As funds with As
knowledge. B has an implied authority from A to order goods from C in the name of
A for the purpose of the shop.
3. By Necessity: Sometimes, exigencies of circumstances require a man to act for
another as an agent, though not appointed as such.
Illustration: A horse was sent by rail. The owner had not taken delivery of the same at
the destination. So, the station master had to feed it. It was held that the station master
had become an agent by necessity and was therefore entitled to recover the charges
incurred by him.
4. By Holding Out: Where a master usually sends his servant to pledge his credit for
certain mangdfgfd he is bound by the acts of the servant for similar purposes
though done without his consent.
5. By Estoppel: When one man by words or conduct causes another to believe that
some other person is his agent and that another person had acted on that belief, he
would be stopped from denying the authority of that another person to act on his
Illustration: a tells B in the presence and within the hearing of P that he (A) is Ps agent
and P does not contradict this statement B, on the faith of this statement, subsequently
enters into a contract with A, taking him to be Ps agent. P is bound by that contract.
6. By Ratification or Expost Eacto Agency : Section 196 of the Indian Contract Act
lays down that where acts are done by one person on behalf of another, but
without his knowledge of authority, he may elect to ratify or to disown such acts.
If he ratifies them the same effects will follow as if they had been performed by
his authority. Thus ratification relates back to the date of the original contract and
binds the principal as if he has expressly authorized it.



A contract of agency is terminated in the following ways:
1. When the period of agency expires or
2. When the purpose of the agency is accomplished or
3. When the principal or agent dies or becomes of unsound mind
4. When the principal becomes insolvent
5. When the subject matter of the contract is destroyed
6. When the object of the contract becomes unlawful
7. When the agent renounces the authority
8. When the principal revokes his authority
The termination that takes effect so far as regards the agent, the moment, it becomes
know to him and so far as regards third persons, the moment it becomes know to them.
So, if an agent knowing the termination of agency, contracts with third persons who are
not aware of the termination, the becomes liable to the principal for damages while the
contract binds the principal and third persons.
An Agency cannot be terminated in the following cases:
(a) When the agency is one, coupled with interest. A, gives authority to B to sell As
land and to pay himself, out of the proceeds, the debts sue to him (B) from A. A
cannot revoke this authority nor can it be terminated by his insanity or death.
(b) When the agent has incurred personal liability and
(c) When the authority ahs been partly exercised by the agent.
1. He is entitled to remuneration and other expenses properly incurred by him in the
agency. But if he is guilty of misconduct, he is not entitled to receive the
Illustration: A employs B to recover Rs. 1000 from C. Through Bs misconduct, the
money is not recovered. B is entitled to no remuneration for his services and must make
good the loss.
2. He is entitled to retain the goods, papers and other property, movable on
immovable, of the principal for his claims.
3. The agent has a right to be indemnified by the principal for all lawful acts.
Illustration: B at Singapore under instructions from A of Calcutta, contracts with C to
deliver goods. A does not send the goods to B and C sues B breach of contract. B informs
A of the suit and A authorizes him to defend the suit. B defends and is compelled to pay
damages etc. A is liable to B for such damages etc.

4. The agent is entitled to be indemnified for the injury caused to him by the
principals neglect or want of skill.
Illustration: A employs B as a brick-layer in building in a house and puts a scaffolding
himself unskillfully and B is in consequence, hurt. A must compensate B.
5. When an agent acts in good faith, the employer must indemnify him for the
consequence of that act, through it causes an injury to the rights of third parties.
Illustration: B, at the request of A, sells goods in the possession of A, but which A had no
right to dispose of B does not know this and hands over the sale proceeds to A. afterwards
C the true owner sues A and recovers the value of goods and costs. A must indemnify B
for what he has paid and for Bs own expenses.


Section 4 of the Sale of Goods Act defines a contract of sale as a contract whereby the
seller transfers or agrees to transfer the property in goods to the buyer for a price. The
term contract of Sale includes an actual sale as an agreement to sell. It may be absolute
or conditional.
When the property in the goods is transferred, the contract is called a sale. The contract
called an agreement to sell, when the transfer of property is take place at a future time or
subject to fulfilment of some condition. An agreement to sell becomes a sale, when the
time lapses or such condition is fulfilled.
Differences between a sale and an agreement to sell may be summarized as follows:



Ownership is transferred to the
It is an executed contract
It creates rights in rem.
The seller can sue for the price
though the goods are in the his
If the seller re-sells the goods,
the buyer can claim damages for
conversion and exercise right of
recovery of goods from third
parties who are aware of the
prior sale
If the goods are destroyed by
accident, the buyer has to bear
the loss, though the goods are in
the possession of the seller
If the buyer becomes insolvent,
the seller, in the absence of a
lien, must deliver the goods to

Agreement to Sell
Ownership does not pass to the buyer.
It remains with the seller.
It is an executor contract
It creates rights in personam
The seller can sue for the damages if
the buyer refuses to take delivery and
pay the price
In case of re-sale the buyer can only
claim damages.

In such cases, the seller has to bear

the loss, even if the goods are in the
possession of the buyer
If the buyer becomes bankrupt before
payment of price, the seller may
refuse to deliver the goods unless paid



the official receiver and claim

only ratable dividend for the
price due
If the seller becomes insolvent,
the buyer can recover the goods
from the official receiver since
the ownership has passed to him.

for since ownership rests with the

In such cases, the buyer who has paid
the price can only claim retable


A term or a stipulation in a contract of sale with reference to goods may be either a
condition or a warranty. A condition is a term which is essential to main purpose of the
contract and hence is the foundation of the contract. The effect of a breach of condition is
that it gives the right to the aggrieved party to treat the contract as void and also to claim
damages, if any.
A warranty is a term which is collateral to the main purpose of the contract and hence is
only a subsidiary promise. The breach of warranty does not give right to the aggrieved
party to treat the contract as void but entitles him to claim damages only. In the absence
of contract to the contrary, time of delivery of goods is treated as condition and for
payment of price, as warranty.
In the following cases, the breach of a condition will be treated as breach of warranty
When the buyer waives the condition or

When the buyer treats the breach of condition as a breach

warranty and does not treat the contract as void or


Where the contract of sale is inseparable and the buyer has

accepted the goods or part thereof or


Where the contract is for specific goods, the property in

which has passed to the buyer.

Condition and warranties may be express or implied, When they are definitely written in
the contract, they are called express conditions and warranties. They are called implied
conditions and warranties, when they are not written in the contract and applied to the
contract either by operation of law or by trade custom.
1. As to title to goods: There is an implied condition that the seller has a right to sell
in case of sale and that in the case of agreement to sell, he will have the right to
sell the goods at the time when the property is to pass.
Rowland Vs Divall: A purchased a car from B for a certain price and used it for some
period. Subsequently, it was found that the car was stolen by B and therefore, A had
returned back the car to the true owner. It was held that A could recover the full price paid
to B.
2. Sale by description: The implied condition is that the goods delivered must
correspond with the description

Example: Where a machine was described as almost new and used very little but when
delivered, was found to be an old and repaired one, it was held that the buyer was entitled
to reject the machine.
3. Sale by sample: The implied condition as --a. That the goods delivered shall correspond with the sample
b. That the buyer shall have a reasonable opportunity of comparing the bulk
with the sample and
c. That the goods shall be free from any defect rendering them
unmerchantable, which would not be apparent on reasonable examination
of the sample.
Drummond & Sons Vs Van Ingen & Co.: Where worsted coating was supplied
corresponding with the sample but not suitable for stitching due to a latent defect, it was
held that the buyer was entitled to reject the goods.
4. Sale by sample as well as description: In the case of sale of goods by sample as
well as description, the goods delivered must correspond with both sample as well
as description.
5. As to quality or fitness: The general rule is Caveat Emptor, i.e. let the buyer
beware. So, the seller need not disclose the faults in the goods he sells nor need he
guarantee that the goods are fit for the purposes of the buyer. So, the buyer takes
them as they come. But in the following cases, there is an implied condition as to
quality or fitness of goods for any particular purpose.
a. Where the buyer makes known the purpose to the seller, who is ordinarily
dealing with sale of goods of that description and the buyer relies on the
judgement of the seller.
b. Where the seller does not disclose the faults in his goods and such faults
cannot be detected on reasonable examination.
c. Where the seller makes a statement and the buyer relies upon it.
Baldry Vs Marshall: A purchased a motor car from B for using it as a tourist car.
B, the seller knew the purpose. The car turned out to be unfit for the purpose. Held, A the
buyer could repudiate the contract.
But there is not implied condition as to fitness or quality of goods when they are
sold under the patent or trade name.
E.W. Evans Vs Stella Benjamin: Where a refrigerator was sold, it was held that
the name of the article itself implies that it is fit for a particular purpose.
6. As to Merchantability: In case of sale of good by description, there is an implied
condition that the goods shall correspond with the description and also that they
shall be of merchantable quality.

Brant Vs Australian Knitting Mills Ltd.: The buyer was supplied wollen underpants by
the manufacturers. The buyer wore them for sometime and contracted a skin disease.
Held, that the buyer was entitled to damages.
Exception: If the buyer has examined the goods, there is not implied condition as to
quality of goods as regards defects which such examination must have revealed.
7. As to wholesomeness: In the case of sale of vision, there is an implied condition
that they are fit for immediate use, A, purchased a bun from B and injured his
teeth by biting a stone in the bun. B was held liable.
1. Warranty of Quiet Possession: There is an implied warranty that the buyer shall
have and enjoy quiet possession.
2. Warranty against Encumbrances: There is an implied warranty that the goods shall
be free from encumbrance or charges in favour of any third party not declared or
known to the buyer before or at the time of contract.
The seller of goods is deemed to be an unpaid-seller where
a) The whole of the price has not been paid or tendered or
b) When a bill of exchange or any other negotiable instrument has been given as
conditional payment but the same has been dishonoured.
An unpaid vendor has the right of withholding the delivery of goods when the property in
goods has not passed to the buyer.
He has the following rights when the property in goods has passed to the buyer.
1. Rights of Lien
The unpaid vendor who is in possession of the goods, can retain such possession until
the price is paid or rendered. And if the goods are partly delivered, the an exercise this
right on the remaining goods except when such part delivery amounts to show that he has
give up the right of lien. This right of lien extends to the whole of goods in the possession
of the unpaid vendor and can be exercised only for the recovery of the price of goods but
not the amounts like godown rent, incurred in storing the goods in exercise of lien for the
He can exercise the right of lien
Where the goods have been sold without any stipulation as to credit

Where the goods have been sold on credit, but the term of credit has expired
and the price remains unpaid.


Where the buyer becomes bankrupt

This right of lien is lost

When the goods are delivered by him to a carrier, or other bailee for the
purpose of transmission without reserving the right of disposal,

When the buyer or his agent lawfully obtains the possession of goods

When the unpaid vendor has given up his right of lien

2. Right of stoppage of goods in transit

When the seller has parted with the possession of goods, he may regain and retain such
possession by stopping the goods in transit, from being delivered to the buyer. This right
is available (1) when the goods are in transit and (2) when the buyer becomes bankrupt.
Following are the rules regarding duration of transit
a) Goods are deemed to be in transit so long as the buyer or his agent does not take
delivery of the goods
b) The transit is at an end, when the buyer or his agent obtains delivery before the
arrival of the goods at their destination
c) The transit is at an end, if the carrier or other bailee acknowledges to the buyer
after the arrival of the goods at the destination the he holds the possession of
goods as a bailee for the buyer.
d) The goods are in transit, if the buyer or his agent rejects the goods.
e) The transit is at an end if the carrier or other bailee wrongfully refuses to deliver
the goods to the buyer.
The unpaid vendor must give notice of his claim to the carrier or other bailee, who is in
possession of the goods, in order to exercise this right of stoppage. Such notice takes
effect when it reaches the carrier or his agent who is in actual possession of goods. On
receipt of notice of the stoppage, the carrier must re-deliver the goods to or according to
the directions of the seller. The seller shall have to bear the expenses of such re-delivery.
3. Right of Re-Sale
The unpaid vendor can re-sell the goods
1) without notice to the buyer if the goods are perishable goods and
2) With notice to the buyer of his intention to re-sell. If the goods are not perishable.
He can retain the profit resulting form such re-sale and claim damages from the original
buyer for loss if any. But if he does not give notice to the buyer of his intention to re-sell

the goods where necessary, he must pay back the surplus or profit to the original buyer
and bear the loss, if any.

Section 4 of the Indian Partnership Act defines it as the relation between persons who
have agreed to share the profits of a business cancelation by gfdg any of them acting for
all Persons who have entered into partnership with one of other are called individually
partners and collectively a firm, and the name under which their business is carried
on, is called the firm name.
1. Relationship: Partnership is the abstract relationship between partners
2. Two or More Persons: As no one can be a partner with himself, there must be at
least two persons. The maximum number of members is 10 for a partnership
carrying on banking business and 20 for a partnership carrying on any other
3. Agreement or Deed: Partnership arises out of an agreement but not out of status.
Such agreement, also called as deed, may be express or implied from the conduct
of the parties. It may be oral or written. It contains details relating to

name of the firm and the names of the partners,

nature and place of business,

the date of commencement and the duration of partnership,

capital and banking account,

sharing of profits and losses,



arbitration etc.

4. Business: The object of the partnership is to carry on any business, profession,

vocation, trading or calling. Such business must be lawful. Mere holding of
property in common is not partnership, e.g. co-ownership.
5. Profit Sharing: Sharing of profits is essential though it does not mean that all
those who participate in profits are necessarily partners.
6. Carried on by all or any of them acting for all: Each partner acts as an agent as
well as a principal. Each one can act in the course of business and bind the other
partners by his acts. As such, he can be called an agent. Since he is also bound by

the acts of the other partners, he can be called the principal. Thus, the law of
partnership is a branch of the general law of agency as every partner has implied
power to bind other partners for the acts of the firm, done in the course of conduct
of the business.
1. Partnership at will: Where the partners have not provided in their deed, for the
duration of partnership or for the termination of partnership, the partnership is
called partnership at will. A partner may retire to dissolve the partnership at his
will, by giving a notice to other partners, of his intention to do so.
2. Particular partnership: A person may become a partner with another person in
particular adventures or undertakings.
3. Partnership for a fixed term: Where the partners fix the definite period or
duration of partnership, it is called a partnership for a fixed term.
In determining whether a partnership exists or not, or whether a person is a partner or
not the real relation between the parties as shown by all relevant facts, must be taken
into consideration.
The joint use of property in common in business for sharing of profits is evidence that
a partnership exists. But this is not conclusive evidence to show that a partnership
exists. Likewise, an active participation in the conduct of business is evidenced that a
partnership exists. But again, it is no conclusive evidence to establish the fact of
existence of partnership. For example, a servant may manage the affairs of a firm.
Yet he is not a partner. In the same way, a joint venture having no object of profit
sharing is not a partnership, while sharing of profits is evidence, though no
conclusive, that a partnership exists. So, Section 6 lays down that the receipt of a
share of profit, or a payment contingent or varying with the profits does not of itself,
make the recipient a partner. Therefore, the true test of partnership is no sharing of
the profit, but whether the relationship of agency exists or not.
Following are different kinds of partners
1. Actual or Ostensible Partner: An actual partner is one who actively participates
in the conduct of the business of the partnership.
2. Dormant or Sleeping Partner: He is a partner who is not known to third parties
as such. He does nto take active part in the conduct of business. He occupies the
position of an undisclosed principal. Hence, third parties can sue him on
discovering that he is a partner. While he has access to accounts and examine and
verify them, he has not duties to perform. Hence no notice of his retirement to the
public is necessary nor the firm is dissolved when he becomes insane.

3. Partner by Estoppel: Where a person causes, by his conduct, another to believe
him to be a partner and on that belief such other person gives credit to the firm, he
is estopped from denying that he is a partner.
Example: X, Y and Z are partners of a firm. X, in the presence and within the hearing of
A, represents to D that A is a partner of their firm. A does not contradict this
representation. A, on faith of that representation, lent Rs. 5000 to the firm, A, is liable as
a partner.
4. Partner by Holding Out : Where a person represents himself or allows others to
represent him as a partner of a particular firm, he becomes liable to all those who
act and lend money to the firm, on the faith of such representation.
Example: A, represents himself as a partner of a particular firm. D on the faith of the
representation, lends credit to the firm. A becomes liable.
The Partnership Act does not provide for the compulsory registration of firms. It has left
it to the option of the firms to get themselves registered. But indirectly, by creating
certain disabilities from which an unregistered from suffers, it has made the registration
of firms compulsory.
The registration of a firm may be effected at any time by filling an application in the form
of a statement, giving the necessary information, with the Registrar of Firms of the area.
The application for registration of a firm shall be accompanied by the prescribed fee. It
shall state:
(a) the name of the firm
(b) the place or principal place of business of the firm
(c) the names of other places where the firm carries on business
(d) the date when each partner joined the firm
(e) the names in full and permanent address of the partners
(f) the duration of the firm.
The statement shall be signed by all the partners or by their agents specially authorized in
this behalf [Sec. 58(1)]. It shall also be verified by them in the prescribed manner [Sec.
When the Registrar is satisfied that the above provisions have been duly compiled with,
he shall record an entry of the statement in the Registrar of Firms (maintained by
Registrar of Firms in respect of each registered firm for recording the necessary
information relating to that firm) and file the statement (Sec. 59). He shall then issue
under his hand a certificate of registration. Registration is effective from the date when
the Registrar files the statement and makes entries in the Register of Firms.

1. Suits between partners and firm: A person suiting as a partner of an unregistered
firm cannot sue the firm or any partners of the firm to enforce a right from a
contract or conferred by the Partnership Act.
2. Suits between firm and third parties: An unregistered firm cannot sue a third
party to enforce a right arising from a contract until

the firm is registered, and

the names of the persons suing appear as partners in the Register of Firms
[Sec. 69(2)]

3. Clain of set-off: An unregistered firm or any partner thereof cannot claim a set-off
in a proceeding instituted against the firm by a third party to enforce a right
arising from a contract, until the registration of the firm is effected [Sec. 69(3)]
The relations of the partners of a firm to one another are usually governed by the
agreement among them. Such agreement may be express or implied.
1. Right to take part in Business
The partnership agreement usually provides the mode of the conduct of the business.
Subject to pay such agreement between the partners, every partner has a right to take part
in the conduct of business [Sec. 12(a)]. This is based on the general principal that
partnership business is the common business of all the partners.
2. Right to be Consulted
Every partner has an inherent right to be consulted in all matters affecting the business of
the partnership and express his views before any decision is taken by the partners.

3. Right of Access to Accounts

Subject to contract between the partners, every partner has a right to have access to and
inspect and copy any of the books of the firm.
4. Right to Share in Profit
In the absence of any agreement, the partners are entitled to share equally in the profits
earned and are liable to contribute equally to the losses sustained by the firm.
5. Right to Interest on Capital
The partnership agreement may contain a clause as to the right of the partners to claim
interest on capital at a certain rate. Such interest, subject to contract between the partners,
is payable only out of profits, if any, earned by the firm.

6. Right to Interest on Advances
Where a partner makes, for the purposes of the business of the firm, any advance beyond
the amount of capital, he is entitled to interest on such advance at the rate of six per cent
annum. Such interest is not only payable out of the profits of the business but also out of
the assets of the firm.
7. Right to be Indemnified
A partner has authority, in an emergency, to do all such acts for the purpose of protecting
the firm from loss as would be done by a person of ordinary prudence, in his own case,
acting under similar circumstances. Such acts of the partner bind the firm. If as a
consequence of any such act, the partner incurs any liability or makes any payment, he
has a right to be indemnified.
8. Right to the Use of Partnership Property
Subject to contract between the partners, the property of the firm must be held and used
by the partners exclusively for the purposes of the business of the firm. No partner has a
right to treat it as his individual property. If a partner uses the property of the firm directly
or indirectly for his private purpose, he must account to the firm for the profits which he
may have earned by the use of that property.
9. Right of Partner as Agent of the Firm
Every partner for the purposes of the business of the firm is the agent of the firm.
10. No New Partner to be Introduced
Every partner has a right to prevent the introduction of a new partner unless he consents
to that or unless there is an express term in the contract permitting such introduction. This
is because partnership is founded on mutual trust and confidence.
11. No Liability before Joining
A person who is introduced as a partner into a firm is not liable for any act of the firm
done before he became a partner.
12. Right to Retire
A partner has a right to retire (a) with the consent of all other partners, or (b) in
accordance with an express agreement between the partners, or (c) where the partnership
is at will, by giving notice to all the other partners of his intention to retire.
13. Right of Outgoing Partner to Share in the Subsequent Profits
Where a partner has died, or has ceased to be a partner by retirement, expulsion,
insolvency, or any other cause, the surviving or continuing partners may carry on the
business with the property of the firm without any final settlement of accounts as between
them and the outgoing partner or his estate. In such a case, legal representative of the
deceased partner or the outgoing partner is entitled to such share of the profits as is
proportionate to his share in the property of the firm.

Partnership is a contract of uberrimae fide. The partners must act with utmost good faith
as the very basis of partnership is mutual trust and confidence. According to Sec. 9,
which deals with the general duties of partners, partners are bound
(a) to carry on the business of the firm to the greatest common advantage,
(b) to be just and faithful to each other, and
(c) to render true accounts and full information of all things affecting the firm to
any partner or his legal representative.
The other duties are spread over the Partnership Act. These duties are summed as under:
1. To carry on business to the greatest common advantage
Every partner is bound to carry on the business of the firm to the greatest common
advantage. He is bound, in all transactions affecting the partnership, to do his best in the
common interest of the firm.
2. To observe faith
Partnership is a fiduciary relation. Every partner must be just and faithful and observe
utmost good faith towards every other partner of the firm.
3. To indemnify for fraud
Every partner is bound to indemnify the firm for any loss caused to it by his fraud in the
conduct of the business of the firm.
4. To attend diligently
It is the duty of every partner to attend diligently to his duties in the conduct of the
business of the firm [Sec. 12b], and to use his knowledge and skill to the common
advantage of all the partners.
5. Not to claim remuneration
A Partner is not entitled to receive any remuneration in any form for taking part in the
conduct of the business of the firm. It is however, usual to allow some remuneration to
the working partners provided there is a specific agreement to that effect.
6. To share losses
It is the duty of every partner to contribute to the losses of the firm. In the absence of an
agreement to the contrary, the partners are bound to contribute equally to the losses
sustained by the firm. An agreement to share profits implies an agreement to share losses
7. To indemnify for willful neglect
Every partner is bound to indemnify the firm for any loss caused to it by his willful
neglect in the conduct of the business of the firm.
8. To hold and use property of the firm exclusively for the firm
It is the duty of every partner of the firm to hold and use the property of the firm
exclusively for the purposes of the business of the firm
9. To account for personal profits

If a partner derives any benefit, without the consent of the other partners, from
partnership transactions, he must account for it and pay it to the firm. This is because the
relationship between partners is a fiduciary relationship and no partner is entitled to make
any personal profit.
10. To account for profit in competing business
A partner must not carry on any business of the same nature as competing with that of the
firm. If he does that he is bound to account for and pay to the firm all profits made by
him in that business.
11. To act within authority
Every partner is bound to act within the scope of his actual or implied authority. Where
he exceeds the authority conferred on him and the firm suffers a loss, he shall have to
compensate the firm for any such loss.
12. To be liable jointly and severally
Every partner is liable, jointly with all the other partners and also severally, for all the
acts of the firm done while he is a partner.
13. Not to assign his rights
A partner cannot assign his rights and interest in the firm to an outsider so as to make him
the partner of the firm. He can, however, assign his share of the profit and his share in the
assets of the firm.
Section 39 of the Indian Partnership Act lays down that the dissolution of partnership
between all the partners of a firm is called the dissolution of the firm. This is
different from the dissolution of partnership. A partnership may be dissolved without
dissolution the firm. But dissolution of firm involves dissolution of partnership. In the
firm of A, B and C, if C dies or retires, the firm will be dissolved. But A and B may
take in D and continue doing the business. This new firm of A, B and D is called the
new or reconstituted firm.
Dissolution of Partnership on the happening of certain contingencies
A partnership is dissolved by -- The death of the partner
The completion of the adventure of partnership
The insolvency of a partner, and
The retirement of a partner
In all these cases, the remaining partners, may constitute the firm. Hence, dissolution of
partnership does not necessarily involve dissolution of the firm. If they do not continue,
the firm is dissolved automatically.


Dissolution of Firm
A partnership between all the partners is dissolved in the following ways
1) Dissolution by Agreement: (a) By mutual consent of all the partners, or (b) in
accordance with the contract entered into by them.
2) Compulsory Dissolution: (a) by the insolvency of al the partners except one, or
(b) by the business of the partnership becoming illegal or unlawful by subsequent
3) Dissolution of Partnership at Will: The firm may be dissolved by any partner
giving a notice to the other partners of his intention to dissolve the firm. But the
notice must be in writing and unambiguous. Once given, it cannot be withdrawn.
The firm is dissolved from the date mentioned in the notice, or if the date is not
mentioned, from the date of communication of the notice.
4) Dissolution through Court: A partnership for a fixed period will be dissolved by
a court where it is not dissolved for the reasons mentioned above.
At the suit of a partner, a firm may be dissolved on any of the following grounds:
(a) that a partner has become of unsound mind,
(b) that a partner has become permanently incapable of performing his duties,
(c) that a partner is guilty of conduct which is likely to affect prejudicially, the
carrying on of the business.
(d) that a partner persistently commits breach of agreement. For instance, a firm is
dissolved when: (i) a partner commits breach of trust, or (ii takes away the
partnership books etc.
(e) that a partner has transferred his interest to a third party or allowed his share
to be charged or sold in the recovery of arrears of land revenue
(f) that the business of the firm cannot be carried on, save at a loss, or
(g) on any other ground which renders it just and equitable that the firm should be

The Contract of Insurance is a contract whereby a person undertakes to indemnify
another against a loss arising on the happening of an event or by pay a sum of money on
the happening of an event. The person who insures is called Insurer. The person who
effects the insurance is called the Insured or Assured. The price for the risk
undertaken by the insurer and paid by the insured to the insurer is called Premium and
the document which contains the contract of insurance is called Policy.
Following are the general principles of contracts of insurance:
1. A contract of insurance is a contract uberrimae fider, i.e. a contract requiring
utmost good faith of the parties. So, all material facts which are likely to influence

the insurer in deciding the amount of premium payable by the insured must be
disclosed by the insured. Failure to disclose material facts renders the contract
voidable at the option of the insurer.
2. The assured must have, that is called insurable interest in the subject matter of
the contract of insurance. He must be so situated with regard to the thing insured
that he would have benefit from its existence, loss from its destruction.
3. Every contract of insurance such as life insurance and personal accident and
sickness insurance, is a contact of indemnity. So, the insurer pays the actual loss
suffered by the insured. He does not pay the specified amount unless this amount
is the actual loss to the insured.
4. The insured must take reasonable precautions to save the property, ion the event
of some mishap to the insured property. He must act as a prudent uninsured
person would act in his own case under similar circumstances to mitigate or
minimize losses.
5. The insurer must run the risk of indemnifying the insured. If he does not run the
risk, the consideration for which the premium is paid, fails and consequently, he
must return the premium paid by the insured.
6. The insurer is liable for loss which is proximately caused by the risk insured
against. The rule is causa proxima non remota spectalur, i.e. the proximate but
not the remote cause is to be looked to. So, the loss must be proximately caused in
order that the insurer is to become liable.
7. Except in the case of life insurance, every contract of insurance comes to an end
of the expiry of every year, unless the insured continues the same and pays the
premium before the expiry of the year.
8. According to the rule of subrogation when the loss is caused to the insured by the
conduct of third party, the insurer shall have to make good such loss and them
have a right to step into the shoes of the insured and bring an action against such
third party who caused the loss to the insured. This right of subrogation is
enforceable only when there is an assignment of cause of action by the insured in
favour of the insurer. The doctrine of subrogation does not apply to life insurance.
there are different kinds of insurance. (1) Life (2) Fire (3) Marine (4) Accident and (5)
Guarantee insurance etc.
Life insurance is popularly referred to as life assurance. In this case, the underwriter
agrees to pay the assured or his heirs, a certain sum of money on death or on the
happening of an event dependent upon human life in consideration of premiums paid by
the assured. It also grants disability and accident benefits annuities and super-annuation


A life insurance policy is mainly to two types, (1) the whole life policy and (2) the
endowment policy. In the former one, the premiums have to be paid either for a specified
number of years or till the death of the assured. The policy matures on the death of the
assured. But in the case of the latter type, the amount assured is payable either on the
death of the assured or on the expiry of a specified number of years whichever is earlier.
Again, a life insurance policy may be either, (1) with profits or (2) without profits. In the
case of the former policy, the assured gets not only the sum assured but also a share in the
profits of the underwriter in the form of bonus. But he has to pay more premium in this
case than that is payable in respect of without profits policy. But in the case of without
profits policy, the assured is not entitled to any share in the profits.
A contract of fire, insurance is a contract whereby the insurer undertakes, in consideration
of the premium paid, to make good any loss or damage caused by fire during a specific
period. The contract specified the maximum amount which the assured can claim in case
of loss. This amount is fixed by the parties at the time of the contract. It is, however, not
the measure of the loss. The loss can be ascertained only after the fire has occurred. The
insurer is liable to make good the actual amount of loss nor exceeding the maximum
amount fixed by the parties.
1. It is a contract of indemnity. The assured can, in the event of loss, recover the
actual amount of loss from the insurer. This is subject to the maximum amount for
which the subject-matter is insured.
2. It is a contract of uberrinate fider. The assured and the insurer have to disclose
everything which is in their knowledge and which will affect the contract of
3. The assured must have insurable interest in the subject-matter both at the time of
insurance and at the time of loss. The insurable interest must be capable of
valuation in terms of money.
4. The risk covered by a fire insurance contract is the loss resulting from fire or
some cause which is the proximate cause of the loss.
5. It is subject to the principles of subrogation and contribution
6. It is contract from year to year. It comes to an end after the expiry of the year. It
can, however, be renewed if the assured pays the premium during the days of


1. Specific Policy

It is policy which covers the loss of the assured up to a specific amount which is less than
the real value of the property. Specific policy is a case of under-insurance to check underinsurance, the insurers usually insert average clause in the policy in which case the policy
is known as average policy.
2. Comprehensive Policy
It is a policy which covers losses against fire, theft, burglary, third party risks, etc. such a
policy is also known as all-in-one policy. It may also cover loss of profits during the
period the business remains closed due to fire.
3. Valued Policy
It is a policy in which the amount payable in case of loss is fixed at the time the policy is
taken. In the event of loss, the fixed amount is payable irrespective of the actual amount
of loss. A valued policy can be legally challenged because it is not a contract of
4. Floating Policy
It is a policy which covers property at different places against loss by fire. It might, for
example, cover goods lying in two warehouses at two different places. It is always
subject to average clause
5. Replacement or Reinstatement Policy
In order to prevent fraudulent devices by the assured, the insurers usually insert a clause
in the policy, called the re-instatement clause, whereby the insurer undertakes to pay the
cost of the replacement of the property damaged or destroyed by fire.
A contract of marine insurance is a contract whereby the insurer undertakes to indemnify
the insured, in manner and to the extent thereby agreed, against marine losses, in
consideration of a premium paid by the insured. It is a contract of indemnity. It is a
contract uberrimae fider. It must have insurable interest. The doctrine of subrogation
applies to it. The usual form of the policy is what is called Lloyds Policy. Lloyds are a
registere body of several members and a broker is always employed in the case of this
policy. Sometimes, a company policy also may be issued.
1. Time Policy: It insures the subject matter for a certain specified period, not
exceeding twelve months.
2. Voyage Policy: It insures the subject-matter for a certain voyage only i.e. journey
from one fixed port to another fixed port.
3. Valued Policy: It specified the agreed value of the subject-manner insured.
Insurers are liable only for the loss not exceeding the value mentioned in the
4. Unvalued or Open Policy: It does not specify the value of the subject-matter. The
value is to be ascertained subsequently at the time of actual loss.

5. Mixed Policy: It insures the subject-matter for a specified voyage and for a
particular period.
6. Floating Policy: It describes the general terms of insurance, leaving other
particulars such as the name of the ship etc. to be declared subsequently.
7. Wagering or Honour Policy: It is also known as policy proof of interest or
Interest or no interest policy. In this case, the insurer does not have insurable
interest in the subject-matter of the contract. It resembles a wages and hence void
Losses are indemnified depending on the honour of the insurer.
A marine insurance policy contains the following particulars:
1. Name of the ship
2. Name of the parties
3. The time of commencement and duration of the risk
4. Lost or not lost clause whereby the insurer is made liable whether the goods
were in existence or not at the time when the insurance was effected, except when
the insured knew that the goods were destroyed already.
5. Touch and Stay clause which mentions the various parts which the ship touches
and the period of its stay at these parts.
6. Accepted perils for which the insurer undertakes to be liable.
7. Free from capture and seizure clause which exonerates the insurer from has
liability for the loss arising out of the capture and seizure of the ship.
8. Free from particular average or Free from all average clause whereby the
insurer is exempted from his liability for any particular average loss or for all
average loss caused to the subject-matter of the contract.
9. Barratry clause relates to the liability of the insurer for the loss arising out of
the wrongful act of the master or any of the crew of the ship.
10. Sue, Labour and Travel clause which entitles the insured to minimize the loss
and claim for expenses from insurer and to recover the goods lost by falling
overboard accidentally.
11. Collision or running down clause whereby the owner of an insured ship shall
indemnify the owner of another ship if the former ship collides negligently with
the latter.
12. Inchmaree clause which protects the insured against any latent defect in the
machinery of the ship.

13. Expected Perils clause which specified the risks not covered by the insurance
A marine policy is thus a formal document signed by the insurer. It must be stamped. It
contains the terms of the insurance as explained above. It is an actionable claim and can
be transferred by means of an assignment.

At the end it is clear that laws are affecting business and they are also changing the
business. Just because of the improvement of science and technology so many new
concept arrived. Those concepts made older laws invalid. For example in the past you
have to go to some place far from your house to make the payment or to get money, but
now you can do it in you home through your computer. In the past there were less number
of companies or businesses. Now there are lot of business, companies, and moreover
there are many large businesses, their yearly turnover is bigger then some countries
economy. Another concept is from environmentalist prospect of view. So you need to
change the law for both of your existence.