You are on page 1of 20

CONTRACT

Contract act’ 1972 is an agreement enforceable by law is contract. A contract essentially consists of
two elements- a) Agreement, b) enforceability by law.
a) Agreement
It is defined as every set of promise forming consideration for each other.

Sec(2a) when one person is signifies to another his willingness to do or abstain from doing anything
with a view to obtaining the ascent of the other in such act or abstinence is said to have a proposal.

2(b) Essential elements of contract (Sec 10)
All agreements are contracts if they are made by the free consent of the parties competent to contract,
for a lawful consideration and with a lawful object and are not expressely declared to be void.(Sec.
10 of contact act)

a) Offer and acceptance:-
There must be lawful offer by on party and lawful acceptance by other parties. The word lawful
implies that an offer and acceptance must conform to the rules laid down in the contract act
regarding offer and acceptance.
b) Intention to create legal relationship:
There must be a relation among the parties that the agreement shall result in or create legal
relationship. Agreement of a social nature doesn’t contemplate legal relationship. E.g.- An agreement
to wine at friend’s house
c) Lawful consideration:
Subject to unfair consideration an agreement is largely enforceable when each of the parties get
something and give something.
d) Capacity of parties:
Capacity means competency of parties to execute a contract. Want of capacity arises from minority,
lunacy, idiocy.
e) Free Consent
Every contract must be extended fogf on the basis of free consents of all the parties. If the agreement
is induced by coercion, undue influence, misrepresentation, fraud and mistake then it is said to taken
that there is absence of free consent.
f) Legality of the object
The object for which the agreement has been extended into must not be illegal or immoral.
g) Certainty
The agreement must not be vague. E.g.- a contract to sell 100 tons of oil for Rs. 100/ton.
h) Possibility of performance
The agreement must be capable of being performed. A promise to do impossible thing can’t be
enforced. E.g.- Bring life to a dead body.
i) Legal Formalities
An oral contract is perfectly valid except in those cases where writing and legislation of agreement is
required by contract. E.g.-Lease, Sale of immovable property.

Offer and Acceptance
Offer alone or acceptance alone is ineffective but an offer coupled with acceptance leads to the
formation of a contract, which is enforceable by the courts provide the essential elements exist.
Formation of an contract can be illustrated by the famous “Gun
Powder and bright metal” ndsdf by Prof. Ansen. The material of gun powder are Sulphur, Iron
Filling etc. but themselves are not enough to make an explosion but a light match stick is applied to
the above mixture an explosion occurs: Like wise offer and acceptance together leads to the
formation of a valid contract. But if there is any disqualification on the part of the either offer or
acceptance no contract will be formed just as gun powder lacks Sulphur or match stick is dsfdsfdsf

1

no explosion will occur. So it is said acceptance is to offer is what a lighted match stick is to a gjhf of
gunpowder.

Consideration
Sec 2. Clause (d) of contract act defines consideration as follows – when the desire of the promisor,
the promise or any other person has done or abstain from doing or does or abstains from doing or
promises to or to abstained from doing something, such act abstinence or promise is called
consideration for the promise. E.g.- A saves B’s goods from fire without being asked to do. A can’t
demand payment for his service.

Promise or any other
It may move from the or any other person wdfd law. “An old lady by a deed of gift made over
certain property to her daughter under the direction that she should pay her maternal uncle R certain
amount of money annually. On the said case R into an agreement with C to pay the agreed amount.
Later on C refused to pay on the plea that no consideration has moved from R. The court held that
the R was entitled to get the money as the consideration had moved from his elder sister. Every
contract must be supported by consideration, but there are 5 exceptions.

“NO CONSIDERATION NO CONTRACT” is the exception to the rule of
contract. Discuss.
The general rule is one of the essential elements of the valid contract. If there is no consideration, the
agreement becomes valid.
Sec 89 of the contract act deals with the certain exceptions. The exceptions are as follows –

(i) An agreement is made out of natural love and affection with those standing in near
relation, to each other; such an agreement must be written down and registered to become
a contract. E.g. - Father making gift of some property to his son.
(ii) An agreement to compensate voluntary service. For e.g.- A finds B’s purse and returned
to him. B promises to pay A Rs. 100.This is a valid contract because it is compensate a
voluntary service.
(iii) Promise to pay a time sfxcvcfs debt. This promise to pay debt must be made in writing
and must be signed by the person to pay wholly or by part the debt.
(iv) Contract of agency.
(v) Completed gift.

The parties to enter into a contract must have a capacity to do so. Capacity means the
competency of parties to enter into a valid contract. According to sec-11 of contract act, every
person is competent to contract who-
a. Is off the age of maturity (A minor is a person who has not completed 18 years
of age).
b. Is off sound mind ( Sec 12 lays down that a person is said to be off unsound
mind for the purpose of making contract if the time of making contract is
made is incapable of understanding it and following a rationale judgment as to
its effect upon his contract. A lunatic is a person who is mentally ffgsf. An
idiot is a person who completely lost his mental power)
c. Is not disqualified from contracting by any law.
An agreement with or by minor is absolutely void. E.g,- The case of Mohori Biwi v/s Dhoron Das.
Dhoron Das, a minor borrowed Rs. 20000/- from Mohari biwi and as a security a mortgage deed in
her favor. Dhoron Das became a major after few months and filed a suit for dfgfg that the mortgage
executed during his minority should be sdasd to void and cancelled.
It was held by ede council that the mortgage to the minor is void and Mohari biwi was not entitled to
repayment of money.

2

g.A spiritual Guru induced his devotee to make a gift of her property in return of a promise of a salvation of the devotee “Held” the consent of the devotee as given under undue influence.-A says B.Distinguish between coercion and undue influence. (ii) Active concealment of a fact by a person having knowledge of the fact. Public invested in the share of the company. (Sec 20).. But mistake of Indian law is known no excuse. Detaining or threatening detain any property to the sfdsfdf of a person whatever with the extension of coercing any person to sfs fgs into an agreement. Misrepresentation Representation is a statement or assertion is made by one party to the contract to the other before the time of contract regarding some facts to it. Free Consent/Coercion- This is committing or threatening to commit any act forbidden by Indian Penal Code or unlawful. E. Later on it transpire that the land doesn’t produce 50 ton/ bigha. There is no intention of deceive. 2) He uses the position to obtain an unfair advantage over the other. Bi-lateral. Mistakes of fact It may be off two type uni-lateral. Mistake of Indian law. A doesnot have an occasion to know.g. This agreement is void. It si neither void nor void able. Mistake Mistakes are off two types – Mistakes of fact.A threatens to B to shoot him. E. E. (iv) Any other fact fitted to deceive. E.g. Distinguish between Fraud and misrepresentation.A company is depicted as prosperous by non-disclosure of it’s liabilities in prospectus. it is unilateral.G.. Where both the parties to an agreement is under mistake has to matter of fact essential to an agreement. (iii) A promise made without an intention of performing it. (v) Any act or omission the law specially declares to be fraud ant. Heed a fraud is perpetrated by non-disclosure of liabilities. Mistakes of law. Mistake of law Its of two kind – Mistake of foreign law. if A does not let his house to A and B is threatened to do so . “Peek vs dsfsf. valid. Ignorance of foreign law is defined as mistake of fact.A agrees to but a certain house from B. Fraud Fraud means and includes any of the following acts committed by a party to a contract with intend to deceive (i) The suggestion that a fact is true when it is not true and the person making the suggestion doesn’t believe it true and the person making the suggestion doesn’t believe it true. is called Bi-lateral mistake..g.E. What are the agreements that have been declared as void by the contractor? 3 .. It turns out the deed at the time of bargain thought fgdfgfdgdfgdfsgfgfgdsfggfgv When in contract only one of the parties committed mistake regarding the subject matter.This is an agreement is bought in coercion. A believes the statement to be true but A didn’t have sufficient ground to believe. who intends to buy A’s land “My land produce 50 ton of paddy per bigha”. Undue Influence 1) A contract is said to be induced by under influence where one of the parties is in a position to dominate the will of the other. ‘1873’ England. Misrepresentation arises when the misrepresentation is in accurate but the inaccuracy is not due to any desire to fraud the party.

But on the 5th of Feb. A may perform the promise by personally paying the same or it to paid through his representatives. 4. Every agreement by which any one is restrained from exercising a lawful performance business or trade of any kind is void (Sec-27). e) Involves or imply injury to person or property. E. 1. An agreement made without consideration is void subject to certain exceptions (Sec-25). the person furnished this supplies is entitled to be reimbursed from the property of such incapable persons.g.g. An agreements is restrained of legal proceedings is void. After 1787 tonnes are delivered the eeer co. 2. E. Breach of Contract Anticipating breach A breach of contract may take place before the time fixed for the performance of contract. A must perform the promise personally. the promiser must himself perform the contract. Agreement by way of dsfds is void (Sec-30). f) The court regards it as immoral or opposed pubic policy.  A agrees to deliver to B 5 tonnes of sugar on 1st June. within time and in the manner prescribed – Personal Performance-dsfdsfdsf involving personal skill. 3. Vcvxcv for incapable person Person incapable entering into a contract or anyone to ghg he legally bound to support is supplied by another person with dsfdsf suited to his condition in life.-  C agrees to supply a dfdsf with 3900 tonns of dsfdsf chains. c) Is off such a nature that if permitted. 4 . Queasy Contract Queasy Contract is exceptional type of contract by which one party is found to pay money in consideration of something done or suffered by other parties.. 6. Performance of Contract It means carry out obligation by parties to the contract. E.g. d) It is fraud ant. Performance by representatives – In all other cases the promisor or his representatives may perform.A contracts with B on 1st Jan to sell 100 tonnes of coal and to deliver the same on 1st June. except when the matter is referred to arbitration (Sec-28). 1. although he has not. An agreement the meaning of which is not contain or capable of being contain is void (Sec- 29)..g. An agreement readdasa of marriage of a person other than a minor is void (Sec-26). He fails to do so on 1st June. E. A writes to B that he is unable to deliver the coal.A promises to pay B a sum of money. informed C that no more would be required. Bi-lateral Mistake ( Sec-20).. Actual Breach of contract It takes place during the performance of contract or at the time when the performance is due. The are not actual founded on actual promise but arise when one party has so conducted himself that he must be wdfdf bound as if he has made a promise. Legality of object and consideration a) The consideration or object of an agreement is lawful unless- b) It’s forbidden by law. B may at fdsff the contract as dfdf and sue for damages.. 7.A promises to paint a picture of B. 5. it would defeat the provisions of any other law.

the sum due from A. E.. A bound to efghgg good to B the amount so paid.. 4.g.to C.A & B jointly own Rs. The consequence of such a sell will be the dsfds of lease. Delivery by Mistake or under coercion A person whom money has been or anything delivered by mistake or by coercion must repay or returned. E. being in arrears this land is advertised for sale by the govt. 2. A done pays the amount to C and D not. E.. B to prevent the sale pays to govt. 3. Benefit of non-gratuitous act Where a person lawfully does something for another person or delivers anybody to him. B is bound to pay for those goods. 5 . C is bound to repay the amount B.g. the zaminder. The revenue payable A to the govt. Fdsffds of goods A person whom finds goods belonging to another and takes them to his custody is subjected to the same responsibility as an dafdasdas 5. not intending to do so gratuitously and such other person enjoying the benefit thereof the later is bound to make compensation to the former in respect of or to revue the things so done or delivered. Reimbursement of interested person A person who is interested in the payment of money which another is bound to pay and who therefore pays it is entitled to be reimbursed by the other. under the law by revenue. 100/.g. 100 once again to C. B treats the goods as his own and uses it.A a trades man left goods to B’s home by mistake..B hold land for a lease granted by A. Knowing thus fact pays Rs.

c) Be a person of ability. This definition extends a concept of consideration not merely to one actually paid but one which is barely promised or partly promised and paid.It means right to be protected against the making of life and property hazardous goods-services. integrity and standing and has adequate knowledge and experience of at least 10 yrs in dealing with problem of economics. Supreme Court has included definition of medical service under the purview of services. who shall be its president sfsfdsf be the other members. industry. processing and supply of electrical and other energy board or lodging. entertainment but doesn’t includes rendering of any service free of charge or under a contract of personal service. law. Similarly it includes not the actual hirer of the service & also any extension of such services if they are aware of approval of the first mentioned person. common accountancy. quantity. Right of consumer under consumer protection act 1) Right to safety. Jurisdiction District forum shall have jurisdiction to uncertainty complaints where value of goods-services and the composition if any claimed doesn’t exceed 20 lakhs. CONSUMER PROTECTION ACT It visualize two distinct type of customers-Firstly those who buy good for consideration and secondly. transport. 2) Right to be informed – It means the right about the quality. 5) Right to seek redressal – To stop unfair or restricted trade practices. purity standard and prices of goods-services so as to protect the consumer against unfair trade practices. 4) Right to be hearted– To be assured that consumer interest will receive the the consideration of appropriate dfdfdf. b) Composition of state commission 6 . financing. Composition of Forum (or composition and jurisdiction of redressal agencies) a) Composition of District Forum Each district forum should consist of a person who is or has been qualified to be an district judge. 6) Right to consumer education – To be an informed consumer. 3) Right to choose. public affair. one of whom shall be an woman who shall have the following qualification- a) Be not less than 35 yrs of age. b) Posses a degree from recognized university. administration. The further amplitude given by these provisions is the fact that the consumer is not merely one who originally buys goods but further includes any user of such gods when such use made with the approval of the original purchase. those who hire or avail of any services for consideration. For previous of the consumer commercial purpose has been exclude (exception commercial purpose doesn’t include used by a person of goods as bought & used by him & services availed by him exclusively for the purpose of earning his livelihood by means of self-employment) Service Service means service of any description which is made available to the potential user and includes but not dsfdsfdf to the provider of the facilities in connection with banking. construction. insurance.To be assured wherever possible access to variety of goods and services at competitive price.

(v) Removal in defects in goods and deficiency of services. Legal heir or representatives of consumer in case of death of original consumer. (viii) Withdrawal of hazardous good. Jurisdiction Original Jurisdiction – To entertain complaints where value of goods and services and compensations if any exceeds 20 lakh but doesn’t exceed Rs. Any voluntary registered consumer association. Who can file complain? 1. 7 . c) Composition of National commission It shall consist of – A Supreme Court judge. Central or any state govt. (ii) Replacement of goods with new one of similar description. 4. 2. (iii) Return of price and charged paid. Five members (one must be a woman) qualification same of that district forum. Each state commission shall consist of a high court judge less that two members of whom one shall be who shall have the same qualification as that member of district forum. Consumer. 3. (vii) Not to offer hazardous good for sale. Relief a consumer can get from redressal agencies- (i) Removal of defect sfdsf by appropriate laboratory. 1crore. (ix) Cease manufacturing of hazardous good. Vbxvcbf – Appeal against district forum and aasda. (vi) Discontinue of unfair-restrictive trade practices. (iv) Payments of compensation. 5. Limitaion – Max 2 yrs. One or more consumer of same interest. (x) Ensure corrective advertisement.

Arbitration Agreement:- It means an agreement by the parties to through dafdafd arbitration all or certain disputes which dsfdrf arise in respect of a definite relationship.Withholding a certificate to which a person is certified to or referring to register transfer of share. The proceedings are conducted and proceedings are adopted as per the agreement with the concurrence of parties.. There different types of arbitration – Domestic Arbitration.g. 3) Institutional Arbitration – Theses are conducted under the rules laid down by an established arbitration organization. Thus the usual features of arbitrations are – Existence of disputes between the parties and their agreement to refer to refer the dispute to the decision of a third person with dsfdsf he’ll act judicially. E. Dispute It means matter is the dispute and not be contention – A dispute shall include disputes of law. Railway act..Electricity Act 1110. E. 1) Adhoc Arbitration – It is arbitration agreed to arrange by the parties themselves without recourse to any institution. ARBITRATION AND CONCILATION ACT Arbitration It is adjudication over disputes between parties by a judge. who have been agreed upon by parties to be judge and decide upon the matter. 2) Statutory Arbitration – It is conducted in accordance with the provision of contain special act which specifically provide for arbitration in respect of disputes arising from matters dsfggchds by those dafdaa. Arbitration is therefore mean submission by two parties of dispute to the judgment of a third person called arbitrator and who is to decide the controversy in a judicial manner. It may relate to an act of commission or omission.It takes place in India when arbitration proceedings the subject matter of the contract and sdfdsfdsf of disputes are governed by Indian laws or when the cause of action of the disputes arises wholly in India or the parties otherwise subject to jurisdiction. 8 .g. It must be civil in nature. Such rules are meant to supplement the provision of arbitration or conciliation act 1956 in the matter of procedure.

g. grains and things attached to and forming the part of the land are agreed to be asdsfddas before sale or under a contract of sale. the property in the goods is transferred from the seller to the buyer.A agrees to sale B a certain ring provided A is able to purchase it from its present owner. growing crops.These are those goods which are already in existence and which are physically present in some persons ownership possession.Theses are those goods which will be produced or manufactured by the seller after the making the contract of sale. E. Specific goods-those goods are which clearly identified and recognized as separate things. E. SALE OF GOODS ACT’1930 It defines a “contract of sale of goods” as a contract whereby a seller transfers or agrees to transfer the property in the goods to the buyer for a price.a seller agrees to sale 1 bag of rice from 100 bags available in his dccxfdfd the buyer.g. The contract is call sale where the transfer of property in goods is to take place at a future date the contract is called agreement to sale. Contingent Goods – This may be a contract for sale of goods. A brief Case. E.g. – A motor Car. –Wood as a new material will because asdasd on conversion after sale. the acquisition of which depends upon a adhjhfda which may or may not happen.g. Goods It means any kind moveable property except actionable claim and money and includes stocks and stores. Generic Goods – are those goods which are indicated by description and are not separately identifiable. Goods are classified as follows- Existing Goods. E. (Existing goods are again classified into two categories. 9 . Future Goods.. Where in a contract of sale..

Difference between hire purchase and installment – In hire purchase possession is given where as in the installment system the ownership is not given till last payment. DOCTRINE OF DOCUMENT It means. he can’t blame the seller and dfdfd damages for him. 2) Merchantable Quality – Where dealer/seller who sales good by description is bound to deliver the goods of merchantable quality. ordinarily a buyer must buy goods after satisfying himself of quality and fitness. 10 . If the buyer makes a bad choice. There are two exceptions – 1) Fitness Buyer’s purpose- Where the buyer expressedly or by implication makes note to seller the particular purpose for which the goods are required so as to the buyer relies to on the sellers skill and judgments and the goods are of the description which in the sdfds of seller’s business to supply.

a motor car dealer (suitable for tour purpose). In the case of sale he has a right to sale the goods 2. he’ll have a right to sell the goods at the time when the property in the goods is to pass. In every contract of sale there is an implied warranty that the buyer shall enjoy quite possession of goods. Whole of the price of goods has not been paid or sdsfdsfdsf. the breach of which give right to claim damages but not right to treat the reject of goods and treat the contract as dsfdsfds. you can’t oblige a party to take beans 3.. 1. E. The capacity was dfdada only 360 tons. – (Baldry v/s Marshall) The plaintiff consulted the defendant . II. Implied Condition 1.When there is contract for sale of goods by description there is an implied condition that the good shall be correspond to the description. Held – Reputation of capacity was not a condition but breach of warranty. Held the car was so vital that that its non- fulfillment defeated the very purpose for which the plaintiff bought the car. – If you contract to sale peas. Sale by Sample- In case of sale by sample there is an implied condition that the bulk shall correspond the sample of quality.-Plaintiff bought a motor car from the defendant and he use it for several months. E. Implied Warranty I. Condition as to title the goods – In a contract of sale there is an implied condition on the part of the seller that. 4. The defendant suggested that a bugatti car would be appropriate. 11 . 2. The goods shall be free from any confusion Warranty Warranty is stipulations collateral to the main purpose of contract. E. E. the particular purpose for which he needs the goods and depends upon the skills and judgments of the seller whose business is to supply goods of that description there is an implied condition that the good shall be reasonably good for the purpose.g. After some time it appeared that defendant have to title to the motor car and the plaintiff was compelled to surrender the motor car to true owner. The dead weight capacity of each ship 460 tones. The dependent contested. In case of the sale of an agreement to sale. The goods must be free from sdfdsfdsdasfd. the breach of which gives rise to a right to treat the contract as dfdfdfd and claim for damages. Who is an unpaid seller? A seller of goods believe to be an unpaid seller when – a.entitled to sue for damages.g.g. Held – Plaintiff relied upon the seller judgment. E. Sale by description. – Plaintiffs who are ship ordered form the defendants 50 tonns of coal ( New South Wales) for dafdada their steamship. CONDITION & WARANTY Condition Condition is a stipulated essential to the main purpose of the contract. The car turned to be unfit for tour purpose and so the plaintiff rejected that. Defendant failed to supply coal of which is unsuitable for the plaitiff’s steam.g. Condition as to fitness/quality - When the buyer express by or by implication makes known to the seller.g.The plaintiff bought two small ships from defendants relying upon the particular provided by the defendant.

whom the good has been sold - o Without any stipulation as to credit. b. Right of stoppage at transit When the goods are in course of transit the buyer but the buyer of good become insolvent. or o When the buyer becomes insolvation. Again an unpaid seller has the following right against buyer – I. Seller’s Lien Unpaid seller of goods who is in possession of them is entitle to retain them until tender or payment has been made. according to the term of sales. 3. An unpaid seller has the following right – 1. Suit for damages When the buyer wrongfully refuses or neglects to accept pay for goods the seller may sue for the damages for the loss he has suffered III. II. or o On credit but time has expired. 2. When a bill of exchange or other negotiable instrument which has a condition on the basis of which it received had not been fulfilled by the reason of dishonor of the instrument. 12 . then the seller can resume possession from the carrier. Claim for special damages and interest The seller may recover special damages/interest by law of special damages and interest. the seller may suit file for recovery of price of goods sold and delivered. Right or resell of goods The unpaid seller who has retained possession of the goods will exercise his right to lien or who has resumed possession from the carrier upon insolvency of the buyer has right to resell the same goods. When under a contract of sell of the property in the goods has already passed to the buyer and the buyer refuses/neglects to pay price of the goods.

(v) The instrument must be stamped.g. Accordingly a dsfdsfdsf or a dividend warrants is not covered by negotiable instrument act’ 1881.This cannot be promissory note since it is conditional. (iii) The instrument must contain a promise to pay. The person who will receive the money is called PAYEE. The essential elements of bill of exchange are – (i) The instrument must be in writing. The person who’ll got the money is called payee. I owe Rs. (vi) Sum of money to be paid must be certain. The person who makes to promise to pay called the dsfdsfdsfdsfdsf. (iv) The drawer. (iii) The instrument must contain an order to pay. (ii) He/she become holder before its maturity. The maker of the bill is called DRAWER and the person who is directed to pay is called DRAWEE. It is the holding duty to present the Bill of Exchange the acceptance. NEGOTIABLE INSTRUMENTS ACT’1881 Sec 13- A negotiable instrument means a promissory notes. (ii) The instrument must be signed by maker. (iv) The instrument must be unconditional. bill of exchange or cheque payable either to order or to bearer. The drawee signifies his acceptance by signing. Bill of exchange A bill of exchange is an instrument in writing containing an order signed by the maker directing a certain person to pay sum money only to or to the order of a certain person to pay a certain sum of money only to or to the order of a certain person or to the wdsdws of the instrument. Under this only three kinds of instruments are recognized as negotiable. drawee. 100 – There is no promise to pay but it is an acknowledgement of indebt ness. These are the essential elements of promissory note – (i) The instrument must be in writing. payment must be certain. Holder in due course Holder of Negotiable instrument is called holder in due course if he/she satisfies the following criteria – (i) He/she obtain the instrument for a valuable consideration. Promissory note A promissory note is an instrument in writing (not being not being a bank note or currency note) containing an unconditional undertaking signed by the maker to pay a certain sum of money aaddfdsfd to or to the order of a certain person or to the bearer of the instrument. (vii) Sum of money must be legal tendered money of India. E. (iii) He/she has no cause to believe that any defect exist in the title of the person from whom he derived the title.-I promise to pay you 7 days after D’s marriage . (v) Payment must be legal tendered money of person. 13 . (viii) The sum of money is payable to a definite person or to his sfgsfsfd. (ii) The instrument must be signed by drawer. (ix) The sum of money is payable is on demand or after certain definite time. Holder of Negotiable Instrument (Sec – 8) Holder of Negotiable instrument means any person is entitled to his own name to the possession there of and to receive or recover the amount due there from the party thereof.

Kol-000 Dishonor by non-acceptance – A bill of exchange is dishonored by non-acceptance in any of the following way - (i) If the drawee doesn’t accept the bill within 48 hours from the date of presented through it is dully presented for acceptance. (vii) The instrument must be stamped. when it is presented for payment to it’s during official hours provided this is validly drawn and the drawer has sufficient funds to his credit. (iii) When the drawer is incompetent to contract. (v) The cheque must be dated. (vii) Cheque is drawn in future date i. (viii) The Payment is payable is on demand or after certain definite time. Such person deemed to have committed an offence and should be 14 . Sayantan Banerjee B. Section 138 of Negotiable Instrument (NI) act (1st April 1989) Chapter XVII of NI act was inserted by act 66 of 1988 effective from 1st April 1989 prescribing penalties in case of dishonor of contains cheques due to insufficiency of funds. (vi) Cheques become due for payment on the date specified for it. Section 138 of NI act states that any cheque drawn by a person on an account maintained by him with a banker for a payment an amount of money to another person from/out of that account for discharge in whole or in part of any legally enforceable debt or other liability is dsfdsfds by bank unpaid either because of the amount of money standing to the credit of that account is insufficient to honor the cheque or that it exceeds the amount arranged to be paid for that account (overdraft) by an agreement made with that bank. (vi) The Payment is payable to a definite person or to his order. the acceptance is conditional. (iv) Signature must tally with specified signature of drawer kept in the bank. Pal (Drawer) Of XYZ lane. is post dated cheque is also valid. (iii) A banker name dasdfda must pay it. (iv) When the drawee gives qualified acceptance i. But in either case it must be payable on demand. Cheque It is a bill of exchange drawn upon a specified banker and payable on demand. Common format of bill of exchange – 10. To. Dishonor by nonpayment A promissory note/Bill of Exchange/cheque is said to be dishonored by non-payment when the maker of the promissory note/acceptor of bill of exchange/drawee of the cheque makes in a default in payment upon the duly required to pay the same. The essential elements of bill of exchange are – (i) A Cheque must fulfill all the essential elements of bill of exchange.e.e. (ii) If there are several drawee and all of them not accept. (address) or order the sum dsfdsfdsf ten thousand for value received in cash. (ii) A cheque may be payable to order or bearer. (v) Whether the drawee is fictitious person. 000/- The three months after the date pay (X).

punishable with imprisonment for a term which may exceeds 2 years or with a fine which may extend to twice the amount of cheque or both. The payee or holder in due course of the cheque makes a demand for payment of the said money by giving notice in writing to the drawer of the cheque within 30 days of the receipt of the information by him from the bank regarding the return of the cheque accepted. III. The drawer of such cheque fails to make payment of the said amount to payee oh the case may be to the holder in due course within 15 days of receipt of the said notice. But the above provision will not apply unless – I. The cheque has been presented to the bank written a period of six months from the date of which it was drawn or within the date of validity whichever is earlier. 15 . II.

E. is called Holding Co. limited by shares.g. Suppose A. (iii) Public Company – A public Co.Company act’1913 The law confers upon a company distinct legal personality with perpetual succession and common seal. (iii) Prohibited any invitation to public to subscribe to a share or debenture of the company. B.A Company or corporation formed by act or legislation is called a statutory Company/corporation. is a legal person separate form A. b. with himself.LIC ( LIC act 1956).. Unlimited Company.  In a public company of members can’t be less than 7 and there is no upper limit.Through the ownership of the share. his wife. Ltd. To control over the composition of the board of Director.e. companies act 1961 or an existing company. limited by guarantee. In the liquidation proceeding Solomon claimed himself to be a secured dsfdsfdas and demanded sfdsfdsf payment out of the assets of the Co.-Solomon v/s Solomon & Co. As a consideration Solomon received major shares of the company and debenture which created a charge on the asset of the company went into liquidation. a co. The unsecured creditor of the company objected on the ground that the Co. (v) Holding Companies and Subsidiaries Company – If a company can control the policies of other company - a. Solomon has a business in goods manufacturing. of members –  In private company number of members can’t be less than 2 and more than 50. is called Subsidiary Co.  In a public company there is restriction on transfer of shares.g. 1) No. Different types of company (i) Statutory Company/corporation . is a company which is not private company. An existing company means a company registered under any other companies act. (iv)Government Company – It is one which not less than 51% of the paid up share capital is held by the central govt. B.g. belong to Solomon and so he can’t be secured Creditor. and the later co. C and fifty others. . 3) Restriction about invitation to public –  A private company can’t invite public to purchase its share/debenture. (ii) Limits the member’s number to 50. Ltd. Accordingly a company is different from its members and individuals who compose it. After sometime he formed a company named Solomon & Co. Then the former co. A private company can be classified into – A co.”. COMPANY ACT A company means a company formed and registered under this act i. C and fifty others form a company named ABC & Co. v/s public Co. daughter and four sons are share holders and transferred the business to the company. E. But the house of the lord of England gave the verdict that Solomon as an undivided and distinct from “Solomon & Co.Discuss. 16 . and/or state Govt. and governments or by ant two or more than together. Reserve Bank of India (act of parliament) (ii) Private Company – It is one which by its dsdsfdsfdsf of association – (i) Restrict the rights of the members to transfer their share. (iv) Restricts about invitation of public deposits. He is a secured creditor and will get ddadadaas in payments out of the assets of the company. Differentiate – Pvt. 2) Restrictions on the shares –  In a private company there is no restriction on transfer of shares. E.

 The place where the registers of the company’s are kept. 6) Ddaasddas Clause – No subscriber of MOA can take less than one share. 2) Situation Clause – The name of the state in which the registered office of the company is to be situated is to be stated. 3) Object Clause – The MOA must state separately the main objects incidental or ancillary to the main objects. Articles of Association (AOA)– It is document which contains rule regulations and by laws regarding the general administration of the company. Its purpose is to enable share holder. AOA is subordinate of MOA & MAO is inconsistent. Memorandum of Association (MOA)– It is charter or constitution of company. 17 .  A public company must held statutory report or meeting.” at the end of the name of the public company and the word “Pvt.” or “public ltd. In side that are the share holders make such regulations for their governance as they think fit. Clauses of MOA (form and content of MOA) – 1) Name Clause – The name of the company with the world “Ltd.” at the end of the name of the end of private company is to be given. The name would be considered as undesirable if it has close resemblance or identical with any existing company. 8) No. Relationship between MAO and AOA – 1. Dsdddadasa in asasas railway carriage Co.” at the end of name. 4) Liability Clause – The nature of liability of the company. the AOA must give addafdf. is undesirable. 5) Prospectus –  A private company needs not to file prospectus. 7) Statutory Report/Meeting –  A private company needs not to held statutory report or meeting. Ltd.  The public company must add “public co. It defines it relations with the outside world. outsiders. 2. A public company can invite public to purchase its share/debenture. It is a basic document. 5) Capital Clause – In case of a company having a share capital the MOA shall state the authorized share capital. of director –  A private company must have at least 2 directors.  A public company must file prospectus for raising capital. The MOA must be need in conjunction with AOA. The purpose is that -  The person is dealing with the company can know where the notice to be sent. whether limited by share or guarantee is to be stated. and creditors of the company to know what is permitted range of activities are. 6) Commencement of Business –  A private company can commences dfdsfdf dsfdfdf dsfdsfdsf dfdfdf  A public company has to wait until obtain a certificate for commencement of business.  A public company must have at least 3 directors. v/s Richie observed the memorandum as it were the area beyond which company’s action can’t go. 4) Restriction about name –  The private company must add “private” at the end of name. The promoters of a company can choose any given name but they can’t select the name which in the opinion of central Govt. It is the foundation on which the structure of the company being built upon.

Briefly stating. The terns of MOA can’t be modified or controlled by AOA. Subsidized Capital – It is the part of the issued capital which is taken up and is accepted by public. Minimum subscription means the amount which is in the estimate of the director to meet the needs of the company namely purchase price of any property. Every person who is dsfsdafd as director or is authorized in writing asdasdasd sign a prospectus so delivered. Promoters must prepare a document akin to prospectus known as STATEMENT in lieu of prospectus. The sfddsfdsf of it be the admission of indebt ness. Statement in lieu of prospectus- A private company need not approach public for money. a prospectus must contain general information (E. Minimum Subscription – Sec:69 The first requisite of a valid allotment is that of a minimum subscription when shares are offered to the public an amount of minimum subscription has to be stated in the prospectus. 18 .Every prospectus must be dated. they are open and accessible to all.It is the total face vale of the share of the company authorized to issue its MOA Issued Capital – It is the part of the authorized capital which is offered to public for sale. The issue of debenture is a particular mode of borrowing money of a company. circular or advertisement or other documents inviting deposits from public or inviting offers from public for subscription or purchase of shares or debenture of a body corporate. Share Capital – Authorized Capital . Registration – Prospectus can’t be issued unless a copy of the same has been sent to the register for companies of registration. Sec-2. Schedule-2 of the company act specifies a list of particulars to be included in the prospectus. AOA are public documents i.). its objects. . The document should be in the form out in schedule – 3 of the act. The promoters of a company use their private resources or contracts to raise required capital.Company’s Name. This document shall deliver to register for registration at least 3 days prior to the first allotment of shares. ASDASDASD defines debenture as “any instrument under seal evidencing a debt. Company’s registered address. number of classes of share offered. In such case no prospectus need to be issued. clause 36 defines prospectus as any document described or issued as a prospectus and issued any notice.e. Form and Contract of Prospectus – It is the only window through the potential investor can look into the soundness of the dfdsdf venture. preliminary expenses and working Capital. MOA. Prospectus The central theme of prospectus is that it sets out the prospects of the company and the purpose for which the capital is required. Paid up Capital – It is the amount of money actually paid by subscriber. It is an instrument which acknowledges creates a debt.g. Expert’s Consent – Allotment of Share – Application is an offer by a prospective share holder to take shares or purchase shares. It is simply an instrument of acknowledgement of debt by the company whereby it is undertakes to the amount covered by it and till then it undertakes further to pay dsfdsfwd thereon to the debenture holders. Dating of prospectus . No shares can be subscribed and the application dsfdasfds which addaaede not be less than 5% of the nominal value of shares has been received in cash. particulars of directors and conditions etc. When an application is accepted it is an allotment. Borrowing power of company – A company can’t borrow money unless it is so authorized by its memorandum of association trading however implied power to borrow has. 3.

b. Priority in payment of dividend over equity share. The privileges of preference share – a. Preference share – are those that are given by AOA of the company on too privilege. manager or secretary of the company. On incorporation a company acquires a distinct legal entity and secures perpetual succession. company and dfdsfsfd in case of a public ltd. d. (iv) Debenture holders have the right to attend annual general meeting.Debenture holder v/s Share holder. Share holder owner of a company till it is folded up fully whereas debenture holders are the creditor or company. the duty of company out of the provision sfdsbvbvfs with the person in charge of the company. Registration of a company – Procedure of registration of a company – for the purpose of registration of a company the following documents accompanied by necessary fees must be submitted to the register of company of the state of in which the registered office the company is situated 1) MOA signed by two subscribers in the case of a private ltd. c. 2) AOA need to be signed in similar manner. (ii) All the debentures are issued under the common seal of a company. if any a company proposes to sfdsfdsf with any individual for appointment as its managing director or whole time director or manager of company. In the winding up proceedings the debenture holders being secured creditors are paid in priority whereas share holders are paid back only after all the other dsfdsfdsf have been satisfied. b. An attorney or solicitor of high court or. company having a share capital and issuing a prospectus can’t commence business until the register issue a certificate “Certificate of commencement of business” Doctrine of in-door management – When AOA prescribes in particular mode for doing a thing. A private Ltd. E. Debenture holders are entitled of fixed rate of interest which the company must pay whereas there are profits or no profit. Distinguish . If the register is satisfied with all the requirements of the act have been complied with. The director gave a bond “A” although no resolution was passed. Outsiders are entitled to assume that the rules are being complied with. (iii) A date is specified in so far as repayment of loans is required. d. company can immediately commence a business on incorporation but a public ltd.The AOA provides that the director would give a bond if authorized by resolution of the company. A person name in the AOA as director. he shall register a company and he should issue a certificate “A certificate of incorporation”. 4) A declaration of any of the following that all. A share holder has a right to vote whereas Debenture holder has no voting right. Types of Share – Equity share – equity share capital is that share capital which is not preference share capital. the requirements of act with regard to the registration has been complied with a. Shareholders on the other hand are entitled to get dividend from company’s profit. 19 . An advocate of Supreme Court or of a high court or.g. a.. company. c. The bond is valid because AOA says that the bond can only be given when there is a resolution was passed. A company secretary in whole time practice or. Essential Characters of debenture - (i) It is acknowledgement of indebt ness by the form of an dsdsfdsfdsf by a company. 3) Agreement.

6) If any underwriting contract have not been carried out the reason there for. A copy of that report must be sent to every member at least 21 days before the date of statutory meeting. address. b. 8) The particulars of brokerage/commission paid to directors or managers. where there is one. Priority as regard return on capital in the event of liquidation of company. b. 3) An abstract of receipts classifying them according to source and also maintaining the expenses incurred by way commission or brokerage. Statutory Meetings – Every public company limited by shares and every company limited by guarantee must within a period of not less than dfdsfdfe month and not more than six months. The statutory meeting should contain the following particulars – 1) The total no. In these meeting members all discuss reports by the director of the company known as “Statutory Reports” which contains particulars relating to information of the company. fully paid up and partly paid up shares. at which the company is entitled to commence business hold a general meeting of the members called “Statutory Meeting”. Such no. 5) Particulars of contract which are to be submitted in the meeting for approval. manager and secretaries. sfgsfgsffs. 4) The name. The report is drafted by directors and certified as correct by two of them including the managing director. Annual General Meeting (AGM) – The first AGM of the company is required to be held within 18 months from the date of commencement/incorporation. which have been allotted. A company holding its first AGM within this period will not to require any other AGM either ion the year of incorporation or in the following year but the time gap between two AGMs should not exceeds 15 months. of member holding not less that 1/10 of the paid up capital of the company or from such members holding not less that 1/10 of the total voting power. Extra-ordinary Meeting – It can be asdasdasd by the Board of directors on requisition received in the regard dsdsfdf from – a. The requisition must set out the matter which will be considered at the meeting. 7) The arrears due to call from directors and others. c. The requisition must be deposited at the registered office of the company. Contents of Statutory Meetings This report is placed and discussed in statutory meeting. Rate of dividend is predetermined. 2) The total amount of cash received by the company by issuing shares. A copy of same must be sent to register of company. c. 20 . occupation of director.