Table of Contents

1. LAW IS THE SUPER MOST POWER. IT IS KING OF THE KINGS. EXPLAIN THE STATEMENT IN
REFERENCE TO REGULATE BUSINESS BEHAVIOR....................................................................................3
2. RESTITUTION AS THE LEGAL REMEDY INCLUDES NOT ONLY THE RESTORATION OR GIVING BACK
OF SOMETHING TO ITS RIGHTFUL OWNER AND RETURNING TO THE STATUS-QUO BUT ALSO
COMPENSATION, REIMBURSEMENT, INDEMNIFICATION, OR REPARATION FOR BENEFITS DERIVED
FROM, OR FOR LOSS OR INJURY CAUSED TO, ANOTHER. WHEN SUCH LEGAL REMEDY IS SOUGHT BY
THE VICTIM? EXPLAIN............................................................................................................................4
3. PRIVITY OF CONTRACT AND PARTIES AUTONOMY ARE THE TWO PILLARS OF MODERN
CONTRACT. INTRODUCE THEM IN BRIEF................................................................................................5
4. WHY SHOULD CONTRACT BE MADE BY COMPETENT PARTIES? WHO ARE THE COMPETENT
PARTIES TO A VALID CONTRACT? WRITE WITH EXAMPLES IN BRIEF.......................................................5
5. HOW IS LEGAL OBLIGATION AND RELATION CREATED IN A CONTRACT? WRITE IT IN THE
REFERENCE OF A LEASE CONTRACT........................................................................................................6
6. A VALID CONTRACT IS THE FOUNDATION OF THE SUCCESS OF BUSINESS. EXPLAIN WITH
EXAMPLE................................................................................................................................................8
7. A) HOW CAN MR. MADHURKAR MAKE EXPRESSED CONTRACT FOR A
MANUFACTURING PROJECT? WRITE WITH SOME OF THE POSSIBLE TERMS AND
CONDITIONS OF SUCH AN OFFER................................................................................................9
7. B) WHILE MAKING AN OFFER, WHY SHOULD MR. MADHURKAR IS TO BE CONCENTRATED ON THE
CONSIDERATION? WHAT SORTS OF RULES HE HAS TO FOLLOW WHILE SETTING THE CONSIDERATION
IN HIS JOINT VENTURE BUSINESS IN NEPAL? WRITE WITH EXAMPLES..................................................10
 1. Law is the super most power. It is king of the kings. Explain the
statement in reference to regulate business behavior.
Ans: Law as king of king can be directly related to law in positive school of thought. Law under
positive thought can be defined as the command issued by the sovereign(one who is habitually
obeyed). Such commands are backed by the threats of sanctions. Ignorance of law is no excuse
under law in positive school of thought.Positive thought looks law as something that needs to be
complied by each and every person within the jurisdiction. Several ACTs are enforced by the
government to bring peace and justice in the state/country. It imposes several small fines and
penalties to severe punishment like sentence of Jail on the non-compliance or violation of law.

If we have to talk about Law as the super most power in reference to regulate business behavior.
We can look toward various acts that the government imposes upon the business it s through
such Acts Any transaction that takes place between two persons(person means: individual, HUF,
AOP, BOI, AJP, firm, company, and other local authority) in relation to sale, purchase, barter,
rent, lease mortgage, physical ownership, title ownership, donate, invest, surrender, collateral are
governed .
Various ACTs are implemented under this law for business to run smoothly. Some of them are:
laws guide and regulate business as to how businesses are to be formed as well as what their
rights are and how they are to do business once they have been formed. Some areas of law
that guide and regulate businesses are:
i. Corporate law: Under corporate law there are laws with respect to sole proprietor,
partnership, and companies which guide and regulate the activities of the respective
businesses. Laws made for sole proprietorship guides and regulates such business
with respect to its registration, licenses, zoning regulations, etc. Laws made for
Partnership guides and regulates partnership firms by the Uniform Partnership Act.
Laws made for companies guides and regulates companies in respect to its
incorporation, registration, raising capital, distributing dividends and bonuses and
many other issues.
ii. Tax Law: Tax law regulates who are liable to pay tax, what are the taxable events,
how to compute taxable income, percentage of tax to be paid along with benefits
exemptions and deductions.
iii. Intellectual Property Law: Intellectual property law guides and regulates with the
rules for securing and enforcing legal rights to inventions, designs, and artistic works.
law protect the exclusive control of intangible assets.
iv. Consumer Law: Consumer Law covers general standards of business conduct,
prohibits unfair trading practices, regulates specific types of business-to-consumer
transactions, provides basic consumer guarantees for goods and services, and
regulates the safety of consumer products and product-related services.
The above list are not exhaustive. There are many other laws which directly or indirectly
guide and regulate the business. Commercial Law, Licensing and Zoning Law and other
laws.
through the help of such Acts business are guided governed and regulates in order to run
administrations smoothly without conflicts arising.
 2. Restitution as the legal remedy includes not only the restoration or
giving back of something to its rightful owner and returning to the
status-quo but also compensation, reimbursement, indemnification,
or reparation for benefits derived from, or for loss or injury caused
to, another. When such legal remedy is sought by the victim?
Explain.
Ans: Then term ‘restitution’ may be defined as an act of restoring back to the rightful owner,
that which has been taken away or lost. It is a contractual situation where one party takes the
benefit but don’t perfrom his part because of the contract being void ab initio or later declared
void.
Example for restitution: X enters into a contract with Y that he will repair Y’s house in a certain
manner, and receive some advance. Later repairs have completed but not in the manner that
discussed. Y incurs Rs. 1000 to rectify the defect.
Here the party Y suffers a loss or damage in consequence of breach of contract is entitled to
receive compensation from the party breaching the contract. In this question given above,
there is a breach of contract by X and Y suffered a loss of Rs.1, 000

In the following points apart from restitution as a legal remedy it also includes compensation,
reimbursement, indemnification or repartation
1. Breach of contract: When there is a breach of contract, not only the injured party, but the
defaulting party is also entitled to claim reasonable compensation for what he has done
under the contract.
2. Suit by a party who has not breached: When a person has begun the work and before he
could complete it, the other party terminates the contract or does something which make
it impossible for the other party to complete the contract, he can claim for the work done
under the contract.
3. Void contract: ‘When an agreement is discovered to be void or when a contract becomes
void, any person who has received any advantage under such agreement or contract is
bound to restore it, to the person from whom he received it.”
4. No contract: Contract Act says that when services are rendered or goods are supplied to a
person without any intention to do so gratuitously, and benefit of the same is enjoyed by
the other person, the latter must compensate the former. This compensation may be by
way of ‘Quantum Meruit’ or ‘Restitution’ or both.
5. The party whose consent was caused by fraud can rescind (cancel) the contract. When a
party opts to rescind the contract, he may claim restitution i.e. to be placed in the same
position as if there was no contract at all. He can also claim compensation for damages.
 3. Privity of Contract and Parties Autonomy are the two pillars of
modern contract. Introduce them in brief.
Ans:
Privity of contract: (i.e. relationship subsisting between the parties to a contract)

Under the law of contract, an agreement can be enforced only by the parties to it. A stranger to
the contract can’t sue and be sued. Since contract is a private relationship between parties, the
rights and obligations under such contract are strictly restricted to them. This is known as
doctrine of privity of contract.
The Consequences of this Doctrine are:
a) A person who is not a party to the contract can’t sue upon it even though he has provided the
consideration.
b) A contract can’t create rights or impose obligations on any person other than the parties to it.

Foe example: Madhan enters into a purchase contract for a rental property in which Abigya is
already living with a one-year lease. As part of the purchase agreement, madhan assumes the
existing lease. The home’s air conditioning unit is not working properly at the time of the
purchase, and the seller, Max, agrees in the contract to have the unit repaired or replaced. Two
months later, madhan is collecting lease payments from Abigya, but nobody has shown up to
take care of the air conditioner. When Abigya calls madhan, he tells her that it is Max’s
responsibility.

If Abigya were to file a civil lawsuit against Max, asking the judge to order him to repair or
replace the air conditioning unit as he had agreed, her case would likely be dismissed. This is
because Max has no contract with Abigya, meaning there is no privity between Max and Abigya,
and therefore Abigya cannot sue him for performance of his obligations under the property sale
contract.

Abigail can, however, sue her landlord, John, to force him to perform his obligations under their
lease contract. If John wants to enforce his contract with Max, he must sue Max himself.

Parties Autonomy:
The parties are free to enter into contracts and to determine their contents. Party autonomy is the
principle under which the parties formulating the contract are free to choose the forms, contents
terms and conditions, of the contract along with remedy for any breach or dispute that may occur
later regarding contract.
 4. Why should contract be made by competent parties? Who are the
competent parties to a valid contract? Write with examples in brief.
Ans: The parties to a contract must have capacity (legal ability) to make valid contract. In every
case, there must be assent of the parties. If, therefore, either of the parties to an agreement is
deprived of the use of his understanding or if he be deemed by law not to have attained it, there
can be no such agreement which shall bind him.
agreements entered into by a minor are void-ab-initio.

Contract Act specifies that every person is competent to contract, provided:

a) is of the age of majority according to the law to which he is subject: any Nepalese below
the age of 18 is considered to be minor as such if he/she enters into a contract then such
contract shall be declared void
lets say, “Ram”, a minor, executed a mortgage deed of his house in favour of a money lender
for Rs.20,000. Out of this he received cash worth Rs.8,000 from the money lender. Later on
the money lender filed a suit for recovery of his money. It was held that an agreement by a
minor is absolutely void and therefore the money lender can’t recover the mortgage money.

b) who is of sound mind: one who is not of unsound mind at the time of entering the
contract
Idiot, Lunacy/insanity, Drunkard/intoxicant, Hypnotized persons are some examples of
person with unsound mind. So contract made by such persons are void.
Lets say, Hari agreed to sell a property worth about Rs.25,000 for Rs.7,000 only; but later it was
proved that he was an idiot, incapable of understanding the transaction at the time of entering the
contract. So in this case the sale will be considered void.

c) is not disqualified from contracting by any law to which he is subject.

i. An alien is a person who is a foreigner to the land. If war is declared between two
countries then such other country is called alien enemy. Contract entered with an
alien enemy during war time is void.
ii. Foreign sovereigns, Government, their representatives and diplomatic staff (e.g.
ambassadors, etc.) have full capacity to contract in Nepal but they have the
privilege of not being sued.
iii. Insolvent’s property lies in the hands of ‘Official Receiver’, and he has no power
to deal with that property. Thus he can’t enter into any contract regarding the
same.
iv. A convict during the period of his imprisonment becomes incompetent

5. How is legal obligation and relation created in a contract? Write it

in the reference of a Lease Contract.
Ans: creating a legally binding obligation between two parties gives Legal Enforceability. Means
if any one party fails to fulfill his obligation, the other party can take the help of law to enforce it.
Legal enforceability depends upon the intention of the parties i.e. whether they want to enter
into a legally binding agreement or not. (Since intention of parties is supreme.)
If the intention of parties can’t be known then the following presumptions will apply.
a) No intention to create legal relations in case of domestic, social and political agreements.
Hence, they do not become contracts.
For example: X Invites Y to dinner. Y accepts the invitation but X failed to attend. Here X can`t
sue Y for the damages because legal presumption is that parties do not have an intention to create
legal relations. Therefore, ‘X’ cannot sue Y for damages.
Similarly another example: X makes a promise to his wife Y to give her pocket money of Rs.
1,000 per month. After 6 months, he stops of giving money as he promised. Can Y claim
damages from X. the answer is no because here legal presumption is that parties do not have an
intention to create legal relations. Therefore, ‘Y’ cannot sue X for damages.

b) However, in business agreements, usual presumption is that parties intend to create legal
obligations.
E.g.: ‘XYZ’ mobile company enters into contract with A to supply mobile phones regularly.
Here the presumption is that both the parties had the intention to create legal obligations.

lease as a legally binding contract

Leases, simply defined, confer exclusive use of defined property on the tenant and vest in the
tenant an interest in the real property, which is registrable. The leasehold interest is created
immediately even though the possession may not commence until a future date. The Lease is the
instrument that controls the rights and obligations of both parties to the occupancy and use. The
Lease imposes legally binding obligations on both parties with financial implications that
potentially may result in significant losses if not managed diligently.

he lease contract should contain, at a minimum, five essential components:

i. who the parties are;

ii. a description of the premises being leased;
iii. how long the arrangement will last (i.e. the term):
iv. what the tenant will pay (i.e. the consideration); and
v. the parties’ signatures.
In some cases, to be enforceable, a lease that has a term longer than one year must be in writing.
Verbal agreements and oral contracts can be legally binding as long as they are “reasonable,
equitable, conscionable and made in good faith.” Problems with oral agreements may arise if the
parties remember the details of the agreement differently. If disputes wind up in court, the
argument becomes one person’s word against the other’s.
6. A valid contract is the foundation of the success of business.
Explain with example.
Ans: A contract is a written agreement between two parties that details the terms of a
transaction. In a business, it generally states the work that will be performed, along with
important information like due dates and costs.

At one time, transacting business was easy. Two people agreed to make a trade, and both
parties honored their word. But in the latter period we can see lots of deal-breaking and
lawsuits that have taken place all around them. In business, contracts are important
because they outline expectations for both parties, protect both parties if those
expectations aren’t met and lock in the price that will be paid for services.
Having a written contract means that everyone knows what he is supposed to do and
when, and makes it easier to resolve any disputes that might arise.

Suppose I have a large agriculture farm named “EASY FARM(EF) pvt. Ltd” where
various types of vegetables, fruits and milk is produced. And let’s say EF entered into a
contract with a vendor X for the supply of seeds and samplings for the fruits and
vegetables.
Here is an illustration of the benefits of a valid contract(i.e contract between “EF” and
“X”) which makes business to run smoothly and easily for us to achieve success:

I. The contract protects both Parties(“ER” & “X”)

Although having expectations in writing increases the likelihoods of success, it also
makes enforceability easier. Simply knowing it’s in writing can put pressure on all
involved parties to meet their obligations on time. The service provider “X”will probably
even routinely check the contract to make sure the work is progressing as agreed. By such
“ER” gets its seeds and samplings on time and with respect to the written qulatity and
quantity, and in the mentioned price in the contract which helps to mitigate future
problems that may have been arise if it was not in written in the form of valid contract

If an issue arises, having the agreement in writing will make enforcement much easier. If
the client decides to work with a different agency halfway through the project, the
provider could take legal action to be paid for work performed. On the other hand, if the
service provider performs poorly, the vendor will have legal protection against paying for
the work.

II. Locking in Financial Agreements

If written properly, your contract will make sure the service provider “X” receives
payment in a timely manner. For big projects, this generally multiple small payments as
certain milestones are reached can be added in the contract as per our choice. Our credit
terms duration of payments and issues relating to advance payments can also be written
in the contract.

III. Closing the Contract

Hopefully, “ER” will never have to take legal action based on the contract, which means
the project will end and you’ll move on to the next project. Both parties can keep a copy
 of the contract on file for several years in case a later issue should arise. I might also have
to keep it safe as a historical record of data as a businessman needs to keep the past
information which the organization went by. This will also help me in the coming future
so that I can fine-tune based on the lessons I learned from previous projects.

7. a) How can Mr. Madhurkar make expressed contract for a

manufacturing project? Write with some of the possible terms and
conditions of such an offer.
Ans : The above given situation shows us a counter offer where the original offer made
by madhurkar is cancelled and new offer is made to him in this case he can either accept
the offer or reject it. Counter offer amounts to rejection of the original offer.
Counter offer results in a new offer. Acceptance of counter offer by the original offeror
amounts to acceptance and a contract is formed (on the basis of counter offer).

But if he wants to make another expressed offer rather than accepting the cross offer, he can
always express another offer
Some of the terms and conditions of such offer are:
1. Offer should consist of willingness to do some act or not to do any act:
2. Offer must be capable of creating legal relationship: If the offer does not intend to give
rise to legal consequences and creating legal relations, it is not considered as a valid offer
in the eyes of law. A social invitation, even if it is accepted, does not create legal
relations because it is not so intended, An offer, therefore, must be such as would result
in a valid contract when it is accepted.
3. The offer must be distinguished from an invitation to offer: An invitation to offer means
the person inviting the other party to make an offer. His object is only to circulate the
information that he is willing to deal with anyone who, on such information, is willing to
have negotiations with him.
4. An offer may be specific or general. An offer can be made to either public at large or to
any specific person or group of persons.
5. An offer may be conditional: An offer can be made subject to any terms and conditions
by the Offeror. The Offeree will have to accept all the terms of the offer, otherwise the
contract will be treated as invalid.
6. The terms and conditions of the offer must be clear, definite and unambiguous:
. a)  If the terms of an offer are vague or indefinite, its acceptance cannot create any
contractual relationship.
. b)  It should not be loose or vague. A vague offer does not convey the actual
meaning of the offer.
 7. b) While making an offer, why should Mr. Madhurkar is to be
concentrated on the consideration? What sorts of rules he has to
follow while setting the consideration in his joint venture business
in Nepal? Write with examples.
Ans: Consideration is a term used in the sense of quid pro quo i.e. ‘something in return’
Consideration is an essential element of a contract without which no single promise will be
enforceable. Consideration is, in a sense, the price agreed to be paid by the Promisee for the
obligation of the Promisor.
Essential Elements or Legal Requirements of Consideration:

i. Consideration must move at the desire of the promisor: Consideration must be offered
by the Promisee or the third party at the desire or request of the Promisor. An act
done at the desire of a third party or voluntarily is not a consideration
ii. Consideration may be an act, abstinence (Self-denial), forbearance (Foregoing one’s legal
right) or detriment (Loss):
iii. Consideration can be past, present or future
iv. Consideration need not be adequate: Consideration need not be of any particular value. It
need not be approximately of equal value with the promise for which it is exchanged
but it must be something which the law would regard as having some value.
v. Consideration should be real and competent: Consideration must be real and must also be
competent. It must be something to which the law attaches some value. Consideration
should not consist of impossible act or promise. It must be real and not illusory. A
consideration which does not have value in terms of money is illusory consideration.

vi. Consideration must be lawful and must not be immoral or opposed to public policy:
consideration is unlawful if:

a) It is forbidden (Prohibited) by law;

b) It is of such a nature that if allowed it would defeat some other law of the Country;

c) It is fraudulent;

d)It involves injury to the person or property of the other;

e) Court regards it as immoral or opposed to public policy