Chapter 4 Business, Law and Government Introduction to B isiness law. Business Taw (sometimes known as commercial law) is the body of law which Sovers business and commercial transactions. I is often considered to be a branch of civil law and deals both with issues of private law and public law. Commercial law includes hin its compass such titles as law of contract; principal and agent; carriage by land and sea; merchant shippi guarantee; marine, fire, life and accident insurance; bills of exchange and partnership. It can also be understood ‘0 regulate corporate contracts, hiring practices, and the manufacture and sales of consumer goods. Law of Contracts A contract is an exchange of promises between two or more parties to do or refrain from doing an act which is enforceable in a court of law. According to legal scholar Sir John William Salmond, “a contract is “an agreement creating and defining the obligations berween two or more parties”. Contract and Agreement “An agreement enforceable by law is a contract’. But it is not exhaustive, since what sorts/kinds of agreements do not mentioned here. Agreements may be of two types: Y Agreements enforceable by law; Y Agreements not enforceable by law, Suppose: An agreement to do a murder is not enforceable by law and as such it can not be a contract; but an agreement to purchase a computer is enforceable by law and as such it can be a contract. It was observed this case that; ‘all contracts are agreements, but all agreements are not contracts:‘The Essential Elements of a Contract ‘An agreement becomes enforceable by law when it fulfils certain conditions. These conditions, which may be called the Essential Elements of a Contract, are explained below. Offer and Acceptance: There must be a lawful offer by one party and a lawful acceptance of the offer by the other party or parties. The adjective “lawful” implies that the offer and acceptance must conform to the rules laid down in the Indian Contract Act regarding offer and acceptance, Intention to create Legal Relationship: There must be an intention (among the Parties) that the agreement shall result in or create legal relations. An agreement to dine at a friend’s house is not an agreement intended to create legal relations and is not contract. Lawful Consideratio Subject to certain exceptions, an agreement is legally enforceable only when each of the parties to it gives something and gets something. ‘An agreement to do something for nothing is usually not enforceable by law. The something given or obtained is called consideration. Capacity of Parties: The parties to an agreement must be legally capable of entering into an agreement, otherwise it cannot be enforced by a court of law. Free Consent: \n order to be enforceable, an agreement must be based on the free consent of all the parties, There is absence of genuine consent if the agreement is induced by coercion, undue influence, mistake, miscegenation, and fraud, Legality of the Object: The object for which the agreement has been entered into must not be illegal, or immoral or opposed to public policy. Certainty: The agreement must not be vague. It must be possible to ascertain the ‘meaning of the agreement, for otherwise it cannot be enforced, Possibility of Performance: The agreement must be capable of being performed. A Promise to do an impossible thing cannot be enforced. Void Agreements: An agreement so made must not have been expressly declared to be void. Under Indian Contract Act there are five categories of agreements which are expressly declared to be void. They are: agreement in restraint to marriage, agreementin restraint of trade, agreement in restraint of proceeding, agreement having uncertain meaning and wagering agreement, Writing Registration and Legal Formatities: An oral contract is a perfectly good contract, except in those cases where writing and/or registration is required by some statute. The elements mentioned above must all be present. If agreement does not become a contract. any one of them is absent, the Law of Agency and Bailment An Agent is a person employed to do any act for another or to represent another in dealing with third person. The person for whom such act is done, or who is sp represented, is called the Principal. Power of Attorney An Agent may be appointed by the Principal, executing a written and stamped document. Such a document is called Power of Attorney. There are two kinds of Power of attorney: General and Special. A general power is one by which the agent is given an authority to do certain general objectives, e.g. managing an estate or a business. A special or particular power may be appointed by which an agent is authorized to do a specific thing, e.g. selling some goods. In Bangladesh the Power of. attorney is regulated by the Power of Attorney Act. 1882. Age and Servant ‘The differences between an Agent and a Servant are summarized below; Y An agent is to exercise his authority in accordance with the principal's instructions; but he is not subject to the principal’s direct control of supervision. A servant has to act according to the orders of the master in every particular. Y An agent is appointed and employed to bring the principal into contractual relationship with third parties. The servant cannot do that, Y Anagent can bind the principal to the third parties. A servant cannot do so.¥_ The mode of remuneration of an agent may vary, including a commission on the basis of the work done. A servant is generally paid through wages. ¥ An agent is liable for wrong done within the scope of his authority. A master is liable for the wrong of his servant if is committed in course of the servant's employment. ¥ An agent may work for several principals. A whole-time servant serves only fone master. . ¥ Asservant can, however, be appointed as an agent for some purposes. Different Classes of Agents The relationship between the principle and agent and the extent of the authority of the later are matters to be determined by agreement of the parties, There are, however, certain well-known varieties of agency contracts where the powers and duties of the agent are settled by usage and custom of trade recognized by the courts of law. Some of these particulars kinds of ageney-contracts, together with their legal incidents are described below. Broker: A broke His duties are at an end when the parties are brought together. The contract of sale one who brings buyers and sellers into contract with one another. and purchase is entered into directly by the parties. The broker does not keep the ‘goods or the property of the principal in his possession. Factor: A factor is a mercantile agent with whom goods are kept for sale. He has got discretionary powers to enter into contracts of sale with third parties. He has a general lien on the goods for money due to him as agent. A Commission Agent: A commission agent is one who secures buyers for a seller of goods and sellers for a buyer of goods in return for a commission on the sale. A commission agent may have possession of the goods or not. is one who is authorized to sell goods of his principal by Auctioneer: An auctionee auction. He has a particular line on the goods for his remuneration. He has the goods in his possession and can sue the buyer in his own name for the purchase price. An =auctioneer acts in a double capacity, Up to the moment of sale he is the agent of the seller. Afler the sale he is the agent of the buyer. An auctioneer has implied authority to sell the goods without any restriction, A Del Credere Agent: A del credere agent is one who, for extra remuneration, guarantees the performance of the contract by the other party. If the other party fails the price or otherwise causes damage to the principal, the del eredere agent ‘must pay compensation to the principal, to pay General Agent and Particular Agent: A general agent is one who represents the alters concerning a particular business, A particular agent is one who is appointed for a specific purpose, principal in all mi &.g. to sell a particular article, Methods of Creating Agency Agency may be created in any one of the following ways; ¥ Agency by Express Agreement: A contract of agency may be created by express agreement. The agreement may be either oral or written. It is usual in ‘many cases to appoint agents by executing a formal power of attomey on a written and stamped document. v Agency by Implied Agreement: An agency agreement may be implied under certain circumstances from the conduct of the parties or the relationship between them. Agency by estoppels and agency of necessity are cases of implied agency. Y Agency by Estoppels or by Holding Out: Agency may be created by estoppels. When a man has by his conduct or statements induced others to believe that a certain person is his agent, he is precluded from subsequently it, ‘Thus an agency is created by implication of law. Termination of Agency ‘An agency may be terminated by (i) act of parties; (ii) operation of law.‘Termination by act of parties: Revocation and Renunciation: The Principle may, by notice, evoke the authority of agent may similarly, by notice Fenounce the business of agency. Revocation and renunciation can be express oF may be im the parties. the agent, The plied from the conduct of Compensation for revocation or renunciation: Whete there isan express or implied agreement to continue the agency for any length of time, andthe contract of agency is revoked or renounced without sufficient cause, compensation must be paid to the injured party. Irrecoverable agency: The principle cannot revoke the author of the agent in the following cases; ¥ When the agent has in interest in the subject matter of the contrac, his authority cannot be revoked so as to prejudice that interest. This is known as agency coupled with interest. ¥ The authority of the agent cannot be revoked once it has been exercised so as to bind the principal ¥ When the agent has partially exercised his authority, the principal cannot by revocation affect the acts already done. Rights of Agents Enforcement of rights: The agent can enforce all the duties of the princi Principal’s duties are the agent’s rights. Agent’s Right of Retainer: An agent may retain, out any sums received on account of ae ; the principal in the business of the agency, all moneys due to himself in respect of i im i is jiness, advances made or expenses properly incurred by him in conducting such busi ir nt and also such remuneration as may be payable to him for acting as ager ;cial contract, the When agent’s remuneration becomes due: In the absence of any spe nhc he 4 for whick gent’s remuneration does not become due until he has completed the ac i im on account of goods 85 appointed. But an agent may detains money received by him osold, although the whole of the goods consi 'gned to him for sale may have been sold, or although the sale may be actually complg te, Agent not entitled 10 remuneration foy business: mi : ° scomputed: An agent who is guilty oF misconduct in the business ofthe agency is not entitled to any remuneration in respect of that part of the business whieh he has misconduct. Agent's Lien: In the absence of any cont retain goods, papers and other property, principal, received by him, until the ‘act (0 the contrary, an agent is entitled to Whether moveable or immoveable of the amount due to himself for commission, the same has been paid or accounted for to Responsi When there is an agreement to the effec, express or implies, the agent may enforce OO es—— to exist in the following cases. Foreign Prineipal: Where the contract is made by an agent for the sale or purchase of goods for a merchant resident abroad. Undisclosed Principal: Where the agent does not disclose the name of his principal. When Principal cannot be used: Where the principal, though disclosed, cannot be sued, However, the agent is also personally responsible in the following cases; Y Fictitious person or non-existent person: Ifthe principal does not exist. Y Unauthorized acts: Agent acting beyond the principal’s authority. Y Misrepresentation or fraud by agent: An agent is personally responsible if he makes misrepresentations or frauds acting in course of the business of the Principal.warranty of authority, Y Representation as to li belief that the agent only principal liable on the cont ‘e | "'¥: Ia person induces the principal to act on the Will be held liable, he cannot afterwards hold the Fact, Sale and Agreement to Sell under a contract of sale the property inthe goods is transfered from the seller to the buyer fo contract is called a sale. On the other hand, when the transfer of ownership is to taka place at a future time or subject to some condition to be fulfilled later, the contract is called an agreement to sell, Differences between a sale and an agreement to sell Sale ‘Agreement to sell Transfer of The property passes to the | The property in the Goods ownership buyer and the goods cannot | remains with the seller until be seized in execution of a} the agreement to sell decree against the seller. | becomes a sale by the expiry of the agreed time or the fulfillment of the agreed conditions Transfer of risk The goods belong to the| Until the goods are not buyer and he has to bear the | transferred to the buyers the loss if the goods are | risk is also not transferred. subsequently damaged or destroyed. Remedial measures The unpaid seller has| The seller's remedy for certain relief available. | branch of contract by the buyers is a suit for damage. Nature of contract — Sale is an executed | Agreement to sell is an | contract. | executor contract. The Essential Elements of Contract of a Sale of Goods: ‘The essential elements of a contract for the s Movable goods: The Sale of Goods Act deal ‘ale of goods are enumerated below; Is only with moveable goods, excepting actionable claims and money.veabl : Moveable goods for money: There must be 4 Contract for the exchange of moveable goods for money. Therefore in a sale there ‘Must be money-consideration, rs: Sit Two parties: Since a contract of sale involves a change of ownership, it follows that the buyer andthe seller must be diferent persons, Formation of the contract of sate: & conteact of sale is made by an offer to sell or buy goods fora price and the acceptance of such offer, Method of forming the contract: Subject to the provision of any law for the time being in force, a contract of sale may be writing, or by word of mouth, or may be implied from the conduct of the parties, The terms of contract: The parties may agree upon any term concerning the time, Place and mode of delivery. The terms may be of b90 types essenti al and non= essential, Other essential elements: \ contract for the sale of goods must satisfy all the essential elements necessary for the formation of a valid contract Nire- Purchase Agreements A hi purchase agreement is one under which person takes delivery of goods promisit 8 10 pa the price by a certain number of installments and, until full payment is made, to pay hire charges for using the goods. From this definition it ean be said that a hire-purcha sreement is a bailment plus an agreement to sell, ‘The main provisions of the Hire-Purchase Act is summarized below: ‘1 + which goods on hit Mire-purchase agreement means an agreement under goods are let on hire i cl yem in accordance with the and under which the hirer has an option to purchase them in accordans terms of agreement and includes an agreement under which. er thereof to a person on condition Y possession of goods is delivered by the owner thereof to a perse that such person pays the agreed amount in periodical installments, and¥ the property in the goods is to at © such person on the payment of the last of, such installment, and such person has a tight to terminate the agreement at any time before the property so passes, # Mire pureliaee Puree a be in we must sign the hire-purchase agreement, 3. Contents ofthe hire-purchase agreement must incl > the hire-purchase py > lude the followings, the cash price of the goods; a the date on which the agreement shall be deemed to have commenced. v the number of installments by which the hire-purchase price is to be paid, the nts and th the date, upon which it is payable, where it is payable; amount of each of those installme: date, or the mode of determining and the person to whom and the place v the goods to which the agreement relates, in a manner sufficient to identify them, v ‘Where any part of the hire-purchase price is, ors to be, paid otherwise than in Cash or by cheque the hire-purchase agreement shall contain, 2 description of that part of the hire-purchase price; Where any of the above requirements has not been complied with, the hirer ‘ay Institute a suite for getting the hite-purchase agreement resigned, ‘ The purchaser has the option of paying the full price before it was due ee ——C goods and the Purchasing price. 6. The seller can recover the possession of the goods, if the purchaser fails to pay any of th stallment prices. 7. The Act provides that there will be certain warranties and conditions to be implied in the hire-purchase agreement. 8. The Act shall not apply in relation to any hire-purchase agreement made before the “ommencement of his Act. |Negotiable Instruments nercial transactions and monetary dealings, are called Negotiable Instruments. ‘Negotiable’ means transferable by delivery and ‘Instrument’ means a written document by which a right is created in favor of some person, ‘The term erally means * ly means ‘a document transferable by delivery’. In English santile law, is i , Mercantile Iaw, the term is used in this wide sense, Thus a Negotiable Instrument is one in “Negotiable Instrument® h, “the tue owner could transfer, the contract or engagement contained therein by wh simple delivery of the instrument’. The Negotiable Instrument Act is based on English Law. The followings are the different types of Negotiable Instruments that are available: Definition of Different Types of Negotiable instruments: Promissory Note: A promissory note is an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking signed by the maker, to pay a certain sum of money only to, or to order of a certain person, or to the bearer of the instrument. The person who makes the promise to pay is called the Maker. He is the debtor and must sing. the instrument. The person who will get the money (the creditor) is called Payee. 1g requirements: Thus from the above definition the promissory note have the follo The instrument must be in writing The instrument must be signed by the maker of it. v v The instrument must contain a promise to pay. 2 The promise to pay must be unconditional. - The maker of the instrument must be certain and definite. o o A promissory note must be stamped. The sum of money to be paid must be certain. v The payment must be in the legal form. The money must be payable to a definite person or a according to his order. rafter a certain definite period of y The promissory note may be payable on demand o . ‘ime.pill of Exchange: ill of Exchange is an i , on 6 1S an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, orto the order of a certain person or to the bearer ofthe instrument. ‘The maker of a bill of exchange is called the Drawer. The person who is directed to pay is called the Drawee. The person who will receive the money is called Payee. When the payee has custody of the bill, he is called the Holder. Its the holder’s duty to present the bill to the drawee for his acceptance, The drawee signifies his acceptance by signing on the bill. After such signature the drawee becomes the Acceptor. Cheque: A Cheque is a bill of exchange drawn upon a specified banker and payable on demand, Essential features of Cheque: > A Cheque must fulfill all the essential requirements of a bill of exchange. > A Cheque may be payable to bearer or to the order but in either case it must be payable on demand. > The banker named must pay it when itis presented for payment to him, > Bill and notes may be written entirely by hand. However, banks provide their customers with printed cheque forms which are filled up and signed by the drawer. The signature must tally with the specimen signature of the drawer kept in the v bank, > A Cheque must be dated. > A Cheque drawn with a future date is valid but it is payable on and after the date specified. > A Cheque may be presented for paym much delay the bank is entitled to consid cent after the due date but if there is too ler the circumstance suspicious and refuse to honor the Cheque und to pay the cheques. v In some certain circumstances the bank is not bopanker’s Draft: A Bill of Exchange is sometimes called a Dr raft. A Bill of Exchange drawn by a bank js called a Banker's Drant, B fanker’s Drafis are of two kinds: (i) from one office to another of the same bank and (ii) from one bank to another. The characteristics features of Bank Drafts are stated below: > lis drawn by a banker upon is branch or upon another bank. > Itis payable on demand. > It cannot be payable to bearer. > Iteannot be stopped or countermanded, except by order of the Court. Dishonor of A Negotiable Instrument: A negotiable instrument may be dishonored in two ways: (ji) by non-acceptance and(ii) by non-payment. Dishonor by Non-Acceptance: A bill of ‘exchange is dishonored by non-acceptance in the following cases: > When after due presentation, the bill is not accepted by the drawer. When. there are several drawers, refusal by one of the drawers will amount to dishonor. > In cases where presentation for acceptance is excused, the bill is treated as dishonored if it is not accepted without presentation, > Where the drawer is incompetent to contract, the bilt may be treated as dishonored. > Where a drawer in case of need is named in a bill, or in any endorsement thereon, the bill is not dishonored until it has been dishonored by such drawer. Dishonor by Non-Payment: A promissory note, bill of exchange or cheque is dishonored by non-payment when the maker of the note or the acceptor of the bill of exchange or the drawer of the cheque makes default in payment upon being duly Tequired to pay the same.‘the Consumer Protection Law consumer protection Law is considered ies, incl topics. ine ‘tity, prtvcey 4 ‘ me a lability, privacy rights, unfair business pra or interactions. Consumer protection Inw in Bangladesh In Bangladesh the consumer protection laws ae inadequate, The Government decided ; soa fate, lecide to enact a lw for the protection ofthe consumers but not yet Published although a ver, the rights of the Be protected through some existing laws designed to Protect the draft law regarding the matter was prepared in 2004, Howe consumers may special category oF consumers. The consumer protection Laws of Bangladesh related to food, fisheries, essential commodities, drugs etc are insufficient and outdated, has fee an ok nats Safe). cuaity or tyglone of food and fisheries or vote the consumers from purchasing essential commodities with proper identification, appropriate market price and quality controtied, It should be Kept in mind that there are differences between buyer and consumer. Consumers are the persons who purchase food and foodstuffs including drug, drinks, beverages and all other commodities essential for daily life and for livelihood whereas buyer is a person who may re-sale the products or purchase anything either essential or insignificant for his 4 . Consumers purchase the products which are perishable or can loose its effectiveness after the expiration of the period whereas buyers are involved in purchasing movable-immovable both types of property. In Bangladesh some courts or authorities are functioning for the protection of the consumers’ right like the mobile Court or BSTI etc. The Consumers are protected in Bangladesh under the following Laws: 1. The Pure Food Ordinance, 1959 2, The Standards of Weights & Measures Ordinance, 1982 3. The Control of Essential Commodities Act, 1956 4. The Essential Commodities Act, 1957 5. The Animal Slaughter (Restriction) And Meat Control Act,19576. The lodine Deficiency 7. The Bangladesh Stand: 1985 8. The Breast. 1984 Disorders Prevention Act, 1989 lards and Testing Institution Ordinance (BSTI), Milk Subst . {ilk Substitutes (Regulation of Marketing) Ordinance, These laws are widely criticized to be obsolete and lack Appropriate punishment to ficient deterrence from offences. create SU QUESTIONS ROR DISCUSSION AND kt TEW 1. Define contracts. What are the purposes of contracts? 2. Explain the essential elements of a valied contract, 3. Define agent and power of attomey. 4, Briefly explain the difference between an Agent and a Servent, 5. Explain Different Classes of Agents. 6. What are the ways agencies may be created? Explain them. 7. Explain different types of agents. Write down the consequences of the appointment of a sub-agent. 8. Explain the ways termination of agency can be happened, 9, Expl short about the rights and responsibilities of agents, 10. Write down the differences between a sale and an agreement to sale. 11. Explain the essential elements of contract of a sale of goods. 12. Describe the main provisions of the Hire-Purchase Act. 13. Define different types of Negotiable Instruments. Write down the essential features or requirements of each type. 14. Explain essential features of cheques. 15, What are the ways a negotiable instrument may be dishonored? Explain them. 16. Distinguish between consumer and buyer. 17. How the rights of the consumers may be protected in Bangladesh? 18. Explain the relevant laws of Bangladesh on the protection ‘of consumers rights