1.

write down the essential element

Of a valid contract
ObIIgau

Contract
Elements of a Valid
2.3 Essential that "all agreements
are contra
1872 provides
Act,
Section 10ofthe Indian Contract
consent of parties
competent to
contract, for a law
free
if they are made by the
are not hereby
expressly declared to
with a lawful object, and
consideration and

void
contract are:
elements of a valid
The essential anothe
of that offer by
proposal by one party and acceptance
ii. An offer or
a g r e e m e n t - c o n s e n s u s - a d - i d e m n .

in an
party resulting
relations or intent to have legal consequences.
i. An intention to
create legal
consideration.
lawful
The agreement is supported by
a
1
capable of contracting.
iv. Theparties to the contract are legally
V. Genuine consent between the parties.
b
consideration of the contract is legal and is not opposed
vi. The object and
public policy.
of the contract are certain.
vii. The terms
 VIll. 1IOa
performed.

based on the
Therefore, to form a valid contract there must (1) agreement, (ii)
be an

a lawful consideration, (iv) made

genuine consent of the parties, (ii) supported by
between the competent parties.
for a lawful object, and (v)
ca
h Q2. what bs Doctrine of Cavecat
Sh
EmptOr ?
rDh
ar pury10.13 Doctrine of Caveat
Emptor
a 163
-

Section 16
navim Caveat Emptor means let the
buyer beware. In other words, the
be attae ct 1ake care of his own interest while buyer
ds purchasing the goods. While
purchasing the
g00d the buyer should check the
goods carefully. If a buyer
and after it he comes to know that these are defective. In this purchases the goods
request responsible for this defect. The object of this principle is to makeseller
case will
the buyer
not be

ived bycareful
Ived by in purchasing. It is his duty that he should check
more
the quality and fitness of the
he damae
he dame commodity which he needs.
ponsibils This law is framed to save the buyer from the expected loss in future.
liveries Example: Mr. Krishna went to market and purchased a bike to take a part in Bike
race competition. But he did not tell the seller that for
which purpose he is buying.
When he reached home, he came to know that this bike is not suitable for bike race
ods
Competition. Due to the principal of Caveat Emptor Mr. Krishna can neither reject
buyer the bike nor can claim for compensation.
liablefi
Ho
nowever, in the following exceptions, the Doctrine of caveat emptor is not applicable.

wnen the seller is aware of the purpose for which the buyer requires the product
 nt when the buyer elies on the judgement and skill of the
inpliot ovNnitin that the seller, th
there is
product purchased serves the purpose for wl
ame or patent which
was
aght. When the goods are sold under a trade
ownitin des not apply mark, thi
When the bayer
purchases products from the seller who sells
s there is an implied condition that the such cla.
class of
e)
product is of
merchantablele quality
Proof of reasonable usage or custom of trade may also establish
ondition with sh an
an impli
implied
regand quality or fitness of
to
goods
for a
The doctrine of
particular purpose,
Caveat Emptor shall not apply to all
have been made those purchases,
by a buyer under a contract where the seller which
consent by fraud. A
seller, who is guilty of fraud, shall obtained his
doctrine of caveat have no
protection of the
emptor.
e) When a buyer,
having satisfied with the quality of the
seller, purchases in bulk, the
Doctrine of Caveat
sample offered by the
finds defects in the bulk or
if the bulk does not
Emptor will not apply when he
sample offered to him. correspond with the product
Where the seller has made a
false
representation
buyer has relied upon it, the doctrine relating to the goods and the
of Caveat Emptor will not
contract being voidable at the option of the innocent apply. Such 3
to rescind the contract. party, the buyer has a right

10.14 Transfer of
Ownership
The transfer of ownership (or property in legal terminology)
is
determines who the goods at a particular point
owns important as =
purnose of a cale icethe trancfer of ownerchin of tho d.
during the contract. The solk
 10:26 S 4 ll 62%

sOLUTION

Points Private Company Public company

A Private Limited
Company is a

company which by
its articles, restricts
A Public Company
the right to transfer means a company, wnich
Meaning share, limits the Is not a Prnvate
maximum number
Company
of members to 200
and prohibits the
issue of
prospectus.
Name of the d Name of the company
2. Name of the company must end
must end with the word
company with the word
Limited.
Private Limited'.
There are minimum
There are minimum
3. Number of 2 members
members. Maximum
TO
the members Maximum
members are unlimited
members are 200.

4. Transfer of
Shares of the shares of the company
company are not
shares are freely transferable
Treely transferable.

The company
cannot i s u e
The company has to
5. Issues of prospectus. s sue prospectus
prospectus Statement in neu o"compulsory
prospectus is

ISsued.
Minimum 2
Minimum 3 Directors are
6. Number of Directors are
needed in a Public
directors needed in a Private Limited Company
Limited Company.
A Private Limited A Public Limited
7. Statutory of Company need not Company must holda
ab
directors hold a Statutory Statutory Meeting
Meeting. compulsonily.
Minimum paid up Moin
Minimum paid up capital
3. Capital capital is one lakh
is five lakh rupees.
rupees
The business can
The business can be
be started after
started after getting
Commencement getting
Commencement
of business
Incorporation Certficate
Certificate
 Get Q4. wrie a no09 on MemoMDdUn of sequencesof
the p
Assocaion
13.2Defining Memorandum of Association
According to Sec 2(56) of the Companies Act, 2013, "Memorandum means the
memorandum ofAssociation of the company as originaly framed or as altered from
time to time".

It regulates the relationship of the company with the outside world.

Memorandum of Association lays down the powers and objects of a company and
the scope of operations of the company beyond which its actions cannot go. Any
action outside the scope of the memorandum of Association, will be "ultra vires the
company and so void.

In Ashbury Carriage Co. vs Riche, it was observed that the Memorandum of associa-
tion of a company is its charter and define the limitations and powers of a company.

It is a public document open for inspection to any member of the public. A Memo-
randum shall not be altered except in the manner and to the extent provided in the
2 act.
13.5 Contents of the Memorandum of Association
Section 4
Memorandum of Association of every company shall contain the following clause:
1. The Name Clause
2. The Registered Office Clause
3. The Objects Clause
4. The Liability Clause
5. The Capital Clause
6. The Association Clause

13.5.1 The name clause

The memorandum must state the name of the company with "Limited' as the last
word in case of a public limited company and with Private limited' in case of a
private limited company.

13.5.2 Legal requirements as to the registered office clause

The memorandum of ASsociation must mention the name of the state in which the
registered office of the company is to be situated. All communication and notices
should be sent to its registered office. The situation of company's registered office
determines the domicile of the company and it is important to determine the jurisdic-
tion of the courts in which the legal action can be taken by or against the company.

13.5.3 Legal requirements as to the objects clause

This clause defines the sphere of the company's activities, the specific objectives
for the formation of company. The company cannot do anything which is not there
in the object clause.

All companies under the Companies Act, 2013 must divide the objects clause into
two parts:

1. Main objects - this sub-clause contains the main objects of the company to be

pursued on its corporation.

 2. Objects incidental to achieve the main objective i t covers the objects which
of
are incidental or ancillary to the attainment of the main objective.
ctus

13.5.4 Legal requirements as to the liability clause

This clause states the nature of liability of the members of the company. In case of
a company limited by shares, the liability of a member is limited to the nominal value
of shares held by him. If the shares are fully paid up his liability is nil. But in case of
partly paid-up shares, the liability is limited to the amount which is unpaid.

In case of a company limited by guarantee, the liability clause must state the amount
which every member undertakes to contribute to the assets of the company in the
event of its winding-up.

13.5.5 Capital clause

This clause states that amount with which the company is to be registered. This
clause should also state the number and face value of shares into which the com-
pany is divided.

13.5.6 Association or subscription clause

In this clause, the subscriber declares that they desire to be formed into a company
and agree to take shares stated against their names. The name, address, occupation
of the subscriber must be given. Each subscriber must sign in the presence of at
least one witness who shall attest his signature. Every subseriber must take at least
one share. In case of public company the memorandum must be signed by at least
seven subscribers, while in case of private company, two subscribers must sign.

After the registration, no subscriber to the memorandum can withdraw his subscrip-
tion on any ground whatsoever.