FREE CONSENT [consensus ad-idem]

Meaning of Free Consent

According to section 13 of Indian Contract Act defined Free Consent as, “Two or more persons
are said to consent when they agree upon the same thing in the same sense”. In English Law is
called ‘Consensus-ad-idem’. The consent is said to free when it is not caused by;

 Coercion
 Undue influence
 Fraud
 Misrepresentation
 Mistake

COERCION [section 15]

Coercion means forcibly compelling a person to enter into a contract under a pressure or a threat.
According to section 15, a contract is said to be caused by coercion when it is obtained by—

a) Committing any act which is forbidden by the Indian Penal Code; or

b) Threatening to commit any act which is forbidden by the Indian Penal Code; or
c) Unlawful detaining of any property; or
d) Threatening to detain any property.

Example X beats Y and compels him to sell his car for Rs 50000. Here Y’s consent has been
obtained by coercion because beating someone is an offence under the Indian Penal Code.

UNDUE INFLUENCE [section 16(1)]

The term ’undue influence’ means dominating the will of the other person to obtain an unfair
advantage over the other. A contract is said to be induced by undue influence, where the relations
subsisting between the parties are such that one of them is in a position to dominate the will of
the other, and the dominant party uses that position to obtain an unfair advantage over the other.
Undue influence category is very wide. The following types of relations are judiciary held to be
of freest and confidence.

I. Advocate & Clint

II. Creditor & Debtor
III. Husband & Wife
IV. Parents & Child

Example X advanced Rs 10000 to his son Y during his minority and obtained upon Y’s coming
of age, a bond from Y for Rs 100000. Here, there is misuse of parental influence.
FRAUD [section 17]
The term fraud may be defined as an intentional, deliberate or willful mistakement which is
material for the formation of a contract the most important requirement of a fraud is that the
mistakement of facts must be made by one party with an intention to deceive the other party.

ESSENTIALS
1. By a party to a contract
2. False representation
3. Representation as to fact
4. Actually deceived
5. Suffered loss

MISREPRESENTATION
May be defined as an innocent mistakement of facts which are material for the contract.
Misrepresentation is a false representation which is made innocently.

Example X says to Y who intends to purchase his land, “my land produces 2 tons of rice per
acre.” X believes the statement to be true although he has no sufficient ground for the belief. Y
purchases X’s land believing X’s statement. Later on, Y finds that the land produces only 1.5
tons of rice per acre. Here X’s representation is misrepresentation.
MISTAKE [section 20]
Means incorrect beliefs about something it is infact incorrect an belief which leads one party to
misunderstand the other. it generally take place where the concerned party’s are not fully aware
of the terms of the agreement and they takes the terms in different sense.

Types of mistake

Mistake of fact Mistake of law

bilateral unilateral Of Of
Indian foreign
law law

Mistake of fact
 Bilateral mistake
May be defined as mistake in which both the parties in an agreement are confused about
the facts which are essential to the agreement.
Eg : Mr.A has two mobile phones nokia and samsung agreement between two parties- A
thinking of nokia- B thinking of samsung. At the time of exicution both are mistaken.
 Unilateral mistake

May be defined as a mistake in which only one of the parties to an agreement is confuse
about the facts which are essential to the agreement.
 Eg : a customer is thinking of offer by alukkas but actually there is no offer. The
customer is mistaken and the dealer is not.

Mistake of law
 Mistake of Indian law
The contract is not voidable because everyone is supposed to know the law of his
country.
 Mistake of foreign law
A mistake of foreign law is treated as mistake of facts, i.e the contract is void if both
the parties are under a mistake as to a foreign law because one cannot be expressed to
know the law of other country.

Discharge of contract
Valid contract creates certain obligations on all the contracting party and the party
became liable to fulfill their respective obligations. When the parties fulfill their
respective obligations their liability under the contract comes to an end and contract is
said to be discharged.

Modes of discharge of contract

 By performance
A contract is said to be decide when parties to a contract perform their respective
obligation which they have agreed to do.
Eg : car sale A transferred 100000 to B and B transferred his car to A, both agrees their
respective obligations.
 By impossibility of performance
Sometimes the performance of a contract is discharged by impossibility of
performance.
 By agreement
A contract may be discharged by mutual agreement of the concerned parties the
following are the methods of discharge of contract related with by mutual agreement.
 novation
May be defined as the substitution of existing contract for a new contract.
Eg : insurance renewal
 Rescission
Means cancellation of the contract by any party or all the parties to a contract.
Eg : divorse- kavya madhavan
 Alteration
 Means a change the terms of contract with mutual consent of parties.
Eg : increasing the existing house rent with the consent of house owner and the
person who took house for rent.
 Remission
Means acceptance by the promisee of a lesser fulfillment of the promise made
Eg :A owes B Rs.5000. A pays to B . B accepts,in satisfaction of the whole
debt, Rs.2000 paid at the time and place at which Rs.5000 were payable. The
whole debt is discharged.
 Waiver
Means intontional relinquishment of a right under a contract.
 By operation of law
The contract may be discharged by operation of law in the following cases:-
Death
Insolvency
Unauthorised material alteration
 By laps of time
 By breach
If any party fails to perform his obligation their occurs a breach of contract:- two types
 Anticipatory breach of contract
Occurs when the party declares his intention of not performing the contract
before the performance is due.
 Actual breach of contract
Two types
 On due date of performance
If a party to a contract refuses or fails to perform his part of the
contract atn the time fixed for performance, it is called an actual
breach of contract on due date of performance.
 During the course of performance
If any party has performed a part of the contract and then refuses
or fails to perform the remaining part of the contract, it is called an
actual breach of contract during the course of performance.

REMEDIES FOR BREACH OF CONTRACT

The parties to a contract are bound to perform their respective obligations. If a party refuses to
perform the obligations, the breach of contract takes place can enforce his right in courts of law.
The process of enforcing the right is known as breach of contract.

 Suit for Recission

  Suit for damages
 Suit for specific performance
 Suit for injunction
 Suit for quantum meruit

Suit for Recission

It means cancellation of the contract if one party commits a breech the other party becomes
entitled to close the contract, the aggrieved party also entitled to claim compensation for the
damage which he has sustained because of the non performance of contract.
Eg: Swetha agreed to sell to Surthi 2tons of mangos on Aug 14.Surthi promises to pay for the
goods on its receipt. Swetha does not supply mangos on the due date. Here, Surthi is discharged
from the liability of paying the price. Surthi is entitled to rescind the contract and to claim
compensation for the damage which he has sustained because of non-supply of mangos on the
due date.

Suit for damages

Damages are monitory compensation allowed for the loss suffered by the aggrieved party due to
breach of contract. The object of awarding damages is not to punish the party at fault but to make
good the financial loss suffered by the aggrieved party due to the breach of contract.

Suit for specfic performance

It means that the court’s direction to the defaulting party to carry out the promise according to
the terms of the contract.
Eg: Arya agreed to sell an old painting to Gowri for Rs 100000.Subsequently, Arya refuses to
sell the painting.Here, Gowri file a suit against Arya for the performance of the contract.

Suit for injunction

Suit for injunction means demanding court’s stay order. Injunction means an order of the court
which prohibits a person to do a particular act. Where a party to a contract does something which
he promised not to do, the court may issue an order prohibiting him from doing so.
Eg: Bekkey to sing at Lijo theatre only during the contract period. During the contract period,
Bekky made contract with Sebastian to sing at another theatre and to perform the contract with
Lijo.It was held that Bekky could be restrained by injunction from singing for Sebastian.

Suit for quantum meruit

Quantum meruit means as much as is earned. Right to Quantum meruit means a right to claim
the compensation for the work already done.
Eg: Chandu an owner of a magazine engaged Mithun to write a book to be published by
installments in his magazine. After a few installments were published, the published of the
magazine was stopped. It was held that Mithun could claim payment for the part already
published.

CONTRACT OF BAILMENT
The word bailment is derived from a french word “baillier” which means to
deliver. Acc.to section 148….”Bailment is the delivery of goods by one person to
another person for some purpose, upon a contract that they shall,when the purpose
is accomplished ,goods must be returned to the directions of the person delivering
them”.
In general…the ownership of the articles or goods remains with the actual owner bt the
possesion is with the other person.
Parties involved in bailment
bailor: the one who delivers the goods.
bailee : to whom the goods are delivered.

Essential or legal rules

All the essentials of a valid contract
delivery of goods
Delivery should be on the basis of contract
Specific purpose
Return of goods

Classification of contract of bailment

On the basis of charges:
Gratuitous bailment: bailment without any charge.

Non gratuitous bailment: - bailment for some charges or reward.

On the basis of benefit:
1.bailment for the exclusive benefit of the bailor:
It is the bailment in which the goods are delivered by the bailor to the
bailee only for the exclusive benefit of the bailor.
2. Bailment for the exclusive benefit of the bailee:
Bailment in which the goods bailed are of the exclusive benefit of the
bailee.

3. Bailment with mutual benefit to both bailor and bailee:

Bailment in which both the bailor and bailee can enjoy the conditions of
the contract of bailment.
Rights of a bailor
1. Right to terminate bailment
2. Right to demand back goods
3. Right to file a suit against wrong doer
4. Right to file a suit for the enforcement of duties implied upon a
bailee.

Duties of bailor
1. Duty to disclose faults in the goods bailed.
2. Duty to bear extraordinary charges
3. Duty to indemnify the bailee
4. Duty to receive back goods.
Rights of bailee
1.Right to compensation
2. Right to return goods to any of the joint bailors
3. Right to receive agreed charges
4. Right to file against wrong doer.
5. Right to lien
{ lien means “right to retain the property of another until
some debts are cleared” }
Duties of bailee
1. Duty to take care of reasonable goods bailed.
2. Not to make unauthorized use of goods.
3. Duty to return goods.
4. Duty not to mix goods bailed with his own goods.
5. Duty not to set up an adverse title.
 How bailment comes to an end
1.Expiry of the specified period
2.Achievement of the objective
3.Inconsistence of goods.
4.Death of bailor/bailee
5.Termination by a bailor
Pledge
Pledge is a special kind of bailment…where goods are delivered as a
security for loan or fulfilment of an obligation.
Parties:
Pledger/pawner – the person who delivers the goods
Pledgee/pawnee – the person to whom the goods are DELIVERED.

Contract of Agency

Contract which creates the relationship of principle and agent is known as of a

contract of agency.

Eg: thus a appoints b to buy ten bags of sugar on his behalf, a is the principal, b is
the agent and the contract between the two is agency.

Parties

1. Agent: a person, employed to do any act or another or to represent another

in dealing with third parties.
2. Principal: A person from whom such an act is done or who is represented.

Essentials/legal rules

1. There should be one agreement between the principal and agent.

2. The agent must act in the representative capacity.
(Power to create legal relationship between the parties)
3. Principal must be competent to contract. (Capacity of principal)
4. Agent need not be competent to contract.
 Creation of agency
1. By expressed agreement
2. By implied agreement
3. Agency by ratification
4. By operation of law

1. By expressed agreement: may be created by an express agreement. In

this case an agent is appointed by an agreement in writing or by words
of mouth.
Eg: to execute added for sale or purchase of land the agent must be
appointed by executing a formal “power of attorney” on a stamped
paper.

2. By implied agreement: in this case a person becomes an agent of

another person due to the conduct of parties or the course of dealing
or situation of a particular case.
(Eg: selling fish in the market)

3. Agency by ratification: ratification means confirmation of acts already

done. Sometimes a person dose some act on behalf of another person
without his knowledge or authority and such, other person is
subsequently ratifies the act done behalf. In such case a valid contract
of agency is created by ratification. It is known as ex-post-factor
agency.

Eg: A buys 5 bags of wheat on behalf of B, B didn’t appoint a as his

agent. B may, upon hearing of the transaction, accept or reject it if B
accepts it the act is ratified and A becomes his agent retrospective
effect.

4. Agency by operation of law: It is said to arise where law treats one

person as an agent of another person.
Eg: partnership
Classification of agents

1. Special agents- one who is appointed perform special act.

Eg: an agent who is employed to sell a motor car.

2. General agent: an agent who is appointed to perform all acts

relating to a particular trade.
Eg: zxy agencies for avt tea productions

3. Universal agent: an agent who is appointed to do all business

activity for his principal.
Eg: universal agency for Samsung India ltd.
Duties of an agent

1. Duty to carry out the work with care and skill.

2. Duty to follow the instructions of principal.
3. Duty to render the proper account to the principal.(no secret
profits)
4. Duty to communicate with principal.
5. Duty not to setup an adverse title.
6. Duty not to delegate authority. (he must work for himself)

Rights of an agent
1. Right to retain money due from principal.
2. Right to receive remuneration
3. Right to lien(agent has the right to retain goods, papers and other
property, whether movable or immovable)
4. Right to indemnified
Delegation of authority by an agent
(delegatus non-potest delegare)
 Ordinarily, the agents expected to perform his duties personally and
he cannot further delegate the work which has been delegated to him
by his principal. This is based on the general rule delegatus.

1. Non-protest non delegare. Thus an agent being a delegator of his

principal cannot pass on that delegated authority to another person.

But according to contract of agency there are exceptions to this rule.

(Agent can appoint sub-agent only in the following circumstance)

1. Nature of work shows appointment of sub-agency is necessary.

Eg: auction sale

2. Where the customs of the particular work shows an agent can

appoint another agent.
E.g.: supervisor to measure plots.

3. Where the principal is giving consent for appointing subagent.

4. Due to unforeseen emergencies Mr. A vegetable merchant

appointed Mr. B as his agent Mr. B brings vegetables from Salem
once in a week. Bandhby dmk party on 12 th Sep. This time without
the consent of Mr. A we can appoint another agent for the sale of
the vegetable.
5. If the work is in ministerial nature.(group of work)

Termination of agency
1. By agreement between principal and agent.
2. By performance of agency.
3. By death of the principal or agent.
4. By insanity either by the principal or agent.
5. By the expiry of the time.
6. By renunciation of his authority by agent.
7. By revocation of the authority by the principal.
 8. By destruction of the subject matter.
9. Insolvency by the principal.

SALE OF GOODS ACT 1930

Sale of goods act 1930 came into force on 1 stJuly 1930. This act extends to the
whole of India except the state Jammu and Kashmir.

Contract of Sale (Section 4)

It is a contract of sale where by the seller transfers or agrees to transfer the
property (legal ownership) in the goods to the buyer for a price. It includes contract
of sale and contract of agreement to sell.

E.g.:- Contract of sale – Sale of mobile

Essentials /Legal rules

It must satisfy all the essentials of a valid contract.

Two parties

Seller: A person who sells or agrees to sell the goods.

Buyer: A person who buys or agrees to buy the goods.

Goods- any movable item other than actionable claim.

Transfer or agrees to change the legal ownership.

Price

Sale (Section 4(3))

Means the legal ownership of the goods is transferred from the seller to buyer.

E.g.:- Sale of a mobile

Agreement to sell (Section 4(4))

In this case the ownership of the goods is not immediately transferred from a seller
to a buyer. But it transfers at a future date.

E.g.:- buying a car[instalment mode].

Condition and Warranty

Condition is a stipulation which is essential to the main purpose of the contract
and the breach of which gives the aggrieved party a right to termination the
contract.

Warranty
It is a stipulation which is collateral to the main purpose of the contract and
breach of which gives the aggrieved party a right to claim damages only.
Auction sale

Sales in public where different buyer come to purchase goods and the goods are sold to the
person who is ready to pay the highest price

Auctioneer

The person who is conducting the contract of auction sale

Indian Partnership Act 1932

Partnership is the relation between two or more person who have agreed to share the profit of
the business carried on by all or any of them acting for all……..

Essentials, Two or more person, Agreement, Business, Sharing of profit, Mutual agency,

Registration

Means getting the partnership registered with registrar of the firm of the area in which the
place of business of the firm Is situated or proposed to be situated
 A partnership business need not be compulsorily registered but a company must
be registered under Indian Companies Act 1956 A partnership business may be registered at
any time but if the firm is not registered it cannot sue third parties so before filling any case the
firm must be registered.

Disadvantage of non- registration

A partner of an unregistered firm cannot sue the firm or other partners of the firm

An unregistered firm cannot sue third parties conducting with the firm

The firm cannot sue the partners

The firm cannot claim the right of set off….

Procedure For Registration

An application is filled by the partners to the registrar of firms

The application must contain particulars like name of the firm address of partners etc.. and the
firm name must not contain words like president, emperor, queen,& other reserved words

Appilcation must be accompanied by prescribed fees

If the registrar is satisfied with the application form and details or particulars he will issue a
certificate of registration This certificate is the evidence of the existence of the firm

Types of partners

Actual partner(active partner)

Partner who takes an active part in the conduct of business

Sleeping/ Dormant partner

Who does not take an active part in the conduct of business

Nominal partner

Who lends his name to the firm without having any real interest in the firm

Eg: mohanlal lend his name to Malabar gold he is not an active partner

Partner in profit only

Partner who shares the profits only not the losses

Sub partner

Is a third person with whom a partner agrees to share his profit.

Rights of partner

Right to take part in the conduct of business

Rights to express opinion

Rights to have access to books

Rights to share profit equally

Rights to receive interest on capital out of profit

Right to claim interest on advance

Rights to be indemnify

Right to present introduction of a new partner

Right to retire

Right not to be expelled

Right to share subsequent profit

Right to dissolve the partnership

Duties of a partner

Mandatory duties

Carry on the business of the firm to the greatest common advantage

To be just and faithful to each other

To render proper accounts and disclose all matters affecting the firm

To indemnify the firm

General duties

To attend actively

Not to claim remuneration for taking part

To indemnify the firm

To hold and use firms property for business purpose

To contribute equally to the losses

Dissolution of a firm

Without the order of court

By mutual agreement

Compulsory dissolution

On happening of certain contingencies

By the order of court

Insanity

Perpetual loss

Permanent in capital

Misconduct

Persistent breach of agreement

Transfer of interest

Any other just & equitable ground

1 .By mutual agreement

By mutual agreement partners can dissolve the firm

2. By compulsory dissolution

If all the partners or one partner of the firm declared as insolvent

If some event takes place which makes it unlawful for the firm business to be carried on E g:
sanction is given for biscuit production, but they are producing arrack

On happening of certain contingencies

Unless otherwise agreed by partners a firm is dissolved on the happening of any of the
following contingencies
Expire of the fixed term for which the firm was constituted

On completion of the venture on undertaking for which the firm was constituted

On the death of a partner

Insolvency

2. By order of court

Insanity

A partner becoming insane is not capable of understanding the contract and forming rational
judgment in such case the court may allow dissolution.

Permanent incapacity

When a partner has become permanently incapable of performing his duties as a partner any
other partner can file petition for the dissolution of firm. In case of temporary incapacity on the
part of partner the court will not pass an order for the dissolution

Misconduct

Persistent breach of agreement

Relation of partnership arises out of an agreement every partner is expected to follow all
provisions of that agreement in the large interests of partnership

Transfer of interest

When a partner has transferred whole of his interest in the firm to a third party

Perpetual losses(continuous loss)

Any other just and equitable ground

The court may also of dissolution on any other grounds which seems to be just and equitable to
the court. The partnership firm will be considered as dissolved from the date of judgment
unless the judgment provides otherwise……..

COMPANY LAW 1956

A company is defined as a voluntary association of person formed for the purpose of doing business
with the capital divisible into transferable shares, limited liability, a distinctive name having a corporate
body , a personality separate and common seal (“According to company law A company law 1956 ‘A
company formed and registered as per 156 Act ’).

FIRST INDUSTRY MINISTER UNION –SYAM PRASAD MOOKHERJEE/ANAND SHARMA

KERALA –K.P GOPALAN/K.P.KUN.

CHARACTERSTICS OF A COMPANY

1 VOLUNTARY ASSOCIATION : - It is a voluntary association of persons who have joined together for a
common object which is generally to earn profit.

2 ARTIFICIAL LEGAL PERSON :- A company is an artificial person created by law. Law recognizes
company as a person. It can enter into contracts with third parties in its own name.

3 SEPARATE LEGAL ENTITY :- A company is an artificial person created by law. It has an independent
legal entity a part from the members who constitute it. A company can own property and deal with it as
it likes. No one can claim any ownership rights in the assets of a company.

4 LIMITED LIABILITY: - A company may be either limited by shares or limited by guarantee.

5 PERPECTUAL SUCCESION: - Member may come and members may go out But a company goes own.
The death or insolvency does not affect the company’s entity or continuity. The law creates a company
and it along can dissolve it.

6 TRANSFERABILITY OF SHARES: - Shares in a company are transferable. In a public company shares are
fully transferable.

7SEPARATE PROPERTY: - Company can earn separate property.

8 COMMPN SEAL: - it represents the company.

9 CAPACITY OF SUE AND BE SUED :- A company being a body corporate can enforce its legal rights.
Similarly it can be sued for breach of its legal duties.

KINDS OF COMPANY
  STATUTORY COMPANY: - which are created by a special Act of legislature. Example RBI,
SBI, LIC etc.
 REGISTERED COMPANIES: - which are formed and registered under companies Act 1956
or were registered under the earlier companies Acts.
 PRIVATE COMPANY: - One which can be formed by a minimum of 2 members and a
maximum number of members 50. It does not invite public to subscribe the shares or
debentures and it does not permit a free transfer of its shares (Section 3).
 PUBLIC LIMITED COMPANY:-A company which is not a private limited company

GOVERNMENT COMPANY

A government company means any company in which not less than 51% of the paid
up share capital is held by

 The central government , or

 Any state government or governments or
 Partly by central government & partly by one or more state governments

OTHERS……..ONE MAN COMOANY….HOLDING COMPANY…….SUBSIDIARY COMPANY ETC…

PROMOTION AND INCORPORATION

PROMOTION: - It is the first stage in the formation of the company (promotion ).in this stage ,first
the idea of a carrying on a business conceived by a person or by a group of person called promoters.
They make detailed investigations about the workability of the idea ,the amount of capital required,
the operating expenses and probable income. To arrive at correct conclusion, they may seek the
help of experts and technicians’ .When the promoters are satisfied ,the idea conceived be put into
practice profitably, they take necessary steps for assembly the proposition.

PROMOTERS: - is a person who does the necessary preliminary work incidental to the formation of
company.

FUNCTION OF A PROMOTER

1. Promoter of a company decides the name of the company.

2. Promoter settles the MOA (Memorandum of Association).
3. Promoter nominates directors, solicitors, bank Auditors and secretary.
4. Arranges for printing of MOA.
5. Steps for the Registration of the company.
6. Issue of Prospectus.
7. Responsible for the Company into Existence
 DUTIES

1. Work with good faith

2. He must faithfully disclose all facts relating to the property and contracts.
3. Verifying the prospectus

Promoter is liable for his activities …both civil liability and criminal liability

INCORPORATION

A company is said to be incorporated when it’s registered with the registrar of the company.

PROCEDURE

To obtain registration of a company application has to be filed with the registrar of the company of
the state in which the registered office of the company is to be situated .The application must be
accompanied by the following documents & necessary fees.

1. MOA signed by members

2. AOA similarly signed
3. Statement of nominal capital
4. A list of directors &their consent
5. Details of qualification shares
6. Declaration by appropriate person stating that all requirements of the companies Act &
other formation to the registration of a company.

CERTIFICATE OF INCORPORATION

This is a certificate issued by registrar of companies Act in accommodation of its registration. According
to Section 35, the certificate of incorporation given by the registrar shall be conclusive evidence that all
requirements of the Act have been compiled within respect of registration. Once a company is
registered the incorporation cannot be challenged even through there are irregularities prior to its
registration.

MEMORANDUM OF ASSOCIATION (MOA)

It is a document which contains the rules regarding the contribution and activities or objects of the
company is governed by MOA. Its relation towards the members and outsiders are determined by this
important document. MOA is designed to make the outside world to know the state of affairs of the
company. It is a public document & can be inspected by anybody.

CONTENTS OF MOA (SECTION 13)

CLAUSES
 1. Name clause
2. Registered office clause
3. Object clause
4. Liability clause
5. Capital clause
6. Subscription clause.

DOCTRINE OF ULTRA VIRES

The term Ultra Vires means beyond the power. ULTRA means beyond & VIRES means power. Beyond
the power denotes very important legal principle applicable to companies. If any Act done which is not
authorized by object clause in memorandum of association of the company, such Act shall not be valid
&is said to be Ultra Vires of the company. Such Act is void &cannot be validated even by the common
consent of members on general meeting.

ARTICLES OF ASSOCIATION (AOA)

Articles of association are rules & regulations by laws for the internal management of
the company. AOA are the rules & regulations framed for the purpose of managing its internal affairs &
for the benefits of share holders.

SHARES

The share capital of a company is usually divided into certain indivisible units of definite sum. These
units are called shares. Act defines a share as “ A share is the share capital of the company & includes
stock except when a distinction between stock & shares is expressed or implied.” [Share represents
the interest of a share holder in a company measured in terms of money.]

CLAUSES OF SHARES

1. Preference shares
2. Equity shares.

COMPANY MEETINGS

Companies meeting are meetings of directors or shareholders or the creditors or debenture holders
who discuss matter relating to the affairs of the company & talking decision affecting the company.

KINDS OF MEETINGS

1. Meetings of directors
2. Meetings of shareholders
A. Statutory meeting
B. Annual general meeting
 C. Extra ordinary general meeting
D. Class meeting
3. Meetings of creditors or debenture holders

STATUTORY MEETING

It is first general meetings of shareholders of a public company. It must be held within a period of
not less than one month and not more than 6 months from the date of commencement of business. It is
held only once in the lifetime of the company. A private company Ltd by guarantee & not having share
capital need not held such meeting. The main object of calling a statutory meeting is to give the
members a general idea about the progress made by the company since its formations. The board of
directors forward a report called statutory report at least 21 days before the day on which meeting to be
held by the members of the company.

ESSENTIALS OF VALID MEETING

A general meeting of shareholder s is said be valid when it is properly convened & legally
constituted. Section 171 of Companies Act explains the provisions related with valid general meeting.

1. PROPER AUTHORITY: - The first important requisition of a valid meeting is that it must be called by
the right person normally, the board of directors is the convening authority for every general
meeting. They should pass a resolution to call a meeting, at a duly convened board meeting.
Convened board meeting. If they fail to call the meeting the members of the company laws board
or central government may call the meeting.
2. NOTICE: - A notice with required length of time must be given to every member entitled to
receive, stating the kind of meeting, day, time & place of meeting & business etc. In case of general
meeting notice must be given at least 21 days before the date of meeting (21+2).
3. REQUIRED QUORUM: - Quorum is the number of person that should be present at the meeting
either in person or by proxy. As per the Articles of the company. The quorum may be fixed by AOA.
4. GENERAL BUSINESS OR SPECIAL BUSINESS (SECTION 173): - The notice shall contain a statement
of the business to be translated at the meeting. The business may be ordinary business or special
business.

CHAIRMAN OF MEETING
For conducting a meeting a chairman is necessary and he is generally appointed by Articles of
Association. If the articles do not designate any person to be a chairman, the members may
personally elect one of themselves to be the chairman. So, the chairman must be a member of
the company.
MINUTES
Every company must keep a record of all proceedings of its general meetings and the meetings of
its board of directors or of a committee of the board. The record of business transacted at
 meetings is known as minutes (section 193). Separate minute’s books are kept for different types
of meeting. The minute must be signed by the chairman.

WINDING UP

Winding up means the process by which the life of the company is ended and it’s properly is
administered for the benefit of the creditors and share holders. It represents the last stage in its life. At
the time of winding up assets & properties of the company are realized. The assets are distributed
among the creditors & shareholders in the manner laid down in the Act.

MODES OF WINDING UP

1. Winding up by the court (compulsory winding up).

2. Voluntary winding up
A. Members voluntary winding up.
B. Creditors voluntary winding up.
3. Winding up under supervision of court (compulsory winding).

NEGOTIABLE INSTRUMENTS ACT 1881

Negotiable instrument means a promissory note , bill of exchange , cheque payable either to the
order of or to the bearer.

Valid essentials or Legal rules

• Must be in writing.

• Signed by the maker.

• Must contain an unconditional promise or order to pay some money.

• Must be freely transferrable.

On the transfer of a N.I from one person to another , who receives in good faith, for
consideration has the Right to Recover the amount mentioned in instrument

Promissory Note

A promissory note is an instrument in writing containing an unconditional undertaking signed by

the maker to pay a certain sum of money only to or to the order of a certain person or to the
bearer of document

Parties
 • Maker /drawer– the person who makes the promissory note.

• Payee – the person to whom the amount written on the PN is payable

Bill of Exchange

According to section 5 of this act , a bill of exchange is 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 or to the order of a certain person or the bearer of document

• Drawer – the person who draws the bill of exchange.

• Drawee – who has been ordered by the drawer to pay the amount.

• Payee – to whom the drawee has been ordered to pay the amount

Cheque

• A cheque is a bill of exchange which is drawn upon a specified banker and payable on demand.

parties

Drawer – the person who draws the cheque.

Banker – who has been ordered by the drawer to pay the amount / bank on which a cheque is
drawn.

Payee – the person on whose form the cheque is drawn. The payee may be a third party or the
drawer himself.