Module 1 Classification of contracts: 1.
On the basis of DIFFERENCE BETWEEN VOID CONTRACTAND
Business Law
is a wide term and embraces all legal principles
concerning business transactions.
According to S R Davar, business law “means
that branch of law which is applicable to or
concerned with trade and commerce in
connection with various mercantile or business
transactions”.
INDIAN CONTRACT ACT 1872
The law relating contract in India is contained in
the Indian contract Act, which came in to force
on the first day of Sept 1872. The act is extended
to the whole of India except the state of Jammu
and Kashmir
ELEMENTS OF CONTRACT
1. Agreement or Offer and acceptance: - There
must be an agreement between the parties of a
contract. Agreement is created by offer and
acceptance. Therefore an agreement is = offer
+acceptance.
2. Lawful consideration: Consideration means
something in return. It may be past, present or
future and must be real and lawful. A contract
without consideration is not a contract at all.
3.Capacity of parties: The parties to an
agreement must be capable of entering into a
valid contract.4. Free consent: For the formation
of a contract one person must give his consent
to another person. The consent thus obtained
must be a free consent. Consent is said to be
free if it is not caused by coercion, undue
influence, fraud, misrepresentation or mistake.
5. Consensus ad idem: It means the two parties
of the contract must agree upon the subject
matter of the contract in the same manner and in
the same sense. That is there must be identity of
minds among the parties regarding the subject
matter of the contract.
6. Lawful object: The object of an agreement
must be lawful. It must not be illegal or immoral
or opposed to public policy. If it is unlawful, the
agreement becomes void.
7. Not declared to be void: There are certain
agreements which have been expressly declared
void by the law.
8. Certainty and possibility of performance: -
The terms of the contract must be preciseand
certain. They should not be vague. The terms of
agreement must be capable of performance
9.Legal formalities: The agreement must comply
with the necessary formalities as to writing,
registration, stamping etc. if any required in
order to make it enforceable by law.
Minors
According to Section 3 of the Indian Majority
Act, 1875, a person who has not completed his
age of 18 years (majority), is considered to be a
minor.
Rules Regarding Minor's Agreements
1. An agreement with or by a minor is void ab
initio. 2. Minor can be a promisee or a
beneficiary. 3. Minor cannot ratify contracts
entered into by him during his minority, even
after attaining the majority. 4. Minor is not bound
to return the benefits received under a void
agreement.
Acceptance
When the person to whom the proposal is made
signifies his willingness thereto, the proposal is
said to be accepted.
Essentials of valid acceptance:
1. Acceptance must be unconditional. 2.
Acceptance must be communicated to the
proposer.3. Acceptance may be express or
implied.4. The acceptance must be given in
some usual and reasonable manner.5. The
acceptance must be given before the lapse of
offer.6. The acceptance cannot be implied from
silence.7. Acceptance must be made by the
offeree.
CONSIDERATION
When a party to an agreement promises to do
something, he must also get something in return
from another party. This something is called
consideration.
Essentials of consideration:
1. Consideration must move at the desire of the
promisor2. Consideration may move from
promisee or any other person3. Consideration
may be past, present or future4. Consideration
need not be adequate 5. Consideration must be
real and not illusory 6. Consideration must be
lawful
ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ
QUASI CONTRACTS
enforceability: a) Valid contract: A contract
which satisfies all the legal requirements laid
down in Section 10 of the Act, is a valid
contract.b) Void agreement: Section 2(g) defines
it as, “an agreement not enforceable by law is
said to be void”. Such agreements are void ab
initio which means that they are unenforceable
right from the time they are made.c) Void
Contract: Section 2(j) provides that "a contract
which ceases to be enforceable by law becomes
void when it ceases to be enforceable."
d)Voidable contract: An agreement which is
enforceable by law at the option of one or more
of the parties there to, but not at the option of
other or others, is a voidable contract. e) Illegal
agreement: An agreement which is either
prohibited by law or otherwise against the policy
of law is an illegal agreement.f) Unenforceable
Contract: An unenforceable contract is that
which is valid and enforceable, but for certain
technical defects it becomes unenforceable.2.
On the basis of mode of creation: a) Express
Contract: An express contract is that which is
made in writing or by the words of mouth.b)
Implied contract: An implied contract is one
which arises out of acts or conduct of the parties
or out of the dealings between them.c) Quasi
Contract: Under certain circumstances, law itself
creates legal rights and obligations against the
parties. These obligations are known as quasi
contracts.3. On the basis of execution a)
Executed Contract: When a contract has been
completely performed, it is termed as executed
contract.b) Executory Contract: Where one or
both the parties to the contract have still to
perform their obligations in future, the contract is
termed as executory contract.c) Unilateral
Contract: A unilateral contract is one sided
contract in which only one party has to perform
his promise or obligation.d) Bilateral Contract: A
bilateral contract is one in which both the parties
have to perform their respective promises or
obligations.
Privity of contract or stranger to contract
A stranger to contract is a person who is not a
party to the contract.•As per the doctrine of
privity of contract, a person, who is not a party to
the contract, cannot sue for carrying out the
promise made by the parties to the contract.
Kinds of offers
1. Express offer: An express offer is one which is
made by words spoken or written. 2. Implied
offer: An implied offer is one which is made
otherwise than in words. 3. Specific offer: A
specific offer can beaccepted only by that
definite person or that particular group of
persons to whom it has made. 4. General offer:
A general offer is one which is made to the world
at large or public in general.5. Standing or Open
or Continuing offer: An offer for a continuous
supply of certain goods and services in any
quantity at a certain price as and when required
it will be termed as a standing or open offer.
6. Counter offer: A Counter offer is rejecting the
original offer and making a new offer. The new
offer is the counter offer. 7. Cross offer: Where
identical offers are made by parties in ignorance
of each other, the offers are said to be cross offers.
Lapses of an offer (when does an offer come to
an end)
1. By communication of notice of revocation by
the proposer: The proposer can revoke or
withdraw his offer at any time before the
acceptor posts his letters of acceptance.
2. By lapse of prescribed time: An offer lapses if
acceptance is not communicated within the time
prescribed in the offer, or if no time is prescribed,
within a reasonable time. 3. By non-fulfillment of
a condition by acceptor: A proposal comes to an
end when the acceptor fails to fulfil a condition
precedent to the acceptance of the proposal.
4. By the death or insanity of the offeror: A
proposal comes to an end by the death or
insanity of the offeror if the fact of the death or
insanity comes to the knowledge of the acceptor
before acceptance. 5. By counter offer: A
proposal lapses if a counter offer is made.
6. By subsequent illegality or destruction of
subject matter: An offer lapses if it becomes
illegal after it is made or which the subject
matter is destroyed before acceptance.
7. By rejection: An offer lapses if it has been
rejected by the offeree.
VOIDABLE CONTRACT
A contract become void when it ceases to
enforceable by law, while an agreement which is
enforceable by law at the option of one party, but
not the others is a voidable contract
A void contract cannot be enforced but a
voidable contract can be enforced if the aggrieve
party elects to carry out the contract
A void contract is valid at the time of formation
but later it becomes void due certain reason
while a contract is voidable because the consent
of one part is not a free consent. No party gains
any option and it has no legal effects, but
aggrieved has the option either elect to be
continue the contract or to cancel.
A void contract is void in itself and a voidable
contract can be void at the option of aggrieved
party.
Wagering agreements
The term ‘wagering agreement’ or ‘wager’ may be
defined as an agreement in which one person
agrees to pay certain amount of money to the
other person on the happening or non-happening
of a specified uncertain event.
Essential features of wagering
1. There must be a promise to pay money or
money's worth by one party to the other. 2. The
promise must be conditional on the happening or
not happening of an event. 3. Mutual chances of
gain or loss. 4. No control over the event. 5.
Uncertainty of the event.
Coercion
Coercion means compelling or forcing a person
to enter into a contract under a threat. According
to Section 19 states that, ‘when the consent of a
party to an agreement is obtained by coercion,
the contract becomes voidable at the option of
the party, i.e., such party can put an end to the
contract if he so chooses’.
Undue influence
When a party enters into a contract under any
kind of mental pressure, unfair influence or
persuasion by the superior party, the undue
influence is said to be employed. If consent to an
agreement is caused by undue influence the
contract is voidable at the option of the other
party.
Fraud
It is the wilful representation made by a party to
a contract with the intention to deceive the other
party or to induce such party to enter into a
contract. A party whose consent to an
agreement was caused by fraud has three
remedies. a. He can cancel the contract. b. Right
to insist upon performance. c. He can file a suit
for damages.
Misrepresentation
It is an untrue statement made by one party to
the other which will induce the other party to
enter into a contract. The effect of
misrepresentation is that it makes the contract
voidable at the option of the aggrieved party and
such party may put an end to the contract if he
so chooses.
Mistake
A mistake is said to have occurred where the
parties intending to do one thing by error do
something else.
Types of mistakes:
1. Mistake of law a).Mistake of Indian law
b).Mistake of foreign law
2.Mistake of fact a). Bilateral mistake
b).Unilateral mistake
Types of damages
1. General or ordinary damages 2. Special
damages 3. Exemplary or vindictive damages
4. Nominal damages 5. Penalty and liquidated
damages
DISCHARGE OF CONTRACT
A contract is said to be discharged when the
rights and obligations of the contracting parties
are extinguished and their relationship comes to
an end.
Various modes of discharge
1. By performance of contract 2. Discharge by
agreement 3. Discharge by lapse of time
4. Discharge by operation of law 5. Discharge by
impossibility of performance 6. Discharge by
breach of contract
Quasi contracts are exceptional kinds of
contracts by which one party is bound to pay
money in consideration of something done or
suffered by the other party. It is imposed by law
and does not arise from any agreement.
Kinds of quasi contracts
1. Supply of necessaries to persons incompetent
to contract 2. Payment by an interested person
3. Liability to pay non-gratuitous acts 4. Payment
by mistake or under coercion
Module 2
Characteristics of a Contract of Indemnity
1. Essentials of a valid contract 2. Compensation
of loss 3. Express or Implied
Rights of Indemnity Holder
1. Damages 2. Costs 3. All sums
4. Suit for specific performance
Features of Contract of Guarantee
1. Three parties 2. Identity of mind 3. Existence
of liability 4. Primary and secondary liability
5. Essentials of a valid contract 6. No
misrepresentation
Kinds of Guarantee
1. Specific guarantee 2. Continuing guarantee
3. Retrospective guarantee 4. Prospective
guarantee 5. Absolute guarantee 6. Conditional
guarantee 7. Fidelity guarantee
Duties of Bailor:
1. To disclose known defects in the goods
2. To bear extraordinary expenses 3. To
indemnify bailee 4. To receive back the goods 5.
To bear the risks
Duties of Bailee:
1. To take reasonable care of the goods bailed
2. Not to mix goods bailed with his own goods
3. Not to make any unauthorized use of goods
bailed 4. To return the goods 5. Not to set up
adverse title
Rights of Bailor
1. Right to get back the goods
2. Right to terminate the bailment
3. Right to claim damages in case of negligence
4. Right to claim any increase in value or profits
5. Right to enforce the duties imposed upon a
bailee
Rights of Bailee
1. Right to enforce bailor duties
2. Right to claim compensation in case of faulty
goods
3. Right to claim reimbursement of expenses
4. Right to remuneration5. Right to recover loss
in case of bailor’s defective title
Right of lien
The bailee has a right to claim his lawful
charges and if they are not paid, the bailee is
given the right to retain the goods until the
charges due in respect of those goods are paid.
This right is known as right of lien. A lien may be
either a particular lien or a general lien.
1. Particular or Special Lien 2. General Lien
Duties of Pawnee
1. To take reasonable care of the goods pledged
2. Not to make any unauthorized use of goods
3. Not to mix goods pledged with his own goods
4. To return goods
Rights of Pawnor
1. The Pawnor has a right to receive any increase
of profits from pledged goods. 2. To ensure that
whether the goods pledged are properly
maintained or not. 3. To redeem the goods
pledged, upon the satisfaction of the debt.
Creation of Agency: 1. Agency by express
agreement 2. Agency by implied agreement 3.
Agency by estoppel 4. Agency by holding out 5.
Agency by necessity 6. Agency by ratification
Different kinds of agents:
1. General agents 2. Special agents 3. Universal
agents 4. Commercial or mercantile agent 5. Non
-mercantile agent
Duties of an Agent:
1. To conduct business as per directions or
custom of trade 2. To act with reasonable care,
skill and diligence 3. Duty to render proper record
4.Duty not to set up adverse title 5. Duty to pass
information to the principal 6. Duty not to
delegate his authority
Rights of an agent:
1. Rights to remuneration 2. Right of retainer
3. Right of lien 4. Right to indemnification
5. Right to compensation
 Module 3
Distinction between sale and agreement to sell:
Sale
•The property or ownership in the goods
immediately passes from seller to buyer.• The
goods belong to the buyer. In case of loss or
damage, the buyer will suffer the loss.• If the
buyer fails to pay the price, the seller can sue
him for price, but cannot resell the goods
• If seller gets insolvent, the buyer can recover
goods from seller’s Official Receiver.
Agreement to sell
• The property in goods transfers on some future
date or subject to fulfillment of some conditions.
• The goods belong to the seller and he will
suffer the loss if goods are destroyed.
• The seller can recover the goods, can sue for
damages and can resell the goods, but cannot
sue the intended buyer for recovery of price.•if
seller gets insolvent, the buyer who has paid the
price can claim rateable dividend.
Conditions and Warranties:
• Condition: According to Section 12(2), a
condition is a stipulation essential to the main
purpose of the contract, the breach of which
gives a right to repudiate the contract.
• Warranty: According to Section 12(3), a
warranty is a stipulation collateral to the main
purpose of the contract, the breach of which
gives a right to a claim for damages but not a
right to reject goods and to treat the contract as
repudiated.
Express and Implied Conditions and Warranties
• The conditions and warranties may be express
or implied.
• Express conditions and warranties are those,
which have been expressly agreed upon by the
parties at the time of the contract of sale.
• When the conditions and warranties are not
written in the contract, but applied to the
contract either by operation of law or by trade or
custom, they are called implied conditions and
warranties.
Doctrine of Caveat Emptor:
• The term ‘caveat emptor’ is a Latin word which
means ‘let the buyer beware’
• The doctrine of caveat emptor means that the
seller is not bound to disclose the defects in the
goods, which he is selling.
• It is the duty of the buyer to satisfy him before
buying the goods that the goods will serve the
purpose for which they are being bought.
Exceptions to the Doctrine of Caveat Emptor:
1. Fitness for buyer’s purpose
2. Goods purchased under patent or brand name
3. Condition as to merchantability
4. Good sold by sample as well as description
5. Condition implied by usage or custom of trade
6. Goods sold by Misrepresentation.
Module 4
Consumer protection Act- 1986 The consumer
protection Act was enacted in 1986 to protect
the interest of the consumers. The primary
objective of this Act is to establishment of
consumer council and other authorities for the
settlement of consumer disputes.
Objectives of consumer protection act-1986 1.
To provide for promotion and protection of
consumers right. 2. To provide protection
against exploitation. 3. To provide remedies for
deceived consumers.4. To provide simple and
speedy consumer grievances. 5. To provide
inexpensive consumer grievances. 6. To make
provision for the establishment of consumer
councils.
Salient features of consumer protection act-
1986
• This act covers all public, private and
cooperative sector. •This act is applicable to all
products and services. •This act provide better
protection for consumers. •This act provide
effective safeguards. •This act provides several
rights to consumers.
Scope of consumer protection act- 1986
1. It is applicable to all goods and services and
unfair trade practices unless specifically
exempted by the central government. 2. It covers
all sectors public, private as well as cooperative.
3. It provide three tier machinery for setting
consumer grievances. 4. It provides six right to
consumers.
ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ | ʀᴀsʜɪᴅ_ᴠᴇɴɢᴀʀᴀ
Consumer Module 5 Winding up and dissolution of LLP
Consumer means any person who buys any Limited liability partnership : Voluntary winding up
goods for a consideration or hires any services Limited liability partnership is a combination of • Any LLP may be wound up voluntarily if the LLP
for a consideration which has been paid or both partnership and corporation. It has the passes a resolution. • Approval of at least three
promised, partly or fully. features of both the forms. In India LPP was fourth of the total partners is required. • If LLP
Unfair trade practices introduced in April 2009. has creditors, the approval of such creditors is
Any business practice or act that is deceptive, LLP Agreement required.
fraudulent or causes injury to a consumer is It means any agreement the partners of the : Winding up by tribunal
called unfair trade practices. limited liability partnership or between the LLP •If the LLP decides that LLP was wound up by
Restrictive trade practice and its partners and which determine mutual the tribunal. • If the LLP was unable to pay its
It is a commercial practice operated by a firm rights and duties of the partners. debts. • If LLP acted against the interest of
which has the effect of restricting, distorting or Features/ Nature of LLP sovereignty and integrity of India. • If there are
eliminating competition. • It has separate legal entity. • It have continuous less than 2 partners for a period of more than 6
Right and remedies for consumers existence. • At least two partners. •Partners may months.
:Rights of consumers • Right to be protected.• be individual or body corporate. • It has limited
Right to be informed. •Right to choose.•Right to liability. • It may be wound up by voluntarily or by
heard.• Right to seek redressal.•Right to tribunal.
consumer education. Advantages of LLP
:Remedies/ Relief to consumers • Removal of 1. Easy formation 2. Separate legal entity
defects from the goods. 3. Limited liability 4. Perpetual succession
• Replacement of defective goods. • Refund 5. Combined benefits of partnership and
against defective goods. • Removal of defects company 6. Flexibility 7. Lower rate of taxation
from the services. •Prohibition on sale of 8. Easy transferability of ownership
hazardous goods. •Award of compensation for Disadvantages of LLP
the loss. 1. Less credibility 2. Joint liability 3. Public
Consumer protection councils disclosure 4. Retaining profit 5. Unlimited liability
1. Central consumer protection council 2. State Difference between LLP and partnership
consumer protection council 3. District LLP Partnership
consumer protection council Formed asper LLP Formed asper
1. Central consumer protection council • The act 2008 partnership act
central government establish a council to be 1932
known as central consumer protection council. •
It has a separate It has no separate
The central minister in charge of consumer
legal entity. legal entity.
affairs is the chairman of this council. • Such
Registration is Registration is not
number of official and non-official members
compulsory compulsory
representing such interest prescribed by central
Minimum number Two to twenty
government.• The terms of the central council
of partner is two. partners.
shall be three years. • Chairman should precede
the central council meeting. •Central council Foreign nationals Foreign nationals
meeting notice should be given prior to 10 days. can be partner cannot be partner.
• The object of central council is to promote and It has perpetual It comes to end at
protect the rights of the consumer. succession. the time of death,
2. State consumer protection council or insolvency of
• The state government establish a council to be partners.
known as state consumer protection council. • Name the end No rule for the
The state minister in charge of consumer affairs word limited name
is the chairman of this council. •Such number of liability partnership
official and non-official members representing Comparison and difference between LLP and
such interest prescribed by state government. • company
Meeting should be conducted at least twice in a LLB COMPANY
year. •The object of state council is to protect the Formed by LLP Act Formed asper
rights of consumers. 2008. companies Act
consumer protection council 2013
• The state government shall establish for every Registration is Registration is
district a council to be known as district compulsory compulsory
consumer protection council. • The collector of It has separate It has separate
the district shall be its chairman. •The district legal entity. legal entity.
council shall meet not less than two times every It has perpetual It has also
year. • The object of this council is to promote succession. perpetual
and protect the rights of the consumers. succession.
Consumer disputes Liability limited to Liability limited to
Consumer dispute means the dispute where the contribution to LLP value of shares
person against whom a complaint has been
Minimum number Minimum number
made, denies or disputes the allegations
of partners is 2 of members 2-
contained in the complaint.
Private company 7-
Redressal agencies for consumer disputes
Public company
1. District forum 2. State commission 3. National
No limit to Maximum number
commission District forum • A consumer dispute
maximum of members 200-
redressal forum established in each district of
partners. Private company
the state is known as district forum.• District
No limit- Public
judge will be the president of district forum. •
company
Two other members with proper qualification
Incorporation by registration of LLP
should also be there in this forum. • One member
• In order to incorporate an LLP, two or more
shall be a woman. • The office of district forums
persons associated for carrying on a lawful
shall be located at district headquarters. • Sitting
business with a view to profit shall subscribe
of district forum shall be convened by the
their names to an incorporation document.
president. •The object of district forum is to
•It shall be filed with the prescribed fees, and in
protect right of consumers. State commission •
the prescribed by the registrar of the state where
The consumer disputes redressal commission
the registered office of the LLP is situated.
established by the state government is the state
•A statement in the prescribed form should also
commission. • The high court judge shall be its
be filed with the incorporation document.
president. • Two other members with proper
• Incorporation document contains the following
qualification should also be there in this forum. •
manner. a) The name of limited liability
One member shall be a woman. • Office of the
partnership. b) The nature of proposed business.
state commission shall be located at the capital
c) The address the registered office. d) The
of the state. • sitting of the state commission
name and address of the partners. e) The name
shall be convened by the president.National
and address of the designated partners.
commission • The consumer disputes redressal
• When all the formalities are compiled with the
commission established by the central
registrar will register the LLP in the name
government is the national commission. • The
specified there in.
Supreme Court judge shall be its president. •Four
other members who has proper knowledge and
experience shall also be there in this
commission. •One member shall be a women.