KAKARAPARTI BHAVANARAYANA COLLEGE (AUTONOMOUS)

DEPARTMENT OF COMMERCE & MANAGEMENT

Program Semester Title of the Course Course Code W.E.F

B.Com. General,
TP, Computers & IV Business Laws R20COM403 2021-22
Logistics

Duration of Semester
Total No of Hours for Instructional Hours
End Examination in Max Marks Credits
Teaching - Learning for Week
Hours
Theory Practical CIA SEE
50 2 0 2 0 50 2

SYLLABUS
LEARNING OUTCOMES:
At the end of the course, the student will able to;
Understand the legal environment of business and laws of business, Highlight the security aspects in
the present cyber-crime scenario, apply basic legal knowledge to business transactions, Understand
the various provisions of Company Law, Engage critical thinking to predict outcomes and
recommend appropriate action on issues relating to business associations and legal issues and
Integrate concept of business law with foreign trade.

UNIT-I: CONTRACT:
Meaning and Definition of Contract - Essential Elements of Valid Contract -Valid, Void and Voidable
Contracts - Indian Contract Act, 1872

UNIT-II: OFFER, ACCEPTANCE AND CONSIDERATION:

Definition of Valid Offer, Acceptance and Consideration - Essential Elements of a Valid Offer,
Acceptance and Consideration.

UNIT-III: CAPACITY OF THE PARTIES AND CONTINGENT CONTRACT: Rules Regarding to Minors
Contracts - Rules Relating to Contingent Contracts - Different Modes of Discharge of Contracts -
Rules Relating to Remedies to Breach of Contract.

UNIT-IV: SALE OF GOODS ACT 1930 AND CONSUMER PROTECTION ACT 2019:
Contract of Sale - Sale and Agreement to Sell - Implied Conditions and Warranties - Rights of Unpaid
Vendor- Definition of Consumer - Person - Goods - Service - Consumer Dispute - Consumer
Protection Councils - Consumer Dispute Redressal Mechanism

UNIT-V: CYBER LAW:

Overview and Need for Cyber Law - Contract Procedures - Digital Signature – Safety Mechanisms.

REFERENCE BOOKS:
1. J. Jaysankar, Business Laws, Margham Publication. Chennai.
2. ND Kapoor, Business Laws, S Chand Publications.
3. Balachandram V, Business law, Tata McGraw Hill.
4. Tulsian, Business Law, Tata McGraw Hill.
5. Pillai Bhagavathi, Business Law,SChand Publications.
6. Business Law, Seven Hills Publishers, Hyderabad.

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 KAKARAPARTI BHAVANARAYANA COLLEGE (AUTONOMOUS)
DEPARTMENT OF COMMERCE & MANAGEMENT

Program Semester Title of the Course Course Code W.E.F

B.Com. General,
TP, Computers & IV Business Laws R20COM403 2021-22
Logistics

Duration of Semester
Total No of Hours for Instructional Hours
End Examination in Max Marks Credits
Teaching - Learning for Week
Hours
Theory Practical CIA SEE
50 2 0 2 0 50 2

MODEL PAPER
SECTION-A (Short Answer Questions)

(Instructions to the Paper Setter: Set minimum ONE question from each unit and maximum EIGHT from all)
Answer any FIVE of the following questions 5x5=25 Marks
01. Agreement
02. Types of Offers
03. Tender
04. Contract of Sale
05. Digital Signature
06. Consideration
07. Damages
08. Consumer Councils
SECTION-B (Essay Questions)

(Instructions to the Paper Setter: Set minimum TWO questions from each unit, either or internal choice)
Answer ALL of the following questions 5x10=50 Marks
09. (a) Define ‘Contract’ and explain the essential elements of a Valid Contract.
(OR)
(b) Explain about Classification of Contracts.
10. (a) Define ‘Offer’ and explain about the essentials of a Valid Offer.
(OR)
(b) Define ‘Acceptance’, what are the essentials of a Valid Acceptance? Explain.
11. (a) Who is a ‘Minor’? Explain the rules regarding Minor’s Agreement.
(OR)
(b) What are the various Modes of Discharge of Contract? Explain.
12. (a) Distinguish between Sale and Agreement to Sell.
(OR)
(b) Discuss about the Consumer Dispute Redressal Machinery that are established under The Consumer
Protection Act to safeguard the Consumer Interests in India.
13. (a) Explain the Need and Objectives of the Information Technology Act, 2000.
(OR)
(b) Write the legal aspects regarding Digital Signature.

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 IMPORTANT QESTIONS
SHORT ANSWER TYPE
UNIT-I
1. Contract
2. Agreement
3. Voidable Contracts

UNIT-II
4. Types of Offers
5. Tender
6. Consideration

UNIT-III
7. Minor
8. Contingent Contracts
9. Damages

UNIT-IV
10. Contract of Sale
11. Conditions and Warranties
12. Consumer Councils

UNIT-V
13. Cyber Law
14. Digital Signature
15. Safety Mechanisms
ESSAY ANSWER TYPE
UNIT-I
1. Define “Contract” and explain the essential elements of a Valid Contract.
2. Explain about Classification of Contracts.

UNIT-II
3. Define ‘Offer’ and explain about the essentials of a Valid Offer.
4. Define ‘Acceptance’, what are the essentials of a Valid Acceptance? Explain.
5. Define “Consideration” and explain the essential elements of a Valid Consideration.

UNIT-III
6. Who is a ‘Minor’? Explain the rules regarding Minor’s Agreement.
7. What are the various Modes of Discharge of Contract? Explain.
8. Write the rules regarding Contingent Contracts.
9. Write about various Remedies available for an Aggrieved Party in the case of Breach of Contract.

UNIT-IV
10. Distinguish between Sales and Agreement to Sell
11. Write about Implied Conditions and Implied Warranties.
12. Explain the Rights of an Unpaid Vendor under the Sale of Goods Act.
13. Discuss about the Consumer Dispute Redressal Machinery that are established under The Consumer
Protection Act to safeguard the Consumer Interests in India.
14. Write an essay on Consumer Protection Councils.

UNIT-V
15. Explain the Need and Objectives of the Information Technology Act, 2000.
16. Write the legal aspects regarding Digital Signature.
17. Discuss about the contract procedures according to IT Act, 2000.

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 UNIT-I
CONTRACT
MEANING AND DEFINITION OF CONTRACT
Introduction:
The law relating to contracts in the India contained in Indian contract Act, 1872. The Act came into
force with effect from September 1st, 1872. It is applicable to the whole of India.
Meaning and Definition of Contract:
The contract is an agreement to do or not to do an act. It is a legally binding agreement which is enforceable at
law.
Definition:
“Contract is an agreement creating and defining obligations between parties.” *Salmond*
“Contract is an agreement enforceable by law.” *Sec 2(h)*
“Every agreement and promise enforceable at law is contract.” *Sir Frederick Pollock*
Thus, there are two essentials of contract.
1.Agreement
2.Its Enforceability at law
These two components together constitute basis for a contract.
Agreement:
Definition:
“Every promise or every set of promises forming consideration for each other.” *Sec 2(e)*
An agreement involves proposal or offer by one party and acceptance of the same by other party. It
requires existence of two or more persons. Thus,
Agreement = Offer + Acceptance
Enforceability at Law:
An agreement to become a contract must give rise to the legal obligations. It should have the
enforceability. Without enforceability the agreement remains as an agreement. Thus,
Contract = Agreement + Enforceability at law

******

ESSENTIAL ELEMENTS OF VALID A CONTRACT

“All agreements are not contracts but all contracts are agreements.” Only the agreements which
are enforceable at law are contracts. An agreement which is not enforceable at law cannot be a contract. Thus,
the term agreement is wider than in scope of contract.
An agreement enforceable at law should possess the essential elements of valid contract as contained
in Sec 10 of the Indian contract Act.
According to Sec 10 “All the agreements are contracts if they are made by free consent of the parties competent
to contract for a lawful consideration and with the lawful object and are not expressly declared to be void.”

The following are the Essentials of a Valid Contract:

1. Offer and Acceptance.
2. Intention to create legal relationship.
3. Lawful Consideration.
4. Capacity of parties.
5. Free consent.
6. Lawful object.
7. Certainty of meaning.
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 8. Possibility of performance.
9. Not declared to be void or illegal.
10. Legal formalities.
1. Offer and Acceptance:
In order to create a valid contract there must be a lawful offer by one party and lawful acceptance of the same
by other party.
2. Intention to create Legal Relationship:
In case there is no such intention on the part of the parties, there is no contract. Agreements of social or
domestic nature do not contemplate legal relations.

Leading Case: Bulfour vs. Bulfour (1919)

Mr. Bulfour was employed in Ceylon. Mrs. Bulfour vowing to illhealth has to stay in England and could not
accompanied her husband to Ceylon. Mr. Bulfour promised to send her 30 pounds per month while he is
abroad, but Mr. Bulfour failed to pay that amount. So, Mrs. Bulfour filed a suit against her husband for
recovering the said amount. It was held that it is a domestic agreement and the promise made by her husband
in this case is not enforceable.

3. Lawful Consideration:
Consideration is known as ‘quid-pro-quo’ which means something in return. Consideration may take in the
form of money, goods, service, a promise to marry, a promise to forbear from suing etc.
Consideration may be past, present or future but it must be real and lawful.
4. Capacity of Parties:
The parties to an agreement must be competent to contract. If either of the parties does not have capacity to
contract, the contract is not valid.
According to Sec 11 following persons are incompetent to contract
a. Minors.
b. Persons of unsound mind.
c. Persons disqualified by law to which they are subject.
5. Free Consent:
Consent means the parties must have agreed upon the same thing in the same sense. This is called‘consensus-ad-idem.’
According to Sec 14 consent is said to be free when it is not caused by
a. Coercion;
b.Undue influence;
c. Fraud;
d. Misrepresentation;
e. Mistake.
An agreement should be made by free consent of the parties.
6. Lawful Object:
The object of an agreement must be lawful. The object has nothing to do with consideration. It means purpose
or design of contract. The object is said to be unlawful if.
a. It is forbidden by law;
b. It is of such nature that if permitted it would defeat the provisions of any law;
c. It is fraudulent;
d. It involves any injury to the person or property of any other;
e. The court regards it as immoral or opposed to public policy.
7. Certainty of Meaning:
According to Sec 29 agreements that meaning of which is not certain or capable of being made certain are
void. The terms of the contract must be précised and certain. It cannot be left vague. The contract may void on
the ground of uncertainty.
8. Possibility of Performance:
If the act is impossible in itself physically or legally it cannot be enforceable at law.
9. Not declared to be Void or Illegal:
The agreement though satisfies all the conditions, for a valid contract must not have been expressly declared
as void by any law in force in the country.
Ex: Agreement in restraint of trade, marriage, legal proceedings etc.
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10. Legal Formalities
All the agreements should be legally registered in a contract. Certain formalities like proper stamps, signatures
etc., should be strictly followed in the case of agreement.
Ex: Registration is required in the case of sale, mortgage, lease, gift of immovable property, negotiable instruments etc.

******

CLASSIFICATION OF CONTRACTS
Contracts may be classified on the basis of their
A. Validity/ Enforceability
B. Formation / Make
C. Performance / Execution

Contracts

Basing on Basing on Basing on

Validity / Formation / Performance /Execu-
Enforceability Make tion

Valid Contracts Express Contracts Executed Contracts

Void Contracts

Void Agreements Oral Written Executory Contracts

Voidable Contracts
Implied Contracts
Unenforceable Contracts
Quasi Contracts Unilateral
Illegal Contracts

Bilateral
(A)Basing on Validity/Enforceability:
1. Valid Contract:
An agreement which is enforceable at law is valid contract i.e., an agreement which satisfies all the essentials
of valid contract as laid down in Sec 10 of the Indian Contract Act, 1872.
2. Void Contract:
An agreement which was legally enforceable when entered into, but which has become void due to
supervening impossibility of performance.
Ex: A contract between citizens of Pakistan and India is valid contract during peace time. But if war breaks
out between two countries the agreement will be void agreement.
3. Void Agreement:
According to Sec 2(g), an agreement which is not enforceable at law by either of parties is void. It is void on
intention that from its inception itself it is void means ‘void-ab-initio’.
Ex: An agreement without consideration and an agreement with minor etc.
4. Voidable Contract:
According to Sec 2(i), an agreement which is enforceable by law at the option of one or more parties but not
6
the option of other or others is voidable contract.
Ex: “A”, the person of weak intelligence made a gift of his entire property to “B” who was in a position to
dominate him. This gift having been obtained by undue influence is voidable at the option of “A”.
5. Unenforceable Contract:
It is a contract which is otherwise valid but cannot be enforceable because of some technical defects like
absence of written form, absence of proper stamps etc.
6. Illegal Contract:
The contract which is either prohibited by law or otherwise against the policy of law is illegal contract.
Ex: “X” borrows Rs. 50,000 form “Y” for the purpose of smuggling of goods. “Y” knows the purpose of the
loan. The agreement between “X” and “Y” is collateral to the main agreement which is illegal; the collateral
agreement is also illegal agreement.

(B) Basing on Formation/Make:

1. Express Contract:
An express contract is one which is entered into by words either spoken (oral) or written.
2. Implied Contract:
When the proposal and acceptance is made otherwise than in words it is an implied contract.
Ex: Taking the ticket while boarding.
3. Quasi Contract:
It is a contract in which there is no intention on either side to make contract but the law imposes legal
obligation on the parties.
Ex: Obligation of founder of lost goods.

(C) Basing on Performance /Execution:

1. Executed Contract:
An executed contract is one, where both the parties have executed their obligations or carried out or
performed. In other words, it is a completed contract.
Ex: “A” sells T.V. set to “B” for Rs. 20,000 “B” Pays the price and “A” handovers T.V. set to “B”.
2. Executory Contract:
When the contract is yet to be performed either wholly or partially or one or both the parties have to yet
perform their obligations the contract is executory contract. The executory contract may be
a. Unilateral contract.
b. Bilateral contract.
a. Unilateral Contract: The unilateral contract is one in which a promise on one side is exchanged for an act
on the other side.
Ex: Mr. “A” contract to sell his car to “B”, “B” pays the price, “A” does not handover the car to “B” and he
will perform it later.
b. Bilateral Contract: These are the contracts made for a promise on one side exchanged for a promise on
other side.
******

UNIT-II
OFFER, ACCEPTANCE AND CONSIDERATION
DEFINITION AND ESSENTIALS ELEMENTS OF VALID OFFER
Introduction:
The term ‘Offer’ is also called ‘Proposal’. It is the first step in the formation of a contract. Any
contract emerges from the proposal. It is the starting point for formation of any contract. The person who
makes an offer is called as ‘Offeror’; the person to whom the offer is made is called ‘Offeree’.

7
Definition:
“When a person signifies to another his willingness to do or to abstain from doing anything with view to
obtaining the assent of that other to such act or abstinence, is said to make proposed.” *Sec 2(a)*
Essentials of Valid Offer:
1. Offer must be capable of creating legal relation.
2. Offer must be certain and definite.
3. Offer must be communicated to the offeree.
4. Offer must be made with a view to obtain the assent of other party.
5. Offer may be conditional.
6. Offer should not contain a term non-compliance of which would amount to acceptance.
7. An invitation to offer is not an offer.

1. Offer must be capable of creating legal relation:

An offer to be enforceable, it must create legal relation. An offer for social or domestic acts is not an offer.
The absence of intention to create legal relationship is not valid offer.
Leading Case: Bulfour vs. Bulfour (1919)

2. Offer Must be certain and definite:

Terms of offer must be properly worded. It should be with certainty in the terms and conditions. The terms of
the offer should be definite and clear. There should not be any confusion or ambiguity in its terms.
Sec 29 of Contract Act states that “Agreements, the meaning of which is uncertain or capable of not being
made certain are void.”
Leading Case: Tylor vs. Portington (1855)

3. Offer must be communicated to the offeree:

Sec 4 of the Contract Act “An offer is communicated to the person to whom it is made (Offeree).” The
communication may be expressed or implied. It may be communicated by means of words viz., words of
mouth, telegram, messenger etc. Communication of offer is complete when it comes to the knowledge of the
offeree.
Leading Case: Lalman Shukla vs. Gouri Dutt (1913)

4. Offer must be made with a view to obtain the assent of the other party:
Offeror should have an intention to obtain the consent of the offeree. It is different from mere expression of
intention. An offer made without having intention to get acceptance is not an offer.
5. Offer may be conditional:
An offer may be conditional or unconditional. A conditional offer lapses when the condition is not accepted
by the offeree.
6. Offer should not contain a term non-compliance of which would amount to acceptance:
An offeror cannot say while making the offer that if the offer is not accepted before certain time it will be
presumed to have been accepted.
7. An Invitation to offer is not an offer:
Mere statement of intention is not an offer. Intention of the offer should not be merely an invitation. Invitation
to offer aims to circulate information of readying to negotiate business with anybody who on such information
comes to the person sending it.
******

TYPES OF OFFERS
1. General Offer:
General offer is the offer which is given to the world at large. This offer is given as an advertisement or in any
other mode. General offer can be accepted by anyone from public who has knowledge about the offer.
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Leading Case: Carlill vs. Carbolic Smoke Ball Company (1893)
Carbolic smoke ball company has prepared a medicine (smoke ball) for disease known as influenza. And the
company has advertised that it would give 100 pounds as reward money who gets influenza even after using
its smoke balls for a certain period of time according to the directions given on it.
The plaintiff Mrs. Carlill used the smoke ball according to the directions of the company but contacted
influenza. It was held that she could recover the reward because the advertisement was not mere invitation to
offer but an offer at large.
2. Special Offer:
When an offer is made to a specified person, specified group of persons is called specific or special
offer. This offer can be accepted by the person only to whom the offer has given.
Leading Case: Lalman Shukla vs. Gauri Dutt (1913)
“D” sent his servant “P” to trace his missing nephew. “D” in the meantime announced a reward for
providing information about the missing boy. “P”, in ignorance of the announcement traced the boy and
informed “D”. “P”, later on came to known of the reward and he claimed it. His claim was dismissed on the
ground that he was ignorant of the offer. It was further held that it was the duty of the servant to search for the
boy.
******

DEFINITION AND ESSENTIAL ELEMENTS OF VALID ACCEPTANCE

Introduction:
Acceptance is the second stage in the formation of a contract. A Contract is created only after an offer
is accepted. “Acceptance is to an offer what a lighted match is to a train of gun powder.” Acceptance can be
given only by the person to whom the offer has been made. Thus, offeree becomes acceptor when he accepts
the offer given by offeror.

Definition:
“When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.”
*Sec 2(b)*
Essentials of Valid Acceptance:
1. Acceptance must be absolute and unconditional.
2. Acceptance should be expressed in usual manner or as per mode prescribed.
3. Acceptance must be made within a reasonable time.
4. Acceptance should be communicated to the offeror.
5. Acceptance must be given before the offer lapses.
6. Acceptance cannot be implied from silence.

1. Acceptance must be absolute and unconditional:

The acceptance must be absolute, unconditional and unqualified. The terms of acceptance must be consistent
with the terms of the offer. Offer may be conditional but acceptance cannot be conditional. Conditional
acceptance amounts to a counter offer and rejection of original offer.
2. Acceptance should be expressed in usual manner or as per mode prescribed:
The acceptance should be expressed in usual manner or as per the mode prescribed by the offeror. If the
offeror or prescribes particular method by which acceptance is to be given, the acceptor should follow it. If no
particular method is prescribed the offeree should accept in a usual manner.
3. Acceptance must be made within a reasonable time:
Offer would normally remain as offer for a particular period in the absence of specific period; the offer
remains open for a reasonable period. The acceptance must be made within such specific or reasonable period.
4. Acceptance should be communicated to the offeror:
An acceptance to be valid and legally binding, it must be communicated to the offeror. Communication of
acceptance to be valid must be made either by the offeree himself or by his authorized agent. Communication

9
 of acceptance by any other person will not be valid.
For a general offer no communication is necessary if it is made by acting of the terms of offer.
Leading Case: Carlill vs. Carbolic Smoke Ball Company (1893)

5. Acceptance must be given before the offer lapses:

Acceptance should be communicated before the offer lapses, or terminates or is revoked by the offeror.
Offeror can revoke his offer before the acceptance. Acceptance must be made before such revocation.
6. Acceptance cannot be implied from silence:
No contract is formed if the offeree remains silent and does nothing to show that he has accepted the offer.
Mental acceptance without any express or implied actions is not an acceptance.

******

DEFINITION AND ESSENTIAL ELEMENTS OF VALID CONSIDERATION

Introduction:
Consideration is one of the most essential elements for formation of contract. In Latin consideration is ‘quid-
pro-quo’ which means ‘something in return’. It may be some benefit, right, interest, or profit that may accrue
to one party or some forbearance, detriment, loss or responsibility suffered or undertaken by other party.

Definition:
“When at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or
abstain from doing, or promises to do or abstains from doing something, such act or abstinence or promise is called
consideration f or the promise.” *Sec 2 (d)*
Essentials of Valid Consideration:
1. Consideration must move at the desire of promisor.
2.Consideration must move from promisee or any other person.
3.Consideration must be real but not illusory.
4.Consideration need not be adequate.
5.Consideration may be past, present or future.
6.Consideration must be legal.

1. Consideration must move at the desire of promisor:

Consideration must move at the desire of promisor. It is not compulsory that consideration should be a benefit
to the promisor. It can be a loss or detriment also.
2. Consideration must move from promisee or any other person:
Consideration may move from promisee or any other person. Any other person other than promisee is referred
as stranger to consideration.
Leading Case: Chinayya vs. Ramayya (1881)

3. Consideration must be real but not illusory:

Consideration must be real and possible. It must not be illusory or unsubstantial.
Consideration is not valid if it is
a. Physically impossible.
b. Legally not allowed.
c. Uncertain.
d. Illusory.
e. Impractical.
4. Consideration need not be adequate:
If it has some value in the eyes of law it is enough and the contract is valid. But if there is no consideration it
can be said that there is no contract. The contract which is supported by consideration is valid irrespective of
fact that the consideration is inactivate.
5.Consideration may be Past, Present, or Future:
The Indian Contract Act recognizes three contracts of consideration viz., Past, Present and Future.

10
a. Past Consideration: It means something wholly done or suffered before making the agreement. Under
English Law, past consideration is no consideration.
b. Present Consideration: It moves simultaneously with promise
c. Future or Executory Consideration: This is move at a future date.

6. Consideration must be legal:

Consideration must be lawful. Illegal consideration has no value in the eyes of law. Consideration must be
moral and not opposed to public policy.

******

UNIT-III
CAPACITY OF THE PARTIES AND CONTINGENT CONTRACTS
RULES REGARDING TO MINORS CONTRACTS
An infant or a minor is a person who is not a major. According to the Indian Majority Act, 1875 minor
is one who has not completed his or her 18th year of age. A person attains majority on completing his 18th
year in India. In the following two cases a person continues to be a minor until he or she completes the age of
21 years.
(i) Where a guardian of a minor or property has been appointed under the Guardians and Wards Act,
1890, or
(ii) Where the superintendence of a minor’s property is assumed by a court of wards.

A minor has an immature mind and cannot think what is good or what is bad for him. Minors are often
exploited so they must be protected by law from any exploitation.
Effects of Minor’s Agreement / Rules regarding Minor’s Agreement:

1. Agreement void ab initio.

2. No ratification.
3. Minor can be a promisee or beneficiary.
4. No estoppel against a minor.
5. No specific performance except in certain cases.
6. Liability for torts.
7. No insolvency.
8. Partnership.
9. Minor can be an agent.
10. Minor cannot bind parent or guardian.
11. Joint contract by minor and adult.
12. Surety for minor.
13. Minor as a shareholder.
14. Liability for necessaries.
1. Agreement Void Ab Initio:
An agreement with or by a minor is void. According to sec-11, A minor is not competent to contract. Minor’s
agreement is void since form its inception.

Leading Case: Mohori Bibi vs. Dharmo Das Ghose (1903)

‘A’, A minor borrowed Rs. 20,000 form ‘B’ and has a security for the same executed a mortgage in his favour.
He became a major, after few months he filed a suit for the declaration that the mortgage executed by him
during his minority was void and should be cancelled. It was held that a mortgage by a minor was void and
‘B’ is not entitled to repayment of money.
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2. No Ratification:
A Minor cannot ratify the agreement even on attaining majority because a void agreement cannot be ratified.
A person who is not competent to authorize an act cannot give it validity by ratifying it.
Leading Case: Arumugan vs. Duraisinga (1914)
A minor borrowed a sum of money executing a simple bond for it, and after attaining majority executed a
second bond in respect of original loan and interest. It was held that suit upon the second bond was not
maintained.
But if on becoming major, minor makes a new promise for fresh consideration, then this new promise will be
binding.

3. Minor can be Promisee or Beneficiary:

If a contract is beneficial to a minor it can be enforced by him. There is no restriction on a minor from being a
beneficiary, for example, being a payee or promisee in contract. Similarly minor in whose favour a promissory
note has been executed can enforce it.

4. No Estoppel Against a Minor:

Where a minor by misrepresenting his age has induced the other party to enter into a contract with him, he
cannot be made liable on the contract. There can be no estoppel against a minor it means he is not stopped
from pleading his infancy in order to avoid the contract. A court may direct minor to restore property. No
doubt, minor has got protection but he has no liberty to cheat others.
Leading Case: Sadiq Ali Khan vs. Jai Kishore (1928)

5. No specific performance except in certain cases:

Minor’s contract being absolutely void, there can be no specific performance of such a contract. A guardian of
a minor cannot bind the minor by an agreement for the purchase of immovable property.
Leading Case: Lalchand vs. Narhar (89 IC 896)

6. Liability for Torts:

A tort is civil wrong. A minor is liable in tort unless the tort in reality is a breach of contract. Thus, where a
minor borrowed a horse for riding only, he will be held responsible when he lent the horse to one of his
friends who jumped and killed the horse. Similarly, a minor is held liable for his failure to return certain
instruments which he had hired and then passed to a friend.
7. No Insolvency:
A minor cannot be declared insolvent as he is incapable of contracting. Debts and dues are payable out of
personal properties of a minor and he is not personally liable.
8. Partnership:
A minor being incompetent to contract cannot be a partner in a partnership firm, but under Section 30 of the
Indian Partnership Act, he can be admitted into the business for the benefits only.
9. Minor can be an Agent:
Minor can act as an agent. But he will not be liable to his principal for his acts. A minor can draw, deliver and
endorse a negotiable instrument without himself being liable.
10. Minor cannot bind Parent or Guardian:
In the absence of authority, express or implied, an infant is not capable of binding his parent or guardian even
for necessaries. The parent will be held liable only when the child is acting as an agent for parents.
11. Joint contract by a Minor and Adult:
In such a case, the adult will be liable on the contract and not the minor. In Sain Das vs. Ram Chand (1923),
where there was a joint purchase by two purchasers, one of them was a minor; it was held that the vendor
could enforce the contract against the major purchaser but not the minor.
12. Surety for Minor:
In a contract of guarantee where an adult stand surety for a minor then he is liable to third party as there is
direct contract between surety and third party.
13. Minor as a Shareholder:
A minor being incompetent to contract cannot be a shareholder of a company. If by mistake he becomes a
12
member, the company can rescind the transaction and remove his name from register. But a minor may, acting
through his lawful guardian become a shareholder by transfer of fully paidup shares to him.
14. Liability for Necessaries:
A claim for necessaries supplied to a minor is enforceable by law. But a minor is not liable for any price that
he may promise and never for more than value of necessaries. There is no personal liability of a minor, but
only his property is liable.

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RULES RELATING TO CONTINGENT CONTRACTS

Definition:
“A contingent contract is a contract to do or not to do something if some event collateral to such contract does
not happen”. *Sec 31*
Essentials of Contingent Contract:
1. There must be a contract to do or not to do something.
2. It must depend upon the happening or non-happening in future of an uncertain event.
3. The event must be collateral or incidental to the contract.
Rules regarding Contingent Contracts:
1.Contingent contracts to do or not to do anything if an uncertain future event happens, it cannot be enforced
by law unless and until that event has happened. If the event becomes impossible, such contracts become void.
(Sec 32)

2.Contingent contracts to do or not to do anything if an uncertain future event does not happen, it can be
enforced when the happening of that event becomes impossible, and not before. (Sec 33)
3.If a contract is contingent upon how a person will act at an unspecified time, the event shall be considered to
become impossible when such person does anything which renders it impossible that he should so act within
any definite time, or otherwise than under further contingencies. (Sec 34)
4.Contingent contracts to do or not to do anything, if a specified uncertain event happens within a fixed time,
becomes void, if, at the expiration of the time fixed, such event has not happened, or if, before the time fixed,
such event becomes impossible. (Sec 35(1))
5.Contingent contracts to do or not to do anything, if a specified uncertain event does not happen within a
fixed time, may be enforced by law when the time fixed has expired and such event has not happened, or,
before the time fixed has expired, if it becomes certain that such event will not happen. (Sec 35 (2))
6. Contingent agreements to do or not to do anything, if an impossible event happens, are void, whether the
impossibility of the event is known or not to the parties to the agreement at the time when it is made (Sec 36)

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TENDER / OFFER OF PERFORMANCE

Offer of performance is also known as ‘Tender’.

Essentials of Valid Tender:

In order that a tender should be valid and adequate, it must fulfill the following conditions which are laid
down in Sec 38.
1. Tender must be unconditional.
2. Tender must be made at proper time and place
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 3. The person to whom the tender is made must be given a reasonable opportunity to inspect the goods
or articles.
4. The tender must be whole and not of the part.
5. The tender must be in the proper form.
6. The tender must be made to the proper person.
7. The party making the tender must always be ready and willing to fulfill the obligation whenever
called upon.
8. The tender made to one of the several joint promisees has the same legal consequences as the tender
to all of them.
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DIFFERENT MODES OF DISCHARGE OF CONTRACTS

The contract is said to be discharged or terminated when the rights and obligations created by it are
extinguished.

A contract may be Discharged in many ways those are as follows:

1. Discharge by agreement (Sec 62, 63)
2. Discharge by operation of law
3. Discharge by breach (Sec 39)
4. Discharge by performance (Sec 37, 38)
5. Discharge by impossibility (Sec 56)
6. Discharge by lapse of time

1. Discharge by Agreement (Sec 62,63):

A contract can come to an end by the mutual agreement of the parties created it. The rights and obligations
created by an agreement can be discharged without their performance by means of another agreement between
the parties which provides for the extinguishment of the earlier rights and obligations. The parties may agree
to terminate the existence of the contract by any of the following ways.
a. Novation.
b.Alteration.
c. Rescission.
d.Remission.
e. Waiver.
f. Accord and Satisfaction.
a. Novation: It means that there being a contract in existence some new contract is substituted for it, either
between the same parties or between different parties.
b. Alteration: It means a change in one or more of the terms of a contract but no change in parties.
c. Rescission: If the parties to a contract agree to rescind it, the original contract need not be performed.
Rescission means cancellation of the contract. Rescission may be done by mutual consent of the parties,
aggrieved party or by the party whose consent is not free.
d. Remission: It means acceptance of lesser amount or lesser degree of performance than what was actually
due under the contract.
e. Waiver: It means the abandonment of right which a person is entitled to. A party to a contract may waive
his rights under the Act; whereupon the other party is released from his obligations.
f. Accord and satisfaction: Accepting any other satisfaction than the performance originally agreed is known
as accord and satisfaction in English law. Accord means the promise to accepting less than what is due under
the old contract. Satisfaction means the payment or the fulfillment of the smaller obligation.

2. Discharge by Operation of Law:

This is done in the following ways.
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 a. Insolvency.
b. Merger.
c. Alteration.
d. Death.
a. Insolvency: Upon insolvency, the rights and liabilities of the insolvent are, with certain exceptions
transferred to an officer of the court known as official assignee.
b. Merger: It occurs when there is acceptance of a higher security in the place of lower. It is the operation of
law which extinguishes a right by virtue of its coinciding with another and greater right in the same person.
c. Alteration: An alteration of written contract made without the consent of other party has the effect of
discharging the contract provided the alteration is of a material part.
d. Death: Where performance of a contract is required to be made in person and the personal qualifications of
the promisor are the considerations for the contract, the death of the promisor discharges the contract.

3. Discharge by Breach:
If any party fails to perform his obligations, there takes place a breach of contract. The breach of contract may
be
a. Actual breach
b.Anticipatory breach
a. Actual Breach: It may take place in the following ways:
i. When performance is actually due, or
ii. When actually performing the contract.
b. Anticipatory Breach: A refusal by a promisor to perform his part of the contract, before the due date of
performance is known as anticipatory breach of contract.

4. Discharge by Performance:
It is one of the most usual ways of discharge of a contract. On the performance of the obligation undertaken
by the parties, the contract is automatically discharged.

5. Discharge by Impossibility:
Agreements which are impossible in itself are void because law does not compel the impossible. Thus, a
promise by ‘A’ that he will raise mango tree in one hour in B’s garden by invoking some mantras is void.

Instances covered under Supervening Impossibility:

a. Destruction of the subject matter.
b. Death or personal incapacity.
c. Change of law.
d. Non-existence or non-occurring of a particular state of things.
e. Declaration of war.

6. Discharge by Lapse of Time:

A contract is discharged by lapse of time. The Limitation Act, 1940 lays down that a contract should be
performed within a specified period. If the contract is not performed and no legal action is taken by the
promisee within the period of limitation, he is deprived of his remedy at law. The contract is terminated in
such a case.

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RULES RELATING TO REMEDIES TO BREACH OF CONTRACT

Parties to a lawful contract are bound to perform their respective obligations. But when one of the
parties repudiates the contract, by refusing to perform his obligations he is said to have committed a breach of
15
the contract. In case of breach of contract, the law provides the following remedies to an injured party.

1. Cancellation or Rescission.
2. Restitution.
3. Specific performance.
4. Injunction.
5. Quantum meruit.
6. Damages.
1. Cancellation or Rescission:
Rescission is revocation of a contract. Where one of the parties to a contract commits breach, the other party
may treat the contract as rescinded. He is freed from all the obligations under the contract.

2. Restitution:
Restitution means return of the benefit received by one party to the contract from the other party under a void
contract. When a contract becomes void it need not be performed, by either party.

3. Specific Performance:
Under certain circumstances a person aggrieved by the breach of contract can file a suit for specific performance i.e., for
an order by the court upon the party guilty of breach of contract directing him to perform what is promised to do.
Specific performance is a discretionary remedy which is allowed only in a limited number of cases.

4. Injunction:
An aggrieved party can sue for an injunction i.e., an order of the court restraining the wrong doer from doing
or continuing the wrongful act complained of. Injunctions are usually granted to enforce negative stipulations
in cases where damages are not adequate relief. Injunction is a preventive relief. It is particularly appropriate
in cases of anticipatory breach of contract.

5. Quantum Meruit:
The phrase ‘Quantum Meruit’ means payment in proportion to the amount of work done. The right to sue on a
quantum meruit arises where a contract, partly performed by one party, has become discharged by breach of
the contract by other party.

6. Damages:
The term damages are used to mean compensation in money as a substitute for the promised performance. Damages for
the breach of a contract are intended to compensate the injured party so far as money can do so.

Damages are of four kinds:

a. General or Ordinary damages.
b. Special damages.
c. Vindictive or Exemplary damages.
d. Nominal damages.
a. General or Ordinary Damages: General damages are those which arise naturally in the usual course of
things for the breach of contract. They are awarded with a view to compensate the injured party and not with a
view to punish the party at fault. General damages are usually assessed on the basis of actual loss suffered.
b. Special Damages: Special damages are those which are the result of unusual circumstances affecting the
plaintiff. These are the damages which the parties knew, when they made the contract, as likely to arise from
the breach of the contract. The notice of special circumstances involved in the contract must be known to the
party against whom special damages are claimed for breach of contract.
c. Vindictive or Exemplary Damages: They are awarded with a view to punish the wrong doer and not
primarily with the idea of awarding compensation to the injured party. Generally vindictive damages are not
awarded for breach of contract, but as a rule awarded in actions of tort. These are awarded in two situations.
i. Breach of contract to marry.
16
 ii. Breach of contracts by a banker having sufficient funds of the customer at the disposal, to honor his
cheque (wrong dishonor).
d. Nominal Damages: These damages are awarded where the injured party has sustained damage of short but
not of a substantial nature to be reckoned with.

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UNIT-IV
THE SALE OF GOODS ACT, 1930
CONTRACT OF SALE
Introduction:

The Sale of Goods Act, 1930 deals with the law relating to sale of goods in India. The term Goods
means every kind of movable property, other than money and actionable claims. Before the Sale of Goods
Act 1930, the law relating to sale of goods was covered under the chapter VII of the Indian Contract Act,
1872, the provisions of which were found to be inadequate.
Therefore a strong need was felt to have an independent Sale of Goods Act and consequently a new
Act called Sale of Goods Act 1930 was passed. The presently Act containing 66 Sections came into force
from 1st July 1930 which extends to whole India except in the State of Jammu and Kashmir.

Contract of Sale:
Definition:

Sec 4 of the Sale of Goods Act defines a contract of sale as “A Contract of Sale of Goods is a
contractwhere by the seller transfers or agrees to transfer the property in goods to a buyer for a price”
Contract of sale consists of:
a) Sale or Absolute sale, or
b) Agreement to sell or Conditional sale.

Essentials of Contract of Sale:

To constitute a valid contract of sale, the following essentials must be presented.
1. Valid contract.
2. Two parties.
3. Transfer of property.
4. Goods.
5. Price.
1.Valid Contract:
To constitute a valid contract of sale, the following essentials should be satisfied viz., a valid offer,
acceptance, free consent of the parties, lawful consideration, competence of the parties and lawful object.
2.Two Parties:
To constitute the contract of sale, there must be a transfer or agreement to transfer the property in
goods by the seller to the buyer. It means that there must be two persons, one the seller and the other buyer.
The parties must be competent to contract.
3.Transfer of Property:
To constitute a valid contract of sale, there should be immediate transfer or an agreement to transfer
the general property in goods sold or agreed to be sold. It is essential to transfer of the general property in
the goods from the seller to the buyer with or without physical possession of the goods.
4.Goods:
The subject matter of contract of sale must be goods, the property in which is to be transferred from
the seller to the buyer. According to sec2(7), “Goods means every kind of immovable property other than
17
actionable claims and money and includes stock and shares, growing crops, gross, trees and things attached to
or forming part of the land which are agreed to be severed it before sale or under contract of sale”.
5.Price:

To constitute a valid contract of sale consideration for transfer must be money paid or promised.
Where there is no money consideration the transaction is not contract of sale, as for instance goods given in
exchange for goods as a remuneration for work or labor. However, existing debt due from the seller to the
buyer is sufficient, further there nothing to prevent the consideration from being partly in money and partly
in goods or some other articles of value.

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SALE AND AGREEMENT TO SELL

Point of difference Sale
1.Nature of Contract A sale is an executed contract
2.Transfer of Property In a sale the property in goods
passes from seller to buyer
immediately and buyer becomes
the owner of the goods
immediately.
3.Risk of Loss In a sale, if the goods destroyed,
risk of loss falls on the buyer
even if the goods were in the
possession of seller because risk
of loss passes with ownership
4.Consequences of the If, after a sale the seller
Breach breaches the contract the buyer
may sue for delivery of goods,
and for the damages. If the
buyer does not pay the price.
5.Insolvency of the In a sale, if the buyer is
Buyer adjudged an insolvent the seller
in the absence of lien over the
goods is bound to deliver by the
goods to the official receiver or
assignee. The seller will,
however be entitled to the rate
able dividend for the price of
the goods.
6.Insolvency of the In a sale, if the seller becomes
Seller insolvent the buyer is entitled to
recover the goods from the
official receiver or assignee as
the property of the goods is
with the buyer.
7.General and Particular A sale creates a right in rem,
Property that means the buyer gets an
absolute right of owner ship and
this right of the buyer is
recognized by the whole world.
Agreement to Sell
An agreement to sell is an executory contract.
In an agreement to sell the property in gods
passes from seller to buyer at some future date
or subject to the fulfillment of certain
conditions.
In an agreement to sell if the goods are
destroyed, the risk of loss falls on seller, even if
the goods were in possession of buyer because
the ownership has not passed from the seller to
the buyer and risk pass with ownership.
On breach of an agreement to sell by the seller,
the buyer has only the personal remedy against
the seller, he may sue for damages but not for
price.
In an agreement to sell, when the buyer
becomes insolvent before he pays for the goods,
the seller may not part with the goods.
In an agreement to sell, if buyer is already paid
the price, the seller becomes insolvent, the
buyer can claim only the rateable dividend and
not the goods.
An agreement to sell create right in personam,
that means a right with which only the
contracting parties are concerned and not the
whole world.

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 8.Right of Resale In a sale, the seller can’t resell
the goods even if he is
possession of goods after sale.
If he does so the new buyer
doesn’t get the good title and
the 1st buyer can recover the
goods.
In an agreement to sell, the seller may sell the
goods since ownership is with the seller. If he
does so, he may become liable for a breach of
agreement. But in this case the new buyer gets
good title.

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IMPLIED CONDITIONS AND WARRANTIES

CONDITIONS AND WARRANTIES SEC 12(1):
“Content in a contract of sale with reference to goods which are subject matter thereof may be a
condition or a warranty”
All the stipulations in a contract of sale are not of equal importance. Some of them are essential to
the main purpose of contract which are called “Conditions” and some are parallel to the main purpose of the
contract which are called “Warranties’ so therefore, these stipulations can be of two types.
1. Conditions
2. Warranties

1. Conditions Sec 12(2):

A Condition is a stipulation essential to the main purpose of the contract the breach of which gives
riseto a right to treat the contract as repudiated.
In order to influence the buyer to purchase the goods, the seller makes certain statement regarding the
goods, which can be of two types.

a. Statements in praise of the goods, which do not form a part of contract: These statements are given
merely inpraise of goods having no legal consequences.
b. Statements which form an integral part of contract: These statements are known as stipulations. A
stipulationgives rise to a legal consequence.
Essentials of a Condition:
1. It is essential to the main purpose of the contract.
2. The non-fulfillment of condition causes irreparable damage to the aggrieved party which would
defeatthe very purpose for which the contract is made.
3. The breach of a condition gives a right to the aggrieved party to rescind the contract and recover
thedamages for breach of condition.
2. Warranties Sec 12(3):
“ A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a
claim for damages but not a right to reject the good and treat the contract as repudiated.
Essential of a Warranty:
1. It is collateral to the main purpose of the contract
2. The breach of warranty causes damages to the aggrieved party and does not defeat main purpose
of thecontract.
3. The aggrieved party can only claim damages for breach of warranty but can repudiate the contract.
The breach of a condition entitles he injured party to repudiate the contract to refuse the good and if he has
already paid for them to recover the price. The remedy in case of breach of warranty is the recovery of
damages only. It does not give right to reject the goods and treat the contract as repudiated. Thus, a
condition is more vital than warranty.

IMPLIED CONDITIONS AND WARRANTIES

Where the conditions and warranties are applicable in a contract of sale by operation of law, they
are said to be implied conditions and warranties. These are the conditions and warranties which do not form
19
 a part of contract of sale at the time of contract between the parties, but they automatically come into
existence by operation of law.

Implied Conditions: The implied conditions laid down under the act are as follows.

1. Condition as to title (Sec 14)

2. Sale by description (Sec 15)
3. Sale by sample as well as description (Sec 15)
4. Condition as to quality or fitness
5. Condition as to merchantability
6. Sale by sample
7. Condition implied by custom or usage of trade.

1.Condition as to Title (Sec14):

In a sale there is an implied condition on the part of the seller that in the case of a sale, he has a right
to sell goods and that in the case of an agreement to sell, he will have a right to sell the goods at the time
when the property is to pass. This is called condition as to title.
2.Sale by Description (Sec15):
Where goods are sold by description, there is an implied condition that the goods shall correspond
with the description. This rule us based on the maxim, “If you contract to sell peas, you cannot oblige a party
to take beans. If the description of the article tendered is different in any respect it is not the article bargained
for and the other party is not bound to take it”. A contract for the sale of one thing cannot be performed by
the supplyof another.
3. Sale by Sample as well as by Description (sec15):
If the sale is by sample as well as by description, it is not sufficient that the bulk of the goods shall
correspond with the sample, if the goods do not also correspond with the description. In other words, there is
animplied condition that the goods shall correspond both with the sample as well as with the description.
4.Condition as to Quality or Fitness:
Subject to the provisions of this act, and of any other law for the time being in force, there is no
implied condition as to the quality or fitness for any particular purpose of goods supplied under a contract of
sale. But where the buyer expressly or by implication makes kwon to the seller the particular purpose for
which the goods are required, so as to show that the buyer relies on the sellers skill or judgment and the good
are of a description, which it is seller’s responsibility to supply there is an implied condition that the goods
shall be reasonably fit for such purpose.
Case law: Grant Vs Australian Knitting Mills Ltd (1936).

5.Conditions as to Merchantability:
There is always an implied condition in a contract of sale that the goods purchased should be of a
merchantable quality.
Case law: Morelli Vs Fitch and Gibbons (1928)

6.Sale by Sample:
In a contract of sale by sample there is a term in the contract, express or implied that the bulk of the
goods are, or shall be equal to the sample.
7.Condition Implied by Custom or Usage of Trade:
An implied condition as to quality or fitness for a particular purpose may be annexed by custom or
usageof trade (Sec 16(3)).

Implied Warranties:
a. Implied warranty of quiet possession.
b. Implied warranty of freedom from encumbrances.
c. Implied warranty annexed by usage of trade.

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(1).Implied Warranty of Quite Possession:
In a contract of sale, the implied warranty of quiet possession is a warranty against disturbances of
possession. It is an implied assurance to the buyer that he shall have the possession and enjoyment of the
goodssold to him without disturbances by the seller or any other person.
(2).Implied Warranty of Freedom from Encumbrances:
There is an implied warranty on the part on the seller that the goods are free from any charge
orencumbrance. A breach of this warranty will occur when the buyer discharges the amount of encumbrance.

(3).Implied Warranty Annexed by Usage of Trade:

A Warranty as to fitness for a particular purpose may be annexed to a contract of sale by a custom
orusage of trade (Sec16 (3).

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RIGHTS OF UNPAID VENDOR

Sec 45 lays down that a seller is unpaid
a) When the whole of the price has not been paid or tendered.
b) When a negotiable instrument or a bill of exchange has been received as conditional payment and
the condition on which it was received has not been fulfilled by reason of the dishonor of the
instrument or otherwise.
Right of an unpaid seller:
The Sale of Goods Act has expressly given two kinds of rights to an unpaid seller of goods namely:

1. Rights against the goods.

2. Rights against the buyer personally.

(1).Rights of an unpaid seller against the goods:

i. Right of lien (Sec 47-49).
ii. Right of stoppage of goods in transit (Sec 50-52).
iii. Right of resale (Sec 54).

(i).Right of lien (Sec 47-49): Lien is the right to retain possession of goods until payment in respect of
them is paid. The right of lien is linked with possession and not with title. It is essentially a right over the
property of another person. The unpaid seller’s lien can be exercised only so long as the goods are in the
actual possession of the seller or his agent. Once the possession is lost, the lien is also lost. The right of lien
cannot be exercised during the currency of credit term (credit sale).

(ii).Right of stoppage of goods in transit (Sec 50-52):This means a right to stop further transit of the
goods, to resume possession thereof and to retain the same till the price is paid. The right of stoppage in
transit arises only after the seller has parted with possession of the goods and the buyer has become
insolvent. This right is only available when the goods are neither in the possession of the seller nor that of
the buyer, but are in the possession of a middle man for the purpose of transmission to the buyer.
(iii).Right of resale (Sec 54): This right may be exercised in the following cases.
a. Where the goods are of a perishable nature. In this case the unpaid seller need not give a notice to
the buyer of his intention to resell the goods.
b. Where the unpaid seller has exercised his right of lien or stoppage in transit, he can give notice to
the buyer of his intention to resell the goods. If after such notice the buyer does not within a
reasonable time pay or tender the price, the seller can resell the goods within a reasonable time. He
can recover from the original buyer any loss occasioned by the breach of the contract.
c. Where the seller has expressly reserved a right of resale, in case the buyer makes default in such
case, on resale though the original contract of sale is there by rescinded, the unpaid seller does not
lose his rightto claim damages for breach of the contract.

21
(2).Rights of unpaid seller against the buyer personally:
i. Suite for price (Sec 55)
ii. Suit for damages for non-acceptance (Sec 56)
iii. Suit for interest (Sec 61)

(i).Suit for price (sec 55): Where under the contract of sale, the property in the goods has passed to the
buyer and the goods has actually come into his possession, the unpaid sellers only remedy is a suit for the
price. Where under a contract of sale, the price is payable on a day certain irrespective of delivery and the
buyer wrongfully neglects or refuses to pay the price, the seller may institute a suit for the recovery of the
same, although the property in the goods may not have post.
(ii).Suit for damages for non-acceptance (sec56): Where the buyer wrongfully neglects or refuses to
accept and pay for the goods the seller may sue him for damages for non-acceptance. The measure of
damages is determined by the rules contained in Sec 73 and 74 of the Indian Contract Act.
(iii).Suit for interest (Sec 61): Where under the contract of sale, the seller tenders the goods to the buyer
and the buyer wrongfully refuses to accept and pay for them, the court may award interest on the price from
the date of the tender of the goods or from the date when the price is payable. If the goods are sold on
credit, interest will run from the expiry of the credit. It may be noted that the seller can only recover interest
when he is in a position to recover the price.

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THE CONSUMER PROTECTION ACT, 2019

Introduction:
The Consumer Protection Act is the revolutionary piece of Legislation which can grow into an
important tool for development. The Act seeks to provide for better protection of the interests of the
consumers. The Consumer Protection Act extends to the whole of India. The Act received the President’s
assent on 09.08.2019, and came into force.
Objectives of Consumer Protection Act / Consumer Rights:
The Act has recognized the following six rights of consumers.
1. Right to consumer education.
2. Right to safety.
3. Right to seek redressal.
4. Right to be heard.
5. Right to choose.
6. Right to information.
1.Right to Consumer Education :
Right to consumer education is an important right available to consumer. Information about the consumer
products in the market, and for the proper functioning of legal system it is necessary that the knowledge of
the availability of a legal remedy should be so widely explained advertised and circulated, so that people
asa whole become conscious about their rights.
2.Right to Safety :
The consumer has a right to be protected against marketing of goods which are hazardous to life and
property of the consumers. For example, adulterated food is dangerous to life and week cement is
dangerousto life as well as property.
3.Right to seek Redressal:
The consumer has given the right to seek redressal against unfair trade practises or their unscrupulous
exploitation. The consumer should have some means of redress when goods fail to live up their promise or
indeed cause injury.
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4.Right to be Heard :
The Right to be heard also includes the right to be assured that the consumer interest will receive due
consideration at appropriate Forums. The consumer disputes should be resolved in a fair and expeditions
manner. The Consumer Protection Act 1986 confirms to these measures.
5.Right to Choose :
Right to choose means the right to be assured. Wherever possible, access to a variety of goods and
services at competitive prices. Fair and effective must be encouraged in order to provide consumers with
greatest range of choice among products and services at lowest prices.
6.Right to Information :
The consumer has been given the right to be informed by the producer about the Quality, Quantity, Potency,
Purity, Standard and Price of goods so as to protect a consumer against Unfair Trade Practises. The right to
obtain adequate information is an important right which enables the consumer to take intelligent decision at
the time of purchasing any goods or hiring any services. It should be the responsibility of the producer to
ensure that goods meet reasonable demands of durability, utility and reliability and are suited for the
purposefor which they are intended.

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DEFINITION OF CONSUMER
Section 2 (7): "Consumer" means any person who:
(i) buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or
under any system of deferred payment and includes any user of such goods other than the person who buys
such goods for consideration paid or promised or partly paid or partly promised, or under any system of
deferred payment, when such use is made with the approval of such person, but does not include a person
who obtains such goods for resale or for any commercial purpose; or

(ii) hires or avails of any service for a consideration which has been paid or promised or partly paid and
partly promised, or under any system of deferred payment and includes any beneficiary of such service other
than the person who hires or avails of the services for consideration paid or promised, or partly paid and
partly promised, or under any system of deferred payment, when such services are availed of with the
approval of the first mentioned person, but does not include a person who avails of such service for any
commercial purpose.

Explanation: For the purposes of this clause:

(a) the expression "commercial purpose" does not include use by a person of goods bought and used by him
exclusively for the purpose of earning his livelihood, by means of self-employment;
(b) the expressions "buys any goods" and "hires or avails any services" includes offline or online transactions
through electronic means or by teleshopping or direct selling or multi-level marketing;

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DEFINITION OF PERSON
Section 2 (31): "Person" includes:
(i) an individual;
(ii) a firm whether registered or not;
(iii) a Hindu undivided family;
(iv) a co-operative society;
(v) an association of persons whether registered under the Societies Registration Act, 1860 or not;
(vi) any corporation, company or a body of individuals whether incorporated or not;
(vii) any artificial juridical person, (not falling within any of the preceding sub-clauses).

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 DEFINITION OF GOODS
Section 2 (21): "Goods" means every kind of movable property and includes "food" as defined in clause
(j) of sub-section (1) of section 3 of the Food Safety and Standards Act, 2006.

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DEFINITION OF SERVICE
Section 2 (42): "Service" means service of any description which is made available to potential users and
includes, but not limited to, the provision of facilities in connection with banking, financing, insurance,
transport, processing, supply of electrical or other energy, telecom, boarding or lodging or both, housing
construction, entertainment, amusement or the purveying of news or other information, but does not
include the rendering of any service free of charge or under a contract of personal service;

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DEFINITION OF CONSUMER DISPUTE

Section 2 (8): "Consumer Dispute" means a dispute where the person against whom a complaint has
been made, denies or disputes the allegations contained in the complaint;

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CONSUMER PROTECTION COUNCILS

The interests of consumers are sort to be promoted and protected under The Act by establishment of
Consumer Protection Councils, at Central, State and District levels. These councils are Advisory Bodies.
Chapter II of the Consumer Protection Act, 2019 comprising of Sections 3 to 9 deals with Consumer
Protection Councils.

Central Consumer Protection Council (Sec 3):

The Central Government shall by notification establish a Council to be known as Central Consumer
Protection Council which shall consist of the following Members:
(a) The Minister In-charge of Consumer Affairs who shall be its Chairman, and of
(b) Such number of other official or non-official members with such interests as may be prescribed.
As per the Consumer Protection Rules, the Central Council shall consist of 150 members and the term of the
Council shall be three years.
Meetings (Sec 4):
A Central Council shall meet as and when necessary and at least one meeting shall be held every year.
Objectives of Central Consumer Protection Council (Sec 5):
The Objectives of Central Council are being promotion and protection of the Consumer Rights.

State Consumer Protection Council (Sec 6):

Sec 7 provides for the establishment of State Consumer Protection Council by any State Government by
notification to be known as Consumer Protection Council (for name of the State).
The State council shall consist of:
(a) A Minister In-charge of Consumer Affairs in State Government who shall be its Chairman, and of
(b) Such number of other official or non-official members representing as may be prescribed by the
StateGovernment.
Meetings (Sec 6(3)):
The State Council shall meet as and when necessary but not less than two meetings shall be held every year.
Objectives of State Consumer Protection Council (Sec 7):
As per Sec 8, the objectives of State Consumer Protection Council are described in Sec 7 to be same of the
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Central Council, namely points enumerated in Sec 6.

District Consumer Protection Council (Sec 8):

The State Government shall by notification establish for every district a Council to be known as District
Consumer Protection Council. It shall consist of:
(a) The Collector of District shall be its Chairman, and of
(b) Such number of other members’ official or non-official as may be prescribed by State Government.
Meetings (Sec 8 (3)):
District Council shall meet as and when necessary but not less than two meetings shall be held every year.
Objectives of District Consumer Protection Council (Sec 9):
The Objectives of every District Council shall be to promote and protect within the District the Rights of the
Consumers laid down in clauses (A) to (F) of Section 6.

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CONSUMER DISPUTE REDRESSAL MECHANISM

The Act provides for a three-tier Quasi-Judicial Redressal Machinery at the District, State and
National levels for redressal of consumer disputes and grievances.

These Quasi-Judicial bodies will observe the principles of natural justice and have been empowered
to give reliefs of a specific nature and to award, wherever appropriate, compensation to consumers.
Penalties for non-compliance of the orders given by the Quasi-judicial bodies have also been provided. The
mechanism is as follows:
1. District Consumer Disputes Redressal Commission (District Commission) – Section 28
2. State Consumer Disputes Redressal Commission (State Commission) – Section 41
3. National Consumer Disputes Redressal Commission (National Commission) – Section 53

1. District Commission (Section 28):

Sec 28 of the Act provides for the establishment of District Commission by the State Government in each
district of the State, and more than one District Commission in a district if it deems fit to do so.
Composition : Sec 28 (2) provides that each District Commission shall consist of:
(a) A person, who is, or who has been or is qualified to be, a District Judge who shall be its President,
(b) Two other members, one of whom shall be a women, who shall have the following qualifications
namely:Be not less than 35 years of age possess Bachelor’s degree from a recognized university,
Be a person of ability, integrity and standing, and have adequate knowledge and experience of at least 10
years in dealing with problems relating to Economics, Law, Commerce, Accountancy, and Industry,
Public affairs or Administration.
Every appointment to District Commission shall be made by the State Government on the recommendation
of a selection committee consisting of the President of the State Commission, the Secretary Law
Department of the State and the Secretary In-charge of Consumer Affairs in the State.
Every member of the District Commission shall hold office for a term of 5 years or up to the age of 65
years whichever is earlier.
The salary or honorarium and other allowances payable to and other terms and conditions of the service of
members of the District Commission shall be such as may be prescribed by the State Government.
Jurisdiction of the District Commission:
Sec 34 provides for the Jurisdiction of the District Commission under two
criteria:Pecuniary, and
Territorial.
Pecuniary Limits: According to Sec 34 (1) the District Commission can entertain complaints where the
value ofgoods or services and the compensation, if any, claimed does not exceed Rupees 50,00,00/-
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Territorial Limits: Under Sec 34 (2) a complaint shall be instituted in a District Commission within the
local limitsof:
(a) The opposite party or each of the opposite parties,
(b) Any of the opposite parties, and
(c) The cause of action wholly or in part, arises.

2. State Commission (Section 41):

The Act provides for the establishment of the State Consumer Dispute Redressal Commission by State
Government in the State by notification.
Composition: Sec 42 (3) provides that each state commission shall consist of:
(a) A person who is or has been a Judge of a High Court appointed by the state Government (in
consultationwith the Chief Justice of High Court) who shall be its President,
(b) Not less than two, and not more than such number of members, as may be prescribed, and one of who
shall be a women, who shall have the following qualifications namely:
Be not less than 35 years of age,
Possess a Bachelor’s degree from a recognized university, and be person of ability, integrity and
standing, and have adequate knowledge and experience of at least 10 years in dealing with problems
related to Economics, Law, Commerce, Accountancy, and Industry, Public affairs or administration.
However, not more than 50% of the members shall be from amongst persons having a judicial background.
Every appointment shall be made by State Government on the recommendation of the selection committee
consisting of President of the State Commission as its Chairman, Secretary of Law Department of the State
as a member, Secretary In-charge of the Department dealing with Consumer Affairs in the State as the
member.
Every member of State Commission shall hold office for a term of 5 years or up to the age of 67 years
whichever is earlier.
Jurisdiction of the State Commission:
Sec 47 of the Act provides that the State Commission Shall have jurisdiction to entertain:
(a) Complaints where the value of goods or services and compensation, if any, claimed exceeds Rupees
50,00,000/- but not exceeds Rupees 2,00,00,000/-,
(b) Appeals against the order of any District Commission within the State, and
(c) To call for the records and pass appropriate orders in any consumer dispute, which is pending before or
has been decided by any District Commission within the State, where it appears to the State Commission
that such District Commission has exercised the jurisdiction not vested in it by law, or has failed to exercise
the jurisdiction illegally or with material irregularity.
(d) In the exercise of its Appellate jurisdiction, the State Commission may entertain appeals only against the
orders of any District Commission within the State

3. National Commission (Section 53):

Sec 53 provides for the establishment of the National Consumer Dispute Redressal Commission by
the Central Government Redressal Commission by the Central Government by notification in the Official
Gazette.
Composition: Sec 54 provides that the National Commission shall consist of:
(a) A person who is or has been a Judge of the Supreme Court, to be appointed by the Central
Government(in consultation with the Chief Justice of India) who shall be its President,
(b) Not less than 4, and not more than such number of members, as may be prescribed, and one of whom
shall be a woman, who shall have the following qualifications, namely:
Be not less than 35 years of age,
Possess Bachelor’s degree from a recognized university, and
Be persons of ability, integrity and standing and have adequate knowledge and experience of at least 10
26
 years in dealing with problems relating to Economics, Law, Commerce, Accountancy, Industry, and
Public Affairs of Administration.
However, not more than 50% of the members shall be from amongst the persons having a judicial
background.
Jurisdiction of the National Commission:
Sec 58 provides that the National Commission shall have jurisdiction:
(b) To entertain complaints where value of goods or services and the compensation, if any, claimed exceeds
Rupees 2,00,00,000/-
(c) To entertain appeals against the orders of any State Commission, and
(d) To call for the records and pass appropriate orders in any consumer dispute, which is pending before, or
(e) Has been decided by any State Commission where it appears to the National Commission that such State
Commission has exercised a jurisdiction not vested in it by law, or has failed to exercise a jurisdiction so
vested, or has been acted in the exercise of its jurisdiction illegally or with material irregularity.

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UNIT-V
CYBER LAW
OVERVIEW AND NEED FOR CYBER LAW
Overview of Cyber Law:

The Information Technology Act, 2000 also called Cyber Law is motivated by the United Nations
Commission on International Trade Law (UNCITRAL) model law on electronic commerce (e-commerce),
adopted in 1996 which provides for recognition to electronic records and according it the same treatment like
a paper communication and record, to bring uniformity in the law in different countries by the United Nations.

The Department of Electronics (DoE) drafted the first bill in 1998 as the E Commerce Act, 1998. It was
redrafted as the “Information Technology Bill, 1999”, and The Information Technology Act, 2000, was thus
passed as the Act No.21 of 2000, got President assent on 9 June and was made effective from 17 October
2000. The act was substantially amended in 2008.

Information technology is one of the important laws relating to Indian cyber laws. This act is helpful to
promote business with the help of internet. It also set of rules and regulations which apply on any electronic
business transaction. Due to increasing crime in cyber space, Govt. of India understood the problems of
internet user and for safeguarding the interest of internet users, this act was made.

Act No. 21 of 2000:

An Act to provide legal recognition for transactions carried out by means of electronic data interchange and
other means of electronic communication, commonly referred to as ―electronic commerce‖, which involve
the use of alternatives to paper-based methods of communication and storage of information, to facilitate
electronic filing of documents with the Government agencies and further to amend the Indian Penal Code, the
Indian Evidence Act, 1872, the Banker’s Books Evidence Act, 1891 and the Reserve Bank of India Act, 1934
and for matters connected therewith or incidental thereto.
WHEREAS the General Assembly of the United Nations by resolution A/RES/51/162, dated the 30th January,
1997 has adopted the Model Law on Electronic Commerce adopted by the United Nations Commission on
International Trade Law;

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AND WHEREAS the said resolution recommends inter alia, that all States give favorable consideration to the
said Model Law when they enact or revise their laws, in view of the need for uniformity of the law applicable
to alternatives to paper-based methods of communication and storage of information;
AND WHEREAS it is considered necessary to give effect to the said resolution and to promote efficient
delivery of Government services by means of reliable electronic records.
BE it enacted by Parliament in the Fifty-first Year of the Republic of India on 9th June, 2000.
Aims and Objectives of the Act:
1. It is objective of I.T. Act 2000 to give legal recognition to any transaction which is done by electronic way
or use of internet.
2. To give legal recognition to digital signature for accepting any agreement via computer.
3. To provide facility of filling document online relating to school admission or registration in employment
exchange.
4. According to I.T. Act 2000, any company can store their data in electronic storage.
5. To stop computer crime and protect privacy of internet users.
6. To give legal recognition for keeping books of accounts by bankers and other companies in electronic form.
7. To make more power to IPC, RBI and Indian Evidence act for restricting electronic crime.

Scope of the Act:

Every electronic information is under the scope of I.T. Act 2000 but following electronic transaction is not
under I.T. Act 2000
1. Information technology act 2000 is not applicable on the attestation for creating trust via electronic way.
Physical attestation is must.
2. I.T. Act 2000 is not applicable on the attestation for making will of any body. Physical attestation by two
witnesses is must.
3. A contract of sale of any immovable property.
4. Attestation for giving power of attorney of property is not possible via electronic record.
Need for Cyber Law:
In today’s techno-savvy environment, the world is becoming more and more digitally sophisticated and so are
the crimes. Internet was initially developed as a research and information sharing tool and was in an
unregulated manner. As the time passed by it became more transactional with e-business, e-commerce, e-
governance and e-procurement etc. All legal issues related to internet crime are dealt with through cyber laws.
As the number of internet users is on the rise, the need for cyber laws and their application has also gathered
great momentum.
The reasons for the Need of Cyber Law::
– Almost all transactions in shares are in Demat form.
– Almost all companies extensively depend upon their computer networks and keep their valuable data in
electronic form.
– Government forms including income tax returns, company law forms etc. are now filled in electronic form.
– Consumers are increasingly using credit/debit cards for shopping.
– Most people are using email, phones and SMS messages for communication.
– Even in “non-cyber crime” cases, important evidence is found in computers/cell phones eg: in cases of
murder, divorce, kidnapping, tax evasion, organized crime, terrorist operations, counterfeit currency etc.
– Cybercrime cases such as online banking frauds, online share trading fraud, source code theft, credit card
fraud, tax evasion, virus attacks, cyber sabotage, phishing attacks, email hijacking, denial of service, hacking,
pornography etc. are becoming common.
– Digital signatures and e-contracts are fast replacing conventional method of transacting business.

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 CONTRACT PROCEDURES
Cyber Contract: The Indian Contract Act, 1872 has been the basis for the enforcement of contracts. The
Act specifies the conditions that are necessary for a contract to be a valid contract and to be enforceable by
law. The information technology Act, 2000 (I.T. Act, 2000) contains provisions on how a contract can be
formed electronically. The Act acts in conjunction with the Indian contract Act, 1872.

Cyber Contract:
The formation of a valid contract is governed by the Indian contract Act, 1872. The contract could be made in
any form to show an agreement between two parties which takes into account all the essentials of a contract.
Writing is not essential for the validity of a contract except where a specific statutory provision requires
writing. An arbitration clause may be in writing. However, the traditional method of recording a contract and
signing a contract by all parties continues to be a prevalent mode of executing a contract. A written document
with the signing is associated with validity and as useful evidence of a transaction. An offer and acceptance
are two main ingredients of a valid contract. New avenues to conclude and validate a contract executed by
people separated geographically have emerged in the age of the internet where distances are no barriers to
business. The primacy of paper documentation had given way to contracts by electronic means. As far as there
are a valid offer and acceptance, the means of communication have ceased to be a factor. The I.T. Act, 2000 is
a commercial code of e-business transaction, contains a provision with means to conclude a contract
electronically and also to provide legal validity to such a transaction.

The I.T. Act, 2000 states that where any law provides that information shall be in writing or in printed
form, the requirement is deemed to be satisfied if such information is in an electronic form and is accessible
for subsequent reference. The key ingredients of the formation of electronic contracts comprise
communication of offer and acceptance by electronic means, verification of the source of the communication,
authentication of the time and place of dispatch, and finally the verifiability of the receipt of the data
communication. If the key ingredients are satisfied the legal enforceability of an electronic contract is at par
with the paper contract.

The provisions of the act are not applicable to the following Negotiable instruments such as cheque,
bill of exchange, and promissory note as defined in the negotiable instruments act, 1881.
1.Power of attorney instruments as defined in the power of attorney act, 1882.
2. Trust as defined under the Indian Trust Act, 1882.
3.Will as defined in the Indian Succession Act, 1925.
4.Any contract for the sale or conveyance of immovable property.
5.Any such class of documents or transactions as may be notified by the central government in the official
gazette.
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DIGITAL SIGNATURE
Digital Signature Certificates (DSC) are the digital equivalent (that is electronic format) of physical or paper
certificates. A digital certificate can be presented electronically to prove the identity of individual, to access
information or services on the internet or to sign certain documents digitally.
In order to be called legally binding all electronic communications or transactions must meet full fundamental
requirements
1- Authenticity of the sender, in order to enable the receiver to determine who sent the message.
2- A hash function (an algorithm which creates a digital representation or fingerprint in form of hash
value which is unique. Any change to the message invariably produces a different hash result. Thus it
provides clear evidentiary connection to the original message content by ensuring that there has been
no modification of message after being digitally signed.

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Definition: According to –
Section 2 (p) ―digital signature‖ means authentication of any electronic record by a subscriber by means of an
electronic method or procedure in accordance with the provisions of section 3;
Section 2 (q) ―Digital Signature Certificate‖ means a Digital Signature Certificate issued under sub-section
(4) of section 35

Authentication of Electronic Records – Section 3:

(1) Subject to the provisions of this section any subscriber may authenticate an electronic record by affixing
his digital signature.
(2) The authentication of the electronic record shall be effected by the use of asymmetric crypto system and
hash function which envelop and transform the initial electronic record into another electronic record.
Explanation.—For the purposes of this sub-section, "hash function" means an algorithm mapping or
translation of one sequence of bits into another, generally smaller, set known as "hash result" such that an
electronic record yields the same hash result every time the algorithm is executed with the same electronic
record as its input making it computationally infeasible—
(a) to derive or reconstruct the original electronic record from the hash result produced by the algorithm;
(b) that two electronic records can produce the same hash result using the algorithm.
(3) Any person by the use of a public key of the subscriber can verify the electronic record.
(4) The private key and the public key are unique to the subscriber and constitute a functioning key pair.
Section 3 lays down that an electronic record can be authenticated by affixing digital signature, effected by the
use of asymmetric crypto system and hash function. The DS is further authenticated by issuance of a
certificate by a trusted third party, the Certifying Authority.
The subscriber/ sender of the message, applies to the CA for DSC. After verifying the identity of the
subscriber, the CA issues a certificate. The certificate is forwarded to the repository maintained by the
Controller. The recipient on receiving the message checks the validity and status of the Subscriber’s certificate
from Repository.
Certifying Authorities:
Certifying Authorities (CA) has been granted a license to issue a digital signature certificate under Section 24
of the Indian IT-Act 2000. One can procure Class 2 or 3 certificates from any of the certifying authorities.

National Informatics Center (NIC)

IDRBT Certifying Authority

SafeScrypt CA Services, Sify Communications Ltd.

(n) Code Solutions CA

E-MUDHRA

CDAC

NSDL

Capricorn

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 Pantasign

IDSIGN

Verasys

XtraTrust

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SAFETY MECHANISMS
Section 2 (nb): Cyber security means protecting information, equipment, devices, computer, computer
resource, communication device and information stored therein from unauthorized access, use, disclosure,
disruption, modification or destruction;

Section 2 (zf): Security procedure‖ means the security procedure prescribed under section 16 by the Central
Government

CHAPTER V
SECURE ELECTRONIC RECORDS AND SECURE 1 [ELECTRONIC SIGNATURE:
Secure Electronic Record (Section 14): Where any security procedure has been applied to an electronic
record at a specific point of time, then such record shall he deemed to be a secure electronic record from such
point of time to the time of verification.
Secure Electronic Signature (Section 15): An electronic signature shall be deemed to be a secure electronic
signature if—
(i) the signature creation data, at the time of affixing signature, was under the exclusive control of signatory
and no other person; and
(ii) the signature creation data was stored and affixed in such exclusive manner as may be prescribed.
Explanation: In case of digital signature, the ―signature creation data‖ means the private key of the
subscriber.
Security Procedures and Practices (Section 16): The Central Government may, for the purposes of sections
14 and 15, prescribe the security procedures and practices:
Provided that in prescribing such security procedures and practices, the Central Government shall have regard
to the commercial circumstances, nature of transactions and such other related factors as it may consider
appropriate.
******

Vijayababu Tekkem
M.Com,PGDFM,M.Com,MHRM,MBA,LL.B,APSET,(Ph.D)
Department of Commerce & Management
K.B.N. College (Autonomous)

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