LAB SESSION-1

LAW: govern my relationship with society as whole and vise-versa

I. Preserve social order
also going to prescribe some penalties if order is not followed
II. Assigning property
what is ours and what is mine.
III. Uncertainty- nobody knows what is coming
reflects economic, social etc.
Law reduces uncertainty, reduces expectations of uncertainty
IV. Mediator between different views
what you feel is right might be different from what I believe

Characteristics:
I. Law will constantly keep on changing- evolving country
II. Overtime, our ideas will change, our conflicts will change (burn crackers or not?)
III. Everybody agrees that they need law
IV. Difference between what is implemented and what you wanted to be implemented

Why different countries have different rules?

 Difference in values and beliefs
 Collection of our thoughts/cultures

# Fundamentally 3 kinds of laws:

1. Common Law: how man evolved, built on history- followed in US/UK
2. Civil law: write laws and interpret the laws – followed in India, not measured the
intensity
3. Islamic Law: religious low- always be combined with civil law

Difference between civil law and common law:

 Civil law- no jury (In India- judges)
 In civil law- no contingency fees
 In civil law- courts will limit on damages
 Civil law will not get money for your pain- Punitive damages not allowed
in common law you get tons of money
 In civil- u can’t fish- u need to put your facts and proofs upfront- Tukka won’t work

# Common categories of laws:

a. Criminal v/s civil- punishment side v/s operational side
criminal side v/s social side
b. Substantive v/s procedural law- talks to u about the existence of the law
(contract law)
 -process of how it needs to be implemented
(what and how needs to be done)
c. Public v/s private- Applies to all (banking law, environmental law)
-private law (property law, contract law)

1. Economic/Fiscal Law: don’t ask why, just comply (demonetization)

2. Social/Mankind law: quietly behave- decided mostly by our culture, religion
(mahatma Gandhi road)
3. Commercial/Contract Law: Honor- comes from custom, usage, practice

# Four things u must remember regarding contract law:

 When it comes to commerce & trade- rush to one single law i.e. contract law
4 Rules:
o remove the error of comprehension- follow rule of 26- only 26 letters in one
sentence
o a person will only read what he wants to read and don’t read what they are
asked to read
o You should remove the error of haste
o Remove the error of Jargon

LAB SESSION-2

CONTRACT LAW:
Agreement v/s Contract

# Concept of a Contract:
o Offer + Acceptance = Agreement (Offer & Acceptance can be verbal, conduct &
in writing)
o Agreements are of 2 types: CONTRACT & SOCIAL
o Indications from intentions
o Contract is enforceable in the court of law & social is not
How do we decide whether we want to take somebody to court?! Depends on:
o TIME
o VALUE
o RISK (If risk is high, we put it in writing)

How do I establish if this agreement is a contract or a social agreement?

I. Offer- a proposal inviting an acceptance – there’s a difference between offer and
invitation Offer
In an offer a response in required, whereas in invitation offer the doesn’t require any
 response (Ads)

II. Unconditional Acceptance: Offer and Counteroffers/Negotiations

At a point both say yes- that is the point where we have to reach

III. Consideration- Exchange of value

Value need not always be money, it can satisfaction, experience, feelings
Exchange can happen in Present/Past/Future

There is no exchange of value, but can be taken to court and is a contract-

MARRIAGE (Exception of Love and Affection)

What is the correct value of something? The value of a pound of bread for a rich man
and a poor man is different. We are expressing value in terms of money- easiest
denominator.
Consideration need not be adequate: Correct Value depends on transaction; law can’t
decide that.

IV. Lawful Object- Purpose of the relationship should be acceptable to law

You can’t say somebody to break my leg and take money against it

ILLEGAL V/S UNLAWFUL

Illegal- the law of the land says it can’t exist. Everything said in the Indian Penal
Code. E.g.- Murder, Theft
Unlawful- The law doesn’t recognize that process. E.g.- Driving without a license

VOID vs. VOIDABLE

Void- ‘cannot exist’ – agreement to show God
Voidable- ‘gives me an opportunity to say yes or no or some variation’

V. Competence:
Decided by three factors:
AGE, Soundness of MIND & AUTHORITY

VI. Free Will:

LAB SESSION- 3

E.g.- I want to sell this mobile, valued at Rs. 5000, to my friend Sahil. He has decided to buy.
=> There’s a CONTRACT
What is Sahil worried about?
=> Delivery, condition, warranty
What am I worried about?
Payment (When, How & Currency)

Definition of a Contract:
Statement of Risks and do we mitigate those risks

# Different kinds of RISKS and their SOLUTIONS:

1st question when you enter a contract-
What is the kind of risk that I’m going to have
What are the solutions that can mitigate this risk
MATRIX: Page- 43

One of the biggest risk- OWNERSHIP

Whenever you are in possession of something, you’ll always carry the risk: Possession and
risk goes hand in hand
If I want to transfer risk, what do I do? => INSURANCE
3 people can take insurance:
o Owner
o Buyer
o Safe-keeper or Bailee (Transporter)
Insurance can be taken by anyone; he has to show that he has got insurable interest.
E.g.- Medical Insurance: Your medical insurance has been done by yourself (1 Lakh), your
parents (1 lakh) & your organization (1 lakh). If something happens to you, who will get a
claim of 2.25 lakhs?
You can never make a profit in insurance; it is only given to cover losses. 2.25 lakhs will be
divided in any ratio, but claim can’t be greater than 2.25L.
(Taking about general insurance)

When are you going to be the owner of something?

You have absolute to do what you want to do. According to law, you are said to be the
owner of something when it is intended to be said. Intentions means: the terms of the
contract, the circumstances of the case & the conduct of the party.
Can you be owner of something and can’t carry the risk? E.g.- Lease
Possession and risk goes together, but Ownership and risk need not go together.

LAB SESSION- 4

What signifies an ownership of the car => TITLE

(E.g.- RC in case of car, Sale deed in case of house)
Title is a symbolic representation of ownership.
We created documents, which prove the ownership
What are these documents?
E.g.:
We have to sell 1 lakh pens to a buyer. From Chennai to Calcutta. How do I make Sumit the
owner of 1 Lakh pens?
Whose documents both will accept? Somebody whom both can trust to deliver the goods.
Any document that a transporter generates,
Take these instances:

I. BILL OF LADING (Ship)- a document given by the ship to acknowledge the receipt
of items. I have to give this document to Sumit, until then he can’t take these goods
from the ship.
If now Sumit wants to sell these pens, he doesn’t have to take the pens physically
from ship; he can directly sell the document & sign the document and transfer his
document. (Simplicity)
 II. RAILWAY RECEIPT (Train): Similarly, the seller has to give the document to the
buyer for him to collect the goods. Collector should have the paper in his hand.
III. LORRY RECEIPT (Lorry)- Sumit will need LR to collect pens. Lorry driver calls
the buyer to ask his address and asks if he has the original LR.
IV. AIRWAY BILL (Courier)- AB is not required to receive the goods.
=> AB is not a document entitled to goods in business. If you have an AB in your
hand, you are not the owner of the good.

If the document is lost, what do I do? Nothing can be done once it is lost.
People put a seal on the document saying non-negotiable. Then it can’t be transferred
to anybody else.
How did I protect the document? Even if someone steals the document, he won’t get
the goods.

V. WAREHOUSE RECEIPT or WAREHOUSE WARRANT – Used in steel, cement

Goods are Dumped in yards

4 of them are negotiable- transfer for value- will get you goods
AB is not negotiable

Possession || Risk || Ownership || Title

The process of transferring possession and risk from the seller to the buyer in known as
DELIVERY TERMS
International Chamber of Commerce (ICC): (Standard across the world)
Standardized delivery terms- Incoterms (Internationals Commerce Terms)
It is not law; it becomes law when party agrees to follow it
Talks about 4 things:
o When and where risk passed from seller & buyer?
o Who should pay various expenses for transporting?
o Who should take insurance?
o Who should bear the taxes?
- Incoterms will not talk about ownership

INCOTERMS
E.g. Seller in Udaipur and Buyer in Singapore:
Write document, sent to Bombay port (Port of Shipment), Goes to Singapore (Port of
Destination), The Terminal (Checking), Payment of Taxes, Goods will go to buyer

Incoterms are nothing but risk sharing terms

 1. EXW (ExWorks): Ex is factory/Warehouse. The buyer will come to premises of
the seller and take goods. Risk will pass to the buyer at the premises of the seller.
2. FCA (Free Carrier): I will incur all the risks until I put the goods to the carrier.
The moment I put in inside the mode of transportation, the risk passes to the buyer.
3. FAS (Free Alongside Ship): Put aside the port (quarry), buyers ship will come
and load the items and go. Buyer will incur all the expenses of loading.
4. FOB (Free on Board): seller takes the responsibility to put the goods inside the
ship.

In India, FCA is FOR (Free on Road)

5. CFR (Cost and Freight): The seller will take the goods and go to the port of the
destination. Freight is the main carriage expense from the port of shipment to the port
of destination. Cost is the expenses incurred from the Udaipur factory to shipment
port.
6. CIF (Cost Insurance & Freight):
7. CPT (Carriage Paid to): The risk will pass moment the carriage is started. But
the expenses will be paid by the seller.
8. CIP (Carriage and Insurance Paid to): Insurance is end to end insurance,
and carriage is end to end.

# 3 terms: E-term, F-terms & C-terms

Incoterms will tell you what kind of insurance policy to take in case of CIP & CIP
In other, Incoterms don’t specify anything
CIF insurance value is lower than CIP

D-terms:
9. DPU (DAT) (Delivery at Place Unloaded): The seller delivers inside the
TERMINAL. Buyer will go to the terminal, pay taxes, fill up the form, and take the
goods.
10. DAP (Delivery at Place): Buyer has to go to Bombay from Udaipur to get his
goods. So, buyer asks government to come to Udaipur and put the goods in BONDED
STORE.
11. DDP: Everything inside my house. No terminal or bonded store.
 LAB SESSION- 5

Cost Sheet: (Selling and Distribution Expenses)

Seller’s expense is minimum in EXW and maximum in DDP

As the risk increases, the expense increases.
These are added in price. Hence, the prices will be lower in EXW and more in DDP.
 Ultimately, all the expenses are paid by buyer.
Incoterms is used:
o As a method of profiling buyers
o As a method of presenting quotations to buyers
o Method of HOW TO BUY (in cheapest way)

Insurance is mutually decided: (see in cost-chart, born by no specific person).

1. Insurance is always an INDEPENDENT subject matter of every commercial
transaction.
2. Insurance is mutually decided- decided by arbitrage, where is it cheaper.
3. Collection of insurance premium- When insurance is paid in India, Indian insurance
company collects the money, that money is invested and circulated within my
economy.
A policy decision: PSUs are asked to take insurance from Indian companies
 4. FLOATING- Value of premium fluctuates every month
Insurance companies believe when goods are with Tata, the goods will be safer as
compared to small vendors. Hence, premium from Tata is higher than that charged
from small vendors.

New Risk:
o Non-performance of the promise
o Non-performance of the product – WARRANTY
Warranty v/s Guarantee- In actual it is same, Indians split it into 2
It is dependent on the parties to assign meaning to these words, they can be same, or
different.

o Warranty – Guarantee: Product

o Warranty – Condition: Promise
E.g. – buyer and seller of milk. Contract of selling 5 bottles of milk. Seller is supposed to
perform the contract. But, in the morning, seller gets the milk in pouches instead of
bottles. Will the buyer take it?
STIPULATION- Terms- there is some promise on which the relationship is standing.
It is called the essence of the contract- Condition of contract. (Milk)
If that essence is not present – then the contract can be cancelled
Something that supports the essence- collateral of the essence. (Bottles, Morning Time,
quantity). This is Warranty. You can’t cancel the product; you can only claim damages
from me.
 You may pay him less, for bringing the milk in pouches, but you can’t cancel the
contract.

Tabular Matrix
Conditions (very important) || Warranties (not very important)

LAB SESSION-6

# Time is the essence of the contract:

Condition v/s warranty: condition gives right to cancel & warranty doesn’t

Payment is not the essence of the contract: If u don’t pay me on time, I can ask for interest,
but I can’t cancel the contract – Shopkeepers, restaurants
By default, if nothing is said, delivery will always be the essence of contract.
If u want payment to be the essence of the contract, u must say it, then only it becomes a
condition.
But in case Dominos, payment is essence, first you pay, and then product

E.g.- Is your employment or salary a condition of the contract?

U work first. If you don’t work, contract cancel.

Quantity is also important – Toyota must supply the agreed amount of quantity in the agreed
upon time.

 Indemnity – If something goes wrong because u use the product (fair&lovely- face
allergy)- make good the loss (E.g.- Insurance)- It can be expressed.
There are only 2 people
Implied Indemnity – On food stuff
 If the product itself suffers, then it becomes warranty
 Guarantee – an assurance of performance by the third party.
3 people: Creditor- to whom the guarantee is given
Principal debtor-
Guarantor-
E.g. U took a loan from bank to pay for IIMU- your father paid security for the same.
Creditor- Bank, Principal Debtor- You & Guarantor- Father
 Here Guarantee with Security- use of collateral
But when physical is not attached- Guarantee with surety – Use of brand value &
creditworthiness (E.g.- Vijay Mallya)
=> Bank’s choice whether they want security or surety

When people don’t perform- failure of promise- BREACH

 ANTICIPATORY- covering against breach (if u deliver late, I’ll pay less)
Damages are pre-defined
 ACTUAL/PRESENT- non-performance happened out of the blue/ no expectation –
due to accidents/Covid
Damages are not pre-defined

DAMAGES- expression of loss or injury in money terms

Injuries can be caused in the way from contract and can also be caused due to
TORT- Negligence

U should assess damage and then arrive at the quantum of damage- how much to pay
How to put an amount to damage? - calculating compensation
Principles:
1. It should happen in the natural course- General Damages/Incidental Damages
2. Parties should know about those consequences- occur after something else – Special
Damage/Consequential Damages
E.g.- U hit someone with bike- He will get injured (Natural) & he may not be able to
work due to that (Consequential)

LAB SESSION- 8

BONDS

Pass ACID test – 5 things

1. Expressed contract – writing
2. In every contract there are 2 people, buyer n seller
=> Obligation (payment) & Condition (sell pen)
In Case of bond, obligation & condition is with the same person
e.g. Employment bond
3. Obligation should always be MONEY
Condition is you should do or not do something
4. Can never be transferred. E.g. employment can’t be transferred
5. MOST IMP.
Obligation to pay money should not arise.
I.O.U: I Owe You => Not a Bond

# TYPES of BONDS:
 LAB SESSION-9

# Regular Bond v/s Indemnity Bond:

1. On bond, amount is known; in indemnity, quantum is never known (you can have a
cap).
2. Indemnity Is always in the form of damages,
3. Indemnity will start only when an event happens; in bond, conditions should get
fulfilled.
4. Indemnity can be for life; bonds will be a definite period of time.

Why company want to retain employees?

1. Biggest Asset: INTELLECTUAL PROPERTY: Products, process, procedures & systems

Every company wants to protect intellectual property
2. You are face of the company in front of your customers.
3. Non-compete bond
4. Want you to be focused, inform them if working somewhere
How restrictions are applied:
E.g.:
CASE 1- CTC 5L, work for 5 years or pay 25 L to company – REJECT
CASE 2- CTC 5L, Work for 6 months or pay 5 L to the company – ACCEPT

Successful Restraints:
 Choice of Employees
 Clarity on Restraint
 Employee Benefits

Quality of contract of service determined by the quality of services

Ensure quality is going to be good: 4 levels:
 RFI – Request of Information – who all are searching of services
 ITT/ITB – Invitation to Tender / Bid – what I want is definite (mostly used in
manufacturing companies)
 RFP - Request for Proposal – propose a method in which service can be delivered
(mostly in software companies)
 Differentiator is price only between RFP & ITT
RFQ – Request for Quote
People respond:

LAB SESSION 10

Every contract of service rests on 3 documents:

1. WHAT are we going to do for each other: SCOPE OF WORK

E.g.- your company wants to hire an event management Company => Scope of Work.
 Will look like this…

2. WHEN, WHERE, and How Often: SCHEUDLE OF SERVICES

E.g.- services are not repetitive, like installing a tv, no schedule of services required

3. HOW are you supposed to render: SLA: Service Level Agreement matric to measure
the quality of services.
Numerical Value for your performance: KPI: Key performance Indicator?
Difference between KRA (key result areas) and KPI
KRA is scope of work or objectives

 Output SLA: not bothered about the

process, just want the output
measure the final product

 When you are worried about the

process (you know when process is
good, output will automatically be
good)
E.g. moms cooking is better than
yours.
INPUT SLAs
Fundamentally 2 types of SLAs:

 Based on type of customer I have:

E.g. Airtel: Mobile service, Broadband, DTH
When an org gives various kinds of services, then the measurement is based upon
what is the relationship with customer.
 Service based SLA: I’m not bothered who’s my customer, org will have standard
services.
 e.g. Airtel: postpaid & pre-paid

Where are you going to see SLAs: 5 places?

1. Performance: 99%, maximum SLA

2. Problem: e.g. u sell cloud, when cloud is down, what happens to connectivity =>
problem management
3. Disaster recovery: e.g. floods, evacuation, management,
e.g. IT companies, dept. called business continuity, if there’s disaster what will you
do, data crashes, what will to do?
4. Warranty
Products: when warrant service comes in product, then it is product sla
5. Customer duties: as a customer what are you supposed to do
It is your responsibility to not throw your phone in water, even if its water resistant

 Negotiation: mostly pre sales and post sales:

on what measures should the fellow be
measured
 Monitoring: whether the fellow is doing the
work e.g. AI to monitor
 Enforcement: suppose u don’t do your
work, what will I do?
In India enforcements are not tough

# Now comes a big question:

you want to go and be employed in a company, you all are rendering services to the company
Why doesn’t company give a service contract?
Why do they give you an Employment Contract?

Employment Contract
As you grow old, your capability to work reduces, when you get old you want some security:

 WELFARE: is the money that you are getting today (wages, salary etc.), take care of
your standard of living today
 SECURITY: Provident Fund, Pension Fund- minimum of 12%
Half is contributed by Employee & half by employer
 Health crisis => you need INSURANCE

EMPLOYMEENT gives you all three

whereas services only give you Welfare

Why can’t I save and take care of my myself in future:

Salary may be less,
human tendency to spend today, government don’t trust people with savings, hence they tell
the organization to save for you
Law says: whenever you are employing somebody to provide with both insurance and
security

e.g. road construction workers, very bad state, work on wage basis, also maids have no
insurance and security

# EMPLOYMENT guarantees Welfare, Insurance & Security

# Outsourcing v/s Subcontracting

# Responsibility v/s Accountability

 Responsibility means performance of certain activities in a predefined manner

Accountability is basically to answer why something went wrong & accept the
consequences of that
As a manager you are accountable to the company for your subordinates
Also, your subordinates is responsible to you, and not accountable to the company,
you are accountable to the company
You can have both at the same time or only one of them
E.g. politicians are both accountable & responsible, college is responsible to you and
your parents are accountable to you

 When you are OUTSOURCING, you are giving away the responsibility but maintain
the accountability
e.g. housekeeping services in IIM => outsourcing
CLRA- Contract Labor Regulations Act

When you are SUBCONTRACTING, you give away both responsibility and
accountability
e.g. Toyota tell Bosch to manufacture engine and give it to me
Haritha makes interiors for Toyota and Vedanta makes aluminum body
Assembling all makes Toyota => subcontracting different work

If an accident occurs, I sue Toyota, both Toyota and Bosch will fight together
 But in IIM security, IIM will compensate you 1st and them file a suit against security
fellow. You have no relationship with security fellow.

LAB SESSION 11
Outsourcing created services or employment?

Is Outsourcing creating employment or Contract? – ACID TEST

3 e.g.:

i) IIM hires a security guard

1. Pass, 2. Pass, 3. Pass, 4. Pass

ii) Citi Bank hires a technician from Wipro

1. Pass, 2. Pass, 3. Pass, 4. Pass

iii) IBM makes buildings, in 1 of the building there’s Otis, annual maintenance contract with
1. Pass, 2. Fail, 3. Fail, 4. Fail
IBM (advance payment), servicemen came to repair lift & gets injured, who will
compensate?

Duty v/s Right: Duty is mandatory, no choice

Every relationship should pass the below four => EMPLOYMENT

# Subcontracting v/s Outsourcing
In subcontracting, responsibility is also passed
In outsourcing you are responsible for employees

Is Shankar sir an Employee?

Will fail test 3 & 4 => not an employee

PAYMENT

World over, we do business for cash. But there’s a huge risk associated – carrying, theft, etc.
Why can’t we come up with instruments, in exchange of which we can get money.

# Negotiable Instruments: A document which give you title to money

1. Promissory Note:
A borrows money from B – 10K – A will also give a letter, saying “I A promise to
pay B 10,000”. This letter is now valued at 10K.
B gave this letter to C - endorsee able

2. Bill of Exchange:
A is a trader, wants to buy rice from B, worth 10K. Since B is a trader, he also wants
to sell wheat, so B goes to C to buy wheat worth 10K.
A has to give 10K to B, and B has to give 10K to C
A can directly pay C – Bill of Exchange

In a bill of exchange, there are three people (drawer- B, drawee- A & C- payee- who
receives);
and in promissory note, there are 2 people (A is both drawer & drawee – he only writs
and he pays)

A, in order to default, keeps running when someone come to collect money.

That’s how bank come to existence.
When bank becomes a drawee- it becomes cheque.

# World over, there are only three negotiable instruments:

1. Promissory Note
2. Bill of Exchange
3. Cheque
All cheques are bills of exchange, vice versa is not true.

# Currency Notes are technically promissory notes, but they are bearer promissory note, it
must be addressed to somebody.
Rs. 1 printed by government of India, Rs. 10 printed by RBI
If you give Rs. 1 to RBI, they will give you coin – Legal tender of the Country

GK:
China bought dollars, if china asks USA to
give currency in exchange of dollars, they
will have to give gold.
World Over, the law debars citizens to make bearer notes. Must be addressed to somebody.

Without any condition:

differentiates negotiable instruments from others
On demand, at sight means
the same

What is E asks A to pay 10K at sight, but A doesn’t have money in his pocket?
A asks for a credit period- USANCE / TENOR

Can I have credit period in case of cheque – NO

The bank will immediately pay you
Not usance
There is no time limit when to ask for money, OPERATIONAL VALIDITY
Operationally, cheques stay alive for 90 days (after that stale cheque)
 LAB SESSION – 12

# Issues with cheques: fellow don’t have money in account but writes a cheque, or comes
from back and say don’t pay because he stole the cheque
=> DEMAND DRAFT (Not an official word, Indian word)
World over it is known as banker’s cheque, and draft means bill of exchange

Which method to use make a payment: MATRIX (Cost & Risk)

# New method:
e.g. TATA steels, Udaipur builders => purchase order of 10 tones, Jamshedpur to Udaipur,
Lorry, Lorry receipt, 10L
SBI, take 10L from Udaipur, give 10L & take order,
DOCUMENT against PAYMENT (DP)
e.g. DP = CoD (Amazon, Fk), In case of amazon bank doesn’t collect money

When credit is given => Document against Acceptance (DA)

When bank is involved => uniformity across the world

 ICC International chamber of commerce
 Regulatory document, controls DA & DP
 Uniform Rules of Collection (URC)
 DA &DP called Documentary collections

Seller doesn’t trust buyer but trusts bank.

LETTER of CREDIT
You can sue the bank, can’t sue in case of
cheque

Submit some documents to bankn before

a specified date
If seller says a want LC => 3rd contract between buyer’s bank and the seller
But seller also doesn’t know buyer’s’ bank
But buyer’s bank knows a bank that seller know, this bank is ADVISING BANK (if LC is
authentic?)
SWIFT – communication between banks, nobody can hack in the system

# 4 players:
 Issuing bank
 Advising bank
 Negotiating bank
 Reimbursing bank
1 bank can pay more than 2 roles. Each player charges some rate => costly, but risk is
minimized.
Who bears the cost? => one of these 2
I. depends on power (either buyer is desperate as seller is only supplier)
II. buyer pays charges in his country, seller in his country (fees can be negotiated with
bank)

LC = Documentary credits
40% of LC is fraud.
Your money is gone, they don’t check goods’ quality

# HOW banks deal with this?

UCPDC: Uniform Customs and Practices in Documentary Credits

 Documentary Collection – DA / DP – URC

 Documentary Credit – LC – UCP