UNIT-1 Lecture 1

INTRODUCTION TO LAW

Law: Law refers to the principles and regulations established by a

Government and applicable to people. The law is a set of legal rules that
governs the way members of a society act towards one another.

Law includes the rules and principles which regulate our relation with other
individuals and with the state. The State regulates the conduct of its people by
a set of rules. It ordains directly or indirectly, implicitly or explicitly a general
course of conduct to be followed by the people.

Definitions:

Salmond defines law as the “body or principles recognized and applied by the
State in the administration of Justice.”

Woodrow Wilson defines law as “that portion of the established habit and
thought of mankind which has gained distinct and formal recognitions in the
shape of uniform of rules backed by the authority and power of the
Government.”

Need for law

• Without law, life and business would become a matter of survival, not
only of the fittest but also of the most ruthless.
• Laws are required in society to regulate the behaviour of the individual,
to correspond with what is acceptable to the majority of individuals,
• Law is the potential tool of social change. In fact law and society are
complementary. No society can exist without law. It is essential for up
keeping of peace in the society.

Types of law:
1) International Law: It is the branch of law which consists of rules that
regulate relationship between countries. It is based on the treaties made
between countries and is backed by their willingness and consent.
It can be private as well as public.
 2) National Law: The law which is applied within a state to govern the
actions of the people in society and it is backed by the coercive
power of the State. This is of two types - public national laws and
private national laws. Public Law regulates the functioning and
organization of state and determines the relationship of state and its
subjects. The private national law governs and regulates the
relationship of citizens with each other.
3) Civil law: It is a legal system that controls relationship between private
individuals and organizations.
4) Criminal Law: This is a legal system concerned with governing the
crimes done against individual or society.
5) Administrative Law: It is the body of law which governs the
administrative agencies of the government.

NATURE OF LAW
1. Law is a body of rules

2. Law is for guiding the conduct of persons.

3. Law is imposed.

4. Law is administered by the authority of the state.

5. Law is dynamic.

6. Law is applicable to all.

Unit -1 Lecture 2

Business Law

Meaning of Business: Business is a broad term and includes various activities

such as production, retailing, distribution, transportation, promotion, insurance,
consultancy, warehousing, financing etc. Business “comprises all profit seeking
activities and enterprises that provide goods and services necessary to an
economic system. Business is a “complex field of commerce and industry in which
goods and services are created and distributed.

Business Law: Business law is that portion of the legal system which guarantees
an orderly conduct of business affairs and the settlement of legitimate disputes in
a just manner.

It is the law that governs commercial matters, and there are two main types:
regulation of commercial entities and regulation of commercial transactions.
Business law is that portion of the legal system which guarantees an orderly
conduct of business affairs and the settlement of legitimate disputes in a just
manner. It establishes a set of rules and prescribes con duct that enables us to
avoid misunderstandings and injury in our business relationships.
Business law may govern legal aspects such as:

 Insurance (accident, life, marine, or fire)

 Relationship between principal and agent
 Banking
 Indemnity and guarantee
 Carriage by land or sea
 Partnership

This branch of law also encompasses laws concerning employment and agency,
contracts, property, sales, business organizations, commercial paper, and
bailment.

SOURCES OF BUSINESS LAW:

1. Legislation- Most of the Indian laws are embodied in the various Acts passed by
Central as well as State legislatures. It lays down the norms to be observed in
business transactions. It is also called as enacted law. In India, all the laws are
made by the Parliament, legislative assemblies with the permission of President
and the governors.

2. Custom - Customs and usages established by long use and constantly put into
practice become binding during commercial transactions. Custom is a habitual
course of conduct observed uniformly and voluntarily by people. A custom, when
accepted by courts and incorporated in judicial interpretations, becomes a law.
Many of the business customs or usages have already been adopted and
legalised. The Indian Contract Act provides that nothing therein contained, “shall
affect any usage or custom of trade.”
3. Case Law – It is developed upon previous judicial decisions. Case laws also
called as “precedent” by lawyers is a judgment of a superior court including a
point of law or principle and which necessitates its adoption and adherence in a
subsequent case involving the same point. Case law is useful in as much as it helps
courts to render uniformity with regard to the interpretation of statutes or
formulation of principles.
4. English Law - Our business laws are largely based on English acts applicable in
England and modified as per the Indian situations. The English law is made from
English common law, Roman law, equity and law merchants. In India, Sale of
Goods Act, for instance, has been taken directly from the English Sale of Goods
Act and the Indian Companies Act corresponds with the English Companies Act.
UNIT 1 LECTURE 3

BUSINESS LAW: IMPORTANCE AND SCOPE

ORIGIN OF BUSINESS LAW

The earliest law in India was the one available from Dharmasastras of Manu,
which is the standard and most authoritative work on Hindu law. The
Dharmasastras covered areas like civil rights, duties, wrongs, criminal law and the
procedures connected to it.Then came the Arthasastra of Kautilya which was
compiled around 300 B.C. Kautilya’s Arthasastra, unlike Dharmasastras, covered
rights, duties and responsibility of the king in the administration of the state
including judicial administration. It was probably the Arthasastra, which for the
first time, contained provisions relating to business. It was in 1858 that the British
Crown assumed sovereignty over India from the East India Company,
and the British Parliament enacted the first statue for the governance of India
under the direct rule of the British Government, the Government of India Act,
1858.The year 1861 witnessed a very important development in the history of
judicial institutions of India. The Government of India Act 1935 brought about
significant changes. While, under all the previous Government of India Acts, the
Government of India was unitary, the Act of 1935 prescribed a Federation,
taking the provinces and the Indian States as units. The Indian independence bill
was introduced in the British Parliament on 4 July 1947, received the Royal Assent
on 18 July 1947 and came into force from that day. From time to time number of
acts was brought into force exclusively to regulate business activities.

IMPORTANCE OF BUSINESS LAW

a) Define the Rules of the Game-It lays down the framework within which the
business activities should be carried out. It specifies how to set up the business,
registrations, documentations, articles of organization, making of by-laws. These
are essential to provide a congenial environment of the business to function
smoothly.

b)Enables Enforcement of Rights - A business person can resort to various judicial

authorities if in case the legal rights have been violated. the businessman may
turn to High Courts or Supreme Court to enforce his/her claims against debtors,
his/her rights to a patent or copyright, right to own property and so on. The
businessman has also a right to defend himself/herself against the actions of
government — Central, State or local bodies.

c) Facilitate Industrial Growth-By selectively issuing licenses to deserving

entrepreneurs, by facilitating capital formation, by ensuring cordial industrial
relations, and by providing other needed facilities, business law contributes
considerably to the growth of industries.

d) Achieve Social Justice- It prohibits business from indulging in practices which

are harmful to the public interest. It seeks to check exploitation of child labour
and discrimination in employment or remuneration on the basis of sex, caste or
religion; misuse of economic power against any section of society; reckless
exploitation of economic resources at the cost of posterity; and systematic
disruption of ecology.

e) To prevent concentration of economic power- Business laws help in the survival

and development of organizations. It helps in the adjustment of claims made
against each other. It prevents concentration of economic power in the few
hands.

f) Offers help in case of breach- Business laws are intentionally made to bring
about order and sanity through its authoritarian schemes on conduct of business.
In cases of breach of contracts by the organization, these laws offer help.

SCOPE OF BUSINESS LAW

Mercantile law is concerned with the study of rights and obligations arising out of
mercantile transactions between mercantile persons. Mercantile persons are
persons who carry on commercial transactions. They may be individuals,
partnership concerns or joint stock companies.

Knowledge of mercantile law is essential to merchants. It helps the merchants to

avoid conflicts with the persons with whom he comes into business contacts.

The scope of business law usually includes: how the legal system affects
businesses; contract law, and why it’s important in business; the roles of directors
and executives who run a business; taxation issues; and of property and
consumer law. If the dispute is not settled though, a complaint can then be made
to either an administrative board or to the courts. It refers to the suit between
bankers, merchants, and traders relating to mercantile transactions . The prime
purpose of business law is to maintain order, resolve disputes, establish generally
accepted standards, protect rights and liberties when it comes to business and its
relation to other companies, government authorities, and the customers.

a) Law of sale of goods- it deals with the agreement made between traders
regarding commercial transactions.

b) Law of contract- Deals with any agreement belonging to society and of various
commercial activities.

c) Foreign exchange management Act-was formulated to assist orderly

development and maintenance of the Indian forex market.

d) Securities Contract act-It governs securities transactions on the secondary

market, after issue, ensuring greater financial transparency and accuracy and less
fraud or manipulation.

e) Consumer protection act-provides a platform for a consumer where they can

file their complaint, and the forum takes action against the concerned supplier

f) Monopolies and restrictive trade practices act- To prevent the concentration of

economic power to the common detriment, for the control of monopolies, for the
prohibition of monopolistic and restrictive trade practices

g) Sick Industries Act-to detect sick or potentially sick companies and to help with
their revival or their closure.
Lecture-4-Introduction to Indian Contract Act, 1872, Definition of Contract, Essentials of a valid
contract

Unit 2: Contract laws 20 Hours

Indian Contract Act, 1872: Definition of Contract, essentials of a valid contract, classification
of Contracts, remedies for breach of contract; Indian Sale of Goods Act, 1930: Definition of
contract, essentials of contract of sale, conditions and warrantees, rights and duties of buyer,
rights of an unpaid seller.

INTRODUCTION

In commercial life promises are made. Sometimes, promises are honored but sometimes breach
is also committed. In case of breach, it is obvious to determine the remedies that are available in
a court of law against a person who fails to honor his promise and the conditions under which the
remedies are available. The law of contract is that branch of business law which determines the
circumstances in which promises made by the parties to a contract, shall be legally binding on
them .It affects all of us in one way or the other. It is, however, more applicable to people
engaged in trade, commerce and industry because bulk of their transactions are based on
contracts.

The Indian Contract Act, 1872

Prior to the enactment of the Indian Contract Act , 1872 English common law was applied
indiscriminately to Indian natives which led to many inconveniences . Therefore , separate
statutes were enacted to supersede English law and to regulate the contracts where parties were
Hindus and Mohammedans.If both the parties were Hindu, , they were regulated by the Hindu
law and where both parties were Mohammedans , Mohammedan law applied. Where , however ,
one party was a Hindu and the other Mohammedan , then law of defendant applied. Only where
laws and usages of Hindus or Mohammedans were silent on any point, English law was applied.
Gradually importance of the enactment of general law regulating the contracts and to define and
amend certain parts of law relating to contracts common to all was felt and this gave birth to the
Indian Contract Act , 1872. The Indian Contract Act, came into force on Ist September 1872. The
Act applies to the Whole of India except the state of Jammu and Kashmir.

Meaning and Definition of Contract:

In a broad sense, a contract is an exchange of promises by two or more persons resulting in an

obligation, which is recognized and enforced by the law. On account of the presence of rights
and obligations, the law gives a remedy for the breach of promises and recognizes its due
performance as a duty. Thus a contract refers to an agreement creating an obligation which
means a binding agreement.
In simple terms, a contract means when two parties put into writing an agreement which contains
certain obligations (promises) which are to be performed by such parties, and when such written
agreement becomes enforceable by law, it becomes a Contract.

Definitions:

According to Sec 2 (h) of Indian Contract Act , 1872,the term contract is defined as‘An
agreement enforceable by law’.

According to Pollock defines a contract as, "Every agreement and promise enforceable at law is
a contract”

Now after examining the definitions of contract we can say that-

Contract = Agreement + Enforceability

A contracted with B for purchase of 10 bags of cement of a certain quality, for Rs 1, 00,000. In this
case, B’s promise is to provide A with 10 bags of cement of that quality only for which A has
contracted and A’s promise is to duly pay B Rs.1, 00,000. In this case, both have to perform
something for the other

Contract has two important components:-

1. An Agreement

2. Enforceable by Law

1. AGREEMENT – Section 2(e)

• Agreement is an accepted proposal. There must be one party to offer a proposal and
another to accept the proposal.

• A proposal when accepted becomes a promise (sec.2(b)).

Agreement = Offer + Acceptance

2. Enforceable by Law

It has legal obligations.

Contract = Agreement + Enforceability by law

Essentials of a valid contract

 Offer and Acceptance
 Free Consent
 Contractual Capacity
 Lawful consideration
 Lawful object
 Agreement not declared void
 Possibility of performance
 Certainty of terms
 Legal relations
 Legal formalities
 Lecture-5-Essentials of a valid contract

Essentials of a valid contract

 Offer and Acceptance
 Free Consent
 Contractual Capacity
 Lawful consideration
 Lawful object
 Agreement not declared void
 Possibility of performance
 Certainty of terms
 Legal relations
 Legal formalities

Offer and Acceptance

There must be two parties to an agreement i.e. one party making the offer and other party accepting
it.Offer and acceptance must be both lawful i.e. it must conform to the rules laid down in the Indian
Contract Act.Agreement is the result of offer and acceptance.Person who offer is called offeror
Person who accept the offer or proposal is called offeree

Example:
A say to B that he will sell his cycle to him for Rs.2000. This is an offer. If B accepts this offer,
there is an acceptance.

Free Consent
It is another essential of a valid contract. Consent (permission) means that the parties must have
agreed upon the same thing in the same sense. For a valid contract it is necessary that the consent
of parties to the contact must be free. Free consent does not exist when it is obtained by fraud,
mistake, coercion etc.

Example:
1. A compels B to enter into a contract on the point of pistol. It is not a valid contract as the
consent of B is not free.

Contractual Capacity
The parties to the agreement must be competent of entering into a valid contract. According to
Section 11, a person is said to be competent if he is (a) of age of majority (b) of sound mind and
(c) not disqualified from entering a contract by any law.

If one of the parties to the agreement suffers from minority, madness, drunkenness etc., the
agreement is not enforceable at law.

Example:
1. M, a person of unsound mind, enters into an agreement with S to sell his house for Rs.2 lac. It
is not a valid contract because M is not competent to contract.
2. A, aged 20 promises to sell his car to B for Rs.3 Lac. It is a valid contract because A is
competent to contract.

Lawful consideration
Consideration is “something in return.” It may be some benefit to the party. Consideration has
been defined as the price paid by one party for the promise of the other. An agreement is
enforceable only when both the parties give something and get something in return.

Example: A agrees to sell his house to B for Rs.10 Lac is the consideration for A’s promise to
sell the house, and A’s promise to sell the house is the consideration for B’s promise to pay
Rs.10 Lac. These are lawful considerations.

Lawful object
The object of the agreement must be lawful. The object for which the agreement has been
entered into must not be fraudulent, illegal, immoral, or opposed to public policy or must not
imply injury to the person or property of another. Every agreement of which the object or
consideration is unlawful is illegal and the therefore void.

Example:
A promise to pay B Rs.5 thousand if B beats C. The agreement is illegal as its object is unlawful

Agreement not declared void

An agreement to become a contract should not be an agreement which has been expressly
declared void by any law in the country, as it would not be enforceable at law.
Under different sections of the Contract Act, 1872, the following agreements have been said to
be expressly void, viz :-

(i) Agreements made with the parties having no contractual capacity, e.g. minor and person of
unsound mind (Sec. 11).
(ii) Agreements made under a mutual mistake of fact (Sec. 20).
(iii) Agreements with unlawful consideration or object (Sec. 23).
(iv) Agreements, whose consideration or object is unlawful in part (Sec. 24).
(v) Agreements having no consideration (Sec 25).

Possibility of performance
The valid contract must be capable of performance. An agreement to do an act impossible in
itself is void. If the act is legally or physically impossible to perform, the agreement cannot be
enforced at law.
Example:
A agrees to share with B,50% of treasure if created by magic, the agreement is not enforceable.

Certainty of terms
For a valid contract, the terms and conditions of an agreement must be clear and certain. The
agreement must not be vague, uncertain or ambiguous
Example:
1. A promised to sell 20 books to B. It is not clear which books A has promised to sell. The
agreement is void because the terms are not clear.

2. O agreed to purchase a van from S on hire-purchase terms. The price was to be paid over two
years. Held there was no contract as the terms were not certain about rate of interest and mode
of payment.

Legal relations
The parties to an agreement must create legal relationship. Agreements of a social or domestic
nature do not create legal relations and as such cannot give rise to a contract. It is presumed in
commercial agreements that parties intend to create legal relations.

Example:
1. Father promises to pay his son Rs.500 every month as pocket money. Later, he refuses to pay.
The son cannot recover as it is a social agreement and does not create legal relations.

2. A offers to sell his watch to B for Rs.200 and B agrees to buy it at the same price, there is a
contract as it creates legal-relationship between them.

Legal formalities
The agreement may be oral or in writing. When the agreement is in writing it must comply with
all legal formalities as to attestation, registration (required for land). If the agreement does not
comply with the necessary legal formalities, it cannot be enforced by law. It is essential for the
validity of a contact that it must be in writing signed and attested by witness and registered if so
required by the law.

Example:
1. A Verbally promises to sell his book to Y for Rs.200 it is a valid contract because the law does
not require it to be in writing.

2. A verbally promises to sell his house to B it is not a valid contract because the law requires
that the contract of immovable property must be in writing.
 Lecture-6-Classification of Contract

Classification of Contracts:

1. Types of Contracts on the basis of Formation

Expressed Contracts

When the terms of a contract are expressly agreed upon (whether by words spoken or written) at
the time of the formation of the contract, the contract is said to be an express contract. The
express contract need not be a written one.

Example: The contract of sale of a property is made expressly by using clear words written on a
stamped paper.

Implied (not stated directly) contract

An implied contract is when the offer and acceptance is made by the acts or conducts of the
parties. An implied contract is one which come into existence by the acts, the conduct of the
parties.

Example: Ordering in a restaurant

Boarding a public bus

Quasi Contract:

A quasi contract arises not from an agreement, but from a mere relationship that comes about
between individuals. In quasi contract, there is no intention of the parties to form a contract but
created by law.
Example: X, a trader, leaves certain goods at house of Y by mistake. This imposes an
obligation on “Y” either to return the goods to X or to make the payment if he treats the goods
as his own

Contingent Contract

A contingent contract is one in which a promise is conditional and the contract shall be
performed only on the happening of some future uncertain event.

Example: A contracts to pay B Rs.10,000, if B’s house is burnt

E- Contract

Electronic contracts (contracts that are not paper based but rather in electronic practice) are born
out of the need for speed, suitability and efficiency. Imagine a contract that an Indian exporter
and an American importer wish to enter into. One option would be that one party first pulls up
two copies of the contract, signs them and couriers them to the other, who in turn signs both
copies and couriers one copy back. The other option is that the two parties meet someplace and
sign the contract.
In the electronic age, the whole contract can be completed in seconds, with both parties simply
attaching their digital signatures to an electronic copy of the contract. There is no need for
delayed couriers and additional travelling costs in such a situation.

2. Types of Contracts On the basis of Validity

Valid Contract:

The Contracts which are enforceable in a court of law are called Valid Contracts. To attain
Validity the Contract should have all essential elements of contract like Offer and Acceptance,
Free Consent, Contractual Capacity, Lawful consideration, Lawful object, Agreement not
declared void, Possibility of performance, Certainty of terms, Legal relations and Legal
formalities.

Example: there is a Contract between X and Y and let us assume that their contract has all those
above said features. It is Valid Contract.

Void Contract

A contract which was valid when it was first entered into but subsequently becomes
unenforceable due to impossibility of performance is called a void contract.

Example: X agrees to sell his horse to Y for Rs.5,000, but the horse died in an accident. It
became impossible to perform the contract due to destruction of the subject. Thus, a valid
contract changes into void contract because of impossibility of performance
Voidable Contract
A Contract which is deficient in only free consent is called Voidable Contract .That means it is a
Contract which is made under certain pressure either physical or mental. At the option of
suffering party, a voidable contract may become either Valid or Void in future.

Example: there is a Contract between A and B where B has forcibly made A involved in the
Contract.
Illegal contract:
What is illegal or against the law cannot be enforced. Illegal contracts are forbidden by law and
punishable under law. It also makes collateral party also illegal

“All illegal agreements are void agreements but all void agreements are not illegal.”

Example: A borrows Rs 10,000 from B to import prohibited goods. B knows the purpose.

Unenforceable Contract:

A contract which is valid in all respects but because of non – fulfillment of some technical
formality, it cannot be treated as enforceable

Example: A borrows Rs 10,000 from B and makes a promissory note and a one rupee stamp is
pasted on the promissory note. The agreement though complete is unenforceable because of the
technical defect i.e., promissory note being under stamped.
 Lecture-7-Classification of Contract

3. Based on Execution / Performance

Executed Contract:

An executed contract is one in which both the parties have performed their respective obligation.

Example : Husain agrees to paint a painting to Arjun for Rs.5000.He paints the painting and
Arjun pays Rs.5000 to him

Executory contract:

An executory contract is one in which one or both parties are still to perform their obligations.
Such controls are future contracts. In such contracts, the consideration is the promise of
performance or obligation.

Contract in which one or both the parties to the contract have still to perform their obligations in
future.Partially performed or wholly unperformed is termed as executory contract.

Example: If Husain painted the painting, Arjun didn’t pay Rs.5000 yet.

4. Based on Liability

Unilateral Contract:

They are one-sided contracts. A unilateral promise is a promise from one side only and intended
to induce some action by the other party.A unilateral contract is one in which only one party has to
make a promise.One party known as offeror makes a promise in exchange for an act by another
party known as offeree.

Eg: Reward Contract (pay reward if anyone get the lost dog/cat)

Bilateral contract:

Commonly used in business transactions. Bilateral contract contains a promise by each party to
fulfill certain obligations to complete the deal. Similar to executory contract. They are very common
in every day life.
• Eg: ‘A’ agrees to pay 50,00,000 to purchase the house. So buyer must pay the price and
seller must transfer the ownership.
 Lecture-8-Offer and Acceptance

Offer and Acceptance

Offer or proposal is the starting point in the formation of a contract. Section 2 (a) defines proposal as
“When one person signifies to another his willingness to do or to abstain from doing anything with a
view to obtaining the assent of that other to such act or abstinence.”

Thus, a proposal is an expression of will or intention. A person making the proposal expresses that he
is willing to contract on the terms stated in it provided the other party to whom the proposal is made
will likewise express his assent to the same terms .Section 2(a) reveals three essential elements in an
offer:
1. Expression of willingness to do or not to do something
2. Made to another person i.e. a person cannot make an offer to himself
3. With the object of gaining the consent of the other person to such act.

The person making the proposal is called the proposer or offeror and the person to whom the proposal
is made is called the offeree.

Kinds of offer:

Offer can be classified on the basis of (1) How an offer is made? (2) To whom an offer is made?

Kinds of Offer

How made? To whom made?

Express Offer Implied Offer General Offer Specific Offer

An offer may be either express or implied from the conduct of the parties. An express offer is one
which may be made by words spoken or written. If A offers to sell his pen to B for Rs 20;it is an
express offer. An implied offer is one which may be gathered from the conduct of the party or the
circumstances of the case.Thus,where a person goes to a doctor for treatment, his conduct implies an
offer that if the treatment is given then its implied to pay the consulting charges. An offer made to a
definite person is called a specific offer. A specific offer can usually be accepted only by the person to
whom it is made. When an offer is addressed to the public at large is called general offer. If A issues
a public advertisement that he would give Rs 500 to anyone who brings back his missing dog, such an
advertisement is a general offer.

Essentials of a valid offer

 The following characteristics are necessary to create a valid offer.
1. The terms of an offer must be clear and certain: - The terms of an offer should not be
indefinite, vague or loose. The vagueness of an offer will not create any contractual
relationship .
For example, A says to B “ I will sell you a Car” as A owns four cars, the offer is not
definite.
2. Offer may be express or implied: - An express offer is one which may be made by words
spoken or written. An implied offer is one which may be gathered from the conduct of the
party or the circumstances of the case.
3. The offer must be communicated to the offeree: - An offer must be communicated to the
offeree. Until an offer is made known to the offeree, he does not know what he has to
accept.
4. An offer must be made with an intention of creating legal obligations: - A proposal will
not become a promise even after it has been accepted unless it was made with a view to
create legal obligations. An offer to perform social or moral acts, without any intention of
creating legal relations, will not be a valid offer.
5. Offer may be conditional: - An offer can be made subject to a condition. It can be
accepted only subject to those conditions. If the condition is not accepted, the conditional
offer lapses.
6. Offer must be made with a view to obtaining the assent of the other party
7. Invitation to an offer is not an offer:-Offer is different from invitation to an offer.
Quotations, catalogues of goods, advertisement for tender etc are not actual offer. They are
mere invitation to offer.
8. Offer may be specific or general: - The offer being made to a particular individual or
organization is known as specific offer. On the other hand, if an offer has been made to a
group of people or public at large, such offer is known as general offer.
9. Offer should not contain a term the on-compliances of which would amount to
acceptance: While making the offer one cannot say that, if the offer is not accepted before
a certain date, it will presumed to have been accepted.
When Does an offer comes to an End? / Revocation of Offer/Lapses of Offer:-
The Offer must be accepted before it lapses. Sec. 6 of the contract act deals with various
modes of revocation of an Offer.
1. Revocation by Communication of notice (Sec. 6(1):- A person who makes an offer can
withdraw it at any time before acceptance. Such revocation may be express or implied.
Notice of revocation will take effect only when it comes to the knowledge of the offeree.
2. By lapse of time (Sec.6 (2):- An offer lapses if it is not accepted within the prescribed
time. Where no time is fixed, it should be accepted within a reasonable time. Otherwise
the offer will lapse after a reasonable time.
3. Death or insanity of an offeror:- An offer lapses by the death or insanity of the offeror,
if the fact of his death or insanity comes to the notice of the acceptor before acceptance.
 4. Non fulfillment of pre requisite conditions: - When the offeror has put some
conditions, which are prerequisites to acceptance, such conditions must be fulfilled
before accepting offer. Non fulfillment of such conditions will lead to revocation of
an offer.
5. By counter offer: - The offer will be revoked if the offeree makes a counter offer.
6. Offer not accepted according to the mode prescribed:- Sometimes the offeror may
prescribe particular mode in which offeree must send his acceptance. Non compliance
of prescribed mode may lead to rejection of acceptance.

Acceptance
Section 2(b) of the Indian Contract Act defines Acceptance as "when a person to whom the
proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal,
when accepted, becomes a promise.The person making the proposal is called the “promisor”, and
the person accepting the proposal is called “promisee”,

ESSENTIALS OF A VALID ACCEPTANCE:-

1. Acceptance must be absolute and unconditional: - Partial and conditional or

qualified acceptance will not be a valid acceptance. That is the acceptor either should
accept the offer or should reject it. There should not be any variation in terms while
accepting the proposal.
2. Acceptance must be given in a prescribed mode or manner: - If the acceptance is
not made according to the mode prescribed, the offeror may intimate to the offeree
within a reasonable time that the acceptance is not according to the mode prescribed ,
and may insist that the offer must be accepted in the mode prescribed. But if still it is
not followed, the offeror can reject that acceptance.
3. Time of Acceptance: - Acceptance must be made within the time allowed. When no
time is specified, acceptance must be given within reasonable period of time.
4. Acceptance must be communicated: Acceptance to be legally effective must be
communicated and brought to the knowledge of the offeror. Even if the acceptor has
accepted the offer but if it is not communicated properly, it would not result into an
agreement.
5. Acceptance may be express or implied: - When an acceptance is made by words
spoken or written, it is an express acceptance. If it is accepted by conduct, it is an
implied acceptance. For example when a person goes to a Restaurant and has some
food, he impliedly accepts to pay for it.
6. Acceptance must be made before offer is revoked: - The acceptance of an offer
must be done before the offer lapses or is withdrawn or cancelled. Once an offer is
revoked due to any reason it is revoked forever.
 7. Acceptance must be made by the offeree: - Acceptance must be made only by the
person to whom the offer is made and not by others.
8. Acceptance is not implied from silence of the party: - Generally, silence on the part
of offeree regarding the offer in no case may amount to acceptance.

COMMUNICATION OF OFFER AND ACCEPTANCE

According to sec.3 of Indian Contract Act, “that the communication of proposal, the
acceptance of proposal, and the revocation of proposal and acceptance respectively are deemed to
be made by any act or omission of the party proposing, accepting or revoking by which he intends
to communicate such proposal, acceptance or revocation or which has the effect of communicating
it”. Thus communication of offer and acceptance is necessary for forming a contract.
The communication of an offer is complete as soon as it comes to the knowledge of the
offeree.
Communication of acceptance is complete –
1. as against the proposer, when it is put in a course of transmission to him as to be out of
the power of the acceptor
2. as against the acceptor, when it comes to the knowledge of the proposer.
For example, A proposes by a letter to sell a Car to B at a specified amount and B accepts A’s
proposal by letter sent by post. Here the communication of acceptance is complete as against A
when the letter is posted and as against B when the letter is received by A.
Revocation of Offer and Acceptance:-
An Offer may be revoked at any time before the communication of its acceptance is
complete as against the proposer, but not afterwards. So an offer can be revoked at any time before
the letter of acceptance has been posted by the accepter.
An Acceptance may be revoked at any time before the communication of the
acceptance is complete as against acceptor, but not afterwards.
 Lecture-9-Consideration

CONSIDERATION
Consideration is one of the essential elements of valid contract. According to sec. 25 of
the Indian Contract Act, an agreement made without consideration is void. Every
agreement must be supported by consideration to become a contract. In true sense
consideration means “something in return” to the promisor (quid proquo).

The term consideration is defined in sec.2 (d) of the Indian Contract Act as,”when at the
desire of the promisor, the promisee or any other person has done or abstained from
doing, or promise to do or to abstain from doing something, such act, abstinence or
promise is called a consideration for the promise.”

Essentials of Consideration:-
1. Consideration must move at the desire of the promisor: - It is essential that promisee

should perform his part of the promise only at the desire of the promisor. The desire of
the promisor may be express or implied. For example, ’A’ buys a book for his friend ‘B’.
Later on ‘B’ promises to pay Rs. 75 to ‘A’. Since ‘A’ has bought the book voluntarily
without the desire of ‘B’, it cannot be valid consideration for the promise of ‘B’.
2. Consideration may move from the promisee or any other person:-According
to Indian law, the consideration may proceed either from the promisee or any other
person. Under the English law, consideration must move from the promisee.
3. Consideration may be past, present or future: - If the promisor had received
the consideration before the date of the promise, it is known as past consideration. If
the promisor receives consideration simultaneously with his promise, it is known as
present consideration. When the consideration on both sides is to move at a future
date, it is called future consideration. However, according to English Mercantile law,
consideration may be present or future only.
Example of past consideration is, "A" renders some service to "B" at latter's desire.
After a month "B" promises to compensate "A" for service rendered to him earlier.
When consideration is given simultaneously with promise, it is said to be present
consideration. For example "A" receives Rs.50/- in return for which he promises to
deliver certain goods to "B". The money "A" receives is the present consideration.
When consideration to one party to other is to pass subsequently to the maker of the
contract, is said to be future consideration. For example. "A" promises to deliver
certain goods to "B" after a week. "B" promises to pay the price after a fortnight,
such consideration is future.

4. Consideration need not be adequate:-According to Indian contract Act, it is not

necessary that the value of promise should be equal to the value of consideration.
Even if the value of consideration is less than the value of promise, the contract is
valid.

5. Consideration must be real and not illusory: - Consideration must have some
value in the eyes of law. It must not be illusory, fictitious, fraudulent and uncertain.

6. Consideration must be something which the promisor is not already bound to do.
A promise to do something what one is already bound to do, either by law, is not a
good consideration. Since it adds nothing to the previous existing legal consideration.

No Consideration No Contract-Exceptions
1. Agreement based upon love and affection:- Here the essentials of the

agreements includes:

a. It must be expressed in writing

b. It should be registered under the law for the time being in force
 c. It should be made on account of natural love and affection, and

d. The parties should stand in a near relation to each other.

If an agreement fulfils the above conditions, it is valid and enforceable

even though it is not supported by consideration.
2. Promise to compensate for Past voluntary services: - If a person has

already voluntarily done something for the promisor and the promisor
agrees to compensate wholly or in part, the agreement is valid even
though it is without consideration.

For example ‘A’ find ‘B’s purse and hand it over to him. B, in return
promise to give A Rs. 50. It is a valid contract.

3. Agreement to pay time barred debt:- A promise by a debtor to pay a

time barred debt is enforceable provided it is made in writing and is

signed by the debtor or by his agent authorized in that behalf. An oral
promise to pay a time barred debt is unenforceable.

4. Agency: - According to sec 185 of the Indian Contract Act, no

consideration is necessary to create an agency.

5. Completed gifts: - Gift once made cannot be recovered on the ground of

absence of consideration.

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 Lecture-10-Capacity of Parties
According to section 10 of the contract Act, parties making an agreement must have
the contractual capacity. Section 11 of the Act states that “every person is competent to
contract who is of a age of majority according to law to which he is subject, and who is of a
sound mind and is not declared disqualified from contracting by law to which he is subject.”
Thus every person is competent to enter into a contract if,
a. he has attained the age of majority
b. he is of sound mind, and
c. he is not disqualified by any law from contracting

MINOR
A person who has not attained the age of majority is a minor. According to the Indian
Majority Act 1875, a person who has not completed his 18th year of age is considered to be a
minor. But if a minor is under the care and custody of the court and a guardian is appointed
by the court for the minor, then the minor becomes major only on the completion of the age
of 21 years.
Law regarding Minor’s Agreement:-
1. An agreement with a minor is void ab initio: A minor does not have the contractual
capacity and when he makes agreements, such agreements are void and cannot be
enforced in the court of law.
2. Minor can be a promisee or beneficiary: - A minor cannot be stopped from getting
benefits in an agreement. If in a contract, minor is a beneficiary or suffered loss or he
is a promisee, he can demand the enforcement of agreement.
3. Ratification on attaining the majority is not allowed: A minor cannot ratify a
promise entered into during his minority, after attaining majority.
4. Minor is not bound to return the benefits received: - If a minor retained any
benefit under the agreement, he is not liable for repay or compensate the same. The
reason is that the original contract is void in the beginning itself.
5. The principles of estopel is not applicable to minor: - The general principle of
estopel is not applicable to a minor.
6. A minor is liable for necessaries supplied: According to sec 68, “if a person,
incapable of entering into a contract or any one whom he is legally bound too
support, is supplied by another person with necessaries suited to his condition in his
life, the person who has furnished such supplies, is entitled to be reimbursed from the
property of such incapable person.
7. Minor can be an agent: A minor can act as an agent and bind his principal by his acts.
8. He cannot be adjudged insolvent: A minor cannot adjudged insolvent as he is not
competent to enter into contracts for debts.
 9. Minor- as partner: A minor cannot be a partner, but he may be admitted to the
benefit of a partnership. His liabilities are limited to the extent of his interest in the
partnership.

PERSONS OF UNSOUND MIND

In order to be competent to contract, a person must be of sound mind. A person who
is usually of unsound mind and occasionally of sound mind may make a contract when he is
of sound mind. A person who is usually of sound mind but occasionally of unsound mind,
may not make a contract when he is of unsound mind.
Types of persons of unsound mind:
1. Idiots: A person who has completely lost his mental powers and incapable of forming
a rational judgment is called an idiot. All agreements other than of necessaries of life,
with idiots are absolutely void.
2. Lunatic: A lunatic person is a person who suffers a serious mental disorder due to
some mental strain or mental shock or any highly tragic event. A lunatic is not liable
for agreements entered into during the period of his madness.
3. Drunken persons: A drunken person suffers from temporary incapacity to contract.
An agreement by a drunken person is void because during his drunkenness he cannot
understand the business and its implications.

PERSONS DISQUALIFIED BY OTHER LAWS

1. Alien enemies: - A person who is not a citizen of India is called alien. The following
rules will apply in respect of an alien enemy:
a. No contract can be made with an alien enemy during the subsistence of war
b. Performance of the contract made before the outbreak of war will be suspended
during the course of war.
2. Foreign sovereigns, and ambassadors:- In the case of Ambassadors and foreign
sovereigns, according to sec 86 of the civil procedures, previous sanction of the
central government is to be obtained .
3. Insolvents: When a debtor is adjudged as insolvent his property vests in the official
Receiver and thereby he cannot enter into a contract. This disqualification is
automatically removed after he is discharged.
4. Convicts:- A convict when undergoing imprisonment is incapable of entering in to a
contract. When the period of sentence expires, the incapacity to contract disappears.
5. Corporations: A company or corporation can enter into contracts only through its
agents, such as Board of Directors, Managing Directors etc in accordance with its
Memorandum of Associations. Any contract beyond the Memorandum is not valid.
6. Married women: They are competent to enter into a contract with respect to their
separate properties. But she cannot enter into contracts with respect to their
husbands’ property.
 Lecture-11- Free Consent
FREE CONSENT
According to Sec13 of the Contract Act defined consent as, “two or more persons are
said to consent when they agree upon the same thing in the same sense.” Without free
consent of the parties, an agreement does not acquire legal sanctity and consequences.
Section 14 of this act states that, ‘Consent is said to be free when it is not caused by,
1. Coercion
2. Undue influence
3. Misrepresentation
4. Fraud
5. Mistake
In the first four cases, the contract is voidable, but in the last case, the contract is void ab initio

ELEMENTS OF FREE CONSENT

COERCION

According to Section 15 “Coercion is the committing or threatening to commit, any act

forbidden by the Indian Penal Code, or the unlawful detaining, or threatening to detain,
any property, to the prejudice of any person whatever, with the intention of causing any
person to enter into an agreement”
In simple words, coercion is the threat used by one party against another for compelling
him to enter an agreement. Section 15 of the Indian Contract Act defines coercion as
the committing or threatening to commit any act forbidden by Indian Penal Code or an
unlawful detaining or threatening to detain, any property of any person with the
intention of inducing any person to enter into an agreement. It is immaterial whether the
Indian Penal Code is or not in force in the place where the coercion is employed.

UNDUE INFLUENCE:

Sometimes the parties to an agreement are so related to each other that one party is in a
position to dominate the will of the other. One party is compelled to enter into an
agreement against his will as a result of “Undue Influence” exerted by the other party
who is in dominating position.
Undue Influence is moral coercion as opposed to physical coercion mentioned in
Section 15. It is the domination of a weak mind by a strong mind to extent which causes
the behavior of the weaker person to assume an unnatural character. It is an influence
which compels another person to do something which he would not have done if he had
 been a free agent. A friendly advice or persuasion would not constitute undue influence.
According to Section 16 “A contract is said to be induced by undue influence where the
relations subsisting between the parties are such that one of the parties is in a position to
dominate the will of the other and uses that position to obtain an unfair advantage over
the other”
Distinction between Coercion and Undue Influence

Undue Influence Coercion

Consent is obtained by the dominant will of Consent is obtained under the threat of
another. offence.

It involves the use of moral or mental forces It involves the use of physical or violent
forces

There is no criminal liability in this case It attracts the provision of Indian Penal Code
(IPC).

There must be certain relationship between It may proceed from a stranger to the
the parties to the contract. contract.

FRAUD:

The term ‘fraud’ includes all acts committed by a person with an intention to deceive
another person.

Fraud is the wilful representation made by a party to a contract with the intent to
deceive the other party or to induce such party to enter into a contract. It means made
knowingly or without belief in its truth or recklessly without caring whether is it true or
false.
Accordingly to Section 17, fraud means and includes any of the following acts done
with intent to deceive or to induce a person to enter into a contract.
Effect of fraud:
If the consent to an agreement is caused by fraud, the contract is voidable at the
option of the party, whose consent was so caused. In case of fraud, the aggrieved party has
the following remedies:-
a. He can cancel the contract within a reasonable time.
b. He can sue for damage
c. He can insist on specific performance of the contract on the condition that he shall be
put in the position in which he would have been if the representation made had been
 true.
MISREPRESENTATION:
It is a misstatement of material facts. The party making untrue statement believes that
the statement is true, but in reality statement turns to be incorrect. It also includes non-
disclosure of material facts and facts without any intention to deceive the other party.
According to sec.18 of the Act, misrepresentation means and includes:
1. The positive assertion in a manner not warranted by information of the person making
it which is not true, though he believes it is to be true.
2. Any breach of duty which, without an intent to deceive, gains an advantage to the
person committing it, or any one claiming under him, or
3. Causing, however innocently, a party to an agreement, to make a mistake as to the
substance of the thing which is the subject of the agreement.
Effects of Misrepresentation:
When consent of the party is caused by the misrepresentation made by another party,
the contract is voidable at the option of the aggrieved party whose consent was caused by
misrepresentation. He has the following rights:
1. May avoid or rescind the contract
2. May insist on the misrepresentation being mad good or
3. May rely upon the misrepresentation as a defence to an action or the contract.
MISTAKE
A mistake means that parties intending to do nothing have by intentional error done
something else. If the agreement is made under a mistake, it means that there is no consent
and when the consent is nullified by such mistake, and then the agreement has no legal effect.
Classification of Mistake:
1. Mistake of fact and
2. Mistake of law
A. Mistake of Fact:-Mistake relating to terms and conditions or any facts essential to the
agreement is known as mistake of facts. Mistake of facts may be
a. Bilateral mistake:- A bilateral mistake is one where both the parties are under a mistake.
Section 20 of the Act lays down that,” where both the parties to an agreement are under a
mistake as to a matter of fact essential to the agreement, the agreement is void.” Therefore
two conditions must be fulfilled for bilateral mistakes:
a) Mistake must be committed by both the parties, and
b) The said mistake must relate to some essential fact.

b. Unilateral mistake: - In this case only one party is under a mistake. In other words, if
there is a mistake on the part of one party alone and the other party does not know the
mistake, then it is called unilateral mistake. According to section 22, “a contract is not
voidable merely because it was caused by one of the parties to it being under a mistake
regarding a matter of fact.”
In the following case unilateral mistake make contracts void:-
i. Unilateral mistake relate to the nature of contract, the contract itself is void.
ii. Unilateral mistakes is as to identity of the person contracted with, the contract is void.
C. Mistake of Law:- Mistake of law may be of two types:
1. Mistake of Indian Law
2. Mistake of foreign law
 Lecture-12- Legality of Object and Discharge of Contract
The contract to be legally valid must contain lawful object. According to section 10 of
the act, “all agreements are contract if they are for lawful consideration and with a lawful
object. Lawful object means, intention to do something permissible within the provisions of
law”. For example, A in consideration of Rs. 10 lac from B agrees to Kill C. The object of
this agreement is killing, which is illegal and punishable under Indian Penal Code.
Unlawful Consideration and Unlawful Object: Under the following circumstances an
agreement would be unlawful:

1. It is forbidden by law:-If the object or consideration of an agreement is forbidden by

law, the agreement is void. For example, A agrees to sell certain goods to B after
knowing very well the goods are to be smuggled out of the country. Here the object
is forbidden by law.
2. It defeats the provisions of any other law:-Where the enforcement of a particular is
of such a nature that it would defeat the provisions of any statutory law which is in
force, the agreement is void.
3. It is fraudulent: - Fraud is punishable under the provisions of the law. Thus an
agreement made with an object of defrauding or deceiving another will be void.
4. It involves an injury to a person or property of other:- Agreements made with an
object of putting some person in to criminal or wrongful harm or damaging his
property or reputation is void.
5. It is Immoral: - If the object of an agreement is considered as immoral in the opinion
of the court, such agreement will be void on account of unlawful object.
6. It is against public policy: - Any agreement which goes against public policy and
adversely affect public welfare public decency and public interest will be void. The
court has declared the following agreements oppose to public policy.
a. Trading with alien enemy
b. Trafficking in public office
c. Interfering with course of justice
d. Marriage brokerage agreements
e. Agreement creating interest against professional duty.
f. Agreement in restraint of parental duty.
g. Agreement in restraint of Trade

DISCHARGE OF CONTRACT
Discharge of contract means terminations of the contractual relationship between the
parties. On the termination of such relationship the parties are released from their obligations
in the contract.
Modes of discharging Contract:
A contract may be discharged in any one of the following ways.
A. Discharge of contract by performance: - This is the most popular and usual way of
discharging contracts. When the parties to a contract fulfill their obligations arising
under the contract within the time, and in the manner prescribed, it is known as
discharge of performance. Performance of contract may be of two types:-
Actual performance and attempted performance
a. Actual performance: - In order to claim performance, the parties to a contract
must have actually performed their part of contract. It is actual performance
b. Attempted performance or tender: - A person who is bound to perform a
promise will be ready to perform and will also offer to perform his promise but
sometimes the other party may refuse to accept that performance. This is known
as “attempted performance”. All attempted performance is legally treated as
equivalent to actual performance except in case of payment of money.
For example, A has borrowed sum of Rs. 15000 from for three months. On the
due date, a makes payment, But B does not accept it. In this case A will not be
released from his liability of making that payment to B; however, he will not be
liable for paying any interest on that after three months.

B. Discharge of contract by mutual agreement: - A contract is formed when the

parties are mutually agreed. In the same way the parties of a contract by a mutual
agreement can discharge that contract. Contract may be discharged by agreement in
the following ways:
1. By Novation (Substitution of a new contract):-Under the method of novation,
existing contract is replaced by new one either between same parties or between
new parties. It discharges an existing contract and brings new contract into
existence. The new contract must be capable of being enforced at law. The
consideration for the new contract is the discharge of the old contract. The
essentials of novation are:
a. There must be mutual consent of all the parties for the novation.
b. The new contract must be one capable of enforced by law
c. New contract is made before the expiry of the period of original contract.
2. By alteration:-Alteration of contract may take place when one or more of the
terms of the contract altered by the mutual consent of the parties to the contract. In
novation, there may be change in parties, but in alteration, original parties exist;
only the terms are altered. Alteration discharges the original obligations.
3. By Rescission:-Rescission means cancellation of the contract. If the parties to a
contract agree to rescind it, the original contract need not be performed.
Rescission may either be total or partial. If all the terms of the contract are
cancelled, it is called total rescission. While, some of the terms of the contract are
cancelled, some new terms are added to it, and then it is called partial rescission.
4. By remission: - Remission means acceptance of lesser performance than what
was actually due under the contract. For example, A owes to B Rs. 50000. A pays
 to Rs. 25000 and B accepts the amount in settlement of the whole debt. In this
case A is discharged from his liability of Rs. 50000.
5. By waiver: - When both parties, by mutual consent, agree to abandon their
respective rights, the contract need not be performed and the same is discharged. It
is called waiver
C. Discharge by lapse of time: - When a period is specified for the performance of the
contract, it is known as period of limitation. If the contract is not performed and the
promisee fails to take any action within the period of limitation, then the contract is
terminated or discharged by lapse of time. In case of contracts, the period of limitation
is three years. After the expiry of this period the court will not allow to enforce the
contract and it will be discharged.
D. Discharge by Operation of Law:- A contract may discharged by the operation of
law in the following cases:
a. By Death:-Where performance of a contract is required to be made in person and
the personal skill and qualification of the promisor are important, the death of the
promisor discharges the contract.
b. By insolvency: When a person is adjudged insolvent, he is discharged from all the
liabilities incurred before the adjudication.
c. By Merger: This is a condition by which, an inferior right contract merges into a
superior right contract. In this case, the inferior right contract stand discharged
automatically.

E. Discharge by Impossibility of Performance: -The impossibility of performance of a

contract may be initial impossibility and subsequent impossibility.

1. Initial impossibility or impossibility at the time of formation of contract:-

When both the contracting parties are aware of impossibility of performance of

the contract even at the time of formation of the contract itself, then the agreement
becomes void ab initio. If they are aware about the impossibility of the contract at
the time of performance, in such a case the contract is void when such
impossibility is discovered.

2. Impossibility which arises subsequent to the formation of contract or

Supervening impossibility: In certain cases, the contract at the time of formation
is capable of being performed. Subsequently after the formation, its performance
becomes impossible or illegal. Such impossibility may arise due to the reasons
beyond the control of both the parties. This kind of impossibility is known as
Supervening impossibility and such contract becomes void.

For example, A agrees to sell his Motor Bike to B for a specific price. Later on
they came to know that motor bike already been stolen. Here the contract is void.
A contract is discharged due to supervening impossibility under the following
situations:-

a. Destruction of subject matter: - If the subject matter of the contract is

destroyed or perished subsequent to the formation of the contract without the
fault of either parties to the contract, the contract need not be performed and it
is discharged.

For example, X agrees to sell his Scooter to Y. Before the transfer, the Scooter
is destroyed by an accident; the contract is discharged by impossibility of
performance.

b. Death or personal incapacity of the promisor:-A promise requiring personal

skill and ability may become physically incapable of performance by reasons
of the death or incapacity of the same person. Such impossibility discharges
the promisor from liability.

c. Change of Law: - Change of law, after the formation of a contract, if renders

performance of contract unlawful; such contract is discharged on the ground
of supervening impossibility.

d. Discontinuation of particular state of thing, which is essential for

performance:
- When the contract is made by the parties, on the ground that, certain state of
things will continue till the performance of a contract. But that state of things
gets changed or discontinued due to any reason beyond the control of the
parties; such contract becomes void on the basis of supervening impossibility.

e. Declaration of war: When a war is declared after the formation of a contract,

all pending contracts with the residents of enemy country remains suspended.

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 Lecture-13- Remedies for Breach of Contract

Remedies for breach of contract

Meaning of Breach of contract

Failure of a party to perform his /her obligations under a contract is called breach of contract

When there is a breach of contract by one party the other party called injured or aggrieved party
shall have certain remedies against him.

Breach Of Contract Occurs When

1. Any party to the contract fails to perform his part of the contract

2. Failure of a party to perform his or her obligation under a contract.

Breach of contract may occur in two ways –

A contract terminates by breach of contract. Breach of contract may arise in two ways:
(a) Anticipatory breach, and (b) Actual breach.
Anticipatory Breach of Contract: Anticipatory breach of contract occurs, when a party
repudiates it before the time fixed for performance has arrived or when a party by his
own act disables himself from performing the contract.
Examples (1) A contracts to marry B. Before the agreed date of marriage he married C.
B is entitled to sue A for breach of promise.
Actual Breach of Contract
The actual breach may take place (a) at the time when performance is due, or (b) during
the performance of the contract.
Actual breach of Contract, at the time when performance is due. If a person does not
perform his part of the contract at the stipulated time, he will be liable for its breach.
Breach during the Performance of the Contract. Actual breach of contract also occurs
when during the performance of the contract one party fails or refuses to perform his
obligation under the contract.

.
Protection of contractual expectations is the primary purpose of law of contract. These expectations
are met where parties perform their respective promises, but if any one party fails to perform his
obligations and breach the contract, the law provides certain remedies to the promise. A legal
remedy is a court order that seeks to uphold a person’s rights or to redress a breach of the law.

When one party breaches a contract, the other party may ask a court to provide a remedy for the
breach. The court may order the breaching party to pay money to the non-breaching party.

TYPES OF REMEDIES
1. SUIT FOR RESCISSION
2. SUIT FOR DAMAGES
3. SUIT FOR QUANTUM MERUIT
4. SUIT FOR SPECIFIC PERFORMANCE
5. SUIT FOR AN INJUNCTION

1. SUIT FOR RESCISSION

The term Rescission refers to the cancellation of contract. In such cases, if one party has
broken his contractual relations, the other party may treat the breach as discharge(comes
to an end) and refuse to perform his part of performance. Thus in case of rescission of
contract, the aggrieved or injured party is discharged from all his obligations of the
contract.
Example: ‘A' contracts to supply 10kg of tea leaves for Rs. 8,000 to 'B' on 15 June. If 'A'
does not supply the tea leaves on the appointed day, 'B' need not pay the price. 'B' may
treat the contract as rescinded. 'B' may also file a suit for rescission and claim damages

2. SUIT FOR DAMAGES

Damages are a monetary compensation allowed to the injured party for the loss or injury
suffered by him as a result of the breach of contract. The fundamental principle
underlying damages is not punishment but to compensate the aggrieved party for the loss
suffered by him in the original position as he would have been.

Mr. Robin contracts to pay 3 lac to Mr. Peter on 1st April. Mr.Robin does not pay the
money on that day. Mr. Peter is unable to pay his debts and suffer a loss. Mr. Robin is
liable to pay Mr Peter principal amount and also interest on it

DIFFERENT TYPES OF DAMAGES

 Ordinary (or) general damages
 Special damages
 Exemplary (or) vindictive (or) punitive
 Nominal damages
 Lecture-14- Remedies for Breach of Contract
DIFFERENT TYPES OF DAMAGES
 Ordinary (or) general damages
 Special damages
 Exemplary (or) vindictive (or) punitive
 Nominal damages

Ordinary (or) General damages

General damages which arise naturally in the usual course of things. Intention is to compensate
the injured party and not to punish.

Example: A contracted to sell and deliver B 50 bags of rice at Rs. 1, 450 per bag, the price to be
paid at the time of delivery. The price of rice rose to Rs. 1, 500 per bag and A refused to sell the
rice. B can claim damages at the rate of Rs.50 per bag.

Special damages
Special damages are those damages that are payable for the loss arising on account of some
special or unusual circumstances. Indirect loss experienced by the affected party out of breach of
contract is treated as special damage. Special damages can be recovered only when the plaintiff
bring to the knowledge of the defendant.

Example:
A contracted with B to supply steel rails who had in his turn contracted to supply the same to a
railway company at a very high profit. At the time of entering into the contract, B’s contract
with the railway company was made clear to A. A committed a breach of contract. B can claim
not only the difference between the market price and the contracted price on the delivery date,
but will also be entitled to the profit which he would have made and the damages which he would
have to pay to the railway company.

Exemplary (or) vindictive (or) punitive

These damages are awarded with a view to punish the wrongdoer and not to compensate the
injured party.

Example : the banker had agreed to give loan to John for a trip to California by crediting the
amount in John’s account, but the banker failed to credit. So Banker will be punished for
humiliating John

Nominal damages
Nominal damages are awarded when the plaintiff is legally in the right, but has not suffered
substantial losses. The amounts awarded in these cases are usually very small. They may only
cover the plaintiff’s legal costs.

Example:
A contracted to purchase a Scooter from B, a dealer. But he failed to purchase the scooter.
However, the demand for the scooters far exceeded the supply, and B could sell the scooter
agreed to be purchased without loss of profit. B is entitled only to nominal damages

3. SUIT FOR QUANTUM MERUIT

It means “AS MUCH AS EARNED” or “in proportion to the work done. “The phrase
“Quantum Meruit‟ literally means when a person has begun the work and before he could
complete it, the other party terminates the contract or does something which make it impossible
for the other party to complete the contract, he can claim for the work done under the contract
so far party.

Example: A, engages B, a contractor, to build a three storied house. After a part of the house is
constructed, A prevents B from working any more. B, the contractor, is entitled to get
reasonable compensation for work done under the doctrine of quantum meruit in addition to the
damages for breach of contract.

4. SUIT FOR SPECIFIC PERFORMANCE

Specific performance means the actual carrying out of the contract as agreed. Under certain
circumstances an aggrieved party may file a suit for specific performance, i.e., for a
decree(official order) by the court directing the party to actually perform the promise that he
has made.
Example: Mr. Tipu agrees to sell his house to Mr. Amir, who agrees to purchase. But due to
some reasons Mr. Tipu commits breach. At the suit of Mr. Amir, court may ask Mr. Tipu to
carry out the contract.

5. SUIT FOR AN INJUNCTION

Injunction is an order of a court restraining a person from doing a particular act.To put it
differently, where a party is in breach of negative term of the contract (i.e., where he is doing
something which he promised not to do) the court may, by issuing an injunction, restrain him
from doing, what he promised not to do.

Example: A, a singer contracts with B the Manager of a theatre to Sing at his theatre for one
year and to abstain from Singing at other theatres during the theatre. She absents herself , B
cannot compel A to sing at his theatre, but he may sue her for an injunction restraining her from
Singing at other theatres .

--------------------------------------------------------------------------------------------------------------------------------
 Lecture-15- Indian Sale of Goods Act,1930 - Introduction,Definition

Indian Sale of Goods Act, 1930

Till 1930, transactions relating to sale and purchase of goods were regulated by the Indian
Contract Act, 1872.In 1930, Sections 76 to 123 of the Indian Contract Act, 1872 were revoked
and a separate Act called ‘The Indian Sale of Goods Act, 1930 was passed. It came into force on
1st July,1930.With effect from 22nd September,1963,the word ‘Indian’ was also removed. Now,
the present Act is called ’The Sale of Goods Act, 1930’. This Act extends to the whole of India
except the State of Jammu and Kashmir.

Definition:

A contract of goods is a contract whereby the seller transfers or agrees to transfer the property to
goods to the buyer for a price. There may be a contract of sale between one part-owner and
another [Sec. 4(1)].

The term ‘contract of sale’ is a generic term and includes both a sale and an agreement to sell.

Scope of the Act

The Sale of Goods Act deals with ‘Sale of Goods Act,1930,’contract of sale of goods is a
contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a
price.” ‘Contract of sale’ is a generic term which includes both a sale as well as an agreement to
sell.

SALE & AGREEMENT TO SELL

A contract of sale is a generic term and includes both an actual sale and an agreement to sell.
Section 4 provides that if the property in goods is transferred from the seller to the buyer under a
contract, the contract is called a sale. Where the transfer of the property in the goods will take
place at a future time or is subject to some condition which has to be fulfilled, the contract is
called an agreement to sell. Such an agreement to sell becomes a sale when the prescribed time
lapses or the conditions are fulfilled.

Basis of Distinction Sale Agreement to Sell

Contract It is an executed contract.
The property in the goods sold
Transfer of property passes to the buyer at the time of
contract. It passes immediately.
It is an executory contract.
The property passes when it
becomes sale on the expiry of
prescribed time or the fulfilment
of certain conditions. It takes
place at a future time or subject to
fulfilment of conditions.
 It creates a right in rem – gives right It creates a right in personam –
right against a person. Right to
Conveyance of property to the buyer to enjoy the goods
enforce a particular person’s to fulfill
against the whole world his obligation.
The transfer of risk takes place
immediately. It is related to There is no transfer of risk of loss
ownership and when ownership is of goods as ownership is not
transferred, the risk also passes to transferred. The loss will be borne
Transfer of risk
the person. If there is loss of goods, by the seller even though the
it will fall on the buyer even though goods are in possession of the
the goods maybe in the possession buyer.
of the seller.
Since the property has passed to the The seller can only sue for
Right of seller in case
buyer, the seller can sue the buyer damages, unless the price was
of breach
for price of the goods. payable at a particular date.
Right of buyer in case
He can sue the seller for damages. He can sue the seller for damages.
of breach
He cannot claim the goods but
Insolvency of seller in He can claim the goods from the
only a rateable dividend for the
possession of goods Official assignee (officer of the court)
money paid.
The seller has to deliver the goods to The seller can refuse to deliver
Insolvency of buyer
the Official assignee except where the goods to the Official Assignee
before paying the price
he has a lien over the property. or Receiver.
 Lecture-16- Essentials of Contract of sale

Essential elements of Contract of sale

1. Seller and buyer

There must be a seller as well as a buyer.’Buyer’ means a person who buys or agrees to buy
goods[Section 2910].’Seller’ means a person who sells or agrees to sell goods [Section 29(13)].

2. Goods

There must be some goods as a subject-matter. Goods must be one which is defined as goods
in Sec. 2(7) of the Sale of Goods Act. As per the definition given in Sec. 2(7) of the Act, goods
means every kind of movable property and it includes
1. stock and share,
2. growing crops, grass,
3. the things attached to or forming a part of the land which can be severed(detached) from
the land.

Example: A agreed to sell to B, wheat crops which are grown in his field. A and B agreed
that B may cut the crop and take it away upon the payment of the price. As the growing crop is
included in the term “goods”, this is a valid contract of sale.

3. Transfer of property (ownership)

Here property means ownership. In a contract of sale, it is the ownership that is transferred (in
the case of sale), or agreed to be transferred (in the case of agreement to sell), as against transfer
of mere possession. The property in the goods means “all ownership rights” of the goods. In a
contract of sale, all the ownership rights of the goods must be transferred by the seller to the
buyer.Thus,there must be either a transfer of ownership of goods or an agreement to transfer the
ownership of goods.The ownership may transfer either immediately on completion of sale or
sometime in future in agreement to sell.

Example: A agreed to buy a new two wheeler from B an agent for Rs.25,000. A paid the price
and got the two wheeler registered in his name and the registration book was delivered
by B to A. This is a valid contract of sale because the ownership of the two wheeler has been
transferred to A.

4. Price

Another essential element of a contract of sale is that there must be some price for the goods.
That means, the goods must be sold for some price. According to Sec. 2(10) of the Sale of Goods
Act, the term price means “the money consideration for a sale of goods“.
Thus the price is the consideration for contract of sale which should be in terms of money. If the
ownership of the goods is transferred for any consideration other than the money, that will not be
a sale but an exchange.

When the consideration is only goods, it amounts to a ‘barter’ and not sale. When there is no
consideration, it amounts to gift and not sale. However, consideration can be paid partly in
money and partly in goods.

Example: A delivered to B 10 cows valued at Rs.2,000 per cow. B delivered to A 20 bags of rice
at Rs.750 per bag and paid the balance of Rs.5,000 in cash in exchange of the cows. This is a
valid contract of sale.

5. Essential elements of a valid contract

All the requirements of a valid contract such as Offer and Acceptance, Free Consent, Contractual
Capacity, Lawful consideration, Lawful object, Agreement not declared void, Possibility of
performance, Certainty of terms, Legal relations and Legal formalities must be fulfilled. If any of
the essential elements of a valid contract is absent, then the contract of sale will not be valid.

Example: A agreed to sell an almirah to B without any consideration. Such a contract of sale is
not valid because it is made without consideration.
 Lecture-17- Conditions and Warranties
Conditions and Warranties

Whenever we buy any goods like electronic gadgets etc, we are concerned about the warranty
periods. We ask the seller about the warranty to make sure that even if the product is found to be
faulty after purchase we can easily get the product replaced or repaired. The terms “Condition”
and “Warranty” are set out in the contract of sale in order to determine remedies the parties can
claim in case of the breach by either of the parties.

Meaning of Conditions [Section 12(2)]

In the context of the Sale of Goods Act, 1930, a condition is a foundation of the entire contract
and integral part for performing the contract. The breach of the conditions gives the right to the
aggrieved party to treat the contract as repudiated. In other words, if the seller fails to fulfil a
condition, the buyer has the option to repudiate the contract or refuse to accept the goods. If the
buyer has already paid, he can recover the prices and also claim the damages for the breach of
the contract.

Example: Sohan wants to purchase a horse from Ravi, which can run at a speed of 50 km per
hour. Ravi shows a horse and says that this horse is well suited for you. Sohan buys the horse.
Later on, he finds that the horse can run only at a speed of 30 km/hour. This is the breach of
condition as the requirement of the buyer is not fulfilled.

Meaning of Warranty [Section 12(3)]

Warranty is the additional stipulation and a written guarantee that is collateral to the main
purpose of the contract. The effect of a breach of a warranty is that the aggrieved party cannot
repudiate the whole contract however, can claim for the damages. Unlike in the case of breach of
condition, in the breach of warranty, the buyer cannot treat the goods as repudiated.

Conditions to be treated as Warranty [Section 13]

In the following three cases a breach of a condition is treated as a breach of a warranty:

1. Where the buyer waives a condition; once the buyer waives a condition, he cannot insist
on its fulfillment e.g. accepting defective goods or beyond the stipulated time amount to
waiving a condition.
2. Where the buyer elects to treat breach of the condition as a breach of warranty; e.g. where
he claims damages instead of repudiating the contract.
3. Where the contract is not severable and the buyer has accepted the goods or part thereof,
the breach of any condition by the seller can only be treated as breach of warranty. It
cannot be treated as a ground for rejecting the goods unless otherwise specified in the
contract. Thus, where the buyer after purchasing the goods finds that some condition is
not fulfilled, he cannot reject the goods. He has to retain the goods entitling him to claim
damages.
Kinds of conditions
In a contract of sale of goods, conditions may be express or implied.

Expressed Condition
These are expressly provided in the contract. For example, buyer desires to buy a Sony TV
Model No. 2020.Here, model no. is an express condition.

Implied Condition
These are such conditions which are automatically incorporated or these are implied by law in
every contract of sale of goods.
 Lecture-18- Implied Conditions
The various implied conditions have been shown below:

Implied Conditions are

1. Conditions as to title [ Section 14 (a)]

There is an implied condition on the part of the seller that

 Firstly, he has the title to sell the good. Title means sole owner of goods

 Secondly, In the case of a sale, he has a right to sell the goods, and 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.

Example: A bought a second-hand motor car from the dealer B and paid for the same. After
six months, he was deprived of it as the seller B had no title to sell the car. It was held that
the aggrieved party, A is entitled to recover the money.

2. Condition in case of sale by description [Section 15]

The implied condition is that if seller is selling the goods by giving/ stating the description to the
buyer then the goods must correspond with the description. Where there is a contract of sale of
goods by description, there is an implied condition that the goods shall correspond with
description. The main idea is that the goods supplied must be same as were described by the
seller. Sale of goods by description include many situations as under:

i. Where the buyer has never seen the goods and buys them only on the basis of description given
by the seller.

ii. Where the buyer has seen the goods but he buys them only on the basis of description given
by the seller.

iii. Packing of goods may sometimes be a part of the description. Where the goods do not
conform to be method of packing described (by the buyer or the seller) in the contract, the buyer
can reject the goods.

3. Condition in case of sale by sample [Section 17]

A contract of sale is a contract for sale by sample when there is a term in the contract, express or
implied, to that effect. Such sale by sample is subject to the following three conditions:

1. The goods must correspond with the sample in quality.

2. The buyer must have a reasonable opportunity of comparing the bulk with the sample.
 3. The goods are free from any defect rendering them unmerchantable. Such defects are
called latent defects and are discovered when the goods are put to use.

4. Condition in case of sale by description and sample [Section 15]

If the sale is by sample as well as by description, the goods must correspond with the sample as
well as the description.

5. Condition as to quality or fitness [Section 16(1)]

As a normal rule buyer is responsible to examine the goods and see whether it’s suitable for him
or not. But when buyer specifically informs the seller about the purpose and relies on the skills
and judgement of the seller so, in this case seller is responsible to provide quality product to the
buyer. If seller cheats with buyer then there will be a breach of implied condition as to quality/
fitness.

6. Condition as to merchantable quality [Section 16(2)]

 Merchantable quality means able to sell the goods

Where the goods are bought by description from a seller who deals in goods of that
description,there is an implied condition that the goods shall be of merchantable quality.The
expression ‘ merchantable quality’ means that the goods are free from latent defects,goods can
be marketable at their full value and goods can be used for the purpose for which they are
bought.

Example: A watch late by 5 minutes does not possess merchantable quality

7. Condition as to wholesomeness

In case of eatables or provisions or foodstuffs, there is an implied condition as to

wholesomeness.Condition as to wholesomeness means that the goods shall be fit for human
consumption.

Example: If you purchase drinking water it should not be contaminated

 Lecture-19- Warranty

Warranty
Meaning
A warranty is a stipulation (stipulation means to demand something):-

1. Which is not essential to the main purpose of the contract.

2. The breach of warranty gives the aggrieved party a right to claim for damages but not the right
to reject the goods
3. Even if there is breach of warranty, the main contract can be completed
4. Breach of warranty can’t be treated as breach of condition

Example: A (buyer) told B (shop keeper) that he wants to buy a good watch. B showed him a
watch saying that it is made in Thailand. A buys the watch and later on realized that watch is
made in China and not Thailand. There is breach of warranty because the stipulation made by
the seller was not correct.

Difference between guarantee and warranty:

Guarantee Warranty
1.Promise that a particular thing will happen 1. It means an assurance given (positive
for sure declaration regarding something).
2.Option for repair/ replacement/ refund is 2.Option for repair/ replacement is there
there
3.Applicable to products/ services 3.Applicable to products/ products parts only

Kinds of Warranty

Expressed Warranty
The warranties which are generally agreed by both the parties and are inserted in the contract, it
is said to be expressed warranties. In an advertisement for Khaitan fans, guarantee for 5 years is
an express warranty.

Implied Warranty
These are such warranties which are automatically incorporated/ applicable by the law. An
implied warranty is a lot like an assumption. For example, when you buy a new car from a car
dealer, the implied warranty is that the car works. When you order a burger at a restaurant, it
comes with the implied warranty that it is eatable.
Following are the implied warranties in the contract of sale:

Implied warranties

a) Warranty as to quiet possession or undisturbed possession [Section14(b)]

Once the goods are sold to buyer then there should be no disturbance by the seller or any third
party to the buyer. There is an implied warranty that the buyer shall have and enjoy quiet
possession of the goods. The breach of this warranty gives buyer a right to claim damages from
the seller.

b) Warranty of freedom from encumbrances [Section 14(c)]

Any goods which are being sold by the seller to buyer should be free from loan/ liability.There is
an implied warranty that the goods are free from any charge or encumbrance in favour of any
third person if the buyer is not aware of such charge or encumbrance. The breach of this
warranty gives buyer a right to claim damages from the seller.

Example: A sells auto to B and B buys the auto on loan.Now B sells the auto to C before paying
all the EMI’s.Now Bank recover the remaining amount from C as C is possessing the auto,here
since B had breached this warranty,C can claim all damages from B

c) Warranty to disclose dangerous nature of goods

In case of selling the goods of dangerous nature to the buyer, there is an implied warranty that
seller should disclose all the relevant information to the buyer. If seller fails to do the same, then
seller will be liable to pay for the damages to the buyer.

Example of dangerous goods: Disinfectant, chemicals etc.

 Lecture-20- Rights of an unpaid seller

Rights of an Unpaid Seller [Section 46-52,54-56,60-61]

The rights of an unpaid seller can broadly be classified under the following two categories:

1. Rights against the goods

2. Rights against the buyer personally

The various rights of an unpaid seller have been shown in Fig.

I Rights against the goods where the property in the goods has passed to the buyer

a) Right of Lien [Section 47,48 and 49]

Meaning of Right of Lein: The right of lien means the right to retain the possession of the
goods until the full price is received.

Three circumstance under which right of lien can be exercised[Section 47(1)]

1. Where the goods have been sold without any stipulation to credit;
2. Where the goods have been sold on credit,but the term of credit has expired;
 3. Where the buyer becomes insolvent.

Other provisions regarding right of lien[Sections 47(2),48,49(2)]

1. The seller may exercise his right of lien,even if he possesses the goods as agent or bailee
for buyer[Section 47(2)]
2. Where an unpaid seller has made part delivery of the goods,he may exercise his right of
lien on the remainder,unless such part delivery has been made under such circumstances
as to show agreement to waive the lien[Section 48].
3. The seller may exercise his right of lien even though he has obtained a decree for the
price of the goods[Section 49(2)].

Circumstances under which right of lien in the following cases:

1. When he delivers the goods to a carrier or other bailee for the purpose of transmission to
the buyer without reserving the right of disposal of the goods[Section 49(1)(a)].
2. When the buyer or his agent lawfully obtains possession of the goods [Section 49(1)(b)]
3. When the seller waives his right of lien[Section 49(1)(c)].
4. When the buyer disposes of the goods by sale or in any other manner with the consent of
the seller[Section 53(1)].
5. Where document of title to goods has been issued or lawfully transferres to any person as
buyer or owner of the goods and that person transfers the document by way of sale,to a
person who takes the document in good faith and for consideration.[Proviso to Section
53(1)].

b) Right of Stoppage of Goods in Transit

The right of stoppage of goods means the right of stopping the goods while they are in transit,to
regain possession and to retain them till the full price is paid.

Conditions under which right of stoppage in transit can be exercised[Section 50]

The unpaid seller can exercise the right of stoppage in transit only if the following conditions are
fulfilled:

1. The seller must have parted with the possession of goods,i.e. the goods must not be in the
possession of seller.
2. The goods must be in the course of transit.

 The buyer must have become insolvent.

c) Right of Resale[Section 46(1) and 54] An unpaid seller can resell the goods under the
following three circumstance:

1. Where the goods are of a perishable nature.

 2. Where the seller expressly reserves a right of resale if the buyer commits a default in
making payment.

 Where the unpaid seller who has exercised his right of lien or stoppage in transit gives a
notice to the buyer about his intention to resell and buyer does not pay or tender within a
reasonable time.

II Rights against the goods where the property in the goods has not passed to the buyer

Right of withholding delivery [Section 46(2)]

Where the property in the goods has not been passed to the buyer, the unpaid seller, cannot
exercise right of lien, but get a right of withholding the delivery of goods, similar to and co-
extensive with lien and stoppage in transit where the property has passed to the buyer.

Right of Stoppage of Goods in Transit

The right of stoppage in transit means that an unpaid seller has the right to stop the goods while
they are in transit, regain possession, and retain them till he receives the full price.

Rights of Unpaid Seller against the Buyer Personally

The unpaid seller, in addition to his rights against the goods as discussed above, has the
following three rights of action against the buyer personally:

1. Suit for price (Sec. 55). Where property in goods has passed to the buyer; or where the sale
price is payable ‘on a day certain’, although the property in goods has not passed; and the buyer
wrongfully neglects or refuses to pay the price according to the terms of the contract, the seller is
entitled to sue the buyer for price, irrespective of the delivery of goods. Where the goods have
not been delivered, the seller would file a suit for price normally when the goods have been
manufactured to some special order and thus are unsaleable otherwise.

2. Suit for damages for non-acceptance (Sec. 56). 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 seller’s remedy in this case is a suit for damages rather than an action for the full price of the
goods.

3. Suit for Interest [Section 61(2)]

In case of breach of the contract on the part of seller,the buyer may sue the seller for interest
from the date on which the payment was made.
 Lecture -21-Rights and Duties of buyer

Rights of the buyer

1. To have delivery of the goods as per contract

2. To reject the goods when they are not of the description, quality or quantity as
specified in the contract.
3. To repudiate the contract when goods are delivered in installments without any
agreement to that effects.
4. To be informed by the seller, when the goods are to be sent by sea route, so that
he may arrange for their insurance.
5. To have a reasonable opportunity to examine the goods for ascertaining whether
they are in conformity with the contract.
6. To sue the seller for recovery of the price, if already paid, when the seller fails to
deliver the goods.
7. To sue the seller for damages if the seller refuses to deliver the goods.
8. To sue the seller for specific performance
9. To sue the seller for damages for breach of a warranty.
10. To sue the seller for damages for anticipatory breach of contract.

Duties of buyer

1. To accept the delivery of goods, when the seller is willing to make the delivery as per
the contract.
2. To pay the price in exchange for possession of the goods
3. To apply for delivery of the goods
4. To demand delivery of the goods at a reasonable hour
5. To bear the risk of deterioration in the course of transit
6. To inform the seller in case the buyer refuses to accept or reject the goods
7. To take the delivery of the goods within a reasonable time
8. To pay damages for non-acceptance of goods
9. To pay the price, where the property in the goods are passed to the buyer.
10. To accept delivery of the goods in installments and pay for them, in accordance with the
contract.
 UNIT 3
INTELLECTUAL PROPERTY LEGISLATIONS

INTRODUCTION:
WIPO (World Intellectual Property Organization) was established by the WIPO Convention in
1967. The WIPO is a specialized agency of the United Nations. It was established to promote
the protection of IP throughout the world. Its headquarters are in Geneva, Switzerland.

MEANING OF INTELLECTUAL PROPERTY:

Intellectual Property is the creation of human intellect. It refers to the ideas, knowledge,
invention, innovation, creativity, research, etc. whether movable or immovable, wherein the
owner may exclusively use his property at will and has the right to prevent others from using it,
without his permission.
Intellectual property (IP) refers to the ownership of an idea or design by the person who came
up with it. It gives a person certain exclusive rights to a distinct type of creative design, meaning
that nobody else can copy or reuse that creation without the owner's permission.
In other words, Intellectual Property is something produced using human intellect which has
commercial value.
DEFINITION OF INTELLECTUAL PROPERTY RIGHTS (IPR):
Intellectual property rights refers to the general term for the assignment of property rights
through patents, copyrights and trademarks. These property rights allow the holder to exercise a
monopoly on the use of the item for a specified period.
According to World Trade Organization,” Intellectual property rights are the rights given to
persons over the creation of their minds. They usually give the creator an exclusive right over the
use of his/her creation for a certain period of time.”
OBJECTIVES OF IPR:
1. The purpose of IPR is to encourage new technologies, artistic expressions and inventions
while promoting economic growth.
2. They allow the creator or the owner to benefit from his/ her own work or investment.
3. It prevents interference from others in stopping the owner to enjoy his rights.
TYPES OF INTELLECTUAL PROPERTIES:
 Patents
 Copyrights
  Trademarks
 Industrial design
 Geographical indications, and
 Trade secret

1. Patents: It is covered under the Act called the Patents Act, 1970 [Amended by Patents
Act, 2005]. It is a monopoly right granted to a person, who invented a new product or
process of making an article, for 20years under the Indian Patens Act, 1970. It can be
renewed after expiration of period.
A patent has to be applied in each country by the inventor, to claim his rights in that
country. An exclusive right granted by a country to the owner of an invention to make,
use, and manufacture and market the invention.
Patent Offices are located at Kolkata, Mumbai, Chennai and Delhi to deal with the
applications for patents.

2. Copyright: Copyright is a legal concept, enacted by most governments, that grants the
creator of an original work exclusive rights to its use and distribution. It is a right, which
is available for creating an original literary or dramatic or musical or artistic work.
Copyright refers to the legal right of the owner of intellectual property.
In simpler terms, copyright is the right to copy. This means that the original creator of a
product and anyone he gives authorization to are the only ones with the exclusive right to
reproduce the work.
Examples of unique creations include computer software, art, poetry, graphic designs,
musical lyrics and compositions, novels, film, original architectural designs, website
content, etc.

3. Trademark: Trademark can be a word, name, brand, symbol, and label etc., used by a
company to create a unique identity for their product. Trademark can be registered, and
then use. The registration validity is for 10 years and renewable after expiry.
It is covered under the Act called the Trade Marks Act, 1999. The Act came into effect
on September 15, 2003. It replaced the Trade and Merchandise Marks Act, 1958.
It extends to the whole of India.
Different Symbols are :
™ Intent to use application filed for product
SM
Intent to use application filed for services
® Registered trademark

4. Industrial design: Design deals with features, shapes, patterns, etc., applied to an article
by an industrial process, manual or mechanical. Designs can be registered based on its
originality, henceforth they can use ® or registered, with registration number.
 The design should be new or original, not previously published or used in any country
before Registration. Total term of a registered design is 10 years + 5 years Extended
Period.

5. Geographical Indication: A sign used on goods that have a specific geographical origin
and possess qualities or a reputation due to that place of origin. Registration of a GI: 10
years & renewable. The Geographical Indication of Goods (Registration and Protection)
Act came into being in 2000.Geographical Indication of Goods (Registration and
Protection) Act 1999. It is typically used for agricultural products, food and wine,
handicrafts.
Eg : Mysore silk, Darjeeling tea etc

6. Trade secret: It refers to any valuable information not known to the society or the
competitors. It need not be anything unique or complex. But must give a competitive
advantage over others.

Eg: method of manufacturing, recipes

 THE INDIAN PATENT ACT – 1970
Introduction:
Patent Protection was first introduced in 18th century. In India the grant of patents is governed by
the Patent Act 1970 and Rules 1972. The patents granted under the act are operative in the whole
of India.
Meaning of Patent:
A patent is a grant from the government which confers on the guarantee for a limited period of
time the exclusive privilege of making, selling and using the invention for which a patent has
been granted. It is a monopoly right to a person who has invented a new and useful article or it is
an improvement of an existing article or a new process of making an article.
Need for Patent:
 To encourage Research and Development
 Induces the inventor to disclose his invention.
 Stimulate capital investment
 Encourage technology development
 Encourages establishment of new industries.
 To protect the creativity of individual
 To protect their invention from being copied.
 To reward the inventor
Objective:
 To have right over invention
 Sue any person who use his product
 Right to sell the product or process
 Absolute owner, has right to improve or modify the product or process
 First owner of the invention
 To enjoy the exclusive rights over the invention.
 The patent is to ensure commercial returns to the inventor for the time and money spend
in generating a new product.
TERMINOLOGIES:

1) INVENTION: This means anything new and useful.

(i) art, process, method or manner of manufacture
(ii) machine, apparatus or other article
(iii) Substance produced by manufacture, and includes any new and useful improvement of
any of them.
2) Legal Representative: a person who in law represents the estate of the deceased person
3) Patentee: means the person to whom the patent is granted and whose name is entered in the
register of patent.
4) Assignee: Patent ownership is transferred to a company the instant the invention is made. This
is done by a contract or agreement. Whatever inventions are made, they are immediately transfer
to the company upon conception. The company is said to be the 'assignee' and the employee is
the 'assignor'
Who can apply for patent?
 True And First Inventor: means a patentee is a true and first inventor. A true and first
inventor means a person who for the first time makes or declares about his invention
through the patent to the rest of the world. True owner will be decided on the basis of the
date on which such patent is obtained. True and first inventor- A person who first to
convert his idea in to an invention.
 Assignee of an inventor – if the inventor is unable to apply for the patent then he can
assign the right to apply to someone else on behalf of inventor.
 The legal representative – of any deceased person who, immediately before his death
was entitled to make such an application.
 Joint inventors
Types of patent:
1)Product patent: it is an exclusive right given to the original inventor of a product. This means
that no other manufacturer can provide the same product through the same or any other
process.The implication is that there will not be a competitor for the producer as it is the product
which is patented. Product patent system gives higher level of protection to the inventor. In 1995
India joined WTO and the impact was member countries have to comply with TRIPS(Trade
Related Intellectual Property Rights)
2) Process Patent:

3)Utility patent: Anyone who creates an entirely new machine, process, chemical compound,
manufactured product, material composition can apply for a utility patent.
4)Design patent
5)Plant patent
PATENTABLE INVENTIONS:
1) Invention must relates to a process or product or both be new (novel): Invention
must not be published in India or elsewhere in prior public knowledge or prior public use
with in India

2) Involves an inventive step: A feature of an invention that Involves technical advance as

compared to the existing knowledge.
3) Be capable of industrial application: Industrial application means invention is capable
of being made or used in any kind of industry.

4) Not fall under section3- Section 3(a) and Sec 3(b):

Inventions contrary to well established natural Laws
Sec 3(b) Commercial exploitation or primary use of inventions, which is
Contrary to public order or Morality
Examples
– Gambling machine,
– Device for house-breaking ,
Commercial exploitation or primary use of inventions , which Causes serious effect
to
 health or
 human, animal, plant life or
 to the environment
Examples
 Biological warfare material or device,
weapons of mass destruction

What is not patentable:

 An invention which is frivolous (no use)

 An invention which causes serious effect to human, animal or plant life or
health or to the environment
 discovery of any living thing or non-living substances occurring in nature
 The mere arrangement or re-arrangement or duplication of known devices
 A method of agriculture or horticulture
 Any method of performing a mental task or playing a game.
 Inventions pertaining to Atomic energy
  Computer programs
 A literary, dramatic, musical or artistic work,
 cinematographic works and television productions

STAGES FROM FILING TO GRANT OF A PATENT or PROCEDURE TO GRANT

PATENT

1) File an application for patent: With one of the patent offices based on territorial
jurisdiction of the place of office or residence of the applicant /agent Pay the required
fee Information concerning application form and details of fee available at
www.ipindia.nic.in Guidelines for applicants also available on this
website

2) Formality Check: An Examiner checks the formal requirements before accepting

the application and the fee – this is done immediately. Issue of application number
and the cash receipt – this is done the same day. In case of receipt of application by
post, cash receipt, application number is sent by post within 2- 3 days
3) Publication: Application is kept secret for a period of 18 months from the date of
filing. In 19th month, the application is published in the official journal – this journal
is made available on the website weekly. Indian patent office will publish patent
applications after 18 months. This is an automatic event and you need not make any
request. Applicant has an option to get his application published before 18 months
also in that case, application is published within one month of the request
4) Request for Examination: Application is examined on request.Request for
examination can be made either by the applicant or by a third party. A period of 48
months, from the date of filing, is available for making request for examination

5) Examination: Application is sent to an Examiner within 1 month from the date of

request for examination. Examiner undertakes examination w.r.t.whether the claimed
invention is not prohibited for grant of patent whether the invention meets the criteria
of patentability

6) Issue of FER (First Examination Report): A period of 1 to 3 months is available to

Examiner to submit the report to the Controller.1 months’ time available to Controller
to verify the Examiner’s report. First Examination Report (FER) containing list of
the objections is issued within 6 months from the date of filing of request.

7) Response from the Applicant: 12 months’ time, from the date of issue of FER, is
available to the applicant to meet the objections. If objections are met, grant of patent
is approved by the Controller – within a period of 1 month.

8) Pre-grant Opposition and Post-grant opposition: The opposition proceedings

before the grant of a patent are usually called pre-grant and those after the grant are
usually called post-grant opposition. Patents of the opposition, in writing against the
grant of a patent after the application for a patent has been published and/but before
the grant of the patent. Pre-grant opposition acts as a defensive shield to confirm the
validity of the patent applications before patents are granted to them.

9) Examination of Pre-grant Opposition: After publication, an opposition can be filed

within a period of 6 months. Opportunity of hearing the opponent is also available
 10) Consideration of Pre-grant Opposition: Opposition (documents) is sent to the
applicant. A period of 3 months is allowed for receipt of response. After examining the
opposition and the submissions made during the hearing, Controller may
a. Either reject the opposition and grant the patent.
b. Or accept the opposition and modify/reject the patent application.
This is to be done within a period of 1 month from the date of completion of opposition
proceedings
11) Grant of a Patent: A certificate of patent is issued within 7 days. Grant of patent is
published in the official journal

Renewal Fee:
• To be paid within 3+6 months from date of recording in the register [sec 142 (4) ]
• No fee for1st and 2nd year
• Renewal fee, on yearly basis, is required to be paid for 3rd to 20th for keeping the patent
in force
• Delay up to six months from due date permissible on payment of fee for extension of
time
• Patent lapses if renewal fee is not paid within the prescribed period
Rights of a patentee:
1) Right against exploit the patent: The patentee has a right to prevent 3rd parties, from exploiting
the patented invention.
2) Right to grant license: The patentee has a power to assign rights or grant license.
3) Right to surrender: The patentee is given the right to surrender the patent by giving notice in
prescribed manner to the controller.
4) Right to sue for infringement: A patentee is given the right to institute proceeding for
Infringement of the patent in a district court.
5. He has the right to assign his right to a third person
Infringement:
Infringement of a patent consists of the unauthorized making, using, offering for sale or selling
any patented invention during the term of the patent.
If a patent is infringed, the patentee may sue for relief in the appropriate Federal court.
The patentee may ask the court for an injunction to prevent the continuation of the infringement
and may also ask the court for an award of damages because of the infringement
 FOREIGN EXCHANGE MANAGEMENT ACT 1999
The Government of India formulated Foreign Exchange Management Act to encourage the
external payments and across the border trades in India. It was formulated in the year 1999 while
it replaced FERA (Foreign Exchange Regulation Act). This was meant to close all the loopholes
and drawback of FERA and hence major economic reforms were introduced under this Act. It
was primarily formulated to de-regularize and have liberal Indian economy.

Objectives of FEMA:
The main objective of FEMA was to help facilitate external trade and payments in India. It was
also meant to help orderly development and maintenance of foreign exchange market in India. It
defines the procedures, formalities, dealings of all foreign exchange transactions in
India. FEMA is applicable to all parts of India and it is also equally applicable to the offices and
agencies which are located outside India however is managed or owned by an Indian Citizen.
FEMA head office is known as Enforcement Directorate and is situated in Delhi. The Directorate
is further divided into 5 zonal offices in Delhi, Mumbai, Kolkata, Chennai and Jalandhar and
each office is headed by a Deputy Director.
• Amend the law relating to Foreign Exchange
• Facilitate external trade and payments (FDI)
• Development and Management of Foreign Exchange market in India
• To regulate import and export currency
• To conserve FOREX reserves of the country and utilize the same in economic
development of India
• To regulate holding of immovable property outside India by citizen of India
• To regulate acquisition,holding of immovable property in India by Non-Resident of India
• To regulate employment in foreign nationals
Scope
• It is applicable to whole of India
• All branches ,offices and agencies outside India owned or controlled by PRI(Person
Resident in India)
• Eg: If Reliance has branch in Australia,then FEMA is applicable to Australia too
• Any contravention committed outside India by person to whom the Act applies

Main Features of the Foreign Exchange Management Act (FEMA)!

The Foreign Exchange Management Act (FEMA) was an act passed in the winter session of
Parliament in 1999, which replaced Foreign Exchange Regulation Act. This act seeks to make
offences related to foreign exchange civil offences. It extends to the whole of India.

The Foreign Exchange Regulation Act (FERA) of 1973 in India was replaced on June 2000 by
the Foreign Exchange Management Act (FERA), which was passed in 1999. The FERA was
passed in 1973 at a time when there was acute shortage of foreign exchange in the country.

It had a controversial 27 years stint during which many bosses of the Indian corporate world
found themselves at the mercy of the Enforcement Directorate. Moreover, any offence under
FERA was a criminal offence liable to imprisonment. But FEMA makes offences relating to
foreign civil offences.

FEMA had become the need of the hour to support the pro- liberalisation policies of the
Government of India. The objective of the Act is to consolidate and amend the law relating to
foreign exchange with the objective of facilitating external trade and payments for promoting the
orderly development and maintenance of foreign exchange market in India.

FEMA extends to the whole of India. It applies to all branches, offices and agencies outside India
owned or controlled by a person, who is a resident of India and also to any contravention there
under committed outside India by two people whom this Act applies.

The Main Features of the FEMA:

The following are some of the important features of Foreign Exchange Management Act:

• FERA Act of 1974 in India was replaced on June 2000 by FEMA

• Any offences under FERA was a criminal offence liable to imprisonment. But FEMA
makes offences relating to civil offences
• FEMA extends to whole of India and also applies to all branches,officies and agencies
outside India owned or controlled by a person ,who is resident of India
• It classified the foreign exchange transactions in two categories i.e Capital account and
Current account transactions
• It provides power to the RBI to regulate and manage foreign exchange in consultation
with central govt
• It gives full freedom to a person resident in India, to own/transfer any foreign immovable
property situated outside India
• This Act is a civil law and provide arrest only in exceptional cases.
• Enforcement Directorate will be more investigative in nature
• Violation of FEMA is a civil offence
 • FEMA is more concerned with Management of foreign exchange instead of control
• MLP-(Money Laundering Prevention) aims to prevent the transfer of fund for illegal
activities
• MLP checks the generation of black money
• All confiscated property shall be under the control of Central Govt
• MLP designated officers will have the power to arrest an individual

Definitions
FEMA, covers, three different types of categories, and deals differently with them.
These categories are:
A. Person
B. Person Resident In India
C. Person Resident Outside India

A. Person :For the purpose of provisions, a person shall include any of the following:
i. An individual
ii. A Hindu Undivided family
iii. A company
iv. A Firm
v. An association of persons or a body of individuals, whether incorporated or not,
vi. Every artificial judicial person, not falling within any of the preceding sub clauses, and
vii. Any agency, office or branch owned or controlled by such person.

Person resident outside India” is defined indirectly to mean a person who is not resident in
India. “Person resident in India” is a person residing in India for more than 182 days in the
Preceding Financial Year. Preceding Financial Year means the financial year, which ended on
the last 31st of March. Thus for example, as on 11th June 2007, the Preceding Financial Year
would be “2006-07”. FEMA also excludes person moving out of India for employment or
business from category of Resident. Similarly it also excludes a person coming as tourist / visitor
from the category of Resident. Let’s see the detailed definition below:

“Person resident in India” means:

1. Person Resident in India for more than 182 days during the course of Preceding Financial
Year but excludes :
(a) A person who has gone out of India or who stays outside India :
i. for employment outside India; or
ii. for carrying on a business or vocation outside India; or
iii. for any other purpose, in such circumstances as would indicate his intention to stay outside
India for an uncertain period.
(b) A person who has come to India or stays in India for any purpose other than :
i. for employment in India, or
ii. for carrying a business or vocation in India, or
iii. for any other purpose, in such circumstances as would indicate his intention to stay in India
for an uncertain period;

AUTHORISED PERSON
RBI delegates its powers to the ‘Authorised Persons’ with suitable guidelines, to deal in foreign
exchange and foreign securities.

Section 2(c) of Foreign Exchange Management Act or FEMA states that ‘authorised person’
means an authorised dealer, money changer, off-shore banking unit or any other person
authorised under section 10 (1) to deal in foreign exchange and foreign securities.

They can handle transactions related to Private visits, business visits,remittances of tour
operators,medical treatment abroad or Overseas education.

All nationalised banks, leading non-nationalised banks and foreign banks are appointed as ‘Authorised
Dealers Category I’ to deal in foreign exchange. They can deal in all other transactions in foreign
exchange like bill of exchange, cheques, letter of credit, deposits etc.

DUTIES OF AUTHORISED PERSON

The authorised person shall, in all his dealings in foreign exchange or foreign security, comply
with the RBI, directions/orders, and shall not engage in any transactions involving foreign
exchange.

Before undertaking any transaction in foreign exchange on behalf of any person, a declaration
and information have to be taken from that person to the effect that the transaction will not
contravene or evade the Act's provisions. If such information or declaration is not given to the
authorised person, the transaction can be refused. Under such circumstances, the RBI needs to be
notified.

FOREIGN EXCHANGE

Foreign exchange can be cash, funds available on credit cards and debit cards, traveler’s checks,
bank deposits, or other short-term claims. Section 2(n) of FEMA states that “foreign exchange”
means foreign currency and includes,-

(i) deposits, credits and balances payable in any foreign currency,

(ii) drafts, travelers cheques, letters of credit or bills of exchange, expressed or drawn in Indian
currency but payable in any foreign currency,
(iii) drafts, travelers cheques, letters of credit or bills of exchange drawn by banks, institutions or
persons outside India, but payable in Indian currency.

TRANSACTIONS COVERED UNDER FEMA

All transactions between a resident and a non-resident is covered in FEMA, these transaction can
be broadly classified in two groups current account transactions and capital account transactions.

1. Current Account Transactions

As per Sec 2 (e) “Capital account transaction” means a transaction which alters the assets or
liabilities, including contingent liabilities, outside India of persons resident in India or assets or
liabilities in India of persons resident outside India, and includes transactions referred to in Sec
6(3). Any person may sell or draw foreign exchange to or from an authorized person if such sale
or drawal is a current account transaction. It includes:

 payments due in connection with foreign trade, other current business, services, and
short-term banking and credit facilities in the ordinary course of business
 payments due as interest on loans and as net income from investments
 remittances for living expenses of parents, spouse and children residing abroad, and
 expenses in connection with foreign travel, education and medical care of parents, spouse
and children

2. Capital account transactions

Section 2 (j) of FEMA defines “capital account transaction” as a transaction which alters the
assets or liabilities, including contingent liabilities, outside India of persons resident in India or
assets or liabilities in India of persons resident outside India, and includes transactions like:

 Changes in Assets/ Liabilities

 Transfer/ issue of security
 Borrowing/ Lending
 Export, import or holding of currency or currency notes
 Giving guarantee

Authorities governing the enforcement of FEMA:

 Foreign Exchange Department of Reserve Bank of India (RBI)

 Directorate of Enforcement, Department of Revenue
 Capital Markets Division,
 Foreign Trade Division,

1. Enforcement Directorate – To investigate provisions of the Act, the Central Government

have established the Directorate of Enforcement with Director and other officers as
officers of the Enforcement. It is mainly concerned with the enforcement of the
provisions of the Foreign Exchange Management Act to prevent leakage of foreign
 exchange which occurs through malpractices. Directorate has to detect cases of violation
and also perform substantial adjudicatory functions
2. Adjudicating Authority – The adjudicating authority will issue a notice to the person who
has contravened the provisions of the Foreign Exchange Management Act, Rules,
Regulations, Notifications or any directions issued by the RBI.[4]
3. Special Director (Appeals) – Any person aggrieved by an order made by the Adjudicating
Authority, being an Assistant Director of Enforcement or a Deputy Director of
Enforcement can prefer an appeal to the Special Director (Appeals).
4. Appellate Tribunal – Any person aggrieved by an order made by the Adjudicating
Authority, or the Special Director (Appeals) can prefer an appeal to the Appellate
Tribunal

What Type of Offences?

Although under FEMA, offences pertain to transactions in Foreign Exchange only.

However relevant offences are as follows:

• Only a person Authorized by Reserve Bank can deal in foreign Exchange

• No one can make a payment to a person resident outside India, without permission of
Reserve Bank.
• No one receives any payment from a person resident outside India, without permission of
Reserve Bank.
• A person resident in India cannot deal in foreign exchange, foreign security or any
immovable property situated outside India, without permission of Reserve Bank. (sec 4)
• Similarly a person resident outside India, cannot acquire immovable property in India
without permission.

Penalties for Contravention under FEMA

Sec 13 imposes penalty in case of:-

contravention of act,
contravention of rules, regulations or oders
contravention of any of the conditions of RBI authorization
Following are the kinds of penalties:
 If, the amount against which offence is quantities, then penalty will be "THRICE" the
sum involved in contravention.
 Where the amount cannot be quantified the penalty may be imposed upto
two lakh rupees.
 If, the contravention is continuing every day, then Rs. Five Thousand for every day after
the first day during which the contravention continues.

Provision of FEMA
1. Provision regarding dealing in foreign exchange
2. Provision regarding holding of foreign exchange
3. Provision regarding current account transactions
4. Provision regarding capital account transactions
5. Provision regarding export of goods and services
6. Provision regarding authorized persons
7. Provision regarding contravention and penalties
8. Provision regarding adjudication and appeal
 CONSUMER PROTECTION ACT, 1986
It is one of the most progressive and comprehensive piece of legislations enacted for the protection
of consumer. The consumer protection act was passed on 5th December 1986. This Act was amended
in the year 1991, 1993 and 2002. This Act tries to help a consumer when the goods purchased are
defective or the services rendered to him are unsatisfactory. Prior to enactment of this Act, consumer
disputes had to be settled only through civil courts which are very expensive.

Definitions:

Consumer
According to Section 2 (1) (d) of the Act ‘consumer’ means any person who buys any goods for a
consideration, which has been paid or promised or partly paid and partly promised. It also includes a
person-
1.who buys any goods for personal use or avails services for consideration;
2.who uses such goods or services with the permission of the buyer;
3.who obtains goods or avail services on deferred payment basis;

4.who obtains goods for self- employment.

Consumer Dispute
According to Section 2 (1)(e) of the Act, ‘Consumer Dispute’ means a dispute where the person
against whom a complaint has been made, denies or disputes the allegations contained in the
complaint.

If the person agrees to the complaint, there is no consumer dispute.

Complainant
According to Section

2 (1) (b) complainant means

i. a consumer; or
ii. any voluntary consumer association registered under the Companies Act or under any other law
for the time being in force; or
iii. the Central Government or any State Government, who or which makes a complaint
iv. one or more consumers, where there are numerous consumers having the same interest.

v. in case of death of a consumer, his legal heirs or representative, who or which makes a complaint.
From the definition of ‘complainant’ it is clear that an individual consumer as well as consumer
associations can make a complaint.
Defect
According to Section 2 (1) (f) of the Act, ‘defect’ means any fault, imperfection or
shortcoming in the quality, quantity, potency, purity or standard which is required to be
maintained by or under any law for the time being in force or under any contract, express or
implied, or as is claimed by the trader in any manner whatsoever in relation to any goods.

Deficiency
According to Section 2 (1) (g) of the Act, ‘deficiency’ means any fault, imperfection or
shortcoming in the quality, quantity, potency, purity or standard that is required to be
maintained by or under any law for the time being in force or has been undertaken to be
performed by a person in pursuance of a contract or otherwise in relation to any service.

Services
Section 2 (O) of the Act defines ‘services’ as
“Service of any description, which is made available to potential users and includes any
provision of facilities in connection with banking, financing, insurance, transport, processing,
supply of electrical or other energy, board or lodging or both, housing construction,
entertainment, amusement or the purveying a news or other information, but does not include
rendering of any service free of charge or under a contract of personal service.”

Unfair Trade Practices

 Falsely represents that the goods are of a particular standard, quality, quantity, grade

 Falsely represents that the services are of a particular standard, quality or grade

 Falsely represents any re-built, second-hand, renovated, reconditioned or old goods

as new goods

 Represents that the goods or services have sponsorship, approval, performance,

characteristics, accessories, uses or benefits which such goods or services do not
have

 Represents that the seller or the supplier has a sponsorship or approval or affiliation
which such seller or supplier does not have

 Makes a false or misleading representation concerning the need for, or the usefulness
of, any goods or services

 Gives to the public any warranty or guarantee of the performance, efficacy or length
of life of a product or of any goods that is not based on an adequate or proper test.
Who is eligible to complain

 Beneficiary of the goods/services

 Legal representative of the deceased consumer

 Legal heirs of the deceased consumer

 Husband of the consumer

 Any voluntary consumer organization registered under the societies registration act

 The Central Government

 The State Government

Essential requirements for Filing a complaint

 Complaint is to be filed within two years of buying the product or using the service.
Complaint needs to be in writing. Letters should be sent by registered post, hand-
delivered, by email or fax.

 The complaint should mention the name and address of the person who is
complaining and against whom the complaint is being filed.

 Copies of relevant documents must be enclosed.

 The consumer must mention details of the problem and the demand on the company
for redressal. This could be replacement of the product, removal of the defect, refund
of money, or compensation for expenses incurred

Circumstances/Situations where complaint cannot be filed

 Complaint on behalf of the public which consist of unidentifiable consumer cannot
be filed under the Act.

 A complaint by an individual on behalf of general public is not permitted.

 An unregistered association cannot file a complaint under the Act.

 If the complaint is found to be frivolous and result of vexation then the district forum
has the authority to dismiss the compliant.

Procedure of Filing a complaint

A complaint can be filed by a complainant within two years from the date on which the
cause of the dispute arose. However, the consumer forums i.e. District Forum, State
Commission or National Commission can accept any complaint even after such period,
if sufficient cause exists for such delay.
On receipt of a complaint, the District Forum/ State Commission/ National Commission
sent a copy of the complaint to the opposite party. The opposite party is asked to give his
reply within 30 days, which can further be extended by another 15 days.
If the nature of defect in goods is such that it cannot be properly determined without
laboratory testing, the redressal agency will sent the defected goods to the appropriate
laboratory.

If no laboratory testing is required in respect of the complaint, then the redressal agency
will decide the case on the basis of the evidence submitted by the complainant and the
opposite party.
 UNIT-5

CONSUMER PROTECTION ACT 1986

CONSUMER PROTECTION COUNCILS

The Act provides the establishment of a Central Consumer Protection Council by the
Central Government and the state consumer protection council in each state by the
respective state government.
Central Consumer Protection Council: It consists of
(a) the Minister in charge of the consumer affairs in the Central Government, who shall be its
Chairman, and
(b) such number of other official or non-official members representing such interests as
may be prescribed.
Procedure for meetings of the Central Council.-The Central Council shall meet as and when
necessary, but at least one meeting of the Council shall be held every year.

The State Consumer Protection Councils: It consists of consist of the following members,
namely :
(a) the Minister incharge of consumer affairs in the State Government who shall be its Chairman
(b) such number of other official or non-official members representing such interests as
may 'be prescribed by the State Government.
(c) such number of other official or non-official members, not exceeding ten, as may be
nominated bythe Central Government.
Procedure for meetings of the State Council: The State Council shall meet as and when
necessary but not less than two meetings shall be held every year.

District Consumer Protection Council: It shall consist of the following members

(a) the Collector of the district, who shall be its Chairman
(b) such number of other official and non-official members representing such interests as
may be prescribed by the State Government.
Procedure for meetings of the district Council: The District Council shall meet as and when
necessary but not less than two meetings shall be held every year. The District Council shall
meet as such time and place within the district as the Chairman may think fit and shall observe
such procedure in regard to the transaction of its business as may be prescribed by the State
Government.

CONSUMER DISPUTES REDRESSAL AGENCIES

 District Forum: These fora are set by the district of the state concerned in each district
wherein it consists of President and two members of which one should be a woman and is
appointed by the State Government.
Each district forum shall consist of
a. A person who is, or has been or is qualified to be a District Judge, who shall be its president
b. Two other members, who shall be person of ability, integrity and standing and have
adequate knowledge or experience, and one of whom shall be a woman.
 Monetary Limit:In this, the complaining party should not make a complaint more than 20 Lacs
and once the complaint is filed the goods are sent for testing and if they found defective the
accused party should compensate and if the party is dissatisfied can make an appeal with state
commission within 30 days.

Powers of the District Forum:

The District Forum shall have the same powers as are vested in a civil court under the code
of civil procedure. , and includes the power to
1. Discover and produce any document or other material object producible as evidence.
2. Reception of evidence on affidavits
3. Requisition of report of the concerned analysis from the appropriate laboratory or from
any other relevant source.
4. Any other matter which may be prescribed

State Commission: This is set up by each state It consists of President and two members. One of
whomshall be a woman, and who Shall have the following qualification:
a. Not less than 35 years of age
b. Possess a bachelor degree from a recognized university
c. To be persons of ability, integrity and standing and have adequate knowledge and experience
of at least ten years I dealing with problems relating to economics, law, commerce,
accountancy etc Monetary limit: - The state commission shall have jurisdiction to entertain
complaints where the value of goods or services and compensation, if any, claimed exceeds Rs.
Twenty lakhs but does not exceeds Rs. One crore. If not satisfied can make an appeal within 30
days in front of the National Commission.

National Commission: Consist of President and 4 members. The National Commission shall
consist of
1. A person who is or has been a judge of the Supreme Court, to be appointed by the
CentralGovernment, who shall be its President.
2. Not less than four, ad not more than such number of members, as may be prescribed, and
one ofwhom shall be a woman, who shall have the following qualifications, namely
a. To be persons of ability, integrity and standing and have adequate knowledge and
experience of at least ten years I dealing with problems relating to economics, law,
commerce, accountancy etc
b. Be not less than thirty five years of age
c. Possess a bachelor’s degree from a recognized university.

Monetary limit:-The National commission shall have jurisdiction entertain complaints where
the value of the goods or services and compensation, if any claimed exceeds Rs. One crore.

APPEAL
Appeal is a legal instrumentality whereby a person not satisfied with the findings of a court has an
option to go to a higher court to present his case and seek justice. An appeal can be made with the
state commission against the order of the district forum within 30 days of the order which is
extendable for further 15 days. An appeal can be made with the National Commission against the
order of the state commission within 30 days of the order or within such time as the National
Commission allows. An appeal can be made with the Supreme Court against the order of the
National Commission within 30 days of the order or within such time as the Supreme Court allows.
 PENALTIES
If a defaulter does not appear in court despite notices and reminders, the court may decide the
matter in his absence. The forum can sentence the defaulter to a maximum of three years
imprisonment and impose a fine of Rs 10,000. Forums can issue warrants to produce defaulters in
court. They can use the police and revenue departments to enforce orders.

RIGHTS OF A CONSUMER

(a) the right to be protected against marketing of goods which are hazardous to life and property

(b) the right to be informed about the quality, quantity, potency, purity, standard and price of
goods to protect the consumer against unfair trade practices

(c) the right to be assured, wherever possible, access to an authority of goods at competitive
prices
(d) the right to be heard and to be assured that consumers interests will receive due
consideration at appropriate forums

(e) the right to seek redressal against unfair trade practices or unscrupulous exploitation of
consumers
(f) right to consumer education

Responsibilities of the Consumer

1. Be quality conscious
2. Beware of misleading advertisements
3. Responsibility to inspect a variety of goods before making selection
4. Collect proof of transaction
5. Complaint for genuine grievances
Remedies to Consumers
The consumer protection act provides the following remedies to consumers:
a) Removal of defects from goods.
b) Replacement of defective goods
c) Refund against defective goods or deficient services.
d) Award of compensation for the loss or injury suffered
e) Removal of defects or deficiencies in the services
f) Discontinuance of unfair trade practices or restrictive trade practices
g) Prohibition on sale of hazardous goods.
 COMPETITION ACT 2002
Based on the Directive Principles, the first Indian competition law was enacted in 1969 and was
labeled the MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969
(MRTP Act). One of the main goals of the MRTP Act was to encourage fair play and fair deal in
the market besides promoting healthy competition. They seek to afford protection and support
consuming public by reducing Monopolistic, Restrictive and Unfair Trade Practices from the
market. The MRTP Act has become obsolete in certain areas in the light of international
economic developments relating to competition laws and hence focus was shifted from curbing
monopolies to promoting competition.

The Competition Act was enacted in the year 2002 and it came into force on 13 th January 2003.
The objectives of the act have been set forth in its preamble which states that the act would
provide for establishment of a Commission (i.e. Competition Commission of India) to prevent
anti-competitive practices, to promote and sustain competition in the market, to protect the
consumers and to ensure freedom of trade carried on by the other participants of the market. The
Act was amended by the Competition Amendment Act, 2007 and became fully operational from
1 June 2011.

OBJECTIVES OF THE ACT

1. Establishment of a Commission to prevent adverse effect on competition.

2. Promotion and sustenance of competition in the market.
3. Protection of consumers’ interests.
4. Freedom of trade.

DEFINITIONS

1. Cartel: The Act defines ‘Cartel’ as an association of producers, sellers, distributors,

traders or service providers who by agreement amongst themselves, limit, control or
attempt to control the production, distribution, sale or price of or trade in goods or
provision of services. Cartel has been put in the category of those anti-competitive
agreements.
2. Bid rigging: An agreement between parties engaged in identical business, which has the
effect of eliminating or reducing the competition for bids or adversely affecting or
manipulating the process for bidding.
3. Predatory price: It means selling of goods at a price which is below the cost of production
of goods or provisions of service in order to eliminate competitors or to reduce
competition.
4. Acquisition: It means, directly or indirectly, acquiring or agreeing to acquire—
i) shares, voting rights or assets of any enterprise; or
 ii) control over management or control over assets of any enterprise.
5. Tie-in arrangement: includes any agreement requiring a purchaser of goods, as a
condition of such purchase, to purchase some other goods.

The Competition Act, 2002 deals with mainly four concepts:

(I)Anti-Competitive Agreements

(II)Abuse of Dominant Position

(III)Combinations and their regulation

(IV)Competition Advocacy

Anti-Competitive Agreements

Anti-Competitive agreements are those agreements among the persons involved in a business
transaction which have the tendency to harm the Competition which results in undue benefit to
one person or group over the loss of others. Such anti-competitive agreements are prohibited
under the Competition Act, 2002. Anti-competitive agreements are divided into two categories
namely horizontal agreements and vertical agreements.

(a)Horizontal Agreement: These are the agreements which generally occur between two or
more entities or enterprises that stand at par with each other in terms of production, supply
distribution etc.in the same market. For example, an agreement between manufactures of a
particular commodity of not selling a particular product below agreed price or for not to supply a
product to a particular market.

Competition Act, 2002 prohibits following types of horizontal agreements namely:

1) Price Fixing Agreement

a) Agreement to raise or stabilize price

b) Establish uniform discount or eliminate discount

c) Set uniform price as Starting point for negotiation

d) Discontinue free service

e) Impose Mandatorily surcharge

f) Restrict price advertising

2) Market Sharing: Market sharing, or market allocation, is where competitors agree to divide up
markets between themselves. This could be by allocating customers, products or geographic
regions to each other.

3) Bid Rigging: Bid rigging can cause serious economic harm as it increases prices artificially,
lowers quality and leads to loss of taxpayers' money. The bid rigging and collusive bidding is
done to support the cartel member that has been designated to win the tender. The other cartel
members may refrain from bidding, withdraw their bid, or submit bids with higher prices or
unacceptable terms.

4) Cartels: Cartel is one type of horizontal anticompetitive agreement provided under the Act and
is presumed to have an appreciable adverse effect on competition. A cartel is said to exist when
two or more enterprises enter into an explicit or implicit agreement to fix prices, to limit
production and supply, to allocate market share or sales quotas, or to engage in collusive bidding
or bid-rigging in one or more markets.

(b)Vertical Agreements: According to Section 3(4) of the Act ‘vertical agreements’ are those
agreements which take place among enterprises or persons at different stages or levels of
production in respect of production, supply, distribution, storage, sale or price of goods etc. For
example, any agreement between manufacturer and wholesaler which can adversely affect
competition in the market. Competition Act, 2002 envisages various types of Vertical
agreements. These are:

1. Tie-in arrangement: Agreement between manufacturer and distributor not to sell manufactures
product at or above a price floor at or below a price ceiling (e.g. requiring a purchaser of goods
to purchase some other goods as condition of such purchase)

2. Exclusive supply arrangement: Agreement restricting the purchase in course of trade from
acquiring the goods of trade from acquiring the goods of any other seller(e.g. restricting a
purchaser in course of his trade from dealing in any goods other than those of the seller)

3. Exclusive distribution arrangement: Agreement to limit or restrict the output or supply of any
goods to ant market or area (e.g. limiting/restricting supply of goods or allocate any area or
market for sale of goods)

4. Refusal to deal: Any agreement which restrict or is likely to restrict by any method any
person/classes of persons to whom goods are sold or from whom goods are brought (e.g.
restricting by any method any person/classes of persons to whom goods are sold)

5. Resale price maintenance: Any Agreement to sell goods on condition that the price to be
charged on the resale by the purchaser shall be stipulated by the seller unless it is clearly stated
that prices lower than those price may be charged . (e.g. selling goods with condition on resale at
stipulated prices )

(II) Abuse of Dominant Position

A person or an enterprise is deemed to be in dominant position when such entity is in a position

of strength and such position enables that entity to operate independently of competitive forces
prevailing in the relevant market or affects its competitors or consumers or the relevant market in
its favour.

The acts which amount to ‘abuse of dominant position’ are enshrined below:

 Direct or Indirect imposition of unfair or discriminatory condition in purchase or sale of

goods or services or prices in purchase or sale
 Limiting or restricting the production of goods or services
 Putting restrictions on technical or scientific development relating to goods or services to
the prejudice of consumers.
 Indulging in practices which result in denial of market access in any manner
 Using Dominant position in one relevant market to protect or to enter into another
relevant market.

III) Regulations of Combinations: Regulation of the Combinations is the third area of

focus of Competition Law. The Acquisition of one or more enterprise by way of merger
or amalgamation or control over enterprise is regarded as combination A Combination is
an acquisition of one or more enterprises by one or more persons, merger or
amalgamation of enterprises, if it meets the prescribed monetary thresholds and involves:
 Any acquisition of control, shares, voting rights or assets of any enterprise.
 Any acquisition of control by a person over an enterprise, where such person already has
direct/indirect control over another enterprise in a similar business
 Any merger or amalgamation of enterprises

Combinations above the defined monetary thresholds require filing and prior approval of
the CCI before they can be made effective. CCI has powers to investigate combinations
and modify/reject them. The CCI must be notified within 30 days of the:
A. Board approval of the enterprises in case of a proposed merger/ amalgamation
B. Execution of any agreement or ‘other document’ in case of a proposed acquisition

When acquisition, Mergers or Amalgamation would constitute a Combination :

In case of an individual: If the parties to that process have an asset of more than 1000 Cr or
turnover of more than 3000Cr inside India
If it is an entity having operation inside & Outside India, it has an asset of more than 500million
$ including at least 500 crore in India or a turnover of 1500 Million USD of which at least 1500
crore in India

COMPETITION ADVOCACY
Central government may obtain opinion of CCI on the possible effect of the policy on
competition while formulating competition policy. On receipt of deference, commission is
required to give its opinion to central Government within 60 days.
The commission has also been assigned the role to take following suitable measures for:

 Promotion of competition advocacy

 Creating awareness about competition
 Imparting Training about competition issue
 The Commission shall render opinion on a reference from the Central Government on
policy / law on competition
 COMPETITION ACT 2002

Introduction: The Competition Commission of India is a statutory body that has been established
under the Competition Act, 2002. Its main objective is to enforce the provisions of Act, 2002
and prevent any Anti-Competitive agreements from being realized. It was established on 14th,
October 2003 and became fully functional in its duties on May 2009 with Dhanendra Kumar as
its first chairman.

Composition of the Commission

The commission comprises seven members including a Chairperson. According to the Act, the
commission’s board must at all times consist of a chairman and a minimum of two board
members and a maximum of six board members. The Act requires the chairman as well as the
members to have a minimum of fifteen years of experience in the fields of finance, accounting,
law, economics, statistical analytics, management, industry, public affairs or competition
matters, including competition law and policy.

All members of CCI are public servant and have protection for action taken in Good faith. CCI
have an overriding effect over other courts and civil court cannot entertain any case of CCI.

They must serve for a term of five years from the date on which they enter upon office and shall
be eligible for re-appointment. The Chairperson or any other Member may, by notice in writing
addressed to the Central Government, resign from the office till three months of giving notice.

Objective
The Competition Commission of India seeks:

 To prevent any practices or policies that may have an adverse effect on constructive
competition in the Indian market.
 To protect the freedom of trade in the Indian market
 To protect the interests of end consumers
 To sustain constructive competition in the Indian market
 To spread and create awareness on fair and healthy competitive practices

Powers
The Competition Commission of India is established under Chapter III Section 7 of the
Competition Act, 2002. The Act also provides the powers the commission holds to ensure its
duties are met. The Act gives The Competition Commission of India the following powers;
  The Competition Commission of India has the power to inquire into a certain agreement
as well as the dominant position of enterprises. This means The Competition Commission
of India has the power to, by its own authority or by any information of alleged
contravention of its prohibition of Anti-competitive regulations launch an inquiry to
determine the same.
 The Competition Commission of India has the power to inquire into any acquisition or
combination if it determines that such acquisition or combination may adversely affect
competition in the Indian market.
 The Competition Commission of India has the power to regulate its own procedures
 The Competition Commission of India has the power to impose monetary penalties upon
violation of The Competition Act,2002

Procedure for Investigation into Combination by CCI

1.The CCI will issue a notice to the parties to the combination to reply within 30days of such
combination for not declaring it as Void. The CCI will direct the Director General to submit a
report on combination, on receipt of such report, If the CCI is satisfied that the combination has
an Adverse effect on competition, it can pass the following order.

2. It can direct the combination shall not be in effect. If the Adverse effect can be rectified by
suitable modification the CCI will order such modification should be performed by the parties.

3. If the CCI is not satisfied by the modification effected by the parties, it can grant 30 Days
further to the party to accept that modification proposed by the commission.

4. If the part still falls to accept the modification the commission can declare the combination as
void as well as it can impose such penalties mentioned in the Act (1 % of Turnover

PENALTIES FOR CONTRAVENTION

Failure to notify a reportable combination: Fine of up to 1% of combined turnover or assets

whichever is higher.

Failure to comply with directions of CCI: Fines of 1, 00,000 per day subject to a maximum of 1
crore.

If any person does not comply with the orders or directions issued, or fails to pay the fine
imposed: he shall be punishable with imprisonment for a term which may extend to three years,
or with fine which may extend to rupees twenty-five crore or with both.

Penalty for making false statement or omission to furnish material information: penalty which
shall not be less than rupees fifty lakhs but which may extend to rupees one crore.

If a person willfully alters, suppresses or destroys any document which is required to be

furnished: fine which may extend to rupees one crore as may be determined by the Commission
COMPETITION APPELLATE TRIBUNAL
The Competition Appellate Tribunal is a statutory organization established under the provisions
of the Competition Act, 2002 to hear and dispose of appeals against any direction issued or
decision made or order passed by the Competition Commission of India.

Every appeal shall be filed within a period of 60 days from the date on which a copy of the
direction or decision or order made by the Competition Commission of India is received and it
shall be in the prescribed form and be accompanied by the prescribed fees. The Appellate
Tribunal may entertain an appeal after the expiry of the period of 60 days if it is satisfied that
there was sufficient cause for not filing it within that period.

Appeal to Appellate Tribunal

1. The Central Government or the State Government or a local authority or enterprise or any
person, aggrieved by any direction, decision or order of CCI referred to the Appellate
Tribunal.
2. Every appeal shall be filed within a period of sixty days from the date on which a copy of
the direction or decision.
3. The Appellate Tribunal may entertain an appeal after the expiry of the said period of
sixty days if it is satisfied that there was sufficient cause for not filing it within that
period.
4. On receipt of an appeal the Appellate Tribunal after giving the parties, an opportunity of
being heard, pass orders as it thinks fit, confirming, modifying or against the direction,
decision or order appealed.
5. The Appellate Tribunal shall send a copy of every order made by it to the Commission
and the parties to the appeal.
6. The appeal filed before the Appellate Tribunal shall be dealt with by it as expeditiously
as possible and endeavor shall be made by it to dispose of the appeal within six months
from the date of receipt of the appeal.
INFORMATION
TECHNOLOGY ACT, 2000
Unit 6
 INTRODUCTION
The general assembly of United Nations on 30th Jan, 1997
recommended that all states should give favourable consideration to
the Model Law.
The Model Law provides for the equal legal treatment of users of
electronic communication and paper based communication. Govt
of India enacted a new law in the year 2000 known as Information
technology Act, 2000.
 OBJECTIVES
• To grant legal recognition to transactions carried out by electronic
means commonly referred to as “ e-commerce” .
• To give legal recognition to digital signature for authentication of any
information
• To facilitate electronic filling of documents with Govt departments
• To facilitate electronic storage of data
• To set up licensing, monitoring and certifying authorities to oversee
issues
• To establish cyber regulations appellate tribunal for hearing appeals
against adjudicating authorities
• To give legal recognition for keeping books of account by bankers in
electronic form.
 DEFINITIONS
• Symmetric Crypto system – It is a system of a secure key pair consisting of
private key for creating a digital signature and public key to verify the digital
signature.
• Certifying authority – A person who has been granted a license to issue a
digital signature certificate under sec 24 of IT Act 2000.
• Digital Signature – means authentication of any electronic record by a
subscriber by means of an electronic method or procedure.
• Electronic record – It means data, record or data generated , image or sound
stored, received or sent in an electronic form
 DIGITAL SIGNATURE
Digital signature is created in 2 distinct steps
- First, the electronic record is converted into a message digest by using a
mathematical function known as “hash function” which digitally freezes the
electronic record thus ensuring the integrity of the content of intended
communication contained in the electronic record. Any tampering with the
contents of electronic record will immediately invalidate the Digital signature
- Secondly, the identity of the person affixing the digital signature is
authenticated through the use of a private key which attaches itself to the
message digest and which can be verified by any person who has the public
key corresponding to such private key.
ELECTRONIC GOVERNANCE(E -GOVERNANCE)

In the IT Act, 2000, there are special provisions under Chapter III to grant
legal recognition to electronic records, signature, and encourage the
government and its agencies to use them.

• Legal recognition of electronic records- Sec 4 gives legal recognition

to electronic records and provides that where any law requires that
any information or matter should be in the typewritten or printed form ,
then such requirement shall be deemed to be satisfied if such
information or matter is
- Rendered or made available in an electronic form
- Accessible to be usable for a subsequent reference
• Legal recognition of digital signature – Sec 5 relating to legal recognition of
the digital signature, provides that where any law requires that information of
document or other matters should be authenticated by signature, such
requirement shall be deemed to have been satisfied, if it is authenticated by
means of digital signature affixed in such a manner as may be prescribed by
the rules framed by Central Govt.
• Use of electronic records and digital signatures in Government and its
agencies – Sec 6 lays down the foundation of electronic governance.
The filing of any form, application or other documents, creations, retention
or preservation of records, issue or grant of any license or permit or receipt
or payment in Govt offices and its agencies may be done through the
means of electronic form.
The appropriate govt may prescribe by rules :
a) Manner and format in which such electronic records shall be filed,
created or issued
b) Manner or method of payment of any fee or charges for filing, creation
or issue of any electronic record.
• Retention of Electronic records – Sec 7 provides that where any law provides
that documents, records shall be retained for any specific period, then the
requirement shall be deemed to have been satisfied if the same is retained in
electronic form.

• Publication of rules, regulations etc in Electronic gazette – Sec 8 deal with the
publication of rules, regulations and notifications in the Electronic gazette.
Where any law requires the publication of any rule, regulation, order, bye-law
or any other matter should be published in the official gazette, then such
requirement shall be satisfied if the same is published in an electronic form.
• Sec 9 provides that the conditions stipulated in sec 6,7,8 shall not grant any
right to the public to insist that documents should be accepted in an
electronic form by any Ministry or dept of central govt or the state govt.

• Power to make rules by Central Govt in respect of digital signature – Sec 10

contains rules relating to digital signature. It provides that the Central govt
may by rules prescribe-
a) The type of digital signature
b) The manner and format in which the digital signature shall be affixed
c) The manner or procedure which facilitates identification of the person
affixing the digital signature.
 DIGITAL SIGNATURE CERTIFICATE
Digital signature certificates are electronic files that are used to identify people
and resources over the internet. It secures communication between parties. A
digital signature certificate securely binds the identity of the subscriber. The
certifying authority is the one to issue the certificate.
Sec 35 of the Act empowers Certifying authority to issue digital signature
certificates. It prescribes the application fees to be paid by persons for getting
digital signature certificate. The maximum fees cannot exceed Rs 25000.
The certifying authority before issuing Digital signature certificate should satisfy
himself that-
a) The applicant holds the private key corresponding to the public key to be
listed in the Digital signature certificate
b) The applicant holds a private key, which is capable of creating a digital
signature
c) The public key to be listed in the certificate can be used to verify a digital
signature affixed by the private key held by the applicant.
 CERTIFYING AUTHORITIES
The IT Act 2000 has formed 3 regulators, namely –
1) Controller of certifying authorities
2) Cyber regulations appellate tribunal
3) Cyber regulations advisory committee
 CONTROLLER OF CERTIFYING AUTHORITIES
Sec 17 provides that the central government appoints a Controller of
Certifying Authorities for the purpose of this act and also appoint Deputy
controllers and Assistant controllers.
The controller shall discharge his functions under this Act subject to the
directions of the Central Govt.
Sec 18 – Functions of Controller
Sec 19- Recognition of foreign certifying authorities – Controller may with the approval
of Central Govt, grant recognition to foreign certifying authorities
Sec 20 – Controller to act as Repository – Of all digital signatures and also to adhere
to certain security procedure to ensure secrecy and privacy of digital signature
Sec 21 – License to issue digital signature certificate
Sec 22 – Application for License – Every application for issue of a license shall be in
such form as prescribed by the Central govt.
Sec 23 – Application for renewal of a license shall be in such form and accompanied
by fees not exceeding Rs5000 as prescribed by the Central govt.
Sec 24 – Procedure for grant or rejection of license
Sec 25 – Suspension of License
Also Certifying authority has power to delegate, to investigate contraventions, can
have access to computer and data…
 CYBER REGULATIONS APPELLATE TRIBUNAL
Sec 48-64 deal with the establishment of Appellate Authority.
Sec 48 provides for the establishment by the Central Govt of one or more
Appellate Tribunal to be known as Cyber regulation Appellate Tribunal. Each
Appellate tribunal shall consist of only one member- The Presiding officer .
Any person aggrieved by an order made by the Controller may file an appeal
before a cyber regulation Appellate Tribunal within a period of 45 days.
Any person aggrieved by an order of the Cyber Appellate Tribunal may file an
appeal to the high court within 60 days.
 CYBER REGULATION ADVISORY COMMITTEE
Sec 88 provides for the constitution of a Cyber Regulations Advisory
Committee which may advise the Central Govt on certain matters of the Act.

It has 21 members headed by the Minister of Information Technology.

The Cyber Regulations Advisory Committee shall advise-
a) The Central Govt as regards any rules or for any purpose connected with
this Act
b) The Controller in framing the regulations under this Act.
 OFFENCES
SEC 65-78 deals with offences committed under the Act
- Tampering with Computer Source Documents
a) Provides for punishment with imprisonment up to 3 years or with fine
which may extend to two lakh rupees.
b) Whoever knowingly conceals, destroys or alters or knowingly causes
another to conceal, destroy or alter any computer source code used
for a computer, computer program or computer network which is
required to be kept by law
• Hacking with Computer system – Sec 66
a) Any person destroys or deletes any information residing in a
computer resource or diminishes its value or utility commits hacking.
b) Imprisonment up to 3 years or fine which may extend up to 2 lakh
rupees

• Publishing of information which is obscene in electronic form

a) Sec 67 provides for punishment to whoever publishes or transmits or
any material which is obscene shall be punished with imprisonment
for a term of 5 years and with fine of upto 1 lakh
b) Sec 72 punishment for breach of confidentiality and privacy with
imprisonment of 2 years or fine upto 1 lakh
c) Sec 73 punishment for publishing a Digital signature certificate or making it
available to any other person with imprisonment of 2 years or fine upto 1 lakh

d) Sec 74 person who knowingly publishes Digital Signature certificate for

fraudulent purpose – imprisonment for 2 years or fine upto 1 lakh
 PENALTIES
• Penalty for damage to computer, computer system etc
- Sec 43 provides penalty for damage caused to any computer network by
introduction of computer virus, unauthorised access, he shall be liable to pay
damages by way of compensation not exceeding one crore to the person
so affected.
- Sec 44
a) If any person fails to furnish any document, return or report to the controller
shall be liable to penalty not exceeding 1 lakh 50 thousand rupees
b) Fails to file any return or furnish any information within time specified shall
be liable to 5 thousand rupees for every day
c) Fails to maintain books of account shall be liable to ten thousand rupees
• SEC 45 – Any person contravenes any regulations under this act shall be
liable to pay 25 thousand rupees