INDIAN CONTRACT UNIT

ACT, 1872
LEGAL RULES – VALID ACCEPTANCE
Given by person to whom offer is made Time
OFFER + ACCEPTANCE = AGREEMENT General offer : Accepted by anyone If mentioned : within specified time
Special offer : Accepted by specific person If not : within reasonable time
AGREEMENT + ENFORCEABLE BY LAW = CONTRACT
Absolute & unqualified
[Neale vs Merret]
Mere Silence Not Acceptance
[Felthouse v.Bindley]
OFFER PROMISE AGREEMENT CONTRACT Must be communicated
Conditional acceptance ≠ Acceptance.
(Sec 2(a)] (Sec 2(b)] (Sec 2(e)] (Sec 2(h)] [Brogden v. Metropolitan Railway Co.]

• signify willingness • when assent • Promise / set of • Agreement By Conduct / Implied Acceptance
to another signified on promise enforceable by law Prescribed Mode • Modes other than verbal / written
proposal If mode prescribed Acceptance in that mode
• to do / abstain • forming consideration • creates legal
• to obtain assent • may not create legal obligation
obligation
Communication of offer Communication of Accepteance
[Sec2(e)]
(Sec 4] [Sec2(e)]
(Sec 4]
KINDS OF OFFER
Complete Complete
GENERAL SPECIAL CROSS COUNTER STANDING
When comes to knowledge of offeree Against the offeror Against the offeree
• To Public at Large • To specified • Exchange of · Conditional • Continuing /
When put in course of When comes to knowledge
• [Carlil v. carbolic person identical offer Acceptance open offer
transmission by the offeree of the offeror
smokeball co.] • [Boulton v. • No Binding · Offer accepted • Open for
Jones] Contract subject to Acceptance
modification over period of time Revocation of Acceptance & offer
[Sec 5]

ESSENTIAL OF VALID OFFER

Legal Relation Not contain term non-compliance of Revocation of offer Revocation of Acceptance
Legal relation must be created which would amount to acceptance
Certain, Definite, Not Vague Specific / General
No contractual relationship if Anytime before it is accepted by offeree Anytime before it comes in knowledge of the offeror
made to public at large / specified person
indefinite / vague
Communicated to offeree Express / Implied Legal भाषा मे Legal भाषा मे
Must be communicated offer can be in words or by conduct
[Lalman Shukla v. Gauri Dutt] “Revoked anytime before communication of “Revoked anytime before communication of
Assent Invitation to offer Acceptance is complete as against the offeror” Acceptance is complete as against the offeree”
must be obtained Terms proposed for negotiation
• Act precedent to offer
Conditional • Can be converted into offer
Cab be subject to T&C

33 Simply Best Commerce Institute in Central India

 INDIAN CONTRACT UNIT
ACT, 1872
ON THE BASIS OF VALIDITY

MODES OF REVOCATION
Valid Void Voidable Illegal Unenforceable

Notice of Non fulfilment Subsequent

of condition Counter Non
Revocation Lapse of precedent Death / offer acceptance Illegality
according to • Enforceable • Not enforceable • Enforceable at • Law forbids • Good in substance
Time Insanity prescribed mode • Contains all by law the option of • Unenforceable due
essential aggrieved party to technical defects
• When consent →
ESSENTIALS OF VALID CONTRACT elements
Not Free

Other than Section 10 Section 10 ON THE BASIS OF FORMATION

Two Parties Agreement
• Offeror & Offeree
• Promise or set of promises forming consideration
• Natural / legal person
• [ State of Gujrat v. Ramanlal S Co. ] Valid Implied Quasi E-Contract
Free Consent
• “Consensus ad idem” → “ some thing in same sense”
Legal Obligation • Consent
• Social / Domestic Agreement → Not enforceable Free ü
• [ Balfour v. Balfour] Coercion, Fraud, Mistake Undue Influence, • Terms expressed • Came into existence by • Not actual contract • Electronic means
Misrepresentation û in writing / words è Action • Resembles a contract • Also known as cyber
è Conduct • No intention of parties contract, mouse click
Other Formalities in certain cases Capacity of Parties
• Contract→Written / Verbal • Major, Sound mind, Not disqualified by law è Course of Dealing • Imposed by Law contract etc.
• Ex: Insurance→written contract • Ta cit Contracts (Silent)
Consideration
• “Quid Pro Quo”→ “Something in Return”
Certainity of Meaning • Right / interest/ Benefit OR Loss/Responsibility suffered
• Must be certain ON THE BASIS OF PERFORMANCE
• Not to be indefinite / vague Lawful consideration & object
• Not lawful if Immoral, Prohibited by law,
Fraudulent, defeat provision of Law, opposed
Possibility of Performance to Public Policy. Executed Executory
•Terms →capable of performing
•Agreement to do impossible act →not enforceable Not expressly declared void
• Not Illegal / Void • Consideration in form of act or forbearance • Consideration in form of Reciprocal Promise
• No obligation pending on part of parties (mutual promise to do / not to do)
TYPES OF CONTRACTS • To be performed in future

On the basis of
Unilateral Bilateral
VALIDITY FORMATION PERFORMANCE
FORMATION
• Valid • Express • Executed • one party performed duty • obligation pending on part
• Void • Implied • Executory • other party's obligation of both the parties
• Voidable • Quasi outstanding
• Illegal • E-Contract
• Unenforceable

34 Study from National Level Faculty at Vidhyoday

 INDIAN CONTRACT UNIT
ACT, 1872
SUIT BY THIRD PARTY TO CONTRACT
Type of Contract Contracting Parties 3rd party
CONSIDERATION 1st party 2nd party
→Trust Settler Trustee Beneficiary
Section 2 (d) →Family Settlement Family member Family member Family member not
included in Contract
• When at the desire of Promisor • Promisee or any other person Family member Family member Female member
→Marriage Contract
• Has done or abstained (Past), does or abstain (Present), Promises to do or abstain (Future)
→Assignment First party Assignor Assignee
Such act / abstinence / Promise → Consideration
→Estoppel by Acknowledgement
Giver Receiver Beneficiary
of Liability

→Covenant Running with Land Seller Buyer Successor of seller

Legal Rules → Consideration
→Agent First party Agent Principal

• If at desire of 3rd party → • Bad Bargain

At the desire Need • Something in return need not be
of Promisor Not a consideration equal to something given Validity of Agreement without Consideration
• [Durga Prasad v. Baldeo] not be • If consent free → cannot be void,
Adequate just because consideration is
inadequate General Rule : Agreement without consideration → Void But → certain exceptions
From Promisee • Stranger to consideration ü
or any other • Stranger to contract û
Must not be Natural Love & Affection Sec 25 (1) Agency
person • [Chinnaiya v. Ramaiyya] • Example : Paying `10,000 to
performance of
what one is police officer to
• Near relationship • Sec 185: No consideration necessary
legally bound investigate crime → Not a
• Executed → consists in • In writing to create agency
to perform valid consideration
Consideration performance
• Executory → consists • Registered under Law
Completed Gift Sec 25 (1)
in promise
• Real (Something, to which law Compensation for past Sec 25 (2)
attaches value) voluntary services • “No Consideration – No Contract”
Consideration
• Not Illusory (not physically / Do not Apply
Consideration • Past / Present / Future
legally impossible) • Services rendered voluntarily for Promisor
• Promisor intended to compensate Bailment Sec 148

• No consideration required to
Must not be unlawful / Immoral / Time Barred Debt Sec 25 (3) effect contract of “Gratuitous
opposed to Public policy Bailment” (Free मे)
Doctrine of Privity of Contract
• Private relation exists between the parties. • Promise in writing Charity Sec 148
• “Stranger to contract cannot sue” • Signed by person or his agent to
• Only party to contract can sue. • Promisee takes Liability
pay time Barred Debt
• EXCEPTIONS→Suit by third party to contract • On promise of person to contribute to Charity
• [Kadarnath v. Gorie Mohammad]

35 Did You Know that Faculty at Vidhyoday produced Three Times All India Rank 1 in CS.
 INDIAN CONTRACT UNIT
ACT, 1872
NOT DISQUALIFIED BY LAW

OTHER ESSENTIAL ELEMENTS OF CONTRACT Persons disqualified

Foreign Sovereign Alien Enemy Convicts Insolvent

Section 11
Major
FREE CONSENT
Capacity to Contract Sound Mind
Consent is Free, when not caused by
Not disqualified by Law
No Specific Performance Coercion Undue Influence Fraud Misrepresentation Mistake
Contract → void-ab-initio (Sec 15) (Sec 16) (Sec 17) (Sec 18) (Sec 20, 21, 22)
• Void agreement→therefore no
(Mohari Bibi v. Dharmo Das Ghose) specific performance

No Ratification after attaining majority No Insolvency VOIDABLE VOID

• Debt & dues payable from personal property
• Void agreement can never be ratified
• Never held personally liable

Beneficiary Partnership Sec 30 COERCION UNDUE INFLUENCE

• Minor→not competent to contract • Cannot be partner → can be • Committing / threatening to commit any Act • Near Relation between 2 parties
→Can take benefit out of contract admitted to benefits
(Forbidden by IPC)
Can always plead minority LAW • Unlawful detaining / threatening to detain any
• One of them is position to dominate
Agent • Person Deemed to be in position to dominate:-
• Rule of Estoppel cannot be applied RELATING • But not liable to principal for his acts
property 1. Real & Apparent Authority (Father – Son)
• Even when falsely represented majorty • Intention : to cause person to make agreement
TO MINOR'S • Effect : 1 Contract voidable
2. Fiduciary Relationship (Trust) (Husband – Wife)
Liability for Necessaries Sec 68 Cannot bind Parent / Guardian 3. Mental Distress (Doctor Patient)
• No personal liability, only his AGREEMENT • Parents liability →when child act as Effect : 2 Benefit received to be restored 4. Unconscionable Bargain (Unreasonable)
property liable an agent for them • Proceed from party to contract Not • Effect: 1 Contract voidable
• 2 conditions • Subject must be other Not
Goods reasonably necessary Joint Contract Effect: 2 May be set aside by court
• Minor + Adult →Adult Liable contracting party Necessary
Not have sufficient supply
• [ Sain Das v. Ram Chand]
Contract by Guardian
• •Within competence Surety Debtor is minor FRAUD
•On minor’s behalf →for benefit of minor • Contract of Guarantee surety (Adult) is liable
to third party
Shareholder Torts Commission of Following act:- Committed by:-
• Only in case of →Transfer / Transmission, minor can • Civil wrong (ex: Defamation etc) • Liable 1. Fact suggested→ knows, not true 1. Party to contract, with his connivance
• be shareholder ·of fully paid up shares 2. Active concealment of fact 2. Agent of party to contract
for torts • Not liable for breach of contract
through lawful Guardian 3. Promise made without intention of
performing
4. Other act filled to deceive Intention:-
1. To deceive OR
PERSON OF SOUND MIND SEC 12 5. Any act declared by Law → as Fraud
2. To indue to enter into contract

Effect:- 1. Rescind→ within reasonable time

usually unsound mind occassionally sound mind usually sound mind occassionally unsound mind 1. Contract voidable
2. Insist performance
2. Sue for damages
∙ Make contract, when of sound mind ∙ Not make contract, when of unsound mind

36 Build Your Career with Best Built Infrastructure

 INDIAN CONTRACT UNIT
ACT, 1872
Agreements opposed to Public Policy

Trading with enemy Traffic relating to public offices

Mere silence (Caveat Emptor : Let the
• Agreement with person from country, • Interferes appointment of best qualified
as to Facts →Not Fraud. buyer beware) at war with India → VOID person → VOID

Exception : i.e. Stifling Prosecution Agreement to create monopolies

Silence = Fraud
• Agreement to drop proceeding in consideration
of amount → VOID
Duty of person keeping silence to speak Where Silence=Speech • Abuse of Justice Marriage Brokerage Agreement
• Exception :- Consideration for compoundable
offence • Void
Fiduciary relationship, Insurance Contracts, Contract not voidable if party had means of
Marriage contracts, Family Settlement, Share Allotment discovering Truth. • Marriage Bureau → only provides information,
Maintenance & Champerty Thus, not covered under this

• Agreement Valid except : 1 Unreasonable

MISRPRESENTATION MISTAKE 2 Motive : Malicious
Interference with course of Justice

• Representation of fact which is not true but • Two parties thing about different subject matter • Agreement with Judicial officer to act
Interest against obligation partially / corruptly → VOID
beleives to be true • Lead contract towards ‘voidness’
• Made without intention to deceive • Mistake of Law • Do something against his duty
• Causing other person to make mistake of Foreign Law : Excusable Consideration Unlawful in part
subject matter Own Law : Not excusable
• Effect : 1 Repudiate Contract • Mistake of Fact • 1 or more objects→Part of single consideration
2 Sue for Restitution Unilateral→Not void • Single object→ Part of several consideration
3 Cannot Claim Damages Bilateral → void VOID AGREEMENTS Unlawful → VOID
CONTRACT NOT VOIDABLE Consideration / Agreement In restraint of marriage
By Incompetent
Parties Bilateral Mistake object unlawful without consideration (except Minor)

Silence amounting to Fraud Fraud / Misrepresentation Enters into contract in ignorance of Fraud
In restraint of Trade Restraint of Legal Agreement Wagering To do
Meaning
(except Sale of proceeding of service Agreement Impossible Acts
uncertain
• Had means to discover truth Goodwill & Partnership) (except Arbitration)
• Did not cause consent of party

LEGALITY OF OBJECT & CONSIDERATION WAGERING AGREEMENT

Sec 23 : Consideration is said to be unlawful
• Promise to pay money / money’s worth • Conditional on uncertain event • Win or lose
• No interest in event
Forbidden by Law Consideration defeats any Rule for the Transaction resembling wager But not void
Transaction similar to wager
• Act punishable under any statute or prohibited time being in force in India Lottery Chit Fund Share
Defeat provisions of Law Consideration involves injury • Game of chance Market Transaction
• Intention of Parties → to defeat provision → Crossword Puzzle & competitions • Delivery of goods / shares → Not wager
• Harm to person or property of another
Court will not enforce it Speculative Transaction Game of Skills / Athletic Competition
Consideration Immoral • Settlement of difference between Contract price Contract of Insurance
Fraudulent & market price
• Type of Contingent Contract → Valid
• As per section 17 Consideration opposed to Public Policy Horse Race Transaction

37 Faculty Teaching at Vidhyoday produced Three Times All India Rank 1 in CA

 INDIAN CONTRACT UNIT
ACT, 1872 Liability of Joint Promisor

Obligation of Parties to Contract

Joint & Any Joint Death of all
Promisor the Joint Promisee Promisee
Several
Dies Promisor
Promisor
Offer to No dies before
Perform perform performance performance

During their Legal Re Legal Releases one J.P.

joint lives May compel
presentative Representative of
Performance Excused Representatives any one J.P. Does not
bound to perform & surviving all jointly liable
dispensed under Law to perform discharge others
promisor Liable

Except Personal RIGHT OF JOINT PROMISEE

skills involved

Contract may be performed by During their Joint Lives Death of any one Death of All

All can claim performance Representative of Deceased Representative of Deceased's

Promiser By Agent By Legal By 3rd +
Survivors can claim performance can Jointly claim performance
Himself Representative person

TIME & PLACE FOR PERFORMANCE

• Personal skilled If promisor Personal skills Others • Promisor
involved employed to contract contracts discharged
• Intention of parties perform No time Time specified Promisee is to performance after
Place not specified
specified [Certain Day] specify time & place reasonable time
Contracts ends L.R. bound to
perform
Promisor apply Duty of promisee
within During usual Valid if Promisee
for appointment to appoint
Reasonable Time Business Hours accepts
SUCCESSION VS ASSIGNMENT of Place reasonable place

• Process of Law
• Contract between two parties
• Burden + Benefit transferred to Legal Heir
• Only benefit can be assigned
Performance of Reciprocal Promise (mutual Promise to do / not to do)
• Liability limited to extent of property inherited

Promisor Party
EFFECT OF REFUSAL need not Order of
prevents
other
Promisor
who has to
perform unless
Promisee Performance from perform 1st
performs performing →Fails
to Accept performance of party to perform

Not responsible for non performance Terminate contract

Promisor Promisee
Doesn’t loose his rights • If fixed : in that order • Party prevented • Cannot claim performance
If continue, indicate by
words/conduct • Not fixed : As per nature make contract claim compensation • Liable to pay compensation
*offer Unconditional, at proper time & place, voidable for loss
of transaction
Reasonable opportunity for inspection

38 Have you heard About Our Holi Event "RANG De”

 INDIAN CONTRACT UNIT
ACT, 1872
CONTRACTS WHICH NEED NOT BE PERFORMED
EFFECT OF FAILURE TO PERFORM AT TIME FIXED
Novation Alteration Rescission Remission

When • Not voidable • Substitution of New • Substitute New Contract • Cancellation of Contract • Acceptance of lesser
• Voidable at option When
Time is • Promisee can claim Contract for old for old • No new Contract fulfilment of terms
of Promisee Time is not
essential essential compensation for loss • Old Contract discharged • Terms can be altered not
contracting parties

VOIDABLE VOID AGREEMENT

IMPOSSIBILTY CONTRACT CONTRACT
INITIAL SUBSEQUENT BECOMES VOID
IMPOSSIBILITY IMPOSSIBILITY
• Impossibility existing at time of • Becomes impossible after entering Person rescinding contract Person who received
contract into contract advantage
• Fact of Impossibility • Also known as supervening impossibility
or Doctrine of Frustration Restore benefit Received
1. If known to parties→ Void Agreement
2. If unknown to parties→Contract Void • Parties discharge from further
performance Restore or Compensate
3. Known to Promisor only→Promisee for it
can claim compensation • Contract it becomes void.

RECIPROCAL ALTERNATIVE
PROMISE PROMISE
Effect of Neglect • Promisee → Not provided reasonable facilities for performance
of Promisee • Promisor → excused by such neglect / refusal
Certain things
One branch Legal One branch Illegal
Legal Illegal
Can be enforced Void Agreement
Valid Void
DISCHARGE OF CONTRACT

APPROPRIATION OF PAYMENTS By By Mutual By Impossibility By Lapse

Performance Agreement of Performance of Time

INDICATED NOT INDICATED NEITHER PARTY

BY DEBTOR BY DEBTOR APPROPRIATES Promisee may Neglect of Promisee
By Operation By Breach waive or Merger of to afford promisor
of Law of Contract Remit performance Rights
• Adjust as per express • Creditor applies at his discretion • Applied in order of time Reasonable facilities
intimation • To any lawful debt actually due
Or
implied circumstances
Even time barred debt can be adjusted

39 Did You Know, Vidhyoday has Record of CITY RANK 1 in XII Boards for 4 Continuous Years
 INDIAN CONTRACT UNIT
ACT, 1872
RECISSION SUIT FOR SPECIFIC SUIT FOR
OF CONTRACT PERFORMANCE INJUNCTION
Breach FAILURE OF PARTY TO PERFORM
• Contract broken • Damages are not • Party negates terms
HIS/ HER OBLIGATION UNDER CONTRACT • Other party may adequate remedy of contract
rescind contract • Court may direct to • Court → restrains
• Can claim carry out promise as from doing, what he
ANTICIPATORY ACTUAL
compensation per terms of Contract promised not to do.

• Breach occuring before time fixed for

performance has arrived
• Breach occurs —
• Express / Implied breach
1. when performance due
• Effect —
2. during the performance QUANTUM MERUIT
1. Rescind & Sue for Damages
immediately. • Other party obtains Right of Action
against defaulting party. • As much as the party has deserved
2. Not rescind & wait for performance
• Promisor may get benefit of supervening Impossibility • Recompensate for value of work done, where no remuneration fixed
• 2 Condition for application of Doctrine

REMEDIES FOR BREACH OF CONTRACT

Claim
Original
Suit upon brought by
Suit for Suit for Specific contract
Damages Quantum party not
Rescission Performance Suit for discharged
Meruit in default
of Contract Injunction

• Claim of Quantum Meruit in following cases —

SUIT FOR DAMAGES

ORDINARY NOMINAL
• Compensation for damages naturally
• No real damage suffered Something Void Agreement One party `Contract Contract
arose during usual course of events.
• Establishes Right to decree done with No Contract refuses to Divisible Indivisable
• No Compensation for Remote / Indirect Loss
DETERIORATION CAUSED BY DELAY intention to do becomes void perform
SPECIAL gratuitously
• Damages recovered even without Notice
• Arises on previous notice of special
circumstances affecting contract PRE – FIXED DAMAGES
VINDICTIVE / EXEMPLARY • Sum to be paid for breach → mentioned in
contract
• Breach of Promise to marry
• Wrongful dishonour of cheque by Bank • Performed badly
Pay for part
but completely
performance
• Deduction for
LIQUIDATED DAMAGESV/SPENALTY enjoyed
bad work

• Reasonable Compensation • Exorbitant amount

• Genuine Pre estimate • Create terror
• Not exceeding sum mentioned • Sum payable in excess of Damage

40 Participate in our Annual Sport Tournament "CHAK De”

 INDIAN CONTRACT UNIT
ACT, 1872
QUASI CONTRACTS
CONTINGENT & QUASI CONTRACT
CONTINGENT CONTRACTS Not an actual Resembles a Also known Law imposes Based on
Contract Contract as Constructive obligations Principle of
Contracts on parties Equity, Justice
SEC 31 Contract to do or not to do something, if some even, & good
collateral to contract does or does not happen conscience
Example Contract of Insurance, Indemnity & Guarantee

FEATURES
* Collateral Event (Pollock & Mulla)
Even in which Neither performance promised
Right
Nor consideration for a promise Always a available
Not arise by Imposed
right to Agreement by Law against
money particular
ESSENTIALS OF CONTINGENT CONTRACT person

Not mere will

Performance Collateral Event Uncertain Event
of Promisor CASES DEEMED AS QUASI CONTRACTS

• Depends on • Contingent event • Event certain

• Neither performance must exist ê
Happening / promised
Non-Happening • Not just will of •Non contingent
•Non consideration
of event promisor contract

Claim for Necessaries Supplied Obligation of person enjoying Non

RULES RELATING TO ENFORCEMENT [Sec 32 – 36]
• Necessaries supplied to Incompetent person Gratuitous Act
Contract dependent on • Right to reimbursed from their property • Lawfully does something
• No intention to act gratuitously
Payment by Interested Person • Person enjoying benefit → Bound to pay
• Interested person pays money
Happening of Event Not happening of Event Conduct of Living Person • Which another is bound to pay Responsibility of finder of goods
• Entitled to be reimbursed • Take care of property
•Event happens : Valid •Event impossible / doesn’t • If acts accordingly : Valid
•Event impossible / doesn’t happens : Valid • No right to appropriate goods
• Otherwise : Void
happens : Void •Event happens : Void Money paid by Mistake / Coercion • Restore goods if owner found
• Money paid / goods delivered by mistake, • Responsibility same as Bailee
coercion, oppression or extortion.
• Must Repay / Return
Specified Event Specified not within Impossible Event
within fixed time fixed time • Void
• If not happens within • Time fixed expired or event • Whether impossibility
fixed time : Void not happened : Valid known or not

41 Proud Vidhyoday Student Lichi Sharma Scored 99% in CBSE Board Exams
 THE SALE OF UNIT

GOODS ACT, 1930 DELIVERY

FORMATION OF THE CONTRACT OF SALE
Actual Constructive Symbolic
Scope of the act Buyer & Seller Goods Goods are physically Effected without change Delivery of things in token
• Only movable Property • All movable property other than money & actionable claim delivered to buyer in custody or physical of transfer of something
• General provision of Contract Act Delivery possession
also applicable • Voluntary transfer of Possession from one person to another
• Expression of Indian Contract Act Document of title Contract of Sale Sale vs Agreement Token Agreement
• Custom & Usage • Proof of the possession or control of GoodsOR
to Sale to sale become sale
Sale
• Is for authorising or purporting to authorise either by ê 1. Transfer of property When time elapses
endorsement or delivery Agreement 2. Nature of contract or
Document showing title to sale 3. Remedies for breach Condition is fulfilled
• Share certificate is document showing title 4. Liabilities of parties
5. Burden of risk
Property (Special vs General)
6. Nature of right
• Ownership or General property
7. Right of resale
Insolvent—Ceases to pay his debts in ordinary course 8. In case of insolvency of seller
Price —Money Consideration for Sale of Goods 9. In case of insolvency of buyer
Quality — State or Condition
Sale VS Hire Purchase Sale VS Bailment
CONTRACT OF SALE HOW MADE (Section 5) 1. Time of passing of property 1. Transfer of property Sales and contract for
2. Position of party 2. Return of Goods Work and Labour
3. Termination of contract 3. Consideration
Section 5(1) Section 5(2) 4. Burden of risk of insolvency of buyer
• Offer to buy or sale Goods at Price Contract may be made 5. Transfer of title
+
• In writing 6. Resale
Acceptance of offer
• By word of mouth
• Immediate delivery of Goods
Or • Partly in writing & partly by subject matter of contract of sale
Immediate Payment word of mouth
Or • Implied from conduct of parties
Both
• Delivery or Payment or both in Installment Section 6 Section 7 FORMATION
Section 7
• Delivery or Payment or both shall be postponed Existing Or Future Goods Goods Perishing before making contract Goods Perishing before sale but
after agreement to sale

GOODS PERISHING OF FUTURE GOODS

Existing Future Contingent Section 9 & 10

Goods are in existence at Goods to be manufacture acquisition depends Agreement to sale at
the time of Contract of Sale produced Or acquired after upon contingency Ascertainment of Price Valuation by Third Party
Contract of Sale
by Contract OR Fixed in a manner agreed 1. Third Party does not OR cannot make such valuation.
Specific Identified and agreed upon at the time of Contract of Sale. OR By the course of dealing between Contract will be avoided
Ascertained Identified after Contract of Sale. Parties 2. Third Party is prevented by buyer OR seller.
Unascertained Not specifically identified or agreed upon at the time of Contract of Sale. Party in fault will file suit.

42 Did You Know, Faculty at Vidhyoday has Record 50% Call Ratio in IPM
 THE SALE OF UNIT

GOODS ACT, 1930

CONDITIONS AND WARRANTIES TRANSFER OF OWNERSHIP AND DELIVERY OF GOODS
CONDITIONS WARRANTIES TRANSFER OF PROPERTY
Essential to main Purpose of Contract Collateral to main Purpose of Contract Depends On
ê ê
Repudiation claim for damaged Identification of goods Intention of Parties

Specific and Unascertained Reservation of

CONDITIONS AND WARRANTIES ascertained Goods
Goods sent
on approval
Right of disposal
Express Terms Goods
Condition
Expressly
Provides Risk prima facie passes with ownership
Section 13 Section 14
17Express & Implied
When condition
Difference is to be treated Implied unless otherwise agree risk
as warranties Condition & Implied Prima facie passes with ownership
Warranties Not Expressly
provided
Exception
Delivery delayed delivery delayed due
• Meaning Voluntary Implied Condition due to fault of seller to fault of buyer
ê
• Right in case 1. Waive Performance of 1. Condition as to title Duty of Seller as a bailee
of Breach Contract 2. Sale by sample
• Conversion of 2. Elect to Treat Condition as 3. Condition as to quality or fitness
Stipulation Warranty Compulsory 4. Condition as to whole some noss TRANSFER OF TITLE BY NON OWNER
1. Non severability of Contract 5. Condition as to Description
2. Fulfillment of Condition 6. Sale by Sample as well as description
execused by law Stipulation 7. Condition as to merchantability Sale by Sale by Sale by buyer
Mercantile Sale by one Sale by Person obtaining Sale by an Sale under
8. Implied Warranty of the Joint Person in Effects of Unpaid Seller Provision of
agent Possession who has already Possession before Estopple
(1) Warranty as to undisturbed possession owner sold goods but Property n Other Act
of Voidable
Contract continues the goods vested
(2) Warranty as to non existence of Possession to him
circumference
(3) Discloser of dangerous nature of goods
Warranty as to quality OR fitness by (SEC-34-41) RULES REGARDING DELIVERY OF GOODS
usage of trade
1. Part delivery 6. Delivery of wrong quantity 11. Buyer right to examine the goods
CAVEAT Emptor 2.
3.
Buyer to apply for delivery
Place of delivery
7.
8.
Expenses of delivery
Goods in possession of third party
12. Installment delivery
13. Delivery in wrong quantity
5. Sale by sample 4. Time of delivery 9. Delivery to carrier
Exceptions — 5. Installment delivery 10. Determination during transit
1. Fitness as to quality OR use 6. Goods by sample as well as description
2. Goods Purchased under patent or brand name 7. Trade usage
3. Goods sold by description 8. Sellers actively cancels the defects DELIVERY
4. Goods of merchandise quality
Actual delivery Symbolic delivery Constructive delivery

43 Build Your Career with Best Built Infrastructure

 THE SALE OF UNIT

GOODS ACT, 1930 OTHER PROVISIONS

UNPAID SELLER (Section 64) (Section 64A)

Definition
1. When whole of the Price has not been Paid
2. When B/E has been received and
Condition is not fulfilled
Auction Sale Inclusion of increased
OR
Rights of Unpaid Seller (Mode of selling Property by inviting decreased taxes in Contract of Sale
bids publicly and
Property is sold to higher bidder) 1. Effect of taxes will be added in Price and reduction in taxes
will be deducted from price
2. Effect of Provision will be excluded if there is contract to contrary
Against buyer Against the goods

Suit for Price Suit for damage Repudiation of Suit for When property in goods When property in Goods Where Goods Completion Right to bid may Where Sale is Reserve Price Pretended
Section 55 for non Contract before Interest has passed to buyer has not passed to buyer are sold in Lots of the Contract be reserved not notified by ê bidding
acceptance due date Section 61 Separate of Sale Seller can the seller Minimum ê
Section 60 Lot Separate on fall of also bid Not lawful for Starting Price Contract will
Contract hammer seller to bid be voidable
where buyer wrongfully Lien Stoppage Resale Lien Stoppage Resale with for himself
neglect OR refuses to Sec. 47 in Transit Sec. 54 Sec.47 Sec. 50 Sec. 54 holding
accept the goods seller Sec. 50 Delivery REPUDIATED BY EITHER PARTY

• Retain the Possession Other Party Treat the Contract as Other Party may rescind
• Right is available even if he is in Possession Subsisting and wait till the date of delivery the Contract and Claim damages
of goods as bailee or agent of buyer
• Termination of Lien
STOPPAGE IN TRANSIT

REMEDIES OF BUYER AGAINST SELLER Right of Stoppage in Transit Duration of How When does Difference between Effects of sub sale
• Buyer becomes insolvent Transit Stoppage in Transit Right of Lien and OR
• Seller pasted with Possession Transit is comes to Right of Stoppage in Pledge by buyer
• Seller can Resume Possession effected an End Transit
Damage for non Suit for Specific Suit for breach Suit for Suit for
delivery Section 57 Performance of warranty anticipatory Interest
Section 58 Section 59 breach Section 60
Right of lien & Right of lien &
Seller wrongfully 1. Contract for sale of buyer can not reject recover stoppage will be stoppage will
refuses to deliver the specific/ ascertained the goods due to interest when affected not be affected
goods Goods Breach of Warranty Interest is
2. Provision of specific recoverable as
per any Law
RIGHT OF RESALE BY SELLER
Relief act
3. Damage is not No Need to inform buyer when Need to inform buyer other goods
adequate remedy goods are of Perishable nature
4. If goods are of (if notice is not given to buyer) (if notice is given to buyer)
special nature Resale Price > Contract Price Resale Price > Contract Price
OR unique difference cannot be retained difference will be retained
Resale Price < Contract Price Resale Price < Contract Price
difference cannot be Recovered difference will be Recovered

44 Faculty Teaching at Vidhyoday produced Three Times All India Rank 1 in CA

 THE INDIAN UNIT

PARTNERSHIP ACT, 1932 VARIOUS KINDS OF PARTNERSHIP

Partnership Relation between Partners WITH REGARD TO DURATION WITH REGARD TO EXTENT OF BUSINESS
Firm Partners who have entered into Partnership are collectively called Firm
Firm Name Name under which their business is carried on Partnership at Will Partnership for General Partnership Particular Partnership
Fixed Period
Association of 2 Carried on by all
OR Agreement Business Sharing of Profit OR Not fixed period agreed upon & Contract for duration Partnership constituted • Particular adventure or
More Persons Any of them acting for all No provision as to determination of of Partnership with respect to business undertaking
Partnership in General • Liability extends
• Firm and minor • Must be the result includes Trade • Sharing of profit • Each partner is principal as to Particular venture
cannot be Partner of an agreement occupation and is essential well agent Partner is for fixed term Continued
or undertaking
after Expiry of term
• Limit 50 • May be oral or Profession motive • Sharing of loss • He can bind other Partner
written (acquisition of Gain) is not essential by his act (agent) Can be dissolved any time by giving
• May be express • He is bound by the acts of notice in Writing
or implied other partner (Prinicipal)
PARTNERSHIP DEED
TEST OF PARTNERSHIP A document in writing containing various terms and conditions as to the
relationship of Partner to each other is called Partnership deed.

Agreement Sharing of Profit Mutual Agency

Relation of Partnership Sharing of Profit is Prima • Existence mutual agency is CLAUSES
cardinal principal’s law
arises from contract not facie evidence not conclusive SPECIFIC POINTS GENERAL POINTS
• Each Partner carrying on business
from status evidence is Principal as well as agent
• Admission & retirement of Partner • Name of Partners & Firm
• Settlement of A/c on Dissolution • Place of Business & Date
TYPE OF PARTNERS • Explusion of Partners • Nature of Business & Duration
• Capital
• IOD, IOC & Interest on Loan
• Salary & Commission
Active or Sleeping Partner or Nominal Partner Partner in Profit • PSR
Ostensible Dormant Partner Only
Partner • Lends his name
• Without having any real • Entitled to Share Profit
Who is Partner by agreement Partnership Partnership Partnership Partnership Partnership
interest only VS VS VS VS VS
Who become Partner &
by agreement • Not entitled to share • Not liable for losses HUF Club HUF Co ownership Association
who does not actively take
any profit • Liable to third party for
& part in the conduct of
business • Does not take part in All acts of profit only
Who actively
conduct of business
participate in the
conduct of business • Liable to third party
• Legal status • Transfer of Shares • Definition • Mode of creation
• Agency • Management • relationship • Death of member
• Management
Incoming Partner— admitted with the consent of All Partners not liable for acts done before admission. • Distribution • Registration • Intrest in • Authority to bind
Outgoing Partner— • who leaves the firm • Liable for All acts till Public notice is given of profit • Winding up Property • Liability
Partner by holding out only — Partner by estopple • Extent of • No. of membership • Dissolution • Calling for accounts
liability on clauses
• Duration of • Governing Law
• Property Existence
When a Person Knowingly to be represented he is Liable like • Minors capacity
OR
represent himself permits himself himself as Partner a Partner • Continuity
in a firm in a firm • Number of members
• Share in business

45 Did You Know, Vidhyoday has Record of CITY RANK 1 in XII Boards for 4 Continuous Years
 THE INDIAN UNIT

PARTNERSHIP ACT, 1932 LIABILITY TO THIRD PARTY

RELATION OF PARTNER TO ONE ANOTHER
Liability of firm for
Liability of a Liability of the firm
misappropriation by
Partner for acts wrongful act of
Duty to Determination Conduct of Mutual rights Partner
Agreement Indemnity loss of the firm a Partner
Section 27
of business & liability Section 25 Section 26
of Partner caused due to Fraud rights and duties Section 12 • No right of remuneration
Section 9 Section 10 of Partner by
• Right to take part in
conduct of business
• Right to Share Profit RIGHT OF A TRANSFREE OF A PARTNERS INTEREST(Section 29)
contract • Interest on Capital
• Right to be conducted
between the • Right of access of books • Interest on Advance
Partners • Right of legal heir/ • Right to be Indemnified
representative/ duty • Right to Indemnified the firm
Section 11 During Continuance
authorised agent.
of Partnership On dissolution of firm / retirement of
transferring partner is entitled.
Transferee is not entitled Transferee is entitled Receive share of Asset of firm
PARTNERSHIP PROPERTY 1. Interfere the conduct of business to receive Share of Profit &
2. Require an Account only (cannot challenge Accounts from date of dissolution
3. Inspect books of firm the Account)
Application of Property of Firm Section 15
Property of Firm

• All Property right & Interest brought

Used Exclusively for Business MINOR ADMITTED TO THE BENEFIT OF PARTNERSHIP (Section 30)
ê
Partner
Personal Profit earned by Partner Section 16
• All Properties right & Interest Right Liability
acquired by Firm
• Goodwill Rights and Duties of Partner after change in Constitution of Firm
before attaining after attaining
Section 17 majority majority
Section 14

Note : Property of firm is different

from Property of Partner After change in After expiry Where additional when he elects to elects not to
Constitution of of term undertakings are become Partner become Partner
firm carried out

RELATION OF PARTNER TO THIRD PARTY LEGAL CONSEQUENCES OF PARTNER COMING IN & GOING OUT
Introduction of A Partner Retirement of A Partner Expulsion of A Partner Insolvency of A Partner
Partner to be agent Implied authority of Extension and Partners authority is Mode of doing act Section 31 Section 32 Section 33 Section 34
of firm Partner as agent of restriction of Partners an emergency to bind firm
Section 18 firm implied authority Section 21 Section 22 RIGHTS OF OUTGOING PARTNERS
Section 19 Section 20
To carry on To share subsequent
competing business profit in certain cases
Effect of Admission by a Partner Effect of Notice to an active Partner
Section 36 Section 37
Section 23 Section 24
An admission or representation made by Partner Notice to Partner operates as a notice to firm
REVOCATION OF CONTINUING GUARANTEE BY CHANGE IN CONSTITUTION OF FIRM
concerning the affairs of the firm is evidence against Exception — fraud on the firm by Section 38
the firm if made in ordinary course of business OR with the consent of Partner

46 Participate in our Annual Sport Tournament "CHAK De”

 THE INDIAN UNIT

PARTNERSHIP ACT, 1932

DISSOLUTION OF FIRM
DISSOLUTION OF FIRM
Without the Court Order By Order of Court
Application for Late Registration on (Section 40 to 43) (Section 44)
Registration
Registration of Firm Payment of Penalty
Section 58 Section 59 Section 59A – 1
1. Mutual Agreement (Section 40) 1. Insanity
• Statement in prescribed form and Registrar shall Late Registration 2. Compulsory Dissolution (Section 41) 2. Misconduct
accompanied by prescribed fees stating record the entry of on Payment of 3. On happening of certain 3. Permanent Capacity
certain details. the statement in Penalty event by notice (Section 42)
Register 4. Persistent breach of Agreement
• Statement shall be signed by All the 4. By Notice 5. Transfer of Interest
partners or by their agent specifically (Partnership at Will) (Section 43)
authorised in this behalf also same should 6. Continuous Loss
be verified 7. Just and Equitable Ground
• Certain words expression or implying the
sanction
OR
approval or patronage Govt. are, not allowed.
RIGHT AND LIABILITIES OF PARTNERS AFTER DISSOLUTION

Section 45 Section 46 Section 47 Section 48 Section 49

CONSEQUENCE OF NON-REGISTRATION Liabilities for Acts Right of Partner to Continuing authority Mode of settlement Payment of firm
(Section 69) of Partner done have business of Partner for the of Partnership debt and of
after dissolution wound up purpose of Account separate debts
winding up
Disabilities Exceptions

CONSEQUENCE OF NON-REGISTRATION
(Section 39 to 47)
(Section 69)
DISSOLUTION OF PARTNERSHIP VS DISSOLUTION OF FIRM

Continuation Wending up Order of Court Scope Final Closure of books

of Business

47 Proud Vidhyoday Student Lichi Sharma Scored 99% in CBSE Board Exams
 THE COMPANIES
ACT, 2013
CLASSES OF COMPANIES
THE COMPANIES ACT, 2013 On the basis of Liability
Sec(20) : Company Incorporated under this act or under any previous company law.
Limited by Shares Limited by Guarantee Unlimited Company
APPLICABILITY • Liability limited to • Liable to extent of amount • Liability unlimited
nominal value of shares held guaranteed in MOA. • Contribute in event of winding up
• At the time of Liquidation
Companies Body Corp.
Other Company
under this Act Insurance Banking Electricity ê
under any
or previous Companies Companies Companies By Notification
Company Law
Special Act
of C.G ON THE BASIS OF MEMBERS
ONE PERSON COMPANY PRIVATE COMPANY
FEATURES Sec 2(62) Sec 2(68)
• Company which has only one • Share Capital : No limit
case of death of member will • Restricts by its Articles :-
Separate Legal Perpetual Limited Liability Artificial Legal Common Seal
become member. 1. Transfer of Shares is restricted
Entity Succession Person • Member / Nominee shall be :- 2. Public offer is prohibited
1. Natural Person 3. Max. member : 200 (except OPC)
• Company can open • Created by Law • Limited by Shares • Created by Law • Official sign of 2. Indian Citizen Present & past employees
Bank A/c, Raise • Wound up by Law • Limited by Guarantee Act through Company 3. Resident in Indian (Min 120 excluded from Counting of 200
loan, Sell, Purchase • Not affected by Unlimited Company Human Agency • Not Mandatory Days stayed in previous F.Y.) Joint Shareholder to be counted
Property etc. Death/ Insolvency • Cannot be converted into Sec. 8 Co. as one
• Asset contributed of members • Min. Director : 2; Min. Member : 2
by SH, is asset of
company. [Macaura
V. Northern Assurance PUBLIC COMPANY
Company Ltd] Sec 2(62)
SMALL COMPANY
Sec 2(85)
CORPORATE VEIL THEORY LIFTING OF CORPORATE VEIL • Co. which is not a private company company other than public co.
• Articles do not have restricting
• Members Sheilded from liability connected to • Courts ignore company & concerns directly with clauses
Company's Action its members PSC Turnover
• Members Min: 7
• Company identified separately from its members • Disregarding corporate entity & paying regard to Max: No limit 4cr or such a 40cr. Or such a
[Salomon V. Salomon & Co. Ltd.] realities behind the legal facade. • Subsidiary of Public Co. → Deemed Higher amt. As Higher amt. As
to be Public Co. may be prescribed may be prescribed

CASES WHERE COMPANY LAW DISREGARD CONCPT OF “SEPERATE LEGAL ENTITY]

Determine Character of Company

ON THE BASIS OF ACCESS TO CAPITAL
Formation of Subsidiary to act as agents
Daimler Co. Ltd V. Continental Tyre Merchandise Transport Ltd. V. British
& Rubber Co Transport Commission
To Protect Revenue / Tax LISTED COMPANY UNLISTED COMPANY
Dinshaw Maneckjee Petit Company formed for • SEC 2 (52) • Company other than listed company
Fraud/ Improper Conduct • Company which has any of its securities listed on
To Avoid Legal Obligation Gilford Motor Company Ltd. V. Horne
Workmen of Associates Rubber any recognised Stock Exchange
Industry V. Associates Rubber Ind. Ltd. • If SEBI prescribes : - Co. not t be considered as
Listed Company

48 Meet CA Anubhav Jain Sir at Vidhyoday, The Man behind 5000 CA Till date....
 THE COMPANIES
INCORPORATION OF COMPANIES
ACT, 2013
ON THE BASIS OF CONTROL Filing of Documents Allotment
with ROC è Registration è of CIN è Maintenance
by ROC of Document
HOLDING COMPANY • MOA & AOA • Issue Certificate • Allotment of • Till Liquidation
• Sec 2 (46) SUBSIDIARY COMPANY • Declaration of Professional of Incorporation Corporate • At the registered
• A company of whose other • Sec 2 (87) • Declaration by Subscriber & (COI) Identification office
companies are subsidiary or Directors shall: Number by ROC
Associate companies • A company in which Holding Co. :-

è
1. Not convicted of offence
1. Controls composition of B.O.D.
2. Not found guilty of Fraud/
Effect of Registration
ASSOCIATE COMPANY OR Misfeasance → during last
• Sec 2 (6) 2. Controls more than half of total voting Power 5 yrs.
• A company in which other 3. All documents Correct, 1. Subscribers will become member of company
company has Complete & True 2. Company
“Significant Influence” on its own or together with its subsidiary • Address for correspondence
(Atleast 20% of total voting • Deemed to be Subsidiary Co. : - If control is of • Details of Subscribers &
power / control) Directors Body Corporate Business Sue & be Sued Acquire, Hold
• Includes Joint venture but not another Subsidiary Co. of the Holding Co.
Own Name in its Own Name & Sell property
a Subsidiary Co.
PENALTY FOR FALSE DISCLOSURE
OTHER COMPANIES
Company Not been Incorporated Company has been Incorporated
• Person furnishing false information • Promoter / First Directors / Person making Declaration
Government Foreign Nidhi • Liable for Fraud u/s 447 • Liable for Fraud u/s 447
Company Company Company
• Sec 2 (45) • Sec 2 (42) • Sec 406 (1) TRIBUNAL IF SATISFIED
• Company in which • Company incorporated • Company incorporated
atleast 51% of paid up outside India to Cultivate habit of
Share Capital held by :- • Has place of business in savings amongst its Pass order for change Member's Liability Removal of Name from Order for Other orders
1. CG India members in MOA / AOA unlimited Register of Companies winding up
2. SG • Through itself or agent,
3. CG + SG physically or electronically. CLASSIFICATION OF CAPITAL

Dormant Company Section 8 Company Public Financial Institution

Nominal Issued Subscribed Called-up Paid-up
• Company formed for future • To promote Art, Science, • LIC
project or to hold IPR / Commerce, Sports, Religion, • UTI • Max. amount of capital • Part of Nominal • Part of Capital • Part of Capital • Total amount
Asset Environment etc. authorised in MOA Capital, offered for Subscribed by its called for paid on shares
• IDFC Ltd. • Also known Authorised subscription members payment issued
• No Significant Accounting • Profit utilized for promotion of
Trans. • Notified by CG in or Registered Capital
objects
consultation with RBI
• Inactive Company :-
1. Not carrying business
• Dividend distribution
• Established under Central
KINDS OF CAPITAL
prohibited
2. Not Significant Accounting Tr. State Act
• Need not use word ‘Limited’
3. Not field financial statement/ or ‘Private Limited’ • Atleast 51% paid up capital
Annual Return held by CG / SG / CG +SG Equity Share Capital Preference Share Capital
Share Capital which is not Preference Share Capital • Part of Issued Share Capital which carries
During last 2 F.Y. preferential right to :-
1. Payment of Dividend 2. Repayment at winding up

49 Did You Know that Faculty at Vidhyoday produced Three Times All India Rank 1 in CS.
 THE COMPANIES
ACT, 2013 DOCTRINE OF ULTRA VIRES
• Act done in excess of legal powers • Acts ultra vires the Director →SH can ratify
• Charted document, defines scope of powers of Company • Acts done beyond the power of Director and • Acts ultra vires the Articles → Articles altered
• Contains object for which company is formed, Beyond which actions cannot go. Company →void & not binding on Company • Acts ultra vires the Company →VOID, SH cannot ratify
• Sec 399 :Memorandum is public document, person contracting with company presumed to have knowledge of it • Company can neither sue nor can it sue on it • [Ashbury Railway Carriage & Iron Company Ltd
• Any contract beyond the power of memorandum ULTRA VIRES & VOID • MOA public document (open for inspection) V. Riche]
• Form of MOA : Table A, B, C, D, E • Person dealing with Company cannot enforce
• Memorandum: Printed, Paragraphed, Numbered, Signed in presence of 1 witness, Description of Subscribers. against Company, if ultra vires.
• MOA must comply with provisions of Companies Act, 2013. Protects
Company
CONTENT OF MEMORANDUM DOCTRINE OF CONSTRUCTIVE NOTICE
• “Right of Inspection to all.”
• Any person can inspect by electronic means, make record or get copies.
Name Object Capital *Nominee • Duty of person dealing with company:
Situation Liability Association 1. To inspect documents
2. Ensure, Contract is in conformity with provisions.
• Limited • State in which • Object of • Ltd / Un Ltd • Authorised • Atleast 1 • (In case of • Person reads the document or not → Presumed to have knowledge of contents.
• Private Registered matters in • Ltd by shares Share Capital Share OPC only) • If Contracts, beyond power of Company → Cannot acquire any rights against Company
Limited office situated furtherance • Ltd by Subscribed • In event of
Protects
Guarantee death of
outsiders
member shall
become member DOCTRINE OF INDOOR MANAGEMENT
• Exception to doctrine of Constructive Notice
MEMORANDUM OF ASSOCIATION • Outsiders not deemed to have notice of internal affairs of Company.
• Popularly known as Turquand Rule [Royal British Bank V. Turquand]
• Rules & Regulations framed to manage Internal affairs. • Indoor management is internal problem of Company, Outsiders not deemed to have knowledge of internal
• Forms of Articles : Table F,G, H, I & J Affairs of Company.
• Model Articles : May adopt all or any regulations
• Entrenchment Provision :
1. Amendment, if more restrictive provisions are inserted
2. At the time of Incorporation or by Amendment (Special Resolution)
EXCEPTIONS TO DOCTRINE OF INDOOR MANAGEMENT

BASIS MOA V/S AOA 1 Actual Constructive 2 Suspicion of 3 Forgery

Knowledge of Irregularity Irregularity
Objectives Defines & delimits the objectives of Company Rules & Regulation for management of Company
• [Howard V. Patent Ivory • [Anand Biharilal V. Dinshaw • [Ruben V. Great Fingall
Relationship Company and outside world Company and its members Manufacturing Co.] & Co.] Consolidated
• Omitting to do something that • Person dealing with Company • Doctrine of Indoor
Alteration Only under certain circumstances with By passing Special Resolution is necessary. suspicious about circumstances Management not
permission of RD/ NCLT • Cannot be protected under • Still doesn’t enquire, then applicable on Forgery.
Doctrine of Indoor Management cannot rely on Doctrine of • Forgery is considered
Ultra Vires Acts done beyond MOA – void and ultravires, Acts beyond AOA, Ratified by Special Indoor Management Null & Void
cannot be ratified Resolution of Shareholder

50 Simply Best Commerce Institute in Central India

 LLP ACT, 2008
CHARACTERISTICS OF LLP

Administration : Ministry of Corporate

Affairs and Registrar of Companies (ROC) Body
Corporate Perpetual
Separate
Legal Entity
Artificial
Legal person
Limited
Liability
Business for
Profit only
Mutual Common LLP
Succession Agency Seal Agreement

First Second Third Fourth

Schedule Schedule Schedule Schedule
ADVANTAGES OF LLP
Mutual Rights & [Sec 55] Conversion [Sec 56] [Sec 57] Conversion
Duties of LLP & Partners Firm → LLP Conversion Unlisted Public
(In absence of Agreement) Pvt. Co.→LLP Co. →LLP Operates on Flexible
basis of Easy to form Capital
Agreement Flexibility in Limited Structure Easy to
BODY CORPORATE Sec 2 (d) Procedural
Requirements
Liabilities
of all Partners
Dissolve

INCORPORATION OF LLP
Includes Does not
Includes Incorporation Registered Effect of
Name Registration
Document Office Registration
• Company & LLP under this Act • Corporation Sole
• Must have last • 2 or more Subscribers • ROC within • For Notices & • LLP capable of :-
• Company & LLP incorporated • Cooperative Society
words LLP • Prescribed form & 14 days Communication 1. Sue & being
outside India • Other Body Corporate notified by C.G.
• Not Undesirable, fees to ROC 1. Register • Changes to be sued
Identical, too • Statement by document intimated to ROC 2. Sell / Purchase
SMALL LLP Sec 2 (ta) nearly resembles Professional & Subscriber
• Name & Address of
2. Issue Certificate Property
• Name Reserved • Certificate is 3. May have
for 3 months LLP, Designated conclusive evidence common seal
Partners.
Contribution Turnover
• Object & Address of LLP
Limit : not exceeding `25 lakh Limit : not exceeding `40 lakh
Higher Amt: not exceeding `5 Crore Higher Amt: not exceeding `50 Crore * CG è Order for change of Name è to be change within 3 months, If not changed è CG è Allot new name

LLP Sec 5
PARTNERS & THEIR RELATIONS
Can be Partner Cannot be a Partner
• Individual • Unsound Mind
• Body Corporate • Undischarged Insolvent Relationship Cessation Changes Agent
• Pending Application for Insovlent • Sec 23 • Sec 24 • Sec 25 • Sec 26
• As per LLP Agreement • As per Agreement • Partner w/I • Agent of LLP
PARTNER • If not, as per First • If not, 30 Days written Notice (15 Days)
LLP
• Not of other partners
Schedule to partners • LLP w/I ROC
• Death / Insolvency (30 Days)
Sec 6 : Min. No. of Partner Sec 7 : Designated Partner ê • If LLP not files with
Entitled to receive ROC → person himself
• Atleast 2 partners • Atleast 2 Designated partners 1. Capital Contribution gives notice to ROC
• If reduced below 2, for more than • Both Individuals & Atleast 1 Resident in 2. Share in Profits
6 months → the only partner liable personally India (Stayed 120 Days in previous yr)
• All partners Body Corporate→Nominee act as D.P.

51 Meet CA Anubhav Jain Sir at Vidhyoday, The Man behind 5000 CA Till date....
 LLP ACT, 2008
LIABILITY OF LLP & PARTNER
SPECIAL COURT

LLP Liability Partner’s Liability Holding Out Fraud Whistle Blowing

• Sec 27
• LLP not liable if:
1. Partner had no
authority
2. Person dealing knows
the fact
• LLP liable if:
1. Within authority
2. in ordinary course of
Business
• Liabilities met out of
Property of LLP
• Sec 28 • Sec 29 • Sec 30 • Sec 31
• Partners not • Represents himself • If intention to • Partner, employee Establishment Procedure & Powers Appeal & Revision
personally liable • Permits to be defraud provides useful • Sec 67A • Sec 67B • Sec 67C
except:- represented as • Unlimited liability information for • For speedy Trial of • Offences u/s 67A triable only • •High Court may exercise
1. own wrongful act or partner of LLP & Partners conviction of LLP or powers conferred by CrPC.
offences by special courts
omission • Liable for credit • If act without its partners
receive on such Knowledge of LLP, ê • Until special court • Special court may try
representation only partner liable court may reduce, designated, another offence
waive penalty Courts u/s 435 of • May proceed with summary
Companies Act, trial
2013 → deemed to be
special court.

FINANCIAL DISCLOSURES
Books of Account & Accounting & Auditing Annual Return
Other Records etc. Standards • Sec 35
• Sec 34
• Sec 34a • Annual Return within 60 Days of
• For each year
• CG with consultation with NFRA closure of F.Y.
• Cash / Accrual Basis, Double entry
system prescribes:-
• Maintain at Registered office 1. Standards of Accounting
• Statement of Account & Solvency
within 6 months from end of each F.Y. 2. Standards of Auditing

WINDING UP & DISSOLUTION

Section 63 Section 64

Voluntary wound up by Tribunal

Winding up
By Tribunal

LLP Decides No. of Partner below 2 Unable to pay Acted against Default in filing with ROC Tribunal
ê Debts integrity, ê ê
for more than security of 1. Statement of A/c & Just &
6 months India Solvency equitable
2. Annual Return
ê
for 5 consecutive years

52 Did You Know that Faculty at Vidhyoday produced Three Times All India Rank 1 in CS.