B.R Notes

BUSINESS REGULATIONS
VI SEM B.COM BUSINESS REGULATIONS
STUDY MATERIALS -2021
PREPARED BY
PROF, TAMIL SELVAN.V MBA,M.COM
SMT NALINI RAGHUNATH RAO DEGREE COLLEGE,JIGANI
ANEKAL TALUK,BANGALORE 560105
SNR DEGREE COLLEGE,JIGANI Page 1

SYLLABUS BUSINESS REGULATIONS

OBJECTIVE:
To introduce the students to various Business Regulations and Familiarize them with common
issues of relevance
UNIT 1: INTRODUCTION TO BUSINESS LAWS 06Hrs
Introduction, Nature of Law, Meaning and Definition of Business Laws, Scope and Sources of
Business Laws
UNIT 2 : CONTRACT LAWS 18Hrs
Indian Contract Act 1872: Definition of Contract, Essentials of valid contract, Classification of
Contracts, remedies for Breach of contract
Indian sale of Goods Act 1930: Definition of contract of sale, essentials of contract of sale
conditions and warranties, rights and duties of Buyer, rights of an unpaid seller
UNIT 3: COMPETITION AND CONSUMER LAWS: 14Hrs
The competition Act 2002: Objectives of competition Act, Feature of Competition Act, CAT,
offences and penalties under the Act, Competition Commission of India.
Consumer protection act 1986: Definition of the terms consumer, Consumer disputes, defect,
Deficiency, Unfair trade practices and services. Rights of the consumer under the act, Consumer
Redressal Agencies-District Forum, State Commission, National Commission.
UNIT 4: ECONOMIC LAWS 12 Hrs
Indian Patent laws and WTO patent rules: Meaning of IPR ,invention and Non-Invention, procedure
to get patent, restoration and surrender of lapsed patent, infringement of patent.
FEMA 1999: objects of FEMA, Salient features of FEMA, definition of important terms: authorized
person, Currency, foreign currency, Foreign exchange, Foreign security, offences and penalties.
UNIT 5: ENVIRONMENTAL LAW 6 Hrs
Environment Protection Act 1986: objects of the Act, Definitions of important terms: :
Environment, Environment pollutant, Environment pollution, Hazardous substances and occupier,
types of pollution, Rules and powers of central government to protect environment in India.

UNIT: 1 INTRODUCTION TO BUSINESS LAWS
Introduction, Nature of Law, Meaning and Definition of Business Laws, Scope
and Sources of Business laws.
Meaning and Definition of Business
Human beings are continuously engaged in some activity or other in order to satisfy their
unlimited wants. Every day we come across the word 'business' or 'businessman' directly or
indirectly. Business has become essential part of modern world.
Business is an economic activity, which is related with continuous and regular production
and distribution of goods and services for satisfying human wants.
Lewis Henry defines business as, "Human activity directed towards producing or acquiring
wealth through buying and selling of goods."
Meaning and Definition of Law
The law is refers to the principles and regulations established by a government and
applicable to people whether in the form of legislation or custom and policies recognized
and enforced by judicial decision. Law is a system of rules that are created and enforced
through social or governmental institutions to regulate behavior.
Salmond defines law as the “body or principles recognized and applied by the state in the
administration of justice”.
According to Austin, “Law is a rule of conduct imposed and enforced by the state." .
Nature of Law
Law is the result of continuous effort through a workable set of rules in the society. It is not
pure science based upon unchanging and universal truth. It affects every activity of the
individual.
The natures of law are as follows:
1. Justice is an aim of Law- Justice is always provided through law. The law means to
provide justice to people.
2. Create a peaceful and harmonious relation between people living under society-Law is
made for keeping peace and harmonious relation by providing security.
3. The law is pervasive (spreading or spread throughout)- Every person is presumed to
know it.
4. It regulates human activities- It regulates human behavior in three ways: Prohibitory,
mandatory and permissive.
5. Ignorance of law is not excused.
6. It is a set of rules which is set by the state.
7. It regulates the human conduct.
8. It is created and maintained by the state.
9. It has the certain amount of stability, fixity and uniformity.
10. It ensures all the people have specific power and responsibilities.
11. Its violation leads to punishment.
Meaning and definition of “Business Laws”
Business law, also called commercial law or mercantile law, the body of rules, Commercial
law or business law is the body of law which governs business and commerce and is often
considered to be a branch of civil law and deals both with issues of private law and public
law. Commercial law regulates corporate contracts, hiring practices, and the manufacture
and sales of consumer goods.
Business law is also known as commercial law and is that branch of law that deals with the
legal rights, duties, liabilities of parties involved in any kind of business transactions related
to commerce, trade, sales and merchandising. It is a branch of civil law and includes public
as well as private law.
Commercial law or business law deals with legal aspects such as the laws of principal and
agent, carriage by sea or land, laws of indemnity and guarantee, laws of insurance (marine,
fire, life, accident insurance), laws of banking, partnership and much more. Business law is a
very broad term by itself and has many divisions and types of law to be studied under it.
Business Law is a wide term and embraces all legal principles concerning business
transactions. It is also known as the ‘Commercial Law’, ‘Law Merchant’ or ‘Mercantile Law’.
Business Law consists of those legal rules, which govern and regulate the business activities,

transactions and trade. It also encompasses the law relating to regulation of business
associations and other incidental matters.
Here are a few important features of business law
1. It is the law of commerce or commercial law as it deals with all the aspects of entering
into selling and purchasing agreements.
2. It includes the study of the law of contract which is important in agreements or contracts
that involve two or more parties buying and selling things in exchange for a consideration
or purchase price.
3. Business law clearly explains the rights, duties, liabilities and legal obligations of the
parties involved in a contract of sales, purchase or any other kind of contract or agreement
entered into in relation to any kind of business or commercial activity.
4. It includes intellectual property law (patents, trademarks, copyrights, etc.) and consumer
protection law.
5. Business law will also apply to anyone who plans on opening or starting a business of
their own.
6. Business law also deals with banking law, finance law and other important civil law
Scope of Business laws

The scope of business law is very wide and varied. It includes law relating to contracts,
partnership, sale of goods, negotiable instruments, companies, insolvency, insurance,
carriage of goods, etc.
Business law is concerned with the study of rights and obligations arising out of business
transactions between mercantile persons. Business persons are persons who carry on
commercial transactions. They may be individuals, partnership concerns or joint stock
companies.
Knowledge of business 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 can be broadly classified as:
1. Law of contract 1872
Deals with any agreement which may be in particular or general with the individuals
belonging to the society and also of various commercial activities.
2. Law of sale of goods 1930
Deals with the agreement between one trader to another trader with only commercial
transactions.
3. Economic and other Legislation

These are termed as ‘General Law’, deals with both the business and society which sets the
rules towards rights, duties and obligations for any category of people in the society.
4.Partnership Act 1932:
According to partnership act of 1932 when two or more people join together to conduct
any economic activity in view of getting profit it is known as partnership.
5.Negotiable instrumentation Act 1881:
Negotiability implies easy transferability from one person to another in return for
consideration. These instruments play key role on modern business as a document which
can be transferable with ease Example: Promissory note, Bills of exchange or cheque.
6.Companies Act 1956:
According to companies act 1956, company is an artificial person created by law having
perpetual succession with legal entity. The liabilities to the individuals are limited. In such
organization management and ownership is different.
7.Insurance Companies Act 1938:
This acts provides safety and assurance to the lives, Health of the individuals and provides
certain extensional protection to properties like fixed assets, Vehicles, goodwill and trade
mark etc.

8.Banking companies Act 1949:
This act provides guidelines and regulations for dealing with funds which includes deposits,
withdrawals, and providing loan for various sections of the societies.
9.FOREIGN EXCHANGE AND MANAGEMENT ACT 1999:
Foreign exchange Act deals with the transactions carried in foreign Currency .For example,
Dollars, pounds etc. this foreign Exchange act facilitates external trade and payments in
view of promoting orderly maintenance of foreign exchange market in India.
10.Copyright Act& Patent Act:
The copy right Act 1957 protects original Literary, dramatic ,musical and artistic works and
cinematograph films and sound recordings.
Indian Patent Act 1970 grants exclusive right to the inventor for his invention for limited
period of time .generally 20 years time has been granted to the patent holder but incase of
inventions relating to manufacturing of food or drugs or medicine it is for seven years from
the date of patent.
Sources of Business Law

A source of law in its narrow sense means the origins of law, i.e. the binding rules governing
human conduct. More generally, it means any premises of a legal reasoning. Such sources
may be international, national, regional or religious.
Major part of Indian Mercantile Law or Commercial Law is based on English Law
The main sources of Indian Mercantile Law are:
1. English Mercantile Law.
2. Statute Law.
3. Judicial Decisions.
4. Customs and Usage.
5. Expert opinions
6. Commercial treaty and agreements

1. English Mercantile Law
The English law is the most important source of Indian mercantile law. Many rules of
English law have been incorporated into Indian law through statutes and judicial decisions.
The sources of English law are:
a. Common Law
This law is known as judge made law. It is based upon customs and practices handed down
from generation to generation. It is the oldest unwritten law. The English Courts developed
these over centuries.
b. Equity
Equity is also unwritten law. It is based upon concepts of justice developed by the judges
whose decisions become precedents. It grew as a system of law supplementary to the
common law and covered the deficiencies of the common law. Its rules were applied in
cases where the rules of common law were considered harsh and oppressive.
The Judicature Acts of 1873 and 1875 abolished the distinction between Common Law and
Equity so that they are now applied to all cases.
c. Case Law
This is also an important source of the English mercantile law. It is built upon the decisions
of the Judges. It is based on the principle that what has been decided in earlier case is
binding in similar future case also unless that there is a change in the circumstances of the
case.
d. A Lex Mercatorian or Law Merchant :It is also one of the important sources of English
mercantile law. A Lex Mercatorian or law merchant consists of legal principles based on
customs and usage. They developed first as a separate system of law and subsequently
became part of the common law.
2. Statute Law
A Bill passed by the parliament and signed by the President becomes a “Statute” or an Act.
Most of the Indian laws are embodied in the various Acts passed by the Central as well as
State legislators.
• The Indian contract act 1872 • The sale of goods act 1930
• The companies act 1956 • The Negotiable instrument act 1881
• The Indian partnership act 1932
3. Judicial Decisions
Judicial decisions are also called as case laws. They referred to as precedents and are
binding on all Courts having jurisdiction lower to that of the Court, which gave the
judgment. The Courts in deciding cases involving similar points of law also follow them.
4. Customs and Usage
Customs and usage plays an important role in regulating business transactions. A well-
recognized custom or usage can even override the statute law. Most of the business
customs and usage have been already codified and given legal sanctions in India. Some of
them have been ratified by the decisions of the competent Courts of law.
5. Experts opinion
The experts can help us to make good business rules. Our law makers take opinion and
guidelines from the exports before making business rules. If we have good business rules
our businessman can managed, regulate and lead business organization successfully. The
experts are the manufactures helping WTO create good business environment in the
business community so experts are considered as a source of business law.
6. Commercial treaty and agreement: - WTO, etc.
Commercial treaty and agreement are business understanding and compromise between or
among the organization and countries. After making business agreement all the members
of that follow its provisions as its business rules. Commercial agreement is always made
with a view to develop and extend business relation between or among the business
organization or countries. The member countries or organization should make business
rules according to provisions of that agreement. For example, member countries of WTO
etc. should follow its rules as their business rule. Therefore, it is also considered is a source
of business law.

PROBLEMS OF BUSINESS LAW
The basic problems of Business Law are:
1.Gap between Principles and Practices:
Business laws are framed by central Government and implemented by various agencies of
state governments. If interpreted wrongly. It create problems. Hence there is gap between
the theory and action.
2.Enactment and Enforcement by Different Authority:
All enactments are done by central government and enforcement of these laws are by the
officers in various levels in each department.
3.Road blocks to Industrial progress:
There is lot of interruption and involvement in every business activity which does not
provide complete freedom to the businessman in their innovations.
4.Loop Holes in Laws:
Even though the laws framed by the government are precise and complete their will be in
some loop holes. Though the laws are rigid in providing license. Still the rich and influential
businessman interprets in different way and succeeds in getting the license.
5.Other problems:
There are other issues like not paying proper taxes to the government and exploiting
various innocent people and getting and wrong way wealth.
Criminal Law
Rules of criminal law imposed duties on people and specify that any violation of these
duties in wrong not merely to the individual who are harmed but to the large community.
Civil Law
Rule of civil law also imposed duties on people and association people violation of duty
create by a civil rule is wrong. But unlike a criminal wrong a civil wrong does not constitute
a wrong against community at large.

Objectives of Business law
1.Defines the Rules of the Game:
Business law provides the platform to carryout business transactions in a smooth and
congenial way without bypassing the law of the land.
2.Enables Enforcements rights:
Business law provides equal rights to all the citizens which are judicially force able against
infringement.
3.Facility for Industrial Growth:
Even though the business law does not specify any policy. it provides equal opportunities to
every person in the society. It provides mandatory guidelines for all business transactions
.thus it encourages entrepreneurs and provides protection to the rights of the business
man.
4.Achieve Social Justice:
Since the business law is impartial for all the sections of the society irrespective of caste
,creed, community. It provides equal opportunities to every person in the society. It
protects the child and women against unscrupulous people. It makes sure that there is
equal opportunities to every person in the society. It protects the child and women against
unscrupulous people. It makes sure that there is equal remuneration for women and men.
5.It is Rigid and Flexible:
It remains the same for all type of business transaction whether Micro or Macro, hence it is
rigid.Due to environmental conditions if required the suitable corrections shall be affected
through amendment by the Government hence it is flexible.

UNIT: 2 CONTRACT LAWS
Indian Contract Act 1872: Definition of Contract, Essentials of valid contract, Classification
of Contracts, remedies for Breach of contract
Indian sale of Goods Act 1930 Definition of contract of sale, essentials of contract of sale
conditions and warranties, rights and duties of Buyer, rights of an unpaid seller
Part – A: INDIAN CONTRACT ACT 1872
Contract Meaning
A contract is a voluntary arrangement between two or more parties that is enforceable
by law as a binding legal agreement.
Contract law concerns the rights and duties that arise from agreements.
A contract is a legally enforceable agreement between two or more parties. It may be oral
or written. A contract is essentially a set of promises. Typically, each party promises to do
something for the other in exchange for a benefit.
Definition of contract
According to Sir John Salmond defines a contract as, “An agreement creating and defining
obligations between two parties.
According to Sir Fredrick Pollock defines, “Every agreement and promise enforceable at
law is a contract”.
The definition of Contract is given under S.2(h) of the Indian Contract Act, of 1872 which
provides ‘a contract is an agreement enforceable by law’. Thus, a contract is an agreement
made between two or more parties which the law will enforce.
According to above definitions it is clear that a contract should consist of two elements
a. Agreement
b. Legal obligation (enforceable by law)
a. Agreement
Agreement is considered to be prime element to form any contract. An agreement is
defined u/s 2 (e) as ‘every promise and every set of promises, forming consideration for
each other. When a proposal is accepted it becomes a promise. Thus, an agreement is an
accepted proposal. Therefore, in order to form an agreement there must be a proposal or
an offer by one party and its acceptance by other party.
In short Agreement = Proposal + Acceptance.
b. Legal obligation (enforceable by law)
An agreement to become a contract must give rise to legal obligation. The second part of
the definition deals with enforceability by law. An agreement is enforceable u/s 10 if it is
made by competent parties, out of their free consent and for lawful object and
consideration. Therefore, a Contract = Agreement + Enforceability. Thus, all contracts are
agreements but all agreements are not necessarily contracts.
Essentials elements of a valid Contract
1. Offer and Acceptance: Basically, a contract unfolds when an offer by one party is
accepted by the other party. The accepted offer should be without any qualification and be
definite. An offer needs to be clear, definite, complete and final. It should be
communicated to the offeree. A proposal when accepted becomes a promise or
agreement. The offer and acceptance must be ‘consensus ad idem’ which means that both
the parties must agree on the same thing in the same sense i.e. identity of wills or
uniformity of minds.
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. 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.
2. Intention to Create Legal Relationship: The intention of the parties to a contract must be
to create a legal relationship between them. Agreements of social nature, as they do not
contemplate legal relationship, are not contracts. For instance, if a father fails to give his
daughter the promised pocket money, the daughter cannot sue the father, because it was
purely a domestic arrangement. Thus, it is clear that all agreements, which do not result in
legal relations, are not contracts.
Example:
1. A 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.
3. Capacity to Contract: If an agreement is entered between parties who are competent
enough to contract, then the agreement becomes a contract.
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.
4. Genuine and Free Consent: Free consent is another essential element of a valid contract.
An agreement must have been made by free consent of the parties. The contract would be
void in case of mutual mistakes. When consent is obtained by unfair means, the contract
would be voidable.
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.
5. Lawful Object: Objectives of an agreement should be lawful. It must not be illegal or
immoral or opposed to public policy. It is lawful unless it is forbidden by law. When the
object of a contract is not lawful, the contract is void.
Example: A promise to pay B Rs.5 thousand if B beats C. The agreement is illegal as its
object is unlawful.
6. Lawful Consideration: Something in return is Consideration. In every contract,
agreement must be supported by consideration. It must be lawful and real.
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.
7. Certainty and Possibility of Performance: The agreements, in which the meaning is
uncertain or if the agreement is not capable of being made certain, it is deemed void. T&C
of the contract should always be certain and cannot be vague. Any contracts that are
uncertain . are considered void. The terms of the agreement must also be capable of
performance and should not enforce impossible act.
Example:
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.
Possibilities of performance
Example: A agrees with B to discover treasure by magic, the agreement is not enforceable.
A agrees with B to put life into B’s dead brother. The agreement is void as it is impossible of
performance
8. Legal Formalities: Legal formalities if any required for particular agreement such as
registration, writing, they must be followed. Writing is essential in order to affect a sale,

lease, mortgage, gift of immovable property etc. Registration is required in such cases and
legal formalities in the relevant legislation should be strictly followed.
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.
Classifications of Contract
1. Contracts on the basis of creation:
a) Express contract: Express contract is one which is made by words spoken or written.
Example No. 1: X says to Y, will you buy a car for ₹. 100000? Y says to X, I am ready to buy
your car for ₹. 100000. It is an express contract made rally.
Example No. 2: X writes a letter to Y, I offer to sell my car for ₹. 100000 to you. Y send a
letter to Y, I am ready to buy your car for ₹. 100000. It is an express contract made in
writing.
b) Implied contract: An implied contract is one which is made other than by words, spoken
or written. It is inferred from the conduct of a person or the circumstance of the particular
case.
Example: X, a coolie in uniform picks up the bag of Y to carry it from railway platform to the
------ without being used by Y to do so and Y allow it. In this case there is an implied offer by
the coolie and an implied acceptance by the passenger. Now, there is an implied contract
between the coolie and the passenger is bound to pay for the services of the coolie.
c) Quasi or constructive contract:
It is a contract in which there is no intention either side to make a contract, but the law
imposes contract. In such a contract eights and obligations arise not by any agreement
between the practice but by operation of law.
Example: where certain books are delivered to a wrong address the addresses is under an
obligation to either pay for them or return them.
2. Contracts on the basis of execution:
a) Executed contract: It is a contract where both the parties to the contract have fulfilled
their respective obligations under the contract.

Example: X offer to sell his car to Y for ₹. 1 lakh, Y accepts X offer. X delivers the car to y and
Y pays ₹. 1 lakh to X. it is an executed contract.
b) Executory contract: It is a contract where both the parties to the contract have still to
perform their respective obligations.
Example: X offers to sell his car to y for ₹ . 1 lakh. Y accepts X offer. It the car has not yet
been delivered by X and the price has not yet been paid by Y, it is an Executory contract.
c) Partly executed and partly executory contract: It is a contract where one of the parties
to the contract has fulfilled his obligation and the other party has still to perform his
obligation.
E.g. X offers to sell his car to y for ₹. 1 lakh on a credit of 1 month. Y accepts X offer. X sells
the car to Y. here the contract is executed as to X and Executory as to Y.
3. Contracts on the basis of enforceability:
a) Valid contract: A contract which satisfies all the conditions prescribed by law is a valid
contract.
E.g. X offers to marry y. y accepts X offer. This is a valid contract.
b) Void Contract: the term void contract is described as under section 2(j) of I.CA, 1872, A
contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable. In other words, a void contract is a contract which is valid when entered into a
contract but which subsequently became void due to impossibility of performance, change
of law or some other reason.
E.g. X offers to marry Y, Y accepts X offer. Later on, Y dies this contract was valid at the time
of its formation but became void at the death of Y.
c) Void Agreement: According to Section 2(g), an agreement not enforceable by law is said
to be void. Such Contracts are void- ab- initio which means that they are unenforceable
right from the time they are made.
E.g. in agreement with a minor or a person of unsound mind is void –ab-initio because a
minor or a person of unsound mind is incompetent to contract.
d) Voidable contract: According to section 2(i) of the Indian contract act, 1872, contract
which is enforceable by law at the option of one or more of the parties thereon but not at
the option of the other or other, is a voidable contract. In other words, A voidable contract
is one which can be set aside or avoided at the option of the aggrieved party. Until the
contract is set aside by the aggrieved party, it remains a valid contract. For e.g. a contract is
treated as voidable at the option of the party whose consent has been obtained under
influence or fraud or misinterpretation.

e) Illegal Contract: An illegal contract is one the object of which is unlawful. Such an
contract cannot be enforced by law. Thus, illegal agreements are always void – ab- initio
(i.e. void from the very beginning)
f) Unenforceable contract: It is contract which is actually valid but cannot be enforced
because of some technical defect (such as not in writing, under stamped). Such contracts
can be enforced if the technical defect involved is removed.
4. Classification of Contracts according to performance
According to the extent of performance of contracts, contracts may be classified as
1.Unilateral Contract :
It is also called as one-sided contract. In a unilateral contract, only one party has to satisfy
his obligation at the time of the formation of it, the other party having fulfilled his
obligation at the time of the contract or before the contract comes into existence.
2. Bilateral Contract
A contract is said to be a bilateral contract where the obligations of both the parties to the
contract are pending at the time of formation of the contract. In this type of contract, a
promise on one side is exchanged for a promise on the other.
OFFER:
Meaning:
Offer is nothing but the “Proposal”. The meaning of these two words is same i.e, signifying
the willingness to do or to abstain from doing any act.
Definition:
According to Section 2(a) of ICA 1872, “When one person signifies to another his willingness
to do or to abstain from doing anything with a view to obtaining the assent of the other to
such act or abstinence”.
Examples of Offer:
1.A say to B” will you purchase my scooter for Rs 8000?” this is an express offer.
2.A write s a letter to B offering to sell his car for Rs 60000 to him. This an express offer.
3.KSRTC runs special buses on a particular route. This an implied offer from KSRTC to carry
the passengers on the route who are prepared to pay the specified fare. This is an implied
offer.

Essentials of Offer:
a. Offer must be capable of creating legal relations: the intension of the offeror while
making the offer is to create legal relations.
b. Offer must be Definite, Certain and non-vague: if the contents of the offer are indefinite,
uncertain and vague, it is not a valid offer. It is essential that the terms of the offer must be
clear and certain, so that the rights and obligations can be exactly fixed.
c. Offer must be communicated to the offeree: Communication of offer is essential to
obtain the assent of the offeree. If there is no communication of offer, there is no
acceptance.
d. Offer must be made with a view to obtain the assent of the other party: the main
purpose of an offer is to get the assent of the other party. Just expressing a mere intension
or making an enquiry is not sufficient to constitute an offer.
e. An offer may be conditional: Sometimes offer may contain one or more conditions.
These are called conditional offer. It can be accepted only subject to that condition.
f. Offer should not contain any assumptions: the offer given by the offeror must not be the
assumed condition.
g. Lapse of an offer:
- If either offeror or offeree dies before acceptance
- It is not accepted within the specified time or within the reasonable time.
- If the offeree does not make a valid acceptance.
- If the offer is revoked by the offeror himself, before acceptance.
h. An invitation to offer is not an offer: Generally, confusion arises between an invitation to
offer and valid offer. This confusion should be removed for understanding the real sense of
proposal.
i. Offer may be Specific or general: when offer is made to a specific person or a body of
persons, it is called a specific offer. When an offer is addressed to the world, it is a called a
general offer. A general offer can be accepted by one from the public.

KINDS OF OFFER
1. Express offer: An express offer is one which may be made either by words spoken or
written. A offer to sell his car by a letter to B for 1000.
2. Implied Offer: An implied offer is one which may be gathered from the conduct of the
parties or from the circumstances of the case.
3. Specific offer: When an offer is made to a specific person or body of persons is called a
specific offer
4. General offer: when an offer is addressed to the whole world, it is called general offer. A
general offer can be accepted by any person from the public.
5. Counter offer: A counter offer is the rejection of the original offer and making new offer.
A person who makes a counter offer and subsequently changes his mind and wishes to
accept the original cannot do as the first offer lapses and he cannot treat it as still open.
6. Standing offer: where large quantities of goods are required by certain companies or
other bodies from the time to time, it is usual ti call tenders for supply of goods for long
duration.
7. Cross offer: When two parties make identical offer to each other in ignorance of each
offer, such offers are known as cross offer.
Conditional Offer:
When a person makes a proposal to the other person without any conditions, it is called
absolute or unconditional offer. On the other hand if any conditions are imposed there on
which are to be fulfilled before its acceptance, it is called a conditional offer.
Important rules of conditional offers:
- Conditions must be communicated to the offeree.
- Conditions should attract the attention of offeree.
- Conditions may be in any language
- Conditions should be reasonable.

ACCEPTANCE:
Meaning:
An offer must be communicated to the offeree. If the offeree signifies his/her assent, it is
called acceptance. An accepted proposal is called promise or agreement.
Definition:
According to Section 2(b), “When the person to whom the proposal is made signifies his
assent, it is an acceptance of the proposal. An accepted proposal is called a promise or
agreement”.
Examples of Acceptance:
1.A offer to sell his car to B for Rs 90000 B accepts this and agrees to buy A’s car for Rs
90000 .in this case a binding contract comes into existence between A and B.
2. A wrote a letter to B “ I want to sell my black horse for Rs 12000.B replied by a letter “I
am ready and willing to buy your black hourse for Rs 12000. Heare B ‘s acceptance is
express acceptance as it it is made from writing.
Essentials of a valid acceptance:
1. Acceptance must be absolute and unconditional: A valid acceptance should not posses
any conditions, it must be absolute. It is contains any condition is not a valid acceptance.
2. Acceptance must be communicated to the offeror: acceptance must be communicated
to the offeror by the offeree. The mode of communication may be oral or written.
3. Acceptance must be made with a reasonable time: acceptance must be given within the
time specified by the offeror. If no time is specified by the offeror, it must be within a
reasonable time.
4. Acceptance must be in the mode prescribed by the offeror: Acceptance is to be made in
the manner prescribed or indicated by the offeror. Acceptance given in any other mode
than the prescribed one, it may not be effective.
5. Acceptor must be aware of the offer: The acceptor must be aware of the offer before
giving consent to it. If the acceptor without knowing the proposal conveys his acceptance, it
is not valid acceptance.
6. Acceptance cannot be implied by silence: Silence of the promise in response to a
proposal cannot be deemed as acceptance.

7. Acceptance must be given before offer lapses: acceptance must be given before the
offer lapses or revokes by the offeror. An acceptance given after lapse or revocation of an
offer is not a valid acceptance.
8. Acceptance must be given only by the offeree: it should be given by the person to whom
the proposal is made. An acceptance given by a third party will not create legal right and
obligations between him and offeror.
Exceptions to this rule:
a. By performing a condition in a conditional offer.
b. Waiver of the communication of acceptance
c. Acceptance given for a general offer
d. An implied acceptance is a good acceptance
Communication of offer and acceptance:
Section 4 of ICA, deals with the communication of offer and acceptance by post. To create a
valid agreement, it is necessary to communicate the offer and acceptance by the respective
parties. When the parties are at the same place, it is east to communicate their offer and
acceptance. But when the parties are at the distant places, offer and acceptance are
generally exchanged through post.
Communication of revocation
Revocation means taking back or cancellation of something. Section 5 of the act governs
regarding the revocation of offer and acceptance.
1. Revocation of offer – rules – section 5: A proposal may be revoked at any time before
the communication of its acceptance is complete against the offeror but not afterwards. It
means the offeror can withdraw his offer at any time before its acceptance but not later.
- Mode of revocation of offer:
➢ By notice of revocation by the offeror to the offeree.
➢ By lapse of time
➢ By non-fulfillment of a condition by the offeree
➢ By death or insanity of offeror
➢ When the acceptance is not given in a prescribed mode.
➢ By subsequent illegality.

2. Revocation of acceptance – Rules- Section 5: An acceptance may be revoked any time
before the communication of acceptance is complete but not afterwards. The acceptance is
binding on the acceptor when the letter of acceptance actually reaches the proposal.
CONSIDERATION
What is Consideration?
Consideration is the benefit that each party receives, or expects to receive, when entering
into a contract. Consideration is often monetary, but it can be a promise to perform a
specific act, or a promise to refrain from doing something.
Section 2(d), defines Consideration as follows; “When at the desire of the promisor, the
promise or any other person has done or abstained from doing, or does or abstains from
doing or promises to do or abstain from doing something, such as an act or abstinence or
promise is called consideration for the promise”.
Examples of Consideration:
1.A agrees to sell a house to B for Rs100000 .For A ‘s Promise, the consideration is RS
100000 for B’s Promise. The consideration is the house.
2.A agrees to sell his scooter to B for Rs 8000.In this case B’ is a Promise to pay the amount
of Rs 8000 is the consideration for A’s promise to sell the scooter.And A’s promise to sell
the scooter is the consideration for B’s promise to pay the amount of Rs 80000.
3. A engages B as a clerk in his office for rs 2000 a month.The Monthly wage is the
consideration received by B,the services of B constitute the consideration received by A.
Essentials of Valid Consideration:
1. Consideration at the desire of the promisor: Consideration must be given by the
promisee at the desire of the promisor only. A gratuitous service rendered by the promisee
without any request or desire of the promisor is not treated as a valid consideration.
2.Consideration may move from promise or any other person: consideration may be given
by the promisee or any other person on his behalf. Under Indian law it is allowed that a
strange to the contract may give consideration.
3.Consideration may be past, present or future: When the promisor receives the
consideration before the date of contract, it is said to be past consideration. The
consideration received along with contract is said to be present consideration, if same is
received at a future date then it is future consideration.
4.Consideration need not be adequate: it is not necessary that the consideration should be
adequate to the promise. But it must be of some value. Law requires some sort of
consideration for the promise.

5.Consideration must be real: though the consideration need not be adequate but it must
be real not illusory. Consideration is also to be competent.
6.Consideration must be lawful: the consideration for an agreement must be lawful. An
agreement is void if it is based on unlawful consideration. The consideration of an
agreement is unlawful unless –
a. It is forbidden by law
b. It would defeat the provision of law if it is permitted
c. It is fraudulent and involves or implies injury to a person or property of another.
d. The court regards it immoral or opposed to public policy.
7Consideration must be something which the promisor is not already bound to do: a
promise to do what one is already bound to do either by general law or under an existing
contract is not good consideration
Exceptions of consideration:
1. Promise made on account of natural love and affection – Sec 25(1)
2. Promises to compensate voluntary services – Sec 25(2)
3. Time barred debts – Sec 25(3)
4. Complete Gifts – Sec25(4)
5. Remission – Sec 63
6. Guarantee Contracts – Sec 127
7. Agency Contract – Sec 85
CAPACITY OF PARTIES
Meaning: The term capacity to contract means the competency or qualification of the
parties to enter into a valid contract.
Definition:
Section 11 of ICA 1872, deals with the competency of parties and provided that “every
person is competent to contract who is of the age of majority according to the law to which
he is subject and who is of sound mind and is not disqualified from contracting by any law
to which he is subject”.
According to Sec 11 the following persons are competent to enter into the contract;
a. Majors c. Sound Minded persons
b. The persons who are not disqualified by any law of the land.
Reasons for incapacity:
1. Incapacity out of mental deficiency
2. Incapacity out of unsound mind
3. Incapacity arising out of status
a. Alien enemies’
b. Insolvents
c. Foreign sovereigns an ambassador
d. Convicts
e. Corporation
f. Married women
g. Professional persons
Minor
According to section 11 of ICA, a minor is an incompetent person to enter into a contract.
Definition:
Section 3 of Indian Majority Act 1875, defines a minor as “A minor is one who has not
completed the age of his or her 18th year”.
Law relating to contracts of Minors:
1. An agreement by or with minor is void: In 1903, the privacy council made it perfectly
clear that a contract entered into by or with a minor is void. A contract of minor is nullity
and non-existence from the inception in the eyes of law.
2. No Ratification: Ratification means subsequent approval of an act already done an
agreement with minor is void from the beginning. A minor cannot ratify the agreement
even on attaining a majority, because a void agreement cannot be ratified.
3. Minor can be promise or beneficiary: where a minor is a promise or beneficiary in a
contract it can be enforced by him. There is no restriction on minor from being beneficiary.
4. No Estoppels against minor: where a minor by innocently misrepresenting his age has
induced the other party to enter into a contract, he can be made liable on that contract.

5. No Specific performance: a minor contract is absolutely void and therefore, there can be
question of specific performance of such a contract.
6. Liability for torts: a tort is a civil wrong. A minor is liable for torts. Minors are liable for
causing injury or damage to the property of others, due to their negligence. They will treat
at par with others in the cases of torts.
7. No Insolvency: a minor cannot be declared are insolvent even though they are due
payable from the properties of a minor.
8. Minor as a partner: As a general rule a minor cannot be admitted as a partner in
partnership firm. This is because a partnership comes into existence out of an agreement.
Minor cannot be a party to an agreement according to ICA but he can admit as a partner
under section 30 of Indian Partnership Act, to the benefits of Partnership firm.
9. Minor cannot bind parent or guardian: In the absence of authority express or implied
minor is not capable for binding his parents or guardian even for necessaries.
10. Minor as an agent: Minor can act as an agent but he will not be liable to his principal for
his acts. The principal cannot make the minor liable for any acts good or bad.
11. Joint contract by minor or adult: in this case of a joint contract entered into by a minor a
along with an adult, the adult will be liable on the contract on the contract but not the
minor.
12. Minors’ liability for necessaries: Necessaries means the things that are essentially
needed by a minor. They do not include luxuries, costly items and unnecessary articles. The
question of necessary depends on the class of society.
Free Consent
Meaning of Consent: Sec 13 of ICA 1872, “two or more persons are said to contract when
they agree upon the same thing in the same sense”.
Meaning of Free Consent: Sec 14 of ICA 1872, “Consent is said to be free when it is not
caused by coercion, undue influence, fraud, misrepresentation or mistake”.
COERCION AND OTHER CONSEQUENCES
1. Coercion
Meaning: it means a threat or force used by one party against another for compelling him
to enter into an agreement.
Definition: According Sec 15 of ICA 1872, “Committing or threatening to commit any act
forbidden by the Indian Penal Court (IPC) or the unlawful detaining or threatening to detain

by property to the prejudice of any person, with the intension of causing any person to
enter into an agreement” is called coercion.
Essentials that amounts to coercion:
a. Committing any act forbidden by IPC
b. Threatening to commit any act forbidden by the IPC
c. Unlawful retaining of property of another
d. Threatening to detain the property unlawfully.
2. Undue Influence:
Meaning: it is the domination of one person who is having strong mind will over another
who is having weak mind and weak will.
Definition: Sec 16 of ICA 1872, “A contract is said to be influenced 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 other and uses the position, to obtain an unfair advantage
over the other”.
Essentials elements of undue influence:
1. Existence of apparent authority
2. Existence of by fiduciary relationship
3. Existence of mental in capacity
4. Existence of unconscionable bargains
5. Contracts with pardanashin ladies
6. Burden of proof.
7. Effect of undue influence
3. Fraud
Meaning: fraud is a willful misrepresentation made by a party to a contract with the
intension to deceive the other party. It means a false statement made knowingly without
belief in its truth or recklessly without caring whether it is true or not.
Definition: According to Sec 17 of ICA 1872,
a. A false suggestion as to a fact knows known to be false or not believe to be true.
b. The active concealment of a fact.

c. A promise made without any intention of performing it
d. Doing any such act or making any such omission as the law specifically declares to be
fraudulent
e. Doing any other act fitted to deceive.
Essentials of fraud:
1. Fraud must be committed by a party to the contract.
2. There must be false suggestion
3. There was no intention to perform the promise
4. There must be active concealment of the fact
5. Where law specifically declared an act to be fraudulent
6. Any other act fitted to deceive
7. There must be an intention to deceive and must actively deceive
8. Mere silence is not fraud
4. Misrepresentation
Meaning: the word representation means a statement made by one party to another. This
may be added before or at the time of contract. It may be made with regard to some
existence fact or past event which may materially include the other party to enter into a
contract.
Essentials of Misrepresentation:
- Making a positive assertion
- Committing the breach of duty
- Causing a party to make a mistake as to substance
- Innocent intention of the party

5. Mistake
It is a misconception or error. A mistake means that the parties are intending to do one
thing but have done something else. To create a valid contract consensus as idem is
necessary. Section 20, 21, 22 deals with mistake;
a. Mistake of law – Section 21
- Mistake of general law
- Mistake of foreign law
- Mistake as to private property rights
b. Mistake of facts – Section 20 & 22
- Bilateral mistake – Sec 20: When both the parties to the contract under a misconception
to the facts of the contract, it is called bilateral mistake.
- Unilateral mistake – Sec 22: A mistake of fact in the mind of one party is called unilateral
mistake.
DIFFERENCE BETWEEN FRAUD AND MISREPRESENTATION
MISREPRESENTATION FRAUD
1.There is no intention to deceive and it is a 1. There is intention to deceive and it is a
false innocent statement false statement made deliberately
2.Person who makes statement believes it to 2.person who makes statement does not
be true. believe it to be true.
3.Here , the contract becomes voidable at 3.Here , the contract become voidable if it
the option of the insured party. gives the right for an independent action in
tort.
4.The consent of one of the parties also not 4.The consent of one of the parties is not
free free

Breach of contract
“When on party to the contract ,fails to perform his obligation under the contract or does
an act which makes the performance of the contract impossible known as breach of
contract.”
Definition of Breach of Contract
1. An unjustifiable failure to perform terms of a contract.
2. A violation of contract through failure to perform, or through interference with the
performance of the contractual obligations.
Different ways to breach a contract
Types of Breaches
There are four different types of breaches of contract:
1. Actual Breach
Most breaches of contracts are one of two types: actual or anticipatory. Actual breaches
occur when a party fails to fulfill her obligations on the date performance is due, or when a
party performs her obligations and the other party refuses to perform.
2. Anticipatory Breach
Anticipatory breach occurs when a party refuses to perform her obligations under the
contract before the due date of performance. For example, if a party agrees to sell her car
to a buyer in five days, but then reneges on day three, she is anticipatorily breaching the
contract.
3. Minor Breach
A contract breach can either be minor or material. A minor breach, also known as a partial
breach, is a failure to complete a minor, non-essential part of a contract. Although it is
technically a breach, the contract can still be completed.
4. Material Breach
A material breach, on the other hand, is a substantial breach in contract terms usually
excusing the non-breaching party from performing and giving her the right to sue for
damages. For example, in a home purchase contract, a seller refusing to give the buyer the
keys to the home after the buyer has completed all contract terms is a material breach.

Remedies for breach of contract

1. Compensatory damages:
This is the most common breach of contract remedy. When compensatory damages are
awarded, a court orders the person that breached the contract to pay the other person
enough money to get what they were promised in the contract elsewhere.
2. Restitution:
When a court orders restitution, they tell the person that breached the contract to pay the
other person back. In the example above, the court would order the first cleaner to pay you
back $100, since that's what you paid him to clean your house.
3. Punitive damages:
This is a sum of money intended to punish the breaching party, and is usually reserved for
cases in which something morally reprehensible happened, such as a manufacturer
deliberately selling a retailer unsafe or substandard goods.
4. Nominal damages:
A court awards nominal damages when there has been a breach of contract but no party to
the contract suffered any harm.
5. Liquidated damages:
These are damages that the parties agree to pay in the event a contract is breached.
6. Quantum Meruit:
A court can award one party payment for what they deserve for any work that she
performed before the other party breached the contract. For example, if the cleaner in the
example above had cleaned half the house, and then you decided you didn't want him to
finish, he can demand $50 as quantum meruit. Translated from Latin, the term means "as
much as he deserved."
7. Remedies in Equity
A remedy in equity is when the court orders someone do something. This can also be called
"injunctive relief." In breach of contract cases, this can look like any of the following:
a. Cancellation: The court cancels the contract and decides that the parties are no longer
bound by it.

b. Specific Performance: This is when the court forces the breaching party to perform the
service or deliver the goods that they promised in the contract. This is typically reserved for
cases when the goods or services are unique and no other remedy will suffix.
DISCHARGE OF CONTRACT
Discharge of contract refers to an agreement that's fully performed. However, discharge of
contract can happen due to other circumstances. Sometimes, obligations are incomplete,
but the parties are no longer liable for them. When a contract is discharged, it's no longer
binding.
➢ Discharge by performance.
➢ Discharge of Contract by Substituted Agreement.
➢ Discharge by lapse of time.
➢ Discharge by operation of law.
➢ Discharge by Impossibility of Performance.
➢ Discharge by Accord and Satisfaction.
➢ Discharge by breach.

CONTRACT LAWS
PART – B: THE SALE OF GOODS ACT 1930
Meaning and Definition of contract of sale
What is Contract of Sale of goods?
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. There can be a contract of sale between one
part-owner and another.
In other words, under a contract of sale, a seller (or vendor) in the capacity of the owner, or
part-owner of the goods, transfers or agrees to transfer the ownership in goods to the
buyer (or purchaser) for an agreed upon value in money (or money equivalent), called the
price, paid or the promise to pay same.
A contract of sale may be absolute or conditional depending upon the desire of contracting
parties.
Definition
According to Section 4 of the Sale of Goods Act a contract of the sale of goods is a
contract whereby the seller transfers, or agrees to transfer, the property in (i.e.,
ownership of) goods to the buyer for a price.
Essentials elements of a Contract of Sale
The following six features are essential elements of any contract of sale of goods.
➢ Goods
➢ Prices
➢ Two parties
➢ Transfer of ownership
➢ Includes both a ‘sale ‘and ‘an agreement to sell ‘
➢ All essentials of a valid contract
1. Two Parties:
A contract of sale of goods is bilateral in nature wherein property in the goods has to pass
from one party to another. One cannot buy one’s own goods.
For example, A is the owner of a grocery shop. If he supplies the goods (from the stock
meant for sale) to his family, it does not amount to a sale and there is no contract of sale.
This is so because the seller and Buyer must be two different parties, as one person cannot
be both a seller as well as a buyer. However, there shall be a contract of sale between part
owners.
2. Goods: The subject matter of a contract of sale must be goods. Every kind of movable
property except actionable claims and money is regarded as ‘goods’. Contracts relating to
services are not considered as contract of sale. Immovable property is governed by a
separate statute, ‘Transfer of Property Act’.

3. Transfer of ownership:
Transfer of property in goods is also integral to a contract of sale. The term ‘property in
goods’ means the ownership of the goods. In every contract of sale, there should be an
agreement between the buyer and the seller for transfer of ownership. Here property
means the general property in goods, and not merely a special property.
4. Price:
The money consideration for the contract of sale is called “Price”. The price must be
money. If goods are exchanged for goods . it is not a sale but a barter. Some time the
consideration for the sale of goods may be partly in goods and partly in money.
Example: 32 bullocks at 6 each were exchanged for 100 quintals of barley the balance is to
be paid in cash. Held that it was a contract of sale.
5. All essentials of a valid contract:

A contract of sale is a special type of contract, therefore, to be valid, it must have all the
essential elements of a valid contract, viz., free consent, consideration, competency of
contracting parties, lawful object, legal formalities to be completed, etc. A contract of sale
will be invalid if important elements are missing. For instance, if A agreed to sell his car to B
because B forced him to do so by means of undue influence, this contract of sale is not valid
since there is no free consent on the part of the transferor.
6. Includes both a ‘Sale’ and ‘An Agreement to Sell’:
The ‘contract of sale’ is a generic term and includes both sale and an agreement to sell. The
sale is an executed or absolute contract whereas ‘an agreement to sell’ is an executory
contract and implies a conditional sale.
A contract of sale can be made merely by an offer, to buy or sell goods for a price, followed
by acceptance of such an offer. Interestingly, neither the payment of price nor the delivery
of goods is essential at the time of making the contract of sale unless otherwise agreed.
Subject to the provisions of the law for time being in force, a contract of sale may be made
either orally or in writing, or partly orally and partly in writing, or may even be implied from
the conduct of the parties.

Conditions and Warranty:

The term condition is defined in section 12 (2) of the sale of Goods Act which reads as
under
“A condition is a stipulation essential to the main purpose of the contract, the breach of
which gives rise to a right to treat the contract as repudiated”
Example:
Ram consults shyam a motor car dealer for a car suitable for touring purposes to promote
the sale of his product, shyam suggests Maruti car and shyam accordingly buys it from
shyam buys a new car consults buys it from shyam. If the car is not suitable for ytouring
purpose so ram can reject the car and have refund the price.
Warranty:
The term warranty is defined in section 12 (3) of the sale of Goods Act which reads under
“ A warranty is a stipulation collateral to the main purpose of the contract, the breach of
which gives rise to a claim for damages but not a right to reject the goods and treat the
contract as repudiated.”
Example: A buys a Maruti car from showroom and the car is guaranteed against any
manufacturing defect under normal usage for a period of 1 year from the date purchase. If
after six months ram finds horn of the car is not working he cannot terminate the contract.
Distinguish between Condition and Warranty
Condition Warranty
1.A requirement or event that should A warranty is an assurance given by the
be performed before the completion of seller to the buyer about the state of
another action, is known as Condition the product, that the prescribed facts
are genuine.
2.The party can bring the contract to an The party can only claim damages.
end.
3.The party can only claim damages. It is a subsidiary provision related to the
object of the contract.
4.A condition has a direct link with the A breach of warranty may not be
essential party of the contract. treated as a breach of condition.
5.Violation of condition can be Violation of warranty does not affect
regarded as a violation of the warranty. the condition.
6.A breach of condition can also be A breach of warranty cannot be
considered as a breach of warranty. considered as a breach of condition

Difference between sale and agreement to sell

Nature SALE AGREEMENT TO SELL
OWNERSHIP Ownership is immediately Ownership is not transferred
transferred to the buyer to immediately the buyer
Nature It is an executed contract It is executor contract
Right It creates right in Rem It creates right in personem
Breach The seller can sue the buyer The seller can use the buyer
for the price for the damages, if the
buyer refuses to pay the
price and take the delivery
Resale If the seller resell the goods, In case of resale the buyer
the buyer can claim damages can only claim damages
for conversion and has the
right to recover the goods
from the third party.
Destruction The buyer shall bear the loss, The seller shall bear the loss
if the goods are destroyed by if the goods are destroyed by
accident accident.
Insolvency of If the buyer becomes If the buyer becomes
buyer insolvent the seller must insolvent the seller may
claim the price due from the refuse to deliver the goods
official receiver of the buyer to the buyer.
Insolvency of If the seller is insolvent the In such case the buyer who
seller buyer can recover the goods has paid the price can only
from the official receiver. claim rebate dividend.
Goods Here we get existing and Here we get future and
specific goods contingent goods
Sales Tax Here the seller is liable for Here the seller is not liable
sales tax for sales tax.

Rights and duties of Buyer

The following are the rights of a buyer:
1.Right to have delivery as per contract:
The first right of the buyer is to have delivery of the goods as per contract.
2.Right to reject the goods:
If the seller sends to the buyer a larger or smaller quantity of goods than he ordered, the
buyer may reject the whole ,accept the whole or accept the quantity to ordered and reject
the rest.
3.Right to Repudiate:
The buyer of goods has a right not to accept delivery thereof by installment.
4.Right to notice of insurance:
Unless otherwise agreed where goods are sent by the seller to the buyer by a sea route ,
the buyer has a right to be informed by the seller so that he may get the goods insured.
5.Right to examine the goods:
The buyer has right to examine the goods which he has not previously examined before he
accepts them. If the buyer repudiates the contract the seller is entitle to damage from the
buyer.
6.Right to verify with sample:
Section 17 provides that when goods are sold by sample the buyer has right to verify the
supply of goods with sample.
7.Right to reject the goods:
The buyer entitled to reject the goods in the following cases
a. where the seller delivers lesser quantity than the contracted for
b. where the seller delivers larger quantity than that contract for
c. where the seller mixes the contracted goods with goods of a different description.
8.Right to have delivery goods
The buyer has right take delivery of goods on payment of price when delivery of goods and
payment of price are concurrent conditions in the contract of sale.
9.Right to repudiation on breach of contract:
As per section 12, the buyer may repudiate the contract if the seller breaks any conditions,
section 13 also entities him to treat it as a breach of warranty.
Under section 12 and section 59, the buyer may claim for damages or reduction of price in
case of breach of warranty by the buyer.
10.Right to notice of Insurance:
It is the duty of the seller to give notice to the buyer to enable him to insure the goods
during the sea transit. If he fails to do so the buyer is not liable for destruction of goods in
transit.

Duties of Buyer:
The buyer in respect to the contract of sale has to perform the following duties.
1.Duty to treat breach of condition as a breach of warranty:
A buyer shall treat a breach of condition as a breach of warranty under certain
circumstances.
2.Duty to accept unconditional appropriation
When there is assent of the seller, the buyer has to accept unconditional appropriation of
unascertained goods.
3.Duty to pay price and accept the goods:
It is the duty of the buyer to take the delivery of the goods and pay for them in accordance
with the terms of the contract.
4.Duty to apply for delivery:
The seller is not bound to deliver the goods to the buyer applies for delivery. In the absence
of any contract to the country.
5.Duty to demand delivery at a reasonable hour:
As per section 36(4)” Demand or Tender of delivery may be treated as ineffectual unless
made at a reasonable hour. What is reasonable hour is question of fact.
6.Duty against deterioration:
Unless otherwise agreed the buyer has to take risk of deterioration of the goods incidental
to the course of transit.
7.Duty to accept installment delivery and pay for it:
Where there is contract for the sale of goods to be delivered by stated installments which
are to be separately paid for , it is the duty of the buyer to accept the installment delivery
and pay for it.
8.Duty to intimate the seller when reject the goods:
Unless otherwise agreed it is duty of the buyer to inform the seller in case of he refuses to
accept the goods.
9.Duty to pay increased tax:
The buyer is liable to pay so much as will be equivalent to the amount paid or payable in
respect of such tax imposed or increase of Tax which may be chargeable at that time of sale
in the absence of any contract to country.
10.Duty to pay price:
Where under contract sale of property in the goods has passed to the buyer and the buyer
wrongfully neglects or refuses to pay the goods according to the terms of the contract, the
seller may sue him for the price of the goods.
11.Duty to pay damages for non acceptance:
Where the buyer wrongfully neglects or refuses to accept and pay for the goods the seller
may sue him for damages for non acceptance.

Rights and duties of seller

The rights of the seller may be discussed as under.
1.Right to demand proper handling of stipulations
The seller has the right to see that the buyer properly handles breach of condition and
breach of warranty.
2.Right to receive payment of Price:

The seller has the right to see that the buyer accepts the goods and pay price for them
3.Right to demand application for delivery:

To seller has the right to get application for delivery from the buyer.
4.Right to get price for excess delivery:

When the seller makes excess delivery and the buyer accepts it, the seller has the right to
demand price on the excess delivery at contract rate.
5.Right to demand acceptance of Installment delivery:

When there is a term for installment delivery. The seller has right to get it accepted by the
buyer.
6.Right to claim compensation:

It is the right of the seller to claim compensation for the loss occasioned by the buyer’s
neglect or refusal to take delivery and also reasonable charges for care and custody of the
goods.
7.Right to sue for damages:

Section 56 lays down that “where the buyer wrongfully neglects or refuses to accept and
pay for the goods the seller may sue him for damages for non acceptance.
8.Right to interest by way of damages:

It is the right of the seller to recover interest or special damages in any case where by low
interest or special damages may be recoverable.
9.Right to treat the contract as subsisting:

Section 60 states” where the buyer repudiates the contract before the date of delivery of
goods, seller may either treat the contract as subsisting and wait till the date of delivery or
he may treat the contract as repudiated and sue for damages for the breach.
10.Right to reserve right of Disposal:
The seller has the right to reserve the right of disposal while delivering goods to carrier or
other bailee.

Duties of a seller
1.Duty to deliver goods in Time:
Where there is a stipulation as to delivery in time, the seller has to do it.
2.Duty to make proper supply:

The seller has the duty to make such supply of goods so that:
The bulk of goods to the corresponds to the sample, the goods correspond the description.
He has also the duty to give the buyer reasonable opportunities to verify the goods with the
sample.
3.Duty to make goods deliverable:

It is the duty of the seller to make the goods deliverable to inform it to the buyer and to
bear the expenses for the same.
4.Duty to accept unconditional appropriation:

It is duty of the seller to accept unconditional appropriation when the buyer has consent.
5.Duty to deliver the goods:

It is the duty of the seller to deliver the goods concurrent to payment of price by the buyer.
6.Duty to follow the rules of delivery:

The seller has to follow all the rules as to delivery as given in the Act.
7.Duty to supply the goods within specified time:

It is the duty of the seller to send the goods to the buyer within the fixed time or within
reasonable time when to time for sending the goods is fixed.
8.Duty to send the send the goods at reasonable hour:

Tender of delivery may be treated as ineffectual unless made at a reasonable hour. what is
reasonable hour is a question of fact.
9.Duty to give notice to the buyer:

Subject to the agreement, it is the duty of the seller to give notice to the buyer to get the
goods insured while the goods are sent by a route involving sea transit. If he fails to do so
goods shall he deemed to be at sellers risk during such sea transit.
10.Duty to not to shift risk:

When the seller delivers the goods from a different place and at his own risk, he cannot ask
the buyer to bear risk of deterioration of goods unless otherwise agreed.

Unpaid seller
When the seller of goods did not receive its whole price or receives part payment of its
price then he is called an unpaid seller.
Definition:
A seller or his agent is called as unpaid seller when
a) The full price has not been paid
b) A bill of exchange or any other negotiable instrument has been given as a conditional
payment but it has been dishonoured.
The rights of unpaid seller are briefly explained below:

I. Right of unpaid against the goods.(when the property in goods has passed to the
buyer)
1) Right of lien: Sec.47 to 49 . Lien is aright to retain the possession of gods until the price
is paid, If the goods are partly delivered he can use this right on the remaining goods
except when the part delivery made is to indicate that he has given up this right.(Sec.48)
This right he can use on the whole of goods in his possession and only for the recovery
of the price of the goods sold but not for the recovery of warehouse charges or godown
rent.
The right he can use only:

a) When the unpaid seller has the possession of goods
b) When the goods have been sold on credit.
c) When the credit period is over and the price is not paid.
d) When the buyer becomes insolvent. Sec.47(1).
Sec.49: This lien right is lost or he cannot use the right.

a) When the unpaid seller delivers the goods to a carrier or other bailee for the
purposes of taking them to the buyer.(but without reserving the right of disposal)
b) When the buyer or his agent lawfully gets the possession of the goods.
c) When the unpaid seller has given up his right of lien.
2)Right of stoppage of goods in transit: Sec.50 to 52. This is the right of the unpaid
seller to stop the goods when they are in transit. (i.e.in journey).
When the seller has parted with the possession of goods, he may regain such
possession by stopping the goods in transit before it is delivered to the
buyer.(Sec.50)

This right is available:

a) When the goods are in transit and
b) When the buyer becomes insolvent.
3) Right of resale(Sec.54) The unpaid seller can re sell the goods:

a) When the goods are perishable (without notice to buyer)
b) When the goods are not perishable with notice to the buyer of his intention to re sell
and Effect of notice of resale to the buyer.
i) When the unpaid seller makes any profit on resale, he can retain the profit of such
resale, if he has given the notice of resale.
ii) He can claim damages for breach of contract from the original buyer for any loss on
the re sale price)
If he does not give such notice of re sale, to the buyer, he must pay back the
surplus(profit) to the original buyer, and shall himself bear the loss.
(When the property in goods has not passed)
Right of with holding the delivery Sec.46(2)

The unpaid seller can withhold the delivery of goods when the peoperty in goods has
not passed to the buyer.

UNIT: 3 COMPETITION AND CONSUMER LAWS

PART – A: THE COMPETITION ACT, 2002
The competition Act 2002: Objectives of competition Act, Feature of Competition Act, CAT,
offences and penalties under the Act, Competition Commission of India.
Consumer protection act 1986: Definition of the terms consumer, Consumer disputes, defect,
Deficiency, Unfair trade practices and services. Rights of the consumer under the act, Consumer
Redressal Agencies-District Forum, State Commission, National Commission.
Competition law deals with behavior of business enterprise by prohibiting restrictive

business practices like competition.
Competition: It is “a situation in a market in which firms or sellers independently strive for

the buyer’s patronage in order to achieve a particular business objective for example,
profits, sales or market share”.
- It is foundation of an efficiently working market system.
- The process of rivalry between firms striving to gain sales and make profits.
- Motive: Self-interest, but outcome mostly beneficial for the society.
- Competition is not just an event, but a process.
- It is not automatic – needs to be nurtured.
Types of competition:
a. Price Competition: Winning customers by lowering price.
b. Non-price Competition: Winning customers by advertising, offering after sales-services,
using promotion tools etc..
Ways of Competition:
a. Fair Competition: Fair means such as producing quality goods, becoming cost-efficient,
optimizing the use of resources, best technology, research & development etc.
b. Unfair Competition: Unfair means such as fixing price with the rivals, predatory pricing,
disparaging or misleading advertisements etc.
The Competition Act 2002
1. A new Law called Competition Act 2002 has been enacted to replace the extent law,
MRTP Act 1969.
2.The new law has been amended on 10th September 2007 by the parliament.

3. An act to provide, keeping in view of the economic development of the country for the
establishment of a commission to prevent practices having adverse effect on competition,
to promote and sustain competition in markets, to protect the interests of consumers and
to ensure freedom of trade carried on by other participants in markets, in India, and for
matters connected therewith or incidental thereto.
Objective of the act
Competition Act 2002 notified in January 2003. Stated objective in preamble is to provide
“for establishment of a commission”.
➢ To ensure fair competition in India
➢ To eliminate practices having adverse effect on competition.
➢ To prohibit Trade Practices Which causes adverse effect on Competition in markets
within India.
➢ To promote and sustain competition in markets.
➢ To protect consumers interests.
➢ To ensure freedom of trade carried on by other participants in markets, in India.
➢ To curb negative aspects of competition through the competition commissions of
India (CCI).
Competition Act, 2002 – What practices are stopped by it?

a. Pricing fixing: if two or more supplier fixe the same price for supply the goods then it will
be restricted practice.
b. Bid rigging: if two or more supplier exchange sensitive information of bid, then it will also
be restricted practice and against competition.
c. Re-sale price fixation: if a producer sells the goods to the distributors on the conditions
that he will not sell any other price which is not fixed by producer.
d. Exclusive dealing: this is also restricted practice. If a distributor purchases the goods on
the condition that supplier will not supply the goods any other distributors.
Main features of Competition Act 2002:

1. Anti – competitive agreements between enterprises (Section 3)
There are two a types of agreements in anti-competitive agreements. They are as follows;
- Horizontal agreement: Agreements between enterprises at the same stage of production,
services, etc.
- Vertical Agreements: agreements between enterprise at different stage of production,
distribution etc. Agreement includes arrangement or understanding, oral, or in writing, not
necessarily enforceable by law.
Unfair trade practices: Any trade practice whose harm outweighs its benefits. It can be
defined as using various deceptive, fraudulent or unethical methods to obtain business.
Unfair trade practices include misrepresentation, false advertising, tied selling and other

acts that are declared unlawful by statute. It can also be referred to as deceptive trade
practices.
Restrictive trade practices: Any trade practice that tends to block the flow of capital into
production and also bring in conditions of delivery to affect the flow of supplies leading to
unjustified cost.
2. Abuse of Dominance (Section 4)

Dominance means a position of strength enabling an enterprise to operate independently
of competitive pressure and to appreciably affect the relevant market, competition and
consumers.
Abuse of dominant position –
1 No enterprise or group shall abuse its dominant position.
2 There shall be an abuse of dominant position – under sub-section (1), if an enterprise or a
group- o Directly or indirectly imposes unfair or discriminatory
Condition in purchase or sale of goods or service. Price in purchase or sale of goods and
services. o Limits or restricts –
3 Production of goods or provision of services or market therefore.
4 Technical or scientific development relating to goods or services to the prejudice of
consumers. o Indulges in practice or practices resulting in denial of market access.
o Makes conclusion of contracts subject to acceptance by other parties of supplementary
obligations which, by their nature or according to commercial usage, have no connection
with the subject of such contracts.
3. Mergers and Acquisitions : (Section 5&6) Regulation of combination:

Combination definition: Combination under the competition Act means acquisition of
control, shares, voting rights or assets, acquisition of control by a person over an enterprise
where such person by a person over an enterprise where such person has direct or indirect
control over another enterprise engaged in competing businesses and mergers and
amalgamations between or amongst enterprises when the combining parties exceed the
thresholds set in the act.
Types of combination:
- Horizontal Combinations: these are those that are between rivals and are most likely to
cause appreciable adverse effect on competition.
- Vertical combinations: these are those that are between enterprises that are at different
stages of the production chain and are less likely to cause appreciable adverse effect on
competition.
- Conglomerate Combinations: These are those that are between enterprises not in the
same line of business or in the same relevant market and are least likely to cause
appreciable adverse effect on competition.
4. Competition Advocacy: (Section 49)
The aim of competition advocacy is to foster conditions that will lead to a more competitive
market structure and business behavior without the direct intervention of the Competition
Law Authority, namely CCI For promotion of competition advocacy and creation of
awareness about competition issues, the commission may take suitable measures to:
- Promote competition advocacy
- Create public awareness
- Impart training about competition
The commission shall render opinion on a reference from the Central Government on
policy/law on competition. CCI is required to give opinion in 60 days.
Competition Commission of India (CCI)

The Competition Act provides for adjudicating relief machinery Competition Commission of
India is a statutory body of the Government of India responsible for enforcing The
Competition Act, 2002 throughout India and to prevent activities that have an appreciable
adverse effect on competition in India. It was established on 14 October 2003. It became
fully functional in May 2009 with Dhanendra Kumar as its first Chairman.
(The Commission comprises a Chairperson and six members. Devender Kumar Sikri is the
current Chairperson of the CCI.2018)
The following are the objectives of the Commission.
1. To prevent practices having adverse effect on competition.
2. To promote and sustain competition in markets.
3. To protect the interests of consumers and
4. To ensure freedom of trade
Competition Appellate Tribunal (COMPAT or CAT)
The COMPAT is a quasi-judicial body constituted under the provisions of the Competition
Act 2002 as amended by competition Act 2007.
COMPAT is headed y a Chairperson, who shall be a serving/retired judge of Supreme Court
of India or Chief Justice of high court or qualified to be judge of Supreme Court or Chief
Justice of a high Court. The Members shall be eminent persons from socio-economic fields.
Offence and Penalties under Competition act 2002
Under the section 43, 44, 45 & 46
Penalty for failure to comply with directions of Commission and Director General. —If any
person fails to comply with a direction given by—
(a) The Commission under sub-section (5) of section 36; or
(b) The Director General while exercising powers referred to in sub-section (2) of section
41, the Commission shall impose on such person a penalty of rupees one lakh for each day
during which such failure continues.

43A Power to impose penalty for non-furnishing of information on combinations. —If any
person or enterprise who fails to give notice to the Commission under sub-section (2) of
section 6, the Commission
shall impose on such person or enterprise a penalty which may extend to one per cent. Of
the total turnover or the assets, whichever is higher, of such a combination.]
44. Penalty for making false statement or omission to furnish material information. —If
any person, being a party to a combination, —
(a) makes a statement which is false in any material particular, or knowing it to be false; or
(b) omits to state any material particular knowing it to be material, such person shall be
liable to a penalty which shall not be less than rupees fifty lakh but which may extend to
rupees one crore, as may be determined by the Commission.
45. Penalty for offences in relation to furnishing of information. —

(1) Without prejudice to the provisions of section 44, if any person, who furnishes or is
required to furnish under this Act any particulars, documents or any information, —
(a) Makes any statement or furnishes any document which he knows or has reason to
believe to be false in any material particular; or
(b) Omits to state any material fact knowing it to be material; or
(c) Willfully alters, suppresses or destroys any document which is required to be furnished
as aforesaid, the Commission shall impose on such person a penalty which may extend to
rupees ten lakh.
(2) Without prejudice to the provisions of sub-section (1), the Commission may also pass
such other order as it deems fit.
46. Power to impose lesser penalty.—The Commission may, if it is satisfied that any
producer, seller, distributor, trader or service provider included in any cartel, which is
alleged to have violated section 3, has made a full and true disclosure in respect of the
alleged violations and such disclosure is vital, impose upon such producer, seller,
distributor, trader or service provider a lesser penalty as it may deem fit, than leviable
under this Act or the rules or the regulations: Provided that lesser penalty shall not be
imposed by the Commission in cases where proceedings for the violation of any of the
provisions of this Act or the rules or the regulations have been instituted or any
investigation has been directed to be made under section 26 before making of such
disclosure.
Conclusion: The Indian Competition Act, 2002 is very much comprehensive and enacted to
meet the requirements of the economic growth and international economic developments
relating to competition laws. The legislation is in synchronization with other policies such as
trade policy, FDI norms, FEMA etc, which would ensure uniformity in overall competition
policy.

UNIT: 3 COMPETITION AND CONSUMER LAWS

PART – B: CONSUMER PROTECTION ACT 1986
Introduction:
The Consumer Protection Act 1986 was passed by the Indian Parliament to protect
consumer rights and to redress consumer complaints and resolve consumer disputes.
Every individual is a consumer of goods and services and expects a fair deal against unfair
exploitation.
This Consumer Protection Act applies to the whole of India except the State of Jammu and
Kashmir and covers all goods and services purchased by the consumers and to all sectors —
private, public and cooperative. The objective of the Act is “to provide for better protection
of the interests of consumers and for that purpose to make provisions for the
establishment of Consumer Councils and other authorities for the settlement of consumer
disputes and for matters connected therewith”. It protects the consumers from unfair
trading or unfair trade practices.
It is important to note that the Indian Consumer Protection Act is social welfare legislation
and has been designed to avoid technicalities, procedural delays, procedural requirement,
court fees and costs.
OBJECTIVES OF COPRA ACT 1986

1.To protect the intrest of the consumer
2.To protect the rights of the consumers regarding
a)marketing of Goods and services (b)quality and Price of the goods and services.
3.To protect the consumer against trade practices.
4.To set up the consumer protection council at the center and the state level
5.To enable the consumer to use his right to consumer education.
Rights of Consumer under the Act
The Consumer Protection Act, 1986 provides for the following rights to the consumers:
(a) Right to be heard and to be assured that consumers’ interests will receive due
consideration at appropriate forum;
(b) Right to seek redressal against unfair trade practices or unscrupulous exploitation of
consumers; and
(c) Right to consumer education.
The Consumer Protection (Amendment) Act 1993 adds the following consumer rights:
(a) The right to be assured wherever possible, access to a variety of goods and services at
competitive prices;

(e) The right to be informed about the quality, potency, purity, standard and price of goods
(or services as the case may be) so as to protect the consumers against unfair trade
practices; and
(f) The right to be protected against the marketing of goods (and services) which are
hazardous to life and property.
Consumer Redressal Agencies

Three Tier Consumer Grievances Machinery under the Consumer Protection Act!
1. District Forum:
District forum consists of a president and two other members. The president can be a
retired or working judge of District Court. They are appointed by state government. The
complaints for goods or services worth Rs 20 lakhs or less can be filed in this agency.
The agency sends the goods for testing in laboratory if required and gives decisions on the
basis of facts and laboratory report. If the aggrieved party is not satisfied by the jurisdiction
of the district forum then they can file an appeal against the judgment in State Commission
within 30 days by depositing Rs 25000 or 50% of the penalty amount whichever is less.
2. State Commission:
It consists of a president and two other members. The president must be a retired or
working judge of high court. They all are appointed by state government. The complaints
for the goods worth more than Rs 20 lakhs and less than Rs 1 crore can be filed in State
Commission on receiving complaint the State commission contacts the party against whom
the complaint is filed and sends the goods for testing in laboratory if required.
3. National Commission:
The national commission consists of a president and four members one of whom shall be a
woman. They are appointed by Central Government. The complaint can be filed in National
Commission if the value of goods exceeds Rs 1 crore. On receiving the complaint the
National Commission informs the party against whom complaint is filed and sends the
goods for testing if required and gives judgment?
Definition of Important Terms

Consumer" means any person who—
1.buys any goods for a consideration which has been paid or promised or partly paid and
partly promised, or under any system of deferred payment and includes any user of such
goods other than the person who buys such goods for consideration paid or promised or
partly paid or partly promised, or under any system of deferred payment when such use is

made with the approval of such person, but does not include a person who obtains such
goods for resale or for any commercial purpose; or
2.hires or avails of any services for a consideration which has been paid or promised or
partly paid and partly promised, or under any system of deferred payment and includes any
beneficiary of such services other than the person who 'hires or avails of the services for
consideration paid or promised, or partly paid and partly promised, or under any system of
deferred payment, when such services are availed of with the approval of the first
mentioned person but does not include a person who avails of such services for any
commercial purposes;
"consumer dispute" means a dispute where the person against whom a complaint has
been made, denies or disputes the allegations contained in the complaint.
"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 under any contract, express or implied or as is claimed by the trader in any
manner whatsoever in relation to any goods;
"Deficiency" means any fault, imperfection, shortcoming or inadequacy in the quality,

nature and manner of performance which 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;
"unfair trade practice" means a trade practice which, for the purpose of promoting the
sale, use or supply of any goods or for the provision of any service, adopts any unfair
method or unfair or deceptive practice including any of the following practices, namely; —
(i) Falsely represents that the goods are of a particular standard, quality, quantity, grade,
composition, style or model;
(ii) Falsely represents that the services are of a particular standard, quality or grade;
(iii) Falsely represents any re-built, second-hand, renovated, reconditioned or old goods as
new goods;
(iv) Represents that the goods or services have sponsorship, approval, performance,
characteristics, accessories, and uses or benefits which such goods or services do not have;
(v) Represents that the seller or the supplier has a sponsorship or approval or affiliation
which such seller or supplier does not have;
(vi) Makes a false or misleading representation concerning the need for, or the usefulness
of, any goods or services;
(vii) 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 thereof;

Chapter No: 04 ECONOMIC LAW

Part – A: - Intellectual Property Rights
Indian Patent laws and WTO patent rules: Meaning of IPR ,invention and Non-Invention, procedure
to get patent, restoration and surrender of lapsed patent, infringement of patent.
FEMA 1999: objects of FEMA, Salient features of FEMA, definition of important terms: authorized
person, Currency, foreign currency, Foreign exchange, Foreign security, offences and penalties.
Patent:
A set of exclusive rights granted by a sovereign state to an inventor or assignee for a limited
period of time in exchange for detailed public disclosure of an invention is called patent.
Salient features of Patent Laws Act 1970 are as follows:
1.Elaborted definition of invention
2.Codification of certain inventions as non-patentable
3.Mandatory furnishing information regarding foreign application
4.Adoption of absolute novelty criteria in case of publication
5.Expansion of the grounds for opposition to the grant of a patent.
6.Enlargement of the grounds for revocation of the patent.
7.provison for appeal to High court on certain decisions of the controller.
8.Provision for operating of branches of the patent office.
9.Provisons for secrecy of inventions relevant for defense purpose.
10.Provision for use of inventions for the purpose of Government or for research or
instruction to pupils.
WTO PATENT RULES

The WTO agreement on Trade –related Aspects of Intellectual Property Rights(TRIPS)
negotiated in the year 1986-94 at Uruguay Round.
The importance of WTO patent Rules is as follows:
1.It introduced intellectual property rules into multilateral trading system for the first time.
2.It was an attempt to narrow the gaps in the way rights are protected.
3.Governments are allowed to reduce any short term cost through various expectations.
Five broad issues covered in an agreement are as follows.

1.How basic principles of the trading system and other international intellectual property
agreements should be applied.
2.How to give adequate protection to intellectual property rights
3.How countries should enforces those rights adequately in their own territories.
4How to settle disputes on intellectual Property between members of the WTO.
5.Special transitional arrangements during the period when the new system is being
introduced.

Meaning: Intellectual property is a category of property that includes intangible creations

of the human intellect. Intellectual property encompasses two types of rights; industrial
property rights and copyright.
A right that is had by a person or by a company to have exclusive rights to use its own plans,
ideas, or other intangible assets without the worry of competition, at least for a specific
period of time. These rights can include copyrights, patents, trademarks, and trade secrets.
What is Intellectual Property Law?

Intellectual property law deals with the rules for securing and enforcing legal rights to
inventions, designs, and artistic works. Just as the law protects ownership of personal
property and real estate, so too does it protect the exclusive control of intangible assets.
The purpose of these laws is to give an incentive for people to develop creative works that
benefit society, by ensuring they can profit from their works without fear of
misappropriation by others.
Types of IPR
The four types of intellectual property include: Trade Secrets. Trademarks, Copyrights, and
Patents.
1. Trade secret: A trade secret is a formula, practice, process, design, instrument, pattern,
commercial method, or compilation of information not generally known or reasonably
ascertainable by others by which a business can obtain an economic advantage over
competitors or customers
2. Patents: A patent is a form of intellectual property. A patent gives its owner the right to
exclude others from making, using, selling, and importing an invention for a limited period
of time, usually twenty years. The patent rights are granted in exchange for an enabling
public disclosure of the invention.
Types of Patent:
1.Utility Patents
The inventor inventing any unconventional object, device, composition or process can have
utility patent.
2. Design Patents
While a utility patent protects the utility or function of a product, a design patent protects
its aesthetic appearance. Design patents can be issued for the appearance, design, shape or
general ornamentation of an invention.
To qualify for a design patent, the patented product must be non-functional; otherwise, a
utility patent would be necessary to protect it. Like the utility patent, design patents are
granted for those appearances that are new, specific, and not obvious.
3. Plant Patents
Plant patents are available for the discovery or invention of plants that are asexually
reproduced. They must be, like the other patents, novel, distinct and not obvious. They
have a 20-year lifespan that does not include maintenance fees.
4. Reissue patent:
It is issued to set right an error in an already issued patent. It however will not affect the
period of protection offered by the original patent.
5.Defernsive publication:
It is used instead of a regular patent to offer limited protection, defensive in nature and
prevent others from patenting and invention ,design or plant. Since 1986 the Statutory
invention Registration has replaced DEF.
Objectives of IP Law:
1. Eliminate or prevent discrimination in matters that affect the availability, scope,
acquisition, use, maintenance, and enforcement of IP rights.
2.Enable U.S. citizens who need IP protection to gain fair and equitable market access
opportunities.
3.Play an active role in developing the IP regime of the World Trade Organization (WTO) to
make sure that it is consistent with other U.S. objectives.
Help the World Intellectual Property Organization (WIPO) build a cooperative relationship
with the WTO.
Steps involved in the patent process in India

The procedure for obtaining a patent in India starts even before a patent application is filed
with the patent office in India.
Step 1 – Decision on doing it yourself or engaging a professional
Before you proceed with the patent application process, you need to decide if you will be
using the assistance of a patent professional or undertaking the patent process yourself.
Considering the number of deadlines and the impact of these deadlines, it is highly
recommended that you engage a patent professional / firm who has years of experience in
the patent field.
If you decide to use the services of a professional, then make sure that you sign a Non-
Disclosure Agreement (NDA) with the patent professional / firm before disclosing the
invention to them. It is a good idea that all your disclosures with any third parties are done
confidentially and you sign NDA’s with each party.

Step 2 – Check the Patentability of the invention by performing a search for similar
technologies
Before filing a patent application in India or in any other country, the first step (optional but
recommended) in the patent registration process is to perform a detailed to determine the
chances of getting a patent. The search should ideally be performed for both patent and
non-patent references.
The advantage of a search is it provides a good idea of the merit of the invention and helps
in deciding if there are good chances of ultimately getting a patent granted. Furthermore,
based on the references discovered during the search, you have the option of fine-tuning
your patent application to ensure that you don’t end up filing a patent for something which
already existed. Hence, a thorough patentability search is always advised but from a
patenting process point of view is totally optional.
If you are thinking of going international with your patent application, spending time and
money on the search will be well worth every Rupee.
Step 3 – Drafting a patent application (Provisional or Complete)

Once, you have made up your mind to go forward with the patent application process, the
next step is to prepare an Indian patent application (Form 1).
Each patent application has to be mandatorily accompanied by a patent specification (Form
2). Based on the state of the invention, you can either file a provisional patent application
or a complete patent application (also known as Non-provisional in some countries).
If the invention is still in the development mode and tests are underway, it is a good idea to
quickly file a provisional application to block the all-important filing date. Filing of the
provisional application gives you 12 months of time to test and finalize your invention and
file the complete application.
It is best to work with a patent agent with the expertise and experience in working and
prosecuting patent applications in your area of technology. Since it may not be very easy to
find quality patent professionals for your area of technology, you can seek free assistance
from experts at Zatalyst.com in helping you finding quality patent professionals and law
firms for each and every patent requirement you may have.
Step 4 – Filing the patent application in India

Patent filing in India can happen in the following scenarios:
o First filing in India – Once the patent application is drafted, the next step is to file the
patent application in India and secure the filing date. In case you are filing a provisional
application first, you need to file the complete application within 12 months from the
provisional filing date.
o Foreign filing decision – Further, if you are interested in protecting your invention in
foreign jurisdictions, the maximum time allowed is 12 months from your first filing date.
Based on the countries you are interested in; you can opt for filing a convention application
in Paris convention members individually in each of the countries you is interested in

protecting your invention. Alternatively, you can use the Patent Cooperation Treaty (PCT)
system to reserve your right in 140 odd member countries. Both the systems have their
pros and cons and the decision of choosing one over other changes based on your
requirement and will be the basis of another post.
o Foreign applications entering India – In another scenario where the patent application
was first filed in a foreign jurisdiction and the patent applicant is interested in filing a patent
application in India under the Paris Convention route or the PCT route, the time limit to
enter India is 12 months and 31 months respectively. Each application for a patent which is
filed with the Indian patent office needs to be accompanied by the forms provided below:
Form 1 – Application for grant of a patent
Form 2 – Provisional/Complete specification)
Form 3 – Statement and undertaking regarding foreign application under section 8 (only
required if a corresponding patent application is filed in another country)
Form 5 – Declaration as to inventor ship (only to be filed along with the complete
application)
Form 26 – Form for authorization of a patent agent (only required if you are using a patent
agent to help you file the application)
Form 28 – To be submitted by startup or small entity (only required if you are claiming
startup or small entity status)
Priority documents – In case you are claiming priority from a foreign patent application and
entering India, you may be required to provide the priority document as well.
Step 5 – Publication of patent application

o When is it published? – Every patent application which is filed with the Indian patent
office is kept as a secret until the time it is published in the official patent journal. Indian
patent office will publish patent applications ordinarily after 18 months. This is an
automatic event and you need not make any request. However, if you wish to get your
application published earlier, you can make a request for early publication (Form 9) and
your application will ordinarily be published within 1 month of the request.
o The advantage of publication – The date of publication is important as your privileges and
rights start from the date of publication, although you can’t enforce your rights by way of
any infringement proceedings until your patent is granted.
o When not published – It is also important to know that there are a few scenarios under
which a patent application may not be published and kept as a secret:
1 .Secrecy directions have been imposed under the patent act. Secrecy directions are
imposed if the invention falls in a category publication of which could be against the
interest of the nation.
2.A complete application was not filed within 12 months from the date of filing of the
provisional application
3.A request for withdrawal was made. Such a request has to be made at least 3 months
prior to publication. So, for practical purposes, it is 15 months from the date of priority in a
standard patent application process.
Step 6 – Examination of the patent application

Every patent application which is filed for protection has to be substantively examined
before a patent is finally granted. The examination process is where your patent application
. will finally be examined on merits of the invention as described and claimed in the patent
specification.
Request for Examination

The examination process, unlike publication, doesn’t happen automatically by way of filing
of the Indian patent application. The applicant has to specifically make a request for
examining their patent application (Form 18). Only when a Request for Examination (RFE) is
received, will the application be queued for examination. So, the earlier you make the RFE
request, the earlier your application may be examined by the examiner.
If you wish to fast track your patent application even further and jump the examination
queue, you can file a request for expedited examination (Form 18A). However, an
expedited examination is only available to the applicant if the applicant is either a startup;
or the applicant chose the Indian Patent Office as the International Search Authority (ISA)
or International Preliminary Examining Authority (IPEA) during their international
application (PCT application).
On the contrary, you may sometimes not want to get your application examined early for
strategic reasons. Reasons for deferring the request could include extending the patent-
pending life, waiting for funding, etc.
Examination process (Objections by examiner & responding to objections)

Once, the Request for Examination has been filed, it will eventually land up on the desk of
the examiner from the relevant technology background for examination. During the
examination process, the examiner will scrutinize the application to ensure that the
application is in accordance with the patent act and rules. The examiner also performs a
search to understand similar technologies to ascertain if the invention would satisfy the
patentability criteria.
Based on the review of the application, the examiner will issue an Examination Report to
the applicant, stating the grounds for objections. The first such examination report is called
the First Examination Report (FER).
Once, the FER is issued, the patent applicant needs to successfully overcome the objections
to receive a patent grant. The whole process may involve responding to examination
reports, appearing for hearing, etc. The total time needed to put an application in order for
the grant is 6 months (earlier 12 months) from the date on which the FER is issued to the

applicant. However, this 6 month period can be extended for a period of 3 months by the
applicant by filing a request for an extension of time (Form 4).
Step 6 – Final decision on grant of patent

Once, the patent application overcomes all the objections, the patent will be granted and
published in the patent gazette.
7– Renewal
After the patent has been granted, it has to be renewed every year by paying the renewal
fee. A patent in India can be renewed for a maximum period of 20 years from the patent
filing date.
RIGHTS OF PATENTEE OF LAPSED PATENT WHICH HAVE BEEN RESTORED SECTION 62
1. On the restoration of a patent, the rights of the patentee shall be subject to such
provision as may be prescribed by the Controller in his order and to such other provisions
as he thinks fit to impose for the protection of compensation of persons who might have
began to avail them off. Or the patented invention between the date when the patent
ceased to have effect and the date of publication of the application for the restoration of
patent Section 62(1),
2.On the lapsing of the patent due to nonpayment of the renewal fees, the patentee loses
his right in the patent and the invention becomes public property. The provision contained
in section 62 of The Act is to safeguard the interests of those persons who after ascertain
from the Register of Patents that the patent has lapsed due to nonpayment of the renewal
fees and become public property had started commercially using the invention
Trade Marks:
A trademark, trade mark, or trade-mark is a recognizable sign, design, or expression which
identifies products or services of a particular source from those of others, although
trademarks used to identify services are usually called service marks.
Importance of trade mark:
Trademark is essentially another word for brand or brand name. A trademark can be any
name, word, symbol, slogan, or device that serves to both identify and distinguish a
business or product from others in the market. Once you have trademarked your business,
if someone else makes an attempt to use something similar enough to confuse customers,
you have the right to legally protect yourself and stop the other party.

Copyright:
Copyright is a legal right, existing in many countries, that grants the creator of an original
work exclusive rights to determine whether, and under what conditions, this original work
may be used by others. This is usually only for a limited time.
Part – B: The Foreign Exchange Management Act FEMA Act 1999
FEMA Act 1999

- The Foreign Exchange Management Act, 1999 (FEMA) has been in force from 2000, thus
replacing the old Foreign Exchange Regulation Act (FERA) 1973.
- It is another matter that the enactment of FEMA also brought with it the Prevention of
Money Laundering Act 2002, which came into effect from 1st July 2005.
FEMA:
THE PARLIAMENT ENACTED The foreign Exchange Management Act in 1999 to replace the
foreign Exchange Regulation Act 1973, .The Government policy of liberalization and
globalization made FERA ineffective. The FEMA ,which has replaced the FERA, aims at
simplifying the law relating to foreign trade and payments.
Objectives of FEMA:
1.To regulate dealings in foreign exchange and foreign securities
2.To regulate the regulations indirectly affecting foreign exchange
3.To regulate Import and Export of Currency and bullion
4.To converse the foreign exchange reserves of the country and to utilize the same in the
interests.
5.To regulate holding of immovable property outside India
6.To regulate employment of foreign Nationals.
Scope of FEMA
The act shall be applied to the whole of India. It shall also apply to all branches, offices and
agencies outside India owned or controlled by a president in India.
The Act has 49 sections which are divided into 7 chapters. The first 3 chapters deal with
operational part, and the next 4 chapters deal with penalties, adjudications, Appeals and
Miscellaneous provisions.
Chapter1: has titles ,scope and applications and important provisions.
Chapter2: has provisions regarding regulations and management of foreign exchange.
Chapter3: Deals with authorization of Authorized persons by Reserve Bank of India to deal
with foreign Exchange.
Chapter 4: Has penal provisions
Chapter 5: Deals with Adjudication, Authority and Special Directors(Appeal)
Chapter 6: has provisions for establishment of Directorate of Environment and their
Powers.
Chapter 7: has miscellaneous provisions related to powers of central Government to frame
rules and regulations and repeal and suspend operations of FERA of 1973
Current account and capital account transactions o Under the FEMA regime, the thrust
was on regulation and control of the scarce foreign exchange, whereas under the FEMA,
the emphasis is on the management of foreign exchange resources. Under FERA, it was safe
to presume that any transaction in foreign exchange or with a non-resident was prohibited
unless it was generally or specifically permitted.
Two golden rules or principles in FEMA are mentioned as follows:
1. All current account transactions are permitted unless otherwise prohibited.
2. All capital account transactions are prohibited unless otherwise permitted.
Penalties for contravention under FEMA;

- The penalty could be up to thrice the sum involved where amount is quantifiable
If contravention is of continuing nature, further penalty up to Rs. 5000 per day during which
the contravention
What are the details required to be filled in the application form?

Along with the application in the prescribed format, the applicant may also furnish the
details as per the Annexes - relating to Foreign Direct Investment, External Commercial
Borrowings, Overseas Direct Investment and Branch Office / Liaison Office, as applicable,
(annexes available in the FED Master Direction No. 18/2015-16 as mentioned in answer to
Q.5 above) along with an undertaking that they are not under investigation of any agency
such as DOE, CBI, etc., a copy of the Memorandum of Association and latest audited
balance sheet while applying for compounding of contraventions under FEMA, 1999.
Important definitions

1. Authorized dealers: An authorized forex dealer is a type of financial institution that has
received authorization from a relevant regulatory body to act as a dealer involved with the
trading of foreign currencies. Dealing with authorized forex dealers ensures that your
transactions are being executed in a legal and just way.
2. Currency: Currency refers to any kind of money that is in circulation in an economy, used
to purchase goods and services. Easily invoice in your customer's currency and keep up with
exchange rates automatically with Debtor.
3. Foreign Currency: Foreign exchange, or forex, is the conversion of one country's currency
into another. In other words, a currency's value can be pegged to another country's
currency, such as the U.S. dollar, or even to a basket of currencies.
4. Foreign Exchange: The foreign exchange market is a global decentralized or over-the-
counter market for the trading of currencies. This market determines the foreign exchange
rate. It includes all aspects of buying, selling and exchanging currencies at current or
determined prices.
5. Foreign security: foreign security means any security, in the form of shares, stocks,
bonds, debentures or any other instrument denominated or expressed in foreign currency
and includes securities expressed in foreign currency, but where redemption or any form of
return such as interest or dividends is payable in Indian currency.
Offences and penalties:

With effect from June 1, 2000, FEMA came to power with the objective of enabling all the
external trades and payments for promoting the orderly development and maintenance of
foreign exchange market in India. There is a paradigm shift from objective under FERA viz.
controlling/conversation of foreign exchange for utilization of economic development of
the country. With this shift in objective in mind there was also a shift in dealing with the
issue relating to penal provisions.
Compliance with FEMA

Compliance means, compliance with the provisions of FEMA 1999, any rule, regulation,
notification, direction or order issued in exercise of the powers under this Act.
Three stages of compliance –
Before undertaking the transaction; While undertaking the transaction; and After
undertaking the transaction.
Powers to compound by
Directorate of Enforcement
1. Sec.3(a) i.e. Hawala transactions.
Reserve Bank of India
1. Sec.3 – Dealing in Foreign Exchange
2. Sec.4 – Holding of foreign currency
3. Sec.5 – Current account transactions
4. Sec.6 – Capital account transactions
5. Sec.7 – Export of goods and services
6. Sec.8 – Realization and repatriation of Foreign Exchange
7. Sec.9 – Exemption from realization & repatriation
8. Sec.10.6 – Miss-utilization of Foreign Exchange

Penalties under section 13 of the Foreign Exchange Management Act, 1999
1. If any person contravenes any provision of this Act, or contravenes any rule, regulation,
notification, direction or order issued in exercise of the powers under this Act, or
contravenes any condition subject to which an authorization is issued by the Reserve Bank,
he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in such
contravention which has quantifiable amount or up to 2 lakhs which includes not
quantifiable amount and where such contravention is a continuing one, further penalty
which may extend to five thousand rupees for every day after the first day during which the
contravention continues.
2.If any person contravenes any provision of this Act or contravenes any rule, regulation,
notification, direction or order issued in exercise of the powers under this Act, or
contravenes any condition subject to which an authorization is issued by the Reserve Bank
of India, he shall, upon adjudication, be liable to a penalty up to thrice the sum involved in
such contravention where such amount is quantifiable, or up to two lakh rupees where the
amount is not quantifiable, and where such contravention is a continuing one, further
penalty which may extend to five thousand rupees for every day after the first day during
which the contravention continues.”
3.Any Adjudicating Authority adjudging any contravention under sub-section (1), may, if he
thinks fit in addition to any penalty which he may impose for such contravention direct that
any money, safety or any other money or property in respect of which the contravention
has taken place shall be confiscated to the Central Government and further direct that the
foreign exchange holdings, if any, of the persons committing the contraventions or any part
thereof, shall be brought back into India or shall be retained outside India in accordance
with the directions made in this behalf.
3. Explanation for this subsection, “property” in respect of which contravention has taken
place, shall include—
1. Deposits in a bank, where the said property is converted into such deposits;
2. Indian currency, where the said property is converted into that currency; and
3. Any other property which has resulted out of the conversion of that property.
Following are the main features of Foreign Exchange Management Act, 1999:
1. FEMA gives power to the central government for imposing restriction on activities like
making payments to a person situated outside of the country or receiving money through
them. Apart from this, foreign exchange as well as foreign security deals is also restricted by
FEMA.
2. Transactions revolving around foreign security or foreign exchange as well as payments

made from any foreign country to India cannot be made without specific or general
permission of FEMA. All transactions must be carried out via an individual who has received
authorization for the same.
3. The central government can restrict an authorized individual to carry out foreign
exchange deals within the current account, on the basis of general interest of the public.
4. Even though drawing or selling of foreign exchange is carried out via an authorized
individual, the FEMA act empowers the Reserve Bank of India to place a number of
restrictions on the transactions of the capital account.
5. Under the act, the Indian residents have the permission to conduct foreign exchange and
foreign security transactions or the right to hold or own immovable property in a foreign
country in case the security, property or currency was acquired or owned when the
individual was based outside of the country, or when they inherit the property from
another individual staying outside the country.
6. The act is not applicable on the resident (of an Indian citizen) based outside the country.
DIFFERENCES BETWEEN FERA AND FEMA

FERA FEMA
1. It was enacted in 1973.Hence it is an 1.it was enacted in 1999. It is an extension of
old enactment FERA
2.It was enacted to regulate the payments 2.It was enacted to facilitate external trade
and foreign exchange in India and payments and to promote orderly
management of the forex market in the
country
3.It has 81 sections in it. FERA was lengthy 3.It has 7 chapters divided into 49 sections.
FEMA is less lengthier than FERA
4.It was introduced when foreign exchange 4.It was introduced when foreign exchange
reserve was low reserve was satisfactory.
5.The approach towards foreign exchange 5. The approach towards foreign exchange
transactions is quite rigid, conservative and transactions is flexible, Positive and
restrictive. welcoming.
6.Citizenship was basis for determining the 6.Morethan 6 months stay is the basis for
residential status determining the residential status.
7.Vilation of the Act was criminal offence 7.Violation of the Act is the civil offence
8.Punishment for contravention was 8.Punishment for contravention was
imprisonment imprisonment
9.the scope of FERA was very wide 9.The scope of FEMA is narrow


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BUSINESS REGULATIONS

VI SEM B.COM BUSINESS REGULATIONS

STUDY MATERIALS -2021

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SYLLABUS BUSINESS REGULATIONS

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Scope of Business laws

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3. Economic and other Legislation

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Sources of Business Law

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UNIT: 2 CONTRACT LAWS

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DIFFERENCE BETWEEN FRAUD AND MISREPRESENTATION

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Remedies for breach of contract

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5. All essentials of a valid contract:

SNR DEGREE COLLEGE,JIGANI Page 33

Conditions and Warranty:

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Difference between sale and agreement to sell

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Rights and duties of Buyer

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Rights and duties of seller

2.Right to receive payment of Price:

3.Right to demand application for delivery:

4.Right to get price for excess delivery:

5.Right to demand acceptance of Installment delivery:

6.Right to claim compensation:

7.Right to sue for damages:

8.Right to interest by way of damages:

9.Right to treat the contract as subsisting:

SNR DEGREE COLLEGE,JIGANI Page 38

2.Duty to make proper supply:

3.Duty to make goods deliverable:

4.Duty to accept unconditional appropriation:

5.Duty to deliver the goods:

6.Duty to follow the rules of delivery:

7.Duty to supply the goods within specified time: