Business Law Question Bank What are the salient features of contract Discharge of contracts Capacity to contracts.

Free Consent – Coercion, undue influence, mistake, misrepresentation, fraud 5. Pledge, Bailment and Agency 6. Directors 7. Memorandum and Articles of Association 8. Prospectus 9. Rights of unpaid seller against goods 10. Write on the Negotiable Instrument Act And Elaborate the provisions of section 138 of the Negotiable Instrument Act 11. Short Notes . Certificate of Incorporation . Ultra Virues . Contingent contracts . Types of companies . Caveat Emptor . Indoor Management . Competition act 1. 2. 3. 4. 12. Distinguish between . Company and Partnership firm . sale and Agreement to Sell . Agreement and Contract . contract and quasi contract . Indemnity and Guarantee . Bills of Exchange and Cheque . Promissory note and Bills of Exchange

1. What are the salient features of contract

then the intention must be to create legal relationship between them. Wife cannot recover the said amount through court of law because it was social agreement and the intention of the parties was not to legal bind them.e. 1) Offer and acceptance : There must be at least two parties to an agreement i. 2) It is enforceable by law i. As they are not contract. For eg. (Promise to do something getting nothing in return is not enforceable by law.This agreement is not entered into . The wife filed a case on her husband for the said amount. Rose and Frank Co Vs Cromption Bros. For eg. 6) Lawful Object : The object of the agreement should be lawful. The term consideration in simple words means something in return.A: Indian Contract defines “Contract as an agreement enforceable by law. The party to whom the offer is made is called an offeree. But it must be real and lawful in nature 4) Competent parties to contract / Capacity to contract : Parties to contract should be capable of entering into a valid contract. which r5ise to legal obligation and legal rights. “All agreement are contract if they are made by free consent of the parties competent to contract. It consists of two important elements of a contract – 1) It is an agreement between two or more person. As a formal or legal agreement. A) age of Majority b) Sound Mind c) Is not disqualified by any law from contracting 5) Free and genuine consent: It is essential to the creation of every contract that there must be free and genuine consent of the parties to the agreement. one party making an offer (proposal) and the other party accepting it. Agreement of a social or domestic in nature do not create a legal relationship.e. 2) Intention to create legal relationship: When the two parties enter into an agreement. Case Balfour Vs Balfour – A husband agreed to pay 70 pounds to his wife every month He failed to pay the said amount to his wife. The acceptance must be according to the mode prescribed and must be communicated to the offerer/ offeror. Essential Elements of Valid Contract : Section 10 lays down the essential elements of a valid contract. for lawful consideration and with lawful object and not hereby expressly declared to be void. In the commercial or business agreements the presumption is usually that the intention of the parties is to create legal relations. In other words it means that the object must be a) It is not forbidden . But if it is specially shown that the parties did not intent to be legally bound. Consideration need not necessarily be in cash or kind.. Every person is competent to contract if he is. – Held – There was not binding contract as there was not intention to create legal relationship. One Clause in the agreement was . The party making an offer is called an offerrer/ Offeror. 3) Lawful Consideration: An agreement to be enforceable law must be supported by consideration. – There was an agreement between R Co and C Company by the means of which the former was appointed as the agent of the latter. and shall not be subject to legal jurisdiction in the law courts. The consent of the parties is said to be free when the parties are of the same mind on all the material terms of the contract.. The agreement is legally enforceable only when both the parties give and get something in return.

(not allowed) by any law c) If permitted. if creates a treasure by magic. A promises to share with B 75% of the treasure. in the interest of the parties that the contract should be in the written form 9) Possibility of Performance: A contract should not be to do impossible act. Alteration – Takes place when one or more terms of the contract is/are altered by the mutual consent of the parties to the contract. written or implied it is however. A contract may be discharged in the following ways : a) By Performance – If both the parties to the contract have performed what they had agreed to do the contract is discharged. 7) Agreement must not be expressly declared to be void : The agreement must not be expressly declared by the Indian Contract Act 1872 to be void. Rescission. By express consent ii. a) An agreement in restraint of trade b) An agreement in restraint of legal proceedings c) An agreement in restraint of marriage d) An Agreement of Wager e) Agreement to do an impossible act f) Minor’s agreement is void ab initio 8) Observance of legal formalities : A contract can be oral. By discharge the rights and obligations of the parties come to an end. Discharge of contracts A: Discharge means termination of a contract. Remmission . Eg. A delivers the goods to B where by B makes the payment of the same. 02. A party is released from the contract where the performance of the contract is excused under the provisions of this law or any other law. Waiver – It takes place when the parties to a contract agree that they shall no longer be bound by the contrct. b) By Agreement or consent i. Novation – When the parties to a contract agree to substitute the existing contract for a new contract it is called novation b. c. e. For eg. As it is an impossible act to create a treasure by magic. By Implied consent a. Such agreement are not enforceable and not valid in law. . it would defeat the provision of any law or c) It is fraudulent in nature d) illegal e) immoral f) opposed to public policy g) Or involves an injury to another person or property of another person. d. the above agreement is incapable of performance and therefore void.It takes place when all or some of the terms of the contract are cancelled.It means acceptance of a lesser fulfilment of the promise made.

according to the law. c) By Impossibility of Performance i. iv. Agreement By Minor : A minor is a person who has not attained the age of majority. the contract is terminated due to lapse of time. According to Sec 3 of Indian Majority Act 1875 a person becomes major on completion of 18 yrs of age. It means that minor domiciled in India is a person who has not completed 18 years of age. Anticipatory breach – It take place when the promisor repudiates the contract even before the date of the performance of the contract. Capacity to contracts. e) By Operation of Law i. However when a guardian of the minor’s person and/or property is appointed by the court the age of majority of such minor is 21 years. Merger : When and inferior right accruing to a party merges into a superior right accruing to the same party under the same of some other contract. Person who are competent to contract under section 11 – Every person is competent to contract. Unauthorised alteration of the terms – Where a party makes any material alteration in the contract without the consent of the other party the other party can avoid the contract. one party fails or refused to his obligation under the contract ii.f. Unknown by the parties – Where at the time of making the contract both the parties are ignorant of the impossibility .The Death of the Promiser shall discharge the contract ii.When a person is adjudged insolvent. 3. ii. In capacity to contract arise from the following three circumstances or conditions :• Age of Minority • Unsound mind i. Insolvency :. If it is not performed. Supervening impossibilities : Impossibility which arises subsequent to the formation of a contract is called supervening impossibility. f) By Breach of Contract i. who is of the age of majority. Actual breach – When during the performance of the contract. d) By Lapse of time – As per the Limitation Act 1963 – that a contract should be performed with in a specific period called period of limitations. iii. A: 1. Merger – It takes place when an inferior right accruing to a party under a contract merges into a superior right accruing to the same party under the same or some other contract. by which he/she is governed. according to the law to which he is subject and who is of sound mind and is not disqualified from contracting by any law.e. Rules Relating to Minor’s Agreement . Death : . or mental incapacity • Disqualification under any law 2. madness. lunacy.

000/. Subsequently. the contract is void. However under the English Law a contract by a minor is voidable. Free Consent – Coercion. the minor sued for setting aside the mortgage. maritial status. b) A minor who has entered into a contract cannot ratify it subsequently on attaining the age of majority because minor’s agreement is void ab initio c) A minor’s property is liable to a person who supplies necessaries of life to a minor. Case law : Mohari Bibee V/s Dharmodas Ghose. Agreement by Person of unsound Mind . a. A minor cannot bind himself by a contract. hence the question of refunding the money die not arise at all.A person is said to be of sound mind if at the time of making the contract is capable of understanding the terms and conditions of the contract and has ability to form a rational judgement as to its effect on his interests. The mortgage claimed refund of Rs. A person who is usually f sound mind but occasionally of unsound mind may not make a contract when he is of unsound mind.from the mortgagee. at the time of entering into a contract.out of which she received Rs. . fraud A : Consent is said to be free when it is not caused by • Coercion • Undue influence • Fraud • Misrepresentation mistake. d) There is no estoppels against a minor. Contract by Corporation – A Corporation is an artificial person created by Law under the Companies Act or formed SpecialAct or Legislature. 8000/.a) A minor’s agreement is VOID AB INITIO and inoperative because a minor has no capacity to contract. Q4. b) Contract by Drunkards – Contract by drunken person is absolutely void and cannot be ratified 4. 8000/. Maritial Status – A married woman is competent to contract she can sue or be used in the court of law. Agreement by Disqualified person – Disqualification or incompetence to contract arises from political status. legal status. misrepresentation. b. Facts : A monor executed a mortgage for Rs. corporate status. a) Contract by Lunatics = Section 12 says that a person who is usually of unsound mind but occasionally of sound mind make a contract when he is sound mind. undue influence. 20. If a minor misrepresents himself to be a major and induces another person to enter into a contract with him even then he can plead minority as a defence in 3.paid by him. Even if the minor misrepresents his age. For Eg. Held – That a minor’s agreement is void ab initio.

e) Mistake – An erroneous belief about something is called “mistake” When an agreement is entered into under a mistake consent is not free. Bailment and Agency A: Pledge – The bailment of goods as security for payment or a debt or performance of a promise is called ‘Pledge”. It means the delivery or handing over of goods. The baille is called the “Pawnee”. Change of position of goods for specific purpose is the essence of delivery.’ the contract is voidable at the option of party whose consent was not free. The transaction is czlled the “Pledge” or “Pawn”. When there is consent but not ‘free consent. a) Coercion is committing. Being a contract. or threatening to commit. under the belief that it is true is misrepresentation.. Bailment : “A bailment is the delivery of goods by one person to another for some purpose upon a contract that they shall be returned or otherwise disposed off. Essentials of Bailment : a) Contract : The delivery of goods is upon a contract between the bailer and the bailee. according to the direction of the person delivering them after the purpose has been accomplished. 05. any act forbidden by the Indian Penal Code. . A statement made which in fact is not true. A delivers his bike to service to the service station to do service of the bike. The person delivering the goods is called as the bailor and the person to whom they are delivered is called as the bailee. Bailor in this case is also called the “Pledgor” and the a bailee is called the “Pledgee” Pledge is therefor a kind of bailment. c) Fraud : Fraud means and includes any of the following acts committed by party to a contract or with his connivance or by his agent with intent to deceive another party thereto or his agent or to induce him to enter into the contract. For eg. However a person already in possession may become a bailee by a subsequent agreement. Pledge. The transaction is called as bailment. or the lawful detaining or threatening to detain any property to the prejudice of any person whatever with the intention of causing any person to enter into an agreement. it must have all the essential elements of a valid contract. b) Undue Influence – A contract is said to be induced by undue influence where the relations subsisting between the parties are such that on the parties is a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.• Mistake When there is no “consent “ there will be no contract all. The bailor in this case is called the ‘pawnor’. d) Misrepresentation – Consent given under misrepresentation of facts is no consent at all.

When the purpose is accomplished they shall be returned or disposed off according to the direction of the bailer. d) For a specific Purpose . This is an implied agency created by the operation of law.The delivery of goods in a bailment must be for a specific purpose. Any person can become an agent 3. The act of the partner while carrying on the business of the firm in the usual way binds the firm and its partner. A: Directors The company being an artificial person carries on its activities and business through individuals called “DIRECTOR” A Director is a person who should A) Have an effective control and power over the business of the company B) Represent the company before an outsider C) Manage the day to day affairs of the company D) Be authorised to take important decisions relating to the companies business . 5. Agency by ratification . promissory note. An agent is bound to follow the lawful instructions of his principal Essentials of Agency: 1. The person employed OR who represents is called as the Agent. f) Return of the Specific goods – The bailee must return the specific goods either to the bailor or to somebody according to the directions of the bailor as soon as the specific purpose for which goods were bailed is accomplished.b) Minimum two parties – Bailor and a Bailee c) Delivery of goods and Change of possession – There is a change of transfer of possession of the goods and or ownership.. e) Movable Property –The bailment of the goods can be only in respect of movable properties except money and actionable claims (Share. The ratification may be expressed or implied by the conduct on whose behalf the act has been done. 06. The person for whom such an act is done or who is represented is called as the principal. Change of possession of goods by delivery from one person to another is essential. debenture. No consideration is necessary for the creation of an agency 4. Agency by operation of laws – In a particular firm a partner is an agent of the other partner and of the partnership firm while dealing with 3rd parties. The relation b/w them is called the Agency.Where a person on behalf of another but without his knowledge does an act and if he ratifies them the same effect will follow as if the act had been done with previous authority. The principal must be a competent person 2. cheque ect) Money is not included as a moveable property for the purpose of bailment. An agent therefore brings together his principal and the third person. Agency : An agent is a person employed to do any act for another or to represent another in dealing with third persons. However this must be for a temporary period.

A: Memorandum and Articles of Association Memorandum of Association It is a public document that has to be submitted along with the application for Incorporation of a Company.e. by a public document means that any member of the public is entitled to inspect document from the office of the Registrar. The Director therefore acts for and on behalf of the company as its agent. It is only because of this reason that the shareholders have full faith in them and hence appoint them and give the entire assets of the company under their control. The Memorandum contains the following clause. e) Director as an Organ of the Company – A Director is compared to an organ of the body of the company. b) Registered Office Address Clause – This clause mentions the registered Office address of the company i. c) Director as a Trustee – A Trustee holds an office of trust and faith. d) Director as an employee – The company Act states that a Director may hold an office OR place in the company as a salaried employee. the place from where the company will carry on its business. . b) Director as an agent – A company being an artificial person acts through the Director.The Directors are collectively termed as BOD – Board of Directors) Role of Director a) Director as a Managing Partner – A partner who manages the business of a partnership firm is called a Managing Partner. If the company is a public company with limited liability the word “Limited” must be written in the name of the company. A director could be compared to the managing partner as he manages the business of the company. Just as the body is responsible for the acts of its organ the Company is responsible for the acts of the Director\ Appointment of Director 1) Appointment of 1st Director 2) Appointment by member at the AGM 3) Appointment at the AGM by the Shareholders by an Ordinary resolution 4) Appointment by proportionate representation 5) Appointment by BOD 07. Similarly a Director holds an office of trust and faith. a) Name Clause – This clause states the name of the company If the company is a private company and the liability of its members is limited the word “Private Limited” must appear in the name of the company.

advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription or purchase of any shares in. It contains the rules and regulations for the internal management of the company. e) Liability Clause – In this clause the liability of the members should be specified f) Association/Subscription Clause – In this clause the subscribers give a declaration that they intend to form an association in accordance with the M?A . Article of Association It is a contract between the company and its members. b. a. It is divided into 2 parts. Each rule in the A/A must be mentioned in a separate paragraph which must be numbered. circular. Prospectus A: A Prospectus means any document described or issued as a prospectus and includes any notice. or debentures of a body corporate. d) Capital Clause – In this clause the company has to mention the total capital it would be authorised to raise by the Balance Sheet.c) Object Clause – This clause specified the object of the company. If the company is limited by share it should specify the total number of shares as well as the value of the share. 8. d) The A/A cannot be enforced against an outsider nor can an outsider enforce the A/A on the Company. Other Object Clause: This part contains those object which the company may carry out in future. It is a public document. The following companies must have an Article of Association a) Unlimited Companies b) Companies limited by Guarantee c) Private Companies limited by shares The Article of Association is a contract between the company and its members therefore a) The members are bound to the company by the A/A b) The Company is bound to its members by the A/A c) The A/A is not a contract between the member – A member cannot enforce the A/A on another member. Main Object clause – This clause must mention the objects that are pursued by the company on incorporation as well as any other object that may have to be carried out for attaining the main object. Contents of the Prospectus a) Dating of Prospectus b) Registration of Prospectus c) Every Person named as a Director or Proposed Director must sign it d) It must state on its fact that a copy of the prospectus has been delivered to the Registrar for Registration e) The Prospectus must be issued within 90 days of its registration .

Right of Withholding Delivery .When the buyer of goods become insolvent. Right of Stoppage in Transit . A seller who has been partly paid is also considered as an unpaid seller for part unpaid. Right of Unpaid Seller a) When the property in the goods has passed to the buyer a. he has received payment in the form of bill of exchange or negotiable instrument which is dishonoured. Other Right i. for eg. Where the seller has expressly reserved his right of resale in case the buyer makes default b) When the property in the goods has not passed a.Where the property in the goods has not passed to the buyer. Where the goods are of perishable nature ii. The consent of the experts if their reports are to be published in the prospectus b. b. 5000/g) A Prospectus must accompany the following documents a. A copy of every contract relating the appointment and remuneration of the managerial personnel 09. Where the seller gives notice to the buyer of his intention to resell the goods iii. A: Rights of unpaid seller against goods An Unpaid seller is one who has not been paid or tendered the whole of the price or one who receives a bill of exchange or other negotiable instrument as conditional payment and the condition on which it was received has been fulfilled by reason of the dishonour of the instrument or otherwise. The term seller includes any person who is in position of a seller.. the unpaid seller who has parted with the possession of the goods has the right of stopping them in transit he may resume possession of the goods as long as they are in the course of transit and may retain them until payment or tender of the price c.f) The company and every person who is responsible for issuing a prospectus without registration shall be punishable with a fine extending upto Rs. He can re-sell the goods under the following circumstances i. the seller has a right to withhold delivery of the goods. Right of Re-sale – When the unpaid seller has exercised his right of lien on his retaining the possession of the goods or resume possession of the goods by exercising his right of stoppage in transit upon insolvency of the buyer. Unpaid seller is one who has not received the whole of the price. An agent of the seller to whom the bill of lading has been endorsed or a consignor or agent who has himself paid or is directly responsible for the price. Therefore. Sue the buyer for the price of the goods . Right of Lien – It means right to retain the possession of the goods or property until the claim is paid or satisfied b.

Recover interest from the buyer where there is specific agreement to that effect 10. Ltd The object clause of the company contained the following object a) To manufacture & Sell railway carriages b) To Act as Mechanical engineers Or General Contractors. iii. Write on the Negotiable Instrument Act A: Section 13 of the Negotiable Instrument Act 1881 defines a negotiable instrument as “ A negotiable instrument means a promissory note.. b) Ultra Virues – Doctrine of ULTRA VIRES – Ultra Vires means beyond powers i. Short Notes a) Certificate of Incorporation : (COI) It is a document which certifies that the company has been registered with the Registrar of Companies under the Companies Act on a particular date. The company entered into a contract with MR.ii. The COI is a documentary proof to establish the registration of the company. A/A should be submitted in case of companies with unlimited libalities. A list of persons who have given their names to be the Director of the Company. Instrument means a document. Public companies limited by Guarantee and Pvt Companies limited by shares. 11. Negotiable literally means – transferable. or cheque payable either to order or to bearer. Riche in which the company agreed to finance the construction of railway lines. A declaration that all requirements of a company are compiled with and the same has to be signed by an Advocate / CA or a person named as Director v. For the purpose of Incorporate of a Company the members are required to make an appointment with the Registrar alongwith the following documents:i. ii. A letter of approval from the Registrar stating that the name of the company has been approved iv. MOA should be signed by at least 7 person in case of a Public Co and at least 2 person in case of Pvt Co. Any Act done by the company which is neither authorised by its object nor by the Companies Act that act is called “Ultra Vires” An act which is ultra vires the company is void and cannot bind the company. Therefore negotiable instrument means a transferable document. bill of exchange. The seller may sue the buyer for damage for wrongfully neglecting or refusing to accept the goods iii.e any act done by the company beyond its legal power and authority. For eg In Ashbury Railway Carriage and Iron Co. At the time of performance the company . COI is issued by the Registrar of Companies when the procedure for registration of a company under the Act is complied with.

if some event. 10. The contract was ultra vires and the company was not bound to finance. Rules Regarding of Contingent Contract 1) Enforcement of contracts contingent on happening of a future uncertain event 2) Enforcement of contract on the non-happening of a future uncertain event 3) When the event is deemed to be impossible 4) Happening of an event with in a fixed time. c.) Contingent contracts – A contract to do or not to do something. 5) Non happening of an event with in a fixed time 6) Agreement contingent on impossible event. d). Types of companies .of N’s house is burnt. For eg A contract to pay B Rs. Incidental to the contract. Characteristics of a Contingent Contract a) There should be existence of a contingency happening or nonhappening of some event in future b) Contingency must be uncertain c) The event must be collateral for eg. Riche filed a case against the company on the grounds that the object clause mentioned that the Company could act as general contractors that would include a contract to finance.000/.refused to finance on the ground that financing was an Ultra Vires act. does or does not happen . Mr. This is contingent Contract. collateral to such contract.

LIC c) Registered Companies – Companies registered under Companies Act 1956 or any previous Companies act are companies registered under the Companies Act. Where the other company hold a majority of its shares iii. The company controls the majority composition of the Board of Director with the sole intention of having control over the management ii. RBI.In such a company the liability of the members are unlimited • d) Government Company – It is a company in which not less then 51% of the total paid up capital is held by the Central Government or State Government or Partly by the Central Government and Partly by one or more state governments e) Based on Holdings a. for eg the buyer must take care. Bank of England b) Statutory Company – these Companies are formed under the Special Statutory Act of the Parliament or State Legislature For eg. Holding Company – Company which ahs a control over a Subsidiary company through any one of the several methods b. The holding company subsidiary has its own subsidiary f) One Man Company – Where a single individual holds almost all the share of a company is termed as one man company – eg Soloman & Company ltd d) Caveat Emptor – It means “let the buyer beware”. SBI. Types of Company a) Chartered Company – These companies are incorporated under special Royal Charter issued by the Kind or Queen. Companies registered under the companies act are either • Companies limited by shares – In this type of company there is a share capital which has a nominal value. As a general rule the buyer purchases goods after satisfying himself as to quality and fitness and therefore the buyer purchases the goods at his own risk relying . Subsidiary Company – A company is deemed to be subsidiary Company under the following conditions i. All companies are now regulated by the provisions of the Companies Act 1956. – East India Company. A Company means a company formed and registered under Companies Act 1956 or an existing company. Company limited by shares may be a public limited company or Private Limited Company • Companies limited by Guarantee – In this case the member undertake to contribute up to a certain limit towards the assets of the company in the event of liquidation • Companies with unlimited liability.A Company is an incorporated association which is an artificial person created by law having a separate entity with a perpetual succession and a common seal. For eg.

ii. g) to Doctrine of Caveat Emptor Fitness for the buyer purpose Merchantable quality Conditions implied by trade usage Express terms Fraud committed by the seller When buyer relies on seller skills and judgement.Where the outsider deals with the company without going through the public document e) Acts outside apparent authority – Where an office of the company does an act which apparently is outside his authority . He knew the pigs were suffering from Swine Fever. Indoor Management : .Though every person is bound to read the Article and Memorandum of the company. It is the buyer’s duty to select goods of his requirement. iii. Pigs were sold to W with all faults and errors of description. but he never disclosed this to W. Exceptions i. v. he is bound to enquire into the internal management of the company whether they are being conducted according to the Article of the Company or not. vi. An outsider is entitled to presume that the directors are acting lawfully in all respects. Explanation – The seller is not bound to supply goods which should be fit for any particular purpose or which should posses any particular quality. This is called Doctrine of Indoor Management.upon his own skill and judgement In a contract for sale of goods there is no implied warranty or condition as to quality or fitness for any particular purpose of goods and therefore the buyer purchases the goods at his risk relying on his own skill and judgement Ward Vs Hobbs H Sent Pigs to market to be sold by auction. Held – Sale was valid as there was no implied warranty or condition for the sale. It is for the buyer to make himself acquainted with qualities and defects of the goods he contemplated purchasing. iv. d) Representation through Article.Where the act is ultra vires. Expectations to the Doctrine of Indoor Management a) Knowledge of Irregularity – Where the third person dealing with the company has actual or constructive notice regarding the non compliance and irregularity of the internal procedure prescribed by the Articles of Association b) Suspicion of irregularity – Where the outsider had some suspicion of some irregularity and contracts with the company without investigating into it c) Forgery or Fraud : .

Distinguish between 1). abuse of dominant position and regulation of competitions. It is now felt that fail and free competition si required for growth of health economy. Partnership has no perpetual Company has a perpetual existence existence The liability of shareholders is Partners of the firm are liable to usually limited unlimited extent. i. 2002 proposes to control aspects of anti-competitive agreements. All over the world it was found that private monopolies can be detrimental to national economy and control is required.h) Competition act : Competition Act. Partnership Firm Registration of a firm is not compulsory under the Partnership Act Minimum two persons constitute a partnership. Maximum membership in case of partnership doing banking business is ten persons and for other business is 20 person A company has a separate legal A firm has no individual legal existence of it sown and is status.e in Partnership there is an unlimited liability Death of a shareholder does not Death of a partner may mean affect the existence of a dissolution of partnership company. Sale and Agreement to Sell 1 2 3 4 Sale of Agreement It is an executed contract In Sale of Agreement the right on the goods against the whole world The property in the goods passes to the buyer with the risk immediately The seller is entitled to sue for Agreement to Sell It is an executor contract Right of goods is in personal The property and risk does not pass to the buyer immediately The seller has the right only to . 3 4 5 6 7 2. 1 2 Company and Partnership firm Company Registration of a company is compulsory under the Companies Act Minimum two or Maximum fifty constitute a Pvt Ltd Co and Minimum Seven and Maximum Unlimited constitute a Public Ltd Co. considered a separate person from its members Property belongs to the Property of the firm is the company property of the partners.

Agreement and Contract Agreement 1 An offer by one party and its acceptance by the other party constitute an agreement 2 Offer and acceptance together constitute an agreement 3 Every promise and every set of promise forming consideration for each other is an agreement 4 Agreement may not create any legal obligation. buyer can recover the goods from official assignee sue for damages for non performance of the contract The seller will have to pay for the loss since the ownership in the goods has not passed to the buyer If buyer becomes insolvent the seller may refuse to deliver the goods unless paid for If seller is insolvent the buyer has to prove the amount paid by him 3. All agreements are not contracts 5 An agreement is a wider concept or a genus 6. All contracts are agreements. Indemnity and Guarantee Indemnity Guarantee .5 6 7 the price of the goods and also the right of lien. It is implied contact 5. stoppage in transit and re-sale In case of loss to goods – The loss will be borne by the buyer even if the possession of goods is with the seller If buyer become insolvent seller must deliver the goods to official assignee If seller becomes insolvent. Contract is a specie of an agreement Contract is concluding and binding 2 3 4 Quasi Contract A quasi contract is an obligation which resembles that created by a contract even where there is no contract between the parties There is no agreement at all The essential for the formation of a contract are absent A Quasi contract is not full fledged contract. Agreement is not a concluded or a binding contract 4. Contract and quasi contract 1 Contract A contract comes into existence out of the will of the parties. expressed with the sole intention of creating an obligation A contract is an agreement A contract is characterized by certain essential elements A contract is a full fledged contract and is binding Contract An agreement and its enforceability at law together constitute a contract Agreement and enforceability together constitute a contract A contract is an agreement enforceable by law A contract necessarily creates a legal obligation.

unless payable on demand Drawer is discharged. if bill is not presented for payment to the acceptor Cheque Only a banker can be a drawee A cheque require no acceptance Payable on demand without any days of grace 4 5 6 7 8 If not presented to the banker for payment it does not discharge the drawer unless he suffers injury or damages Notice of dishonours is to be In case of dishonour no notice of given to all the parties liable to dishonour is necessary pay Bills of exchange can never be A cheque may be crossed crossed Bills must be properly stamped Cheques requires no stamp A bill may be noted or protested A cheque is not required to be for dishonour noted or protested for dishonour . second between the surety and the creditor and the third. Drawee is liable only after his acceptance A bill is normally entitled to three days of grace after maturity. between the surety and the principal debtor. one contract between the creditor and the principal debtor. the performance of which is guaranteed by the surety There are three contract. 6. Surety can se the principal debtor.1 2 3 4 There are two parties Indemnifier and Indemnity Holder The liability of the indemnifier is primary The liability of Indemnifier arises only on the happening of a contingency There is only one contract between the 5indemnifier and indemnified 5 Indemnifier cannot sue a third party for the loss suffered There are three parties – Creditor. Bills of Exchange and Cheque 1 2 3 Bills of Exchange Any one can be a drawee. Principal Debtor and Surety The liability of the surety is secondary. The surety is liable only if the principal debtor fails There is an existing debt or duty. including a banker It must be presented for acceptance.

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