BUSINESS LAWS

UNIT - I
 INTRODUCTION
• Law is a complex and multifaceted field that
encompasses various branches and categories.
• The legal system encompasses seven primary types of
law that form the basis for our understanding and
application of justice.
• The seven types of law are:
1. Constitution Law
2. Statutory Law
3. Common or Case Law
4. Civil Law
5. Criminal Law
6. Equity Law
7. Administrative Law
• Defined as a definite rule of conduct and
human relations.
• It also means a uniform rule of conduct which
is applicable equally to all the people of the
State.
• Law prescribes and regulates general
conditions of human activity in the state.
“Law” means “rule made by authority for the
proper regulation of a community or society
or for correct conduct in life” - Oxford English
Dictionary
• “Law is the body of principles recognized and
applied by the state in the administration of
justice”.
• Salmond ‘Law’ denotes rules and principles either
enforced by an authority or self – imposed by the
members of a society to control and regulate
people’s behavior with a view to securing justice,
peaceful living and social security.”
• “Law is that portion of the established habit and
thought of mankind which has gained distinct and
formal recognition in the shape of uniform rules
backed by the authority and power of the
Government.” - Woodrow Wilson
 Nature/ Features/Characteristics of Law

• Law must be applicable to all. Everyone in the eyes of law is equal

and no one can escape from the eyes of the law.
• Law is uniform in nature. Power of making law lies in the hand of
the state. State passes those laws which are considered to be for
human welfare.
• The state has a government which also helps in making law and
through which laws are enforced.
• Laws are said to be reliable and just for every individual present
in the state. These are rules for every individual.
• Every state needs the law as it is believed to be the most
important element which helps the state to function smoothly.
Contd..
• Law can be the threat to those who are willing to do
wrong in society and once they commit anything wrong
are severely punished.
• The punishments which are given to the guilty are also
decided by the law.
• Each country has the court which settles any issues
taking place in a state according to the laws formulated.
• Law act as a shield to every individual in the state. It
helps people co-exist harmoniously and protect
themselves from any wrong or evil doings.
• These laws are made by the representatives of the
citizen. Then this law also requires public opinion and
should also function in accordance with public needs.
 THE CONTRACT ACT 1872
• The INDIAN CONTRACT ACT, 1872 governs
law relating to contracts in India.
• The Act was passed by British India and is
based on the principles of English Common
Law.
• This Act is applicable to whole of India
including Jammu and Kashmir.
• The Act came into effect from 1st September,
1872 and applies to all contracts in India.
 NATURE AND CLASSIFICATION OF
CONTRACTS
• The nature of contract refers to a branch of law that
determines various situations and circumstances in
which promises made by a party to a contract shall be
binding on them.

• It consists of a number of limiting principles but does

not lay down the rules and responsibilities enforced by
the law.
• To make an agreement which results in a contract,
there must be an offer and an acceptance; and to the
promises which stem from the offer and acceptance the
law attaches a binding force of obligation.
• What is an Agreement?

Agreement = Offer + Acceptance

• What is a Contract?

Contract = Agreement (Offer + Acceptance) +

Enforceable by Law
 CLASSIFICATION OF CONTRACT
• From the point of view of enforceability:

(i) valid:

Valid Contract : A valid contract is one which satisfies all the

requirements prescribed by law for the validity of a contract, i.e.
the essential elements laid down in Sec.10.

Example 1: Party A agrees to sell Rice crops to Party B. Both parties

agree that Party A can cut the crops and take them, once he pays
the agreed price.
(ii) void contracts or agreements
Void Contract : A contract which was legal and
enforceable when it was entered into may
subsequently become void due to impossibility of
performance, change of law or other reasons.

When it becomes void the contract ceases to have

legal effect. In other words, a void contract is not
valid from its inception but subsequent to its
formation, it becomes invalid and destitute of legal
effect because of certain reasons. [Sec. 2(j)].

For example, an agreement between drug dealers

and buyers is a void agreement simply because the
terms of the contract are illegal.
• Void Agreement : “An agreement not
enforceable by law is said to be void.”— Sec.
2(g).
• A void agreement has no legal effect. It confers
no rights on any person and creates no
obligations.
• An agreement made by a minor; agreements
made without consideration (except the cases
coming under Sec.25); certain agreements
against public policy; agreements in restraint of
trade or in restraint of marriage or in restraint
of legal proceedings, etc. are examples of void
agreements.
• (iii) voidable : Voidable Contract [Section 2(i)] :
A voidable contract is a contract which can be
avoided or set aside at the option of one of
the parties to the contract. It can be set aside
at the option of the party defrauded.

Examples X threatens to kill Y if he does not

sell his new Ambassador car to X for
Rs.12,0000. Y agrees. The contract has been
brought about by coercion and is voidable at
the option of Y, i.e. the aggrieved party
iv) illegal and unenforceable: An illegal agreement is
one which is against the law enforceable in India.
E.g., an agreement with a minors is void but not
illegal.