Class PPTs

Introduction:
Legal Aspects of Business

LAB:1-4
LAW- Common definition in English legal textbooks
• Law: rules of conduct
imposed by a state
upon its members
and enforced by the courts
• Law may be defined as a body of rules, created by the state,

binding within its jurisdiction and enforced with the authority of
the state through the use of sanctions
• A set of rules and procedures usually intended to regulate

some aspect of society
• Social purpose of law: to regulate human behaviour – hence

rules of conduct v. simply rules
Why do we need LAW?
• To provide a governmental structure and legislative
procedures: constitutional law
• To provide public services and to raise taxes to pay for
them: administrative and revenue law;
• To regulate and promote the economy: administrative, civil
and criminal law are all involved
• To promote public order and preserve national security:
criminal law
• To give individual members personal rights and duties in
relation to others and to enable personal enforcement of
these rights: the civil law or Torts
• To give legal validity to approved relationships and
transactions between members of the society
Law in everyday life
Step on a bus!!! The law is there. You have almost certainly entered into a
contract to pay the fare to your destination.
The bus is involved in an accident. The law is ready to determine who is
responsible for the injury you sustained.
Your job, your home, your relationships, your very life – and your death, all
– and more – are managed, controlled, and directed by the law.
ACTIVITIES AFFECTED BY HOW REASON FOR

LAW THE LAW
Took a bath Yes. Health Law Water must be clean Health
Brushed teeth Yes. Food and Toothpaste must not Health

Drug Laws be harmful to the
health
Ate breakfast Yes. Food Laws Food need to be Health
wholesome
Caught the bus to Yes. Traffic Law The bus driver must Safety
school have a license
Law and Society of Business
“ignorantia juris non excusat”
Law pervades almost every part of human life
Without law there will be chaos and confusion in society
Knowledge of law is necessary for all persons who live in a society
Law is a set of rules laying down rights and obligations which the state
enforces
It includes rules & principles which regulates our relation with other
individuals and with the state
Business, Commercial & Mercantile in relation to law are used in same
sense. Laws concerning to trade, industry and commerce.
Rules and regulation which governs the formation and execution of

business transaction made by various persons in the society.
Law and Act
Business Law vs. Business Ethics
While staying within the confines of an increasing array of

business laws is necessary for success in business, it is
not sufficient. Businesses must also recognize additional
limitations and expectations placed upon them by
business ethics, those principles and values that define
what is right and wrong.
While ethical principles normally start with what is legal,

they often impose a higher standard that recognizes a
multitude of stakeholders beyond just suppliers,
customers, and employees.
https://hbr.org/1993/05/whats-the-matter-with-business-ethics/
“If we were not running our business in the public interest, the
public would get back at us with restrictive regulations and laws.”
Introduction to Business Law
Business law encompasses the law governing contracts,

sales commercial paper, agency and employment law,
business organizations property and bailment.
Contracts
Buying & Selling -Transaction
Insurance – Indemnity
Partnership
Formation of Business
Role of Directors/Promoters
Consumers
Competition
Information Technology
IP Laws
Scope and Classification of Law
https://www.youtube.com/watch?v=jQ6smN3lcnY
Law and society of Business
Different types of Law:
Constitution – Overriding law establishing fundamental principles of
Govt. either at federal or state level
Statutes – Law enacted by the elected representatives of the

legislative branch of the Govt.
Administrative Regulations & Decisions – Similar to statutes enacted

by administrative agencies instead of elected representatives
Common law – Based on prior court decisions (Precedence). Cases

not governed by other types of law.
Treaties – Contracts between two or more political authorities

Ordinances – Created by countries and municipality
Executive orders – Laws enacted by President or Governors
Law and society of Business
Classification of Law:
Substantive law & Procedural Law
Public Law & Private Law
Criminal law & Civil Law
Note: Classification is not mutually exclusive
The Constitution of India has set up three branches of the GoI

Substantive vs. Procedural
• Substantive law defines or creates the rights and obligations of
persons and governments.
IPC- Sections 511. (Defines offences & provides punishment for it)
• Procedural law provides the steps or process one must follow
in order to avail oneself of one’s legal rights or enforce
another’s legal obligations.
CrPC- Sections 484
CPC- Sectons155
• Public Law deals with the • Private Law deals with the
relationships between government relationships between ordinary
organisations and ordinary citizens people in everyday transactions
Also between different
government organisations • That includes you and me, as
well as businesses and
• Public Law includes constitutional companies
law, administrative law, and
criminal law • Private Law includes the law of
contract and the law of tort
https://study.com/academy/lesson/what-
is-tort-law-definition-and-examples.html
Criminal vs. Civil
Union or State
Classification of Law
Pseudo Contract- Unjust enrichment of one person at the cost of

another. May be an agreement without essential elements. Eg.- TV
delivered wrongly and is been used with no intention of return.
Common Law System v. Civil Law System
Below: A world map showing countries today that have a civil law system (light blue), countries
that have a common law system (green), and countries that have both (orange).
Common Law System vs. Civil Law System
Common Law System Civil Law System

• Case law and the courts are • Consists of a legal code of
most important source of law general principles which is
• Main source of law are the source of law
precedents (previous • Civil Law is used to
decisions made by superior describe legal systems
courts on similar facts) which are based on old
• Common Law is used to Roman Law (from the
describe legal systems based Roman Empire in what is
on the English legal system now Italy)
• These are usually countries - Eg.: France, Germany
which were once part of the
British Empire
– Eg.: America, Australia,
New Zealand, India
Cyber Law
• Cyber Law is an emerging body of law that applies to

transactions on the internet.
• Generally, it consists of traditional legal principles as

applied to the web.
• Electronic commerce and contracting is becoming a

more accepted way of doing business in the global
economy.
Administrative Structure of the Indian Legal System
Types of Court
Legal Theory and Nature of Jurisprudence
No person shall be deprived of his life or personal liberty except

according to procedure established by law.
– Constitution of India, Article 21
Legal theory is a systematic study of law. It is the philosophy of

law that studies the legal aspects in the context of the society’s
cultural, political, economic, and other areas.
Jurisprudence, as against the theory, concerns itself with the

procedures and application of the law. Jurisprudence mainly
interprets law in three aspects: Analytical (Studies law as a pure
discipline), Historical (Studies the legal history, tracing the
origins & development of law) and Ethical (Law based on ethical
value of justice, moral perspective).
Principle of Commercial Jurisprudence
Some Constitutional Aspects
Indian Constitution
Indian constitution had 395

articles in 22 parts and 8
schedules at the time of
commencement.
By 2018, Constitution of
India has 448 articles in
24 parts, 12 schedules, 5
appendices and 108
amendments.
Origins - The Law Of Business
• Historically, began as a private system in England to influence
commerce.
• Originated in the English Law Merchant.
• Administered by Merchant Courts established in various merchant

guilds.
• Merchant Courts were integrated into English Common Law.
• Today, the Law of Business focuses on maintaining a competitive

environment;
• Regulates specific marketing and business activities;
• Includes contract and sales law, commercial paper, negotiability,

secured transactions, agency, employment, and property law, as
well as, laws regulating business organizations.
Manager and the Legal Environment
Case Laws Cited
The State Bank of Punjab Vs Amrik Singh, 1990
- Cannot be reinstated after convicted (Article 311)
Mohd. Ahmed Khan Vs Shah Bano Begum, 1985

- Petition granted for maintenance by husband after divorce
Epic Case of Sita’s Trial by Ordeal in Valmiki Ramayan
- Chastity under suspicion due to her abduction & confinement by Ravana
- Successfully Withstands test of fire & ends up in bosom of mother earth
Dabur India Ltd Vs K R Industries, 2008

- “Dabur lal dant manjan” packing, color and blurb was imitated by “Sujata”
- Dismissed Claim as no evidence to establish copyright infringement within
the jurisdiction of High Court in Delhi as the product was selling in Andhra
Pradesh
K M Nanavati Vs State of Maharastra, 1961 (Clandestine relationship)
- Jury awarded 8-1 not guilty
- Court sentenced him for Life Imprisonment
- People and media drummed up support & Governor had to grant
sanction to the petition of pardon
O.J. Simpson: Inside the Case of the Defense 'Dream Team'
https://www.youtube.com/watch?v=5dyOTyiiUmA
https://www.youtube.com/watch?v=HrB3rOcrJxg
https://www.youtube.com/watch?v=Uztf1el3JUo
Basic Structure of the Constitution
Since the
constitution has
conferred a limited
amending power
on the parliament,
the parliament
cannot under the
exercise of that
limited power
enlarge the very
power into an
absolute power.
(Applying the
doctrine of “basic
structure” with
respect to
Article368 – Nani
Palkhiwala,
defender of Indian
Constitution)
Whether constitutional amendment as per Article
368 applicable to fundamental rights also?
The verdict upheld the scope for judicial
review to ensure t ..
Read more at:
http://timesofindia.indiatimes.com/articlesh
ow/77967798.cms?utm_source=contentofi
nterest&utm_medium=text&utm_campaign
=cppst
Basic Structure of the Constitution
1. Supremacy of the constitution
2. Sovereign, democratic and republican nature of the Indian Polity
3. Secular character of the constitution
4. Separation of power between the legislature, the executive & the judiciary
5. Federal Character of the constitution
6. Unity and integrity of the nation
7. Welfare state (socio-economic justice)
8. Judicial Review
#Me Too Saga
Ira Trivedi accuses Chetan Bhagat of
harassment, says he tried to kiss her
Law of contract
LAB:5-6
The Indian Contract Act, 1872
The Law of Contract Constitutes the most important branch of
mercantile or commercial law and has 238 sections. It affects
everybody, more so, trade, commerce and industry. It may be said
that the contract is the foundation of the civilized world.
Contracts are the essential elements of everyday life. We sign

consumer contracts without really stressing about it, from pay-for-
services companies like our cable or satellite company to a service
contract on our smart phone. We are notorious for signing but not
reading our car insurance policies, hoping everything works out in
the end.
The Contract Act-1872
From English Law- All Provision
Basic Prov.
Goods/Services
+ Sale of Goods Partnership
Immovable Property
Additional Prov. Partnership Act, 1932
TOPA, 1882 SOGA, 1930
Added: Special Contracts

The Contract Act-1872
While all contracts are agreement, all agreements are not contracts
Agreements which are not legally enforceable, are not contracts
An Agreements is a promise or a commitment or a set of reciprocal
promises or commitments. It involves an offer or a proposal
Proposal when accepted becomes a promise
Consideration generally means compensating aka quid pro quo
(something in return for another thing)
Definition
Contract = An Agreement + Legal (Object + consideration)
+ Writing + Free Consent + Eligible person
Agreement = A set of Reciprocal promises

Contract = Promise1 + Promise2 + Legal Object (Enforceable law
+ possibility of performance) + Legal Consideration
(Subject to exception) + writing (Bond/Stamp paper +
electronic (Cyber Law) + Free of ( Fraud,
Misrepresentation, Coercion, Undue influence, Mistake)
+ Eligible (Major, sound mind, not alien enemy, not
convict, not disqualified)
Promise = Offer + Acceptance
Promise1 + Promise2 = [ (Offer1 + Acceptance1) + (Offer2 + Acceptance2)]

The essential elements of a valid contract are as follows:
1. Agreement.
2. Intention to create legal relationship.
3. Free and genuine consent.
4. Parties competent to contract.
5. Lawful consideration.
6. Lawful object.
7. Agreements not declared void or illegal.
8. Certainty of meaning.
9. Possibility of performance.
10. Necessary Legal Formalities
CASE: OFFER AND ACCEPTANCE
Som enters a shop to buy a DVD player. Different communications
which could take place between him and the shopkeeper, Arvind.
Situation 1: Som says, “I want a Philips DVD player. The price

quoted in the company’s advertisements is Rs. 4,000.
Will you sell me one for this price?” Arvind replies,
“Yes sir, I will.”
Situation 2: Som says, “I want to buy a Philips DVD player.”

Arvind replies, “It will be Rs. 4,000, sir.” Som says,
“Fine. Give me one.”
Situation 3: Arvind says, “Philips is a good make. I recommend

it to you. It is priced at Rs. 4,200.” Som offers, “I can
pay Rs. 3,500.” Arvind responds, “We do not bargain.”
Som says, “But still, give me some discount.” Arvind
says, “I will give it to you for Rs. 4,000.” Som replies,
“All right. I will buy one.” 7
The agreement in all the three cases (in the previous slide) is the
same, that is, Som will buy a Philips DVD player from Arvind for
Rs. 4,000. However, they reached the agreement through different
communicative processes. For an agreement to get formed,
parties must initiate communication. The last part of the
communication is important in deciding whether an agreement has
been formed or not. One party puts up an offer or proposal to
another and the other person accepts it, leading to an agreement
between the parties. An offer is the penultimate act leading to the
agreement. Once accepted, both the parties get bound by the
agreement.
Thus, in situation 1, Som has offered and Arvind has accepted,
while in situations 2 and 3, Arvind has offered and Som has
accepted.
PRINCIPLE: An agreement is about a meeting of two minds. It can

be formed when one party puts up an offer and the other person
accepts it.
8
Understanding Definitions of Contract Law
Understanding Definitions of Contract Law
Proposal/Offer
Section 2(a) defines Proposal / Offer as “ when one person
signifies to another his willingness to do or to abstain from doing
anything with a view to obtaining the assent of that other to such
act or abstinence, he is said to make a proposal.
Rules as to offer:
1) The offer must be capable of creating legal relation
2) The offer must be certain, definite and not vague
3) The offer may be expressed or implied
4) The offer must be distinguished from an invitation to offer
5) An offer may be specific or general
6) The offer must be communicated
7) The offer must be made with a view to obtaining the consent/assent of
the offeree
8) An offer may be conditional
9) The offer should not contain a term the non-compliance of which
would amount to acceptance. i.e. A man cannot say that if
acceptance is not communicated by certain time the offer would be
considered as accepted
Types of Proposal/Offer
1) General Offer: It is an offer made to the public in general and hence
anyone can accept and do the desired act.
2) Special Offer: When offer is made to a definite person, it is known

as specific offer and such offer can be accepted only by that specified
person.
3) Cross Offer: When two parties exchange identical offers in ignorance

at the time of each other’s offer, the offers are called cross offers.
4) Counter Offer: When the offeree offers to qualified acceptance of the

offer subject to modifications and variations in the terms of original offer,
her is said to have made a counter offer. Counter offer amounts to
rejection of the original offer.
5) Standing, Open or Continuing offer: An offer is allowed to remain open
for acceptance over a period of time is known as standing, open or
continuing offer.
Eg. - A railway company invited tenders for supply of certain iron articles
it would require for a year.
Case Law #1
Carlill v. Carbolic Smoke Ball Co
1893
http://www.cram.com/flashcards/contract-law-cases-5071221
IRAC Method
Defendant advertised £100 for a customer contracting a
Issue - malady following the correct use of the carbolic smoke ball.
The contract stated that £1000 had been deposited in the
bank as a sign of their sincerity/security. The plaintiff, attacked
by influenza, believed herself entitled to collect the reward as
CSB refused to pay what she was entitled to as per the advt.
Rule - Has to be a valid Contract- General Offer, Company

benefiting from sale of the product
Application - Performing the offer and not necessary has to inform
the company
3 judge bench held it is a binding contract, breach of contract

Conclusion - by CSB, Carlill is entitled and decision was made in her favour.
There was an “offer to the world”, which “ripened” into a
unilateral contract upon performance of its conditions. The
1000 pounds deposit shows sincerity and an objective legal
intention to be bound. Not a puff, but a very clear PROMISE,
the consideration for which was the performance of the terms.
Acceptance
Section 2(a) explains Acceptance as “ A proposal or offer is said to
have been accepted when the person to whom the proposal is
made signifies his assent to the proposal to do or not to do
something ”
Rules to an acceptance:
1) Acceptance must be absolute
2) Communication to Offeror
3) Acceptance must be in prescribed mode
4) Within specified time if any, otherwise in reasonable time.
5) Mere silence is not acceptance
6) Acceptance by conduct
Promise, Consideration, Agreement & Contract
Section 2(b) defines promise as “ when the person to whom the proposal
is made signifies his assent thereto, the proposal is said to be accepted.
Proposal when accepted, becomes a promise ”
Sec 2(d) defines consideration as “ When at the desire of the promisor, the
promisee or any other person has done or abstained from doing, or does
or abstains from doing or promises to do or to abstain from doing
something, such an act or abstinence or promise is called consideration for
the promise ”
Sec 2(e) defines agreement as “ every promise and every set of promises,
forming the consideration for each other ”
Agreement = Offer/Proposal + Acceptance i.e. Agreement is the result of
the proposal made by one party to the other party and that other party
gives his acceptance thereto.
According to Section 2(h) of the Act, the term contract Is defined as “an
agreement enforceable by law ”
https://blog.ipleaders.in/analysis-section-10-indian-contract-act-1872/
1) Consideration must move at the desire of the promisor: Consideration must
be offered by the promisee or the third party at the desire or request of the promisor.
An act done at the desire of a third party is not a consideration.
CASE Eg. If A’s godown catches fire and B asks C to call the fire brigade and C
incurred expenses worth Rs5000. Here, C cannot claim any reward for the service or
claim the expenses from A since the act was done at desire of third party.
2) Consideration from promisee or any other person: Consideration may
proceed from the promisee or any other person who is not a party to the contract. i.e.
There can be a stranger to consideration but not stranger to a contract.
3) Executed and Executory consideration: A consideration which consists in the
performance of an act is said to be executed. When it consists in a promise, it is said
to be executory. The promise by one party may be the consideration for an act by
some other party, and vice versa.
4) Past Consideration: In order to support a promise, a past consideration must be
moved by a previous request. Consideration is given and accepted in exchange for
the promises. But in the event of services being rendered in the past at request or
the desire of the promisor, the subsequent promise is regarded as an admission that
the past consideration was not gratuitous.
CASE Eg. Rahul’s gold ring got lost in the lawn and asked maid to help him search
the ring. Later the maid found ring and returned it back to Rahul. Rahul promised to
pay maid Rs2000 as reward after 7 days.
Q - What if later Rahul refuses to pay reward after 7 days, can maid sue him?
Yes, because past consideration is valid.
5) Adequacy of consideration: Consideration need not to be of any particular
value. It need not be approximately of equal value with the promise for which it is
exchanged but it must be something which the law would regard as having some
value.
CASE Eg. Ramesh agrees to sell his bike worth Rs90000 for Rs10000. The
contract is valid in spite of inadequate consideration until the transaction taking
place comprises of free consent.
6) Performance of what one is legally bound to do: The performance of an act
by a person who is legally bound to perform the same cannot be consideration for a
contract. Hence a promise to pay money to a witness is void, for it is without
consideration.
CASE Eg. Ramesh promised to pay his lawyer Rs10000 extra over and above the
fees charged by lawyer if he wins the case.
Q- Can Lawyer sue Ramesh if he does not pay the extra Rs10000?
No, because the agreement between Ramesh and Lawyer regarding extra
Rs10000 was void as there was absence of consideration.
7) Consideration must be real and competent: Consideration must be real and
must also be competent. It must be something which the law attaches some value.
CASE Eg- Ravi promises Raju that he will take him to another world if Raju pays
Rs.50000.
Here the agreement is void since illusory consideration is involved.
8) Consideration must not be unlawful, immoral, or opposed to public policy.
NO CONSIDERATION, NO CONTRACT
Contracts without consideration is void and hence not enforceable by law.
http://santhi-businesslaw.blogspot.in/2009/09/cases-on-contract-act.html
If Obligation is:
Domestic
Legal Social (Friends)
(Relatives)
NOTE: Marriage & Divorce are legal

All contracts are agreement but all agreements are not contract
i.e in order to be enforceable by law, it should create a legal
obligation
Case Law #7
Invitation to Offer and Offer
Case Laws Cited
Case Law Regarding- Name of Case Law Decision of Case Law - Interpret
Application
1 General Offer Carlill vs. Carbolic Pharma co. advt. Prize money of
Smoke Ball Co., 1893 $100 if contracted Influenza. Mrs.
(camphor type - Carlill used smoke balls and had
Influenza) influenza.
General Offer can be accepted by
any person making execution on the
same.
Specific offer is made to specific person
on specific contract. Eg.- pink smoke ball
with mogra fragrance
2 Specific Offer Boulton Vs Jones, 1857
(Leather purchase from A specific offer can be accepted by
Brockle Hurst, who sold to that person only to whom offer is
Boulton, Jone refused) made
Tata -Chorus- CSN
Acquisition-Reverse Merger
Notice regarding Attraction of the offeree or part to
3 Handerson Vs
conditions of offer contract should be towards the
Stevenson, 1875 condition of offer else not applicable
(Ticket condition Luggage was lost. Liability of any loss
overleaf) injury or delay.
4 Inserting
condition after Olley Vs Malborough Addition of a new condition after
execution of Court ltd., 1949 execution of contract will not have
contract Baggage lost any valid implementation.
Case Laws Cited
Case Law Regarding- Name of Case Law Decision of Case Law - Interpret
Application
Attraction for Parker vs SE Rail Co, The liability of the company will be
5
1877 limited upto the amount stated in the
conditions of
(Limited Liability at cloak conditions for which attraction is
Offer room for luggage lost) attracted at the time of offer
- Opp. of Handerson Vs
Stevenson
6 Purposive Offer Fisher Vs Bell,1961 A mere invitation to treat, does not

(Invitation for treat- constitute an offer
flick knife)
Offer & Balfour Vs Balfour, 1919 As it is an agreement of domestic

7
Acceptance (Husband promised to nature, it was held that it does not
pay £30 to his wife contemplate to create any legal
every month when obligation.
away)
8 Not party to any Donoghue Vs Dependence of negligence on

Stevenson 1932 contract resulting in tort action.
contract
(Mrs Donoghue's friend One of 'proximity' or
bought her a ginger- 'neighbourhood'
beer. The Decomposing
Snail in Ginger Beer)
Types of Contract
Classification of Contract on the basis of Enforceability:
a. Valid Contract:
Contract which satisfy all the essential elements of a valid
contract as laid down be Section 10.
b. Void Contract:
An agreement may be enforceable at the time when it was
made but later on, due to certain reason, it become void and
unenforceable.
c. Illegal Contract:
All illegal agreement are void but all void agreement are not
necessarily illegal.
e.g. An agreement with minor is void but not illegal.
d. Unenforceable Contract:
Certain contract become void because the law court will not
enforce them due to not fulfillment of certain formalities.
Classification of Contract on the basis of Mode of Creation
a. Expressed Contract:
Contract is made by words spoken or written.
b. Implied Contract:
Contract which come into being on account of the act of the
parties and not by their express words, written or spoken.
Classification of Contract on the basis of Extent of Execution

a. Executed Contract
Where both the parties to the contract have fulfilled their
respective obligation, the contract is said to executed.
b. Executory Contract
Where one or both the parties to the contact still to perform
certain things in future or under the terms of the contract
something remains to be done, the contract is termed as an
executory contract.
CASE: EXPRESS AND IMPLIED OFFER AND ACCEPTANCE
Situation 1: Gyan says to a shopkeeper, “Will you sell me
this soap for Rs. 10?” The shopkeeper nods.
Situation 2: In a hostel mess, different food items are kept
on a table in bowls. Students can pick up and
eat what they like. An attendant notes down the
food items picked up by a student, against his
name in a register. The amount for the item
picked up from the table is deducted from the
‘advance mess charge’ paid by the student at
the beginning of the term.
Situation 3: Ajay waved for a taxi to stop, got into the taxi,
and left.
27
In situation 1, Gyan makes an express offer. The
acceptance by the shopkeeper is implied in the nod of his
head.
In situation 2, the offer is made by the hostel mess. It is
implied in the food kept on the table. The acceptance is also
implied, when a student picks up an item.
In situation 3, both, the offer and the acceptance, are
implied.
28
Free Consent
According to Sec. 13 ‘Two or more person are said to consent
when they agree upon the same things in the same sense.’
This mean that there should be perfect identity of mind
(consensus ad idem) regarding the subject-matter of contract.
According to Sec. 14 consent is said to be free when it is not
caused by any of the following :
a. Coercion -Voidable
b. Undue Influence -Voidable
c. Fraud -Voidable
d. Misrepresentation -Voidable
e. Mistake -Void
(e) A mistake means an error in understanding the fact relevant for formation of a
contract. (Void ab initio – Section 20)
Difference Between Coercion and Undue Influence
1. Mode of Obtaining Consent
- In Coercion ,Consent obtained by threatening to act.
- In U.I., Consent obtained by using dominating power.
2. Type of Force
- In Coercion, physical force is exercised.
- In U.I., Moral forced is used.
3. Existence of Relationship
- Relationship between the promisor and the promisee is not
necessary.
- Some sort of relationship MUST exist between the two parties
to the contract.
Diff. between Fraud and Misrepresentation
1. Intention:
- In fraud, there is intention to deceive (mislead to
somebody).
-In Misr. , there is no intention to deceive.
2. Consequence:
-In Fraud, damage can be available to the affected party
for the loss suffered .
-In Misr. , no such damage are available.
3. Defense:
-In Fraud, the guilty party does not have any defense in
its favor.
In Misr. , the guilty party have defense in its favor.
Diff. between Wagering agreement & Contingent Contract
Case Law - Examples
i) A has two cars, one blue and other red. He wants to sell his blue
car. B who knows of only A’s red car, offer to purchase A’s car for Rs.
20000. No Consensus ad idem
ii) If B goes to A and on the point of pistol asks A to sell his red car for
sum of Rs. 20000 to him, there is consent. Coercion
iii) M falsely tells R that the car that he was offering to sell was once
owned by Sachin Tendulkar. This is a case of ________Fraud
iv) A, in Mumbai, enters into a contract with B in Chennai with a

condition that all disputes will be subject to Mumbai jurisdiction. This
limits the right of B to sue only in Mumbai court in case of dispute. Valid
v) A agrees to sell B hundred tons of oil. Void

vi) A agrees with B to put life into a dead man. Void
Modes of Discharging a Contract
Discharge of a contract implies termination of contractual
obligations. This is because when the parties originally entered into
the contract, the rights and duties in terms of contractual obligations
were set up. Consequently when those rights and duties are put out
then the contract is said to have been discharged.
Once a contract stands discharged, parties to it are no more liable
even though the obligations under the contract remain uncompleted.
A contract is deemed to be discharged, that is concluded and no
longer binding, in the following circumstances:
Performance
Agreement
Lapse of Time
Operation of Law
Impossibility of Performance
Accord and Satisfaction
Breach
Consequences of Breach of Contract
Remedies for Breach of Contract

In case of breach of contract, the law provides several
remedies:
1. Rescission: The injured party may sue to treat the
contract as rescinded.
2. Damages: Compensation may be claimed for the loss.
3. Quantum meruit (What one has earned): Where there is

some breach occurring from both the parties to the
contract, a suit may be filed where the quantum merit be
judged and remedy granted.
Consequences of Breach of Contract
4. Specific performance: The court may direct parties to

actually perform the contract.
5. Injunction: It is a restraint order from the court to a party

which had breached a negative term, what it promised not
to do. The court orders it to restrain from its action.
6. Rectification: When either through fraud or mistake,

performance is not possible, either of the parties may file
suit for rectification whereby either the contract is corrected
or cancelled.
Special Contracts
LAB:8
Important Distinctions
Student Task
Coercion and Undue influence
Fraud and Misrepresentation
Contingency contract and Wagering Contract

CASE LAWS-
VideoScribe (SPARKOL) whiteboard animator
Donaghue v Stevenson
https://www.youtube.com/watch?v=fQmsqcpOesI
The Decomposing Snail in Ginger Beer: Strangest Cases in Law

https://www.youtube.com/watch?v=0GJZGolKjF0
1. Donoghue v. Stevenson: The History of Law Reporting

https://www.youtube.com/watch?v=yLleV7XhkRI
Carlill v Carbolic Smoke Ball Co | A Unilateral Contract

https://www.youtube.com/watch?v=YSiyuHoit9s
EXAMINE THE SCENARIOS
Mobile sent to service center for repairs Giving clothes for dry cleaning
BAILMENT
Bailment is a type of special contract. Since it is a ‘contract’, naturally all
basic requirements of contract are applicable.
A “bailment” is the delivery of goods by one person to another for some

purpose, upon a contract that they shall, when the purpose is
accomplished, be returned or otherwise disposed of according to the
directions of the person delivering them. The person delivering the
goods is called the “bailor”. The person to whom they are delivered is
called the “bailee” [section 148].
Bailment means act of delivering goods for a specified purpose on trust.

The goods are to be returned after the purpose is over.
In bailment, possession of goods is transferred, but property i.e.

ownership is not transferred.
ESSENTIAL AND LEGAL RULES AS TO BAILMENT
Contract: A bailment is usually created by agreement b/w the bailor &
bailee.
Delivery of Goods: In bailment, the possession of goods must be
delivered by the bailor to the bailee.
No Transfer of Ownership: In bailment, possession is transferred
from one person to another but ownership of goods remains with the
bailor.
Delivery of Goods for Some Purpose: The delivery of goods must be
for some specific performance.
Return of Specific Goods: Goods are delivered to the bailee with the
condition that the same goods will be returned to the bailor after the
accomplishment of purpose.
Movable Goods: In bailment, the goods bailed must be movable.
Deposit of Money Into Bank: Deposit of money into bank by a
customer is not a contract of bailment because the money deposited is
not returned in identical coins and notes deposits.
Gratituous Bailment : Where neither the bailor nor the bailee get
any remuneration, then, it gratuitous.
Non-Gratituous Bailment : When either the bailor or bailee get

remuneration (related expenses), then it is known as non-gratuitous
bailment.
BAILMENT
BAILMENT
The termination of bailment is takes place in the following

conditions:
1. On the expiry of the period.

2. On the achievement of the object—the specific purpose
is achieved.
3. Right to extraordinary expenses.
4. Destruction of the subject matter.
5. Gratuitous bailment.
6. Death of the bailor or bailee.
PLEDGE
Bailment of goods as a security for payment of debts or performance of
promise is called pledge. The bailor is called pledgor or pawnor and the
bailee is called Pledgee or Pawnee.
• ESSENTIALS OF PLEDGE:
Delivery of Goods: The delivery of goods to pledgee is necessary to

constitute a pledge.
Delivery of goods should be by way of security. The security being
for the payment of debt or the performance of a promise.
Goods must be movable. An implied condition to return the goods.
• RIGHTS AND DUTIES OF PAWNEE

Right of retainer
Right of particular lien
Right to extraordinary expenses
Right in case of default of the pawnor
• RIGHTS AND DUTIES OF PAWNOR

Right of redemption
Right to take back the goods.
https://efinancemanagement.com/sources-of-finance/pledge-vs-hypothecation-vs-lien-vs-
mortgage-vs-assignment
PLEDGE
https://recruitercover.co.uk/blog/recruitmen
t-agency-professional-indemnity-insurance/
CONTRACT OF INDEMNITY
A contract by which one party promises to save the other from loss/damage
caused to him by the conduct of the promisor himself, or by the conduct of
any other person, is called a contract of indemnity. [section 124].
For Example - A contracts to indemnify B against the consequences of any

proceedings which C may take against B in respect of a certain sum of 20000
rupees. This is a contract of indemnity.
• PARTIES TO CONTRACT OF INDEMNITY:
INDEMNIFIER: The person who promises to indemnify.

INDEMNITY HOLDER: The person whose loss is to be indemnified.
• Examples:
Motor insurance
Marine insurance
Fire insurance
Life insurance is not a contract of indemnity.
A contract of life insurance is a mere contract to pay a certain sum of money on
the death of a of person (or on maturity) in consideration of the payment of a
certain sum of money at periodical intervals. The assured merely pays the
premium to the insure in order to secure a certain sum payable to him or to his
representatives in case of death.
EXAMINE THE SCENARIO
Bank guarantees represent a more significant contractual obligation for banks than
letters of credit do. A bank guarantee, like a letter of credit, guarantees a sum of
money to a beneficiary; however, unlike a letter of credit, the sum is only paid if the
opposing party does not fulfill the stipulated obligations under the contract. This can
be used to essentially insure a buyer or seller from loss or damage due to non-
performance by the other party in a contract.
Bank guarantees insure both parties in a contractual agreement from credit risk. For
instance, a construction company and its cement supplier may enter into a new
contract to build a mall. Both parties may have to issue bank guarantees to prove
their financial stance and capability. In a case where the supplier fails to deliver
cement within a specified time, the construction company would notify the bank,
which then pays the company the amount specified in the bank guarantee.
CONTRACT OF GUARANTEE
A “contract of guarantee” is a contract to perform the promise, or discharge

the liability, of a third person in case of his default. A guarantee may be
either oral or written. [section 126].
• PARTIES TO CONTRACT OF GUARANTEE
SURETY: The person who gives the guarantee is called the “surety”. Person
giving guarantee is also called as ‘guarantor’. ;
PRINCIPAL DEBTOR: the person in respect of whose default the guarantee
is given is called the “principal debtor”, and
CREDITOR: the person to whom the guarantee is given is called the
“creditor”.
• Three parties are involved in contract of guarantee. Contract between any

two of them is not a ‘contract of guarantee’. It may be contract of indemnity.
• Primary liability is of the principal debtor. Liability of surety is secondary and

arises when Principal Debtor fails to fulfill his commitments. However, this is
so when surety gives guarantee at the request of principal debtor. If the
surety gives guarantee on his own, then it will be contract of indemnity. In
such case, surety has all primary liabilities.
KINDS OF GUARANTEE
On the basis of Time:

1.) RETROSPECTIVE GUARANTEE (Given for existing debt)
2.) PROSPECTIVE GUARANTEE (Given for future debt)
On the basis of Transaction:

1.) LIMITED OR SPECIFIC GUARANTEE (For a single transaction)
2.) CONTINUING GUARANTEE (Extends to series of transactions)
https://keydifferences.com/difference-between-indemnity-and-guarantee.html
EXAMINE THE SCENARIO
AGENCY
CONTRACTUAL RELATIONSHIPS
EXAMPLE:
PRINCIPAL AGENT
Authority to Enter into Contract

on Behalf of Principal
(Contract Usually Between
Principal and Agent) THIRD Negotiation of
PARTY Contract on Behalf of
Principal (Within
Scope of Authority)
RESULT
PRINCIPAL AGENT
THIRD
PARTY
DEFINITION OF AGENT AND PRINCIPAL
AGENT
An ‘AGENT’ is a person employed to do any act for another or to
represent another in dealings with third persons. The function of an
agent is to bring his principal Into contractual relations with third
persons. Formation of Agency- Express/Implied Agreement (Oral or
Written), Ratification, Operation of Law
Forms of Agency:
1. General Agent- Power to act for the principal on all business
matters.
2. Special Agent- Authority of the principal for one/single transaction
3. Del Credere Agent- Guarantees to the principal that if the third party
does not pay then the agent will pay
4. Marketing Agent- Limited authority to introduce potential clients to
the principal. Does not have the authority to negotiate.
5. Distribution Agent- Distribution of supplier’s goods in a particular
place
PRINCIPAL
A person for whom the above act is done or who is so represented is
called the ‘PRINCIPAL’
DIFFERENCE B/W AGENT & SERVANT
An agent is employed to bring the principal into the legal relations
with the third persons or to represent him in dealings with third
persons.
A servant does not ordinarily create legal relations b/w
the third person and the employer.
An agent is bound to follow all the lawful instructions of the

principal but he is not subject to the direct control and supervision of
principal. A servant acts under the direct control and supervision of
his employer and is bound to follow all the reasonable orders given
to him in the course of his employment.
An agent may work for several principals at the same time but
servant usually serves only one master.
A principal is liable for the wrongs of his agent done within the
scope of his authority. A master is liable for the wrongs of the
servants if they are committed in the course of his employment.
Agency, Appointment, and Authority of Agents
TERMINATION
• In accordance with agency agreement
• By notice
– As required in agreement
– Implied – if not set forth in agreement
• For particular period or task

– At end of period or completion of task
• Incapacity of either party

– Death, insanity
• Bankruptcy of principal
• Principal must inform third parties of termination or
risks continuing liability for agent’s actions
CASE LAWS
Continuing Guarantee: Bhagvandas Rangildas Vani V. Secy. State for India 1926
- Guarantee for payments by installments cannot be construed as an instance of
continuing guarantee. Refer section 129 of the Indian Contract.
- There is also the concept of “Continuing Guarantee” which applies towards more
than one single transaction. Though it may be stipulated by putting up any kind of
specific limit- time or capital.
Rule of appointment of Agent: B Mahinder Das v. Mohan Lal And Others 1938
- Bhagwan Das & Co., banking concern, an agent appointed by Mohanlal to lease
his said houses. Mahinder Das was appointed as a sub-agent on behalf of
Mohanlal, by the banking concern to rent the houses and agreed for a commission
on the rent realized. The rent was paid but not as per agreement.
- The appeal was dismissed as the bank was responsible for the loss sustained by
the petitioner as it gave the authority to the sub-agent
Sale Of Goods Act 1930
LAB:7
Formation of Contract of Sale
• Exchange of goods for goods is BARTER
• Exchange of goods for money is SALE
• Exchange of money for money is known as EXCHANGE
New Article 366(2A) of the Indian Constitution (101st Amendment) Act,

2016, defines Goods and Service Tax (GST) to mean a tax on supply of
goods or services, or both, except taxes on supply of alcoholic liquor for
human consumption.
Goods: Means every kind of movable property other than money and
securities but includes actionable claim, growing crops, grass and things
attached to or forming part of the land which are agreed to be severed
before supply or under a contract of supply.
Service: New Article 366(26A) defines service to mean anything other than
goods, money and securities.
Subject matter of Contract of Sale
• Goods is the subject matter—Goods means every kind of
movable property other than ACTIONABLE CLAIMS AND
MONEY (Legal Tender) and includes stocks and shares,
growing crops, grass and things attached to or forming part
of the land which are agreed to be severed before sale or
under the contract of sale. Trade marks, copyrights, patent
rights, goodwill, electricity, water, gas are all goods.
• It should be marketable
• Actionable claim means a claim to a debt or any beneficial
interest in movable property not in possession (which can
be enforced by action in a court. A debt from one person to
another is an actionable claim and cannot be bought or sold
as goods.
Subject matter of Contract of Sale
• Classification of Goods - Existing Goods (Specific Goods,
Ascertained goods, unascertained goods or generic goods);
Future Goods; Contingent Goods
• Document of title to goods: Document is the proof of title to

the goods—proof of possession and ownership. The
documents can be endorsed or simply delivered to transfer
the property (depending on the nature of contract)
• Other terms of Sale are the Price (ascertainability and

agreement to sell at valuation) and Stipulation as to time
(time of delivery and time of payment)
Sale and an Agreement to Sell
Sale Agreement to Sell
• Sale takes place when there is a • Agreement to sell means a contract of

transfer of ownership in goods sale under which the transfer of
from the seller to the buyer. A sale property in goods is to take place at a
is an executed contract future date or subject to some
conditions thereafter to be fulfilled. It is
an executory contract.
• Immediate transfer of property.
The term ‘contract of sale’ includes
both actual sales and agreement • Transfer of property at a later date
for sale. (subject to certain conditions)
• Specific and Existing Goods • Unascertained existing goods, future

goods and contingent goods
• Risk of loss is on the seller though

• Risk of Loss falls on buyer though buyer has possession
seller has possession
• The seller can only sue for damages
• In case of breach seller can sue and not for the price though the
for the price though he continues possession is with the buyer
the possession
Sale and an Agreement to Sell
Remember: “Risk follows ownership”

Case Laws – Sale and Agreement to Sale
Examples:
• Agreement by A to buy 20 tonnes of oil from the seller’s cisterns.
The seller has many cisterns, with more than 20 tonnes in them.
This is merely an agreement to sale.
(White Vs Wilks, 1813)
• Agreement for sale of a quantity of nitrate of soda to arrive at a

certain ship. This is an agreement to sell at a future date subject
to the double condition of the arrival of the ship with the specified
cargo on board.
(Johnson Vs Macdonald, 1842)
• A customer who picks up goods in a self-service shop is merely

offering to buy them and the sale is not complete until they are
paid for.
(Pharmaceutical Society Vs Boots, 1952)
Classification of goods
• Goods may be classified as:
1. Existing
2. Future
3. Contingent
Existing goods are those which are owned or possessed

by the seller at the time of the contract
Instances of goods possessed but not owned by the seller
are sales by agents and pledgees
Future goods means goods to be manufactured or
produced or acquired by the seller after making the
contract of sale
Example: Mahesh agrees to sell future crop of a particular
agricultural field in the next season. This is an agreement
to sell future goods
• Contingent goods are the goods the acquisition of
which by the seller depends upon a contingency which
may or may not happen. Contingent goods is a part of
future goods
Example: Alka agrees to sell to Vivek a certain painting

only if Chetan, its present owner sells it to her. This
painting is classified as contingent goods
• Existing goods may be either:
a) Specific or ascertained
b) Generic and unascertained
• Specific goods means goods identified and agreed upon

at the time a contract of sale is made
• Generic or unascertained goods are goods indicated by
description and not specifically identified
• Example: Anthony, who owns a TV showroom, has 20

TV sets and agrees to sell any one of them to Bharti.
The contract is for unascertained goods, since which
particular TV set shall become the subject matter of sale
is not individualised at the time of the contract of sale.
Effect of perishing of goods
• It may also be mentioned that it is only the perishing of
specific and ascertained goods that affects a contract of
sale
• Where unascertained goods form the subject matter of a
contract of sale, their perishing does not affect the contract
and the seller is bound to supply the goods from wherever
he likes, otherwise be liable for breach of contract
Example:
Where A agrees to sell to B ten bales of Egyptian cotton out
of 100 bales lying in his godown and the bales in the godown
are completely destroyed by fire, the contract does not
become void. A must supply 10 bales of cotton after
purchasing them from the market or pay damages for the
breach
• Example:
There was a contract for the sale of a parcel
containing700 bags of Chinese groundnuts of different
qualities. Unknown to the seller 109 bags had been
stolen at the time of the contract. The seller delivered the
remaining 591 bags and, on the buyer’s refusal to take
them, brought an action for the price. It was held that the
contract being indivisible had become void by reason of
the loss of the goods and the buyer was not bound to
take delivery of 591 bags or pay for the goods.
Note: Had there been all bags of the same weight and
quality for certain price per bag, the contract would have
been divisible and the buyer could only have avoided
the contract as to those goods which had actually
perished
Examples:
(a) A buyer took a horse on a trial for 8 days on condition

that if found suitable for his purpose the bargain would
become absolute. The horse died on the 3rd day without
any fault of either party. Held, contract, which was in the
from of an agreement to sell, becomes void and the seller
should bear the loss (Elphick vs Barnes).
(b) A, had contracted to erect machinery on M’s premises,

the price to be paid on completion. During the course of
the work, there was a fire which completely destroyed
premises and the machinery. It was held that both parties
were excused from further performance and A was not
entitled to any payment as the price was payable on the
completion of entire work (Appleby vs Myers).
Conditions & Warranties
• In a contract of sale, parties make certain stipulations, i.e.,
agree to certain terms regarding the quality of the goods,
the price and the mode of its payment, the delivery of
goods and its time and place
All stipulations cannot be treated on the same footing -
• Some may be intended by the parties to be of a
fundamental nature, eg. Quality of the goods to be
supplied, the breach of which therefore will be regarded as
a breach of the contract
• Some may be intended by the parties to be binding, but of
a subsidiary or inferior character, eg., time of payment, so
that a breach of these terms will not put an end to the
contract but will make the party committing the breach
liable to damages
The former stipulations are called ‘conditions’ and the latter
‘warranties’
Conditions & Warranties (Sec. 11-17)
• Sec. 12(2) defines a ‘condition’ as, ‘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’ (denied),
• Sec 12(3) defines a ‘warranty’ as, ‘stipulation collateral to

the main purpose of the contract, the breach of which
gives rise to claim for damages but not to a right to reject
the goods and treat the contract as repudiated’ .
Example: 1
Kaushik asks a dealer to supply him a shirt which would
not shrink after use and wash. The dealer supplies a
shirt which shrinks after use and wash. Kaushik can
reject the shirt or keep the shirt and claim damages.
Here the stipulation to supply a shirt which would not
shrink after use and wash is a condition.
Now, if Kaushik buys a particular shirt which is warranted

by the dealer to be one which would not shrink after use
and wash and the shirt does shrink after use and wash,
Kaushik’s only remedy is to claim damages
• Example: 2
A man buys a particular horse which is warranted
quiet to ride and drive. If the horse turns out to be
vicious, the buyer’s only remedy is to claim damages.
But if instead of buying a particular horse, a man
asks a dealer to supply him with a quiet horse and
the dealer supplies him with a vicious one, the
stipulation is a condition, and the buyer can return the
horse and can also claim damages for breach of
contract (Hartley vs Hyman)
• The illustrations are a clear proof of the fact that an

exactly similar term may be a condition in one
contract and a warranty in another depending upon
the construction of the contract as a whole
https://blog.ipleaders.in/implied-conditions-and-warranties-under-the-sale-of-goods-act/
Implied Conditions
Condition & Warranty - Distinguished
1. As to value:
A condition is a stipulation which is essential to the
main purpose of the contract, whereas a warranty is a
stipulation which is collateral to the main purpose of
the contract.
2. As to breach:
The breach of a condition gives the aggrieved party
the right to repudiate the contract and also to claim
damages.
3. As to treatment:
A breach of condition may be treated as a breach of
warranty. But a breach of warranty cannot be treated
as a breach of condition.
When breach of Condition is to be treated
as breach of Warranty
• Illustration:
A agrees to supply B 10 bags of first quality sugar @ Rs.
1625 per bag but supplies only second quality sugar, the
price of which is Rs. 1500 per bag. There is a breach of
condition and the buyer can reject the goods. But if the
buyer so elects, he may treat it as a breach of warranty,
accept the second quality sugar and claim damages @
Rs. 125 per bag.
Rights of Unpaid Seller & Caveat Emptor
Jus in Rem: Right against goods/ property/ assets

Jus in Personam: Right against a person
Lien: Right over the custody or possession of goods
Negotiable Instruments Act 1881
LAB:9
Definition
Source – English Common Law
Purpose – Trade or Commerce (Mercantile)
Meaning
Negotiable Instrument
Rights in an instrument can be Written Document by which right is
transferred from one person to another created in favour of some person
How many times it can be negotiated?
Negotiable Instruments
Bearer or Order
Includes Excludes
Promissory Note (Sec 4) Currency Note (Exception)
Bills of Exchange (Sec 5) Hundi (Local Custom -CondAppl)
Cheque/DD (Sec 6) Money Order
Cheque is a B/E only drawn on a specified bank Share/Debenture
Govt Bonds
Common Features of NI
1. Transferability: By Endorsement or Delivery (Bearer Instrument),
N number of times till maturity.
By Endorsement – Written form
By Delivery – Bearer Instrument
2. Independent Title: Transferor & Transferee (in favour)
3. Certainty: Regarding the Amount
4. Right to Sue: Holder or Holder in due course (Legally demand)

Parties to a Promissory Note
There are primarily two parties involved in a promissory note.
They are:
(i) The Maker or Drawer: The person who makes the note and
promises to pay the amount stated therein. In the above
specimen, Sanjeev is the maker or drawer.
(ii) The Payee – the person to whom the amount is payable. In
the above specimen it is Ramesh.
In course of transfer of a promissory note by payee and others,

the parties involved may be –
(a) The Endorser – the person who endorses the note in favour
of another person. In the above specimen if Ramesh
endorses it in favour of Ranjan and Ranjan also endorses it in
favour of Puneet, then Ramesh and Ranjan both are
endorsers.
(b) The Endorsee – the person in whose favour the note is
negotiated by endorsement. In the above, it is Ranjan and
then Puneet.
Elements of Promissory Note
1. In writing and signed by the maker
2. Promise/Undertaking to pay
3. Promise to pay must be unconditional
4. Money and a certain sum of money
5. Certainty of Parties (Maker and Payee)
6. Other than a bank or currency note
7. Payable to bearer or order (RBI Sec 31)

• Illustrations: A signs the instruments in the following terms:
“I promise to pay B or order Rs. 500”
“I acknowledge myself to be indebted to B in Rs. 1, 000 to be
paid on demand, for value received”
Parties to a Bill of Exchange
There are three parties involved in a bill of exchange
(i) The Drawer – The person who makes the order for making
payment. In the above specimen, Rajiv is the drawer.
(ii) The Drawee – The person to whom the order to pay is made.
He is generally a debtor of the drawer. It is Sameer in this
case.
(iii) The Payee – The person to whom the payment is to be
made. In this case it is Tarun.
The drawer can also draw a bill in his own name thereby he
himself becomes the payee. Here the words in the bill would
be Pay to us or order.
In a bill where a time period is mentioned, just like the above
specimen, is called a Time Bill.
But a bill may be made payable on demand also. This is called a
Demand Bill.
Essentials of a Bill of Exchange
1. It must be in writing
2. It must contain an order to pay. A mere request
to pay on account, will not amount to an order
3. The order to pay must be unconditional
4. It must be signed by the drawer
5. The drawer, drawee and payee must be
certain. A bill cannot be drawn on two or more
drawees but may be made payable in the
alternative to one of two or more payees
6. The sum payable must be certain
7. The bill must contain an order to pay money
only
8. It must comply with the formalities as regards
date, consideration, stamps, etc
Cheque
A cheque is the means by which a person who has fund in the
hand of a bank withdraws the same or some part of it.
A cheque is a kind of bill of exchange but it has additional
qualification namely-
1- It is always drawn on a specified banker and
2- It is always payable on demand without any days of grace.
3- Types: bearer cheque, crossed cheque
Cheque Truncation System
Negotiation
One of the essentials feature of a negotiable instrument is
its transferability. A negotiable instrument may be
transferred from one person to another in either of the
followings way-
1- By negotiation
2- By assignment
Negotiation
The transfer of an instrument by one party to another so as
to constitute the transferee a holder is called Negotiation.
Negotiation means as the process by which a third party is

constituted the holder of the instrument so as to entitle
him to the possession of the same and to receive the
amount due thereon in his own name.
Assignment
When a holder of a bill note or cheque transfer the same to

another, he in fact gives his right to receive the payment
of the instrument to the transferee.
Holder & Holder in due course
• Holder means any person entitled in his own name to the

possession a promissory note bill of exchange or cheque
and to recover or receive the amount due thereon from
the parties thereon. A holder must therefore have the
possession of the instrument and also the right to
recover the money in his own name.
• “Holder in due course means any person who for
consideration became the possessor of a promissory
note, billl of exchange or cheque, if payble to the bearer
or the payee or indrosee there of ,if payble to the order
before the amount mentioned in it became payble , and
without having sufficient cause to believe that any defect
existed in the title of the person from who he derived his
title’
Differences- Student Presentation
• P/N & B/E & Cheque
• Assignment & Negotiation
• Holder & Holder in due course
• Case Laws
Cheque/ECS/SI Bounce Case process. Section 138 of
the Negotiable instruments Act & section 25 of the
Payment and Settlement Systems Act, 2007.
– Criminal procedure, punishable offense
Take a return memo from banker as “Insufficient fund”
along with the original cheque as evidence
Negotiable Instruments (Amendment) Bill, 2017

- Interim judgment for paying atleast 20% of liability within 60 days
- Fast track resolution
Discharge
“Discharge means release from obligation”.
• By Payment
• By express waiver
• By cancellation
• By material alteration or lapse of time.
Dishonor
• It may be by non acceptance or non payment
• A bill of exchange can be dishonored by non acceptance
in the following ways-
1- Does not accept 48 hours from the time of presentment
2- Drawee is fictitious person
3- Drawee has become insolvent or dead
4- Drawee is incompetent
Indian Partnership Act 1932
LAB:10
Business Forms
Sole Proprietorship: A business owned and managed by one individual who
is responsible for all its debts.
General Partnership: Business with two or more owners who share in both
the operations of the firm and the financial responsibility for its debts
Corporations: A business that is legal entity separate from tis owners who
has responsibility with the limits of their investment.
Public vs Private
Different aims:
Private sector aims (breakeven, survival, profit maximisation,
growth);
Public sector aims (service provision, cost limitation, value for
money, meeting government standards, growth of range of
provision)
Firm vs Company
Firm: Proprietorship & Partnership
Hybrid: LLP.
Company: OPC, Pvt. Ltd., Public Ltd.
F
Partnership Defined
“Partnership is the relation between persons who have
agreed to share the profit of business carried on by all or any
one of them acting for all.”
In short, the term is defined as a voluntary contract between

two or more competent persons to place their money, effects,
labour and skill or some or all of them in lawful business with
the understanding that there shall be sharing of profit
between them.
Partners firm and firm’s name:

Persons who have entered into partnership with one another are
called individually ‘Partners’ and collectively ‘A firm’ and the name
under which their business is carried on is called the firm name.
Indian Partnership Act-Pulak Soni
https://www.youtube.com/watch?v=oKdvDBDdyck
Essential elements of partnership
(i) Association of two or more persons
(ii) Agreement
(iii) Sharing of profit
(iv) Existence of a business
(v) Mutual Agency

Section 80 states, “ Subject to the provisions of this act a partner is the
agent of the firm for the purposes of the business of the firm”.
The principal of agency is the essence of partnership. A partner is both

a principal and an agent, while the relation between the partners is that
of principals, they are agent of the firm and of one another in relation to
third parties for the purpose of the business of the firm.
Nature of Partnership- Rights
Rights of Partner:
- Share Profits
- To take part in the conduct of business
- To be consulted
- Access to books
- Right to remuneration
- Right to interest on Capital
- Right to take interest on Advances (loans)
- Right to Retire
- Right to stop admission of a new partner
- Right of outgoing partner to do competing business
- Right of outgoing partner to share subsequent profits
- Right no to be expelled
- Right to be indemnified
- Right to use property of partnership business
Implied Authority of Partner
For the purpose of the implied authority business are divided into two
categories :
(a) When a partner has implied authority: Implied authority in
commercial or Trading Business. On this case a partner may carry
on behalf of the firm usual commercial activities like
(1) Buying & selling the goods.
(2) Receiving & giving payments.
(3) Employing persons for the firm.
(4) Repay the loans on behalf of the firm.
(5) He may draw, make, sign endorse, accept, transfer, negotiable
instrument in the name of firm.
(b) When a partner has no implied authority: Following limitations as

regards implied authority of a partner which will not bind the firm,
they are as follows :
(1) To open a bank A/c in his own name on behalf of the firm.
(2) To compromise or relinquish any right or claim of the firm.
(3) To withdraw a suit or proceeding
Minor's Position in Partnership
According to section II of contract Act & the principles laid down in
the case of Mohribibi V/s Dharmadas Ghosh, a minor is incompetent
to contract & a contract by a minor is void ab initio.
Since partnership is a contract, therefore minor's entry in a
partnership firm, as a rule has been barred. But the second part of
section 30 opens the door for the person who is a minor to become a
partner in a firm. A minor may admitted only to the profit or benefit of
the partnership with consent of all the partners of the firm.
Moreover, a partnership firm cannot be formed with only minor
persons as partners, so at least two major partners should be
there.
Rights of a Minor:
(a) To share profit
(b) To inspect the books of A/c
(c) To filed suit for A/c's of profit against other partner.
(d) To elect to become a partner - on attaining majority.
(e) To elect not to become partner - on attaining majority.
Garner vs Murray Rule
As the liabilities of partnership firm is unlimited. Now one question arose
that in which proportion or ratio, the rest partners divide this extra loss or
deficiency of firm.
Before the decision of Garner V/s Murray case, this extra loss deems as
normal loss and it is distributed rest partners in their profit and loss sharing
ratio.
Decision in Garner V/S Murray Case (1903) :-
In this case, the judges decided that in the absence of any anti- agreement,
1. That the solvent partners should bring in cash equal to their respective
shares of the loss on realization
2. That the solvent partners should bear the loss arising due to the
insolvency of a partner in the ratio of their Last Agreed Capitals
Last Agreed Capital means

1. In case of Fixed Capitals - Fixed Capital (as given in the Balance Sheet)
without any adjustment
2. In case of Fluctuating Capitals - Capital after making adjustments for
past accumulated reserves, profits or losses, drawings, Interest on capital,
Interest on Drawing, remuneration to a partner etc. to the date of
dissolution but before making adjustment for profit or loss on realization.
Limited Liability Partnership
Limited Liability Partnership entities, the world wide recognized
form of business organization has been introduced in India by way
of Limited Liability Partnership Act, 2008.
A Limited Liability Partnership, popularly known as LLP combines
the advantages of both the Company and Partnership into a single
form of organization.
In an LLP one partner is not responsible or liable for another
partner's misconduct or negligence, this is an important difference
from that of a unlimited partnership.
In an LLP, all partners have a form of limited liability for each
individual's protection within the partnership, similar to that of the
shareholders of a corporation.
However, unlike corporate shareholders, the partners have the
right to manage the business directly. An LLP also limits the
personal liability of a partner for the errors, omissions,
incompetence, or negligence of the LLP's employees or other
agents.
Limited Liability Partnership
Limited Liability
Partners with
unlimited liability Perpetual
Partnership LLP Company
Succession
Director not Reqd.
Registration with ROC
https://www.legalraasta.com/llp-registration/
Specimen of Partnership Deed
Essential Contents of a Partnership Deed:
Name of the Business / Choosing a Partnership Firm Name
Location of the Business
Name and Address of Partners
Nature of Firm’s Business
Duration of Partnership
Partners’ Capitals
Interest on Capital
Drawing and Interest rate
Division of Profit/profit sharing ration
Partners’ Salary and Commission
Rights and Duties of Partners
Admission and Retirement of Partners
Death of a Partner
Valuation of Goodwill
Revaluation of Assets and Liabilities
Accounts and Audit http://formocks.com/registering-a-business-
Dissolution of Partnership partnership/partnership-deed-format-
indiafilings-document-center-in-registering-
Arbitration in case of disputes among partners a-business-partnership/#h
Arrangements to be followed in case a partner become insolvent
Salary, if any payable to the partners for managing the firm
The method of preparing accounts and arrangement for audit.
The operation of banks A/c. http://www.commercepk.com/what-is-partnership-deed-contents/
The Companies Act 2013
LAB:12
The Companies Act
• FEATURES
• TYPES
• FORMATION
• COMMENCEMENT
• DOCTRINES
• DIRECTORS
• METHODS OF RAISING CAPITAL
• MEETINGS
• WINDING UP
The Companies Act 2013
29 Chapters
470 Sections
7 Schedules
~ 9,50,000 Companies
New Company Law:
Incorporation, Capital Raising, Governance, Board Mgt.,
Accounting & Audit, Shareholder Rights, M&A, Litigations,
Bankruptcy etc.
CNBC-The Firm
https://www.youtube.com/watch?v=cs0XJ_sJQVk
Corporate Movies & Scams in India
Wall street
Erin Brockavich
The Wolf of Wall Street
Gafla- Dalal street scam
The Insider- Whistle blower
Rogue Trader- Barings Bank
Margin Call- Lehman Brothers
Barbarians at the Gate- Leveraged buyout
The Crooked E - The Unshredded Truth About Enron (2003)
King Fisher Airlines – 2012 – Rs.9100 crores

Satyam Computers- 2009 – Rs.7000 crores
Ketan Parekh- 2001- 200% annual return on some stocks
Harshad Mehta-1992 – Rs.3500 crores
Saradha Chit Fund- 2013 - Rs.2400 crores
Sahara Group- 2014 - Rs.47000 crores
Theories of the corporation
What is the entity of a corporation?
What are the components of a company?
Does a company always protect members and officers?
What is the responsibility of a company to the community, if any?

Some theories of the corporation
The company as a fiction: a company is a convenient
fiction that performs a social purpose. The company is not a
legal person in the same way as a human.
Realist theory: a company is a real ‘person’ brought into

existence by a group of individuals acting together for a
common purpose. As a real rather than a fictitious person, its
existence does not depend on state intervention but is
deemed to be a real person with organs, allowing it to think
and act. A company can therefore be liable for crimes and
wrongs because it can think.
Some theories of the corporation cont …
Contractual theory: the company is a nexus of contracts
between various constituencies—shareholders, managers,
creditors and employees—who have an interest in the firm.
The law is designed to allow the different parties to make and
enforce various legal relations (e.g. limited liability).
Aggregate theory: related to contractual theory and based

on the idea that individuals form associations or aggregations
to carry out some common purpose; in the case of a
company it is usually a commercial purpose.
Political or stakeholder theory: a company is a distinct

social entity, rather than the product of private contract, and
has various stakeholders, including the community itself. The
company is responsible to the whole community, not just to
shareholders.
Some theories of the corporation cont …
Communitarian theory: a company is a social institution
and operates within a community. It has a responsibility to all
members of the community, and is not just as a profit-
making institution for the shareholders and officers of the
company.
Concession theory: sometimes referred to as privilege

theory, concession theory states that a company is created
by the state and the status of separate legal entity is
conceded, or alternatively granted, as a privilege to a body.
The company, in turn, has responsibilities and duties to
society when making decisions that affect the community.
Nature & Characteristics Of A Company
(i) Corporate personality: Company as a person is capable of owning
property, incurring debts, borrowing money, having a bank account,
employing people, entering into contracts and suing or being sued in the
same manner as an individual. Its members are its owners however they
can be its creditors simultaneously. A shareholder cannot be held liable for
the acts of the company even if he holds virtually the entire share capital.
Salomon v. Salomon and Co. Ltd. (1897)
Lee v. Lee’s Air Farming Ltd.(1961): Lee, a qualified pilot, held all but one
of the shares in the company. He voted himself the managing director and
got himself appointed by the articles as chief pilot at a salary. He was
killed in an air crash while working for the company. His widow claimed
compensation for the death of her husband in the course of his
employment. The company opposed the claim on the ground that Lee was
not a worker as the same person could not be the employer and the
employee.
Lee was a separate person from the company he formed and his widow
was held entitled to get the compensation. In effect the magic of
corporate personality enabled him (Lee) to be the master and servant at
the same time and enjoy the advantages of both.
The Veil of Incorporation
The creation of a company (an artificial entity) creates a
barrier between the members and operators of the company
and its creditors.
Salomon v Salomon &Co [1897] AC 22
Lee v Lee’s Air Farming Ltd [1961] AC 12
The separate entity is created through ‘the veil of

incorporation’.
If a company entity is misused for improper purposes (e.g.
fraud, tax evasion, evasion of contractual obligations) then
a court may ‘lift the veil of incorporation’ and disallow the
separate entity of the company from its owners and
operators.
(ii) Limited Liability: The company, being a separate person, is the owner
of its assets and bound by its liabilities. The liability of a member as
shareholder, extends to the contribution to the capital of the company up to
the nominal value of the shares held and not paid by him.
(iii) Separate Property: Company being a legal person and entirely distinct
from its members, is capable of owning, enjoying and disposing of property
in its own name. The company is the real person in which all its property is
vested, and by which it is controlled, managed and disposed off.
(iv) Transferability of Shares: The capital of a company is divided into

parts, called shares. The shares are said to be movable property and,
subject to certain conditions, freely transferable, so that no shareholder is
permanently or necessarily wedded to a company.
(v) Perpetual Succession: An incorporated company never dies, except

when it is wound up as per law. A company, being a separate legal person is
unaffected by death or departure of any member and it remains the same
entity, despite total change in the membership. A company’s life is
determined by the terms of its Memorandum of Association.
Perpetual Existence of Corporate Businesses
• The Coca-Cola Company – incorporated in 1892
• Procter & Gamble – founded in 1837, and is now one of the

largest sellers of consumer products in the world
• Lehman Brothers – formed 150 years ago, but now being

liquidated, due to managerial failure
(vi) Common Seal: Upon incorporation, a company becomes a legal entity
with perpetual succession and a common seal. Since the company has no
physical existence, it must act through its agents and all contracts entered
into by its agents must be under the seal of the company. The Common Seal
acts as the official signature of a company.
vii) Capacity to Sue and Be Sued: A company being a body corporate,

can sue and be sued in its own name. To sue, means to institute legal
proceedings against (a person) or to bring a suit in a court of law. All legal
proceedings against the company are to be instituted in its name. Similarly,
the company may bring an action against anyone in its own name.
A company’s liability for torts

A tort is a wrongful action that allows the person suffering an injury
to sue for damages. A company is liable for torts committed by its
management, employees and agents on behalf of the company.
(viii) Contractual Rights: A company, being a legal entity different from
its members, can enter into contracts for the conduct of the business in its
own name.
(ix) Limitation of Action: A company cannot go beyond the power stated
in its Memorandum of Association. The Memorandum of Association of the
company regulates the powers and fixes the objects of the company and
provides the edifice upon which the entire structure of the company rests.
(x) Voluntary Association for Profit: A company is a voluntary
association for profit. It is formed for the accomplishment of some stated
goals and whatsoever profit is gained is divided among its shareholders
or saved for the future expansion of the company.
xi) Termination of Existence: A company, being an artificial juridical
person, does not die a natural death. It is created by law, carries on its
affairs according to law throughout its life and ultimately is effaced by
law. Generally, the existence of a company is terminated by means of
winding up.
Selecting the Form for Ownership of a Business –
Comparing the Business Structures and Key Attributes
Individual Proprietorship Partnership /Limited Corporations
Partnership (LLPs)
Persons Required One – and only one At least two persons or Only need one entity to
entities form; but can be unlimited
Formation No formalities – except local Written agreement Formal document and

licenses required for general filing required to create
partnership is not corporation
mandatory
Limited partnership
requires written agreement
Liability for Debts Full liability Each general partner liable Shareholders not
for all debts of the personally liable, except to
partnership. Limited prevent abuse.
partners have limited
liability
Control Individual Control Each general partner as Board of directors and
agreed; no control for officers (Managers under
limited partners LLC law)
Tax Included in individual's tax Flows through to partners Separate taxpayer

responsibility
Types of Companies
1 One-person company: The 2013 Act introduces a new type of entity to the
existing list i.e. apart from forming a public or private limited company, the
2013 Act enables the formation of a new entity a ‘one-person company’
(OPC). An OPC means a company with only one person as its member
2. Private company: The 2013 Act introduces a change in the definition for a
private company, inter-alia, the new requirement increases the limit of the
number of members from 50 to 200.
3. Small company: A small company has been defined as a company, other
than a public company.
(i) Paid-up share capital of which does not exceed 50 lakh INR or such
higher amount as may be prescribed which shall not be more than five
crore INR
(ii) Turnover of which as per its last profit-and-loss account does not exceed
two crore INR or such higher amount as may be prescribed which shall
not be more than 20 crore INR
As set out in the 2013 Act, this section will not be applicable to the following:
• A holding company or a subsidiary company
• A company registered under Section8
4. Producer company is a hybrid between a private limited company and a
cooperative society. It combines the goodness of a cooperative enterprise and
the vibrancy and efficiency of a company. It accommodates the unique elements
of cooperative business with a regulatory framework similar to that of a private
limited company (Sec 465). It shall carry on or relate to any of following activities
classified broadly:-
(a) production, harvesting, processing, procurement, grading, pooling, handling,
marketing, selling, export of primary produce of the Members or import of goods
or services for their benefit :
(b) rendering technical services, consultancy services, training, education,
research and development and all other activities for the promotion of the
interests of its Members;
(c) generation, transmission and distribution of power, revitalization of land and
water resources, their use, conservation and communications relatable to primary
produce;
(d) promoting mutual assistance, welfare measures, financial services, insurance
of producers or their primary produce;
• Karnavati Producer Company Limited in Madhya Pradesh
• Vanilla India Producer Company Ltd (VANILCO) has been promoted by Kerala
based Indian Farmers Movement (Infarm)
• The Indian Organic Farmer Producer Company Limited is a company of
farmers producing organic products.
Co-op Enterprises & Co-op Stakeholders
Incorporation of Producer Company: Any one of the following combination

of producers can incorporate a producer company:
• 10 or more producers (individuals); or
• 2 or more producer institutions; or
• Combination of the above two (10+2).
Name of the company shall end with the words "Producer Company
Limited”
Every producer company is to have

– At least 5 and not more than 15 directors.
– A full time chief executive should be appointed by the board and
– Shall be entrusted with substantial powers of management as the
board may determine.
Audit & Regulators
Auditing standards: The Standards on Auditing have been accorded legal
sanctity in the 2013 Act and would be subject to notification by the NFRA.
Auditors are now mandatorily bound by the 2013 Act to ensure compliance with
Standards on Auditing.
Cognizance to Indian Accounting Standards (Ind AS): The 2013 Act, in several
sections, has given cognizance to the Indian Accounting Standards, which are
standards converged with International Financial Reporting Standards, in view of
their becoming applicable in future. For example, the definition of a financial
statement includes a ‘statement of changes in equity’ which would be required
under Ind AS.
1. National Company Law Tribunal (NCLT)
2. National Financial Reporting Authority (NFRA): The 2013 Act requires the
constitution of NFRA, which has been bestowed with significant powers not
only in issuing the authoritative pronouncements, but also in regulating the
audit profession.
3. Serious Fraud Investigation Office (SFIO): The 2013 Act has bestowed legal
status to SFIO.
Incorporation of a Company
1. One-person company The 2013 Act introduces a new type of entity to the existing
list i.e. apart from forming a public or private limited company. The rules state that
only a natural person who is an Indian citizen and resident in India can incorporate
an OPC or be a nominee for the sole member of an OPC.
2. Memorandum of Association Content: The 2013 Act specifies the mandatory
content for the memorandum of association which is similar to the existing
provisions of the 1956 Act and refers inter-alia to the following:
• Name of the company with last word as limited or pvt. limited as the case may be
• State in which registered office of the company will be situated
• Liability of the members of the company
Reservation of name: The 2013 Act incorporates the procedural aspects for applying
for the availability of a name for a new company or an existing company in sections
4(4) and 4(5) of 2013 Act.
3. Incorporation of company: An affidavit from the subscribers to the memorandum and
from the first directors has to be filed with the ROC, to the effect that they are not
convicted of any offence in connection with promoting, forming or managing a
company or have not been found guilty of any fraud or misfeasance, etc., under the
2013 Act during the last five years along with the complete details of name, address of
the company, particulars of every subscriber and the persons named as first directors.
Incorporation of a Company
4. Articles of association: The 2013 Act introduces the entrenchment provision
that enables a company to follow a more restrictive procedure than passing a
special resolution for altering a specific clause of articles of association. A
private company can include entrenchment provisions only if agreed by all its
members or, in case of a public company, if a special resolution is passed
5. Formation of a company with charitable objects: New objects like
environment protection, education, research, social welfare etc., have been
added to the existing object for which a charitable company could be
incorporated. [section 8 of 2013 Act]
6. Commencement of business, etc.: The existing provisions of the 1956 Act
as set out in section 149 which provide for requirement with respect to the
commencement of business for public companies that have a share capital
would now be applicable to all companies and filed within 180 days of
incorporation.
7. Registered office of company: Where a company has changed its name in
the last two years, the company is required to paint, affix or print its former
names along with the new name of the company on business letters, bill
heads, etc.
MoA & AoA: Distinction
Basis MoA AoA
Objective Defines the Objective for which How the Objective is to be
Company is formed achieved. Define the rules of
internal Mgt.; Rules & Regulations
Position Main Document/ Charter/ Subsidiary Document
Constitution (Subordinate to (Subordinate to MoA &
Companies Act) Companies Act)
Relationship Company & Outsiders Company & Insiders
Validity Legally required doc (Invalid- Ratified in GM retrospective

Doctrine Ultra Vires-Beyond the (Valid- Doctrine Intra Vires-Within
power) the power)
Necessity Every Co. is required to file MoA Not Compulsory- Public Cos can
have Table-A form
Alteration Alteration is very difficult. Can be Altered by passing special

Approval by Statutory Authority resolution by members only.
Case Law
Ashbury Railway Carriage & Iron Co. Ltd. v. Riche, (1875) Lord Cairn
observed: “The memorandum of association of a company is its
charter and defines the limitations of the powers of the
company.......... it contains in it both that which is affirmative and that
which is negative. It states affirmatively the ambit and extent of
vitality and powers which by law are given to the corporation, and it
states negatively, if it is necessary to state, that nothing shall be done
beyond that ambit.........”
COMPANIES ACT 2013 –
DUTIES AND RESPONSIBILITIES OF
DIRECTORS
Board of Directors: New Section 149 provides that the minimum number of
directors in the case of a public company shall be three and in the case of a
private company it shall be two. The maximum number of directors can be
15.
Independent Directors:
• The Government can prescribe by rules that in certain class of companies,
there shall be at least one woman director.
• Every listed Company will be required to have at least 1/3rd of the total
number of directors as Independent Directors.
• An Independent Director shall not be entitled to receive any remuneration
other than a fee and reimbursement of expenses, for attending the meetings
of the Board or any committee thereof or for any other purpose as decided
by the Board.
• An Independent Director shall possess appropriate skills, experience and
knowledge in one or more field of Finance, Law, Management, Sales,
Marketing, Administration, Research, Corporate Governance, Technical
Operations or Other Disciplines related to the Company’s Business.
• Independent directors shall Comply with the provisions specified in
schedule IV. This schedule lays down a “Code of Conduct” for Independent
Directors.
Appointment of Directors:
I. Subscribers to the Memorandum and Articles shall be the first
directors, if the Articles do not make any provision.
II. Every director will be appointed by the company at the General
Meeting.
III. No person shall be appointed as a director, if he is not allotted the
Director Identification Number (DIN) u/s.154.
IV. The person to be appointed as a director has to give his consent in the
prescribed form which is to be filed by the company with ROC within
30 days.
V. Atleast 2/3rd of the directors on the Board of a public company shall be
such that they are liable to retire by rotation. At every AGM 1/3rd of
such directors shall retire by rotation.
VI. Section 165 of the new Act provides that no person shall be a director
or alternate director in more than 20 companies. It may be noted that
u/s 275 of the existing Act this limit is 15 companies. Out of these, the
maximum number of public companies cannot exceed 10.
Duties of Directors:
Section 166 of the new Act provides that a director of a company (including a
private company) shall act in accordance with the Articles of the company.
His duties are listed in the section as under:
(i) He has to act in good faith in order to promote the objects of the
company for the benefit of its members as a whole.
(ii) He has to act in the best interest of the company, its employees,
shareholders, community and for the protection of environment.
(iii) He has to carry on his duties with due and reasonable care, skill and
diligence and exercise independent judgment.
(iv) He shall not involve in a situation in which he may have a direct or
indirect interest that conflicts or likely to conflict with the interest of the
company.
(v) He shall not achieve or attempt to achieve any undue gain or advantage
either to himself, his relatives, partners or associates.
(vi) He shall not assign his office to any other person.
It is also provided that if he is found guilty of making any undue gain
during the course of discharging his duties as a director, he shall be
liable to refund an amount equal to such gain to the company.
Meetings of the Board (sections 173 to 176):
(i) First meeting of the Board shall be held within 30 days of incorporation
of the company. Thereafter minimum of 4 meetings shall be held every
year. Not more than 120 days should intervene between two
consecutive meetings.
(ii) Attendance by Board Members may be either in person or by video

conferencing or other audio visional mode as may be prescribed.
(iii) Atleast 7 days notice in writing should be given to the directors before
the date of the meeting.
(iv) Quorum for a Board Meeting shall be 1/3rd of its total strength or two
directors, whichever is higher.
(v) A resolution can be passed by circulation of papers provided it is

approved by majority of directors.
Appointment and Remuneration of Managerial Personnel (Section 196 &197):
Appointment of Managing Director (MD), Whole-Time Director (WTD) or
Manager shall not be for a term exceeding 5 years.
Total managerial remuneration payable to MD, WTD, Manager and other

directors by a public company shall not exceed 11% of net profits of the
Company for the financial year. Such net profits are computed as provided in
new Section 198. For this purpose remuneration of the directors shall not be
deducted from the gross profits.
Except with the approval of the Company in General Meeting;-
(a) Remuneration payable to MD, WTD or Manager(if there is only one such
person) shall not exceed 5% of the above net profits.
(b) If there are more than one such persons, the total remuneration payable
to all such persons shall not exceed 10% of such net profits.
(c) Remuneration payable to other non-executive directors shall not exceed –
• One percent of such net profits if there is a MD, WTD or Manager.
• Three percent of such net profits if there is no MD, WTD or Manager.
Eg. Alexis Multispecialty hospital, Director & Professional Fees as Director
Fredie Mehta vs. Union of India (1991) Advance as Housing Loan to MD
(Sec185)
Committees constituted under the Act 2013:
Audit Committee S-177
CSR Committee S-135
Stakeholder Relationship committee S-178
Nomination & Remuneration committee S-178

Procedure of Online Incorporation of Company-MCA
1. Obtain Digital Signature Certificate as per IT Act 2000
2. Obtain Director Identification Number
3. Reserve the company name with RoC
4. Drafting MoA & AoA
5. E-stamping
6. Filing Incorporation Docs with RoC along with requisite Fees
7. Verification of docs by RoC & Issuance of Certificate of Incorporation
8. Subsequently issue prospectus for public listing

Consumer Protection Act 1986
LAB:15
Consumer Protection Act 1986
Enacted to provide for the better protection of the interest of
consumer
This Act applies to all the goods and services.
The act was amended in 2002 and the amendments came into
force w.e.f. 15th March 2003, subsequently a bill is placed in 2018.
Consumer is one who

– Buys any goods for a consideration and includes a
hire-purchaser;
– Any user of such goods for consideration but
excludes one, who obtains for re-sale or for
commercial purposes;
– Hires a service for consideration and includes a
beneficiary of such service, if availed of with the
approval of the hirer but does not include the
rendering of any service free of charge or under a
contract of personal service
Background
• Buyer could be easily misled and duped.
• Common consumer is neither knowledgeable nor well informed.
• He needs support and protection from unscrupulous sellers.
• Under sale of goods Act the principle is ‘caveat emptor’
• Unjust enrichment of one person at the cost of another
Rights of the Consumers
Act is intended to protect the following six
distinct rights of the consumers:
• Protection from marketing of the goods and
services which are hazardous to life and
property.
• To be informed about the quality, quantity,

purity, standard and price of the goods or
services so the consumers are protected
from unfair trade practices.
• To have access to variety of the goods and

services at competitive prices.
• The right to be heard and assured that

consumer’s interests will receive due
consideration at appropriate forums.
• Right to speedy and simple redressal to

consumer disputes.
• The right to consumer education.

http://www.nationalconsumerhelpline.in/
Complaint
Complaint means any allegation made by a complainant in writing
that:
– An unfair trade practice or restrictive trade practice has been
adopted
– The goods bought or agreed to be bought or services hired or
availed or agreed to be hired or availed suffer from deficiency
– He has been charged a price in excess of the price
– Goods which are hazardous to life and safety being offered for
sale without information
Definitions
• Restrictive trade practice: Any trade which tends to bring about manipulation of
price or its conditions of delivery or to affect flow of supplies in the market in such
a manner as to impose unjustified costs or restrictions.
• Unfair trade practice: A trade practice which for the purpose of promoting the sale
adopts any unfair method or unfair or deceptive practice.
Hyderabad: Man Filed A Complaint Against INOX Movies- RTP
The practice of not allowing The Court observed, “In view of the above
customers to carry outside water judgement there cannot be two MRPs for
bottles into the screening area is a the same water bottle and manufacturer
restrictive trade practice where INOX also has no right to fix different MRP to two
creates a manipulative environment different water bottles of same quality and
to push customers into buying water quantity.”
bottles double its actual cost.”
The Hyderabad Consumer Forum judgement
In its 4 April 2017 order, it directed INOX multiplex to grant
the following reliefs:
1.The movie theatre to have visual
representation/notification in the theatre premises that the
customers can carry water bottles into the screening area.
2.Let them (customers) know the total number of screens
at INOX movies, GVK one and the total number of water
dispensers placed at this place. As he (Gopal) saw only
Gopal bought a water
one dispenser for multiple screens placed in a very
bottle from INOX,
isolated manner.
Maheshwari Parmeshwari
3.To take cognizance of this case and take required action
Mall, also in Hyderabad,
against INOX Movies (Hyd) at GVK One Mall and
for Rs 50, instead of the
directing them to stop such practices of looting ignorant
MRP of Rs 20.
customers.
What constitutes a defect or deficiency?
A defect or deficiency is a:
Fault
Imperfection
Shortcoming
Inadequacy
Quality
Nature
Who is a complainant?
• A consumer
• Any voluntary consumer association registered under the
Companies Act or any other law
• Central or State Government, if it makes a complaint
• One or more consumers having same interest
• In case of death of a consumer, his legal heir or
representative.
A Consumer Dispute arises when a complaint is denied

or disputed.
The main objective of the Act is:-
• To provide simple, speedy and inexpensive redressal to the

consumer’s grievances.
• To provide a three-tier quasi-judicial machinery at the
national, state and district level has been envisaged under
the Act.
• National Consumer Disputes Redressal Commission
(National Commission).
• State Consumer Disputes Redressal Commission (State
Commission).
• District Consumer Disputes Redressal Forum (District
Forum).
Jurisdiction & Court Fee as per CP Act 1986
*For Revised Limits – Check CP Bill 2018 Pecuniary Limits

Krishan Dass Chaurasia V. State Bank of India (1995) the total claim in
a complaint did not exceed Rs. 1,00,000/-. It was held that the matter
was not within the jurisdiction of the State Commission and such a claim
was rejected by the State Commission. The Complainant could seek the
remedy from the District Forum.
Time Limit for filing complaint
• Within two years from the date on which the cause of
action arises
• Even where the time limit expires, the complaint can be

taken up
– provided complainant is able to satisfy the Forum or
Commission about the reasonableness in the delay
• The delay for every single day has to be explained.

THE COMPLAINT
BEFORE THE HON'BLE DISTRICT CONSUMER DISPUTES REDRESSAL FORUM AT ............. OR
BEFORE THE HON'BLE STATE CONSUMER DISPUTES REDRESSAL COMMISSION AT .........OR
BEFORE THE HON'BLE NATIONAL CONSUMER DISPUTES REDRESSAL COMMISSION AT
NEW DELHI IN RE : COMPLAINT NO. ...... OF 20....... IN THE MATTER OF :
(FULL NAME) (DESCRIPTION) (COMPLETE ADDRESS)....Complainant
Versus
(FULL NAME) (DESCRIPTION) (COMPLETE ADDRESS) .....Opposite P
COMPLAINT UNDER SECTION 12 (Before District Forum)
SECTION 17 (Before State Commission) SECTION 21(Before National Commission)
OF THE CONSUMER PROTECTION ACT, 1986.
RESPECTIFULLY
1.INTRODUCTION
2.TRANSACTION For Complaint Registration
3.DEFECT/DEFICIENCY http://consumeraffairs.nic.in/
4.RECTIFICATION
5.OTHER PROVISIONS
6.EVIDENCE
7.JURISDICTION
8.LIMTATION
9.RELIEF CLAIMED
10.PRAYER CLAUSE It is, therefore, most respectfully prayed that this Hon'ble
Forum/Commission may kindly be pleased to ........ (Details of relief's which complainant
wants the Court to grant)
Who is a consumer for the purpose of services?
a) One who hires any services for a consideration, which has

been paid or promised or partly paid or partly promised or
under any system of deferred payments. “Service” means
service of any description, which is made available to
potential users and includes, but not limited to the
provisions of the facilities in connection with:
1) banking 2) financing 3) insurance 4) transport

5) processing 6) supply of electrical or other energy
7) boarding or lodging or both 8) house construction
9) entertainment 10) amusement etc…
b) It includes any beneficiary of such service other than the

one who actually hires the service for consideration and
such services are availed with the approval of such person.
But does not include the rendering of any service free of

charge or under a contract of personal service
LAB: 22-23
Police arrested a 21-year-old girl for
questioning the total shutdown in the city for Bal
Thackeray’s funeral on her Facebook account in
2012.
Another girl who ‘liked’ the comment was also
arrested. The duo were booked under Section
295 (A) of the IPC (for hurting religious
sentiments) and Section 66 (A) of the
Information Technology Act, 2000.
Information Technology Act, 2000
• Enacted on 17th May 2000

• India is 12th nation in the world to
adopt cyber laws
• IT Act is based on Model law on e-

commerce adopted by United
Nations Commission on
International Trade Law
(UNCITRAL)
Information Technology Act in a capsule
• Called the Information Technology Act, 2000
• Came into force in June, 2000
• Extends to whole of India and also to people who

contravene the provisions of the act outside India.
• Shall come into force as per notification by the Central

govt. including amendments incorporated from time to
time. Amendment to the Act was in 2008, 2015…
Broad Objectives of the IT Act
To provide legal recognition for transactions:-
• Carried out by means of electronic data interchange, and

other means of electronic communication, commonly
referred to as "electronic commerce“
• To facilitate electronic filing of documents with

Government agencies and E-Payments
Objectives of the IT Act
The Act strives to achieve the following objectives:
1. To give legal recognition to transactions done by electronic
mode or online.
2. To grant legal recognition to digital signature for accepting
any agreement via computer.
3. To provide facility of filling documents online.
4. To authorize any undertaking to store their data in electronic
storage.
5. To prevent cyber crime by imposing high penalty for such
crimes
6. To protect privacy of internet users.
7. To give legal recognition for keeping books of account by
bankers and other undertakings in electronic form.
Extent of application
• Extends to whole of India and also applies to any offence or
contravention there under committed outside India by any
person {section 1 (2)} read with Section 75- Act applies to
offence or contravention committed outside India by any
person irrespective of his nationality, if such act involves a
computer, computer system or network located in India
• Section 2 (1) (a) –”Access” means gaining entry into,

instructing or communicating with the logical, arithmetic or
memory function resources of a computer, computer
resource or network
• Typical traits - Cyberspace: Anonymity, speed, access,

dependency, no territory restriction, lack of awareness of laws
Electronic Commerce
• Electronic Commerce transactions
over the Internet include
– Formation of Contracts
– Delivery of Information and Services
– Delivery of Content
• Future of Electronic Commerce

depends on
“the trust that the transacting parties
place in the security of the
transmission and content of their
communications”
Electronic World
• Electronic document produced by a computer. Stored in digital
form, and cannot be perceived without using a computer
– It can be deleted, modified and rewritten without leaving a mark
– Integrity of an electronic document is “genetically” impossible to
verify
– A copy is indistinguishable from the original
– It can’t be sealed in the traditional way, where the author affixes
his signature
• The functions of identification, declaration, proof of electronic

documents carried out using a digital signature based on
cryptography.
Certificate based Key Management
• Operated by trusted-third party -
CA Certifying Authorities (Licensed CAs)
issue Digital Signature Certificates (DSC)
CA A B for electronic authentication of users.
http://cca.gov.in/cca/
• Provides Trading Partners Certificates
• Notarises the relationship between a
CA A CA B public key and its owner having a private
User A User B key.
Essential steps of the digital signature process
• STEP 1 The signatory is the authorized holder a unique cryptographic
key pair;
• STEP 2 The signatory prepares a data message (for example, in the
form of an electronic mail message) on a computer;
• STEP 3 The signatory prepares a “message digest”, using a secure
hash algorithm. Digital signature creation uses a hash result derived
from and unique to the signed message;
• STEP 4 The signatory encrypts the message digest with the private
key. The private key is applied to the message digest text using a
mathematical algorithm. The digital signature consists of the encrypted
message digest,
• STEP 5 The signatory typically attaches or appends its digital
signature to the message;
• STEP 6 The signatory sends the digital signature and the (unencrypted
or encrypted) message to the relying party electronically;
Essential steps of the digital signature process
• STEP 7 The relying party uses the signatory’s public key to verify the
signatory’s digital signature. Verification using the signatory’s public key
provides a level of technical assurance that the message came exclusively
from the signatory;
• STEP 8 The relying party also creates a “message digest” of the message,
using the same secure hash algorithm;
• STEP 9 The relying party compares the two message digests. If they are
the same, then the relying party knows that the message has not been
altered after it was signed. Even if one bit in the message has been altered
after the message has been digitally signed, the message digest created by
the relying party will be different from the message digest created by the
signatory;
• STEP 10 Where the certification process is resorted to, the relying party
obtains a certificate from the certification service provider (including
through the signatory or otherwise), which confirms the digital signature
on the signatory’s message. The certificate contains the public key and
name of the signatory (and possibly additional information), digitally
signed by the certification service provider.
Cyber Law
- Cyber Law is the law governing the cyber space
- Cyber space includes computers, networks, softwares, data
storage devices, Internet, website, email & Even electronic
devices such as cell phones, ATMs etc
Cyber Law deals with:
Cyber Crimes
Electronic or digital signatures
Intellectual Property
Data Protection & Privacy
Combating Cyber crimes
• Technological measures-Public key cryptography, Digital
signatures ,Firewalls, etc
• Cyber investigation-Forensic experts, investigators
• Law & enforcement
Types of Cyber Crimes
• Cyber terrorism Crime

• Cyber pornography against
Govt.
• Defamation
• Cyber stalking (section 509 IPC)
• Sale of illegal articles-narcotics, weapons, wildlife
Crime
• Online gambling
against
• Intellectual Property crimes- software piracy, persons
copyright infringement, trademarks violations, theft
of computer source code
• Email spoofing Crime
• Forgery against
• Phishing property
• Credit card frauds
Types of Cyber Crimes -Classified
Introduction to cyber crimes and their classification-25.08s

https://www.youtube.com/watch?v=q74DHPIjP5Y
Data diddling: Changing data prior or during input
into a computer
• Section 66 and 43(d) of the I.T. Act covers the offence of
data diddling
• Penalty: Not exceeding Rs. 1 crore
Case in point :
NDMC Electricity Billing Fraud Case: A private contractor
who was to deal with receipt and accounting of electricity
bills by the NDMC, Delhi. Collection of money,
computerized accounting, record maintenance and
remittance in his bank who misappropriated huge
amount of funds by manipulating data files to show less
receipt and bank remittance.
Cyber Crime provisions under IT Act, 2000
& IT (Amendments) Act, 2008
Offences & Relevant Sections under IT Act (Total Sections-90)
Tampering with Computer source documents Sec.65

Hacking with Computer systems, Data alteration Sec.66
Sending offensive messages Sec.66A
Publishing obscene information Sec.67
Un-authorized access to protected system Sec.70
Breach of Confidentiality and Privacy Sec.72
Publishing false digital signature certificates Sec.73
http://www.itlaw.in/
Imprisonment upto seven years &/or fine upto Rs 10 lakhs

Computer Related Crimes under IPC and Special Laws
Sending threatening messages by email Sec 503 IPC

Sending defamatory messages by Sec 499, 500 IPC
email
Forgery of electronic records Sec 463, 470, 471 IPC
Bogus websites, cyber frauds Sec 420 IPC
Email spoofing Sec 416, 417, 463 IPC
Online sale of Drugs Narcotics Drugs &
Psychotropic Substances
Act 1985
Web-Jacking Sec. 383 IPC
Online sale of Arms Arms Act
Cyber stalking
In 2001, Ritu Kohli (first lady to register the cyber stalking
case) was a victim of cyber-stalking. A friend of her
husband gave her phone number and name on a chat site
for immoral purposes. A computer expert, Kohli was able to
trace the culprit. Now, the latter is being tried for "outraging
the modesty of a woman", under Section 509 of IPC.
How data brokers sold my identity | Madhumita Murgia-16.19s

https://www.youtube.com/watch?v=AU66C6HePfg
Cyber defamation
• SMC Pneumatics (India) Pvt. Ltd. v. Jogesh Kwatra: India’s
first case of cyber defamation was reported when a company’s
employee (defendant) started sending derogatory, defamatory
and obscene e-mails about its Managing Director. The e-mails
were anonymous and frequent, and were sent to many of their
business associates to tarnish the image and goodwill of the
plaintiff company.
The plaintiff was able to identify the defendant with the help of a
private computer expert and moved the Delhi High Court. The
court granted an ad-interim injunction and restrained the
employee from sending, publishing and transmitting e-mails,
which are defamatory or derogatory to the plaintiffs.
Forgery
• Andhra Pradesh Tax Case

In the explanation of the Rs. 22 Crore which was recovered
from the house of the owner of a plastic firm by the sleuths
of vigilance department, the accused person submitted
6000 vouchers to legitimize the amount recovered, but after
careful scrutiny of vouchers and contents of his computers
it revealed that all of them were made after the raids were
conducted . All vouchers were fake computerized vouchers.
Is IT Act incomplete?
• New forms of cyber crimes
• Internet Banking, E-fund transfer and e-payments laws.
• Cyber Taxation issues:-

– Jurisdictional problems
– Issues whether a website a Permanent Establishment (PE)
– Problem of jurisdiction and extraterritorial jurisdiction
– Privacy concerns
UNAUTHORISED
ACCESS
E-MAIL ABUSE
Top Five Emerging Cybersecurity
Challenges- Prof Srini 17.14s
DATA THEFT https://www.youtube.com/wat
ch?v=ylxd_UwgvJU

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Introduction:

Legal Aspects of Business

• Law may be defined as a body of rules, created by the state,

• A set of rules and procedures usually intended to regulate

• Social purpose of law: to regulate human behaviour – hence

ACTIVITIES AFFECTED BY HOW REASON FOR

Brushed teeth Yes. Food and Toothpaste must not Health

Rules and regulation which governs the formation and execution of

While staying within the confines of an increasing array of

While ethical principles normally start with what is legal,

Business law encompasses the law governing contracts,

Statutes – Law enacted by the elected representatives of the

Administrative Regulations & Decisions – Similar to statutes enacted

Common law – Based on prior court decisions (Precedence). Cases

Treaties – Contracts between two or more political authorities

The Constitution of India has set up three branches of the GoI

Pseudo Contract- Unjust enrichment of one person at the cost of

Common Law System Civil Law System

• Cyber Law is an emerging body of law that applies to

• Generally, it consists of traditional legal principles as

• Electronic commerce and contracting is becoming a

No person shall be deprived of his life or personal liberty except

Legal theory is a systematic study of law. It is the philosophy of

Jurisprudence, as against the theory, concerns itself with the

Indian constitution had 395

• Originated in the English Law Merchant.

• Administered by Merchant Courts established in various merchant

• Merchant Courts were integrated into English Common Law.

• Today, the Law of Business focuses on maintaining a competitive

• Regulates specific marketing and business activities;

• Includes contract and sales law, commercial paper, negotiability,

Mohd. Ahmed Khan Vs Shah Bano Begum, 1985

Dabur India Ltd Vs K R Industries, 2008

2. Sovereign, democratic and republican nature of the Indian Polity

3. Secular character of the constitution

5. Federal Character of the constitution

6. Unity and integrity of the nation

7. Welfare state (socio-economic justice)

Contracts are the essential elements of everyday life. We sign

Added: Special Contracts

Agreement = A set of Reciprocal promises

Promise = Offer + Acceptance

Promise1 + Promise2 = [ (Offer1 + Acceptance1) + (Offer2 + Acceptance2)]

Situation 1: Som says, “I want a Philips DVD player. The price

Situation 2: Som says, “I want to buy a Philips DVD player.”

Situation 3: Arvind says, “Philips is a good make. I recommend

PRINCIPLE: An agreement is about a meeting of two minds. It can

2) Special Offer: When offer is made to a definite person, it is known

3) Cross Offer: When two parties exchange identical offers in ignorance

4) Counter Offer: When the offeree offers to qualified acceptance of the

Rule - Has to be a valid Contract- General Offer, Company

3 judge bench held it is a binding contract, breach of contract

NOTE: Marriage & Divorce are legal

6 Purposive Offer Fisher Vs Bell,1961 A mere invitation to treat, does not

Offer & Balfour Vs Balfour, 1919 As it is an agreement of domestic

8 Not party to any Donoghue Vs Dependence of negligence on

Classification of Contract on the basis of Extent of Execution

iv) A, in Mumbai, enters into a contract with B in Chennai with a

v) A agrees to sell B hundred tons of oil. Void

Remedies for Breach of Contract