introduction to business legislations

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Business and Corporete Laws Prof. G Prasad

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Nature of Contract Synopsis : 1. Introduction 2. Meaning of Business Law 3. Sources of Business Law 4. Business Law in India 5. Contract Act, 1872 6. Meaning of Contract 7. Essential elements of a valid Contract 8. Classification of Contracts

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INTRODUCTION Law : The term `law’ refers to rules of conduct enforced by the State to maintain peace and order in the society Definition of Law : Austin has defined law in the following words : `A law is rule of conduct imposed and enforced by the Sovereign.’’ Salmand defined law as `the body of principles recognized and applied by the State in the administration of justice.’’ Holland defined law as ``rule of external human actions enforced by Sovereign Political Authority.’’

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2. MEANING OF BUSINESS LAW Business law is a branch of General Law. It relates to industry, trade and commerce. It includes law relating to contracts, sale of goods, partnerships, negotiable instruments, companies, cooperative societies etc. Further, consumers are a special constituent of any business. Consumers Protection Act not only recognises the importance of safeguarding the rights and interests of the Consumers but also puts every business on alert and answerable to the consumer 3. SOURCES OF BUSINESS LAW English Mercantile Law Statutes of Indian Legislature Judicial Decisions Customs and Usage

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BUSINESS LAW IN INDIA Contract Act, 1872 Negotiable Instruments Act, 1881 Sale of Goods Act, 1930 Partnership Act, 1932 Companies Act, 1956 Securities Contracts (Regulation) Act, 1956 MRTP Act, 1969 Foreign Exchange Management Act, 1999 Patent Act, 1970; Copy Right Act, 1957; Trade and Merchandise and Marks Act, 1958 Sick Industrial Companies (Special Provision) Act, 1985 Consumer Protection Act, 1986 Environment (Protection) Act, 1986 Essential Commodities Act, 1955 Information Technology Act, 2000 Competition Act, 2002

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5. CONTRACT ACT, 1872 Applicability : The Contract Act, 1872 is the most important constituents of Indian Mercantile Law. It affects every person since every one of us enters into a contract virtually every day. 2. Coverage of the Act The act deals with the basic principles of the law of contracts. It deals with general principles of Contracts and special contracts as given below in the following chart. Chart - 1 Indian Contract Act Special types of contracts Sec. 124 - 238 General Rules relating to Contracts Sec.1 - 75

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General Principles of Contracts (Sec.1-75) : General principles of contracts include rules and laws relating to communication, acceptance and revocation of proposal (Sec.2-9) voidable contracts (Sec.10-19 A and 22-23), void agreements (Sec.11,2230, 32, 36. 56, 57 and 64-67), contingent contracts (sec.31-36), performance of contracts (Sec.37-67) certain relations resembling those created by contracts (Sec.68-73) and consequences of breach of contract (Sec.73-75). 2. Special Types of Contracts : Sec.124 to 238 deal with special types of contracts. These are contracts of Indemnity and Guarantee (Sec.124 to 147) Bailment and pledge (Sec.148 – 181) and Agency Contracts (Sec.182 – 238).

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6. MEANING OF CONTRACT 1. Contract – Definitions : Let us go through some definitions relating to contract. Salmond : A contract is an agreement, creating and defining the obligation between parties. Sir William Anson : A contract is an agreement enforceable at law made between two or more persons by which rights are acquired by one or more to acts or forbearances on the part of others. Sir Fredrick Pollock : Every agreement and promise enforceable at law is a contract. Contract Act : Section 2(h) of the Act states that an agreement enforceable by law is a contract. Therefore, a contract essentially consists of two elements : (i) an agreement, and (ii) its enforceability by law.

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6.2 Essential Requirements of Contract Two parties An agreement : Consensus-ad-idem 3. Legal obligation 6.3 Agreements which are not contracts : Agreements relating to social matters Domestic agreements between husband and wife Balfour Vs. Balfour (1919) In this case, on leaving England for Ceylon, the husband agreed to pay 30 pounds to his wife every month till she remained in England. As he failed to send the promised amount regularly, the wife sued him for recovery of the amount. But her suit was dismissed on the ground that it was an informal arrangement and there was no intention to create legal relationship Agreement = Offer + Acceptance

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6.4 All contracts are agreements but all agreements are not contracts 6.5 All obligations do not constitute contracts Torts or civil wrongs Quasi contracts Judgements of Courts Status of obligations like relationships of husband and wife 7. ESSENTIAL ELEMENTS OF A VALID CONTRACT According to Section 10 all agreements are contracts if they are made by the free consent of the parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby expressly declared to be void. Thus, an agreement becomes a valid contract if it has the following elements.

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Offer and acceptance Intention to create legal relationship : Lawful Consideration Competence of parties to Contract Free consent Lawful object Agreement not declared as void Certainty and possibility of performance : Legal formalities

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CLASSIFICATION OF CONTRACTS Chart – 2 Classification of Contracts Validity and Enforceability Mode of Creation Extent of Execution Obligation to perform

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Classification of contracts on the basis of validity and Enforceability : Valid contracts Voidable contracts Void Contract Classification of contracts on the basis of Mode of Creation : Express Contracts Implied contracts Quasi Contracts Classification on the basis of extent of execution : Executed Contracts Executory Contract

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Classification on the basis of the obligation to perform : Unilateral Contracts Bilateral Contract

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Tahank You