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BUSINESS LAW Introduction /Meaning •
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This involves two terms “Business” “Business” &” LAW LAW “. Business law means law relating to the business bus iness world. Business has to be regulated according to the Law of the land. The Term Term “BU!"#” “BU!"#” ma$ be understood as the organised organised e%orts of enterrises enterrises to sul$ to consumers consumers with goods & services services and to earn ro't ro't in the rocess. (( !t is a broad term which includes varied activities li)e (. *roduction+ *roduction+ romotion+ wholesaling+ retailing+ Transortation+distribution+ Transortation+distribution+ warehousing+ 'nancing+ insurance+consultancies+ etc.
LAW denotes rules & rinciles+either enforced b$ an authorit$ or self imosed b$ members of a societ$+ societ$+ to control control and regulate regulate eole,s behaviour with a view to securing -ustice+eaceful living living & social securit$ •
LAW is a seci'ed code of conduct which should be followed b$ each and ever$bod$ in the state.
Business Law •
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refers to the rinciles and regulations established b$ a ovt. and a nd alicable to eole+ whether in the form form of legislation or of customs and olicies olicies recogni/ed and enforced b$ -udicious decision concerning business+ trade+!ndustr$ trade+!ndustr$ & commerce commerce Business Law was evolved to govern & regulate regulate business+ trade+ !ndustr$ & 0ommerce. Business Law in eneral eneral includes+ laws laws relating to contracts+sales of goods+ artnershi+ comanies+"egotiable !nstruments+ insurance+insolvenc$+ carriage carriage of goods etc. ources of Business Law
The Important Sources of Business Law: •
(1!Legis"ation
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(# $ustom
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(% $ase Law
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(& Natura" Law
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(' Eng"is Law!
1. Legislation is the common source of law. Both parliament and state assemblies have enacted a number of legislations that cover various aspects of business. 2. Custom : A substantial part of Business law is customary.& not based on science or technology. A custom when accepted by court & incorporated in judicial interpretations becomes law. 1. Case law case law ,popularly called “precedent” by lawyers in judgment of superior court including a point of law or principles which necessitates its adoption and adherence in subseuent case involving the same point. !. Natural law "atural #ustice is another source of $aw. %.g. "o man can be punished '()% for the crime is a guiding principle for any legislation. *. English Law our business laws are largely based on %nglish Acts applicable in %ngland. +. DHARMA : this fact is ignored that the main source of Law is “dharma“in ancient period. Even today the main spirit behind every aw is dharma !"ustice nyayya###$
LAW )* $)N+,A$+ •
Law of contract is the most imortant and basic art of 2ercantile law.
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3e'nition of Law of 0ontract
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Law of contract determine the circumstances in which a romise or an agreement shall be legall$ binding on the erson ma)ing it.
+e Indian $ontract Act 1-.# •
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The !ndian contract Act is the most imortant iece of legislation a%ecting business. *rior to this there was #nglish common law. This !ndian 0ontract Act 145 alies to whole of !ndia e6cet the state of 7ammu & 8ashmir.+ This Act came into force on 19:9145.
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e0nition )f a $ontract;
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“#ver$ agreement and romise enforceable at Law” is contract.
e0nition of $ontract2 as per te Act •
According to ection
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A roosal
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o an agreement is an acceted roosal.
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There must be one art$ to >??#@ a roosal and another to A00#*T the roosal.
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Agreement >%erC Accetance
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>%er C Accetance 0ontract.
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An agreement becomes enforceable when it gives rise to a legal obligation.
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i.e obligation must be L#AL "ot ocial or religious.
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The main di%erence between LE7AL 8 S)$IAL >bligation is that the former involves mone$ values but the latter does ">T.
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#nforceabilit$ of agreement is another reDuisite of a contract.
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“o All 0ontracts are Agreements but All agreements are not contract.”
Essentia"s of ;ALI $ontract: •
As er ection 1E+ all agreements are contracts if the$ are made b$ the free consent of the arties+ who are $)M
Essentia"s of A ;ALI $ontract! 1=>%er & Accetance< o%erer & >%eree= “lawful o%er” and “lawful Accetance”>%er and accetance together constitute an Agreement. =?ree consent<
ect(should not be forbidden b$ lawHimmoral or oosed to ublic olic$+ not fraudulent+ should not in-urious to the erson or roert$ of other.+ not immoral. I= <"ura"it5 of persons: There must be at least two ersons or two grous of ersons to form a 0ontract. There must also be *@!J!TK< )nowledge= of contract between the arties. I= Not e3press"5 dec"ared ;)I T be imossible to erform=
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4=$ertaint5 of terms <"ot JAU# Terms= :=!ntention to create "ega" re"ationsip!
1 Lega" forma"ities( whether oral Hwritten= but in writing is better <@egistration=taming + reDuirement of witness etc.
Right-in-personam & Right-in- rem •
“@ight9in9ersonam” means right against a articular erson.< i.e. Against a articular erson onl$=
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>n the contrar$ + a @ight9in9rem means rights against whole world.
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A contract create right in9 ersonam onl$..
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?or #.g . 2r. M ta)es a sum of loan of @s.1EEE from K. K has the right to recover this amount onl$ from 2r.M and not from an$ bod$ or from the world . The right of K against M is a ersonal right.
A rigt? in @rem ( A rigt against te Wor"d •
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2r. Ale6 urchased a house from 2r. Allw$n. "ow Ale6 is the owner of the house and there fore Ale6 has the right of Duiet ossession and en-o$ment against the whole world and not against Allw$n >"LK. LAW >? 0>"T@A0T 3># ">T 0@#AT A “@!NT9!"9@#2”+ BUT !T 0@#AT# >"LK A “@!NT9!" *#@>"A2”
$"assi0cation of $ontract (+5pes of $ontract •
0ontracts can be classi'ed on the basis of three criteria;
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A= ?ormation
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B= Jalidit$H or enforceabilit$
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0= *erformance
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>n the basis of formation 0ontracts can be classi'ed into ;
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1. E3press contract <= Imp"ied $ontract(%= uasi $ontract
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0lassi'cation of 0ontracts
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1. E3press $ontract ; !n an e6ress contract + the terms are made clear in wrting >r >rall$ at the time of entering in to agreement.!n this contract te proposa" and acceptance are made in words! . Imp"ied contract : !n this t$e of contract the roosal and accetance is made oterwise tan in words! !n imlied contract +neither art$ will use words of romise or e6lict words indicating that a contract is formed. . uasi $ontract
E3amp"es ???uasi $ontract A=The 'nder of lost goods is under obligation to 'nd out the true owner & return the goods. B= when some articles are delivered to a wrong addressee + te wrong addressee(te receiCer= is under obligation either to a$ for them or return them
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0= erson a$ing mone$ owed b$ another. •
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Law recognises this obligation as a contract though there is no e6licit agreement between the giver and receiver of the bene't. ulier of necessities to minor+ lunatics+. Jalid 0ontract. An agreement enforceable at law is a valid contract. An agreement becomes a contract when all the essentials of a valid contract +as laid down in section 1E are ful'lled. Joid contracts. An agreement which is enforceable when entered in to but which has become void due to suervening imossibilit$ of erformance .#.g. a contract 4etween citiDen of two countries is Ca"id contract during peace 4ut if war 4reas out 4etween te two countries te agreement wi"" 4ecome Coid contract! The law will not enforce such a contract+ nor can it be made valid b$ the arties. Joid Agreement According ection
;oida4"e $ontract! According to section
A Coida4"e contract is one that can be set aside at the otion of one of the arties to the contract. The art$ who can rescind the contract is the aggrieved .The other art$ who causes wrong cannot set aside the contract. The other art$ who induced the consent can not ta)e advantage of his own fraud because “he who comes into #Duit$
istinction 4etween ;oid $ontract 8 ;oid Agreement •
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An agreement not enforceable at law is a “void agreement” . !n the case of void agreement no contract comes into e6istance.r an agreement which illegal is J>!3 Agreement.Joid ab initio.
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But incase of a void contract + a contract come in to e6istance+ but subseDuentl$+ ceases to be enforceable b$ law. An agreement wic is Coid neCer matures into a contract. An agreement which becomes illegal in the course of erformance is a case of void contract.< war bro)e out= where as an agreement which is null and void ab initio is a case of Joid agreement. < void from its ver$ incetion=
istinction 4etween Coida4"e contract and Coid agreement 1.Legal #%ects. A Joid agreement from the ver$ beginning has no legal e%ects. A voidable contract is one which one of the arties ma$ aQrm or re-ect at his otion. !t is valid and enforceable till it is reudiated or rescinded. .0urabilit$.The defect in the case of voidable 0ontract is curable and ma$ be 0ondoned. But void agreement is void ab initio and its defects are incurable. .0omensation ince void agreement is unenforceable at law there does not arise an$ Duestion of comensation on account of the non9erformance of the agreement. But incase of a voidable contract+ a erson is entitled to comensation for loss or damages su%ered b$ him on account of the non9erformance of the contract.
Unenforcea4"e $ontract (4ut Ca"id This contract is otherwise valid+ but can not be enforced because of some technical defect li)e absence of written form+or absence of roer stam+ or “not registered” etc. such contracts will not be enforced b$ the courts until and unless the defect is recti'ed.
($! $"assi0cation on te 4asis of r it is a comleted contract.
#! E3ecutor5 contract! Where the contract is $et to be erformed either wholl$ or artiall$ or one or both the arties have $et to erform their obligations+ the contract is e6ecutor$. An #6ecutor$ contract ma$ be
Uni"atera" 8 Bi"atera" $ontracts •
A Uni"atera" $ontract is one in which one art$ has discharged his obligation either before or at the time of entering in to a contract.
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A Bi"atera" $ontract is one where a romise on one side is e6changed for a romise on the art of other art$.< i.e. both the arties have to erform their obligation= i.e. #6ecutor$ contract.These are also )nown as contracts with e6ecutor$ consideration.
Lega"it5 of )4>ect 8 $onsideration •
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According to section of the !ndian 0ontract Act+ an agreement of which the object or consideration is unlawful is viod “Lawful “ means “ermitted b$ law” The “consideration “or the “ob-ect” of an agreement is unlawful ; A= if it is forbidden b$ law B= if it is such that if allowed+ it would defeat the rovision of the law 0= if it is fraudulent+ 3= if it causes in-ur$ to a erson or his roert$ #= if it is immoral in nature ?= if the court regards it as oosed to ublic olic$ !n each of these cases the consideration or ob-ect of an agreement is unlawful. Legalit$ of the >b-ectH consideration
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!n some cases both “>b-ect” and “consideration “ ma$ be the same.+ but the$ are normall$ distinct. The word “>b-ect” means urose or design. The “consideration” refers to the bene't accruing to each art$ in a contract. !n some cases “consideration” for an agreement ma$ be lawful+ but the “ob-ect” for which the agreement was entered ma$ be unlawful.
Meaning of some of te reuirements of "awfu" )4>ect 8 consideration •
1. for4idden 45 "aw
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An act or underta)ing is forbidden b$ law;9
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A when it is unishable under criminal law of the countr$
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B when it is rohibited b$ secial legislations or regulations made b$ a cometent authorit$.
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#! if it defeat an5 "aw! ome times the consideration for an agreement ma$ not be directl$ forbidden b$ law+ but if ermitted +ma$ defeat the rovisions of an$ law. E3amp"e! A,s estate is sold for arrears of revenue under the rovisions of an Act of the legislature b$ which the defaulter is rohibited from urchasing the estate .B+ u on an understanding with A +becomes the urchaser + and agrees to conve$ the estate to A u on receiving from him the rice which B has aid. The agreement is void+as it renders the transaction+in e%ect a urchaser b$ the defaulter and so defeat the ob-ect of the law.<2ohan lal J. Udai "ara$an= . If it is *raudu"ant
Agreement which are entered into for romoting fraud are void.
#.g. An agreement to for sale of goods for the urose of smuggling them out of the countr$ is void +and the rice of the goods if sold can not be recovered.
&!If it inCo"Ces or imp"ies in>ur5 to te person or propert5 down another,s house is unlawful.
An agreement to ull
G. If te court regard as immora" !mmoral means inconsistent with what is right. #.g. A advances mone$ to B + a married woman to enable her to get a divorce from her husband and B agreed to marr$ him as soon as she get divorce. !t was held that A is not entitled to recover bac) the mone$ as the ob-ect was immoral< bai Ji-li Js "ansa "agar= I.if the court regards it as being oosed to ublic olic$. This includes an$ activit$ that ma$ harm ublic safet$ +health or morals or against genera" we"fare this term ma$ var$ case to case.
greements !pposed to public "olic# 1. Trading with enem$ .stiPing rosecutions
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