Business Law for

BBA-102/BUSS2422

Himalayan College of Management

hcmbba2018@gmail.com

Jiban Prasad Dallakoti, Advocate

LL.M. Business Law and MA-Political Science
Assistant General Manager-Legal, Tara Management
Email:- dallakotijiban@gmail.com
Jiban Prasad Dallakoti, LLM/Corporate Lawyer
 Major areas to study
• Law of Contract
• Law of Agency
• Sale of Goods
• Hire Purchase

• Lesson 42 hours (guided), other activities

(independent) 78 hours-3 credit

Jiban Prasad Dallakoti, LLM/Corporate Lawyer

Introduction and definition of Contract
• In the primitive stage of society, the life of people was not complex and needs of
people also were very limited. People were capable themselves to fulfill their
requirements with taking help of other persons.
• People believes that they would have to bear a sin if they did not perform their
promises. Therefore they perform honestly. But such promises could not remain
only in the religion or morality because of the development of human conscience
and civilization. Some of the promises remain not to be performed. As a result, law
relating to contract was felt necessary for regulating such transactions or promises.
Now the states begun enact and issues various kinds of laws to regulate the
human activities. The law related to trade, commerce and industry is enacted.
Those laws are subsequently called the law of contract.
• Basically, the law of contract emerged due to increase of economic and business
activity in the society.
• Simply, the law of contract is that law which is made to control and systematize the
rules formulated or contract concluded by the parties to it.
• Set of the rules made for having the promises, made by the business person
performed, for settling the disputes arising out between them is called the law of
contract.
• A contract is mutual assent, that is, it is a legal agreement created by an exchange
of promises between two parties to do or not to do something.

Jiban Prasad Dallakoti, LLM/Corporate Lawyer

 Why contract law ?
 The law of contract particularly relates to an agreement
enforceable by law. Basically it relates enforceability of promises.
 Contract Law is for security and stability of business world.
 Contract law is basis for trade and Commerce.
 There is no security, if there is no binding nature of promises.
 Contract Law is foundation of commercial law or mercantile Law.
 Everyone enters in a contract several times a day Vis; purchasing
groceries, riding on a bus or taxi; having a cup of tea or coffee in
restaurant, taking the laundry services etc.
 Criminal Law imposes duty / punishment in violation. But contract
law as a Private legislation imposes obligation in breach such as
compensation, specific performance e.t.c.

Jiban Prasad Dallakoti, LLM/Corporate Lawyer

 Development of contract law
 Contract law is developed as part of obligation
 Developed as a private law or private legislation.
 18th and 19th century/existence of natural law.
 During the 19th century philosophy of lasses faire took root.
 At that time judges created more principles which are the basis of
contract law.
 At that time more people thought that law should interfere people
as less as possible. / Cause of private legislation or contract.
 People felt only statutory law can not provide fairness and justice in
each and every transaction.
 Contract was introduced for the private agreement of parties.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer
 Some Definitions of Contract
Section 1 of Contract Act 1950 of Malaysia
(e) every promise and every set of promises, forming the consideration
for each other, is an agreement;
(h) an agreement enforceable by law is a contract
Indian Contract Act 1872
Section 2 (h) – “Contract is an agreement enforceable by law’’
Muliki Civil (code) Act, 2074- Part 4- contract and other liablity
related
 Section 504 (1) has defined the Contract is an agreement
Concluded between two or more parties to do or not to do
something which must be enforceable by law.
Sir William Anson
A legally binding agreement between two or more persons by
which right are acquired by one or more to act or forbearances on
the part of others.

Jiban Prasad Dallakoti, LLM/Corporate Lawyer

 Definitions continue
Salmond
A Contract is an agreement creating and defining
obligation between the two parties or more
persons.
Frederic Pollock-
A contract is a promise or set of promises for the
breach of which law provides remedy.
Halsbury defines that “A contract is an agreement
made between two or more persons which is
intended to be enforceable at law”
Black’s Law Dictionary defines “An agreement
between two or more persons which creates an
obligation to do or not to do a particular things.
Jiban Prasad Dallakoti, LLM/Corporate
Lawyer
 Agreement and Contract
 Set of promise +some consideration = Agreement
 Agreement +Enforceable by law = Contract
 All the contracts are agreement but all the
agreements are not contract.
Consensus Ad Idem – Meeting of mind. It is a
Latin legal principle.
Meeting of mind is essence of agreement which
is Consensus Ad Idem.
-Consent at the ‘Same sense’ at the ‘same time’.
No consensus Ad Idem, No Contract

Jiban Prasad Dallakoti, LLM/Corporate Lawyer

 What agreements are contracts
# Section 505 of Muliki Civil (code) Act, 2074- contract can
be done in writing or oral or conduct of the parties. However,
contract can not executed if contract does not complete
certain procedure or formalities that has prescribed by law.
# Section 10 of contract Act 1950 of Malaysia
(1) All agreements are contracts if they are made by the
free consent of parties competent to contract, for a
lawful consideration and with a lawful object, and are
not hereby expressly declared to be void.
(2) Nothing herein contained shall affect any law by which
any contract is required to be made in writing or in the
presence of witnesses, or any law relating to the
registration of documents.

Jiban Prasad Dallakoti, LLM/Corporate Lawyer

 Case Laws
# Balfour v Balfour (1919) - Husband and Wife’s Case
– Husband agreed to pay 30 pound every months to his wife while he
was in abroad. Latter on, he failed to pay and his wife filed a suit
against her husband for recovery the amount. The court denied the
claim because it was only a domestic agreement and did not intention
to create legal relationship.
• This case established that only Agreement plus Only social
obligation is not Contract.
Marrit Vs Marrit (1970)
• The husband promised to transfer a house to his wife, after she
pays the whole installments dues. The wife performed her
obligation but her husband rejected to transfer the house to his
wife. The wife sued her husband and the court decided that her
husband is bound to perform his promises because there was
intention to create legal relationship between them.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer
 Types of Contract
# On the basis of legal validity:-
(a) Valid contract (b) Void Contract (c ) Voidable contract
(d)illegal contract (e) unenforceable contract
# On the basis of formation
(a) Expressed Contract (b) Implied Contract
(c ) Quasi contract- indirect contract. obligation
created by law. Ex. Lost of goods.
# On the basis of performance- Executed and Executory
Contract. Executory means that which remains to be
carried into effect. Contract to be implement in future.
Example-Appoint manager with effect from next year.)
# on the basis of Liability :-Unilateral (one sided contract) and
Bilateral contract.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer
 Elements/essential
elements/Components/Ingredients/prerequisites of Contract

• The scope of an agreement is wider then that of a

contract because a contract must fulfill some
essential elements. It has limited scope which
exists within the limitations of legality. Thus all
contract are agreements but all agreements are
not contract.
• An agreement to be enforceable by law must
possess the following elements, which are
essential for a valid contract.
• In lacking of any necessary element of a contract,
it looses its validity and enforceability.

Jiban Prasad Dallakoti, LLM/Corporate Lawyer

Elements of a Contract
1. Plurality of Parties
2. Offer and Acceptance
3. Intention to create legal relationship
4. Free Consent
5. Capacity/Competent Parties
6. Lawful consideration
7. Lawful Object
8. Not expressly declared void
9. Clarity and Certainties
10. Possibility to perform
11. Meeting of Mind
12. Legal Formalities

Jiban Prasad Dallakoti, LLM/Corporate Lawyer

 1. Plurality of Parties
• To form a contract, there must be at least two
parties. A promise or a set of promises are
exchanged between offeror and acceptor.
Therefore, two parties i.e. offeror and acceptor
are required for this purpose.
• Example
Amar makes an offer to Bhawana to buy a car for
Rs.5o Lakhs and Bhawana agrees to sell her car
for Rs.50Lakhs. Here, Amar is the offeror and
Bhawana acceptor.
#Muliki Civil (code) Act, 2074 provides in its
definitions that there must be two or more
parties to conclude a valid contract.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer
 2. Offer and Acceptance
• There must be at least two parties to form/create
a contract. The agreement involves a valid offer
by one party and a valid acceptance to the offer
by the other party. Both the offer and acceptance
must be communicated to person who accepts an
offer, and to the person who makes an offer.
• The offer and acceptance must be “consensus ad-
idem”. It means that the both parties must agree
upon the same thing in the same sense.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer
3. Intention to create legal relationship
• The parties to a contract must intend to create legal
relationship. The relationship, which is enforceable by
the law, is known as legal relationship.
• It is assumed that all business agreements, parties have
intention to create legal relationship. But in the case of
agreements of friendship, social or moral nature or
domestic nature, it is assumed that the parties have no
intention to create legal relationship.
• A invites B to have a breakfast and B accepts the
invitation. It is a social agreement, which does not
intend to create legal relationship because either A fails
to serve breakfast to B or B falls to attend the
breakfast, neither of them can go the court of law for
enforcement of the agreement.

Jiban Prasad Dallakoti, LLM/Corporate Lawyer

 4. Free Consent
• If the parties give their consent freely or
knowingly or voluntarily, it is terms as free
consent. Therefore, every valid contract
requires free consent of the parties.
• A positive decision towards the terms of the
agreement is consent.
• If the consent is made by any means of
coercion, fraud, undue influence,
misrepresentation or mistake, such consent is
not said to be free.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer
 5. Capacity to contract /Competent
Parties
• Both parties to the agreement must be capable of
entering into a contract. It means that both the parties
must have qualification prescribed by law.
# Muliki Civil (code) Act 2074 section 506- minor and not
capable person.
# any person who has not completed the age of 16 or
minor
# Who is not of sound mind
# who is declared disqualified by law
 Incompetence to contract makes an agreement void.

Jiban Prasad Dallakoti, LLM/Corporate Lawyer

 6 Lawful consideration
• Consideration is “something in return”. There is general
rule that no consideration no contract.
• Consideration means an advantage or benefit from one
party to another party. The agreement is legally
enforceable only when the parties give something and
get something in return or something for something.
Not only cash and kinds but to do or not to do
something.
• Consideration may be past, present and future and
positive or negative. The consideration must be lawful.
• Exception is contract of agency or contract based on
love and affection.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer
 7. Lawful object
• The object of an agreement must be lawful. It
is prerequisite of a valid contract.
• The object must not be contrary to the
prevailing law or public policy or morality.
• Example: A provides Rs.50,000 to B for
restrain his lawful marriage with C. This
contract is void because lawful marriage is a
legal right of B. Here, the object of contract is
contrary to the prevailing legal provision.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer
 8. Not expressly declared void
• The agreement must have not been expressly
declared void by any prevailing law of the
country.
• If a contract is made contrary to current law is
regarded as void. So the contract which is
expressly declared void by law is no more
contract.
• Exe: In restrain of trade, In restrain of legal
proceeding.

Jiban Prasad Dallakoti, LLM/Corporate Lawyer

 9 Clarity and Certainties
• Ambiguous and vague contract can not be
performed. So the terms of the contract must
be clear.
• A contract which is vauge term as it does not
provide reasonable meaning thereof void ab
initio.

Jiban Prasad Dallakoti, LLM/Corporate Lawyer

 10. Possibility to perform
• The obligation must be possible to perform.
• If a contract creates impossible obligation to
perform to the party, it is itself void.
• Exe- a contract to change the color of sky.
• Generally law does not compel to do
impossible work.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer
 11. Meeting of Mind
• Two parties should agree the term in same sense.
• Two or more persons are said to consent when
they agree upon the same thing in the same
sense.
• Mutual assent or consensus ed idem) is a phrase
in contract law used to describe the intentions of
the parties forming the contract.
• It refers to the situation where there is a common
understanding in the formation of the contract.
• This condition or element is often considered a
necessary requirement to the formation of
a contract.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer
 12. Legal Formalities
• The legal formalities are determined by the local
law of land. The agreement must fulfill the
necessary legal formalities to form a valid
contract.
• Part 4-Section 464 of Civil (Code) Act, 2074 says
that the house rent agreement above one lakhs
and ownership transfer of immovable property
should be registered.
• If legal formalities do not complete, agreement
looses its enforceability.
•
Jiban Prasad Dallakoti, LLM/Corporate
Lawyer
 Offer (proposal)
• Rujan makes an offer to Ruben to buy a car for Rs.15lakhs
and Ruben agrees to sell his car for Rs. 15 lakhs. Here,
Rujan is the offeror and Ruben is acceptor.
• Offer must be definite and acceptance must be absolute or
unconditional.
• The person making the proposal or the Person who makes
that proposal is called :-“Promisor”or“offeror”.
• The person to whom it is made or the person accepting the
proposal is called “promisee” or “offeree”.
• “Merely supplying of information can not be treated as an
offer and acceptance, so as to create a valid contract”.
• Offer of a contract is an expression of willingness to
contract on certain terms, made with the intention that it
shall become binding as soon as it is accepted by the
person to whom it is addressed.
Jiban Prasad Dallakoti, LLM/Corporate
Lawyer
 Types of Offer
1 Express – words, spoken or written
# an offer which is made by words of speaking or by
writing is known as express offer.
‘A” will you buy my house in one cores.
‘B’ yes, I will purchase in this price.
They made agreement – Written.
2 Implied
By conduct or circumstances.
# An offer is made by conduct of party is known as implied
offer.
Saja Bus Company runs a bus on a particular route there is
an offer to carry the passenger. If the passenger rides that
becomes offer after acceptance.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer
 Cont.
3 Specific
When an offer is made for to a particular or definite person . It can be accepted by
that person only.
A proposed only for B to buy A’s a piece of land.
C the brother of B can not accept.
This offer is only for B.
4. General
Offer is made for entire universe.
• Sec 511 of Muliki Civil (code) Act 2074 reads that if the advertisement published
for public to offer to do something by giving remuneration then publisher has to
give said amount If any one claim that h/she has worked that work as per
advertisement.
• Contract according to proposals presented before the public.
• Case; Carlill V. Carbolic Smoke Ball Co. 1893 1QB 256.
‘A’ Company by notice announced to pay £100 in case of not recovering infection
diseases by using the medicinal balls
But not recovered and claimed by ‘A’ that was only puffing advertisement.
# But the Court held that ‘A’ is liable to pay the promised reward.
5 Negative Offer, Positive Offer and Counter Offer also can put under types of
offer.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer
 Rules regarding Offer
i. Offer must be made to obtain the
assent/consent to create contractual obligation.
There must be intention to create legal relation.
ii. Offer should be clear and specific. It should be
definite.
iii. Different from invitation to offer.
iv. Counter offer is the rejection of original offer
v. Offer may be expressed or implied
vi. An order is not an offer
vii. Mere expression not an offer
Jiban Prasad Dallakoti, LLM/Corporate Lawyer
 Cont.
• Advertisements catalogues or store flyers are not offers
• ‘For sale”is not offer.
• Only prospectus to subscribe share of a company is not
offer
• Application of share is offer.
• Allotment is the acceptances.
• Price list at petrol pump – Invitation, odder by the
Consumer to fill the petrol – offer.
• Filling of the petrol by petrol Pump is acceptance.
• Advertisement of tender is only invitation. An offer must
be definite / certain.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer
 Lapses of offer / duration of offer
• Offer lapses after reasonable or stipulated time.
• Lapse by death or insanity.
• Subsequent illegality or destruction in
subsequent matters.
• When condition is not accepted by offeree.
• Be denying or rejection.
• Counter offer by offeree, accepted with some
other offers.
• Revocation by offeree, revocation before
accepting.

Jiban Prasad Dallakoti, LLM/Corporate

Lawyer