Legal Aspects of

Business
Course Code:111
1. The Indian Contract Act 1872
2. Sale of Goods Act,1930
3. The Companies (Amendment) Act 2015.
4. The Consumer Protection Act 2019 1986)
Case Study:

1. Pharmaceutical Society of great Britain Vs Boots Cash Chemists Ltd

2. Balfour Vs Balfour
3. State Bank of India Vs Mula Sahakari shakhar karkhana (2006)
4. Ranchhod das Vs Nathmal Hirachand Co (1949).
The Indian Contract Act 1872

 Essential Elements of Valid Contracts are as follows:

 1. Two or more parties
 Offer and acceptance
 Intention to create legal relationship
 Capacity/ competency of the parties
 Free and genuine consent
 Agreement must not be void or declared void by law
 Certainty and possibility of performance
 Legal formalities
Inference Drawn:

 Law of contract is the most important branch of business law that brings
certainty in business transaction. It deal with general principles of law of
contract.
 An agreement enforceable by law is a contract.
 Contract consists of two parts, an agreement and its enforceability by law.
 An agreement made by the competent parties, out of their free consent and
for lawful object.
 consideration is a contract which is enforceable by law.
 All contracts are agreements but all agreements are not contract.
 In order to make a valid contract, and agreement must have the essential
elements mentioned .
Case Law:

 Inder Singh v/s Parmeshwardhari Singh, 1957 Patna High Court.

Contracts of Indeminity and Guarantee

 Sec 124-125 & 126-147 of Indian Contract Act, 1872.

 Contract of indemnity is one of the specie of general contract, therefore , the

general principles of law of contract is applicable to it.

 Indemnifier (promisor) & Indemnity holder (promise)

 Ingredients of Indemnity:1. Contract of indemnity is a contract ii) One party

promises the other iii) Promise relates to save the other party from the loss
caused to him.
Contract of Guarantee

 A contract of guarantee is a specific contract. It is contract to perform the

promise or discharge the liability of a third party.
 Ingredients: 1. Contract of guarantee is a specific contract ii) It is a contract
comprising a promise to perform (a) promise of third party (b) discharge the
liability of third party.(Iii) Guarantee may be oral or written.
Difference Between Indemnity and
Guarantee

Contract of Indeminity Contract of Guarantee

 The contract of indemnity is defined u/s  Contract of guarantee is defined u/s 126 of
Indian Contract Act, 1872.
124 of Indian Contract Act 1872.
 The person who gives the guarantee is called the
 A contract by which one party promises to surety, the person in respect of whose default
save the other from loss caused to him by the guarantee is given is called the principal
the conduct of the promisor himself or by debtor, and the person to whom the guarantee is
given is called the creditor. A guarantee may be
the conduct of any other person is called either oral or written.
a contract of indemnity.
 There are three parties in the contract of
 There are two parties in contract of guarantee i.e creditor, principal debtor and the
surety.
indemnity. Promisor and promisee
 The liability of the surety to the creditor is co-
 The liability of the promisor to promise is lateral or secondary. The primary liability is of
primary and independent. principal debtor.
 It is necessary that the surety should give the
 It is not necessary for indemnifier to act guarantee at the request of debtor.
at the request of the indemnified.
Contigent ontract & Quasi contract

 A contingent contract is a contract to do or not to something, if some event ,

collateral to such contract, does or does not happen.
 Essentials of continent contract:
 1. There must be a contract to do or not to do something.
 2.It must depend upon the happening or non-happening of some future
uncertain event.
 3.The event must be collateral or incidental to the contract.

 Case Law:-
 Frost v. Knight (1872)
Quasi-Contracts( Sec68-72,73 of
ICA1872)
 Def: Quasi means half way or partial. Quasi- Contracts are nothing but certain relations
resembling with those created by contract. Quasi-contracts are the creations by law. In case
of quasi-contractual relationship the consequences of conduct of the parties are declared to
be enforceable, irrespective of the fact that it is not a contract. The basis of quasi-contract
is the conscience. An innocent and honest person shall not suffer.
 Kinds of Quasi-Contact:-
1. Necessaries supplied to person incapable of contracting, S-68.
2. Reimbursement of person paying money due by another, in payment of which he is interested,
S-69
3.Obligations arising out of finder of goods, S-71.
4. Obligations arising out of money paid under coercion, mistake or voidable contract, S-72.
Case Law:
 Fibrosa Spolka Akeyina V. Fairbain Lawson Combe Barbour Ltd, (1942).
Discharge of Contract and Breach of
Contract:
 Contract is discharged by various modes. A valid contract creates certain obligations between
parties. The contractual relationship created by the contract comes to an end when the
rights and obligations arising out of contract are extinguished. The process of coming to an
end of contractual relationship is called discharge of contract.
 When one of the party to the contract fails to perform his obligation under the contract, it is
said to be a breach of contract. Anticipatory breach and actual or present breach are the
kinds of breach of contract.
 Mode of discharge of contract:
1. By performance
2. By non-performance by one party
3 . By breach of contract and rescission
4. By agreement: novation, alteration and rescission
5. By act of promise
6. 6. Discharge or Termination under contract provisions.
Agency- Creation of agency

 Agency is the relationship , which exist between two persons one of whom
expressly or impliedly consent that the other should represent him or act on
his behalf. Thus an agent is one who is employed by another, to do any act for
that another or represent him in dealings with the third person. The principal
or basis of agency is whatever a person can do personally he can do it through
another. Sec 182 to 238 deals with provisions of contract of agency.

 Essentials of relationship of agency:

1. Agreement between the principal and the agent.
2. Intention of the agent to act on behalf of the principal.
3. Consideration- No consideration is required to create an agency.
4. Capacity of the parties
Various Modes of creation of agency :

1.Agreement
2. Necessity
3. Ratification
Agent And Principal:(Relationship and
Rights)
 Rights of the Agent:-
1. Right of retainer
2. Right to receive remuneration
3. Right of lien
4. Right of indemnification
5. Right of Compensation

Rights of the Principal:

1. To recover Damages
2. To obtain an account of secret profits and recover them
3. To resist Agent claim for indemnity against liability incurred.
Contract of sale of Goods, Conditions
and Warranties;
 Contract of sale of goods are subject to the general legal principles applicable
to all contracts, such as offer and its acceptance, the capacity of the parties,
free and legal consent, consideration and legality of the object.
 A contract of sale of goods is a contract whereby the seller transfers or agrees
to transfer the property in the goods to the buyer for price paid.
 A sale is a transfer of ownership in exchange of price paid or promised or
partly paid and partly promised.
 To constitute a valid sale there must be a transfer of property in the goods i.e
ownership and control over the goods. A sale proper and agreement to sell
differs from each other.
Essentials of contract of sale:

1. Two Parties
2. Goods
3. Price
4. Transfer of general property
5. Essential elements of a valid contract
Condition and warranties: (Sec 12 to 17)

 Def. of condition- S12(2)-

 A condition is stipulation essential to the main purpose of the contract, the breach
of which gives rise to a right to treat the contract as repudiated. In condition,
nature of stipulation are essential to the main purpose of contract, breach of
which gives rise to right to repudiate contract. A condition may be express or
implied.
 Def. of warranty-s.12(3)-
A warranty is a stipulation collateral to the main purpose of the contract, the
breach of which gives rise to a claim for damages but not to a right to reject the
goods and treat the contract as repudiated. The warranties may be express or
implied.
Case Law:-
R S Thakur v. H G E Corporation, AIR 1971 Bom.97.
Transfer of property/ownership
Performance of the Contract of sale:
 The Sale of Goods Act provides for various rules as to transfer of property as
between seller and buyer to determine the rights and liabilities of both of
them( Seller and Purchaser).
 According to S.31 of Sale of Goods Act , 1930, performance of a contract of
sale means delivery of the goods to the buyer, acceptance of the delivery of
the goods and payment of those goods, in accordance to the terms of contract
of sale. A contract of sale always involves reciprocal promises the seller
promising to deliver the goods and buyer promising to accept and pay for
them.
Kinds of delivery:-

A) Actual Delivery
B) Symbolic Delivery
C) Delivery by attornment

Case Law-
I. T. Commissioner Vs. R C Gupta & Company AIR 1968 Cal. 385
Rights of Unpaid Seller
Sale by Auction
Def. of unpaid seller:

As per S.45 (1), a seller of goods is deemed to be an unpaid seller when-

a) The whole of the price has not been paid

b) A bill of exchange or other negotiable instrument has been received as a conditional payment, and the condition on it which was received has not been
fulfilled by reason of the dishonor of instrument.

Rights of the unpaid seller against the goods:

1. Right of lien

2. Right of stoppage in transit

3. Right to re-sale

Right of an unpaid seller against the buyer personally

1. Suit for price

2. Suit for damages for non-acceptance

3. Repudiation of contract before due date

4. Suit for interest

Case Law:

Kalka Prasad Vs. Harish Chandra AIR 1957 ALL. 25.

Sale by auction

A sale by auction is a public sale where different intending buyers try to outbid each Goods are
ultimately sold to the highest bidder.
Rules of auction sales:
1. Goods put up for sale in lots
2. Completion of Sale
3. Right of Seller to bid
4. Sale not notified subject to a right to bid
5. Reserve Price
6. Use of pretended bidding
7. Knock out or agreement not to bid against each other

8. Case Law:
9. Jai Bhawani Timber Vs. State of M.P. AIR 1992
Negotiable Instruments

 Def: Negotiable Instrument is a signed documents that promises a payment to

a specified person or assignee. A transferable signed document that promises
to pay the bearer a sum of money at future date or on demand.
 Types:
1. Cheques
2. Promissory Notes, Bill of exchange
3. Certificate of Deposit
4. Money order

Case Law:
Modi cement Ltd Vs Kuchil Kumar Nandi (1998)
Negotiation and Types of Endorsements
required to be Done
 The holder of negotiable instrument may sign his or her name on the back of
instrument which replicates the transfer of Title or ownership of that
instruments, the process is known as endorsement.
 Type of endorsement:
1.The endorsement in blank
2. The endorsement in full
3. Conditional endorsement
4. Restrictive endorsement
5.Partial endorsement.
Dishonor of Negotiable Instrument-
Noting and Protest
 Noting and protest are related topic in negotiation instruments Act 1881 that
deals with the dishonor of negotiable instrument such as promissory note or
bill of exchange.
Noting:-
The holder of a dishonor instrument can have a Notary Public Documents, the
dishonor on the instrument itself, on the paper attached to it or both. The note
must be made within the reasonable time with reason of dishonor, date and
notary’s fee.
Protest:-
The holder can have the notary public note which certify the dishonor of
Instruments is called the protest. The protest provide the formal declaration of
dishonor of Instrument.
Company –Definition/Salmon Vs.Salmon
Co. Ltd
 A company is an artificial person created by law having separate entity with a perpetual succession and
common seal. Company is an association of persons for some common objects.
 Characteristics of company:
1.Incorporated Association
2.Legal entity distinct from its members
3. Artificial person
4. Transferability of shares
5. Limited Liability
6. Perpetual Succession
7. Common Seal
8 Company is not a citizen

Case Law:
Salmon Vs.Salmon Company Ltd.
Types of Company:

 1. Private Company
 Public Company
 Small Company
 Subsidiary Company
 Unlimited Company
 Company Limited by shares
 Company Limited by guarantee
 Foreign Company
 Government Company
 Holding Company
 One person company
One person company:

 One person Company means a company which has only one person as a
member.
 Less Compliances
 No need of AGM & BM
 Less expensive
 Easy Incorporation.
 Efficient Management
 Easy Fund Raising
 Legal Status
 Limited Liability
Incorporation of Company, MOA

 Incorporation is the way that a business entity known as corporation is

formally organized and officially brought into existence.
 Steps involved in incorporation of a company:
1. Check the company name with MCA
2. Company name reservation
3. Obtain the pre-registration documents
4. Select preferred business type
5. Register the company online with ROC
6. Obtain the certificate of incorporation and commencement of business
Memorandom of Association (MOA)

 The memorandum of association is a document which contains the fundamental conditions

upon which alone the company is allowed to be incorporated. It defines the power or scope
of the activities of the company. I
 It lays down the object of the company and the company can not exceed the objects even if
every member agrees.
 A company can not legally do any act which is not authorized by its MOA.
 It defines as well as confines the powers of the company.
 If anything is done beyond these powers, that will be ultra vires the company and so void.
Contents of MOA:-
1. The name of company (Limited/Pvt.Ltd.)
2. Name of state in which company would be registered (ROC).
3. Law ful Object of company
4. The liability of members of the company.
Article of Association

 AOA lays down the rules and regulations for the internal management of the
company .

 It specifies the duties, rights and power of management of the company.

 AOA is the subsidiary to the MOA.

 The AOA contains the rules regarding Share capital, Share transfer, voting
rights of shareholders, the appointment of directors, Accounts, auditors etc.

 AOA brings clarity in relationship between shareholders and company.

Share Capital and Debentures

 Every company limited by shares must have a share capital. Share capital of a
company refers to the amount invested in the company to carry out its operation.
 The share capital may be increased or altered subject to certain conditions.
Type of share capitals:
1. Equity Share Capital
2. Preference Share Capital.
Debentures:
1. Debentures are one kind of written documents that acknowledges a company’s
borrowed money and includes term & conditions of loan, repayment, redemption
etc.
2. Debentures are issued to raise the funds of company.
Acceptance of Deposits

 Deposits are a means through which companies generally acquire funding. The
provisions concerning deposits are covered under Sections 73 to 76 of the Companies
Act, 2013, which are generally read with the prescribed Rules. As per the Companies
Act, 2013, a deposit is any money that is received, either by means of a deposit or a
loan or any other form as may be prescribed, but does not include certain classes of
transactions. They are:-
 Any amount,
 Received from the Central Government or a State Government, or any such source
where the repayment will be guaranteed by the State or the Centre.
 Received from foreign banks or international banks, foreign governments,
multilateral financial institutions subject to the provisions of FEMA, 1999.
 Received by way of financial assistance or loan from Public Financial Institutions
notified by the Central Government or Scheduled Banks or Insurance Companies.
 Received as a loan or facility from any banking company or the State Bank of India
or any of its subsidiaries.
 Received by a company from any other company.
Appointment of Director including a
Woman Director:-
 As perSec 152 of company act 2013 where no provision is made in the Articles
of a company for appointment of the first director, the subscriber to the
memorandum who are individual shall be deemed to be the first directors of
the company until the directors are duly appointed and in case of a one
person company an individual being member shall be deemed to be the first
director until the director or directors are duly appointed by the member in
accordance with the provisions of this section.
 First Director
 Allotment of DIN (Sec 154)
 Filing of consent to act as director (DIR-2, DIR-12)
 Proportion of directors liable to retire by rotation
 Retiring directors when deemed to be re-appointed.
Appointment of woman directors

 Following class or classes of companies as prescribed under rule 3 of company

rules 2014to have at least one woman director:

1. Every Listed company

2. 2. Every other Public Company having-

A) Paid-up share capital of 100 crore rupees or more or

B) Turnover of 300 crore rupees or more.

Unfair and Restrictive Trade Practices
(CP Act 1986 repealed by CP Act 2019)
 The Consumer Protection Act (CPA) of India defines unfair trade practices as any false or
misleading representation, statement, or advertisement. This includes deceptive practices,
which are also considered unfair trade practices. An act is considered unfair if it meets the
following criteria:

 It causes or is likely to cause substantial injury to consumers

 It cannot be reasonably avoided by consumers

 t is not outweighed by countervailing benefits to consumers or to the competition


Restrictive Trade Practices

 A restrictive trade practice (RTP) is a business agreement that can prevent or

restrict competition by controlling prices or the areas where goods are
sold. RTPs can also include practices that obstruct the flow of capital or
resources into production. Some examples of RTPs include:
Agreements between firms that limit competition
 Tie-up sales
 Exclusive dealing
 Price discrimination
 Resale price maintenance
 Double pricing for loyalty
Consumer dispute Redressal
Forums/Commissions
 District Consumer dispute Redressal Commission

 State Consumer dispute Redressal Commission

 National Consumer dispute Redressal Commission

Composition, Jurisdiction, Powers ,
Appellate Authorities
 Composition of DCDRC:-
One President, Two Members
Jurisdiction: upto 1 Cr
: within the local limits of whose jurisdiction consumer resides or
work for gain.
Power: CPC 1908

Power to execute the order passed( under sec 71 CPA 2019, Sec 27, 25 of CPA
1986 now repealed.)
Review of order passed by it (Sec 40)
Award compensation.
State consumer dispute Redressal
commission:
 Composition:
One President and Four Members
A) Jurisdiction: >1cr upto 10 cr.
B) Appeals against the order of any district Commission within 45 days .
Power:
A) Award Compensation
B) Review of order passed by it within 30 days.

Appellate Authirity: NCDRC

NCDRC

 Composition:
One President and Four members
Jurisdiction:
A) Appellate Jurisdiction for SCDRC.
B) B) >10 cr and above.
C) Power:
Award compensation,
Execution of order passed by it.

Appellate Authority: Hon’ble Supreme Court.

Digital Signature

 A digital signature is a mathematical technique used to validate the authenticity

and integrity of a digital document, message or software. It's the digital
equivalent of a handwritten signature or stamped seal, but it offers far more
inherent security. A digital signature is intended to solve the problem of tampering
and impersonation in digital communications.
 Digital signatures can provide evidence of origin, identity and status of electronic
documents, transactions and digital messages. Signers can also use them to
acknowledge informed consent.
 Kinds of Digital Signature (DSC)
1. Class-2 DSC
2. Class-3 DSC
3. Generally used by professions, Business entity or individual to authenticate
electronic documents.
Electronic Governance:

 Electronic Governance under IT Law 2000 focuses on regulating electronic

transactions and communication to enhance efficiency in government processes
It establishes a legal framework for electronic signatures, ensuring their validity
and reliability in digital transactions. Examples: Internet, mobile etc.
Kind of e-governance:
There are essentially four types of e-governance - G2C (Government to Citizens)
G2B (Government to Business) G2E (Government to employees) G2G
(Government to Government) that represent different dimensions of digital
interactions and services within the broader scope of e-governance.
Electronic Records:

 Electronic records refer to information stored in a digital format,

encompassing documents, images, emails, databases, and other types of data
. Unlike traditional paper records, electronic records exist in a non-physical,
digital realm, making them accessible through various electronic device.

Example: emails, mobile data, internet etc.

Case Study:
Ved Ram & Sons.
Intellectual Property Law
(Patent, Copy Right,Trade Marks, Design)
 Concept of Patent: A patent is a state-granted right that gives an invetor exclusive right over their
inventions for a set period of time. The patent holder can use the invention, sell it or license it to others
and can prevent others from using it without their permission . The patent system is designed to balance
the interest of inventors and society. It’s a legal document. Example: ornamental design, drugs, coca –cola
bottles etc.
 Concept of copy- right: Copyright is a type of intellectual property (IP) law that protects original works of
authorship, such as paintings, photographs, illustrations, musical compositions, sound recordings, computer
programs, books, poems, blog posts, movies, architectural works, and plays. Copyright protects the way
these things are expressed, but not facts, ideas, systems, or methods of operation.
 Concept of Trade-Marks: A trademark is any word, name, symbol or device used to identify and
distinguish goods and/or services from those of others.

 Concept of Design: ‘design’ is a human touch given to any product in the form of a composition of colours,
shapes, patterns, etc., which adds aesthetic value and attraction to the product. Design involves some
creativity and distinctiveness, and thus, if the shape of a product is due to some function that it needs to
perform, then it will not fall under the subject of design.
 Case Law:
Diamond Vs Chakravarti , 447, U.S. 303 (1980)
 Classification of contract on the basis
of formation :-
 Express contract :
A contract is said to be an express where it is entered into by words, which may
be spoken or written. Where the offer or the acceptance of any contract is
expressly agreed upon words spoken or written at the time of the formation of
contract, the contract is said to be an express contract.

Example: A tells B on the telephone that he is prepared to sell his scooter for Rs.
20,000/- to B, accepted the offer on telephone. This is an express contract.
Implied Contract:

 When a contract is inferred from the conduct of the parties , a contract is

said to be implied. An implied contract is not made in words. Such contract
comes into existence on account of act or conduct of the parties.

Illustration:
1. A gets into a public bus.
2. A went to a restaurant and ordered a cup of tea.
In both the cases, there is implied contract that A will pay the fair of bus or pay
for the cup of tea.
Quasi Contract/Constructive Contract:

 Quasi contracts are not contracts in fact, but they are contract in law. The
obligations are resembling to contract. It required to be performed. Quasi-
Contract is based on a principal of equity that, “a person shall not enrich
himself unjustly at the expense of another.”

Illustration:-
“A” a tradesman leaves certain goods at B’s house by mistake. B, treats the
goods as his own. B is bound to pay for the goods to A.
Reference Books

1. Legal Aspect of Business--------Ravinder Kumar.

2. Business Laws-------------S. D. Geet
3. Business Laws--------------S.S. Gulshan
4. Legal Aspect of Business-------Akhileshwar Pathak.
5. Elements of Mercantile Law-----N.D. Kapoor.

Web Resources:
http://www.livelaw.in
https://indiankanoon.org
 THANKS

PREPARED BY:

Dr. (CS) Akhilesh Kumar Pandey