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BUSINESS LAW

AN INTRODUCTION TO
LAW, LEGAL SYSTEMS
AND GLOBALIZATION
OBJECTIVES
To understand the essential features of a
legal system, including our Constitution

To appreciate Globalization as relevant to
Law and Legal Institutions

To study the different forms and principles
of Civil and Tortious liabilities
LAW
Law is a system of rules, usually enforced
through a set of institutions.
It shapes politics, economics and society
in numerous ways and serves as the
foremost social mediator in relations
between people.
Law governs a wide variety of social
activities.




Law :
The term `law refers to rules of conduct enforced by the
State to maintain peace and order in the society

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.

Definition of Law :
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
recognizes 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
1. English Mercantile Law
2. Statutes of Indian Legislature
3. Judicial Decisions
4. Customs and Usage

What is the Role of Law?
To establish and enforce norms or societal
morals
Achieves justice?

To limit power of the Government and other
authorities
Enforces accountability?

To examine reason in all activities
Typology of Law
Legal remedies = Constitutional, Civil,
Criminal, Contractual and Tortious

Legal systems and Judicial approaches =
Common Law and Civil Law

Principles of interpretation = Statutory,
Constitutional and Evidentiary
1: Analyzing What is Law ?
Natural Law view.
Positivist view.
Historical view.
Legal Realism view.
Natural Law
Assumes that law, rights and ethics are based
on universal moral principals inherent in nature
discoverable through the human reason.
The oldest view of jurisprudence dating back to
Aristotle . (system of laws existing in particular
place. the system of laws that exists in a
particular place or that affects a particular area
of activity)
Jeffersons Declaration assumes the Laws of
Nature.
Natural Law
Rev. Martin Luther King, Jr.
Letter from the Birmingham Jail, April 16,
1963. [T]here are two types of laws: just
and unjust laws. . . . A just law is a man-
made code that squares with the moral
law . . . . An unjust law is a code that is
out of harmony with the moral law. . . .
An unjust law is a human law that is not
rooted in eternal and natural law.
Legal Positivism
Law is the supreme will of the State that
applies only to the citizens of that nation
at that time.
Law, and therefore rights and ethics, are
not universal. The morality of a law, or
whether the law is bad or good, is
irrelevant.
Legal Realism
Jurisprudence that holds law is not simply
a result of the written law, but a product
of the views of judicial decision makers,
as well as social, economic, and
contextual influences.
2: The Common Law Tradition
American law is based largely on English
Common Law which was based largely on
traditions, social customs, rules, and cases
developed over hundreds of years.
The Common Law Tradition [2]
At common law, there were two separate
court systems with two different types of
remedies:
COURTS OF LAW (monetary relief), and
COURTS OF EQUITY (non-monetary relief)
based on notions of justice and fair dealing.
Courts of Law
Also called kings courts where judges
were appointed by the king.
Remedies limited to those provided at law,
i.e., land, chattel (something that you
own), money.
Judges resolved disputes by application of
rules of law to the facts of the case before
the court.
Courts of Equity
Equitable relief was sometimes available
in instances where a strict application of
the law to the facts of the case compelled
a result that was legal but unjust.
Remedies Today
Today federal and state courts of general
jurisdiction have consolidated remedies at
law and remedies at equity.
Generally, the same court can fashion a
remedy that includes both damages and
equitable or injunctive relief.
Stare Decisis
Stare decisis is a Latin phrase meaning to
stand on decided cases.
Makes the law stable and predictable.
Increases judicial efficiency by relieving courts
of having to reinvent legal principles for each
case brought before them.
Stare Decisis and Precedent
Stare decisis is judge made law based on
precedent.
Precedents are judicial decisions that give rise
to legal principles that can be applied in future
cases based upon similar facts.
Precedents and other forms of positive law, such
as statutes, constitutions, and regulations, are
referred to as binding authority and must be
followed.
Cases of First Impression
In cases of first impression where there
is no precedent, the court may refer to
positive law, public policy, and widely held
social values in order to craft the best new
precedent.
Legal Reasoning
Method used by judges to reach a
decision.
Many courts and attorneys frame decisions
and briefs using the IRAC format: Issue,
Rule, Application (Analysis), and
Conclusion.
Types of Legal Reasoning
Deductive Reasoning: Makes use of
syllogism, a type of logical relationship
involving a major premise and a minor
premise.
Linear Reasoning: Proceeds from point
to point, with the final point being the
conclusion.
Reasoning by Analogy: Analysis that
compares facts of present case with
facts of similar previously-decided
cases.
4: Classifications of Law
Every type of law will be either:
Civil or Criminal, and either
Substantive or Procedural, and either
Public or Private.
Civil vs. Criminal
Civil law defines the rights between
individuals or individuals and
governments.
Criminal law defines an individuals
obligations to society as a whole.
Substantive vs. Procedural
Substantive law defines or creates the
rights and obligations of persons and
governments.
Procedural law provides the steps one
must follow in order to avail oneself of
ones legal rights or enforce anothers
legal obligations.
7: Businesspersons
and the Law
Laws regulate all areas of business.
Factors business owners must consider:
Is contract enforceable?
Contract for goods vs. services?
What happens if someone breaches the
contract?
Dispute Resolution?
Contract law regulates everything from
buying a bus ticket to trading on derivatives
markets.
Property law defines rights and obligations
related to the transfer and title of personal
and real property.
criminal law offers means by which the
state can prosecute the perpetrator

Major Legal Systems
Common Law derived from case
circumstances; Judges role is dominant
Adversarial system

Civil or Continental statutory bases; Judges
discretion is minimized
Inquisitorial system

Religious or customary based on traditional
texts and practices
Civil Laws
Private Law = regulate rights and duties
between individuals
Contracts and Civil actions

Equitable bases of interpretation
Equity and equality balance of interests
Probabilities and preponderance
Compensatory remedies
Criminal Laws
Relates to only specific offences and results in
deterrent punishments no victim perspective?
Not retrospective; right to silence

Strict interpretation and fair trial principles
procedural guarantees
Beyond all reasonable doubt

Prosecution by the State on the rationale of
public welfare and deterrence
Economic Crimes
Features of Economic Crimes:
Cause economic loss to society; not just to
victims
Multiple negative effects
Specific modus operandi
Fraudulent intent
Evidentiary difficulties expert testimony

Quest for the Truth
Object of Criminal Justice = accurate truth
substantial and scientific

DNA Profiling; Narco-analysis; Medico-legal;
Forensic methods and resources
Fingerprinting; graphology; phonetics

Documentary and Cyber evidence
Reliance on Expert evidence
Structure of the Courts
Civil side = Civil Judge District Court High
Court Supreme Court

Criminal side = Magistrate Sessions Court
(District) High Court Supreme Court
Aided by Police and Prosecution

Jurisdiction/Powers = determination of facts
appreciation of evidence material questions of
facts and law decisive on facts; appeals on law
Exercise of Judicial Powers
Regular Appeals and Review in superior Courts

Special Appeals in the Supreme Court

Writ powers of High Courts and the Supreme
Court (of emergent nature)

Review and Curative powers of Supreme Court
The Constitution of India
Preamble Sovereign, Socialist, Secular, Democratic
Republic

Justice, Liberty, Equality & Fraternity

Inherent Qualities of the Indian Legal System

Longest in the World 395 not out !

12 Schedules and 22 Parts

Government and its three branches
Fundamental Rights
Enforceable only against State except Right
against exploitation and Right of Personal
Liberty which are enforceable against fellow
citizens too
Is Company a State only public function

Certain Rights are only for Citizens Right to
freedom of speech & expression; to form
associations; to move freely and reside
anywhere in India; occupation
Fundamental Rights
Right to Equality bedrock of all Rights
Equality before the Law; and Equal
Protection of the Laws

Classification based on intelligible differentia
Must have a nexus with the Objective
Eschews Arbitrariness
Caste based Reservations; AIDS Drugs Policy
Equality?
Fundamental Rights
Fundamental Freedoms only to citizens

Reasonable restrictions public order
and interests of general public

TEN Sports and Cricket on DD
Restrictions on the Media in reporting on
terror strikes and rescue attempts
Right to Property
Earlier a Fundamental Right

Now a Constitutional Right

Deprivation only by authority of law
Public interest and Just compensation
Singur controversy; SEZs
Directive Principles of State Policy
Non enforceable by Courts

Welfare of the People
Right to Work
Distribution of Economic Resources
Living wage for workers
Participation of Workers in management of
Industries
Federalism Law making Powers
Union, State and Concurrent Lists to facilitate smooth
trade and commerce

Union = Defence, Ports, Aircrafts, Railways, Intellectual
Property, Trade and Commerce; Total 96 with residuary
power

State = Land Rights, Production, supply and distribution
of goods; Total 66

Concurrent = Contracts, Banking, Economic and Social
Planning; Total 47
Government Contracts
On behalf of President or Governor
They are not personally liable

Is Government Company like any other?
PPPs and other Public Contracts

Economic Policy of the State
Nature of Judicial interventions
Globalization of Law
To appreciate the relevance of
International legal principles in
the Indian Legal System
Effect of International Law
Transnational Dispute Resolution Mechanisms
Institutional models: WTO; ICJ; Commercial
Arbitration mechanisms

Application of International Principles within the
Legal System of a Nation
Enforcement of International Covenants
Formation and Compliance of Treaties
Adoption by Domestic Institutions Courts and
Legislatures
WTO Constitutional Principles
Most Favoured Nation (MFN)

National Treatment

One Member One Vote

Reverse Consensus Rule
WTO Principles

Single Undertaking except in Plurilateral Form

Dispute Settlement multi-tiered structure

Enforcement Sanctions and Countermeasures

Supreme respect for Negotiations at all stages
Specific Challenges
WTO - International Trade Regulation
Captured by vested interests?

Defensive Mechanisms and Trade
Remedies
Objectivity in the Rules?

Dispute Settlement Mechanisms
Level-playing field?
LAW OF TORTIOUS
LIABILITY
To understand the extent of
legal duty to take care and the
corresponding enforceable remedies
What is a Tort?

Civil Wrong an affront committed in a
private sphere, but against a duty owed to
a society

Different from Criminal Law; Contract Law
Typology of Torts
Negligence
Defamation Libel and Slander
Trespass to person (assault, battery,
confinement) and to property
Nuisance Public and Private
Abuse of legal procedure harassment
Accidents & Environmental Hazards
Basic Principles
Duty to take care reasonable standard

Breach of that duty

Injury and Damage caused by such breach

Damages payable as Compensation
Basic Principles
Remoteness of Damage and Test of
Reasonable Foresight

Compensation is the objective restitutio
in integrum

Res ipsa loquitor (facts speak for
themselves) rule of evidence
Injuria sine damnum

Ashby v. White (1703) legal right
injured, but no damage

Nominal damages awarded

Damnum sine injuria

Mayor of Bradford v. Pickles
Use of own land but, with bad motive
City of Bradford was affected by such an act

No legal right was injured
General Defences
1. Volenti non fit injuria if volunteered
by the plaintiff with knowledge + consent
Consent could be express or implied
Medical Negligence Prior Informed Consent

2. Inevitable accident
Uncertain and unforeseen
Despite reasonable care by the defendant
General Defences
3. Act of God (vis major)
Involvement of Natural forces
Unforeseen extraordinary impact

4. Right of Private Defense
To protect person or own property
Necessary and Reasonable force standard
Proportionality expected electric fencing
General Defences

5. Statutory Authority
Activity causing injury should be authorized
Does not apply to such authorized activities
undertaken in a negligent manner

6. Contributory Negligence when the
plaintiff is also partly liable
Kinds of Liabilities

1. Vicarious Liability

2. Strict Liability

3. Absolute Liability
Vicarious Liability
Responsibility and liability imposed for
actions undertaken by certain others
Principal is liable for Agents acts
Partners are liable for each others acts
Master is liable for the servants acts what
about Government servants?
Contract of Service & Contract for Service
Strict Liability
Rylands v. Fletcher (1868)

Negligent work, even of Independent Contractors
Source of damage from own land
Strict Responsibility attributed to any damage
caused by actions on own property

General Defences can be claimed to overcome
liability
Absolute Liability
Indian Supreme Court improvised the
Strict Liability principle
Cases involving violation of the Environment

No application of General Defences

Compensatory liability mandated
Deep pocket principle
Discussion
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
4. BUSINESS LAW IN INDIA

1. Contract Act, 1872
2. Negotiable Instruments Act, 1881
3. Sale of Goods Act, 1930
4. Partnership Act, 1932
5. Companies Act, 1956
6. Securities Contracts (Regulation) Act, 1956
7. MRTP Act, 1969
8. Foreign Exchange Management Act, 1999
9. Patent Act, 1970; Copy Right Act, 1957; Trade and
Merchandise and Marks Act, 1958
10. Sick Industrial Companies (Special Provision) Act, 1985
11. Consumer Protection Act, 1986
12. Environment (Protection) Act, 1986
13. Essential Commodities Act, 1955
14. Information Technology Act, 2000
15. Competition Act, 2002
5. CONTRACT ACT, 1872
1. 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

1. 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).
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.
6.2 Essential Requirements of Contract
1. Two parties
2. An agreement :
Consensus-ad-idem
3. Legal obligation
6.3 Agreements which are not contracts :
1. Agreements relating to social matters
2. 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
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.
1. Offer and acceptance
2. Intention to create legal relationship :
3. Lawful Consideration
4. Competence of parties to Contract
5. Free consent
6. Lawful object
7. Agreement not declared as void
8. Certainty and possibility of performance :
9. Legal formalities
CLASSIFICATION OF CONTRACTS
Chart 2

Classification of Contracts
Validity and
Enforceability
Mode of
Creation
Extent of
Execution
Obligation
to perform
Classification of contracts on the basis of validity and Enforceability :
1. Valid contracts
2. Voidable contracts
3. Void Contract
Classification of contracts on the basis of Mode of Creation :
1. Express Contracts
2. Implied contracts
3. Quasi Contracts
Classification on the basis of extent of execution :
1. Executed Contracts
2. Executory Contract
Classification on the basis of
the obligation to perform :


1. Unilateral Contracts

2. Bilateral Contract

CONTRACT
CONTRACT - According to sec.2(h), a
contract is defined as an agreement
enforceable before the law.

AGREEMENT - According to sec.2(e),
every promise or set of promises forming
consideration for each other.

PROMISE - According to sec.2(b),
when a person made a proposal to
another to whom proposal is made, if
proposal is assented there to.

OFFER - According to Sec.2(a), when a
person made a proposal, when he signifies
to another his willingness to do or to abstain
from doing something.



CONSENSUS - AD IDEM-
According to Sec.13, meeting of minds or
identity of minds or receiving the same thing
in same sense at same time.



Agreement Legal Obligation

Contract
All agreements are contracts
but all
contracts are not
agreements.


CONTRACT = AGREEMENT +
ENFORCIBILITY BEFORE LAW
ESSENTIAL ELEMENTS
OF A VALID CONTRACT
(Sec.10)

1.Offer & acceptance.
2.Intention to create legal relationship.
3.Consensus - ad - idem.
4.Consideration.
5.Capacity to contract.
6.Free consent.
7.Legality of object.
8.Possibility of performance.
9.Writing & registration.

VALID CONTRACTS

Absolute contract
Contingent contract(Sec. 31-36)
Express contract
Implied/Quasi contract(Sec.68- 72)
Valid contract - If all the condition are
fulfilled it is called as a valid contract.
Contingent contract - In a contract
to do or not to do something, if an event
is collateral, does or doesn't happen.
Express contract - When contracts
are either in writing or in oral.
Implied contract - When contracts
are neither in writing nor in oral.
Absolute contract - A contract which
is not dependent on fulfillment of any
condition.

OVoid contract
Is void(Void - ab - initio)
Becomes void
OVoidable contract
OIllegal contract
OUnenforceable contract
Invalid contract - In a contact if
any one condition is not fulfilled.
Is void (Void-ab-initio) - An
agreement which is not valid from
the beginning.
Becomes void - An agreement
which is valid in the beginning but
due to some supervening
impossibility the contract becomes
void.
Illegal contract - An agreement
forbidden by law.
Unenforceable contract - It is
valid but due to some technical
defect the contract becomes void. In
case defects are removed the
contract is enforceable.(lack of
registration, lack of signature etc.,)
Voidable contract - A contract
which is valid unless until avoided
by either the party.

Executed contract - In a contract where both


the parties have performed their obligation,
there is remaining nothing to perform.
Executory contract - In a contract where both
the parties are yet to perform their obligation.
Unilateral contract - In a contract one party
has performed his obligation and other
person is yet to perform his obligation.
Bilateral contract - In a contract where both
the parties have performed their obligation.
Bilateral & Executory are same and inter -
changeable.

According to Sec.2(a),
when a person made a
proposal, when he
signifies to another his
willingness to do or to
abstain from doing
something.


Express offer
Implied offer
Specific offer
General offer
Cross offer
Counter offer
Standing offer
Express offer - When offer is given
to another person either in writing or in
oral.
Implied offer - When offer is given
to another person neither in writing nor
in oral.
Specific offer - When offer is given
to a specific person.
General offer - When offer is given
to entire world at a large.(Carlill Vs.
Carbolic smoke ball Co.,)

Cross offer - When both the
persons are making identical offers to
eachother in ignorance of others offer.
Counter offer - When both the
persons are making offers to eachother
which are not identical in ignorance of
others offer.
Standing offer - An offer which
remains continuously enforceable for a
certain period of time.
+Offer must be given with an intention
to create a legal relationship.(Balfour
Vs. Balfour)

+Offer must be definite.(Taylor Vs.
Portington)

+There is a clear cut difference
between offer, invitation to offer,
invitation to sale. (Harris Vs.
Nickerson)
+Offer must be communicated. (Fitch
Vs. Snedkar)

+Mere statement of price of price is not
an offer.(Harvey Vs. Facey)

According to sec.2(b), when a
person made a proposal to
another to whom proposal is
made, if proposal is assented
there to, it is called
acceptance.



Acceptance must be given as per the
mode prescribed by the offerer.
Acceptance must be given before the
lapse of time or within reasonable time.
Acceptance must be unconditional.
Acceptance may be given by any
person in case of general offer.
Acceptance may be given by any
specific person in case of specific offer.
Acceptance must be communicated.
(Bordgon Vs. Metropolitan Rly. Co.)
Mental acceptance is no acceptance
or acceptance must not be derived from
silence.
Acceptance must not be precedent to
offer.
According to sec 2(d) consideration is
defined as when at the desire of the
promisor , or 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 absinence or
promise is called a consideration for the
promise .
When a party to an agreement promises
to do something he must get
something in return .This something
is defined as consideration.
LEGAL RULES AS TO
CONSIDERATION
1)It must move at the desire of the promisor.
[Durga Prasad v. Baldeo ]
2)It may move by the promisee .
[Chinnaya v. Ramayya ]
3)It must be past ,present or future .
4)It need not be adequate .
5)It must be real .
6)It must not be illegal , immoral or opposed to
public policy .

STRANGER TO CONTRACT
It is general rule of contract that only parties
to contract can sue & be sued on that
contract . This rule is known as Doctrine of
privity i.e relationship between the parties
to contract .
Exceptions
1)A trust or a charge .
2)Marriage settlement , partition or other
family arrangements .
3)Estoppel
4)Assignment of contract .
5)Contract with agent .
6)Convenants running with land .

Contract without consideration
is void Exceptions
Love & affection .
[Venkataswamy v. Rangaswamy]
Compensation for voluntary service .
Promise to pay a time barred debt .
Completed gift .
Agency sec (185) .
Charity .
Contract of bailment sec(148 ) .



[Abdul Aziz v. Masum Ali]
[Kedarnath v. Gauri Mohamed ]
Following are the condition for a person
to enter into contract
He must be major
He must be sound mind
He must not be disqualified by any
other law.
Disqualified persons to
enter into a contract
a) Minor
b) unsound person
c)others
i.e alien enemy,
insolvent,
convict,
company/corporationagainst MOA / AOA .
According to Indian majority act sec(3)
minor is defined as any person under
the age of 18 years . In the following
cases a person is said to be minor if
he does not complete the age of 21
years
a) any person under the guardian &
wards act ,1890
b)any person which comes under
superintendence of law/legal
representative
Rules governing minors
agreement
Rule 1 : judges are counsellors ,
jury is the servant ,
law is the guardian .
Rule 2:in case minor entered into a
contract which is unlawful , illegal ,
immoral he is also prosecutable &
punishable under the relevant law.

An agreement with minor is void
ab initio
[Mohiri Bibi v. Dharmadas Ghase]
Minor can be promisee
[Shrafat Ali v. Noor Mohd]
Minor cannot ratify his agreement
on attaining the age of majority
[Indra Ramaswamy v. Anthiappa
Chettier]

Minor as a shareholder ,
Minor as a partner,
Minor as a agent ,
Minor as a member of trade union ,
No estoppel against minor ,
He can plead his minority ,
He can enter into contract for his
necessary
[Robert v. Gray ]
On behalf of minor his parents ,
guardian or any other person can
enter into void contract to acquire
movable property.

According to sec(12) a person
generally sound , occasionally
unsound can enter into a
contract when he of sound mind
A person generally unsound
occasionally sound can enter
onto contract when he is sound
mind .
1)Lunatic ,
2)Idiots ,
3)Drunken or intoxicated persons .
According to Sec 10 of the Indian
Contract Act one of the essentials of a
valid contract is Free Consent
Sec 13 defines consent as Two or
more persons are said to consent when
they agree upon the same thing in the
same sense.According to Sec 14,
consent is said to be free when it is not
caused by:
1.Coercion
2.Undue influence
3.Fraud
4.Misrepresentation
5.Mistake

According to Sec 15 coercion means
Committing or threaten to commit any act
forbidden by Indian Penal Code 1860 or
unlawful detaining or threating to detaining
any other persons property with a view to
enter into an agreement. It is immaterial
whether the IPC is or is not in force where
the coercion is employed

The threat amounting to coercion need
not necessarily be from a party to contract ,
it may also proceed from a stranger to the
contract.
Consent is said to be caused by coercion when
obtained by:
1.The committing or threatening to commit any act
forbidden by the Indian Penal Code
2.The unlawful detaining or threatening to detain any
property
It is not important whether the IPC is or not in force
where the coercion is taking place.
For example A and B , both Indians are on a voyage
trip to America when the ship is on the Atlantic
ocean B threatens a that if doesnt transfer his
property to Bs name then he will push him into the
water.now though the IPC is not in force on the
Atlantic ocean it is still considered a coercion.

1.Chikkim Ammiraju vs. Seshamma:
In this case a person threatened his wife and son
that he would suicide if she doesnt transfer her
property in his brothers favour. The wife and
son executed the release of the deed under the
threat . Held the threat of suicide amounted to
coercion within Sec 15 and the release deed was
therefore voidable.
This also is a very important case
to prove that threat to commit
suicide amounts to coercion
2. Ranganayakamma vs. Alwar Setty:

A young widowed girl of 13 years was
forced to adopt a boy by her relatives who
prevented the removal of his body for
cremation until she consented. Held the
consent was not free but was induces by
coercion.Consequently the adoption was
set aside.
3.Muthia vs. Muthu Karuppa:
An agent refused to hand over the
account books of a business to the
new agent unless the principal
released him from all liabilities.the
principal had to give a release
deed.held the deed was
given under coercion
and was voidable
at the option of the
principal.
4. Bansraj vs. Secretary of State:
The government gave a threat of
attachment against the property of
P for the recovery of the fine due
from his son. P paid the fine. Held
contract was
induced by
coercion
Sometimes a party is compelled to enter into a
contract against his will as a result of unfair
persuasion by the other party.
Section 16 defines undue influence as follows
A contract is said to be induced by undue
influencewhere the relations subsisting
between the parties are such that one of the
parties is in a position to dominate the will of
the other and uses that position to obtain an
unfair advantage over the other








1. There are two persons
2. The relations are satisfying between them
3. One must dominate the other
4. There must be unfair advantage
5. It involves the moral pressure
There is an undue influence between the
following persons:
-Principal and agent
-Superior and and subordinate
- Doctor and patient
- Father and son
- Teacher and student
- Promoter and company
- Master servant
- Spiritual advisor and devotee

Among the following relations there is no undue
influence
1.wife and husband
2.landlord and tenant
3.debtor and creditor

CASE: Raniannapurna vs. Swaminathan
A poor Hindu widow was persuaded by a money
lender to agree to pay 100% rate of interest on
money lent by him. She needed the money to
establish her right to maintenance.it was a clear case
of undue influence and the court reduced the rate of
interest to 24%
According to Sec 17 fraud means and includes any of
those acts committed by a party to contract or with his
connivance or by his agent with an intent to deceive or
induce a person to enter a contract:
1. The suggestion that a fact is true when it is not
true and the person making it does not believe in
itto be true
2. The active concealment of a fact by a person
having knowledge or belief of the fact
3. A promise made without any intention of
performing it
4. Any other act fitted to deceive
5. Any such act or omission as the law specially
declares to be fraudulent
The essentials of fraud are:
1. There must be a representation or
assertion and it must be false
2.The representation must relate to a fact
3.The representation must have been
made with the intention of inducing the
other party to act upon it
4.the representation must have been
made with a knowledge of its falsity
5.the other party must have subsequently
suffered some loss
According to Sec 18 there is misrepresentation:
1. When a person positively asserts a fact is true
when his information does not warrant it to be
so, though he believes it to be true
2. When there is any Breach of duty by a person
which brings an advantage to the person
committing it by misleading another to his
prejudice
3. When a party causes however innocently the
other party to the agreement to make a mistake
as to the substance of the thing which s the
subject of the agreement
Babul vs. R.A.Singh:
M was a marriage broker who gave Y the
photograph of a man and told him that the man
was young and rich. Y conveyed the same to his
daughter who agreed for the proposal. But on the
day of marriage it was discovered that the man
was the age of 60. There is fraud between M and
Y. whereas the is misrepresentation between Y
and his daughter.
Important case:
MISTAKE
Mistake of fact
Of the
country
Of the foreign
country Bilateral mistake Unilateral mistake
Mistake as to subject matter
Mistake as to
possibility
As to
person
As to
nature
Physical impossibility Legal impossibility
existence identity quality quantity title price
Mistake of law
Unlawful agreements
illegal immoral
Agreement opposing
public policy
wager
An agreement which
interferes with
administration of
government
An agreement
interfering with the
administration of justice
An agreement interfering
with administration of
personal liberties
Restraint of
parental rights
Restraint of
profession
Restraint of
marriage
Restraint of
trade
Restraint of
martial duties
If the object of an agreement is the
performance of an unlawful act, the
agreement is unenforceable.
For a contract to be valid only if the object
and the consideration should be legal.
The word object means purpose or design.
UNLAWFUL OBJECT
An agreement forbidden by law [Sec 23]

An agreement defecting any provisions of law [Sec 24]

Case: Alexander vs. Rayson
A leased a flat to R at a rent of 1,200
pounds.with the object of deceiving the rating
authority two agreements were entered, one for
450 pounds and one for 750 pounds. A sued R
for recovery of an installment of 750 pounds.
Held A could not recover and R was entitled to
remain in possession of the flat.
Unlawful agreements
If it is immoral
Case: S.Yellappa vs. Y.Sabu
Cohabitation agreements are immoral
Sumitradevi vs. Sulekha Kundu

An agreement between a husband and wife to
separate in future is immoral and void
An agreement opposed to public policy
If it is fraudulent

If it is creating damage to person or property
Case: Ramswaroop vs. Bansimandir
B borrowed Rs. 100 from L and executed a
bond promising to work for L without pay
for a period of two years.In case of default
B was to pay interest at a very exorbitant
rate and the principal sum of once. Held the
contract was void as it involved injury to
the person of B.


There are two persons.
There must be an uncertain future event.
No control over the event by both the
parties.
There must be a reciprocal promise.
Others are not interested in the contract.

Wager Contract (Sec 30)
A wager contract is a contract in which one
person promises to another to pay money
or moneys worth by the happening of an
uncertain future event in consideration for
other persons promise to pay if the event
does not happen.


Essential Elements of
Wagering

There are two persons.
There must be an uncertain future event.
No control over the event by both the
parties.
There must be a reciprocal promise.
Others are not interested in the contract.

Example:
In a wrestling bout,
A tells B that wrestler
no.1 will win. B
challenges the
statement of A. They
bet with each other
over the result of the
bout. This is a
wagering agreement.
CONTINGENT
CONTRACTS
Contingent Contract(sec 31)
A contingent contract is a contract to do or
not to do something, if some event,
collateral to such contract, does or does not
happen. It is also called a conditional
contract.

Essential Elements of a
Contingent Contract:
There are two persons.
There must be an uncertain future event.
Some control over the event but not
absolute control.
There is no reciprocal promise between the
persons.
Others may be interested in the contract.
It is a valid contract.
Example:
A contracts to pay B
Rs.10,000 if Bs
house is burnt. This is
a contingent contract.
Rules Regarding Contingent
Contracts
Contingent contracts dependent on happening of an
uncertain future event cannot be enforced until the
event has happened.( Sec 32 )
Where a contingent contracts is to be performed if
a particular event does not happen, its performance
can be enforced when the happening of that event
becomes impossible.( Sec 33 )
If a contract is contingent upon how a person will
act at an unspecified time, the event shall be
considered to become impossible when such person
does anything which renders it impossible that he
should so act within any definite time, or otherwise
than under further contingencies.( Sec 34)
Contingent contracts to do or not to do
anything, if a specified uncertain event does
not happen within a fixed time, may be
enforced if the event does not happen or its
happening becomes impossible before the
expiry of that time.( Sec 35 )

Contingent agreements to do or not to do
anything, if an impossible event happens,
are void, whether or not the fact is known to
the parties. (Sec 36)

Differences Between a Wagering
Agreement and a Contingent
Agreement:

Wager agreement
There is a reciprocal
promise.
It is a void contract.
Others are not
interested in the
contract.
It is contingent in
nature.

Contingent agreement
There is no reciprocal
promise.
It is a valid contract.
Others are interested in
the contract.
It may not be wagering
in nature.

DISCHARGE BY PERFORMANCE
DISCHARGE BY AGREEMENT OR
CONSENT
DISCHARGE BY IMPOSSIBILITY OF
PERFORMANCE
DISCHARGE BY LAPSE OF TIME
DISCHARGE BY OPERATION OF LAW
DISHARGE BY BREACH OF CONTRACT
ACTUAL PERFORMANCE
When both parties perform their promises &
there is nothing remaining to perform

ATTEMPTED PERFORMANCE
When the promisor offers to perform his
obligation ,but promisee refuses to accept the
performance. It is also known as tender
DISCHARGE BY
AGREEMENT OR CONSENT
NOVATION (Sec 62): New contract substituted for
old contract with the same or different parties
RESCISSION (Sec 62) : When some or all terms of a
contract are cancelled
ALTERATION (Sec 62):When one or more terms of
a contract is/are altered by the mutual consent of
the parties to the contract
REMISSION (Sec 63) :Acceptance of a lesser
fulfilment of the promise made.
WAIVER :Mutual abandonment of the right by the
parties to contract
MERGER :When an inferior right accruing to a
party to contract merges into a superior right
accruing to the same party
KNOWN TO PARTIES
UNKNOWN TO PARTIES
SUBSEQUENT IMPOSSIBILITY
SUPERVENNING IMPOSSIBILITY (Sec 56)
Destruction of subject matter
Non-existance of state of things
Death or incapacity of personal services
Change of law
Outbreak of war
THE LIMITATION ACT 1963,
CLEARLY STATES THAT A
CONTRACT SHOULD BE
PERFORMED WITHIN A SPECIFIED
TIME CALLED PERIOD OF
LIMITATION

IF IT IS NOT PERFORMED AND IF
THE PROMISEE TAKES NO ACTION
WITHIN THE LIMITATION TIME,
THEN HE IS DEPRIVED OF HIS
REMEDY AT LAW
+DEATH
+MERGER
+INSOLVENCY
+UNAUTHORISED ALTERATION OF THE
TERMS OF A WRITTEN AGREEMENT
+RIGHTS & LIABILITIES VESTING IN THE
SAME PERSON

+ACTUAL BREACH :
At the time of performance
During the performance

+ANTICIPATORY BREACH
By the act of promisor
(implied repudation)
By renunciation of obligation
(express repudation)

A remedy is a means given by law for the
enforcement of a right
Following are the remedies
[1] Rescission of damages.
[2] Suit upon quantum meruit.
[3] Suit for specific performance.
[4] Suit for injunction.

When a contract is broken by one party,the other
party may sue to treat the contract as rescinded
and refuse further performance.In such a case,he is
absolved of all his obligations under the contract.
The court may give rescission due to
1)contract is voidable.2)contract is unlawful
The court may refuse to rescind if
1)Plaintiff has ratified the contract.2)Parties cannot
be restored to the original position.3)The third
party has acquired for value.4)When only a part is
sought to be rescinded.(sec 27 of specific relief act
1937)
Damages are a monetary compensation
allowed to the injured party by the court for the
loss or injury suffered by him by the breech of
the contract.The objective of awarding damages
for the breech of contract is to put the injured
party in the same position as if he had not been
injured.This is called the doctrine of
restitution.The fundamental basis is awarding
damages for the pecuniary loss.
The phrase quantum meruit literally means as
much as earned.A right to sue on a quantum
meruit arises when a contract, partly performed
by one party,has been discharged by breach of
contract by the other party.This right is
performed not on original contract but on implied
promise by other party for what has been done.
In certain cases of breach of contract damages are
not an adequate remedy.The court may,in such
cases,direct the party in breach to carry out his
promise according to terms of the contract.This is
a direction by the court for specific performance
of the contract at the suit of the party not in breach
Cases for specific performance to be enforced
1)when the act agreed to be done is such that
compensation is not adequate relief.2)when there
is no standard for ascertaining the actual damage
3)when it is probable that compensation cannot
be agreed to be done.

When a party is in breech of a negative term of
contract the court may,by issuing an
order,restrain him by doing what he promised
him not to do. Such an order of the court is called
injunction
Court refuses grant of injunction
[1] whereby a promisor undertakes not to do
something
[2] which is negative in substance though not in
form
Supply of necessaries (Sec 68)
Payment by a interested person (Sec 69)
Obligation to pay for non gratuitous acts
(Sec 70 )
Responsibility of finder of goods (Sec 71 )
Mistake or Coercion (Sec 72 )


According to sec 68 a minor is liable to pay out
of his property for necessaries supplied to him or
to anyone whom he is legally bound to
support.The significance of this is that it does not
arise out of a contract as much so as it arises out of
a contract.the minor is not personally liable and
necessaries include food,clothing as well as
education,They also include watch bicycle etc.
OBLIGATION TO PAY FOR
NON GRATUITOUS ACTS
According to Sec 70 when a person lawfully does or
delivers anything for the other ,not intending to do
so gratuitously,and the person derives any benefit
from it,he is liable to compensate,or restore the
thing so done or delivered.
Here three conditions must satisfy
[1] The thing must have been done lawfully
[2] The person intending to do it must not have done
it gratuitously
[3] The person must have derived benefit from the
act
PAYMENT BY A INTERESTED
PERSON
According to Sec 69 a person who is interested in
the payment of money which another is bound by
law to pay,and who therefore pays it, is entitled to
be reimbursed by the other.
The essential elements center around
[1] The payment made should be bona fide of ones
interest
[2] The payment should not be a voluntary one
[3] The payment must be such that the other is
bound by law to pay

RESPONSIBILITY OF THE
FINDER OF GOODS
According to Sec 71 a person who finds goods
belonging to another and takes them into his
custody is subject to the same responsibility as the
bailee is bound to take as much care of the goods as
a man of ordinary prudence would,In addition to
that he must make efforts to trace the owner.If he
does not ,he will be guilty of wrong conversation,and
till the owner is found out the property will vest
with the finder,he can sell in case of
[1] goods are or perishable nature
[2] owner cannot be found out
[3] when owner refuses to pay for the lawful charges
[4] when the lawful charges amount to two thirds of
thing

A CONTRACT BY WHICH ONE
PARTY PROMISES TO ANOTHERR TO
SAVE HIM FROM LOSS CAUSED TO
HIM BY THE CONDUCT OF THE
PROMISOR HIMSELF , OR BY THE
CONDUCT OF ANY OTHER PERSON IS
CALLED A CONTRACT OF INDEMNITY
- There are two persons , the indemnifier
the indemnified or the indemnity holder
- There must be loss either by the
promisors conduct or by any other
persons conduct
- It is a contingent contract by nature
- It may be express or implied

Sec125 deals with the commencement
of the indemnifiers liability. His liability
commences when the event causing the
loss occurs or when the event saving the
indemnified from the loss becomes
impossible
A CONTRACT OF GUARANTEE IS A CONTRACT TO
PERFORM THE PROMISE, OR DISCHARGE THE
LIABILITY,OF A THIRD PERSON IN CASE OF HIS
DEFAULT. THE PERSON WHO GIVES THE
GUARANTEE IS KNOWN AS THE SURETY, THE
PERSON IN RESPECT OF WHOM THE GUARANTEE
IS GIVEN IS KNOWN AS THE PRINCIPAL DEBTOR,
AND THE PERSON TO WHOM THE GUARANTEE IS
GIVEN IS CALLED THE CREDITOR. A
GUARANTEE MAY BE EITHER ORAL OR WRITTEN.
Concurrence of three contracts
Primary liability is that of the principal debtor
In case the debtor is a minor , the suretys
liability becomes primary
All the essentials of a valid contract
It may be in writing or oral
There need not be full disclosure of facts to the
surety before he gives the guarantee
SPECIFIC GUARANTEE :
When a guarantee extends to a single
transaction or debt it is known as a specific or
simple guarantee
CONTINUING GUARANTEE :
When a guarantee extends to a series of transactions
It is called continuing guarantee
BAILMENT
The word Bailment is derived from the French
word ballier which means to deliver .
Bailment means 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 instructions of the person delivering them.
The person delivering the goods is called the
bailor and the person to whom they are
delivered is called the bailee.
There are two persons namely Bailor and
Bailee.
Bailor means the person delivering the
goods, Bailee means the person to whom
the goods are delivered.
Their must be delivery of goods .
The goods must be in deliverable
condition.




Only the goods are delivered but not
the ownership of goods, their must be
purpose.
Bailey can use the goods.
Goods must be returned or disposed off
after the purpose is accomplished.
Duties of bailor.
To disclose known faults.
To bear extraordinary expenses of
bailment.
To indemnify bailee for loss in case of pre
mature termination of gratuitous bailment.
To receive back the goods.
To indemnify the bailee.
OEnforcement of rights.
OAvoidance of contract. (Sec153)
OReturn of goods lent gratuitously. (Sec 159)
OCompensation from a wrong doer. (Sec 180)
Delivery of goods to one of several joint
bailor of goods. (Sec 165).
Delivery of goods to bailor without title.
(Sec 166).
Right to apply to court to stop delivery.
(Sec 167)
Right to action against trespassers. (Sec
180)
Bailee s lien.

The bailment of goods as security for
payment of a debt or performance of a
promise is called Pledge.
The bailor in this case is called the
pledger or pawnor and the bailee is
called the pledgee or pawnee
RIGHTS AND DUTIES OF
PAWNOR AND PAWNEE
Rights of Pawnee.
Right of retainer.
Right of retainer for subsequent advances.
Right to extraordinary expenses.
Right against true owner, when the
Pawnors title is defective.
Pawnees rights where pawnor makes
default .

Right to get back goods.
Right to redeem debt.
Presentation and maintenance of the goods.
Rights of an ordinary debtor.
AGENCY
AGENT
Sec 182 defines an agent as a
person employed to do any
act for another , or to
represent another in
dealings with third
personsthe person for
whom such act is done is s
called the principal
Agreement between principal & agent
Intention of agent to act on behalf of the
principal
Anyone can be an agent
Anyone can employ an agent

BY EXPRESS AGREEMENT
BY IMPLIED AGREEMENT
Agency by estoppel
Agency by holding out
Agency by neccesity
AGENCY BY RATIFICATION
AGENCY BY OPERATION OF LAW
Agent must act as an agent for his principal
Principal must be in existance at the time of contract
Ratification must be with full knowledge of facts
Ratification should be done within a reasonable time
of the performance of the act
The act to be ratified should be of lawful nature
The ratification can be done only to the whole
transaction & not any part of it (Sec 199)
Ratification should be communicated with the party
to contract
Ratification should not cause any damages to a third
party
Ratification can only be of acts which principal had
the right to do


A sub agent is aperson employed & acting
under the control of the agent in the
business of the agency (Sec 191)

A substituted agent is a person named by the
agent, on an express or implied authority
from the principal, to act for the principal
(Sec 194)
DIFFERENCES BETWEEN SUB- AGENT &
SUBSTITUTE-AGENT
SUB-AGENT
1. He works under the
agent
2. There is no contact
between the agent &
the principal
3. Agent is wholly &
solely responsible for
the acts of the sub-
agent
SUBSTITUTE AGENT
1. He works under the
pprincipal
2. There is a contract
between him & the
principal
3. Agent is in no way
responsible for the
acts of the substituted
agent
Termination of agency
By act of parties
Agreement
Revocation by the principal
Revocation by the agent
By operation of law
Performance of the contract
Expiry of time
Death of either party
Insanity of either party
Insolvency of either party
Destruction of the subject matter
Principal becoming an alien enemy
Dissolution of a company
Termination of sub-agents authority
THANK
YOU

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