Legal Aspects Of Business Unit - 1 PPTs

Legal Aspects Of Business Unit - 1 PPTs

1. LEGAL ASPECTS OF BUSINESS UNIT - I

2. LAW - DEFINITION Includes all the rules and principles, which regulate our relations with other individuals and with the state. Law is the body of principles recognized and applied by the state in the administration of justice.

3. LAW OF CONTRACT It is that branch of law which determines the circumstances in which promises made by the parties to a contract shall be legally binding on them.

4. INDIAN CONTRACT ACT, 1872 Deals with: The general principles of the law of contract Some of the special contracts (indemnity and guarantee, bailment and pledge)

5. CONTRACT A contract is an agreement made between two or more parties which the law will enforce. Sec 2 (h ) defines contract as follows: Contract is an agreement enforceable by law.

6. ELEMENTS OF CONTRACT Agreement Its enforceability by law.

7. AGREEMENT Every promise and every set of promises , forming consideration for each other. AGREEMENT = OFFER + ACCEPTANCE

8. PROMISE When the person to whom the proposal is made signifies his assent thereto , the proposal is said to be accepted. A proposal when accepted becomes a promise.

9. CONSENSUS AD IDEM This means that the parties to the agreement must have agreed about the subject matter of the agreement in the same sense and at the same time.

10. OBLIGATION It is a legal tie which imposes upon a definite person or persons the necessity of doing or abstaining from doing a definite act or acts.

11. ESSENTIAL ELEMENTS OF VALID CONTRACT Offer and acceptance Intention to create legal relationship Lawful consideration Capacity of parties – competency Free and genuine consent Lawful object Agreement not declared void Certainty and possibility of performance Legal formalities

12. CLASSIFICATION OF CONTRACTS Classification according to validity Classification according to formation Classification according to performance

13. CLASSIFICATION ACCORDING TO VALIDITY Voidable contract Void agreement Void contract Illegal agreement Unenforceable contract

14. CLASSIFICATION ACCORDING TO FORMATION Express contract Implied contract Quasi-contract E-commerce contract

15. CLASSIFICATION ACCORDING TO PERFORMANCE Executed contract Executory contract Unilateral or one – sided contract Bilateral contract

16. VOID AGREEMENTS A void agreement is one which is not enforceable by law. Agreements the meaning of which is uncertain Wager agreements or wager Following agreements are declared void: Agreement by incompetent parties Agreements to do impossible acts Agreements in restraint of trade Agreement in restraint of marriage

17. ESSENTIALS OF A WAGERING AGREEMENT Promise to pay money Uncertain event Each party must stand to win or lose No control over the event No other interest in the event

18. PERFORMANCE OF CONTRACT Performance of a contract takes place when the parties to the contract fulfill their obligations arising under the contract within the time and in the manner prescribed

19. OFFER TO PERFORM Where a promisor has made an offer of performance to the promisee , and the offer has not been accepted the promisor is not responsible for non performance , nor does he thereby lose his rights under the contract.

20. BY WHOM MUST CONTRACTS BE PERFORMED? Promisor himself Agent Legal representatives Third persons Joint promisors

21. WHO CAN DEMAND PERFORMANCE? It is only the promisee who can demand performance of the promise under a contract.

22. TIME AND PLACE OF PERFORMANCE Where no application is to be made and no item is specified Where time is specified and no application is to be made Application for performance on a certain day and place Application by the promisor to the promisee to appoint place Performance in manner or at time prescribed or sanctioned by the promisee

23. RECIPROCAL PROMISES Promises which form the consideration or part of the consideration for each other are called reciprocal promises. They are classified as follows: Mutual and independent Conditional and dependent Mutual and concurrent

24. RULES REGARDING PERFORMANCE OF RECIPROCAL PROMISES Simultaneous performance of reciprocal promises Order of performance of reciprocal promises Effect of one party preventing another from performing promise Effect of default as to promise to be performed first Reciprocal promise to do things legal an also other things illegal

25. TIME AS THE ESSENCE OF CONTRACT It means that the performance of the promise by a party to the contract is essential within the specified period, in order to entitle him to enforce performance from the other party. When time is of the essence When time is not of the essence

26. APPROPRIATION OF PAYMENTS Where the debtor intimates Where the debtor does not intimate and the circumstances are not indicative Where the debtor does not intimate and the creditor falls to appropriate

27. BREACH OF CONTRACT Breach of contract means breaking of the obligation which a contract imposes. It may be: Actual breach of contract Anticipatory or constructive breach of contract

28. REMEDIES FOR BREACH OF CONTRACT A remedy is the means given by law for the enforcement of a right. When a contract is broken, the injured party has one or more of the following remedies: Rescission of the contract Suit for damages Suit upon quantum meruit Suit for specific performance of the contract Suit for injunction.

29. QUASI - CONTRACTS Under certain circumstances, a person may receive a benefit to which the law regards another person as better entitled, or for which the law regards another person as better entitled , or for which the law considers he should pay to the other person, even though there is no contract between the parties. Such relationships are termed as quasi-contracts. Law of quasi-contracts is also known as the law of restitution.

30. KINDS OF QUASI - CONTRACTS Supply of necessaries Payment by an interested person Obligation to pay for non – gratuitous acts Responsibility of finder of goods Mistake or coercion

31. QUANTUM MERUIT Means “as much as earned” or “ as much as is merited” The claim for quantum meruit arises in the following cases: When an agreement is discovered to be void When something is done without any intention to do so gratuitously When there is an express or implied contract to render services but there is no agreement as to remuneration. When the completion of the contract has been prevented by the act of the other party to the contract When a contract is divisible

32. SALE OF GOODS ACT , 1930

33. CONTRACT OF SALE OF GOODS A contract of sale of goods is a contract whereby the seller transfer the property to goods to the buyer for a price. A contract of sale may be absolute or conditional.

34. SALE AND AGREEMENT TO SELL Where under a contract of sale, the property of goods is transferred from the seller to the buyer, the contract is called “sale”, but where the transfer of the property in the goods is to take place at a future time or subject to some conditions thereafter to be fulfilled, the contract is called an “agreement to sell”.

35. ESSENTIALS OF A CONTRACT OF SALE Two parties Goods Price Transfer of general property Essential elements of a valid contract

36. SALE AND AGREEMENT TO SELL-DISTINCTION SALE AGREEMENT TO SELL TRANSFER OF PROPERTY EXECUTED CONTRACT EXECUTARY CONTRACT TYPE OF GOODS EXISTING AND SPECIFIC GOODS ONLY FUTURE AND CONTINGENT GOODS RISK OF LOSS LOSS FALLS ON BUYER LOSS FALLS ON THE SELLER CONSEQUENCES OF BREACH SELLER CAN SUE FOR THE PRICE SELLER CAN SUE FOR DAMAGES RIGHT TO RE-SELL SELLER CANNOT RESELL THE GOODS RESALE IS POSSIBLE GENERAL AND PARTICUALR PROPERTY CONTRACT PLUS CONVEYANCE MERELY A CONTRACT INSOLVENCY OF BUYER SELLER MUST PAT TO BUYER SELLER DOES NOT PART WITH THE GOODS INSOLVENCY OF SELLER BUYER CAN RECOVER GOODS FROM SELLER BUYER CAN CLAIM RERATEABLE DIVIDEND

37. HIRE – PURCHASE AGREEMENT A hire-purchase agreement is a contract whereby the owner of the goods lets them on hire to another person called hirer or hire purchaser on payment of rent to be paid in installments and upon an agreement that when a certain number of installments are paid, the property in the goods will pass to the hirer.

38. DISTINCTION BETWEEN SALE AND HIRE-PURCHASE SALE HIRE – PURCHASE OWNERSHIP IS TRANSFERRED FROM THE SELLER TO THE BUYER OWNERSHIP IS TRANSFERRED FROM SELLER TO THE HIRE PURCHASER POSITION OF BUYER IS THAT OF OWNER POSITION OF HIRE PURCHASER IS THAT OF BAILEE BUYER CANNOT TERMINATE THE CONTRACT HIRE PURCHASER HAS AN OPTION TO TERMINATE THE CONTRACT IF BUYER MAKES THE PAYMENT IN INSTALLMENTS, AMOUNT PAYABLE GETS REDUCED INSTALLMENTS PAID BY THE HIRE-PURCHASER ARE REGARDED AS HIRE CHARGES

39. SUBJECT MATTER OF CONTRACT OF SALE Goods form the subject-matter Actionable claims and money, are not goods CLASSIFICATION OF GOODS EXISTING GOODS Specific goods ascertained goods Unascertained or generic goods FUTURE GOODS CONTINGENT GOODS

40. EFFECT OF DESTRUCTION OF GOODS Goods perishing before making of contract Goods perishing after the agreement to sell but before the sale is effected

41. THE PRICE Ascertainment of price Agreement to sell at valuation

42. STIPULATIONS AS TO TIME Stipulations relating to time of payment Stipulations not relating to time of payment

43. CONDITION A condition is a stipulation which is essential to the main purpose of the contract. Its non-fulfillment upsets the very basis of the contract.

44. WARRANTY It is a stipulation which is collateral to the main purpose of the contract. It is not of vital importance as a condition is.

45. CONDITION AND WARRANTY - DIFFERENCE CONDITION WARRANTY DIFFERENCE AS TO VALUE ESSENTIAL TO THE MAIN PURPOSE OF THE CONTRACT COLLATERAL TO THE MAIN PURPOSE OF THE CONTRACT DIFFERENCE AS TO BREACH IN CASE OF BREACH THE AGGRIEVED PARTY CAN REPUDIATE THE CONTRACT OF SALE THE AGGRIEVED PARTY CAN CLAIM DAMAGES ONLY DIFFERENCE AS TO TREATMENT BREACH OF CONDITION IS TREATED AS BREACH OF WARRANTY BREACH OF WARRANTY CANNOT BE TREATED AS BREACH OF CONDITION

46. IMPLIED CONDITIONS Condition as to title Sale by description Condition as to quality or fitness Condition as to merchantability Condition implied by custom Sale by sample Condition as to wholesomeness

47. IMPLIED WARRANTIES Warranty of quiet possession Warranty of freedom from encumbrances Warranty as to quality or fitness by usage of trade Warranty to disclose dangerous nature of goods

48. CAVEAT EMPTOR This means “let the buyer beware”, i.e., in a contract of sale of goods the seller is under no duty to reveal unflattering truths about the goods sold.

49. TRANSFER OF PROPERTY

50. STAGES IN PERFORMANCE OF A CONTRACT OF SALE OF GOODS The transfer of property in the goods The transfer of possession of the goods The passing of the risk

51. PASSING OF PROPERTY Rules for ascertaining when the property in goods passes to the buyer: Goods must be ascertained Intention of the parties

52. PERFORMANCE OF CONTRACT

53. PERFORMANCE OF CONTRACT Performance of contract of sale means as regards the seller, delivery of the goods to the buyer, acceptance of the delivery of the goods and payment for them, in accordance with the terms of the contract of sale.

54. DELIVERY OF GOODS It means voluntary transfer of possession of goods from one person to another. TYPES OF DELIVERY Actual delivery Symbolic delivery Constructive delivery or delivery by attornment

55. RULES AS TO DELIVERY OF GOODS Mode of delivery Delivery and payment concurrent conditions Effect of part delivery Buyer to apply for delivery Place of delivery Time of delivery Goods in possession of third party Cost of delivery Delivery of wrong quantity Installment deliveries Delivery to a carrier or wharfinger

56. RIGHTS OF THE BUYER Right to have delivery as per contract Right to reject the goods Right to repudiate Right to notice of insurance Right to examine Rights against the seller for breach of contract suit for damages suit for price Suit for specific performance Suit for breach warranty

57. DUTIES OF THE BUYER Duty to accept the goods and pay for them in exchange for possession Duty to apply for delivery Duty to demand delivery at a reasonable hour Duty to accept installment delivery and pay for it Duty to take risk of deterioration in the course of transit Duty to intimate the seller where he rejects the goods Duty to take delivery Duty to pay price Duty to pay damages for non-acceptance

58. RIGHTS OF AN UNPAID SELLER

59. AN UNPAID SELLER A seller of goods is deemed to be an unpaid seller when – the whole of the price has not been paid or tendered a bill of exchange or other negotiable instrument has been received as a conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonor of the instrument or otherwise.

60. RIGHTS OF AN UNPAID SELLER Rights of an unpaid seller against the goods right of lien right of stoppage in transmit right of re-sale Rights of an unpaid seller against the buyer personally suit for price suit for damages for non-acceptance repudiation of contract before due date suit for interest

61. REMEDIES FOR BREACH OF CONTRACT OF SALE Seller’s suits Suit for price Suit for damages for non-acceptance of the goods Suit for damages for repudiation of contract by the buyer before due date Suit for interest Buyer’s suits suit for damages for non-delivery of the goods suit for specific performance suit for breach of warranty suit for repudiation of contract by the seller before due date suit for interest

62. NEGOTIABLE INSTRUMENTS A negotiable instrument is a document which entitles a person to a sum of money and which is transferable from one person to another by mere delivery or by indorsement and delivery

63. CHARACTERISTICS OF NEGOTIABLE INSTRUMENT Freely transferable Title of holder free from all defects Recovery presumptions

64. TYPES OF NEGOTIABLE INSTRUMENTS Negotiable by statute – promissory notes, bills of exchange, cheque Negotiable by custom or usage - exchequer bills, bank notes, debentures, circular notes

65. PROMISSORY NOTE A promissory note is an instrument in writing containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to order of, a certain person, or to the bearer of the instrument

66. ESSENTIAL ELEMENTS OF PROMISSORY NOTE Writing Promise to pay Definite and unconditional Signed by the maker Certain parties Certain sum of money Promise to pay money only Bank note or currency note is not a promissory note Formalities like number, date, place, consideration It may be payable on demand It cannot be made payable to bearer on demand

67. BILL OF EXCHANGE A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to , or to the order of, a certain person or to the bearer of the instrument PARTIES TO THE BILL: DRAWER DRAWEE PAYEE

68. ESSENTIAL ELEMENTS OF BILL OF EXCHANGE It must be in writing It must contain an order to pay The order must be unconditional It requires three parties the parties must be certain It must be signed by the drawer The sum payable must be certain It must contain an order to pay money It must be affixed with the necessary stamp

69. CHEQUE A cheque is a bill of exchange drawn upon a specified banker and payable on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form.

70. CROSSING OF CHEQUES A crossed cheque is one on which two parallel transverse lines with or without the words “& Co” are drawn. TYPES OF CHEQUES: open cheques crossed cheques

71. TYPES OF CROSSING General crossing Special crossing Restrictive crossing

72. CLASSIFICATION OF NEGOTIABLE INSTRUMENTS Bearer and order instruments Inland and foreign instruments Instruments payable on demand Time instruments

73. PARTIES TO A NEGOTIABLE INSTRUMENT

74. CAPACITY OF PARTIES Every person is competent to contract who is of the age of the majority according to the law to which he is subject, and is of sound mind and is not disqualified from contracting by any law to which he is subject

75. PARTIES TO A BILL OF EXCHANGE Drawer Drawee Acceptor Payee Holder Indorser Indorsee Drawee in case of need Acceptor for honour

76. PARTIES TO A PROMISSORY NOTE Maker Payee Holder Indorser Indorsee

77. PARTIES TO A CHEQUE Maker Drawee Payee Holder Indorser Indorsee

78. HOLDER Any person entitled in his own name To the possession thereof To receive or recover the amount due thereon from the parties thereto.

79. HOLDER IN DUE COURSE Any person is a holder in due course if he fulfills the following conditions: That for consideration he became the possessor or the payee or indorsee That he became the holder of the instrument before its maturity That he became the holder of the instrument in good faith

80. PRIVILEGES OF A HOLDER IN DUE COURSE Inchoate stamped instrument Liability of prior parties Fictitious payee Negotiable instrument without consideration Conditional delivery Instrument cleansed of all defects Instrument obtained by unlawful means or for unlawful consideration Every holder is a holder in due course Estoppel against denying original validity of instrument Estoppel against denying capacity of payee to indorse Indorser not permitted to deny the capacity of prior parties

81. LIABILITY OF PARTIES TO NEGOTIABLE INSTRUMENTS Liability of drawer Liability of drawee of cheque Liability of maker of note and acceptor of bill Liability of indorser Liability of prior parties to a holder in due course General rules regarding liability Acceptor’s liability on a forged indorsement Acceptor’s liability for a bill in a fictitious name

82. TRANSFER OF NEGOTIABLE INSTRUMENT Transfer by negotiation negotiation by delivery negotiation by indorsement and delivery Transfer by assignment

83. INDORSEMENT It means writing on an instrument Indorser – person who so signs the instrument Indorsee – person to whom the instrument is indorsed

84. DISCHARGE OF A NEGOTIABLE INSTRUMENT The term discharge is used in two senses: Discharge of the instrument Discharge of one or more of the parties from liability thereon An instrument is said to be discharged when all rights of action under it are completely extinguished and when it ceases to be negotiable.

85. MODES OF DISCHARGE OF AN INSTRUMENT By payment in due course By party primarily liable becoming holder By express waiver By cancellation By discharge as a simple contract

86. DISCHARGE OF A PARTY By payment By cancellation By release By allowing drawee more than forty-eight hours By non-presentment of cheque Cheque payable to order Draft drawn by one branch on another Parties not consenting discharged by qualified acceptance By operation of law By material alteration Discharge by payment of altered instrument

87. AGENCY

88. AGENT AND PRINICIPAL - DEFINITION An agent is a person employed to do any act for another, or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented is called the principal.

89. ESSENTIALS OF RELATIONSHIP OF AGENCY Agreement between the principal and the agent Intention of the agent to act on behalf of the principal.

90. RULES OF AGENCY Whatever a person can do personally, he can do through an agent He who does not act through another does it by himself

91. CREATION OF AN AGENCY By express agreement By implied agreement By ratification By operation of law

92. CLASSIFICATION OF AGENTS Special agent General agent Universal agent Commission agent Del credere agent

93. DUTIES OF AGENT To carry out the work undertaken according to the directions given by the principal To carry out the work with reasonable care, skill and diligence To render proper accounts to his principal To communicate with the principal in case of difficulty Not to deal on his own account To pay sums received for the principal To protect and preserve the interests of the principal in case of his death or insolvency Not to use information obtained to the course of the agency against the principal Not make secret profits Not to set up an adverse title Not to put himself in a position where the interest and duty conflict Not to delegate authority

94. RIGHTS OF AN AGENT Rights of retainer Right to receive remuneration Right of lien Right of indemnification Right of compensation Right to stoppage in transit

95. DUTIES OF PRINCIPAL To indemnify the agent against the consequences of all lawful acts To indemnify the agent against the consequences of acts done in good faith To indemnify agent for injury caused by principal’s neglect

96. RIGHTS OF PRINCIPAL To recover damages To obtain an account of secret profits and recover them and resist a claim To resists agent’s claim for indemnity against liability incurred

97. AGENT’S AUTHORITY Actual or real authority Ostensible or apparent authority

98. POSITION OF PRINCIPAL AND AGENT IN RELATION TO THIRD PARTIES The relationship is discussed under three heads: Where the principal is named Where the principal is unnamed Where the principal is undisclosed

99. NAMED PRINCIPAL The position of the named principal for the acts of his agent are as follows: Acts of the agent are the acts of the principal When the agent exceeds his authority Notice given to agent as notice to principal Principal inducing belief that agent’s unauthorized acts were authorized Misrepresentation or fraud of agent

100. UN NAMED PRINCIPAL When an agent contracts as an agent for a principal but does not disclose his name, the principal is liable for the contract of the agent, unless there is a trade custom or a term, express or implied, to the effect which makes the agent personally liable.

101. UNDISCLOSED PRINCIPAL An agent not only conceals the name of the principal but also the fact that he is an agent.

102. PERSONAL LIABILITY OF AGENT When the contract expressly provides When the agent acts for a foreign capital When he acts for an undisclosed principal When he acts for a principal who cannot be sued Where he signs a contract in his own name Where he acts for a principal not in existence Where he is liable for breach of warranty of authority Where he receives or pays money by mistake or fraud Where his authority is coupled with interest Where the trade usage or custom makes him personally liable

103. TERMINATION OF AGENCY Termination of agency by act of the parties agreement revocation by the principal revocation by the agent Termination of agency by operation of law performance of the contract expiry of time death and insanity destruction of subject matter principal becoming an alien enemy dissolution of a company termination of sub-agent’s authority

104. IRREVOCABLE AGENCY When an agency cannot be terminated or put an end to, it is said to be an irrevocable agency An agency is irrevocable in the following cases: Where the agency is coupled with interest Where the agency has incurred a personal liability Where the agent has partly exercised the authority