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1New Horizon CollegeMarathahalli BangaloreStudy Material of3 Business RegulationsForIII Semester BBACompiled bySowmya, Asst. Professor3Introduction To Business lawAs a social being man interacts with various people as part of his daily activities. In all of these interactions he plays different role...

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New Horizon College Marathahalli Bangalore

Study Material of 3.5 Business Regulations For III Semester BBA

Compiled by Sowmya.J, Asst. Professor

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Title

Sl.No.

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Introduction To Business law

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6

Indian Contract Act 1872

2.

11

Offer and Acceptance

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17

Consideration

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21

Contractual Capacity of Parties

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25

Free Consent

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32

Legality of Object

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38

Performance of Contract

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42

Discharge of Contract

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51

Sale of Goods Act 1930

10.

58

Consumer Protection Act 1986

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65

Competition Act 2002

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77

Right to Information Act 2005

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81

Right to Education Act 2009

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92

Foreign Exchange Management Act 1999

15.

98

Environment Protection Act 1986

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Introduction To Business law As a social being man interacts with various people as part of his daily activities. In all of these interactions he plays different roles such as a buyer, a seller or a tax payer. In all of these he is supposed to observe a code of conduct and is guided by certain generally accepted principles and rules. These rules are termed as laws

What Is Law? Law includes the rules and principles which regulate our relation with other individuals and with the state. The State regulates the conduct of its people by a set of rules. It ordains directly or indirectly, implicitly or explicitly a general course of conduct to be followed by the people. Such rules of conduct if recognised by the state and enforced by it on people are termed as law.

Business Law Business law is also known a Mercantile law or commercial law. It is the body of law that applies to the rights, relations, and conduct of persons and businesses engaged in commerce, merchandising, trade, and sales. Mercantile law is used to denote that branch of law which is concerned with such matters as are usually the subject of what may be called Mercantile Transactions i.e it deals with contractual situations and the rights and obligations arising out of mercantile transactions between mercantile persons. A mercantile person may be a single individual a partnership or a joint stock company. The term Mercantile law is also used to denote the aggregate body of those legal rules which are connected with trade industry and commerce.

Sources of Business Law 1. English Mercantile Law: this is the most important source of the Indian mercantile law. The principal source of English Mercantile law is the common law of England. It also takes important references from “Lex Mercatoria” a Latin expression for a body of trading principles used by the merchant throughout Europe in the medieval. Meaning literally ‘law merchant’, it evolved as a system of customs and best practice, which was enforced through a system of merchant courts along with main trade routes. It functioned as the international law of commerce. The English Mercantile law constitutes the foundation on which the superstructure of the Indian Mercantile law has been built and is supplemented by a) Common law : It refers to a system of law based upon English customs usages and traditions which were developed over centuries by the English Courts. It is unwritten and its principles are applied whenever subsequent disputes of similar nature arise. b) Equity: It refers to that branch of English law which developed separately from the Common law. It is based upon concepts of justice developed by the judges whose decisions became precedents. These precedents now constitute Equity law. c) Statute Law: The Statute law refers to the laid down in the acts of parliament. It is superior to and overrides any rule of the common law of equity.

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Visit www.Bustudymate.in For More Study Material d) Case Law: It is built up on previous judicial decisions i.e on the principle that what has been decided in an earlier case is binding in a similar future case, unless there is a change in the circumstances 2. Statutory Law: Statutory law is written law set down by the legislature or other governing authority such as the executive branch of the government in response to the need to clarify the functioning of the government, improve civil order to codify existing law, or for an individual or company to obtain special treatment. In context to India, all laws are statutory i.e when ‘Bill’ is passed by the Parliament and signed by the President of India; it becomes an ‘Act’ or a ‘Statute’. The bulk of Indian of Indian Mercantile law is a statutory law. The contract act 1872, the Sale of Goods Act 1930, The partnership act, The Companies Act 1956 are all examples of Statutory Law. 3. Judicial Decisions: The past judicial decisions of courts are important sources of law. Sometimes there is no statutory provision which can answer a legal question raised in a law suit. In such cases the court will look into the previous court decisions on similar matters to find the relevant law. The precedents set by the higher courts have a binding force on lower courts and the precedents set by the same courts of the same status like High Courts of different states have persuasive value for each other. 4. Customs and Usages: Customs and usages of a trade play an important role in business dealings of that trade. Customs and usages established by long use and constantly put into practise become binding on the parties entering into commercial transactions. A custom in order to be binding on the parties must be ancient reasonable certain definite consistent with other customs and uniformly recognised in the ordinary course of business. When a custom is accepted by a court and is incorporated in a judicial decision, it becomes a legally recognised custom. As a matter of fact they have a binding force on the parties, like by the mercantile usage prevailing in the Delhi Iron Market among big merchants, no interest can be charged on the unpaid price for transactions before 1917. To have a binding force, the custom or usage must be certain, reasonable and well known.

Scope Of Business Law Some of the areas where business law applies include but are not limited to: ▪ Compensation ▪ Business formation ▪ Stockholders’ agreements ▪ Investigating business fraud ▪ Financial transactions ▪ Regulatory compliance (i.e. business license) ▪ Lawsuits These are contained in laws such as The Indian Contract Act,1872, The Sale of Goods Act,1930,The Partnership Act,1932, The Negotiable Instruments Act,1881 The Companies Act,1956, The Patents Act,1970,The Trade and Merchandise Marks Act,1958, The Consumer Protection Act,1986. Important questions 4

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Visit www.Bustudymate.in For More Study Material 2marks: 1. What is Lex mercotaria? 2. Name the sources of Business law. 3. What is case law? 8 marks 1. Differentiate between case laws and judicial decisions 2. Explain the scope of Business Laws 3. What is statutory law? Explain its importance in the framing of laws. 15 marks 1. Describe the various sources of business laws. 2. What is business law? Explain its significance in the field of business.

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Indian Contract Act 1872 The law of contract 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. Its rules define the remedies that are available in a court of law against a person who fails to perform his contract and the conditions under which remedies are available. The law relating to contracts in India is contained in Indian Contract Act, 1872. The Act was passed by British India and is based on the principles of English Common Law. It is applicable to all the states of India except the state of Jammu and Kashmir. It determines the circumstances in which promises made by the parties to a contract shall be legally binding on them. All of us enter into a number of contracts everyday knowingly or unknowingly. Each contract creates some rights and duties on the contracting parties. It is of particular importance to people engaged in trade commerce and industry as bulk of their business transactions are based on contracts. The laws relating to contracts is contained in the Indian Contract act 1872. The first six chapters of the Act embodies general principles, the different stages of formation, its essential elements, its performance or breach and remedies for breach of contract. The remaining chapters deal with some of the special contracts viz indemnity and guarantee (chapter VIII sections 124 – 147) Bailment and pledge ( chapter IX sections 148 – 181 )and agency ( chapters X sections 182 to 238)

Important Features Of The Contract Act 1872 ● The Indian contract act is not exhaustive as it does not profess a complete code for all types of transactions. There are separate acts which deal with contracts relation to Partnership and Sale of Goods. ● The Indian Contract act does not lay down a number of rights and duties which the law will enforce; it consists rather of a number of limiting principles subject to which the parties may create rights and duties for themselves which the law will uphold. So as long long as they don’t infringe some legal prohibition they can make what rules they like in respect of the subject matter of their agreement and the law will give effect to their decisions. ● There are several agreements which do not necessarily create a legal obligation but still they are contractual in nature and they are enforceable. Ex. Torts or civil wrongs, quasi contracts and judgement of courts . ● Law of contract creates jus in personam as distinguished from jus in rem. ● A social Agreement does not give rise to contractual obligation and is not enforceable in a Court of Law. It is only those agreements which are enforceable in a Court of Law that are contracts.

Definition Of Contract A contract is an agreement made between two or more parties which the law will enforce. Sec 2 (h) defines contract as “An agreement enforceable by law”. This definition is based on Pollock’s definition “ Every agreement and promise enforceable by law is a contract”.

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Visit www.Bustudymate.in For More Study Material Sir William Anson defines a Contract as a “Legally binding agreement between two or more persons by which rights are acquired by one or more to acts or forbearances (abstaining from doing something) on the part of others”. Contract = Agreement+ Enforceability at Law Other definitions ● Offer(i.e. Proposal) [section 2(a)]:-When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other person either to such act or abstinence, he is said to make a proposal. ● Acceptance 2(b):- When the person to whom the proposal is made, signifies his assent there to, the proposal is said to be accepted. ● Promise 2(b):- A Proposal when accepted becomes a promise. In simple words, when an offer is accepted it becomes promise. ● Promisor and promise 2(c):- When the proposal is accepted, the person making the proposal is called as promisor and the person accepting the proposal is called as promisee. ● Agreement 2(e):- Every promise and set of promises forming the consideration for each other. In short agreement = offer + acceptance. Essential Elements Of A Valid Contract According to Sec 10, all agreements are contracts if they are made by the free consent of parties competent to contract for a lawful consideration and with a lawful object and are not expressly declared void. In order to become a contract an agreement must have the following essential elements: 1. Proper offer and proper acceptance There must be 2 parties to an agreement based on a lawful offer made by one person to another and lawful acceptance of that offer by the latter. The terms of offer must be definite and the acceptance of the offer must be absolute and unconditional. Sections 3 to 9 of the Contract Act, 1872 lay down the rules for making valid acceptance. 2. Intention To Create Legal Relationships: When the two parties enter into an agreement, there must be intention to create a legal relationship between them. If there is no such intention on the part of the parties. There is no contract between them. Agreements of a social or domestic nature do not contemplate legal relationship; as such they are not contracts. 3. Lawful consideration: An agreement to form a valid contract should be supported by consideration. Consideration means something in return (quid pro quo). It can be cash, kind, an act or abstinence. It can be past, present or future. However, consideration should be real and lawful and not fictional.

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Visit www.Bustudymate.in For More Study Material 4. Capacity of parties to Contract In order to make a valid contract the parties to it must be competent to be contracted. According to section 11 of the Contract Act, a person is considered to be competent to contract if he satisfies the following criterion: ▪ The person has reached the age of majority. ▪ The person is of sound mind. ▪ The person is not disqualified from contracting by any law. 5. Free Consent: To constitute a valid contract there must be free and genuine consent of the parties to the contract. It should not be obtained by misrepresentation, fraud, coercion, undue influence or mistake. 6. Lawful Object and Agreement The object of the agreement must not be illegal or unlawful. In other words the object must not be a. illegal, b. immoral, c. opposed to public policy. If an agreement suffers from any legal flaw it will not be enforceable by law. 7. Certainty, Possibility of Performance: the agreement must be certain not vague or indefinite (sec 29) if it is vague and it is not possible to ascertain its meaning, it cannot be enforced. 8. Legal Formalities: A contract may be by words spoken or written. As regards the legal effects there is no difference between a contract in writing and a contract made by words of mouth. But there are some other formalities also which have to be compiled with in order to make an agreement legally enforceable. 9. Agreement not declared void or illegal Agreements which have been expressly declared void or illegal by law are not enforceable at law; hence they do not constitute a valid contract.

Classification of Contracts Contracts may be classifies according to their (1) Validity (2) Formation (3) Performance Classification According To Validity: A contract is based on an agreement. An agreement becomes a contract when all the essential elements reffered to above are present. In such a case the contract is a valid contract. If one or more of these elements are missing the contract is either voidable, void, illegal or unenforceable. ▪ ▪

Valid contract: An agreement which has all the essential elements of a contract is called a valid contract. A valid contract can be enforced by law. Void contract [Section 2(g)]: A void contract is a contract which ceases to be enforceable by law. A contract when originally entered into may be valid and binding on the parties. It may subsequently become void. – There are many judgments which have stated that where any crime has been converted into a "Source of Profit" or if any act to be done under any contract is opposed to "Public Policy" under any contract—than that contract itself cannot be enforced under the law-

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Visit www.Bustudymate.in For More Study Material Voidable contract [Section 2(i)]: An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of other or others, is a voidable contract. If the essential element of free consent is missing in a contract, the law confers right on the aggrieved party either to reject the contract or to accept it. However, the contract continues to be good and enforceable unless it is repudiated by the aggrieved party. ▪ Illegal contract: A contract is illegal if it is forbidden by law; or is of such nature that, if permitted, would defeat the provisions of any law or is fraudulent; or involves or implies injury to a person or property of another, or court regards it as immoral or opposed to public policy. These agreements are punishable by law. These are void-ab-initio. “All illegal agreements are void agreements but all void agreements are not illegal.” ▪

Unenforceable contract: Where a contract is good in substance but because of some technical defect cannot be enforced by law is called unenforceable contract. These contracts are neither void nor voidable. On The Basis Of Formation: ▪

Express contract: Where the terms of the contract are expressly agreed upon in words (written or spoken) at the time of formation, the contract is said to be express contract. ▪ Implied contract: An implied contract is one which is inferred from the acts or conduct of the parties or from the circumstances of the cases. Where a proposal or acceptance is made otherwise than in words, promise is said to be implied. ▪ Quasi contract: A quasi contract is created by law. Thus, quasi contracts are strictly not contracts as there is no intention of parties to enter into a contract. It is legal obligation which is imposed on a party who is required to perform it. A quasi contract is based on the principle that a person shall not be allowed to enrich himself at the expense of another. Examples:

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➢ claim for necessaries supplied to person incapable of contracting or on his account ➢ Reimbursement of person paying money due to another, in payment of which he is interested ➢ obligation of person enjoying benefit of non gratuitous act ➢ Responsibility of finder of goods ➢ Liability of person to whom money is paid or thing delivered On The Basis Of Performance: ▪ ▪

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Executed contract: An executed contract is one in which both the parties have performed their respective obligation. Executory contract: An executory contract is one where one or both the parties to the contract have still to perform their obligations in future. Thus, a contract which is partially performed or wholly unperformed is termed as executory contract. Unilateral contract: A unilateral contract is one in which only one party has to perform his obligation at the time of the formation of the contract, the other party having fulfilled his obligation at the time of the contract or before the contract comes into existence. Bilateral contract: A bilateral contract is one in which the obligation on both the parties to the contract is outstanding at the time of the formation of the contract. Bilateral contracts are also known as contracts with executory consideration. 9

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Important Questions 2 marks 1. What is the definition of a contract according to the Indian Contract Act? 2. List out the various classes of a contract. 3. Who is a promisor and the pro...