Legal Aspects of

Business
Course Code:111
1. The Indian Contract Act 1872
2. Sale of Goods Act,1930
3. The Companies (Amendment) Act 2015.
4. The Consumer Protection Act 2019 (repealed 1986)
Case laws based on consumer
protection Act 2019/1986 (repealed)
1. Jagnarayan Lal Vs Doctor Smt. Girija Tiwari ,2021, supreme court of
India

2. Yogesh Bihari Lal Gupta vs Bses Rajdhani Power Limited on 23 May,

2008

3. Ashok Gupta vs Indian Airlines Limited on 2 December, 2008

4. immco Birla Ltd. vs Anil Sethi on 22 October, 2008

The Indian Contract Act 1872

 Essential Elements of Valid Contracts are as follows:

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

 Law of contract is the most important branch of business law that

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

 Inder Singh v/sParmeshwardhari Singh, 1957 Patna High Court.

Contracts of Indeminity and
Guarantee
 Sec 124-125 & 126-147 of Indian Contract Act, 1872.

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

therefore , the general principles of law of contract is applicable to it.

 Indemnifier (promisor) & Indemnity holder (promise)

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

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

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

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

Contract of Indeminity Contract of Guarantee

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

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

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

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

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

 Essentials of relationship of agency:

1. Agreement between the principal and the agent.
2. Intention of the agent to act on behalf of the principal.
3. Consideration- No consideration is required to create an agency.
4. Capacity of the parties
Various Modes of creation of agency
:
1.Agreement
2. Necessity
3. Ratification
Agent And Principal:(Relationship
and Rights)
 Rights of the Agent:-
1. Right of retainer
2. Right to receive remuneration
3. Right of lien
4. Right of indemnification
5. Right of Compensation

Rights of the Principal:

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

1. Two Parties
2. Goods
3. Price
4. Transfer of general property
5. Essential elements of a valid contract
Condition and warranties: (Sec 12 to
17)
 Def. of condition- S12(2)-
 A condition is stipulation essential to the main purpose of the contract, the
breach of which gives rise to a right to treat the contract as repudiated. In
condition, nature of stipulation are essential to the main purpose of
contract, breach of which gives rise to right to repudiate contract. A
condition may be express or implied.
 Def. of warranty-s.12(3)-
A warranty is a stipulation collateral to the main purpose of the contract,
the breach of which gives rise to a claim for damages but not to a right to
reject the goods and treat the contract as repudiated. The warranties may be
express or implied.
Case Law:-
R S Thakur v. H G E Corporation, AIR 1971 Bom.97.
Transfer of property/ownership
Performance of the Contract of sale:
 The Sale of Goods Act provides for various rules as to transfer of
property as between seller and buyer to determine the rights and
liabilities of both of them( Seller and Purchaser).
 According to S.31 of Sale of Goods Act , 1930, performance of a
contract of sale means delivery of the goods to the buyer, acceptance
of the delivery of the goods and payment of those goods, in
accordance to the terms of contract of sale. A contract of sale always
involves reciprocal promises the seller promising to deliver the goods
and buyer promising to accept and pay for them.
Kinds of delivery:-

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

Case Law-
I. T. Commissioner Vs. R C Gupta & Company AIR 1968 Cal. 385
Rights of Unpaid Seller
Sale by Auction
Def. of unpaid seller:
As per S.45 (1), a seller of goods is deemed to be an unpaid seller when-
a) The whole of the price has not been paid
b) A bill of exchange or other negotiable instrument has been received as a conditional payment, and the condition on
it which was received has not been fulfilled by reason of the dishonor of instrument.
Rights of the unpaid seller against the goods:
1. Right of lien
2. Right of stoppage in transit
3. Right to re-sale
Right of an unpaid seller against the buyer personally
4. Suit for price
5. Suit for damages for non-acceptance
6. Repudiation of contract before due date
7. Suit for interest

Case Law:
Kalka Prasad Vs. Harish Chandra AIR 1957 ALL. 25.
Sale by auction

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

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

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

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

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

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

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

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

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

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

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

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

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

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

 AOA is the subsidiary to the MOA.

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

 AOA brings clarity in relationship between shareholders and company.

Share Capital and Debentures

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

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

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

company rules 2014to have at least one woman director:

1. Every Listed company

2 Every other Public Company having-

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

B) Turnover of 300 crore rupees or more.

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

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

 It cannot be reasonably avoided by consumers

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

Restrictive Trade Practices

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

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

 State Consumer dispute Redressal Commission (SCDRC)

 National Consumer dispute Redressal Commission (NCDRC)

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

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

Appellate Authirity: NCDRC

NCDRC

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

Appellate Authority: Hon’ble Supreme Court.

Digital Signature

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

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

 Electronic Governance under IT Law 2000 focuses on regulating

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

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

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

Example: emails, mobile data, internet etc.

Case Study:
Ved Ram & Sons.
Who is consumer ? Define.

 A person who buys any goods or services for a consideration, which has
been paid or promised or partly paid & partly promised, or under any
system of deferred payment also include the user with approval of such
goods or beneficiary of services.
 A consumer is a person or a group who intends to order, or use
purchased goods, products, or services primarily for personal, social,
family, household and similar needs, who is not directly related to
entrepreneurial or business activities.
 Example:
person who pays a hairdresser to cut and style their hair. A
company that buys a printer for company use. The customer is the
company who purchased the printer, and the consumers are the employees
using the printer. The company doesn't intend to resell the printer.
What is deficiency in services ?

 Deficiency means any fault, imperfection shortcoming or inadequacy in

the quality, nature, and manner of performance which is required to be
maintained by or under any law for time being in force or has been
undertaken to be performed by a person in pursuance of a contract or
otherwise in relation to any service.
 Example:
A agreed to supply water to B for irrigation of crops. He failed to do so
because of a power breakdown due to the burning of a transformer. As a
result crop damaged. B sued A for providing deficient service. The National
Commission held that it was duty of A to get the transformer repaired
immediately. Since he was negligent in doing so, he is liable for the
deficiency in service - Orissa Lift Irrigation Corpn. Ltd. v. Birakishore
Raut [1991] 2 CPJ 213 (NC).
Important Sections Under CP Act
2019.
 Complaint is filed before DCDRC, SCDRC, NCDRC under Section 35 of CP
Act 2019.
 Appeal is filed U/S 41 of CP Act 2019 against the order of DCDRC to SCDRC
within a period of 45 days from the receipt of order.
 Appeal is filed U/s 51 of CP Act 2019 against the order of SCDRC to NCDRC
within a period of 30 days from the date of receipt of order.
 Appeal is filed U/S 67 of CP Act 2019 against the order of NCDRC to
Supreme Court within 30 days from the date of receipt of order.
 Execution is filed U/S 71 & 72 of CP Act 2019. Punishment under these
sections is one month to three years jail sentence or monetary fine Rs.
25,000/ to Rs. 1,00, 000/ or both.
 Every consumer complaint is filed within two (02) years from the date of
cause of action.
What is IT Act 2000 ?

 An Act to provide legal recognition for transactions carried out by

means of electronic data interchange and other means of electronic
communication, commonly referred to as ―electronic commerce‖,
which involve the use of alternatives to paper-based methods of
communication and storage of information, to facilitate electronic
filing of documents with the Government agencies and further to
amend the Indian Penal Code, the Indian Evidence Act, 1872, the
Banker’s Books Evidence Act, 1891 and the Reserve Bank of India Act,
1934 and for matters connected therewith or incidental thereto.
What are the offences under IT Act
2000?
 Tampering with computer source documents:-
Whoever knowingly or intentionally conceals,destroys or alters or intentionally or
knowingly causes another to conceal, destroy, or alter any computersource code used
for a computer, computer programme, computer system or computer network, when
thecomputer source code is required to be kept or maintained by law for the time being
in force, shall be punishable with imprisonment up to three years, or with fine which
may extend up to two lakh rupees, orwith both.
 Explanation.–For the purposes of this section, ―computer source code‖ means the
listing of programmes, computer commands, design and layout and programme
analysis of computer resource inany form.
 Computer related offences:
If any person, dishonestly or fraudulently, does any act referredin section 43, he shall be
punishable with imprisonment for a term which may extend to three years orwith fine
which may extend to five lakh rupees or with both.
Punishment for sending offensive messages through communication service, etc.
Practice Questions

 .1. Alok sees a book displayed in a shelf of a book shop with a price
tag of Rs.95/. Alok tenders Rs. 95 at the counter and ask for the book.
The book seller refuses to sell saying that book has already been
sold to some one else and he does not have the another copy of that
book in the stock . Is the book seller bound to sell the book to Alok ?
Explain referring with suitable case law.


 Q.2. X offered to sell his house to Y for Rs.50,000. Y accepted the

offer by E-mail. On the next day Y sent a fax revoking the acceptance
which reached X before the Email. Is the revocation of acceptance
valid? Would it make any difference if both the E-mail of acceptance
and the fax of revocation of acceptance reach X at the same time ?
Practice Questions

 Q.3 . ( i) Mr. Mohan an industrialist has been fighting a long drawn

litigation with Mr. Kamal, another industrialist. To support his legal
campaign Mr. Mohan enlists the services of Mr. Anil a legal expert
stating that an amount of Rs.5 lakhs would be paid, if Mr. Anil does
not take up the brief of Mr. Kamal. Mr. Anil agrees, but at the end of
the litigation Mr. Mohan refuses to pay. Decided whether Mr. Anil can
recover the amount promised by Mr. Mohan under the provisions of
the Indian Contract Act, 1872.
 (ii) Ramesh instructed Suresh, a transporter, to send a
consignment of apples to Mumbai. After covering half the distance,
Suresh found that the apples will perish before reaching Mumbai. He
sold the same at half the market price. Ramesh sued Suresh. Will he
succeed?

Practice Questions

 .4. State with reason Whether the following contracts can be enforced .
 (i) Where there is a family settlement in writing and family member who
is not a party to the settlement wishes to enforce his claim.
 (ii) Where an orphanage wishes to enforce a promise made by a
philanthropist to donate a specified sum.
 (iii) An agreement to create an agency in which consideration is absent .
 Q.5. (i) R gives his umbrella to M during raining season to be used for 2
(Two) days during examinations. M keeps the umbrella for a week . While
going to R’s house to return the umbrella , M accidently slips and Umbrella is
badly damaged . Who bear the loss and why ?
 (ii) X buys from Y a painting which both believes to be the work of
an old Master for which X pays a high price . The painting turns out to be only
a modern copy . Discuss the validity of the contract ?
Practice Questions

 Q. 6. (i) Father promised to pay his son Rs. One Lakh if the son passed
CS (Company Secretary ) Exam in First Attempt. His son passed the CS
examination in First Attempt, but father failed to pay Rs one lakh as
promised. Son filed a suit for recovery of amount . State along with
reasons whether son can recover the amount as per Indian Contract Act
1872 ?
 (ii) M advances Rs. 5,00,000/ (Five Lakh Rupees) to N on the
guarantee of P. The Loan carries interest @ 12% per annum.
Subsequently N becomes financially embarrassed . On N’s request , M
reduces the Interest to 8% per annum and does not sue N for one year
after the loan becomes due. N becomes insolvent . Can M sue P ?
Practice Q Answers

 Q. 1. Ans:- No, a display of goods with prices marked thereon is only invitation for offer , and
not an offer itself.


 Q.2. Ans. Yes, the revocation of acceptance is valid because acceptor may revoke the acceptance
at any time before the letter of acceptance reaches to offer. If the letter of acceptance (E-mail) and
letter of revocation (Fax) reach to X at same time, the formation of contract will depend upon the
facts that which of the two is opened first by X. If X reads the Fax letter First, revocation is valid.
But if he reads the e-mail first , revocation is not possible.
 Q.3 (i)Ans. Agreement in restraint of trade is one wherein a person is restrained from exercising his
lawful profession, trade or business of any kind and is to that extend is void. However one of the
exception to agreement in restraint of trade is in respect of “ Service Agreement”. This case of Mr.
Anil and Mr. Mohan falls in the category of an exception to an agreement in restraint to trade.
 Conclusion: Mr. Mohan can recover the amount from Mr. Anil.
 (ii) Ans. An agent has the authority in an emergency to do all such acts as a man of ordinary
prudence would do for protecting his principal from losses which the principal would have done
under similar circumstances. In the given case Suresh had acted in an emergency situation and
Ramesh will not succeed against him.
Practice Q Answers

 Q.4.Ans. (i) As per the judgement in “ Shuppu Vs Subramanian” 33 Mad 238, A

family settlement in writing may be enforced by the family member who was not a
party of the settlement.
 (ii) A gratuitous promise such as a promise to donate money lacks
consideration and can not be enforced.
 (iii) According to section 185 of ICA 1872 an agreement creating an agency
though devoid of consideration , is valid and can be enforced.
 Q.5 Ans. (i) M shall have to bear the loss since he failed to return the umbrella
within stipulated time and section 161 of ICA 1872 clearly says that where a baily
fails to return the goods within the agreed time, he shall be responsible to the bailor
for any loss, destruction or deterioration of the goods.
 (ii) The contract is absolutely void as there is mutual mistake of both the parties
as to the substance or quality of the subject matter going to be the very root of the
contract. In case of bilateral mistake of essential facts, the agreement is void since
ab-initio, as per sec 20 of ICA 1872.
Practice Q Answers

 Q.6 Ans. (i) According to the provision of Sec 10 of ICA 1872, there
should be an intention to create a legal relationship between the
parties . Agreement of a social nature or domestic nature do not
contemplate legal relationship and as such not contract , which can
be enforced. This principal has been laid down in the case of Balfour
Vs Balfour . Accordingly applying the above provision and decision of
the cited case, in this case son can not recover the amount of rs. One
lakh from his father.
 (ii) M can not sue P, because a surety is discharged from liability
when without his consent the creditor makes any changes in terms of
his contract with principal debtor as per sec 133 of ICA 1872.
Case laws based on Company Act
2013/1956(repealed).
1. Salmon Vs Salmon & Company Ltd.

2. Cyrus Investments Pvt. Ltd. & Anr. v. Tata Sons Ltd.& Ors

3. Tata Consultancy Services Limited v. Cyrus Investments Pvt.

Ltd.

4. Seth Mohan Lal v. Grain Chambers Ltd