LAW AND PRACTICE OF BUSINESS

1) What are the Essentials of “Acceptance” ?

a) It must be by the person whom offer is made.
b) It must be absolute and unqualified.
c) It must be communicated.
d) It must be communicated in manner prescribed.
e) It must be given with in reasonable time.
f) It must be succeed an offer.
g) Silence cannot be prescribed as mode of acceptance.

2) What are the essential features of contract of guarantee ?

a) Three parties A contract guarantee ties up three parties, viz Principal Debtor creditor and
the surety.
b) Consent :- A contract guarantee demands the free consent of all three parties.
c) Liability :- The liability of the surety is secondary where as the liability of principal debtor
is primary.
d) Capacity :- The principal debtor, interesting to note may be incompetent but the surety and
the creditor must be capable of entering into contract.
e) Consideration :- In contract of guarantee the consideration is receive by the principal debtor
is regarded as sufficient consideration to the surety therefore the creditor is not need to
furnish any separate consideration to the surety.
f) No a contract of good faith :- A contract of guarantee is a not contract of good faith. The
creditor therefore need not to disclose the surety all material facts relating to debtor thereby
affecting to his credit.
g) Surety and principal debtor Distinct :- In the eyes of law the surety and principal debtor are
distinct persons. As such the suit brought against the principle debtor cannot be applied to
the surety.

3) Explain briefly about the different ways to discharging the contract?

a) The Different ways of Discharge of Contract :-
• By Performance.
• By Mutual Agreement
• By Impossibility of Performance.
• By Lapse of Time
• By operation of Law.
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• By Breach of Contract.

a) By Performance :- This is the most common and natural way of discharging

contract when the parties of contract fulfill their respective obligations with in the
time and in the more prescribed. The contract is understood have been performed
and discharged.

b) By Mutual Agreement :- Since contract is created by means of agreement it can

also be discharged by the agreement between same parties nullifying the previous
contract it may happen in one of the following ways
1) Novation :- New contract is substituted for existing contract.
2) Alteration :- It changes in one or more terms of contract.
3) Recession :- Cancellation of all or some terms of contract.
4) Remission :- Acceptance of lesser sum than what was contracted for or less
fulfillment of promise.
5) Merger :- When an inferior right Accruing party merges into superior right
accruing party.

c) By Impossibility of performance :- As General role impossibility of performance

of an contract is not an excuse for non performance of contract. However if
impossibility is caused by such circumstances which are beyond the control of
contracting parties the contract becomes void and parties are free from obligations.

A contract is Discharged on ground of Impossibility of performance in following

cases
• Destruction of subject matter
• Failure of ultimate purpose
• Death or Incapacity of promisor
• Change of law
• Out break of war

d) Discharge by Laps of Time :- According to Limitation of Act, a contract

should be performed within a specified period , called “ Period of Limitation”
if it is not performed and if no action is taken by the promisee within that
period the contract is discharged and promisee loses his right of action, An
ordinary debt becomes time barred debt on expiry of 3 years.

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 e) Discharge By Operation of Law :-Termination of a contract by operation of
law takes place in the following cases.

• By death :-in contract involving personal skill or ability , it stands terminated on the
death of promiser.
• By insolvency :- A contract is discharged by the insolvency of ine of the parties . On
insolvency rights and liabilities of insolvent are transferred to official Receiver
• By Material alteration :- If the terms and conditions of the contract are altered by one
party without consent of other party the contract is discharged .
• By Merger where an inferior right under a contract merges with superior right under
a contract the first contract stands discharged automatically.

F) Discharged by Breach of contract :- Breach of contract by one party puts an end to

the obligation created under a contract however the party who is not at fault can sue the
other party Breach of contract arise in 2 ways
1) Actual
2) Anticipatory.

4) Define the term consideration & exception to the rules of No consideration & No
contract.

An agreement to be enforceable by law must be supported by valid consideration . This means

that the presence of consideration is a “sine quo non” for the validity of the agreement.
Interestingly there are certain cases where agreements are valid through without
consideration . (sec 25)
These exception are briefed below:

1 ) Natural love and affection : an agreement made without consideration will be valid if
a) it is expressed in writing, b) it is registered under the law. C) it is made on account of
natural love and affection , and d) it is between parties standing in a near relation to each
other. It is to be remembered that all these essentials must be present to enforce an
agreement made sans consideration.
2) Compensation for past voluntary services: A promise made without consideration is
valid if it is a promise to compensate a person who has already voluntarily done something
for the promiser to be clear a promise to pay for past voluntarily service ls binding. For
example : A saves B from drowning from well and B by patting A promise to pay him Rs
10000 it is a contract .

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 3) Time barred debt : A promise to pay a time barred debt enforceable . But the promise
must be in writing must be signed by the promiser . The promiser maybe to pay the whole
or part of the debt . The promiser must be happy because something is better for him
than nothing A line of warning at the end an oral promise to pay time barred debt is
not enforceable.

4)Completed Gifts: The principle NCNC shall not apply to apply to completed gifts . A gifts in
fact does not require any consideration in order to be valid n as between the donor and donee,
any gift actually made will be valid although there is no consideration.
5) Contract of agency : One more exception to the rule. No consideration , No contract ‘
is contract of agency . sec185 of the Indian contract act 1872 lays down that no
consideration is required to create the contract of agency
6) Remission
7) Contribution to charity
5) Meaning of minor and unsound person ?
Sec 3 of Indian contract act 1875 defines a minor as “ a person who has not completed
18 years of years of age” however the period of minority will be extended upto the
age 21 years if a guardian is appointed by the court of the and minor’s property is
taken over the court of wards for management interestingly in England all those below
the age of 21 years are minor.
Law relating to minor’s agreements :
1)Absolutely void: Since a minor is incompetent to enter into a valid contract a contract
entered into by him is absolutely void . it is devoid of any legal consequences.
2) No ratification : An agreement with minor is absolutely null and it cannot be ratified
by the minor on attaining age of majority .
3) No estoppel : contract by minor is completely void even if he falsely represents
himself to be a major. And thereby induces another person enter into an agreement
with him The principle of estopped of estopped is not applicable to him.
3) minor as partner : minor is incompetent to enter to valid contract and therefore he
can not legally become a partner of the firm . however he can be become partner of the
firm with consent of all partners(sec 30 partner ship act 1932)
4) Minor as agent : sec 184 of the contract act provides that minor can be appointed as
agent. He can bind principal by his act . But unlike others agents, he is not personally
held liable for any negligence or breach of duty.

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5) minor as share holder : since a minor is incompetent to enter into a contract he can
not purchase share of a company . if he inherits the shares, the name of his lawful
guardian will be entered as member in the register of the member .

6)Explain the meaning of reciprocal promise & features.

A Contract consist of reciprocal/ mutual promise when one party makes the promise
in consideration of a similar promise made by the other party. In simple words a
promise by one party for promise of the other party both promise are called as
reciprocal promise.
Reciprocal promise take the following forms:
• Mutual & concurrent : where the two promise are to be preformed simultaneously
they are said to be mutual & concurrent .
Ex : A & B contract that A shall deliver. Bicycle to B and B promise to pay for
it on delivery. A need not to deliver bicycle unless B is ready and willing to pay
for it on delivery . B need to pay unless A is ready & willing to delivery bicycle.

• Mutual & Independent : Where each party must perform his promise
independently without waiting for the promise of the other party is know as mutual
& independent.
• Mutual & dependent : where the performance of the promise by one party depends
upon the prior performance of the other party promises are understood to be
mutual& dependent.
• Liability for preventing performance : where a contract contains reciprocal promises
and one party prevents the other from performing his promise, the contract
becomes voidable option of the party so prevented aggrieved party is entitled to
claim compensation for any loss.
• Legal & Illegal : when persons reciprocally promise firstly, to do certain things
which are legal and secondly to do certain other things which are illegal . first set
of promise is a contract where as the second is void agreement.
•

7 Assignment of contract meaning & features

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 Assignment of contract means of contractual rights and obligation by the party to the
contract to the third party The law in India is not f much worried about assignment.
Assignment may be take place a) by an act parties and b) By operation of law
The rules regarding assignment are as under:
• Contract which are purely of personal nature . ex marriage , painting etc… cannot
be assigned.
• The obligation / liabilities under a contract cannot be assigned except with the
consent of the promise.
• The rights and benefits under a contract are assigned unless the contract is
personnel in nature.
• Assignment by operation by law takes place on the death or insolvency . On the
death a party his rights and liabilities devolve upon his legal representatives.

8) Explain the wages agreements. Essentials features of contract.

The gamble term “ wager’ in simply a bet. Wagering agreement is an agreement
between two parties by which one promises to pay money or money’s worth on the
happening of some uncertain event in consideration of the other party’s promise to pay if
the event does not happen.
Ex : an agreement between A promises to pay Rs 500 if rains today and B in return
promises to pay A if it does not is wagering contract.

Essential of wagering agreement :

• There must be promise to pay money or money ‘s worth.

• The promise must be a conditional one .i e in an event happening or non happening
• The event must be an uncertain event. If any party having any control over the
event the transaction is not wager.
• Each party should stand to win or lose under the terms of wager. An
Agreement is, therefore not a wages:

A) If one party may only win and cannot lose or

B) If he may lose but not win or
C) If he can win or lose.
• The party lack any material interest in the event their interest is only stake which
they may win or lose

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9) What is Contract of Guarantee ? features of contract
According to sec 126 “ a contract of guarantee is contract to perform the promise or
discharge the liability of third person in case of his default” . the person who gives guarantee
is called guarantor or surety . the person to whose favor the guarantee is given principal
debtor and the person to whom the guarantee is given is called the creditors .
Features / characteristics

• Three parties: A contract of guarantee ties up together 3 parties viz principal

debtors, creditor & surety
• Consent: A contract of guarantee demands the free consent of all the 3 parties.
• Liability : The liability if the surety is secondary where as liability of principal
debtor is primary .
• Consideration : In contract of guarantee the consideration received by principal
debtor is regarded as sufficient consideration to the surety therefore the creditor
need not furnish any separate consideration to the surety

10) Features of pledge & bailment

Features of bailment:
• Bailment always takes place through contract between bailor & bailee
• In rare case it takes between true owner & finder of goods
• Bailment is concerned with only movable goods . money is clubbed in the category
of movable of goods . hence deposit of money in bank is not bailment.
• In bailment the ownership of goods remains with bailor
• Under bailment goods are delivered on the condition that they condition that
they must be returned when the purpose is completed.

Features of pledge
• It is created through contract between pledger and pledgee
• It cover only movable goods like documents valubles etc…
• It is requires delivery may be actual or constructive
• If pledger fails to pay the money in due date the pledgee has the right to sell the
security.
• When pledger pays the amount with interest the pledger has to returns the security
.

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11) What is quasi contract ? explain features of quasi contract ?
Generally a contract is created is crated by means of agreements between the parties
through offer and acceptance. But there are some contract which are created by the law
without any agreement or offer & acceptance . such contract are called quasi contract.
Features :
1) Supply of necessaries sec 68: if person incompetent to enter contract is supplied by
another person with necessaries suited to his condition in life, the person who has
supplied such necessaries is entitled to be re imbursed from the property of such
incompetent person.
2) Reimbursement of payment sec 69: A pers who is interested in the payment of the
money which is another is bond by the law to pay and therefore who pays entitled to be
reimbursed by the other.
3) payment for non gratuitous act sec 70: when a person lawfully does something for
another not intending to do so gratuitously and such other person enjoys the benefit
there of, the latter has to compensate the format in respect of the things so done.
4) Finder of goods sec 71: Sec 71 speaks in clear terms about the responsibility if a
finder of goods it says “ a person who find s goods belongings to another and takes
them into his custody is subject to the same responsibility as bailee”.
5) Payment by mistake sec 72: A person to whom has been paid by mistake, must repay
it. It is duty a person receiving the money to return the money to a person who has
paid it by mistake.

12) Competition Act Objectives and Features ?

a) The Competition Act 2002 in the context of new economic regime, India adopted enacting
a new competition called Competition Act 2002. It extends whole India Baring the state
Jammu and Kashmir.

Objective of Competition Act 2002 :-

• Eliminate practice having adverse effect on Competition.

• Promote and Sustain Competition.
• Protect interest of consumer
• Ensure freedom to trade carried down by other participant in Indian Market.
• Inquire into certain agreements and dominant position of an enterprises.

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 Features of Competition Act 2002 :-

• The MRTP act may be repealed and the MRTP commission Wounded up.
• The provision related to unfair trade practices need not to figure in competition Act
as consumer protection act 1956 presently covers them sufficiently.
• The pending unfair trade practice cases in the MRTP commission may be transferred
to concerned consumer Disputes Redressal agencies under consumer protection Act,
1986.
• The board of industrial Finance and restructuring formulated under provision of sick
industrial companies Act 1985 has been abolished.

13) Consumer protection Act Objectives and Rights ?

a) The consumer protection Act assent on 24th dec 1986 and came into force from 15th April
1987. Indian market generally, is sellers market and it also natural also become Indian
consumer are innocent illiterate ignorant duped easily by unscrupulous sellers.
Objectives of act / Rights of consumer :-

• Right to be protected against market of goods which are hazardous to life and
property.
• Right to inform quality, Quantity, purity, potency, standard and price of goods protect
consumer from unfair trade practices.
• Right to be assured wherever possible, access to wide variety of goods at competitive
price.
• Right to be heard and to be assured that consumer interest will due to consideration
and appropriate forums.
• Right to seek redressal against exploitation of consumer.
• Right to consumer education.

14) Guarantee, Bailment, Pledge Features ?

a) According to section 148 of Indian contract act the Bailment “is the delivery of goods by
one person to another for the same purpose, upon a contract they shall be return when the
purpose is accomplished”.

Features of Bailment :-

• Bailment is always takes place through contract between bailor and bailee. Its very
rare case implied by law.

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 • Bailment is consider is only with movable goods money cannot be clubbed into
category of movable goods.
• Bailment demands delivery of goods from the bailor to bailee for some purpose
• The delivery of goods actual Constrictive depends upon circumstances of each case.
• In bailment ownership of goods remains with the bailor.
• Under bailment goods are delivered on the condition that they must be returned when
the purpose is accomplished.
Contract on Pledge.

According to section 172 of Indian contract act,1872 “The bailment of goods as a

security for payment of debt or performance of promise is called Pledge”.

Features of Pledge :-

• Its created contract between pledger and pledgee.

• It covers only movable goods like goods, Documents, valuables Etc.
• It requires delivery of goods from pledger to pledgee.
• The delivery may be actual or constrictive.
• In the pledge ownership of goods remains with pledger.

Contract on Guarantee.
According to section 126 “A contract on Guarantee is a contract to perform the promise of
discharge the liability of third person in case of his default.

Features of Guarantee :-
• Three Parties :- Principal Debtor , Creditor and Surety.
• Consent :- Demands free consent for all the three parties.
• Liability :- Principal debtor is primary. Surety continue to liable
• Capacity
• Consideration
• Not a contract of good faith
• Surety and principal debtor is Distinct.

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1) What are the essentials of Valid Contract ?
a) As per Sec 2 (b) “ An agreement enforceable by law is a contract but to be enforceable by
law the agreement must be carry the essential elements of valid contract outlined by the
section 10.
The Essentials of valid contract are :-
1) Offer and Acceptance.
2) Legal relationship
3) Capacity of parties. Age minority and not disqualified any law.
4) Lawful consideration.
5) Free consent
6) Lawful Object .
7) Certainty
8) Possibility of performance
9) Not declared void
10) Writing and Registration.

2) What is Offer ? Legal Rules of Offer ?

a) The word Offer and Proposal are one and the same. An offer , so to do say it’s a
proposal made by one party enter into an agreement with another.
Legal Rules of an Valid offer :-

• It must be created legal Relations

• Terms must be certain and definite
• It may specific or general .
• It may me expressed or implied
• It is different from invitation
• It must be communicated
• It should not be consider silence as acceptance
• It may carry some terms and conditions.

3) Who is Minor ? Legal Rules of minor ?

Section 3 of Indian Majority act 1875 defines a minor as “ A person who has not
completed 18 years of age” the period of minority will extend up to 21 years if :
Guardian is appointed by the court of law and minor property is taken over by the
court.

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Legal Rules of Minor’s Agreement :-
• Absolutely Void
• No ratification
• No Estoppel
• No Restitution
• Minor Beneficiary
• Minor as partner
• Minor as agent
• Minor as shareholder Minor as insolvency
• Minors liability for Necessaries.

4) Explain the Discharge of contract ?

a) A discharge of contract said to be when the rights and obligations created by
extinguished. When contract is discharged the contract between parties will be
stand still
The contract will be discharged for the following :-

a) By Performance
b) By Mutual Agreement
c) By Impossibility of performance.
d) By lapse of time.
e) By operation of law
f) By Breach of contract.

1) By Performance :- fulfilled performed and discharged. By both the parties

2) By Mutual Agreement :- created contract can also discharge by another

agreement. Between parties nullifying previous agreement.

a) Novation :- Discharge of old contract and enter new contract

b) Alteration :- Altering the contract agreement for new contract.
c) Recession :- cancellation of all or some term of contract partial or total.

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 d) Remission :- acceptance of lesser sum of contracted or lesser fulfillment
of promise.

3) By Impossibility of Performance :- contract will become void on basis of

non performance of the contract. Not an excuse.

a) Destruction of subject matter :-

b) Failure of ultimate purpose :-
c) Death on incapacity of promiser
d) Change of law.
e) Out break of war.

4) By Lapse of time :- The contract should be preformed with in the specific

period of time given called period limitation. if not contract is discharges.

5) By discharge of Operation of law:- The contract take following

a) By Death
b) By Insolvency
c) By material Alteration :- if Terms and condition is altered.
d) By merger

6) By breach of contract :- Breach of contact by one party puts an end to

obligation under a contract.
a) Actual :- Party fails or refuses to perform the contract.
b) Anticipatory Breach of Contract :- by Intention not
performing contract.

3) Creation or termination of Agency ?

Agent is person employed to do any act for another or to represent another
in dealing with third persons. The person for whom such act is done or who is
represented is called principal. “The contract which creates relationship of principal
and agent is called as an agency.”

Creation of agency:
1) By express agreements
2) By implied agreements
3) By Ratification
4) By operation of law

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 1) By express agreements: An agency is more often than not created by an express
agreements which may be oral or written .
2) By implied agency: This agency is created from the conduct of the parties
on a particular situation . it is inferred from the circumstance of the case
• Agency by estoppel: This is completely based on “ doctrine of estoppel” which
reads ‘ where a person by words or contract will fully leads to another person to
believe that a certain state of exists he
• Agency by holding out: This agency is completely based doctrine of holding out
which is the extended part of doctrine of estoppel .
• Agency by necessity: under special circumstance the law confers an authority on
a person to act as an agent for another and such an agency is called agency by
necessity.

3) Agency by ratification :- it means subsequent adoption an acceptance of act done

by principal.

4) Agency by Operation of Law :- Agencies sometimes arises through operation of

law when company quotes.

Termination of Agency

Termination of Agency :
1) By Act of parties
2) By operation of Law

1) By Act of Parties :-
I) Agreement
II) Revocation of principal :- Revoke authority agent by Principal.
III) Renunciation by agent :- After giving reasonable reason.

2) By Operation of Law :-
I) Completion of Agency Business
II) Expiry of Time
III) Death of principal or Agent
IV) Insanity of Principal or Agent
V) Fulfilment of the object
VI) Insolvency of Principal.

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Types of Contracts ?

Valid Contracts

The Valid Contract as discussed in the topic on “Essentials of a Contract” is an agreement

that is legally binding and enforceable. It must qualify all the essentials of a contract.

Void Contract Or Agreement

The section 2(j) of the Act defines a void contract as “A contract which ceases to be
enforceable by law becomes void when it ceases to be enforceable”

Voidable Contract

These types of Contracts are defined in section 2(i) of the Act: “An agreement which is
enforceable by law at the option of one or more of the parties thereto, but not at the option of
the other or others, is a voidable contract.

Illegal Contract ,

Unenforceable Contracts : Unenforceable contracts are rendered unenforceable by law due

to some technical. The contract can’t be enforced against any of the two parties.

NEGOTIABLE INSTRUMENTS ACT, 1881

The Negotiable Instruments Act was enacted, in India, in 1881. Prior to its enactment, the
provision of the English Negotiable Instrument Act were applicable in India, and the
present Act is also based on the English Act with certain modifications. It extends to the
whole of India except the State of Jammu and Kashmir. The Act operates subject to the
provisions of Sections 31 and 32 of the Reserve Bank of India Act, 1934.

According to Section 13 (a) of the Act, “Negotiable instrument means a promissory note,
bill of exchange or cheque payable either to order or to bearer, whether the word “order”
or “ bearer” appear on the instrument or not.”

CHARACTERISTICS OF A NEGOTIABLE INSTRUMENT

A negotiable instrument has the following characteristics:

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 1. Property: The possessor of the negotiable instrument is presumed to be the owner
of the property contained therein. A negotiable instrument does not merely give
possession of the instrument but right to property also.

2. Title: The transferee of a negotiable instrument is known as ‘holder in due course.’

A bona fide transferee for value is not affected by 5 any defect of title on the part of
the transferor or of any of the previous holders of the instrument.

3. Rights: The transferee of the negotiable instrument can sue in his own name, in case of
dishonor. A negotiable instrument can be transferred any number of times till it is at
maturity. The holder of the instrument need not give notice of transfer to the party liable
on the instrument to pay.

4. Presumptions: Certain presumptions apply to all negotiable instruments e.g., a

presumption that consideration has been paid under it. It is not necessary to write in a
promissory note the words ‘for value received’ or similar expressions because the
payment of consideration is presumed. The words are usually included to create additional
evidence of consideration.

5. Prompt payment: A negotiable instrument enables the holder to expect prompt

payment because a dishonor means the ruin of the credit of all persons who are parties to
the instrument.

PRESUMPTIONS AS TO NEGOTIABLE INSTRUMENT.

1.Consideration: It shall be presumed that every negotiable instrument was made drawn,
accepted or endorsed for consideration. It is presumed that, consideration is present in every
negotiable instrument until the contrary is presumed. The presumption of consideration, 6
however may be rebutted by proof that the instrument had been obtained from, its lawful
owner by means of fraud or undue influence.

2. Date: Where a negotiable instrument is dated, the presumption is that it has been made or
drawn on such date, unless the contrary is proved.

3. Time of acceptance: Unless the contrary is proved, every accepted bill of exchange is
presumed to have been accepted within a reasonable time after its issue and before its
maturity. This presumption only applies when the acceptance is not dated; if the acceptance
bears a date, it will prima facie be taken as evidence of the date on which it was made.

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4. Time of transfer: Unless the contrary is presumed it shall be presumed that every
transfer of a negotiable instrument was made before its maturity.

5. Order of endorsement: Until the contrary is proved it shall be presumed that the
endorsements appearing upon a negotiable instrument were made in the order in which they
appear thereon.

6. Stamp: Unless the contrary is proved, it shall be presumed that a lost promissory note,
bill of exchange or cheque was duly stamped.

7. Holder in due course: Until the contrary is proved, it shall be presumed that the holder
of a negotiable instrument is the holder in due course. Every holder of a negotiable
instrument is presumed to have paid consideration for it and to have taken it in good faith.
But if the instrument was obtained from its lawful owner by means of an offence or fraud,
the holder has to prove that he is a holder in due course.

8. Proof of protest: Section 119 lays down that in a suit upon an instrument which has
been dishonoured, the court shall on proof of the protest, presume the fact of dishonour,
unless and until such fact is disproved.

TYPES OF NEGOTIABLE INSTRUMENT

Promissory notes Section 4 of the Act defines, “A promissory note is an instrument in

writing (note being a bank-note or a currency note) containing an unconditional
undertaking, signed by the maker, to pay a certain sum of money to or to the order of a
certain person, or to the bearer of the instruments.” Essential elements 8 An instrument to
be a promissory note must possess the following elements:

1. It must be in writing:

2. It must certainly an express promise or clear understanding to pay: There must be

an express undertaking to pay. A mere acknowledgment is not enough. The following are
not promissory notes as there is no promise to pay.
If A writes: (a) “Mr. B, I.O.U. (I owe you) Rs. 500”
(b) “I am liable to pay you Rs. 500”.
(c) “I have taken from you Rs. 100, whenever you ask for it have to pay” .
The following will be taken as promissory notes because there is an express promise to
pay: If A writes:

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 (a) “I promise to pay B or order Rs. 500”
(b) “I acknowledge myself to be indebted to B in Rs. 1000 to be paid on demand, for the
value received”.

(3) Promise to pay must be unconditional: A conditional undertaking destroys the

negotiable character of an otherwise negotiable instrument. Therefore, the promise to pay
must not depend upon the happening of some outside contingency or event. It must be
payable absolutely.

(4) It should be signed by the maker: The person who promise to pay must sign the
instrument even though it might have 9 been written by the promisor himself.

(5) The maker must be certain: The note self must show clearly who is the person
agreeing to undertake the liability to pay the amount. In case a person signs in an assumed
name, he is liable as a maker because a maker is taken as certain if from his description
sufficient indication follows about his identity.

(6) The payee must be certain: The instrument must point out with certainty the person
to whom the promise has been made. The payee may be ascertained by name or by
designation.

(7) The promise should be to pay money and money only: Money means legal tender
money and not old and rare coins. 10 A promise to deliver paddy either in the alternative
or in addition to money does not constitute a promissory note.
(8) The amount should be certain: One of the important characteristics of a promissory
note is certainty—not only regarding the person to whom or by whom payment is to be
made but also regarding the amount.

(9) Other formalities: The other formalities regarding number, place, date, consideration
etc. though usually found given in the promissory notes but are not essential in law.

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 Bill of exchange

Section 5 of the Act defines, “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”.

Essential conditions of a bill of exchange

(1) It must be in writing.
(2) It must be signed by the drawer.
(3) The drawer, drawee and payee must be certain.
(4) The sum payable must also be certain.
(5) It should be properly stamped.
(6) It must contain an express order to pay money and money alone.

For example, In the following cases, there is no order to pay, but only a request to pay.
Therefore, none can be considered as a bill of exchange:
(a) “I shall be highly obliged if you make it convenient to pay Rs. 1000 to Manjunath”.
(b) “Mr. Sanjay, please let the bearer have one thousand rupees, and place it to my account
and oblige”

Cheques

Section 6 of the Act defines “A cheque is a bill of exchange drawn on a specified banker, and
not expressed to be payable otherwise than on demand”. A cheque is bill of exchange with two
more qualifications, namely,

(i) it is always drawn on a specified banker, and

(ii) it is always payable on demand. Consequently, all cheque are bill of exchange, but all
bills are not cheque. A cheque must satisfy all the requirements of a bill of exchange; that
is, it must be signed by the drawer, and must contain an 17 unconditional order on a
specified banker to pay a certain sum of money to or to the order of a certain person or to
the bearer of the cheque. It does not require acceptance.
Parties to Bill of Exchange.

1. Drawer: The maker of a bill of exchange is called the ‘drawer’.

2. Drawee: The person directed to pay the money by the drawer is called the ‘drawee’,
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3. Acceptor: After a drawee of a bill has signed his assent upon the bill, or if there are more
parts than one, upon one of such pares and delivered the same, or given notice of such signing
to the holder or to some person on his behalf, he is called the ‘ acceptor’.

4. Payee: The person named in the instrument, to whom or to whose order the money is directed
to be paid by the instrument is called the ‘payee’. He is the real beneficiary under the
instrument.

Parties to a Promissory Note

1. Maker. He is the person who promises to pay the amount stated in the note. He is the debtor.
2. Payee. He is the person to whom the amount is payable i.e. the creditor.
3. Holder. He is the payee or the person to whom the note might have been indorsed.
4. The indorser and indorsee (the same as in the case of a bill).

Indian Partnership Act 1932

The Indian Partnership Act 1932 defines a partnership as a relation between two or more
persons who agree to share the profits of a business run by them all or by one or more
persons acting for them all. As we go through the Act we will come across five essential
elements that every partnership must contain.

Rights and Duties of Partners

1) Duty to Act in Good Faith

2) Duty to render true accounts
3) Duty to Indemnify Fraud
4) Duty to Diligent
5) Duty to Proper use of property of the firm
6) Duty to Account Personal Profits

Rights
1) Right to be Consulted
2) Right to Renumeration (Mutual Rights)
3) Interest Rights (Int on Capital)
4) Right to Indemnity.
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 Types of Partners

Types of partnerships

1) General partnership

A general partnership is the most basic form of partnership. It does not require forming a
business entity with the state. In most cases, partners form their business by signing a
partnership agreement.

Ownership and profits are usually split evenly among the partners, although they may
establish different terms in the partnership agreement.

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2. Limited partnership

Limited partnerships (LPs) are formal business entities authorized by the state. They have
at least one general partner who is fully responsible for the business and one or more
limited partners who provide money but do not actively manage the business.

Limited partners invest in the business for financial returns and are not responsible for its
debts and liabilities.

3. Limited liability partnership

A limited liability partnership (LLP) operates like a general partnership, with all partners
actively managing the business, but it limits their liability for one another's actions.

The partners still bear full responsibility for the debts and legal liabilities of the business,
but they're not responsible for errors and omissions of their fellow partners.

4. Limited liability limited partnership

A limited liability limited partnership (LLLP) is a newer type of partnership available in

some states. It operates like an LP, with at least one general partner who manages the
business, but the LLLP limits the general partner's liability so all partners have liability
protection.

Procedure of Registration
According to the India Partnership Act 1932, there is no time limit as such for the
registration of a firm. The firm can be registered on the date when it is incorporated or any
such date after so. The requisite fees and fines must be paid. The procedure for such a
registration is as follows,

1] Application to the Registrar of Firms in the prescribed form (Form A).

• Name of the Partnership Firm

• Name and address of all partners
• Place of business (address of main and branch offices)
• Duration of the partnership
• Date of joining of partners

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 • Date of commencement of business
2] The duly signed copy of the Partnership Deed (which contains all the terms and
conditions) must be filled with the registrar

3] Deposit/pay the necessary fees and stamp duties

4] Once the registrar approves the application, the firm will be entered into the records. And
the registrar will also issue a certificate of incorporation.

Contents of Partnership Deed

This partnership deed will contain all the conditions and the legalities of the partnership
deed. It will provide a guiding basis for all future activities. And in case of a dispute or legal
proceedings, it can also be used as evidence. A general partnership deed will contain the
following information,

• The agreed name of the Partnership Firm. Please note that such a name cannot
have the words “company” or “private company” in it.
• The nature of the business will also be mentioned in the deed
• Date of commencement of such business
• The place of business, i.e addresses of main office or branch offices if any,
where communication can be sent
• The duration of a partnership if it is a partnership for a specific purpose or time.
If it is a partnership at will then no such duration will be mentioned
• Contribution to the capital of all the partners
• Profit sharing ratio. However, if no ratio is given it is assumed that the profit is
shared by all the partners equally.
• Salary of all active partners
• Interest on contribution and the interest on drawings (must be according to the
provisions of the Indian Partnership Act 1932)
• Terms and conditions of the retirement or expulsion of a partner, and the terms
to continue the partnership after such an incident
• The day-to-day functioning of the firm and the distribution of the managerial
duties among the partners

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 • Preparation of the firm’s accounts and the provisions for internal and statutory
audit
• Procedure for voluntary or forced dissolution of the firm.

Dissolution of Firm

Dissolution of partnership firm is a process in which relationship between partners of firm is

dissolved or terminated. If a relationship between all the partners of firm is dissolved then it is
known as dissolution of firm. In case of dissolution of partnership of firm, the firm ceases to
exist.

Dissolution of Partnership Firm

The dissolution of partnership takes place in any of the following ways:

1. Change in the existing profit sharing ratio.

2. Admission of a new partner
3. The retirement of an existing partner
4. Death of an existing partner
5. Insolvency of a partner as he becomes incompetent to contract. Thus, he can no
longer be a partner in the firm.
6. On completion of a specific venture in case, the partnership was formed
specifically for that particular venture.
7. On expiry of the period for which the partnership was formed.

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 Indian Companies Act 1956

TYPES OF COMPANIES

1. Private Company :- Section 3(1)(iii)

Means a company which has a minimum paid-up capital of one lakh rupees or such
higher paid-up capital as may be prescribed, and by its articles,

(a) restricts the right to transfer its shares, if any;

(b) limits the number of its members to 50not including

2) Public Company: - Section 3 (1) (iv)

Means a company which__

(a) Is not a private company;

(b) has a minimum paid-up capital of five lakh rupees or such higher paid-up capital,
as may be prescribed;

(c) is a private company which is a subsidiary of a company which is not a private

company.

3. Company Limited by Shares :- Section 12(2)(a)

A company having the liability of its members limited by the memorandum to the amount,
if any, unpaid on the shares respectively held by them.

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 Memorandum of Association

A memorandum of association legal statement signed by all initial shareholders or guarantors

agreeing to form the company. 'Articles of association' - written rules about running the
company agreed by the shareholders or guarantors, directors and the company secretary.

Format of Memorandum of Association

Section 4(5) of the Companies Act states that a memorandum should be in any form as
given in Tables A, B, C, D, and E of Schedule 1. The Tables are of different kinds because
of different kinds of companies.

Table A – It is applicable to a company limited by shares.

Table B – It is applicable to a company limited by guarantee and not having a share capital.

Table C – It is applicable to a company limited by guarantee and having a share capital.

Table D – It is applicable to an unlimited company not having a share capital.

Table E – It is applicable to an unlimited company having a share capital.

The memorandum should be printed, numbered and divided into paragraphs. It should also
be signed by the subscribers of the company.

Articles of Association

Articles of association form a document that specifies the regulations for a company's
operations and defines the company's purpose. The document lays out how tasks are to be
accomplished within the organization, including the process for appointing directors and
the handling of financial records.

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 Contents of the Articles of Association

• Calls on shares.
• Surrender of shares.
• The process for the transfer of shares.
• Forfeiture of shares.
• Lien of shares.
• Process for conversion of shares to stocks.
• Share warrants
• Transmission of shares.

Cyber Law

Cyber Law also called IT Law is the law regarding Information-technology

including computers and internet. It is related to legal informatics and supervises
the digital circulation of information, software, information security and e-
commerce.

IT Act 2000 :- The Information Technology Act, 2000 is an Act of the Indian
Parliament notified on 17 October 2000. It is the primary law in India dealing with
cybercrime and electronic commerce.

RTI

The Right to Information (RTI) is an act of the Parliament of India which sets out
the rules and procedures regarding citizens' right to information. It replaced the
former Freedom of Information Act, 2002. Under the provisions of RTI Act, any
citizen of India may request information from a "public authority" (a body of
Government or "instrumentality of State") which is required to reply expeditiously
or within thirty days. In case of matter involving a petitioner's life and liberty, the
information has to be provided within 48 hours. The Act also requires every public
authority to computerize their records for wide dissemination and to proactively
publish certain categories of information so that the citizens need minimum
recourse to request for information formally.

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Right to inspect works, documents, records
Right to take notes, extracts or certified copies
Right to take samples
Right to obtain information in electronic form
Right to information whose disclosure is in the public interest Information which cannot be
denied to Parliament or State Legislature shall not be denied to any person.

Cyber Crime :-
• Phishing.
• Harassment.
• Ransomware.
• Prostitution.
• Child Pornography & Solicitation.
• Intellectual Property Theft. ...
• Account Hacking.
• Drug Trafficking.

What are the 7 types of intellectual property?

Below are the seven types of intellectual property:
1. Trademarks.
2. Copyright.
3. Trade Secret.
4. Industrial Design.
5. : Database.
6. Unfair competition.
7. Patents.

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1 Marks Questions
1) Business Law ?
a) The term business or Mercantile Law may be defined as branch of law which deals
with rights and obligations arising out of business transaction between the traders.

2) Contract ?
a) A contract is an agreement or promise made by between two or more parties.
Where by legal rights and obligations are created which law shall enforce.
Agreement Enforceable by Law is known as contract.

3) Promise ?
a) Sec 2 of (D) defines when the person to whom proposal is made signifies his
accent their to proposal is said to be accepted a proposal when accepted becomes
promise.

4) Agreement
a) Section 2 (e) Every promise and every set of promises forming the consideration
for each other.

5) Minor ?
a) Section 3 of Indian Majority act 1875 defines A person Who has not completed
18 years of age is known as minor.

6) Unsound Mind ?
a) Indian Contract act section 12 reads as under A person is said to be unsound mind
for purpose of making contract if they time when he makes it he is capable of
understanding it and forming a rational judgement as to its effect upon his interest.

7) Free consent ?
a) Section 13 Defines free consent as under two or more persons are said to consent
when they are agree upon same thing in same sense.

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 8) Fraud ?
Intentional misrepresentation of materials facts in order to deceive another person is
called fraud

9) Meaning of contingent contract ?

A contingent contract is an agreement that states which actions under certain
certain conditions will result in specific outcomes. Contingent contract usually
occurs when negotiating parties fails to reach an agreement.

10) Reciprocal promises?

A contract consist of reciprocal or mutual promises when one party makes a promise
in consideration of a similar promise made by the other party .

11) Quasi Contract ?

a) Agreement between the parties through offer and Acceptance but there are some
contract which are created by the law without any Agreement or offer and Acceptance
such contract are called Quasi Contract.

12) Bailment and Pledge

a) Bailment According to sec 148 Bailment is delivery of goods by one person to
another person for some purpose upon a contract that they shall be return when
purpose is accomplished.

b) Pledge :- According to Section 172 Indian Contract Act the Bailment of Goods as
Security for payment of debt are performance of promise is called Pledge .

13) Indemnity
a) According to section 124 a contract by which one party promises to save other
from loss caused to him by conduct of promiser himself or by the conduct of any
other person is called contract of Indemnity.

14) Sub Agent

a) He is a person who is employed and acting under the control of Main Agent is
Known as sub agent

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 b) Special Agent :- He is one who is employed to do particular act or to represent his
principal in a particular contract.

15) Acquisition :- It means Acquiring or agree to acquire shares voting rights or

asset of any enterprises.

16) Unit
a) A plant or a factory established for production storage supply distribution acquisition
or control of any article.

b) Trade :- Buying and selling of goods relating to production supply

Shares :- in the share capital of company carrying voting rights and includes.

17) Laboratory :- It means which is recognized and financed by the state or central
govt for conducting test of any goods with view to find out whether such goods suffer
any defect.

18) Consumer :- Who buy goods for consideration (price) and includes any user of
such goods.

19) Restrictive Trade Practices :- Any Trade practice which requires a consumer
to buy goods or avail service as condition president for buying of avail of goods
service.

20) Unfair trade practices:- Trade practice for which purpose of promoting of sale
of any goods for provision of any service adopt any unfair method.

Note (Red Marked Questions are Important Questions at the Exam Point of View )
Please Check once Again and Add questions If necessary

By Vishal M (Global Business School Hubli)

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