CONTENTS Foreword I-7 Message I-5 Preface to First Edition I-9 About the book I-11 About the authors I-13 B.Com. (General, Computers and Vocational) (III Year) I-17 Contents I-21 PART I INDIAN CONTRACT ACT, 1872 1 BASICS 1.1 Introduction and Definitions of Law 3 1.1-1 Characteristics of law 4 1.1-2 The maxim Ignorantia Juris Not Excusat 5 1.2 Business Law as a Branch of Law 5 1.3 Contract and Indian Contract Act 6 1.3-1 The Indian Contract Act, 1872 7 1.4 Definition of Contract 8 1.5 Nature of Law of Contract 8 I-23
I-24 CONTENTS 1.6 Glossary 9 1.7 Chapter end questions 9 2 ESSENTIAL ELEMENTS OF A VALID CONTRACT 2.1 Introduction to and Definition of a valid contract 12 2.2 Introduction to Essential Elements of a Valid Contract 14 2.2-1 Essential Elements of a Valid Contract 15 2.3 Types of contracts 19 2.4 Agreement v. Contract 21 2.5 Role Play 21 2.6 Glossary 25 2.7 Summary 26 2.8 Cases with Solutions 27 2.8.1 Cases for practice 30 2.9 Chapter end questions 31 Questions from previous exams 31 2.10 Exercises 32 3 ESSENTIALS OF A VALID OFFER 3.1 Introduction 33 3.1-1 Tests to be applied in respect of a valid offer 34 3.2 Kinds of offer 34 3.3 Essentials of a valid offer 35 3.3-1 Cross Offers and Counter Offer 38 3.3-2 Lapse of Offer 39 3.3-3 Special terms in a contract 39 3.4 Role Play 40 3.5 Glossary 42 3.6 Summary 43 3.7 Cases with Solutions 44 3.7-1 Practical cases for practice 45
CONTENTS I-25 3.8 Chapter end questions 46 Questions from previous exams 46 3.9 Exercises 47 4 ESSENTIALS OF A VALID ACCEPTANCE 4.1 Introduction 48 4.1.1 Kinds of acceptance 49 4.2 Essentials of a valid acceptance/legal rules as to acceptance 50 4.2.1 Two important points to ponder 52 4.3 Communication of Offer, Acceptance and Revocation 53 4.4 Role play 55 4.5 Glossary 57 4.6 Summary 58 4.7 Cases with Solutions 58 4.7.1 Cases for practice 59 4.8 Chapter end Questions 60 Questions from previous exams 60 4.9 Exercises 61 5 ESSENTIALS OF A VALID CONSIDERATION 5.1 Introduction 62 5.1-1 Definitions 63 5.2 Essentials of a valid consideration 64 5.3 The Two Important Doctrines and their Exceptions 67 5.3-1 Doctrine of Stranger to Contract Doctrine of privity of contract 67 5.3-2 Doctrine of no consideration no contract (ex nudo pacto non oritur actio) 69 5.4 Role play: The role play is designed to explain certain elements of consideration. 70 5.5 Glossary 72
I-26 CONTENTS 5.6 Summary 73 5.7 Cases with Solutions 73 5.7-1 Cases for practice 74 5.8 Chapter end questions 75 Questions from previous exams 75 5.9 Exercises 76 6 CAPACITY TO CONTRACT 6.1 Introduction 77 6.2 Capacity of Parties 78 6.3 Special Rules regarding Minor s Agreements 80 6.4 Role play 86 6.5 Glossary 87 6.6 Summary 88 6.7 Cases with Solutions 89 6.7.1 Cases for Practice 89 6.8 Chapter end questions 90 Questions from previous exams 90 6.9 Exercises 91 7 FREE CONSENT 7.1 Introduction 92 7.1-1 Consent and free consent 93 7.2 Flaw in consent 93 7.2-1 Introduction to flaws in consent 94 7.3 Coercion and undue influence 95 7.3-1 Coercion 95 7.3-2 Undue influence 97 7.3-3 Pardanashin Women 100 7.3-4 An Unconscionable Bargain 100
CONTENTS I-27 7.3-5 Distinction between coercion and undue influence 100 7.3-6 Effect of undue influence 101 7.4 Fraud and misrepresentation 101 7.4-1 Fraud 101 7.4-2 Misrepresentation 105 7.5 Mistake 106 7.6 Role play 108 7.7 Glossary 109 7.8 Summary 110 7.9 Cases with Solutions 110 7.9-1 Cases for Practice 111 7.10 Chapter end questions 112 Questions from previous exams 112 7.11 Exercises 113 PART II DISCHARGE OF A CONTRACT 1 LEGALITY OF OBJECT AND CONSIDERATION 1.1 Introduction 117 1.2 Unlawful consideration and object 118 1.3 Agreements, the object or consideration of which is unlawful in part 120 1.4 Role Play 121 1.5 Glossary 122 1.6 Summary 122 1.7 Cases with Solutions 123 1.7.1 Cases for Practice 123 1.8 Chapter end Questions 125 Questions from previous exams 125 1.9 Practical Exercise 125
I-28 CONTENTS 2 EXPRESSLY DECLARED VOID AGREEMENTS 2.1 Introduction 126 2.2 Agreements declared void 127 2.3 Contingent contract 128 2.4 Role Play 131 2.5 Glossary of terms 132 2.6 Summary 132 2.7 Cases with Solutions 132 2.7.1 Cases for practice 133 2.8 Chapter end questions 134 Questions from previous exams 135 2.9 Exercise 135 3 DISCHARGE OF CONTRACT 3.0 Introduction 137 3.1 Discharge by mutual agreement 137 3.2 Discharge by operation of law 139 3.3 Material alteration 139 3.4 Performance of a contract/discharge by performance 140 3.5 Discharge by breach 142 3.5-1 Actual breach 142 3.5-2 Anticipatory breach 142 3.6 Discharge by lapse of time 142 3.7 Discharge by impossibility 143 3.7-1 Effect of impossibility 145 3.8 Doctrine of Frustration 146 3.9 Appropriation of payments and reciprocal promises 146 3.9-1 Appropriation of payments 146 3.9-2 Reciprocal promises 147 3.10 Role Play 149 3.11 Glossary 150
CONTENTS I-29 3.12 Summary 150 3.13 Cases with Solutions 151 3.13-1 Cases for practice 152 3.14 Chapter end questions 152 Questions from previous exams 153 3.15 Exercise 154 4 REMEDIES FOR BREACH OF CONTRACT 4.0 Breach of contract 155 4.1 Remedies 156 4.2 Damages 157 4.2-1 Distinction between special damages and ordinary damages 159 4.2-2 Award of Cost of Decree 159 4.3 Role play 159 4.4 Glossary 160 4.5 Summary 160 4.6 Cases with Solutions 161 4.6-1 Cases for practice 162 4.7 Chapter end questions 163 Questions from previous exams 163 4.8 Exercise 164 PART III SALE OF GOODS ACT 1 THE SALE OF GOODS ACT 1.0 Introduction 167 1.1 Salient features of contract of sale of goods 168 1.2 Distinction between sale and agreement to sell 170 1.3 Three points to ponder 171
I-30 CONTENTS 1.3-1 Subject matter of contract of sale 171 1.3-2 Performance of a contract of sale of goods 172 1.4 Television - Role play 175 1.5 Glossary 176 1.6 Summary 177 1.7 Case with Solution 178 1.7-1 Cases for practice 178 1.8 Chapter end questions 179 Questions from previous exams 179 1.9 Exercises 180 2 RIGHTS OF UNPAID SELLER 2.1 Introduction 181 2.2 Unpaid seller 182 2.2-1 Rights of a seller 183 2.2-2 Rights of an unpaid seller 184 2.3 Role Play 187 2.4 Glossary 188 2.5 Summary 189 2.6 Case with Solution 189 2.6.1 Case for practice 190 2.7 Chapter end questions 190 Questions from previous exams 190 2.8 Exercise 191 3 CONDITIONS AND WARRANTIES 3.1 Introduction 192 3.1-1 The significance of distinguishing the stipulations into conditions and warranties 193 3.2 Distinction between a condition and a warranty 193
CONTENTS I-31 3.3 Types of conditions and warranties 194 3.3-1 A brief account of implied conditions and warranties 194 3.3-2 Implied conditions and warranties in detail 195 3.4 Caveat emptor and exceptions to the doctrine of caveat emptor 198 3.5 A truck and the deal struck - A role play 199 3.6 Glossary 200 3.7 Summary 200 3.8 Practical cases with Solutions 201 3.8-1 Cases for practice 202 3.9 Chapter end questions 202 Questions from previous exams 203 3.10 Exercises 203 4 SALE BY NON-OWNERS AND AUCTION SALE 4.1 Sale by non-owners 204 4.1-1 Exceptions to the rule 205 4.2 Auction Sale 208 4.2-1 Rules of Auction Sale [Section 64] 208 4.2-2 Liabilities of an auctioneer 209 4.3 Role Play 209 4.4 Glossary 210 4.5 Summary 210 4.6 Case with Solution 211 4.6-1 Cases for practice 211 4.7 Chapter end questions 211 Questions from previous exams 212 4.8 Exercise 212
I-32 CONTENTS PART IV CONSUMER PROTECTION ACT AND INTELLECTUAL PROPERTY RIGHTS 1 THE CONSUMER PROTECTION ACT, 1986 1.1 Introduction 215 1.1.1 A brief Introduction to Consumer Protection Act, 1986 216 1.2 Amendments 216 1.3 Terminology 217 1.3.1 Defect and deficiency 222 1.4 Rights of consumer 223 1.5 Consumer Protection Councils 223 1.5.1 Central Consumer Protection Council (CCPC) 224 1.5.2 State Consumer Protection Council (SCPC) 224 1.6 Consumer Redressal Agencies 225 1.6.1 District Forum 225 1.6.2 State Commission 227 1.6.3 National Commission 227 1.6.4 Penalties 228 1.6.5 Leading Cases 228 1.7 The Redressal Forum - A role play 228 1.8 Glossary 229 1.9 Summary 230 1.10 Case with Solution 231 1.10.1 Cases for practice 231 1.11 Chapter end questions 231 Questions from previous exams 232 1.12 Exercises 233 2 INTELLECTUAL PROPERTY RIGHTS 2.1 Introduction 234
CONTENTS I-33 2.2 Laws in force and Laws in the offing 235 2.3 Objectives of Protecting Intellectual Property 236 2.4 Copyright as Intellectual Property 236 2.4-1 Assignment and Licensing of copyrights 238 2.4-2 Infringement of copyrights 238 2.5 Trademarks as intellectual property 239 2.5-1 The Trademark Act empowers the following 240 2.5-2 Features of a Trademark 240 2.5-3 Procedure for obtaining Trademarks 240 2.6 Patent as an Intellectual Property 241 2.6-1 Definitions 241 2.6.2 Procedure for obtaining a patent 243 2.7 Industrial Design 244 2.8 Trade secrets 244 2.8.1 Geographical Indications (Source: http://ipindia.nic.in/girindia/) 245 2.9 Intellectually Yours - A role play 246 2.10 Glossary 247 2.11 Summary 247 2.12 Case with Solution 248 2.13 Chapter end questions 248 Questions from previous exams 249 2.14 Exercises 249 3 INFORMATION TECHNOLOGY ACT, 2000 3.1 Introduction 250 3.1.1 Information Technology Act, 2000 251 3.2 Scope of the Act 251 3.3 Aims and objectives 252 3.3.1 Meanings of certain terms 252 3.4 Cyber crimes 256 3.4.1 Punishments for the offenders 256
I-34 CONTENTS 3.5 Role play 260 3.6 Glossary 261 3.7 Summary 262 3.8 Case with solution 263 3.8.1 Cases for practice 263 3.9 Chapter end questions 264 Questions from previous exams 264 3.10 Exercise 264 PART V COMPANY LAW 1 FUNDAMENTALS OF COMPANY LAW 1.1 Introduction 267 1.1.1 Prospectus 271 1.1.2 Memorandum of Association 273 1.1.3 Articles of Association 275 1.2 The Three Doctrines 276 1.2-1 Doctrine of ultra vires 276 1.2.2 Doctrine of Constructive Notice of Memorandum and Articles 279 1.2.3 Doctrine of Indoor Management 280 1.3 Company secretary 281 1.4 Knowledge sans Wisdom - A role play 283 1.5 Glossary 284 1.6 Summary 284 1.7 Case with solution 285 1.7.1 Cases with hints 286 1.8 Chapter end questions 286 Questions from previous exams 286 1.9 Exercises 287
CONTENTS I-35 2 COMPANY MANAGEMENT 2.1 Introduction 289 2.2 Minimum Number of Directors 289 2.3 Who can be appointed as a Director 289 2.4 Appointment of Directors 289 2.5 Removal of Directors 292 2.6 Qualifications for Directors 293 2.7 Disqualification of directors 293 2.8 Rights of Directors 294 2.9 Duties of Directors 295 2.10 The Post Exam Fever - A Role Play 296 2.11 Glossary 297 2.12 Summary 298 2.13 Case with solution 299 2.13-1 Cases for practice 299 2.14 Chapter end questions 300 Questions from previous exams 300 2.15 Exercise 301 3 MEETINGS AND RESOLUTIONS 3.1 Introduction 302 3.2 Terminology 303 3.3 Board Meetings or Directors Meeting 305 3.4 Shareholders Meeting 306 3.4.1 Statutory Meeting 306 3.4.2 Annual General Meeting 307 3.4.3 Extraordinary General Meeting (EGM) 309 3.4.4 Essentials of a valid meeting 309
I-36 CONTENTS 3.5 Resolutions 312 3.5.1 Ordinary resolution 312 3.5.2 Special resolution 313 3.5.3 Resolution requiring special notice 314 3.5.4 Motion v. Resolution 314 3.6 Role play 315 3.7 Glossary 316 3.8 Summary 317 3.9 Case with Solution 318 3.9.1 Cases for practice 318 3.10 Chapter end questions 319 Questions from previous exams 319 3.11 Exercises 320 4 WINDING UP 4.1 Introduction 321 4.2 Modes of Winding up 322 4.2-1 Winding up by court or compulsory winding up 322 4.2-2 Voluntary Winding up 324 4.2-3 Winding up under the Supervision of the Court 329 4.2-4 Official Liquidator (Source and adopted from http://www.companyliquidator.gov.in) 329 4.3 Role Play 336 4.4 Glossary 337 4.5 Summary 337 4.6 Case with solution 338 4.6-1 Cases for practice 338 4.7 Chapter end questions 339 Questions from previous exams 339 4.8 Exercise 340
CONTENTS I-37 PART VI MISCELLANEOUS 1 INDEMNITY AND GUARANTEE 1.0 Introduction 343 1.1 Contract of Indemnity 344 1.1.1 Rights of Indemnity-holder, when sued 345 1.2 Contract of guarantee 345 1.2.1 Kinds of Guarantee 347 1.3 Distinction between a contract of indemnity and a contract of guarantee 348 1.4 Role play 349 1.5 Glossary 350 1.6 Summary 350 1.7 Cases with solutions 351 1.7.1 Cases with hints 352 1.8 Chapter end questions 353 Questions from previous exams 353 1.9 Exercise 353 2 BAILMENT 2.1 Introduction 354 2.2 Kinds of bailments 357 2.3 Duties and rights of bailor and bailee 358 2.3.1 Duties of Bailor 358 2.3.2 Duties of bailee 359 2.3.3 Rights of bailor 361 2.3.4 Rights of bailee 362 2.3.5 Rights of bailor and bailee against a wrong-doer 363 2.4 Termination of bailment 363 2.5 Pledge 364
I-38 CONTENTS 2.6 Role play 364 2.7 Glossary 365 2.8 Summary 365 2.9 Cases with solutions 366 2.9.1 Cases with Hints 367 2.10 Chapter end questions 367 Questions from previous exams 367 2.11 Exercises 368 3 QUASI CONTRACTS 3.1 Introduction 369 3.2 Types of quasi contracts 370 3.2.1 Leading Cases 373 3.3 Role play 373 3.4 Glossary 375 3.5 Summary 375 3.6 Cases with solutions 375 3.6.1 Cases for Practice 376 3.7 Chapter end questions 376 Questions from previous exams 377 3.8 Exercise 377 ANNEXURE ANNEX A1 : ADDITIONAL PRACTICAL CASES 381 ANNEX A2 : CHARTS AND TABLES FOR RECAPITULATION 394 ANNEX A3 : IMPORTANT CASE STUDIES 412 ANNEX A4 : IMPORTANT SECTIONS UNDER DIFFERENT ACTS 415