B.l.r ppt according to jnt university syllabus

COMPILED BY,VIVEK. DEP OF MBA SITS. KMM

INTRODUCTION TO LAW OF INTRODUCTION TO LAW OF CONTRACTCONTRACT

Law of contract is the most important and Law of contract is the most important and basic part of mercantile law, and it is the basic part of mercantile law, and it is the foundation for various other laws falling foundation for various other laws falling under mercantile law.under mercantile law.

Its not only the merchants or traders but Its not only the merchants or traders but every human being in an organized every human being in an organized society ,consciously or unconsciously enters society ,consciously or unconsciously enters in to a contract. in to a contract.

As contracts are the basic of most of the As contracts are the basic of most of the business transactions ,law of contract is of business transactions ,law of contract is of great significance to all mercantile great significance to all mercantile people ,traders ,owners, partnership firms , people ,traders ,owners, partnership firms , banks ,etc engaged in commercial activity . banks ,etc engaged in commercial activity .


ENFORCEABILITYENFORCEABILITY

An agreement to become a contract An agreement to become a contract must have enforceability by law . It must have enforceability by law . It must give rise to legal obligation. legal must give rise to legal obligation. legal obligation means a legal tie among the obligation means a legal tie among the persons doing or performing an act .persons doing or performing an act .

So agreements may be social or legal So agreements may be social or legal related but social contracts do not give related but social contracts do not give rise to legal obligations.rise to legal obligations.


HISTORY OF INDIAN CONTRACT HISTORY OF INDIAN CONTRACT ACT -1827ACT -1827

►The law related to contracts in The law related to contracts in India is contained in the India is contained in the IndianIndian contract act 1872contract act 1872

►The act came in to force with The act came in to force with effect from effect from sep 1 1872sep 1 1872


THE ACT AS ENACTED HAS THE ACT AS ENACTED HAS 266SECTIONS DIVIDED IN TO 266SECTIONS DIVIDED IN TO

FOLLOWING GROUPSFOLLOWING GROUPS General principles of law of contract General principles of law of contract

- - 1to751to75.. Contracts related to sale of goods -Contracts related to sale of goods -

76 to76 to 124124.. Special kind of contracts (indemnity, Special kind of contracts (indemnity,

guarantee, bailment etc ) -guarantee, bailment etc ) -125 to 125 to 238238..

Contracts relating to partnership -Contracts relating to partnership -239 to239 to 266266..

COMPILED BY,VIVEK. DEP OF MBA SITS. KCOMPILED BY,VIVEK. DEP OF MBA SITS. KMMMM

CONTRACTCONTRACTDEFINITIONDEFINITION:CONTRACT is a term derived from :CONTRACT is a term derived from the Latin word “the Latin word “CONTRACTUMCONTRACTUM” ,which means ” ,which means ““DRAWNDRAWN TOGETHERTOGETHER” sec 2(H) of the Indian ” sec 2(H) of the Indian

contract act 1872 defines contract as “contract act 1872 defines contract as “AN AN AGREEMENT ENFOCEABLE BY LAW”.AGREEMENT ENFOCEABLE BY LAW”.

Acc to Pollock: Every agreement and promise Acc to Pollock: Every agreement and promise enforceable at law is a contract. enforceable at law is a contract.

Acc to salmond: Contract is an agreement Acc to salmond: Contract is an agreement creating and defining obligations between the creating and defining obligations between the

parties.parties.

SO, a contract consists of an agreement and its SO, a contract consists of an agreement and its enforceability by lawenforceability by law


AGREEMENTAGREEMENTAGREEMENT is defined as “every promise AGREEMENT is defined as “every promise

and set of promises forming and set of promises forming consideration for each other” (sec2(e)).consideration for each other” (sec2(e)).

PROMISE is defined as “when the person PROMISE is defined as “when the person to whom the offer is made signifies his to whom the offer is made signifies his approval, the proposal is said to be approval, the proposal is said to be accepted”.accepted”.

CONSIDERATION: its nothing but CONSIDERATION: its nothing but something in return of doing something something in return of doing something



Essential elements of valid Essential elements of valid contractcontract

► Offer and acceptance.Offer and acceptance.► Consideration-lawful consideration with Consideration-lawful consideration with

lawful object.lawful object.► Capacity of parties to contract. Capacity of parties to contract. ► Free consent .Free consent .► Agreement should be declared valid it Agreement should be declared valid it

shouldn’t be void.shouldn’t be void.► Writing and registration, if so required by Writing and registration, if so required by

law.law.► Legal relationship.Legal relationship.► Certainty.Certainty.► Possibility of performance.Possibility of performance.► Enforceable by law.Enforceable by law.


OFFER OR PROPOSALOFFER OR PROPOSAL

► DEFINITION –Sec2(a)DEFINITION –Sec2(a) defines defines ProposalProposal ((offeroffer) as ) as ““when one person signifies to when one person signifies to another person his willingness to do or to another person his willingness to do or to abstain from doing anything with a view to abstain from doing anything with a view to obtain the assent of that other person to such obtain the assent of that other person to such act or abstinence he is said to make a act or abstinence he is said to make a proposalproposal””..

► The The personperson making such offer or proposal is making such offer or proposal is proposerproposer or or offerer.offerer.

► Sec2(c)Sec2(c) states states person makingperson making the proposal the proposal as as promisorpromisor and the and the person acceptingperson accepting the the proposal as proposal as promisee.promisee.


ESSENTIALS OF A VALID ESSENTIALS OF A VALID PROPOSAL OR AN OFFERPROPOSAL OR AN OFFER

► Beyond expression of willingness ,there must Beyond expression of willingness ,there must be something in the nature of a request.be something in the nature of a request.

► Proposer cant dictate terms .Proposer cant dictate terms .

► Offer must be intended ,capable of creating Offer must be intended ,capable of creating legal relations ,the agreement must have an legal relations ,the agreement must have an express or tacit reference to the legal express or tacit reference to the legal relations between the parties ,there must be a relations between the parties ,there must be a common intention of the parties to enter in to common intention of the parties to enter in to legal obligation.legal obligation.


►A simple statement of intention does A simple statement of intention does not constitute a binding promise even not constitute a binding promise even though a person to whom it is made though a person to whom it is made acts up on it.acts up on it.

►The words used must apply to definite The words used must apply to definite persons to create legal relations .the persons to create legal relations .the offer must be made to a definite offer must be made to a definite person .person .

►The terms of offer must be certain and The terms of offer must be certain and instantly recognizable .instantly recognizable .

►An offer can be express or implied An offer can be express or implied from the circumstances.from the circumstances.


► An offer must be communicated to an An offer must be communicated to an offeree .A person cant accept an offer offeree .A person cant accept an offer unless he knows of the existence of the unless he knows of the existence of the offer.offer.

► An offer may be conditional but the An offer may be conditional but the conditions must be clearly communicated . conditions must be clearly communicated . A conditional offer lapses when the A conditional offer lapses when the condition is not accepted by the offeree.condition is not accepted by the offeree.

► The offeror should intend to be bound by The offeror should intend to be bound by it as soon as it is accepted by the offeree it as soon as it is accepted by the offeree he shouldn’t reserve to himself any furthur he shouldn’t reserve to himself any furthur act to be done on his part ,if he does act to be done on his part ,if he does so ,then its an invitation to an offer and so ,then its an invitation to an offer and not an offer. There is no contract between not an offer. There is no contract between the parties unless the offer is accepted ,so the parties unless the offer is accepted ,so it can be withdrawn before it is accepted.it can be withdrawn before it is accepted.


TEST TO DETERMINE WHETHER THE TEST TO DETERMINE WHETHER THE PROPOSAL MADE IS VALID OR NOTPROPOSAL MADE IS VALID OR NOT

1.1. Intention of the proposer - Does he Intention of the proposer - Does he intend to create a legal obligation intend to create a legal obligation and stand to be bound by it as soon and stand to be bound by it as soon as it is accepted by the other.as it is accepted by the other.

2.2. Is the offer communicated to the Is the offer communicated to the person to whom it is definitely person to whom it is definitely intended to be made. intended to be made.


COUNTER-OFFERCOUNTER-OFFER

►A COUNTER-OFFER IS A REJECTION OF A COUNTER-OFFER IS A REJECTION OF THE ORIGINAL OFFER .IT IS A NEW THE ORIGINAL OFFER .IT IS A NEW OFFER .THIS NEW OFFER IS TERMED OFFER .THIS NEW OFFER IS TERMED AS COUNTER-OFFERAS COUNTER-OFFER


COUNTER-OFFERCOUNTER-OFFER

►A A COUNTER-OFFERCOUNTER-OFFER is a is a REJECTIONREJECTION of the of the ORIGINAL OFFERORIGINAL OFFER ,Its a ,Its a NEW NEW OFFEROFFER .This new offer is termed as .This new offer is termed as COUNTER-OFFERCOUNTER-OFFER..

►Simply said as Simply said as OFFER TO AN OFFER TO AN OFFER .OFFER .


ACCEPTANCEACCEPTANCE

►DEFINITION :According to DEFINITION :According to sec2(b)sec2(b) when when the person to whom the proposal is the person to whom the proposal is made signifies his assent theretomade signifies his assent thereto , ,the the proposal is said to be acceptedproposal is said to be accepted . .

►A proposal when accepted becomes a A proposal when accepted becomes a promise.promise. Sec2(c)Sec2(c) states states person makingperson making the proposal as the proposal as promisorpromisor and the and the person acceptingperson accepting the proposal as the proposal as promisee.promisee.


►Performance of the conditions of a Performance of the conditions of a proposal, The acceptance of any proposal, The acceptance of any consideration for reciprocal promise which consideration for reciprocal promise which may be offered with a proposal is an may be offered with a proposal is an acceptance of the proposal (sec 8).acceptance of the proposal (sec 8).

►An acceptance need not always be An acceptance need not always be expressed in words .expressed in words .

►performance of the conditions of a performance of the conditions of a proposal is an acceptance of the proposal.proposal is an acceptance of the proposal.

►There must be absolute and unconditional There must be absolute and unconditional acceptance of the terms of a proposal.acceptance of the terms of a proposal.


ESSENTIALS OF A VALID ESSENTIALS OF A VALID ACCEPTANCE ACCEPTANCE

RULESRULES

1.1. Acceptance must be absolute and Acceptance must be absolute and unqualified.unqualified.

2.2. Mode of acceptance-acceptance must be Mode of acceptance-acceptance must be expressed in some usual and reasonable expressed in some usual and reasonable manner.manner.

3.3. Mental acceptance is not sufficient in law. Mental acceptance is not sufficient in law.

4. Acceptance must be communicated to the 4. Acceptance must be communicated to the offeror. offeror.

5. Acceptance of the proposal.5. Acceptance of the proposal.


6.Acceptance of the proposal need not 6.Acceptance of the proposal need not

always always be expressed in be expressed in words.words.

7.Acceptance must be by a certain person.7.Acceptance must be by a certain person.8.If the act is done in ignorance of the 8.If the act is done in ignorance of the

proposal ,it is not acceptance of the proposal ,it is not acceptance of the proposal.proposal.

9.Acceptance must be given within a 9.Acceptance must be given within a reasonable time.reasonable time.

10.Acceptance must be given before the 10.Acceptance must be given before the offer lapses or is revoked or is withdrawn. offer lapses or is revoked or is withdrawn.


CONSIDERATIONCONSIDERATION► Acc to Acc to Sec 2(d)Sec 2(d) of the of the INDIAN CONTRACT INDIAN CONTRACT

ACT ACT CONSIDERATIONCONSIDERATION is: is:

► When at the desire of the promisor, the When at the desire of the promisor, the promisee or any other person promisee or any other person

(1)Has done, or abstained from doing, or(1)Has done, or abstained from doing, or (2)Does or abstains from doing ,or(2)Does or abstains from doing ,or (3)promises to do or to abstain from (3)promises to do or to abstain from

doing doing something .something .

► Such act or abstinence or promise is Such act or abstinence or promise is consideration for the promise.consideration for the promise.


Acc to Pollock Acc to Pollock “consideration is the “consideration is the price for which the promise of other price for which the promise of other is bought , and the promise thus is bought , and the promise thus given for value is enforceable”.given for value is enforceable”.

Every contract consists of two parts: Every contract consists of two parts: (a) (a) promisepromise .(b) .(b) Consideration for the Consideration for the

promise . promise .

SimplySimply said said considerationconsideration is is QUID QUID PRO QUOPRO QUO “something in“something in return of return of something.”something.”


ESSENTIALS OF A VALID ESSENTIALS OF A VALID CONSIDERATIONCONSIDERATION

1.1. Consideration must move at the desire of Consideration must move at the desire of the promisor.the promisor.

2.2. Consideration may move from the Consideration may move from the promisee or any other person –stranger to promisee or any other person –stranger to a contract.a contract.

3.3. Consideration may be past, present or Consideration may be past, present or future. future.

4.4. Consideration may be an act of doing or Consideration may be an act of doing or abstaining from doing something or it may abstaining from doing something or it may be an act of forbearance or abstinence .be an act of forbearance or abstinence .


5.5. Consideration need not be Consideration need not be adequate.adequate.

6.6. Consideration must be real and not Consideration must be real and not illusory.illusory.

7.7. Consideration must not be unlawful, Consideration must not be unlawful, illegal, immoral or opposed to illegal, immoral or opposed to public policy.public policy.

8.8. Performance of existing obligation Performance of existing obligation is no consideration.is no consideration.

9.9. Forbearance to sue is a good Forbearance to sue is a good consideration.consideration.


CAPACITY TO CONTRACTCAPACITY TO CONTRACT

According to sec 11 of the contract act a According to sec 11 of the contract act a person is competent to contract if He/She :person is competent to contract if He/She :

I.I. Is a major .Is a major .

II.II. Is of a sound mind .Is of a sound mind .

III.III. Is not disqualified from contracting by any Is not disqualified from contracting by any law to which he is subject.law to which he is subject.


MINOR’S AGREEMENT MINOR’S AGREEMENT

MINORSMINORS

► According to sec3 of the Indian majority act,1875, According to sec3 of the Indian majority act,1875, a person domiciled in India ,who has not completed a person domiciled in India ,who has not completed age of 18 is a minor.age of 18 is a minor.

► A person is treated as minor until the age of 21 in A person is treated as minor until the age of 21 in the situation the situation

a) Where a guardian to the person or property or a) Where a guardian to the person or property or both is both is appointed by the court ,orappointed by the court ,or

b) The property of minor is put under the b) The property of minor is put under the superintendence superintendence of court of wards.of court of wards.


WHEN CAN A MINOR WHEN CAN A MINOR CONTRACTCONTRACT

I.I. Promisee or transferee.Promisee or transferee.

II.II. Agency.Agency.

III.III. Partnership.Partnership.

IV.IV. Necessaries.Necessaries.


PERSONS OF UNSOUND MINDPERSONS OF UNSOUND MIND

► Under sec 12, “A person is said to be of a Under sec 12, “A person is said to be of a sound mind for the purpose of making a sound mind for the purpose of making a contract, if at the time when he makes it, contract, if at the time when he makes it, he is capable of understanding it and of he is capable of understanding it and of forming a rational judgment as to its forming a rational judgment as to its effects up on his interests.”effects up on his interests.”

► Persons of unsound mind are:Persons of unsound mind are:a.a. Idiots lunatics.Idiots lunatics.b.b. Drunken or intoxicated person.Drunken or intoxicated person.c.c. A person delirious from fever ,etc.A person delirious from fever ,etc.


OTHER PERSONS DISQUALIFIED OTHER PERSONS DISQUALIFIED FOR CONTRACTFOR CONTRACT

►Alien enemy.Alien enemy.► Insolvent.Insolvent.►Foreign sovereigns.Foreign sovereigns.►Convicts.Convicts.► Joint stock companies and Joint stock companies and

corporations incorporated under corporations incorporated under special acts.special acts.


CONTRACTS BYCONTRACTS BY

►MARRIED WOMEN.MARRIED WOMEN.►CORPORATIONS.CORPORATIONS.► INSOLVENTS.INSOLVENTS.


FREE CONSENTFREE CONSENTconsentconsent

► According to According to sec 13sec 13 of the contract act of the contract act Two or more persons are said to consent Two or more persons are said to consent when they agree up on the same thing in when they agree up on the same thing in the same sense.the same sense.

► It means that there must be consensus It means that there must be consensus ad ad idem idem between the parties regarding the between the parties regarding the subject matter of the contract .such subject matter of the contract .such consensus must have arisen out of free consensus must have arisen out of free consent in view of the provision of sec 10 consent in view of the provision of sec 10 “all agreements are contracts if they are “all agreements are contracts if they are made by free consent of the parties.”made by free consent of the parties.”


FREE CONSENTFREE CONSENT

► Consent alone is not sufficient for a Consent alone is not sufficient for a contract. It must also be free. Acc contract. It must also be free. Acc to sec 14, to sec 14, consent is said to be free when it is consent is said to be free when it is not caused by any of the following:not caused by any of the following:

i.i. Coercion.Coercion.ii.ii. Undue influence.Undue influence.iii.iii. Fraud.Fraud.iv.iv. Misrepresentation, andMisrepresentation, andv.v. Mistake.Mistake.


COERCIONCOERCIONUnder Sec 15 coercion means:Under Sec 15 coercion means:

1. (a) The committing or threatening to 1. (a) The committing or threatening to commit commit an act forbidden by the an act forbidden by the Indian penal Indian penal code,1860 ; code,1860 ;

(b) The unlawful detaining or threatening (b) The unlawful detaining or threatening to to detain any property to the prejudice detain any property to the prejudice of any of any person, whatever. person, whatever.

2. The intention of the above act must be to 2. The intention of the above act must be to cause the other person to enter in to an cause the other person to enter in to an agreement. Sec15 agreement. Sec15 states that it is states that it is immaterial whether the Indian penal code immaterial whether the Indian penal code is or is not in force where the coercion is or is not in force where the coercion takes place.takes place.


ESSENTIALS TO PROVE AS ESSENTIALS TO PROVE AS COERCIONCOERCION

1.1. There must be the commitment or There must be the commitment or threatening to commit any act threatening to commit any act forbidden by the Indian penal code.forbidden by the Indian penal code.

2.2. The coercion may comprise of The coercion may comprise of unlawful detaining or threatening to unlawful detaining or threatening to detain any property to the badness of detain any property to the badness of any person .any person .

3.3. May proceed from either a party to May proceed from either a party to the contract or from a stranger.the contract or from a stranger.


4.4. Coercion may be directed to the Coercion may be directed to the prejudice of any person whatever.prejudice of any person whatever.

5.5. The intention of coercion must be to The intention of coercion must be to cause the other person to make a cause the other person to make a contract.contract.

6.6. The application of IPC or otherwise at The application of IPC or otherwise at the place of coercion makes no the place of coercion makes no difference.difference.


UNDUE INFLUENCEUNDUE INFLUENCE

Acc to sec16(1) Acc to sec16(1) A contract is said to be A contract is said to be induced by undue influence when:induced by undue influence when:

a) The relation existing between the a) The relation existing between the parties is in a position to dominate parties is in a position to dominate

the will of the other.the will of the other.

b) The party uses that position to obtain b) The party uses that position to obtain an unfair advantage over the other.an unfair advantage over the other.


Assumptions OF UNDUE Assumptions OF UNDUE INFLUNCEINFLUNCE

► Acc to sec 16(2) ,Acc to sec 16(2) ,A person is A person is deemed to be in a position to deemed to be in a position to dominate the will of another in dominate the will of another in the following cases.the following cases.

a. Real or apparent authority :a. Real or apparent authority :

b. Fiduciary relationship:b. Fiduciary relationship:

c. Mental distress:c. Mental distress:


FRAUDFRAUD► Sec 17 ,states Sec 17 ,states fraudfraud as as “any of the “any of the

following acts committed by a following acts committed by a party to a contract or with his party to a contract or with his participation or by his agent to participation or by his agent to induce another to enter in to the induce another to enter in to the contract.”contract.”

a.a. The false suggestion as to a fact known The false suggestion as to a fact known to be false or not believed to be true .to be false or not believed to be true .

b.b. The active cover up of a fact by one The active cover up of a fact by one having knowledge or belief of the fact. having knowledge or belief of the fact.


c. A promise made without any c. A promise made without any intention of intention of performing it.performing it.

d. Any other act fitted to deceive. d. Any other act fitted to deceive.

e. Any such act or omission as the law e. Any such act or omission as the law specifically declares to be specifically declares to be

fraudulent.fraudulent.


MISREPRESENTATIONMISREPRESENTATION

►Acc to sec 18 REPRESENTATION Acc to sec 18 REPRESENTATION means a statement of fact made by means a statement of fact made by one party to the other before or at the one party to the other before or at the time contract is made with regard to time contract is made with regard to some existing facts or some past some existing facts or some past event which materially induces the event which materially induces the formation of the agreement. formation of the agreement.

►A wrong representation when made A wrong representation when made innocently is misrepresentation.innocently is misrepresentation.


Misrepresentation may be Misrepresentation may be committed in any of the committed in any of the

following waysfollowing ways►1.unwarranted statements.1.unwarranted statements.

►2.breach of duty.2.breach of duty.

►3.inducing mistake about subject 3.inducing mistake about subject matter.matter.


MISTAKEMISTAKE► Mistake is an wrong belief about something.Mistake is an wrong belief about something.► Mistake is of two major kinds:Mistake is of two major kinds:

1.Mistake of law1.Mistake of law:: a. mistake as to Indian law a. mistake as to Indian law

sec 21 says that “sec 21 says that “a contract is not a contract is not voidable because it was voidable because it was

caused by a caused by a mistake as to any mistake as to any law in force in law in force in India”. India”.

b. mistake as to foreign lawb. mistake as to foreign law “ “mistake as to of a foreign country mistake as to of a foreign country vitiates the vitiates the contract and renders it contract and renders it void. it does not have void. it does not have the same the same effect as a mistake of fact”effect as a mistake of fact”


2.Mistake of fact:2.Mistake of fact:

a. a. Bilateral mistakeBilateral mistake

““Acc to sec 20 where both the parties to an Acc to sec 20 where both the parties to an agreement are under a mistake as to a agreement are under a mistake as to a

matter of matter of fact, essential to the agreement fact, essential to the agreement shall be void.”shall be void.” Therefore a bilateral mistake has Therefore a bilateral mistake has two elements.two elements.

(1) there must be a common or mutual (1) there must be a common or mutual mistake , i.e mistake shared by both or all parties.mistake , i.e mistake shared by both or all parties.

(2) the mistake must be related to a matter of (2) the mistake must be related to a matter of fact essential to the agreement.fact essential to the agreement.

bb. unilateral mistake. unilateral mistake

Acc to sec 22 a contract is not voidable merely Acc to sec 22 a contract is not voidable merely because it was caused by one of the because it was caused by one of the

parties to it parties to it being under a mistake as to a being under a mistake as to a matter of fact. matter of fact.


LEGALITY OF OBJECT AND LEGALITY OF OBJECT AND CONSIDERATIONCONSIDERATION

► For a valid contract , both the consideration and For a valid contract , both the consideration and object must be lawful.object must be lawful.

► Object may defined as purpose or design of Object may defined as purpose or design of the contract.the contract.

► Acc to sec 23 ,the object and consideration of an Acc to sec 23 ,the object and consideration of an agreement shall be unlawful if:agreement shall be unlawful if:1.it is forbidden by law.1.it is forbidden by law.2.it is of such nature if permitted ,it would 2.it is of such nature if permitted ,it would defeat the defeat the provisions of lawprovisions of law3.it is fraudulent.3.it is fraudulent.4.it involves or implies injury to the person 4.it involves or implies injury to the person or or property of other.property of other.5.the court regards it as immoral or 5.the court regards it as immoral or opposed to opposed to public policy.public policy.


Agreements opposed to public Agreements opposed to public policypolicy

1.Trading with enemy.1.Trading with enemy.

2.Stifling prosecutions.2.Stifling prosecutions.

3.Maintenance and champerty.3.Maintenance and champerty.

4.Marriage brokerage agreements.4.Marriage brokerage agreements.

5.interfering with course of justice.5.interfering with course of justice.

6.Trafficking in public offices and titles.6.Trafficking in public offices and titles.


7.Agreement restricting personal liberty.7.Agreement restricting personal liberty.

8.Agreement in restraint of parental 8.Agreement in restraint of parental rightsrights

9.Agreements tending to create interest 9.Agreements tending to create interest opposed to duty.opposed to duty.

10.Agreements interfering with marital 10.Agreements interfering with marital status.status.

11.Agreements to vary the period of 11.Agreements to vary the period of limitation.limitation.


CONTINGENT CONTRACTSCONTINGENT CONTRACTS► MEANING:A contract to do or not to do MEANING:A contract to do or not to do

something, if some event collateral to something, if some event collateral to such contract does or does not happen.such contract does or does not happen.

► Contracts may be either Contracts may be either absoluteabsolute or or contingent.contingent.

► ABSOLUTE CONTRACT- a contract in ABSOLUTE CONTRACT- a contract in which the parties must perform their which the parties must perform their reciprocal promises in all events.reciprocal promises in all events.

► CONTINGENT CONTRACT-it is a contract CONTINGENT CONTRACT-it is a contract to do or not to do something if some to do or not to do something if some event, collateral to such contract does or event, collateral to such contract does or does not happen.does not happen.


ESSENTIALS OF A CONTINGENT ESSENTIALS OF A CONTINGENT CONTRACTCONTRACT

a.a. Dependence on a future event.Dependence on a future event.b.b. Collateral event.Collateral event.c.c. uncertain event.uncertain event. Insurance ,indemnity,& guarantee Insurance ,indemnity,& guarantee

are some examplesare some examplesSECTION 32 TO 36 OF THE SECTION 32 TO 36 OF THE

CONTRACT ACT CONTAIN THE CONTRACT ACT CONTAIN THE RULES REGARDING RULES REGARDING PERFORMANCE OF CONTINGENT PERFORMANCE OF CONTINGENT CONTRACTS. CONTRACTS.


RULES REGARDING CONTINGENT RULES REGARDING CONTINGENT CONTRACTCONTRACT

1.1. Contracts contingent on the happening Contracts contingent on the happening of an event.of an event.

2.2. Contracts dependent on the non Contracts dependent on the non happening of an event.happening of an event.

3.3. Contracts contingent upon the future Contracts contingent upon the future conduct of a living person.conduct of a living person.

4.4. Contracts contingent upon happening or Contracts contingent upon happening or non happening of a specified event non happening of a specified event within a fixed time.within a fixed time.

5.5. Contracts contingent upon the happening Contracts contingent upon the happening of an impossible event. of an impossible event.


PERFORMANCE AND PERFORMANCE AND DISCHARGE OF A CONTRACTDISCHARGE OF A CONTRACT

PERFORMANCE OF CONTRACTPERFORMANCE OF CONTRACT It means fulfillment of the terms of the It means fulfillment of the terms of the

contract by the respective parties to contract by the respective parties to the contract.the contract.

Who can demand performance.Who can demand performance. Who should perform the promise.Who should perform the promise. In case of joint promisor.In case of joint promisor.


DISCHARGE OF CONTRACTDISCHARGE OF CONTRACT

Means discontinuation of the Means discontinuation of the contractual relation between contractual relation between the parties.the parties.

When the rights & obligations When the rights & obligations arising out of a contract are arising out of a contract are extinguished the contract is said to extinguished the contract is said to be discharged or terminated.be discharged or terminated.


MODES OF DISCHARGEMODES OF DISCHARGE

A.A. Discharge by performance.Discharge by performance.

B.B. Discharge by mutual consent and Discharge by mutual consent and agreement.agreement.

C.C. Discharge by subsequent or Discharge by subsequent or supervening impossibility or supervening impossibility or illegality.illegality.

D.D. Discharge by lapse of time.Discharge by lapse of time.

E.E. Discharge by operation of law Discharge by operation of law


REMEDIES FOR BREACH OF REMEDIES FOR BREACH OF CONTRACTCONTRACT

a.a. Rescission of contract.Rescission of contract.b.b. Suit for damages.Suit for damages.

1.general or compensatory damages.1.general or compensatory damages.

2.special damages.2.special damages.3.exemplary ,punitive or vindictive damages.3.exemplary ,punitive or vindictive damages.4.nominal damages.4.nominal damages.

5.liquidated damages5.liquidated damages..c.c. Suit for specific performance.Suit for specific performance.d.d. Suit for injunction.Suit for injunction.e.e. Suit for quantum meruit.Suit for quantum meruit.


CONTRACTS OF INDEMNITY AND CONTRACTS OF INDEMNITY AND GUARANTEEGUARANTEE

CONTRACT OF INDEMNITYCONTRACT OF INDEMNITY► Acc to sec 124, Acc to sec 124, “a contract of indemnity means a “a contract of indemnity means a

contract by which one party promises to save the contract by which one party promises to save the other from loss caused by the conduct of the other from loss caused by the conduct of the promisor himself or by the conduct of any other promisor himself or by the conduct of any other person”.person”.

► The person who promises to make good for the loss is The person who promises to make good for the loss is INDEMNIFIER or PROMISOR.INDEMNIFIER or PROMISOR.

► The person whose loss is promised to be made good is The person whose loss is promised to be made good is the INDEMNIFIED or PROMISEE.the INDEMNIFIED or PROMISEE.

Sec 124 has restricted the scope of indemnity only to cases Sec 124 has restricted the scope of indemnity only to cases where loss is caused by a human agency namely:where loss is caused by a human agency namely:

(a) By the conduct of the promisor.(a) By the conduct of the promisor. (b) By the conduct of a third party.(b) By the conduct of a third party.


CONTRACT OF GUARANTEECONTRACT OF GUARANTEE

► Acc to sec126, Acc to sec126, “a contract of “a contract of guarantee is to perform the guarantee is to perform the promise or to discharge liability of promise or to discharge liability of a third person in case of his a third person in case of his default”.default”.

► The person giving the guarantee is the The person giving the guarantee is the surety.surety.

► The person on whose behalf the The person on whose behalf the guarantee is given called the principal guarantee is given called the principal debtor.debtor.

► The person to whom the guarantee is The person to whom the guarantee is given is called the creditor.given is called the creditor.


RequisitesRequisites ofof aa valid valid guaranteeguarantee

1.1. Principal debt.Principal debt.

2.2. Consideration.Consideration.

3.3. Competent parties.Competent parties.

4.4. No misrepresentation.No misrepresentation.

5.5. Surety’s liability must be Surety’s liability must be conditional.conditional.

6.6. Concurrence of all the three parties.Concurrence of all the three parties.

7.7. Writing not compulsory.Writing not compulsory.


CONTRACT OF AGENCYCONTRACT OF AGENCY

►SEC 182 defines SEC 182 defines “a person employed “a person employed to do any act for another or to to do any act for another or to represent another in dealing with represent another in dealing with third person”.third person”.

►The person The person for whom such act is donefor whom such act is done or who isor who is represented is represented is called called PRINCIPAL.PRINCIPAL.

►The relation between these two is The relation between these two is termed as termed as AGENCYAGENCY..


Principles of AgencyPrinciples of Agency

► Contracts of agency are based on two Contracts of agency are based on two important principles:important principles:

(a) whatever a person can do personally shall (a) whatever a person can do personally shall also be allowed to be done through an agent also be allowed to be done through an agent except in case of contracts involving except in case of contracts involving personal services such as painting, marriage personal services such as painting, marriage ,singing ,etc.,singing ,etc.

(b) He who does an act through a duly (b) He who does an act through a duly authorized agent does it by himself, i.e., the authorized agent does it by himself, i.e., the acts of the agent are considered the acts of acts of the agent are considered the acts of the principal the principal


Essentials of a contract of AgencyEssentials of a contract of Agency

i.i. Existence of agreement.Existence of agreement.

ii.ii. Competency of the principal.Competency of the principal.

iii.iii. The agent need not be competent.The agent need not be competent.

iv.iv. No consideration is required to No consideration is required to create agency.create agency.


THE SALE OF GOODS ACT, THE SALE OF GOODS ACT, 19301930GENERAL PRINCIPLESGENERAL PRINCIPLES

Meaning:Meaning: Acc to sec4of the act ,a contract of sale Acc to sec4of the act ,a contract of sale

means means ““a contract whereby the seller a contract whereby the seller transfers or agrees to transfer the transfers or agrees to transfer the property property in the goods to the buyer for a in the goods to the buyer for a price”.price”.

Thus a contract may be: (a) a sale or (b) an Thus a contract may be: (a) a sale or (b) an agreement to sell.agreement to sell.

The term property has been used in sec 4 The term property has been used in sec 4 in the sense of ownership .in the sense of ownership .


Essential elements of contract of Essential elements of contract of salesale

i.i. Two parties.Two parties.

ii.ii. Agreement.Agreement.

iii.iii. Goods.Goods.

iv.iv. Transfer of property.Transfer of property.

v.v. Price.Price.

vi.vi. All the essential elements of a valid All the essential elements of a valid contract must also be present in a contract must also be present in a contract of sale.contract of sale.


CLASSIFICATION OF GOODSCLASSIFICATION OF GOODS

►EXISTING GOODSEXISTING GOODS (a) Specific goods.(a) Specific goods. (b) Ascertained goods.(b) Ascertained goods. (c) Unascertained goods.(c) Unascertained goods.

►FUTURE GOODSFUTURE GOODS ►CONTINGENT GOODSCONTINGENT GOODS


EFFECT OF PERISHING OF EFFECT OF PERISHING OF GOODSGOODS

1)1) Goods perishing before making of Goods perishing before making of contract(sec7). contract(sec7).

2)2) Goods perishing before sale but after Goods perishing before sale but after agreement to sell(sec8).agreement to sell(sec8).

3)3) Perishing of future goods. Perishing of future goods.


Performance of contract of Performance of contract of salesale

►PerformancePerformance means the delivery of means the delivery of goods by the seller ,and acceptance goods by the seller ,and acceptance and payment for the goods by the and payment for the goods by the buyer (sec31).buyer (sec31).

►Delivery Delivery means voluntary transfer means voluntary transfer of possession from one person to of possession from one person to another sec2(2). another sec2(2).


Modes of deliveryModes of delivery1.1. Actual deliveryActual delivery: In this the goods are : In this the goods are

physically handed over to the to the physically handed over to the to the buyer by the seller or to the person buyer by the seller or to the person authorized to hold them on his behalf.authorized to hold them on his behalf.

2.2. Symbolic deliverySymbolic delivery: It is the doing of : It is the doing of some act which has the effect of putting some act which has the effect of putting the goods in possession of the buyer.the goods in possession of the buyer.

3.3. Constructive deliveryConstructive delivery: It takes place : It takes place when a person in possession of goods of when a person in possession of goods of the seller acknowledges to the buyer the seller acknowledges to the buyer that he holds the goods on his behalf.that he holds the goods on his behalf.


Rules regarding delivery(sec32-Rules regarding delivery(sec32-38)38)1)1) Delivery and payment are concurrent Delivery and payment are concurrent

conditions [sec32].conditions [sec32].2)2) Delivery should have the effect of putting Delivery should have the effect of putting

the goods in possession of the buyer or his the goods in possession of the buyer or his agent [sec33].agent [sec33].

3)3) Effect of part delivery[sec34].Effect of part delivery[sec34].4)4) Buyer to apply for delivery[sec35].Buyer to apply for delivery[sec35].5)5) Place of delivery[sec36(1)].Place of delivery[sec36(1)].6)6) Time for delivery of goods[36(2)].Time for delivery of goods[36(2)].7)7) Goods in possession of a third Goods in possession of a third

party[sec36(3)].party[sec36(3)].8)8) Expenses of delivery[sec36(4)].Expenses of delivery[sec36(4)].


9.9. Delivery of wrong quantity.Delivery of wrong quantity.a) short deliverya) short deliveryb) excess deliveryb) excess deliveryc) mixed deliveryc) mixed delivery

10.Instalment delivery.10.Instalment delivery.11.Delivery of carrier or wharfinger.11.Delivery of carrier or wharfinger.

a) to make a suitable contract with a) to make a suitable contract with the carrier or wharfingerthe carrier or wharfingerb) to inform the buyer in time to b) to inform the buyer in time to enable him to insure his goodsenable him to insure his goods

12.Deteriaration of goods during 12.Deteriaration of goods during transit.transit.


Acceptance of delivery by the Acceptance of delivery by the buyerbuyer

1.1. Buyer’s right to examine the goods.Buyer’s right to examine the goods.

2.2. Acceptance of the goods by the Acceptance of the goods by the buyer.buyer.

a) he intimates the seller that he has a) he intimates the seller that he has accepted the goodsaccepted the goods

b) he does any act to goods which is b) he does any act to goods which is inconsistent with the ownership of the inconsistent with the ownership of the seller.seller.

c) he fails to return the goods to the seller c) he fails to return the goods to the seller after the expiry of reasonable time.after the expiry of reasonable time.


3.3. Buyer not bound to return the goods.Buyer not bound to return the goods.4.4. buyer’s liability for neglecting or buyer’s liability for neglecting or

refusing to take delivery of goodsrefusing to take delivery of goods..

a) any loss arising from the buyers a) any loss arising from the buyers negligence or refusal to take delivery of negligence or refusal to take delivery of the goods ,andthe goods ,and

b) reasonable expenses for the care and b) reasonable expenses for the care and custody of goods .where the negligence or custody of goods .where the negligence or refusal of the buyer amounts to refusal of the buyer amounts to repudiation of the contract ,the seller can repudiation of the contract ,the seller can claim damages for breach.claim damages for breach.


NEGOTIABLE INSTRUMENTS ACT-NEGOTIABLE INSTRUMENTS ACT-18811881

► NEGOTIABLE INSTRUMENT.NEGOTIABLE INSTRUMENT. Acc to sec 13of the act a negotiable Acc to sec 13of the act a negotiable

instrument means instrument means “a promissory note, bill “a promissory note, bill of exchange or cheque payable either to of exchange or cheque payable either to order or bearer, whether the words order or bearer, whether the words order or bearer appear on the order or bearer appear on the instrument or not.”instrument or not.”

► Thus, the negotiable instruments act has Thus, the negotiable instruments act has mentioned only three types of instruments,mentioned only three types of instruments,

1.promissory note .1.promissory note . 2.bill of exchange.2.bill of exchange. 3.cheque.3.cheque.


ESSENTIAL CHARACTERISTICS OF A ESSENTIAL CHARACTERISTICS OF A NEGOTIABLE INSTRUMENTNEGOTIABLE INSTRUMENT

I.I. Free transferability.Free transferability.II.II. Holder’s title free from defects.Holder’s title free from defects.III.III. Recovery.Recovery.IV.IV. Presumptions of sections 118&119.Presumptions of sections 118&119. (a) date(a) date (b) time of acceptance(b) time of acceptance (c) time of transfer(c) time of transfer (d) order of endorsements(d) order of endorsements (e) stamp(e) stamp (f) holder in due course(f) holder in due course (g) Consideration(g) Consideration (h) Proof of protest(h) Proof of protest


PROMISORY NOTEPROMISORY NOTE

►Sec 4 defines Sec 4 defines a promissory note as a promissory note as an instrument in writing (not an instrument in writing (not being a bank note or a currency being a bank note or a currency note) containing an note) containing an unconditional undertaking, unconditional undertaking, signed by the maker, to pay a signed by the maker, to pay a certain sum of money only to, or certain sum of money only to, or the order of, a certain person, or the order of, a certain person, or to the bearer of the instrument.to the bearer of the instrument.


Characteristics of a promissory Characteristics of a promissory note:note:1)1) Instrument in writing.Instrument in writing.2)2) Promise to pay.Promise to pay.3)3) The promise to pay must be unconditional.The promise to pay must be unconditional.4)4) Signed by the maker.Signed by the maker.5)5) Certainty of the parties.Certainty of the parties.6)6) Certain sum of money.Certain sum of money.7)7) The promise must relate to the payment of The promise must relate to the payment of

money only.money only.8)8) Other formalities like stamp, date place, Other formalities like stamp, date place,

consideration. consideration. 9)9) It may be payable on demand or after a definite It may be payable on demand or after a definite

period of time.period of time.10)10) It can be made payable to bearer on demand on It can be made payable to bearer on demand on

account of the prohibition of sec 31 of reserve account of the prohibition of sec 31 of reserve bank of India act 1934.bank of India act 1934.


RaghavendraRaghavendra

8-3-1418-3-141

Balaji nagar Balaji nagar khammam khammam

Rs 10,000/- only 24-10-Rs 10,000/- only 24-10-20092009

Three months after date I promise to pay to Three months after date I promise to pay to kiran kiran kumarkumar or to his order the sum of rupees ten thousand or to his order the sum of rupees ten thousand for value received.for value received.

To To

Kiran kumarKiran kumar

13-rly qtrs13-rly qtrs

WarangalWarangal

RaghavendraRaghavendra


BILL OF EXCHANGEBILL OF EXCHANGE

►Sec 5 defines Sec 5 defines ““a bill of exchange a bill of exchange as, an instrument in writing as, an instrument in writing containing an unconditional containing an unconditional order, signed by the maker, order, signed by the maker, directing a certain person to pay directing a certain person to pay a certain sum of money only to, a certain sum of money only to, or to the order of a certain or to the order of a certain person or to the bearer of the person or to the bearer of the instrument.”instrument.”


CHEQUECHEQUE

► Sec 6 of negotiable instruments act Sec 6 of negotiable instruments act defines a cheque is a bill of exchange defines a cheque is a bill of exchange drawn on a specified banker and not drawn on a specified banker and not expressed to be payable otherwise expressed to be payable otherwise than on demand and it includes the than on demand and it includes the electronic image of a truncated electronic image of a truncated cheque and a cheque in the electronic cheque and a cheque in the electronic formform


CHARACTERSTICS OF A CHARACTERSTICS OF A CHEQUECHEQUE

► It is always drawn on a specified It is always drawn on a specified banker.banker.

► It is always payable on demand.It is always payable on demand.► It doesn't require any acceptance.It doesn't require any acceptance.►No grace days are allowed.No grace days are allowed.► It may be crossed sometimes.It may be crossed sometimes.


ENDORSEMENTENDORSEMENT

►When the maker or holder of a When the maker or holder of a negotiable instrument signs the negotiable instrument signs the same ,otherwise than such a maker ,for same ,otherwise than such a maker ,for the purpose of negotiation ,on the back the purpose of negotiation ,on the back or face thereof or on a slip of paper or face thereof or on a slip of paper annexed to it ,or signs for the same annexed to it ,or signs for the same purpose a stamped paper intended to be purpose a stamped paper intended to be completed as a negotiable instrument, completed as a negotiable instrument, he is said to endorse the same.he is said to endorse the same.


Types of endorsementsTypes of endorsements

1.1. Blank or general.Blank or general.2.2. Full or special.Full or special.3.3. Restrictive.Restrictive.4.4. Partial.Partial.5.5. Conditional or qualified.Conditional or qualified.6.6. Sans recourse.Sans recourse.7.7. Sans frais .Sans frais .8.8. Faculative. Faculative.


HOLDERHOLDER

The holder of a negotiable instrument means any The holder of a negotiable instrument means any person entitled to the possession of the person entitled to the possession of the instrument in his own name and to receive or instrument in his own name and to receive or recover the amount due on it from the parties recover the amount due on it from the parties to it.to it.

HOLDER IN DUE COURSEHOLDER IN DUE COURSE

Holder in due course is a person who for some Holder in due course is a person who for some consideration became the possessor of a bill of consideration became the possessor of a bill of exchange or a promissory note if payable to the exchange or a promissory note if payable to the bearer or payee, or endorsee, before the bearer or payee, or endorsee, before the amount mentioned in it became payable ,and amount mentioned in it became payable ,and without having sufficient cause to believe that without having sufficient cause to believe that any defect existed in the title of the person any defect existed in the title of the person from whom he derived his title.from whom he derived his title.


DISCHARGE OF PARTIESDISCHARGE OF PARTIESi.i. By payment in due course.By payment in due course.ii.ii. By cancellation of the instrument.By cancellation of the instrument.iii.iii. By release of the of a party to the instrument. By release of the of a party to the instrument. iv.iv. By allowing drawee more than 48 hours to By allowing drawee more than 48 hours to

accept.accept.v.v. By non presentment of a cheque with in a By non presentment of a cheque with in a

reasonable reasonable time of its issue.time of its issue.vi.vi. In case of a qualified acceptance, the parties In case of a qualified acceptance, the parties

not not consenting to are discharged.consenting to are discharged.vii.vii. By operation of law:By operation of law: (a) by an order of insolvency of court .(a) by an order of insolvency of court . (b) by lapse of time. (b) by lapse of time. (c) by merger of amount of instrument in to the (c) by merger of amount of instrument in to the

judgment debt. judgment debt.


COMPANIES COMPANIES ACT,1956ACT,1956

Company: Acc to sec 3(1)1 of the Company: Acc to sec 3(1)1 of the companies act a company means a companies act a company means a group formed and registered under group formed and registered under this act or an existing company as this act or an existing company as defined in sec(1)2 as an existing defined in sec(1)2 as an existing company means a company formed company means a company formed and registered under any of the and registered under any of the previous companies law.previous companies law.


KINDS OF COMPANIESKINDS OF COMPANIES

ON THE BASIS OF MODE OF ON THE BASIS OF MODE OF INCORPORATION.INCORPORATION. CHARTERED COMPANIES: like east India CHARTERED COMPANIES: like east India

company.company. STATUORY COMPANIES: these are STATUORY COMPANIES: these are

created by a special act like LIC ,RBI, created by a special act like LIC ,RBI, SBI.SBI.

REGISTERED COMPANIES: are REGISTERED COMPANIES: are companies registered under the act.companies registered under the act.


ON THE BASIS OF LIABILITY OF ON THE BASIS OF LIABILITY OF MEMBERS:MEMBERS: LIMITED BY SHARES: where the liability of LIMITED BY SHARES: where the liability of

the members is limited to the amount the members is limited to the amount unpaid on the shares.unpaid on the shares.

LIMITED BY GUARANTEE: where the LIMITED BY GUARANTEE: where the liability of the members of a company is liability of the members of a company is limited to a fixed amount which the limited to a fixed amount which the members undertake to contribute to the members undertake to contribute to the assets of the company in the event of its assets of the company in the event of its being wound up .being wound up .

UNLIMITED: every member is liable for UNLIMITED: every member is liable for the debts of the company ,as in an the debts of the company ,as in an ordinary partnership ,in proportion to his ordinary partnership ,in proportion to his interest in the company. interest in the company.


ON THE BASIS OF NUMBER OF MEMBERS:ON THE BASIS OF NUMBER OF MEMBERS: PRIVATE: where the minimum number of PRIVATE: where the minimum number of

members is two and maximum is fifty.members is two and maximum is fifty. PUBLIC: where the min number is seven and PUBLIC: where the min number is seven and

max is limited by number of shares.max is limited by number of shares.

OTHER TYPES OF COMPANIESOTHER TYPES OF COMPANIES:: GOVERNMENT COMPANIES: the companies in GOVERNMENT COMPANIES: the companies in

which not less than 51%of the paid up share which not less than 51%of the paid up share capital is held by the state govt and partly by capital is held by the state govt and partly by one or more state govts.one or more state govts.

FOREIGN COMPANY: means a company FOREIGN COMPANY: means a company incorporated outside India but having branches incorporated outside India but having branches in India. in India.


PRODUCER COMPANIES: The companies PRODUCER COMPANIES: The companies (amendment) act 2002 ,has introduced a (amendment) act 2002 ,has introduced a new type of company known as producer new type of company known as producer companies. any ten individual producers companies. any ten individual producers or any two or more producer institutions or any two or more producer institutions may form and incorporate a company as may form and incorporate a company as a producer company .a producer company .


Formation and Incorporation of Formation and Incorporation of a Companya Company

1.1. PromotionPromotion

2.2. Registration/IncorporationRegistration/Incorporation

3.3. Flotation/Raising of capitalFlotation/Raising of capital

4.4. Commencement of BusinessCommencement of Business


Memorandum of AssociationMemorandum of Association

► ContentsContents

a)a) Name of the CompanyName of the Company

b)b) Registered OfficeRegistered Office

c)c) Objects of the companyObjects of the company

d)d) LiabilityLiability

e)e) CapitalCapital

f)f) Association or SubscriptionAssociation or Subscription


Articles of AssociationArticles of Association► Contents of ArticlesContents of Articlesa)a) Different classes of shares and there rightsDifferent classes of shares and there rightsb)b) Procedure of making an issue of share capital and Procedure of making an issue of share capital and

allotment of sharesallotment of sharesc)c) Procedure of issuing of share certificates and share Procedure of issuing of share certificates and share

warrantswarrantsd)d) Forfeiture of share and the procedure of there reissueForfeiture of share and the procedure of there reissuee)e) Procedure for transfer and transmission of sharesProcedure for transfer and transmission of sharesf)f) Directors there appointment remuneration qualification Directors there appointment remuneration qualification

etc...etc...g)g) Accounts and auditAccounts and audith)h) Alteration of share capital and buy back of shares Alteration of share capital and buy back of shares i)i) Borrowing powers of directorsBorrowing powers of directorsj)j) General meetings alternatives and pollsGeneral meetings alternatives and pollsk)k) Voting rights of membersVoting rights of membersl)l) Dividend and reservesDividend and reservesm)m) Winding upWinding up


Company Management and Company Management and AdministrationAdministration

► Director- according to the act director Director- according to the act director means any person who runs the means any person who runs the organization, through whom a company acts organization, through whom a company acts does it’s business. They are the brains of the does it’s business. They are the brains of the company. Board of directors or the board in company. Board of directors or the board in relation in company means the board of relation in company means the board of directors of a company.directors of a company.

► Min and Max Number of directorsMin and Max Number of directors - Min 2 in a private company.- Min 2 in a private company. - Min 3 in a public company.- Min 3 in a public company. - The max number may be as mentioned in - The max number may be as mentioned in

the the articles of the company.articles of the company.


a)a) First director.First director.b)b) Appointment of directors by company.Appointment of directors by company.c)c) Appointment of directors by the board.Appointment of directors by the board.d)d) Appointment of directors by third parties.Appointment of directors by third parties.e)e) Appointment of directors by proportional Appointment of directors by proportional

representation.representation.f)f) Appointment of directors by central Appointment of directors by central

government.government.g)g) Appointment of directors by small share Appointment of directors by small share

holders.holders.

Appointment of DirectorsAppointment of Directors


Powers &duties of directorsPowers &duties of directors

► Powers to be exercised by resolutions passed Powers to be exercised by resolutions passed by the board’s meetingsby the board’s meetings

1) the power to make calls.1) the power to make calls. 2) to issue debentures.2) to issue debentures. 3) to borrow money other than on debentures.3) to borrow money other than on debentures. 4) to invest funds.4) to invest funds. 5) to make loans.5) to make loans. 6) to fill casual vacancy in board.6) to fill casual vacancy in board. 7) to make political contributions.7) to make political contributions. 8) recommend rate of dividend at the annual 8) recommend rate of dividend at the annual

general general meetings. meetings.


►Powers to be exercised by Powers to be exercised by company in general meetings:company in general meetings:

1)sale lease or disposal of the 1)sale lease or disposal of the undertaking.undertaking.

2)showing any concession regarding 2)showing any concession regarding payment of debts.payment of debts.

3)make investment of the amount of 3)make investment of the amount of compensation received.compensation received.

4)contribution of charitable and other 4)contribution of charitable and other funds.funds.


►Duties of directorsDuties of directors

1) duty of good faith.1) duty of good faith.

2) duty to take reasonable care.2) duty to take reasonable care.

3)duty to disclose interest.3)duty to disclose interest.

4)duty to participate in committees of 4)duty to participate in committees of the the board like audit committee or board like audit committee or investors investors grievance committee.grievance committee.


Company meetings and Company meetings and resolutionsresolutions

►A company being an artificial legal A company being an artificial legal person can only act through some person can only act through some human intermediary. the various human intermediary. the various provisions of the act and rules provisions of the act and rules empower members to do certain empower members to do certain things all decisions of the company things all decisions of the company are taken in meetings .are taken in meetings .


KINDS OF MEETINGSKINDS OF MEETINGS► Statutory meetingsStatutory meetings► Annual general meetings {AGM}Annual general meetings {AGM}► Extraordinary general meetings {EGM}Extraordinary general meetings {EGM}► Board meetingsBoard meetings

RESOLUTIONSRESOLUTIONS► Any motion voted upon and agreed to in a Any motion voted upon and agreed to in a

meeting and entered in minutes, a motion when meeting and entered in minutes, a motion when passed ,with or without amendment is called passed ,with or without amendment is called resolution.resolution.

► Types of resolutions:Types of resolutions: 1. ordinary resolution1. ordinary resolution 2. special resolution2. special resolution 3. resolutions requiring special resolution3. resolutions requiring special resolution


Modes of winding upModes of winding up(i)(i) Compulsory winding up by Court Compulsory winding up by Court

[Sec.433][Sec.433]

(ii)(ii)Voluntary winding up Voluntary winding up

Members voluntary winding upMembers voluntary winding up

Creditors voluntary winding upCreditors voluntary winding up

(i)(i) Voluntary winding up under supervision Voluntary winding up under supervision of the court.of the court.


► Special Resolution.Special Resolution.► Default in holding statutory meeting.Default in holding statutory meeting.► Failure to commence business.Failure to commence business.► Reduction in membership.Reduction in membership.► Inability to pay debts.Inability to pay debts.► Just & equitable.Just & equitable.


► Ordinary resolution passed where the Ordinary resolution passed where the period fixed by the Articles for the period fixed by the Articles for the duration.duration.

► If the company resolves by special If the company resolves by special resolution that it shall be wound-up resolution that it shall be wound-up voluntarily [sec.484]voluntarily [sec.484]


MembersMembers► Solvent companiesSolvent companies► No need of No need of

creditors meetingcreditors meeting► Liquidator Liquidator

appointed by the appointed by the membermember

► No committee of No committee of inspection can be inspection can be formed.formed.

CreditorsCreditors► Insolvent Insolvent

CompaniesCompanies► Creditors meeting Creditors meeting

necessarynecessary► Liquidator appointed Liquidator appointed

by the creditorby the creditor► If wish can formed a If wish can formed a

Committee of Committee of inspection.inspection.

COMPILED BY,VIVEK. DEP OF MBA SITS. KCOMPILED BY,VIVEK. DEP OF MBA SITS. KMMMM

Definition of taxDefinition of tax

A charge imposed by government on the annual A charge imposed by government on the annual gains of a person, corporation, or other taxable unit gains of a person, corporation, or other taxable unit derived through work, business pursuits, derived through work, business pursuits, investments, property dealings, and other sources investments, property dealings, and other sources determined in accordance with the state lawdetermined in accordance with the state law

A tax levied on the annual earnings of an individual A tax levied on the annual earnings of an individual is called personal income tax. Personal Income taxes is called personal income tax. Personal Income taxes are levied by the central government.are levied by the central government.

Income Tax Act, 1961 imposes tax on income other Income Tax Act, 1961 imposes tax on income other than agricultural income. Tax on agricultural income than agricultural income. Tax on agricultural income can be imposed only by State Governmentscan be imposed only by State Governments


► A charge imposed by government on the A charge imposed by government on the annual gains of a person, corporation, or annual gains of a person, corporation, or other taxable unit derived through work, other taxable unit derived through work, business pursuits, investments, property business pursuits, investments, property dealings, and other sources determined in dealings, and other sources determined in accordance with the state lawaccordance with the state law

► A tax levied on the annual earnings of an A tax levied on the annual earnings of an individual is called personal income tax. individual is called personal income tax. Personal Income taxes are levied by the Personal Income taxes are levied by the central government.central government.


Classification of incomeClassification of income

►Salary / remunerationSalary / remuneration► Income from house propertyIncome from house property► Income from business/professionIncome from business/profession►Gifts / charityGifts / charity►Capital gainsCapital gains


Tax is classified in to two Tax is classified in to two categoriescategories

►DIRECT TAX:DIRECT TAX: These are the taxes paid These are the taxes paid after the benefit reaches the hands of after the benefit reaches the hands of a person a person .{these taxes are paid .{these taxes are paid from income, benefits and wealth}from income, benefits and wealth}

►INDIRECT TAX:INDIRECT TAX: These are the taxes These are the taxes paid when a person or consumer paid when a person or consumer purchases something purchases something .{these taxes .{these taxes are paid on the goods or services are paid on the goods or services consumed}consumed}


Assessee Assessee

► “ “ Assessee” means a person by whom Income Assessee” means a person by whom Income tax or any other sum of money is payable tax or any other sum of money is payable under the act. under the act.

► It includes every person in respect of whom It includes every person in respect of whom any proceeding under the act has been taken any proceeding under the act has been taken for the assessment of his income or loss and for the assessment of his income or loss and the amount of refund due to him.the amount of refund due to him.

► It also includes a person who is assessable in It also includes a person who is assessable in respect of the income or loss of another or who respect of the income or loss of another or who is deemed to be an assessee or an assessee in is deemed to be an assessee or an assessee in default under the provisions of the act.default under the provisions of the act.


Assessment yearAssessment year

► Assessment Year – ( Sec 2(9)Assessment Year – ( Sec 2(9)► Assessment year may be defined as a year in which Assessment year may be defined as a year in which

the income of the previous year is to be assessed.the income of the previous year is to be assessed.► In some countries it is called “ tax year”In some countries it is called “ tax year”► It always starts on April 1 and ends on March 31 of It always starts on April 1 and ends on March 31 of

the next yearthe next year► Income of the previous year is taxed in the Income of the previous year is taxed in the

immediately following assessment year.immediately following assessment year.► In some countries it is called “ Income Year”In some countries it is called “ Income Year”► From the assessment year 1989-90 onwards all From the assessment year 1989-90 onwards all

assesses are required to follow the financial year.assesses are required to follow the financial year.


WHO IS A PERSON?WHO IS A PERSON?

►Person‘ includes * Individual * HUF * Person‘ includes * Individual * HUF * Company * Partnership Firm * Company * Partnership Firm * Association of Persons (AOP) or body Association of Persons (AOP) or body of individuals whether incorporated or of individuals whether incorporated or not * Local Authority like Municipality not * Local Authority like Municipality etc. * Artificial Judicial person [section etc. * Artificial Judicial person [section 2(31) of Income Tax Act] 2(31) of Income Tax Act]


Procedure for advance Procedure for advance payment of taxpayment of tax

► It is another method of collection of tax by It is another method of collection of tax by the central government in the form of prepaid the central government in the form of prepaid tax .tax .

► Its also known as “PAY AS YOU EARN”.Its also known as “PAY AS YOU EARN”.► Advance tax liability under different situationsAdvance tax liability under different situations 1)payment of advance tax by the assessee of 1)payment of advance tax by the assessee of

his own account (sec 210)his own account (sec 210) 2)payment of advance tax in pursuance of 2)payment of advance tax in pursuance of

assessing officer (210)assessing officer (210) a) order by the assessing officer.a) order by the assessing officer. b) lower estimate by assessee.b) lower estimate by assessee. c) higher estimate by the assessee.c) higher estimate by the assessee.


Computation by an assesseeComputation by an assessee

3)payment of advance tax in 3)payment of advance tax in pursuance of revised order of pursuance of revised order of assessing officer.assessing officer.

a) lower estimate by the assessee.a) lower estimate by the assessee.

b) higher estimate by the assessee.b) higher estimate by the assessee. Computation of advance tax (sec 209)Computation of advance tax (sec 209)

computation by an assessee .computation by an assessee .Computation by assessing officer . Computation by assessing officer .


GROSS TOTAL INCOMEGROSS TOTAL INCOME

► Gross total income is commonly defined as the Gross total income is commonly defined as the amount of company’s or person’s income before amount of company’s or person’s income before all deductions or any tax payers income, except all deductions or any tax payers income, except which is specifically excluded by the internal which is specifically excluded by the internal revenue code ,before taking deduction taxes in to revenue code ,before taking deduction taxes in to account. account.

► The GTI is computed by aggregating incomes the The GTI is computed by aggregating incomes the following five head following five head

1.1. Income from salaryIncome from salary2.2. Income from house propertyIncome from house property3.3. Profits and gains of business or profession Profits and gains of business or profession 4.4. Capital gainsCapital gains5.5. Income from other sourcesIncome from other sources


Documents

B.l.r ppt according to jnt university syllabus