Saturday, June 24, 2006


Business Legislation Notes - Prof. Bijoy Kumar Dutta - Part 2


In a private company the number of members cannot be less than 2 & cannot be more than 50. In a public com[any the number of members cannot be less than 7 but there is no upper limit.

In a public company, there is no restriction of transfer of shares but in private company there is restriction.

A private company cannot invite the public to purchase its shares or debentures but a public co, may do so.


Public company issues prospectus for raising capital but private company need not find prospectus but it has to find a statement in lieu of prospectus.

Private company can commence a business its own but public company cannot commence a business.

Private company must have at least 2 directors but a public company must have minimum 3 directors.

In a private company, no statutory meeting needed but in a public company it is needed.

14th June, 2006 – Bijoy Kumar Dutta – Business Legislation


An arrangement enforceable by law is a CONTRACT. The contract essentially consists of 2 elements.
1) Agreement
2) Its enforceability by law

Section 2a

When one person signifies to another, his willingness to do or abstain from doing anything with a view to obtaining the ascent of that other in such act or abstinence, he is said to make a proposal.

Section 2b

When the person to whom the proposal is made signifies his ascent there to the proposal is said to be accepted. The proposal when accepted becomes a promise.

(Promise = Agreement = Proposal + Accepted)

Section 10 (VVV Imp)

All agreements are contracts if they are made by the free consent of the parties competent to contract for a lawful consideration & with a lawful object and are not expressly declared to be void.

There must be lawful offer by one party and lawful acceptance of the offer by the other party. The word lawful implies that an offer & acceptance must conform to the rules laid down in the contract act regarding offer and acceptance.

There must be an intention among the parties that the agreement shall result in or create legal relationship.
Agreement of social does not contemplate, legal relationship as for instance an agreement to dine at your friend’s house.

Subject to certain exceptions an agreement is legally enforceable when each of the parties to it, get something & give something an agreement to do something for noting is usually not enforceable by law.

( My Concept – potato seller sells potato at Rs 7 per kg – this is open offer – I buy 2 kgs from him at Rs 14 ) ( Bus fare – This is implied offer – as contract is made)

Every contract must be entered into on the basis of free consent of all the parties. If the agreement is induced by coercion, undue influence, misrepresentation, fraud & mistake then it is to be taken as absence of free consent.

Capacity means competency of parties to execute a contract. Want of capacity arises from minority, lunacy, idiocy and drunkenness.

The object for which an agreement has been entered into must not be illegal or immoral or opposed to public policy.

The agreement must be capable of being performed.
Eg: life into a dead body


An oral conflict is perfectly valid except in those cases where writing & registration is required by law. Eg: lease gift, sale of property.

The elements mentioned above must be present in a contract. If anybody of there is absent, the agreement is not a contract from this it follows that all agreements are contracts but all contracts are not agreements.

Imp Question
All agreements are contracts but all contracts are not agreements. Discuss.


1. Terms of offer must be definite, unambiguous, certain & not vague.
Eg: ‘A’ says to ‘B’, “I will sell you a car”. A owns 5 different car. So offer is not definite as he is not specific, which car he wants to sell.

2. Offer must be communicated.
An offer to be complete must be communicated to the person to whom it is made. Unless it is done there can be no acceptance.
Eg: ‘D’ is a man called “Gouri Dutta”. He sent his servant to trace his missing nephew. Then ‘D’ announces a reward of Rs 500. ‘P’ his servant ignorance of the announcement traces the boy. ‘P’ later came to know about the reward. He asks for the money. Master refuses to give the money. Court says, you will not get the money, as he did not know about the offer.


1. It must be absolute & unqualified.
Eg: M offered land to N at 280 pounds. ‘N’ replies accepting & enclosing Rs 80 pounds & promising to pay the balance at a monthly installment of 50 pounds. Held no concluded contract.

2. It must be communicated to the offerer.


This is committing or threatening to commit an act forbidden by Indian Penal Code for unlawful detaining or threatening to detain any property to the prejudice of a person. ‘A’ threatens ‘B’ to shoot him if he does not let out his house to ‘A’ and ‘B’ is threatened to do so, the agreement is brought by coercion.

A contract is said to be induced by undue influence where one of the parties is in a position to dominate the wheel of the other & he uses the position to obtain an unfair advantage over the other.
Eg: A spiritual Guru induced a devotee to make a gift of the property in return of a person of salvation of the devotee. Held, the consent of the devotee was given under undue influence.

Representation is a statement or assertion made by one party to the other before the time of the contract regarding some fact relative to it. Mis-representation arises when the representation to inaccurate, but the inaccuracy is not due to any desire to defraud the other party. There is no intention to deceive.

Eg: A says to B who intends to purchase A’s land ”My land produces 15 quintals of paddy per bigha” A believes the statement to be true although A did not have sufficient ground to believe. Later on it transpires that the land does not produce 15 quintals of paddy per bigha. This is mis-representation.

Fraud means includes any of the following acts committed by a party to a contract,
1) The suggestion that the fact is true when it is not true & the person making this suggestion does not believe it to be true.
2) The active consentment of a fact by a person having knowledge & believe of the fact.
3) The promise made without any intension of performing it.
Eg: A company was depicted as prosperous by non-disclosal of liabilities in the prospectus. Public invested in the shares of the company held fraud was perpetrated by non-disclosal of liability.

It is of 2 kinds
1) Mistake of Fact.
2) Mistake of Law.
Ignorance of foreign law into betrayed as mistake of fact that is void but mistake of Indian Law is no excuse. Mistake of facts may be bilateral mistake, unilateral mistake.



Section 2d
Defines consideration as follows, when at the desire of the promisor, the promisee or any other person has done or abstained from doing or does & abstains from doing or promises to do or promises to do or to abstain form doing “something”. Such act, abstinence or promise is called consideration for the promise.

1. Consideration is to be given at the desire of promisor.
Eg: ‘A’ saves ‘B’s goods from fire, without being asked to do so. ‘A’ cannot demand payment for his services.
2. Consideration to be given by the promisee or any other person.
Eg: An old lady by a deed of gift, maneuvers certain properties to her daughter ‘C’ under the direction, that she should pay her maternal uncle ‘R’ certain amount of money annually. On the same day ‘C’ entered into an agreement with maternal uncle ‘R’ to pay the agreed amount. Later on ‘C’ refuses to play on the plea that has no consideration has moved from the ‘R’ to ‘C’. Held, ‘R’ was entitled to maintain a suit as consideration half moved from the old lady. Consideration has to be given may be past, present or future.

Question VVVV Imp
“No consideration, no contract, exception to the rule, discuss.”

1. Agreement made out of natural love or affection with those standing in relation to each other. Such an agreement must be written down and registered
Eg: Father giving some property to his daughter.

2. Agreement to compensate voluntary service. ‘A’ finds ‘B’s purse & returns it to him. ‘B’ promises to pay ‘A’ Rs 500. This is a valid contract.

3. Promise to pay a time barred debt. His promise to pay must be made in writing & must be signed by the person to pay.

4. Contract of agency.

5. Completed gift

21st June, 2006 – Bijoy Kumar Dutta – Business Legislation

What are the agreements that have been expressly declared as void.

Section 20
Where both the parties through an agreement are under a mistake, as to a matter of fact essential to the agreement. (I did not understand the meaning)

Eg: A agrees to buy from B a certain horse. It turns out that the horse was dead at the time of bargain though neither party was aware of the same.

Section 25
An agreement made without consideration is void subject to certain exception.

Section 26
An agreement in restraint of mrriage of any person other than a minor is void.

Section 28
An agreement in restrained by legal proceedings is void except where the case has been referred to arbitration.

Section 29
Agreement: The meaning of which is not certain or capable of being madecertain is void.
Eg: Every student gives 100 tons of oil to B

Section 30
Agreement by way of wager is void.

Performance of contract means carrying out of the obligations by the parties to the contract within time & in the manner prescribed.

Section 37
Section 37 provides that a party is to the contract, mans either performed or offers to perform their respective promises unless such performance is dispersed with or excuse under the provision of the act or of any other law.

Section 40
In cases involving personal skill, the promisor must himself perform the contract.
Eg: A promisor to paint a picture. A must perform the promise personally.

In all other cases the promisor or his representative may employ a competitive person to perform.
Eg: A promisor to pay B a sum of money A may perform the promise by personally paying the same or cause it to be paid by representative.

Contracts involving personal skill, comes to an end when promisor dies. It is heir or legal representative are not bound to perform such contracts.

In cases not involving personal skill the representative of a deceased promisor are bound to perform the contract.


If a party to the contract breaks its obligation, which a contract imposes, a breach of contract takes place. It may be actual or anticipary breach of contract.


A breach of contract may take place before the time is fixed for the performance of the contract as arrived.
Eg: ‘A’ contracts with ‘B’ on first January to sell 100 tons of coal and to deliver to deliver the same on 1st June, but on 5th Feb, writes to ‘B’ that he is not going to deliver the coal. ‘B’ at once can treat the contract as an end & sue for damages.


It takes place during the performance of the contract or at a time when the performance of contract is due; one party either fails or refuses to perform his obligations under the contract.

Eg: (a) ‘A’ agrees to supply to a railway company with 3900 tons of railway chairs after 1787 tons of chairs had been delivered. The railway company told ‘A’ that no more will be required.

(b) ‘A’ agrees to deliver to ‘B’, 500 tons of sugar as 1st June, he fails to do so on 1st June this is actual breach of contract.

This is committing or threatening to commit any at forbidden by Indian Penal Code or unlawful detaining or threatening to detain any property to the prejudice of a person whatsoever with the intension of causing any person with the *****

Eg: ‘A’ Threatens ‘B’ to shoot him, if he does not lend out his house to ‘A’ & ‘B’ is threatened to do so, the agreement is brought about by coercion.

LAWFUL OBJECT (continuation of section 10)

Section 23
Legality of object & consideration -
The consideration or object of an agreement is lawful unless
i) It is forbidden by law, or
ii) Is of such a nature that if permitted it would defeat the provisions of any other law, or,
iii) Is fraudulent, or,
iv) Involves or implies injury to person or property of another, or,
v) The court regards it as immoral or opposed to public policy

i. An agreement for sale of opium entered into by a person who has not obtained a license; is forbidden by law
ii. An agreement by a Hindu husband that he will always live in his father-in-laws house & the wife will not live elsewhere is void & is no answer to a suit brought by the husband for restitution of conjugal rights
iii. An agreement is fraud on creditors is fraudulent
iv. A suit cannot lie to recover advances for printing libelous matter
v. A agrees to lend his daughter to B for concubinage is void as it is illegal


Quasi Contracts are exceptional kinds of contracts by which one party is bound to pay money in consideration of something done or suffered by the other party ; they are not founded on actual promises, but arise when one party has so conducted as if he has made a promise, although in fact he has not.

Definition: A quasi contract is founded on the principle of equity that a person shall not be allowed to enrich himself unjustly at the expense of another.

1) Necessaries for incapable persons - If a person, incapable of entering into a contract, or anyone whom he is legally bound to support, is supplied by, another person, with necessaries suited to his condition in life. The person who has furnished such supplies is entitled to be reimbursed from the property for such incapable person.

Section 68

‘A’ supplies ‘B’, a lunatic with necessaries suitable to his condition in life. ‘A’ is entitled to be reimbursed from his property.

2) Reimbursement of interested person – A person who is interested in the payment of money which another is bound to pay & who therefore pays it is entitled to by reimbursed by other.

Section 69

‘B’ holds land on a lease granted by ‘A’, the zamindar. The revenue payable by ‘A’ to the government being in area his land in advertised for sale by government under the revenue law, the consequences of such sell will be annulment of ‘B’s lease.

‘B’ in order to prevent the sale & consent annulment of the lease, pays to the government the sum due from ‘A’, ‘A’ is bound to pay good to ‘B’ the amount so paid.

3) Benefit of non gratuitous act – Where a person lawfully does anything for another person and deliver anything to him not intending to do so gratuitously & such other person enjoys the benefit thereof, the latter is bound to make compensation to the former in respect of or to restore the thing so done or delivered

Section 17

‘A’, a tradesman leaves goods to B’s house by mistake. ‘B’ treats the goods as his own, ‘B’ is bound to pay for them.

4) Finder of goods – A person who finds goods belonging to another & takes them into his custody, he is subjected to the same responsibility as bailey.

Section 71

‘B’ is bound to take goods as much care of the goods as a man of ordinary prudence would under similar circumstances take of his own goods of the same bulk quality & value.

5) Delivery by mistake or under coercion.

A person to whom money has been paid or delivered anything by mistake or under coercion must repay to the person who paid him by mistake or under coercion.

‘A’ & ‘B’ jointly owe Rs 100 to ‘C’. ‘A’ alone pays the amount to ‘C’ & ‘B’ not knowing this fact pays Rs 100 over again to ‘C’. ‘C’ is bound to repay the amount to ‘B’.

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