Legal Aspects of Business

1. LEARNING OUTCOMES OF INDIAN CONTRACT ACT (1872)

Objective: To ensure that the rights and obligations arising out of a contract are honoured and legal remedies are made available to an aggrieved party against the party failing to honour his part of agreement. The Act makes it obligatory that this is done and compels the defaulters to honour their commitments. These essentials of a valid contract are reflected in a document providing for a contract in following ways: Offer and acceptance (Now this agreement witness as under) Consideration (in consideration of) Competence of parties (individual Mention of name and age will take care of matter, in case of company and corporate - a company registered under the companies act 1956 or a corporation brought into existence by a special act of a parliament). 10 essential elements of the valid contract: Offer and its acceptance Free consent of both parties Mutual and lawful consideration It should be enforceable by law Consensus ad idem Lawful obligations Parties have to be competent to contract Object must be lawful Certainty and the possibility of performance Written and registered if necessary. Termination of offer or acceptance can be done by: Sending revocation notice Lapse of time Failure of acceptor to fulfil the condition precedent to acceptance Failure to accept according to the mode which is prescribed Death or insanity of the offeror Rejection The acceptance not given within a reasonable time The acceptance must be by an ascertained person. An offeree must notice that offer cannot be accepted after it was rejected unless it is renewed A Silence of an offeree does not imply acceptance The acceptance must be made before lapse or revocation of the offer. Offer accepted - becomes agreement and there must be a consideration which make a commercial agreement

Discharge of Contract Substitution of an old contract with new contract

Legal Aspects of Business

Alteration (change in terms of contract Rescission (by mutual consent/non- performance/voidable) Waiver Discharge by Operation of law Insolvency Merger Death Lapse of Time Material alteration / unauthorized alteration Discharge of the contract by impossibility Destruction of the object necessary for performance Change of law Personal incapacity

Remedies in case of Breach Suit for damages Bring an action for specific performance, Claim for quantum merit, Suit for cancellation or rescission.

2. LEARNING OUTCOMES OF SALES OF GOODS ACT (1930)

A sale of goods Act is a contract where the seller transfers or agrees to transfer the property in goods to buyer for a price. The term contract of sale is a generic term and includes both a sale and an agreement to sell. Under a contract of sale, the property in the goods is transferred from the seller to the buyer, but where the transfer of property in the goods is to take place at a future time or subject to some conditions thereafter to be fulfilled. The contract is called agreement to sell. There must be some goods which is or is to be transferred from the seller to the buyer. Goods which form the subject matter of the contract of sale must be movable. The transfer of immovable property is not regulated by the sale of goods Act. The consideration for the contract of sale, called price, must be money. When the goods are exchanged for goods, it is not a sale but barter. If there is a breach of any condition, the aggrieved party can treat the contract as invalid. When a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may claim the condition or treat the breach of the condition as a breach of warranty. If the buyer once decides to waive the condition he cannot afterwards insists on its fulfilment. And when a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty.

3. LEARNING OUTCOMES OF PARTNERSHIP ACT (1936)

Legal Aspects of Business

Partnership consists of 3 main elements: Partnership must be a result of an agreement between two or more persons. Agreement must be to share the profits of the business. Business must be carried on by all or one acting for all. Other main points in Partnership Act: Existence of Mutual Agency is the cardinal principle of partnership law. The element of agreement distinguishes partnership from other relations which arise by operation of law and not from agreement such as joint owners, Hindu Undivided Family, etc. Minor: Person under 18 years. Rights: To agreed share of profits in firm, access to accounts of firm, option to become a partner, on attaining majority. Liabilities: Before attaining majority: To the extent of his profits & property in firm, no personal liability, cannot be declared insolvent. After attaining majority: He can elect to become a partner within 6 months of attaining majority. If he becomes partner then he is liable to 3rd parties for all acts of firm since he became a partner. If he elects not to become a partner, he has to give a public notice saying so within 6 months. After notice is given, he wont be liable for acts of firm after the date of notice. Mutual rights and liabilities of partners: Right to take part in conduct of business Right to be consulted Right to access books Right to remuneration Right to share profits Interest on capital Interest on advances Right to be indemnified Right to stop admission of new partner Right to retire Right not to be expelled Right of the outgoing partner to carry on competing business Right of the outgoing partner to share subsequent profits Right to dissolve the firm

Duties: Carry business to greatest common advantage, be faithful & render a true account of all things related to firm, to partners or legal representatives. To indemnify for fraud or wilful neglect

Legal Aspects of Business

Attend duties diligently without remuneration & share losses, account for any profits & account for profits of competing business

3rd party liabilities: Contractual, liability for wrongful act, misappropriation by a partner. Firm registration: Statement must state: firm name, principal business place, other places, joining date of each partner, names & permanent addresses of partners, firm duration. Firm dissolution: Voluntary: By agreement, compulsory, on happening of certain contingencies, by notice of partnership at will. By court: Insanity of any partner, misconduct, permanent incapacity, persistent breach of agreement, continuous losses, transfer of interest, just & equitable grounds. Liabilities: Continued until public notice.

4. LEARNING OUTCOMES OF COMPANIES ACT (1956)

Constitutes Company Law in India In effect from 1st April, 1956. The act recognizes the fact that a company is an incorporated association which is an artificial person created by law, having a separate entity with a perpetual succession & a common seal. Its a consolidating Act which presents how a joint stock company operates in a business context. Deals with entire rules, regulations and mechanism which are required to incorporate a company, conduct its day to day operations and how to deal with its liquidation and reorganisation. Liability of the members of a Company is limited to the extent of value of shares held by them. Liability of members may also be limited to the extent of the guarantee given by them. There may also be Companies with unlimited liability. Companies act deals with both public and private companys procedures. Memorandum of Association is a public document that has to be submitted along with the application for Incorporation of a Company. It is a public document we mean that any member of the public is entitled to inspect this document from the office of the Registrar. MOA contains name, address, object, capital, and liability and association clause. An article of association is a contract between the Company & its members. It contains the rules & regulations for the internal management of the Company. The schedule of The Companies Act contains model forms of the AOA. If the members desire they may select any one of these forms or they may have their own set of rules & regulations.

It also deals with how shareholders conduct annual general meeting along with the rules and regulations like it contains when it has to be conducted, what are the requirements to make a meeting valid like presence of quorum. It also deals with conditions when a shareholder can demand a poll.

Legal Aspects of Business

In companies to arrive at decisions in meeting you need to pass resolution, depending upon situation the company may have to pass ordinary or special resolution. The bill provides for a greater shareholder democracy and less government intervention in the affairs of a company by removing controls and approvals.

Objectives:

Safeguarding interest of the stakeholders. Facilitating control. To ensure the transparency and greater accountability towards the stakeholders. To help in development of companies in India Provides more stringent provisions relating to the company promoters and company management. Provides elaborate provisions relating to form and contents of a prospectus, maintenance of accounts by companies, reduction of share capital, etc. The Act recognizes the institution of Government Companies (in which government holds at least 51% share capital) and makes special provisions for them. This Act also provides measures calculated to disintegrate the concentration of economic power and wealth which affect the public interest adversely.

5. LEARNING OUTCOMES OF COMPETITION ACT (2002)

Seeks to promote and sustain competition in the markets, protect the interests of consumers, to ensure freedom of trade for all participants in markets in India and to thwart anticompetition practices. The Act takes into account the modern issues of globalisation and WTO besides the shortcomings of the now repealed MRTP Act 1969. But success of the Act depends on the identification and determination of anti-competitive agreements. Objective: prevent anti-competition practices To promote and sustain the competition in markets To protect interests of the consumers Ensure freedom of trade for all the participants in the markets in India This new Act attempts to delimit practices like cartels, bid rigging, exclusive supply and distribution agreements.

This Act focuses on the following four major areas: Prohibition of the anti-competitive agreements Prohibition against the abuse of dominant position Regulation of the combinations Advocacy of the competition policy

Legal Aspects of Business

The Competition Com-mission has fixed certain norms for the acquirer company and the one being acquired in terms of assets and turnover. It means that Commission intends to enquire into only those cases that result in substantial control of the assets or turnover. The competition act ensures that the dominating player in the market does not use its position to reduce competition from the market and the market does not become a monopoly. Competition policy should thus have the positive objective of promoting consumer welfare. Therefore, while competition policy is a desirable objective and a useful instrument for serving consumer interest and welfare, first, there is a need to bring about a competitive environment.

6. LEARNING OUTCOMES OF CONSUMER PROTECTION ACT (1986)

Consumer Protection Act 1986 was established for the protection of consumers and makes provision for the establishment of authorities to safeguard the interest of consumers and to settle consumers disputes. The complaint can be filed by a consumer, any consumer association or the Government (Central and State) in a District Forum which is a Consumer Disputes Redressal Forum. A consumer dispute arises when the person against whom a complaint has been made denies the allegations. As a consumer, we must be aware about the issues leading to consumers disputes. Consumer must be aware of the unfair trade practices. Unfair methods to promote sale: A false statement about the quality/quantity/model of goods/services A false representation of old/renovated/repaired goods as new goods Offering warranty or guarantee of performance/lifecycle of goods which is not based on proper testing of the goods Publication of advertisements about sale of goods that are not intended to be offered for sale Representing the supplier or the seller as having an affiliation which such seller or supplier doesnt have A misleading or false warranty or guarantee or a false promise to replace/repair goods or continue the service until a specified result is attained Charging a price in excess of the price fixed by law/price displayed on goods/price agreed by both the parties involved

7. LEARNING OUTCOMES OF FEMA ACT (1999)

The Foreign Exchange Management Act (FEMA) is a 1999 Indian law "to consolidate and amend the law relating to foreign exchange with the objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India". It was passed to replace FERA.

Legal Aspects of Business

This act is applicable to whole India and anybody of organisation which is situated outside India but controlled by an Indian. Activities such as payments made to any person outside India or receipts from them along with the deals in foreign exchange and foreign security is restricted. FEMA gives the central government the power to impose the restrictions. The act deals in foreign exchange under the current account by an authorized person can be restricted by the Central Government, based on public interest. It also sought to control certain aspects of the conduct of business outside the country by Indian companies and in India by foreign companies. It has a criminal legislation which meant that its violation would lead to imprisonment and payment of heavy fine. It permits only authorised person to deal in foreign exchange or foreign security. But such an authorised person, under the Act, will mean authorised dealer, a money changer, an off-shore banking unit or any other person for the time being authorised by Reserve Bank. Foreign exchange means 'foreign currency' and includes deposits, credits and balances payable in any foreign currency and secondly drafts, travellers, cheques, letters of credit or bills of exchange, expressed or drawn in Indian currency but payable in any foreign currency.