LEGAL ASPECTS OF BUSINESS

ASSIGNMENT
Sunny Koul (01) Drishya Trivedi (02) Anshu Sindhu (03) Jayalaxmi M Desai (04) Satyaki Roy (05)
Question 1and 2: What is a Contract. Explain the essential elements of a contract. Contract
In an agreement with specific terms between two or more persons or entities in which there is a promise to do something in return for a valuable benefit known as consideration. Since the law of contracts is at the heart of most business dealings, it is one of the three or four most significant areas of legal concern and can involve variations on circumstances and complexities. The existence of a contract requires finding the following factual elements: a) An offer. b) An acceptance of that offers which results in a meeting of the minds. c) A promise to perform. d) A valuable consideration (which can be a promise or payment in some form) e) A time or event when performance must be made (meet commitments). f) Terms and conditions for performance, including fulfilling promises. g) Performance. A unilateral contract is one in which there is a promise to pay or give other consideration in return for actual performance. A bilateral contract is one in which a promise is exchanged for a promise. Contracts can be either written or oral, but oral contracts are more difficult to prove and in most jurisdictions the time to sue on the contract is shorter (such as two years for oral compared to four years for written). In some cases a contract can consist of several documents, such as a series of letters, orders, offers and counteroffers. There are a variety of types of contracts: 1) "Conditional" on an event occurring;

2)"Joint and several," in which several parties make a joint promise to perform, but each is responsible; 3)"Implied," in which the courts will determine there is a contract based on the circumstances. Parties can contract to supply all another's requirements, buy all the products made, or enter into an option to renew a contract. The variations are almost limitless. Contracts for illegal purposes are not enforceable at law. Essential elements of contract
Minimum two parties :- At least two parties are needed to enter into a contact. One party has to make an offer and other must accept it. The person who makes the 'proposal' or 'offer' is called the 'promisor' or 'offeror'. While, the person to whom the offer is made is called the 'offeree' and the person who accepts the offer is called the 'acceptor'.

Offer and acceptance: - There must be an 'offer' and an 'acceptance' to the offer, resulting into an agreement. Both offer and acceptance should be lawful. Legal obligations: - The parties must intend to create a legal obligation. The agreement sought to be enforced should contemplate legal relations between the parties to it. Lawful consideration: - A contract is basically a bargain between two parties, each receiving 'something' of value or benefit to them. This 'something' is described in law as 'consideration'. Consideration is an essential element of a valid contract. It is the price for which the promise of the other is bought. A contract without consideration is void. The consideration may be in the form of money, services rendered, goods exchanged or a sacrifice which is of value to the other party. This consideration may be past, present or future, but it must be lawful. Competent parties:- The parties making the contract must be legally competent in the sense that each must be of the age of majority, of a sound mind, and not expressly disqualified from contracting. An agreement by incompetent parties shall be a legal nullity. Free consent:- The contracting parties must give their consent freely. 'Consent' means that the parties must agree about the subject matter of the agreement in the same sense and at the same time. Consent is said to be free if it is not induced by coercion, undue influence, fraud, misrepresentation or mistake. The absence of free consent would affect the legal enforceability of a contract. Lawful object:- The object of the agreement must be lawful. An agreement is unlawful, if it is:- (i) illegal (ii) immoral (iii) fraudulent (iv) of a nature that, if permitted, it would defeat the provisions of any law (v) causes injury to the person or property of another (vi) opposed to public policy. Not expressly declared void:- An agreement expressly declared to be void under the Contract Act or under any other law, is not enforceable and is, thus, not a contract. The Contract Act declares void certain types of agreements such as those in restraint of marriage, or trade, or legal proceedings as well as wagering agreements. Certainty and possibility of performance:- The terms of a contract must not be vague or uncertain. If an agreement is vague and its meaning cannot be ascertained, it cannot be enforced. Also, the terms of a contract must be such as are capable of performance. An agreement to do an impossible act is void and is not enforceable by law. Legal formalities:- Generally, a contract may be oral or in writing. However, certain contracts are required to be in writing and may even require registration. Therefore, where law requires an agreement to be put in writing or be registered, the same must be complied with. For instance, the Indian Trusts Act requires the creation of a trust to be reduced to writing.

Q3: Define and explain the terms of offer or proposal and discuss the essentials of a valid offer as well valid acceptance.
OFFER OR PROPOSAL It is an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed", the "offered". E.g. : - Anand offers to sell his bike for a consideration that is money in this case. MODES OF MAKING AN OFFER

1. Express offer : It means an offer made by words .The written offers can be made by letters, telegrams, advertisement etc. the oral offer can be made either in person or over telephone. 2. Implied Offer: It is an offer made by conduct. It is made by positive acts or signs so that the person acting or making sign means to say or convey something. However, silence of a party cab in no case amounts to offer by conduct. 3. Offer by abstinence: An offer can also be made by a party by omission to do something. This includes such conduct or forbearance on ones part that the other takes it as his willingness or assent. 4. a. b. c. Specific and general offers : An offer can be made either to A definite person or a group of person The public at large, It can be accepted by that person to whom it has been made. ESSENTIALS OF A VALID OFFER The terms of offer must be definite, unambiguous and certain or capable of being made. An offer must have knowledge of offer before he can accept it. An offer cannot contain a term the non-compliance of which may be assumed to amount to acceptance. If a person makes a statement without any intention of creating a binding obligation, this does not amount to an offer. Where two parties make identical offers to each other in ignorance of each other offers, this does not result in a contract. The offer must be made with a view to obtain acceptance thereto. An offer must be distinguished from a mere invitation to offers. ACCEPTANCE OF AN N OFFER: - When a person to whom offer is made signifies his ascent thereto, the offer is said to be accepted. ESSENTIALS OF A VALID ACCEPTANCE It must be absolute and unqualified and according to exact terms of offer. It must be communicated to the offer. It must be according to the mode. It must be given within the time specified. It must be made before the offer lapses or is terminated, revoked or withdrawn.

Question4 : Explain the rights and duties of an Agent to his principal.

Rights of an Agent 1. Right to remuneration: Agent is entitled to his agreed commission or remuneration and if there is no agreement, to a reasonable remuneration. But this does not become payable unless he has carried out the objective of agency, except where there is a contract to the contrary. When the object of agency is deemed to have been carried out or the act assigned to the agent is completed would depend on the terms of the contract. 2. Right of retainer: Agent may retain all moneys due to himself in respect of advances made or expenses incurred by him in conducting such business and also such remuneration as may be payable to him for acting as agent. This can be claimed on moneys received by him in the business of agency.

3. Right of lien: Except in the absence of contrary in the contract, agent is entitled to retain goods, papers and property of the principal received by him, until the amount due to himself for commission, disbursement and services in respect of the same has been paid or accounted for to him. 4. Right of stoppage in transit: the agent can stop the goods in transit in two cases: Where he has purchased goods on behalf of the principal either with his own funds, or by incurring a personal liability for the price, he stands towards the principal in the position of the unpaid seller. He can stop the goods in transit if in the meantime the principal has become insolvent. Where the agent holds himself liable to his principal for the price of the goods sold. As a Del credere agent, he may exercise the unpaid sellers right of stopping the goods in transit in case of buyers insolvency.

5. Right of indemnification: The principal is bound to indemnify agent against the consequences of all lawful acts done by the agent in exercise of authority conferred on him. 6. Right to compensation for injury caused by principals neglect: The principal must compensate his agent in respect of injury caused to such agent by the principals neglect of want of skill. Duties of an agent 1. To conduct the business of agency according to the principals directions: The duty of the agent must be literally complied with. That is, the agent is not supposed to deviate from the direction of the principal even for the principals benefit. If he does so, any losses occasioned shall have to be borne by the agent. In the absence of instructions from the principal, however, the agent should follow the custom of the business at the place where it is conducted. 2. The agent should conduct the business with skill and diligence: This is generally possessed by persons engaged in similar business, except where the principal knows that the agent is wanting in skill.

3. To render proper accounts: The agent has to render proper accounts. If the agent fails to keep proper accounts of the principals business, everything consistent with the proved facts will be presumed against him. Rendering of accounts doesnt mean showing the accounts, but maintaining proper accounts supported by vouchers. 4. To communicate with the principal in case of difficulty: It is the duty of the agent, in case of difficulty to use all reasonable diligence, in communicating with his principal and in seeking to obtain his instructions. In case of emergency, however, the agent can do all that a reasonable man would, under similar circumstances, do with regard to his own business.

5. Not to make any secret profits: Agent should deliver to the principal all moneys including secret commission received by him. He can, however, deduct his lawful expenses and remuneration. 6. Not to deal on this own account: Agent should not deal on his own account without first obtaining the consent of his principal. If he does so, the principal can claim from the agent any benefit which he might have obtained. Further, in case agent deals on his own account, he shall cease to be entitled for his remuneration as agent. 7. Not entitles to remuneration of misconduct: Agent who is guilty of misconduct in the business of agency is not entitled to any remuneration in respect to that part of the business which was misconducted. 8. Not to disclose confidential information: Supplied to him by the principal.

9. To take all reasonable steps for the protection and preservation of the interests
entrusted to him: When the principal dies or becomes of unsound mind.

Question5: What Is Partnership?

A partnership is a relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. The business of a partnership firm is carried on by all or any one or more of them on behalf of all. Every partner has an authority to act on behalf of all of them and can, by his actions, bind the firm and all the other partners of the firm. Each partner is the agent of the others in all matters that are connected with the business of the partnership.

Essential elements of partnership in Indian partnership act, 1932 A) A partnership can be formed either by oral or written agreement: In France and Italy, the law requires all partnerships agreements to be in writing. But in England, USA and India, written agreement in not compulsory. But in order to avoid misunderstanding and litigation; it is desirable to enter into a written agreement which is called partnership deed and agreement. The partnership deed is required to be stamped, according to the provision of the Stamp act, 1989. Each partner should possess a copy of the deed. B) Partnership agreement and contract law: As a partnership agreement is a contract, so all the essential elements of Indian Contract Act, 1872, are applicable to it. C) Free consent: All the partners must consent to the partnership agreement; otherwise, they obviously lack the intent necessary to form the partnership. All legal partners may assert all the laws which mar free consent, such as fraud, coercion ( acting of forcing another party to act in a voluntary manner) and under influence. D) Legal purpose: All partnership must have legal purpose. No court will enforce a partnership agreement for an illegal object, suppose A and B run a shop dealing in smuggled objects. No court will enforce the partnership agreement against one another or a debt owed to them by one of their clients. E) Capacity: A minor is not a competent to contract. But a contract with a minor is void as against him but not as against the other party. Moreover in the contract of agency a minor can be appointed as an agent. Moreover with the consent of the entire partner for the time being, a minor may be admitted to the benefits of partnership. Further, where a court declares a partner insane or a partner is shown to be a unsound mind, another party may seek dissolution of the partnership. Because partnership require mutual agency, a lunatic may not be a partner, since he cannot act as an agent. F) Writing: A contract need not be in writing. Accordingly a partnership agreement need not be in writing. It may be oral, written or implied form the parties conduct. However because disputes easily

developed over overall agreements, parties should have a written agreement. No particulars form need be used. G) Right to select ones partner: No one can become a member of partnership that is being formed, or join an already existing partnership without the consent of all the member of the firm. Each partner has been given the right to choose each of the other partners unless they are involved in some other possible wrongdoings which could cause a greater financial loss. Unless the partners have expressed agreed otherwise, the composition of the firm cannot be changed without the consent of the partner. H) Unlimited Liability : The liability of each partner is unlimited in respect of the firms debts. In other words, the liability of a partner is Joint & Several. I) No separate legal entity:

The partnership firm has no independent legal existence apart from the persons who constitute it. J) Restriction on transfer of interest: No partner can transfer his share to an outsider without the consent of other partners. K) Number Of Partners In A Firm: There can be a maximum of 20 partners in a firm if the business is anything other than banking business and only 10 partners if the firm is engaged in banking business.