1.

Need for law

a. To prevent a state of anarchy, i.e. when people do anything they
wish regardless of the effect of the action on the quality of life of
others
b. To enforce rights and to solve conflicts in reasonable periods of time
c. To protect the interests of the weaker sections of society against
those of the stronger sections, especially in the short term
2. Characteristics of law
a. Utilitarianism All laws are for the greater good
b. Laws should have clarity and be as unambiguous as possible to
interpretation
c. Should take into account all stakeholders
d. Should be equal for all subjects
e. Should be fair and not discriminatory
f. Legal certainty Law must provide those subject to the law to
regulate their conduct with certainty and protect the subjects from
arbitrary use of state power
3. Rule of Law
a. The legal principle that law should govern a state as opposed to
being governed by arbitrary decisions of individual government
officials
4. Sources of Law
a. The origin from which rules of human conduct come into existence
and derive their legal force. Can be social norms, traditions
b. Can also refer to the sovereign or state from which the law derives
its validity
5. Rights
a. Civil and political rights protect the individuals freedom from
infringement by governments, social organizations and private
individuals
i. Right to Freedom of speech and expression
ii. Right to peaceful assembly
iii. Right to freedom of movement
iv. Right to Life
b. Economic, Social and cultural rights
i. Right to freedom of trade and commerce
ii. Right to education
iii. Right to Health
iv. Right to a clean environment
c. Fundamental rights can only be enforced against state and not
corporations/individuals
d. All rights are accompanied by a corresponding duty
e. Most such freedoms are subject to reasonable restrictions
f. Rights are often a result of international conventions
6. Types of Rights
a.
7. Types of Law
a. Criminal
b. Civil
c. Commercial
d. Personal
e. Jurisdiction
8. Judicial structure

a.
b.
c.
d.
e.
f.

Civil courts
Criminal courts
Tribunals Special courts set up to adjudicate on specific issues
Regulators
Statutory Authorities
Locus standi - Ability of a party to demonstrate to the court
sufficient connection to and harm from the law or action challenged
to support that party's participation in the case
g. In personem A judgment enforced against a person, wherever
he/she is
h. In rem the courts authority over property located in its jurisdiction
9. Legal remedy
a. Civil
i. Contractual Breach of specific contract
ii. Tortious In case of occurrence of a tort (civil wrong) that
causes harm to someone else
b. Criminal
c. Statutory
d. Constitutional
10.Rule of Law
a. Laws should be stable
b. Laws should be prospective, not retrospective
c. Judiciary should be independent
d. Principles of natural justice should be observed
i. Person is barred from deciding any case in which his
judgment can be deemed to be biased
ii. A fair hearing should be guaranteed
e. No man should be denied justice
f. Courts should have power of judicial review (legislative and
executive actions should be subject to review by the judiciary)
11.Constitutionalism
a. The governing authority can and should be legally limited in its
powers
b. Separation of powers should be observed
i. Horizontal Powers vested in three authorities viz. legislative,
executive, judicial
ii. Vertical Powers vested in states and centre
12.Constitution
a. Touchstone from which all validity of rules and laws are derived
b. Provides for affirmative action (positive discrimination towards a
disadvantaged group of society)
13.Fundamental rights
a. Include Right to
i. Life
ii. Equality
iii. Freedom (individual and collective)
iv. Against exploitation
v. Freedom of religion
vi. Cultural and educational rights
vii. Constitutional remedies
b. Individuals cannot be tried twice or more for the same or similar
charge(s) after a legitimate judgment has been passed once

c. Individuals cannot be forced to stand as a witness against

themselves
14.Contract
a. An agreement entered into voluntarily by two or more parties, each
of whom intends to create some legal obligations between them
b. A contract is characterized by an offer and acceptance by
competent persons who exchange consideration (anything of legal
value) to create mutuality of obligation
15.Need of contracts
a. Provides an unambiguous description of responsibilities
b. Bind parties to their duties
c. Establishes a time frame to perform duties
d. Provides means for recourse if required
16.Agreement
a. A non-legally binding agreement between two or more parties
17.Salient features of Contract
a. Minimum two parties required
b. Parties should be competent
c. The contract comes into effect once the offer is made by one party
and accepted by the other party
d. Intention of all parties should be unambiguous
e. The consideration should be defined
f. Parties should be acting with free consent
g. Lawful object Objective should not violate the law
h. Void A contract ceases if it is non-enforceable
i. Certainty and possibility of performance
j. Severability If parts of the contract are deemed illegal or
otherwise unenforceable, remainder of the contract will apply
k. Ambiguity in the contract is interpreted against the interest of the
party which drew up the contract
18.Discharge of contract
a. By performance When parties fulfil their obligation
b. By agreement Contract can be discharged by mutual consent. Can
be in the following forms:
i. Novation When a new contract replaces the old one
ii. Alteration when one or more terms of a contract are
changed
iii. Rescission When all or some terms of contract are rescinded
iv. Remission Acceptance of a lesser fulfilment of obligations
v. Merger when an inferior right merges with the superior one
c. By impossibility
i. Initial impossibility A contract to do something impossible is
void ab initio
ii. Supervening impossibility Impossibility that arises after
entering into contract
iii. Impossibility of performance can often not be taken as an
excuse for non-performance of a contract
d. Frustration
i. A contract is frustrated when an event occurs that makes the
performance impossible or obligations become fundamentally
different to those originally undertaken. Clauses are generally
not provided in the contract
e. Force majeure

i. An event that makes performance impossible. Clauses are

provided in the contract
19.Types of contracts
a. Joint Ventures
i. Contract between two or more parties for the purpose of
executing a particular business undertaking
ii. Issues
1. Decide shareholding pattern
2. Take care of sectoral FDI caps
3. Transfer of shares to other parties. Can include
provision of right of first refusal
4. Put/call options for exit strategy
5. Decide profit sharing basis
6. Can
include
non-compete
clause
to
prevent
competition from forming another competing company
7. Provide for payment of indemnity
8. Provisions for dispute resolution
b. Click Wrap agreements
i. A type of contract that is widely used with software licenses
and online transactions in which a user must agree to terms
and conditions prior to using the product or service.
c. Letter of Credit
d. Bank Guarantee
20.Sale of Goods
a. A contract of sale of goods is a contract whereby the seller transfers
or agrees to transfer the property in goods to a buyer for a price
21.Characteristics of sale of goods
a. Express terms (explicitly stated in the contract) and implied terms
b. Fitness of purpose A warranty which is implied when a buyer relies
upon seller to select goods to fit a specific request
c. Conditions Essential to the main purpose of the contract and
breach gives right to aggrieved party to repudiate contract and
claim damages
d. Warranty Collateral to the main purpose of the contract and
breach gives right to claim damages
22.Incoterms International trading guidelines published by the International
Chamber of Commerce
a. FOB Free on Board Seller fulfils obligation after the goods cross
the ships rails
b. CIF Cost, Insurance, Freight Seller to arrange for carriage of
goods. Risk passes when goods are on board. Ownership passes
when seller transfers the bill of lading and insurance policy to buyer
23.Doctrine of Agency
a. Refers to the equal relationship between a principal and an agent
whereby the principal authorizes the agent to work under his/her
control and on their behalf
b. Vicarious Liability Refers to the responsibility of the superior for
the actions of the agent
c. Agent The principal has a large amount of control over their
actions
d. Independent contractor Principal has little control over their
actions

e. Agency cost Internal costs that arise from or are to be paid to an

agent. Usually arise because of conflicts of interest between the
shareholders
(principal)
and
management
(agent),
when
management may be more inclined to grow the firm in a way to
further their own interest over that of the shareholder
f. Agency costs can be in the form of bonuses paid to management
based on share price increases
24.Corporate Structures
a. Partnership
b. Limited Liability Partnership
c. Private Limited Company
d. Public Limited Company
25.Partnership
a. Partnership is the relation between persons who have agreed to
share the profits of a business carried on by all or any of them
acting for all
b. The firm is the collective of those who formed the partnership. It is
not a distinct legal entity apart from the partners
c. Maximum number of partners can be 100
d. Registration is not mandatory but unregistered firm cannot sue for
infringement of its contractual rights, but only its statutory or
contractual rights
e. Rights of Partners
i. To conduct business
ii. To access of accounts
iii. To be indemnified
iv. To retire and not to be expelled
f. Duties of partners
i. Maintain positive fiduciary relationship
ii. To indemnify for fraud
iii. Not to claim remuneration
iv. To be liable jointly and severally
v. To act within authority
g. Dissolution of partnership When one or more partners die or leave
or more join, partnership is dissolved and new partnership is
formed, without affecting firm
h. Dissolution of firm When the partnership firm is wound up
i. On dissolution of firm, public notice should be given and all
incomplete transactions must be completed, accounts should be
settled
26.Limited Liability Partnership
a. A corporate body and is a distinct legal entity from that of its
partners
b. Registration is mandatory and the LLP ha perpetual succession (the
firm would continue existing despite any change in membership or
exit in business of any of the partners
27.Company
a. An association of likeminded people who have come together as a
group to conduct business and earn profits
28.Features of a Company
a. It is a juristic person (a person only in the eyes of law)
i. It has its own identity and it can sue and be sued upon and
court can hold it accountable for its actions

b. Members of a company have limited liability in two ways

i. Liability is limited to the unpaid value of the shares
possessed
ii. Limited to the amount the members have undertaken to
contribute to assets of the company if it is going to be
dissolved
c. Perpetual succession
d. Company seal It is the companys signature through which its will
is expressed and authority is exercised
e. Shares can be transferred freely
f. Company can buy, own and sell property in its own name
29.Incorporation of Company
a. Minimum of two members (private) or seven members (public)
b. Distinguish promoters. They have a quasi-trustee status before
incorporation
i. They have control over the affairs of the company and the
board of directors are accustomed to act on their advice
c. Determine objects of the company
d. Identify directors
e. File Memorandum and Articles of Association
f. Upon registration, registrar of companies will issue a certificate of
registration
30.MoA
a. The constitution of the company. Contains conditions for
incorporation and defines its objects as reason for existence
b. Also contains the nature of liability of the company, share capital
and association clause
31.AoA
a. Deals with the rules and regulations of the internal management
b. Contains rules relating to transfer of shares, voting rights of
members, process of winding up
32.Prospectus
a. Any notice inviting offers from the public for subscription on
purchase of any shares or debentures in a body corporate
b. Gives details about the position of the company and the amount of
capital the company seeks to raise
c. Any misstatement in prospectus that deceives an investor would
imply need for remedy for both company and directors/promoters
d. Company faces only civil penalties. Directors/Promoters face both
civil and criminal penalties
33.Types of shares
a. Preference shares
b. Equity shares
c. Sweat equity shares
34.Debt Capital
a. The company borrows by issuing debentures and secured debts and
by creating mortgages against loans
b. Directors face a limit to the amount they can borrow, as set by MoA
and AoA
35.Management
a. Consists of the Board of Directors and Key Managerial Personnel.
They have a fiduciary relationship to the company
36.Board of Directors

a. All companies with paid up capital greater than 5 crore should

have a Managing Director, a Secretary and an Audit Committee. A
company cannot be a manager in another company
b. Public companies should have a min of 3 directors and private
companies, min of two
c. Directors are liable to indemnify the company for any loss in the
event of acting ultra vires (beyond their authority); for any
dishonest dealings and negligence in duty
d. Directors also face criminal liability for concealing name of creditor,
fraudulently obtaining credit for company, default in distributing
dividend, etc.
37.Key Managerial Personnel
a. All companies with PUC above 5 crore should have the following
i. Managing director, or CEO or Manager or in their absence, a
Whole time director
ii. Company secretary
iii. Chief financial officer
38.Conduct of business
a. All company shall need to have a general meeting of members
within a period of not less than one month nor more than six
months from the date of commencing business
b. Meetings should be held at least once every three months
c. For an AGM, quorum is five for public and two members for private
companies
d. AGM can discuss on accounts, audit reports,, declaration of
dividend, appointment of directors and auditors
39.Types of company
a. One person company
b. Private company Max number of members can now be 200
c. Small company Companies other than public company, which
have
i. PUC not higher than INR 50 lakh
ii. Turnover not exceeding INR 2 crore
d. Dormant company Company formed for a future project or to hold
an asset and having no significant accounting transaction
40.Private limited company
a. It has restrictions on the right to transfer shares and AoA prohibits
seeking subscription of shares from public
41.Public limited company
42.Prevention of Oppression and Mismanagement
a. In case a shareholder or group of investors feel they have been
unfairly treated, they may seek relief from the company law board
43.Fraud
a. Includes any act of commission or omission or abuse of position by
any person with the intent to deceive or gain undue advantage of
the company or its shareholders or any other person with or without
wrongful gain or wrongful loss
b. May face imprisonment and fine
44.Merger
a. Combination of multiple entities into one
b. Can be
i. Vertical Entities having a buy-sell relationship
ii. Horizontal entities in the same business domain

c. Mergers need to be approved by a majority of AGM

45.Winding up
a. Assets are disposed to settle liabilities
b. Can be voluntary winding up or under the supervision of court
c. Company can also be forced to wind up by the court
Dispute Resolution
46.Types of International Business Disputes is usually Corporation vs.
a. Another corporation
b. Foreign citizen
c. Foreign statutory bodies
d. Sovereigns
47.Basis for choosing resolution mechanism
a. Cost to be incurred
b. Time taken to reach judgment and subsequent implementation
c. How implementable the solution is
d. How amenable the solution is to short term and long term outlooks
48.Disadvantages of Foreign litigation
a. Legal system is unfamiliar
b. Usually high cost
c. Discovery process, the formal process of exchanging information
between the parties about the witnesses and evidence they'll
present at trial. Discovery enables the parties to know before the
trial begins what evidence may be presented, is often expensive
d. Uncertainty of outcome
e. Foreign litigation is to be avoided and should only be as a last resort
49.Anticipating disputes
a. Have clear safeguards in the contract regarding choice of forum
(where resolution would occur), choice of law (which legal system
would apply) and the choice of mechanism
b. Choice of forum Generally forum selection clauses are upheld,
unless court declines jurisdiction if it is inconvenient to the parties
(forum non conveniens)
c. Jurisdiction
i. Subject matter jurisdiction - the authority of a court to hear
cases of a particular type or cases relating to a specific
subject matter
ii. Personal jurisdiction - the constitutional requirement that a
defendant have certain minimum contacts with the forum in
which the court sits so that the court may exercise power
over the defendant. In US, it involves
1. Consent - Party filing complaint consents to be bound
by the judgment of the court
2. Power - Party filing complaint consents to be bound by
the judgment of the court
3. Notice - Due process requires that notice be given in a
manner "reasonably calculated" to inform a party of
the action affecting him
iii. Minimum contacts - A party is said to have minimum contacts
if the party's contacts with the state in which that court sits
are such that the party "could reasonably expect to be haled
(dragged forcibly) into court" in that state

iv. Service of process - the procedure by which a party to a

lawsuit gives an appropriate notice of initial legal action to
another party (such as a defendant), court, or administrative
body in an effort to exercise jurisdiction over that person so
as to enable that person to respond to the proceeding before
the court, body, or other tribunal
50.ADR is applicable when
a. When settlement discussions have been unsuccessful
b. Where litigating would be expensive
c. If the loss would lead to high damages
d. When a confidential settlement is required
e. When the time to resolve is substantial
51.ADR is not applicable when
a. Where the contention is over a point of law
b. When a party seeks injunctive relief (an equitable remedy in the
form of a court order that compels a party to do or refrain from
specific acts)
c. Public/criminal law issues
52.Types of ADR mechanisms
a. Negotiation
i. The main objective is to arrive at an agreement acceptable
by both parties
ii. A series of steps
iii. Useful when the parties seek to maintain relationship
iv. Identify what are the key things each party needs from the
relationship
v. Negotiate on motivation and not outward stance
vi. Keep in mind the limits to things you can ask for and receive
from other party
vii. Strategies might include Good cop, bad cop; Offer you cant
refuse; make list of objectives according to priorities,
negotiate hard on things you dont really want (red herrings)
ultimately conceding on those points, thus obliging counter
party to accede on points you really want
b. Mediation
i. Use of a professionally competent neutral third party to guide
parties on impartial assessment of all factors in the aim of
reaching an amicable solution
ii. The mediator is primarily a facilitator and need not be a
specialist
iii. Has the advantages of being confidential, and takes less
time. Useful when multicultural parties are involved
iv. It is not a forfeiture of other legal remedies
v. Binding like a contract
c. Conciliation
i. Similar to mediation, but the third party will actively assist
parties to reach a settlement. He or she is usually an expert
ii. Binding like a court decree
d. Arbitration
i. An independent party (arbitrator) makes an award on the
dispute in a private forum, acting in a judicial fashion
ii. Agreement to arbitrate is usually contractual and arbitrator
cannot meet the parties in private

iii. Types
1. Ad hoc Parties set up separate arbitration forum
2. Institutional
a. ICSID - International Centre for Settlement of
Investment Disputes
b. LCIA - London Court of International Arbitration
c. ICC International Chamber of Commerce
53.Some terms in international disputes
a. Obsolescing bargain A model of interaction between a
multinational enterprise and a host country government, which
initially reach a bargain that favours the MNE but where, over time
as the MNE's fixed assets in the country increase, the bargaining
power shifts to the government.
b. Calvo doctrine
a foreign policy doctrine which holds that
jurisdiction in international investment disputes lies with the
country in which the investment is located
Assignment Questions
1. Can we obtain commercially sensitive information and trade secret of a
competitor using RTI?
a. RTI cant be used to obtain trade secrets. Also, other items excepted
are information available to a person in a his fiduciary relationship
to another entity; information which could impede progress of
investigation; information of personal nature; information on events
which occurred more than 20 years earlier; information which
infringes on copyright
2. In an existing contract is a change of parties/terms permissible?
a. Yes, terms can be changed by mutual consent. Novation refers to
the act of replacing one obligation with another or replacing a party
with another
3. What is jurisdiction?
a. The practical authority to interpret and apply the law. Often used to
refer to the area over which this authority applies
4. Do corporations enjoy fundamental rights? If yes, which ones?
a. Fundamental rights that apply to persons are also enjoyed by
companies as they are juristic persons. Rights which apply to
citizens do not apply to companies. Specifically, the rights that
apply are: equality before law; protection from being convicted
except for violation of law; protection of life and liberty; protection
against arrest and detention in certain cases; freedom of
conscience;
5. Distinction between MoU and contract
a. MoU is an agreement between two or more parties and usually does
not contain any legally enforceable promises. It is usually employed
as an instrument to signal a future willingness to enter into a legally
binding contract
6. Distinction between frustration and force majeure
a. A contract is frustrated when an event occurs that makes the
contract impossible to perform or the obligation become
fundamentally different to those undertaken originally. Does not
require the existence of a specific clause in the contract

b. Force majeure when events occur that makes the performance of

the contract impossible. There are usually force majeure clauses in
contracts that define which events would trigger the clause
7. Negative control
a. Protective provisions that give minority investors the right to
unilaterally block a variety of corporate actions. Usual situations
that apply are dissolution of corporation, sale/merger, etc.
8. Define Letter of Credit, Bank Guarantee, Performance guarantee, Earnest
money
a. LC Document from the buyers bank guaranteeing payment to a
seller subject to the fulfilment of conditions in the contract
b. BG A document which promises payment to one party if the
counterparty(ies) do not meet stipulated conditions
c. Performance guarantee A type of bank guarantee issued by the
project executors bank against the successful completion of the
project
d. Earnest money A deposit made to the seller of a property showing
the buyers intent to purchase the property.
9. Distinction between conditions and warrants
a. Conditions Stipulations that are essential for the main purpose of
the contract of sale and non-fulfilment of which would cause breach
of contract and the aggrieved party would be able to claim
damages
b. Warranty Stipulations which are not essential to the main purpose
of the contract. Non-fulfilment would not cause breach but the
aggrieved party can claim damages
10.Define FOB, CIF, Incoterms and point of passing of ownership in each
a. FOB Free on Board - Seller fulfils obligations after the goods cross
the ships rails or are loaded on to the transport. Ownership passes
at the same time
b. CIF Cost, Insurance, Freight Requires seller to arrange for
carriage of goods by sea to a destination. Risk of loss or damage
passes when the goods are on board
c. Incoterms International commercial terms published by the
International Chamber of Commerce
11.Dissolution of partnership vs dissolution of a partnership firm
a. Dissolution of partnership The process during which the ongoing
nature of the partnership is terminated. This may be due to the exit
or death of a partner or entry of another. In such cases, a new
partnership relation is defined and hence a new partnership is
formed. The partnership firm continues business as usual
b. Dissolution of partnership firm The firm itself is wound up and
assets are liquidated and economic relation between partners
comes to an end
12.Can a company be a partner in another firm
a. A partnership firm, not being a juristic person cannot be a partner in
another firm
13.Types of directors and their liabilities
a. Managing director A director who has substantial powers of
management of affairs of the company
b. Whole time director A director in full time employment by the
company

c. Independent director Directors other than a managing director,

whole time director or nominee director. Companies with paid up
share capital above INR 10 crores or total turnover greater than 100
crores have to appoint at least two independent directors. They are
not related to promoter and have no pecuniary relationship with the
company or its subsidiaries
d. Directors are personally liable when they act ultra vires (beyond
their authority). Also, they are liable when they enter into contracts
in their personal capacity
e. They are liable when they breach statutory guidelines like
misstatement in prospectus
14.Liabilities of Key Managerial Personnel
15.Related party transaction and how they are reported
a. Firms cannot enter into a transaction with any of its promoters,
directors, Key managerial personnel or their relatives except with
the consent of the board of directors. They have to mention the fact
that they have in the annual report
16.Arms length distance
a. Transaction between two related parties that is conducted as if they
were unrelated
17.Corporate criminal liability
a. Companies are liable to be prosecuted and punished for criminal
activities even if the punishment involves imprisonment and fine. If
found guilty, a fine is imposed and not imprisonment
18.Parent subsidiary relationship
a. A subsidiary is a company in which another company (the parent)
owns a majority of the shares. They are separate entities and parent
is not liable for the obligations and actions of the subsidiary
19.Amendment of object clause
a. Objects clause is the MoA which states the purpose and range of
activities for which the company does business
b. It can be amended by a special resolution. A company which has
raised public money and has unutilized amount cannot change
objects unless by special resolution and giving fair notice in media
and dissenting shareholders are given a chance to exit
20.Indoor management
a. The doctrine of indoor management states that persons dealing
with the company need not bother themselves regarding the
internal workings of the company regarding the contract once they
have satisfied themselves that the transaction is done according to
the MoA and AoA
21.Sweat equity vs ESOP
a. Sweat equity Issued by a company to directors and employees at
a discount or for consideration, other than cash, for providing their
know-how or making available to the company any IP they own. It is
taxed as per IT Act and is treated as salary
b. ESOP the option given to employees to buy shares of the company
at special prices. It is taxed twice, at exercise and at sale and
Capital Gains Tax applies
22.Dormant company
a. Company formed and registered for a future project or to hold an
asset or intellectual property and has no significant transaction

23.Difference between promoter and shareholder w.r.t. rights and obligations

a. Promoter is named in the prospectus or is identified by the company
in its annual statements. They have control over the affairs of the
company and the directors are accustomed to act on their advice
24.In a parent subsidiary relationship is there a way to show earnings of
subsidiary as parent
a. It can be shown by crediting the percentage of ownership of total
subsidiarys earnings minus any inter-company transactions
25.Liabilities of promoter, shareholder, director
a. Promoter Can be held liable for noon-compliance of provisions in
prospectus. Is liable to public examination like any other director or
officer in case a court directs so
b. Shareholder Liable only to the extent of unpaid capital. Is liable to
pay full dividend back in case the dividend distribution is illegal (e.g.
if it renders the company insolvent)
c. Director Can be held liable for torts (civil wrongs) if it can be
shown that he was the wrongdoer or principal in the act. Have
criminal liability for contravention of statutory duties of IPC