Study Material for

Business Regulations
B.B.A Bangalore University
By: Mrs. Viraja.Kanawally

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Study Material for Business Regulations

3.5 BUSINESS REGULATIONS

OBJECTIVE
The objective is to introduce the students to various regulations affecting business
and to familiarize the
students with such regulations.

Unit 1: INTRODUCTION TO BUSINESS LAWS 06 Hrs

Introduction, Nature of Law, Meaning and Definition of Business Laws, Scope and
Sources of Business
Law, Fundamental Rights and Directive Principle of State Policies, Principles having
economic significance, Overview of Business Laws in India.

Unit 2: CONTRACT LAWS 14 Hrs

Indian Contract Act, 1872: Definition of Contract, essentials of a valid contract (all
essentials need to be
explained in great detail), classification of contracts, breach of contract and
remedies for breach of contract. Indian Sale of Goods Act, 1930: Definition of
contract of sale, essentials of contract of sale, conditions and warrantees, rights and
duties of buyer, rights of an unpaid seller.

Unit 3: INFORMATION LAWS AND RTE 10Hrs

Right to Information Act, 2005: Objectives of the RTI Act, Scope, SuoMoto disclosure,
Method of seeking information, Eligibility to obtain information, Authorities under the
Act,. Right to Education Act: objectives of the RTE Act Salient Features.

Unit 4: COMPETITION AND CONSUMER LAWS 12Hrs

The Competition Act, 2002: Objectives of Competition Act, the features of

Competition Act, components
of Competition Act, CCI, CAT, offences and penalties under the Act. Consumer
Protection Act, 1986: Definition of the terms consumer, consumer dispute, defect,
deficiency, unfair trade practices and services. Consumer Protection Act, Consumer
Redressal Agencies District Forum, State Commission, National Commission, any
two landmark judgments of the Supreme Court.

Unit 5: ECONOMIC AND ENVIRONMENTAL LAWS 14Hrs

FEMA 1999: Objects of FEMA, definition of important terms authorized dealer,

currency, foreign currency, foreign exchange, foreign security, Directorate of
Enforcement, salient features of the FEMA,
offences and penalties, Environment Protection Act, 1986: Objects of the Act,
definitions of important terms environment, environment pollutant, environment
pollution, hazardous substance and occupier, types of pollution, global warming,
causes for ozone layer depletion, carbon trade, rules and powers of central
government to protect environment in India.

SKILL DEVELOPMENT

Prepare a chart showing sources of business law and Indian Constitution Articles
having economic
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significance.
Draft an agreement on behalf of an MNC to purchase raw materials indicating
therein terms and conditions and all the essentials of a valid contract.
Draft an application to the Chief Information Officer of any government office
seeking information about government spending.
Draft digital signature certificate.
Draft a complaint to District Consumer Forum on the deficiency of service in a
reputed corporate hospital for medical negligence.
Collect leading cyber crimes cases and form groups in the class room and conduct
group discussion.
Draft a constructive and innovative suggestions note on global warming
reduction.

BOOK REFERENCE
1.
2.
3.
4.
5.
6.
7.
8.
9.

K. Aswathappa, Business Laws, Himalaya Publishing House,

K.R. Bulchandni: Business Laws, HPH.
N.D. Kapoor, Business Laws, Sultan chand publications.
S.S. Gulshan, Business Law 3rd Edition, New Age International
S.C. Sharama& Monica : Business Law I.K. International
Tulsian Business Law , Tata McGraw-Hill Education
Dr. K. Venkataraman, SHB Publications.
Kamakshi P & Srikumari P, Business Regulation
Dr. Alice Mani: Business Regulations, SBH.

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Unit 1
INTRODUCTION TO BUSINESS LAWS 06 Hrs
1.1
Introduction
1.2
Nature of Law
1.3
Meaning and Definition of Business Laws
1.4
Scope and Sources of Business Law
1.5
Fundamental
Rights
and
Directive
Principle of State Policies
1.6
Principles having economic significance
1.7
Overview of Business Laws in India.

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1.1

Introduction

1.1 INTRODUCTION TO LAW

Law is essential to any society in that it provides the rules by which people
and businesses interact. Law affects almost every function and area of
business. The authors of one business law text go so far as to say that the
difference between winning and losing in the business world often depends
upon the ability to make good choices from a legal perspective.1 This is
because almost every business decision has legal repercussions, including
deciding whether to incorporate a business, obtaining financing, protecting
proprietary knowledge used to develop
products/services, entering into contracts to purchase raw materials,
ensuring that products meet safety standards, disposing of plant wastes,
promoting and pricing products/services, entering into contracts to sell
products/services, and providing product warranties and aftersales service.
At all stages of business, running afoul of the law can hurt a business, while
playing within the boundaries of the law can help the business to succeed.
For this reason, accountants, who play
a key role in almost every aspect of operations, must have a solid working
knowledge of the law.

1.2

Nature of Law
The nature of the business law is that it acts in respect to the location
of the business and the area of activity. The business law usually
depends on the governing authority.
Business Law enjoys the following characteristics.
a.
It is a conduct, culture, tradition and religion developed by human
beings.
b.
It creates rights and duties, all the people have specific power and
responsibilities.
c.
It maintains peace & security, peace and security is possible by the
help of law.
d.
It Provides justice and gives punishment, law always aims to give
justice to the victim and punishment to the law breakers.
e.
It regulates internal activity; law regulates our day today activities.
f.
It is defined by the court, Supreme Court, defines silent.

1.3

Meaning and Definition of Business Laws

1.3.1 Definition of law: Austin: - Law is rule of conduct imposed and
enforced by the sovereign
Salmond: -Law is the body of principles recognized and applied by the state
in the administration of justice
Hooker: - Law refers to any kind of rule or cannon where by actions are
framed.

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Definition of business law :According to S R Davar, business law means that

branch of law which is applicable to or concerned with trade and commerce
in connection with various mercantile or business transactions.
1.3.2 Meaning of business Law:
Business Law is a wide term and embraces all legal principles concerning
business transactions. It is also known as the Commercial Law, Law
Merchant or Mercantile Law.
Business Law consists of those legal rules, which govern and regulate the
business activities, transactions and trade. It also encompasses the law
relating to regulation of business associations and other incidental matters.
1.3.3 Objectives of business law:
The law serves many purposes and functions in society. Four principal
purposes and functions are establishing standards, maintaining order,
resolving disputes, and protecting liberties and rights.
A. Establishing Standards
The law is a guidepost for minimally acceptable behavior in society. Some
activities, for instance, are crimes because society (through a legislative
body) has determined that it will not tolerate certain behaviors that injure or
damage persons or their property. For example, under a typical state law, it is
a crime to cause physical injury to another person without justificationdoing
so generally constitutes the crime of assault.
B.

Maintaining Order

This is an offshoot of establishing standards. Some semblance of order is

necessary in a civil society and is therefore reflected in the law. The law
when enforcedprovides order consistent with societys guidelines.
C.

Resolving Disputes

Disputes are unavoidable in a society made of persons with different needs,

wants, values, and views. The law provides a formal means for resolving
disputesthe court system. There is a federal court system and each state
has its own separate court system. There are also various less formal means
for resolving disputescollectively called alternative dispute resolution
(ADR). We will learn about the federal and state court systems in chapters 6
and 7, respectively, and about ADR in chapter 9.

D. Protecting Liberties and Rights

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The constitutions and statutes of the United States and its constituent states
(see chapter 5) provide for various liberties and rights. A purpose and
function of the law is to protect these various liberties and rights from
violations or unreasonable intrusions by persons, organizations, or
government. For example, subject to certain exceptions, the First Amendment
to the Constitution prohibits the government from making a law that prohibits
the freedom of speech. Someone who believes that his free speech rights
have been prohibited by the government may pursue a remedy by bringing a
case in the courts.
1.4

Scope and Sources of Business Law

1.4.1 Scope of Business Law
The Scope of Business Law
To say that business law applies to every facet of business is not an
exaggeration. Most business transactions have legal aspects that it would not
be wise to ignore. This applies to all types of businesses; whether it is a single
proprietorship, partnership, corporation or limited liability company.
Business law is not designed to make running a business difficult; its
purpose is to provide clear-cut and enforceable rules and regulations to avoid
issues and conflicts. It is the responsibility of both big and small business
owners to comply with the law, but not everyone has a handle on what needs
to be done and how to do them. Retaining a lawyer to ensure compliance
with the law is the safest method for good business practice.
Some of the areas where business law applies include but are not limited to:
Compensation
Business formation
Stockholders agreements
Investigating business fraud
Financial transactions
Regulatory compliance (i.e. business license)
Lawsuits
A little knowledge of business law can be risky; not knowing the whole
picture and its impact on other aspects of the business can lead to making
bad decisions. Having a competent and conscientious lawyer on board,
especially if there has already been past incidents, means that you can
concentrate on managing and growing the business. You will never have to
worry about business law compliance.
An in-house legal counsel can also ensure that your business does not get
into trouble when dealing with potential clients, other businesses or financial
institutions. Contracts and agreements can be properly vetted and analyzed
before final commitment, and this lessens the amount of unnecessary work
later on. Business law is designed to protect everyones interest and legal
rights. It can work for you if you have a thorough understanding and/or if you
have competent legal counsel to oversee legal business matters.

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The following legislation enacted by Indian Legislature from time to time is

covered in the Indian
Business Laws:
a) The Indian Contract Act, 1872.
b) The Negotiable Instruments Act, 1881.
c) The Sale of Goods Act, 1930.
d) The Indian Partnership Act, 1932.
e) The Insurance Act, 1972.
f) The Arbitration & Conciliation Act, 1996.
g) The Law of Insolvency.
h) Law Relating to Carriage of Goods.
Source: http://spsworkflow.com/
1.4.2 Sources of Business Law
The main sources of Indian Business Law are as follows:
a) The English Mercantile Law [Common Laws, Equity, Roman Laws and Case
Laws],
b) Statutes of the Indian Legislature [Supreme and Subordinate Legislation],
c) Judicial Decisions & Precedents [Declaratory, Persuasive, Absolutely
Authoritative &
Conditionally Authoritative Precedents],
For a long time India was under the British rule. Therefore, the British Rulers
applied English laws in India with minor modifications suiting the Indian
conditions. Indian Commercial Law is no exception. It is based on the English
Commercial Law. However, the English Commercial Law, unlike the Indian
Commercial Law, is not codified.
The sources of Indian Mercantile Law are:
A. English Commercial Law: As pointed out above it is the most important
source of the Indian Commercial Law. English Commercial Law in turn is
based on:
(a) Common Law of England:
It is unmodified law consisting of customs, usages and traditions developed
over a long period of time by the English Courts. The Common Law used to
be applied to disputes of a similar nature. However, in course of time, rigidity
of the Common Law led to the growth of Equity.
(b) Equity:
The Common Law of England could not be applied in all cases. For example,
grant of damages in terms of money may not be an adequate remedy where
specific performance is necessary. It is almost impossible to conceive of any
law which could suit or meet all possible circumstances for all time to come.
Hence to remedy the defects of the Common Law, Equity developed. It is
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nothing but the application of principles of natural justice and good

conscience. In the beginning, Equity used to be administered by the Court of
Chancery, while the King's Court administered the Common Law. However,
this distinction was abolished by the Acts of Judicature passed in 1873 and
1875. Common Law and Equity are, now administered by one and the same
Court in a given case.
(c) Law Merchant:
It will be no exaggeration to say that English Commercial Law is nothing but
Law Merchant itself. The law Merchant was based on customs and usages
prevalent among merchants and traders. In the beginning, Law Merchant was
administered by tribunals consisting, mainly, of the merchants. Gradually, it
came to be recognised by the Common Law Courts also.
(d) Statute Law:
It is the law passed by the Parliament. These laws are superior to Common
Law and Equity as Parliament is supreme. It is remarked about British
Parliament that it is all powerful in as much as it can do everything except
making a man a woman or a woman a man.
B. Indian Statute Law:
Unlike English Commercial Law, most of our Commercial Law is codified in the
form of Acts passed by the Parliament and State Legislatures. The Indian
Contract Act. 1872, the Sale of Goods Act, 1930, and the Partnership Act,
1932 are examples of the Statute Laws passed by our Parliament. These laws
have brought about uniformity all over the country. Such laws enable the
country to introduce any change in the laws so as to make them more
effective and uniform in their application.
C. Precedents or Judicial Decisions:
This is based on the doctrine of equity that decision in an earlier case should
be equally applicable to a similar case in future unless, of course, the
circumstances have changed. Decisions of higher Courts are binding on lower
Courts. For example, a decision of our Supreme Court is binding on all the
High Courts and other courts under their jurisdiction. Similarly, decisions of a
High Court are binding on all the Courts subordinate to it. For example, a
decision of Mumbai High Court is binding on all the Courts in the State of
Maharashtra (Mumbai). However, decision of a High Court is not binding on
other High Courts. Thus a decision of the Mumbai High Court is not binding on
the Calcutta High Court.
D. Customs and Usage:
Although Commercial Law in India is codified, most of our business customs
have been given due recognition by law. For example, in many cases, law has
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made specific provisions in this respect. The Indian Contract Act, 1872, at the
very outset, lays down that, "Nothing therein contained shall affect any usage
or custom of trade not inconsistent with the Act;'
A custom is legally binding only when it is certain, reasonable, definite,
consistent and is uniformly recognised. Hundi is a very good example which
satisfies the above requirements. Hence, it has been recognized by the
Negotiable Instruments Act as equivalent to any other negotiable instrument
like a Cheque, Bill of Exchange etc. Normally, a custom or usage should not
be inconsistent with any 'Statute' Law.
1.4.3 Need of Business Law :
The need for law is felt when a dispute arises between two parties. To settle
the disputes, it becomes important to have a set of rules which are applicable
in different situations. Every citizen of India should have knowledge of the
Law of the land. No one can be excused on the basis of ignorance of law.
Therefore it becomes important to know the law of the country where one
lives. In this way, every Indian should have knowledge of Commercial Law. In
the absence of Mercantile Law, neither can we demand our rights nor can we
fulfill our obligations.
1.5

Fundamental Rights and Directive Principle of State Policies

1.5.1. Fundamental Rights: The Fundamental Rights are defined as basic
human freedoms that every Indian citizen has the right to enjoy for a proper
and harmonious development of personality. These rights universally apply to
all citizens, irrespective of race, place of birth, religion, caste or gender.
Aliens (persons who are not citizens) are also considered in matters like
equality before law. They are enforceable by the courts, subject to certain
restrictions.
Fundamental Rights is a charter of rights contained in the part three
Constitution of India. It guarantees civil liberties such that all Indians can lead
their lives in peace and harmony as citizens of India. These include individual
rights common to most liberal democracies, such as equality before law,
freedom of speech and expression, and peaceful assembly, freedom to
practice religion, and the right to constitutional remedies for the protection of
civil rights by means of writs such as habeas corpus. Violation of these rights
result in punishments as prescribed in the Indian Penal Code or other special
laws, subject to discretion of the judiciary.
The seven fundamental rights recognized by the Indian constitution are: [1]
1. Right to equality: Which includes equality before law, prohibition of
discrimination on grounds of religion, race, caste, gender or place of birth,
and equality of opportunity in matters of employment, abolition of
untouchability and abolition of titles.
2. Right to freedom: Which includes freedom of speech and expression,
assembly, association or union or cooperatives, movement, residence, and
right to practice any profession or occupation (some of these rights are
subject to security of the State, friendly relations with foreign countries,
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3.
4.

5.
6.
7.

public order, decency or morality), right to life and liberty, protection in

respect to conviction in offences and protection against arrest and detention
in certain cases.
Right against exploitation: Which prohibits all forms of forced labour, child
labour and traffic of human beings
Right to freedom of religion: Which includes freedom of conscience and
free profession, practice, and propagation of religion, freedom to manage
religious affairs, freedom from certain taxes and freedom from religious
instructions in certain educational institutes.
Cultural and Educational rights: Preserve the right of any section of
citizens to conserve their culture, language or script, and right of minorities
to establish and administer educational institutions of their choice.
Right to constitutional remedies: Which is present for enforcement of
Fundamental Rights.
Right to education: It is the latest addition to the fundamental rights
1.5.2: Directive Principles of State Policy:
The Constitution of India is the supreme law of India. It came into existence
on January 26, 1950.It is the longest written constitution of any sovereign
country in the world, containing 444 articles, 12 schedules,22 parts and 94
amendments. Part IV (Article 36-51) deals with various Directive Principles of
State Policy.
Definition:
The Directive Principles of State Policy are guidelines to the central and state
governments of India, to be kept in mind while framing laws and policies.
These provisions, contained in Part IV of the Constitution of India, are not
enforceable by any court, but the principles laid down therein are considered
fundamental in the governance of the country, making it the duty of the State
to apply these principles in making laws to establish a just society in the
country.

Directives:
Article 36:Definition of state:
The State includes the Government and Parliament of India and the
Government and the Legislature of each of the States and all local or other
authorities within the territory of India or under the control of the
Government of India.
Article 37:- Application of the principles.
Article 38:State to secure a social order for the promotion of welfare of the people.

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Article 39:Certain principles of policy to be followed by the State.

-equal rights to men and women.
-ownership of resources.
-equal pay for equal work.
-protection of children.
Article 39 A:- Equal justice and free legal aid. - to citizens having economic
or other disabilities.
Article 40:- Organisation of village panchayats
Article 41: Right-to work, to education and to public assistance in certain
cases.
Article 42:-Provision for just and humane conditions of work and maternity
relief.
Article 43:- Living wage, good working conditions etc. , for workers .
Article 43 A:- Participation of workers in management of industries.
Article 44:- Uniform civil code for the citizens.
Article 45:- Provision for free and compulsory education for children.
Article 46:- Promotion of educational and economic interests of Scheduled
castes , Scheduled Tribes and other weaker sections
Article 47:- Duty of the State to raise the level of nutrition and the standard
of living and to improve public health.
Article 48:- Organisation of agriculture and animal husbandry.
Article 48 A:- Protection and improvement of environment and safeguarding
of forests and wildlife.
Article 49:- Protect ion of monuments and places and objects of national
importance.
Article 50:- Separation of judiciary from executive.
Article 51:- Promotion of international peace and security.
-just and honorable relations.
-encourage settlement of international disputes by arbitration.

Classification Of The Directive Principles

Directive Principles of State Policy have been grouped into four
categories.
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These are: (A) the economic and social principles, (B) the Gandhian
principles, (C) Principles and Policies relating to international peace and
security and (D) miscellaneous.
A . The economic and social Principles:The state shall endeavour
to achieve Social and Economic welfare of the people by:
(1) providing adequate means of livelihood for both men and women.
(2) reorganizing the economic system in a way to avoid concentration
of wealth in few hands.
(3) securing equal pay for equal work for both men and women.
(4) securing suitable employment and healthy working conditions for
men, women and children.
(5) guarding the children against exploitation and moral degradation.
(6) making effective provisions for securing the right to work,
education and public assistance in case of unemployment, old age,
sickness and disablement.
(7) making provisions for securing just and humane conditions of work
and for maternity relief.
(8) taking steps to secure the participation of workers in the
management of undertakings etc.
(9) promoting education and economic interests of working sections of
the people especially the SCs and STs.
(10) securing for all the workers reasonable leisure and cultural
opportunities.
(11) making efforts to raise the standard of living and public health.
(12) providing early childhood care and education to all children until
they complete the age of 6 years.
B. The Gandhian Principles There are certain principles, based on
the ideals advocated by Mahatma Gandhi. These Principles are as
follows : (1) To organize village Panchayats.
(2) To promote cottage industries in rural areas.
(3) To prohibit intoxicating drinks and drugs that are injurious to health.
(4) To preserve and improve the breeds of the cattle and prohibit
slaughter of cows, calves and other milch and drought animals.
C. Directive Principles of State Policy Relating To International
Peace And Security : India should render active cooperation for
world peace and security and for that the state shall endeavour to : (1) promote international peace and security.
(2) maintain just and honourable relations between nations.
(3) foster respect for international laws and treaty obligations.
(4) encourage settlements of international disputes by mutual
agreement.

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D. Miscellaneous The Directive Principles in this category call

upon the state : (1) To secure for all Indians a uniform civil code.
(2) To protect historical monuments.
(3) To save environment from pollution and protect wild life.
(4) To make arrangements for disbursement of free legal justice
through suitable legislation.
1.6

Principles

having

economic

significance:

Economic Principles:
Economic principles always aim to shape our country in to a Welfare State. Art. 38(1)
provides that the State shall promote the welfare of the people by securing and
protecting as it may a social order in which justice social, economic, and political
shall inform all the institutions of national life. The State shall strive to minimize the
inequalities in income and try to eliminate inequalities in status, facilities and
opportunities among individuals and groups engaged in different vocations within
the country (Art.38-2). Thus promotion of welfare of people by securing a social
order where justice shall prevail is the objective of our constitution. To ensure such
objectives the State shall direct its policy in securing
adequate means of livelihood for all citizen irrespective of men and women
equally ;

equal distribution of wealth and resources among all classes ;

equal pay for equal work for both men and women ;

just and humane conditions of work, a decent standard of living , full

employment, leisure and social and cultural opportunities;

participation of workers in the management of undertakings and

establishments ;

protection of children, youth against exploitation and against moral and

material abandonment. The forty-two amendment altered this provision and
provides that children are given opportunities and facilities to develop in a healthy
manner and in conditions of freedom and dignity and that childhood and youth are
protected against moral and material abandonment;

Provision of work and compulsory education for all people, relief in case of
unemployment, old age, sickness and disability and other cases of undeserved
want ;

equality of opportunity and status for all individuals ;

level of nutrition and standard of living of the people ;

public health and enforce prohibition of consumption of intoxicating drinks

and drugs;

environment safeguarding forest and wild life of the country ;

a uniform civil code throughout the country ;

protection of adult and child labour.

1.6

Overview of Business Laws in India.

Many business laws in India precede the countrys independence in 1947.
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For example,
the Indian Contract Act of 1872 is still in force, although specific
contracts such as partnerships and the sale of goods are now covered by
newer laws.
The Partnership Act of 1932 covers partnership firms in India. Business
laws regulating chartered accountants and cost accountants were passed in
1949 and 1959, respectively. The
Banking Regulation Act of 1949 continues to regulate private banking
companies and manage banks in India. In 2012, it was amended by the
Banking Law (Amendments) Act. Under these amendments, the Reserve
Bank of India (RBI) was given power to restrict voting rights and shares
acquisition in a bank. The RBI established the Depositor Education and
Awareness Fund. Banks are now able to issue both equity and preference
shares under RBI guidelines.
While India is often criticized for complex regulations, it is important to keep
in mind that that in some cases, these laws are simpler than those of the
U.S. Furthermore, most regulations are consistent across the country, and
attorneys in India can practice in any state. Filing lawsuits is seldom
productive in most commercial disputes since court cases can drag on for
decades and collection can take even longer. For large deals, binding thirdcountry arbitration can be the best way to resolve disputes.
Following Indias economic development in the 21st century, the Ministry of
Corporate Affairs passed the :
Competition Act of 2002 and the Limited Liability Act in 2008. These
promote sustainable competition in markets, prohibit anti-competitive
business practices, and protect consumer interests while ensuring free trade.
The Parliament of India passes and amends regulations for both businesses
and investors. In addition to provisions from the Companies Act of 1956,
the Companies Act of 2013 features provisions regarding mergers and
acquisitions, board room decision-making, related party transactions,
corporate social responsibility, and shareholding. The act was further
amended through the Companies Act of 2015 which eliminated the
procedural common seal, declarations for commencement of businesses, and
minimum paid-up capital requirements. The amendment also relaxed
governing-related party transactions while limiting access to strategic
corporate resolutions in India.
As a member of the International Labor Organization, India offers protections
for employees. These include:
the Payment of Wages Act of 1936, the
Industrial Employment Act of 1946,
the Industrial Disputes Act of 1947,
the Payment of Bonus Act of 1965, and
the 1972 Payment of Gratuity Act.
Protections include annual bonuses of 8.33% and separation fees of about 15
days per year of employment. Other labor laws such as the Building and
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Other Construction Workers Acts of 1996 and the Workmens Compensation

Act of 1923 (amended in 2000) are in effect. Passed in 1926, the Trade
Unions Act deals with the registration, rights, liabilities, and responsibilities of
trade unions. The Industrial Disputes Act of 1946 regulates trade unions and
matters between industrial employers and employees.
Business laws in India include consumer protection.
The Consumer Protection Act, 1986 mandates Consumer Dispute
Redressal Forums at local and national levels. Older laws, such as
the Standards of Weights & Measures Act of 1956, ensure fair
competition in the market and free flow of correct information from providers
of goods and services to consumers.
Due to the growth of trade, the Indian government passed the :
Foreign Trade (Development and Regulation) Act of 1992 to facilitate
imports and augment exports. The latest EXIM Policy, known as the Foreign
Trade Policy, was issued for April 2015 to March 2020. The Service Exports
from India Scheme (SEIS) replaced the Served from India Scheme. The SEIS
extends the duty-exempted scrip to Indian service providers and provides
notified services in a specified mode outside the country. Under the Export
Promotion Capital Goods Scheme, the export obligation requires six times
the duty saved on imported capital goods; in the case of local sourcing of
capital goods, the export obligation is reduced by 25%. Beyond goods and
services, the Foreign Exchange Management Act of 1999 regulates foreign
exchange transactions including investments abroad.
As a founding member of the World Trade Organization in 1995, India has
updated business laws regarding copyrights, patents, and trademarks to
meet the Agreement on Trade Related Aspects of Intellectual Property Rights.
Indian companies and the federal government honor global IP rights.
However, because music copyrights are different in India, both Indian and
Western IP owners in the entertainment industry have suffered due to digital
piracy. Even so, there are few IP-related disputes outside of several
celebrated pharmaceutical industry cases. In 2013, Indias Supreme Court
denied Novartis an extension to update its cancer drug Glivec due to
evergreening charges.
E-commerce and online expansion of companies prompted India to create
regulations to cover cyber law and security compliances, such as the techno
legal regulatory provisions in the Companies Act of 2013.
The Information Technology Act of 2000 is the primary law for ecommerce regulation in India. In 2008, the IT Act was amended to provide
explicit legal recognition of electronic transactions.

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Unit 2: CONTRACT LAWS 14 Hrs

2.1 Indian Contract Act 1872:
2.1.1Definition of Contract
2.1.2 essentials of a valid contract (all essentials need
to be explained in great detail),
2.1.3 classification of contracts
2.1.4 breach of contract and remedies for breach of
contract.
2.2 Indian Sale of Goods Act, 1930:
2.2.1 Definition of contract of sale
2.2.2 essentials of contract of sale
2.2.3 conditions and warrantees
2.2.4 rights and duties of buyer,
2.2.5 rights of an unpaid seller.

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2.1 Indian contract act 1872:

2.1.1 DEFINITION OF CONTRACT
Contract is an agreement between two or more persons creating rights and
duties between them and which is enforceable by law.
Pollack defines contract as, every agreement and promise enforceable at
law is a contract.
According to Section 2(h) of the Contract Act, an agreement enforceable by
law is a contract.
From the above definitions it is clear that a contract consists of two
elements:
(1)
An agreement.
(2)
The agreement should be enforceable by law.
(1) AGREEMENT
According to Section 2(e) Every promise and every set of promise forming
the consideration for each other, is an agreement.
An agreement, therefore, comes into existence only when one party make a
proposal or offer to the other and that other signifies his assent (i.e. gives his
acceptance).
From the above definitions it is clear that for an agreement there must be:
(a) Plurality of Persons
There must be two or more persons to make an agreement because one
person cannot enter into an agreement with himself.
(b) Consensus ad idem
It means that both the parties to an agreement must agree about the subject
matter of the agreement in the same sense and the same time. The term consensus
means identity of minds.
EXAMPLE:
A own two cycles Sohrab and Eagle. A is selling Sohrab cycle to B. B. thinks
he is buying Eagle cycle. There is no consensus ad idem and consequently no
contract.
2) Enforceability
Enforceability is the second requirement of contract. An agreement is said to
be enforceable if it is recognized by courts. In order to be enforceable by law, the
agreement must create legal obligations between the parties. If an agreement does
not create legal obligations, it is not contract. All contracts are agreements but all
agreements are not contracts. Agreements are of two types:
(a) Social agreements
(b) Legal agreements

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Social agreements are social in nature and do no enjoy the benefits of law. In such
agreements the parties do not intend to create legal relations.
Legal agreements are contracts because they create legal obligations
between the parties. In business agreements it is presumed that the parties intend
to create legal relations so all business agreements are in other words contracts.
EXAMPLE:
(a)A invites B to a dinner. B accepts the invitation but does not attend it A cannot
sue B for damages. It is a social agreement because it does not create legal
obligation. It is not a contract.
(b)A promise to sell his car to B for Rs.2 lac. It is a legal agreement because it
creates legal obligations between the parties. This agreement is also a contract.
2.1.3 CLASSIFICATION OF CONTRACTS
The contracts can be divided in the following three main groups.
1.
2.
3.

According to enforceability.
According to formation.
According to performance.

1. ENFORCEABILITY:
According to enforceability, a contract can be divided into the following five
kinds:
a. VALID CONTRACT:
DEFINITION:
A valid contract, is an agreement enforceable by law. An agreement becomes
enforceable by law when all the essentials of a valid contract as explained by section
10 are present. If even one is missing, there, is no valid contract.
OBLIGATION OF PARTIES
In valid contract all the parties to the contract are legally responsible for the
performance of a contract, if one of the parties breaks the contract, the other party
has a right to take action against the guilty party. The contract can be enforced
through the court also.
EXAMPLE:
A Proposes to sell his car to B for Rs.2 lac and B accepts the proposal. If A
and B both possess contractual capacity and B is consent is free, thee is a valid
contract between A and B.
If A fails to deliver the car, B can sue him in the court for delivery and if B
fails to make the payment, A can sue him for recovery of price.
b. VOIDABLE CONTRACT

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DEFINITION:
According to Section 2(i) An agreement which is enforceable by law at the
option of one or more of the parties thereto, but not at the option of the other or
others, is avoidable.
Generally, avoidable contract takes place when the consent of one of the
parties is not free. It is a valid contract until it is avoided by the party having the
right to avid it. Once it is avoided it becomes void. But if the party chooses to affirm
it, the contract continuous to be valid.
CIRCUMSTANCES UNDER WHICH A CONTRACT BECOMES VOIDABLE
The following are the circumstances under which a contract
becomes voidable.
1.
A contract becomes voidable when the consent of one of the parties to the
contract is obtained by coercion undue influence, misrepresentation or fraud. (Sec
19).
EXAMPLE:
(a)
A, threatens to shoot B to purchase his Honda 110 for Rs.20,000. B
agrees. This contract was made by coercion and is voidable at the option of B.
(b)
A, in order to deceive B, falsely states that 500 pounds of sugar is
produced annually at As factory and in this way induces B to buy the factory. The
contract is voidable at the option of B.
2.
When a person promises o do something for another person but the other
person prevents him from performing his promise, the contract becomes voidable at
his option. (Sec 5).
EXAMPLE:
A contracts with B that A shall whitewash. Bs House for Rs.10,000. A, is
ready to whitewash but B prevents him from doing so. This contract is voidable at
the option of A.
3.
When a party to the contract promises to do a certain thing within a
specified time, but fails to do it, then the contract becomes voidable at the option of
the promise, if the time is essence of the contract, (Sec 55)
EXAMPLE
A, contracts with B that A shall white-wash Bs House for Rs.10,000 within
one week. But A does not turn up within the specified time. The contract is voidable
at the option of B.
c.

VOID CONTRACT

DEFINITION:

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The word void means not binding in law. A contract, -which cannot be
enforced by either party, is called a void contract Section 2(j) defines A contract
which ceases to be enforceable by law becomes void, when it ceases to be
enforceable.
From this definition, it is clear that a void contract is not void from the very
beginning. It is valid contract and binding on the parties when it is originally made
but after its formation it become void due to certain reasons.
FORMATION:
According to formation, a contract can be divided into the following
three kinds:
i. EXPRESS CONTRACT
Where the offer or acceptance is made in words spoken or written, it is an
express contract.
It can also be defined in this way that an express contract is one in which the
parties directly state the terms of the contract orally or in writing at the time the
contract is made.
EXAMPLE:
A tells on telephone to B that he wants to sell his car for Rs.3 lac and B
informs A that he agrees to purchase the car, there is an express contract.
ii. IMPLIED CONTRACT
Where the offer or acceptance is made, otherwise than in words, it is an
implied contract.
Implied contract is one, which is not made by words, written or spoken, but
by the acts and conduct of the parties thereto. It arises when one person, without
being requested to do so, renders services under circumstances indicating that he
expects to be paid for them, and the other person, known such circumstances,
accepts the benefit of those services.
EXAMPLE
(a)
A, a Railway Coolie carries the luggage of B in order to carry it out of
the railway station without being asked by B, and B allows him to do so. The conduct
of B shows that he is a ready to pay to A for the services. It is an implied contract.
(b)
M, a professional shoes shiner starts polishing the shoes of W without
being asked to do so, and W allows him to do so. It is an implied contract and W is
under obligation to pay to M.
iii. CONSTRUCTIVE OR QUASI CONTRACT
Such a contract does not arise due to express or implied agreement
between the parties but the law imposes a contract under certain special
circumstance. A quasi Contract is based upon the principle of equity that a person
shall not be allowed to get benefit at the expense of another.
EXAMPLE
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(a)
A, finder of lost goods is under a obligation find out the true owner and
return the goods.
(b) A, a trader, leaves goods at Bs house by mistake, B treats the goods as his own
and starts using them. There is a quasi contract between A and B. B is bound to pay
for the goods.
PERFORMANCE
According to performance a contract can be divided into the following four
kinds:
1. EXECUTED CONTRACT
Executed means that which is done. A contract is said to be executed when
both the parties have completely performed their obligations. It means that nothing
remains to be done by either party under the contract.
EXAMPLE
(a) A, purchased a book from B for Rs.200 and paid the price on the spot. It is an
executed contract because both the parties have performed their duties.
(b) A agrees to paint a picture for B for Rs.2,000. When A paints the picture and B
pay the price, the contract is said to be executed.
2. EXECUTORY CONTRACT
Executory means that which remains to be done. In an executory contract
something remains to be done. In other words a, contract is said to be executory
when both the parties to a contract have yet to perform their obligations.
EXAMPLE
(a) M promise to sell his car to N for Rs.2 lac and N pays only Rs.50,000 as advance
money and promise to pay the balance later. M gives the possession of car to N and
promises to transfer ownership on receipt of full amount. The contract between M
and N is executory because there remains something to be done on both sides.
(b) A agrees to teach B, from the next month and B promises to pay Rs.800 to A. It
is an executory contract because the promises are yet to be performed.
3. UNILATERAL CONTRACT
Unilateral contract is one in which only one party has to fulfill his obligations
at the time of formation of the contract, the other party has already fulfilled his
obligations by doing some acts at the time of the contract or before the contract
comes into existence. Such contract is also known as contract with executed
consideration.
EXAMPLE
A promised to pay Rs.1,000 to any one who found his lost bag. B found the bag and
returned it to A. It is an unilateral contract which comes into existence when the bag
is found. Now A has to pay as B as already performed his obligation by finding the
bag.
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4. BILATERAL CONTRACT
A bilateral contract is one in which die obligations of both the parties to the
contract are outstanding at the time of the formation of the contract. In other words
it is a contact in which both the parties have yet to perform their obligations.It is
similar to executory contract and is also known as contract with executory
consideration.
EXAMPLE
A Promises to paint the picture for B and B promises to pay Rs.5,000 to A.
2.1.2 ESSENTIALS OF A VALID CONTRACT:
A valid contract is an agreement, which is binding and enforceable. In valid
contract all the parties are legally bound to perform the contract.
According to Section 2 (h) of the Contract Act, an agreement enforceable by
law is a contract.
It means an agreement is regarded as a control when it is enforceable by
law. It is a contract, which can be enforced by either of the parties to the contract. If
one of the parties refuses to perform the contract, the other party can take an action
in a court of law against such party. To be enforceable by law, an agreement must
possess some essentials of a valid contract, which are stated in section 10.
According to Section 10, all agreements are contracts if they are made by
the free consent of parties, competent to contract, for a lawful consideration and
with a lawful object and are not hereby expressly declared to be void.
When necessary the agreement must satisfy the requirements of law
regarding writing attestation or registration.
ESSENTIALS OF VALID CONTRACT
An agreement becomes enforceable by law when it fulfils essential
conditions. These conditions may be called the essentials of a valid contract, which
are as follows:
(1) OFFERS AND ACCEPTANCE
For an agreement there must be a lawful offer by one and lawful acceptance
of that offer from the other party. The term lawful means that the offer and
acceptance must satisfy the requirements of Contract Act. The offer must be made
with the intention of creating legal relations otherwise, there will be no agreement.
EXAMPLE:
A say to B that he will sell his cycle to him for Rs.2000. This is an offer. If B
accepts this offer, there is an acceptance.

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2) LEGAL RELATIONSHIP
The parties to an agreement must create legal relationship. It arises when
parties know that if one for the failure of a contract. Agreements of a social or
domestic nature do not create legal relations and as such cannot give rise to a
contract. It is presumed in commercial agreements that parties intend to create
legal relations.
EXAMPLE:
(i) A father promises to pay his son Rs.500 every month as pocket money. Later, he
refuses to pay. The son cannot recover as it is a social agreement and does not
create legal relations.
(ii) A offers to sell his watch to B for Rs.200 and B agrees to buy it at the same
price, there is a contract as it creates legal-relationship between them.
(iii) A husband promised to pay his wife a household allowance of 30 pounds every
month. Later, the parties separated and the husband failed to pay. The wife used for
allowance. Held that the wife was not entitled for the allowance as the agreement
was social and did not create any legal obligations.
3. LAWFUL CONSIDERATION
The third essential of a valid contract is the presence of consideration.
Consideration is something in return. It may be some benefit to the party.
Consideration has been defined as the price paid by one party for the promise of the
other. An agreement is enforceable only when both the parties get something and
give something. The something given or obtained is the price of the promise and is
called consideration.
EXAMPLE:
(i)
A agrees to sell his house to B for Rs.10 Lac is the consideration for As
promise to sell the house, and As promise to sell the house is the consideration for
Bs promise to pay Rs.10 Lac. These are lawful considerations.
(ii)
A promise to obtain for B employment in the public service, and B
promise to pay 10,000 rupees to A. the agreement is void, as the consideration for it
is unlawful.
4. CAPACITY OF PARTIES
An agreement is enforceable only if it is entered into by parties who possess
contractual capacity. It means that the parities to an agreement must be competent
to contract. According to Section 11, in order to be competent to contract the parties
must be of the age of majority and of sound mind and must not be disqualified from
contracting by any law to which they are subject. A contract by a person of unsound
mind is void ab-initio (from the beginning).

Page | 23

If one of the parties to the agreement suffers from minority, madness,

drunkenness etc., the agreement is not enforceable at law, except in some cases.
EXAMPLE:
(i)
M, a person of unsound mind, enters into an agreement with S to sell his
house for Rs.2 lac. It is not a valid contract because M is not competent to
contract.
(ii)
A, aged 20 promises to sell his car to B for Rs.3 Lac. It is a valid contract
because A is competent to contract.
(5) FREE CONSENT
It is another essential of a valid contract. Consent means that the parties
must have agreed upon the same thing in the same sense. For a valid contract it is
necessary that the consent of parties to the contact must be free.
EXAMPLE:A compels B to enter into a contract on the point of pistol. It is not a valid
contract as the consent of B is not free.
(6) LAWFULL OBJECT
It is also necessary that agreement should be made for a lawful object. The
object for which the agreement has been entered into must not be fraudulent,
illegal, immoral, or opposed to public policy or must not imply injury to the person or
property of another. Every agreement of which the object or consideration is
unlawful is illegal and the therefore void.
EXAMPLE:A promise to pay B Rs.5 thousand if B beats C. The agreement is illegal as its
object is unlawful.
(7) WRITING AND REGISTRATION
According to Contract Act, a contract may be oral or in writing. Although in
practice, it is always in the interest of the parties that the contract should be made
in writing so that it may be convenient to prove in the court. However, a verbal
contract if proved in the court will not be considered invalid merely on the ground
that it not in writing. It is essential for the validity of a contact that it must be in
writing signed and attested by witness and registered if so required by the law.
EXAMPLE:
(i)
A Verbally promises to sell his book to y for Rs.200 it is a valid contract
because the law does not require it to be in writing.
(ii)
A verbally promises to sell his house to B it is not a valid contract
because the law requires that the contract of immovable property must be in
writing.
(8) CERTAINITY
According to Section 29 of the Contract Act, Agreements the meaning of
which are not certain or capable of being made certain are void. In order to give
rise to a valid contract the terms of the agreement, must not be vague or uncertain.
For a valid contract, the terms and conditions of an agreement must be clear and
certain.
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EXAMPLE:
(i)
A promised to sell 20 books to B. It is not clear which books A has
promised to sell. The agreement is void because the terms are not clear.
(ii)
A agrees to sell B a hundred tons of oil. It is not clear what is the kind of
oil. The agreement is void because of it uncertainty.
(iii)
O agreed to purchase a van from S on hire-purchase terms. The price
was to be paid over two years. Held there was no contract as the terms were not
certain about rate of interest and mode of payment.
(9) POSSIBILITY OF PERFORMANCE
The valid contract must be capable of performance section 56 lays down
that. An agreement to do an act impossible in itself is void. If the act is legally or
physically impossible to perform, the agreement cannot be enforced at law.
EXAMPLE:(i)
enforceable.

A agrees with B to discover treasure by magic, the agreement is not

(ii)
A agrees with B to put life into Bs dead brother. The agreement is void
as it is impossible of performance.
(10) NOT EXPRESSLY DECLARED VOID
An agreement must not be one of those, which have been expressly
declared to be void by the Act. Section 24-30 explains certain types of agreement,
which have been expressly declared to be void. An agreement in restraint of trade
and an agreement by way of wager have been expressly declared void.
EXAMPLE:A promise to close his business against the promise of B to pay him Rs.2 lac
is a void agreement because it is restraint of trade.
OFFER AND ACCEPTANCE:
The first essential of a valid contract is an agreement i.e., offer and
acceptance. The agreement result from an exchange of promises by the parties
involved. An agreement arises when one party, the offer or, makes an offer and the
other party to whom the offer is made i.e. the offeree accepts it. In every case, there
must be both an offer and an acceptance. If either is lacking there is no agreement.
In order to make a contract there must be a lawful offer by one party and lawful
acceptance of the offer by the other party.
OFFER / PROPOSAL

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DEFINITION:
The words proposal and offer are synonymous and are used interchangeably.
Section 2(a) defines a proposal as when one person signifies to another his
willingness to do or to abstain from doing any thing, with a view to obtaining the
assent of that other to such act or abstinence he is said to make a proposal.
This definition of an offer consists of two parts.
(1)
There must be an expression of the willingness by one to another to do or to
abstain from doing something.
(2)
The expression of willingness must be made to obtain the assent of the other
person to such act or abstinence.
The offer must be made with the intention of creating legal relations;
otherwise, there will be no agreement.
EXAMPLE:(i) A offer to sell his watch to B for Rs.100 A is making an offer to B.
(ii)A says to B I am willing to sell my car for Rs.3 Lac Are you interested to buy it. A
makes an offer to B.
DEFINITIONS:
OFFEROR:
The person making the offer is called the offeror or promisor or proposer.
OFFEREE:
The person to whom the offer is made is called the offeree or proposer.
PROMISOR:
The person accepting the offer is called the promisor or acceptor.
ESSENTIALS OF A VALID OFFER
Following are the legal rules or essentials of a valid offer:
(1) IT MAY BE EXPRESS OR IMPLIED
An offer may be made either by words or by conduct. An offer, which is
made by words spoken or written, is called an express offer. The offer, which is made
by the conduct of a person, is called an implied offer.
EXAMPLE:

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(a)
M says to N that he will sell his motorcycle to him for Rs.40,000. It is an
express offer.
(b)
A railway coolie carries the luggage of B without being asked to do so B
allows him to do so. It is an implied offer.
(c)
The new Khan Transport Company runs buses on different routes to
carry passengers at the scheduled fares. This is an implied offer by the company.
(2) IT MUST CREATE LEGAL RELATIONS
The offer must be made in order to create legal relations otherwise, there will
be no agreement. If an offer does into give rise to legal obligations between the
parties it is not a valid offer in the eye of law.
EXAMPLE:(a)
A invites B to dinner B accept the invitation. It does not create any legal
relations, so there is no agreement.
(b)
A offers to sell his watch to B for Rs.200 and B agrees. There is an
agreement because here the parties intend to create legal relations.
(c)
Three friends joined to enter a newspaper competition and agreed to
share any winnings. It was held the intended to create legal relations and their
agreement was therefore a contract.
(3) IT MUST BE DEFINITE & CLEAR
An offer must be definite and clear, if the terms of an offer are not definite
and clear, it cannot be called a valid offer. If such offer is accepted it cannot create a
binding contract.
EXAMPLE:
A has two motorcycles. He offers B to sell one motorcycle for Rs.27,000. It is
not a valid offer because it is not clear that which motor cycle A wanted to sell.
(4) IT IS DIFFEENT FROM INVITATION TO OFFER
An offer is different from an invitation to offer. It is also called invitation to
treat or invitation to receive offer. An invitation to offer looks like offer but legally it
is not offer.
In the case of an invitation to offer, the person sending out the invitation
does not make an offer but only invites the other party to make an offer. His object is
to inform that he is willing to deal with anybody who after getting such information
is willing to open negotiations with him. Such invitations for offers are not offers
according to law and so cannot become agreement by acceptance.
EXAMPLE:

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(a)
Quotations, Catalogues of prices, display of goods with prices issue of
prospectus by companies are examples of invitation to offer.
(b)
Display of goods in an auction sale is not an offer rather it is an
invitation to offer. The offer will come from the buyer in the form of bids.
(5) IT MAY BE SPECIFIC OR GENERAL
When an offer is made to a specified person or group of persons, it is called
specific offer. Such an offer can be accepted only by the person or persons to whom
it is made. A general offer, on the other hand, is one, which is made to public in
general and it may be accepted by any person who fulfils the conditions mentioned
in it. Both specified and general offers are valid.
EXAMPLE:(a)
M makes an offer to N to sell his bicycle for Rs.800, it is a specific offer.
In this case, only N can accept it.
(b)
A announces in a newspaper a reward of Rs.1,000 for any one who will
return his lost radio. It is general offer.
(6) IT MUST BE COMMUNICATED TO THE OFFEREE
An offer is effective only when it is communicated to the offeree. If an offer
is not communicated to the offeree it cannot be accepted. Thus an offer, which is not
communicated, is not a valid offer. It applies to both specific and general offers.
EXAMLES:
A without knowing that a reward has been offered for the arrest of a
particular criminal, catches the criminal and informs the police. A cannot recover the
reward as he was not aware of it.
(7) IT SHOULD NOT CONTAIN NEGATIVE CONDITION
an offer should not contain a condition the non-compliance of which may be
assumed as acceptance. An offeror cannot say that if acceptance is not
communicated up to a certain date, the offer would be presumed to have been
accepted. If the offeree does not reply, there is no contract, because no obligation to
reply can be imposed on him, on the ground of justice no agreement because such
condition cannot be imposed on the offeree. It is only a one sided offer.
EXAMPLE:
A wrote to B offering to sell his book for Rs.500 adding that if he didnt reply
with in 5 days, the offeree would be presumed to have been accepted. There is no
agreement b/c such condition cant be imposed on the offeree. It is only a one sided
offer.
(8) IT MAY BE SUBJECT TO ANY TERMS & CONDITIONS
An offeror may attach any terms and conditions to the offer he makes. He may even
prescribe the mode of acceptance. There is no contract, unless all the terms of the
Page | 28

offer are accepted in the mode prescribed by the offeror. It must be noted that if the
offeror asks for sending the acceptance by telegram and the offeree sends the
acceptance by letter, and the offeror may reject such acceptance.
EXAMPLE:
A asks B to send the reply of his offer by telegram but B sends reply by letter, A
may reject such acceptance because it is opposed to the prescribed mode of
communication.
(9) IT MUST NOT CONTAIN CROSS OFFERS
When two parties make similar offers to each other, in ignorance of each
others such offers are called cross-offers. The acceptance of cross-offers does not
result in complete agreement.
EXAMPLE:
On 23rd December 2007, A wrote B to sell him 100 ton of iron at Rs.10,000
per ton. On the same day, B wrote to A to buy 100 tons of iron at Rs.10,000 per ton.
There is no contract between A & B because the offers were similar and made in
ignorance of the other and so there is no acceptance of each others offer.
REVOCATION OR TERMINATION OF OFFER
According to Section 6, an offer may come to an end in any of the following
ways:
(1) NOTICE OF REVOCATION
The offeror can revoke his offer at any time by sending a notice of
revocation to the offeree, before its acceptance. The offeror can reject the offer
before its acceptance even though the period for which the offer was kept open has
not yet expired.
EXAMPLE:
A, the offeror at an auction sale makes the highest bid. But he has the right
to withdraw (revoke) the bid (offer) is revoked before acceptance.
(2) LAPSE OF TIME
When the offer states that, the it is open until a particular date the offer
terminates on that date if it is not accepted by that time. If the offer does not specify
the time, it will terminate after the lapse of a reasonable time. What is reasonable
time depends upon the circumstances of each case.
EXAMPLE:
An application for allotment of shares was made on 8th June. The application
was informed on the 23rd November that shares have been allotted to him. He
refused to accept them. It was held that his offer had lapsed by reason of the delay
Page | 29

of the company in notifying their acceptance, and that he was not bound to accept
the shares.
(3) FAILURE TO FULFILL CONDITION
An offer stands revoked if the offeree fails to fulfill the conditions given
therein. If an offer contains some conditions and the offeree has taken responsibility
to fulfill such conditions and if the offeree fails to fulfill such conditions the offer
terminates.
EXAMPLE:
A offer to sell his scooter to B for Rs.48,000 if B gets admission in medical
college. If B fails to get admission the offer will stand revoked as he fails to fulfill the
conditions.
(4) REVOCATION OF OFFER BY OFFEREE
If the offeree rejects the offer and communicates the rejection to the offeror,
the offer shall terminate even though the period for which the offer was kept open
may not have yet expired. The rejection may be by words spoken or written or
implied.
EXAMPLE:
A offered to B to sell his bicycle to him at Rs.1000 only telling t hat the offer
was open for a period of 10 days. Here B being the offeree only after 3 days rejected
the offer. It shall terminate although the period for which offer was kept open had
not yet expired.
(5) COUNTER OFFER BY THE OFFEREE
An offer may be revoked by the offeree by making the counter offer. An offer
comes to an end when the offeree makes a counter offer.
EXAMPLE:
A offers to sell his house to B for Rs.1 Lac B offers Rs.80,000. A refuses.
Finally, B offers Rs.1 lac but A refuses to sell. There is no contract because B by
offering Rs.80,000 has already rejected the offer.
(6) DEATH OR INSANITY OF THE OFFEROR OR OFFEREE
If the offeror dies or becomes insane before the acceptance the offer lapses
provided that the fact of his death or insanity comes to the knowledge of the
acceptor before acceptance. If the person to whom a proposal is made dies before
the acceptance of the proposal the proposal will come to an end. But if he dies after
proposal is accepted then his legal representative, will be responsible for the
contract.
EXAMPLE:
X had written t o the D requesting them to give credit to Y and guaranteeing
payment up to Rs.100. D gave credit to Y.X then died and D in ignorance of this fact
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of death continued the credit to Y. D sued Xs executors on the guarantee. It was

held that the defendants were liable.
(7) SUBSEQUENT ILLEGALITY
An offer lapses if it becomes illegal after it is made and before it is accepted.
An offer may also terminate, when it becomes illegal due to change in law, before its
acceptance by the offeree.
EXAMPLE:
An offer is made to sell 10 bags of rice for Rs.2000 and before it is accepted
a law prohibiting the sale of rice by private individuals is enacted the offer comes to
an end as sale would be illegal on the promulgation of the new law.
(8) DESTRUCTION OF SUBJECT MATTER
An offer lapses if the thing which is the subject matter of the offer destroys
before its acceptance by the other party.
EXAMPLE:
A offer to sell his horse to B the horse dies before the acceptance of offer by
B the offer terminates.
ACCEPTANCE:
DEFINITION:
Section 2(b) defines acceptance as follows:
Aacceptance is the assent given to a proposal and it has the effect of converting of
the proposal into promise. Without the acceptance of the proposal no agreement can
come into existence.
EXAMPLE:
A offer to sell his house to B for Rs.5 Lac B accepts the offer to purchase the
house for Rs.5 Lac. This is an acceptance.
ESSENTIALS OF A VALD ACCEPTANCE
The following are the different legal rules or essentials a valid acceptance:
(1) IT MUST BE GIVEN BY THE OFFEREE
An offer can be accepted only by the person to whom it is made. It cannot be
accepted by an other person without the consent of offeror. If anyone attempted to
accept it no contract with that person arises.
EXAMPLE:
A sold his business to B without disclosing the fact to his customers. J sent an
order for the supply of goods to A by name. B received the order and executed the
same. It was held that thee was no contract between B and J because J never made
any offer to B.
Page | 31

(2) IT MUST BE ABSOLUTE & UNCONDITIONAL

In order to convert the offer into an agreement the acceptance must be
absolute and unconditional. If the offeree imposes any condition in his acceptance it
is not a valid acceptance but a counter offer.
EXAMPLE:
A offers to sell his watch to B for Rs.500 and B replies that he can buy it only
for Rs.300 thee is a material variation in the acceptance. Therefore, there is no
agreement as the acceptance is not absolute and unconditional.
(3) IT MUST BE IN A PRESCRIBED MANNER
If the offeror in his offer has prescribed any particular manner of acceptance it must
be given according to all that particular manner. If no particular manner is
prescribed in the offer then acceptance should be made in a reasonable manner.
EXAMPLE:
A makes an offer to B and writes if you accept the offer send your
acceptance by telegram. B sends his acceptance by registered post. It is not a valid
acceptance. But a should inform B that it is rejected because it not in the prescribed
manner.
(4) IT MSUT BE COMMUNICATED TO THE OFFEROR
In order to form a contract, the acceptance must be communicated to the
offeror in a clear manner by the offeree or his authorized agent. Mere expression of
intention to accept an offer is not a valid acceptance.
EXAMPLE:
A proposes by letter to purchase Bs house. B expresses his intention to sell
it to A but does not send a reply to him. The house is sold to C despite Bs intention.
A has no legal remedy against B.
(5) IT MAY BE EXPRESS OR IMPLIED
When an acceptance is given by words spoken or written, it is called express
acceptance. When it is given by conduct, it is called implied acceptance. Sometimes
the proposal instead of being made to a definite person is made to the public.
EXAMPLE:
A wrote a letter to B to sell his cycle for Rs.2,000. B accepted his offer and
sent a letter of acceptance to A. It is an express acceptance.
CONSIDERATION
ESSENTIALS OF A VALID CONSIDERATION

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The essentials or legal rules of a valid consideration are as under:(1) IT MUST MOVE AT THE DESIRE OF THE PROMISOR
In order to constitute legal consideration the act or abstinence forming the
consideration for the promise must be done at the desire or request of the promisor.
EXAMPLES:
A saves Bs house from the fire without being asked to do so. A cannot
demand payment for his services because A performed this act voluntarily and not
at the desire of B.
(2) IT MAY MOVE FROM THE PROMISEEE OR ANY OTHER PERSON
The second essential of a valid consideration is that consideration may
move from the promisee or from a third person on his behalf. In other words the act
which is to constitute consideration may be done by the promise or any other
person.
EXAMPLE:
A, an old lady, gifted her property to her daughter R on the condition that
she should pay certain amount annually to As brother C. On the same day R,
entered into an agreement with her Uncle C to pay the amount. Afterwards she
refused to fulfill her promise. C filed a suit. It was held that C was entitled to recover
the amo0unt as the consideration on his behalf had moved from her sister A.
(3) IT MAY BE PAST, PRESENT OR FUTURE
It is clear from the definition of consideration that it may be past present or
future. It means that the consideration is an act, which has already been done at the
desire of the promisor, or in progress or is promised to be done in future.
(A) PAST CONSIDERATION:
When the consideration for a present promise was given before the date of
the promise it is called a past consideration. It is not a valid consideration.
EXAMPLE:
(a)
A has lot his pure and B a finder, delivers it to him. B cannot demand
payment for his services because of past consideration.
(b)
A teaches the son of B at Bs request in the month of January and in
February B promises to pay A sum of Rs.2,000 for his services. The services of A will
be past consideration.
(B) PRESENT CONSIDERATION:

Page | 33

When consideration is given simultaneously by one party to another at the

time of contract, it is called Present Consideration. The act constituting the
consideration is wholly or completely performed.
EXAMPLE:
A sells a book to B and B pay its price immediately it is a case of present
consideration.
(C) FUTURE CONSIDERATION:
When the consideration on both sides is to be given at a future date, it s
called future consideration or executory consideration. It consists of promises and
each promise is a consideration for the other.
EXAMPLE:
X promises to deliver certain goods to Y for Rs.1500 after a week upon Ys
promise to pay the agreed price at the time of delivery. The promise of X is
supported by promise of Y and the consideration is executory on both sides.

(4) IT NEED NOT BE ADEQUATE

It is not necessary that consideration should be adequate to the value of the
promise. The law only insists on the presence of consideration and not on its
adequacy. It is for the parties to the contract to consider the adequacy of
consideration and the courts are not concerned about it.
EXAMPLE:
A agrees to sell his car worth Rs.200,000 for Rs.50,000 only and his consent
is free. The agreement is valid contract.
(5) IT MUST BE REAL
It is necessary that consideration must be real and competent. Where
consideration is physically impossible illegal uncertain or unreal it is not real and
therefore shall not be a valid consideration.
(a) PHYSICALLY IMPOSSIBLE:
A promise to do something which is physically impossible.
EXAMPLE:
A, promise to put life in Bs dead brother on Bs promise to pay him Rs.1 Lac.
(b) LEGALLY IMPOSSIBLE:
A promise to do something which is illegal.
E.g. A promise to pay Rs.1 Lac to B on his promise to beat C.
(c) UNCERTAIN CONSIDERATION:

Page | 34

A promise to do something, which is too unclear and uncertain.

E.g. A employs B for a certain work and B promises to pay a
CAPACITY OF PARTIES
Section 10 of the Contract Act requires that the contracting parties must be
competent to contract. Section 11 lays down that every person is competent the
contact who is of the age of majority according to the law to which he is subject and
who is of sound mind and is not disqualified from contracting by any law to which he
is subject. According to section 11 the following persons are incompetent to
contract.
1.
2.
3.

Minors.
Persons of unsound mind.
Persons disqualified by law.

MINOR
AGE OF MAJORITY:
According to the Majority Act, 1875, a minor is a person who has not
completed 18 year of age. Where a guardian of minors person or property has been
appointed under the guardian and wards Act or court of wards ha taken charge of
minors property a minor will attain the age of majority after 21 years of age.
NATURE OF MINORS AGREEMENTS
The law regarding minors agreements may be explained as under:
(1) VOID AGREEMENT
According to Contract Act, a minors agreement is absolutely void because a
minor has no legal capacity to enter into a contract. The agreement is deemed as
void ab-initio a minor is not liable to perform any act, which he has promised to
perform under an agreement. He cannot be held liable because he does not possess
the capacity to judge what is good and what is bad for him. He cannot be compelled
to pay back the money received by him under the agreement.
EXAMPLES:
A. a minor sold his shop to B. The amount was paid to A but the sale deed
could not be registered as A was minor. On a suit by B, it was held that as, A was
minor, so agreement was void ab-initio and the amount was not recoverable.
(2) MINOR AND NECESSARIES
According to Section 68, a person who supplies necessaries to a minor or
anyone whom the minor is bound to support the supplier is entitled to recover
reasonable value of such goods from the property of a minor. If a minor owns no
Page | 35

property the supplier will lose the price of the price of necessaries. In nutshell minor
will not be personally liable it is his property only which is liable.
What is a necessary article depends upon the status and circumstances of
the particular minor. Luxury goods cannot be regarded as necessaries. Food and
clothing may be necessaries. The necessaries may include lodging expenses medical
expenses and loans taken up by minor for necessaries, etc. But if a minor takes a
loan for trade that will not be a necessary.
EXAMPLES:
(a) A supplies necessaries to B, a minor for his life. A is entitled to recover value
from Bs property.
(b) A supplied minor a coat with diamond buttons. A cannot recover the price of the
coat.
(3) AGREEMENT BY GUARDIAN OF BEHALF OF MINOR
A contract made, on behalf of minor, by his guardian is binding on the minor.
It can be enforced against the minor provided the contract is within the authority of
the guardian and it is for the benefit of the minor. The sole aim should be the benefit
and welfare of the minor.
EXAMPLE:
A contract of sale of immovable property by the guardian of minor, for the
minors benefit, may be specifically enforced by either party to the contract.
(4) MINOR AS AN AGENT
A minor can be an agent. If a minor works as an agent he can make his
principal responsible to third parties for his acts. But he cannot be held personally
liable for negligence or breach of duty.
EXAMPLE
A appoints M, a minor as his agent to sell his house. M makes an agreement
with B to sell As house. The agreement is valid.
FREE CONSENT
INTRODUCTION:
It is essential to the creation of a contract that both parties should agree to
the same thing in the same sense. In such situations, a person who ha made an
agreement should not be held responsible to it, because his consent is not real.
DEFINITION OF CONSENT:

Page | 36

According to section 10 free Consent of all the parties to an agreement is

one of the essential elements of a valid contract. Contract Act, defines the term
Consent as Two or more persons are said to consent when they agree upon the
same thing in the same sense.
DEFINITION OF FRE CONSENT:
Contract Act lays down that consent is said to be free when it is not caused
by coercion undue influence fraud misrepresentation, or mistake.
In other words when the consent is obtained by coercion, undue influence
misrepresentation or fraud thee is no free consent, and the contract is voidable at
the option of the party whose consent was not free.
The various reasons, which make consent un-free, are discussed one by one
in detail.
COERSION
DEFINITION:
Section 15 of the Contract Act, defines coercion as follows:
Coercion is the committing or threatening to commit, any act, forbidden by
the Pakistan Code, or the unlawful detaining to detain, any property, to the prejudice
of any person whatever, with the intention of causing any person to enter into an
agreement.
BURDEN OF PROOF:
The burden of proof that coercion was used lies on the party who to set aside
the contract on the ground of coercion.
UNDUE INFLUENCE
DEFINITION:
Section 16(1) of the act define undue influence as follows:
A contract is said to be induced by undue influence where the relations
subsisting between the parties such that one of the parties to a contract are in a
position to obtain an unfair advantage over the other.
Position t o dominate the will of the other is clarified as under. A person is
deemed to be in a position to dominate the will of another:
(a)
Where he hold a real or apparent authority over the other e.g. the
relationship between master and servant police office and the accused or;
(b)

Where he stands in a fiduciary relation to the other.

Page | 37

(c)
Where he makes a contract with a person whose mental capacity is
temporarily or permanently affected by reason of age, illness or mental or bodily
distress e.g. old illiterate persons etc.
(1) POSITION TO DOMINATE
In order to prove undue influence it is necessary that relations existing
between the parties should be such that one of them must be in a position to
dominate the will of the other. The person who occupies the superior position may
be in a position to obtain the consent of another party.
EXAMPLE:
U, a spiritual adviser induced his follower M to gift to him the whole of his
property to secure benefits to his soul in t he next world. Such consent is said to be
obtained by undue influence. U is in a position to dominate the will of another.
(2) UNFAIR ADVANTAGE
In order to prove undue influence it is also necessary that the party who is in
a dominating position must have used his position to obtain an unfair advantage
from the other.
EXAMPLE:
A, having advanced money to his son B, obtains from him, by misuse of
parental influence, a bond for a greater amount than the sum advanced. A obtains
unfair advantages.
DISTINCTION BETWEEN COERCION AND UNDUE INFLUENCE
The following are the points of distinction between the two.
Point of distinction

COERCION

UNDUE INFLUENCE

Nature

Coercion is a physical
threat either to property
or person
Threatening to do an
illegal act.

Undue influence is a mental

or moral threat

Coercion
may
be
exercised by Or Against
the
party
to
the
agreement it may also
be exercised by or
Against
some
third

Undue influence must be

exercised by or against the
party t the agreement.

Illegal & Unfair

Parties

In undue influence the act

may not be illegal, it may
only be unfair.

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party.
Relationship

For concern no specific

relationship
between
the parties is necessary

Effect

In coercion the contract

is voidable at the option
of aggrieved party.

For undue influence there

must
be
a
specific
relationship between the
parties
In undue influence the
contract is either voidable
or the court may set aside it
or enforce it in a modified
form.

FRAUD
The term fraud includes all acts committed by a party to induce the other
party to enter into a contract with an intention to deceive.
DEFINITION:
According to Section 17, Fraud means and includes any of the following
acts committed by a party to a contract or with his connivance, or by his agent, with
intent to deceive or to induce another party thereto or his agent, to enter into the
contract.
1.
The suggestion as a fact, of that which is not true, by one who does not
believe it to be true;
2.
The active concealment of a fact b one having knowledge or
belief of the fact;
3.

A promise made without any intention of performing it;

4.

Any other act fitted to deceive; and

5.
fraudulent.

Any such act or omission as the law specially declares to be

(1) SUGGESTION REGARDING FACTS

When a party to the contract makes a false statement intentionally, he
would be liable for fraud. But if a person honestly believes his statement to be true,
he cannot be held liable for fraud.
EXAMPLE:
(a)
A tells B known to be false that his factory produce 500 pound of butter
per day. On this suggestion, B agrees to buy the factory. A is guilty of fraud.
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(b)
A known that his watch is made in Pakistan. In order to sell his watch he
tells B that it is made in Japan. B buys the watch. A is guilty of fraud.
(2) ACTIVE CONCEALMENT OF FACT
When the party to be contract conceals material facts, essential to the
contract, which he is under an obligation to disclose to the other party before
entering into a contract he is guilty of fraud. According to sale of goods act, the
seller is bound to disclose to the buyer about the faults in the goods hi is selling.
(3) PROMISE IWTHOUT INTENTION OF PERFORMING
The initial intention into to perform the promise that is being made is a
necessary element to constitute fraud. Thus, where a person enters into a contract
and obtains possession of goods with the intention of not paying for them, he
commits fraud.
EXAMPLE:
(a)
X purchases certain good from Y on credit without any intention of
paying for them as he was under insolvent circumstances. X is guilty of fraud.
(b)
A knowing that he has no money, takes a dinner in a hotel with an
intention of slipping away. A is guilty of fraud.
(4) ANY ACT WITH INTENTION TO DECEIVE
This is general clause and includes all cases not falling within any of the
other clauses provided the act is fitted to deceive. A person can adopt different
methods to cheat the other party. It is therefore difficult to explain all the methods
under the definition of the fraud.
EXAMPLE:
A company issued prospectus containing statement which was true that
company has paid divided between 2004 and 2005. In fact in these years the
company suffered losses and paid dividend out of secret reserves.
(5) ANY ACT OR OMISSION
According to this section it is obligatory to disclose relevant facts to the other
party in certain cases. The seller is bound to disclose to the buyer all material
defects about the property i.e. property is mortgaged etc. If some one omits to
disclose facts he would be guilty of fraud.
A mere expression of opinion or commendatory expression is not fraud. For
example if some one says tat land is very fertile or our products are best in the
market.
(6) CONTRACTS OF MARRIAGE ENGAGEMENT
Every material fact must be disclosed by both parties to a contract of
marriage otherwise the other party is justified in breaking off the engagement.

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DISTINCTION BETWEEN FRAUD AND MISREPRESENTATIN

The following are the points of distinction between the two:
Points of distinction
FRAUD
MISREPRESENTATION
Intention

In case of fraud, the party

makes a False statement
with an intention to
deceive the other party

In case of
misrepresentation there is
no intention to deceive
the other party.

Belief

In case of fraud, the

person making the
suggestion does not
believe it to be true.

In case of
misrepresentation the
person making the
suggestion believes it to
be true.

Damages

In fraud, the aggrieved

part can Claim damages in
addition to the right of
avoiding the contract

In misrepresentation
entitles the party to avoid
contract and there can be
no suit for damages

Offence

Fraud may amount to an

offence of cheating. It is a
criminal act.

Misrepresentation does
not amount to a Offence
of cheating. It is not a
criminal act.

Truth

In case of fraud, the

aggrieved party can avoid
contract even if it had the
means of discover the
truth with Ordinary
diligence.

In case of
misrepresentation
aggrieved party cannot
avoid the count if it had
means to discover the
truth ordinary diligence.

.
PERFORMANCE OF CONTRACTS
Performance of Contract means the fulfillment of legal obligations created
under the contract by both the promisor and the promise. When a Contract is duly
performed by both the parties to the contract, the contract comes to an end. The
various rules regarding the performance of contracts are as under:
PERFORMANCE OF A SINGLE PROMISE
WHO CAN DEMAND PERFORMANCE?
Page | 41

It is only the promise who can demand performance of the contract. There is
a rule that a person cannot acquire right under a contract to which he is not a party.
A third party cannot demand performance of the contract even though it was made
for his benefit. In case of death of the promise, his legal representatives can demand
performance.
EXAMPLE:
(a) A promises B to pay C a sum of Rs.1000. The person who can demand
performance is B and not C. In case of death of the promise, his legal
representatives can demand performance.
(b) A draws a cheque for Rs.100 in favour of C the banker makes a mistake
regarding As balance and refuses payment. Bank is liable to A ad not to C because
C is not a party to contract.
Who May Perform?
(1) THE PROMISOR HIMSELF
As a general rule, a contract may be performed by the promisor, either
personally or through any other competent person.
But in case of contract involving personal skill, taste or diligence e.g. a
contract to paint a picture a contract of agency or of service; the promisor himself
must perform the contract of agency or of service; the promisor himself must
perform the contact. In case of death or disablement of a promisor, a contract will be
discharged and the other party would be freed form liability.
EXAMPLE:
A promise to paint a picture for B. A must perform the promise himself.
(2) THE PROMISOR OR HIS AGENT
Where personal skill is not necessary and the work could be done by any
one, the promisor or his representative may employ a competent person to perform
it. In case of a contract to sell goods, the promisor himself or his agent may perform
the contract.
EXAMPLE:
A promise B to sell goods. A may perform this promise himself or ask his
agent for performance.
(3) THE LEGAL REPRESENTATIVE
In case of death of the promisor before performance, the liability of
performance falls on his legal representatives of a deceased promisor are not bound

Page | 42

to perform the contract. But in case of a contract of impersonal nature the legal
representative are bound to perform the contract. They are not personally liable.
EXAMPLE:
(a) Promises to paint a picture for B on a certain day at a certain price. A dies before
the day. The contract cannot be performed. As heirs are not liable for the contract
as in this case the personal skill of A was involved.
(b) Promises to deliver goods to B on a certain day on payment of Rs.1000. A dies
before that day. As representatives are bound to deliver the goods to B and B is
bound to pay the settled sum of Rs.1000 to As representatives.
(4) THE THIRD PERSON
If a promise accepts performance of the promise from a third person, he
cannot afterwards enforce it against the promisor. Once the third party performs the
contract, and that is accepted by the promise there is end of the matter and the
promisor is then discharged.
EXAMPLE:
A promise accepted lesser amount from a third party in full satisfaction of his
claim; it was held that he could not enforce the promise against the promise against
the promisor for the remainder.
PERFORMANCE OF JOINT PROMISES
Joint promises may take any of the following shapes:
(1) Where several joint promisor make a promise with a single promise, e.g. A, B C
jointly promise to pay Rs.3,000 to D, or
(2) Where a single promisor makes a promise with several joint promises e.g. P
promise to pay Rs.3000 to Q and R jointly, or
(3)Where several joint promisor make a promise with several joint promises, e.g. A,
B and C jointly promise to pay Rs.3000 to P, Q and R jointly. The following are the
rules regarding performance in this case.
Who Can Demand Performance?
When a promise is made with several persons jointly, then, in the absence of
any agreement to the contrary all the promise jointly have a right to claim
compensation and a single promise cannot demand performance.
In case of death of any one promise, the legal representatives of deceased
persons jointly can demand performance with serving promises.

Page | 43

When all the promise are dead, the legal representatives of all jointly can
demand performance.
EXAMPLE:
A borrows Rs.5000 from B and C. A promises B and C jointly t return the sum
with interest B dies. Bs representative with C jointly can demand performance. On
the death of C the representative of B and C jointly can demand performance.
Who May Perform?
(1) ALL PROMISORS MUST JOINTLY FULFILL THE PROMISE
When two or more persons make a joint promise the, unless a contrary
intention appears from the contract, all such persons must jointly fulfill the promise.
When any one of he joint promisor dies his legal representative must fulfill the
promise, jointly with the surviving promisors. On the death of all the original
promisors the legal representatives of all of them jointly must fulfill the promise.
The above rule is of course subject to the following usual conditions:
(a)The contracts involving personal skill e.g. to paint a picture; come to an end on
the death of any of the joint promisor and the liability of performance does not fall
on the legal representatives.
(b)The legal representatives are not personally liable. Their liability is limited to the
assets inherited by them.
EXAMPLE:
A, B and C jointly promise to pay D Rs.3,000. D may compel either A or B or
C or all or any two of them to pay him Rs.3000.
(2) EACH PROMISOR MAY COMPEL FOR CONTRIBUTION
If one of the joint, Promisors is compelled to perform the whole contract, he
can ask for equal contribution to the others, unless a contrary intention appears
from the contract.
EXAMPLE:
If A is compelled to pay the entire amount of Rs.3000 he can recover from B
and C Rs.1000 each.
(3) SHARING OF LOSS BY DEFAULT IN CONTRIBUTION
If any one of the joint promisors makes a default in making contribution, if
any, the remaining joint promisors must bear the loss arising out of such default in
equal shares.

Page | 44

EXAMPLE
If A is compelled to pay the whole Rs.3000 and C is unable to pay anything. A
is entitled to receive Rs.1500 from B. If Cs estate is able to pay one half of his share,
A is entitled to receive Rs.500 from Cs estate and Rs.1250 form B.
(4) EFFECT OF RELEASE OF ONE JOINT PROMISOR
In case of a joint promise, if one of the joint promisors is released form his
liability by the promise, his liability to the promise ceases but his liability to the other
promisors to contribute does not cease.
EXAMPLE:
A, B and C are under a joint promise to pay Rs.3000 to X. X may release C
from liability, but A & B remain liable to pay to X. C is not released from the debt.
DISCHARGE OF CONTRACT
When the rights and obligations arising out of a contract come to an end, the
contract is said to be discharged or terminated. A contract may be discharged in any
of the following ways:
1.
2.
3.
4.
5.
6.

Discharge
Discharge
Discharge
Discharge
Discharge
Discharge

by
by
by
by
by
by

performance.
Agreement.
subsequent impossibility.
lapse of time.
operation of law.
breach of contract.

1. DISCHARGE BY PERFORMANCE:
Performance is the natural mode of discharge. When the parties to a
contract perform their shares of the promises, the contract is discharged. If only one
of the several parties performs the promise, he alone is discharged. Performance
may be: (a) actual performance; or (b) offer of performance or tender.
2. DISCHARGE BY AGREEMENT:
A contract can also be discharged by the fresh agreement between the
same parties. A contract may be terminated by agreement in any of the following
ways:
(a) NOVATION
Novation of contract means replacement of an existing contract by another
contract. In novation the parties may change. If the parties are not changed then the
material terms of the contract must be altered in the new contract because a mere
variation of some of the terms of a contract is not novation but alteration.
EXAMPLE
Page | 45

A is indebted to B and B to C. By mutual agreement Bs debt to C and Bs

loan to. A are cancelled and G accepts A as his debtor. There is novation involving
change of parties.
(b) ALTERATION
Alteration of a contract takes place when one or more of the terms of the
contract are changed. If a material alteration in a written contract is made with the
consent of all the parties the original contract is discharged by alteration and a new
contract takes its place. An alteration may be a change in the amount of money, the
rate of interest, or the names of the parties. Alteration results in the discharge of the
original contract.
The difference between novation and alteration is that in case of novation
there may be a change of parties but in case of alteration parties remain the same
and only the term o the contract are changed.
EXAMPLE
A agrees to supply B. 1000 mounds of salt at Rs.50 a mound within 3 months
from date. Later on, A and B alter the agreement in the following way: A agrees to
supply 800 mounds of salt at the same rate within 2 months instead of three. The
latter agreement puts an end to the former.
(c) RESCISSION:
Means cancellation of contract by mutual consent. A contract may be
cancelled by agreement between the parties at any time before it is discharged by
performance. The cancellation of agreement releases the parties form their
obligation arising out of the contract.
EXAMPLE:
A promises to deliver certain goods to B on a certain date. Before the date of
performance, A and B mutually agree that the contract will not be performed. The
parties have cancelled the contract.
(d) REMISSION:
Remission means the acceptance of lesser sum than what was due from
promisor. According to the section 63, a person who has a right to demand the
performance of a contract may:
(i) Remit or give up the whole or part of a debt.
(ii) Extend the time for performance.
Where a promise remits a part of the debt and gives a discharge for the whole debt
on receiving a smaller amount, such discharge is valid.
EXAMPLE:
Page | 46

A owes B Rs.5,000. A pays to B and B accepts in full satisfaction Rs.2000.

The whole debt is discharged.
3. DISCHARGE BY SUBSEQUENT IMPOSSIBILITY:
INITIAL IMPOSSIBILITY:
According to section 56, An agreement to do impossible act is void abinitio. It means agreement which is obviously impossible cannot be binding, e.g., an
agreement to discover treasure by magic is void agreement.
SUBSEQUENT IMPOSSIBILITY:
Sometimes, a contract capable to be performed after formation becomes
impossible or unlawful and as a result void.
(a) DESTRUCTION OF SUBJECT MATTER
When the parties make a contract for a particular subject matter, the
contract is discharged if the subject matter is destroyed without the fault of the
promisor or promise.
EXAMPLE:
A, let out a music hall to B for a number of concerts on certain days. The hall
was destroyed by fire before the date of first concert. The plaintiff sued the
defendant for damages. It was held that the contract has become void and the
defendant was not liable.
(c) DEAT OR PERSONAL IN CAPACITY
Where the performance of a contract depends upon the personal skill, or
qualification or the existence of a given person, the contract is discharged on the
illness or incapacity or the death of that person.
In other words the death or illness of a particular person whose action is
necessary for the promised performance discharges the duty to render that
performance.
EXAMPLE:
(a)A and B contract to marry each other. Before the time fixed for the marriage, A
dies. The contract becomes void.
(b) An artist undertook to perform at a concert for a certain price, but before he
could do so, he met with an accident and lost his right arm. Held the artist was
discharged due to disablement.

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(d) CHANGE OF LAW

Contracts, which are lawful when made but become unlawful later due to
change in law, become impossible to be performed. A subsequent change in law
may render the contract illegal and in such cases the contract is deemed
discharged. Impossibility created by law is valid excuse for non-performance.
EXAMPLE:
A sold to B 100 bags of wheat at Rs.150 per bag. But before delivery the
government banned the sale and purchase of wheat by private traders. The contract
was discharged by subsequent change in law.
(e) DECLARATION OF WAR
A contract entered into with an alien enemy during war is illegal and void
abinitio. Contract entered into before the commencement of war is suspended
during the war. However, such contracts may be revived after the war is over if the
nature of the contract so permits.
EXAMPLE:
A contracts to take in cargo for B at a foreign port. As Govt. afterwards
declared war against the country in which the port is situated. The contract becomes
void.
(4) DISCHARGE BY LAPSE OF TIME:
A contract is discharged by lapse of time. The Limitation Act, 1908 laws down
that a contract should be performed within a specified period. If the contract is not
performed and no legal action is taken by the promise within the period of limitation,
he is deprived of his remedy at law, the contract is terminated in such a case.
EXAMPLE:
A owes Rs.5000 to B. The last date for the repayment of the loan has expired
and B does not file a suit against A for three years. B loses the rights to recover the
money back.
(5) DISCHARGE BY OPERATION OF LAW:
A contract terminates by operation of law in the following cases:
(a) INSOLVENCY
The insolvency Act provides for discharge of contracts under particular
circumstances. Where the court declares a person as insolvent, the rights and duties
of such person are transferred to the officer of court, know as Official Receiver, After
the order of the court such person is discharge from his liabilities incurred before his
insolvency.
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EXAMPLE
A promises to sell his car to B for Rs.2 lac. Before the performance of the
contract A is declared insolvent by court. The contract between A, & B is discharged.
(b) MERGER
Merger takes place when an inferior right available to a party merges into a
superior right available to the same party under, some other contract. As a result of
merger the former contract stands discharged automatically.
EXAMPLE
(a) Where a man holds property under a contract of tenancy buys the property. His
rights as a tenant are merged into the rights of ownership and the contract of
tenancy stands discharged by operation of law.
(b)Where a part-lime lecturer is made full time lecturer, the contract of part time,
lectureship is discharged by merger.
(c) UNAUTHORIZED MATERIAL ALTERATION
Where a party to the contract makes any material alteration in the contract,
without the consent of the other party, the contract can be avoided by the other
Party. A material alteration is one, which changes the legal identity or character of
the contract or the rights and duties of the parties to the contract. An alteration
which is not material or which is authorized will not affect the validity of the
contract. An alteration even by a stranger will entitle the other party to avoid the
contract, but where the alteration is unintentional, contract cannot be avoided.
EXAMPLE:
A executes a promissory note in favour of B for Rs.3,000. B by alteration
exceeds the amount from Rs.3,000 to 30,000. A may refuse to pay Rs.3,000.
6. DISCHARGE BY BREACH OF CONTRACT:
Ac contract must be performed according to its terms. But where the
Promisor fails to perform the contract according to the terms of the contract, thee is
a breach of contract by him. Breach of contract may be of two kinds;
1. Actual Breach
2. Anticipatory breach
(1)
Actual Breach
It occurs when a party fails to perform a contract, when performance is due. But, if a
party, who has failed to perform the contract at the appointed time, subsequently
expresses his willingness to perform, he can do so after paying compensation, if
time is not essence of contract.
EXAMPLE:

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A degrees t o deliver 5 bags of wheat on 1st March He does not deliver the
wheat on the day. There is a actual breach of contract.
(2)

Anticipatory Breach

An anticipatory breach of contract occurs before the time fixed for

performance has arrived. It may happen in two ways.
(i) Express Breach
In this case a party to the contract communicates t the other party, his
intention not to perform the contract, before the due date of performance has
arrived.
EXAMPLE:
A contracts with B to supply 100 bags to wheat for Rs.15,000 on 1st March.
On 15th February, A informs B that he will not be able to supply the wheat. Thee is
express rejection of contract.
(ii) Implied Breach
In this case a party to the contract does an act, which makes the
performance of the contract impossible.
EXAMPLE:
A promises to sell his horse to B on 1st June and before that date he sells the
same horse to C.
INDEMNITY AND GUARANTEE
CONTRACT OF INDEMINITY
DEFINITION AND NATURE:
A contract by which one party promises to save the other from loss caused
to him by the conduct of the promisor himself or by the conduct of and other person,
is called a contract of indemnity.
In other words a contract where one person promise to compensate the
other from the loss, which may arise due to the conduct of the promisor himself or
any other person, is called a contract of indemnity.
PARTIES:
There are two parties to a contract of indemnity.
1. INDEMNIFIER:

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The person who promises to make good the loss is called the indemnifier
(promisor).
2. INDEMNITY HOLDER:
The person whose loss is to be made good is called the indemnity holder or
indemnified (promise).
EXAMPLE:
(a)A parked his scooter at the college scooter stands. He lost his token given by the
contractor. The contractor refuses to return the scooter to A unless he (A) gives him
an indemnity bond against any loss which he may suffer if any other person claims
the scooter from the contractor.
(b)A and B went to a shop. A says to the shopkeeper. Let B have the goods I shall
see you are paid It is contract of indemnity.
RIGHTS OF INDEMNITY HOLDER:
The following are the rights of indemnity holder against the indemnifier.
1. He can recover all damages which he may be compelled to pay in respect of any
suit filed against him.
2. He can recover expenses in respect of any suit filed by him with the authority of
indemnifier.
3. He can recover all expenses which he may have paid under the terms of any
compromise of any such, provided the compromise was made with the consent of
indemnifier.
RIGHT OF INDEMNIFIER:
It is a well known principle of law that where one person has agreed to
indemnify another, he will on making good the loss, be entitled to all the ways and
means by which the person indemnified might have protected himself against or
reimbursed himself for the loss.
CONTRACT OF GUARANTEE
DEFINITION:
A contract of guarantee is a contract to perform the promise or discharge the
liability of a third person in case of his default.
A contract of guarantee is made with the object of enabling a person to get a
loan or goods on credit or an employment etc. It may be either oral or written. It is a
promise to pay a debt owing by a third person in case the later does not pay.

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PARTIES:
There are three parties to a contract of guarantee:
1. Surety:
The person who gives the guarantee is called the surety or guarantor;
2. Creditor:
The person to whom the guarantee is given is called he creditor.
3. Principal debtor:
The person for whom the guarantee is given is called the principal debtor.
EXAMPLE:
(a) A requests B to lend Rs.5 lack to C and guarantees that if C fails to pay, he will
himself pay to B, there is a contract of guarantee.
(b) A sells and delivers goods to B. C afterwards, without consideration, agrees to
pay for them in default of B. The agreement is void.
WRITING NOT NECESSARY:
According to section 126, it is not necessary that contract of guarantee must
be in writing. It may be either oral or written. It may be express or implied from the
conduct of parties.
EXAMPLE:
A sells and delivers goods to B on the verbal guarantee of C. It is valid
guarantee.
NATURE AND EXTENT OF SURETYS LIABILITY
EXTENT OF SURETYS LIABILITY
Section 128 of the contract Act 1872 provides that the liability of the surety
is co-extensive with that of the principle debtor, unless it is otherwise provided by
the contract. The phrase co-extensive with that of principle debtor shows the
quantum of the suretys liability. The quantum of obligation of surety is the general it
will be neither more nor less; the suretys liability can be made less than that of the
principle debtor but never greater with special contract.
EXAMPLE:
A guarantee to B the payment of a bill of exchange by C, the acceptor. The
bill is dishonored by C. A is liable not only for the amount of the bill.
1. SPECIFIC GUARANTEE:
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The guarantee which is given for a single debt or transaction is called

specific or ordinary guarantee. It comes to an end as soon as the liability under the
transaction ends.
EXAMPLE:
G guarantees K for the payment of 5 bags of wheat purchased C.C makes
payment. Later on C again purchases 5 bags of wheat. C did not pay for that. K used
g. Held, Gs guarantee is specific guarantee and G is not liable.
2. CONTINUING GUARANTEE:
According to section 129, a guarantee, which extends to a series of
transaction, is called continuing guarantee. In other words a guarantee which covers
a number of transactions over a period of time is called continuing guarantee. It is
just like a standing offer, which is accepted by the creditor every time a subsequent
transaction take lace. Being a sanding offer it may be revoked at any time by the
surety as to further transactions.
EXAMPLE:
(a) A guarantee to C for Bs credit purchases with a running balance of account not
exceeding Rs.5,000. this is a continuing guarantee.
(b) A guarantees to C for Bs purchases from C for six months to the extent of
Rs.5,000. this is a continuing guarantee.
DISTINCTION BETWEEN INDEMNITY AND GUARANTEE
The following are the points of distinction between the two:
Points of Distinction

INDEMNITY

GUARANTEE

1.

In a contract of
Indemnity, three are
two Parties the
indemnifier and the
indemnity holder

In a contract of
guarantee, there are
three parties. The
creditor, the principal
debtor, and the surety.

In indemnity there is
only one contract
between the
indemnifier and the
indemnified.

In guarantee, there are

three contracts one
between creditors, and
the principal debtor,
second between the
creditor and the surety,
and the third between
the surety and the
principal debtor.

Number of Parties

2.
Number of
Contract

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3.
Number of
Liability

The liability of
indemnifier is primary
and independent.

The liability of surety is

secondary. It means
that surety is liable
only if the principal
debtor fails to perform
his obligations.

4.

Request

In the contract of
indemnity, the
indemnifier acts
without the request of
the debtor.

5.

Purpose

A contract of indemnity
is for the
reimbursement of loss.

In a contract of
guarantee the liability
already exists and its
performance is
guarantee by the
surety
A contract of guarantee
is for the security of a
debt.

A surety has the following rights:

1. Against the creditor.
2. Against the principle debtor.
3. Against the co-sureties.
1. SURETYS RIGHTS AGAINST THE CREDITOR:
(a) RIGHT TO SECURITIES:
According to Section 141, the surety, at the time of payment, can demand
the securities, which the creditor has received from the principal debtor at the time
of creation of contract.
Whether the surety knows of the existence of such securities or not is immaterial. If
creditor by negligence loses any security held by him, the surety is discharged to
that extent from the payment of guaranteed sum. But if the security is lost due to
unavoidable act, the surety would not be discharged.
Surety can recover the securities only after making full payment. He cannot
claim the benefit of a part of the securities if he has paid a part of the debt.
EXAMPLE:
(a) C advance B Rs.2000 on the guarantee of A, C has also a further security for
Rs.2000 by a pledge of Bs furniture. C cancels the pledge. B becomes insolvent and
C sues A on his guarantee. A is discharged from liability to the amount of the value
of the furniture.
(b Cvs advance to B is secured by a decree. He receives also a guarantee for the
advance from A.C afterwards takes Bs goods in execution under the decree and
then without the knowledge of A withdraws the execution. A is discharged.
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(c) A as surety for B makes a bond jointly with B to C to secure a loan from C to B.
Afterwards C obtain from B a further security for the same debt. Subsequently C
gives up the further security. A is not discharged.
(b) RIGHT TO CLAIM SET-OFF, IF ANY:
The surety is also entitled to the benefit of any set-off or counter claim,
which the principal debtor has against creditor.
EXAMPLES:
A, the creditor is in possession of his principal debtor, Bs car for which B
could have counter-claimed. C, the surety of B can claim set-off in respect of that car
against B.
2. SURETYS RIGHT AGAINST THE PRINCIPAL DEBTOR:
The surety enjoys the following rights against the principal debtor.
A. Right of Subrogation:
According to Section 140 when the surety has paid the guaranteed debt on
default of the principal debtor, the surety is entitled to all the remedies, which are
available to creditor against debtor.
EXAMPLE:
A direct of a company guaranteed and paid the rent due from the company
before the date of liquidation. It was held that he was entitled to stand in the place
of the creditor and use all remedies in the name of the creditor.
B. RIGHT TO INDEMNITY:
In every contract of guarantee there is an implied promise by the principle
debtor to indemnity the surety and the surety is entitled to recover from the
principal debtor what eve sum he has rightfully paid under the guarantee but not
sums which he had paid wrongfully.
In other words the surety can recover from the principal debtor, the amount
which he has rightfully paid to the creditor.
EXAMPLE:
B is indebted to C and A is surety for the debt. C demands payment from A
and on his refusal sues him for the amount. A defends the unit, having reasonable
grounds for doing so but is compelled to pay the amount of debt with costs. He can
recover from B the amount paid by him for costs, as well as the principal debt.
3. SURETYS RIGHT AGAINST CO-SURETIES:
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Where a debt is guaranteed by more than one sureties, they are called co
sureties. In such a case all the sureties are liable to make the payment to the
creditor according to the agreement among them. If there is no agreement and one
of the co-sureties is compelled to pay the entire debt, he has a right to contribution
from the so-sureties. Sections 146 and 147 provide the rules in connection.
(a) SIMILAR AMOUNT:
Where three are sureties for the same debt and the principal debtor has
committed a default each party is liable to contribute equally to the extent of the
default.
EXAMPLE:
A, B and C are sureties to D for the sum of Rs.3000 let to E. E makes default
in payment. A, B and C are liable as between themselves to pay Rs.1000 each. If C is
insolvent and could pay only Rs.500 then A and B will contribute equally to make
good his loss.
(b) DIFFERENT AMOUNT:
Where there are sureties for the same debt for different sums, they are
bound to contribute equally subject to the limit fixed by their guarantee. They will
not contribute proportionately.
EXAMPLE:
(a) A, B and C as sureties for D guarantee for different sums. A Rs.10,000 B
Rs.20,000 C Rs.40,000 D makes default in payment to the extent of RS.30,000
liability of A, B and C is Rs.10,000 each.
(b) If D makes default to the extent of Rs.40,000 then liability shall be used as of A
Rs.10,000 B and C will pay equal share of the balance of 15,000 each.
(c)If D makes default to the extent of Rs.70,000 then A, B and C will pay full amount
of guarantee.
DISCHARGE OF SURETY FROM LIABILITY:
A surety is said to be discharged from liability when his liability comes to an
end. I can be revoked by notice of the liability has not been incurred. But a
continuing guarantee may at any time, be revoked by the surety as to future
transaction by giving a notice to the creditor. The liability of surety comes to an end
regarding the future transactions after the surety has served the notice of
revocation. The surety remains liable for transaction entered into prior to the notice.
EXAMPLE:

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A lends B a certain sum on the guarantee of C. C cannot revoke the

guarantee. But if A has not yet given the sum to B, C may revoke the
guarantee by giving a notice.
1. DEATH OF SURETY:
In specific guarantee the surety is not discharged form his liability on his
death if the liability has already occurred. But in case of a continuing guarantee, the
death of surety discharges him from liability regarding the transactions after his
death unless there is a contract to the contrary. The decreased suretys estate will
not be liable for future transactions entered into after the death of the surety even if
the creditor has not notice for the death.
EXAMPLE:
A sells goods to B for Rs. 1 lac C guarantees payment. A delivers goods cost
Rs.50,000. Afterwards C dies Cs property is liable up to Rs.50,000 only.
2. CHANGE IN TERMS OF CONTRACT:
According to Section 133, when any change is made in the terms of the
contract by the principal debtor and the creditor without the suretys consent, the
liability of the surety terminates as to future transactions.
3. RELEASE OR DISCHARGE OF PRINCIPAL DEBTOR:
According to section 134 the following two ways discharge the surety from
liability:
EXAMPLE:
M contracts to lend N Rs.1 lac on 1 March. S guarantees payment. M pays
the amount on 1 January. S is discharged from his liability, as the terms of contract
have been changed.
4. RELEASE FOR DISCHARGE OF PRINCIPAL DEBTOR:
According to section 134 the following two ways discharge the surety from
liability:
The surety is discharged by any contract between the creditor and the principal
debtor, by which the principal debtor is a released. Any release of the principal
debtor is a release of the surety also.
The surety is also discharged by any act or omission of the creditor, the legal
consequence of which is the discharge of the principal debtor.
EXAMPLE:

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(a)A contracts to build a house for B. C guarantees for the performance of the
contract by A if B release A from the performances of the contract, the liability of C
as a surety shall come to an end.
(b A contract with B to build house for B within a stipulated time. B is liable to supply
the necessary timber. C guarantees As performance of the contract. B fails to supply
the timber. C is discharged from his surety ship.
5. ARRANGEMENT WITHOUT SURETYS CONSENT:
According to Section 135,where the creditor without the consent of surety
makes an arrangement with the principal debtor for composition or promises to give
him time or no to sue him, the surety will be discharged. Section 136 provides that
where a contract to give time to the principal debtor is made by the creditor with a
third person and not with the principal debtor the surety is not discharged.
EXAMPLE:
P purchased a motor car from C under the hire purchase agreement on
guarantee of S for the due performance of the agreement. C for valuable
consideration gives P further time for payment of one of the installments. Held the
giving of time to P discharged S from his liability.
6. CREDITORS ACT OR OMISSION:
Section 139 provides that if the creditor does any act which is inconsistent
with the right of the surety or omits to do any act which his duty to the surety
requires him to do and the eventual remedy of the surety himself against the
principal debtor is thereby impaired the surety is discharged.
It is the duty of the creditor to do every act necessary for the protection of
the rights of the surety and if he fails in this duty, the surety is discharged.
EXAMPLE:
A employs B as a cashier on the guarantee of M. A promise to check up the
cash of B at least once a month. A does not check the cash as promised. B commits
fraud. M is not liable to A.

2.2 CONTRACT OF SALES OF GOODS

2.2.1 SALE OF GOODS ACT 1930:
The law relating to sale of goods is contained in the Sale of Goods Act, 1930.
This law came into force on 1 July 1930. The Act contains 66 Sections and extends to
the whole of Pakistan.
It is like any other contract. In order to be valid, it must also possess all the
essentials of a valid contract.
DEFINITION OF CONTRACT OF SALE:

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Section 4(1) of the Sale of Goods Act defines a contract of sale of goods as
a contract whereby the seller transfers or agrees to transfer the property in goods
to the buyer for a price.
In other words, a contract to transfer the ownership of goods from the seller
to the buyer is known as contract of sale.
2.2.2 ESSENTIALS OF A CONTRACT OF SALE:
The above definition provides the following essentials of a contract of sale of
goods.
1. BUYERS AND SELLER:
There should be two parties to a contract of sale, i.e. a buyer and a seller.
One person cannot act as a buyer and seller because a person cannot buy his own
goods and similarly a person cannot sell his goods to himself.
EXAMPLES
A sells his computer to B for Rs.40,000. A is a seller and B, is a buyer.
2. TRANSFER OF PROPERTY:
Transfer of property is the second essential of contract of sale. Property here
means ownership. A mere transfer of possession of the goods cannot be termed as
sale.
EXAMPLE
A sells his A.C. to B for Rs.20,000. The ownership and the possession of the
A.C. will transfer from A to B.
3. GOODS:
The subject matter of the contract of sale must be goods. According to
section 2(7), goods means every kind of movable property other than actionable
claims and money; and includes electricity, water, gas, stock and shares, growing
crops, grass and thing attached to our forming part of the land which are agreed to
be severed before sale or under the contract of sale.
EXAMPLE:
A sells his car to M for Rs.3 Lac. It is a contract of sale because here the
subject matter i.e. a car is a moveable thing.
4. PRICE
According to section 2(10), the consideration in a contract of sale must be
the price. When goods are sold or exchanged for other goods, the transaction is

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barter, and not a contract of sale of goods. If goods are sold partly for goods and
partlyfor money, the contract is sale.
EXAMPLES:
(i) A sells his chair to B for Rs.2,000. It is contract of sale.
(ii) X sells his horse to B against Bs promise to give 100 mounds of wheat. It is not a
contract of sale.
5. SALE AND AGREEMENT TO SELL
The terms contract of sale includes, both sale and an agreement to sell.
Where under a contract of sale the property (ownership) in the goods is transferred
from the seller to the buyer, at the time of making the contract the contract is called
as sale. Where under a contract of sale the transfer of ownership in the goods is to
take place at a future time or subject to some condition thereafter to be fulfilled, the
contract is called an agreement to sell.
EXAMPLES:
(i)A buys a book from S and pays the whole price on a counter. It is a sale.
(ii) A agree to buy Bs car for Rs.200,000, if his mechanic approves the car. It is an
agreement to sell.
6. OTHER FORMALITIES:
There is no specific procedure to make a contract. Apart from the above, all
other essentials of a valid contract like capacity of the parties, free consent, legality
of object etc. should also be there in a contract of sale. It may be oral or in writing.
EXAMPLE:
A verbally promises to sell his radio to B for Rs.2,000. It is a contract of sale
if both the parties are competent to contract and have given their consent freely,
etc.

DISTINCTION BETWEEN SALE & AGREEMENT TO SELL

The following are the points of the distinction between the two:SALE
1. Transfer of Property
In a sale, the ownership in goods
passes to the buyer immediately at
the time of making the contract.

AGREEMENT TO SELL
In an agreement to sell, there is no
transfer of ownership to the buyer at
the time of the contract. The
ownership transfers at a certain date
or subject to fulfillment of some
condition.
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2.
Type of Goods
A sale can only be in case of existing
and specific goods.
3.
Nature of Rights
In sale, the buyer becomes and so
gets the rights against the goods.
Moreover, if the seller refuses to
deliver the goods, the buyer may sue
for recovery of goods.
4.
Right of Resale
In a sale, he ownership is with the
buyer and so the seller cannot resell
the goods, even though the goods are
in the possession of seller.
5.
Nature of Contract
A sale is an executed contract,
because the ownership has passed
from seller to the buyer

A agreement to sell is mostly in case

of future and contingent goods.
In an agreement to sell, the buyer
cannot get the rights against the
goods. He gets the rights against the
seller only so he can sue for damages
for breach of agreement and not for
recovery of goods
In an agreement to sell, the ownership
in goods remains with the seller and
so he can resell those goods to the
new buyer. The original buyer can use
for breach of contract only and the
subsequent buyer gets at good title to
the goods.
An agreement to sell is an executory
contract, as the property has to pass
in future.

2.2.3 KINDS OF GOODS

According to Sale of Good Acts the goods may be classified into following
kinds.
Existing Goods.
Specific Goods.
Future Goods.
Contingent Goods.
1. EXISTING GOODS:
The goods which are owned and possessed by the seller, at the time of
entering the contract of sale are called existing goods. In other words the goods
which are physically in existence and in sellers ownership or possession, at the time
of entering the contract of sale are called existing goods.
2. SPECIFIC GOODS:
According to section 2(14), the goods which are identified and agreed upon at the
time of contract of sale are called Specific goods. Where there is a contract for
specific goods, the seller can complete the contract only by delivering tie goods
agreed upon.
EXAMPLE:
(i)A agrees to sell to B a particular radio bearing a distinctive number; there is a
contract of sale of Specific goods.

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(ii)X owns a number of cows, and promises to sell one of them; the contract is not
for specific goods. But if the cow to be sold has been singled out, the contract is for
specific goods.
3. FUTURE GOODS:
According to section 2(6), the goods which a seller does not possess at the
time of contract but which will be manufactured, produced or acquired by the seller
after making the contract of sale are called future goods. As a rule, a person may
make a contract about the goods of which he is not the owner. He hopes to acquire
such goods. He can just make an agreement sell about future goods.
The reason is that he cannot transfer the ownership of the goods before the
goods come into existence. Thee can be no sale of future goods because the
ownership cannot pass on to the buyer at the time of contract.
EXAMPLE:
X agrees to sell to Y all the mangoes, which will be produced in his garden
next year. It is a contract of future goods.
4. CONTINGENT GOODS:
According to section 6(2), the goods which are also not in existence at the
time of contract of sale are called contingent goods. These are like future goods. In
this case, the acquisition by the seller depends upon an uncertain contingency. In
case of contract of contingent goods, the ownership does not pass to the buyer at
the time of contract, like future goods.
A contract of sale of contingent goods is enforceable only if the event on the
happening of which the performance of the contract is dependent happens,
otherwise the contract becomes void.
EXAMPLE:
A agrees to sell to B a specific there painting provided the is able to purchase
it from its present owner. This is a contract for the sale of contingent goods.
FIXATION OF PRICE:
The money consideration for a sale of goods is known as price. According
to Section 2(10) Price is an essential element in every contract of sale of goods. A
valid sale cannot take place without a price. The price should be paid or promised to
be paid in legal tender money in Pakistan, i.e., unless otherwise agreed.
MODES OF FIXING THE PRICE:
1. PRICE:

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This is the most usual mode of fixing the price. The parties are free to fix any
price. The price may be stated in a contract by the parties to the contract. The price
should be definite, if an alternative price is fixed, the agreement is void.
2. AGREED MANNER:
There may be an agreement among the parties that the buyer would pay
the market price prevailing on a particular date or it may be fixed by a third party,
i.e. valuer appointed by the consent of parties.
Remember that if no rice is fixed the contract is not void for uncertainty
because in that case law usually allows market price prevailing on the date of supply
of goods.
3. COURSE OF DEALING:
If the buyer has been previously paying to a particular seller the price
prevailing on the date of placing the order, the, it is clear that the buyer will pay the
price prevailing on the date, of any subsequent order.
4. REASONABLE PRICE:
If the price is not capable of being fixed in accordance with any of the above
modes, the buyer is bound to pay to the seller a reasonable price. What is a
reasonable price is a question of fact and depends upon the circumstances of each
case. Generally, the market price is considered as reasonable price.
2.2.4 CONDITION AND WARRANTIES
A contract of sale of goods contains various terms or stipulations regarding
the quality of the goods, the price, the mode of payment, the delivery of goods the
time of performance and the place where the goods are to be sent etc.
Some of the re stipulations may be major terms while others may be minor
terms. In law of sales major, terms are called conditions and minor terms are called
warranties.
DEFINITION OF CONDITION:
According to section 12(2) a condition is a stipulation essential to the main
purpose of the contract the breach of which gives the aggrieved party a right to
repudiate the contract itself.
In other words, a condition is essential for the main purpose of the contract.
It is regarded as the very basis of the contract. Its non-fulfillment causes irreparable
loss to the aggrieved party. In case of violation of condition the aggrieved party gets
a right to cancel the contract. The party can refuse to accept the goods. If the
injured party has already paid the price, he can recover it.
EXAMPLE:

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A contract to deliver 100 Pak fan to B. But A delivers Climax fans. It is breach
of condition on the part of A. B is entitled to reject the fans or accept them and claim
damages.
DEFINITION OF WARRANTY:
According to Section 12(3) a warranty is a stipulation collectral to the main
purpose of the contract the breach of which gives the aggrieved party a right to
use for damages only, and not to avoid the contract itself.
In other words a warrantee is not essential for the main purpose of the
contract. It is subsidiary or collectral to the main purpose of the contract. It is not
regarded as the basis of the contract.
It is of secondary importance. The breach of warranty gives the injured party
a right to recover damages only. It does not give right to reject the goods and treats
the contract as repudiated.
There is no hard and fast rule as to know which stipulation is a condition and
which one is a warranty. The only suitable method to distinguish between these two
terms is that if the stipulation is such that its breach would be very harmful for the
rights of the aggrieved party, then such a stipulation is a condition and where it is
not so the stipulation is only a warranty.
EXAMPLE:
A promise to deliver to B 100 washing machines at his showroom. But A
delivers them at the home. It is a breach of warranty on the part of A. B cannot
reject them. He can claim damages only.
DISTINCTION BETWEEN CONDITION AND WARRANTY
The following are the points of distinction between a condition and
a warranty:
CONDITION
1.
Value
A condition is a stipulation, which
is Essential to the main purpose
of the Contract.
2.
Basis
It forms the basis of a contract
and goes direct to the root of the
contract.
3.
Breach
The breach of a condition gives
the aggrieved party the right to
reject the contract.
4.
Treatment
A breach of condition may be

WARRANTY
A warranty is a stipulation, which
is not essential to the main
purpose of Contract.
It does not form the basis of a
contract and does not go direct to
the root of the contract
The breach of warranty does not
give aggrieved party a right to
reject the contact.
A breach of warranty cannot be
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treated as a breach of warranty.

5.
Option
In case of breach of condition, the
Aggrieved party has an option to
Claim damages instead of
rejecting.

treated as a breach of condition.

In case of breach of warranty the
aggrieved party has no option to
reject the contract. He can only
claim damages.

EXPRESS AND IMPLIED CONDITIONS AND WARRANTIES

Conditions and warranties may be express or implied. The conditions and
warranties which are included in clear words the contracts are called express. The
conditions and warranties which are not included in the contract but the law
presume their existence in the contract is called implied.
IMPLIED CONDITIONS:
Unless otherwise agreed, the law includes the following conditions into a
contract of sale of goods.
1. CONDITIONS AS TO TITLE:
In a contract of sale, there is an implied condition on the part of the seller
that in the case of sale he has a right to sell goods and that in the case of
agreement to sell; he will have a right to sell the goods at the time when the
property is to pass. The seller has the right to sell the goods as the owner or as
owners agent.
As a result of this condition if the sellers title proves to be defective the
buyer can reject the goods and the recover his price. In this case the buyer has no
option to treat the breach of condition as breach of warranty and accept the goods
and use the seller for damages He must return the goods to the true owner. He can
recover the price form seller because the consideration has failed.
EXAMPLE:
(a) A purchased a car from B. After few months the car is seized by the police as a
stolen one. A can recover the price from B.
(b)R purchased a motor from D and used for several months. D had no title to the
car and, therefore, R was compelled to return the car to the true owner. R used D to
recover the price, which he had already paid. He was held entitled to recover the
whole of the price paid by him.
2. SALE BY DESCRIPTION:
Where there is a contract of sale of goods by description; there is an implied
condition that the goods shall correspond with the description. If the goods are not
according to the description, the buyer can reject the goods. In a sale by description,
the seller cannot perform the contract by supplying another.

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EXAMPLE:
A advertised a car for sale as Corolla, 2008 Model. B after buying the car,
found it of an earlier model. B could return the car.
3. SALE BY SAMPLE:
In case of sale by sample, the goods must be supplied according to sample
agreed upon. And the bulk shall correspond with the sample in quality.
EXAMPLE:
Two parcels of wheat were sold by sample. The buyer examined the bulk a
week after. One parcel was shown to him but the seller refused to show the other
parcel, which was not thee in the warehouse. It was held, that the buyer was entitled
to rescind the contract.
4. SALE BY SAMPLE AS WELL AS BY DESCRIPTION:
When goods are sold by sample as well as by description, there is an implied
condition that the bulk of the goods wshall correspond both with the sample and
with the description, if the goods supplied correspond only with the sample and not
with the description or vice-versa, the buyer can reject the goods. The bulk of goods
must correspond with both.
EXAMPLE:
N agreed to sell G some oil described as foreign refined oil, was similar to
sample only. The oil supplied, though corresponded with the sample, was mixed with
local oil. Held, that since the oil supplied was not in accordance with the description,
the buyer was entitled to reject the same.
5. CONDITION AS TO FITNES OR QUALITY:
Where the buyer informs to the seller about the particular purpose for with
the goods are require, there is an implied condition tha the goods shall be
reasonably fit for such purpose.
EXAMPLE:
A enters into an agreement with B to buy 100 oil filters to be used for Suzuki
cars. The oil filters were unfit. A can reject them.
6. CONDITION AS TO MERCHANTABILITY:
Where goods are bought by description from seller who deals in goods of
that description, there is implied condition that the goods shall be of mercantable
quality. Merchantability quality means that the goods mush be saleable in the
market as goods of that description.
EXAMPLE:

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A sold a Radio to B. The Radio was defective. It did not work in spite of
repairs. B could return the Radio and claim refund.
7. CONDITION AS TO WHOLESOMENESS:
Wholesomeness means conducive to health. This condition applies only in contract
of sale of eatables and provisions. In such cases goods supplied must be
merchantable and wholesome also.
EXAMPLE:
(a)F bought milk A, a dairy owner. The milk contained germs of typhoid fever. Fs
wife, on taking the milk, became infected and died of it. A, was held liable in
damages.
(b)C bought a bun containing a stone, which broke one of Cs teeth. Held C could
recover damages.
IMPLIED WARRANTIES:
Unless otherwise agreed, the law includes the following warranties into a
contract of sales of goods.
1. QIET POSESSION:
In every contract of sale, it is implied warranty on the part of seller that the
buyer shall have and enjoy quiet possession of the goods. It is an implied assurance
to the buyer that he shall have the possession and enjoyment of the goods sold to
him without disturbance by the seller of any other person. If this right of buyer is
disturbed by a person having a superior right than that of the seller, the buyer can
claim damages from seller.
EXAMPLE:
A bought a motor car from B and used it for some months, after some
months if appeared that B had no title to it and A was compelled to surrender it to
the true owner. A was entitled to recover the purchase price form B.
2.2.5 Rights and Duties of the Buyer and Seller according to the Sale of
Goods Act-1930
Rights and Duties of The Buyer
RIGHTS
1. To have delivery of the goods as per contract. (Sec. 31 & 32)
2. To reject the goods when they are not of the description, quality or quantity as
specified in the contract (Sec 37).

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3. To repudiate the contract when goods are delivered in installments without any
agreement to that effects [ Sec. 38 (1)]
4. To be informed by the seller, when the goods are to be sent by sea route, so that
he may arrange for their insurance [Sec 39 (30)]
5. To have a reasonable opportunity to examine the goods for ascertaining whether
they are in conformity with the contract. (Sec. 41)
6. To sue the seller for recovery of the price, if already paid, when the seller fails to
deliver the goods.
7. To sue the seller for damages if the seller wrongfully neglects or refuses to deliver
the gods to the buyer ( Sec 57)
8. To sue the seller for specific performance
9. To sue the seller for damages for breach of a warranty or for breach of a condition
treated as breach of a warranty ( Sec 59)
10. To sue the seller the damages for anticipatory breach of contract ( Sec 60)
11. To sue the seller for interest where there is a breach of contract on the part of
the seller and price has to be refunded to the buyer ( Sec 61)
DUTIES
1. To accept the delivery of goods, when the seller is willing to make the delivery as
per the contract (Sec. 31)
2. To pay the price in exchange for possession of the goods
3. To apply for delivery of the goods. (Sec. 35)
4. To demand delivery of the goods at a reasonable hour [Sec 36 (4)]
5. To accept delivery of the goods in installments and pay for them, in accordance
with the contract. [(Sec. 38 (2)]
6. To bear the risk of deterioration in the course of transit, when the goods are to be
delivered at a place other than where they are sold ( Sec 40)
7. To inform the seller in case the buyer refuses to accept or rejects the goods ( Sec
43)
8. To take the delivery of the goods within a reasonable time after the seller tenders
the delivery (Sec. 44)
9. To pay the price, where the property in the goods are passed to the buyer, in
accordance with the terms of the contract ( Sec 55)
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10. To pay damages for non-acceptance of goods ( Sec 56)

Rights and Duties of The Seller

RIGHTS
1. To reserve the right of disposal of the goods until certain conditions are fulfilled.
( Sec 25 (1)]
2. To assume that the buyer has accepted the goods , where the buyer
3. To deliver the goods only when applied for by the buyer ( Sec 35)
i) Conveys his acceptance;
ii) Does an act adopting the sale; or
iii) Retains the goods without giving a notice of rejection, beyond
specified date (or reasonable time), in a sale on approval. (Sec 24)
4. To make delivery of the goods in installments, when so agreed (Sec 39 (1)]
5. To exercise lien and retain possession of the goods, until payment of the price
( Sec 47 (1)]
6. To stop the goods in transit and resume possession of the goods, until payment of
the price ( Sec 49 (2) and 50]
7. To resell the goods under certain circumstances ( Sec 54)
8. To withhold delivery of the goods when the property in the goods has not passed
to the buyer (Sec 46 (2)]
9. To sue the buyer for price when the property in the goods has passed to the buyer
or when the price is payment on a certain day, in terms of the contract, and the
buyer fails to make the payment (Sec 55)

DUTIES
1. To make the arrangement for transfer of property in the goods to the buyer.
2. To ascertain and appropriate the goods to the contract of sale
3. To pass an absolute and effective title to the goods, to the buyer.
4. To deliver the goods in accordance with the terms of the contract ( Sec 31)

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5. To ensure that the goods supplied conform to the implied / express conditions and
warranties.
6. To put the goods in a deliverable state and to deliver the goods as and when
applied for by the buyer ( Sec 35)
7. To deliver the goods within the time specified in the contract or within a
reasonable time and a reasonable hour. [ Sec 36 (2) and (4)]
8. To bear all expenses of and incidental to making a delivery ( i.e. up to the stage of
putting the goods into a deliverable sate [Sec 36 (5)]
9. To deliver the goods in the agreed quantity. (Sec. 37 (1)]
10. To deliver the goods in installments only when so desired by the buyer. [Sec 38
(1)]
11. To arrange for insurance of the goods while they are in transmission or custody
of the carrier. [Sec. 39 (2)]
12. To arrange for insurance of the goods while they are in transmission or custody
of the carrier. [Sec. 39 (2)]
2.2.6 RIGHTS OF UNPAID SELLER
DEFINE OF UNPAID SELLER:
According to Section 45(1) the seller of goods is deemed to be an unpaid
seller:
1. When the whole of the price has not been paid or tendered; or
2. when a bill of exchange or other negotiable instrument has been received as a
conditional payment and the same has been dishonored.
FEATURES OF UNPAID SELLER:
The following are the features of unpaid seller;
1. He must sell goods on cash basis and he must be unpaid.
2. If he sells the goods on credit, he is not an unpaid seller.
3. He is unpaid seller if the term of credit has expired and the price has not been
paid.
4. He must be unpaid either wholly or partly. If only a part of the price remains
unpaid he is deemed to be an unpaid seller.

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EXAMPLES:
(a) A sells goods to B on 5 months credit. A is not an unpaid seller. But if B becomes
insolvent after 2 months A becomes an unpaid seller.
(b)A sells goods to B for Rs.5 thousand. B has paid Rs.3 thousand and the remaining
are still to be paid. A is an unpaid seller.
(c)A sells 50 books to B. A gets a cheque form B for a period of 10 days. On the date
of maturity, the cheque is dishonored. A becomes an unpaid seller.
(d) A sells a mixer to B. B tenders the payment to take delivery. But A refuses to
accept payment. A is not unpaid seller.
RIGHTS OF AN UNPAID SELELR:
An unpaid seller has the following rights:
(1) Right of unpaid seller against the goods.
(2) Right of unpaid seller against the buyer personally.
We shall examine these rights in detail one by one.
1. RIGHTS OF UNPAID SELLER AGAINST THE GOODS:
An unpaid seller has the following three rights in spite of the fact that the
ownership in the goods has passed to the buyer.
(a)Right of lien;
(b)Right of Stoppage of goods in transit;
(c) Right of resale.
(a) RIGHT OF LIEN:
Lien is the right to retain possession of goods and refuse to deliver them to
the buyer until the price due in respect of them is paid or tendered. An unpaid seller
in possession of the goods can exercise his right of lien on the goods in the following
cases.
(i)Where the goods have been sold without any stipulation as to credit;
(ii)Where the goods have been sold on credit, but the term of credit has expired;
(iii)Where the buyer becomes insolvent even though the period of credit may not
have yet expired.
RULES REGARDING LIEN:
The rules regarding lien are as under:
(i)The right of lien can be exercised only when the goods are in possession of seller.

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(ii) It can be exercised by the unpaid seller if he is in possession of goods as agent or

bailee of the buyer.
(iii) It can be exercised even if the document of title has been delivered but the
goods are in the possession of the seller.
(iv) It can be exercised for price and not for other expenses.
(v) If seller delivers some goods, he can retain the remainder.
(vi)If the seller delivers the goods under the circumstances as to show in agreement
to waive the lien, the seller cannot retain the remainder.
EXAMPLE:
A sells the goods to B for Rs.1 Lac B pays 50 thousand and promises to pay
the remaining after sometime. A has a right to exercise a lien on the goods.
TERMIANTION OF LIEN:
The unpaid seller losses his lien in the following cases:
(i) When he delivers the goods to a carrier or other bailee for the purposes of
transmission to the buyer without reserving the right to disposal of the goods.
(ii)When the possession of the good is obtained lawfully by the buyer or his agent.
(iii)When the seller waives his right of lien on the goods.
(iv) It may be noted that right of lien if once lost, will not revive if the buyer delivers
the goods to the seller for any particular purpose.
EXAMPLE:
Where a refrigerator after being sold was delivered to the buyer and since it
was not functioning properly the buyer delivered back the same to the seller for
repairs, it was held that the seller could not exercise his lien over the refrigerator.
(b) RIGHT OF STOPPAGE OF GOODS IN TRANSIT:
The second right of the unpaid seller is to stop the goods in transit. Goods in
transit mean that the goods must be neither with the seller, nor with the buyer nor
with their agent. They should be in the custody of a carrier. He can regain
possession of the goods as long as they are in course of transit and retain them until
payment or tender of the price.
RIGHT OF STOPPAGE:
The unpaid seller can exercise this right under the following circumstances.
(i)When the buyer becomes insolvent;
(ii) When the buyer or his agent takes delivery of the goods before their arrival at
the appointed destination.
(iii)When the buyer requests the carrier to carry the goods to a new destination after
the original destination is reached.
(iv)When the carrier wrongfully refuses to deliver the goods to the buyer or his
agent.
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(v)When part delivery of the goods has been made to the buyer or his agent with the
intention of delivering the whole of the goods.
EXAMPLE:
A sells 20 bags of cement to B. a gives the delivery of the cement to carrier
to carry to B. Later on A gets news that B has becomes insolvent. A can stop delivery
of cement in transit to B.
(c) RIGHT OF RESSALE:
The third right of unpaid seller is resale. He can resell the goods in the following
cases:
(i)Where the goods are of perishable nature; or
(ii)Where there is express provision regarding such right in the contract; or
(iii)Where the seller gives a notice to the buyer of his intention to resell and the
buyer does not pay or tender the price within a reasonable time.
SALE WITH NOTICE:
(i) If on a resale there is a loss to the seller, he can recover it from the defaulting
buyer.
(ii) If the resale results in profit, the seller can retain it.
SALE WITH NOTICE:
(i) If the unpaid seller sells without giving notice to buyer he will not be entitled to
recover damages from buyer.
(ii) In case of profit on resale, the buyer will be entitled to profit.
EXAMPLE:
(a) X sells some vegetables to Y on credit. Y does not pay. X can resut to any other
person.
(b) M sells 100 blankets to N for Rs.1 Lac and gives him one week for payment N
does not pay. M can resell those blankets to any other person.
(3) RIGHTS OF UNPAID SELLER AGAINST THE BUYER PERSONALLY:
The unpaid seller, in addition to his rights against goods has the following
rights against the buyer personally:
(a) SUIT FOR PRICE:
Where the ownership in goods has passed to the buyer and the buyer
refuses to pay the price according to the terms of the contract, the seller can use
the buyer for price, irrespective of delivery of goods.

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EXAMPLE:
A sells the goods to B for Rs.1 Lac refuse to pay the price. A can use for the
price.
(b) SUIT FOR DAMAGES FOR NON-ACCEPTANCE:
Where the buyer refuses to accept and pay for the goods the seller may use
him for damages for non-acceptance. The seller can recover damages only. He
cannot recover full price.
EXAMPLE:
A sells the goods to B. B refuses to take the goods and pay the price. A can
use B to compel to take the goods.
(c) SUIT FOR SPECIAL DAMAGES AND INTEREST:
The seller can use the buyer for special damages also where the parties are
aware of such loss at the time of contract the unpaid seller can recover interest at a
reasonable rate on he total unpaid price of goods sold, from the time it was due it is
actually paid.
EXAMPLE:
X sells some goods to Y. Y does not pay the price. X can use for damages and
interest on unpaid price if the parties are aware of such circumstances.
BUYERS RIGHTS AGAISNT SELLER:
The buyer has the following rights against the seller for breach of contract:
1. SUIT FOR DAMAGES FOR NON-DELIVERY:
Where the seller wrongfully neglects or refuses to deliver the goods to the
buyer the buyer may use the seller for damages for non-delivery.
EXAMPLE:
A sells iron to B at Rs.50 thousand a ton. A does not supply the iron on a
stated date. The price of iron increases to 60 thousand a ton. B can use for damages
arising due to non-delivery.
2. SUIT FOR SPECIFIC PERFORMANCE:
Were there is breach of a contract for the sale of specific goods the buyer
may life a suit for specific performance. This remedy is granted only when damages
would not be adequate remedy. It is granted when subject-matter of the contract is
rare goods, say, a picture by a dead painter.

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EXAMPLE:
A Promise to sell B a rare painting. A refuse to give painting. B can use for
specific performance.
3. SUIT FOR DAMAGES FOR BREACH OF WARRANTY:
Where there is breach of warranty by the seller, the buyer is entitled to use
for damages if he has paid the price to seller. But if the buyer has not yet paid the
price he may ask the seller for a reasonable reduction in price.
EXAMPLE:
A promises to sell and deliver tables to B on 1st March 2000. But A delivers on
10 March. B can claim damages.
th

4. SUIT FOR CANCELLATION AND DAMAGES FOR BREACH OF CONDITION:

Where thee is a breach of condition by the seller, the buyer can avoid the
contract and claim damages.
EXAMPLE:
A Promise to sell to B Sony TV. A sends Sharp TV to B. B can avoid the
contract and claim damages.

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Unit 3: INFORMATION LAWS AND RTE 10Hrs

3.1 Right to Information Act, 2005:
3.1.1 Objectives of the RTI Act
3.1.2 Scope
3.1.3 SuoMoto disclosure
3.1.4 Method of seeking information
3.1.5 Eligibility to obtain information
3.1.6 Authorities under the Act
3.2 Right to Education Act: objectives of the RTE Act
Salient Features.

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3.1 Introduction :The Right to Information Act (RTI) is an Act of the Parliament of
India "to provide for setting out the practical regime of right to information for
citizens" and replaces the erstwhile Freedom of information Act, 2002. Under the
provisions of the Act, any citizen may request information from a "public authority"
(a body of Government or "instrumentality of State") which is required to reply
expeditiously or within thirty days. The Act also requires every public authority to
computerise their records for wide dissemination and to proactively certain
categories of information so that the citizens need minimum recourse to request for
information formally. This law was passed by Parliament on 15 June 2005 and came
fully into force on 12 October 2005. The first application was given to a Pune police
station. Information disclosure in India was restricted by the Official Secrets Act
1923 and various other special laws, which the new RTI Act relaxes.
3.1.1 OBJECTIVES
The soul objective of the Right To Information Act 2005 is as following:
An Act to provide for setting out the practical regime of right to information for
citizens to secure access to information under the control of public authorities, in
order to promote transparency and accountability in the working of every public
authority, the constitution of a Central Information Commission and State
Information Commissions and for matters connected therewith or incidental thereto.
Above statement articulated as a soul objective in the Act includes the following
objectives / points:
To setup the practical regime:
However, article 19(1)(a) of the Indias constitution provides Freedom of
Expression, as a Fundamental Right and as well as in the matter of State of UP
v Raj Narain(1975)4 SCC 428, Supreme Court of India has already declared Right To
Know as a fundamental Right under article 19(1)(a). It means to know the
information any one can approach to the High Court or Supreme Court directly, but
this efforts was not enough to avail the information properly and systematically as
well as uncertainty was their regarding its applicability which was creating
ambiguous situation and facing difficulties to avail the information from the various
agencies of government and non-government organizations. Therefore in order to
provide systematic and concrete mechanism Parliament of India enacted
Right To Information Act 2005 which facilitate the citizen to avail all kind of
information with reasonable restriction mentioned as a general and specific
exception under Section 8, 9, and 24 of the same Act.
For citizens:
According to Section 3 of RTI Act only citizen of India is eligible to file the application
for any information subject to this Act but the guideline issued by Ministry of
Personnel, Public Grievances & Pensions Department of Personnel & raining,
through their letter No.1/69/2007-IR dated 27th February 2008, directs that, if any RTI
Application filed on the behalf of organization, in such case, instead of rejection that
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should be accepted as a personal application on the behalf of that name of the

person mentioned in the RTI Application.
to secure access to information under the control of public authorities,
Definition of Public Authority articulated in Section 2(h) of RTI Act includes all the
governmental organizations, and as well as , those Non Governmental Organizations
substantially financed by the Government but Act doesnt revealed the percentage
of financial aids for this purpose which raise the ambiguous situation and
dependability on the courts decision.
The expression under the control of public authority which is perused in final part
of the Section 2(f) while defining the word Information that, information relating
to any private body, which can be accessed by a public authority under any other
law for the time being in force means citizen can access the information which is
directly related to the activities of that Public Authority as well as those information
regarding private body which is held by that Public authority. So in this way indirectly
citizen can access the information related to the private bodies from the government
offices who are authorised to control or monitor them, or connected in any way
under any other laws for the time being in force.
To promote transparency and accountability in the working of every
public authority,
This Act ensure to eradicate the any type of corruption in Public Authority by
providing mandatory obligation to the Public Authority to make ensure to
disseminate the information sought by the Indian citizen within a certain time period
with nominal fee,. As well as Section 4 impose Public authority to maintain and
provide access all the information specified in the Section
4(b) by
applying suo motu (self initiative) action. So, due to the mandatory dissemination of
information in the accessible format definitely transparency and accountability can
established because that information not only help to aware the puple as well as
could admit as a evidence in any legal procedure.
The constitution of a Central
Information Commissions:

Information

Commission

and

State

To provide the proper remedy with objectivity state and central commissions has
been established seperatly by this Act (Refer Chapter 3 & 4 respectively). In such
Commissions Second Appeal and Complaint can be filed by citizen without any fee.
The status of Chief Commissioners and other Commissioners are same as the Chief
and other Election Commissioners respectively.
Matters connected to Public Authority or incidental thereto:
This is the first Act in India which provides the controlling power to the citizen in
which Public Authorities are compelled to disseminate the information which is either
directly or indirectly connected to them. Even if sought information is not belongs to
particular Public Authority, in such case, that Public Authority is compelled to
transfer to the relevant Public Authority instead of rejection.
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3.1.2 Scope :

The Act covers the whole of India except Jammu and Kashmir, where J&K Right to
Information Act is in force. It covers all constitutional authorities, including the
executive, legislature and judiciary; any institution or body established or
constituted by an act of Parliament or a state legislature. It is also defined in the Act
that bodies or authorities established or constituted by order or notification of
appropriate government including bodies "owned, controlled or substantially
financed" by government, or non-Government organizations "substantially financed,
directly or indirectly by funds" provided by the government are also covered in the
Act.

Private bodies
Private bodies are not within the Act's ambit directly. In a decision of Sarbjit roy
vs Delhi
Electricity
Regulatory
Commission,[1] the Central
Information
Commission also reaffirmed that privatised public utility companies are not
applicable for RTI. As of 2014, private institutions and NGOs receiving over 95% of
their infrastructure funds from the government come under the Act. [2]
Political parties
The Central Information Commission (CIC), consisting of Satyanand Mishra, M.L.
Sharma and Annapurna Dixit, has held that the political parties are public authorities
and are answerable to citizens under the RTI Act. The CIC, a quasi-judicial body, has
said that six national parties - Congress,BJP, NCP, CPI(M), CPI and BSP and BJD - have
been substantially funded indirectly by the Central Government and have the
character of public authorities under the RTI Act as they perform public functions [3]
[4]
In August 2013 the government introduced a Right To Information (Amendment)
Bill which would remove political parties from the scope of the law. [5] In September
2013 the Bill was deferred to the Winter Session of Parliament. [6] In December 2013
the Standing Committee on Law and Personnel said in its report tabled in
Parliament[7]
"The committee considers the proposed amendment is a right step to address the
issue once and for all. The committee, therefore, recommends for passing of the
Bill."
Right to information includes the right to:

Inspection of work, documents, records;

Taking notes, extracts or certified copies thereof;
Taking certified samples of material;
Obtaining information in the form of diskettes, floppies, tapes, video cassettes
or in any other electronic mode or through printouts where such information
is stored in a computer or in any other device

3.1.3 SuoMoto disclosure : The Act makes it obligatory for every public authority
to make suo-motu disclosure in respect of the particulars of its organization,
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functions, duties etc. as provided in section 4 of the Act. Besides, some public
authorities under the Central Government have published other information and
have posted them on their websites.

3.1.4 Method of seeking information:

Method of Seeking Information
A citizen who desires to obtain any information under the Act, should make an
application to the Central Public Information Officer (CPIO) of the concerned public
authority in writing in English or Hindi or in the official language of the area in which
the application is made. The applicant can send the application by post or through
electronic means or can deliver it personally in the office of the public authority. The
application can also be sent through a Central Assistant Public Information Officer
appointed by the Department of Post at sub-divisional level or other sub-district
level.
Fee for Seeking Information
The applicant, along with the application, should send a demand draft or a bankers
cheque or an Indian Postal Order of Rs10/- (Rupees ten), payable to the Accounts
Office of the public authority as fee prescribed for seeking information. The payment
of fee can also be made by way of cash to the Account Officer of the Public authority
or to the Central Assistant Public Information Officer against proper receipt.
The applicant may also be required to pay further fee towards the cost of providing
the information, details of which shall be intimated to the applicant by the CPIO as
prescribed by the Right Information (Regulation of Fee and Cost) Rules, 2005. Rates
of fee as prescribed in the Rules are given below:
a. rupees two (Rs.2/-) for each page (in A-4 or A-3 size paper) created or copied;
b. actual charge or cost price of a copy in large size paper;
c. actual cost or price for samples or models;
d. for inspection of records, no fee for the first hour; and a fee of rupees five
(Rs.5/-) for each subsequent hour (or fraction thereof);
e. for information provided in diskette or floppy rupees fifty (Rs.50/-) per
diskette or floppy; and
f. for information provided in printed form at the price fixed for such publication
or rupees two per page of photocopy for extracts from the publication.
If the applicant belongs to below poverty line (BPL) category, he is not required to
pay any fee. However, he should submit a proof in support of his claim to belong to
the below poverty line. The application not accompanied by the prescribed fee of
Rs.10/- or proof of the applicants belonging to below poverty line, as the case may
be, shall not be a valid application under the Act and therefore, does not entitle the
applicant to get information.
Format of Application
There is no prescribed form of application for seeking information. the application
can be made or plain paper. The application should, however, have the name and
complete postal address of the applicant. Even in cases where the information is
sought electronically, the application should contain name and postal address of the
applicant.
The information seeker is not required to give reasons for seeking information.
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3.1.5 Eligibility to obtain information:

1. A citizen has a right to seek such information from a public authority which is
held by the public authority or which is held under its control. This right
includes inspection of work, documents and records; taking notes, extracts or
certified copied of documents or records; taking certified samples of material
held by the public authority or held under the control of the public authority.
2. The public authority under the RIT Act is not supposed to create information;
or to interpret information; or to solve the problems raised by the applicants;
or to furnish replies to hypothetical questions. Only such information can be
had under the Act which already exists with the public authority.
3. A citizen has a right to obtain information in the form of diskettes, floppies,
tapes, video cassettes or in any other electronic mode or through print-out
provided information is already stored in a computer or in any other device
from which the information may be transferred to diskettes.
4. The information to the applicant shall ordinarily be provided in the form in
which it is sought. However, if the supply of information sought in a particular
form would disproportionately divert the resources of the public authority or
may cause harm to the safety or preservation of the records, supply of
information in that form may be denied.
5. The Act gives the right to information only to the citizens of India. It does not
make provision for giving information to Corporations, Associations,
Companies etc. which are legal entities/persons, but not citizens. However, if
an application is made by an employee or office-bearer of any Corporation,
Association, Company, NOG etc. who is also a citizen of India, information
shall be supplied to him/her, provided the applicant given his/her full name.
In such cases, it will be presumed that a citizen has sought information at the
address of the Corporation etc.

3.1.6 Authorities under the act:

The text below is from my brief titled Who is a Public Authority under the
Right to Information Act, 2005? as published on the website of
Accountability Initiative, published in September 2013. The brief can be
accessed here.
The definition of public authorities under the Right to Information Act, 2005
(RTI Act) has been an extremely contentious issue since the RTI came into
force. However, in the wake of an order of the Central Information
Commission (CIC) declaring political parties as public authorities under the
RTI Act1, the issue has taken centre stage in public debates. The Central
Government sought to undo the CIC decision by proposing to amend the
definition of Public Authorities to exclude political parties. This amendment
has now been referred to a Parliamentary standing committee. This
development affords an important opportunity to examine the definition of
public authorities, and controversies arising from its interpretation. The
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specific focus of this brief is on a sample of cases that were brought to the
High Courts.
The RTI Act empowers citizens with the right to access information under the
control of public authorities. Accordingly, RTI Act creates a legal framework
to make good this right by defining public authorities, allowing citizens to ask
public authorities for information, and imposing penalties on officials of public
authorities for failing to disclose information defined in Section 2(f). The RTI
Act also mandates that every public authority shall pro-actively disclose
information pertaining to it, and maintain its documents and records to
facilitate the right to information under the Act.
Therefore the question of who is a public authority? is critical one because
it sets the boundaries of the scope of the RTI Act specifically and the
transparency regime in the country, more generally. In the last seven years, a
wide variety of entities otherwise considered to be private entities (such as
schools, colleges and sports associations) have been declared public
authorities, and have had to comply with the requirements of the RTI Act. A
perusal of judgments of High Courts and the CIC reveals a diverse and at
times, conflicting jurisprudence regarding the ambit of public authorities
under the RTI Act.

3.2 Right to Education Act

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 It is an act enacted by the Indian Parliament and received its assent of

the president on 26th August 2009.
The RTE Act is to provide for free and compulsory education to all the
children of the age of six to fourteen years.
This act may be called the right of children to free and compulsory
education act, 2009.
3.2.1 Objectives of the RTE act:
The RTE Act provides for the:
Right of children to free and compulsory education till completion of
elementary education in a neighbourhood school.
It clarifies that compulsory education means obligation of the
appropriate government to provide free elementary education and
ensure compulsory admission, attendance and completion of
elementary education to every child in the six to fourteen age group.
Free means that no child shall be liable to pay any kind of fee or
charges or expenses which may prevent him or her from pursuing and
completing elementary education.
It makes provisions for a non-admitted child to be admitted to an age
appropriate class.
It specifies the duties and responsibilities of appropriate Governments,
local authority and parents in providing free and compulsory education,
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and sharing of financial and other responsibilities between the Central

and State Governments.
It lays down the norms and standards relating inter alia to Pupil
Teacher Ratios (PTRs), buildings and infrastructure, school-working
days, teacher-working hours.
It provides for rational deployment of teachers by ensuring that the
specified pupil teacher ratio is maintained for each school, rather than
just as an average for the State or District or Block, thus ensuring that
there is no urban-rural imbalance in teacher postings. It also provides
for prohibition of deployment of teachers for non-educational work,
other than decennial census, elections to local authority, state
legislatures and parliament, and disaster relief.
It provides for appointment of appropriately trained teachers, i.e.
teachers with the requisite entry and academic qualifications.
It prohibits (a) physical punishment and mental harassment; (b)
screening procedures for admission of children; (c) capitation fee; (d)
private tuition by teachers and (e) running of schools without
recognition,
It provides for development of curriculum in consonance with the
values enshrined in the Constitution, and which would ensure the allround development of the child, building on the childs knowledge,
potentiality and talent and making the child free of fear, trauma and
anxiety through a system of child friendly and child centred learning.
3.2.2 Salient features of the act:

Main features of Right to Education 2009 act The salient features of the
Right of Children
for Free and Compulsory Education act are
Free and compulsory education to all children of India in the six to 14
age group;
No child shall be held back, expelled, or required to pass a board
examination until completion of elementary education;
A child above six years of age has not been admitted in any school or
though admitted, could not complete his or her elementary education, then,
he or she shall be admitted in a class appropriate to his or her age; Provided
that where a child is directly admitted in a class appropriate to his or her age,
then, he or she shall, in order to be at par with others, have a right to receive
special training, in such manner, and within such timelimits, as may be
prescribed: Provided further that a child so admitted to elementary education
shall be entitled to free education till completion of elementary education
even after fourteen years.
Proof of age for admission: For the purposes of admission to
elementary education. the age of a child shall be determined on the basis of
the birth certificate issued in accordance with the provisions of the Births.
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Deaths and Marriages Registration Act, 1856 or on the basis of such other
document, as may be prescribed. No child shall be denied admission in a
school for lack of age proof
A child who completes elementary education shall be awarded a
certificate;
Calls for a fixed student-teacher ratio;
Will apply to all of India except Jammu and Kashmir;
Provides for 25 percent reservation for economically disadvantaged
communities in admission to Class One in all private schools;
Mandates improvement in quality of education;
School teachers will need adequate professional degree within five
years or else will lose job;
School infrastructure (where there is problem) to be improved in
three years, else recognition cancelled;
Financial burden will be shared between state and central
government

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Unit 4: COMPETITION AND CONSUMER LAWS 12Hrs

4.1 The Competition Act, 2002:
4.1.1 Objectives of Competition Act,
4.1.2 the features of Competition Act,
4.1.3 components of Competition Act, CCI, CAT,
4.1.4 offences and penalties under the Act.
4.2 Consumer Protection Act, 1986:
4.2.1 Definition of the terms consumer,
4.2.2 consumer dispute, defect, deficiency, unfair trade
practices and services.
4.2.3 Consumer Protection Act, Consumer Redressal
Agencies
4.2.4 District Forum,
4.2.5 State Commission, National Commission,
4.2.6 any two landmark judgments of the Supreme Court.

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4.1 The competition act 2002:

The Competition Act, 2002 was enacted by the Parliament of India and
governs Indian competition law. It replaced the archaic THE. Under this
legislation, the Competition Commission of India was established to prevent
activities that have an adverse effect on competition in India. [1][2] This act
extends to whole of India except the State of Jammu and Kashmir.
It is a tool to implement and enforce competition policy and to prevent
and punish anti-competitive business practices by firms and unnecessary
Government interference in the market. Competition laws is equally
applicable on written as well as oral agreement, arrangements between the
enterprises or persons.
4.1.1 Objectives of Competition Act,
The main objectives of the Act are:(i)
To provide for the establishment of a commission to prevent practices
having adverse effect on competition;
(ii)
To promote and sustain competition in markets in India ;
(iii) To protect the interests of consumers;
(iv) To ensure freedom of trade carried on by the participants in the
markets in India and for related matters.
4.1.2 The features of Competition Act,
a. Prohibits anti-competitive arguments. (Sec 3)
These are agreements which cause or are likely to cause an
appreciable adverse effect on competition within India:
Horizontal Agreements:
These are between and among competitors who are at the same
stage of production, supply, distribution, etc. These are presumed to
be illegal
Examples: cartels, bid rigging, collusive bidding, sharing of markets,
etc.
Vertical Agreements:
Vertical Agreements are between parties at different stages of
production, supply, distribution, etc.
These are not presumed illegal; are subject to rule of reason.
Examples: tie-in arrangements, exclusive supply/distribution
agreements, refusal to deal

Page | 87

b. Prohibits abuse Dominant positions.

(Sec 4)

Section 4 in the Competition Act, 2002

4. Abuse of dominant position.
(1) No enterprise shall abuse its dominant position.
(2) There shall be an abuse of dominant position under sub-section (1), if an enterprise,
(a) directly or indirectly, imposes unfair or discriminatory
(i) condition in purchase or sale of goods or services; or
(ii) price in purchase or sale (including predatory price) of goods or service; or Explanation.For
the purposes of this clause, the unfair or discriminatory condition in purchase or sale of goods or
services referred to in sub-clause (i) and unfair or discriminatory price in purchase or sale of
goods (including predatory price) or service referred to in sub-clause (ii) shall not include such
discriminatory conditions or prices which may be adopted to meet the competition; or
(b) limits or restricts
(i) production of goods or provision of services or market therefor; or
(ii) technical or scientific development relating to goods or services to the prejudice of
consumers; or
(c) indulges in practice or practices resulting in denial of market access; or
(d) makes conclusion of contracts subject to acceptance by other parties of supplementary
obligations which, by their nature or according to commercial usage, have no connection with
the subject of such contracts; or
(e) uses its dominant position in one relevant market to enter into, or protect, other relevant
market. Explanation .For the purposes of this section, the expression
(a) dominant position means a position of strength, enjoyed by an enterprise, in the relevant
market, in India, which enables it to
(i) operate independently of competitive forces prevailing in the relevant market; or
(ii) affect its competitors or consumers or the relevant market in its favour;
(b) predatory price means the sale of goods or provision of services, at a price which is below
the cost, as may be determined by regulations, of production of the goods or provision of
services, with a view to reduce competition or eliminate the competitors.

Provides the Regulations of combinations.(Sec 5&6)

Regulation of combinations.
(1) No person or enterprise shall enter into a combination which causes or is likely to cause an
appreciable adverse effect on competition within the relevant market in India and such a
combination shall be void.
(2) Subject to the provisions contained in sub-section (1), any person or enterprise, who or which
proposes to enter into a combination, may, at his or its option, give notice to the Commission, in
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the form as may be specified, and the fee which may be determined, by regulations, disclosing
the details of the proposed combination, within seven days of
(a) approval of the proposal relating to merger or amalgamation, referred to in clause (c) of
section 5, by the board of directors of the enterprises concerned with such merger or
amalgamation, as the case may be;
(b) execution of any agreement or other document for acquisition referred to in clause (a) of
section 5 or acquiring of control referred to in clause (b) of that section.
(3) The Commission shall, after receipt of notice under sub-section (2), deal with such notice in
accordance with the provisions contained in sections 29, 30 and 31.
(4) The provisions of this section shall not apply to share subscription or financing facility or any
acquisition, by a public financial institution, foreign institutional investor, bank or venture
capital fund, pursuant to any covenant of a loan agreement or investment agreement.
(5) The public financial institution, foreign institutional investor, bank or venture capital fund,
referred to in sub-section (4), shall, within seven days from the date of the acquisition, file, in the
form as may be specified by regulations, with the Commission the details of the acquisition
including the details of control, the circumstances for exercise of such control and the
consequences of default arising out of such loan agreement or investment agreement, as the case
may be. Explanation.For the purposes of this section, the expression
(a) foreign institutional investor has the same meaning as assigned to it in clause (a) of the
Explanation to section 115AD of the Income-tax Act, 1961 (43 of 1961);
(b) venture capital fund has the same meaning as assigned to it in clause (b) of the Explanation
to clause (23FB) of section 10 of the Income-tax Act, 1961 (43 of 1961).

Enjoins Competition Advocacy.(sec 49)

Section 49 in the Competition Act, 2002
49 Competition advocacy . 21 [
(1) The Central Government may, in formulating a policy on competition
(including review of laws related to competition) or on any other matter, and
a State Government may, in formulating a policy on competition or on any
other matter, as the case may be, make a reference to the Commission for its
opinion on possible effect of such policy on competition and on the receipt of
such a reference, the Commission shall, within sixty days of making such
reference, give its opinion to the Central Government, or the State
Government, as the case may be, which may thereafter take further action as
it deems fit.]
(2) The opinion given by the Commission under sub-section (1) shall not be
binding upon the Central Government 21 [or the State Government, as the
case may be,] in formulating such policy.
(3) The Commission shall take suitable measures 23 [***] for the promotion of
competition advocacy, creating awareness and imparting training about
competition issues. "(1) In formulating a policy on competition (including
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review of laws related to competition), the Central Government may make a

reference to the Commission for its opinion on possible effect of such policy
on competition and on receipt of such a reference, the Commission shall,
within sixty days of making such reference, give its opinion to the Central
Government, which may thereafter formulate the policy as it deems fit.".

4.1.3 components of Competition Act, CCI, CAT,

Components Of Competition Act
The rubric of the new law, Competition Act, 2002 (Act, for brief) has
essentially four compartments:
# Anti - Competition Agreements
# Abuse of Dominance
# Combinations Regulation
# Competition Advocacy

Anti Competition Agreements

Firms enter into agreements, which may have the potential of
restricting competition. A scan of the competition laws in the world will
show that they make a distinction between horizontal and vertical
agreements between firms. The former, namely the horizontal
agreements are those among competitors and the latter, namely the
vertical agreements are those relating to an actual or potential
relationship of purchasing or selling to each other. A particularly
pernicious type of horizontal agreements is the cartel. Vertical
agreements are pernicious, if they are between firms in a position of
dominance. Most competition laws view vertical agreements generally
more leniently than horizontal agreements, as, prima facie, horizontal
agreements are more likely to reduce competition than agreements
between firms in a purchaser - seller relationship. An obvious example
that comes to mind is an agreement between enterprises dealing in the
same product or products. Such horizontal agreements, which include
membership of cartels, are presumed to lead to unreasonable
restrictions of competition and are therefore presumed to have an
appreciable adverse effect on competition. In other words, they are per
se illegal. The underlying principle in such presumption of illegality is
that the agreements in question have an appreciable anti-competitive
effect. Barring the aforesaid four types of agreements, all the others
will be subject to the rule of reaso test in the Act.

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Abuse of Dominance
Dominant Position has been appropriately defined in the Act in terms of
the position of strength, enjoyed by an enterprise, in the relevant
market, in India, which enables it to (i) operate independently of
competitive forces prevailing in the relevant market; or (ii) affect its
competitors or consumers or the relevant market, in its favour.
Section 4 enjoins, No enterprise shall abuse its dominant position.
Dominant position is the position of strength enjoyed by an enterprise
in the relevant market which enables it to operate independently of
competitive forces prevailing in the market or affects its competitors or
consumers or the relevant market in its favour. Dominant position is
abused when an enterprise imposes unfair or discriminatory conditions
in purchase or sale of goods or services or in the price in purchase or
sale of goods or services. Again, the philosophy of the Competition Act
is reflected in this provision, where it is clarified that a situation of
monopoly per se is not against public policy but, rather, the use of the
monopoly status such that it operates to the detriment of potential and
actual
competitors.
At this point it is worth mentioning that the Act does not prohibit or
restrict enterprises from coming into dominance. There is no control
whatsoever to prevent enterprises from coming into or acquiring
position of dominance. All that the Act prohibits is the abuse of that
dominant position. The Act therefore targets the abuse of dominance
and not dominance per se. This is indeed a welcome step, a step
towards
a
truly
global
and
liberal
economy.
The Act on Combinations Regulation
The Competition Act also is designed to regulate the operation and
activities of combinations, a term, which contemplates acquisitions,
mergers or amalgamations. Thus, the operation of the Competition Act
is not confined to transactions strictly within the boundaries of India but
also such transactions involving entities existing and/or established
overseas.
Herein again lies the key to understanding the Competition Act. The
intent of the legislation is not to prevent the existence of a monopoly
across the board. There is a realisation in policy-making circles that in
certain industries, the nature of their operations and economies of
scale indeed dictate the creation of a monopoly in order to be able to
operate and remain viable and profitable. This is in significant contrast
to the philosophy, which propelled the operation and application of the
MRTP Act, the trigger for which was the existence or impending
creation of a monopoly situation in a sector of industry.
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The Act has made the pre-notification of combinations voluntary for the
parties concerned. However, if the parties to the combination choose
not to notify the CCI, as it is not mandatory to notify, they run the risk
of a post-combination action by the CCI, if it is discovered
subsequently, that the combination has an appreciable adverse effect
on competition. There is a rider that the CCI shall not initiate an inquiry
into a combination after the expiry of one year from the date on which
the
combination
has
taken
effect.
Competition Advocacy
In line with the High Level Committee's recommendation, the Act
extends the mandate of the Competition Commission of India beyond
merely enforcing the law (High Level Committee, 2000). Competition
advocacy creates a culture of competition. There are many possible
valuable roles for competition advocacy, depending on a country's legal
and
economic
circumstances.
The Regulatory Authority under the Act, namely, Competition
Commission of India (CCI), in terms of the advocacy provisions in the
Act, is enabled to participate in the formulation of the country's
economic policies and to participate in the reviewing of laws related to
competition at the instance of the Central Government. The Central
Government can make a reference to the CCI for its opinion on the
possible effect of a policy under formulation or of an existing law
related to competition. The Commission will therefore be assuming the
role of competition advocate, acting pro-actively to bring about
Government policies that lower barriers to entry, that promote
deregulation and trade liberalisation and that promote competition in
the
market
place.
Perhaps one of the most crucial components of the Competition Act is
contained in a single section under the chapter entitled competition
advocacy.

Cci competition commission

Commission of India

of

India:

Competition

Competition Commission of India is a body of the Government of

India responsible for enforcing The Competition Act, 2002 throughout India
and to prevent activities that have an adverse effect on competition in India.
It was established on 14 October 2003. It became fully functional in May 2009
Page | 92

Headquarters
The headquarters of the Competition Commission Of India is in New Delhi
Objectives of the Competition Commission of India
To achieve its objectives, the Competition Commission of India
endeavours to do the following:
Make the markets work for the benefit and welfare of consumers.
Ensure fair and healthy competition in economic activities in the
country for faster and inclusive growth and development of economy.
Implement competition policies with an aim to effectuate the most
efficient utilization of economic resources.
Develop and nurture effective relations and interactions with sectoral
regulators to ensure smooth alignment of sectoral regulatory laws in
tandem with the competition law.
Effectively carry out competition advocacy and spread the
information on benefits of competition among all stakeholders to
establish and nurture competition culture in Indian economy.
Composition of the Competition Commission of India
The Commission comprises a Chairperson and six members. Ashok Chawla
is the current Chairperson of the CCI. The members of the Competition
Commission of India are:
S.L. Bunker
S.N. Dhingra
Geeta Gouri
Anurag Goel
M.L. Tayal
Duties of Commission
According to the provisions of this Act, it shall be the duty of the Commission
to:
Eliminate practices having adverse effect on competition
Promote and sustain competition
Protect the interest of customers
Ensures freedom of trade carried by other participants, in markets in
India.
The commission may inquire into any alleged contravention of the
provisions accompanied by such fee as may be determined by
regulations.
It includes Power to award compensation
It includes power of commission to regulate its own procedure.
Inquiry into certain agreements and dominant position of enterprise
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The Commission shall, while determining whether an agreement has an

appreciable adverse effect on competition under section 3, have due regard
to all or any of the following factors:
Creation of barriers to new entrants in the market
Driving existing competitors out of the market
Foreclosure of competition by hindering entry into the market
Accrual of benefits to consumers
Improvements in production or distribution of goods or provision of
services
Promotion of technical, scientific and economic development by means
of production or distribution of goods or provision of services.
The Commission shall, while inquiring whether an enterprise enjoys a
dominant position have due regard to all or any of the following factors:

Economic Power including commercial advantages over competitors

/market share/size/resources, Importance of the enterprise; vertical
integration/ sale or service network of such enterprises; dependence of
consumers on the enterprise
Monopoly or dominant position whether acquired as a result of any
statute or by virtue of being a Government company or a public sector
undertaking or otherwise;
Entry barriers including barriers such as regulatory barriers, financial
risk, high capital cost of entry, marketing entry barriers, technical entry
barriers, economies of scale, high cost of substitutable goods or
service for consumers
Countervailing buying power; market structure and size of market;
social obligations, social costs
Relative advantage, by the way of the contribution to the economic
development, by the enterprise enjoying a dominant position having or
likely to have an appreciable adverse effect on competition; any other
factor which the Commission may consider relevant for the inquiry
4.1.4 Penalties
If any person, without reasonable clause, fails to comply with the orders or
directions of the act, he shall be punishable with fine which may extend to
rupees 1 lakh for each day during which such non-compliance occurs, subject
to a maximum of rupees 10 Cr, as the Commission may determine.
If any person does not comply with the orders or directions issued, or fails to
pay the fine imposed he shall be punishable with imprisonment for a term
which may extend to 3 years, or with fine which may extend to rupees 25 Cr,
or with both, as the Chief Metropolitan Magistrate, Delhi may deem fit.
Compensation in case of contravention of orders of Commission
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The grieved party may make an application to the Appellate Tribunal for an
order for the recovery of compensation from any enterprise for any loss or
damage shown to have been suffered, by such party as a result of the said
enterprise violating directions issued by the Commission.
Penalty for failure to comply with directions of Commission and Director
General
If any person fails to comply, without reasonable cause, with a direction given
by the Commission or the Director General, such person shall be punishable
with fine which may extend to rupees one lakh for each day during which
such failure continues subject to a maximum of rupees one Cr, as may be
determined by the Commission.
Power to impose penalty for non-furnishing of information on combinations
If any person or enterprise who fails to give notice to the Commission, the
Commission shall impose on such person or enterprise a penalty which may
extend to one percent, of the total turnover or the assets, whichever is
higher, of such a combination.
Penalty for making false statement or omission to furnish material
information
If any person, being a party to a combination, makes a statement which is
false in any material particular, or knowing it to be false; or omits to state any
material particular knowing it to be material, such person shall be liable to a
penalty which shall not be less than Rs 50 lakh but which may extend to
rupees one Cr, as may be determined by the Commission.
Functions:
1) To prevent practices having adverse effect on competition
2) To promote and sustain competition
3) To protect the interest of consumers
4) To ensure freedom of trade carried by market participants in markets in
India .
Principles of CCI: The competition commission of India is being guided by
the following principles in its approach to its work:
1 To be in line with markets; have good understanding of market forces.
2
To minimize costs of compliance by enterprises and cost of
enforcement by commission
3
3 To maintain confidentiality of business information; to maintain
transparency in Commissions own operation
4
To maintain a consultative approach.
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To be a professional body, equipped with requisite skills Administrative

structure: It consists of 1 chairman and 6 members

Divisions of CCI:
Economy division
Advocacy division
Anti-trust division
Investigation division
Combination division
Capacity Building
International Co-operation
Competition Appellate Tribunal( CAT) The Competition Appellate Tribunal
(COMPAT) is a quasi-judicial body constituted under the provisions of the
Competition Act, 2002, as amended by Competition (Amendment) Act, 2007.
COMPAT is headed by a Chairperson, who shall be a serving/ retired Judge of
Supreme Court of India or serving/retired Chief Justice of a High Court or
qualified to be a Judge of Supreme Court or Chief Justice of a High Court. The
Members shall be eminent persons from socioeconomic fields. COMPAT
adjudicates appeals against the orders of the Competition Commission of
India and also adjudicates the claims of compensation that may arise from
the findings of CCI or itself. After the dissolution of the erstwhile Monopolies
and Restrictive Trade Practices (MRTP) Commission, the Government of India
vide Ordinance dated 14.10.2010, vested the COMPAT with powers to hear
and dispose of pending cases, dealt with by the-then MRTP Commission.
About 1,825 pending cases were transferred to COMPAT, out of which 1,583
cases have been disposed of by the end of December, 2012. Contravention of
Competition Act attracts severe consequences

4.2 Consumer Protection Act, 1986:

The consumer protection act is a milestone in the history of socioeconomic legislation of the country. It is one of the most progressive and
comprehensive piece of legislations enacted for the protection of
consumer. The consumer protection act was passed on 5 th December
1986. This Act was amended in the year 1991,1993 and 2002. This Act
tries to help a consumer when the goods purchased are defective or the
services rendered to him are unsatisfactory. Prior to enactment of this
Act, consumer disputes had to be settled only through civil courts which
are very expensive.

4.2.1 Definition of the terms :

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Definitions of Important terms:1. Complainant:-According to Section 2(1) (b) Complainant means (i) a
consumer or (ii) any voluntary consumer association registered under the
Companies Act, 1956 or under any other law for the time being in force or
(iii) the central govt. or any state government, which makes a complaint
(iv) one or more consumers, if there are a number of consumers and have
the same interest.
2. Complaint:- A complaint means any allegation in writing made by a
complainant that a. An unfair trade practice or a restrictive trade practice
has been adopted by any trader or service provider.
b. The goods bought by him or agreed to be bought by him suffer from one or
more defects.
c. The services hired or availed or agreed to be hired or availed of by him
suffer from deficiency in any respect;
d. A trader or the service provider, as the case may be, has charged for the
goods or for the services mentioned in the complaint, a price in excess of the
price fixed by or under any law for the time being in force or displayed on the
goods or any package containing such goods.
e. Goods which will be hazardous to life and safety when used are being
offered for sale to the public in contravention of the provisions of any law,
requiring traders to display information in regard to the contents, manner and
effect of use of such goods with a view to obtaining any relief provided by or
under this act.
3 Consumer: - According to this Act, Consumer means any person who
a. Buys any goods for a consideration which has been paid or promised or
partly paid and partly promised, or under any system of deferred payment.
The term includes any user of such goods other than the person who buys
such good for consideration paid or promised or partly paid and partly
promised or under any system of deferred payment when such use is made
with the approval of such person. But the term does not include a person who
obtains such goods for resale or for any commercial purpose; or
b. Hires or avails of any services for a consideration which has been paid or
promised or partly paid and partly promised, or under any system of deferred
payment.
4. Consumer disputes: - Consumer disputes means a disputes where the
person against whom a complaint has been made, denies or disputes the
allegations contained in the complaint.
5. Defect:- Defect means any fault, imperfection or short coming in the
quality, quantity, potency or standard which is required to be maintained by
or under any law for the time being in force or under any contract, express or
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implied or as is claimed by the trader in any manner whatsoever in relation to

any goods.
6. Deficiency:- It means any fault , imperfection, shortcoming or inadequacy
in the quality, nature and manner of performance which is required to be
maintained by or under any law for the time being in force or has been
undertaken to be performed by a person in pursuance of a contract or
otherwise in relation to any service.
7. Goods: - According to the sale of goods act, goods means every kind of
movable property other than actionable claims and money ie, legal tender. It
includes shares, patent rights, copy rights trademarks, fruits, minerals, water,
electricity etc.
8. Manufacturer:- A manufacturer as per sec2 ((1)(j) is a person who
a. Makes or manufacture any goods or part thereof or
b. Does not make or manufacture any good but assembles part thereof made
or manufacture by others and claim the end product to be goods
manufactured by himself, or
c. Puts or causes to be put his own mark on any goods made or manufactured
by any other manufacturer and claims such goods to be goods made or
manufactured by himself.
9. Restrictive Trade Practices:- As per sec.2(1)(n) Restrictive trade
practices means any trade practice which requires a consumer to buy, hire
or avail of any goods or as the case may be, services, as a condition
precedent for buying, hiring or availing of other goods or services.
10. Service:- According to section 2(1) (o) service means service of any
description which is made available to potential users and includes the
provisions of facilities in connection with banking, financing, insurance,
transport, supply electrical or other agency, boarding and lodging or both,
housing construction entertainment, amusement etc. The term does not
include the rendering of any service free of charge or under a contract of
personal service.
11. Persons:- Person includes
a. A firm whether registered or not
b. A Hindu undivided family
c. A co-operative society
d. Every other association of person whether registered under the societies
Registration Act 1860 or not.
12. Trader:- Trader in relation to any goods means a person who sells or
distributes any goods for sale and includes the manufacture thereof, and
where such goods are sold or distributed in package form, includes the
packer thereof.
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13. Unfair trade practices:- Unfair trade practice means a trade practice
which for the purpose of promoting the sale, use or supply of any goods or for
the provision of any service, adopts any unfair method or unfair or deceptive
practices including any of the following practices namely:
(1) The practice of making any statement , whether orally or in writing or by
visible representation which
a. Falsely represent that the goods are of a particular standard, quality grade,
composition, style or model.
b. Falsely represent that the services are of a particular standard, quality or
grade
c. Falsely represents any rebuilt, second hand renovated, reconditioned or old
goods as new goods.
d. Represents that the goods or services have sponsorship, approval,
performance, characteristics, accessories, uses or benefits which such goods
or services do not have
e. Makes a false or misleading representation concerning the need for , or the
usefulness of, any goods or services;
f. Gives to the public any warranty or guarantee of the performance, efficacy
or length of the life of a product or of any goods that is not based on an
adequate or proper test thereof.
g. Which makes to the public a representation in a form that purports to be(a)
a warranty or guarantee of a product or of any goods or services; or(b) a
promise to replace, maintain or repair an article or any part thereof or to
repeat or continues a service until it has achieved a specific result
h. Which materially misleads the public concerning the price at which a
product or like product or goods or services, have been or are, ordinarily sold
or provided, and, for this purpose, a representation as to price shall be
deemed to refer to the price at which the product or goods or services has or
have been sold by sellers or provided by suppliers generally in the relevant
market unless it is clearly specified to be the price at which the product has
been sold or services have been provided by the person by whom or on
whose behalf the representation is made;
i. Which gives false or misleading facts disparaging the good, services or
trade or another person?
2 .Permits the publication of any advertisement whether in any newspaper or
otherwise, for the sale or supply at the bargain price, of goods or services
that are not indented to be offered for sale for supply at the bargain price, or
for a period that it, and in quantities that are, reasonable, having regard to
the nature of the market in which the business is carried on, the nature and
size of business, and the nature of the advertisement.
3. Permits (a) the offerings of gifts, prizes or other items with the intention of
not providing them as offered or creating impression that something is being
given or offered free of charge when it is fully or partly covered by the
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amount charged in the transaction as a whole; (b) the conduct of any contest,
lottery, game of chance or skill, for the purpose of promoting, directly or
indirectly, the sale, use or supply of any product or any business interest.
4. Permits the sale or supply of goods intended to be used, or are of a kind
likely to be used, by consumers, knowing or having reason to believe that the
goods do not comply with the standards prescribed by competent authority
relating or performance, composition, contents, design, construction,
finishing or packaging as are necessary to prevent or reduce the risk of injury
to the person using the goods.
5. Permits the hoarding or destruction of goods, or refuses to sell the goods
or to make them available for sale or to provide any serve, if such hoarding or
destruction or refusal raises, tends to raise or is intended to raise, the cost of
those or other similar goods or services.
14. Bargaining Prices: - Bargaining Price means
(a.) a price that is stated in any advertisement to be a bargain price, by
reference to an ordinary price or otherwise or;
(b) a price that person who reads, hears or sees the advertisement, would
reasonably understand to be a bargain price having regard to the prices at
which the product advertised or like products are ordinarily sold.
Consumer Protection Councils: - The Act provides the establishment of a
Central Consumer Protection Council by the Central Government and the
state consumer protection council in each state by the respective state
government.
Central Consumer Protection Council: - The central government shall, by
notification, establish
with effect from such date as it may specify in such notification, a council to
be known as the Central Consumer Protection Council.
Composition of Central Consumer Protection Council: The Central
consumer protection council shall consist of the following members:- a. The
minister in charge of the consumer affairs in the central government who
shall be the chairman of the Central Council.
b. Such members of other official or non-official members representing such
interest as may be prescribed.
Terms and conditions of members of the Central Council:
The term of the council shall be three years. Any member may, by writing
under his hand to the chairman of the central council, resign from the council.
Objectives of the Central Council:The main objectives of Central consumer protection council are as follows:1. The right to be protected against the making of goods and services which
are hazardous to life and property.
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2. The right to be informed about the quality, quantity, potency, purity

standard and price of goods or services as the case may be so as to protect
against unfair trade practices.
3. The right to be assured, wherever possible, access to a variety of goods
and services at competitive prices.
4. The right to be heard, and to be assured that consumers interest will
receive due consideration at appropriate forums.
5. The right to seek redressel against unfair trade practices or restrictive
trade practices
6. The right to consumer education.
Meetings
The meetings of the central council shall be presided over by the Chairman.
In the absence of the chairman, the vice chairman shall preside over the
function. The central council shall meet as and when necessary, but at least
one meeting of the council shall be held every year. The central council shall
meet at such time and place as the Chairman may think fit and shall observe
such procedures in regard to the transaction of the business as may be
prescribed.
The state Consumer Protection Council: - The state government shall by
notification establish with effect from such date as it may specify in such
notification, a council to be known as the State Consumer Protection Council.
Members of the Council:- The State consumer Protection Council shall
consist of the following members:
1. The minister in charge of consumer affairs in the state government, who
shall be its Chairman.
2. Such member of other officials or non-official members representing such
interest as may be prescribed by the State Government.
3. Such member of other official or non-official members, not exceeding ten,
as may be nominated by the Central Government.
Meeting of the Council: - The State Council shall meet as and when
necessary, but not less than two meeting shall be held every year. The state
council shall meet at such time and place as the
Chairman may think fit and shall observe such procedure in regard to the
transaction of its business as may be prescribed by the State Government
Objects:
The objects of State Consumer Protection Council shall be to promote and
protect within the state the rights of the consumers as laid down in sec.6.
Which are same as those of the central council.
The District Consumer Protection Council: - The District Consumer
Protection Council shall consist of the following members.
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1. The District Collector, who shall be its chairman.

2. Such member of other official and non-official members representing such
interest as may be prescribed by the state Government.
Meetings: The District Council shall meet as and when necessary but not
less than two meetings
shall be held every year.
Time and Place of meeting: - The District Council shall meet as such time
and place within the district as the chairman may think fit and shall observe
such procedure in regard to the transaction of its business as may be
prescribed by the State Government.
Objects: - The objects of every District Council shall be to promote and
protect within the district the rights of the consumers.
Rights and Remedies of Consumers:
According to section 6 of the Consumer Protection Act, the following rights
are available to consumers
1. Rights to be protected or right to safety: - Every consumer has the right to
be protected against the marketing of goods and services which are
hazardous to life and property.
2. Right to be informed: - Every consumer has the right to be informed about
the quality, quantity, potency, purity standard and price of the goods or
services as the case may be, so as to protect the consumer against the unfair
trade practices.
3. Right to be assured: - Every consumer has a right to be assured, wherever
possible, access to a variety of goods and services at competitive prices.
4. Right to be heard: - Every consumer has a right to be heard and to be
assured that consumers interest will receive due consideration at appropriate
forums.
5. Right to seek redressal: - Every consumer has a right to seek redressal
against unfair trade practices or restrictive trade practices or exploitation of
consumers.
6. Right to consumer education: - Every consumer has a right to consumer
education, which will help the consumer to know his rights and duties.
Remedies to Consumers: - The consumer protection act provides the
following remedies to consumers:
a) Removal of defects from goods.
b) Replacement of defective goods
c) Refund against defective goods or deficient services.
d) Award of compensation for the loss or injury suffered
e) Removal of defects or deficiencies in the services
f) Discontinuance of unfair trade practices or restrictive trade practices
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g) Prohibition on sale of hazardous goods.

Redressal Agencies for Consumer Disputes:
The consumer protection act provides for three tier quasi-judicial redressal
machinery at the District, State and National levels for redressal of consumer
disputes and grievances. Accordingly sec. 9 provides for the establishment of
the following agencies.
a. A consumer Dispute Redressal Forum to be known as the District Forum
established in each district of the State by notification. The State Government
is empowered to establish more than one District Forum in a district.
b. A consumer Disputes Redressal Commission to be known as the State
Commission established by the state Government.
c. A national Consumer Disputes Redressal Commission established by the
Central Government.
District Forum:
Composition: - Each district forum shall consist of:
a. A person who is, or has been or is qualified to be a District Judge, who shall
be its president
b. Two other members, who shall be person of ability, integrity and standing
and have adequate knowledge or experience, and one of whom shall be a
woman.
Tenure of office: Every member of the District Forum shall hold office for a
term of five years or
up to the age of sixty five years, whichever is less and shall not be eligible for
reappointment.
Office and Place of sitting of the District Forum: - The office of the
District Forum shall be located at the headquarters of the District. Sitting of
the District Forum, as and when necessary, shall be convened by the
President.
Jurisdiction of the District Forum: - The District Forum shall have a
jurisdiction to entertain complaints where the value of the goods or services
and the compensation, if any, claimed does not exceed rupees five lakhs.
Powers of the District Forum:
The District Forum shall have the same powers as are vested in a civil court
under the code of civil procedure. , and includes the power to
1. Discover and produce any document or other material object producible as
evidence.
2. Reception of evidence on affidavits
3. Requisition of report of the concerned analysis from the appropriate
laboratory or from any other relevant source.
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4. Any other matter which may be prescribed

State Commission: - Each state commission consist of
1. A person who is or has been a judge of a High Court, appointed by the
State Government . The person so appointed shall be its president
2. Not less than two and not more than such number of members as may be
prescribed, and one of whom shall be a woman, and who Shall have the
following qualification:
a. Not less than 35 years of age
b. Possess a bachelor degree from a recognized university
c. To be persons of ability, integrity and standing and have adequate
knowledge and experience of at least ten years I dealing with problems
relating to economics, law, commerce, accountancy etc.
Office and Place of sitting of State Commission: - Office of the state
Commission shall be located at the capital of the State. Sitting of the State
Commission, as and when necessary, shall be convened by the president.
Monetary limit: - The state commission shall have jurisdiction to entertain
complaints where the value of goods or services and compensation, if any,
claimed exceeds Rs. Twenty lakhs but does not exceeds Rs. One crore.
National Commission: The National Commission shall consist of:
1. A person who is or has been a judge of the Supreme Court, to be appointed
by the Central Government, who shall be its President.
2. Not less than four, ad not more than such number of members, as may be
prescribed, and one of whom shall be a woman, who shall have the following
qualifications, namely:
a. To be persons of ability, integrity and standing and have adequate
knowledge and experience
of at least ten years I dealing with problems relating to economics, law,
commerce, accountancy etc
b. Be not less than thirty five years of age, and
c. Possess a bachelors degree from a recognized university
Monetary limit:-The National commission shall have jurisdiction entertain
complaints where the value of the goods or services and compensation, if any
claimed exceeds Rs. One crore.
Any two landmark judgments of the Supreme Court.
1. New India Assurance Company Limited v Abhilash Jewellery [III
(2009) CPJ 2 (SC)]
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Date of Decision: 22.01.2009

The complainant/respondent, who had taken a jeweller's block policy, lodged
a claim with the opposite party insurer for loss of gold ornaments. The insurer
repudiated the claim on the ground that the loss occurred when the gold was
in the custody of an apprentice, who was not an employee (because the
policy stipulated that for indemnification of the loss, the property insured had
to be "in the custody of the insured, his partner or his employee"). The
National Commission allowed the complaint holding that an apprentice was
an 'employee' since section 2(6) of the Kerala Shops and Commercial
Establishments Act (as well as some other statutes) defined an 'employee' to
include an 'apprentice'. The Supreme Court, however, held that the word
'employee' in the contract of insurance mentioned had to be given the
meaning in common parlance. The definition in the local Act, including an
'apprentice' in the category of 'employee', was only a 'legal fiction', which is a
concept in law and could not be applied to an insurance contract. The Court,
therefore, allowed the appeal.
2. Life Insurance Corporation of India v Gowramm [III (2009) CPJ 25
(NC)]
Date of Decision: 11.05.2009
The petitioner insurer repudiated the life insurance policy in the name of the
respondent's late husband (insured) on the ground of deliberate
misstatements and withholding of correct facts regarding the health of the
insured. The lower Fora rejected the various contentions of the insurer and
allowed the complaint. Before the National Commission, the insurer relied
upon the Commission's decision in L.I.C. of India and Another v Parveen
Dhingra [II (2003) CPJ 70 (NC)] and contended that revival of the policy
constituted a new contract between the parties and the limitation period of
two years under section 45 of the Life Insurance Act, 1938 had to be counted
from the date of revival. Therefore, the misstatements and concealment of
facts could be made a ground for repudiation even though same were not
made a ground at the time of initial policy. The Commission referred to the
Supreme Court decision in Mithoolal Nayak v Life Insurance Corporation of
India [AIR 1962 SC 814] where the Court had rejected a similar contention
that the revival of the policy constituted a new contract between the parties
and held that section 45 was clear that the period of two years was to be
reckoned from the date on which the policy was originally effected. The
Commission observed that the decision of Supreme Court had to be preferred
and followed

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Unit 5: ECONOMIC AND ENVIRONMENTAL LAWS 14Hrs

5.1 FEMA 1999:
5.1.1
Objects of FEMA,
5.1.2
definition of important terms
authorized dealer, currency, foreign currency, foreign
exchange,
foreign
security,
Directorate
of
Enforcement,
5.1.3
salient features of the FEMA, offences
and penalties,
5.2 Environment Protection Act, 1986
5.2.1
Objects of the Act,
5.2.2
definitions
of
important
terms

environment, environment pollutant, environment

pollution, hazardous substance and occupier, types of
pollution, global warming, causes for ozone layer
depletion, carbon trade, rules and powers of central
government to protect environment in India.

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5.1

FEMA 1999:

INTRODUCTION
The Foreign Exchange Management Act, 1999 was enacted 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.[1] In fact it is the central legislation that deals with inbound
investments into India and outbound investments from India and trade
and business between India and the other countries.

The FEMA provides:

Free transactions on current account subject to reasonable restrictions
that may be imposed
RBI control over Capital Account Transactions
Control over realization of export proceeds
Dealings in Foreign Exchange through Authorised Person (e.g
Authorised Dealer/ Money Changer/ Off-shore Banking Unit)
Adjudication of Offences
Appeal provisions including Special Director (Appeals) and Appellate
Tribunal
Directorate of Enforcement
Background of FEMA:
In 1999, the Indian Government formulated the Foreign Exchange
Management Act (FEMA).On the 1st of June, 2000, FEMA came into
force replacing the Foreign Exchange Regulation Act(FERA), which was
formulated in 1973. FERA was enacted in the backdrop of acute
shortage of Foreign Exchange in the country and had a controversial
27 year stint during which manybosses of the Indian Corporate world
found themselves in the mercy of the EnforcementDirectorate
(E.D.).Extensive economic reforms were undertaken in India in the
early 1990s and this led to thederegulation and liberalization of the
country's economy. Foreign Exchange Management Act(FEMA) was
thus formulated in order to be compatible with the policies of pro
liberalizationof the Indian government.FEMA has brought a new
management regime of Foreign Exchange consistent with theemerging
frame work of the World Trade Organization (WTO).Enactment of FEMA
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brought with it Prevention of Money Laundering Act, 2002 which came

intoeffect from 1st July, 2005.
Scope of FEMA:
It is applicable to the entire country.Agencies, branches, and offices,
outside India, that are owned by Indian residents, also fallunder the
jurisdiction of this act.It also extends to any dispute that is committed
in offices, agencies and branches outside India that are owned by
individuals covered by this act.

5.1.2 Objectives of FEMA

i)

Among the various objectives of the Foreign Exchange Management Act (FEMA), an
important one is to revise and unite all the laws that relate to foreign exchange.

ii)

Further FEMA aims to promote foreign payments and trade in the country.

iii)

Another important objective of the Foreign Exchange Management Act (FEMA) is to

encourage the orderly maintenance and development of the foreign exchange market in
India

iv)

The objective of the Act is 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. FEMA
extends to the whole of India.

v)

It applies to all branches, offices and agencies outside India owned or controlled by a
person who is a resident of India and also to any contravention there under committed
outside India by any person to whom this Act applies.

vi)

To regulate import and export of currency!

vii)

To Regulate acquisition, holding etc.", of immovable property! in &India !

non0residents

viii)

To regulate holding o immovable property outside &India

ix)

To regulate dealings in foreign exchange and securities"

x)

To regulate certain payments

xi)

To regulate foreign companies"

xii)

To regulate the transactions indirect! officiating foreign exchange"

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xiii)

To regulate employment of foreign nationals

xiv)

To conserve the foreign exchange resources of the country and to utilize the same in the
interest of the economic development of the country
5.1.3 Definition of important terms
Authorised Dealer
Means a person authorised as an authorised
dealer under sub-section (1) of section 10 of the Act
Means a person authorised as an authorised dealer under sub-section
(1) of section 10 of the Act, and includes a person carrying on business
as a factor and authorised as such under the said section 10
Note: 1. This definition applies to all the Regulations wherein mention
is made about authorised dealer, except the Foreign Exchange
Management (Offshore Banking Unit) Regulations, 2002.Reg.2(ii)of
Foreign Exchange Management (Export of Goods and Services)
Regulations, 2000
Currency: Currency
Includes all currency notes, postal notes, postal
orders, money orders, cheques, drafts, travellers cheques, letters of
credit, Acts of exchange and promissory notes, credit cards or such
other simi- lar instruments, as may be notified by the Reserve Bank
Section 2(h) of Foreign Exchange Management Act,1999
foreign currency: Means any currency other than Indian currency
Section 2( m) of Foreign Exchange Management Act,1999
foreign exchange: Foreign Exchange
Means foreign currency and
includes,(i) deposits, credits and balances payable in any foreign currency,
(ii) drafts, travellers cheques, letters of credit or Acts of exchange,
expressed or drawn in Indian currency but payable in any foreign
currency,
( iii) drafts, travellers cheques, letters of credit or Acts of exchange
drawn by banks, institutions or persons outside India, but payable in
Indian currency
"Section 2(n) of Foreign Exchange Management Act, 1999 "
Foreign security: Foreign security
Means any security, in the
form of shares, stocks, bonds, debentures or any other instrument
denominated or expressed in foreign currency and includes securities
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expressed in foreign currency, but where redemption or any form of

return such
as interest or dividends is payable in Indian currency
Section 2(o) of Foreign Exchange Management Act,1999
Directorate of Enforcement: Director of Enforcement
Means the
Director of Enforcement appointed under sub-section (1) of section 36
Section 2(k) of Foreign Exchange Management Act,1999

5.1.4 Salient features of the FEMA

Salient features of FEMA:

It will facilitate trade rather than prevent misuse of foreign exchange.

Definitions of capital account transaction and current account

transaction have
Been introduced keeping in mind the possibility of introduction of capital
account convertibility in the near future.

All current account transactions shall be allowed (subject to reasonable

restrictions).Reserve Bank to classify those capital account transactions
that are to be permitted and to regulate transfer and issue of foreign
securities by a resident in/outside India as well assetting up of
branches/offices by foreign companies in India.

All key sections relating to dealings, holding and payments in foreign

exchange
And exports have been simplified.

Liberalization in enforcement provisions reflects that the attitude is of

putting
trust in the persons covered
Compounding of offences
Compounding of offence means making good the loss suffered by a victim.
The statutes bar the offences which are very serious in nature from being
compounded. Only offences that are simple in nature and a compromise can
be made between the parties will come under the purview of compounding.

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Why do we go for compounding?

Contravention of law and Non compliance leads to penalties and prosecution
and to save ourselves from punishment we go for compounding.
Compounding is a boon under our statute to save the offender from
prosecution and other legal penalties.
Compounding of offences under FEMA, 1999
The objective behind the formulation of FEMA 1999 replacing FERA 1974 was
to boost foreign trade and investment into India. The contravention under
FERA was treated as Criminal offence punishable as per Criminal Procedure
code, 1973. But the offences under FEMA is considered only to be civil
punishable with monetary penalty.
Penalty (Section 13)
On adjudication, if it is proved the a person has contravened the
provisions of Foreign Exchange Management Act, 1999 and the rules,
regulations, notifications made there under shall be liable to a penalty
of thrice the sum involved in the contravention, where the amount is
quantifiable or upto rupees two lacs where the amount is not
quantifiable . And in case of continuing offence with a further penalty
which may extend up to Rs. 5000 every dayduring which the default
continues.
In addition to the above, the adjudicating authority may direct that any
currency, security or other money or property shall be confiscated.
he provision for penalty under FEMA 1999 makes it clear that the
contravention leads to payment of huge sum of money, rendering it difficult
for the offender to revive his business or make good the monetary loss.
Section 15 deals with the power to compound contravention. It states that
any contravention under Section 13 may be compounded within 180 days of
submitting an application to the Directorate of Enforcement or its officers and
officers of the RBI as may be prescribed.
Once an offence has been compounded, no further proceeding shall be
initiated or continued against the offender in respect of the compounded
contravention.
From the above it is clear that the compounding of contravention is a
Voluntary process on the part of the person committing such contravention.
i.e., the Offender can proceed to be adjudged and pay the necessary
penalties or he can compound his offences.

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When

application for compounding can be made?

On being advised of a contravention under FEMA 1999
Either through Memorandum
Suo moto
On becoming aware of the contravention

Environment Protection Act, 1986

ENVIORNMENT PROTECTION ACT(passed in March 1986 and came into force
on 19 Nov. 1986) The Constitution of India clearly states that it is the duty of
the state to protect and improve the environment and to safeguard the
forests and wild life of the country. The Department of Environment was
established in India in 1980.This later became the Ministry of Environment
and Forests in 1985 The EPA (Environment Protection Act), 1986 came into
force soon after the Bhopal Gas Tragedy and is considered an umbrella
legislation as it fills many gaps in the existing laws. Thereafter a large
number of laws came into existence as the problems began arising, or
example, Handling and Management of Hazardous Waste Rules in 1989.
INTRODUCTION The concern over the state of environment has grown, the
world over since the sixties. The decline in environmental quality has been
evidenced by increasing pollution, loss of vegetal power and biological
diversity, excessive concentration of harmful chemicals in the ambient
atmosphere and in food chains, growing risks of environmental accidents and
threat to life support systems.
From time to time various legislations relating to protection of environment
from specific types of pollution have been passed by the Indian legislature.
However, the Environment (Protection) Act, 1986 is the most comprehensive
act on the Indian statute book relating to environment protection. It is a
general legislation for the protection of environment. It was enacted under
Article 253 of the Constitution.
The world communitys resolve to protect and enhance the environment
quality found expression in the decisions taken at the United Nations
Conference on the Human Environment held in Stockholm June, 1972. The
Government of India participated in the conference and strongly voiced the
environmental concerns. While several measures had been taken for
environmental protection, both before and after the conference, the need for
general legislation further to implement the decision of the Conference had
become increasingly evident. Therefore the Environment (Protection) Act,
1986was passed.
Objects of the Act,
OBJECTIVES
To implement the decisions made at the U.N. Conference on the Human
Environment held at Stockholm in June, 1972.
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 To co-ordinate activities of the various regulatory agencies under the

existing laws and creation of an authority or authorities for environment
protection.
To provide for deterrent punishment to those who endanger human
environment, safety and health.
To ensure sustainable development is also one of the goals of the
EPA,1986. If the act is not armed with the powers to ensure sustainable
development, it will become a barren shell.
To enact general law on environmental protection which could cover
uncovered gaps in the areas of major environmental hazards as the existing
laws generally focused on specific types of pollution or on specific categories
of hazardous substances and some major areas of environmental were not
covered.
In short, the EPA, 1986 aims at protecting and improving the environment
and prevention of hazards to human beings, other living creatures, plant and
property
5.2.2 Definitions of important terms environment, environment
pollutant, environment pollution, hazardous substance and occupier,
types of pollution, global warming, causes for ozone layer depletion,
carbon trade, rules and powers of central government to protect
environment in India.
IMPORTANT DEFINITIONS:
1. Environment [Section 2(a)]: Environment includes water, air and land and
the inter relationship which exists among andbetween water, air and land
and human beings, other living creatures, plants,microorganisms and
property.
2. 2. Environmental Pollutant [Section 2(b)]: Environmental Pollutant
means any solid, liquid or gaseous substance present in suchconcentration
as may be, or tend to be, injurious to environment.
3. 3. Environmental Pollution [Section 2(c)]: Environmental pollution means
the presence in the environment of any environmentalpollutant.
4. Handling [Section 2(d)]: Handling, in relation to any substance, means
the manufacture, process, treatment,destruction, conversion, offering for
sale, transfer, or the like of such substance.
5. Hazardous Substance [Section 2(e)]: Hazardous substance means any
substance or preparation which, by reason of its chemicalor
physicochemical properties or handling, is likely to cause harm to human
beings, otherliving creatures, plants, microorganisms, property, or the
environment.
6. Occupier [Section 2(f)]: Occupier in relation to any factory or premises
means a person who has control over theaffairs of the factory or premises
and includes, in relation to any substance, the person in possession of the
substance.
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Types of pollution:Different Types of pollution are categorized based on the

part of the environment which they affect or result which the particular
pollution causes. Each of these types has its own distinctive causes and
consequences. Categorized study of pollution helps to understand the basics
in more detail and produce protocols for the specific types. Accordingly, the
main types of pollution are:
Water Pollution
As the name suggests, Water Pollution is the type of pollution that
involves the contamination of various water bodies. Various aquatic
creatures depend on these water bodies and its natural nutritious
features to support its life.
Air Pollution
The contamination of the air present in the atmosphere is known as
Air pollution. Respiration is an important life process of all living
things. We breathe in the air present in the atmosphere. Therefore if
the air around us is contaminated with poisonous gases, it would have
a fatal effect on us.
Soil Pollution:
Stripping soil of its natural fertility by using artificial chemicals like
pesticides, insecticides, ripening agents etc. is known as Soil
Pollution. Plants depend on the nitrogenous compounds present in the
soil for their nutrition. Use of insecticides, pesticides and other artificial
chemicals absorbs the nitrogen from the soil making it unfit for the
growth for plants. Plants are responsible for holding the soil together
firmly so, when the plants cant grow the soil splits, leading to soil
erosion.
Thermal Pollution
Rise in the temperature in the ecosystem due the release of excessive
heat energy into the environment by artificial methods or natural
disasters is called Thermal Pollution. Generally, manufacturing
industries release a lot of heat energy which gets transferred to the air
and water bodies. Even vehicles which have combustion engines
release a lot of heat energy as they require high temperatures to
function. Carbon dioxide has a property of blocking heat from exiting
the atmosphere and so the heat coming in from the sun is trapped in
the atmosphere.
Radioactive Pollution

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Radioactive pollution occurs when Radioactive metals disintegrate

releasing dangerous beta rays which can cause cancer and other
mutative diseases. These types of pollution can occur by either the
dumping of radioactive waste from nuclear power plants into water
bodies, damage of nuclear reactors leading to radioactive
contamination that would last for many years and many more. In the
Second World War, when the U.S.A attacked Hiroshima and Nagasaki of
Japan, the atomic bomb left a radioactive footprint leading to highly
mutative diseases. So, most of the people who survived the atomic
bombing died eventually from cancers and mutations.
Noise Pollution:
There are different qualities of sounds. The sounds which are not
pleasant to hear are called Noises. So an excess of noise in the
outdoors leads to Noise Pollution. This can be experienced by too
many vehicles honking at the roads, heavy machinery being operated
in the open (for ex, a jackhammer), trains, clubs, over populated
crowds and many more. Noise pollution is known to cause mental
stress and depression. It can also cause damage to the ear drum which
can cause deafness. Noise pollution has more of a psychological effect
rather than a physical one.
Light Pollution
Bright lighting in functions, big cities, etc. causes Light Pollution.
Excessive light on the retina causes extreme discomfort in the eyes,
especially in dim conditions like during night time. Bright lights strain
the eyes and also give headaches and migraines. If we observe, light
pollution, thermal pollution and noise pollution all are types of pollution
that are caused by the different forms of energy.
Global Warming: Global Warming is the increase of Earth's average
surface temperature due to effect of greenhouse gases, such as carbon
dioxide emissions from burning fossil fuels or from deforestation, which
trap heat that would otherwise escape from Earth. This is a type of
greenhouse effect.

The Causes of Ozone Depletion

Scientific evidence indicates that stratospheric ozone is being
destroyed by a group of manufactured chemicals, containing chlorine

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and/or bromine. These

substances" (ODS).

chemicals

are

called

"ozone-depleting

ODS are very stable, nontoxic and environmentally safe in the lower
atmosphere, which is why they became so popular in the first place.
However, their very stability allows them to float up, intact, to the
stratosphere. Once there, they are broken apart by the intense
ultraviolet light, releasing chlorine and bromine. Chlorine and bromine
demolish ozone at an alarming rate, by stripping an atom from the
ozone molecule. A single molecule of chlorine can break apart
thousands of molecules of ozone.
What's more, ODS have a long lifetime in our atmosphere up to
several centuries. This means most of the ODS we've released over the
last 80 years are still making their way to the stratosphere, where they
will add to the ozone destruction.
The main ODS are chlorofluorocarbons (CFCs), hydrochloro
fluorocarbons (HCFCs), carbon tetrachloride and methyl chloroform.
Halons (brominated fluorocarbons) also play a large role. Their
application is quite limited: they're used in specialized fire
extinguishers. But the problem with halons is they can destroy up to 10
times as much ozone as CFCs can. For this reason, halons are the most
serious ozone-depleting group of chemicals emitted in British
Columbia.
Hydrofluorocarbons (HFCs) are being developed to replace CFCs and
HCFCs, for uses such as vehicle air conditioning. HFCs do not deplete
ozone, but they are strong greenhouse gases. CFCs are even more
powerful contributors to global climate change, though, so HFCs are
still the better option until even safer substitutes are discovered.
The Main Ozone-Depleting Substances (ODS)
Chlorofluorocarbons (CFCs)
The most widely used ODS, accounting for over 80% of total
stratospheric ozone depletion. Used as coolants in refrigerators,
freezers and air conditioners in buildings and cars manufactured before
1995. Found in industrial solvents, dry-cleaning agents and hospital
sterilants. Also used in foam products such as soft-foam padding
(e.g. cushions and mattresses) and rigid foam (e.g. home insulation).
Halons Used in some fire extinguishers, in cases where materials and
equipment would be destroyed by water or other fire extinguisher
chemicals. In B.C., halons cause greater damage to the ozone layer
than do CFCs from automobile air conditioners.
Methyl Chloroform
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Used mainly in industry for vapour degreasing, some aerosols, cold

cleaning, adhesives and chemical processing.
Carbon Tetrachloride Used in solvents and some fire extinguishers.
Hydrofluorocarbons (HCFCs)
HCFCs have become major, transitional substitutes for CFCs. They
are much less harmful to stratospheric ozone than CFCs are. But HCFCs
they still cause some ozone destruction and are potent greenhouse
gases.
Carbon Trade:
A carbon trade is an exchange of credits between nations designed to
reduce emissions of carbon dioxide. The carbon trade allows countries
that have higher carbon emissions to purchase the right to release
more carbon dioxide into the atmosphere from countries that have
lower carbon emissions. The carbon trade originated with the 1997
Kyoto Protocol and is intended to reduce overall carbon dioxide
emissions to 5% below 1990 levels between 2008 and 2012.
General Powers of the Central Government
8. To make rules to regulate environmental pollution; To notify
standards and maximum limits of pollutants of air, water, and soil for
various areas and purposes; Prohibition and restriction on the handling
of hazardous substances, and location of industries (Sections 3-6).
Under Sec (3): may constitute authority or authorities for the purpose
of exercising of performing such of the powers and functions;
Under Sec (4): may appoint a person for inspection;
Under Sec (5): may issue directions in writing to any officers or any
authority to comply;
Under Sec (6): it empower the government to make rules to achieve
the object of the Act.
Under Sec (7): persons carrying on industry, operation etc. not to
allow emission or discharge of environmental pollutants in excess of
the standards;
Under Sec (8): persons handling hazardous substances must comply
withprocedural safeguards.
9. Prevention, Control, and Abatement of Environmental Pollution
The Central Government has the power to take all such measures as
it deems necessary for the purpose of protecting and improving the
quality of environment and preventing, controlling and abating
environmental pollution. Such measures may include: Co-ordination
of actions by the State Government officers and other authorities
under this act or under any law. Planning and execution of nationwide programmes for the prevention, control and abatement of
environmental pollution. Laying down standards for the quality of
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environment in the various aspects. Laying down standards for the

emission or discharge of environmental pollutants. Restriction of
areas in which any industry, operation or process shall be carried out.
Laying down procedures and safeguards for handling of hazardous
substances. Examination of manufacturing processes, materials and
substances which are likely to cause environmental protection.
Carrying out and sponsoring investigations and research relating to
problems of environmental pollution. Establishment and recognition
of environmental laboratories. Such other matters as the Central
Government may deem necessary of the purposes of securing effective
implementation of this Act. Under section 3(3), the Central
Government may constitute an authority or authoritiesto exercise
powers and perform functions as mentioned above.
11. OFFENCES ANDPENALTIES : Penalty for contravention of the
provisions of the Act, Rules, Orders and Directions Offences by Companies
and Government Departments
12. PENALTIES One of the objectives of EPA is to provide for deterrent
punishment to those who endanger human environment, safety and health.
Sec 15 of the EPA provides that any person who fails to comply or
contravenes any of the provisions of the Act, or the rules made or orders or
directions issued under the act or rules, then for such failure or
contravention, he shall be punishable:- a) With imprisonment for a term
which may extend to 5 years, b) With fine which may extend to one lakh
rupees, c) With both. In case the failure or contravention continues after
the conviction for first failure or contravention, an additional fine which may
extend to five thousand for every day can be imposed for a period during
which failure or contravention continues. If the failure or contravention
continues beyond a period of one year after conviction, the offender shall be
punishable with imprisonment for a term which may extend to seven years.
13. OFFENCES Sec 16 of EPA incorporates the principle of vicarious
liability of the person incharge , Director, Manager, Secretary or other
officer, for the offence ifcommitted by the company. When any offence is
committed by the company then the company as well as the person directly
incharge of and responsible for the conduct of the business of the company
shall be deemed to be liable to punishment. However, the person incharge
of responsible for the conduct of business of the company is no held liable if
he proves: a) That the offence was committed without his knowledge, b)
That he exercised all due diligence/ care to prevent the commission of such
offence. In Suo Motu v. Vatva Industries Asson, it was held that the pollution
control board and its officers are free and competent to take action against
any person on violating any provisions of the environmental laws. They need
not wait for any direction of the court for taking action under the law.
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14. Who can make the Complaint? A complaint under this act can be made
by: a) The central govt. or any other authority by that govt. or, b) Any
person who has given notice of not less than60 days of the alleged offence
and of his intention to make complaint to the Central Govt. or the authorized
officer.
Global warming: is the increase in the average temperature of Earth's nearsurface air and oceans since the mid-20th century and its projected
continuation caused chiefly by increasing concentrations of greenhouse
gases namely Carbon Dioxide, Methane, Nitrous Oxide, Hydro fluorocarbons
(HFCs), Per fluorocarbons ( PFCs), Sulphur Hexafluoride(SF6) resulting from
human activities such as burning of fossil fuels, deforestation, industrial
processes and other sources.
POWER OF CENTRAL GOVERNMENT TO TAKE MEASURES TO PROTECT
AND IMPROVE ENVIRONMENT
(1) Subject to the provisions of this Act, the Central Government, shall have
the power to take all such measures as it deems necessary or expedient for
the purpose of protecting and improving the quality of the environment and
preventing controlling and abating environmental pollution.
(2) In particular, and without prejudice to the generality of the provisions of
sub-section (1), such measures may include measures with respect to all or
any of the following matters, namely:-(i) co-ordination of actions by the State Governments, officers and other
authorities-(a) under this Act, or the rules made thereunder, or
(b) under any other law for the time being in force which is relatable to the
objects of this Act;
(ii) planning and execution of a nation-wide programme for the prevention,
control and abatement of environmental pollution;
(iii) laying down standards for the quality of environment in its various
aspects;
(iv) laying down standards for emission or discharge of environmental
pollutants from various sources whatsoever:
Provided that different standards for emission or discharge may be laid down
under this clause from different sources having regard to the quality or
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composition of the emission or discharge of environmental pollutants from

such sources;
(v) restriction of areas in which any industries, operations or processes or
class of industries, operations or processes shall not be carried out or shall be
carried out subject to certain safeguards;
(vi) laying down procedures and safeguards for the prevention of accidents
which may cause environmental pollution and remedial measures for such
accidents;
(vii) laying down procedures and safeguards for the handling of hazardous
substances;
(viii) examination of such manufacturing processes, materials and substances
as are likely to cause environmental pollution;
(ix) carrying out and sponsoring investigations and research relating to
problems of environmental pollution;
(x) inspection of any premises, plant, equipment, machinery,
or other processes, materials or substances and giving, by
directions to such authorities, officers or persons as it
necessary to take steps for the prevention, control and
environmental pollution;

manufacturing
order, of such
may consider
abatement of

(xi) establishment or recognition of environmental laboratories and institutes

to carry out the functions entrusted to such environmental laboratories and
institutes under this Act;
(xii) collection and dissemination of information in respect of matters relating
to environmental pollution;
(xiii) preparation of manuals, codes or guides relating to the prevention,
control and abatement of environmental pollution;
(xiv) such other matters as the Central Government deems necessary or
expedient for the purpose of securing the effective implementation of the
provisions of this Act.
(3) The Central Government may, if it considers it necessary or expedient so
to do for the purpose of this Act, by order, published in the Official Gazette,
constitute an authority or authorities by such name or names as may be
specified in the order for the purpose of exercising and performing such of
the powers and functions (including the power to issue directions under
section 5) of the Central Government under this Act and for taking measures
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with respect to such of the matters referred to in sub-section (2) as may be

mentioned in the order and subject to the supervision and control of the
Central Government and the provisions of such order, such authority or
authorities may exercise and powers or perform the functions or take the
measures so mentioned in the order as if such authority or authorities had
been empowered by this Act to exercise those powers or perform those
functions or take such measures.

salient features of Environmental (Protection) Act, 1986

According to the Environmental (Protection) Act 1986, the term environment
includes water, air, land and the interrelationship which exist among and
between water, air, land and human beings, other living creatures, microorganism, plant and property.
The salient features of the act are:
1. The central government shall have the power to take all such measure as
it deems necessary or useful for the purpose of protecting and improving the
quality of the environment and preventing, controlling and decreasing
environmental pollution.
2. No person carrying on any industry, operation or processes shall discharge
or emit any environmental pollutants or permit to do so in excess of such
standards as may be prescribed.
3. No person shall handle or cause to be handled any hazardous substances
except in accordance with such procedure and after complying with such
safeguards as may be prescribed.
4. The central government or any officer empowered by it, shall have power
to take, for the purpose of analysis, sample of air, water, soil or other
substances from any premises, factory etc. as may be prescribed.
5. Whoever fails to comply with or violate any of the provisions of this Act or
the rules made or orders or directions issued there under shall in respect of
each such failure or violation be punishable with imprisonment or with fine or
with both.

Assignment questions:

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