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Welcome to

Term-II
Course on
Business Law
By
Dr. Narendra Y Phadnis
Professor-HRM & Law
IMT-Nagpur
Ignorantia Juris non execusat
‘Ignorance of Law is No Excuse’

Every one is supposed to know & presumed to know the


Law of the Land.

Business Managers must have basic & working


knowledge of Business Law.
to take Right &Appropriate Business Decisions.
LAW
 Set/Body of Rules & Regulations.
 About conduct in a civilized society.
 Regulates & Controls Relationships.
 Creates Rights & Obligations/Duties.
 Created &/or Recognized by Authority/Govt.
 Administered & Implemented by Authority/ Govt.
 Sanctions- Penalty/Punishment/Compensation
 Enforced by Law Courts. (Justiciable)
 Remedy in the Law Courts/Authority.
Business
 Any Commercial Dealing or Activity or Mercantile
transaction for the purpose of Material Gains/Profits.
 Manufacture/Transportation/Supply of Goods and/or
Services (Products) for sale/resale/use/consumption
of customers & consumers. (B to B and B to C)
 Does not cover purely Social, Cultural, Religious,
Charitable, Humanitarian & Missionary, Domestic
(Family) Activities & Sovereign Functions of State.
Industry
 Employer- Employee (Boss-Subordinate)
relationship & working together
 Well Organized, Systematic, Continuous Activity.
 Offers Goods and/or Services to customers,
Consumers/Society for its use or consumption.
 Profit Making & Capital investments are not
essential.
 Except Family & Sovereign functions of the State
under the constitution, all activities under the Sun
satisfying above criteria are Industries.
Industry=Business=Trade=Commerce
These are Synonyms in the eyes of Law.
Legally these are equivalent terms.
Business Law
 Also referred to as Commercial or Mercantile Law
concerning Trade, Commerce & Industry.
 A branch of Civil law mostly dealing with Contractual
Business Relationships.
 Also covers commercial transactions amongst relatives &
friends (social groups) but not social transactions.
 Creates Legal/Regulatory Business Environment
 Regulates, Controls & Governs Formation & execution of
business transactions.
 Ensures & Assures “Certainty” in business dealings.
 Provides Legal Remedies for breach of business promises &
commitments.
Sources of Business Law in India
 English Law (Common Law)
 Customs & Usages of Trade.
 Judicial Decisions/Court Rulings or Case
Law (Precedence)
 Indian Statutory Law (passed by legislature)
Broad Course Contents
 Indian Constitutional Provisions relating to
Business and Overview of Indian Legal and
Judicial Systems.
 Law of Contracts and Special Contracts including
Electronic Contracts.
 Contract of Sale of Goods (Sale of Goods Act)
 Consumer Law (Consumer Protection Act)
 Bouncing of Cheque-Negotiable Instruments Act.
Broad Course Contents (Contd.)
 Company Law.
 Partnership & LLP.
 Competition Law.
 Foreign Exchange Management Act (FEMA)
 Over view of Intellectual Property Law (IPR)
Above Course Contents will be delivered in 20 sessions
of 75 Minutes each in Term-II starting last week of
Sept. 2018. till Mid Dec. 2018.
For Details refer Course Outline posted on ERP.
Law in India means & includes
(Article 13 of Constitution of India)
 Constitution of India. (Supreme & Fundamental Law
of the Land i.e. India)
 Acts made by Legislature (Statutory Law)
 Rules & Regulations made by Govt. and Ordinances
passed by Executive i.e. Council of Ministers.
 Notifications, Circulars, Resolutions (GR), Orders etc
issued by the Govt. Officials.
 Policies & Rules of organizations for its internal
administration & discipline.
 Contracts made by Parties including Business
Contracts.
Branches of Law
 Civil Law.
 Criminal Law.
 Constitutional Law.
 International law.

Business or Mercantile Law is part of


Civil Law.
Business Law
The Course in B-Schools is Popularly Known as
‘Legal Aspects of Business’ OR Legal Environment of
Business. Acronym ‘LAB’ OR ‘LEB’
The Course is meant for Business
Managers & Not Lawyers (Advocates)
Course Learning
 The Faculty (NYP & SNS) will act as Facilitator only.
 Learning will happen through Practical Business
Situations/Problems & Case Studies/lets.
 Illustrations & Examples linked to Legal Concepts,
Legal Rules & Principles.
 Legal Provisions (Rules) relevant for Business
Managers will be discussed without reference to
Sections Nos. or Rule Nos.
 Emphasis on Peer Group Interactions, Class
Participation & Self Study.
Andragogy
(Learning Methodology)
 Interactive & Participative
 Minimal Lecturing for basics, conceptual learning & clarification of
doubts & difficulties.
 Emphasis on self study & learning through peer group.
 Case-lets/Practical Problems/Business Situations Group Assignments &
Presentations-Through Group Representative(s)
 Case Preparation & Group Discussions- Off Class Room. (within or
outside group)
 Class Participation- Open house meaningful discussions (Asking
Relevant Questions & Giving Relevant Answers) in the class linked to
class participation evaluation component.
Course Evaluation
Components.
 Group Assignment- Case Presentations -20% Through
Group Representatives (Team Work-Group Evaluation)
 Class Participation-10% (Individual Evaluation)
 Assessment of Learning (AOL)- 10% -AACSB Component.
 Mid Term-20% (Closed Book-Moodle Based-Objective
Type)- Individual Evaluation.
 End Term Exam- 40% (2 hours-Descriptive Type-Theory +
Application based- Closed Book- Paper/Pen mode)-
Individual Evaluation.
 Mid Term & End Term Exams will be common & combined
for all 6 sections
Syllabus/Curriculum for Evaluation
Components.
 Topics expressly mentioned in the course
outline/contents (session plan)
 Topics/Legal Issues/Legal Concepts/Rules
Principles/Case-lets/Business Situations discussed
during the class sessions.
 Power Point Presentations (PPTs) of the Faculty
(Dr. NYP)
 Study Material /Handouts.
 Relevant Chapters/Topics from Text Book & other
Reference Books.
Constitutional Provisions for Business, Trade
& Commerce.
 Fundamental Rights :- Equality before law & Equal
protection of laws (Article 14)
 Freedom of Speech & Expression Article 19(1)(a)- includes
Commercial speech, advertising and product promotional
activities.
 Freedom to assemble & form unions & associations to
protect & promote business interest. Art. 19(1)(b) & (c)
 For business & other purposes freedom to move any where
in India, settle in any part of India & carry out any lawful
business, trade, occupation, job, profession.
Art. 19(1) (d) (e) (g).
 All the above freedoms are not absolute & are subjected to
reasonable restrictions/limitations-Art . 19(2) to 19(6)
Constitutional Provisions for
Business, Trade & Commerce.
 Right to life & earn livelihood through legitimate
means/sources. (Article 21)
 Right to acquire, own, hold & dispose-off property for
business & residence purposes (Art. 300A).
 Finance, property, Contracts, Suits, Freedom of Trade,
Commerce & Intercourse. Articles 264 to 307.(Part XII)
Constitutional Provisions
on Advertising.
 Advertising & Promotional Activity being a “Commercial
Speech” & an “Industry”, is Part of Fundamental Rights &
Freedoms under the Indian Constitution- Articles 19 (1) (a), (c),
(d), (g) & 21.
 Advertising is also ‘Consumer’s Fundamental Right’ to receive
Right, Reliable & Timely information Art. 19 (1) (a)
 Fundamental Right to Advertise is not Absolute & Unfettered.
 Reasonable Restrictions & Controls can be imposed through
Regulations in the larger interest of Public & Nation i.e. health,
safety, security, decency, morality, social order, communal
harmony, unity & integrity. Articles 19 (2) to 19 (6).
Fundamental Duties (Chapter IV-A) Article-
51-A

The fundamental duties relevant for Business Managers are:-


 To protect & improve the natural environment including
forests, lakes, rivers and wild life. And to have compassion
for living creatures. (which is also part of CSR)
 To develop the scientific temper, humanism and the spirit
of inquiry and reform.
 To strive towards excellence in all spheres of individual &
collective activity, so that the nation constantly rises to
higher levels of endeavors and achievement.
Directive Principles of State Policy (Chapter IV)

The important & relevant principles for business managers are:-


 Right to work & adequate means of livelihood.
 Equal Pay for Equal Work for both men & women.
 A living wage, conditions of work ensuring a decent standard of
life, to all workers.
 Workers’ participation in the management of Industries.
 Organization of agriculture & animal husbandry on modern &
scientific lines.
 Equitable distribution of the natural & material resources of the
country to serve the common/collective social interest. (part of
CSR)
Supreme Court of India.
Articles 13, 32,124 to 147.
 Judicial Review & Doctrine of Ultra vires.
 Fundamental Right to approach SC
 The Final Interpreter, Custodian & Guardian of
Constitution & Laws.
 A Court of Record- Can punish for its contempt.
 Jurisdiction- Original, Appellate, SLP, Advisory.
 Doctrine of Precedent Article-141(Stare decisis)
Verdicts are binding on all authorities in India.
 All authorities to act in aid & support to SC. Article
144.
Prerogative Writ Petitions
Articles 32(SC) &226(HC)
Types of Writs
 Habeas Corpus
 Mandamus
 Prohibition
 Certiorari
 Quo Warranto
 Public Interest Litigations (PIL)
Contract Law
 It is the foundation of the modern business
superstructure.
 Contract is derived form Latin word ‘Contractum’
meaning ‘drawn together’
 Contracts are voluntary agreements between the
parties.
 It requires the ‘exercise of free will of the parties’
Contract
 Contract = Agreement + Legal obligation &
Enforceable by Law. [sec. 2(h)]
 Agreement=Offer/Proposal+ its Acceptance [sec.2(e)].
Promise= Proposal+ Acceptance- sec 2(b)
Agreement = Promise or set of promises forming
consideration for each other.
Agreement, commitment, Undertaking & promise are
synonymous terms.
Offer, Acceptance & Consideration are essential
components of a contract.
Essentials of a Contract
Sec.10
 Offer/Proposal + its Acceptance= Agreement.( Proper Offer, its
Proper Acceptance, Proper Communication & Consensus-ad-
idem)
 Consent- free & genuine.(sec.10,13 to 22)
 Create Legal Relationship i.e Legal Obligation
 Competent to Contract.(sec.10 to 12)
 Lawful Consideration on both sides.(sec.2(d),10, 23- 25)
 Lawful Object.(sec23 & 24)
 Not declared void or illegal. (sec 26 to 30)
 Terms should be clear. (sec 29)
 Performance must be possible. (sec 56)
 Legal Formalities if any.( Writing, Registration, Stamping
& Attestation etc if required by any other law)
Void Agreements- No Contracts.
Not Enforceable.
 Agreement with Incompetent &Unauthorized Person-
sec.11.(Minor, unsound mind, incompetence under law)
 Mutual Mistake of Facts- sec.20.
 Unlawful object & consideration-sec.25.
 Restraint of Marriage- sec.26.
 Restraint of trade or business-sec 27.
 Restraint of Legal/Court Proceedings-28
 Uncertain Agreements-sec29.
 Wagering (Bet) Agreements-sec.30.
 Impossible Agreements- sec. 56.
 Agreement to enter future Agreement.
Essentials of Valid Offer/Proposal
 Offer is the final say or act of offerer awaiting
acceptance/consent from the offeree.
 Purpose is to obtain Acceptance (from offeree)
 Intend to create legal relationship.
 Specific offer must be communicated to offeree.
 General offer is made to public at large.
 Terms must be definite, clear & certain
 Positive or Negative. Express or Implied.
 Special terms must be communicated.
 Invitation to offer & declaration of intention are not offers.
Offers can be conditional.
 Offer should not say that non- communication of
rejection/denial amounts to acceptance of offer.
 Offer should not compel the offeree to reply.
Offer/Proposal
 Offer can be modified/altered before acceptance
but not afterwards.
 Offer can be withdrawn/revoked before acceptance
but not afterwards.
 Offer lapses after the specified period or
reasonable period (if not specified)
 Open offer can also be withdrawn before the
agreed/specified period unless supported by
consideration.
Offer/Proposal
 Cross Offer & Counter Offer is no acceptance & hence
no contract. (it only indicates negotiations)
 Counter Offer is new/fresh offer which needs to be
accepted by the other party.
 Counter offer & cross offer terminates the
earlier/original offer.
 Acceptance or Rejection of offer extinguishes/expires
the offer.
 The terminated or revoked offer cannot be accepted.
Invitation to offer
 The communication which precedes offer.
 The purpose is information sharing, further enquiry &
negotiations.
 It solicits or invites or generates offers.
 Whether a communication is offer or invitation to
offer depends on the essence or contents of the
communication.
 Acceptance of or response to Invitation (to offer) does
not result in a contract.
Essentials of valid Acceptance
 Absolute & unqualified.
 Must be made by offeree himself or his agent/attorney.
 Acceptance of Specific offer Must be communicated to offeror.
 Acceptance of General offer (public offer) is deemed to be communicated
by compliance of conditions of the General Offer.
 Must be in prescribed manner if asked for.
 Must be in response to offer. (Can not precede offer)
 Made within reasonable time or specified time.
 Before the offer lapses. (before the deadline mentioned)
 Can be express or Implied.
 Any change/alteration in acceptance makes it a counter offer which is an
implied rejection of the original offer.
 Counter offers and Cross offers is not acceptance and hence do not make a
contract. Original offer lapses due to counter/cross offer.
Consideration-sec.2(d) & 25
 Material benefit which parties exchange.
 Some thing of value in return to both the parties.(May
not be sufficient/adequate)
 To promise do or promise not to do something for the
other party.
 It can be benefit/interest/right to one and
loss/sufferance or detriment to other.
 The promise or commitment of one party is
consideration for the other & vice versa.
 It should be legal however legal obligation is not
consideration.
Consideration
Rule- “No Consideration- No Contract”
Exceptions-
1. written & registered gift deed on account of natural love &
affection between persons standing in near social & blood
relations.
2. Completed Gift. (not promise to gift)
3. Promise to compensate for past voluntary services.
4. Agreement to pay time barred debt.
5. Contract of Agency, Contract of Guarantee & Gratuitous
Bailment.
6. Remission.
7. Promise to charity where the other party has incurred liability
based on promise. (To pay whichever is less)
Contracts with Minor
(not completed 18 years of age)
 Is void & inoperative ab-initio.
 Cannot be ratified on attaining major age.
 Cannot be asked to repay or compensate for benefits
received.
 Can claim & receive benefits (law protects interests, rights
& benefits of Minor)
 Does not incur any loss, risk or obligation.
 Can plead & not stopped from pleading minority.
 Minor can be an agent but not liable to principle or third
party for his/her acts.
 Minor cannot be a partner but can be admitted to benefits
(not losses) of the partnership.
Formation of Contract
 Contract is formed when communication of
Acceptance is complete.
 Contract is formed at a place & time where/when
communication of acceptance is complete.
 Cause of Action for breach of contract arises at the
place of its formation.
 Parties may expressly agree the place of formation
of Contract (i.e. cause of action if contract is
breached) which must be place of business or
place of permanent residence of either party.
Jurisdiction of Court
 Place where the Cause of Action arose i.e. where
the contract is formed.
And
 Place where the defendant/respondent
permanently reside and/or carry on its business.
 Parties may expressly agree to opt for either of the
two jurisdictions above but not any third place.
 Mere unilateral declarations about jurisdiction on
business documents by itself will not confer
jurisdiction on Courts.
 Parties do not confer jurisdiction on courts. They
mutually select any one jurisdiction which already
exists as per law. (Sec.20 of CPC)
Privity of Contract
 Contract is a Legal Relationship between Contracting Parties.
(Reciprocal Material Considerations- viz. Money, Goods, Services)

 Creating Rights/Benefits & Duties/Obligations/Liabilities.

 In Personam (i.e. as against specific person (s) or parties) & not in rem
(i.e. not against the whole world).

 By & Large Third parties & Strangers are not bound by the terms of
contract. (No Rights- No obligations).

 Third Party-Beneficiaries of the contract would acquire Rights &


Benefits specified in the contract but not liabilities.

 Successors, LR’s, Administrators/Executors, Assigns would acquire


Rights/Benefits and/or Duties/Liabilities.
Performance of Contract
 A Contracts creates Legal Obligations.
 Parties to carry out their respective obligations.
(i.e. Promises)
 Types- Actual (Executed) Performance- Liability
ends. Attempted Performance or Tender
Performance- Performance or Willingness to
perform is not acceptable to other side.
 Liabilities of Performer in both the above types
ends but their rights/benefits under the contract
are alive till satisfied by the other party.
Performance of Contract
 Who can Demand?- Promisee himself or its
Authorized Representative, LR in case of death of
promisee Third party specified in contract who
acquires rights/benefits under the contract.
 Who should perform?- Promisor himself when
performance involves personal skills. Promisor or
his agent or successor in office or property, LR of
promisor in case of his death. Third Party with
acceptance of Promisee & Third party. Joint
promise by Promisors jointly.
Discharge or Termination of Contract

 By Performance of all parties (Executed)


 By Mutual Consent/Agreement (Rescission)
 Discharge by Subsequent Impossibility
(Frustration) or illegality or Operation of Law.
 By Lapse of Time- Period of limitation.
 By Breach of Contract- Either or both parties fails
or refuses to perform its promises. Anticipatory
breach & Actual breach.
Damages (Sec.74)
(Monetary Compensation)
 Liquidated Damages- Fair & Genuine
Amount/Sum fixed and stipulated in the contract
(Pre-estimated) payable on breach of contract.
 Penalty- Amount/Sum so fixed/agreed but
disproportionate to loss/injury caused.
 Interest Payable-Agreed/fixed/Stipulated.
 Remote Consequential Business loss amounts to
penalty.
 Unreasonable interest charges is penalty.
Remedies for Breach of Contract
Sections 73 to 75
 Rescission of the Contract (To put an end to, To
Withdraw from, To terminate)
 Suit for Damages for loss or injury (Monetary
Compensation)
 Suit for Specific Performance
 Suit for Injunction.
 Suit upon Quantum Meruit.
Court Vis-à-vis Damages
 Court grants liquidated damages being reasonable.
 Parties cannot claim penalty as a matter of right being unreasonable.
 Court grants reasonable interest @ equal to current Nationalized Bank
FD Rate or max. Nationalized Bank Commercial Lending Rate.
 Court grants reasonable compensation whether by way of liquidated
damages and/or penalty but not exceeding the sum stipulated in the
contract.
 If No sum is so fixed or stipulated then reasonable compensation with
reasonable interest is granted.
 If Damages+ Compensation+ Penalty= Actual Loss is awarded but not
exceeding the sum fixed in the contract if any.
 If No Sum is so fixed then Actual Loss (not remote loss) is granted.
 Principles applicable in Quasi- Contracts are followed by Courts while
deciding reasonability of compensation.
 The object is to restore that position of parties where they would be
immediately on performance of contract but not further.
 Between the actual loss & the amount stipulated (LD) the court will
grant whichever is less.
Special Contracts
(Under Indian Contract Act 1872)
 Indemnity- Sec. 124 & 125
 Guarantee- Sec. 126, 127 &128
 Bailment- Sec. 148,151,152, 154,160,161
 Pledge (Pawn)-Sec.172
(Mortgage, Hypothecation)
 Agency Sec. 182 to 185, 211 to 220.
Contract of Agency
 Nominating & Authorizing a person to act for & on his
behalf or to represent in dealing with third person.
 Delegation of Authority for dealing with third person.
 Person who is so nominated is an Agent.
 The Person who nominates is Principal.
 Agent is merely a connecting link or a Conduit between
principal & third person creating contract between
Principal & third party i.e agent binds the principal by
his acts. Acts of Agent are Acts of Principal.
 Agency does not create any relation or contract between
an agent & third party.
Agency
 Minor & Person of unsound mind can be an agent but Principal cannot
take any action against such agent. i.e. such agent is not liable to
Principal. (sec.184)
 Principal & third Party must however be competent to contact.
 No consideration for agency is necessary.(sec.185)
 An Employee can also act as Agent but an agent may not be an
employee. (Agents are generally independent persons)
 Sub Agents & Substituted agents are permitted only in exceptional &
emergent situations with Knowledge & No Objection of Principal.
 Rights of Principal are duties of an Agent & vice versa.
 Agent must carry out his duties towards the Principal faithfully,
honestly, with utmost skills & Care & sincerity & Transparently.
Irrevocable Agency or Power of Attorney
 General rule is ‘An Agency can always be revoked’ i.e.
Power of Attorney is revocable.
 Exceptions are:- (i.e. Principal cannot revoke)
1. Agency coupled with substantial interest of Agent
other than agent’s remuneration or commission.
2. Where the authority has been partly exercised by an
agent so as to bind principle with third party.
3. When the agent has incurred personal liability
acting within the scope of his role as agent.
Manager in the eyes of Law
(Managerial Powers & Authority)
 He is an Employee + An Agent. (Both)
 Binds & Creates contractual relations between
organization & outside world (Third Parties).
 Authority to Appoint or Terminate or take
disciplinary action against subordinates.
 Authority to sanction leave & grant facilities to the
staff.
 Drawing & Disbursing Authority or operating
organization’s financial accounts.
Indemnity
 To make good the loss of other party or to save him from the loss.
 To Compensate the other person who suffered loss. (sec.124)
 Indemnity holder or Indemnified can recover from indemnifier
damages, cost, sums on loss in a suit. (sec.125).
 Indemnifier is liable only on loss to the indemnified/ Indemnity holder
& on his liability becoming certain & absolute.
 It is a contingent contract. (Loss to indemnity holder is must)
 Indemnity is not Repayment after Payment.
 Indemnifier has to pay when loss to indemnity holder is ascertained.
 Contract of Insurance is Contract of Indemnity.
 Indemnity is given for anticipated loss to indemnity holder by any one
& is acted upon as soon as the loss is quantified.
Guarantee
 Guarantor/Surety has to pay to creditor on default by the
Principal debtor.
 Guarantee is given for existing liability or debt of Principal
debtor. End of Liability is end of guarantee.
 Liability of Surety arises only on default of the Principal
debtor.
 It is a tripartite Contract & there are three contracts.
 There is an implied contract of Indemnity between Surety
& Principle debtor.
Guarantee
 Consideration or benefit to Principal debtor itself is
treated as consideration to surety for giving guarantee
(sec.127).
 Liability of Principal debtor is primary.
 Liability of surety is secondary & contingent but once PD
defaults the surety’s liability is co-extensive/concurrent
with PD.
 On default by PD both PD & Surety are jointly & severally
liable to creditor.
 Creditor may opt to sue surety alone for the debt without
proceeding against PD. (sec128)
Bailment
 Delivery i.e Possession of Goods to a person
(Bailee) who is not owner of goods for some
purpose with time limit on returnable basis. (To be
returned to Bailor i.e. owner of Goods)
 The Risk of Loss/damages etc is with the Bailor
(owner) if Bailee is in no way at fault & has acted
timely, diligently & prudently. (sec.152)
 The Risk of Loss is with Bailee if he defaults in
taking proper care & unauthorized use & non
returning goods in agreed time. (sec 160 &161)
Pledge (Pawn)
 Bailment as a security for repayment of debt
 Bailor is called Pawnor & Bailee as Pawnee.
 Rights & Duties are same as in Bailment.
 Pawnor defaults in repayment of debt Pawnee can
recover his dues by sale of goods on notifying to
pawnor.
 Pledge of Goods (movable) is called as
hypothecation where as Pledge of Immovable
property is called as Mortgage.
Tenders & Auctions
 Tenders are written offers or e-offers in response to
notice or Advertisement (invitation to offer). Parties
need not be physically present. Offerers do not know
each others offers.
 In Auction parties or their agents are physically
present (or through video conference) at the venue &
time & verbally offer their bids. They know each others
offers/bids.
 E- auctions are gaining popularity due to convenience
as parties get advantages of both the systems i.e.
tenders & auctions.
 In Auction ‘Without Reserve’- but with reserve price
Highest bid more than reserve price must be accepted.
Tender & Auction Sale
 Both tenders & auction bids are offers which may or may not be accepted.
 There is No legal obligations on the other party to accept a lowest tender or
a highest Auction Bid.
 Withdrawal/revocation of tenders & auction bids is valid before its
acceptance.
 Insistence on non-withdrawal of tenders or Auction bids is possible by
separate agreement with consideration to the bidders.
 Auction seller i.e auctioneer cannot bid unless he reserves his right
expressly & notifies it to bidders.
 Auction sale can be cancelled by the auctioneer any time before acceptance
of bid.
 Auction sale will be held on the terms suitable & convenient to auctioneer
with notice to bidders.
 Auctioneer can protect his interest with reserve secret price to nullify
“Knockout” agreements of bidders.
 Auctioneer can fix & notify a minimum starting price for a bid.
E-Contracts- Communication of Electronic
Message (Record)

 There are three parties to Electronic transmission or


communication- Originator, Addressee &
Intermediary i.e. service provider.
 The components of the communication of electronic
record are:- Attribution, Acknowledgement, Time &
Place of dispatch & receipt of electronic message.
Attribution of Electronic Message

Message is credited or attributed to originator if


a) originator himself has sent that message or
b) authorized some one to send message on his behalf
or
c) Sent by the Automated system programmed by the
originator.
Dispatch of Electronic Record
Occurs when sender presses ‘Send’ or ‘Submit’ button
and the message sent cannot
cancelled/modified/withdrawn by the sender. (this
occurs once computer resource or server has
commenced sending the message)
Receipt of Electronic Record
 If addressee has ‘designated’ e-mail Id, receipt occurs
when message enters the server of designated e-mail
id.
 When message is sent to ‘personal’ e-mail id instead of
‘designated’ e-mail id- when retrieved by addressee.
 When there is no designated e-mail Id of addressee
then as soon as it enters the server of the personal e-
mail id.
Contract of Sale of Goods
(Sale of Goods Act 1930)
 Transfer of Property in goods i.e ownership of goods (executed or
completed sale ) or agreement to sell of goods (intended sale or
conditional sale) for price (money)
 Goods are movable property other than money & actionable claims.
 Contract of Sale i.e. Sale or Agreement to sell is concerned with
Transfer of property in goods i.e. Ownership of Goods (Title) & not
with delivery/possession of goods. Payment of Price can also be
deferred.
 Possession/Custody of Goods without ownership is Bailment or Pledge.
 Transfer of Immovable Property is governed by TP Act.
Contract of Sale of Goods Vs Contract for
Work (Work Order)
 In Contract of Sale Ownership & Delivery of Goods
is Primary & Goods are sold on “here & now” or “as
it is” basis.
 In Work Contract/Order there is processing of
material/goods with application of labour/skills &
then delivery of goods to buyer. Raw material can
be supplied either by buyer or buyer instructs the
service provider to purchase requisite raw material
& process it further. Application of Skills & Labour
is primary & more relevant in Work Orders.
Types of Contracts
 For Sale of Goods (Normal Sale)
 For Services.
 Composite/Joint Contract (Divisible) (Services/Labour +
Sale of Goods)
 Composite Contract (Indivisible)
(Services/Labour +Sale of Goods)
are “WORKS CONTRACT”
There is ‘deemed sale of goods in works contract for tax
purpose
(Article 366 (29-A) (b))-46th Constitutional amendment
w.e.f 1982.
Works Contracts
(Indivisible/Composite)
 Construction of Buildings etc.
 Erection/Installation of Plant & Machinery, Elevators
etc.
 Assembly, Fabrication work etc.
 Electrical Fittings.
 Annual Maintenance Contracts (AMC)
Contract of Sale
(sec.4 of Sale of goods Act)
 It covers both Sale and Agreement to Sell.
 Sale is Executed Contract- immediate transfer of right to
property i.e. ownership to buyer.
 Agreement to sell is a conditional transfer of ownership in
future. (Executory)
 Both Sale & Agreement to sell is not necessarily linked with
Delivery of goods & Payment for goods. Contract of sale can be
made without making delivery &/or receiving payment.
 The Risk is associated with & passes with ownership & not with
Possession of goods.
 Ownership passes as specifically & expressly intended by the
parties. Passing of ownership can be linked to delivery &
payment (which becomes agreement to sell)
Hire-Purchase Agreement
(Hire-Purchase Act 1972)
 It must be in Writing.
 It is Hiring goods on installments with intention to
Purchase. (Hiring with a view to Buy)
 It is Bailment + Agreement To Sell.
 Initially Consumer is Bailee & becomes owner
subsequently. (i.e on Full payment)
 Sale is effected i.e ownership is transferred on Payment of
Last installment. (Pre-final installments are treated as Hire
charges or rental)
 Both Hire-vendor & Hirer have an option to terminate the
contract & take back & return goods respectively before the
sale is effective i.e before the last installment.
Condition
 It is a Core Term or Stipulation which forms the basis of
contract. (Primary & Main Term of a Contract)
 It is a root cause or the very purpose of a contract.
 It is a main & essential term without which contract
becomes redundant.
 On breach contract can be repudiated i.e terminated +
damages if any can be claimed.
 Goods can be returned or replaced & Price and/or damages
can be claimed.
 Condition can be converted to a Warranty mutually.
Warranty
 It is a term or stipulation secondary, collateral or
subsidiary to a contract.
 On breach, contract cannot be terminated only
damages can be claimed.
 Goods cannot be returned or replaced. Price can
not be recovered. Only loss incurred due to wrong
assurance can be recovered.
 Only repairs or replacement of defective parts or
components of goods can be done free of cost.
 Breach of Warranty is not breach of condition.
Condition & Warranty
 Depends on the intentions of parties & construction of a
contract. (i.e drafting of the terms of contract- Intent &
content)
 The situation & circumstances which led to formation of
contract. (Context)
 Intentions are inferred from terms of contract, background
situation & conduct of parties.
 It is desirable to put clear, specific & precise terms in
contract with details.
 Generally specific & special requirements of buyer are
conditions where as extra/additional assurances of seller
(not sought after by buyer) are warranties.
Caveat Emptor
(Let the Buyer beware)
 It’s a caution or warning to buyer.
 It Buyer’s responsibility & duty to buy goods as per his
requirements/suitability & satisfaction.
 Buyer buy at his risk. Buyer has to thank or blame himself
for goods received.
 Seller is under no obligation to disclose defects in goods.
 General rule has few exceptions.
 An outdated concept replaced by “Let the seller beware” on
passing of Consumer Law for end users.
Thanks & Best Wishes.
Dr. NYP