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MARWARI COLLEGE RANCHI
BUSINESS LAW
What is Business Law?
Business Law is also known as Commercial law or corporate law, is the body of law that applies to the rights, relations, and conduct of persons and businesses engaged in commerce, merchandising, trade, and sales. It is often considered a branch of civil law and deals with issues of both private law and public law.
Meaning of Law
The word ‘ Law ’ has been derived from the Teutonic word ‘ Lag , which means ‘definite’. On this basis, Law can be defined as a definite rule of conduct and human relations. It also means a uniform rule of conduct, which is applicable equally to all the people of the State. Law prescribes and regulates general conditions of human activity in the state. “LA “Law is the body of principles recognized and applied by the state in the administration of justice.” – Salmond
Introduction to Business Law
Business law encompasses all of the laws that dictate how to form and run a business. This includes all of the laws that govern how to start, buy, manage and close or sell any type of business. Business laws establish the rules that all businesses should follow. A well-informed businessperson will be generally familiar with business laws and know when to seek the advice of a licensed attorney. Business law includes state and federal laws, as well as administrative regulations.
Business Law Definition
Business law defines as a branch of law that “ regulates relations that originate from conducting economic activities or that are in a close subject or functional relation with such activities.
Business Law Meaning
Business Law originated in the common law system , particularly the one in the United States of America. By its content, it is a counterpart of the term “commercial law”. The reasons to adopt the term “business law” are the following:
- In our area, commerce is understood as the exchange of goods for money rather than as an equivalent of all economic activities;
- the term “economic law” is not common in market economies as it reminds of an enforced legal administrative framework of conducting economic activities;
- “Social property” as a proprietary basis of “economic law” has disappeared.
Business Law of India
Prior to the enactment of the various Acts constituting Business Law, the personal laws of the parties to the suit regulated business transactions. Their respective laws and usages governed the rights of Hindus and Muslims. Where both parties were Hindus, the Hindu Law regulated them and where both parties were Muslims, the Mohammad and Law was applied. Gradually, the need for the enactment of a uniform law regulating the contracts was realized and this gave birth to the Indian Contract Act 1872
Summary
Business law encompasses all of the laws that dictate how to form and run a business. This includes all of the laws that govern how to start, buy, manage and close or sell any type of business. The word ‘ Law ’ has been derived from the Teutonic word ‘ Lag , which means ‘ definite ’. On this basis, Law can be defined as a definite rule of conduct and human relations. It also means a uniform rule of conduct, which is applicable equally to all the people of the State. There are various branches of law like International law, constitutional law, criminal law, civil law, business law or mercantile law.
Indian Contract Act, 1872
The Law of Contract constitutes the most important branch of Mercantile or Commercial Law. The superstructure of modern business is built upon the foundation. It affects everybody, more so, trade, commerce and industry. It may be said that the contract is the foundation of the civilized world.
Elements of a Valid Contract
Section 10 of the Indian Contract Act, 1872 provides that “ 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 ”.
Thus, the essential elements of a valid contract are as follows:
- An offer or proposal by one party and acceptance of that offer by another party resulting in an agreement —consensus-ad-idem.
- An intention to create legal relations or intent to have legal consequences.
- The agreement is supported by a lawful consideration.
- The parties to the contract are legally capable of contracting.
- Genuine consent between the parties.
- The object and consideration of the contract is legal and is not opposed to public policy.
- The terms of the contract are certain. Therefore, to form a valid contract there must be (i) an agreement (ii) based on the genuine consent of the parties, (iii) supported by a lawful consideration, (iv) made for a lawful object, and (v) between the competent parties. Not expressly declared to be void The last essential elements of a valid contract to clinch a contract are that the agreement entered into for this purpose must not be which the law declares to be either illegal or void. An illegal agreement is an agreement expressly or impliedly prohibited by law. A void agreement is one without any legal effects. Example : Threat to commit murder or making/publishing defamatory statements or entering into agreements, which are opposed, to public policy is illegal in nature. Similarly, any agreement in restraint of trade, marriage and legal proceedings etc. are classic examples of void agreements.
Consideration Section 2(d) of the Indian Contract Act, 1872 defines consideration thus: “ when at the desire of the promisor, the promise or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or to abstain from doing something, such act or abstinence or promise is called a consideration for the promise ”. In simple words ‘Consideration’ would generally mean ‘compensation’ for doing or omitting to do an act or deed. It is also referred to as ‘quid pro quo’ viz ‘something in return for another thing’. Such a consideration should be a lawful consideration. Example : A agrees to sell his toys to B for Rs. 100, B’s promise to pay Rs. 100 is the consideration for A’s promise to sell his toys and A’s promise to sell the toys is the consideration for B’s promise to pay Rs. 100.
Summary
The Indian Contract Act mostly deals with the general principles and rules governing contracts. The Act is divisible into two parts.
- The first part (Section 1- 75) deals with the general principles of the law of contract, and therefore applies to all contracts irrespective of their nature.
- The second part (Sections 124-238) deals with certain special kinds of contracts, namely contracts of Indemnity and Guarantee, Bailment, Pledge, and Agency. According to Section 2 (h) of the Indian Contract Act, 1872 “An agreement enforceable by law is a contract.” A contract, therefore, is a combination of the two elements:
- an agreement
- an obligation
Types of Contract in Business Law
Types of contract are divided into 3 types:
- On the Basis of the Mode of Formation
- On the Basis of Performance
- On the Basis of validity or Enforceability
Example: If Mr A leaves his goods at Mr B’s shop by mistake, then it is for Mr. B to return the goods or to compensate for the price. E-contract An e-contract is a contract made through the digital mode. Example: Via Internet Executed contract In an executed contract, both the parties have performed their promises under a contract. Example: A contracts to buy a car from B by paying cash, B instantly delivers his car. Executory contract In an Executory contract, both the parties are yet to perform their promises. Example: A sells his car to B for Rs. 2 lakh. If A is still to deliver the car and B is yet to pay the price, it is an executory contract. Partly Executed and partly executory contract In a partly executed and partly executory contract, one party has already performed his promised and the other party has yet to execute his promise. Example: Anuj sells his bike to Bibek. Though Anuj has delivered the bike, Bibek has yet to pay the price. For Anuj, it is an executed contract, whereas it is an executory contract on the part of Bibek since the price has yet to be paid. Unilateral Contract A unilateral contract is also known as a one-sided contract. It is a type of contract where only one party has to perform his promise. Example: Anuj promises to pay Rs. 1000 to anyone who finds his lost cellphone. B finds and returns it to Anuj. From the time B found the cellphone, the contract came into existence. Now Anuj has to perform his promise, i.e. the payment of Rs. 1,000. Bilateral contract A Bilateral contract is one where the obligation or promise is outstanding on the part of both the parties. It is also known as a two-sided contract. Example : Aj promises to sell his car to Bj for Rs. 1 lakh and agrees to deliver the car on the receipt of the payment by the end of the week. The contract is bilateral, as both the parties have exchanged a promise to be performed within a stipulated time.
Valid contract If the contract entered into by the parties and satisfies all the elements of a valid contract as per the act, it is said to be a valid contract. Void contract Section 2 (j) states as follows: “A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable”. Thus, a void contract is one, which cannot be enforced by a court of law. Example : Mr Aj agrees to write a book with a publisher. After few days, Aj dies in an accident. Here the contract becomes void due to the impossibility of performance of the contract. It may be added by way of clarification here that when a contract is void, it is not a contract at all but for the purpose of identifying it, it has to be called a void contract. Voidable contract Section 2(i) defines that an agreement, which is enforceable by law at the option of one or more parties but not at the option of the other or others, is a voidable contract. This in fact means where one of the parties to the agreement is in a position or is legally entitled or authorized to avoid performing his part, then the agreement is treated and becomes voidable. Such a right might arise from the fact that the contract may have been brought about by one of the parties by coercion , undue influence , fraud or misrepresentation and hence the other party has a right to treat it as a voidable contract. Illegal contract Illegal contract are those that are forbidden by law. All illegal contracts are hence void also. Because of the illegality of their nature, they cannot be enforced by any court of law. In fact, even associated contracts cannot be enforced. Contracts, which are opposed to public policy or immoral, are illegal. Similarly, contracts to commit a crime like supari contracts are illegal contracts. Unenforceable contract A type of contract , which satisfies all the requirements of the contract but has technical defects is called an unenforceable contract. A contract is said to have a technical defect when it does not fulfil the legal formalities required by some other act. When such legal formalities are compiled are complied with, later on, the act becomes enforceable.
Executed contract – Which has been completely performed by all the parties. Executory contract – One in which something remains to be done by all the parties. Bilateral contracts – Where the obligations on the part of both the parties are outstanding at the time of formation of the contract. Unilateral contract – Where only one party has to perform his duty or obligation.
