Assignment for business law-2

7/29/2019 Assignment for business law-2

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According to Salmond a contract is

An agreement creating and defining obligations between the parties

According to Sir William Anson,

A contract is-an agreement enforceable at law made between two or more persons, by which rights

are acquired by one or more to acts or forbearances on the part of the other or others.

An agreement becomes enforceable by law when it fulfills certain conditions. These conditions, which

may be called the Essential Elements of a Contract, are explained below.

1. Offer and Acceptance:

There must be a lawful offer by one party and a lawful acceptance of the offer by the other party or

parties. The adjective lawful implies that the offer and acceptance must conform to the rules laid

down in the Indian Contract Act regarding offer and acceptance.

2. Intention to create Legal Relationship:

There must be an intention (among the parties) that the agreement `shall result in or create legal

relations. An agreement to dine at a friend house is not an agreement intended to create legal

relations and is not a contract.

But an agreement to buy and sell goods or an agreement to marry, are agreements intended to create

some legal relationship and are therefore contracts, provided the other essential elements are present.

3. Lawful Consideration:

Subject to certain exceptions, an agreement is legally enforceable only when each of the parties to it

gives something and gets something.


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An agreement to do something for nothing is usually not enforceable by law. The something given or

obtained is called consideration. The consideration may be; in act (doing something) or forbearance

(not doing something) or a promise to do or not to do something. Consideration may be past

(something already done or not done).It may also be present or future: But only those considerations

are valid which are lawful.

4. Capacity of Parties:

The parties to an agreement must be legally capable of entering into an agreement otherwise it cannot

be enforced by a court of law.

Want of capacity arises from minority, lunacy, idiocy, drunkenness, and similar other factors. If any

of the parties to the agreement suffers from any such disability, the agreement is not enforceable by

law, except in some special cases.

5. Free Consent:

In order to be enforceable, an agreement must be based on the free consent of all the parties. There is

absence of genuine consent if the agreement is induced by coercion, undue influence, mistake,

misrepresentation, and fraud.

A person guilty of coercion, undue influence etc. cannot enforce the agreement. The other party (the

aggrieved party) can enforce it, subject to rules laid down in the Act.

6. Legality of the Object:

The object for which the agreement has been-entered into must not be illegal, or immoral or opposed

to public policy.

7. Certainty:

The agreement must not be vague. It must be possible to ascertain the meaning of the agreement, for

otherwise it cannot be enforced.

8. Possibility of Performance:

The agreement must be capable of being performed. A promise to do an impossible thing cannot be

enforced.

9. Void Agreements:

An agreement so made must not have been expressly declared to be void. Under Indian Contract Act

there are five categories of agreements which are expressly declared to be void. They are:

1. Agreement in restraint, to marriage. (Sec. 26)2. Agreement in restraint of trade. (Sec. 27)3. Agreement in restraint of proceedings.4. Agreements having uncertain meaning... (Sec. 29}5. Wagering agreement. (Sec. 30)
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10. Writing, Registration and Legal Formalities:

An oral, contract is a perfectly good contract, except in those cases where writing and/or registration

is required by some statute. In India writing is required in cases of lease, gift, sale and mortgage of

immovable property: negotiable instruments; memorandum and articles of association of a company

etc. Registration is compulsory in cases of documents coming. Within the purview of Section 17 ofthe registration Act, e.g., mortgage, deeds covering immovable property. The terms of an oral contract

are sometimes difficult to prove.

Therefore important agreements are usually entered into in writing even in cases where writing is not

compulsory.

Conclusion

.

The elements mentioned above must all be present. If any one of them is absent, the agreement doesnot become a contract. An agreement which fulfills a11 the essential elements is enforceable by law

and is called a contract. From this it follows that, every contract is an agreement but all agreements

are not contracts.

Every contract gives rise to certain legal obligations or duties on the part of the contracting parties.

The legal obligations are enforced by the courts. The Indian Contract Act contains rules regarding

each of the elements mentioned above. These rules are discussed in the subsequent chapters. .

Offer

A proposal is also called an offer. The promisor or the person making the offer is called the

offeror. The person to whom the offer is made is called the offeree.

Promise and Acceptance

When, the person to whom the proposal is made signifies his assent thereto, the proposal is

said to be accepted. A proposal when accepted becomes a promise.-Sec, 2(b),

The person making the proposal is called the `promisor and the person accepting the proposal is

called the `promisee. -Sec. 2(c).


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The Contract Act contains various rules regarding offer or proposal. They can be summed up as

follows:

1.Anoffer may beexpress or maybe implied from the

circumstances:

An offer may be made in two ways:

I. by words, spoken or written and

II. by conduct.

When an-offer is made by stating so in words or in writing, it is called an Express offer. When an

offer is implied from the conduct of a person, it is. Called an Implied offer. Examples (i) and (it) in

the last page, are cases of express offer. Example - (ii) is a case of an implied offer.

In so far .as the proposal or acceptance of any promise is. Made in words, the promise is said to beexpress. In so far as such proposal or acceptance is made otherwise than in words, the promise is said

to be implied-Sec. 9.

2.An offermaybe madeto a definite person;

To some definite class of persons; or to the world at large an offer made to a definite person or a

definite class of person is called a Specific offer. An offer sent to all persons (or the world at large) is

called a General offer.)Example (i) is an offer to a definite person; example (ii) is an offer to a

definite class of persons; and example (iii) is an offer to the world at large. (See pp. 17-18)

3. Legal relationship is required:

The offer must be one which -is capable of creating a legal relationship. A social party or an invitation

to play cards is not a legal relationship. Therefore, an offer to such an affair does not lead to a binding

contract. (See chapter 3, Part I, p. 33)

The terms of the offer must be certain, definite, unambiguous and not vague: X says to Y, I will give

some money if you marry Z . This is not an offer which can be accepted because the amount of

money to be paid is not certain.

1. A mere statement of intention is not an offer :2. A distinction is usually made, between an offer and a statement of intention.3. Price-lists and catalogues, and enquiries for customers are merely statements of intention.


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4. They are not regarded as offers but as invitation to others to made offers.An advertisement in a newspaper or elsewhere may be so worded that it amounts to an offer. But

ordinarily and advertisement is considered to be an invitation to make offers.

Similarly, in an auction sale, articles are displayed with an intention that the bidders present may bid

for them i.e. may make an offer. Thus in an auction sale a bid is an otter while the fall of the hammer

signifies the acceptance of the auctioneer. (Payre v. Cave)

Examples:

A label on an article in a shopkeepers showcase stating `price Rs. S is considered to be the expression

of an intention to sell the article at Rs.5. If is not an offer to the .world at large which can be accepted

by anybody. The intending purchaser who wishes to buy the article is the proposer. The shopkeeper

may or may not accept the proposal. The same rule applies to pricelist and catalogues. Fisher v. Bell.

6. Offer must be communicated to the offered:

A person cannot accept an offer unless he knows of the existence of the offer.

P offers a reward to anyone who returns his lost dog. Q finding the dog brings it to P without having

heard of the offer. Held, he was not entitled to the reward. Fitch v. Snedaker In this case it was argued

that a man cannot accept an offer without intending to do so, and he cannot intend to accept an offer

of which he was ignorant.

In Lalman v. Gauri Dutt. G sent his servant in search of his missing nephew. Subsequently G

announced a reward for information concerning the boy. L brought back the missing boy, without

having known of the reward. Held, there was so contract between L and G and the reward cannot be

claimed.

7. An offer may be conditional:

An offer may be made subject to conditions. In such cases, the conditions must be clearly

communicated to the offeree.

If a person accepts an offer without knowledge of the conditions, the offeror cannot claim fulfillment

of the conditions. But if the conditions are clearly written or expressed and should have been known

to the offeree, he cannot plead ignorance of the conditions.

Example:

T, who could not read, took an excursion ticket on the railway. On the front of the ticket was printed

for conditions see back. One of the conditions was that the railway company would not be liable for

personal injuries to passengers. T was injured by a railway accident. Held, T was bound by the

conditions and could not recover any damages. Thomson v. L. M. & S Rly


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Revocation of an Offer. When does an Offer Lapse?

An offer comes to an end, and is no longer open to acceptance under the following circumstances.-Sec

6.

1. By notice

If the offeror gives notice of revocation to the other party, i.e., expressly withdraws the offer, and the

offer comes to an end. An offer may be revoked any time before acceptance. But not afterwards. Once

an offer is accepted there is a binding contract. The acceptance of an offer becomes binding on the

offeror as soon as the acceptance is, put in course of communication to the offeror so as to be out of

the power of the acceptor. But any time before this happens the offer may be revoked.

A proposal is sent by X to Y and is accepted by Y by letter. The proposal might have been revoked

any time before the letter of acceptance was posted but it cannot be revoked after the letter is posted.

The notice of revocation does not take effect until it comes within the knowledge of the offeree.

2. By lapse of time

When the proposer prescribes a time within which the proposal must be accepted, the proposal lapses

as soon as the time expires.

3. After expiry of reasonable time

If no time has been prescribed, the proposal lapses after the expiry of a reasonable time. What is

reasonable time will depend on the circumstances of the case.

Example:

On 8th June, M offered to take shares in R Company. He received a letter of allotment on 23rd

November. M refused to take the shares. Held, M was entitled to refuse as the offer had lapsed by the

delay in acceptance. Rams gate Victoria Hotel Co. v. Montefiore.

4. By failure of a condition precedent


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An offer lapses by the failure of the acceptor to fulfill a condition precedent to acceptance, where such

a condition has been prescribed

Example:

P says to Q. I will sell my house at Delhi to you for Rs. 50,000 if you are married. The offer cannot

be accepted until and unless Q is married.

5. By death or insanity

An offer lapses by the death or insanity of the proposer, if the fact of his death or insanity comes to

the knowledge of the acceptor before acceptance.

6. Counter Offer

When a counter offer is given, the original offer lapse. See the Case of Hyde v. Wrench

7. By refusal

A proposal once refused is dead and cannot be revived by its subsequent acceptance.

Example:

An offer to sell his farm to B for Rs. 1,000. B replies offering to pay Rs. 950. A refuses. Subsequently

B writes accepting the original offer. There is no contract because the original offer has lapsed.

Definition of Consideration

Consideration is an essential element in a contract. Subject to certain exceptions, an agreement is not

enforceable unless each party to the agreement gets something: This something is called

consideration: It is used in the sense of quid -pro quo i.e. something in return.

In the English case, Currie v. Misa, consideration was defined as, some right, interest profit or

benefit accruing to one party, or some -forbearance, detriment, loss or responsibility given; suffered

or undertaken by the other.

Section 2(d) of the Contract Act defines consideration as follows: When, at the desire of the

promisor, the promisee 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.

Examples


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(i) P agrees to sell a house to Q for Rs. 80,000. For P s promise, the V consideration is Rs: 80; 000.

For Qs promise, the consideration is the house:

The following rules may be laid down regarding consideration

1. Desire (or request) of the promisor is essential:

The act done or lass suffered by the promisee must have been done or suffered at the desire of the

promisor. An act done without any request is a voluntary act and does not come within the definition

of consideration.

Examples

X promised to pay. Y some money by a letter. Y showed the, letter to Z who thereupon consented tothe marriage of her daughter with Y. Z cannot force X to pay the money to Y because them is no

connection between the marriage and the promise to pay. Dashwood v.Jermyn

.

2. The-consideration must bereal:

The consideration must have some value in the eye of taw.

It must not be sham or illusory.

The impossible acts and illusory or non-existing goods cannot support a contract. Therefore, real

consideration comes from good consideration. (See p. 39)

A contribution to charity is without consideration. Therefore, it is not real consideration.

Examples:

No consideration : V owed 1208 to E who told V that if the money was not paid by 7th July he would

file a bankruptcy petition against V Thereupon V promised to pay the money before 12 oclock on 8th

July and E agreed not to file the petition before that time. Held, there was no consideration for Es

promise. Vanburgen v. St. Edmunds Properties Ltd


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3. Public duty:

Where the promise is already under an existing public duty, an express promise to perform, or

performance of, that duty will not amount to consideration.

There will be no detriment to the promisee or benefit to the promisor over and above their existingrights and liabilities

Example: A contract to pay money to a witness who has received a subpoena to appear at a

trial. Collins v. Godefroy

4. Promise to a stranger:

But a promise made to a stranger to perform an existing contract, is enforceable because the promisor

undertakes a new obligation upon himself -which can be enforced by the stranger.

X wrote to his nephew B, promising to pay him an annuity of 150 in consideration of his marrying

C B was already engaged to marry C Held, the fulfillment of Bs contract with C was consideration to

support Xs promise to pay the annuity. Shadwell v. Shadwell;

5. Consideration neednotbe adequate:

Section 25 (explanation 2) provides that, An agreement to which the consent of the party is freely

given is not void merely because the consideration is inadequate; but the inadequacy of the consid-

eration may be taken into account by the court in determining the question whether the consent of the

promisor was freely given.

Consideration means a reasonable equivalent or other valuable benefit passed on by the promisor tothe promisee or by the transferor `to the transferee. Similarly, when the word `Consideration is

qualified by the word `adequate, it makes consideration stronger so as to make it sufficient and

valuable having regard to the facts, circumstances and necessities of the case. Sonia Bhatia v. State

of U. P. and others.

Examples:

S files a suit against B for Rs. 5,000. Subsequently he agrees to withdraw the suit on payment of Rs.

3,000. The agreement is a contract. The withdrawal of a suit is valuable consideration so as to support

the promise to pay money.

6. The consideration must not be illegal, immoral, or

opposed to public policy:

If either the consideration of the object of the agreement is illegal, the agreement cannot be enforced.

The same principle applies if the consideration is immoral or opposed to public policy. [See, Section

23 and Ch. S for examples of such agreements.

7. The consideration may be present, past, or future:

This follows from the definition of consideration given in the Act.


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8. Consideration may move from the promise or from

any other person:

A person granted some properties to his wife C directing her at the same time to pay an annual

allowance to his brother R C also entered into an agreement with R promising to pay the allowance to

R.

This agreement can, be enforced by R even though no part of the consideration received by C moved

from R Chinnaya v. Ramaya.

A stranger to the consideration can sue to enforce the contract, though a stranger to the contract

cannot. In England, a stranger to the consideration .cannot sues on the contract.

9. What is good consideration? :

The rules or the necessary factors for consideration can be summed up as follows:

(1) There must be desire of the promisor;

(2) It must be real;

(3) Reasonable;

(4) Not illegal, immoral or opposed to public policy;

(5) Present, past or future; and

(6) From the promisee or any person.

Subject to the above essential factors, a good consideration can be any of the following:

(1) Physical goods;

(2) Services;

(3) Forbearance (for example not to sue);

(4) Arbitration or the compromise of disputed claims, and

(5) Settlement or composition with creditors.


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Explanation

Consideration is essential for the validity of a contract. "A promise without consideration- is a gift;

one made for a consideration is a bargain".-Salmond and Windfield, Law of Contracts.

A promise without consideration is a gratuitous undertaking and cannot create a legal obligation.

Under Roman law an agreement without consideration was called a nudum pactum and was

unenforceable. Under English law simple contracts must be supported by consideration but especiallycontracts require no consideration. Under Indian law the presence of consideration is, as a rule,

essential to the validity of contracts.

Exceptions

There are exceptional cases where a contract is enforceable even though there is no consideration.

They are as follows:

I. Natural love and affection :An agreement made without consideration

is valid if, `it is expressed in writing and registered under the law for the time being in force for the

registration of documents, and is made on account of natural love and affection between parties

standing in a near relation to each other.''-Sec 25(1).

An agreement without consideration is valid under Section 25(l) only if the following requirements

are complied with :

(i) The agreement is made by a written document.


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(ii) The document is registered according to the law relating to registration in force at

the time.

(iii) The agreement is made on account of natural lave and affection.

(iv)The parties- to the agreement stand in a near relation to each other.

Examples

A for natural love and affection, promises to give his son B, Rs. 1,000. A puts his promise to B in

writing and registers it. This is a contract. [Illustration (b) to Section 25]

2. Voluntary Compensation:

A promise made without any consideration is valid if, it is a promise to compensat e wholly or in

part, a person who has already voluntarily done something for the promisor, or something which the

promisor was legally compellable to do.-Sec. 25(2).

Section 25(2) applies when there is a -voluntary act by one party and there is a subsequent promise

(by the party benefited) to pay compensation to the former. The term `voluntarily signifies that the

act was done, ` otherwise than at the desire of the promisor.

Examples

(i) D finds Bs purse and gives it to him. B promises to give D Rs. 50. This is a contract.

(ii) D supports Bs infant son. B promises to pay Ds expenses in so doing. This is a contract.

3. time-barred debt:

A promise to pay, wholly or in part, a debt which is barred by the law of limitation can be enforced if

the promise is in writing and is signed by the debtor or his authorized agent.-Sec. 25(3).

A debt barred by limitation cannot be recovered. Therefore a promise to repay such a debt is, strictly

speaking, without any consideration. But nevertheless such a promise can be enforced if the debtor or

his authorized agent makes written and signed promise to repay tithe debt must be a liquidated or

ascertained sum of money and there must be a definite promise to pay. A mere acknowledgement of

the debt is not enough.

Example

D woes B Rs. 1000 but the debt is barred by the Limitation Act. D signs a written promise to pay B

Rs. 500 on account of the debt. This is a contract.

4. Agency:

No consideration is required to create an agency.-Sec. 185.

5. Completed gift:


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The rule no consideration; no contract does not apply to completed gifts. Explanation l, to Section

25 states that, Nothing in this section shall affect the validity as between the donor and the donee, of

any gift actually made.

Thus, if a person gives certain properties to another according to the provisions of the Transfer of

Property Act (i.e., by a written and registered document) he cannot subsequently demand theproperty back on the ground that there was no consideration.

Definition and characteristics:

Partnership is the relation between persons who have agreed to share the profits of a

business carried on by all or any of them acting for all. A partnership as defined in the act,

must have three essential elements:

1. There must be an agreement entered into by two or more persons.2. The agreement must be to share the profits of a business.3. The business must be carried on by all or any of them acting for all.

1.Voluntary agreement : the first elements shows the voluntarycontractual nature of partnership. A partnership can only arise as a result of anagreement, express or implied, between two or more person. Where there is no

agreement there is no partnership. But a partnership cannot be formed with more

than ten person in banking and twenty person in other types of business. A

partnership with persons exceeding the above limits must be registered under a

companies act.

2. Sharing of profits of a business: The second elementsstate the motive underlying the information of a partnership. It also lays down that

the existence of a business is essential to a partnership business include any trade,

occupation or profession if two or more person join together to form a music clubit is not a partnership because there is no business in this case. But if two or more

persons join together to give musical performance to the public with a view to

earning profit, there is a business and a partnership is formed.

3.Mutual agency: The third element is the most important feature ofpartnership. It states that person carrying on business in partnership is agents as

well as principles. The business of a firm is carried on by all or by any one or more

of them on behalf of all. Every partner has the authority to act on behalf of all and

can, by his actions, bind all the partners of the firm, each partner is the agent of the

others in all matters connected with the business of the partnership. The law of

partnership has therefore been called a branch of the law agency.


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4. The test of a true partnership: in a true partnership, all theessential elements mentioned above must be present. If all the relevant facts taken

together show that all the three essential elements are present, the group of persons

doing business together will be called a partnership.

Co-ownership means joint ownership. A and B jointly purchase a horse. They are co

owners but not necessarily partners. The distinction between co ownership and partnership

can be described as follows:

1. In a partnership each partner is the agent of the others but a co owner is not theagent of the other owners. The rights of a co owner cannot be affected by any act

done by the other owners.

2. Partnership always arises out of agreement. Co ownership may arise by agreementor by operation of law. A and B inherit a house from their father. They become co

owners by operation of the law of inheritance.

3. A co owner can transfer his interest to a third party without the consent of the otherco owners. A partner can transfer his interest, under certain circumstances, but the

transferee can never become a partner of the business without the consent of the

other partners.4. A partnership always implies a business. Co ownership may exist without any

business, e.g. joint ownership of a residential house.

5. Since co ownership may exist without a business. The question of sharing profitsor losses on immaterial in a co ownership. In a partnership there must be sharing of

profits.

6. A partner has a lien on the partnership assets for moneys spent by him for thepartnership. A co owner has no lien under similar circumstances.


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The rights of partners, and the relations of partners to one another, are determined by the

agreement of the partners. The important rights of partners are summarized below:

1. Conduct of business:Every partner has a right to take part in theconduct of the business.

2. Can express opinion: every partner shall have the right to express hisopinion.

3.Access, inspection, copy: Every partner has a right to haveaccess to and to inspect and copy any of the books of the firm.

4. Equity of profits:The partners are entitled to share equally in theprofits earned.

5. Interest on capital: A partner is entitled to get interest on the capitalout of profits only.

6.Interest on advance: A partner. Paid or advanced to the firm beyondthe amount of capital, is entitled to interest thereon at the rate of six per cent per

annum.

7. To get indemnity: The firm shall indemnify a partner in respect ofpayments made and liabilities incurred by him, in the ordinary and proper conduct

of the business and in doing such act, in any emergency.

8.Application of property of firm: The property of the firmshall be held and used by the partners exclusively for the purposes of the business.

9. Partners authority: Every partner has right to act on behalf of thefirm. He has express and implied authority.

10.Power in an emergency:he has certain powers in an emergency.11.Reconstitution: The constitution of a firm may be changed by the

introduction of a new partner, death, retirement , insolvency, expulsion or by the

transfer of a partners share to an outside.

12.Dissolution: A partner has the right to get the firm dissolved underappropriate circumstances. Upon dissolution, the partners have the right to get

accounts of the firm and surplus assets according to their shares.

13.Right to carrying on a competing business: By aspecial agreement, an outgoing partner can be prevented from carrying on a similarbusiness within a specified period or local limits,

14.Right to share profits after retirement: if afterretirement and the continuing partner carry on the business of the firm with the

property of the firm the outgoing partner is entitled to get share of profits or 6%

per annum of his share of the property of the firm at their option.


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The important duties of partners are summarized below:

1. Justice, faithfulness, true accounts, fullinformation:partner are bound to carry on the business of the firm to the

greatest common advantages, to be just and faithful to each other, and to render

true accounts and full things affecting the firm to any partner or his legal

representative.

2. To pay indemnity: every partner shall indemnify the firm for any losscaused to it by his fraud in the conduct of the business of the firm.

3. To attend diligently:Every partner is abound to attend diligently tohis duties.

4. No remuneration:Subject to any contract to the contrary, a partner is notentitled to received remuneration for taking part in the concert of the business.

5. Equality of losses:Subject to any contract to the country, partnersare bound to pay the losses of the firm equally.

6. To pay indemnity for willful neglect:A partner shallindemnity the firm for any loss caused to it by his willful neglect in the conduct of

the business of the firm.

7.No private benefits: A partner cannot use the partnership properties,directly or indirectly, for his own benefits.

8. To account for secret profit: If a partner derives any profitsfor himself from any transaction of the firm, or from the use of the property or

business connection of the firm or the firm name, he shall account for that profit

and pay it to the firm.

9. No secret profit: If a partner derives any competing business of thefirm, he shall account for and pay to the firm all profits made by him in that

business.

10.Unlimited liability:Every partner is liable for the acts of the firmdone while he is a partner. The liability is joint and several.

A firm may be dissolved on any of the following grounds:


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1. By agreement(sec.40):A firm may be dissolved any time with the

consent of all thepartners of the firm. Partnership is created by contract, it can also be

terminated by contract.

2. Compulsory dissolution(sec.41):A firm is dissolved____

(a) By the adjudication of all the partners or of all the partners but one asinsolvent, or

(b) By the happening of any event which makes the business of the firm unlawful.But if a firm has more than one undertaking, some of which become unlawful

and some remain lawful, the firm may continue to carry on the lawful

undertakings.

3. On the happening of certain

contingencies(sec.42):Subject to contract between the partners, a firm

is dissolved-----

(a) If constituted for a fixed term, by the expiry of that term;(b) If constituted to carry out one or more adventures or undertaking, by thecompletion thereof.

(c) By the death of a partner ; and(d) By the adjudication of a partner as an insolvent.

The partnership agreement may provide that the firm will not be dissolved in any of the

aforementioned cases. Such a provision is valid.

4. By notice(sec.43):where the partnershipis at will, the firm may be

dissolved by any partner giving notice in writing to all other partners of his intention todissolve the firm. The firm is dissolved as from the data mentioned in the notice as the

data of dissolution, or, if no data is mentioned, as from the data of communication of

the notice.

5. Dissolution by the court(sec.44): At the suit of a partner, the

court may dissolved a firm on any one of the following grounds:

(a) Insanity: if a partner has become of unsound mind. The suit for dissolution in

his case can be filed by the next friend of the insane partner or by any other

partner.

(b)

Permanent incapacity: if a partner becomes permanently incapable ofperforming his duties as a partner. Permanent incapacity may arise from an

incurable illness.

(c) Guilty conduct: if a partner is guilty of conduct which is likely to affect

prejudicially the carrying on of the business, regard being had to the nature of

the business. To justify

(d) Persisten breach agreement: If a partner wilfully and persistently commits

breach of the partnership agreement regarding management or otherwise

conducts himself.


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(e) Transfer of whole interest: If a partner has transferred the whole of this

interest in the firm to an outside or has allowed his interest to be sold in

execution of a decree.

(f) Loos: If the business of the firm cannot be carried on except at a loss. The

courts have been given discretion to dissolve a firm in cases where it isimpossible to make profits.

Just and equitable clauses: If the court considers it just equitable to

dissolve the firm. This clause give a discretion power to the court to dissolve a firm.

Company:

The term company is used to describe an association of a number of persons, formed for some

common purpose and registered according to the law relating to companies. Section 3(1) (i) of the

Companies Act, 1994 states that a company means, a company formed and registered under this Act

or an existing company.

Essential features of a company

1.Registration-

A Company comes into existence only after registration under the Companies Act. But a

Statutory Corporation is formed and commence business as notified or stated in the Act and

as passed in the Legislature.

2.Voluntary Association-A Company is an association of many people on a voluntary basis. Therefore a company is

formed by the choice and consent of the members.


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3.Capital-A Company must have a capital, otherwise it cannot work.

4.Permanent Existence-The Company has Perpetual Succession. The death or insolvency of a shareholder does not

affect its existence. A company comes into end only when it is liquidated according to

provision of the Company Act.

5.Legal Personality-A Company is regarded by law as a single person. It has a legal personality. This rule applies

even in the case of One-man Company.

6.Limited Liability-The liabilities of shareholders of a company are usually limited. The creditors of a company

are not creditors of individual shareholders and a decree obtained against a company cannot

be executed against any shareholders. It can only be executed against the assets of the

company. According to the Company Act 1994 of Bangladesh, the liability of shareholder

may be limited by share under section 6(a) (4) or limited by the guarantee under section

7(a)(4).

7.Transferability-The shareholder of a company can transfer its share and ordinarily the transferee becomes a

member of the company.

8.Statutory Obligation-A Company is required to comply with various statutory obligations regarding management,

e.g., filling balance sheets, maintaining proper account books and registers etc.

9.Common Seal-Company cannot sign on any contract because it is artificial person and it works with

common seal.

10. Right To Sue-Company can sue on other parties like natural person for protecting its assets and properties.

Other persons can also change on the company.


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11. Financial Power-A Company is given exclusive power and the only medium of organizing business which is

given the privilege of raising capital by public subscription either by way of shares ordebentures.

PRIVATE LIMITED COMPANY PUBLIC SECTOR

1. PRIVATE LIMITED COMPANY IS OWNED BYPRIVATE INDIVIDUALS.

1. PUBLIC SECTOR INCLUDES ALL BUSINESS OWN BYSTATE AND LOCAL GOVERNMENT.

2. PRODUCTS ARE COSTLY THAN PUBLICCOMPANIES.

2. LOW PRICE, SO THAT EVERYBODY CAN AFFORDTHE SERVICE.

3. SOME COMPANY DOESNT PROVIDE SERVICE INLOCAL ISOLATED AREAS.

3. OFFER A SERVICE TO THE PUBLIC IN ALL AREAS OFTHE COUNTRY.

4. WORKS FOR LIMITED NUMBER OF PEOPLE 4. WORKS FOR EVERYBODY5. MOST OF THE PRIVATE COMPANIES WORK FORPROFIT. 5. WORKS FOR PEOPLE WITH LOW PROFIT MOTIVE6. ITS MINIMUM NUMBER OF PERSONS IS TWO

AND THE MAXIMUM IS 50.

6. ITS MINIMUM NUMBER OF PERSONS IS SEVENAND THE MAXIMUM IS UNLIMITED.

7. IT MAKES THE USE OF PRIVATE LIMITED AFTERITS NAME.

7. IT MAKES THE USE OF THE WORD LIMITED AFTERTHE NAME.

8. IT CAN COMMENCE ITS BUSINESS OPERATIONAFTER GETTING CERTIFICATE OF

INCORPORATION .

8. IT REQUIRES BOTH THE CERTIFICATE OFINCORPORATION AND THE CERTIFICATE OF

COMMENCEMENT FOR ITS COMMENCEMENT.

9. THE MEMORANDUM OF ASSOCIATION AND THEARTICLES OF ASSOCIATION IS SIGNED BY AT

LEAST TWO PERSONS.

9. ITS MEMORANDUM AND ARTICLES OFASSOCIATION IS SIGNED BY AT LEAST SEVEN

PERSONS.

10.THE FILLING OF BOTH MEMORANDUM ANDARTICLE OF ASSOCIATION IS OBLIGATORY.

11.IT DOES NOT REQUIRE THE FILLING OF THEPROSPECTUS OR STATEMENT-IN-LIEU OF

PROSPECTUS.

10.IT MAY NOT HAVE ITS OWN ARTICLES OFASSOCIATION BECAUSE IT MAY ADOPT TABLE 'A'.

11.IT MUST FILE PROSPECTUS OR STATEMENT INLIEU OF PROSPECTUS BEFORE ALLOTMENT OF

SHARES.

12.IT CANNOT SELL SHARES TO THE GENERALPUBLIC IN THE OPEN MARKET.

12.IT SELLS SHARES TO THE GENERAL PUBLIC IN THEOPEN MARKET.


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13.TRANSFER OF SHARE IS RESTRICTED IN THEARTICLES OF ASSOCIATION.

13.TRANSFER OF SHARES IS NOT RESTRICTED AND A SSUCH SHARES ARE FREELY TRANSFERABLE AND

ARE QUOTED IN THE STOCK EXCHANGE.

14.THERE ARE OF LEAST TWO DIRECTORS ANDTHEY NEED NOT RETIRE BY ROTATION.

14.IT HAS AT LEAST 3 DIRECTORS AND THEY ARESUBJECT TO RETIRE BY ROTATION.

15.THERE IS NO LEGAL RESTRICTION ONDIRECTOR'S REMUNERATION.

15.THE DIRECTORS CANNOT DRAW REMUNERATIONMORE THAN 11 PERCENT OF THE NET PROFIT OF

THE COMPANY.

Documents

Assignment for business law-2