LAW(LEGAL ASPECTS)

LAW

system of rules and regulations which a country or society recognizes as binding on its citizens, which the authorities may enforce, and violation of which attracts punitive action. These laws are generally contained in the constitutions, legislations, judicial decisions etc.

PURPOSE/FUNCTIONS OF LAW

To deliver justice. To provide equality and uniformity. To maintain impartiality. To maintain law and order. To maintain social control. To resolve conflicts. vii. To bring orderly change through law and social

reform.

SOURCES OF LAW

Customs Religion Judicial decisions Legislation equity

INDIAN CONTRACT ACT

Law of contract lays down legal rules relating to promises, their formation, performance and enforcement.

Agreement : A negotiated and usually legally enforceable understanding between two or more legally.

Contract :A contract is a legally enforceable agreement between two or more parties with mutual obligations.

ESSENTIAL INGREDIENTS OF CONTRACT

An offer & acceptance A promise to perform A valuable and legal consideration Free consent of both parties Parties should be competent to contract Object should be lawful Possibility of Performance Contract should not have been declared void Legality

FEATURES

Proposal and acceptance Consideration Capacity to contract Free consent Legality of object Discharge of contract Breach of contract

PROPOSAL AND ACCEPTANCE

Proposal/offer : When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. [section 2(a)].

Types of offer : express and implied Acceptance : when one person signifies his

assent on the proposal made.

CONSIDERATION

Something in return  It is anything of value promised to another when

making a contract. It can take the form of money, physical objects, services, promised actions

If A signs a contract to buy a car from B for $5,000, A's consideration is the $5,000, and B's consideration is the car.

Promise : the proposal is said to be accepted. A pro posal, when accepted, becomes a promise.

Promisor and promise - The person making the proposal is called the “promisor”, and the person accepting the proposal is called the “promisee”. [section 2(c)].

Reciprocal promises - Promises which form the consideration or part of the consideration for each other are called reciprocal promises. [section 2(f)].

CAPACITY TO CONTRACT Minor Person of Unsound mind A person who is intoxicated state

Free consent : Consent of both parties must be free. It is not a free consent :

1.Coercion 2.Undue influence,

3.Fraud 4.Misrepresentation

5.Mistake

DISCHARGE OF CONTRACT Discharge of a contract relates to the circumstances in which

the contract is brought to an end. Where a contract is discharged, each party is freed from their continuing obligations under the contract.

Modes of discharge :•  Discharge by Performance• Discharge by repudiatory breach• Discharge by Agreement• Discharge by Frustration

BREACH OF CONTRACT If the party does not fulfill his contractual promise, or has

given information to the other party that he will not perform his duty as mentioned in the contract or if by his action and conduct he seems to be unable to perform the contract, he is said to breach the contract.

Anticipatory breach :Anticipatory breach occurs when the party declares his intention of non performing the contract before the performance is due.

Actual breach : when the party to contract refuses to perform his part at the time fixed for performance

WHAT AGREEMENT ARE CONTRACT

All agreements are contracts if they are made by the free consent of parties competent to contract, for a lawful considera tion and with a lawful object, and are not hereby expressly declared to be void. Nothing herein contained shall effect any law in force in India and not hereby expressly repealed, by which any contract is required to be made in writing or in the presence of witnesses, or any law relating to the registration of documents. [section 10].

REMEDIES FOR BREACH OF CONTRACT Recession of contract Suit for damage Suit for specific performance Suit for injunction Suit upon quantum profit

Quasi contract :A quasi contract is not a contract at all because one or other essential for the formation of a contract is absent It is a law upon a person for the benefit of another even in the absence of a contract. It is based on the principle of equity, which means no person shall be allowed to unjustly enrich himself at the expense of another such obligations are called quasi contracts

COMPANY LAW

A company can be defined as an "artificial person", invisible, intangible, created by or under law, with a discrete legal entity, perpetual succession and a common seal. It is not affected by the death, insanity or insolvency of an individual member.

A company is an association or collection of individuals, whether natural persons, legal persons, or a mixture of both. Company members share a common purpose 

CHARACTERISTICS

Separate legal entity Limited liability Perpetual succession Transferable shares Capacity to sue and being sued Professional management Corporate veil

CLASSIFICATION OF COMPANIES1. On the basis of incorporation Statuary company Registered company

2. On the basis of liability :

limited liability

3. On the basis of number of members private company Public company

4. On the basis of control : Holding Subsidiary company

5.On the basis of ownership Govt company Non govt company

MEMORANDUM OF ASSOCIATION

Memorandum of association is the document that governs the relationship between the company and the outside. It is one of the documents required to incorporate a company. MOA is required to file at incorporate of a company.

Name clause : name of registered entity Registered office clause: office address Object clause: aims & objective of company The association clause: 1st shareholder, his allocated shares The capital clause: share capital, minimum paid up capital The liability clause: limited liability, each member’s liability

ARTICLES OF ASSOCIATIONArticles of association is a document which defines the responsibility of the directors, the kind of business undertaken and the means by which shareholders exert control over BOD.

It covers : Powers, duties, rights and liabilities of Directors Powers, duties, rights and liabilities of members Rules for Meetings of the Company Dividends Borrowing powers of the company Calls on shares Transfer of shares,Forfeiture of shares Voting powers of members

Doctrine of constructive notice

Documents are open & accessible to all. Presumption that any outsider dealing with company

has read & understood the documents. It is a negative doctrine, acting only against the

outsiders & not the company.

DOCTRINE OF INDOOR MANAGEMENT

Persons dealing with the company in good faith have a right to assume that the internal requirements prescribed in public documents have been observed

Persons are not bound to enquire into regularity of internal proceedings Exceptions :

Knowledge of irregularity Negligence on part of the outsider Forgery Acts outside scope of apparent authority

SHARES The capital of a company is divided into shares. Each share

forms a unit of ownership and is offered for sale so as to raise capital for the company.

Types of shares : Equity share Preference shares Bonus shares Right shares Allotment of shares Calls on shares Forfeiture of shares Share certificate Share warrant

Equity shares: it give their holders the power to share the earnings/profits in the company as well as a vote in the AGMs of the company. Such a shareholder has to share the profits and also bear the losses incurred by the company.  Equity shareholders are regarded as the real owners of the company.

Preference shares: preference shares earn their holders only dividends, which are fixed, giving no voting rights

Bonus shares : bonus shares are additional shares given to the shareholders without any additional cost, based upon No. of shares that a shareholder owns.

Right shares : right shares are those shares which are issued to existing shareholders. company can issue right shares only after two years of creation of company.

Allotment of shares: an appropriation of a certain no. of shares to an applicant in response of his application for shares. Allotment means distribution of shares who has submitted written application.

Oversubscription: the excess no. of shares that investors want to buy but are not available due to high demand.

Calls on shares: a demand made by company on its shareholders to pay whole or part of the balance remaining unpaid on each share at any time during the life time of a company.

Forfeiture of shares : share forfeiture is the process by which the directors of a company cancels the power of shareholders if he does not pay his call money when the company demands for it. Company gives 14 days notice.

Share certificate: a certificate issued by a company certifying that on the date the certificate is issued a certain person in the registered owner of shares in the company.

Share warrant: share warrant are securities issued by a company which give their owner the right to purchase shares in a company at a specific price at a future date.

PARTNERSHIP A partnership is an arrangement where parties, known

as partners, agree to cooperate to advance their mutual interests. The partners in a partnership may be individuals, businesses, interest-based organizations, schools, governments or combinations thereof.

“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”.

ESSENTIALS OF PARTNERSHIP

Voluntary agreement Sharing profit of business Contract for partnership Maximum no. of partners is 20 Mutual agency

TYPES OF PARTNERS

Active partner Dormant partner Nominal partner Partner in profit Partner by estoppel

RIGHTS OF PARTNERS Right to take part in management:  Right to express opinion:  Right to take out copies and inspect the books of account:  Right to share profits:  Right to have interest on capital and advances  Right to be indemnified.  Right to have joint share in the partnership property:  Right of preventing the entry of new partner:  Right to retirement: Right to dissolve:  Right to have profits after retirement or death:  Right to carry on competitive business:

DUTIES OF PARTNERS

To carry on the business to the greatest common advantage: To be just and faithful to each other: To render true accounts: To provide full information: To attend diligently to his duties: To work without remuneration: To indemnify for loss caused by fraud or willful neglect: To share losses: To act within authority: Duty not to assign his interest: