Business Law

Not expressly declared void

The agreement must not have been expressly declared to be void under the Act. Sections 24-30 specify certain types of agreements that have been expressly declared to be void. For example, an agreement in restraint of marriage, an agreement in restraint of trade, and an agreement by way of wager have been expressly declared void under sections 26, 27 and 30 respectively.

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Registering Company in India

Type of Business entities in India:

  • Private Limited Company

  • Public Limited Company

  • Unlimited Company

  • Partnership

  • Sole Proprietorship

Private Limited Company

A private company is a company which has the following characteristics:

  • shareholders’ right to transfer shares is restricted;

  • the number of shareholders is limited to fifty; and

  • an invitation to the public to subscribe to any shares or debentures is prohibited.

Public Limited Company

A public company is defined as a company which is not a private company. The following conditions apply only to a public company:

  • It must have at least seven shareholders.

  • A public company is not authorized to start business upon the grant of the certificate of incorporation. In order to be eligible to commence business as a corporation, it must obtain another document called “trading certificate”.

  • It must publish a prospectus or file a statement in lieu of a prospectus before it can start transacting business.

  • A public company is required to have at least three directors.

  • It must hold statutory meetings and obtain government approval for the appointment of the management.

There are several other provisions contained in the Companies Act 1956 which are applicable only to public companies and should be consulted.

Applicable law

The Indian Companies Act of 1956 : The Companies Act of 1956 sets down rules for the establishment of both public and private companies. The most commonly used corporate form is the limited company, unlimited companies being relatively uncommon. A company is formed by registering the memorandum and articles of association with the State Registrar of Companies of the state in which the main office is to be located.

Corporate Documents & Registration of a Company

An application for registration should be submitted to the registrar of companies with the following documents:

Addresses of Registrar of companies and Regional Directors can be found on:

http://www.indiainfoline.com/lega/adof.html

1. Memorandum of Association;

2. Articles of Association;

3. A declaration signed by a person named in the articles of the proposed company as a director, manager, or secretary of the company, or by an advocate of the Supreme Court or High Court, or by an attorney entitled to appear before the High Court, or by a chartered accountant practicing in India stating that all the requirements of the Companies Act 1956 and the applicable rules with respect to the registration and other matters have been complied with;

4. A list of persons who have consented to act as directors of the company.

5. If the proposed company is a public company, consent of very person prepared to act as a director must be submitted in a prescribed form;

6. Information about directors, managing directors and managers and secretary must be submitted in a prescribed form;

7. Information about the registered office in a prescribed form;

8. Power of attorney in favor of one of the promoters or any other person, authorizing him/her to make corrections in the documents submitted to the registrar of the companies, if it becomes necessary; and

9. Applicable registration fee payable to the registrar of the companies.

For further Queries u can visit:

http://nitpu3.kar.nic.in/roc/faqs.htm

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Contract Law

Contract: An agreement enforceable by law is a contract.Thus for the formation of a contract there must be

  1. An agreement

  2. The agreement should be enforceable by law

An agreement is defined as every promise and every set of promises forming the consideration for each other and a promise is an accepted proposal.

FORMATION OF A CONTRACT

For the formation of a contract the process of proposal or offer by one party and the acceptance thereof by the other is necessary. This generally involves the process of negotiation where the parties apply their minds make offer and acceptance and create a contract.

When one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of the other to such act or abstinence, he is said to make a proposal.

When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted.

In order to convert a proposal into a promise, the acceptance must be

  1. Absolute and unqualified – Any departure from the terms of the offer or any qualification vitiates the acceptance unless it is agreed to by the person from whom the offer comes. An acceptance with a variation is no acceptance; it is simply a counter proposal.

  2. Expressed in some usual and reasonable manner. – If the proposer prescribes any particular manner of acceptance it has to be in that manner and where no manner is prescribed it should be in a usual and reasonable manner.

Details regarding the Indian Contract Law


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Remedies for Breach of Contract

The remedies for breach of contract are
Comparative Remedies for Breach of Contract (International Studies in the Theory of Private Law)
1. Damages – Monetary compensation is awarded to the injured party. A court decides on this figure. E.g. Robbie Williams sacked his manager and the manager was awarded €1.7million because he had honoured the terms of the contract.

2. Specific Performance– A judge orders that certain orders are carried out. It is a suitable means if damages are not important. E.g. A builder and a client disagree on the standard of workmanship carried out on a house. The builder is ordered by the judge to upgrade the work.

3. Rescind the contract– A judge attempts to place both parties back in the same position as they were before the contract. The purpose of this is to release the parties from the contract. E.g. Failure to obtain planning permission on a site.

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Termination of a Contract

"A "A Mutual Responsibility and a Moral Obligation": The Final Report on Germany's Compensation Programs for Forced Labor and Other Personal InjuriesA contract can come to an end when all the responsibilities and obligations that arose under the contract are no longer required. All rights that may have existed are no longer exist when a contract is discharged (ended). A contract may end by the following

1. Performance- This is the most usual way and there must be complete and exact performance by the parties involved. E.g. A two year work contract between an employer and an employee comes to an end at the end of the two years.

2. Agreement– Both parties agree to end the contract early therefore they are free from any legal obligations. E.g. A premiership player is not scoring enough goals and is under pressure from his fans. He agrees with his clubs decision to release him from his contract


3. Frustration – Due to unforeseen circumstances, it has been deemed impossible to complete the contract. E.g. The planned Michael Jackson concerts planned to go ahead in London could not take place due to the unforeseen death of the artist.
Introduction to the Law of Contracts
4. Breach of Contract – a condition has been broken by one of the parties. E.g. A professional footballer fails to turn up for training and is seen partying instead.

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Eight Simplified Essential Elements of a Valid Contract

The law of contract affects every single transaction between buyers and sellers. It is a legally binding relationship between two or more people that is enforceable by law.

Essential Elements of a contract (Must be learnt)
The Book of Agreement: 10 Essential Elements for Getting the Results You Want

  1. Offer: An offer is a proposal to give or do something and, when accepted, there is said to be an agreement. It must be clear and may be implied by conduct e.g. taking goods to the checkout.
  2. Acceptance: This is a positive unqualified assent to all terms of the offer e.g. a house buyer makes an offer of price for a house and seller is happy to accept.
  3. Consideration: This refers to whatever is exchanged between the parties.

    -It must be real
    -It need not be adequate
    -It must be legal

    e.g. The staff at the Beckham wedding signed a contract of silence in which the consideration was agreed at a €1. This was never paid which means a valid contract did not exist.

  4. Intention to contract: The Person must want to create legal relations. Therefore the parties signing a contract must know that they are entering a legal agreement that cannot be broken
  5. Capacity to contract: This is the power of a natural person to enter into a contract.Contracts and Partnership: Containing All the Essential Elements Necessary to Make a Complete and Binding Contract, Together With a Full Explanation of ... of Both Contracts and Partnerships [ 1899 ]

    The following parties do not have the capacity to enter a contract.

    • Minors- people under 18 except for necessities e.g. food
    • Persons under the influence of alcohol or illegal drugs
    • Persons of unsound mind.
  6. Consent to contract: A person must enter into a contract of their own free will. There should be no use of force or lies. e.g. a groom only married his pregnant wife after he was threatened by her father. One month later the marriage contract was cancelled.
  7. Legality of form: This refers to the manner in which the contract is made. It can be oral (simple contract) or written. E.g. when buying a house a contract must be written.
  8. Legality of purpose: This means that legally binding contracts can only be for legal transactions. E.g a judge will not award compensation to a bank robber whose getaway driver did not show up as agreed!!

Invitation to treat is not the same as offer- An invitation to treat invites a person to make an offer to buy something. E.g. a price tag on a pair of jeans is an invitation to buy the jeans. If the customer decides to buy the jeans, this is an offer. If the shopkeeper accepts the offer, this is acceptance, therefore a contract has been made.

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What are the essentials of a valid contract?

A contract is an agreement which legally binds the parties whereby each party promises to do, or not to do something.
International Business Law: Text, Cases and Readings
For a contract to be validly formed, the following elements must be satisfied:

a) Offer
b) Acceptance
c) Consideration
d) Intention to Create Legal Relations

(a) Offer

An offer is a proposal which contains terms and conditions stated by the offeror to the offeree. It can be made in writing, orally or by conduct. An offer can be addressed to a particular person, a group of people or to everyone.

Carlill v Carbolic Smoke Ball Co. (1892)
An advertisement was published in several newspapers stating that it would pay 100 pounds to anyone who caught flu after using its smoke ball as directed for 14 days. The company further states that they had deposited 1000 pounds at the Bank to meet possible claims.

The above case is an offer made to “the whole world”. For advertisements made by an owner of a lost dog and whoever finds it and return it to the owner gets a reward. A contract for the payment of the reward would come into existence when Tom finds the missing dog and return it to the owner. Such contacts are referred to as unilateral contracts. The offeror may not know the offeree’s identity immediately because there is no exchange of promises.

In a bilateral contract, an offer is made to a particular person and there is an exchange of promises that give rise to mutual obligations. The parties would know the identities of each other for this type of contract.

Business Law: Texts and Cases(b) Acceptance

Acceptance is defined as an unqualified and unequivocal of assent to the terms of the offer. In the absence of any specific instructions in the offer as spelt out by the offeror, acceptance does not require any specific format and can be made in writing, orally or by conduct.

  • Communication of Acceptance
    Acceptance is not effective until communicated to and received by the offeror. Thus, if an acceptance is not received because of interference on a telephone line,
    or because the offeree’s words are too indistinct to be heard by the offeror, there is no contract. It must be communicated by the offeree or by someone with his authority.

    Powell v Lee (1908)
    P applied for the post of headmaster of a school. One of the managers, without authority, informed P that he had been appointed. It was held that there is no acceptance, as P was not informed by the person authorized by the board.

  • Silence
    It is a situation where acceptance may not require any communication, where the parties have agreed that the offeree’s silence is to be construed as his acceptance. Therefore, both parties must agree to it.

    Felthouse v Bindley (1862)
    After negotiations, P wrote to the D offering to buy a horse for 30 155s, adding that if he did not hear from the seller, he would consider the horse his at that price. It was held that D’s silence did not amount to an acceptance. An acceptance must be unqualified acceptance of the terms of the offer. It can neither be a counter offer.

(c) Consideration
Business Law Today, Standard Edition, 9th Edition
A promise is only legally binding if it is made in return for another promise or an act (either positive act or something given up), if it is part of a bargain. The requirement of “something for something” is called consideration. It may be defined as some benefit accruing to one party, or some detriment suffered the other.

There are 3 types of consideration:

  • Executory Consideration
    Here, the bargain consists of mutual promises. The consideration in support of each promise is the other promise and not a performed (executed) act.

  • Executed Consideration
    If one party makes a promise in exchange for an act by the other party, when that act is completed, it is executed consideration.

  • Past Consideration
    Consideration that was provided before a promise is made is considered as past consideration. Past consideration refers to consideration that was given without any contemplation of the promises made or consideration given independently of any promise. Therefore, past consideration is no consideration at all.

    Roscorla v Thomas (1842)
    P purchased a horse from D. After the sale was completed, D gave an undertaking that the horse was not vicious which was proved to be wrong. P’s consideration was in the past. The payment of the price was complete before the undertaking was given. P therefore gave nothing in return for the undertaking. It is not possible to sue in “something for nothing” situation.

Text, Cases and Materials on Equity and Trusts, Fourth Edition

  • Adequacy & Sufficiency
    Consideration need not be adequate (ie: equal) to the value of the promise given as long as it is sufficient.

    Chappel v Nestle (1959)
    Nestle Co offered to the public gramophone records of a certain dance tune at a price together with 3 chocolate bar wrappers. The wrappers were thrown away on receipt by the company. It was held that the wrappers were part of the consideration even though they were of no further value once received by the company.

  • Consideration Must Move From Promisee
    This maxim represents an alternative way of stating the basic rule of privity of contract. It means that the only person who can sue on a contract is the person who paid the price.

    Tweddle v Atkinson (1861)
    A couple married and their respective fathers subsequently entered into a contract indicating that each father was to pay a specified sum to the young husband, Tweddle, and that he is entitled to sue for the money. The fathers later died. Tweddle sued the executors for the money due to him. It was held that Tweddle could not enforce the contract. Being the reason that he was not a party to the contract, and no consideration flowed from him. From Tweddle’s perspective, the law viewed the fathers’ promises as gratuitous promises. 

  • Consideration Must Not Be Illegal, Vague or incapable of Performance

    This situation gives rise to insufficient consideration is where the consideration is too vague or insubstantial in nature to be enforceable.

    White v Bluett (1853)
    Bluett had issued a promissory note to his father. Upon his father’s death, his father’s executor, White, sued him on the note. Bluett argued that his father had agreed to discharge his liability in consideration of Bluett’s promise to cease complaining that he was overlooked in favour of his brothers. It was held that Bluett’s promise was nothing more than a promise “not to bore his father” that was too vague and was insufficient consideration for the alleged discharged by his father.

U.S. v. Microsoft: The Inside Story of the Landmark Case(d) Intention to Create Legal Relations

Where parties have not expressly denied an intention to create legal relations, what matters is not what parties had in their minds, but the inferences that reasonable people would draw from their words or conduct.

  • Social and Domestic Agreements
    It covers situations where the agreement is made between friends or between family members whereby there is a presumption that legal relations are not intended.

    Merritt v Merritt (1970)
    A husband left his wife and when pressed by her, indicated that if she would pay the outstanding mortgage instalments, he would transfer the house into her name when all the payments had been made. It was held that there was a binding contract since the presumption that legal relations are not intended does not apply if husband and wife are separated or about to separate.

  • Commercial Agreements
    In the case of commercial agreements, there is a general presumption that there is the necessary intention to create legal relations. This presumption flows from the desire of the law to give efficacy to agreements made in a commercial context.

    Edwards v Skyways Ltd (1964)
    Skyways promised Edwards to an ex gratia payment should he terminate his services. He left his position with Skyways and claimed the ex gratia payment. The court held that, in this particular case, the general presumption of intention in commercial agreements is not rebutted by the use of the phrase ex gratia to describe the payment. Skyways was legally bound to make the payment.

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Sources of International Law

In the decentralized international legal system, lacking formal institutions of law – making the question of identifying the sources of international law is complicated.

A pragmatic response to the question has been found in the provisions of Article 38 of the statute of the international court of justice, which provides that the court is to apply:

A- “International conventions, whether general or particular, establishing rules expressly recognized by the contesting states;

B- International custom, as evidence of a general practice accepted as law;

C- The general principles of law recognized by civilized nations;

D- Judicial decisions and the teaching of the most highly qualified publicists of the various nations, as subsidiary means for the determination of the rules of law”.

It is clear that Article 38 does not provide a complete list of the sources of international law. It is rather a direction to the court as to the various materials it should consider when deciding disputes submitted to it.

Moreover, apart from the single reference to “Subsidiary means” in (d), there is no indication in Article 38 of the priority or hierarchy of the sources of international law. Because it was intended that the court should consider each “source” simultaneously, given that international law must be regarded as an integrated system of legal rules and not merely an amalgam of various unrelated principles. So, initially, existing relevant treaty provisions between the parties to the dispute must be applied. In the event of no prevailing provision, a custom, which is accepted as legally binding, should be applied.

If neither a treaty provision nor a custom can be identified the “general principles of law” may be invoked; while finally, under Article 38 judicial decisions and writing may be utilized as subsidiary means of determining the rules of international law.

Each category of law cited in Article 38 will now be examined.

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Sources of International Law – Custom

International law, as a primitive legal system, with no formal method of making or enforcing laws, traditionally has relied heavily on customary international law, although increasingly the international community relies upon treaties as custom is slow to react to change. But custom remains crucial to the development of a comprehensive international legal system, as it is only rules of customary international law, which bind all states.

Custom in international law is a practice followed by states because they feel legally obliged to behave in such a way. Custom must be distinguished from behaviour that is motivated by reasons other than legal obligation such as courtesy, friendship or convenience.

A rule of customary international law derives its legal character through the possession of two elements: a- A material element. The material element refers to the behaviour and practice of states, which includes treaties, diplomatic correspondence, official legal statements, etc ….

For a rule to be considered part of customary international law, it must be generally adopted in the practice of states. That practice must be adopted by the majority of states, in any case, the majority of interested states. State practice must be constant and uniform. Finally, no minimum time limit on the duration of state practice is required before the rule may be considered part of customary international law, as the test is whether the rule is generally accepted.

The psychological element, although difficult to prove, is an essential element in the formation of customary law. It is not enough for the formation of customary law that there is general, uniform and consistent state practice. In order that this practice constitutes law, states must recognize it as binding upon them as law. State practice must be accompanied by a belief that the practice is obligatory, rather than merely convenient or habitual. This belief in the obligatory nature of the practice is called opinio juris.

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Sources of International Law – Treaties

Treaties are only examined here in so far as they constitute a source of law. Treaties, as Article 38 provides, may be between two states (bilateral) or between several states (multilateral). However, all treaties involve a contractual obligation for the parties concerned, and consequently, create law only for the parties agreeing to the terms of the treaty. But the provisions of multilateral treaties may become customary international law, and thus creating general obligations.

Treaties are the most important source of international law.

Customary law and law made by treaty have equal authority as international law. Usually they are complementary but difficulties can arise if the treaty and customary law stipulate contradictory obligations. In those rare cases of conflict, and unless the parties have expressed otherwise, generally the later, be it custom or treaty, prevails as between the same parties.

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