Contract Agreement Types of

Section 2(h) Section 2(b) Contract

Every promise Validity

Enforceable by Forming Based on Based on
An Agreement or Set of For each other Or
law consideration Formation Performance
promises Enforceability

Express Executed Executory

Illegal Contract
Contract Contract Contract
(law forbids) (consideration in
(Word or writing) (Act is done) future)
Section 10 – Essentials of Contract Other than Section 10 – Essentials of
(C2L2AN) Contract – (COP3)
Free Consent Certainty of meaning Void Contract Implied Bilateral
(cease to Unilateral
Contract Contract
enforceable) Contract (2 Party
Competency of the Parties Other Formalities to be complied (by implication) (1 Party obligation
pending)
obligation
pending)
Lawful Consideration Possibility of Performance
Voidable Contract
(enforceable at Tacit Contract
Legal Object Parties intend to create legal relation (w/o words) Agreement
option)
Agreement 2 Parties

Not expressly declared Void Valid Contract Quasi-Contract With No

(enforceable With Intention
(resemble Intention to
agreement) to create legal
contract) create legal
relation
relation
All Contracts are agreements but all agreements are not contract
Unenforceable E-Contracts
Contract Contract Social
(using electronic
(technical defect) means)
Agreement
 Offer/Proposal
Section 2(a)
Essentials of
Valid Offer

To do or to with a view to
When One Signifies to abstain from To such act or He is said to
His willingness obtain assent Certain,
person another doing anything abstinence make proposal
of other Definite and
not vague

Kinds of Offer
Obtain Assent
of other party

Special Offer Cross Offer Counter Offer Standing Offer

Express Offer Implied Offer General Offer (Made to specific (identical offer (open for Not contain a
(Qualified
(Word or writing) (By Conduct) (public at large) exchange in acceptance for
person) ignorance ) Acceptance)
period) term of non-
compliance

Examples of Invitation to Offer :- Offer is different from :- General or

specific
Invitation by company to public for Statement of Intention
subscribing its shares
Display of Goods for sale in shop Statement of Price Express or
implied
Advertisement of Auction Sales Statement of Announcement

Price Quotation in reply to query of price Invitation to Offer Creating Legal

Menu card/price tags etc. Relation

Communication of offer is complete when it comes to the knowledge of the person to whom it is made
Communicated
to offeree
Advertisements are Invitation to offer except it is announced in the form of reward. Then it is considered as General Offer.

May be
Conditional
 Acceptance
Modes of Rules regarding
Section 2(b) Revocation of Valid
Offer Acceptance
(LI2ON3) (MT-C2AP2)

When the Proposal is signifies his Proposal is said Proposal when Becomes a
To whom assent thereto Mere Silence is
person made to be accepted accepted promise
Lapse of Time not
acceptance

Communication
Modes of Insanity of
of Acceptance is Time
Acceptance death
completed

Communication Communication Communication Against the Against the

Subsequent Must be
by Act by Omission by Conduct proposer acceptor
Illegality Communicated

Communication Put in
of revocation is transmission When it comes Conduct/Impli
and out of
Counter Offer
completed to knowledge of ed Acceptance
acceptor power proposer
to withdraw
Against the Against the Non-acceptance
person who person to whom as per Absolute and
makes it it is made prescribed Unqualified
Acceptance mode
Offer cannot be
cannot be
revoked once
revoked once
Put in communication
communication
transmission When it comes of acceptance is Notice of Prescribed
of acceptance is
and out of to his completed Revocation Mode
completed
person power to knowledge against the
against the
withdraw proposer
acceptor
Non-fulfilment Accepted by
Promise of condition Person to whom
Silence does not amount to acceptance except for the any previous conduct
precedent offer is made

Offer/Proposal Acceptance
 Consideration Doctrine of Rules regarding
Section 2(d) privity of Consideration
Contract (E-P3AI2D)

Or does or Or promises to
When at desire The promisee has done or Such act, is called
do or abstain Executed and
of the or any other abstained from abstains from abstinence or consideration
from doing Executory
promisor person doing doing promise for promise 7 Exceptions
something Meaning Consideration
(A3C2TS)
Exception to No
Consideration No Past Present or
Only parties to
Contract Rule future
Contract can Agent
(Natural ABC3D) sue each other

Move from
Stranger to Promisee or any
Assignment of
Compensation Promise to pay Contract cannot other person
Contract
Natural Love for Past Time barred sue
Agency Bailment Charity Completed Gift
and Affection Voluntary Debt (Written&
Services signed)
Performance –
Stranger to Acknowledge legally bound
consideration ment or to perform
is valid Estoppel
Out of natural Services
Love and Rendered
Affection Voluntarily Need Not be
Stranger to Covenant
Adequate
Contract is not running with
Valid Land
Near relation
to each other Rendered to
Promisor Not illusory
Certain
Must be Real
Marriage
Contracts
In Writing Promisor in
Not Immoral,
existence Unlawful or
opposed to public
Trust policy
Registered Promisor
Under Law intended to
compensate Move at desire
Family of promisor
Settlement
 Essentials of
Valid Contract

Agreements Wagering
Lawful oppose to Agreement
Free Consent Not Expressly
Competent Consideration public policy
(Not caused declared Void
parties and Object
by) unless
like
Transactions
Marriage Transactions resembling
Major Made by Agreement in Trading with
Coercion Forbidden by Brokerage similar to wager but not
(completed 18 Incompetent restraint of enemy
Law Agreements Wager void
years of age) Parties trade

Defeat Interference
Undue Bilateral
Agreement in Stifling Lottery Chit Funds
Sound Mind provision/rule restraint of Legal with Course of
Influence Mistake of fact Prosecution Transactions
of law proceedings Justice

Unlawful Agreement – Maintenance Interest Crossword Commercial/sh

Not Disqualified Consideration Uncertain and against Puzzles and are market
Fraud Fraudulent transaction
by Law or Object meaning Champerty obligation Competitions

Agreement Games of Skill

Injury to Wagering Trafficking of Consideration Speculative
without and Athletic
Misrepresentation person or Agreements Public offices unlawful in transactions
Consideration Competition
property and Title Part

Agreement in Agreements to Horse Race

restraint of do impossible Agreements to transaction Insurance
Mistake Court regards marriage Acts Create where win is less Contract
immoral Monopolies than Rs.. 500

Opposed to
public Policy
Minor – Age of majority is regulated by Every person domiciled in India who not
Indian Majority Act, 1875 completed as 18 years of age will be Disqualified Persons
termed as minor Person

Contract with Minor is Void ab initio Guardian can enter into contract for
benefit of minor
Having Having Having
No ratification after attaining majority Minor is not liable for specific Examples Incompetency permanent temporarily permanent
performance may arise from sound mind unsound mind unsound mind
Minor can be beneficiary or take benefit Minor cannot become a partner in
out of contract partnership Valid Contract
Foreign
Political Status Valid Contract when sound Void Contract
Promissory note can be made in favour of Minor can be admitted to benefits of Sovereigns
mind
Minor partnership with consent of all partners
Minor is liable for torts (civil wrong) Minor cannot be declared insolvent Corporate Void contract
Ambassadors
Status when unsound
For Necessaries, Minor’s estate is liable Minor can become agent but not liable to mind
but he is not personally liable principal
Minor cannot bind guardian or parent Adult will be liable in case of joint promise Alien Enemy Legal Status
by Minor and adult
Minor cannot become shareholder of the Surety (adult) of minor is directly liable to
Company. However through legal third party Corporations
guardian can become shareholder of fully
paid shares by transfer or transmission.
Company will remove name of minor from Minor can always plead minority even
Convicts
member register if he mistakenly becomes when earlier he falsely represent himself
a member as major

Insolvents
 Section 14
Consent means Free Consent when not caused by

Two or more are said to When they upon the same In the same Undue Mis
persons thing Coercion Fraud Mistake
consent agree sense Influence representation

In case of Coercion, fraud, misrepresentation, or undue influence, the contract is voidable

Coercion
Section 15

Any act Or
Or Or threatening To the With the any person
Is the forbidden by
unlawful
threatening to to detain any prejudice of intention of to enter into an
Committing Indian Panel
commit Code
detaining property any person causing agreement

Essentials of Effect of List of Voidable Contracts

Coercion Coercion
1. Where consent is not Free due to
a) Coercion
Committing or Unlawful Immaterial Restore the
With intention whether IPC is in b) Fraud
threatening to detaining or Voidable at benefit or
of causing any force or not
Commit any threatening to where the
option of repay the
person to enter c) Misrepresentation
act forbidden detain into agreement coercion is aggrieved money on
by IPC property employed party rescission of
contract d) Undue influence
2. Party preventing event on which the
contract is to take effect (Sec 53)
3. Effect of failure to perform at fixed time, in
which time is essential (Section 55)
 Undue
Influence
(Section 16) Mistake

Where the between the One of the To dominate To obtain

the will of the And he uses
relations parties are parties is in unfair Over the other
other that position
Subsisting such that position advantage Mistake of Law Mistake of Fact

Indian Foreign
Section 19A Bilateral Unilateral
Essentials of Law Law
Undue Influence Effect of Undue
Influence
One excusable Both the Only One
cannot and parties
Deemed Party is
Relations Object must be Burden of Proof excuse treated as are under
Position to under
between to take undue on dominating ignorance mistake of
dominate the Voidable at Court may mistake mistake
Parties advantage party of law fact
will (MUFA) option of enforce it in a
aggrieved modified
Contract
party manner Contract Contract Contract
Mental May be
Not void is void not void
distress avoided

Unconscionable
bargains

Fiduciary
Relation

Real and
Apparent
Authority
 Fraud
Section 17

Or With an Or to induce
Means and Any of the Committed by
with his Or another party
intention to him to enter
includes following acts party to contract by his agent or his agent
connivance deceive into contract

Stating Facts
which is not Essential
Mere Silence is
true by One Elements of
not Fraud
who does not fraud
Except
believe it to be
true
Effect of Fraud
Duty of Person Representation
Other party must
to speak must
Active Silence=Speech
concealment (RELIANCE KA
of fact by FAMILY SIM) -Can rescind Insist to put in
one having Be false Have been Voidable at the contract a position if
knowledge or induced to act option of party And representation
Fiduciary
belief of the upon defrauded -Sue for made been
Relationship
fact representation damages true
Related to fact /assertion
Promise made Family
without Settlement
Contracts Made before have relied
intention of
conclusion of upon the
performing it
contract representation
Share
and must have
Allotment
Any other act been deceived
Contracts Made With
fitted to intention to induce
deceive the other party
Insurance have
Any Contracts Made with consequently
Act/omission knowledge of its suffered a loss
which law falsity by acting on
declares representation
Marriage
fraudulent Made without
Contracts
belief in its truth
 Misrepresentation
List of Agreements where consideration or object is unlawful
1. Forbidden by Law
Means and 2. Defeat the provisions of Law
includes
3. Fraudulent
4. Involves injury to the person or property of another
the positive Any breach of Causing,
assertion duty however
5. Court regards it as immoral
In a manner Without intent
Innocently 6. Opposed to Public Policy (9 cases)
not warranted to deceive

By the Gains advantage A party to an

to the person
information agreement List of Void Agreements
committing it
1. Made by incompetent parties (Section 11) 6. Agreement in restraint of marriage (Section 26)
Or any one
of the person
claiming under To make a 2. Agreements made under Bilateral mistake offact 7. Agreements in restraint of trade (Section 27)
making it mistake (Section 20)
him
3. Agreements the consideration or object ofwhich is 8. Agreement in restraint of legal proceedings(Section
As to the
of that which is by misleading
substance of
unlawful (Section 23) 28)
not true another
the thing 4. Agreement the consideration or object of whichis 9. Agreement the meaning of which is uncertain
unlawful in parts (Section 24) (Section 29)
Though he to his prejudice
Which is the
believes it to or anyone 5. Agreements made without consideration (Section 10. Agreements to do impossible Acts (Section 56)
subject of the
claiming under 25)
be true agreement
him
11. Wagering Agreement
 Agreements Exception to
oppose to Agreement in
Wagering Agreement restraint of trade
public policy

Agreement Agreement
Sale of
Marriage Meaning Essentials with outgoing between
Trading with Goodwill
Brokerage partner partners
enemy
Agreements
Promise to pay Seller agreed
Agreement With Not to carry
money or to refrain from
Interference involving continuing competing
Stifling money worth carrying similar
with Course of partners business
Prosecution business
Justice
Payment of Conditional on Within
sum of money event He will not carry During
specified local continuance of
Maintenance Interest similar business
limits partnership
and against
Champerty obligation Upon Uncertainity Within a
determination event Local limits specified
must be period
Trafficking of Consideration
reasonable
Public offices unlawful in Of an
and Title Part uncertain Or within
Two parties
event specified local
limits
Agreements to
Create Each party
Monopolies stand to win or
lose

Common
intention to Valid Contract
bet

No Interest in
event except
for stake
 Breach of Contract

Anticipatory Breach of
Contract Actual Breach

occurring Before the Refusal to Refusal to

Is breach of When the To perform his And Signifies his perform on perform during
before the promise time fixed has
contract promisor refuses unwillingness scheduled date the performance
time fixed arrived

Effect of Remedies for

Anticipatory breach of
breach contract

Treat the Treat the Suit for

Suit for Rescission of Suit for specific Suit for
Contract as Contract quantum
damages contract performance injunction
rescinded and operative and meruit
sue for wait till the
damages scheduled date compensation for Damages are not Contract to
Treat the
any loss/damage adequate Court may issue service but no
from breach of
contract as
Eg :- unique injunction order agreement to
contract rescinded item remuneration

Court may restrain him

Guilty Party Guilty party naturally arose Absolved of all
direct party in from doing
may can also take in the usual his obligations Law will infer a
breach to what he
reconsider and advantage of course of and entitled to promise to pay
perform his promised not
perform his any things damages
promise to do
part of supervening
contract impossibility
 Types of Damages

General/ Vindictive or Nominal Damages for

Special Pre-fixed
Ordinary Exemplary
Damages
deterioration
damages Damages caused by delay damages
damages

compensation Only eligible Amount

Awarded In 2 Damages can decided by
for any for special Awarded only
cases only be recovered parties
loss/damage damages

naturally arose If other party Payable on

Breach of Plaintiff proved From carrier
in the usual received notice breach of
promise to the breach of without notice
course of of special contract
marry contract
things circumstances

Wrongful Deterioration
But in fact has Amount can be
from such dishonor by includes physical
affecting the not suffered any liquidated
breach of banker of his
real
damages as well
damages or
contract customer’s loss of opportunity
contract loss/damage penalty
cheque for sale

Note :- No compensation is payable for any remote or indirect loss

 Quantum Meruit

Treatment of
Prefixed
damages
Pre-Fixed Damage
Cases where
Mandatory
Meaning QM is Liquidated Damages Penalty
Conditions
applicable
Reasonable estimate of likely loss in case An amount arbitrarily fixed as the
English Law Indian Law
As much as the of breach damages payable
Original
party doing the Void Agreement
Contract Sum payable is approx. to the probable Sum payable is so large as to be far in
service deserved or Void Contract
discharged damage excess of probable damages
Makes Does not Makes
Damages are differentiation differentiation Liquidated damages is a genuine pre- Penalty is amount stipulated as terrorem
Claim brought Something is
Compensatory between between estimate of the damage of the offending party
by party not in done non-
and QM is gratuitously Liquidated Liquidated
default damages and
Promissory note can be made in favour of Minor can be admitted to benefits of
restitutory damages and
penalty Minor partnership with consent of all partners
penalty
Contract to Contract to
service but no service but no
agreement to agreement to Liquidated Court awards
Penalty –
remuneration reasonable
remuneration damages- Clause
compensation
Clause is disregarded not more than
One person One Party effective and and cannot amount
rendered abandon or amount is recover more mentioned in
service to refuse to recoverable than actual loss contract
another perform

No particular Divisble contract

remuneration & party not in
default enjoyed
has been fixed
the benefit

Indivisible
Law will infer a Contract
promise to pay perform badly-
entitled to
compensation
 Contingent Contract based
Contract on

To do or not to Collateral to Does or does Happening of Non –Happening

Contract If some event contract
do something not happen event of event

Collateral
If Event If Event
Event If Event If Event
becomes becomes
Happens Happens
impossible impossible

Which is directly Nor the whole of Can be Becomes Void Becomes Void Can be
An event neither A promised as consideration enforced Contract Contract enforced
performance part of contract for promise

Essentials of
Contract based
Contingent
on
Contract

Contract Event Happening Event non

depend on Event Event not within specified Happening within
Event must be
happening or collateral to mere will of time specified time
uncertain
non-happening contract the promisor
of event
If Event If Event
If Event If Event does If Event If Event does
becomes becomes
Happens not happen Happens not happen
Contracts contingent on happening of an impossible event is void impossible impossible
within time within time within time within time within time within time

Contingent Contract based on happening of conduct of living person is Can be

unenforceable if living person does something to to make event impossible Becomes Void Void Contract Can be
enforced Contract enforced
 Quasi Contract

Relations Known as Principle of No man grow

No Offer, No
resembling of Created by law constructive equity, justice rich at another’s
Acceptance
contracts contracts and conscience loss Features of
Quasi Contract

Deemed cases Right to money

of Quasi and not
Contracts liquidated sum
of money

Does not arise

Claims for Payment by Obligation of Responsibility of Money Paid by from
necessaries Interested person enjoying finder of lost Mistake or agreement
supplied Person non gratuitous act goods Coercion

To person Restore the Imposed by

Is entitle to He had done Mus repay or the law
incapable of goods to true
reimbursement the act lawfully return it
contracting owner

Person to whom Right not

He had available against
he is legally Take proper care
delivered the all the world
bound to of the property
thing lawfully
support

No right to Right available

He did not do against a
appropriate
so gratuitously person/persons
the ghoods

Other person
Treated as
enjoyed the
baliee
benefit
 Who can
Obligations of Condition for
perform the
Party to Valid Offer of
Acceptance promise ?
Contract

Must be
Actual Offer to unconditional Promisor Legal Agent of Promisor or Legal
Performance Performance himself Representative Representative

Must be made
Where a party at proper time
Where a party In case contract involves personal skills, then it can be performed by joint promisor only
made on offer
to a contract
to
has done what
performance If promisee accepts whole or part of promise from third party then it cannot claim the same
he had
but other Must be made from promisor
undertaken to at proper place
party has not
do
accepted

Other party
Succession Assignment
has reasonable Succeeded by law Voluntarily
opportunity to
ascertain Both Burden and benefits get devolve on Only benefits can get assigned to assignee
legal heir and not the liabilities thereunder
that the Ex :- A son becomes owner of estate of his Ex :- Creditors assigns the benefit of a
person by father after his death promise, he thereby entitles the assignee
whom it is to realise the debt from the debtor
made is able
and willing Liability of son is limited to the extent of In case of personal consideration, benefit
there and then the property inherited by him cannot be assigned.
to do the
whole of what
he is bound by
his promise to
do
Time for Performance of the Contract (Sec 46 to 50)

Time for
Performance

Application by Application by
promisee is promisee is
required not required

Duty of the Both date & Date is No Date &

promisee to time is specified but Time is
tell date & specified in the time not specified in the
proper time contract specified in the contract
contract

Performance
Performance Performance at any time Within a
as per the as mentioned during usual reasonable
application in the contract hours of time
business
 Contracts Need not be performed
with the consent of both the parties
Place for
Performance
Rescission (Sec Restoration of
62) benefit under
Void
Agreement or
Application by Application by
Novation (Sec
Void Contract promisee is promisee is
(Sec 65)
62) required not required

Alteration (Sec
Communication Duty of the
of Rescission
62) (Sec 66) promisee to Place is Place is not
tell proper specified in the specified in the
Remission (Sec
place contract contract
63)
Effect of Neglect
of promise to
afford promisor Duty of the
Restoration of reasonable
benefit under facilities for
promisor to
voidable performance Performance Performance apply to
contract (Sec 64) (Sec 67)
as per the as mentioned promise for
application in the contract appoint a
reasonable
place
 Joint Promisors
Sequence for Appropriation of Payments

Devolution of Join Liabilities Devolution of Joint Rights

Section 59 :- Debtor expressly or impliedly intimated against which debt to be applied against
When two or more persons have made a When a person has made a promise to
joint promise, then all such persons during two or more persons jointly, then unless a
particular Debt
lives, must jointly perform the promise contrary intention appears from the
contract, the right to claim performance
After the death of any of joint promisor, rests, as between him and them, with Section 60 :- If debtor does not intimate expressly or impliedly, then Creditor may apply as per his
then legal representative jointly with the them during their joint lives, and after the wish against any debt sue & payable including time barred debt but excluding disputed debts
survivors must fulfil the promise death of any of them, with the
In case of death of all the joint promisors, representative of such deceased person
then legal representative of all joint jointly with the survivor or survivors, and Section 61 :- Neither Debtor nor Creditor appropriated, then as per law ,apply payment in order of
promisors jointly must fulfil the promise after the death of the last survivor, with time of debts including time barred debts. If the debt are of same date then then apply
the representatives of all jointly proportionately
Promise may any one or more of joint
promisors to perform the whole of
promise
9 Ways to Discharge a Contract
If one of the joint promisors is made to
perform the whole contract, then Joint
Promisor may compel other joint
promisors to compel equally
7. Promisee may
A release of one of such joint promisors by 1. By 4. By Lapse of waive or remit 9. Effect of
the promisee does not discharge the other Performance time performance of neglect of
joint promisors neither it does free the promise promisee to
joint promisor from responsibility to the afford promisor
other joint promisors reasonable
2. By Mutual 5. By operation
In case of default in contribution by the 8. Merger of facilities for
Agreement of Law
joint promisor(s), remaining joint Rights performance
promisors must bear the loss arising from
such default in equal shares 3. By
6. By Breach of
Impossibility of
Contract
Contract
 Order of performance of reciprocal Time is Fixed
promises
under Contract

Promisor failed
Expressly fixed
Not expressly to perform
fixed in the
in the contract
contract within the
fixed time
Perform in
Perform in order as the
order as fixed nature of
in the contract transaction Time is not
requires Time is
essence of the
essence of the
contract
contract

Contract is Performed Not performed

voidable at the with in within
option of the reasonable reasonable
promisee time time

Only entitled Contract

Continue the
Cancel the to becomes
contract &
contract & compensation voidable at the
claim
claim the but cannot option of the
compensation
compensation cancel the promisee
after giving
of loss contract
notice
 Agreement to do Impossible Act is Void (Section 56)
Types of
Impossibility

Initial Subsequent
Impossibility Impossibility

Impossibility at the time of entering contract Impossibility after entering into contract

If known to the If unknown to Change in

If known to the Performance Performance circumstances
both the the both the
promisor only becomes Becomes Beyond
parties parties
impossible illegal contemplation
B promises to of parties
A contracted B A contracted B
pay a sum of to sell his horse to sell his
Rs. 5 Lacs if A for Rs. 10,000. horse for Rs. Contract become Void
Indian ocean Both are 10,000. A is
within a week unaware that aware that
by swimming horse is died horse has died

Void &
Agreement is Void but Promisee Promisee can
cannot claim compensation claim
compensation
 Mr. A will transfer ownership of goods

Mr. B will pay price

Mr. A Mr. B
(Seller) (Buyer)
 Goods
Buyer Seller Delivery means
means
means means

Every kind of Voluntary From one

Person who Agrees to buy agrees to sells movable transfer of person to
Who sells or property possession another
buys or goods goods

Other than Includes

Quality of goods
includes
Actionable claims
Growing
Actionable
Money Stock & shares Crops, grass,
Claims
Are claims things Their state Or condition
By action or attached
which can be
suit to/forming
enforced
part of land
which are
agreed to be
severed before Price means
Types of Goods sale or under
contract of
sale
Property Money For sale of
means consideration goods
Contingent
Existing Goods Future Goods
Goods

General
Ownership or
property
Specific Goods Ascertained Unascertained
Goods Goods
 Types of Goods Types of Delivery

Ascertained Unascertained Contingent Constructive Symbolic

Existing Goods Specific Goods Future Goods Actual Delivery
Goods Goods Goods Delivery Delivery

Goods are in Goods to be Acquisition of Delivery delivery of a

Goods Goods which are Goods are
existence at the Goods which manufactured/ goods which effected without thing in token of
identified & not specifically physically
time of making are identified produced/ any change in a transfer of
agreed identified by the seller delivered
contract acquired the custody something else

depends upon Seller transfer Like handing

Owned/posses upon at the At the time of By seller after an uncertain Or actual
In accordance making the physical over of
sed/acquired time a contract making of contingency possession of
with agreement contract of sale possession of documents of
by the seller of sale is made contract of sale (event) the thing
the goods title

Contingent Like bill of

Indicated or Contract for sale Most common As in the case
At the time of goods also lading, railway
Ex:- Samsung After contract defined only by of future goods is
method of of delivery by
contract of description or always agreement
operates as an
receipt,
GaLaxy S7 edge of sale is made attornment
sale sample to sell agreement to delivery
sell
delivery order
 Types of Mercantile Agent
Essential elements of Contract of Sale
Contract of Sale

Means an agent who in the customary 1. Minimum 2 parties (Buyer and seller)
Agreement to course of business has any of the following
Sale authorities:-
Sell 2. Subject Matter of Contract – Goods (Movable
property)

Property 3. Price – Wholly in Money or Partly in Money

Property in Consign goods
transferred Sell or buy and Partly in kind
goods or
On future date goods
transferred pledge goods
Or 4. Transfer of property (ownership) of Goods –
immediately to
Condition
buyer
fulfilment
Immediately or future

5. May be Absolute or Conditional

Price 6. All other essentials of a valid contract

Insolvent
(Covered under ICA, 1872)

If not
Determined by
Person is said to be insolvent determined

Or cannot pay a) Fixed by a) Pay

When he debts as they Contract reasonable
ceases to pay become due, b) Manner price to
his debts in the whether he provided seller
ordinary has committed by b) Reasonable
course of an act of contract depends on
business insolvency or c) Course of facts &
not dealing circumstatn
between ces
the parties
 OWNERSHIP JISKI RISK USKA
Valuation by 3rd
Specific Goods
party decided in
perished before
contract
PROPERTY JISKI RISK USKA

Valuation not Making of sale but after Risk passes with the property
Valuation done
done contract of making agreement
sale to Sell
Exception to risk follows ownership :-
Price as per Seller’s Fault Buyer’s Fault
valuation done Contract Agreement If delivery has been delayed by the fault of the seller or the
by third party becomes void becomes void buyer, the goods shall be at the risk of the party in default, as
Suit against party at fault & regards loss which might not have arisen but for the default.
Agreement can be avoided

Various Mode of Contract of Sale :-

1. Immediate Delivery & Immediate Payment

2. Immediate Delivery & payment in future

3. Immediate payment & delivery in future

4. Payment & Delivery both in future

5. Delivery/payment / both in instalments

 Types of Types of
Stipulations Conditions
4 Cases where Condition can be treated as
Conditions Warranties
Express Implied Warranty
Conditions Conditions

Expressly Presumed by Buyer altogether waives the performance of

Essential to Collateral to
the main the main
agreed
between the
law to be
present in the condition
purpose of purpose of parties contract
goods goods

Types of Buyer elects to treat the breach of the conditions,

Warranty
On breach, On breach, as one of a warranty
contract can only damages
be repudiated can be claimed
Express Implied
Warranty Warranty Contract is non-severable and the buyer has
Quality or fitness accepted either the whole goods or part of it
Expressly Presumed by
agreed law to be
between the present in
parties contract Where the fulfilment of any condition or warranty is
General Rule Exception
excused by law by reason of impossibility or otherwise.
No implied
a)IF the buyer tells the purpose to
condition or
seller &
warranty as to
b) Buyer relied on seller’s skill &
quality or
judgement
fitness
c) Seller’s business to supply goods of
that description
7 Implied Conditions 4 Implied Warranties
Condition as to title

Sale by sample Warranty as to undisturbed possession

Condition as to quality or fitness

warranty as to quality or fitness by usage of trade
Condition as to wholesomeness

Condition as to description Warranty as to non- existence of encumbrances

Sale by sample as well as by description

disclosure of dangerous nature of goods
Condition as to merchantability
Exceptions to Caveat Emptor/ Duties of Seller Caveat Emptor/Duties of Buyer
Goods Sold by Description
Sale by sample Let the Buyer beware
Fitness as to quality or use except brand or patent name
Seller is not bound to disclose the defects in the
Goods by sample as well as description goods
Trade usage
Buyer cannot holds seller responsible for his bad
Seller actively conceal defect or guilty of fraud selection of goods
Condition as to merchantability
Rule is laid down in section 16
Goods of Merchantable quality
 In case of Specific Transfer of
Transfer of property goods Property in
unascertained
goods Essentials of Appropriation of goods (Section
23(1))
Already in Not in
General Rule Deliverable Deliverable General Rule
(sec 19) Law state State (sec 18)
1. Sale of Unascertained or future goods

further Not
Specific No further Property does transferred 2. Goods should conform to the description &
Intention of action
Circumstances Action not passes until the goods quality stated in the contract
the parties Required
(20-24) Required by until such are ascertain
By seller to goods are put
Seller
ascertain price into
How to
3. Goods must be in a deliverable state
deliverable
ascertain Property state Deemed
intention of Property does
passes And the buyer Appropriation
the parties? not passes 4. Goods must be unconditionally appropriated
immediately has notice of Goods
until action is
when contract thereof
done
is made When the
Terms of the
seller, delivers 5. Assent may be express or implied
contract
the goods to
Seller the
6. Assent may be given either before or after
carrier or appropriation.
Conduct of the
bailee for the
parties
transmission 7. Appropriation must be made by :-
Puts condition to the buyer
(Right of Does not put a) Buyer with the assent of seller or
Circumstances disposal) condition b) Seller with the assent of buyer
of the case & does not
reserve the
right of
Property in
disposal
Property does goods
not transfer transferred as
unless per Normal
condition(s) Rules
fulfilled explained
earlier
 Sale or return basis
Seller is ready and willing to
Deterioration of deliver goods
goods during transit

Seller request buyer to take

Does not give Gives delivery
acceptance acceptance Seller agrees
to deliver at
own risk Buyer does not take
delivery within reasonable
Property time
Express or
transferred if Deterioration Deterioration
If time given, Implied
buyer does necessarily not necessarily
property
does incidental to incidental to
transferred on
something transit transit Seller is entitled for
time lapse
equivalent to Property
acceptance transferred on
Buyer will bear Seller will bear
acceptance
loss loss
If time not Any loss by buyer neglect or
- Buyer Sell refusal & Reasonable
given,
the goods charges for care and
property
or custody of goods
transferred on
- Buyer
expiry of
Pledges the Acceptance of Goods
reasonable
Goods Seller may also repudiate
time
contract if he has a right
even when he has claimed
damages
Sale for cash only or Return :- Buyer does
Retains the
where the goods have been delivered by a person on “sale or Buyer any act to
goods after
return” on the terms that the goods were to remain the intimates his goods, which is
reasonable
property of the seller till they are paid for, the property therein acceptance to inconsistent
time w/o
seller with
does not pass to the buyer until the terms are complied with, ownership of
intimating
i.e., cash is paid for. rejection
seller
 Wrong Quantity
Who will take the Delivered
Delivery of Goods Delivery Time of Delivery

Excess
Less Quantity Quantity
Putting in Buyer will take Seller sends delivered
Doing anything Time Fixed in No Time Fixed delivered
possession of possession them to buyer
to goods Contract in Contract

Buyer Accepts
Buyer reject the
Buyer rejects Buyer Accepts whole of goods
Buyer or his Which the Within excess Qty
As per contract As per contract delivered
agent parties agrees As per contract reasonable
time
Pay them as per
Pay them as per Pay them as per
contracted rate for
Part Delivery of contracted rate for contracted rate for
Express Contract Place of Delivery not actual qty
Goods whole goods goods accepted
w.r.t delivery specified in contract delivered

Delivery of
Goods to
Intention to Intention not
No Sale Agreement to Carrier
severe to severe Yes Sell
For purpose of
Delivery transmission
treated of part Delivery to buyer
Delivery at place Delivery at place
Seller is not bound Delivery as per Delivery at place
only which treated of to deliver until terms of the at which they are
at which they are at which they are
actually whole goods at the time of manufactured or
buyer applies for it Contract at the time of sale
Agreement produced
Deemed
delivered delivery to
buyer

Note :- Expenses of and incidental to putting goods into deliverable state must be borne by seller in absence of
contract to contrary

Note :- Buyer must have a reasonable opportunity to examine the goods on delivery if not previously examined
 Exceptions to
Nemo Dat Quod
non habet

Sale by buyer
Sale by person Sale by unpaid
obtaining
Sale by Sale by One of Sale in case of seller exercising Sale under the
who has possession Effect of
Mercantile the Joint voidable right of lien or provisions of
already sold before property
stoppage in Estoppel
Agent Owners contract is transferred to other act
the goods transit
buyer

Sale by buyer Where the

Agent has Sale by person Sale by unpaid
obtaining Sale by official owner is
Possession of One joint Buyer acquire who has seller who had
possession receiver/ estopped by
Goods/docum owner has sole a good title to already sold exercised his
before Liquidator of the conduct
ent with possession of the goods sold the goods but right of lien or
property is company will from denying
consent of goods by seller continues with stoppage in
transferred to give valid title the seller’s
owner the possession transit
buyer authority

Sale made by He may sell,

Possession is Who obtained Of goods or Purchase of
agent in pledge or The transferee
with the possession of documents of who resells the goods from a
ordinary otherwise will get a good
consent of goods under title, he may goods to other finder of goods
course of dispose of the title against
other joint voidable sell them to person under certain
business as goods to a the true owner
owners contract third person circumstances
agent third person

Buyer acted in Buyer acted in

Proof that true
Contract has Buyer acted in Buyer acted in A Sale by owner has
good faith, no good faith, no Buyer acquires
not been good faith, good faith, Pawnee can actively
notice of fact notice of fact a valid title
rescinded until without notice without notice convey a good suffered /held
that seller has that seller has against the
the time of the of previous of lien or other title to the out other
not authority not authority original buyer
seller sale right that buyer person as
to sell to sell
owner
 Unpaid Seller

Auction Rules

Whole of the other been received And the received has As by reason of
Where bill of
price has not negotiable as conditional condition on not been dishonor or 1. Separate contract of sale for each lot
exchange or payment
been paid instrument has which it was fulfilled otherwise

Unpaid seller includes any person who is in the position of seller 2. Contract completed on fall of hammer

Rights/remedies Remedies of
of an unpaid buyer against 3. Right to bid may be reserved expressly
seller the buyer

4. Fraud if right to bid not notified

Against Goods Against Buyers Damages for
non-delivery

5. Reserved or upset price may be notified

Property in Property in Suit for specific
Suit for price
goods has goods has not performance
passed to been passed to 6. Sale voidable if seller use pretending bidding
buyer buyer
Suit for Suit for breach
damages of warranty
With holding
Lien delivery When tax on goods (like excise/custom/GST) increase or
Suit for Suit for
anticipatory decrease after entering into contract of sale but before
interest
breach performance, then buyer would have to pay the revised price
Stoppage in
Lien considering the revised tax rates.
Transit
The effect of above provision can be excluded by an
Suit for agreement to contrary
Resale Stoppage in interest
Transit

Resale
 Partnership True Test of Content of Partnership Deed / Agreement
Section 4 Partnership

Name of the Partnership Firm

Who have
Carried on by
is the relation agreed to
all or any of Sharing of
between share the Agreement Agency
persons profits of
them acting Profit Name of all the partners
for all
business

Nature of business of firm

Persons who entered into partnership with one
Kinds of
another are called
partnership
Principal place & other place of business of firm

Individually Collectively
“partners” “firm” Based on
Based on Date of Commencement of partnership
extent of
duration
business

Duration of Partnership Firm

Partnership at Partnership for Particular General

Will fixed period Partnership
Capital Contribution of each partner
Partnership

Elements of
Profit sharing ratio
Partnership

Provision for admission, retirement, expulsion

Association of Agreement to Business carried on by
Agreement two or more Business share profits all or any of them Rate of interest on Capital, drawings & Loan
persons acting for all etc.

Salaries or Commission payable to partners

 Types of Partner

Based on
extent of
business Based on
Incoming duration
Active or Sleeping or Nominal Outgoing Partner by Partner in
Ostensible Dormant Partner Partner Partner Holding Out profits only

Particular General
Partnership Partnership
Actively Does not take Holds himself Partnership at Partnership for
New person Person who
participates in Actively part in Not a Partner as partner or Entitled to will fixed period
admitted into leaves the
conduct of conduct of by Agreement allows others profits only
partnership firm
partnership partnership to do it Partnership in Partnership
particular Two
constituted for
adventure or Conditions are
business in Provision is
Lends his Not liable for undertaking satisfied :-
Not require to Liable to general made by
Must Give name and acts done prior Requires 1. No fixed
give public anyone who Not liable in period has contract for
public Notice liable to third to admission public notice the duration
notice on acts on faith of case of losses been agreed &
on retirement party for all by other on retirement A general
retirement representation Dissolved on
acts of the firm partners partnership is
completion of
the adventure different from 2. No provision
a particular Partnership
Note :- Nominal Partner and Partner by holding out/estoppel is not entitled to share in profits or undertaking made as to
partnership. comes to end
determination
after expiry of
of the
duration.
partnership

If fixed
Dissolved by
partnership is
any partner by
continued
giving notice in
after the
writing to all
expiry of such
other partners
term then
of his intention
treated as
to dissolve the
partnership at
same
will
4 General Duties of Partner (Section 9):- Rights &
Conduct of Business :- Subject to Contract,
Duties of each
-Bound to carry business to the greatest common partner Every partner has a right to take part in the
advantage conduct of the business
-Just & faithful to each other
-To render true accounts to other partners or their Every partner is bound to attend diligently to
Rights & duties
legal representative of the partners his duties in the conduct of the business
Subject to
-To render full information of all things affecting firm of a firm may be
provisions of
to other partners or their legal representative the Act
determined by Every partner has right to express his opinion
contract (oral or on business matters
writing)
Ordinary matters are decided by majority of
What is Partnership property? Mutual Rights & Liabilities :- Subject to partners
Contract,
Change in nature of firm business require
Partner is not entitled to any remuneration for consent of all partners
all property, rights and interests which Partners taking part in conduct of business of firm
contributed to common business except in case of customs
Every partner & his duly authorized agent has
Both Profit & Losses to be shared equally right to have access to / inspect / take copy of
all the property, rights and interest acquired or amongst partners books of firm
purchased by or for the firm
where a partner is entitled to interest on the
capital subscribed by him such interest shall be In event of death, partner’s legal representative
payable only out of profits; has right to have access to / inspect / take copy
Goodwill of the business of books of firm
partner making, for the purposes of the
business, any payment or advance beyond the
Subject to contract, partnership property shall
amount of capital he has agreed to subscribe,
be used by partners exclusively for the purpose
is entitled to interest thereon at the rate of six
of the business of firm only
percent per annum

What is property of partner?

firm shall indemnify a partner in respect of
Property which exclusively belong to the
payments made and liabilities incurred by him
partner only
 Subject to
Contract
Change in firm means 8 Acts which are not in implied authority of partners

Submit a dispute relating to business of firm to arbitration

If partner Open a bank account on behalf of firm in his own name

derives any
profits for Where some Partnership
Partnership Compromise or relinquish any firm’s claim or its portion
himself from partner or carries on
Where a new business other carries on
- Any partners go
If a partner partner or than the business after Withdraw a suit or proceedings filed on behalf of firm
transaction out i.e. by
carries on any partners come business for the expiry of
of the firm death which it was
business of the in term fixed for
- use of retirement,, originally Admit any liability in a suit or proceedings against the firm
same nature as the purpose
property of insolvency formed
and competing
the firm Acquire any immovable property on behalf of firm
with that of the
- business
firm
connection
of the firm As per section 17, subject to contract, rights & duties of partner remain same Transfer immovable property belonging to the firm
- the firm as far as possible after there is any change in the firm
name Enter into partnership on behalf of firm

Mutual Agency
Implied authority can be extended or restricted by a contract
between the partners
He shall account for that profit & pay it But restriction on implied authority is only effective against a
to firm third party if
a) Third party knows about such restriction; or
b) Third party does know that he is dealing with a partner of
This rule
In case of emergency, partner has the Authority of Every partner firm
Every partner cannot be all
authority to perform all the acts to partner to bind acts both as
is the agent of the
protect the firm from losses as would be the firm given principal as
firm for the transactions
done by person of ordinary prudence under section well as agent
purpose of the and dealings
whether such act falls under his implied 19 is known as for the
business of the between the
authority or not implied purpose of
firm partner
authority business
themselves
 Transfer of
Section 23 & Partnership
24 Liability to third Interest
parties

Rights of
Rights of Transferee on
Share in
Transferee dissolution/tra
Firm is liable if partnership is
An Admission Firm is liable during nsferring
Notice to any any partner transferable
of facts or Every partner for any continuance partner ceases
acting partner on misapplies the to be partner
representation is jointly & wrongful act or
matters relating property or
made by a severally liable omission of a
to the affairs of money of a
partner for all acts of partner in the
the Firm treated third party
concerning the the firm while ordinary
as notice to the either received Sale, mortgage
affairs of firm he is a partner course of Only entitled Entitled to
firm except in by partner or and creating
will bind the business to share of receive share
case of fraud firm charge on
firm and can profits of of transferring
committed by partner’s
treated as transferring partner in
that partner or interest is
evidence partner assets of firm
with the consent possible
against the
of that partner Introduction of new
firm
partner

He cannot

- Interfere
And for the
with
purpose of
conduct of
ascertaining
the
the share of
New partner is business
the assets,
Subject to With the not liable for transferee is
contract consent of all the acts of firm - Require
entitled to
between the the existing done before accounts of
accounts of
partners partners his admission firm
firm as from
as partner the date of
- inspect/cha
dissolution
llenge
books of
accounts
 Minor admitted as
beneficiary with
consent of all partners
Minor cannot become a partner in firm but can be
admitted as beneficiary in the firm with the consent of all
the existing partner

Minor As After attaining

Beneficiary Majority
Within 6 months on attaining majority or obtaining
knowledge that he is a beneficiary in firm, whichever
date is later, such person require to give public notice
that whether he has elected to become partner or not. Rights of Liabilities of He elected not
If he fails to give notice within 6 months, then treated as He becomes to become
Minor as Minor
partner of firm on expiry of said 6 months partner partner
beneficiary as beneficiary

confined only
Right to his to the extent
personally His rights and
agreed share of his share in
liable to third liabilities
of the profits the profits and
parties for all continue to be
the property of
acts of the firm those of a
the firm.
done since he minor up to
access to, Liabilities of
was admitted the date of
inspect and Minor
to the benefits giving public
copy the as beneficiary
of partnership notice
accounts of
the firm no personal
liability for the
sue the debts of the share in the
partners for firm property and
His share shall
accounts or for the profits of
not be liable
payment of his if the firm is the firm
for any acts of
share but only declared remains the
the firm done
when severing insolvent his same to which
after the date
his connection share in the he was
of the notice.
with the firm firm vests in entitled as a
the Official minor.
Receiver/
Assignee
 Liability of Retiring
Ways of Retirement of 3 Mandatory
partner/expelled
Partner conditions for
partner
expulsion o partner

Exercised in
By giving Power of Power must be
In accordance Good faith
With the notice to other expulsion must exercised by
with the Public Notice is Public Notice is (3 points for
consent of all partners in exist in the majority of
express not given given test of good
the other case of contract directors
agreements by faith)
partners partnership at
the partners
will

Retiring Partner must

Retiring Expulsion is in Partner is
Public Notice is required in case of retirement of partner, Partner remain be given an
Partner remain interest of served with
expulsion of partner & dissolution of firm but not not liable to opportunity of
liable to third partnership the notice
required in case of admission, death or insolvency of third parties being heard
parties for acts
partner for acts done
done after
after
retirement/
retirement/ If the above conditions are not satisfied, the expulsion is null & void
expulsion
expulsion

Note :- Dormant partner is not

required to give public notice in case
of retirement

LIABILITY OF ESTATE OF DECEASED PARTNER :-

Where under a contract between the partners, the firm is not dissolved by the death of a partner, the estate of a deceased partner is not liable for any act of the firm done after his death.
 Outgoing partner can
carry competing Right of outgoing
partner/representative
Effect of Insolvency of a
business ,
But, Subject to of deceased partner if partner
contract, cannot a/cs are not settled

1. No public notice is required in case any

in the absence of a contract partner become insolvent
to the contrary, the
outgoing partner or his
Represent Solicit the estate is entitled at the
2. He will be ceased to be a partner from the
himself as custom of option of himself or his very date on which the order of adjudication is
Use the firm
name
carrying on the persons who representatives made.
business of the were dealing
firm with the firm
3. The insolvent partner cannot be continued
share of the as a partner.
profits made to interest at
since he the rate of six
ceased to be a per cent per 4. The estate of the insolvent partner is not
Outgoing partner may make an agreement with his partner as may annum on the liable for the acts of the firm done after the
partner that he will not be carrying competing business be attributable amount of his
and such agreement will be valid if restrictions imposed date of order of adjudication.
to the use of share in the
are reasonable his share of property of the
the property of firm:
the firm 5. The firm is also not liable for any act of the
As per section 38, continuing guarantee given to a firm insolvent partner after the date of the order of
or to third party in respect of the transaction of a firm is,
adjudication,
in the absence of an agreement to the contrary, revoked
as to future transactions from the date of any change in
the constitution of the firm. Note :- Above provision is not
applicable if option is given to other 6. Ordinarily but not invariably, the insolvency
partner for purchase & such partner of a partner result in dissolution of a firm; but
exercise such option the partners are competent to agree among
themselves that the adjudication of a partner
as an insolvent will not give rise to dissolution
of the firm
 Registration of
Firm Firm name shall not contain following words:-

Crown
Compulsory
Optional in
under English
India
Laws
Emperor
Content of Statement
Steps for Registration of Firm (Section 58 & 59)
Empire
- Files statement with RoF in the prescribed
form with prescribed Fees
- RoF of the area in which any place of business
Imperial
is situated
- Statement need to be signed by all the King
partners

RoF issues Certificate of Registration after Queen

a) Satisfying all the provisions are being
complied with
b) Recording an entry in the register of firms Royal
Effective Date of Registration :-
Govt linked
Registration is deemed to be completed as
soon as an application in the prescribed form State Govt can give approval to use firm name linked with
with the prescribed fee and necessary details govt. by order in writing
concerning the particulars of partnership is
delivered to the Registrar

Registered Firm shall use the bracket & word

(Registered) immediately after is name
 Mode of Consequences of Non-Registration Exceptions :- Non – Registration of firm
Settlement of (Section 69) does not, however the following rights
On Dissolution Partnership
of firm Accounts
1. No suit in civil court by firm or other co- 1. Right of third parties to sue the firm or
partners against third party any partner
2. No relief to firm or partner for set-off of 2. right of partners to sue for the
Public Notice is Public Notice is claim dissolution of the firm or for the
give not given Assets must be applied settlement of the accounts of a dissolved
Losses including in following manner:- firm, or for realization of the property of a
deficiencies of - Debts of the firm to dissolved firm.
capital shall be 3rd parties
Partners Partners 3. Aggrieved partner cannot partner legal 3. The power of an Official Assignees,
paid - To each partner
remain liable remain not action against firm or other partners Receiver of Court to release the property
- First out of what is due to him
to third parties liable to third of the insolvent partner and to bring an
profits; from advances
for acts done parties for acts action
- Next out of - To each partner
after done after capital what is due to him 4. Third party can sue both registered or 4. The right to sue or claim a set-off if the
dissolution dissolution - Lastly by the on account of unregistered firm value of suit does not exceed Rs. 100 in
partners in the capital value
proportions in - The residue if any
Note :- Insolvent Partner, Property profit sharing 5. The right to suit and proceeding
shall be divided
of deceased partner and dormant ratio instituted by legal representatives or heirs
among the partners
partner are not liable to third party of the deceased partner of a firm for
in the proportion in
even if no public notice is given account s of the firm or to realise the
profit sharing ratio
property of the firm

Note :- After dissolution, each Property

Rights of
partner has the authority which is partner after
necessary to wind up the affairs of dissolution
the firm
Of firm Of partner

Surplus First applied

Property of First applied
distributed against debts
Firm applied in against
among the of firm and
debts and separate debts
partners or then share of
payments of and then
representatives each partner
the firm against each
to their rights against
debts of firm
separate debts
 Modes of Dissolution of Firm

Without Court Intervention With Court Intervention (Section 44)

Insanity / Unsound Mind

Dissolution by Agreement (Section 40)
Permanent Incapacity
Dissolution by notice (in partnership at will)
(Section 43) Persistent Breach of agreement

Compulsory dissolution of firm (Section 41) Transfer of Interest

Continuous Losses / Perpetual Losses

Dissolution on happening of certain
contingencies (Section 42) Just & equitable grounds
1. After expiry of fixed term of partnership 1. Deadlock in Management
2. Completion of adventure/undertaking 2. Partners are not in talking terms
3. Death of a partner 3. Loss of substratum
4. Adjudication of partner as insolvent 4. Gambling by partner on a stock exchenge
 Intro Applicable to

Company Electricity
Company Body Corporate
470 sections 7 schedules Whole of India incorporated Banking Insurance Companies
under this law or (generation/suppl governed by incorporated by
Companies Companies any other act
previous law y) special Act

Except
Except
inconsistent Except
Company inconsistent
with IRDA Act, inconsistent
with Banking
1999 or with Electricity
Regulation Act,
Insurance Act, Act, 2003
1949
1938

As per Is an Features
Companies incorporated (CLASS)
Act, 2013 association

Means a Artificial Limited Artificial Legal Separate legal Perpetual

company person created Common Seal Entity
Liability Person Succession
incorporated by law

Official Limited by Artificial – Existence Company will

Signature of shares – Other than separate from go on till
Under this Act Having
company unpaid value natural Birth its members winding up
Or separate entity
Limited by Own Property
guarantee – upto Legal – in its own Members may
optional amount
Under any Created by law name change or die
With perpetual guaranteed
previous succession
company law Shareholders
Sign of 2 Unlimited Person – rights Law alone can
are not owners
Directors & CS, Company with of an of assets of bring end to life
if appointed unlimited liability individuals of company
company
And a common
seal
 Corporate Veil

In Salomon vs. Salomon & Co. Ltd. the House of Lords laid down that a company is a
Company is Salomon Vs. Members are Members enjoy
Refers to legal shielded from
person distinct and separate from its members. In this case one Salomon
concept
separate from Salomon and corporate
company liability insulation incorporated a company named “Salomon & Co. Ltd.”, with seven subscribers
its members Co. Ltd.
consisting of himself, his wife, four sons and one daughter. This company took over
the personal business assets of Salomon for £ 38,782 and in turn, Salomon took
20,000 shares of £ 1 each, debentures worth
Lifting of £ 10,000 of the company with charge on the company’s assets and the balance in
Corporate Veil cash. His wife, daughter and four sons took up one £ 1 share each. Subsequently, the
company went into liquidation due to general trade depression. The unsecured
creditors to the tune of £ 7,000 contended that Salomon could not be treated as a
Incorporation secured creditor of the company, in respect of the debentures held by him, as he
Corporate entity Formation of
Trading with To avoid legal for was the managing director of one-man company, which was not different from
used to evade subsidiaries to obligation
Enemy illegal/improper Salomon and the cloak of the company was a mere sham and fraud.
/circumvent tax act as agent purpose

affairs under Transport Incorporation It was held by Lord Mac Naughten:

Dinshaw Formation of co.
control of company for illegal/
Maneckjee to reduce bonus “The Company is at law a different person altogether from the subscribers to the
people of enemy formed improper
petit liability
country subsidiary purpose memorandum, and though it may be that after incorporation the business is precisely
the same as it was before and the same persons are managers, and the same hands
Private companies Subsidiary By tranfering its Defeat law, receive the profits, the company is not in law the agent of the subscribers or trustees
Test of control were sham and investments to
veil lifted to
applied for defraud for them. Nor are the subscribers, as members, liable, in any shape or form, except to
is adopted subsidiary
decide owner license creditors the extent and in the manner provided by the Act.”

-Application
Character of Court disregard Court upheld
rejected - Parent the corporate
Or avoid legal
person at helm the corporate
entity and subsidiary veil obligations
of affairs are one
 Types of
Companies

Liability of Number of
Capital
Control Others
members Members

Limited by Private Holding Listed

shares Company Company Company Foreign Small
Company Company

Limited by One Person Subsidiary Unlisted

Guarantee Company Company Company Section 8 Nidhi
Company Company

Unlimited Public Associate

Company Company Company Dormant Public Financial
Company Institution
 Limited by One Person
Shares Company

To the amount Personal property Shareholder co- Procedure

Liability of By its To encourage Only one
unpaid on cannot be called owner of simplified No minimum paid Nominee clause
members is memorandum to meet company entrepreneurs person as up capital
shares, held by company, but through in MOA
limited of association them liabilities not its assets hip member exemptions

Limited by Private
guarantee Company

Restricts Prohibits invitation

Liability of By its such amount To contribute to In the event of Restrict the right Joint Exclude (Current
employees & Past to public to
members is memorandum mentioned in the assets of its being wound to transfer members to shareholder as subscribe
company shares in articles one member employees)
limited of association MOA up 200 securities

Unlimited Public
Company Company

Can claim
Liability ceases Liability extend to Has minimum Maximum Subsidiary of
Not having any On liability of whole company’s contribution Not a private Minimum members – no
when he ceases capital as public co. is
limit its members liabilities from other company and members - 7 limit deemed public co.
to be member prescribed
members
 Subsidiary Associate
Company Company

Layer in relation In which other

Company includes Inludes a joint
In relation to Means a In which holding to holding In relation to Means a company has Which is not a
any body subsidiary co. venture
other company company company corporate company means other company company significant
company
its subsidiary influence

Controls controls more Control at least Participation in

composition of than one –half 20 percent of business
board of of the total total voting decisions under
directors voting power power agreement

Can appoint or Either at its own

remove all or or together with Listed
majority of its its subsidiaries
Company
directors co.

Which have listed

Listed on any Provided such As prescribed in Shall not be
Which has any or intend to list
recognized stock class of such class of consultation considered
of its securities exchange companies with SEBI listed companies
securities

A company is Unlisted
holding co. Company

In relation to Of which such

Means a
Company includes Means a
one or more companies are any body
another company subsidiaries company
corporate
companies companies

Other than
listed company
 Govt.
Foreign Company
Company

And Includes a
And conducts any In which not less
Means Co. or Which has place Means any company which
Incorporated business activity in than 51 % of paid
body of business in company up share capital is subsidiary of
outside India India in any
corporate India Govt. Co.
manner

Or any State Or partly by CG

Whether by Physically or Held by Central
govt. or State and partly by
itself or through through Govt.
Govts one or more SG
an agent electronic mode

Nidhi or
Section 8 Mutual benefit
Company society

Deals with Which are Which the Central Declare to be

Apply its profits Means a In the official
formation of formed to Govt. may, by Nidhi or Mutual
in company notification gazette
company promote benefit Society

Prohibit
Education Social welfare
Promote its payment of
objects dividend to
members
commerce religion

science charity

Protection of
Art
environment

Research sports
 Public
Financial
Dormant Inactive Institutions
Company Company (PFI)

Company Not made any Has not filed any

formed & Or Inactive Not carrying Conditions to be
significant financial includes
registered under Company any business notified as PFI
accounting statements and
this Act or operation or transactions annual returns

Established
Life Insurance
To hold an asset under any
For a future During the last 2 Corporation of
or intellectual Central or State
project or financial years India
property Act

Or not less than

Infrastructure 51 percent of
And has no Significant
significant
Development the paid up
accounting Finance Co. Ltd. share capital
accounting
transaction transaction
Is held by CG,
Specified co. in
SG, partly by CG
may make an means any Unit Trust of
and SG, partly by
application to transaction India Act, 2002
one or more SGs
Registrar other than
Not include
Institutions person acting in
For obtaining Allotment of notified under professional
status of shares to fulfil the
Payment old or this act capacity eg.
dormant co. requirements of
this Act Banker, etc.

made by it to fulfil For maintenance

of fees to requirements or
this act or any
of its office and
registrar records
other law
 Person
Promoter required to
subscribe MOA

As per Act Simple terms Public Co. Private Co. One Person Co.

Person who 7 or more 2 or more

Named as such 1 Person only
form the persons
in prospectus persons
company

Who conceive
Identified by the the idea of
co. in annual forming the
return company

Take all
Who has control
necessary steps
over the affairs
for its
of Co.
registration

Accordance with Not include

whose advice, person acting in
BOD professional
accustomed to capacity eg.
act Banker, etc.
 Section 7 – INCORPORATION OF COMPANY

SPICE = Simplified Proforma for Incorporating a Company Electronically

Files SPICE
form
With
Promoter additional ROC
documents

CORPORATE IDENTIFICATION NUMBER

RoC issues Certificate of
Incorporation
 LIST OF ADDITIONAL DOCUMENTS

1) MoA and AoA duly signed by subscribers to the MOA

2) Declaration that requirement for registration mentioned in the Act and rules are complied

3) Declaration that not convict/ not filed guilty for fraud

4) Correspondence address till registered office is established

5) Specified particulars of every subscriber to the memorandum

6) Specified particulars of First Director mentioned in articles

7) Interest of the first directors in other companies or firms

 EFFECT OF REGISTRATION

1) From date of incorporation, Company is separate from Subscriber to MoA ( Separate legal entity)

2) A company purchase 100 percent shares of other company but still they are different

3) Central Govt owns 100 percent shares of all the company but still it is not an agent of Govt

4) Any money payable by members to company will be considered as debt due to company
 Where a company has been got incorporated by furnishing false or incorrect information or representation or by
suppressing any material fact or information in any of the documents or declaration filed or made for incorporating such
company or by any fraudulent action, the Tribunal may, on an application made to it, on being satisfied that the situation
so warrants

pass such orders, as it may think fit, for regulation of the management of the company including
1) changes, if any, in its memorandum and articles, in public interest or in the interest of the
company and its members and creditors; or

2) direct that liability of the members shall be unlimited

3) Declaration that not convict/ not filed guilty for fraud

4) direct removal of the name of the company from the register of companies;

5) pass an order for the winding up of the company

6) pass such other orders as Tribunal may deem fit:

Befor passing order, Tribunal

1) Give the company shall be given a reasonable opportunity of being heard in the matter &

2) shall take into consideration the transactions entered into by the company, including the
obligations, if any, contracted or payment of any liability.
 CONTENT OF MOA – Compulsory Clauses

1) Name Clause – Name of the Company Private Co/. – Private Limited, Public Co. – Limited

2) Registered Office Clause – Only name of state in which registered office is situated

3) Object Clause – Main object and incidental objects thereto

4) Liability Clause – Limited by shares/guarantee/ unlimited Liability

5) Capital Clause – Only applicable for company limited by shares

6) Association Clause – Every subscriber must take atleast 1 share

7) Nominee clause (applicable to OPC) – In death of subscriber who will become member
 MOA IS CHARTER OF THE COMPANY

1) Contains the object of the Company

2) Identifies the possible scope of its operations

3) MoA is a public document

4) Deemed Assumption – Everyone dealing with Co. has knowledge about the content of MoA

5) Format of MoA is given for each type of company

FORMAT Applicable for

Table A Limited by shares
Table B Limited by guarantee and not having share capital
Table C Limited by guarantee and having a share capital
Table D Unlimited Company
Table E Unlimited Company having share capital
 Content of AOA

1) Contains Regulations –contain the regulations for management of the Company

2) Other Matters – Contains Matters as are prescribe under the Rules

3) Contains provision for Entrenchment

4) Manner of Inclusion of Entrenchment

5) Notice to Registrar of the entrenchment Provision

6) Forms of Articles :- Table F,G,H,I & J in Schedule I

7) A company may adopt all or any of the regulations contained in the model articles.

8) In case of any company, which is registered after the commencement of this Act, in so
far as the registered articles of such company do not exclude or modify the regulations
contained in the model articles applicable to such company, those regulations shall, so
far as applicable, be the regulations of that company in the same manner and to the
extent as if they were contained in the duly registered articles of the company.
 Entrenchment

Contain provisions for entrenchment: The articles may contain provisions for
entrenchment (to protect something) to the effect that specified provisions
of the articles may be altered only if conditions or procedures as that are
more restrictive than those applicable in the case of a special resolution,
are met or complied with.
Manner of inclusion of the entrenchment provision: The provisions for
entrenchment shall only be made either on formation of a company, or by
an amendment in the articles agreed to by all the members of the
company in the case of a private company and by a special resolution in the
case of a public company.
Notice to the registrar of the entrenchment provision: Where the articles
contain provisions for entrenchment, whether made on formation or by
amendment, the company shall give notice to the Registrar of such
provisions in such form and manner as may be prescribed.
 Types of Capital Types of share
capital

Equity share Preference

Authorized Subscribed Called-up
Issued Capital Paid-up Capital capital share capital
Capital Capital capital

Capital issued
Part of capital With differential Preferential
Authorized by from time to Part of the Total With uniform
which is for voting rights right with
MOA time for capital, amount/paid voting rights
subscription the time being (DVR) respect to

Maximum
Part of authorized Subscribed by Which has been As paid up on a) Payment of
amount of capital called for payment
the public shares issued dividend AND
share capital

Upon which it Includes shares Nominal amount Total amount

allotted for =capital-calls in b) Repayment of
pays stamp of shares taken called up on capital in case of
consideration arrears
duty other than cash up by the public shares issued winding up
 Doctrines

Exception to
Doctrine of Doctrine of
Doctrine of Doctrine of
Constructive Indoor Indoor
Ultra Vires Notice Management Management FACTS of the Royal British Bank vs. Turquand

Memorandum Mr. Turquand was the official manager (liquidator) of the insolvent Cameron’s
Any act done The Doctrine
and articles of Coalbrook Steam, Coal and Swansea and Loughor Railway Company. It was
or a contract of Indoor 1. Actual or
association of constructive incorporated under the Joint Stock Companies Act, 1844. The company had given a
made by the Management
a company knowledge of bond for £ 2,000 to the Royal British Bank, which secured the company’s drawings on
company is the
when irregularity its current account. The bond was under the company’s seal, signed by two directors
which travels exception to
registered with and the secretary. When the company was sued, it alleged that under its registered
beyond the the doctrine of
Registrar of The rule does deed of settlement (the articles of association), directors only had power to borrow
powers of the constructive not protect any
Companies, up to an amount authorized by a company resolution. A resolution had been passed
company is notice. person when the
become public but not specifying how much the directors could borrow.
wholly void documents, person dealing
and This is the with the
and they are Held, it was decided that the bond was valid, so the Royal British Bank could enforce
inoperative in doctrine of company has
available for notice, whether the terms. He said the bank was deemed to be aware that the directors could borrow
law and is indoor
inspection to actual or only up to the amount resolutions allowed. Articles of association were registered
therefore not management
any person, on constructive, of with Companies House, so there was constructive notice. But the bank could not be
binding on the popularly
the payment the irregularity. deemed to know which ordinary resolutions passed, because these were not
company known as
of a nominal registrable. The bond was valid because there was no requirement to look into the
Turquand Rule.
fees. company’s internal workings. This is the indoor management rule, that the company’s
indoor affairs are the company’s problem.
Whether a
2. Suspicion of
The impact of person reads Irregularity
Doctrine of
the doctrine of the documents
constructive
ultra vires is or not, he is The doctrine in no
notice does in way, rewards
that a not only
no sense mean those who behave
company can presumed to negligently
that outsiders
neither be have read the
are deemed to
sued on an documents but 3. Forgery it
have notice of
ultra vires also cannot apply to
the internal
transaction, understood forgery which
affairs of the
nor can it sue them in their must be
company
on it true regarded as
perspective nullity.