Legal Aspects of Business

1. LEGAL ASPECTS OF
BUSINESS
Presented by,
Sadiah

2. WAGERING AGREEMENT
“To Wager means to Bet”
Agreements entered into between parties under the condition that money is payable by the first party
to the second party on the happening of a future uncertain event, and the second party to the first
party when the event does not happen, are called Wagering Agreements.
For instance : There is a bet between A and B. A promises to pay B INR 100/- if it rains.
B promises an equal amount if it doesn't rain.
Wagering agreements are void and not illigal. However, in certain cases it is illigal.
EXAMPLES : Cricket matches, lottery, Gujarat and Maharashtra.
Collateral Transaction : The transaction which is attached to the main transaction.
EXAMPLE : A borrows Rs 500 from B and payed to C, to whom A has lost bet.

3. The effects of Wagering agreement on Collateral
Transaction
1. Wagering agreement if it is void then transaction collateral to wagering transactions are not void
but they are valid
EXAMPLE : In case of previous example, B can recover the money , borrowed by A.
1. Wagering agreement , if it is illegal, so the collateral transaction is void.
EXAMPLE : In Gujarat and Maharashtra, wagering agreements have been declared illegal. So the
collateral transactions are also illegal and so such transactions are void.

4. Exceptions of Wagering Agreements.
In these cases the wagering agreements are considered VALID.
1. Sale and purchase of share, stock and goods : Transactions for the purchase and sale of shares
and stocks, with an intention to take and give delivery of shares, is not a wager. However, if
the intention is only to settle the price difference, the transaction is a wager and hence void.
2. Competitions : Sports competitions such as Athletics, Wrestling, Indoor games, Boxing,
Football, Cricket, Hockey etc. are not games of chance. It is decided by skill. Hence, they
are not wagers.
3. Horse Race : Any subscription or contribution of the value of Rs.500 or upwards made
towards any prize or sum of money which is to be awarded to the winner of any horse race
is not wager.
4. Contract of Insurance : They are entered into, to safeguard the interest of one party to the
contract. In this contract, the insured has insurable interest in the property or life. Hence, it
is not a wager.

5. Quasi Contracts
“ Quasi means resemblance to “
Quasi Contracts are similar to contracts. However, it is different from a contract, in respect that
there is no formal agreement entered into by the parties.
Contract = Agreement + legal obligations
Quasi Contract = No agreement + legal obligations
In case of Quasi contract, there is no offer, no acceptance, no consensus and absolutely no intentions
to strike a contract. Still, the law, from the conduct and relationship of the parties, imposes an
obligation.
EXAMPLE : A boarded a bus and purchased a ticket for desired destination. Upon buying the ticket,
the bus driver is obligated to drop A at the desired destination.
(https://youtu.be/5i-exxA4h1A “)

6. CASES WHICH ARE TREATED AS QUASI CONTRACTS
Claim for necessaries supplied to a person incapable
of contracting or on his account
Examples:
A supplies B, a lunatic, with necessaries suitable to
his condition in life. A is entitled to be reimbursed
from B’s property.
A who supplies the wife and children's of B, a lunatic,
with necessaries suitable to their conditions in life, is
entitled to be reimbursed from B’s property

7. Reimbursement to a person paying money due by
another in payment of which he is interested: A person
who is interested in payment of money which another is
bound by law to pay, and who, therefore, pays it, is
entitled to be reimbursed by the other (S. 69)
EXAMPLE:
B holds land in Bengal, on lease granted by A, the
Zamindar. The revenue payable by A to the govt being
in arrear, his land is advertised for sale by the govt.
Under the revenue law, the consequence of such sale
will be the annulments of B’s lease. B, to prevent the
sale and consequent annulment of his own lease, pays
the govt, the sum due from A. A is bound to make good
to B the amount so paid.

8. Obligation of person enjoying benefits of
non-gratuitous act: where the person lawfully does
anything for another person, or delivers anything to
him, not intending to do it gratuitously, and such
another person enjoys the benefit thereof, later is bound
to make compensation to the former (s. 70)
Example
A, a tradesman, leaves goods at B’s house by mistake.
B treats the goods his own. Is B bound to pay for them.
A saves B’s property from fire. Is A entitled to get
compensation from B.
Responsibility of finder of goods: A person who finds
goods belonging to another and take them into his
custody, is subject to the same responsibility as bailee.

9. Liability of person to whom money is paid or
things delivered by mistake or under coercion:
A person to whom money has been paid, or
thing delivered by mistake or under coercion,
must repay or return them
Example: A and B jointly owe Rs 1,000 to C.
A pays the amount to C. Also, B, not knowing
this fact, pay Rs 1,000 to C. Is C bound to
repay the amount to B.

10. Contingent Contracts
● A contingent contract is to do or not to do something, if some event
collateral to such contract does or does not happen.
● A contingent contract may be contingent upon The happening or not
happening of some event within a specified time
● Example: A contract to pay B Rs 10,000 if B’s house is burnt

11. Performance of Contract
Performance of contract means carrying out of obligation under it
Who must perform the promise under the contract-
● By promisor himself
● By his agent
● By his legal representative
Performance of joint promises
● When two or more person has made a joint promise, all such persons must jointly fulfill
the promise
● When two or more person make a joint promise, the promisee may compel any one or
more of such joint promisors to perform whole of the promise.

12. ● Where, a joint promisor has been compelled to perform the whole
promise, he may compel other joint promisor to contribute equally. If
any one of the joint promisor makes default in such contribution, the
remaining joint promisor must bear the loss in equal shares.
Examples
● A, B and C are under joint promise to pay D Rs 3,000. a is compelled
to pay the whole amount. Can A recover the amount from B and C. if
yes, how much.
● A, B and C are under joint promise to pay D Rs 3,000. C is compelled
to pay the whole amount. A is insolvent, but his assets are sufficient
to pay half of his debt. Can C recover the amount from B and A. If
yes, how much.
● A, B and C are under joint promise to pay D Rs 3,000. C is unable to
pay anything. And A is compelled to pay the whole amount. B is
insolvent, but his assets are sufficient to pay half of his debt. Can A
recover the amount from B and C. If yes, how much.

13. Contracts which need not be performed
● The parties may mutually agree to substitute the original contract
by a new one or rescind it or alter it
● The promisee may dispense with or remit wholly or in part the
performance of the promise made to him or extend the time for
such performance or accept any satisfaction for it
● The person at whose option the contract is voidable because of
undue influence, fraud, coercion or misrepresentation can rescind
it
● The promisee neglects or refuses to afford the promisor
reasonable facilities for the performance of his promise

14. Rules regarding the time, place and manner of
performance of contract
● When the time for the performance has been
specified, the promisor must perform on the day
fixed during usual business hours and at the place
at which promise ought to be performed
● Where a time of performance is not specified, the
performance must be made within a reasonable
time
● Where a promise is to be performed on a certain
day, the promisee must apply for performance at a
proper place during usual business hours
● When promise is to be performed and no place is
fixed, the promisor must apply to the promisee to
appoint a reasonable place for performance
● The performance of any promise may be made in
any manner or at any time which the promisee
prescribes or sanctions

15. Remedies for Breach of contract:
Remedies are available under Indian Contract Act, 1872 and under Specific Relief Act 1963.
Remedies under specific relief act are
● A decree for specific performance: the court direct the party in breach to carry out his promise
according to the term of the contract
● An injunction: an order of the court prohibiting a person to do something where a party is in breach of
negative term of contract
● A suit on quantum meruit: means as much as merited (earned). A right to sue on a “quantum meruit”
arises where a contract partly performed by one party has become discharged by breach of other
party.
Remedies under Indian Contract Act, 1872
● Recession of contract (s. 39)
● Damages for the loss sustained or suffered

16. Remedies for Breach of contract:
Rescission of the contract: When breach of contract is committed by one
party, the other party may treat the contract as rescinded.Aggrieved party is
freed from all the obligation
Example
● A promises to supply one bag of rice on a certain day and B promises
to pay the price on receipt of the bag. A does not delivers the bag of
rice on the appointed day.

17. Damages
Damages are awarded as per rules laid down in Ss.
73-74. As per S.73 -
compensations as general damages will be awarded
only those losses that directly or naturally results
from breach of contract
compensation for losses indirectly caused by
breach may be paid as special damages
aggrieved party should try to take steps to keep the
losses to the minimum
S. 74 provides that if the parties agree in their contract
that whosoever commits the breach shall pay the
agreed amount as compensation, the court has
power to award a reasonable amount only, subject
to such agreed amount.

18. Different kinds of damages:
Ordinary damages: damages which naturally arise in the usual
course of thing from such breach
The measure of ordinary damage is difference between the
contract price and market price at the date of breach
Example: A contracts to deliver 10 bags of rice at Rs 500 a bag
on future date. On the due date he refuses to deliver. The price on
that day is Rs 520 a bag. What is the measure of damage?
Special damages: are claimed in case of loss of profit etc.
When there are certain special circumstances present and their
existence is communicated to the promisor, the non-performance
of promise entitles the promisor to not only pay ordinary
damages but also other damages that may result therefrom.
The communication of special circumstances are prerequisite for
the claim of damages

19. CASES
A, a builder, contracts to erect and finishes the house by the 1st Jan, in
order that B give possession of it at that time to C, to whom B has
contracted to let it. A is informed of the contract between B and C. A
builds the house so badly that before 1st Jan it falls down and had to
be rebuilt by B, who in consequence losses the rent, which he has to
receive from C and is obliged to make compensation to C for the
breach of contract. Can B claim for compensation? How much?
X’s mill was stopped due to breakdown of shaft. He delivered the
shaft to Y, a common carier, to be taken to manufacturer to copy it
and make a new one. X did not make known to Y that delay would
result in loss of profit. By some neglect on the part of Y the delivery
of the shaft was delayed in transit beyond a reasonable time. As a
result, the mill remain idle for a longer time than otherwise would
have been, had the shaft been delivered in time. Is Y liable for loss of
profit?
Contd..

20. Liquidated damages & Penalty:
The parties to the contract pre-estimate of the loss which might
happen to them in case contract was broken by any of them
(Liquidated damages)
The parties made no attempt to estimate the loss that might
happen to them in case of breach but still stipulate a sum to be
payable in case of breach with the object of coercing the party to
perform the contract (penalty)
Example:
A contracts with B to pay B Rs 1000 if he fails to pay B 500 on a
particular day. A fails to pay Rs 500 on that day. Is B entitled for
compensation?
A contracts with B that if A practices as surgeon in Calcutta, he
will pay B Rs 5000. A practices as surgeon in Calcutta. Is B
entitled for compensation?

21. Contd…
Exemplary, punitive or vindictive
damages: awarded to punish the
defendant and not solely of awarding
compensation to the plaintiff. These have
been awarded
For breach of a promise to marry
For wrongful dishonor of the cheque of the
customer by a banker possessing adequate
funds of the customer.
Nominal damages: awarded where there is
only technical violation of legal rights but
no substantial loss is caused thereby.