1. NITIKA BACHHAWAT
BUSINESS LAWS
REVISION NOTES
NITIKA BACHHAWAT
BUSINESS LAWS
REVISION NOTES

2. THE INDIAN CONTRACT ACT, 1872
IN FORCE since 1ST SEPTEMBER 1872

3. Contract::
agreement enforceable by law
Agreement::
 Every promise and
 Every set of promises
 Forming consideration for each other
Nitika Bachhawat
Promise:
A proposal when accepted
3

4. Essentials of a valid contract
Not given by Act but are
essential
Given by the Act
1. Two parties
2. Intention to create a legal
relationship
3. Fulfillment of legal
formalities
4. Certainty of meaning
5. Possibility of performance
1. Offer and acceptance
2. Lawful consideration
3. Capacity to contract
4. Free consent
5. Legal object
6. Not expressly declared
void
Nitika Bachhawat
1. Two parties
2. Intention to create a legal
relationship
3. Fulfillment of legal
formalities
4. Certainty of meaning
5. Possibility of performance
1. Offer and acceptance
2. Lawful consideration
3. Capacity to contract
4. Free consent
5. Legal object
6. Not expressly declared
void
4

5. Types of contract
Basis of validity Basis of formation Basis of
performance
1. Void
2. Voidable
3. Illegal
4. Unenforceable
5. valid
1. Express
2. Tacit
3. Quasi
4. E.com
1. Executed
2. Executory
3. Unilateral
4. Bilateral
Nitika Bachhawat
1. Void
2. Voidable
3. Illegal
4. Unenforceable
5. valid
5

6. Void Voidable Valid Illegal unenforceable
not enforceable
by law
enforceable at
the option of
one party but
not at the
option of other
enforceable at
the option of
both the parties
void and
punishabl
e
not enforceable
due to technical
defects
Express Tacit Quasi E com
By words oral or
written
Inferred by acts of
the parties
Not a real contract
but looks like a
contract implied by
law
Contract entered
using electronic
means
Nitika Bachhawat
By words oral or
written
Inferred by acts of
the parties
Not a real contract
but looks like a
contract implied by
law
Contract entered
using electronic
means
Unilateral Bilateral Executed Executory
One sided contract
one having
performed before or
at the time of
contract
Both the parties are
yet to perform
Reciprocal promises
yet to be performed
Performed
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7. Void Voidable
It is not enforceable by law It is enforceable at the option of the
aggrieved party
The contract cannot be performed If the aggrieved party within a reasonable
time does not avoid the contract then he
will have to perform the contract.
The aggrieved party will not have any legal
remedies
The aggrieved party will have legal
remedies against the other party.
Nitika Bachhawat
Void Illegal
It is not punishable by law It is punishable by law
It need not be void ab initio It is always void ab initio
Void need not be illegal Illegal is always void
If the main contract is void the collateral is
valid
Collateral to an illegal agreement is
always void
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8. Offer :
Willingnesstodoortoabstainfromdoingsomething,withaviewtoobtain
theother’sconsent.
Special General Cross Counter Standing
• made to a
definite person
or group
• accepted by
that person or
group
• the offeree
known to the
offeror
• made to the
world at large
• anyone may
come forward
act accordingly
and accept the
offer
• the offeree is
not known to
the offeror
• identical
offers
• in ignorance
• both offers
will lapse
• no contract
can arise
• modification
of the original
offer
• original offer
will lapse
•Contract can
arise if
accepted
within that
period
• open for
acceptance
over a period of
time.
Types of offer:
Nitika Bachhawat
• made to a
definite person
or group
• accepted by
that person or
group
• the offeree
known to the
offeror
• made to the
world at large
• anyone may
come forward
act accordingly
and accept the
offer
• the offeree is
not known to
the offeror
• identical
offers
• in ignorance
• both offers
will lapse
• no contract
can arise
• modification
of the original
offer
• original offer
will lapse
•Contract can
arise if
accepted
within that
period
• open for
acceptance
over a period of
time.
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9. Rules of offer:
1. Must be clear, definite and not vague
2. May be express or implied
3. Must be communicated
4. Cannot be accepted in ignorance
5. May be conditional
6. Must not contain a term non-compliance of which would amount
to acceptance
7. An invitation to offer is not an offer
Nitika Bachhawat
Acceptance:When the Offeree signifies his consent thereto
Rules of acceptance :
1. Must be unconditional
2. Must be communicated
3. Cannot be presumed from silence
4. Must be in the specified mode
5. Must be within the specified or reasonable time
6. May be by conduct
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10. Communication of Offer
For the Offeror For the Offeree
When he posts the
letter
When he receives the
letter
Nitika Bachhawat
When he posts the
letter
When he receives the
letter
Communication of offer takes place when it comes to the
knowledge of the person to whom it is made
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11. Communication of Acceptance
As against the Proposer As against the Acceptor
When the Acceptor
posts the letter
When the letter
reaches the Proposer
Nitika Bachhawat
When the Acceptor
posts the letter
When the letter
reaches the Proposer
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12. Communication of Rescission
For the person
who makes it
For the person against
whom it is made
When he posts it When he receives it
Nitika Bachhawat
When he posts it When he receives it
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13. Time of Rescission
Offer Acceptance
If the revocation letter reaches
before the acceptance letter is
posted
If the revocation letter
reaches before the
acceptance letter reaches
Nitika Bachhawat
If the revocation letter reaches
before the acceptance letter is
posted
If the revocation letter
reaches before the
acceptance letter reaches
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14. Consideration :
• when at the desire of the promisor
• the promisee or any other person
• has done or abstained from doing, does or abstains from doing or
promises to do or abstain from doing
• such an act or abstinence or promise is called promise for the
consideration.
Rules of consideration:
1. Must move at the desire of the Promisor
2. May move from the Promisee or any other person
3. Maybe Executed or Executory
4. May be past ,present or future
5. Need not be adequate
6. Must be for something which a promisor is not bound to do
Nitika Bachhawat
Consideration :
• when at the desire of the promisor
• the promisee or any other person
• has done or abstained from doing, does or abstains from doing or
promises to do or abstain from doing
• such an act or abstinence or promise is called promise for the
consideration.
Rules of consideration:
1. Must move at the desire of the Promisor
2. May move from the Promisee or any other person
3. Maybe Executed or Executory
4. May be past ,present or future
5. Need not be adequate
6. Must be for something which a promisor is not bound to do
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15. Privity of contract:
Only the parties to the contract can sue
and be sued third party cannot sue
No consideration no contract:
a contract without consideration is void
1. Trust or beneficiary
2. Family or marriage settlement
3. Assignment
4. Estoppel or acknowledgment of
liability
5. Covenants running with the land
1. Natural love and affection
2. Compensation for past voluntary
service
3. Time barred debt
4. Agency
5. Completed gifts and donations
6. Bailment
Nitika Bachhawat
1. Trust or beneficiary
2. Family or marriage settlement
3. Assignment
4. Estoppel or acknowledgment of
liability
5. Covenants running with the land
1. Natural love and affection
2. Compensation for past voluntary
service
3. Time barred debt
4. Agency
5. Completed gifts and donations
6. Bailment
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16. Minor’s agreement:
1. A minors agreement is void
2. He can be a beneficiary
3. A minor can plead minority. But if his intention is to cheat he will have to
compensate the other party
4. The rule of estoppel does not apply on a minor
5. A minors act cannot be ratified
6. The rule of restitution does not apply on a minor
7. A minor can be an agent and not a principal. If he is a principal the agent will be
liable
8. Contracts by the guardian of minor is valid if it I beneficial for the minor. If the
court appoints the guardian and he contracts with the sanction of the court all
such contracts are valid.
9. A minor is never personally liable for the necessaries supplied to him, the liability
is against his property .
10. A minor is laible for torts other than for breach of contract
11. If a minor is one of the joint promisors except him all the other parties shall be
liable
Nitika Bachhawat
Minor’s agreement:
1. A minors agreement is void
2. He can be a beneficiary
3. A minor can plead minority. But if his intention is to cheat he will have to
compensate the other party
4. The rule of estoppel does not apply on a minor
5. A minors act cannot be ratified
6. The rule of restitution does not apply on a minor
7. A minor can be an agent and not a principal. If he is a principal the agent will be
liable
8. Contracts by the guardian of minor is valid if it I beneficial for the minor. If the
court appoints the guardian and he contracts with the sanction of the court all
such contracts are valid.
9. A minor is never personally liable for the necessaries supplied to him, the liability
is against his property .
10. A minor is laible for torts other than for breach of contract
11. If a minor is one of the joint promisors except him all the other parties shall be
liable
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17. Coercion Undue influence Fraud Misrepresentation
• Committing or
threatening to
commit an act
which is a crime
under the Indian
Penal Code.
• unlawful detaining
or threatening to
detain any property
• with the intention
of causing the other
party to contract
• Parties are in such
a relation that
• one party is in a
position to
dominate the will of
another
•Uses that position
to obtain an unfair
advantage over the
oher
• position to
dominate will:
i. Real and
apparent
authority
ii. Fiduciary
relation
iii. Mental distress
iv. Unconscionable
bargains
• Means and
includes
• act done by the
party or with his
connivance or by his
agent
• with an intent to
deceive the other
party or to induce
him to enter into a
contract
• the positive
assertion of a fact
which is not true
though he believes
it to be true
• breach of duty
without an intention
to deceive gains an
advantage over
another by
misleading another
• causing however
innocently a party to
agreement to make
a mistake to the
substance which is
the subject of the
agreement.
Nitika Bachhawat
• Committing or
threatening to
commit an act
which is a crime
under the Indian
Penal Code.
• unlawful detaining
or threatening to
detain any property
• with the intention
of causing the other
party to contract
• Parties are in such
a relation that
• one party is in a
position to
dominate the will of
another
•Uses that position
to obtain an unfair
advantage over the
oher
• position to
dominate will:
i. Real and
apparent
authority
ii. Fiduciary
relation
iii. Mental distress
iv. Unconscionable
bargains
• Means and
includes
• act done by the
party or with his
connivance or by his
agent
• with an intent to
deceive the other
party or to induce
him to enter into a
contract
• the positive
assertion of a fact
which is not true
though he believes
it to be true
• breach of duty
without an intention
to deceive gains an
advantage over
another by
misleading another
• causing however
innocently a party to
agreement to make
a mistake to the
substance which is
the subject of the
agreement.
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18. The following acts are regarded as fraud
i. Stating a wrong fact as true
ii. Active concealment of fact (hide the fact)
iii. promise made without an intention to perform
iv. Any at fitted to deceive
Silence is not fraud:
Exceptions:
1. Duty of the person keeping silent to speak
2. Where silence is equivalent to speech
Consequences of coercion, undue influence, fraud and
misrepresentation:
1. The contract is voidable
2. Where one party uses fraud or misrepresentation and the other party iif he would
have used his diligence would have come to know the facts the contract is valid
3. If one party uses fraud or misrepresentation but the other party was not infact
misled by it he contract is valid,
Nitika Bachhawat
The following acts are regarded as fraud
i. Stating a wrong fact as true
ii. Active concealment of fact (hide the fact)
iii. promise made without an intention to perform
iv. Any at fitted to deceive
Silence is not fraud:
Exceptions:
1. Duty of the person keeping silent to speak
2. Where silence is equivalent to speech
Consequences of coercion, undue influence, fraud and
misrepresentation:
1. The contract is voidable
2. Where one party uses fraud or misrepresentation and the other party iif he would
have used his diligence would have come to know the facts the contract is valid
3. If one party uses fraud or misrepresentation but the other party was not infact
misled by it he contract is valid,
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19. Mistake
Bilateral Unilateral Indian law Foreign law
Mistake of subject
matter
i. Quantity
ii. Quality
iii. Identity
iv. Existence
v. title
When one party is
mistaken about the
subject matter
Ignorantia juris non
excusat
Is treated as a
mistake of fact
Mistake of fact Mistake of law
Nitika Bachhawat
Mistake of subject
matter
i. Quantity
ii. Quality
iii. Identity
iv. Existence
v. title
When one party is
mistaken about the
subject matter
Ignorantia juris non
excusat
Is treated as a
mistake of fact
VOID VALID VALID VOID
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20. Lawful object or consideration
1. Consideration or object is forbidden by law
2. Consideration or object defeats the provisions of law
3. When consideration defeats any rule for the time being in force
4. When it is fraudulent
5. When consideration involves injury to the person or property of another
6. When consideration is immoral
7. When consideration is opposed to public policy
i. Trading with enemy
ii. Stifling prosecution
iii. Maintenance and champerty
iv. Interference with the course of justice
v. Traffic relating to public offices/ sale of public offices
vi. Interest against obligation
vii. Marriage brokerage agreement
viii. Agreement in restraint of marriage
ix. Agreement for the creation of monopoly
x. Agreement in restraint of trade
xi. Agreement in restraint of legal proceedings
Nitika Bachhawat
1. Consideration or object is forbidden by law
2. Consideration or object defeats the provisions of law
3. When consideration defeats any rule for the time being in force
4. When it is fraudulent
5. When consideration involves injury to the person or property of another
6. When consideration is immoral
7. When consideration is opposed to public policy
i. Trading with enemy
ii. Stifling prosecution
iii. Maintenance and champerty
iv. Interference with the course of justice
v. Traffic relating to public offices/ sale of public offices
vi. Interest against obligation
vii. Marriage brokerage agreement
viii. Agreement in restraint of marriage
ix. Agreement for the creation of monopoly
x. Agreement in restraint of trade
xi. Agreement in restraint of legal proceedings
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21. Agreement expressly declared void
Agreement unlawful in part Agreement which is
uncertain
Wagering agreement
• if both parts are
separable then the legal
part is valid and the illegal
part is void
•If both the parts are not
separable then the
contract is completely void.
• Even if the parties agree
to such an agreement it
shall be void on the
grounds of uncertainty.
• if in an agreement there
is a vague term but there
are means to ascertain the
vague term the contract is
not void.
• an agreement to give money
upon the happening or non
happening of an uncertain
event.
•Both the parties are set to win
or lose
•The following are not
regarded as wager:
i. Crossword puzzles and
competitions based on
skill and not dependent on
the similarity of answer
with the editors answer
ii. Speculation
iii. Horse racing where prize is
500 or more
iv. Chit fund
v. Commercial transaction or
share market transactions
vi. Games of skill and athlete
competition
vii. Insurance contracts
Nitika Bachhawat
• if both parts are
separable then the legal
part is valid and the illegal
part is void
•If both the parts are not
separable then the
contract is completely void.
• Even if the parties agree
to such an agreement it
shall be void on the
grounds of uncertainty.
• if in an agreement there
is a vague term but there
are means to ascertain the
vague term the contract is
not void.
• an agreement to give money
upon the happening or non
happening of an uncertain
event.
•Both the parties are set to win
or lose
•The following are not
regarded as wager:
i. Crossword puzzles and
competitions based on
skill and not dependent on
the similarity of answer
with the editors answer
ii. Speculation
iii. Horse racing where prize is
500 or more
iv. Chit fund
v. Commercial transaction or
share market transactions
vi. Games of skill and athlete
competition
vii. Insurance contracts
21

22. Who can perform the contract:
1. The promisor himself
2. His agent except in case of contracts of personal skill and confidence
3. The legal representatives in the event of death of the parties except in case of
contracts of personal skill and confidence
4. Third party
5. Joint promisors
Nitika Bachhawat
Succession Assignment
Inheritance. Transfer of rights
Operation of law Operation of law or by agreement
Both asserts and liabilities are transferred
but liability to the extent of assets
Liabilities are assigned only with the
consent of all the parties concerned
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23. Nitika Bachhawat
Time and place of performance
Case Perfomance
No time specified reasonable time
Day specified but no time specified during the business hours
No place fixed duty of the Promisor to ask the Promisee
to fix a reasonable place
Performance on a particular day but
Promisor will not perform unless asked by
the Promisee
duty of the Promisor to ask the Promisee
to fix a reasonable place
Performance on a particular day but
Promisor will not perform unless asked by
the Promisee
Effect of refusal to accept performance
Where the promisor offers to perform the promise:
i. Unconditionally
ii. At the proper time and place
iii. The promisee is given an opportunity to examine the
thing whether it is same for which the contract is made
And the promisee refuses to accept .
Offer to one of the joint promisors shall be deemed to be an
offer to all of them
Promisor is
not liable for
non
performace
nor does he
lose his
rights
23

24. Nitika Bachhawat
Effect of refusal by a party to perform
If one of the parties has refused to perform the contract the other party may
i. Terminate the contract; or
ii. Indicate by words or conduct about his intention to carry on with the contract.
Once he accepts the contract he cannot later cancel the same
Liability of joint promisors
Each of the joint promisor is jointly liable for his share and severally liable for the whole
share.
If any of the joint promisor has performed the whole contract he may compel the
others to contribute to the performance.
If any of the joint promisor has performed the whole contract he may compel the
others to contribute to the performance.
If any one of the joint promisor makes a default in such contribution or is unable to
contribute then his loss shall be borne by the others in their proportion
If any one of the joint promisor is dead his legal heirs along with the other survivors
shall perform the contract. If all the joint promisors are dead then the legal heirs of all
the joint promisors shall perform the contract.
If the promisee releases any of the joint promisor it does result in the release of the
other joint promisors and they shall be liable to the promisee. However the released
promisor shall be liable to the other joint promisors
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25. Nitika Bachhawat
Reciprocal promises
1. Promises which are to be performed simulteneously
2. Promisor need not perform his promise unless the promisee is ready and willing to
perform his promise
3. The order of performance may be fixed either by agreement or by implication
i. By agreement is when the parties fix the order in which the contract shall be
performed. Contract must be performed in the specified order only
ii. The contract may not specify the order but it can implied from the nature of
contract the order of performance
4. In case of reciprocal promises if one party prevents the other from performing the
contract the party so prevented
i. Has no obligation to perform
ii. But has a right to claim the damages
1. Promises which are to be performed simulteneously
2. Promisor need not perform his promise unless the promisee is ready and willing to
perform his promise
3. The order of performance may be fixed either by agreement or by implication
i. By agreement is when the parties fix the order in which the contract shall be
performed. Contract must be performed in the specified order only
ii. The contract may not specify the order but it can implied from the nature of
contract the order of performance
4. In case of reciprocal promises if one party prevents the other from performing the
contract the party so prevented
i. Has no obligation to perform
ii. But has a right to claim the damages
Appropriation of payment
1. Debtor will specify and if the creditor accepts the payment must set off that debt
only.
2. If the payment is made on account generally, the creditor may set off any debt.
3. If nothing is specified the first debt in order of time and if more then one debt
then in their proportion.
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26. Nitika Bachhawat
Time of performance
Time of essence Time not of essence
If the time is of essence and the party
fails to perform the aggrieved party has a
right to avoid the contract.
If time is not of essence and party fails to
perform within time the contract is valid.
The aggrieved party can claim damages
If the party accepts the performance at
any time other than fixed for contract then
he can claim damages only if he gives
notice.
Restitution
Restore the benefits received under a void contract or under a voidable contract on its
becoming void.
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27. Nitika Bachhawat
Discharge of contract
1. Performance
i. Actaul – parties have discharged there obligationm
ii. Attempted - one is ready, other refuses to accept
2. Lapse of time
3. Operation of law
i. Death
ii. Insolvency
iii. Merger
4. Mutual consent
i. Novation: substituting old contract for a new contract
ii. Rescission: cancellation of the contract
iii. Alteration: change in the terms of the contract
iv. Remission: acceptance of lesser amount or kind in place of cash
5. Impossibility of performance
i. Existing at the time of contract (known to both, unknown to both, known to
one)
ii. Supervening impossibility (death of the promisor, destruction of subject
matter, non existence of a particular state of things, outbreak of war, change
in law)
6. Breach – non fulfillment of the terms of the contract.
i. Actual – on the due date or during the course of performance
ii. Anticipatory – prior to the due date
1. Performance
i. Actaul – parties have discharged there obligationm
ii. Attempted - one is ready, other refuses to accept
2. Lapse of time
3. Operation of law
i. Death
ii. Insolvency
iii. Merger
4. Mutual consent
i. Novation: substituting old contract for a new contract
ii. Rescission: cancellation of the contract
iii. Alteration: change in the terms of the contract
iv. Remission: acceptance of lesser amount or kind in place of cash
5. Impossibility of performance
i. Existing at the time of contract (known to both, unknown to both, known to
one)
ii. Supervening impossibility (death of the promisor, destruction of subject
matter, non existence of a particular state of things, outbreak of war, change
in law)
6. Breach – non fulfillment of the terms of the contract.
i. Actual – on the due date or during the course of performance
ii. Anticipatory – prior to the due date 27

28. Nitika Bachhawat
Remedies for breach
Damages Sue for
rescission
Quantum
meruit
Sue for specific
performance
Sue for
injunction
Ordinary – claimed as a right
Special – claimed only when
notice of special loss
Vindictive or exemplary
damages – breach of
contract of marriage and
wrongful dishonour of
customers cheque
Nominal – when the
aggrieved party does not
suffer any loss on account of
breach
Penalty – very high amount
Liquidated – very near to the
actual damage
If one party
does not
perform the
other may
sue for
canceling
the contract
As much
as is
earned or
merited
i. Goods have
no substitute;
or
ii. Damages are
not an
adequate
relief
Has to perform
the contract
There is a
negative
term in the
contract and
one party
breaches
that
negative
term
Ordinary – claimed as a right
Special – claimed only when
notice of special loss
Vindictive or exemplary
damages – breach of
contract of marriage and
wrongful dishonour of
customers cheque
Nominal – when the
aggrieved party does not
suffer any loss on account of
breach
Penalty – very high amount
Liquidated – very near to the
actual damage
i. Goods have
no substitute;
or
ii. Damages are
not an
adequate
relief
Has to perform
the contract
There is a
negative
term in the
contract and
one party
breaches
that
negative
term
Rules of damages: (1) Any damage arising in the ordinary course of the contract can
be claimed as a matter of right. (2) Special damages can be claimed only if the
special circumstances were made known. (3) Remote damages can never be
claimed. (4) Any damage arising under a quasi contract can be claimed. 28

29. Nitika Bachhawat
Contingent contract
Dependent on the
happening of an
event
Dependent on the
non happening of
an event
Dependendt on a
third party
Dependent on an
impossible event
If a contingent
contract is
dependent on the
happening on an
event it is
Valid: when the
event happens and
Becomes void:
when the event
does not happen
If a contingent
contract is
dependent on the
non happening on
an event it is
Valid: when the
event does not
happen and
Becomes void:
when the event
happens or does
not become
impossible
If the third party
acts according to
the contract the
contract shall be
valid
It is void ab initio
If a contingent
contract is
dependent on the
happening on an
event it is
Valid: when the
event happens and
Becomes void:
when the event
does not happen
If a contingent
contract is
dependent on the
non happening on
an event it is
Valid: when the
event does not
happen and
Becomes void:
when the event
happens or does
not become
impossible
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30. Nitika Bachhawat
Quasi contract
Goods delivered by mistake or under coercion: person to whom money has been paid
or anything is delivered by mistake or under coercion must repay or return.
claim for necessaries supplied to a minor or to a lunatic’s family: if a person not
capable of contracting is supplied with necessaries or supplied to his family, the person
can recover the value of the necessaries from the person’s property.
Payment by an interested party: A person who makes payment on behalf of another to
protect his interest has a right to recover the amount from the person on whose behalf
the payment was made.
Obligation of a person receiving benefits o a non gratuitous act: if a person does nythig
for another or delivers something not doing so gratuitously then the person who enjoys
the benefit is liable to pay the reasonable charges .
Responsibility of finder of the goods: if a person finds goods belonging to another takes
them in his custody he has the same position as that of the bailee of the goods. He
must restore the good back to the true owner.
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Goods delivered by mistake or under coercion: person to whom money has been paid
or anything is delivered by mistake or under coercion must repay or return.
claim for necessaries supplied to a minor or to a lunatic’s family: if a person not
capable of contracting is supplied with necessaries or supplied to his family, the person
can recover the value of the necessaries from the person’s property.
Payment by an interested party: A person who makes payment on behalf of another to
protect his interest has a right to recover the amount from the person on whose behalf
the payment was made.
Obligation of a person receiving benefits o a non gratuitous act: if a person does nythig
for another or delivers something not doing so gratuitously then the person who enjoys
the benefit is liable to pay the reasonable charges .
Responsibility of finder of the goods: if a person finds goods belonging to another takes
them in his custody he has the same position as that of the bailee of the goods. He
must restore the good back to the true owner.