RBSE Class 12 Business Studies Notes Chapter 9 Business Law and Contract Act

Rajasthan Board RBSE Class 12 Business Studies Notes Chapter 9 Business Law and Contract Act

In simple words, law is a system or set of rules, regulations, principles, etc. prescribed or formed by local government, state or nation, to regulate and control human behaviour in social, economic and political sphere.

Law is a system of rules and principles accepted and used by the state to maintain law and order in the state.

Business Law

Business law may be defined as that branch of law which consists of laws relating to trade, industry and commerce.

Scope of Business Law

The scope of business law is very wide and varied. It includes :
Indian Contract Act, 1872.
The sale of Goods Act, 1930.
The Indian Partnership Act, 1932.
The Negotiable Instrument Act, 1882.
The Arbitration Act, 1940.
The Companies Act, 2013.
The Banking Regulation Act, 1949.
The Consumer Protection Act, 1986.
The Essential Commodities Act, 1955.
The Industrial Law.
The Labour Act.
The Insurance Laws (Amendment) Act, 2015.
The Securities Exchange Board of India Act, 1992.
Foreign Exchange Management Act, 1999.
Patent, Trademark and Copyright Act.
Information Technology Act, 2000.
Carriage of Goods Law.

Sources of Indian Business Law

English Common Law : The sources of English mercantile law are common law, equity law, merchant and statute law. The common law of England or the judge-made law, is the preliminary source of Indian law.
Acts Enacted by Indian Legislature: The greater part of Indian Business/Mercantile law is legislature-enacted. The Acts enacted by the Indian Parliament are that source of law which makes it possible to bring uniformity in Indian laws.
Judicial decisions or Judicial precedent: Keeping in view the present situation, the verdicts / decisions made by Supreme Court on new issues and emerging debates on them are used as examples by lower courts while taking decisions.
Custom and Trade Usages : Customs and Trade Usages become binding, when certain pre-requisites are fulfilled. Then the custom is recognised by courts and it becomes a legal obligation.
Justice, Equity and Good Conscience : In the absence of any rule of a statutory law or custom or personal law, on a particular point arising the before the courts, the court applies this, which means that in substance and in circumstances, the rule of English law is applicable to the Indian society and circumstances.

Indian Contract Act, 1872

Indian Contract Act, ICA, 1872 came into force on Ist Spetember 1872, having 266 sections. But, later in 1930, some of the sections were deleted, although Sale of Goods Act, and Indian Partnership Act, 1932 were codified as separate Acts.
After these, changes in the subject matter of ICA have been made and they are presently as follows :
Sections 1 to 75, Basic Principles of Contract and Quasi Contract.
Sections 76 to 123, Sale of Goods Act repeated.
Sections 124 to 147 Contracts of Identity and Guarantee-related provisions.
Sections 148 to 181 provisions related to contract of bailment and pledge.
Sections 182 to 238 provisions related to agency contract.

Definition of Contract

The word contract has its origin from the Latin word “contractum”, which means to draw together, combine, make an agreement.
Contract is a voluntary, delibrate, legally binding agreement between two or more competent parties, which defines the legal obligations and authorities of parties.

Elements of a Valid Contract

Presence of two or more parties.
Agreement should be there between two parties.
Intention to create legal relationship while entering into an agreement.
Agreement becomes a contract if it is entered into between the parties who are competent to contract.
Free and genuine consent of the parties to the agreement.
Both the parties give something and get something in return.
Object should be lawful for agreement.
Certainty should be there in agreement.
Possibility of performance.
Agreement must not have beeh expressly declared void by any law or force in the country.
A contract may be made by words, spoken or written.

Important Glossary

Agreement : A proposal which when accepted becomes a promise. An agreement is an accepted proposal.
Therefore, Agreement = Offer + Acceptance
Contract : Only those agreements which create legal obligations, i.e. which are enforceable by law are called contracts.
Void agreement : It is an agreement without any legal effect that cannot be enforced in a court of law.
Void contract: A void contract is that which can’t be performed or completed because of sudden and unexpected events.
Quasi contract: These are the contracts which are created neither by words spoken, nor written, nor by the conduct of the parties, but these are created by law and legal obligation is imposed on the party who is required to perform it.
Bilateral contract: A contract in which both the parties commit to perform their respective promises.
Offer: An offer is a proposal by one party to another to enter into a legally binding agreement with it.
Counter offer : Offer accepted on the terms and conditions other than set out by the offerer.
Cross offer: When two parties exchange identical offers in ignorance at the time of each other’s offer.
Fraud : Fraud is ffadulent misrepresentation of facts willfully, with a view to decfeve the other party or to induce a person to enter into contract.
Undue Influence : A contract is said to be induced by undue influence where the relationship subsisting between the parties is such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.
Pledge: The bailment of goods as security for payment of a debt or performance of a promise is called pledge.
Bailment : It the delivery of goods by one person to another for some purpose upon a contract, that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the direction of person delivering them.
Agent: An agent is a person who is employed to do any act for another (principal) or to represent another in dealings with third persons. The person for whom such act is done is called principal.
lien : Right of one person to retain possession of some goods belonging to another until some debt or claim of the person in possession is satisfied.

Important Definitions

According to Pollack – “Every agreement and promise enforceable by law is a contract.”
According to Salmond – “A contract is an agreement creating and defining obligation between two or more persons by which rights are acquired by one or more to act or forbearance on the part of others.”
According to Sir William Anson – “A legally binding agreement between two or more persons by which rights are acquired by one or more to acts or forbearance on the part of others.”