Business Law All Chapters Notes

V BBM ‘B ’ BUSINESS LAW CLASS
CONTENTS
1. Introduction to Business Laws
2. Indian Contract Act, 1872
3. Patent Act, 1970
4. Trade & Merchandise Marks Act, 1958
5. Copyright Act, 1957
6. Consumer (Protection) Act, 1986
7. Foreign Exchange Management Act, 1999
8. Information Technology Act, 2000
9. Environment Protection Act
10.Competition Act, 2002
Module I.
BUSINESS LAWS
What is law ?
1. A citizen may think of ‘law ’
as a set of rules which he must obey.
2. A lawyer who practices ‘ law ’ may think of law
as a vocation .
3. A legislator may look at ‘law ’
as a something created by him.
4. A judge may think of ‘law ’
as a guiding principles to be applied in making
decisions.
Law
►Law includes all those rules

and regulations which
►regulate our relations with other
individuals and with the state.
Meaning of law
► Law means a set of rules .
► It may be defined as the rules of conduct
recognized and enforced by the state to
control and regulate
the conduct of people,
to protect their property and
contractual rights with a view to
securing justice, peaceful living and
social security.
Continue……..
► The law is not rigid, it is flexible.
► Since the value system of society keeps on
changing , the law also keeps changing
according to the changing requirements of the
society.
► There are several branches of law such as
International law, constitutional law, criminal law,
civil law etc..
► Every branch of law regulates and controls a
particular field of activity.
Why should one know law
► Because ignorance of law is no excuse.
► Ex : 1
If X is caught traveling in a train without ticket,
cannot plead that he was not aware of the rule
regarding the purchase of ticket and therefore, he
may be excused.
► Ex : 2
If Y is caught driving scooter without driving
license, he cannot plead that he was not aware of
the traffic rule regarding the obtaining of a driving
license and therefore, he may be excused.
Definition of Law by Salmond
►“Law is ………………
…the body of principles recognized and
applied by the State in the
administration of the justice ” .
Object of law
►The object of law is order, and the

result of order is that men are
enabled to look ahead with
some sort of security as to
the future .
Need for the knowledge of law
► ‘Ignorantia juris non excusat ’

is a familiar maxim. This means
ignorance of law is not excusable .
The law now a days is a matter of great intricacy.
As such no sound business man would
attempt to solve important legal questions
affecting his business interest without
expert legal advice .
BUS INES S LAWS
► Bus ine s slaws

are those laws which re gulate the
conduct of the business.
Sources of Business Law
► 1.English Mercantile Law

► 2.The Statute Law
► 3.The Common Law (sometimes called as case
law)
► 4.Customs and Usages
Continue………..
► English Mercantile Law : English laws are the
primary sources of Indian Mercantile Law. English
laws are based on customs and usages of
merchants in England.
► The Statute Law : The various Acts passed by
the Indian Legislature are the main sources of
mercantile law in India, e.g. Indian Contract Act,
1872, The Sale of Goods Acts,1930, The
Partnership Act, 1932, The Negotiable Instruments
Act 1881, The Companies Act, 1956.
Continue………….
► The Common Law : This source consists
of all those unwritten legal doctrines
embodying customs and traditions
developed over centuries by the English
courts. Thus, the common law is found in
the collected cases of the various courts of
law and is sometimes known as ‘case law’.
► The common law emphasizes precedents.
Continue………
► Customs and usages : The customs and
usages of a trade are also one of the
sources of mercantile law in India. These
customs and usages govern the merchants
of a trade in their dealings both each other.
Some Acts passed by the Indian Legislature
recognizes the importance of such customs
and usages.
Module: II
Law of Contract
► The law of contract is regulated by Indian Contract Act, 1872
OBJECT OF THE LAW OF CONTRACT
The law of contract is that branch of law which
determines the circumstances in which promises
made by the parties to a contract shall be
legally binding on them.
In simple words, the purpose of law of contract is to
ensure the realization of reasonable expectation of
the parties who enter in to contract.
OBJECT OF LAW OF CONTRACT
► According to Sir William Anson,
The law of contract is intended to ensure

that, ‘what a man has been led to
expect shall come to pass, and that
what has been promised to him
shall be performed.
‘JUS IN REM’ &
‘JUS IN PERSONAM’
Law of contract creates,
‘jus in rem ’ and ‘jus in personam ’.
► ‘Jus in rem ’ means,
right against the world at large.
‘jus in personam ’ means,
the right against particular persons.
Definition of C ontrac t
► Section 2(h) of Indian Contract Act, 1872
defines a contract as ……..
“An agreement enforceable by law ”.
So, a contract is an agreement made
between two or more parties which the
law will enforce.
CONTRACT
► An agreement enforceable by law is a
contract.
Contract = Agreement + Enforceability
Agreement = Offer + Acceptance
An agreement is defined as,
“every promise and set of promises, forming
consideration for each other ” [Sec2(e)].
Definition of Promis e
►A promise is defined thus:

“When the person to whom the proposal is
made signifies his assent there to, the
proposal is said to be accepted.
A proposal, when accepted, becomes a
promise.” [Section 2(b)].
An agreement is an accepted proposal.
Consensus ad idem
► The essence of an agreement is meeting of the
minds of the parties.There must in fact, be
consensus ad idem .
► Eg., A , (owns two horses named Rajhans &
Hansraj), is selling horse Rajhans to B .
B thinks he is purchasing Hansraj.
There is no consensus ad idem consequently no
contract.
Agreement and its types
► Legal Agreement
► Social Agreement
► Domestic Agreement
Obligation
► An agreement, to become a contract, must give rise to a

legal obligation or duty.
► An obligation is a legal tie which imposes upon a definite
person or persons the necessity of doing or abstaining
from doing a definite act or acts.
Ex. A agrees to sell his car to B for Rs.1,00,000/-.The
agreement gives rise to an obligation on the part of A to
deliver the car to B on the part of B to pay Rs.1,00,000/- to
A. This is a legal agreement . This agreement is a
contract.
Obligation
► An agreement which gives rise to social

obligation is not a contract .
► An agreement is a wider term.
► An agreement may be a social agreement or a
legal agreement.
► If A invites B to a dinner and B accepts the
invitation, it is a social agreement .
Obligation
► A social agreement does not give rise to contractual

obligations and is not enforceable in a Court of law.
► It is only those agreements which are enforceable in a
court of law which are contracts.
► A father promises to pay his son Rs.100/- every month as
pocket allowance. Later he refuses to pay.
The son cannot recover as it is a domestic
agreement and there is no intention on the part of the
parties to create legal relations.
All contracts are agreements, but all agreements are
not necessarily contracts
► ESSENTIALS OF A VALID CONTRACT : Sec 2(h) &
sec(10)
1. Offer and Acceptance
2. Intention to create legal relationship
3. Lawful consideration
4. Capacity of parties-Competency
5. Free and genuine consent
6. Lawful object
7. Agreement not declared void
8. Certainty and possibility of performance
9. Legal formalities
ESSENTIALS OF A VALID CONTRACT :
1.Offer and Acceptance :

There must be two parties to an
agreement, i.e., one party making the offer
and the other accepting it
The terms of the offer must be definite and
the acceptance of the offer must be
absolute and unconditional.
The acceptance must also be according to the
mode prescribed.
2.Intention to create legal relationship :

When two parties enter into an agreement, their
intention must be to create legal relationship
between them .If there is no intention on the part
of the parties, there is no contract between them.
E g ., A husband promised to pay his wife a house hold
allowance of 30 pounds every month .Later the parties
separated and the husband failed to pay the amount. The
wife sued for the allowance .
Held, the agreement such as these were outside the realm of
contract altogether (Balfour vs.Balfour,1919 & s Carbolic
smoke ball Co.v
s Carlill)
► 3. Lawful consideration :
An agreement to be enforceable by law must be
supported by consideration .
‘Consideration’ means advantage or benefit moving from
one party to the other. It is the essence of a bargain.
In simple words, it means ‘something in return ’.
A promise to do something and, getting nothing
in return is usually not enforceable by law.
Consideration need not be in cash or kind .
It may be an act or abstinence.
It may be past,present or future.But it must be
real and lawful
► 4.Capacity of parties-Competency :
The parties to the agreement must be
capable of entering in to a valid contract .
Every person is competent to contract if he,
(a) is of the age of majority,
(b) is of sound mind, and
(c) is not disqualified from contracting by any law
to which he is subject.
The flaw in capacity to contract may arise from
minority, lunacy, idiocy, drunkenness, etc.
► 5.Free and genuine consent :

It is essential to the creation of every contract that
there must be free and genuine consent of the
parties to the agreement.
The parties are said to be of the same mind when
they agree about the subject matter of the
contract in the same sense and at the same
time(Sec.13).
There is absence of free consent if the
agreement is induced by coercion, undue
influence, fraud, misrepresentation and
mistake(Sec.14).
► 6 .Lawful object :
The object of the agreement must be lawful .
In other words, it means that the object must
not be (a) illegal, (b) immoral, or (c)
opposed to public policy(Sec.23)
If an agreement suffers from any legal flaw,
it would not be enforceable by law.
7. Agreement not declared void :

The agreement must not have been expressly
declared void by law in force in the country under
the provisions of sections 24 to 30 of the
Indian Contract Act,1872
Under these provisions, agreement in restraint of
marriage, agreement in restraint of legal
proceedings, agreement by way of wager have
been expressly declared as void
A void agreement is one which is not
enforceable by law .
8. Certainty and possibility of performance :

The agreement must be certain and not vague or
indefinite (Sec.29).
If it is vague and if it is not possible to ascertain it ’s
meaning, it cannot be enforced.
Ex. ‘A ’ agrees to sell to ‘B ’ “a hundred tons
of oil ”.
There is nothing whatever to show what kind of oil
was intended. The agreement is void.
► 9.Legal formalities :
A contract may be made by words spoken or
written .
As regards the legal effects, there is no difference
between a contract in writing and a contract made
by word of mouth.
It is however in the interest of the parties
that the contract should be in writing.
In some other cases, a contract, besides being a
written one, has to be registered.
Classification
of Contracts
Contracts may be classified according to,
1.Validity 2.Formation, and 3.Performance
VALIDITY FORMATION PERFORMANCE
1 .Voidable Contract [2(i)] 1 .Express Contract [9] 1 .Executed Contract
2 .Void Agreement [2(g)] 2 .Implied Contract [9] 2 .Executory Contract
3 .Void Contract [2(j)] 3 .Quasi Contract 3 .Unilateral Contract
4 .Illegal Agreement 4 .Bilateral Contract
5 .Unenforceable Contract
1.Classification according to ‘Validity ’
► i] Voidable contract: An agreement which is

enforceable by law at the option of one party but
not at the option of the other or others is a voidable
contract [Sec.2(i)].
The party whose consent is not free may
either rescind (avoid or repudiate) the
contract, if he so desires, or elect to be bound
by it.
A voidable contract continues to be valid till it is
avoided by the party entitled to do so.
Classification of Contract………
► Example of Voidable Contract: A promises

to sell his car to B for rs. 2000. His consent
is obtained by use of force. The contract is
voidable at the option of A .
► He may avoid the contract or elect to be bound by
it.
Continue………..
► Example 2: X threatens to kill Y if he does not sell his
house for rs. 1,00,000 to X. Y sells his house to X and
receives payment.
► Here, Y’s consent has been obtained by coercion and
hence this contract is voidable at the option of Y, the
aggrieved party.
► If Y decides to avoid the contract, he will have to return
rs.1,00,000 which he had received from X.
► If Y does not exercise his option to repudiate the contract
within a reasonable time and in the mean time, Z
purchases that house from X for rs. 1,00,000 in good faith,
Y cannot repudiate the contract.
Classification of Contract………
► ii] Void Agreement: An agreement not

enforceable by law is said to be void
[Sec.2(g)].Such agreements are
void-ab-initio which means that they are
unenforceable right from the time they are
made
► E.g., An agreement with a minor or a person of
unsound mind is void-ab-initio because a minor or
a person of unsound mind is incompetent to
contract
Cont’d…..
► iii] Void Contract: A contract which ceases

to be enforceable by law is a void contract.
[2 (j)].
► A void contract is a contract which was valid when entered
into but which subsequently became void due to
impossibility of performance, change of law or some other
reason.
► E.g., A contract to import goods becomes void,
when war breaks out between the countries.
Cont’d…..
► iv] Illegal Agreement : An illegal agreement

is one which is unlawful. Such an
agreement cannot be enforced by law.
Thus, illegal agreements are always void-
ab-initio( i.e., void from the very beginning)
► E g :An agreement to import prohibited goods.
Continue………..
► Example: X agrees to pay Y rs.1,00,000 if Y kills Z and
claims rs.1,00,000. Y cannot recover from X because the
agreement between X and Y is illegal as its object is
unlawful
Effect on collateral agreements : In case of illegal
agreements, even the collateral agreements become void
Example: If in the above example, x borrows rs,1,00,000
from W who is aware of the purpose of the loan, the main
agreement between X and Y is illegal and the agreement
between X and W which is collateral to the main agreement
is also void. Hence, W cannot recover the money from X.
Cont’d…
► ………….Illegal Agreement :
► An illegal agreement is not only void as between
the parties but has this further effect that even the
collateral transactions to it become tainted with
illegality.
A collateral transaction is one which is
subsidiary, incidental or auxiliary to the principal or
original contract.
Cont’d……..
► v] Unenforceable Contract :
► An unenforceable Contract is one which cannot
be enforced in a Court of law because of some
technical defect such as absence of writing or
where the remedy has been barred by lapse of
time.
The contract may be carried out by the parties
concerned; but in the event of breach or repudiation of
such a contract, the aggrieved party will not be entitled to
the legal remedies.
2.Classification according to ‘Formation ’
► A contract may be (a) made in writing or by word of mouth,

or (b) inferred from the conduct of the parties or
circumstances of the cases. These are the modes of
formation of contract.
► On the basis of ‘ Formation’ Contract can be
classified as,
(i) Express Contract, (ii) Implied Contract, &
(iii) Quasi Contract.
Cont’d…….
(i) EXPRESS CONTRACT : If the terms and

conditions of contracts are expressly agreed
upon (whether words spoken or written) at the
time of formation of contract, the contract is said
to be ‘Express Contract ’.
Ex: X says to Y “will you buy my car for rs.
1,00,000?” Y says to X “ I am ready to buy your
car for rs. 1,00,000”.
(ii) IMPLIED CONTRACT : One which is inferred
from the acts or conduct of the parties or course
of dealings between them.
An implied contract is one which is not an express
contract.
Continue……
► Ex: A transport company runs buses on different
routes to carry passengers. This is an implied
acceptance by X. Now, there is an implied contract
and X is bound to pay the prescribed fare.
► Ex: X, a coolie in uniform picks up the baggage of
Y to do so and Y allows it from platform to the taxi
without being asked by to do so and Y allows it.
In this case there is ay the coolie and an implied
acceptance by the passenger. Now, there is an
implied contract between the coolie and the
passenger and the passenger is bound to pay for
the services of the coolie
Contracts ………classified.
(iii)QUASI CONTRACT : Strictly speaking Quasi

Contract is not a contract at all.
A contract is intentionally entered in to by the
parties.
A quasi contract, on the other hand is created
by law. It rests on the ground of equity that, “
a person shall not be allowed to enrich
himself unjustly at the expense of another ”.
Continue…….
► Ex: A finds some goods belonging to B, it is
his duty to restore them to the rightful
owner. These contracts are based on the
principle of equity, justice and good
conscience.
► The Indian Contract Act 1872, has
described the obligations arising under
these contracts as ‘certain relations those
created by contracts’
III. Classification according to ‘Performance ’
► (i) Executed Contract

(ii) Executory Contract
-Unilateral or One-sided Contract
-Bilateral Contract
….. Classification according to ‘Performance ’
(I) EXECUTED CONTRACT :

‘Executed’ means that which is done.
An executed contract is one in which both the parties have
performed their respective obligations.
Ex: X offers to sell his car to Y for rs. 1,00,000. Y accepts x’s offer. X
delivers the car to Y and Y pays rs. 1,00,000 to x. It is an executed
contract
(ii) EXECUTORY CONTRACT :
‘Executory’ means that which remains to be carried in to effect.
It is a contract where both the parties to the contract have still to
perform their respective obligations.
Ex: X offers to sell his car to Y for rs.1,00,000. Y accepts X’s offer. If the
car has not yet been delivered by X and the price has not yet been
paid by Y, it is an executory contract.
Continue…….
© Partly Executed and partly Executory Contract: It
is a contract where one of the parties to the
contract has fulfilled his obligation and the other
party has still to perform his obligation.
Ex. X offers to sell his car to Y for rs. 1,00,000 on a
credit of one month. Y accepts X’s offer. X delivers
the car to Y. Here, the contract is executed as to X
and executory as to Y.
► ONE-SIDED OR UNILATERAL CONTRACT
Performance of only one party is outstanding.
► BILATERAL CONTRACT.
Performance of both the parties remains outstanding.
CASE 1.
► Over a cup of tea in a restaurant,A invites
B for a dinner at his house on a Sunday. B
hires a taxi and reaches A ’s house at the
appointed time, but A fails to perform his
promise.
Can B recover any damage …???
VERDICT OF CASE 1.
► No. [Balfour V. Balfour,1919 ]
► A husband promised o pay his wife a household
allowance of 30 sterling pounds every month.
► Later the parties separated and the husband failed
to pay the amount. The wife sued for the
allowance.
Held , agreement such as these were outside the
realm of contract altogether.
CASE 2.
► (a) A engages B for a certain work and
promises to pay such remuneration as
shall be fixed by C .
B does the work.
► (b) A and B promise to marry each
other.
► (c) A takes a seat in public vehicle.
► (d) A invites B for a card party
VERDICT OF CASE 2.
► (a) There is a contract between A and B
and A is bound to pay the remuneration as shall
be fixed by C .
If C does not fix , or refuses to fix the remuneration,
A is bound to pay a reasonable remuneration.
► (b) There is a contract between A and B
► (c) There is a contract between A and B
► (D) There is no contract
CASE 3.
►A forced B to enter in to a contract at
the point of pistol.
What remedy is available to B .
If he (B ) does not want to be bound by
the contract ..??
VERDICT OF CASE 3.
► He (B) can repudiate the contract as his
consent is not free.
CASE 4.
►M mows L ’s lawn without being asked by L
to do so. L watches M do the work but does
not attempt to stop him.
Is ‘L ’ bound to pay any charges to ‘M ’ ?
VERDICT OF CASE 4.
► Yes, L
is bound to pay M a reasonable
remuneration.
CASE 5.
►C orally offered to pay A , an auto mechanic, Rs
50 for testing a used car which C was about to
purchase from D .
► A agreed and tested the car. C paid A Rs 50 in
cash for his services.
Is the agreement between ‘C ’ and ‘A ’,
(a) express or implied,…..???
(b) executed or executory, …???
(c) Valid,void, voidable or unenforceable…???
VERDICT OF CASE 5.
The agreement is,
► (a) express,
► (b)executed, and
► (c) valid.
CASE 6.
►A promises to pay B Rs.500,
if he(B ) beats C .
B beats C , but A refuses to pay.
Can B recover the amount.. ???
VERDICT OF CASE 6.
► No as the agreement is illegal.
CASE 7.
►D lived as a paying boarder with a
family. He agreed with the members of the
family to share prize money of a
newspaper competition.
► The entry sent by D won a prize 750
sterling pounds. He refused to share the
amount won.
► Can the members of the family
recover their share …….???
VERDICT OF CASE 7.
► Yes, ‘as there was mutuality in the
agreement between the parties ’ and the
parties had intended to be bound.
OFFER & ACCEPTANCE
►An offer is a proposal by one
party to another to enter in to a
legally binding agreement with
him.
Offer [Proposal]
A person is said to have made a proposal, when , he,
…….
“signifies to another his willingness to
do or to abstain from doing anything
with a view to obtaining the assent of
that other, to such act or abstinence”
[Sec.2(a)]
ELEMENTS REQUIRED FOR A
VALID OFFER
► 1.It must be made by one person to
another person . In other words, there
can be no proposal by a person to himself
ex: X says to Y that he wants to sell his car
to himself for rs. 1 lakh.
There is no proposal because there can be
no proposal by a person to himself.
Continued………
► 2. Itmust be an expression of readiness
or willingness to do (i.e., a positive act)
or to abstain from doing something (i.e., a
negative act)
ex: X offers to sell his car to Y for rs. 1 lakh. It is a
positive act on the part of X
ex: X offers not to file a suit against Y if Y pays X
the outstanding amount of rs. 1,00,000 . It is a
negative act on the part of X
Continued…….
► 3. It must be made with a view to obtain
the consent of that other person to
proposed act or abstinence.
ex: X just for fun says to Y “I am ready to sell my
car for rs.1000”. Y, knowingly that X is not serious
in making the offer, says “ I accept your offer”.
In this case, X’s offer was not the real offer as he did
not make it with a view to obtain the consent of Y.
PROMISOR-PROMISEE
► The person making the offer is known as
the , offeror,
proposer or
promisor, and
the person to whom it is made is called
the,
offeree or
proposee.
When the offeree accepts the offer, he
is called the acceptor or promisee
[Sec.2(c)].
How an offer is made
►E.g., An offer may be made by express
words, spoken or written. This is known
as Express offer .
When A says to B , “will you purchase my
house at Meerut for Rs.5,00,000 ” ?
……How an offer is made
► An offer may be inferredfrom the conduct of the
parties or the circumstances.
This is known as Implied Offer .
E.g .,When a transport company runs a bus on a

particular route, there is an implied offer by the
transport company to carry passengers for a
certain fare.
‘Specific ’ and ‘General ’ Offer …..
When an offer is made to a particular person, it is

called specific offer.
E.g. A offers to sell car to B [only] for
Rs.1,00,000.
When an offer is made to the world at large, it is

called general offer. A general offer can be
accepted by any person by fulfilling the terms of
offer.
E.g., Mrs Carlill v. Carbolic Smoke Ball Co.[1893].
MRS. CARLIL V.CARBOLIC
SMOKE BALL CO.
► Carbolic Smoke Ball Co. advertised in the
newspaper that it would pay rs.1000 to anyone
who contracts influenza after using the smoke ball
of the company according to the printed
instructions.
► Mrs.Carlil uses the smoke ball according to the
printed directions but subsequently she contracted
influenza.
► She filed a suit for the reward.
► It was held that she was entitled to recover the
reward because she had accepted the offer by
fulfilling the terms of the offer.
What constitutes an offer …. …
► 1.The offer must show an obvious

intention on the part of the offeror to be
bound by it.
Thus, if A jokingly offers B Rs 10 for his
typewriter and B knowing that A is not serious,
says “I accept ”, A ’s proposal does not
constitute an offer.
…What constitutes an offer
► 2.The offeror must make the offer
with a view to obtaining the assent of
the offeree to such act or abstinence.
► 3.The offer must be definite.
► 4.It must be communicated to the
offeree.
LEGAL RULES FOR A VALID
OFFER
► 1.Intention to create legal relationship
► 2.Certain and unambiguous terms
► 3.Different from a mere declaration of intention
► 4.Different from an invitation to offer
► 5.Communication
► 6.A statement of price is not an offer
► 7.No term the Non-compliance of which amounts
to Acceptance
LEGAL RULES AS TO OFFER
► 1.Offer must be suchin law is capable

of being accepted and giving rise to
legal relationship.
► ex:
Rose & Frank Company v. Crompton
Brothers
► Ex: Rose & Frank Company was appointed as
selling agents in North America by Crompton
Brothers by an agreement. One of the clauses in
the agreement provided” this agreement is not
entered into formal or legal agreement and shall
not be subject to legal jurisdiction in the law
courts”.
► It was held that this agreement was not a legally
binding contract because there was no intention to
create legal relations.
2.Certain and Unambiguous Terms
► The terms of the offer must be certain and
unambiguous and not vague.
► If the terms of the offer are vague, no
contract can be entered into because it is
not clear as to what exactly the parties
intended to do.
Continued…….
► Ex 1: X offers to sell to Y “ a 100 tons of oil”.
► If X is a dealer in coconut oil or mustard oil,
his offer is not certain because it is not
clear that he wants to sell coconut oil or
mustard oil.
► But if X is a dealer in coconut oil only, it is
clear that he wants to sell coconut oil.
Hence, the offer is certain .
……LEGAL RULES AS TO OFFER
► 3.An offer must be distinguished from ;

(i) A declaration of intention and an
announcement.:
The offer must be distinguished from a mere
declaration of intention . Such statement or
declaration merely indicates that an offer will be
made or invited in future,
(ii) An invitation to make an offer or
to do business.
A mere declaration of intention
► Ex 1: A father wrote to his would be son-in-
law that his daughter would have a share of
what he left after the death of his wife.
► It was held, that the letter was a mere
statement of intention and not an offer.
(Farine v. Fickar)
Continued………
► Ex 2: X, a broker of Bombay wrote to Y a
merchant of Ghaziabad stating the terms on which
he is willing to do business.
It was held that the letter was a mere statement of
intention and not an offer.
(Devidatt v. Shriram)
Ex 3: A notice that the
goods stated in the notice will be sold by tender
does not amount to an offer to sell.( Spencer v.
Harding)
Continued……..
► Ex 4: An auctioneer advertised in a newspaper
that a sale of office furniture will be held on a
particular day.
► Mr. X with the intention on buy to furniture came
from a distant place for the auction but the auction
was cancelled.
► It was held that Mr X cannot file a suit against the
auctioneer for his loss of time and expenses
because the advertisement was merely a
declaration of intention to hold auction and not an
offer to sell. (Harris v. N.Nickerson)
Invitation to offer
► An offer must be distinguished from an
invitation to offer. In case of an invitation to
offer, the person making an invitation invites
others to make an offer to him.
Continued…………
► Ex 1: Goods were displayed in the shop for sale
with price tags attached on each article and self
service system was there. One customer selected
the goods.
► It was held that the display of goods was only an
intention to offer and the selection of the goods
was an offer by the customer to buy and the
contract was made when the cashier accepted the
offer to buy and received the price.
(Pharmaceutical Society of Great Britain v. Boots
Cash Chemists Ltd.)
Continued……….
► Ex 2: A prospectus issued by a company for
subscription to its shares and debentures is
only an invitation to general public to make
an offer to buy the shares/debentures which
may or may not be accepted by the
company.
……LEGAL RULES AS TO OFFER
►4.Offer must be communicated:

An offer must be communicated to the
person to whom it is made. An offer is
complete only when it is communicated
to the offeree. One can accept the offer
only when he knows about it
Continued……
► Thus , an offer accepted without its knowledge
does not confer any legal rights on the acceptor.
► Ex 1: ‘S’ offered a reward to anyone who traces
his lost dog. ‘F’ brought the dog without any
knowledge of the offer of reward. It was held ‘F’
was not entitled to the reward because F cannot
be said to have accepted the offer which he did
not know.( Fitch v.Snedaker,1868)
Lalman Shukla v.Gauri Dutt
► ‘G’ sent his servant ‘L’ to trace his lost nephew.
When the servant had left, G announced a reward
of Rs.500 to anyone who traces the missing boy.
‘L’ found the boy and brought him home. When ‘L’
came to know about the reward, he filed a suit
against ‘G’ to recover the reward.
► It was held that ‘L’ was not entitled to reward
because he did not know about the reward
when he found the missing boy.
Legal rules as to offer……..
► 6.A statement of price is not an offer .
► HARVEY Vs. FACEY,[1893]
E.g., Three telegrams were exchanged between
Harvey and Facey .
1. “Will you sell your Bumper Hall Pen ?
Telegraph lowest cash price-answer paid. ”
[Harvey to Facey]
2. “Lowest price for Bumper Hall Pen 900 pounds. ”
[Facey to Harvey]
…………..6.A statement of price is not an offer .
HARVEY Vs. FACEY,[1893]
3. “We agree to buy Bumper Hall Pen for the sum

of 900 pounds asked by you ” [Harvey to Facey ]
Held, there was no concluded contract between Harvey
and Facey
The first telegram asked two questions;
(i) the willingness of Facey to sell, and
(ii) the lowest price. Facey replied only to the second
question and gave his lowest price, i.e., he supplied mere
information and no offer had been made by him to sell.
There could be contract only if he had accepted
Harvey ’s last telegram.
Special Terms of Contract
► The special terms of the offer must

also be communicated along with the
offer.
► If the special terms of the offer are not
communicated, the offeree will not be
bound by those terms.
Continued……..
►The question of special terms arises
generally in case of standard form of
contracts.
►Standard contracts are made with big
companies such as insurance
companies, railways, shipping
companies, banking companies,
hotels, dry cleaning companies.
Continued…
► Since such companies are in position to
exploit the weakness of general public by
including certain terms in the contract which
may limit their liabilities, it is provided that
the special terms of the offer must be
brought to the notice of general public.
Continued……
► Ex 1: X purchased a ticket Dablin to White Haven and on
the back of the ticket, certain conditions were printed
one of which excluded the liability of the company for loss,
injury or delay to the passengers or his luggage.
X never looked at the back of the ticket and there was
nothing to draw his attention to the conditions printed on
the back side. His luggage was lost due to the negligence
of the servants of the shipping company, it was held that X
was entitled to claim compensation for the loss of his
luggage in spite of the exemption clause because there
was no indication on the face of the ticket to draw his
attention to the special terms printed on the back of the
ticket.
……Special Terms of Contract
E.g., A hotel put up a notice in a bed
room , exempting the proprietor from
liability for loss of client ’s goods .
Held, the notice was not effective as it came to
the knowledge of the client only when the
contract to take a room had already been
entered in to.
Olley v. Marlborough Court Ltd ., [1949].
Example of Special Terms of Contract
►A deposited a bag in the cloak room of a railway

station. On the face of the ticket, issued to him,
was written “see back”. One of the printed
conditions, limited the liability of the company for
loss of a package to 10 pounds.The bag was lost
and P claimed 24.50 pounds, as it’s value.
► Held, ‘P ’ was bound by the conditions on the
back of the ticket even if he had not read them
[Parker Vs. S E Rail Co.(1877) ]
Example of Special Terms of Contract
► If conditions are printed on the back of a ticket, but
there are no words at all on the face of it to draw the
attention of the person concerned to those
conditions, he is not bound by them;
► Example: C hired a deck chair from Municipal
Council. He paid a hire of 2 $ for two sessions of 3
hours .He sat on the chair, it broke and injured him.
Held ,Council was liable
► [Chapleton Vs. Barry Urban District Council,1940 ].
AGREEMENT TO AGREE IN FUTURE IS NOT A
CONTRACT
► If the parties have not agreed upon the terms of the
contract, but have made an agreement to agree in
future, there is no contract.
An agreement to be finally settled must comprise all
the terms which the parties intend to introduce in
to the agreement.
E.g., An actress was engaged in a theatrical
company for a certain period .One of the terms of
the agreement was that if the play was shown in
London, she would be engaged at a salary to be
mutually agreed upon. Held , there was no
contract.
Acceptance
► Acceptance means giving consent to the offer.
► It is an expression by the offeree of his willingness
to be bound by the terms of the offer.
► According to sec 2(b) of the Indian Contract
Act,1872,” A proposal is said to have accepted
when the person to whom the proposal is made
signifies his assent thereto. A proposal when
accepted becomes a promise”.
Acceptance
► An acceptance may be express or implied.
► It is express when it is communicated

by words, spoken or written or by doing
some required act.
► It is implied when it is to be gathered
from the surrounding circumstances of the
cases or the conduct of the parties.
Acceptance
► Who can accept offer ?
Acceptance of a particular offer: Specific Offer
When an offer is made to a particular person, it can
only be accepted by him alone. If it is accepted by
any other person, there is no valid acceptance.
The rule of law is clear that if you propose to
make a contract with ‘A’, ‘B’ cannot
substitute himself for without your
consent.
Acceptance of a general offer
►When an offer is made to world
at large, any persons to whom
the offer is made can accept it
[Mrs.Carlill Vs.Carbolic Smokeball Co.(1893)]
Legal Rules as to Acceptance
► The acceptance of an offer is the very essence of a
contract. To be legally effective, it must satisfy the following
conditions:
► 1.It must be absolute and unconditional i.e., it
must conform with the offer.
► 2.It must be communicated to the offeror
► 3.It must be according to the mode prescribed or
usual and reasonable mode.
► 4.It must be given within a reasonable time
…..Legal Rules as to Acceptance
► 5.It cannot precede an offer.
► 6.It must show an intention on the part of
the acceptor to fulfill terms of the promise.
► 7.It must be given by the party or parties to
whom the offer is made.
► 8.It must be given before the offer lapses or
before the offer is withdrawn.
► 9.It cannot be implied from silence.
1. It must be absolute and unconditional
i.e., it must conform with the offer.
► An acceptance, in order to be binding, must be

absolute and unqualified [Sec.7(1)] in respect of
all terms of the offer, whether material or
immaterial, major or minor.
► If the parties are not ad idem on all matters
concerning the offer and acceptance, there is no
contract.
► Examples: a) ‘A’ made an offer to ‘B’ to purchase a
house with possession from 25 th July. The offer was
followed by an acceptance suggesting possession from 1st
August. Held, there was no contract.
[ Rutledge Vs .Grant (1828)]
……… .1.It must be absolute and unconditional
i.e., it must conform with the offer.
► Examples :
► b) M offered to sell a piece of land to N at
280 sterling pounds. N accepted and
enclosed 80 sterling pounds with a promise
to pay the balance by monthly installments
of 50 sterling pounds each. Held , there was
no contract between M and N , as the
acceptance was on condition. [Neale Vs.
Merret (1930)].
……….1.It must be absolute and unconditional
i.e., it must conform with the offer .

► c) N offered to buy J ’s horse if warranted
quiet in harness. J agreed to the price and
warranted the horse in quiet double
harness. Held, there was no acceptance
[Jordon Vs.Norton,1838]
d) A says to B , I offer to sell my car for
Rs.50,000”.B replies, I will purchase it for
Rs.45,000”. This is no acceptance and amounts to
counter offer.
2.It must be communicated to the offeror
► To conclude a contract between the

parties , the acceptance must be
communicated in some perceptible form.
► A mere resolve or mental determination on
the part of the offeree to accept an offer,
when there is no external manifestation of
the intention of the intention to do so, is not
sufficient. [ Bhagwandas Kedia Vs. Giridharilal
(1966)]
2.It must be communicated to the
offeror
► Examples:
► a) ‘A’ tells ‘B’ that, he intends to marry ‘C’ . But
tells ‘C ’ ‘nothing of his intention. There is no
contract even if ‘C’ is willing to marry ‘A’ .
► b) A draft agreement relating to supply of coal
was sent to the manager of a railway company for
his acceptance. The manager wrote the word
“approved” and put the draft in the drawer .
Held , there was no contract.
[Brogden Vs. Metropolitan Rail Co.
(1877)].
2.It must be communicated to the
offeror
►F offered to buy his nephew’s horse for 30 sterling
pounds saying: “If I hear no more about it I
shall consider the horse is mine at 30
sterling pounds”. The nephew did not write to F
at all, but he told his auctioneer who was selling
his horses not to sell that particular horse
because it had been sold to his uncle. The
auctioneer inadvertently sold the horse. Held, F
had no right of action against the auctioneer as the
horse had not been sold to F , his offer of 30
pounds not having been accepted [Felthouse Vs. Brindley
(1862)].
3.It must be according to the mode prescribed or
usual and reasonable mode.
► The communication must be according to

the mode prescribed [ Sec.7(2)]
► Eg. If the Offeror has sought the
communication of acceptance from offeree
by telephone it cannot be given by post.
► In case, the acceptance is made in a manner other than
the mode prescribed but the offeror does not raise any
objection within a reasonable time, the acceptance will be
binding.
4. It must be given within a reasonable time
► If any time limit is specified ,the acceptance to an offer

must be given within a reasonable time. If it is not given
within the reasonable time, the offer lapses.
► In Ramsgate Victoria Hotel Ltd. Vs.
Montefiore(1886)
M applied for the shares of R & Co. on 8 th June.
But the Company did not intimate about allotment
until November. M refused to take shares. Held ,
the offer was lapsed by unreasonable delay.
5.It cannot precede an offer.
►In a company shares were allotted to a

person who had not applied for them.
Subsequently when he applied for shares ,
he was unaware of the previous allotment.
The allotment of shares previous to
application is invalid.
6.It must show an intention on the part of the acceptor to fulfill
terms of the promise.
► If no such intention is present, the acceptance

is invalid.
7. It must be given by the party or parties to whom the offer is
made.
► Acceptance must be communicated by the offeree himself or by

a person who has the authority to accept.
► If acceptance is communicated by an unauthorized person, it
will not give rise to legal relations.
Continued...
► Ex: ‘P’ applied for the post of a headmaster in a school. The
managing committee passed a resolution approving P to the
post but this decision was not communicated to P.
But one member of the managing committee in his
individual capacity and without any authority informed P
about the decision.
Subsequently, the managing committee cancelled its
resolution and appointed someone else. ‘P’ filed a suit for
breach of contract.
It was held that P’s suit was not maintainable because there
was no communication of acceptance as he was not informed
about his appointment by some authorized person. (Powell v.
Lee)
8.It must be given before the offer lapses or before
the offer is withdrawn.
► The acceptance must be given before the offer

lapses or is withdrawn. In other words, if an
acceptance is made after the lapse or withdrawal
of the offer, it will not give rise to legal relations.
► Ex: X offered by a letter to sell his car for
Rs.1,00,000. Subsequently, x withdrew his offer by
a telegram which was duly received by Y. After the
receipt of telegram, Y sent his acceptance to X. In
this case, the acceptance is invalid because it was
made after the effective withdrawal of the offer.
9.It cannot be implied from silence.
► The acceptance of an offer cannot be implied

from the silence of the offeree or his failure to
answer, unless the offeree has by his previous
conduct indicated that his silence means that
he accepts. A wrote to B., I offer you my car for
Rs.10,000. If I don’t hear from you in seven days , I
shall assume that you accept”. B did not reply at all.
There is no contract.
Communication of Offer, Acceptance and
Revocation
► An offer, it’s acceptance and their revocation
(withdrawal) to be completed must be
communicated.
► When the parties are at distance and the offer
and acceptance and their revocation are made
through post, i.e., by letter or telegram, the rules
contained in Secs.3 to 5 apply.
Mode of communication (Sec.3)
► The communication of offer, its acceptance and their
revocation respectively are deemed to be made by any
► (a) act, or
► (b) omission, of the party offering, accepting or revoking.
► In other words, offer, acceptance or revocation may be
communicated by words spoken or written, or by
conducted.
► Thus installation of a weighing machine at a
public place is an offer , putting of a coin in the
slot of the machine is the acceptance of the offer,
and the switching off the machine amounts to
revocation of the offer.
When is communication complete
[Sec.4]
► Communication of offer : The communication

of offer is complete when it comes to the
knowledge of the person to whom it is made.
E.g., A proposes by a letter, to sell a
house to B at a certain price. The
letter is posted on 10 th July.
It reaches B on the 12 th July.
The communication of offer is complete
when B receives the letter i.e., 12 th July.
When is communication complete[S.4]
► Communication of Acceptance: Communication of acceptance is

complete-
* as against the proposer, when it is put in the course of
transmission to him, so as to be out of power of the acceptor ;
* as against the acceptor, when it comes to the knowledge of the
proposer.
E.g., ‘B’ accepts ‘A’ s proposal, in the above case, by a letter sent by post
on 13th instant. The letter reaches ‘A’ on 15th instant. The communication
of Acceptance is complete, as against the ‘A’, when the letter is posted,
i.e., on 13th, as against ‘B’, when the letter is received by ‘A’, i.e., on 15 th.
When is communication complete…..
► The communication of revocation is complete:

► Revocation means “taking back” “recalling” or
“withdrawal”. It may be revocation of offer or
acceptance. The communication of a revocation is
complete--
-as against the person who makes it, when it is
put in to the course of transmission to the person
to whom it is made so as to be out of the power of
the person who makes it ;
-as against the person to whom it is made,
when it comes to his knowledge(Sec.4)
When is communication complete……
Ex. A proposes, by a letter, to sell his house to B at a

certain price .The letter is posted on 15th May. It reaches B
on 19th May.
A revokes his offer by telegram on 18th May. The telegram
reaches B on 20th May. The revocation is complete as
against A when the telegram is dispatched i.e., on 18th May.
It is complete as against B when he receives it. i.e., on 20th
May.
Time for Revocation of Offer and Acceptance
(Sec.5)
► Time for Revocation of Proposal(Sec.5,para 1)

A proposal may be revoked at any time before the
communication of it’s acceptance is complete as
against the proposer, but not afterwards.
Ex. A proposes by a letter sent by post to sell his house
to B. The letter is posted on the 1st of the month. B
accepts the proposal by a letter sent by post on the
4th.The letter reaches A on the 6th.
A may revoke his offer at any time before B posts his letter of
acceptance, i.e., on 4th but not afterwards.
B may revoke his acceptance at any time before the letter of
acceptance reaches A , i.e., on 6th but not afterwards.
CONTRACTS OVER TELEPHONE
OR TELEX OR ORAL
COMMUNICATION
► A contract by telephone or telex has the
same effect as an oral agreement entered
into between the parties when they are face
to face.
► But the offeree must make sure that his
acceptance is properly received, i.e.,heard
and understood by the offeror (Kanhaiyalal
v. Dineshwara Chandra)
Example
► A makes an offer to B across a river or a
courtyard. B shouts back accepting A’s
offer, but A does not hear B’s reply as it was
drowned by an aircraft flying overhead.
There is no contract at that moment. If B
wishes to make a contract, he must wait till
the aircraft is gone and then shout back his
acceptance so that A can hear what B says.
Until A hears B’s reply, there is no contract.
WHEN DOES AN OFFER COME TO
AN END?
► 1. By communication of notice of revocation
by the offeror at any time before its
acceptance is complete as against him
Ex: At an auction sale, A makes the
highest bid for B’s goods. He withdraws the
bid before the fall of the hammer. The offer
has been revoked before its acceptance.
Continued………..
► 2. By lapse of time:
► If it is not accepted within the prescribed time,
then it ends in revocation of offer.
► If no time is prescribed, it lapses by the expiry of
a reasonable time.
► Ex: On June 8 M offered to take shares in R
company. He received a letter of acceptance on
November 23. He refused to take the shares.
Held, M was entitled to refuse as his offer had
lapsed as the reasonable period during which it
could be accepted had elapsed (Ramsgate
Victoria Hotel Co. v. Montefiore)
Continued…….
► 3. By non-fulfilment by the offeree of a
condition precedent to acceptance:
Ex: S, a seller, agrees to sell certain goods
subject to the condition that B, the buyer,
pays the agreed price before a certain date.
If B fails to pay the price by that date, the
offer stands revoked.
Continued……….
► 4. By death or insanity of the offeror
provided the offeree comes to know of it
before acceptance.
► 5. If a counter-offer is made to it:
► 6. If an offer is not accepted according to
the prescribed or usual mode:
OFFER AND ACCEPTANCE:PRACTICAL PROBLEMS
1.Are the following offers valid ?

(a) A garment store gave the following advertisement in a
newspaper: “Special sale for tomorrow only. Men ’s night
suits reduced from Rs200 to Rs100. ”
(b) P says to Q “I will sell you a camera. ” P owns three

different types of cameras of different prices.
(c) An auctioneer displays a refrigerator before a

gathering in an auction sale.
(d) A advertises in The Statesman that he would pay
Rs 200 to anyone who finds and returns his lost dog.
Solution for Case.1
►1.(a),(b) and (c) there is no offer.
►In case of (d) there is a valid offer. Any
person can accept it by performing the
act with knowledge of the reward.
[Fitch vs.Snedaker]
Case 2.
►A tells B in the course of a
conversation with him that he will give
Rs10,000 to anyone who marries his
daughter with his consent. B marries
A ’s daughter with A ’s consent .
►Is he entitled to recover the amount ?
Solution for Case.2
► No, as what A tells B is a statement of intention.
Case.3
►A sees a rare book displayed in a shop.
► It is labeled “First Edition Rs15.”
► A enters the shop and puts Rs 15 on the counter
and asks for the book.
► seller does not agree to sell that book, says, the
real price of the book is Rs 50 and that it had been
marked as Rs 15 by mistake.
► Is the bookseller bound to sell the book for
Rs. 15 ?
Solution for Case.3
► No.
► (Pharmaceutical Society of Great Britain
Vs. Boots Cash Chemists).
Case.4
► A sent a telegram to B , “will you sell your car?
Quote lowest price.”
► B sent a reply “ Lowest price Rs 25,000”.
► A sent a second telegram to B .
► “I agree to buy your car for Rs 25,000”.
► B there after refuses to sell.
(1) Can A compel B to do so ?
(2) Is there a contract between A and B ?.
(3) What is the name of the case related to this?
Solution for Case.4
► (a) No (b) No. (c) ( Harvey vs. Facey)
Case.5
► A sent a letter to B offering to sell his house to B . The
next day, A wrote another letter revoking his offer.
Meanwhile, B had accepted A ’s offer by return of post.
► What is B ’s remedy, if any, against A :
► (a) If A ’s letter of revocation reaches B before B ’s letter
of acceptance reaches A ;
► (b) If B ’s letter of acceptance is lost in the post;
► © If B ’s letter of acceptance is posted an hour
after posting of A ’s letter of revocation ?
Solution for Case.5
► In all three cases there is a concluded
contract between A and B .
I.e., as soon as the letter of acceptance is posted by B.

Case.6
► B offered to sell his house to A for Rs.50,000.A
accepted the offer by post.
On the next day, A sent a telegram withdrawing
the acceptance which reached B before the
letter.
(a) Is the revocation of acceptance valid ?
(b) Would it make any difference if both the letter of
communicating acceptance and the telegram
communicating revocation of acceptance, reach
B at the same time?
Solution for Case. 6
► (a) Yes.
► (b) If A opens the telegram first (and this would be
normally so in case of rational person) and reads
it, the acceptance stands revoked.
► If he reopens the letter first and reads it,
revocation of acceptance is not possible as the
contract has already been concluded.
CONSIDERATION
► Consideration is one of the essential elements to
support a contract. Subject to certain exceptions,
an agreement made without consideration is
“nudum pactum” (a nude contract) and is void.
► Justice Patterson defines consideration in the
following words: “Consideration means something
which is of some value in the eye of law…It may
be some benefit to the plaintiff or some
detriment to the defendant. ” [Thomas vs.
Thomas(1842)].There are two leading cases which
explain this point.
Abdul Aziz vs. Masum Ali (1914)
► The secretary of a Mosque, Committee filed a suit to

enforce a promise which the promisor had made to
subscribe Rs.500 to the rebuilding of a mosque.
► Held, “the promise was not enforceable
because there was no consideration in the
sense of benefit ” , as “the person who made the
promise gained nothing in return for the promise
made”, and the secretary of the Committee to whom
the promise was made, suffered no detriment as
nothing had been done to carry out the repairs.
Hence the suit was dismissed.
Kedarnath vs. Gauri Mohammad
Calcutta [1886]
► The facts of this case were almost similar to those of the

previous case, but the secretary in this case incurred a
liability on the strength of the promise. Held, the amount
could be recovered, as the promise resulted in a
sufficient detriment to the secretary . The promise
could, however, be enforced only to the extent of the
liability (detriment-loss) incurred by the secretary.
► In this case, the promise, even though it was gratuitous,
became enforceable because on the faith of the promise
the secretary had incurred a detriment (loss).
Definition of Consideration
[Section 2(d) of Indian Contract Act,1872]
► “When at the desire of the promisor, promisee
or
► any other person has done or
► abstained from doing or
► does or
► abstains from doing, or
► promises to do or
► to abstain from doing, something, such act or
abstinence or promise is called a consideration
for the promise.”
Analysis of
Definition of Consideration
► (1) An act , i.e., doing of something. In this sense consideration is in an
affirmative form.
Example: A promises B to guarantee payment of price of the
goods which B sells on credit to C . Here selling of goods by B to C is
consideration for A ’s promise.
(2) An abstinence or forbearance, i.e., abstaining or refraining from
doing something. In this sense consideration is in a negative form .
Example :A promises B not to file a suit against him if he pays
him Rs.500.The abstinence of A is the consideration for B ’s payment.
(3) A return promise .
Example: A agrees to sell his horse to B for Rs 10,000. Here B ’s
promise to pay the sum of Rs.10,000 is the consideration for A ’s
promise to sell the horse, and A ’s promise to sell the horse is the
consideration for B ’s promise to pay the sum of Rs.10,000.
Legal Rules as to Consideration
► 1.It must move at the desire of the promisor.
► 2.It may move from the promisee or any other
person.
► 3.It may be an act, abstinence or a return
promise.
► 4.It may be past, present or future.
► 5.It need not be adequate.
► 6.It must be real and not illusory
► 7.It must be something which the promisor is
not already bound to do.
► 8.It must not be illegal, immoral or opposed to
public policy (Sec.23).
Legal Rules as to Consideration……….
► 1. It
must move at the desire of the
promisor :
An act constituting consideration must have
been done at the desire or request of the
promisor. If it is done at the instance of a
third party or without the desire of the
promisor, it will not be a good
consideration.
Example:A saves B’s goods from fire without
being asked to do so. A cannot demand payment
for his services.
► 2.It may move from the promisee or any
other person.
Consideration may move from promisee or
any other person, i.e., even a stranger.
This means that as long as there is
consideration for a promise it is immaterial
who has furnished it.
But the stranger to consideration will be
able to sue only if he is a party to the
contract.
► 2.It may move from the promisee or any other person

Example: An old lady, by a deed of gift, made
over certain property to her daughter D , under the
direction that she should pay her aunt, P (sister of
the old lady), a certain sum of money annually.
The same day D entered in an agreement with P
to pay her the agreed amount. Later, D refused to
pay the amount on the plea that no consideration
had moved from P to D . Held, P was entitled to
maintain suit as consideration had moved from the
old lady, sister of P , to the daughter.
[Chinnayya vs.Ramayya(1882)]
► 3. It may be an act, abstinence or a a return promise .( The

following are good consideration for a contract)
(1) Forbearance to sue : If a person who could sue
another for the enforcement of a right agrees not
to pursue his claim, this constitutes a good
consideration for the promise by the other
person. This results in a benefit to the person not
sued and a detriment to the person who could
sue.
Example : A borrows from B Rs.100 at 20 percent
p.a., and fails to pay the amount. When B is about to file a
suit, A agrees to pay a higher rate of interest. B, as a
result, does not file the suit. This forbearance on the part of
B to file a suit is a sufficient consideration and B can
enforce the promise by A to pay the higher rate of interest.
3. It may be an act, abstinence or a return promise .

(2) Compromise of a disputed claim :
Compromise is a kind of forbearance. Originally ,
the claim should be reasonable and the person
claiming should honestly believe that it is a valid
claim. He should also act bona fide (in good
faith) .
(3) Composition with creditors : A debtor who is
financially embarrassed may call a meeting of his
creditors and request them to accept a lesser
amount in satisfaction of their debt. If the
creditors agree to it, the agreement is binding
both upon the debtor and the creditors and this
amounts to a compromise of the claims of the
creditors.
► 4. It may be past, present or f uture .

(1) Past Consideration :
When consideration by a party for a present
promise was given in the past, i.e., before
the date of the promise, it is said to be
past consideration .
Example: A renders some service to B at
latter’s desire. After a month B promises to
compensate A for services rendered to him. It is
past consideration. A can recover promised
amount.
►4. It may be past, present or future.

(2) Present or Executed Consideration :
When consideration is given simultaneously with
promise, i.e., at the time of promise, it is said to
be present consideration. In case sale, for
example, consideration is present or executed .
Example: A receives Rs. 50 in return for which he
promises to deliver certain goods to B. The money A
receives which he promises to deliver certain goods to B.
The money A receives is the present consideration for the
promise he makes to deliver the goods.
► 4. It may be past, present or future.

(3) Future or executory consideration :
When consideration from one party to the
other is to pass subsequently to the making of the
contract, it is future or executory consideration.
Example:
D promises to deliver certain goods to P after a
week; P promises to pay the price after a fortnight.
The promise of D is supported by the promise of
P. Consideration in this case is future or
executory.
► 5. It need not be adequate .
Consideration, as already explained, means “something
in return ”.
This something in return need not necessarily be equal
to “something given ”.
The law simply provides that a contract should be
supported by consideration.
So long as consideration exists, the Courts are not
concerned as to it ’s adequacy, provided it is of some
value.
Continued………
► Ex:
► A agrees to sell a horse worth rs.1,000 for
rs.10.
► A denies that his consent to the agreement
was freely given.
► The inadequacy of the consideration is a
fact which the Court should take into
account in considering whether or not A’s
consent was freely given.
► 6.It must be real, and not illusory.

Although consideration need not be adequate, it must be real,
competent and of some value in the eyes of the law.
There is no real consideration in the following cases:
(1) Physical Impossibility: A promises to put life in to B’s dead
wife and B should pay him Rs.500.A’s promise is physically
impossible of performance.
(2) Legal Impossibility: A owes Rs 100 to B. He promises to pay
Rs.20 to C, the servant of B, who in return promises to
discharge A from the debt. This is legally impossible
because C cannot give discharge for a debt due to B, his
master [Harvey vs. Gibbons, (1675)].
► ………….6.It must be real, and not illusory

(3) Uncertain consideration:
A engages B for doing a certain work and promises to pay a
“reasonable” sum. There is no recognized method of
ascertaining the “reasonable” remuneration. The promise is
unenforceable as consideration is uncertain.
(4) Illusory consideration:
Two of the crew of a ship deserted it half way through a voyage.
The captain thereby promised to divide the salary of the
deserters among the rest of the crew if they worked the
vessel home. Held, they could not recover the amount as the
consideration was illusory. They were already under an
obligation to bring the vessel home.
► 7.It must be something which the promisor is not

already bound to do.
A promise to do what is already bound to do, either by
general law or under an existing contract, is not a
good consideration for a new promise, since it adds
nothing to the pre-existing legal or contractual
obligation.
Likewise a promise to perform a public duty by a
public servant is not a consideration.
Continued……….
► Ex:
► (1) A promised to pay B, who had received
summons to appear at a trial in a civil suit, a
certain sum being a compensation for the loss of
time during his attendance.
► Held, the promise was without consideration, for B
was under a duty imposed by law to appear and
give evidence.
► (Collins v. Godefroy,(1831))
Continued……….
► Ex:
► (2) There was a promise to pay to a lawyer an
additional sum if the suit was successful. Held,
the promise was void for want of consideration.
► The lawyer was under a pre-existing contractual
obligation to render the best of his services
under the original contract.
► But where a person being already under a legal
or contractual duty to do something undertakes
to do something than he is bound to do under
the original contract, this will be a good
consideration for the promise.
► 8. It
must not be illegal, immoral or
opposed to public policy .
The consideration given for an agreement must
not be unlawful.
Where it is unlawful, the Court do not allow an
action on the agreement.
STRANGER TO CONTRACT
It is a general rule of law that only parties to a

contract may sue and be sued on that contract. This
rule is known as the “Doctrine of privity of contract . ”
► Privity of contract means relationship subsisting
between the parties who have entered in to contractual
obligations.
► It implies a mutuality of will and creates a legal bond or tie
between the parties to contract.
Two Consequences of the
“Doctrine of Privity of Contract ”
► (1) A person who is not a party to a
contract cannot sue upon it even
though the contract is for his benefit
and he provided consideration.
► (2) A contract cannot confer rights
or impose obligation arising under it
on any person other than the parties
to it.
Thus, if there is a contract between A and B, C
cannot enforce.
[Dunlop Pneumatic Tyre Co.Ltd. Vs. Selfridge & Co.Ltd.,( 1915)]
Dunlop Pneumatic Tyre Co.Ltd.
Vs.
Selfridge & Co.Ltd.,(1915)
►S bought tyres from the Dunlop Rubber Co. and sold
them to P , a sub-dealer, who agreed with S not to sell
below Dunlop’s list price and to pay the Dunlop Co., 5
pounds as damages on every tyre P undersold.
► P sold two tyres at less than the list price and thereupon
the Dunlop Co. sued him for the breach.
► Held, the Dunlop Co. could not maintain the suit as it
was a stranger to the contract.
Exceptions to the rule “Stranger to a contract
cannot sue. ”
► 1.A trust or charge: A person (called beneficiary) in
whose favor a trust or other interest is created can
enforce it even though he is not a party to the
contract.
Example: A agrees to transfer certain properties to
be held by T in trust for the benefit of B. B can
enforce the agreement
(i.e., the trust) even though he is not a party to the
agreement
[M.K. Rapai vs. John(1965)]
Exceptions to the rule
“stranger to a contract cannot sue. ”
► 2.Marriage settlement, partition or other family

arrangements .
Example: Two brothers, on a partition of joint properties,
agreed to invest in equal shares a certain sum of
money for the maintenance of their mother.
Held , she was entitled to require her sons to make the
investment .
[Shuppu Ammal vs. Subramaniam (1910) Madras High Court.]
Exceptions to the rule “stranger to a contract cannot
sue. ”
► 3. Acknowledgement or estoppel :
Where the promisor by his conduct,
acknowledges or otherwise constitutes
himself as an agent of a third party, a
binding obligation is thereby incurred by
him towards the third party.
Example: ‘A ’ receives some money from ‘T ’ to be
paid over to ‘P ’. A admits of this receipt to ‘P ’.
‘P ’ can recover the amount from ‘A ’ who shall be
regarded as the agent of ‘P ’.
Exceptions to the rule “stranger to a contract cannot
sue. ”
► 4.Assignment of contract : Where a benefit

under a contract has been assigned, the assignee
can enforce the contract subject to all equities
between the original parties to the contract
► e.g. the assignee of an insurance policy.
► 5. Contracts entered in to through an agent :
The principal can enforce the contracts
entered in to by his agent provided the agent
acts within the scope of his authority and in the
name of the principal.
“A contract without consideration is void ”
-Exceptions
► The general rule is ex nudo pacto non oritur

actio,
i.e., an agreement made without
consideration is void.
Sec.25 and 185 dealt with the exceptions to
this rule.
In such cases agreements are enforceable
even though they are made without
consideration. These cases are---
“A contract without consideration is void ”
-Exceptions……….
1.Love and Affection [Sec.25(1)]:

Such agreement made without consideration is valid if:
(i) It is expressed in writing
(ii) It is registered under the law
(iii) It is made on account of love and affection, and
(iv) It is between parties standing in a near relation to each
other.
Examples:
(a) F ,for natural love and affection, promises to
give his son, S , Rs.1,000.F puts his promise to
S in writing and registers it . There is a contract.
(b) By a registered agreement, V on account of
natural love and affection for his brother, R ,
promises to discharge his debt to B . If V does
not discharge the debt, R may discharge it and
then sue V to recover the amount.
[Venkataswamy vs. Ramaswamy, (1903)
A contract without consideration is void
-Exceptions
► 2.Compensation for voluntary services.[ Sec.25(2)]

A promise to compensate, wholly or in part, a person who
has already voluntarily done something for the promisor, is
enforceable, even though without consideration. In simple
words, a promise to pay for a past voluntary service is
binding.
Examples: (a) A finds B ’s purse and gives it to him. B
promises to give rs. 50 .There is a contract.
(b) A says to B , “ At the risk of your life you saved me

from a serious accident. I promise to pay you
Rs.1,000.”There is a contract between A and B .
Continued………
► (c) X, a neighbor helped putting down the
fire in Y’s house. Afterwards , Y promised X
to give Rs.1000. This is a valid contract
even though the consideration did not move
at the desire of the promisor.
► (d) X, supported Y’s infant son. Y promised
to pay X’s expenses in so doing. This is a
valid contract. Here, X has done that act
which Y was legally bound to do.
-Exceptions
► 3.Promise to pay a time barred debt :

► Such promise with out consideration is valid if:
► (1) It is made in writing
► (2) It is signed by the debtor or his agent, and
► (3) It relates to a debt which could not be enforced by a
creditor because of limitation.
Note: According to the Law of limitation, a debt which
remains unpaid or unclaimed for a period of 3 years
becomes a time barred debt which is legally not
recoverable.
-Exceptions
Example: D owes C Rs.1,000 but the debt is barred by

the Limitation Act. D signs a written promise o pay C
Rs.500 on account of the debt. This is a contract.
-Exceptions
4. Completed Gift :
The rule “ No consideration, no
contract ” does not apply to
completed gifts..
e.g., X transferred some property to Y
by a duly written and registered
deed as a gift. This is a valid
contract even though no
consideration.
5. Agency [Sec.185]
-Exceptions
► 6. CharitableSubscription :
Where the promisee on the strength of the
promise makes commitments, i.e., changes his
position to his detriment [Refer. Kedarnath Vs. Gauri
Mohammad].
Important Cases
► Abdul Aziz, V. Masum Ali:
► The secretary of a Mosque, Committee filed a
suit to enforce a promise which the promisor had
made to subscribe rs.500 to the re-building of a
mosque.
► Held, “the promise was not enforceable because
there was no consideration in the sense of benefit
”, and the secretary of the Committee to whom
the promise was made, suffered no detriment as
nothing had been done to carry out the repairs.
Hence the suit was dismissed.
Continued…………
► Kedar Nath v. Gauri Mohamed:
► The facts of this case were almost similar to
those of the previous case, but the secretary in
this case incurred a liability on the strength of the
promise.
► Held, the amount could be recovered, as the
promise resulted in a sufficient detriment to the
secretary.
► In this case, the promise, even though it was
gratuitous, became enforceable because on the
faith of the promise the secretary had incurred a
detriment.
Consideration: Practical Problems
► 1.A promises a subscription of Rs.10,000 to

the National Defense Fund. He does not pay.
Is there any legal remedy against him?
Answer: Case.1
► No. (Abdul Aziz vs. Masum Ali)
Case.2
► Can A recover in the following cases?
(a) B gets in to difficulties while swimming in the river
Ganga and cries for help. A hears the cry, removes his
coat and dives in to water and rescues B . B , who is full
of gratitude, promises to pay A Rs.200 but fails to do so.
Case.2
►(b) B writes to A , “At the risk of your
own life, you saved me from a serious motor
accident. I promise to pay you Rs.1,000.”
Case.2
► (c) While B is away on holiday, a storm damages the
roof of B’s house, and his neighbor, A, carries out the
necessary repairs. On his return, B promises to pay A
Rs.200 for the work done and materials supplied.
Case.2
►(d) A finds B ’s purse and gives it to
him. B promises A to give him
Rs.100
Case.2
► (e) A, who is B ’s friend, seeks the help of a
few persons in putting down a fire in B ’s
house. B promises to give A Rs. 100 for his
timely help.
Answers to case.2
►Yes. A can recover the amount
from B in all the cases. [Sec.25(2)]
Case.3
►A owes B Rs.1,000 but the debt is
barred by limitation. A gives a letter
to B agreeing to pay him Rs 500 on
account of the debt.Is this a valid
agreement?
Answer to Case.3
►Yes. [Sec.25(3)]
Case.4
► A, being a dire need of money, sells his new
car purchased two months ago at a cost of
Rs.1,72,000 for Rs.11,000. Afterwards A
seeks to set aside the contract on the
ground of inadequacy of consideration.
Will he succeed?
Answer to Case.4
► No.
Case.5
► A ,B , and Center in to a contract under
which A promises both B and C that if B will
dig A ’s garden, he (A ) will give Rs.50 to C .
Can C compel A to pay the money on B ’s
digging A ’s garden according to the terms
of the contract?
Give reasons.
Answer to Case.5
► Yes.
Case.6
► A’s Uncle in a sudden display of generosity
promises him a watch as a gift on his next
birthday.
If the uncle fails to give the watch, can ‘A’
do anything about it legally?
Answer to Case.6
► No.
Case.7
► H who was badly in need of money offered to sell
his piano worth rs.5,000 to C for rs.4,000. C
refused to buy . H gradually lowered his price until
rs.1000 was reached, which C accepted. Before
the piano was delivered, H received an offer of a
larger sum from T, and he refused to carry out the
contract with C, claiming that the consideration
was inadequate. Is H liable to pay damages to C
for failure to carry out his part of the contract?
CAPACITY TO CONTRACT
[COMPETENCY OF THE PARTIES]
► The parties who enter in to contract must have capacity to do so.
Capacity here means competency of the parties to enter in to contract.
According to Sec.10 an agreement becomes a contract if it is entered
in to between the parties who are competent to contract
► According to Sec.11 every person is competent to enter in to contract
who (a) is of the age of majority.
(b) is of sound mind, and
(c) is not disqualified from contracting by any law to which he is
subject.
► Thus Section 11 declares the following persons to be incompetent to
contract; 1.Minor
2.Persons of unsound mind
3.Persons disqualified by any law to which they
are subject.
1.Minors
► According to Indian Majority Act,1875, a minor is a person
who has not completed 18 years of age. In the following
two cases , he attains majority after 21 years of age.
(1) Where a guardian of a minor’s person or property has
been appointed under the Guardians and Wards Act,1890
or
(2) Where the superintendence of a minor’s property is
assumed by a Court of Wards.
Minor’s Agreements
► 1. An agreement with or by a minor is void and inoperative
ab initio. [Mohiribibi vs. Dharmodas
Ghose,(1903) Calcutta High Court]
► In this case a minor mortgage his house in favor of a money lender to

secure a loan of Rs.20,000 out of which the mortgagee (the money
lender) paid the minor a sum of Rs.8000. Subsequently the minor
sued for setting aside the mortgage, stating that he was underage
when he executed the mortgage.
► Held, the mortgage was void and, therefore, it was cancelled. Further
the money lender’s request for the repayment of the amount
advanced to the minor as part of the consideration for the mortgage
was also not accepted.
► 2 .He can be a promisee or a beneficiary :
Incapacity of a minor to enter in to a contract means
incapacity to bind himself by a contract. There is nothing
which debars from becoming a beneficiary. Such contracts
may be enforced at his option, but not at the option of the
other party. [Sharafat Ali Vs. Noor Mohammed(1924)].
Example: (a) M , aged 17, agreed to purchase a second-hand
scooter for Rs.5,000 from S . He paid Rs.200 as advance
and agreed to pay the balance the next day and collect the
scooter. When he came with the money the next day, S
told him that he had changed his mind and offered to return
the advance. S cannot avoid the contract, though M may,
if he likes.
► 3 .His agreement cannot be ratified by him on attaining the
age of majority.
► “Consideration which passed under the earlier contract
cannot be implied in to the contract which the minor enters
on attaining majority.”
[Nazir Ahmed Vs. Jiwan Dass
► Thus consideration given during minority is no
consideration.
► If it is necessary a fresh contract may be entered in to by
the minor on attaining majority provided it is supported by
fresh consideration.
[S.Shanmugam Pillai vs.K.S.Pillai (1973)SC].
► 4 .If he has received any benefit under a void
agreement , he cannot be asked to compensate
or pay for it.
► Sec.65 provides for restitution in case of
agreements discovered to be void does not apply
to a minor.
Example: M, a minor, obtains a loan by mortgaging
his property. He is not liable to refund the loan.
Not only this, even his mortgaged property
cannot be made liable to pay the debt.
► 5 .He can always plead minority:
Even ,if he has , by misrepresenting his age,
induced the other party to contract with him,
he cannot be sued in contract for fraud
because if the injured party were allowed to
sue for fraud, it would be giving him an
indirect means of enforcing the void
agreement.
Minor ’s Agreements
5 .He can always plead minority:
Example: S, minor, by fraudulently representing himself to be

of full age, induced L to lend him 400 POUNDS. He
refused to repay it and L sued him for the money .
Held, the contract was void and S was not liable to repay the
amount [Leslie vs. Shiell,1914] Lawrence J observed that
in this case “ Wherever an infant is still in possession of
any property in specie which he has obtained by his fraud,
he will be made to restore to it’s former owner. But I think
it is incorrect to say that he can be made to repay money
which he has spent , merely because he received it under
a contract induced by fraud”.
Minor ’s Agreements
5.He can always plead minority:
► The Court may, where some loan or

property is obtained by the minor by some
fraudulent representation and the
agreement is set aside , direct him, on
equitable considerations, to restore the
money or property to the other party.
Where as the law gives protection to the
minors , it does not give them liberty “to
cheat men.”
► 6 .He cannot enter in to a contract of partnership .
But he may be admitted to the benefits of an already
existing partnership with the consent of the other
partners.
► 7 .He cannot be adjudged insolvent .
This is because he is incapable of contracting debts.
► 8 .He is liable for the
‘necessaries’ supplied or
necessary services rendered to him or anyone
whom he is legally bound to support.
► 9 .He can be an agent. An agent is merely a

connecting link between his principal and third
party. As soon as the principal and the third party
are brought together, the agent drops out. A minor
binds the principal by his acts without incurring
any personal liability.
► 10 .A minor is liable in tort (A civil wrong).
But where a tort arises out of contract a
minor is not liable in tort as an indirect way
of enforcing a invalid contract.
Minor’s Liability for Necessaries
of Life.
► A minor is liable to pay out of his property for
‘necessaries’ supplied to him or to anyone whom he is
legally bound to support.(Sec.68). The claim arises not out
of contract but out of what is known as ‘quasi contracts’.
► Again it is only the property of the minor that is liable for
meeting the liability arising out of such contracts. He is not
personally liable.
► The law has provided this exception intentionally because if
it were not so, it would be impossible for minors even to
live.
What are necessaries of life ?
► The term necessaries is not defined in, ICA,1872.

The English Sale of Goods Act 1893, defines it in Sec.2 as
“ goods suitable to the condition in life of such infant or
other person, and to his actual requirement at the time of
sale and delivery”.
► Such goods need not necessarily belong to a class of
goods, but they must be (I) suitable to the position and
financial status of the minor, and (ii) necessaries both at
the time of sale and at the time of delivery
2.Persons of Unsound Mind.
► One of the essential conditions of competency of parties to a contract
is that they should be of sound mind.Sec.12 lays down a test of
soundness of mind. It reads as follows:
“ A person is said to be of sound mind, for the purpose of
making a contract if, at the time when he makes it, he is
capable of understanding it and of forming a rational
judgment as to its effect upon his interests.
A person who is usually of unsound mind but

occasionally of sound mind , may make a contract when he
is of sound mind.
A person who is usually of sound mind , but

occasionally of unsound mind, may not make a contract
when he is of
unsound mind. ” EXAMPLES ………..
Persons of Unsound Mind.
► Examples:
(a) A patient in a lunatic asylum, who is at intervals of sound
mind, may contract during those intervals.
(b) A sane man who is delirious from fever, or who is so
drunk that he cannot understand the terms of a contract,
or form a rational judgment as to it’s effect on his
interests, cannot contract while such delirium or
drunkenness lasts.
Persons of Unsound Mind
Soundness of mind of a person depends upon two facts:
1.His capacity to understand the contents of the business
concerned, and
2.His ability to form a rational judgment as to it ’s effect
upon his interests .
If a person is incapable of both, he suffers from unsoundness of
mind. Whether a party to a contract is of sound mind or not is a
question of fact to be decided by the Court. There is a
presumption in favor of sanity.
If a person relies on unsoundness of mind, he must prove it
sufficiently to satisfy the Court.
Contracts of Persons of Unsound
Mind
► LUNATICS. A lunatic is a person who is mentally deranged
due to some mental strain or other personal experience.
He suffers from intermittent intervals of sanity and insanity.
He can enter in to contract when he is of sound
mind .
► IDIOTS. An idiot is a person who has completely lost his
mental powers.
He does not exhibit understanding of even ordinary
matters. Idiocy is permanent where as lunacy denotes
periodical insanity with lucid intervals. An agreement of
an idiot, like that of a minor, is void .
Contracts of
Persons of Unsound Mind
► DRUNKEN OR INTOXICATED PERSONS.

A drunken or intoxicated person suffers from temporary
incapacity to contract, i.e. ,at the time when he is so drunk or
intoxicated that he is incapable of forming a rational judgment.
However, persons of unsound mind are liable for necessaries supplied
to them or to anyone whom they are legally bound to support .
PERSONS DISQUALIFIED BY LAW
(other persons)
► 1. Alien Enemies
► 2. Foreign Sovereigns
► 3. Convicts
► 4. Insolvents
3. Other persons
► ALIEN ENEMIES. Contracts with alien enemy [an alien
whose State is at war with the Republic of India] may be
studied under two heads, namely-
(a) contracts during the war, and
(b) contracts made before the war
(a) During the continuance of the war, an alien enemy can
neither contract with an Indian subject nor can he sue in an
Indian Court. He can do so only after he receives a license
from the Central Government.
3. Other persons
► ALIEN ENEMIES.
(b) Contracts made before the war may either be suspended
or dissolved. They will be dissolved if they are against the
public policy or if their performance would benefit the
enemy. For this purpose even an Indian who resides
voluntarily in a hostile country, or who is carrying on
business there would be treated as an alien enemy.
Foreign sovereigns, their diplomatic staff and
accredited representatives of foreign states
► They have some special privileges and
generally cannot be sued unless they of
their own submit to the jurisdiction of our law
Courts. But an Indian has to obtain prior
sanction of the Central government in order
to sue them in our law Courts.
CORPORATIONS & COMPANY
► A corporation is an artificial person created by law, having
a legal existence apart from it’s members. It may come in
to existence by a special Act of Legislature registration
under Companies Act, 1956.
► A contractual capacity of a company [corporation] is
regulated by the terms of Memorandum of Association and
the provisions of Companies Act,1956. If it exceeds it’s
powers, whether expressly conferred on it or derived by
reasonable implication from it’s objects clause in the
Memorandum, the contract ultra vires and is void.
INSOLVENTS & CONVICTS
► INSOLVENTS:
When a debtor is adjudged insolvent is deprived of his
power to deal in that property. It is only the official Receiver
or Official Assignee who can enter in to contracts relating
to his property, and sue and be sued on his behalf.
► CONVICTS:
A convict when undergoing imprisonment is incapable of
entering in to contract.
PRACTICAL PROBLEMS
► 1.A minor fraudulently represented to a money lender that
he was of full age and executed a mortgage deed for
Rs.10.000. Has the money lender any right of action
against the minor for the money lent or for damages for
fraudulent misrepresentation ?
Answer to Case.1
► No. (Mohiri bibi v. Dharmodas Ghose)
(Leslie vs. Shiell)
Case 2.
► 2.A minor is supplied with necessaries of life by a grocer.
He makes out a promissory note in favor of the grocer. Is
the grocer entitled to claim payment under the promissory
note (a) from minor personally, (b) against his estate.
Answer to Case.2
► (a) No
► (b) Yes(Sec.68)
Case .3
► 3. M, a minor aged 17, broke his right arm in
a hockey game. He engaged a physician to
set it. Does the physician have a valid claim
for his services ?
Answer to Case.3
► Yes, but it is only M’s estate which will be
liable(sec.68).
Case.4
► A, an adult, said to M, a minor:
“I will not
pay the commission I promised you for
selling my magazines. You are a minor and
cannot force me to pay.” Is A right?
Answer to Case.4
► No. A minor can be a beneficiary or a
promisee.
Free Consent
► Meaning of “Consent ” [Sec.13]
Consent means acquiescence or an act of
assenting to an offer.
“Two or more persons are said to
consent when they agree upon
the same thing in the same sense”.
What is Free Consent ?
► Meaning of “Free Consent ”[Sec.14]
► A consent is said to be free when it is not
caused by -
1 .Coercion as defined in Sec15, or
2 .Undue Influence in Sec.16 or
3 .Fraud as defined in Sec.17,or
4 .Misrepresentation as defined n Sec.18 or
5 .Mistake , subject to the provisions of
Sec.20,21 or Sec.22].
Coercion [Sec.15]
► When a person is compelled to enter in to a
contract by the use of force by the other party or
under a threat, “coercion” is said to be employed.
► Coercion is the committing or threatening to
commit, any act forbidden by the Indian Penal
Code,1860 or unlawful detaining, or threatening to
detain, any property, to the prejudice of any
person whatever, with the intention of any person
to enter in to an agreement.(Sec.15).Examples
are…….
Examples of Coercion
a. A threatens to shoot B if he (B ) does not release him (A )
from a debt which A owes to B . B releases A under the
threat. The release has been brought about by Coercion.
b .A threatens to kill B if he does not lend Rs.1,000 to C. B
agrees to lend the amount to C. The agreement entered
in to under coercion.
Consent is said to be caused by coercion when it is obtained
by:
(1) Committing or threatening to commit any act forbidden by
the Indian Penal Code,1860. Example…
A threatens to shoot B if he (B ) does not lend
Rs 500.B lends the amount. The threat amounts to coercion.
Examples of Coercion
► 2. Unlawful detaining or threatening to detain any
property .
► An agent refused to hand over the account
books of a business to the new agent
unless the principal released him from all
liabilities. The principal had to give a
release deed as demanded. Held, the
release deed was voidable at the option
of the principal.
[Muthia vs.Muthu Karuppa,(1927)Madras High Court ]
Effect of Coercion
► When consent to an agreement is caused by
coercion, fraud or misrepresentation, the
agreement is a contract voidable at the option
of the party whose consent was so
caused(Sec.19).
► According to Sec.72, a person to whom money
has been paid, or anything delivered by mistake or
under coercion, must repay or return it.
Threat to commit suicide-Does it amount to
coercion?
Chikham Amiraju vs.Seshamma(1917)Madras HC.
► In this case, a person held out a threat of
committing suicide to his wife and son if they did
not execute a release in favor of his brother in
respect of certain properties. The wife and son
executed the release deed under the threat.
► Held, “ the threat of suicide amounted to coercion
within Sec 15 and the release deed was,
therefore, voidable”.
Threat to commit suicide-Does it amount to
coercion?
[Purabi Mukherjee vs. Basudev
Mukherjee(1969)Calcutta]
► It was observed that, “one committing suicide places
himself or herself beyond the reach of the law, and
necessarily beyond the reach of any punishment too.
► But it does not follow that suicide is not forbidden by the

Penal Code. Sec.306 of the Penal Code punishes
abetment of suicide. Sec.309 punishes an attempt to
commit suicide.
► Thus suicide as such is no crime, as indeed, it cannot be.

But its attempt is: its abetment too is. So, it may
very well be said that the Penal Code does forbid
suicide. ” As such a threat to commit to suicide amounts
to coercion.
Duress
► In the English Law, the near equivalent of
the term “coercion ” is “duress ”. Duress
involves actual or threatened violence over
the person of another (or his wife, parent,
or child) with a view to obtaining his
consent to the agreement .
► If the threat is with regard to the goods or
property of the other party, it is not
duress. ”
UNDUE INFLUENCE
Section 16(1)
► Definition :
“A contract is said to be induced by ‘undue
influence’
(a) where the relations subsisting between
the parties are such that one of the parties
is in a position to dominate the will of other
(b) and uses that position to obtain an unfair
advantage over the other.”
A person is deemed to be in a position to dominate
the will of another .
Sec 16(2)
(a) Where he holds real or apparent authority over the
other.E.g.,the relationship between master and servant,
doctor and patient.
(b) Where he stands in a fiduciary relation.[Relation of trust
and confidence] to the other. E.g., father and son, solicitor
and client, trustee and beneficiary, and promoter and
company.
(c) Where he makes a contract with person whose mental
capacity is temporarily or permanently affected by reason
of age, illness or bodily distress. E.g., Between a medical
attendant and his patient.
Difference Between
Coercion and Undue Influence
► 1.The consent is given under ► 1.The consent is given by a
the threat of an offence person who is so situated in
(Forbidden by Indian Penal relation to another that the other
Code) person is in a position to
dominate the will of the other.
► 2.Coercion is mainly of physical ► 2.Undue influence is of moral

character. (Violent force) character. (Mental pressure)
► 3.It involves criminal act. ► 3.No criminal act is involved.
4.There must be an intention of ► 4.Uses to obtain an unfair

causing any person to enter in advantage over the other.
to contract.
Examples of UNDUE INFLUENCE
► 1. Aspiritual guru induced his devotee

to gift him the whole of his property in
return of a promise of salvation of the
devotee.
Held, the consent of the devotee was
given under undue influence
[Mannu Singh vs.Umadat Pandey (1890)]
Examples of UNDUE INFLUENCE
►2.An illiterate elderly woman made a

deed of gift of practically the whole of
her property to her nephew who
managed her affairs. Held, the gift
should be set aside on the ground of
undue influence. [Inche Noriah vs.Shaikh Allie
Bin Omar(1929)]
EFFECT OF UNDUE INFLUENCE
When a consent to an agreement is caused by
undue influence, the agreement is a contract
voidable at the option of the party whose consent
was so caused.
Discretion of Court : Any such contract may be

set aside either absolutely or if the party who was
entitled to avoid it has received any benefit
thereunder, upon such terms and conditions as
the court may seem just and equitable.
Continued……..
► Ex 1: A’s son forged B’s name to a promissory
note. B under threat of prosecuting A’s son obtains
a bond from A, for the amount of the forged note.
If B sues on this bond, the Court may set the bond
aside.
► Ex 2: A, a money-lender, advances Rs.100 to B,
an agriculturist, and by undue influence induces B
to execute a bond for Rs.200 with interest at 6 per
cent per month. The Court may set aside,
ordering B to repay Rs.100 with such interest as
may seem to it just.
RELATIONSHIP WHICH RAISE
PRESUMPTION OF UNDUE
INFLUENCE
► Parent and child
► Guardian and ward
► Trustee and beneficiary
► Religious adviser and disciple
► Doctor and patient
► Solicitor and client
The presumption of undue influence applies
whenever the relationship between the parties is
such that one of them is , by reason of confidence
reposed in him by the other, able to take unfair
advantage over the other.
NO PRESUMPTION OF UNDUE
INFLUENCE IN THE
RELATIONSHIP
► Landlord and tenant
► Creditor and debtor
► Husband and wife. (The wife should not be
pardanashin otherwise the presumption will
arise.)
In the above cases undue influence will
have to be proved if any.
BURDEN OF PROOF
► When a contract is avoided on the ground of
undue influence, the liabilities of dominant party
and weaker party has to be proved.
The weaker party has to prove
(a) That the other party was in a position to
dominate the will
(b) That the other party actually used his influence
to obtain an unfair advantage
(c) That the transaction is unconscionable
(unreasonable)
Continued……
► In case of unconscionable transaction, the
dominant party has to prove that such
contract was not induced by undue
influence.
► Note: A transaction is said to be
unconscionable if the dominant party makes
an exorbitant profit of the other’ s distress.
Example of unconscionable
transaction
X was in great need of money. The market rate of
interest prevailing at that time was 15% to 24%. A
lender agreed to grant the loan at 30% because of
stringency in the money market. This cannot be
called as unconscionable transaction because of
an unusual high rate of interest.
However, if the lender agreed to grant the loan at a
rate which is so high (say 75% or 100%) then the
Court considers it unconscionable, and the
transaction will be called unconscionable
CONTRACTS WITH
PARDANASHIN WOMAN
► A woman who observes complete seclusion ( i.e., who
does not come in contact with people other than her family
members) is called pardanashin woman.
► Legal Presumption: A contract with a pardanashin woman
is presumed to have been induced by undue influence.
► Burden of Proof: The other party who enters into a contract
with a pardanashin woman must prove —(a) that he made
full disclosure of all the facts to her.
► (b) that she understood the contracts and the implications
of the contract.
► (c) that she was in receipt of competent independent
advice before entering into the contract.
Misrepresentation
► A statement of fact which one party makes in the
course of negotiations with a view to inducing the
other party to enter in to a contract is known as a
representation.
► It may be expressed by words spoken or written or
implied from the acts and conduct of the parties.
► A representation when wrongly made, either
innocently or intentionally, is a
misrepresentation .
MISREPRESENTATION & FRAUD
► Misrepresentation may be-
(I) An innocent or unintentional
misrepresentation, or
(II) An intentional, deliberate or willful
misrepresentation with an intent to
deceive or defraud the other party .
The former is called “MISREPRESENTATION ” and
the latter “FRAUD ”
MISREPRESENTATION
►“Misrepresentation” is a
misstatement of a material fact
made innocently with an honest
belief as to it’s truth or non-
disclosure of a material fact,
without any intent to deceive
the other party .
Examples of Misrepresentation
► 1. A while selling his mare to B , tells him
that the mare is thoroughly sound. A
genuinely believes the mare to be sound
although he has no sufficient ground for the
belief. Later on B finds the mare to be
unsound. The representation made by A is
a misrepresentation.
Examples of Misrepresentation
► 2.A company’s prospectus contained a
representation that it had statutory powers to run
it’s tramways by steam provided the consent of a
Government authority was obtained. The directors
issued a prospectus stating there in that the
permission for the use of steam power would be
granted. The permission was refused .The
company was then wound up. Held, the directors
were guilty of misrepresentation and not of fraud.
[Derry vs.Peek(1889)]
Requirements of
► MISREPRESENTATION
1.It must be a representation of material fact. Mere
expression of opinion does not amount to
misrepresentation even if it turns out to be wrong.
► 2.It must be made before the conclusion of the
contract with a view to inducing the other party to enter in
to contract.
► 3.It must be made with the intention that it should
be acted upon by the person to whom it is addressed.
► 4.It must actually have been acted upon and must
have induced the contract.
► 5.It must be wrong but the person who made it
honestly believed it to be true .
Requirements of
MISREPRESENTATION
► 6.It must be made without any intention to deceive
the other party.
► 7.It need not be made directly to the plaintiff. A wrong
statement of facts made to a third party with the
intention of communicating it to the plaintiff, also
amounts to misrepresentation .
E.g., A told his wife within the hearing of their daughter that
the bridegroom proposed for her was a young man. The
bridegroom, however, was a over sixty years. The
daughter gave her consent to marry him believing the
statement by her father. Held, the consent was vitiated by
misrepresentation and fraud.
[Babul vs.Singh(1968)Patiala High Court]
FRAUD
► “Fraud ” exists when it is shown that,
(1) a false representation has been made
(i) knowingly , or
(ii) with out belief in it ’s truth , or
(iii) recklessly, not caring whether it is true
or false , and
(iv) the maker intended the other party to
act upon it .
(2) there is a concealment of material fact.
……… .. FRAUD
►The intention of the party making

fraudulent misrepresentation
must be to deceive the other party
to the contract or to induce him to
enter in to a contract.
………..FRAUD
► According to Sec.17. “fraud ” means and includes any
of the following acts committed by a party to a
contract:
1.The suggestion that a fact is true when it is not true and the
person making the suggestion does not believe it to be
true;
2.The active concealment of a fact by a person
having knowledge or belief of the fact;
3.A promise made without any intention of performing it;
4.Any other act fitted to deceive;
5.Any such act or omission as the law specially declares to
be fraudulent.
ESSENTIAL ELEMENTS OF FRAUD
► 1.There must be a representation and it must be
false :
E.g., The prospectus of a company did not refer to the
existence of a document disclosing liabilities . This
gave the impression that the company was prosperous. If
the existence of the document had been disclosed the
impression would have been different. Held, non disclosure
of information amounted to fraud and any one who
purchased shares on the faith of this prospectus could
avoid the contract.[Peek vs.Gurney(1873)]
…………ESSENTIAL ELEMENTS OF FRAUD
► 2.The representation must relate to a material
fact which exists now or existed in the past.
(i) A sells some spoons to B and makes the following
statements. The spoons are as good as that of X.
[This is a statement of opinion].
(ii) The spoons have as much silver in them as that of X
[This is a statement of fact]
(iii) The spoons are the best available in the market for the
price. [This is a puffing statement].
► 3. The representation must have been
made before the conclusion of the contract
with the intention of inducing the other
party to act upon it.
► 4. The representation must have been
made with a knowledge of it’s falsity or
without belief in it’s truth or recklessly, not
caring whether it is true or false.
► 5.The other party must have been induced to act
upon the representation or assertion .A mere
falsehood is not enough to give a right of action .
Eg., A bought shares in a company on the faith of a
prospectus which contained an untrue statement that one
B was a director of the company. A had never heard of B
and, therefore, the statement was immaterial from his point
of view .A’s claim for damages in this was dismissed
because the untrue statement had not induced A to buy the
shares.
[Smith vs.Chadwick(1884)]
► 6.The other party must have relied upon the

representation and must have been deceived.If
representation does not come to the notice of a
party, it cannot be said to have misled that party
because it does not lead that party at all.
► 7.The other party, acting on the representation or
assertion, must have subsequently suffered some
loss.
Contracts not necessarily voidable
-Exceptions.
► When consent to an agreement is caused by coercion,
fraud or misrepresentation, the agreement is a contract
voidable at the option of the party whose consent was so
caused. But in the following cases, the contract is not
voidable:
► 1.Where the consent of a party to a contract was caused
by misrepresentation or fraud and that party could
discover the truth by ordinary diligence.
E.g., A by misrepresentation, leads B erroneously to believe
that five hundred tonnes of indigo are made annually at his
factory. B examines the accounts of the factory,which
show that only four hundred tonnes of indigo have been
made. After this B buys the factory. The contract is not
voidable on account of A’s misrepresentation.
MISTAKE
► Mistake is erroneous belief about something .
It may be a (1) Mistake of law, or (2) Mistake of fact.
► (1)Mistake of law: It may be….
(a) Mistake of law of the country
(b) Mistake of law of foreign country
► (2) Mistake of fact: Mistake of fact may be,
(a) Bilateral Mistake, or
(b) Unilateral Mistake.
MISTAKE OF LAW
Example of (1) Mistake of law of the country
► A party cannot be allowed to get any relief on the ground

that it had done a particular act in ignorance of law.A
mistake of law is, therefore, no excuse, and the contract
cannot be avoided.
► E.g ., A and B enter in to contract on the erroneous belief
that a particular debt is barred by Indian Law of Limitation.
This contract is not voidable.
► But, if a person enters in to a contract by making a mistake
of law through the inducement of another, whether
innocent or otherwise ,the contract may be avoided.
MISTAKE OF LAW
(2) Mistake of law of a foreign country
►Such a mistake is treated as

mistake of fact and the
agreement in such a case is
void (Sec.21).
…………….MISTAKE
► Bilateral Mistake : Where both the parties to an
agreement are under a mistake as to a matter of fact
essential to the agreement, the agreement is void
[Sec.20].It may be Bilateral or Unilateral Mistake
► Bilateral Mistake : It may relate to ……
(a)Subject mater,or (b) Possibility of performance
(a) Subject matter may relate to ………………..
(i)Existence (ii)Price (iii)Quantity (iv) Quality
(v) Identity or (vi) Title .
(b) Possibility of performance :It may relate to,
(i) Physical , or Legal impossibility .
Bilateral Mistake
► The following two conditions have to be fulfilled .
1.The mistake must be mutual :
E.g., A agreed to purchase B’s motor car which was lying down in B’s
garage.Unknown to either party, the car and garage were completely
destroyed by fire a day earlier.The agreement is void.
2.The mistake must relate to a matter of fact essential to the
agreement :
E.g., A man and woman entered in to a separation agreement under
which a man agreed to pay a weekly allowance to the woman,
mistakenly believing themselves lawfually married.Held, the agreement
was void as there was mutual mistake on a point of fact which was
material to the existence of the agreement.
[Galloway vs.Galloway(19141)].
Bilateral Mistake
► :
The various cases whish fall under Bilateral mistake are as follows.
1.Mistake as to the Subject matter :
(a)MISTAKE AS TO THE EXISTENCE OF THE SUBJECT MATTER.
E.g., A agrees to buy a horse from B a certain horse. It turns out that the horse
was dead at the time of the bargain, though the neither party was aware of the
fact. The agreement is void.
(b) MISTAKE AS TO THE IDENTITY OF THE SUBJECT MATTER:
E.g., W agreed to buy from R a cargo of cotton “to arrive ex-peerless from
Bombay”.There were two ships of that name sailing from Bombay.One sailing
in October and the other in December.W meant the former ship and R, the
latter.Held, there was a mutual or bilateral mistake and there was no contract.
[Rafles vs.Wichelhaus(1864)]
…. Bilateral Mistake
► …………………………………………………1.BILATERAL MISTAKE:
(c) MISTAKE AS TO THE QUALITY OF THE SUBJECT MATER:
E.g., Table Napkins were sold at an auction by y description “with the
crest of Charles 1 and the authentic property of that monarch ”. In fact
the napkins were Georgian. Held the agreement was void as there was
a mistake as to the quality of the subject matter.
[Nicholson &Venn vs.Smith Mariott(1947)]
(d) MISTAKE AS TO THE QUANTITY OF THE SUBJECT MATTER:
E.g., A silver bar was sold under a mistake as to it’s weight. There was a
difference in value between the weight as it was and as it was
supposed to be. Held, the agreement was void. [Cox
vs.Prentice(1815)]
…. Bilateral Mistake
► …………………………………………………1. BILATERAL MISTAKE:

(e) MISTAKE AS TO THE TITLE OF THE SUBJECT MATTER:
E.g., A person took a lease of a fishery which, unknown to either party, already
belonged to him. Held, the lease was void.
[Cooper vs.Phibbs (1815)]
(f)MISTAKE AS TO THE PRICE OF THE SUBJECT MATTER.

E.g., C wrote to W offering to sell certain property for 1,250 pounds. He had
earlier declined an offer from W to buy the same property for 2000 pounds. W
Who knew that this offer of 1,250 pounds was a mistake for 2,250 pounds,
immediately accepted the offer. Held, W knew perfectly well that that the offer
was made by mistake and hence the contract could not be enforced. [Webster
vs.Cecil(1861)]
► Unilateral Mistake : Where only one of the parties is
under a mistake as to a matter of fact, the contract is not
voidable(Sec.22).
► E.g., A offers to sell his house for Rs.44,000.By mistake he
makes an offer in writing for Rs..40,000.He cannot plead
mistake as a defense.
► There are however, two exceptions .
Regarding the (i) identity of the person contracted with. (ii)
Nature of contract.
► (I )Mistake at to the identity of the person contracted with :
E.g. ,If A intends to enter in to a contract with B , C cannot give himself
any right in respect of the contract by accepting the offer.
In such a case the contract is void.
► (ii) Mistake as to the nature of the contract :
Where a person is made to enter in to a contract through the
inducement of another but through no fault.
E.g., M, an old man of poor sight, endorsed a bill of exchange thinking
that it was a guarantee. Held, there was no contract on the ground that
the mind of the signer did not accompany the signature [Foster vs.
Mackinson (1869)]
Legality of Object
►An agreement is a contract if it is made
for a lawful consideration and with a
lawful object (Sec.10)
►Every agreement of which the object or
consideration is unlawful is void.
Continued……..
► The consideration or object of an agreement is
unlawful if-
(a) It is forbidden by law; or
(b) If it is of such a nature that, if permitted it
would defeat the provisions of any law.
Ex: X borrowed Rs.1,00,000 from Y and agreed
not to raise any objection as to the limitation and
that Y may recover the amount even after the
expiry of limitation period. This agreement is void
as it defeats the provisions of the Law of Limitation
Act; or
Continued….
(c) It is fraudulent; or
(d) It involves or implies injury to the person or
property of another; or
(e)The Court regards it as immoral, or opposed to
public policy.
► No action is allowed on an illegal agreement.
Void Agreements
► A void agreement is one which is not enforceable by law .
[Sec.2(g)]
► The following agreements are declared to be void.
1.An agreement made by incompetent persons( Sec.11).
2.Agreement made under mutual mistake of fact (Sec.20)
3.Agreements the consideration or object is unlawful (Sec.23)
4.Agreements the consideration or object is unlawful in part.
(Sec.24)
5.Agreement made without consideration is void ( Sec.25)
6.Agreement in restraint of marriage (Sec.26)
7.Agreement in restraint of trade (Sec.27)
8.Agreement in restraint of legal proceedings (Sec.28)
9.Agreement the meaning of which is uncertain ( Sec.29)
10.Agreement by way of wager (Sec.30)
11.Agreement contingent on impossible events(Sec.36)
12.Agreement to do impossible acts.(Sec.56)
Wager or Wagering Agreement
[Sec.30]
► A wager agreement is an agreement
between two persons under which money or
money’s worth is payable, by one person to
another on the happening or non-happening
of a future uncertain event. Ex. X promises
to pay rs.1,000 to Y if it rains on a particular
day, and Y promises to pay rs.1,000 to X if it
did not. Such agreement is a wagering
agreement.
… Wager or Wagering Agreement
[Sec.30]
►“The essence of gambling and
wagering is that one party is to win and
the other to lose upon a future event,
which at the time of the contract is of
an uncertain nature, that is to say, if the
event turns out one way, A will lose
but if it turns out the other way he will
win”. [Thacker Vs.
Hardy(1878)]
Essentials of a wagering Agreement
► 1.Promise to pay money or money’s worth

► 2.Uncertain event
► 3.Each party must stand to win or lose.
► 4.No control over the event
► 5.No other interest in the event
The following transactions however are, not
wagers
► 1. A crossword competition involving a good measure of

skill for it’s successful solution
► 2.Games of skill, e.g., picture puzzles or athletic
competitions
► 3.A subscription or contribution or an agreement to
subscribe or contribute toward any event (a cup or other
prize for a race or other contest), prize or sum of money of
the value of Rs.500 or above to be awarded to the winner
or winners of a horse race (Exception to Sec.30)
► 4.Share market transactions in which delivery of stocks and
shares is intended to be given and taken.
► 5.A contract of insurance.
AGREEMENTS CONTINGENT ON
IMPOSSIBLE EVENTS
► According to Section 36 of the Indian
Contract Act,1872 contingent agreements to
do or not to do anything, if an impossible
event happens are void whether the
impossibility of the event is known or not to
the parties to the agreement at the time
when it is made. Ex: A agrees to pay
Rs.1,000 if B marries C (a Hindu) who is
already married to D . This is a void
agreement.
AGREEMENTS TO DO
IMPOSSIBLE ACTS
► According to Section 56 of the ICA 1872,
‘An agreement to do an impossible act is
void’.
Ex: A undertakes to put life to the dead wife
of B. This agreement is void
RESTITUTION
► Restitution means “ return or restoration of
benefit”.
► Ex 1: A , a singer contracts with B the
manager of a theatre to sing at his theatre
for two nights every week during the next
two months and B agrees to pay her rs.100
for each night’s performance. On the sixth
night, A willfully absents herself from the
theatre and B in consequence rescinds the
contract, B must pay A for the five nights on
which she had sung.
Continued…….
► Ex 2: A contracts to sing for B on a specified
day and receives an advance of Rs.1000
but is unable to sing due to serious illness
on that day. Since the contract has become
void. A must return Rs.1,000 to B.
Contingent Contracts
► Contingent contract is a contract to do
something, if some event, collateral to
such contract, does or does not happen.
► Characteristics of a contingent contract.
1.It’s performance depends upon the happening or
non happening in future of some event.
2.The event must be uncertain.
3.The uncertain future event must be collateral to the
contract.
THREE ESSENTIAL ELEMENTS
OF CONTIGENT CONTRACT
► 1.Its performance depends upon the
happening or non-happening in future of
some event
► 2.The event must be uncertain
► 3.The event must be collateral. (incidental to
the contract)
Example of the event must be collateral
► There was a contract for the sale of American
parachute cloth by A to B . The goods were to be
delivered when they arrived. A failed to give
delivery and B sued for damages for breach. A
pleaded that the contract was a conditional one
and as the goods had not arrived he had no
obligation to give delivery. Held, the contract was
an absolute one and the obligation of A was not
contingent upon the arrival of the goods
► Contracts of insurance, indemnity and guarantee
WAGERING AND CONTINGENT CONTRACT
► 1.A wagering agreement consists of reciprocal promises
whereas a contingent contract may not be of a wagering
nature
► 2.A wagering agreement is essentially of a contingent
nature whereas a contingent contract may not be of a
wagering nature
► 3.A wagering agreement is void where as a contingent
contract is valid
► 4.In a wagering agreement, the parties have no other
interest in the subject-matter of the agreement except the
winning or losing of the amount of the wager
► 5.In a wagering agreement the future event is the sole
determining factor while in a contingent contract the future
event is only collateral
Performance of Contract
• The parties to a contract either perform or offer to
perform their respective promises.
• By whom the contract must be performed ?
(a) By promisor himself
(b) By agent
(c) By legal representative
(d) By Joint promisors
(e) By Third Party
Who can demand performance ?
(a) Promisee: It is only the promisee himself. In case of his
death, the legal representative, who can demand
performance.
Ex: X promises Y to pay Rs.1000 to Z. It is only Y who can
demand performance and not Z.
(b) Joint Promisees: In case of joint promisees, any of the
joint promisees can demand performance.
When all promisees die ,the legal representatives of all the
deceased persons can demand performance.
Ex: X promises Y and Z jointly to repay loan of Rs.1,000 on a
specified day. Y’s representative jointly with Z can demand the
Continued…
• Performance from X on specified day. If Y and
Z die before that specified day, the
representatives of Y and Z jointly can demand
the performance from X on specified day.
• (c) Third Party: A third party can also demand
the performance of the contract in some
exceptional cases like beneficiary in case of
trust, the person for whose benefit the provision
is made in family arrangements.
Continued…….
• (d) Legal representative: In case of death of the
promisee, his legal representative can demand
performance unless a contrary intention appears from
the contract or the contract is of a personal nature.
Ex: X promises to marry Y on the specified day. Y dies
before the specified day. The legal representatives of Y
cannot demand performance of the promise from X
because the contract is of personal nature.
Who must Perform
• (a) Promisor: If it appears from the nature of the case
that it was the intention of the parties to any contract
that any promise contained in it should be performed
by the promisor himself, such promise must be
performed by the promisor.
• Ex: X promises to marry Y. X must perform this
promise personally.
• Ex: X promises to paint a picture for Y. X must
perform the promise personally,
Continued………
• (b) Promisor’s Agent: If it was not the intention of
the parties that the promise should be performed by
the promisor himself, such contracts can be performed
by the promisor himself or any competent person
employed by him.
Ex: A promises to pay B a sum of money. A may
perform this either by personally paying the money to
B, or by causing it to be paid to B by another, and if A
dies before the time appointed for payment, his
representatives must perform the promise, or employ
some proper person to do so.
Continued……
• (c) Legal Representatives: In case of death of
promisor, his legal representative can perform
the contract unless a contrary intention appears
or the contract is of personal nature.
Ex: X promises to marry Y. X dies. X’s legal
representatives cannot perfom this promise.
(d) Third Party
(e) Joint Promisors
D i s c h a r g e … of Contract
► A contract is said to be discharged when the

obligations created by it come to an end .
The various modes of discharge of contract are as
follows:
1.Discharge by performance
2.Discharge by agreement or consent
3.Discharge by impossibility
4.Discharge by lapse of time
5.Discharge by operation of law
6.Discharge by breach of contract.
DISCHARGE… OF CONTRACT
► 1. Discharge by performance :
It takes place when the parties to a contract fulfill
their obligations arising under the contract within
the time and the manner prescribed.
► 2. Discharge by agreement or consent :
The contract rests on the agreement of the parties.
The parties may get discharged from the
obligations of performance of contract by
agreement or mutual consent.
Discharge.. of Contract
2. Discharge by agreement or consent : The discharge by consent may
be express or implied. Discharge by consent –
► (a) Novation : When a new contract is substituted for an existing one,
either between the same parties or between the one of the parties and
the third party.
► (b) Rescission: When all or some of the terms of contract are cancelled.
► (c) Alteration : When one or more terms of the contract is/are altered
by the mutual consent of the parties to a contract.
► (d) Remission: Acceptance of a lesser fulfillment of the promise
made
► (e) Waiver: Intentional relinquishment or giving up of a right by a
party entitled thereto under a contract.
► (f) Merger: When an inferior right accruing to a party under a
contract merges in to a superior right accruing to the same
party under a new contract.
Discharge …of Contract
► 3. Discharge by impossibility :
Impossibility of performance may be-
(1)Initial impossibility or (2) Supervening impossibility.
(1)Initial impossibility : An agreement to do an impossible act
in itself is void.
(2)Supervening impossibility : Impossibility which arises
subsequent to the formation of contract (which could be
performed at the time when the contract was entered in to) is called
supervening impossibility. The cases covered by of supervening impossibility
include: (a) Destruction of the subject mater
(b) Non-Existence or non-occurrence of a
particular state of things
(c) Death or incapacity for personal service
(d) Change of law, & (e) Outbreak of war
The contract is discharged in these cases.
Discharge of Contract
► The following cases are not covered by supervening
impossibility :
(a) Difficulty of performance
(b) Commercial impossibility
(c) Failure of a third person on whose work the
promisor relied
(d) Strikes, lock outs and civil disturbances
(e) Failure of one of the objects
The contract is not- discharged in these cases.
► 4.Discharge by lapse of time :
If the contract is not performed within the period of limitation
and if no action is taken by the promisee in a law court, the
contract is discharged.
► 5 .Discharge by operation of law :
This includes discharge by,
(a) death
(b) merger
(c) insolvency
(d) unauthorized alteration of the terms of a written
agreement, and
(e) rights and liabilities becoming vested in the same person.
► 6.Discharge by breach of contract:
If a party breaks his obligation which the contract imposes,
there takes place breach of contract.
Breach of contract may be,(a) Actual or(b) Anticipatory
breach.
(1)Actual breach of contract may occur,
(a) at the time when the performance is due, or
(b) during the performance of the contract.
(2)Anticipatory breach of contract occurs when a party
repudiates his liability or obligation under the contract
before the time for performance arrives.
Remedies for
Breach of Contract
► In case of breach of contract, the injured party has one or
more of the following remedies:
1.RESCISSION :When there is breach of a contract by a
party , the injured party may sue to treat the contract as
rescinded. He is also absolved of all the obligations under
the contract.
2.DAMAGES :Damages are monetary compensation
awarded to the injured party by Court for the loss or injury
suffered by him.
The foundation for modern law of damages, both in India and
England, is to be found in the case of Hadley vs.
Baxandile .
2.Hadley vs.Baxandile(1854)
► X ’s mill was stopped by the breakdown of a shaft. He
delivered the shaft to Y , a common carrier, to be taken to a
manufacturer to copy it and make a new one. X did not
make known to Y that delay would result in loss of profits.
By some neglect on the part of Y the delivery of the shaft
was delayed in transit beyond a reasonable time (so that
the mill was idle for a longer period than otherwise would
have been the case had there been no breach of the
contract of carriage).
► Held , Y was not liable for loss of profits during the period
of delay as the circumstances communicated to Y did not
show that a delay in the delivery of the shaft would entail
loss of profits to the mill.
2.Damages may be of four types:
► (1) Ordinary Damages : These are damages which

actually arise in the usual course of things from the breach
of a contract.
► (2) Special Damages : Damages which may reasonably
be supposed to have been in the contemplation of both the
parties at the time when they made the contract as the
probable result of the breach of it, are known as special
damages and may be recovered.
…..Damages may be of four types:
► 3.Vindictive or Exemplary Damages :These

damages are allowed in case of the breach of a
contract to marry or dishonor of a cheque by a
banker wrongfully.
► 4.Nominal Damages : Where the injured party has
not suffered any loss by reason of the breach of a
contract, the Court may award a very nominal sum
as damages.
3. QUANTUM MERUIT :
[As much as earned]
A right to sue on a quantum meruit (as much as

earned) arises where a contract, partly performed
by one party, has become discharged by the
breach of the contract by the other party.
This right is founded on the implied promise by the
other party arising from the acceptance of a
benefit by that party.
Liquidated Damages and penalty.
► ‘Liquidated damages’ represent a sum, fixed or

ascertained by the parties in the contract, which is
a fair and genuine pre estimate of the probable
loss that might ensue as a result of breach.A
‘penalty’ is a sum named in the contract at the
time of it’s formation, which is disproportionate to
the damage likely to accrue as a result of breach
the Courts in India allow only ‘reasonable
compensation’.
4.Specific Performance
►4.Specific Performance :In certain

cases the Court may direct the party in
terms of the contract to actually carry
out the promise, exactly according to
the terms of the contract.This is called
“specific performance of the contract”.
5.Injunction
►5.Injunction: It is a mode of securing

the specific performance of the
negative terms of a contract.
Module.III
INTELLECTUAL PROPERTY LAWS :
Patents Act,1970
► Intellectual property law awards to inventors, artists and institutions
certain exclusive rights to produce, copy, distribute and license goods
and technologies.
► IPR s provide incentives to inventors to develop new knowledge and to
authors and artists to create forms of artistic expression. Thus, over
time there are dynamic gains from the introduction of new products,
information and creative activities.
► But from the perspective of efficiency, they are only a second means of
encouraging invention, because the market exclusively conferred by
IPR s reduce current competition and may therefore lead to a static
distortion in the allocation of resources. Patents and copyrights have
limited term, which minimizes the costs of market exclusivity.
Source: Intellectual Property and Development: Pp.3 The
World Bank,2005
Module.III
INTELLECTUAL PROPERTY LAWS :Patents Act,1970
► BACKGROUND:
The term ‘property ’ poses different

meaning to different people.
To a scientist ‘property’ means
“identifiable characteristics or elements
of matter”, to an economist it may
mean “any means of production”, but
to a lawyer it is equivalent to a
“bundle of rights”.
Understanding of the importance of
STONE
► Perhaps as soon as the earliest human
being just used a big stone to kill the
enemy, human being understood the
importance of ‘stone’ in the early monolithic
age itself and started collecting stones to
protect himself. Perhaps with this ‘urge for
belonging’ heralded the birth of the concept of
property .
Attributes of ‘Property’
► 1.It is scarce [limited]
► 2.It possesses value
► 3.Availability through acquisition orpossession
► 4.Inherent quality of satisfying possessiveness
► 5.Uniqueness of uses
SOURCE: Intellectual Property/MBL/NL SIU,Bangalore

Introduction to Intellectual Property
► The immaterial product of a man ’s brains

may be valuable as his land or his goods.
► The law, therefore, gives him a proprietary
right in it, and the unauthorized use of it by
other persons is violation of his
ownership ,and considered not less than
theft.
Intellectual Property [I.P.] Laws
NEED FOR IP PROTECTION: No one can deny the importance
of individual’s intellectual ability to positively contribute to
the wealth and human happiness .
SOURCES OF I.P. LAWS: I.P. laws are comparatively new in
origin. Britain obviously was the first country to search for a
legal regime to protect intellectual property . Patent system
had it’s origin in the royal grants under it’s prerogative.
It finally came within the domain of legislation in 1624.
[a] Attempts to globalize the I.P. l regime: Paris Convention,1883
[b] National Statutes
[c] Judicial Decisions
ECONOMIC CONSIDERATION
SOURCE: Intellectual Property/MBL/NLSIU, Bangalore
► 1.NATURE OF INTELLECTUAL PROPERTY RIGHT :

Intellectual property right is a right exclusively designed in law to own, possess,
produce, reproduce, sale, give license or otherwise dispose of.
2.ECONOMICS OF IPR : All IPR s create monopoly and the result would be;
(a) the inventor can use the economies of scale to maximize his return
so that he gets back the amount invested in R&D by way of
maximum return ;
(b) the inventor, as a monopolist can determine the quantity he has to
produce in order to maximize his profit ;
© the inventor having the monopoly power, can himself regulate the market in
different ways like reducing production to charge more, creating shortage in
supply or take a long term policy decision in favor of expanding investment on
regional consideration to create an artificial scarcity in certain regions to exploit
the market conditions.
Statutory Framework
► 1.Indian Patents Act.1970 regulating patents;
[Process, Products, Apparatus ,Capable of Industrial application ] .
► 2.The Copy Right Act.1957;

[Musical work, Artistic work, Literary work, e.g., books, periodicals ].
► 3.The Designs Act.1911; [Shapes and Ornamentation ]
► 4. The Trade and Trade Marks Act,1958;

[ Marks used to distinguish goods-words, signs or combinations
, formulae, patterns, methods, programs, techniques, or
compilations of information that provide one ’s business with a
competitive advantage].
Global Influence
► The I.P. statutes reflect the legal philosophy of IPR protection.
However, this legal philosophy has become largely globalize with the
GATT Agreement in 1994 containing the TRIPS (Trade Related
Intellectual Property Rights) Agreement.
► Besides, there exist several other conventions on various areas like:
(i) Patent and Trade Mark: Paris Convention,1883 for
Protection of Industrial Property.
(ii) Copyright: The Berne Convention,1971,
The Universal Copy-Right Convention
(iii) Washington Treaty on Intellectual Property in respect of
Integrated Circuits .1989 and also there is WIPO.
IMPORTANCE OF
INTELLECTUAL PROPERTY
► A] Social Benefits :
Recognition of intellectual property is important because an
inventor or a creator of an idea may keep it
secret either consciously or unconsciously.
Consciously because he wants to exploit his idea
fully through keeping the matter a trade secret. If
he consciously wants to maximize his advantage
by keeping the trade secret, he also runs the
danger of ‘reverse engineering ’ and
consequential non-protection .
…….IMPORTANCE OF
INTELLECTUAL PROPERTY
B] New Ideas and New Markets : New

dimension and new ideas have as a rule opened
up new markets for consumer and industrial
goods.
C] Role of Intellectual Property in
Development : The rewards granted to the
innovator/ creator of ideas are reflected by the
benefits which the innovation/ creation confers on
the consumer
HISTORY AND PHILOSOPHY OF
PATENT PROTECTION
► The word patent originated from the Latin word ‘patene ’
which means ‘to open ’ .The English Crown had the
practice of addressing open letters to all it’s subjects
notifying them of the grant of monopoly rights or privileges
to individuals in respect of inventions.
► The rights and privileges by means of ‘open letters’, i.e.,
documents on which the royal seal were intended for
public view. Open letters were intended for display and
inspection by any interested party. The language of
government in medieval England was Latin and Latin for
open letter is litterate patente.
As English slowly took over from Latin as official language,
the documents became known as ‘letters patent’ and later
just ‘patents’.
HISTORY AND PHILOSOPHY OF
PATENT PROTECTION
► Justification for the Patent System:
(i) Patents as an instrument of justice to the inventor
(ii) Patents as aiding industrial growth
► Aiding Industrial Growth: Swan Committee(England,1946) identified
four benefits from exclusive rights in an invention.
(i) It encourages research
(ii) It induces an investor to disclose his or her discoveries
(iii) It rewards investment for inventions up to the stage at
which they are commercially practicable
(iv) It provides an inducement to invest capital in new lines
of production
Patent as an asset
► Patent = Property E.g., House Property)
► Use = Live
► Sell = Sell
► License = Rent
► Mortgage = Mortgage
► Abandon = Abandon
Inventor
► In all countries except U.S.A the first to file is
entitled to a patent; who first invented is not the
criteria.
► A consideration in U.S.A-first to invent is entitled to
a patent, who first filed is not a criteria.
► Proper maintenance of records in chronological
order in an accepted format is essential to
establish patent-ship.
Who can apply for patents ?
► First and true inventor of the invention.
► An assignee of the first and true inventor
► Legal representative of any deceased
person who was entitled to make such an
application before his death.
► The true and first inventor can have others
as joint applicants.
Patents
► Patents are granted to individuals and
organizations who can lay claim to a new product
or manufacturing process , or to an existing
product or process which was not previously
known.
► The granting of patent gives the ‘patentee ’ a
monopoly to make , use, or sell the
invention for a fixed period of time .
PATENT ……
► In technical language, it is an official document
conferring an exclusive right or privilege on the
inventor of a new thing or process of manufacture
for a term of years to use or sell his invention .
After the expiry of the term of the patent, it becomes public
juris (of public right) i.e., any member of the public can
manufacture that thing or article. The law relating to
patents in India is contained in the Patents Act,1970
which is based on the English Patents Act of 1949.
► The Act extends to the whole of India (Sec.1)
What is patent ?
► “A patent is an exclusive right granted for
an invention, which is a product or a
process that provides, in general, a new
way of doing something , or offers a new
technical solution to a problem.
In order to be paten-table, the invention
must fulfill certain conditions”.
-World Intellectual Property Organization
(WIPO)
What does a patent do ?
►A patent provides protection for the
invention to the owner of the
patent.
The protection is granted for a
limited period, generally 14 years.
How to keep patents alive ?
► To keep patents in force, a yearly fee has to be paid .
► The fee goes up with the age of the patent
► Failure to pay fees within the prescribed time leads to
lapse of the patent .
► Patents cannot be renewed at the end of their
lifetime when they lapse.
► The patent then becomes open to all and be used
by anyone without the fear of infringement .
Advantages of obtaining a patent
► 1.The patentee gets exclusive right to use his
invention.
► 2.The patentee can bring a suit for infringement
of his patent .
► 3.If the patentee does not have the means or is not
himself in a position to work the invention patented
commercially, he can sell his patent and grant
licenses to others to exploit, and thereby
earn money .
► 4.The holder of an exclusive license would have the
rights of the patentee. He would also be able to
enforce such rights.
…Advantages of Obtaining a Patent
► 5.The patentee can make improvements in or modification
in an invention described or disclosed in the complete
specification of the main invention and obtain the grant
of a patent for the improvement or modification as
a “patent of addition ”. A patent of addition remains in
force as long as the patent for the invention remains in
force.
► 6.The grant of a patent enables the inventor to obtain an
official record of his inventor-ship from the
Government.
Important Definitions
► CONTROLLER [Sec.2(1) (b)]. “Controller” means

Controller-General of Patents, Designs and Trade Marks.
► EXCLUSIVE LICENSE [Sec.2(1)(f)]. It means a license
from a patentee (grantee or proprietor of patent) which
confers on the license and persons authorized by him, any
right in respect of the patented invention. The right of
the licensee must be to the exclusion of all others
(including the patentee himself) .“ Executive license” shall
be construed accordingly.
…….Important Definitions
► INVENTION [Sec.2(1)(f). It means a new product or

process involving an inventive step and capable of
industrial application. The three basic requirements of an
invention are: manner of manufacture, novelty and utility.
Manufacturing primarily denotes the making of something
out of some material, by application of power in
transformation of the material and art and skill in the
process of that improves, restores or preserves a saleable
product.
If the starting material remains unaltered by the process and the product
also remains the same as the starting material, the process cannot be
called a manufacture for the purpose of patent-ability.
► PATENT [Sec(1) (m)]: It means a patent under the

Patents Act, 1970.
► PATENTED ARTICLE AND PATENTED
PROCESS [Sec.2(1) (o)]:They mean respectively an
article or process in respect of which a patent is in
force.
► PATENTEE [Sec.2 (1)(p)]: “Patentee” means the
person for the time being entered on the Register
as the grantee or proprietor of the patent.
► Medicine or drug [Sec.2(1)(l)] includes-

(1)All medicines for internal or external use of human beings
or animals;
(2)All substances intended to be used for or in the diagnosis,
treatment, mitigation or prevention of diseases in human
beings or animals;
(3) All substances intended to be used for in the maintenance
of public health, or the prevention or control of any
epidemic disease among human beings or animals;
Cont’d………….[Medicine or drug [Sec.2(1)(l)] includes-]

(4) Insecticides, germicides, fungicides, and all other
substances intended to be used for the protection
or preservation of plants;
(5)All chemical substances which are ordinarily used
as intermediates in the preparation or manufacture
of any of the medicines or substances referred to
above.
► PERSON [Sec.2(1) (s)]: “Person” includes the

Government.
► PERSON INTERESTED [Sec.2(1)(t)]:“Person
interested” includes a person engaged in, or
in promoting, research in the same field as
that to which the invention relates.
► TRUE AND FIRST INVENTOR [Sec. 4(1)(y)]: “True

and first inventor” is a person who first
made the invention and applied for
the patent . It does not include either the
first importer of an invention in to India, or a
person to whom an invention is first
communicated from outside India.
…………TRUE AND FIRST INVENTOR
[Sec. 4(1)(y)]:
► Cont’d………….[TRUE AND FIRST INVENTOR [Sec. 4(1)(y)]]
If two persons have independently

made the same invention and neither
has used it or disclosed it to the world, the
one who applies first for the patent is
considered in law the true and first
inventor , although the other might have
made it earlier in time.
INVENTIONS NOT PATENTABLE
[Sec.3 to 5 of Indian Patent Act,1970]
► WHAT ARE NOT INVENTIONS (SEC.3) It is
not in public interest to grant rights in
respect of certain items, e.g., discovery of a
scientific principle, or an invention injurious
to public health, or a process for the
treatment of human beings, animals or
plants, or a method of agriculture or
horticulture.
Cont ’d ….[What is not PATENTABLE in India ? ]
The following are therefore not inventions within the meaning

of his Act and hence non patent-able:-
(a) Trifling invention : i.e., an invention which is frivolous
or which claims anything obviously contrary to well-
established natural laws.
(b) Invention prejudicial to public order or
environment , i.e., an invention, the primary or intended
use or commercial exploitation of which, could be
contrary to public order or morality or which causes
serious to human, animal or plant life or health or to the
environment.
(c) Scientific principle or abstract theory

i.e., the mere discovery of a scientific principle or the
formulation of an abstract theory, or discovery of any living
thing or non-living substance occurring in nature.
(d) Discovery of new property or use of a known
substance , i.e., the discovery of any new property or new
use for a known substance or of the mere use of a known
process, machine or apparatus. If the known process
results in a new product or employs at least one new
reactant( a chemically reacting substance), it will be an
invention.
e) Admixture , i.e., a substance obtained by a mere

admixture( mixing with something) resulting only in
the aggregation of the properties of the
components thereof or a process for producing
such substance.
(f) Arrangement , re-arrangement or duplication ,
i.e., the mere arrangement omitted by Amendment
Act,2002 or re-arrangement or duplication of
known devices, each functioning independently of
one another in a known way.
► (g) Omitted by Amendment Act ,2002

► (h) A method of agriculture or horticulture
► (i) A process of treating human beings or
animals , i.e., any process for the medicinal,
surgical, curative prophylactic (preventing of
disease diagnostic, therapeutic, or other treatment
of human beings or any process for a similar
treatment of animals to render them free of
disease or to increase their economic value or that
of their products.
► (j) Plants and animals , i.e., plants and animals

in whole or any part thereof other than micro-
organisms but, including seeds varieties and
species and essentially biological process for
production or propagation of plants and animals.
► (k) Mathematical program i.e., a mathematical
or business method or a computer program per se
or algorithms
► (l) Literary program i.e., a literary, dramatic,

musical or artistic work or any other aesthetic
creation whatsoever including cinematographic
works and television productions.
► (m) Mental act or method of playing game
i.e., a mere scheme or rule or method of
performing mental act or method of playing game.
► (n) A presentation of information .

► (o) Topography of integrated circuits
► (p) Traditional knowledge , i.e., an invention
which in effect or traditional knowledge or
which is an aggregation or duplication of
known properties of traditionally known
component or components.
► Inventionsrelating to atomic energy not

patent-able(Sec.4)
No patent shall be granted in respect of an invention

relating to atomic energy.
Process and Product Patent
► (1) Meaning of Process Patent: Process patent
means that when a substance is invented or produced a
patent is not granted to the substance itself but it is only
the method or the process of manufacture of a substance
that is granted a patent.
► (2) Cases where only Process patent is available
:It must be remembered that under the scheme of the
Indian Patent Act,1970, Patent is granted not for the
benefit of the Patentee but for the benefit of the public at
large .Therefore Indian Patent Act,1970 provides only a process patent in
particular cases.
….Process and Product Patent
► (3)Product Patent and Mandate under the G.A.T.T :
In product patents, patent is granted not to the method or
process of manufacture of a substance but to the
substance itself.
Therefore, it is the “product” that is covered by the patent.
Under the Patents Act, 1970 both product and process
patents are available in India. Now India is a signatory to
the Agreement on Trade Related Intellectual Property
Rights (TRIPS), India is under obligation to provide Product
patents to all inventions
APPLICATION FOR PATENTS
[Sec.6 to 11]
► Application entitled to apply for patents (Sec.6):

An application for a patent for invention may be made by any
of the following persons, singly or jointly, that is to say-
1.By any person claiming to be the first and true inventor of
the invention;
2.By the person being the assignee of the person claiming to
be the true and first inventor in respect of the right to make
such application;
3.By the legal representative of any diseased person who
immediately before his death was entitled to make such an
application.
[Sec.6 to 11]
Form of Application (Sec.7)

► Application for one invention only.
► Application by assignee to be accompanied
by proof of right to apply.
► Applicant to be in possession of invention
► Specifications
[Sec.6 to 11]
Information and undertaking regarding foreign applications(Sec.8)

Where an applicant for a patent under this Act is prosecuting an application for a
patent in a foreign country in respect of the same or substantially the same
invention, he shall file along with his application-
► (1) A statement setting out detailed particulars
► (2)An undertaking that, up to the date of the acceptance of his
complete specification filed in India
The Controller may also require the applicant to furnish details relating to the
objections, if any, taken to the application filed in a foreign country on the
ground that the invention is lacking in novelty or patent-ability, the amendments
effected in the specifications, the claims allowed in respect thereof and such
other particulars as he may require.
[Sec.6 to 11]
► Provisional and complete specifications (Sec.9)

Time for filing specifications: Where an application
for a patent is accompanied by a provisional
specification, a complete specifications within 12
months from the date of filing application. If the
complete application is not so filed, the application
shall be deemed to be abandoned.
[Sec.6 to 11]
► Contents of specifications(Sec.10)
Every specification whether provisional or complete
Shall begin with a title sufficiently indicating the subject
matter to which the invention relates. Every complete
specification shall-
(1)fully describe the invention and it’s operation or use
(2)disclose the best method of performing the invention
which is known to the applicant
(3)end with a claim or claims defining the scope of the
invention for which protection is claimed.
[Sec.6 to 11]
► Section 11 deals with priority dates for each

claim of complete specification.
Examination of Application
[Sec.12 to 24]
► Examination of application(Sec.12)
When the complete specification has been filed in respect of
an application for a patent, the application and the
specification relating there to shall be referred by the
Controller to an examiner for making a report to him in
respect of the following matters, namely-
(1) whether the application and the specification relating
there to are in accordance with the requirements of this Act
and of any rules made there under:
……..Examination of Application
[Sec.12 to 24]
► (2) whether there is any lawful ground of objection to the

grant of the patent under this Act in pursuance of the
application. This will include an examination as to formal
matters (like the prescribed form, fees to be paid) and
substantive maters (patent-ability of invention and
specifications);
► (3)The result of investigations made for prior claim
► (4)any other matters which may be prescribed
The examiner shall ordinarily make report to the Controller
within a period of 18 months of such reference.
Refusal of application (Sec.15)
► Where the Controller is satisfied that the application or

any specification filed in pursuance thereof does not
comply with the requirements of this Act or any rules
made there under, the Controller may either,
(a) Refuse to proceed with the application; or
(b) Refuse the application, specification or drawings to be
amended to his satisfaction before he proceeds with the
application.
If it appears to the Controller is not an invention, or
non-patent-able then he shall refuse the application.
Infringement of Patents [Sec.104-117]
► This Act grants statutory right to patentee, his agents and

licensees to work or exploit the invention. If some other
person violates these and encroaches upon their rights, it
amounts to infringement.
► Burden of Proof .
In any suit for infringement of a patent, where the subject
mater of a patent is a process for obtaining a product, the
Court may direct the defendant to prove that the process
used by him to obtain the product, identical to the product
of the patented process, is different from the patented
process.
Penalties [Sec.118-124]
► For unauthorized claim of patent rights-fine
up to Rs.10,000
► Falsification of entries in Registry etc-
Imprisonment up to 2 years or fine of
Rs.10,000 or both.
The IPR tools can help to preserve the rights of the
innovator against wrongful use by others.
► Various features of the Gillette ’s non-electric razor are

protected by 17 patents, which are displayed on the pack.
Gillette , as a name, is a registered trademark in several
countries. Similarly, the U.S-based Golden Valley
Microwave Food Inc.’s Micro-wave Popcorn is protected by
number of U.S patents.
► Globally, patent related disputes and their settlement is on
the rise.
► A sum of $800 million was exchanged in 1994 by way of
licensing fees compared to $300 million in 1991.Texas
Instruments earned $1.2 billion for licensing IPRs.
LAW OF TRADEMARKS
[Trade & Merchandise Marks Act,1958]
► Introduction :
When a person sells his goods under a particular
trade mark he acquires a kind of limited exclusive right to use
the mark in relation to those goods.
► Trade Mark as Intellectual Property :
Trade Mark for long has been identified and grouped along
with patent, design and copy right as a form of intellectual
property.
Trade Marks have gained recognition as signifying property
rights on the basis of that the owner of the trade mark
acquired value in the mark by it ’s constant use.
FUNCTIONS OF TRADE MARK
► It gives an indication to the purchaser about

the identity of the manufacturer or the
quality of the goods.
► It gives the purchases a satisfactory
assurance of the quality.
The purchaser simply would make his purchase on
the implicit faith of the mark being genuine and
that it possesses a quality equal that previously found with
same trade mark.
Where does the statute step in ?
► The statute, i.e., Trade and Merchandise Marks

Act,1958 (herein after TMM) codifies the law and provides
for registration of trade marks already in use and even
those proposed to be used.Hence the statute recognizes
ownership of trade marks,and provides various rights there
in.
► In broad terms, the TMM provides for the following:
1.Nature of rights a person can acquire in respect of TM
2.Mode of acquisition and method of transfer of rights
3.Nature of infringements and remedies.
Statutory Definitions
► 1.Trade Mark:Trade Mark in India is governed by the Trade and Merchandise
Marks Act,1958.A trade mark is defined under section 2(1)(v) as follows..
“Trade Mark ” means a registered trade mark or a
mark used to in relation to goods for the purpose of
indicating or so as to indicate a connection in the course of
trade between the goods and some person having a right
as proprietor to use the mark.
► 2.Under Section 2(1)(j) “mark ” includes a device, a
brand, heading, label, ticket, name, signature,
word, letter or numeral or any other combination
thereof .
…Statutory Definitions
► 3. “Goods ” Goods are simply defined
under TMM Act
as “Anything which is the subject of trade or
manufacture”.
► 4. “Name ” A name includes any
abbreviation of a name according to to
Section 2(1)(b) of the TMM Act.
► 4.3 Different Types of Trade Marks :
1.Letter Mark :Mark includes letter mark

under Section2(1)(j) of the Act.The identity
created out of letter forms have been very
useful elements for designers to work with
and develop successful mark.Some popular
examples of letter marks as trade marks are
IBM , GM , 3M , ELBEE etc.
► 4.3 Different Types of Trade Marks
2.Symbol: Symbols may take the shape of brands
or logos.A logo is a visual depiction of a
manufacturer or a company and gives an identity
to it.Today logos are identified by consensus as
symbols that belong to a particular company and
as representing quality,elegance etc.The best
example of popular logo as a trade mark are
those of Daimler Benz , BMW etc.
3.Brand: Brands refer to those kinds of

marks which are branded on goods
themselves constituting the trade
mark.For example, Cycle brand of
Agarbathis or Camel Brand Safety
Matches.
4. Label and Ticket:Label means a composite mark
containing various features including devices,
words, usually painted on paper and attached to
the goods themselves.The label may contain
,apart from the trademark even matter which does
not have the trade mark value. A ticket may be
said to be a label attached to goods by a string
etc.The exact distinction between label and ticket
is not very clear.
5.Color Combinations : Color schemes can also
constitute marks within the definition of the Act.
6.Containers : In one of the cases, it was pointed out that,
a container would not fall within the definition of the
mark.Therefore for registration of trade mark ,it is
necessary for an applicant to show the mark in two
dimensions, so that others may more readily know what
they must not use in two dimensions.
► Certified Trade Mark Sec.2(1)(c):Certified
Trade Mark means a mark adopted to
distinguish in the course of trade, goods
certified by any person in respect of origin,
material, mode of manufacture, quality,
accuracy, or other characteristics, from
goods not so certified and registrable.
Rights conferred upon registration :
► Rights include;
*Right to use
*Right to license
*Right to sell
*Right to sue (upon infringement).
Unregistered Trade Mark
► The 1958 Act does not make marks
compulsorily registrable.Therefore, there is
no ban on a person using the mark without
being registered.
Remedies for Infringement of Unregistered
Mark
► If a MARK is unregistered under the 1958 Act then
the civil remedies provided by the Act for
infringement of trade marks cannot be availed by
the person who has been using such unregistered
mark.Section.27(1) provides that, “no person
shall be entitled to institute any
proceedings to prevent or recover damage
for infringement of an unregistered trade
mark ”.
Unregistered Trade Mark and
Goodwill
► Trade mark is always considered as an
inseparable part of goodwill of business, as a part
of which it is used.
► The 1958 Act has also incorporated the common
law principle in Section38(1) which reads as
follows, “An unregistered trade mark shall not be
assignable or transmissible except along with the
goodwill of the business concerned”.
Table of Prohibited Marks
Section.11(a A mark, use of which is likely to

) deceive or cause confusion
11(b) A mark use of which would be
contrary to any law for the time
being in force.
11(c) A mark comprising or containing
scandalous or obscene matter.
11(d) A mark comprising or containing any
matter likely to hurt the religious
sentiments of any class or section of the
citizens of India
Table of Prohibited Trademark
Section A mark disentitled to

11(e) protection on a court of law
12(1) A mark identical or
deceptively similar to a
trade mark actually
registered in respect of the
same description
13 A word which is unaccepted
name.
Ownership of Trademark and
Rights of Owners
► Registration is not a pre-condition to
assume ownership of trade mark.The
ownership in a mark can be acquired by it ’s
use on specified goods or on registration
under the Act in respect of particular goods
or particular class of goods.
IPR Laws: Copyrights
► Introduction : General Meaning.
Copyright means an exclusive right given

by law for certain period, to an author
or composer of work conferring him the
right to produce copies of work.
► Object of Copyright :
Copyright deals with the protection of rights
of various types of works, yielding from the
intellectual labor of human being.Therefore
it can be considered as a reward of labor.
The object of copyright is to
encourage authors, artists and
composers to produce original works
by rewarding them with exclusive rights
for a limited period.
► Relevance of Copyright Law :
Copyright protection is essential to
encourage exploitation of copyrighted
work for the benefit of the public by
entrepreneurs, like publishers, film
producers, or sound recorders.
► International Implications of
Copyright Law : Copyright has gained
international dimension because being an
intellectual property it is transferred more
easily and quickly across national
boundaries.The speed with which
intellectual property can be copied today
has led to large scale infringement of
copyrights
► Nature of Copyright:Copyright-purely a statutory right.
Negative and multiple nature of Copyright :
The copyright law essentially concerns itself
with the negative right of preventing copying
or multiplication of material covered under
the copyright, so as to protect the writer,
composer or artist from unlawful
reproduction and exploitation.
► What to be protect by Copyright :
For a work to be protected under the
copyright there must be sufficient “skill,
labor and judgment” or “selection,
Judgment and Experience”.
Copy protects the skill and labor employed by
the author.
Lord Atkinson in
Macmillan vs.Cooper(1924) pointed out that,
► “it is the product of labor,skill and capital of one

man which must not be appropriated by another,
not elements, the raw materials, if one may use
the expression, upon which the labor,skill and
capital of the first have been expended to secure
copyright for his product. It is necessary that the
labor, skill and capital expended should be
sufficient to import to the product some quality or
character which the raw material did not possess
and which differentiate the raw material from
product”.
Copyrights
►Copyright protects form and not
idea.
►Work must be in a permanent
form.
►Copyright must be distinguished
from monopoly right.
FERA, 1973
The FERA came in to force on 1st January,1974
It extends to the whole of India and to the branches and agencies of
overseas Indian companies including Indian citizens.It seeks to
regulate in particular;
► 1.The assets held in India by non-residents
► 2.Holding immovable property outside India by Indians
► 3.Employment of foreign nationals, and repatriation of foreign currency,
► Establishment or place of business in India, and
► 5.Acquisition, holding, etc of business interest and immovable property
in India
FERA, 1973
► Objectives of FERA:
1.To regulate dealings in foreign exchange and securities, as well as
transactions indirectly affecting foreign exchange;
2.To regulate imports and exports of currency and bullion;
3.To conserve foreign exchange resources of the country
4.To regulate holding of immovable property of Indians outside India
5.To regulate acquisition, holding,etc, of immovable property by non-
residents in India;
6.To regulate employment of foreign national in India
The Foreign Exchange Management Act, 1999
► Introduction : FEMA, 1999 replaces the FERA,1973.

► FERA aimed at having stringent controls to conserve
India’s foreign exchange.
► FERA amended in 1993 to bring about certain changes, as
a result of introduction of economic reforms and
liberalization of the Indian economy.
► But it was soon realized that FERA had by and large
outlived it’s utility in the changed economic scenario and
there fore was replaced by FEMA in 1999.
FERA (1973) VS FEMA (1999)
► 1.To consolidate and ► 1.To consolidate and

amend the law amend the law relating
regulating the(then to foreign exchange
existing) law relating with the objective of
facilitating external
foreign exchange and trade and payments
for the conservation of and development &
the FX resources of maintenance of FX
the country market in India
FERA (1973) VS FEMA (1999)
► 2.FERA focused on ► 2.Whereas, FEMA

control of foreign focused on
exchange management of foreign
► 3. FERA almost exchange
prohibited almost all ► 3.All current account
foreign exchange transactions are
transactions unless permissible by the law
there was general itself.
specific permission
FERA (1973) VS FEMA (1999)
► 4.Under FERA, ► 4.FEMA is a civil law

however, the offence unlike FERA.The
was of criminal nature. contravention of
provision under FEMA
will be dealt with
through civil
procedure.
FERA (1973) VS FEMA (1999)
► 5. Under FERA there ► 5.The burden of proof

was a presumption of under FEMA will be on
existence of a guilty the enforcement
mind, unless the agency and not on the
accused proved person implicated.
otherwise.
FERA (1973) VS FEMA (1999)
► 6.Offences under ► 6.Offences under

FERA, were subjected FEMA are
to penalty as well as compoundable by
severe imprisonment. paying penalty.
FEMA prescribes an
elaborate redressal
machinery for total
justice and fairness to
the person implicated.
Definitions [Section.2]
► AUTHORIZED PERSON:
It means an authorized dealer, money

changer, off-shore banking unit or any
other person for the time being
authorized under the law to deal in
foreign exchange or foreign securities.
Export
Export means,
►(I) ‘taking out of India to a place
outside India any goods’,
►(ii) ‘Provision of services from India to
any persons outside India’.
Import
► Import means bringing in to India any goods
or services.
CURRENCY
► This expression includes all currency notes, postal
notes, postal orders, money orders, checks
(cheques), drafts, traveler (checks) cheques,
letters of credit, bill of exchange and promissory
notes, credit cards or such other similar instrument
may be notified by the Reserve Bank.RBI has
notified ‘debit cards’ ‘ATM’ cards or any other
instrument by whatever, name called that can be
used to create a financial liability, as ‘currency’.
CURRENCY NOTES
► It means and includes cash in the form of
coins and bank notes.
Foreign Exchange
► It means foreign currency and include:
(i)deposits credits and balances payable in any foreign
currency;
(ii)drafts, travelers’ cheques, letters of credit or bills of
exchange expressed or drawn in Indian currency but
payable in any foreign currency;
(iii)drafts, travelers’ cheques, letters of credit or bills of
exchange drawn by banks, institutions or persons outside
India, but payable in Indian currency.
Person
► A ‘person’ includes: (i) an individual,(ii) a Hindu
Undivided family, (iii) company
(iv) a firm,(v) an association of persons or body of
individuals, whether incorporated or not (vi) every
artificial judicial person, not falling within any of the
preceding sub clauses, (vii) any agency, office, or
branch owned or controlled by such persons.
Person Resident Outside India
► It means a person who is not resident in
India.
Foreign Security
► Any security in the form of shares, bonds,
debentures, or any other instrument
denominated or expressed in foreign
currency and includes securities expressed
in foreign currency.
Duties of authorized person
► 1.To comply with RBI directions
► 2.Not to engage in unauthorized
transactions
► 3.To ensure compliance of FEMA provisions
► 4.Duty to produce books accounts etc.
Powers of RBI
► Sec.12(1) empowers RBI to cause an
inspection to be made, by an officer of the
RBI specially authorized in writing by RBI of
the business of any authorized person as
may appear it ti be necessary.
Powers of the Authorized Person
► 1.To deal in or transfer any foreign exchange or
foreign security
► 2. Receive any payment by order or on behalf of
any person resident outside India in any name.
► 3.To open NRO,NRE,NRNR, NRSR and FCNR
accounts.
► 4.To sell or purchase foreign exchange for current
account transactions
Regulation and Management of
Foreign Exchange
It prohibits any person other than an authorized
person from
► (a) dealing in or transferring any foreign exchange
or foreign security to any person or
► (b) by making any payment to or to the credit of
any person resident outside India in any manner;
or
►
…..Regulation and Management of
Foreign Exchange
► © receive otherwise than through an authorized
person any payment by order or on behalf of any
person resident outside India in any manner,
► (d) entering in to any financial transactions in India
as consideration for or in association with
acquisition or creation or transfer of a right to
acquire, any asset outside India by any person.
Holding of Foreign Exchange
► Section.4 provides that except as otherwise
provided in the Act; no person resident in
India shall acquire, hold, own possess or
transfer any foreign exchange, foreign
security or any immovable property situated
outside India.
Module .IX
Competition Act,2002
[Competition Law]
► In pursuit of globalization, India has responded by

opening of it’s economy, by removing controls and
resorting to liberalization.
► The natural corollary of this is that the Indian
market should be geared to face competition from
within the country and from outside.
► MRTP Act,1969 had become obsolete and hence
replaced by Competition Act 2002.
The objectives of
Competition Act,2002
► 1.To prevent practices having adverse effect

on competition;
► 2.To promote and sustain competition in
market;
► 3.To protect the interest of consumers;
► 4.To ensure freedom of trade carried on by
other participants in markets in India.
Important Definitions
Under Competition Act, 2002
► Acquisition [Sec.2(a)].It means, directly or

indirectly, acquiring or agreeing to acquire-
(i) shares, voting rights or assets of
any enterprise
(ii) control over management or
control over assets of any enterprise.
Definitions
► Agreement [Sec.2(b)].It includes any
arrangement or understanding or action in
concert-
(i) Whether or not, such arrangement,
understanding or action is formal or in writing; or
(ii) Whether or not such arrangement,
understanding or action is intended to be
enforceable by legal proceedings.
Definitions
► Consumer [Sec.2(f)]. “Consumer” means any person who-
(i) Buys any goods for a consideration.The consideration may have
been paid or promised or partly paid and partly promised, or under
any system of deferred payment.
“Consumer” includes any user of the goods other than the person
who buys them for consideration paid or promised to be paid in the
above manner.When such use is made with the approval of the
owner, it makes no difference whether the purchase of goods is for
resale or for any commercial purpose or for personal use;
(ii) Hires or avails of any services for a consideration.
(iii) Consumer includes any beneficiary of services.
Definitions
► Enterprise [2(h)].It means a person or a department of the
Government, who or which is, or has been or is proposed
to be, engaged in any activity, relating to the-
(i)production,storage,supply,distribution, acquisition, or
control of articles or goods, or
(ii)provision of services of any kind, or
(iii)investment, or in the business of acquiring, holding,
underwriting or dealing with shares, debentures or other
securities of any other body corporate, either directly or
through one or more of it’s units or divisions or
subsidiaries.
Definitions
► Goods [2(i)]. “Goods” means goods as defined
in the Sale of Goods Act,1930 and includes-
(A) Products manufactured, processed or mined.
(B) Debentures, stocks and shares after allotment;
(C) In relation to goods supplied, distributed or
controlled in India, goods imported in India.
Definitions
► Person [Sec.2(l)]. “Person” includes-
(i) an individual;
(ii) a Hindu undivided family;
(iii) a company
(iv) a firm;
(v) an association of persons or a body of
individuals, whether incorporated or not, in
India or outside India; [cont ’d..]
Definitions
[ being cont ’d..]
► (vi) any corporation established by or under any
Central, State or Provincial Act or a Government
Company as defined in the Sec.617 of the Companies
Act, 1956;
► (vii) any body corporate incorporated by or under the
laws of a country outside of India;
► (viii) a co-operative society registered under any law
relating to co-operative societies;
► (ix) local authority; and
► (x) every artificial judicial person, not falling within any of
the preceding sub-clauses.
Definitions
► Price [Sec.2(o)]”Price” in relation to the sale of
any goods or to the performance of any services,
includes every valuable consideration, whether
direct or indirect, or deferred.It also includes any
consideration which in effect relates to the sale of
any goods or to the performance of any services
although ostensibly relating to any other matter or
things.
Definitions
► Relevant Market [2(r)]:It means a
market which may be determined by
the Competition Commission with
reference to the relevant product
market or the relevant geographic
market or with reference to both the
markets.
Definitions
► Relevant Geographic Market [Sec.2(s):It
means a market comprising the area in
which the conditions of competition for
supply of goods or provision of services or
demand of goods or services are distinctly
homogeneous and can be distinguished
from the conditions prevailing in the
neighboring areas .
Definitions
► Relevant Product Market [Sec.2(t)]: It
means a market comprising all those
products or services which are regarded as
interchangeable or substitutable by the
consumer, by reason of characteristics of
the products or services, their prices and
intended use.
Definitions
► Services [Section2(u)].It means service of any description
which is made available to potential users. It includes the
provision of services in connection with business of any
industrial or commercial matters such as accounting,
banking, communication, education, financing, insurance,
chit funds, real estate, transport, storage,material treatment
, processing, supply of electrical or other energy, boarding,
lodging, entertainment, amusement, construction, repair,
conveying of news or information and advertising.
Definitions
► Shares [Sec.2(v)]. It means shares in the capital of a
company carrying voting rights and includes-
(i) any security which entitles the holder to receive shares
with voting rights;
(ii) stock except where a distinction between stock and
share is expressed or implied.
Trade [Sec.2(x)].It means any trade, business industry,
profession or occupation relating to the
production,supply,distribution,storage or control of goods
and includes the provision of any services.
Definitions
► Turnover [Sec.2(y)].
It includes value of sale of goods or
services.Words and expressions used but
defined in this Act and defined in the
Companies Act, 1956 shall have the same
meanings respectively assigned to them in
that Act [Sec.2(z)].
Prohibition of certain agreements, abuse of dominant position
and regulation of combinations
[Chapter II-Sec. 3 to 6]
► SECTION.3 provides for prohibition of entering in to anti-
competitive agreements .
► SECTION.4 prohibits abuse of dominant position by any
enterprise.
► SECTION.5 deals with combination of enterprises and
persons : Acquisition of one or more enterprises by one or more
persons or acquiring of control or merger or amalgamation of
enterprises under certain circumstances specified, shall be construed
as combination.
► SECTION.6 provides that no person or enterprise shall enter
in to combination which is likely to cause or causes an
appreciable adverse effect on competition within the
relevant market in India.
Anti-Competitive Agreements (Sec.3)
► Sec.3 provides that no enterprise or person shall

enter in to any agreement in respect of
production, supply, distribution, storage
acquisition or control of goods or provision of
services, which causes or likely to cause an
appreciable adverse effect on competition within
India . This rule applies to association of enterprises and
association of persons while entering in to any such
agreement[Sec.3(1)]
► Any agreement entered in to contravention of the
provisions contained in Sec.3(1) shall be void [Sec.3(2)]
► Adverse effect on competition :Any agreement

entered in to between enterprises or associations of
enterprises or persons or association of persons or
between any person and enterprise or practice carried on,
or decision taken by, any association of enterprises or
association of persons, including cartels, engaged in
identical or similar trade of goods or provision of services,
which-
► (a) directly or indirectly determines purchase or sale prices;
……….Anti-Competitive Agreements
► (b) limits or controls production, supply, markets, technical

development, investment or provision of services;
► © shares the market or source of production or provision of
services by way of allocation of geographical area of
market, or type of goods or services or number of
customers in the market or any other similar way;
► (d) directly or indirectly results in bid rigging or collusive
bidding.
Shall be presumed to have an appreciable adverse effect on
competition.
► “Bid rigging” means any agreement, between enterprises

or persons referred to above engaged in identical or similar
production or trading of goods or provision of services,
which has the effect of eliminating or reducing competition
forbids or adversely affecting or manipulating the process
for forbidding.
► “Cartel” includes an association or producers, sellers,
distributors, traders or service providers who, by
agreement amongst themselves, limit, control or attempt to
control the production, distribution, sale or price of, or trade
in goods or provision of services[Sec.3(3)].
► An agreement which causes or is likely to cause an

appreciable adverse effect on competition, includes the
following agreements also:
(a) tie- in arrangement ; requiring a purchaser of goods,
as a condition of such purchase, to purchase some other
goods
(b) Exclusive supply agreement ; restricting in any
manner the purchaser in the course of his trade from
acquiring or otherwise dealing in any goods other than
those of the seller.
[cont’d]……….An agreement which causes or is likely to
cause an appreciable adverse effect on competition, includes
the following agreements also;
© Exclusive supply agreement ; to limit,restrict or

withhold the output or supply of any goods or allocate
any area or market for the disposal or sale of the goods.
(d) Refusal to deal ; restricts by any method the persons
or classes of any persons to whom goods are sold or
from whom goods are bought.
(e) Resale price maintenance : Any agreement to sell goods
on condition that the prices to be charged on the resale by the
purchaser shall be the prices stipulated by the seller unless it
is clearly stated that prices lower than those prices may be charged
[Sec.3(4)].
Horizontal Practices
► Horizontal merger: Two firms in the same industry
merge
► Horizontal Price Fixing(Collusion):Explicit or
implicit agreements in an industry to control prices.
► Price Discrimination:Charging customers different
prices that are not justified by cost differences of
serving these customers.
► Predatory pricing: Selling at price below cost to
drive out arch rival firms.
Vertical Practices
► Refusal to deal : A manufacturer refuses to sell to
distributor or retailer.
► Exclusive dealing :A manufacturer grants another firm
an exclusive right to distribute a product.
► Exclusive Territory :A manufacturer grants an exclusive
territory to a seller and no other is permitted to sell in that
territory.
► Retail Price Maintenance : A manufacturer sets a
minimum price below which a retailer cannot sell.
[Non-application of Section.3]
Section.3 does not apply to-
► 1.The right of any person to restrain any infringement of, or

to impose reasonable conditions, as may be necessary for
protecting any of his rights which have been conferred
under the Copy rights Act,1957,Patents Act,1970, the
Trade and Merchandise Marks Act, 1958, the Trade Marks
Act, 1999, the Geographical indications of
Goods(Regulation and Protection) Act,1999, the Designs
Act, 2000 and Semi Conductor Integrated Circuits Layout
Designs Act,2000.
Competition Commission of India
[CCI]
Establishment of commission(Sec.7): With effect
from such date as the Central Govt. may appoint,
there shall be established, for the purposes of this
Act, a Commission to be called the “Competition
Commission of India”.
Corporate body:It shall be a body corporate.
Offices: The head office shall be at a place as the
Central Govt. may decide from time to time.
Composition of Commission(Sec.8)
► A chairperson and not less than two and not more than ten members to be
appointed by the Central Govt.
► The Central Govt. shall appoint the Chairperson and the members during the
first year of operation.(Sec.8(1))
► Qualifications:The Chairperson and every member shall be he persons of
ability,integrity and standing, who-
(a) are, or have been, or qualified to be , a Judge of a High Court;
(b) Have special knowledge of, and professional experience in, not less than 15
years, international trade, economics, business, commerce, law, finance,
accountancy, management, industry, public affairs, administration or in any
other matter which, in the opinion of the Central Government, be useful to
the Commission(Sec.8(2))
(c) The chairperson and other members shall be whole time members.
(Sec.8(3)).
CCI
► Selection of Chairperson and other Members(Sec.9)
► Term of office of Chairperson and other Members(Sec.10)
Vacancy and Oath of Office
► Resignation, Removal and Suspension of Chairperson and other
members(Sec.11)
► Restriction on employment in certain cases (Sec.12)
► Salary and Allowances(Sec.14)
► Vacancy not to invalidate the proceedings of the Commission(Sec.15)
► Appointment of Director General, etc.(Sec.16)
salary and appointment
► Registrar and officers and other employees of he Commission(Sec17).
Duties, Powers and Functions of
Commission
► Duties(Sec.18)
1. To eliminate practices having adverse effect on
competition
2. To promote and sustain competition
3. To protect the interest of the consumers
4. Ensure of freedom of trade carried by other
participants, in markets in India.
Consumer (Protection) Act,1986
► Law relating to consumer protection is contained in the Consumer
Protection Act,1986. Act applies to all the goods and services.
► The objects of the Act are as follows:
1.BETTER PROTECTION OF INTERESTS OF CONSUMERS.
2.PROTECTION OF RIGHTS OF CONSUMERS:

IT SEEKS TO PROMOTE AND PROTECT THE RIGHTS OF
CONSUMERS SUCH AS-
a) Right to protection against marketing of goods or
services which are hazardous to life and property;
The objects of the Act are as follows:
2.PROTECTION OF RIGHTS OF CONSUMERS.IT SEEKS TO PROMOTE AND PROTECT
THE RIGHTS OF CONSUMERS SUCH AS-
[being Cont ’d ……]

b)Right to be informed about the quality, quantity, potency,
purity, standard and price of goods or services so as to
protect the consumers against unfair trade practices;
c)Right to be assured, wherever possible, access to goods
and services at competitive prices;
d) Right to be heard and to be assured that consumers ’
interest will receive due consideration at appropriate
forums;
The objects of the Act are as follows:
e) Right to seek redressal against unfair trade practices or

restrictive trade practices or unscrupulous exploitation of
consumers; and
f) Right to consumer education.
► 3.Consumer Protection Councils.
► 4.Quasi-judiciary machinery for speedy redressal of
consumer disputes.
a) to give relief of a specific nature, and
b) to award, wherever appropriate, compensation
to consumer.
COPRA TERMS: Definitions
► 1.Appropriate laboratory[Sec.2(1)]
► 2.Complainant[Sec.2(1) (b)]
► 3.Complaint[Sec.2(1) ©]
► 4.Consumer[Sec.2(1)(d)]
► 5.Consumer Dispute[Sec.2(1)(e)]
► 6.Defect [Sec2(1) (f)]
► 7.Deficiency[Sec.2(1)(g)]
► 8.District Forum[Sec.2(1)(h)]
► 9.Goods[Sec.2(1) (i)]
► 10.Manufacturer[Sec(1)(j)]
COPRA TERMS: Definitions
► 11.National Commission[Sec.2(1) (k)]

► 12. Person[Sec.2(1)(m) ]
► 13.Restrictive trade practice[Sec.2(1)(n)]
► 14.Service[Sec2(1)(o)].
► 15.State Commission[Sec.2(1)(p)]
► 16.Trader [Sec.2(1) (q)]
► 17.Unfair trade practice[Sec.2(1) ®]
Consumer Protection Council
[Sec.4 to 6]
► The Central Consumer Protection Council

Establishment [Sec.4]
Membership
Procedure for meeting of the Central Council [Sec.5]
Objects of the Central Council(Sec.6)
► The State Consumer Protection Council [Sec.7 & 8]
Establishment (Sec.7)
Membership
Meetings
Time and place of meetings and procedure.
Consumer Disputes Redressal Agencies
► (a) a Consumer Disputes Redressal

Forum (District)
► (b) a Consumer Disputes Redressal
Commission(State)
► © a National Consumer Disputes
Redressal Commission (National).
The Information Technology Act,2000
► The modern age is the age of computers, new

communication systems and digital technology.
► International trade through the medium of
e-commerce has been growing rapidly in the fast few
years and many countries have switched over from
traditional paper based commerce to e-commerce.
► The United Nations Commission on International Trade
Law(UNICITRAL) adopted the Model Law on
Electronic Commerce in 1996.The Model provides for
equal legal treatment of users of electronic communication
and paper based communication.
The Information Technology Act,2000
►The IT Act,2000 was by both the

houses of parliament, and it
received the assent of the
president on the 9th June,2000.It
came in to force on 17 th October,
2000.The Act extends to the whole
of India.
Offences
[Sec65-78]
► Tampering with computer source documents :(Sec.65)
If any person knowingly or intentionally conceals, destroys or
alters or intentionally or knowingly causes another to
conceal, destroy or alter any computer source code used
for a computer, computer program. Computer system or
computer network, when the computer source code is
required to be kept or maintained by law for the time being
in force, he shall be punishable with imprisonment up to 3
years, or with fine which may extend to Rs.2,00,000 or with
both.
Offences
►Hacking with computer system(Sec.66).
Who ever intent to cause or knowing that he is likely to cause
wrongful loss or damage to public or any person destroys
or deletes or alters any information residing in a computer
resource or diminishes it’s value or utility or affects it
injuriously by any means, commits hacking.Whoever
commits hacking shall be punished with imprisonment up
to 3 years, or with fine which shall be punished with
imprisonment up to 3 years, or with fine which may extend
up to Rs.2,00,000 or with both.
Publishing of information which is obscene in
electronic form(Sec.67).
► Who ever publishes or transmits or causes to be published in the

electronic form, any material which is luscious(lustful,lewd) or appeals
to the prurient(exciting to lasciviousness) interest or if it ’s effect is such
as to tend to deprave and corrupt persons who are likely, having
regard to all relevant circumstances, to read, see or hear the matter
contained or embodied in it, shall be punished.On first conviction he
shall be punishable with imprisonment of either c and with fine,which
may extent to Rs.1,00,000.In the event of a second or subsequent
conviction he shall be convicted with imprisonment of either description
for a term which may extend to 10 years and also with fine which may
extend Rs.2,00,000.
Power of Controller to give directions
(Sec.68)
► Power of Controller to give directions(Sec.68).
The controller may, by order, direct a certifying Authority or
any employee of such authority to take such measures or
cease carrying on such activities as specified in the order if
those are necessary to ensure compliance with the
provisions of this Act, rules or any regulations made there-
under.Any person who fails to comply with any such order
shall be guilty of an offence and shall be liable on
conviction to imprisonment for a term not exceeding 3
years or to a fine not exceeding Rs.2,00,000 or to both.

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V BBM ‘B ’ BUSINESS LAW CLASS

►Law includes all those rules

►The object of law is order, and the

► ‘Ignorantia juris non excusat ’

► Bus ine s slaws

► 1.English Mercantile Law

► According to Sir William Anson,

The law of contract is intended to ensure

►A promise is defined thus:

► An agreement, to become a contract, must give rise to a

► An agreement which gives rise to social

► A social agreement does not give rise to contractual

1.Offer and Acceptance :

2.Intention to create legal relationship :

► 5.Free and genuine consent :

7. Agreement not declared void :

8. Certainty and possibility of performance :

► i] Voidable contract: An agreement which is

► Example of Voidable Contract: A promises

► ii] Void Agreement: An agreement not

► iii] Void Contract: A contract which ceases

► iv] Illegal Agreement : An illegal agreement

► A contract may be (a) made in writing or by word of mouth,

(i) EXPRESS CONTRACT : If the terms and

(iii)QUASI CONTRACT : Strictly speaking Quasi

► (i) Executed Contract

(I) EXECUTED CONTRACT :

E.g .,When a transport company runs a bus on a

When an offer is made to a particular person, it is

When an offer is made to the world at large, it is

► 1.The offer must show an obvious

► 1.Offer must be suchin law is capable

► 3.An offer must be distinguished from ;

►4.Offer must be communicated:

3. “We agree to buy Bumper Hall Pen for the sum

► The special terms of the offer must

►A deposited a bag in the cloak room of a railway

► It is express when it is communicated

► An acceptance, in order to be binding, must be

i.e., it must conform with the offer .

► To conclude a contract between the

► The communication must be according to

► If any time limit is specified ,the acceptance to an offer

►In a company shares were allotted to a

► If no such intention is present, the acceptance

► Acceptance must be communicated by the offeree himself or by

► The acceptance must be given before the offer

► The acceptance of an offer cannot be implied

► Communication of offer : The communication

► Communication of Acceptance: Communication of acceptance is

► The communication of revocation is complete:

Ex. A proposes, by a letter, to sell his house to B at a

► Time for Revocation of Proposal(Sec.5,para 1)

1.Are the following offers valid ?

(b) P says to Q “I will sell you a camera. ” P owns three

(c) An auctioneer displays a refrigerator before a

I.e., as soon as the letter of acceptance is posted by B.

► The secretary of a Mosque, Committee filed a suit to

► The facts of this case were almost similar to those of the