8/5/2014

BUSINESS LAW
COLLEGE NOTES

ABHISHEK SINHA
BBA 3RD SEMESTER
 BUSINESS LAW

1 INTRODUCTION
BUSINESS ENVIRONMENT means the sum total of all individuals , institutions , and other forces
that are outside the control of the Business Organizations or Enterprises but that may affect its
performance .

In other terms we can say that Business Environment is a mixture of two types of Environment . The
two types of Business Environment are :

BUSINESS ENVIRONMENT

1. INTERNAL ENVIRONMENT 2. EXTERNAL ENVIRONMENT

a. HUMAN RESOURCE MANAGEMENT a. ECONOMIC ENVIRONMENT

b. PRODUCTION MANAGEMENT b. SOCIAL ENVIRONMENT
c. MARKETING MANAGEMENT c. TECHNOLOGICAL ENVIRONMENT
d. SALES MANAGEMENT d. POLITICAL ENVIRONMENT
e. LEGAL ENVIRONMENT

FEATURES OF BUSINESS ENVIRONMENT

The important Features of Business Environment are as mentioned :

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TOTALITY OF EXTERNAL FORCES : Business Environment is the sum total of all external factors
Which are present outside the organization but can easily
affect the day to day functioning of the firm or the organization .

SPECIFIC AND GENRAL FORCES : Business Environment includes both specific and general
forces . Specific Forces such as investors , customers , etc
affects individual enterprises directly and immediately in their day today working . General Forces
such as social , political , legal , etc have impact on all business houses .

INTER RELATEDNESS : Different elements of parts of Business Environment are totally

interrelated to each other .

DYNAMIC ENVIRONMENT : Business Environment is always considered as dynamic in nature

i.e it keeps on changing after a certain specific period of time .

RELATIVITY : Business Environment is a relative concept since it always differs

from country to country , and even region to region .

IMPORTANCE OF BUSINESS ENVIRONMENT

The basic Importance of Business Environment and its understanding by managers can be
appreciated if we consider the following facts , which are :

1. It enables the firm to identify opportunity and getting the first mover advantage of the
same .
2. It helps the firm to identify threats and the early warning signals .
3. It helps in tapping useful resources .
4. It helps in coping with various changes in an Environment .
5. It helps in Planning and policy formulation for the firm / enterprises / organization .
6. It helps in improving performance of an organization .

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DIMENSIONS OF BUSINESS ENVIRONMENT

There are five important dimensions of Business Environment which are as mentioned below . All the
dimensions of the Business Environment are having equal importance in the world of Business .All
the dimensions are basically considered as the categories of External Business Environment .

ECONOMICAL
ENVIRONMENT

LEGAL SOCIAL
ENVIRONMENT ENVIRONMENT

BUSINESS
ENVIRONMENT

POLITICAL TECHNOLOGICAL
ENVIRONMENT ENVIRONMENT

FIG. : DIMENSION OF BUSINESS ENVIRONMENT

1. ECONOMICAL ENVIRONMENT : Interest rate , Inflation rates , Changes in disposable

income etc are few of the common examples of Economical Environment or in other words
we can say the these are the important parts of Economical Environment .

2. SOCIAL ENVIRONMENT : The social environment of a business includes the social

forces like Customs and Traditions , values , social trends , etc .

3. TECHNOLOGICAL ENVIRONMENT : Technological Environment includes forces relating to

scientific improvements and innovations which provides new ways of producing goods and
services .

4. POLITICAL ENVIRONMENT : Political Environment includes political conditions such as

general stability and peace in the country .

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5. LIGAL ENVIRONMENT : Legal environment includes various legislation passed by

the Government administrative , orders issued by Government , etc .

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2 Indian contract
Act
The Law relating to Contracts in India is contained in INDIAN CONTRACT ACT 1872 . The act was
passed by BRITISH INDIA and is based on the principles of ENGLISH COMMON LAW .
It is applicable to all the states of India except JAMMU AND KASHMIR . It determines the
circumstances in which promises made by the parties to a contract shall be legally banded on them .

PARTS OF THE LAWS :

A. PROPOSAL U/S 2(A) : Proposal is also known as an Offer . If a person signifies to another , his
willingness to or to abstain from doing anything with a view of obtaining
assent of that of another is known as Proposal .

B. PROMISE U/S 2(B) : When the person to whom the Proposal is made signifies his assent ,
there to the proposal is said to be accepted .

C. PROMISOR OR PROMISEE U/S 2(C) : The person making the proposal is known as
PROMISOR and the person who is accepting the
proposal is known as PROMISEE .

D. CONSIDERATION U/S 2(D) : The price which is paid by the promise to the promisor for the
acceptance of the proposal is known as CONSIDERATION .

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E. AGREEMENT U/S 2(E) : All promises or set of the promises forming consideration for each
another is said to be an AGREEMENT .

F. CONTRACT U/S 2(H) : All agreements infusible by law are known as a CONTRACT .

ESSENTIALS OF A VALID CONTRACT

The important essentials of a valid contract are as mentioned :
1) There should be a Proposal in words or oral , expressed or implied .
2) There must be a Promise that means the Offer is being accepted . So , the element of
acceptance is also important .
3) Consideration should have the elements of consideration for proposal as well as promises .
4) There must be free consent (UNDER SECTION 10 , 13 & 14 ) that means it should be free
from elements which are given under section 15 , coercion under section 16 , undrew
influences under section 17 , frawod under section 18 and misrepresentation and mistakes
under section 20 and 21 respectively .
5) The parties should have capacity to contract or to make any contract .
6) There should be a presence of a lawful object .

EXAMPLE :
Any offer from the side A to B for paying a sum of money to help B in passing the UPSE
Examination in an unaccepted way . This above example cannot be referred as a Contract .

7) Certainty of Meaning
8) Possibility of Performance must be present in the contract .
9) Neccesory legal formalities must be full filled before making a contract .
10) Agreement not valid : The agreement should be infusible by law . Any agreement which is
not infusible by law is not called a valid contract . The section 2J states that a contract
which is made must be infusible by law to become a valid contract .

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ALL CONTRACTS ARE AGREESMENT BUT ALL AGREEMENTS ARE NOT THE CONTRACT .

All agreements are not studied under the Indian Contract Act as some of them are not contracts . As
per section 2(H) of Indian Contract Act 1872 all agreements are infusible by law are called contract .

The contract act is the law of those agreement which creates obligations and incase of break of
Promise by the Promise , the Promisors has the legal remedies .

Therefore a legal obligations having its source in an agreement will only give rise to a contract

OFFERS OR PROPOSALS U/S ( 2A ).

When one person signifies to another his willingness to do or to abstained from doing anything with a
view of obtaining the assets , consent of that other to such act then it is said to make a Proposal .

ESSENTIALS OF PROPOSALS :

1. WILLINGNESS : It must be an expression of willingness to do or to obtain from doing something .

2. Like the expression of willingness to do or to abstain from doing something must be to another
person . There can be no Proposal by a person to himself meaning there must be a Promisor and
a Promise .
3. The expression of willingness to do o to abstain from doing something must be made with the
view to obtain the assent of other person to such act or to abstinent .

FOLLOWING ARE NOT THE PROPOSAL :

1. Do you insured to sell your Motorcycle ?

2. I may sail my Motorcycle if I can get Rs . 20, 000 .

WHERE AS THE FOLLOWING ARE THE EXAMPLES OF A PROPOSAL

1. I am wiling to sell my motorcycle to you at Rs. 18 , 000.

2. Will you buy my motorcycle for Rs . 22 , 000 ?

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LEGAL RULES VALID ON AN OFFER

There are few Legal Rules which are related to a valid offer . They are as mentioned :

i. Offer should be expressed in written or in an oral form , implied , conduct of person or

circumstances .
ii. It should give legal consequences and be capable of creating legal relationship .
iii. The terms of the offer must be certain and should not be vague .
iv. An invitation to a offer is not an offer .
v. An offer must be communicated to the promise .
vi. An offer should not contain a term that non compliance of which would amount to acceptance
.
vii. An offer can be made subject to terms and conditions .
viii. Two identical cross offers could not make a contract

LAPSES OR REVOCATION OF OFFERS :

i. Any offer lapses after a particular time period {U/S 6(2)} .

ii. Any offer lapses if it is not accepted in the more prescribed .
iii. An offer lapses by rejection . It can be through counter offer or due to condisnal offer or due
to condisnal acceptance .
iv. An offer lapses by the death of the insanity of the parties before acceptance . {U/S 6(4)} .
v. Any Offer lapses by revocation{U/S 6(1)}, non fulfillment of any condition {U/S 6(3)} or due to
subsequent inequalities .

SECTION 2(B) : PROMISE OR ACCEPTANCE

When the person to whom the proposal is made signifies his accent there too , the proposal is said
to be accepted .
When a proposal is accepted by the accepter then it becomes a promise .

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LEGAL RULES REGARDING A VALID ACCEPTANCE ARE

1. Acceptance must be given by the person to whom the offer is made .

EXAMPLE : If A sold his business to his manager B without disclosing the fact to C , where C is
a customer who is having a running account with A . C sent a n order to supply goods to A but B
receives that order and executed the order on the very same day . C refuses to pay the price to B
and because C never made any offer to be therefore C was hold liable to pay price to B .
2. Acceptance must be absolute : {U/S 7(a)}
EXAMPLE : L offers to M to sell his bike for Rs. 12000 . M accepted his offer and tendered Rs.
11500 cash down and promises to pay balance amount of Rs. 500 by evening .
Thus in above case there has been no contract between L and M as Ms acceptance was
absolute .

SECTION 2(D) : CONSIDERATION

Essentials of Consideration :
1. Consideration must move at the desire of the promisor .
2. Consideration may move from the promisor to the promise
3. Consideration may be past , present or future .
4. There must be something of value .

Exception of the statement no consideration no contract :

Section 25 of INDIAN CONTRACT ACT estates that :

1. Agreement made on account of natural love or affection . U/S 25(i) .

2. Agreement to compensate for past voluntary services .
3. Agreement to pay a time barred debts .
4. Any gift .
5. Contracts of any agencies .
6. Contribution to charity .

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TYPES OF CONTRACT :

Contracts are classified into various types , they are as mentioned :

CONTRACTS

VALIDITY
MODE OF
OR PERFORMANCE
FORMATION
INFORABILITY

a. VALID a. EXPRESSED a. EXECUTED OR

b. VOID CONTRACT EXECUTORY CONTRACT
c. VOIDABLE b. IMPILED CONTRACT b. UNILATERAL OR
d. INFORCABLE c. QUASI CONTRACT BILATERAL
e. ILLEGAL CONTRACTS CONTRACT .

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