The BUSINESS LAW notes

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					Brief Notes on BUSINESS LAW for B.Com/B.S students Moughera Waqas
07-08-2008

Prelude
[The abbreviations/terms/symbols used in this essay] P.P.C Pakistan Penal Code 2(a) section(sub-section) I.P.C Indian Penal Code notes/comments { } explanation of a particular term
[Note: In this essay the words offer and proposal are used in their actual interpretation as given above, not as the substitutes to each others. Disclaimer: The writer does not accept any liability for any damage caused by use of this essay professionally. It does not contain any professional information. It contains only brief student notes.]

The contract law is a very important branch of MERCANTILE LAW. It determines the dealing strategy for the situations and circumstances in which the promises are made by the parties. The law governing the contract in Pakistan is contained in The Contract Act, 1871. The Contract Act, 1871 actually came into force on the 1st September, 1872 that was the reason that it stood “The Contract Act, 1872”. A brief and general over view of the Act is following.
i.

ii. iii. iv. v.

The General principles governing all types of contracts sec. 001-075 Sales of goods sec. 076-123 Indemnity and guarantee sec. 124-147 Bailment sec. 148-181 Agency sec. 182-238 ------------------CHAPTER I -------------------

The principle thing in business law is a “Contract”, but the foremost thing is the “Agreement”, which actually initializes the procedure which ends in the form of a legally binding “Contract”. Stated as: Agreement>Contract. When at least two or more persons agree upon a particular subject matter, having consensus ad idem (the identical thought about a particular subject matter), it is said to be an agreement. No matter how, where, when it came into being, and by what means used? Sec. 2(e) “Every promise or a set of promises forming the consideration for each other is an agreement.” There are two certain types of agreements, first „Social‟ and the other is „Legal‟. Social agreements do not create legal obligations, while the legal agreements do and are enforceable by law. Then first and very beginning step of an agreement/contract is an offer or a proposal. Sec. 2(a) “When one person signifies to another his willingness to do, or to abstain from doing anything with a view to attain the assent of that other to such act or abstinence, he is said to make a proposal.”

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- In the above given definition of proposal in sec. 2(a), the word has been used „proposal‟ not the „offer‟, it is a definition of proposal not of offer. There is a very slight difference between the two terms, generally not recognized. An offer is a wider term and more complex, while the term proposal is a shorter term. The offer can contain more than one proposals but a proposal cannot contain even a single offer. There are always two parties in a contract. First „promisor/offeror‟ {the person who makes the offer} and the other one is „promisee/offree‟ {the other person to whom the offer is being made}. TYPES OF PROPOSALS/OFFERS
i. ii. iii. iv.

Express {verbal/written communication of words/sentences} Implied {proposal/offer expressed by the conduct} Specific {to a certain/specific person/institution} General {to a certain body of people/whole world}

ESSENTIALS OF A VALID CONTRACT i. Proposal and acceptance {a proposal should always followed by an
acceptance (agreement)}.
ii. iii.

Lawful Consideration {the price/payback of the parties to each other} Legal Relation {a contract must create legal relation between the two
parties, i.e. recognition of the existence of the contract by a law enforcing authority}. Written and registered agreement {for the future concerns a contract must be reduced down to writing}. Capacity of parties {the parties should be major, or sound mind and having no disqualification from law to enter into a contract [sec.11]}. Lawful Object {the object/aim of the contract should be lawful, it should not to be purpose to unlawful/immoral/opposing the public policy/imply to some person or his property (sec. 23,24)} Free Consent {the parties should take part in a contract by their free will not by force or by any sort of pressure}. Possibility of Performance {the concern should be physically and legally possible to be performed} Precise and definite {the subject matter/concerns/terms should be clear to both of the parties}.

iv. v. vi.

vii. viii. ix. x.

Not expressly declared void {the contract should not be one of
them that have been declared void in sec. 24-03}.

KINDS OF CONTRACTS 1. Formation Basis [Express/Implied/Qausi] 2. Performance basis [Executed/Executory/Unilateral and bilateral] 3. Validity Basis [Valid/Void/Void-able/Illegal/Unenforceable] 4. Special Basis [Bailment/Indemnity/Guarantee/Agency/Contingent/Wagering]
i.

Express {it can either be expressed by words or by a written piece of
paper, while the statue states that the contract should be reduced to writing} Implied {expressed by the conduct/act} Qausi {based on equity, not based on the agreement of the parties but created by the formation of natural justice} Executed {both parties have made their part of the contract} Executory {either one or the both parties have to make their part yet} Unilateral {one of the parties yet have to perform their obligation} Bilateral {both of the parties yet have to perform their obligation} Valid Contracts {sec. 2(h), “an agreement enforceable by law”}

ii. iii. iv. v. vi. vii. viii.

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ix. x.

Void Contract {sec. 2(j), a contract which is ceased to be enforceable

by law, becomes void when it ceases to be enforceable} Voidable Contract {sec. 2(i), contract, voidable at the option of one or the two of the paries, not at the option of the others} xi. Unenforceable Contract {valid but having some defects like absence of writing, stamp or attestation to prove in the court} xii. Illegal Contract {when there is unlawful consideration either on the part of the promisor or the promise, like defeating the provision of law, fraudulent, involves injury to a person/property} xiii. Bailment Contract {to change the possession not temporarily not the ownership of a particular subject matter} xiv. Indemnity Contract {promise by one to the other, to recover the other from a loss caused by promisor himself or by some third party} xv. Guarantee Contract {to perform the promise, or discharge the liability of a third person in case of his default} xvi. Agency Contract {relation between two persons acting as principle and agent} xvii. Contingent Contract {sec. 31, to do or not to do some thing, if some event, collateral to such contract does or does not happen} xviii. Wagering Contract {to give money or money‟s worth upon the determination or the ascertainment of an uncertain}

A general figure will be drawn like this: Offer/Proposal + Acceptance> Agreement; Agreement + Enforceability of law>Contract
moughera@gmail.com

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