Answers – Business Law

Arpit Jain

1. Introduction

Contract Act, 1872

Indian Contract Law governs contract law. IP does not establish a set of legally enforceable rights
and obligations, but a set of restrictive principles by which parties can set their own rights and
obligations. Under section 10 of the Contract Act, every contract is a contract if it is entered into by
the free consent of the contracting parties to give lawful consideration using lawful subject matter,
and expressly by law It stipulates that it shall not be invalidated. An agreement between two or
more parties is required to form a contract. You cannot make a contract with yourself. A contract
consists of two elements: an offer or proposal by one party and her acceptance of it by the other
party. If one or more of the essential elements of a valid contract are missing, the contract may be
void, void, illegal or unenforceable. Effective means that the contract contains all the contractual
elements specified in Section 10 of the Contract Act.

Essential elements of contracts

Minimum of two parties: At least two parties are necessary to form a contract because one person
cannot enter into a contract with himself. To form a contract, one party has to make an offer and the
other must accept it.

Offer and acceptance: There must be an offer and an acceptance to the offer, resulting into an
agreement. Both offer and acceptance should be lawful.

Intention to create legal obligation: The parties must create a legal obligation. In business
agreements, an intention to create legal relations is recognized, unless the parties have expressly
agreed to do so otherwise.

Lawful Consideration: An agreement is legally enforceable only when each of the parties thereto
gives something and gets something that is a consideration. Consideration may be past, present or
future.

Competent Parties: The parties to the contract must be competent, i.e., of the age of majority (Over
18 Years), of sound mind and not disqualified from contracting by any Law to which they are subject
to. Thus; a minor, lunatic, idiot, drunkard, etc. cannot, except for some special cases, enter into a
valid contract.

Free Consent: All the parties must give their free consent, to form a valid contract. Consent means
that the parties must agree about the subject matter of the agreement in the same sense and at the
same time (Consensus-ad-idem). Consent is said to be free unless it is induced by coercion, undue
influence, fraud, misrepresentation, or mistake.

Lack of free consent

When there is no free consent involved in a contract, it becomes voidable. Free consent cannot be
there if consent is gained through:
Coercion (Section 15): "Coercion" is the committing, or threatening to commit, any act forbidden by
the Indian Penal Code, or the unlawful detaining, or threatening to detain any property, to the
prejudice of any person whatever, with the intention of causing any person to enter into an
agreement. For example, Rahul threatens Sonia to sell her house to him for Rs.50 lakhs even if the
actual value of the house is around Rs.75 lakhs. Here, even if the transaction takes place, it would be
invalid as the consent was taken by coercion.

Undue influence (Section 16): "Where a person who is in a position to dominate the will of another
enters into a contract with him and the transaction appears on the face of it, or on the evidence, to
be unconscionable, the burden of proving that such contract was not induced by undue influence
shall lie upon the person in the position to dominate the will of the other."

For example, a senior manager of an organization asks his junior to enter into an agreement

Lack of free consent

When there is no free consent involved in a contract, it becomes voidable. Free consent cannot be
there if consent is gained through:

Coercion (Section 15): "Coercion" is the committing, or threatening to commit, any act forbidden by
the Indian Penal Code, or the unlawful detaining, or threatening to detain, any property, to the
prejudice of any person whatever, with the intention of causing any person to enter into an
agreement. For example, Rahul threatens Sonia to sell her house to him for Rs.50 lakhs even if the
actual value of the house is around Rs.75 lakhs. Here, even if the transaction takes place, it would be
invalid as the consent was taken by coercion.

Undue influence (Section 16): "Where a person who is in a position to dominate the will of another
enters into a contract with him and the transaction appears on the face of it, or on the evidence, to
be unconscionable, the burden of proving that such contract was not induced by undue influence
shall lie upon the person in the position to dominate the will of the other." For example, a senior
manager of an organization asks his junior to enter into an agreement regarding offering his duties.
As senior manager is in dominating position, this contract is not valid.

Fraud (Section 17): "Fraud" means and includes any of the following acts committed by a party to a
contract, or with his connivance, or by his agent, with intent to deceive another party thereto of his
agent, or to induce him to enter into the contract. For example, Ramesh tells Pintu to buy mobile
from Rajat's shop as he is a genuine person and sell good products but later it was found that, Rajat
sells duplicate products and do not even entertain customers' requests once they find about the
same.

Misrepresentation (Section 18): It means it is an untrue statement of a material fact which induces
the other party, to enter into an agreement. For example, Rahul is selling his car to Parul claiming
that it is in perfect condition and no maintenance or repairs required. Later she found that there
were several issues with it and she had to spent thousands of rupees to make it in working
condition.

Mistake of fact (Section 20): That means, when both the parties to an agreement are under a
mistake as to a matter of fact essential to the agreement, the agreement is void. Some common
forms of mistake given below:

 Mistake as to the identity of the person contracted with

  Mutual mistake as to the existence of a thing. Mutual mistake about the identity or quantity
of a thing.
 Mutual mistake as to the actual subject matter of the contract.
 Mistake in relation to the nature of the transaction of the contract.

For example, Arjun enters into a contract with Bishwas to sell his horse at a later date but actually,
that horse is just died and both parties do not know about it. And so; there is no contract at all, i.e.
the contract is void due to a mistake of fact.

2. Introduction

Environmental sustainability

Environmental sustainability is the decisions and actions taken to protect the natural world, with a
particular focus on maintaining the capacity of the environment to support human life. This is an
important issue in an age where people are becoming more aware of the impact that businesses and
individuals can have on the environment. Environmental sustainability is about making responsible
choices that reduce the negative impact your business has on the environment. It's not just about
reducing waste or using less energy, it's also about designing processes that will make your business
fully sustainable in the future. It is really important that we take care of the environment. Otherwise,
we endanger the lives of animals, plants, crops and even our own. All ecosystems that make up our
environment are closely interconnected. If we want a good place to live, we have to take this issue
seriously. Without the environment, we would have no place to live and no resources to live on.
Living more sustainably contributes to life and liveable resources. Living more sustainably helps the
forests we use to live. Our forests provide us with wood, timber, rubber and even essential oils.
Working to protect the environment means giving something back to your generation. After all, your
generation is the generation that uses and lives in it now. Real-life cases of court intervention to
protect the environment or prevent environmental degradation or pollution

Municipal Council, Ratlam v. Shri Vardhichand & Ors.; Supreme Court of India

In this case, some of the residents of the town of Rattram complained to the district judge that the
city had failed to construct a proper sewer system, that the stench and stench from the work of the
neighboring slum residents were a nuisance. Filed a complaint. The Ratram Borough Sub-District
Judge ordered the community to draw up an appropriate development plan within six months of the
appeal by the residents of Ratram (approved by the Supreme Court). The community then appealed
to the Supreme Court of India, claiming it did not have the necessary financial support or resources
to comply with the direction of the Ratram Sub-District Judge. Respondents focused on stopping
contamination from spills from nearby alcohol factories that caused malaria. The Supreme Court has
ordered the Ratlam Parish Council to immediately comply with the order of the Rattram Sub-District
Judge to protect the area from contamination by alcohol crops encroaching on residents'
neighborhoods. The problem is due to private polluters and arbitrary urban planning. To cover the
Court's decision, the Supreme Court ruled that a pollution-free environment is an integral part of the
right to life under Article 21.

Vellore Citizens Welfare Forum v. Union of India; Supreme Court of India

The petition was directed against excessive pollution of the Paral River by pollutant emissions from
tanneries and other industries in Tamil Nadu. The Paral River is the main source of drinking and
bathing water for the surrounding people. Since then, a research center at the Tamil Nadu
Agricultural University in Vellore has found that about 35,000 hectares of farmland are completely
or partially unusable for cultivation. This is one of the landmark cases in which the Supreme Court
critically analyzed the relationship between the environment and industrial development. Under
constant scrutiny by the Supreme Court, the question arose as to whether tanneries should be
allowed to continue operating at the cost of millions of lives. The petitioners claimed that all surface
and groundwater in the Paral River had been contaminated, resulting in a lack of access to drinking
water for residents of the area. The Supreme Court, which analyzed the report, made every effort to
maintain consistency between conditions and improvements in its decisions. The court recognized
that these tanneries are India's largest source of foreign exchange income and provide employment
for many people. In any event, it is both destructive to nature and poses a health risk to all, and the
court handed down a verdict in favor of the plaintiffs, giving all tanners a sum of 1 at the collection
agency's office. ordered to pay a fine of 10,000 rupees. The court also arranged for the state of Tamil
Nadu to issue an order against M.C. A total of 50,000 rupees was presented to Mr. Mehta in
appreciation for his commitment to environmental safety.

Conclusion

Finally, it can be said that, we all live in an environment and it should be protected in every possible
manner. If the environment is polluted, it would have harmful effects and for the betterment of
ourselves, we should act in a responsible manner. Government and authorities are doing their work
but as a citizen, we all should come together and try to keep our environment clean. It would be a
good gift for our future generations and should be taken seriously.

3.(a) Introduction

Employees' Provident Fund Act, 1952

This scheme is to induce employees to save a portion of their earning for retiring days as old age
benefit. The Act was established in fulfilment of the objective of the Employee's Provident Fund Bill,
1951 for the industrial workers to protect the future of their dependants in the case of
unemployment after retirement or the death of an earning member. The Act was passed to have
some provisions for the future of the industrial worker after retirement or for his dependants in the
case of his death. These objectives can be summarized as below:

1. To provide substantial security and timely monetary assistance to industrial workers and their
families as a social obligation to protect them in old age.

2. To provide a scheme for the institutions of provident fund and pension schemes for regularizing
the payments to retired persons.

The Provident Fund Scheme, on recommendation of the Central Board, declares the rate of interest
to be credited to the account of the fund subscriber. The employee can withdraw the full amount
standing to his credit in the event of

• Retirement from service

• Retirement on account of permanent and total disablement
• Migration from India for permanent settlement abroad and
• On termination from the services in the course of mass retrenchment.
The actual transfer of the provident fund account accumulated with interest enn take place in cases
as:

• Re-employment in another region or sub-region

• On leaving one establishment and joining other entitled for this Scheme
• Re-employment in establishments not covered under this Act.

The EPF eligibility criteria are as follows: Any company with more than 20 employees must register
with the Employees' Provident Fund Organisation of India compulsorily.

Companies with less than 20 employees can also register for the Employees' Provident Fund
voluntarily.

• All employees drawing a salary are eligible for EPF.

• Moreover, it is compulsory for all employees earning less than 15,000 to register for the EPF.
• However, employees earning more than 15,000 can also voluntarily stay in the EPF
• scheme.

Applicability, calculation and apportionment of provident fund schemes

• Employees Provident Fund Scheme: Under this scheme, the amount is accumulated and paid
along with interest at the time of retirement, resignation or death. This scheme allows
making a partial withdrawal from the account.
• Employees' Pension Scheme: Under this scheme, the contributor shall be getting monthly
pension after he/she retires
• Employees Deposit Linked Insurance Scheme: Under this scheme if the employee dies, the
survivors or dependants shall be paid a lump sum amount.
• Emplover's contribution to different schemes
• Employees Provident Fund: 3.67
• Employee's Deposit Link Insurance Scheme (EDLIS): 0.50 Employees' Pension Scheme (EPS):
8.33

Employees can contribute to the provident fund and the fixed contribution percentage is 12%.
Besides the above contributions, the employer is also required to contribute towards the
administration of funds. The contribution is made of the basic salary. The contribution is mandatory
when the employee wages/salary is up to Rs.15,000.

3.(b) Introduction

The Payment of Gratuity Act is social welfare legislation, for the word "gratuity" means something
given voluntarily or beyond obligation. In modern industrial law, the employer and employee
relations demand gratuitous payment not as an option of the employer but is deemed to be a duty
cast on him to pay his employee a share of the bounty earned through his labour, subject to certain
conditions and mitigations. At the same time, the employee has a right to demand such payment if
those conditions are not satisfied.

Its main objective is to accept the gratuity payment as a compulsory statutory benefit as against a
gracious gift to the employee by the employer. The aim to introduce this legislation to certain
establishments and industries are to enforce a measure of social justice or social security. It is
applicable to certain industries and establishments in India such as factories, commercial
establishments, mines, oil fields, plantations, ports and railways, wherever 10 or more persons are
employed or were employed on any day of the preceding 12 months.
Main Provisions in this Act

• It is payable at the time of retirement; however, it can also be paid depending upon certain
conditions such as:
• On termination of employment after rendering continuous services for not less than 5 years
• On attaining the age of superannuating
• On resignation by an employee after services for at least 5 Years
• On the death or disablement of an employee to perform duty due to accident or disease.
• There is no scope for contracting out of the Act by private treaty or negotiation between the
employer and the employee as the payment of gratuity is a statutory obligation on an
employer.

Conclusion

Entitled to gratuity and calculation of gratuity payment Gratuity is payable to employees who have
rendered a continuous service of five years or more. It is payable on termination, superannuation or
at the time of resignation. The maximum gratuity payable to the employee is Rs.10 Lakhs, which is
exempted as per the Income Tax Act. The gratuity amount is determined in the following manner:

a. The employer shall pay gratuity at the rate of 15 days wages for every completed year of service
based on the rate of last drawn wages by the employee concerned.

b. The formula for calculation is as follows:

(Basic Salary + DA) Number of Years of Continuous Service

If the employee has worked for more than 6 months, one complete year is to be counted. If the
employee has worked for less than 6 months, that period is ignored. Thus, the main provisions of the
Gratuity Act are as follows:

• The minimum amount of the gratuity paid under the Gratuity Act is 3.5 lakhs.
• For getting the gratuity amount, an employee must have worked for at least five years with
an organisation.
• The maximum gratuity amount cannot exceed beyond 10 lakhs.
• Employer can deduct gratuity for negligence in services.