Law means a ‘set of rules’ which governs our behaviors and 10.
10. Void contract: A contract which ceases to be enforceable by
relating in a civilized society. So there is no need of Law in a
uncivilized society.
Offer (i.e. Proposal): When one person signifies to another his
willingness to do or to abstain from doing anything, with a view
to obtaining the assent of that other person either to such act
or abstinence, he is said to make a proposal.
Acceptance: When the person to whom the proposal is made,
signifies his assent there to, the proposal is said to be accepted.
Promise: A Proposal when accepted becomes a promise. In
simple words, when an offer is accepted it becomes promise.
Promisor and Promise: When the proposal is accepted, the
person making the proposal is called as promisor and the
person accepting the proposal is called as promisee.
Consideration: When at the desire of the promisor, the
promisee or any other person has done or abstained from
doing something or does or abstains from doing something or
promises to do or abstain from doing something, such act or
abstinence or promise is called a consideration for the promise.
Agreement: Every promise and set of promises forming the
consideration for each other. In short, agreement = offer +
acceptance.
Contract: An agreement enforceable by Law is a contract.
Void Agreement: An agreement not enforceable by law is void.
Voidable Contract: An agreement is a voidable contract if it is
enforceable by Law at the option of one or more of the parties
there to (i.e. the aggrieved party), and it is not enforceable by
Law at the option of the other or others.
Void Contract: A contract which ceases to be enforceable by
Law becomes void when it ceases to be enforceable.
ESSENTIALS OF VALID CONTRACT
All agreements are contracts, if they are made –
 by free consent of the parties, competent to
contract,
 for a lawful consideration and
 with a lawful object, and
 not hereby expressly declared to be void.
1. Proper offer and proper acceptance with intention to create
legal relationship.
Cases:- A and B agree to go to a movie on coming Sunday. A
does not turn in resulting in loss of B’s time B cannot claim any
damages from B since the agreement to watch a movie is a
domestic agreement which does not result in a contract.
2. Lawful Consideration: Consideration must not be unlawful,
immoral or opposed to the public policy.
3. Capacity: The parties to a contract must have capacity (legal
ability) to make valid contract.
Section 11:- of the Indian contract Act specify that every person
is competent to contract provided.
(i) Is of the age of majority according to the Law which he is
subject, and
(ii) Who is of sound mind and
(iii) Is not disqualified from contracting by any law to which he
is subject.
4. Free Consent: Consent of the parties must be genuine
consent means agreed upon same thing in the same sense i.e.
there should be consensus – ad – idem. A consent is said to be
free when it is not caused by coercion, undue influence, fraud,
misrepresentation or mistake.
5. Lawful Object
 The object of agreement should be lawful and
legal.
 Two persons cannot enter into an agreement to
do a criminal act.
6. Possibility of Performance: The terms of the agreement
should be capable of performance. An agreements to do act,
impossible in itself cannot be enforced.
7. The terms of the agreements are certain or are capable of
being made certain
Example: A agreed to pay Rs.5 lakh to B for ultra-modern
decoration of his drawing room. The agreement is void because
the meaning of the term “ ultra – modern” is not certain.
8. Not declared Void: The agreement should be such that it
should be capable or being enforced by law. Certain
agreements have been expressly declared illegal or void by the
law.
9. Necessary Legal Formalities: A contract may be oral or in
writing. Where a particular type of contract is required by law
to be in writing and registered, it must comply with necessary
formalities as to writing, registration and attestation. If legal
formalities are not carried out then the contract is not
enforceable by law.
2. Consideration may move from the promisee or any other
law because void when of ceased to be enforceable. When
both parties to an agreement are:-
 Under a mistake of facts [
 Consideration or object of an agreement is
unlawful
 Agreement made without consideration
 Agreement in restrain of marriage
 Restraint of trade
 Restrain legal proceeding
 Agreement by wage of wager
11. Voidable contract: An agreement which is enforceable by
law at the option of one or more the parties but not at the
option of the other or others is a voidable contract. Result of
coercion, undue influence, fraud and misrepresentation.
Essentials elements of an offer:
(1) There must be two parties.
(2) The offer must be communicated to the offeree.
(3) The offer must show the willingness of offeror. Mere telling
the plan is not offer.
(4) The offer must be made with a view to obtaining the assent
of the offeree.
(5) A statement made jokingly does not amount to an offer.
Acceptance: When the person to whom the proposal is made,
signifies his assent there to, the proposal is said to be accepted.
1. Acceptance must be absolute and unqualified
Example: A offers to sell his house to B for Rs. two lakhs. B
accepts the offer and promises to pay the price in four
installments. This is not pay the acceptance as the acceptance is
with variation in the terms of the offer.
2. Acceptance must be communicated: Mere mental
acceptance is no acceptance, But there is no requirement of
communication of acceptance of general offer.
3. Manner of acceptance: General rule say that it must be as
per the manner prescribed by offeror. If no mode is prescribed
in which it can be accepted, then it must be in some usual and
reasonable manner.
4. If there is deviation in communication of an acceptance of
offer: Offer or may reject such acceptance by sending notice
within reasonable time. If the offeror doesn’t send notice or
rejection, he accepted acceptance of offer.
5. Acceptance of offer must be made by offeror.
Example: A applied for the headmastership of a school. He was
selected by the appointing authority but the decision was not
communicated to him. However, one of members in his
individual capacity informed him about the selection.
Subsequently, the appointing authority cancelled its decision. A
sued the school for breach of contract. The Court rejected the
A’s action and held that there was no notice of acceptance.
“Information by unauthorized person is as insufficient as
overhearing from behind the door”.
7. Time limit for acceptance
 If the offer prescribes the time limit, it must be
accepted within specified time.
 If the offer does not prescribe the time limit, it
must be accepted within reasonable time.
8. Acceptance of offer may be expressly (by words spoken or
written); or impliedly (by acceptance of consideration); or by
performance of conditions (e.g.in case of a general offer)
9. Mere silence is not acceptance of the offer
Example A offers to B to buy his house for Rs.5 lakhs and writes
“If I hear no more about it within a week, I shall presume the
house is mine for Rs.5 lakhs. “B does not respond.
10. However, following are the two exceptions to the above
rule. It means silence amounts as acceptance of offer.
 Where offeree agrees that non – refusal by him
within specified time shall amount to acceptance
of offer.
 When there is custom or usage of trade which
specified that silence shall amount to
acceptance.
11. Acceptance subject to the contract is no acceptance: If the
acceptance has been given ‘subject to the contract” or subject
to approval by certain persons, it has not effect at all. Such an
acceptance will not create binding contract until a formal
contract is prepared and signed by all the parties.
CONSIDERATION
Consideration is a quid pro quo i,e something in return it may
be –
(i) some benefit right, interest, loss or profit that may accrue to
one party or,
(ii) some forbearance, detriment, loss or responsibility suffered
on undertaken by the other party
1. Consideration must move at the desire of the promisor: D
constructed a market at the instance of District collector.
Occupants of shops promised to pay D a commission on articles
sold through their shops. Held, there was no consideration
because money was not spent by Plaintiff at the request of the
Defendants, but at instance of a third person viz. the Collector
and, thus the contract was void.
person who is not a party to the: Contract. A owed Rs.20,000
to B. A persuaded C to sign a Pro Note in favour of B. C
promised B that he would pay the amount. On faith of promise
by C, B credited the amount to A’s account. Held, the discharge
of A’s account was consideration for C’s promise.
3. Consideration may be past, present, Future: Under English
law, Past consideration is no consideration. Present
consideration :- cash sale. Future or executory consideration:- A
Promises to B to deliver him 100 bags of sugar at a future date .
B promise to pay first on delivery.
4. Consideration should be real and not illusory. Illusory
consideration renders the transaction void consideration is not
valid if it is.
(i) Physically impossible
(ii) Legally not permissible
(iii) Uncertain
(iv) illusory (fulfillment of a pre existing obligation)
5. Must be legal: Consideration must not be unlawful, immoral
or opposed to public policy.
Free Consent
Free consent is a fundamental element in the formation of a
valid contract. It ensures that all parties voluntarily agree to the
terms of the contract without any form of coercion, undue
influence, fraud, misrepresentation, or mistake.
Coercion
Essential elements of coercion
(a) Committing any act which is forbidden by the IPC
(b) Threatening to commit any act which is forbidden by the
IPC.
(c) Unlawful detaining of any property or
(d) Threatening to detain any property.
(e) coercion need not necessary proceed from party to
contract.
(f) Coercion need not necessary be directed against the other
contracting party.
(g) It is immaterial whether the IPC is or is not in force at the
time or at the place where the coercion is employed
Effect of threat to file a suit: A threat to file a suit (whether
civil or court) does not amount to coercion unless the suit is on
false charge. Threat to file a suit on false charge is an act
forbidden by the IPC and thus will amount to an act of coercion.
Effect of Threat to commit suicide:- Threat to commit suicide
amounted to coercion
Undue Influence
Undue influence in contract law refers to a situation where one
party exerts excessive pressure on another party, taking
advantage of a position of power or trust, to obtain their
consent to a contract. For undue influence to invalidate
consent, several essential elements must be present:
1. Relationship of Trust and Confidence: There must be a
relationship where one party places trust and confidence in the
other. This often involves relationships such as parent and
child, guardian and ward, attorney and client, doctor and
patient, or spiritual advisor and follower.
2. Dominant Position: One party must be in a dominant
position over the other. The dominant party has the ability to
influence or control the decisions of the weaker party due to
the nature of their relationship
3. Unfair Advantage: The dominant party uses their position to
obtain an unfair advantage. The contract or transaction must
benefit the dominant party disproportionately or be
significantly disadvantageous to the weaker party.
4. Absence of Free Will: The weaker party’s consent is not
given freely but is influenced by the pressure or influence
exerted by the dominant party. The weaker party does not act
independently but is unduly influenced to act in a manner
dictated by the dominant party.
Transaction Unconscionable:
 The contract or transaction is excessively one-
sided or unconscionable, indicating that the
weaker party was not acting with their full,
independent judgment.
Examples to Illustrate Undue Influence:
 Parent and Child: If a parent pressures an adult
child into signing over property rights by
exploiting the child's trust and dependence, this
could constitute undue influence.
 Attorney and Client: If an attorney convinces a
client to enter into a contract that
disproportionately benefits the attorney, using
the client’s trust and reliance on their legal
expertise, this could be undue influence.
 Doctor and Patient: If a doctor persuades a
patient to make a significant financial decision
that benefits the doctor, exploiting the patient’s
trust and reliance on their medical advice, it may
be undue influence.

Fraud
Fraud means any act committed by a party to a contract or with
his connivance or by his agent with intent to deceive another
party there to or his agent or to induce to enter into contract.
Essentials of fraud :-
(a) By a party to the contract
(b) There must be representation – [an opinion a statement of
expression – does not fraud].
(c) The representation must be false.
(d) Before conclusion of contract.
(e) The misrepresentation must be made willfully.
Misrepresentation
Misrepresentation is when a party (person) asserts something
which is not true though he believes is to be true. In other
words misrepresentation is a falls representation made
innocently.
1. False Statement of Fact: There must be a representation of
fact that is false. Opinions, intentions, or future predictions
generally do not qualify as misrepresentations unless they are
stated as facts or made by someone with special knowledge.
2. Materiality: The false statement must be material, meaning
it must be significant enough to influence the decision of the
party to whom it is made. A trivial or insignificant falsehood
typically does not constitute misrepresentation.
3. Inducement: The false statement must have induced the
other party to enter into the contract. The party must have
relied on the false representation when deciding to agree to
the contract.
4. Intent and Knowledge: Depending on the type of
misrepresentation, the state of mind of the party making the
false statement can be important.
5. Reliance: The party claiming misrepresentation must have
relied on the false statement when entering into the contract. If
they did not rely on the statement or were unaware of it, there
can be no claim of misrepresentation.
6. Damage: The party claiming misrepresentation must have
suffered damage or loss as a result of relying on the false
statement. This is particularly relevant in claims for damages in
fraudulent and negligent misrepresentation.
Mistake
In contract law, a mistake refers to an erroneous belief about a
fact at the time the contract is made. A mistake can make a
contract void or voidable, depending on the nature and type of
the mistake. Essential Elements of Mistake:
1. Existence of Mistake: There must be a clear mistake
regarding a fact that is fundamental to the contract. This fact
must be material and significant to the agreement.
2. Shared or Known Mistake: In the case of mutual or common
mistakes, both parties must share the same erroneous belief. In
unilateral mistakes, the mistake must be known or should have
been known by the other party.
3. Material Effect: The mistake must have a material effect on
the agreed-upon exchange. The error must be so significant
that it changes the nature of the contract or the substance of
the agreement.
4. No Assumption of Risk: The party claiming the mistake must
not have assumed the risk of the mistake. If the contract
explicitly or implicitly places the risk of the mistake on one
party, that party cannot later claim relief due to the mistake.
VOID AGREEMENT
Void agreement is an agreement which is not enforceable by
Law – void – ab – inito.
(1) Agreement by or with person’s incompetent to contract
(2) Agreement entered into through a mutual mistake
(3) Object or consideration – unlawful
(4) Consideration or object partially, unlawful
(5) Without consideration
(6) Restraint of marriage
(7) Restraint of trade
(8) Legal proceeding
(9) Consideration identified
(10) Wagering agreement
(11) Impossible agreement
(12) An agreement to enter into an agreement in the future.
Contract of Indemnity
A contract is called as a ‘contract of indemnity’ if –
One party promises to save the other from loss caused to him
by the conduct of the promisor himself, or by the conduct of
any other person.
Essential elements of a contract of indemnity
1. Contract : All the essentials of a valid contract must also be
present in the contract of indemnity
Example:- X asks Y to beat Z and promises to indemnify Y
against the consequences. Y beats Z and is fined Rs.1,000. Y
cannot claim this amount from X because the object of the
agreement was unlawful.
2. Loss to one party: A person can indemnify another person
only if such other person incurs some loss or it has become
certain that he will incur some loss.
3. Indemnity by the promisor: The purpose of contract of
indemnity is to protect the indemnity holder from any loss that
may be caused to the indemnity holder.
4. Reason for loss: The contract of indemnity must specify that
indemnity holder shall be protected from the loss caused due
to –
 Action of the promisor himself; or
 Action of any other person; or
 Any act, event or accident which is not in the
control of the parties.
RIGHTS OF INDEMNITY HOLDER
Right to recover damages: The indemnity holder has the right
to recover all the damages which he is compelled to pay in any
suit in respect of any matter covered by the contract of
indemnity.
Right to recover costs: The indemnity holder has the right to
recover all the costs which he is compelled to pay in bringing or
defending such suit.
Condition:
(a) The indemnifier authorised him to bring or defend the suit;
or
(b) The indemnity holder did not contravene the orders of the
indemnifier; and The indemnity holder acted as it would have
been prudent for him to act in the absence of any contract of
indemnity.
Right to recover sums paid: The indemnity holder has the right
to recover all the sums which he has paid under the terms of a
compromise of such suit.
(a) The indemnifier authorised him to compromise the suit; or
(b) The indemnifier holder did not contravene the orders of the
indemnifier; and the indemnity holder acted as it would have
been prudent for him to act in the absence of any contract of
indemnity.
Contract of guarantee
A ‘contract of guarantee’ is a contract to –
- Perform the promise; or
- Discharge the liability, of a third person in case
of his default.
ESSENTIALS AND LEGAL RULES FOR A VALID CONTRACT OF
GUARANTEE.
1. Must have all the essentials of a valid contract
• All the essentials of a valid contract must be present in the
contract of guarantee.
• Exceptions:
(a) Consideration received by the principal debtor is a sufficient
consideration to the surety for giving the guarantee.
(b) Even if principal debtor is incompetent to contract, the
guarantee is valid. But, if surety is incompetent to contract, the
guarantee is void.
2. Primary liability of some person: The principal debtor must
be primarily liable. However, even if the principal debtor is
incompetent to contract the guarantee is valid. The debt must
be legally enforceable. The debt must not be a time barred
debt.
3. The contract must be conditional: The liability of surety is
secondary and conditional. The liability of surety arises only if
the principal debtor makes a default.
4. No misrepresentation: The creditor should disclose all the
facts which are likely to affect the surety’s liability. There must
not be any concealment of facts.
5. Form of contract: A contract of guarantee may be either oral
or written.
CONTRACT OF SALES OF GOODS
A contract for the sale of goods is a legally binding agreement
between a seller and a buyer concerning the transfer of
ownership of goods or products in exchange for payment.
Essentials
1. Offer and Acceptance: Like any contract, a contract for the
sale of goods begins with an offer made by the seller and
acceptance of that offer by the buyer. This forms the basis of
mutual assent or agreement between the parties.
2. Consent of the Parties: Both parties must enter into the
contract willingly and voluntarily, without any form of coercion,
undue influence, or misrepresentation.
3. Legal Capacity: Both parties must have the legal capacity to
enter into the contract. This typically means they must be of
legal age and mentally competent. In some cases, special rules
may apply to minors or individuals with limited mental capacity.
4. Subject Matter: The contract must clearly identify and
describe the goods being sold. This includes specifying the type,
quantity, quality, and any other relevant characteristics of the
goods.
5. Price: The contract must specify the price that the buyer
agrees to pay for the goods. The price can be fixed, determined
by a formula, or left to be determined in accordance with the
contract terms.
6. Delivery of Goods: The contract should include provisions
regarding the delivery of the goods, including the place and
time of delivery, who bears the costs of transportation, and any
other relevant terms regarding the transfer of possession.
7. Payment Terms: The contract should outline the terms of
payment, including when payment is due, any installment
payments, method of payment (cash, check, credit, etc.), and
any applicable discounts or penalties for late payment.
8. Transfer of Title: The contract should specify when title
(ownership) of the goods transfers from the seller to the buyer.
This is particularly important in determining who bears the risk
of loss or damage to the goods during transit.
Patent
Patent is a monopoly right granted by the State to an inventor
for a limited period, in respect of the invention, to the exclusion
of all others. A system of patents serves many useful purposes.
If the invention is commercially utilized, the patent ensures just
reward in terms of money and recognition for the inventor, for
all the time and effort, knowledge and skills, money and other
resources invested to come up with the invention.
What is a Patentable Invention?
According to the Indian Patent Act, a patentable invention is
defined as
“a new product or process involving an inventive step and
capable of industrial
application.”
Invention must be ‘new’
Something that is already known is not patentable. An
invention is deemed to be new on the priority date if it does
not form part of the state-of-the-art i.e., part of the knowledge
available to the public. Priority date is usually the date on which
the applicant for patenting his invention first makes the
application.
Invention must involve an ‘inventive step’
According to the definition of the inventive step, the invention
must be non-obvious to a person skilled in that particular art,
i.e. it must not follow plainly or logically from what is already
known. The question whether an invention involves an
inventive step has to be decided in the context of any prior
publication or public use.
Invention must be having ‘industrial application’
To be patentable, the invention has to be capable of industrial
application, that is, it can be made or used in an industry.
However, industry in this context does not necessarily imply the
use of machinery or manufacturing of an article. It may include
any useful, practical activity as distinct from purely intellectual
or aesthetic activity.
GROUNDS OF OPPOSITION TO PATENT
 Obtained wrongly or fraudulently.
 The invention has been already published and known.
 Not involved in any of the inventive step.
 Not completed within 12 months.
 No clear and explicit description of the invention.
 Not considered an invention based on the subject matters for
the invention..
Inventions that cannot be patented
1. Abstract Ideas:
Abstract ideas, mathematical theories, algorithms, and purely
mental processes cannot be patented. These are considered
fundamental truths or basic tools of scientific and technological
work.
2. Laws of Nature:
Natural phenomena, laws of nature, and scientific principles
cannot be patented. For example, the law of gravity or the
natural properties of elements cannot be patented.
3. Natural Products:
Natural products, such as naturally occurring organisms, plants,
minerals, and other substances, are not patentable unless they
have been significantly altered or manipulated by humans.
4. Mere Discoveries:
Discoveries of things that exist in nature, even if previously
unknown, cannot be patented. This includes the discovery of a
new plant species or a naturally occurring DNA sequence.
5. Abstract Business Methods:
Abstract business methods or schemes for doing business, such
as methods of bookkeeping, financial strategies, or sales
techniques, are generally not patentable unless they involve a
specific technical implementation.
What are consumer rights under Consumer Protection Act,
2019
There exist six rights of a consumer under the Consumer
Protection Act, 2019. The rights of the consumers are
mentioned under Section 2(9) of the Act, which are as follows:
1. The right of a consumer to be protected from the marketing
of goods and services that are hazardous and detrimental to life
and property.
2. The right of a consumer to be protected against unfair trade
practices by being aware of the quality, quantity, potency,
purity, standard and price of goods, products or services.
3. The right of a consumer to have access to a variety of goods,
services and products at competitive prices.
4. The right to seek redressal at respective forums against
unfair and restrictive trade practices.
5. The right to receive adequate compensation or consideration
from respective consumer forums in case they have been
wronged by the seller.
Consumer Disputes Redressal Agencies Under Consumer
Protection Act
1. The District Commissions will have the jurisdiction to
entertain complaints where the value of the goods, services or
products paid as consideration to the seller does not exceed 50
lakh rupees.
2. State Commissions will have the jurisdiction to entertain
complaints where the value of the goods, services or products
paid as consideration to the seller exceeds 50 lakh rupees but
does not exceed two crore rupees.
3. The National Commission will have the jurisdiction to
entertain complaints where the value of the goods, services or
products paid as consideration to the seller exceeds two crore
rupees.
4. The Act further states that every complaint concerning
consumer dispute shall be disposed of as expeditiously as
possible. A complaint filed under this Act shall be decided
within the period of three months from the date of receipt of
notice by the opposite party in the cases the complaint does
not require analysis or testing of the goods and services and
within a period of 5 months, if it requires analysis or testing of
the goods and services.
5. The Consumer Protection Act, 2019 also facilitates the
consumers to file complaints online. In this regard, the Central
Government has set up the E-Daakhil Portal, which provides a
convenient, speedy and inexpensive facility to the consumers
all over India so that they are able to approach the relevant
consumer forums in case of any dispute arises.
Company
Company is defined as a voluntary association of a certain
number of people having some common interests united by
some commercial or industrial undertaking to carry out
legitimate business.
NATURE OF A COMPANY
1. Independent Corporate Existence
A company is said to have an independent corporate existence
since its incorporation because it holds a separate legal entity.
A company can enter into partnership with other individuals or
other companies and can buy any number of shares,
debentures of another company.
2. Limited liability
One of the most important and essential advantages of
incorporation and registration of companies is the limited
liability. The term “limited liability” means the condition where
the shareholders or the proprietors of the company are legally
liable only for the debts which are equal to the nominal value of
their shares invested.
3. Perpetual succession
This is a major advantage of a company because even though
members come and go, but the company never dies and it
enjoys the same rights and privileges. The company continues
to exist for an indefinite period of time until the company shuts
down due to some other reason.
4. Separate property
The property or assets owned by the company does not belong
to any of the members of the company. No members can claim
the property and use it for personal purposes.
5. Capacity to sue and be sued
If the company has the right of incorporation, then there are
certain liabilities for which it can be held liable. The company,
hence, can sue as well be sued by other companies and people.
6. Transferable shares
The investors of the company are free to liquidate shares or
encash money, whenever they are willing to at any point of
time. This helps and motivates the investors to invest their
money as they can get back their investments easily.
Types Of Companies
On the basis of Number of Members:
 Public Companies
A public company is defined in Section 2 (71) of the Companies
Act of 2013. To establish a public company, it is necessary to
have at least 7 partners. One of the special features of a public
company is that there are no restrictions on the buying and
selling of shares.
 Private Companies
A private company refers to an association of persons whose
maximum number of members is limited to 200 and minimum
members is 2. A private company cannot invite the general
public to subscribe to its shares or debentures.
 One-Person Company (OPC)
A sole proprietorship is a company that has only one person as - Payee: It specifies the payee or the bearer to whom the
a partner or shareholder. The board of payment is to be made.
directors must have 1 director and its only member can also - Date of Payment: It states the date when the payment is to be
hold the role of director. made, which can be on demand or at a future date.
On the basis of Liability: - Signature: It must be signed by the maker (the person who
 Companies limited by shares promises to pay).
It refers to a company in which the liability of its partners is - Writing: It must be in writing.
limited to the amount specified in the partnership agreement.
However, any unpaid amount on the share may be called upon 2. Bill of Exchange:
to settle the liability. A bill of exchange is a written, signed order by one party (the
 Companies limited by guarantee drawer) directing another party (the drawee) to pay a specific
In this type of company, the liability of the partners is limited to amount of money to a third party (the payee) or to the bearer
the amount they undertake to contribute to the assets of the at a specified future date or on demand.
company in the event of its dissolution. The liability of the Characteristics:
shareholders is limited by the amount of the guarantee they - Unconditional Order: It contains an unconditional order to pay
give in the partnership agreement. a certain amount of money.
 Companies with unlimited liability - Parties Involved: It involves three parties – the drawer (who
It applies to those companies that do not determine the liability creates the bill), the drawee (who is directed to pay), and the
of their members. Members’ liability is unlimited and their payee (who receives the payment).
assets can be used to satisfy the company’s debt. - Specified Amount: The amount to be paid must be certain and
On the basis of Company Incorporation: not subject to change.
 Royal/ Chartered Companies - Date of Payment: It specifies the date of payment, which can
These companies were formed by the royal charter that is at be on demand or at a future date.
the express orders of the King or Queen and were also known - Acceptance: The drawee must accept the bill by signing it
as Chartered Companies. For example- East India Company. before it becomes binding.
 Statutory Companies - Signature: It must be signed by the drawer.
It applies to those companies which are incorporated by a
special Act of Parliament or State Legislature. The main 3. Cheque:
objective of this type of company is to provide a public service. A cheque is a written, signed order by one party directing a
 Registered Companies bank to pay a specific amount of money to another party or to
Companies that are registered under the provisions of the the bearer on demand.
Companies Act, 2013 or any previous Companies Act are called Characteristics:
registered companies. This type of company is formed when - Unconditional Order: It contains an unconditional order to pay
they have received a certificate of incorporation (ROC). a certain amount of money.
- Parties Involved: It involves three parties – the drawer, the
On the basis of Residence:
drawee, and the payee.
 Foreign companies
- Specified Amount: The amount to be paid must be certain and
Foreign company means any company or body corporate
not subject to change.
having its place of business or carrying on business in India
- Date: It is dated on the day it is issued.
 Indian companies
- Signature: It must be signed by the drawer.
It applies to those companies where incorporation and
- Payable on Demand: It is always payable on demand and not
registration are done in India. It is an umbrella term and almost
at a future date.
all other types of companies fall under it.
On the basis of Ownership/Control
 Government Company:
Government company is essentially defined as, that company in
which equal to or more than 51% of the paid-up share capital is
held by the Central Government, or by any State Government.
 Holding Company
Holding Company is a company which controls another
company. A company can become the holding company of
another company in any of the following ways:
i) by holding more than 50% of the issued equity capital of the
company,
ii) by holding more than 50% of the voting rights in the
company,
iii) by holding the right to appoint the majority of the directors
of the company.
 Subsidiary Company
A company, which operates its business under the control of
another (holding) company, is known as a subsidiary company.
Other types of Companies:
 Section 8 Company
It is also known as a non-profit company. The object of the
company is the promotion of commerce, art, science, sport,
education, research, welfare, religion, charity, environmental
protection, or any other object.
FEATURES OF INFORMATION TECHNOLOGY ACT, 2000
 It defines various terminologies used in the Act like cyber
cafes, computer systems, digital signatures, electronic records,
data, asymmetric cryptosystems, etc under Section.
It protects all the transactions and contracts made through
electronic means and says that all such contracts are valid.
 It also gives recognition to digital signatures and provides
methods of authentication.
 It contains provisions related to the appointment of the
Controller and its powers.
 It recognises foreign certifying authorities.
 It also provides various penalties in case a computer system is
damaged by anyone other than the owner of the system..
Types of negotiable instruments and their characteristics
1. Promissory Note:
A promissory note is a written, signed promise by one party to
pay a specific amount of money to another party either on
demand or at a specified future date.
Characteristics:
- Unconditional Promise: It contains an unconditional promise
to pay a certain amount of money.
- Specified Amount: The amount to be paid must be certain and
not subject to change.