COMMERCE

NATIONAL TESTING AGENCY (NTA)

PAPER – 2 || VOLUME – 5
1. Indian Contract Act, 1872 1
2. Special Contracts 13
3. The Sale of Goods Act 1930 24
4. Negotiable Instruments 38
5. Indian Companies Act 2013 44
6. Limited Liability Partnership
Partnership 66
7. Competition Act 2002 71
8. Information Technology Act, 2000 75
9. The Right to Information Act of 2005 85
10. Intellectual Property Rights 88
11. Goods and Services Tax (GST) 90

1. Income-
Income-Tax 96
2. Deduction and Collection of Tax at Source 134
3. Concept of Corporate Tax Planning 141
4. International Taxation 155
The Indian Contract Act is one of the oldest mercantile laws of our country. It came
into effect on the 1st of September 1872 and is applicable to the whole of India
with the exception of Jammu & Kashmir. Containing a total of 266 sections it is
the principal law regulating contracts in India.

The Indian Contract Act, 1872 defines the term “Contract” under its section 2 (h)
as “An agreement enforceable by law”. In other words, we can say that a contract
is anything that is an agreement and enforceable by the law of the land.

This definition has two major elements in it viz – “agreement”

agreement” and “enforceable by
law”
law”. So in order to understand a contract in the light of The Indian Contract Act,
1872 we need to define and explain these two pivots in the definition of a contract.

In section 2 (e), the Act defines the term agreement as “every promise and every
set of promises, forming the consideration for each other”.

Now that we know how the Act defines the term “agreement”, there may be some
ambiguity in the definition of the term promise.

The Act in its section 2(b) defines the term “promise” here as: “when the person
to whom the proposal is made signifies his assent thereto,
thereto, the proposal becomes
an accepted proposal. A proposal when accepted, becomes a promise”.

In other words, an agreement is an accepted promise, accepted by all the parties

orderr to
involved in the agreement or affected by it. This definition says that in orde
establish or draft a contract, we need to initiate some steps:

The definition requires a person to whom a certain proposal is made.

The person (parties) in step one has to be in a position to fully understand all the
aspects of a proposal.

“Signifies his assent thereto” – means that the person in point one accepts or
agrees with the proposal after having fully understood it.

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Once the “person” accepts the proposal, the status of the “proposal” changes to
“accepted proposal”.

“Accepted proposal”
proposal” becomes a promise. Note that the proposal is not a promise.
For the proposal to become a promise, it has to be an accepted proposal.
To sum up, we can represent the above information below:

Agreement = Offer + Acceptance.

Now let us try to understand this aspect of the definition as is present in the Act.
Suppose you agree to sell a bike for 30,000 bucks with a friend. Can you have a
contract for this?

Well if you follow the steps in the previous section, you will argue that once you
and your friend agree on the promise, it becomes an agreement. But in order to
be a contract as per the definition of the Act, the agreement has to be legally
enforceable.

Thus we can say that for an agreement to change into a Contract as per the Act,
it must give rise to or lead to legal obligations. In other words, must be within the
scope of the law. Thus we can summarize it as Contract = Accepted Proposal
(Agreement) + Enforceable by law (defined within the law)

A contract
contract that is not a valid contract will have many problems for the parties
involved. For this reason, we must be fully aware of the various elements of a valid
contract. In other words, here we shall ponder on all the ramifications of the
definition of the
the contract as provided by The Indian Contract Act, 1872.

The Indian Contract Act, 1872 itself defines and lists the Essentials of a Contract
either directly or through interpretation through various judgments of the Indian
judiciary. Section 10 of the contract
contract enumerates certain points that are essential
for valid contracts like Free consent, Competency Of the parties, Lawful consideration,
etc.

Other than these there are some we can interpret from the context of the contract
which is also essential Let us
us see.

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1. : So you decide to sell your car to yourself! Let us say to avoid
tax or some other sinister purpose. Will that be possible? Can you have a
contract with yourself? The answer is no, unfortunately. You can’t get into a
contract with yourself.

A Valid Contract must involve at least two parties identified by the contact.
One of these parties will make the proposal and the other is the party that
shall eventually accept it. Both the parties
parties must have either what is known
as a legal existence e.g. companies, schools, organizations, etc. or must be
natural persons.

For Example: In the case State of Gujarat vs Ramanlal S & Co. – A business
partnership was dissolved and assets were distributed among the partners as
per the settlement. However, all transactions that fall under a contract are
liable for taxation by the office of the State Sales Tax Officer. However, the
court held that
that this transaction was not a sale because the parties involved
were business partners and thus joint owners. For a sale, we need a buyer
(party one) and a seller (party two) which must be different people.

2. : The parties that areare subject to a contract must

have clear intentions of creating a legal relationship between them. What this
means is those agreements that are not enforceable by the law e.g. social or
domestic agreements between relatives or neighbors are not enforceable in a
court of law and thus any such agreement can’t become a valid contract.

3. : Some contracts have special conditions that if not

observed would render them invalid or void. For example, the Contract of
Insurance is not a valid contract
contract unless it is in the written form.

Similarly, in the case of contracts like contracts for immovable properties,

registration of contract is necessary under the law for these to be valid.

4. : Consider this statement “I agree to pay Mr. X a desirable

amount for his house at so and so location”. Is this a valid contract even if
all the parties agree to this term? Of course, it can’t be as “desirable amount”
is not well defined and has no certainty of meaning. Thus we say that a
valid contract
contract must have certainty of Meaning.

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5. : Suppose two people decide to
get into an agreement where a person A agrees to bring back the person
B’s dead relative back to life. Even when all the parties agree and all other
conditions of a contract are satisfied, this is not valid because bringing
someone back from the dead is an impossible task. Thus the agreement is
not possible to be enforced and the contract is not valid.

6. : Consent is crucial for

for an agreement and thus for a valid
contract. If two people reach a similar agreement in the same sense, they
are said to consent to the promise. However, for a valid contract, we must
have free consent which means that the two parties must have reached
consent
consent without either of them being influenced, coerced, misrepresented or
tricked into it. In other words, we say that if the consent of either of the
parties is vitiated knowingly or by mistake, the contract between the parties
is no longer valid.

7. : Section 11 of the Indian Contract Act, 1872 is:

“Who are competent to contract — Every person is competent to contract

who is (1) of the age of majority according to the law to which he is subject,
and who is (2) of sound mind and is (3) not disqualified from contracting by
any law to which he is subject.”

Let us see these qualifications

qualifications in detail: refers to the fact that the person
must be at least 18 years old or more. Means that the party or the person
should be able to fully understand the terms or promises of the contract at
the time of the formulation of the contract. States that
that the party should not
be disqualified by any other legal ramifications. For example, if the person is
a convict, a foreign sovereign, or an alien enemy, etc., they may not enter
into a contract.

8. : Quid Pro Quo means ‘something in return’ which

which means that
the parties must accrue in the form of some profit, rights, interest, etc. or
seem to have some form of valuable “consideration”.

For example, if you decide to sell your watch for Rs.

Rs. 500 to your friend, then
your promise to give the rights to the watch to your friend is a consideration
for your friend. Also, your friend’s promise to pay Rs. 500 is a consideration
for you.

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 9. : In Section 23 of the Act, the unlawful considerations are
defined as all those which:
* It is forbidden by law.
* Is of such a nature that, if permitted, it would defeat the provisions of any
law, or is fraudulent.
* involves or implies, injury to the person or property of another
* the Court regards it as immoral or opposed to public policy
* These conditions will render the agreement illegal.

Discharge of a contract implies termination of contractual obligations. This is because

when the parties originally entered into the contract, the rights and duties in terms
of contractual obligations were set up. Consequently when those rights and duties
are put out then the contract is said to have been discharged. Once a contract
stands discharged, parties to it are no more liable
liable even though the obligations under
the contract remain incomplete.

A Contract is deemed to be discharged, that is, concluded and no longer binding, in

the following circumstances:
* Discharge by performance.
* Discharge of Contract by Substituted Agreement.
* Discharge by lapse of time.
* Discharge by operation of law.
* Discharge by Impossibility of Performance.
* Discharge by Accord and Satisfaction.
* Discharge by breach.

Where both the parties have either carried out or tendered (attempted) to carry out
their obligations under the contract, is referred to as discharge of the contract by
performance. Because performance by one party constitutes the occurrence of a
constructive
constructive condition, the other party’s duty to perform is also triggered, and the
person who has performed has the right to receive the other party’s performance.
The overwhelming majority of contracts are discharged in this way.