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Essentials of Valid Contract

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A contract is an agreement between two or more persons to do or not to do some particular thing, such agreement being enforceable at law. According to section 2 (h) 1872 contract act, It is an agreement enforceable by law

Therefore, is an agreement the object of which is to create an obligation. In other words, It is a combination of two ideas- Agreement and obligation.

Contract = Agreement + Obligation

An agreement creating and defining obligation between the parties

SALMOND

“An agreement as the source of a legal commitment import that one party shall be bound to some performance, which the other shall have a legal right to enforce”.

LEAK

“This undertaking is an agreement enforceable at law made between two or more persons by which rights are acquired by one or more to act or forbearance on the part of the other or others”.

ANSON

Example

If there is an agreement between X and Y, that X will construct a house for Y, and Y will pay rupees 5 Laces to X, the agreement contracts.

The term agreement is wider than the term “Contract”. An agreement may exist without any legal obligation and it covers a variety of transactions which may not be enforceable by law.

All contracts are, therefore, agreement, but all agreement are not necessarily contracts. An agreement can be a contract only when it is enforceable at law.

Difference Between Void & Voidable Contract

Void
• An Agreement not enforceable by law is said to be void under section 2 (g). Such a contract is not enforceable by either party
• A void agreement is null from every beginning
• Under this type of contract no compensation to be paid due to its non-performance.
• A void contract can be objected by any person joining this type of agreement
• The collateral agreement will become void in case of the void agreement due to the illegality of the object and consideration
Voidable
• An agreement which is enforceable by law at the option of one more of the parties thereto but not at the option of the others is a voidable contract under section 2(i).
• A voidable contract is held to be valid until it is avoided and till that time actions were taken under it are entitled to protection in law.
• If a person rightfully revokes a contract, he has the right to receive compensation for loss or damage suffered by him due to the non-performance of the contract
• A voidable contract can only be objected by the option of the person whose consent has been obtained by fraud, coercion, misrepresentation and undue influence
• This contract does not affect the collateral contract just as a void agreement

Examples

If A delivers goods to B under a mistaken belief that B is C and B sell these goods to D, who is a bonafide purchaser, for value without notice, A can recover the goods from D because D purchased the goods from a man who had himself no title under a void contract.

If however, B obtain the goods from A by a fraudulent or misrepresentation and then sells them to D, a bonafide purchaser, A cannot recover the goods from D until A has avoided the contract with B.

Essential of Valid Contract

Agreement

There should be an agreement between the two parties i.e. purposer and acceptor. One making the proposal and others accepting it. The proposal and acceptance must be made in accordance with the rules contained in the contract Act.

Example

X Offers to sell his house to Y for Rs.7 laces Y accepts the offer to purchase the house for Rs.7 laces. This is an acceptance by which agreement may be made between proposer and acceptor

Creation of Legal Relationship

The intention of the agreement must be to create legal relations between the proposer and acceptor. The agreement must be capable of performing with terms clear and certain.

Example

X offers to sell his car to Y for Rs.3 laces and Y is ready to purchase it at Rs. 3 laces. There is a contract as it creates a legal relationship between X and Y.

Competent to Contract

Every person is not competent to enter into a binding contract. Under section II, the persons who are not competent to contract are those (i) who have attained the age of majority according to the law by which they are governed. (ii) Who are of sound mind, and (iii) who are not disqualified by any law to which they are subject. Minor has no capacity to contract so his agreement is void. He is not liable to perform what he has promised to do under an agreement.

Free Consent

For the validity of an agreement, it is essential that it must have been made by the free consent of the parties. Under Section 13, two or more persons are said to consent when they agree upon the same thing in the same sense. It is when there are consent that the parties are said to of the same mind. When one party has a different thing in mind or when each understands the thing in different way, there is no consent by the promise.

Under section 14, consent is said to be free when it is not caused by (1) Coercion (2) Undue influence (3) Fraud (4) Misrepresentation or (5) mistake as defined in relevant sections. It is an important essential for the validity of a contract. Where there is consent, but not free consent, there is generally a contract voidable at the option of the party whose consent was not free.

Consideration

Consideration is indispensable for every contract. An agreement is invalid if it has been concluded without any consideration. It is an act i.e. past, present or future done or to be done at the request of the promisor, by the promise or any other person. For the validity of an agreement, the consideration must be lawful

Example

X agrees to sell his car to Y for Rs.5 laces. Here X’s promise to sell his car is for Y’s consideration to pay Rs.5 laces. Similarly, Y’s promise to pay Rs.5 laces is for X’s consideration to sell his car to Y

Capability of Performance

The contract must be made for definite, certain and capable of performance terms. An agreement, the meaning of which is not certain and clear or capable of being made certain are void.

Example

  • X agrees to sell to Y a hundred ton of oil. There is nothing whatever to show what kind of oil was intended to sell. The agreement is void for uncertainty
  • X agrees to sell to Y five hundred tons of rice at a price to be fixed by Z. There is no uncertainty to void because the price is being capable to stay certain.

Not Expressly Declared Void

In order to make a valid contract, an agreement must not be one of those that are expressly declared by law to be void. The agreement that is expressly declared to be void is as follows:

  1. Agreements in restraint of Marriage.
  2. Agreement in restraint of trade.
  3. Agreements by way of a wager.
  4. Agreement to do impossible acts.
  5. Agreements in restraint of legal proceedings.

Legal Relationship

An agreement is a contract only when it is made with a lawful object. Under section 23, “Every agreement of which the object or consideration is unlawful is void.”

Example

X, Y and Z enter into an agreement for the division among them of gains acquired, or to be acquired, by them by fraud, the agreement is void as its object is unlawful

Other Legal Requirements

The agreement must be in writing, attested by the witness and registered. If so required by any provision of law in force in our country. Some agreements such as:

  1. Agreements to the transfer of immovable property
  2. Agreement to pay a time-barred debt
  3. Agreement to refer the disputes to an arbitrator for arbitration is such agreement which must be reduced to writing and registered before they can be legally enforced.

Classification of Wages

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“The wage is a sum of money paid under contract by an employer to a worker in exchange of services rendered by the worker”

Benham

Anyhow, more comprehensively,

“A wage is the remuneration paid to labour in return of services rendered either under contract or independently.”

Classification of Wages

The rewards of labour can be classified under the following categories:

Salary

If a person is highly paid, the remuneration is called salary e.g. the earning of a professor, engineer, etc.

Pay

The payment to the middle class workers such like typists, clerks, etc, for their services is called pay.

Wage

The remuneration which is paid to the inferior type of workers such like skilled or unskilled workers is, called wage.

Fee

Fee is the earnings of independent workers such like doctors, lawyers, etc.

Further Classification

Wages can further be classified on the basis of their form and manner of payment.

According to Manner of Payment

Time Wages

If a person is receiving his remuneration on the basis of a unit of time i.e. daily, weekly, monthly or yearly, the wages are called time wages.

Piece Wages

If a person is receiving his remuneration on the basis of his work done, is called piece wages.

According to Form

Nominal Wages

The total amount of money earned by a person during a certain period is called nominal wage. In other words, the amount which is paid to worker only in times of money is called nominal wage.

Real Wages

The total amount of satisfaction which a worker receives in the form of necessities, comforts and luxuries in return for the services, is called real wage.

These wags include nominal wages plus extra facilities and concessions such as free clothing, free housing, free electricity, free accommodation, etc.

Determination of Wage

Divergent theories have been introduced to determine wages. Anyhow, we shall discuss only two very important theories, i.e. the marginal productivity theory and the modern theory.

Note: Both these theories have already been discussed.

Difference Between Trust & Holding Company

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Holding Company and Trust are two main types of limited partnership and joint stock company. The major differences in both are their structures as well as few other things.

Holding Company: is a company which actually holds shares of other producers and services providers. These companies are not producing goods and services by themselves but they earn a profit this way. Advantages and Disadvantages of holding companies must be considered before setting up.

Trust Company: is a type which administrate things in any company on their behalf. They are not owners – they are just Legally authorized bodies or trustees. Trustor (The owner) gives rights to trustee (Trust company) to invest, estimate, manage and hold things on third party behalf; also known as beneficiary.

Formation

  • Its process for formation is very complicated. Consent of the proposed members is necessary for its formation
  • A holding company may be formed easily without the consent of its subsidiaries

Management

  • It is managed and supervised by the Board of Trustees
  • Board of Directors is liable to manage the holding company and its subsidiaries

Objective

  • It is formed to create a monopolistic situation in the market. Therefore its objects are illegal and regarded against the welfare of the public
  • Its objects are legal. Therefore its activities are not considered against the public interest

Right of Issue

  • Trust can issue a trusted certificate to its member’s companies. It has no right to issue any kind of shares certificate
  • Holding company can issue the share certificate to its members. It cannot issue trust certificates

Position

  • It is a strong form of combination. A member company cannot easily come out of the trust
  • It is a comparatively loose form of combination. The holding company can easily give up control of its subsidiaries

Centralized Control

  • In the trust, the member companies surrender their shares to the Board of Trustees. Thus they secure the centralized control and become the “Beneficiaries” of the trust agreement
  • Majority of the shares of limited company must be secured by holding company in order to obtain centralized control

Functions of Retailer

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A retailer is the last link in the chain of distribution of consumer products. He brings the producer in close touch with the consumer. He is a part of the distribution mechanism which cannot be dispensed due to his following valuable services

Distribution of Good

The functions retailers perform are the consequence of the separation of distance, time and information between producers and consumers. All retailers are involved in assisting in the physical movement of goods and in effecting a change of ownership. Retailers also hold stocks so that goods are available when required by the consumer

So, he plays a very important role in distributing goods to various consumption centers.

Consumers Choice

As the retailer is in close touch with his customers, he knows the demand, tastes and fashion of the consumer. This position enables the retailer to pass information on products to producers on behalf of consumers.

Storage Facilities

Retailers storage activities also help both producers and consumers. By ordering and accepting delivery in advance of the season, the retailer removes some of the risk of deterioration and damage and bears the costs of storage.

Buying and Selling Activities

Whether the retailer is supplied directly by the manufacturer or through a wholesaler, he buys in fairly large quantities and sells in the smaller quantities that are convenient for consumers use.

Credit Facilities

The retailer is often expected to provide credit facilities to his customers. This could be a selling advantage but is expensive to give and, in general, would derive from some relationship with the customer.

Grading and Packing

By dividing large unit quantities into consumer-sized amounts the retailer is performing a service to manufacturers as well as to consumers.

It would be highly uneconomical for manufacturers to package and ship their goods in the quantities demanded by consumers. But butchers, fruiters, tailors, and other retail traders are still concerned in their various ways with grading and preparing their goods.

Delivery Services

Many retailers offer delivery as an additional service. This is an expensive and a grocer, for example, who provided it would charge more for his goods.

Advice to Customer

Customers rely on the advice of their retailers when buying many goods, both those which are technically complex, such as motor-mowers or air conditioning plant, and also such apparently simple goods as packaged foods and dress materials.

The efficient retailer has a responsibility not only to advice on goods that are already established in the market, but to inform his customers of new lines as they becomes, available and to stock them if he believes that they will be needed.

Rights of Parnters

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Consultation

Every partner has equal rights in disposing of the matter. However, ordinary matters are decided by the simple majority of partners and policy matters are settled with the consent of all the partners but every partner must be consulted.

Receive Profit

Every partner has a right to receive equal profit from the management in the absence of an agreement.

Participation in the Management

Every partner is allowed to take part in the management of the business.

Inspection of Accounts

Every partner has a right to Inspect and verify all types of record, books and accounts and is also allowed to copy them.

Compensation

A partner is entitled to be indemnified by the firm for all acts done by him in respect of:

  • Payment of debts and liabilities
  • Payment made in the emergency
  • Payment incurred to conduct the partnership affairs.

Exercise Power

As one partner is an agent of other partner, so he can exercise his power to protect the firm from loss and the expenses incurred in this respect will be paid by his copartner.

Interest on Capital

A partner is not allowed to receive interest on capital invested by them.

To use the business property

Every partner is a joint owner of the business property. So he has equal right to use it for business purpose.

Introduction of New Partner

New partner cannot be admitted in the firm without the consent of all partners.

Right to Continue

Every partner has the right to continue his partnership with the firm. He cannot be expelled from partnership without any solid reason.

Rights of other partner after outgoing of a Partner

After outgoing of a partner from the firm surviving partners have a right to carry on the business activities without’ any clearing of accounts. So out going partner or representative of deceased partner is entitled to receive profit or interest from the date of separation till the final settlement of accounts.

Liability before admitting

New admitting partners will not incur any obligation of the firm before the become a partner.

Retirement

Every partner has right to retire from the firm serving notice of 14 days to all partners in case of partnership at will.

Commence competing business

An out-going partner has right to commence competing business but he cannot use the firm’s name or trade market o other special privilege.

Duties of Partners

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To Perform True Services

Every partner must perform true services in partnership i.e., to maintain the true accounts, to keep the actual vouchers records and transactions and to permit the other partners to inspect the accounts fairly.

To be Sincere and Careful

Every partner must be sincere, faithful and careful to other partners. He should discharge his duties very fairly.

To work for Best Advantages

Every partner is expected to conduct this business of the firm to the best advantages.

To Provide all Types of information

As one partner is an agent of another, he must conveys all types of information to them.

Compensation for Loss

If a partner commits a fraud to his copartners he must compensate them for any loss caused to them by his act.

To use the Partnership Property

Every partner is bound to use the property of the firm for the best interest of all the partners in the absence of an agreement.

To conduct the Business without Remuneration

In the absence of agreement every partner must conduct the business activity without any remuneration i.e., salary or commission in the form of goods.

Distribution of Loss

The amount of loss is sustained by each partner equally in the absence of any agreement.

To compensate for Intentional Neglect

If a firm suffers loss due to the intentional neglect in the conduct of the activities the partners are bound to indemnify the firm for such loss.

To Carry on Competing Business

Partners are not allowed to carry on business other than the business of the partnership as long as they are partners.

To keep the Secrecy

A partner is bound to keep the secrecy of the business. In case of leakage of secrecy, he will be personally liable.

Transferring of Interest

Partners interest cannot be transferred to any third person so as to make him a member in the firm.

To conduct within powers

Every partner is restricted to conduct his activities conferred upon him within the scope of powers.

To Get any Undue Advantages

The business property cannot be directly or indirectly used for private purposes. Partners are not allowed to take any undue advantages from the business of the partnership.

To Return Earned Profit

The profit earned from the sources of firm will be paid to the management of the partnership.

Business Combination

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Business combination is formed when two or more business undertaking units combine to carry on business together for achieving the economic benefits.

It is also originated when a number of different business concerns of same line combine together under one management with a view to achieve some definite objects of mutual benefits.

At present we find a general tendency to form cartel, trust, holding company, pool and amalgamation etc at home or abroad for the object of increasing capital volume, specialization and standardization. Rival firms combine together in order to avoid heavy cost of competition.

Forms of Business Combinations

forms of business combination

At present we find a general tendency to form cartel, trust, holding company, pool and amalgamation etc at home or abroad for the object of increasing capital volume, specialization and standardization. Rival firms combine together in order to avoid heavy cost of competition.

These business combination forms have different types; entirely depends upon missions, agreements, benefits of both parties.

Trade Association

It is a voluntary association of traders, merchants and industrialists who belong to particular place and who engage in similar nature of business. It is formed for the achievement of common purposes.

For example, Cloth Merchants Association, Leader Traders Association, Iron Merchants Association. Common fund is established in  which each member contributes for the protection of their interest.

Objective of Trade Associations

  • To Encourage the friendly relation among the members.
  • To avoid the competition among the members.
  • To promote the interest and welfare of its members.
  • To arrange the supply of raw material and labours.

Chamber of Commerce

It is an association of various merchants, industrialists and business men who belong to particular city or district. It is formed to promote trade, commerce and industrial activities in the country. Its management is conducted by elected executive committee.

Government has also right to appoint some members. Its recommendations are considered very useful in formulating budget and other trade and commercial policy. These chambers remain in close touch with the Ministry of Commerce.

Objectives of Chamber of Commerce

  • To protect the interest of its members.
  • To promote the business activities in the country.
  • To remove or minimize the effect of trade restrictions.
  • To collect the information relating to trade, commerce, industry and shipping.
  • To settle the disputes arising among the members inside or outside the business.

Pool

Pool is a device to regulate the production, to divide the territory of market and to distribute the profit of its members. Under this system members do not loose their entity so it is deemed stable form of combination.

Objectives of Pool

  • To avoid competition among its members.
  • To regulate the supply of production.
  • To control the prices of product.
  • To avoid over production.
  • To minimize the expenditure on distribution.
  • To earn handsome profit of their goods.

Cartel

It is an association .of independent producers and businessmen to design certain arrangements for jointly conducting their marketing functions. Joint selling agency is to be organized for performing marketing functions.

All the participating members agree with the cartel to dispose of their entire product to it. Then the cartel arranges to supply the goods to the market. It is a loose type of combination where the member units enjoy full independence. So they can easily come out of cartel at any time.

The form of combination was first introduced in Germany.

Objectives of Cartel

  • To achieve economy of large scale distribution.
  • To eliminate unnecessary competition.
  • To limit the supplies of their product.
  • To improve the quality of the product and condition of sale.
  • To control the price of their products.

Rings

This is an organization of producers who combine to restrict output they produces for the purpose of securing some monetary gain. All the members agree with the ring that they would not produce the goods in excess of the quote fixed for them. Defaulters are to be fined by the rings. It is usually organized to exploit the consumers.

Objectives of Rings

  • To avoid over production.
  • To control the supply of the product.
  • To secure monetary gain by controlling price.

Trust

Trust is another kind in which the stockholders transfer a majority of their stock or shares to a Board of Trustees in exchange for trust. certificates This is the combination of several joint stock companies which is managed by the Board of Trustees who control the shares or stock of its members.

Trust is formed to control the production and distribution. As it enjoys sound financial position it can achieve the benefits of large scale production. This is a strong vertical type of combination. Its members cannot easily come out of the trust.

Trust originated in U.S.A in 1879 but due to its harmful activities for the public it was declared illegal by the court in 1890.

Objectives of Trust

  • To increase capital volume for large scale production.
  • To enjoy the benefits of large scale organization.
  • To achieve the economies in production and distribution.
  • To control the market.
  • To regulate the prices and output.

Corner

This is the combination of speculators which is generally organized in the share market. Under this system entire goods or shares available on the particular market are purchased by the corner with the object of reducing the supply to the minimum.

Thus its members are in a position to achieve monetary gain by affecting prices. But in the modem age this device cannot be successful due to fast means of transport and communications.

Objectives of Corner

  • To establish a temporary monopoly of the market.
  • To charge high prices of their goods.
  • To control the supply of the particular commodity.

Informal Agreement

This is the form of mutual understanding or agreements among the competing business with the object of controlling the prices of the product and regulating the market. This is a simplest and loose form of combination which is generally based on oral agreement among the rival units.

A member can be expelled from the combination if he fails to abide by any rules and regulations but it may also come to an end if the members are violating rules. This is also known as Gentlemen’s, Agreement.

Objectives of Informal Agreement

  • To avoid unnecessary competition among the constituent units.
  • To control the prices of the product.
  • To improve the condition of the scale.
  • To restrict output of the competing members.
  • To reduce the cost of marketing the product.

Syndicate

This is the organization of producers and manufacturers who combine to regulate the product and price. This is loose type of combination in which member units have complete independence in the matter of internal administration of their own units.

It can be formed of local, national and international level. The following procedure is to be adopted by syndicate.

  • Its members cannot dispose of their product directly in the market, but entire output of its members are purchased by syndicate at agreed prices.
  • Syndicate arranges to sell the product of its members in the market at reasonable prices.
  • The profit earned by the syndicate is distributed among the members in agreed producers.

Objectives of Syndicate

  • To avoid competition among the producers.
  • To regulate the output and prices of the product.
  • To locate reasonable market for the products of its constituent units.
  • To dispose of the output at handsome prices.

Holding Company

A holding company is a device to control the majority of other company’s shares. Under this system, any company may become holding if the sufficient number of shares are purchased by it.

The company whose shares are owned by the holding company is named as subsidiary company. A company may itself be a holding company and at the same time be a subsidiary to another company.

Objectives of Holding Company

  • To eliminate competition.
  • To obtain the benefit of large scale production.
  • To achieve economy in the field of management and production.
  • To increase the efficiency of business by modern technique.
  • To control market and to avoid over production.
  • To enjoy the research results and patent rights of each other.
  • To increase the financial stability of the subsidiary company before the general public.

Amalgamation

When two or more joint stock companies which are already established combine into large one amalgamation comes into existence. New combination company generally take over all the assets and obligations of the old companies.

Each company of the amalgamation lost its separate entity. For example if X company and Y company combined together under the new name of X and Y company it is called amalgamation.

Objectives of Amalgamation

  • To achieve the economies of large scale production.
  • To increase the financial resources.
  • To attain the benefit of technical and scientific development.

Merger

When a joint-stock company takes over the entire ownership of one or more than one business units. It is known as a merger. So two or more firms absorb into one in exchange for stock and shares. In case of a merger, each firm loses ~ its separate entity. For instance, if y company merge with the A company, y company will lose its identity.

Objectives of Merger

  • To eliminate competition.
  • To secure benefit of large scale production.
  • To control market.
  • To achieve the economies in management, production and distribution.
  • To hire the services of expert and efficient persons.
  • To enjoy taxes and other exemption facilities.
  • To increase the efficiency of business by adopting new technique, improved formula and scientific invention.

Types of Business Combination

Vertical Business Combination

Vertical combination takes place when various department of large industrial units combine together under single management. Under this arrangement constituent units link up all the stages of production i.e. from purchasing of raw material to its finishing.

Objectives of Vertical Business Combination

  • To regular the supply of raw material
  • To achieve economy in the purchasing and other sectors.
  • To locate the assured market for their products
  • To minimize the cost per unit.
  • To eliminate competition.
  • To avoid over production.
  • To reduce the middle man’s commission.
  • To supervise the management and production of effectively.
Vertical Business Combination

Horizontal Business Combination

When two or more similar nature of business units combine under one management Horizontal combination comes into form. For instances two or more textile industrial undertakings unite under single management it is called horizontal combination. It is also known as a parallel combination

Horizontal Business Combination

Objectives of Horizontal Business Combination

  • To achieve benefits of large scale production.
  • To avoid competition.
  • To obtain economy in management and production.
  • To regulate the prices of product.
  • To hire the service of outstanding talented persons.
  • To increase the efficiency of constituent units.
  • To produce the goods at minimum cost.
  • To supply the goods at possible lowest prices.
  • To secure the market of the product.
  • To introduce the improved method of production.
  • To avoid over production.

Circular Business Combination

When different natures of industrial business units combine into single large company under one managing authority it is called circular combination. It is also named as lateral combination.

For example if sugar; chemical and glass industries are combined together under one controlling authority, circular combination takes place.

Circular Business Combination

Objectives of Circular Business Combination

  • To establish the cordial relation among the constituent units.
  • To supervise the production and management most effectively.
  • To promote the cooperation in financing advertising, research and other overheads.

Diagonal Business Combination

Diagonal combination takes place when two or more business units rendering subsidiary services unite under main industry. Suppose if repairing and distributing units are combined with textile industrial unit, it is called diagonal combination.

Objectives of Diagonal Business Combination

  • To maintain the quality of the product.
  • To reduce the cost per unit.
  • To achieve the economy in various overheads.
  • To promote the efficiency of business
Diagonal Business Combination

Rights and Duties of Collective Bargaining Agent

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Collective Bargaining Agent is the agent of the workmen in the establishment or, as the case may be industry, in the matter of collective bargaining.

It means the trade union of workmen which is formed for the purpose of regulating the relation between workmen and employers or for imposing restrictive conditions on the conduct of any trade or business

Representation of Collective Bargaining Agent

In case of one trade union

Where there is only one registered trade union in an establishment or a group of establishment and the number of the members of such a trade union is not less than one third of the total number of workers in the establishment an application has been made for the purpose. The Registrar of trade union will certify such a trade union to be a collective bargaining agent.

Incase of more than one Trade Union

Where there are more registered trade union than one in an establishment or a group of establishments, the Registrar shall, upon an application made in this behalf by any union having not less than 1/3 members of total workers employed.

In such establishment or group of establishments or by the employer, or the government hold within fifteen days from making of the application, a secret ballot to determines as to which one of such trade unions shall be the collective bargaining agent form the establishment or group

Rights and Duties of Collective Bargaining Agent

The rights and duties of collective Bargaining Agent in relation to an establishment or group of establishment are given below:-

The Terms of Employment

He undertakes collective bargaining with the employer or employers an matters connected with employment, non–employment, the terms of employment or the conditions of work.

Nomination of Representative

He can nominate representative of workmen on the Board of Trustees of any welfare institution or Provident funds and of the worker’s participation fund.

Representation of Workman

He represents all or any of the workman in any proceedings.

Giving of Notice

The collective bargaining agent can give notice and declare a strike in according with provisions of ordinance.

Nomination of workers

He nominates workers representations on the Management committee which is to be constituted under section 23B to participate in Management.

Nominations of Shop Stewards

He can nominate shop stewards, who is required by section 23A to act as link between labour and management.

Appointment of Auditors

The collective bargaining Agent appoints auditors to audit accounts in case workers doubt the accuracy of the accounts already audited by the Managements auditors.

The Statement In Lieu of Prospectus

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A prospectus may be defined as any advertisement, notice circular or other invitation, offering to the public for subscription or purchase of any share or debenture of the company. It is the nature of the contract between the company and the person who buys the shares.

The object of these documents is to convince the public to make an application for shares or debentures in the company. A public company is entitled to subscribe to its shares by means of a prospectus after receiving the certificate of incorporation.

Prospectus or Statement in Lieu of prospectus must be submitted to the registrar’s office before publication. Prospectus may be dated and signed by all the directors or proposed directors or his agents authorized in writing. Every copy issued to the public must, on the face of it state that a copy has been so submitted to registrar’s office.

Grounds for Issuing Statement in Lie of Prospectus

Do not want to Issue Prospectus

If a company does not want to issue a prospectus to the public for subscription of the shares, this statement is required to be issued to the public for necessary information.

It must be signed by every person named in it as a director or by his agent authorized in writing: The nature of the information of this document is more or less similar to that given in the prospectus.

A copy of this statement must be filed with the registrar within the prescribed time. This provision does not apply to a private company.

Share Certificate

A share certificate is a document issued under the common seal of the company and it states the extent of the interest of its holder in the company’s capital.

This certificate is usually given free of charge to every member whose name is entered in the register of members. It indicates the name, address and other particulars of the holder, the number of shares and the amount paid upon share held by him.

Share Warrant

This document is issued under the common seal of the company in respect of fully paid up shares. It is a negotiable instrument which is transferable by mere delivery. It must be stamped – according to the market value of the shares. It may be issued with- coupons attached by means of which the holder is entitled to claim and dividend.

Common Seal

Every company must have a common seal with its registered name engraved there in legible letters. It acts as the official signature of the company. Regulations governing the use and custody of the seal are laid down in the Articles of Association. It is generally to be used by the authority of the directors.

It is not necessary to use it on all documents. But the seal is required on documents when demanded by the company Ordinance or Articles of Association i.e. debentures, share certificate or share warrant.

Dividend

A dividend is that portion of the company’s net profit which is distributed among the shareholders in proportion to the number of shares holding. It is first declared at the Board of Directors Meeting which is finally approved by shareholders at the annual general meeting.

Until a dividend is declared, no shareholders can claim any return on the capital he has invested in the: company. It must be paid out of the profits of the company. The directors are empowered to transfer some portion of profits to reserve fund before recommending a dividend.

Minimum Subscription

It is the minimum amount of shares subscribed by the public before the directors can proceed to allotment. The amount of minimum subscription fixed by the Memorandum or the Articles and named in the prospectus under the heading i.e., preliminary expenses, underwriting commission, working capital and repayment of loans.

If no such amount is fixed then the whole of the capital offered for subscription must be subscribed by the public. This is intended to ensure that the company will not commence the business without adequate capital.

Transmission of Shares

It signifies a change in ownership of the securities through the operation of law in case of death or insolvency of members. The right of the member is automatically transferred to his legal representatives after his death.

Similarly, on becoming bankrupt, a member’s shares may be transferred to a trustee by operation of law. The trustee must, however, prove to the company that he is entitled to deal with bankrupt’s shares.

Underwriting

The person who takes the risk to purchase a specified number of the shares and debentures of a newly floated company is known as an underwriter. He receives a commission in exchange for his services which is called underwriting commission.

So, the act of sale insurance by a specialized person in consideration of commission is named as underwriting. Sometimes underwritings do not want to take the whole risk, he may transfer a part to sub-underwriter which is arranged by means of a contract.

Contents of the Prospectus

The object of these documents is to convince the public to make an application for shares or debentures in the company. A public company is entitled to subscribe to its shares by means of a prospectus after receiving the certificate of incorporation. Before publication, it must be submitted to the registrar office.

The prospectus may be dated and signed by all the directors or proposed directors or his agents authorized in writing. Copies should be submitted to the public and must mention it about submission to the public.

Every prospectus issued by a public company must contain particulars:

Objectives

The main object for which the company is formed.

Particulars of Founders

  • The names, addresses and other particulars of founders.
  • Number of founders.
  • Their interest in the property and profit of the company.

Share Capital

The different classes of shares, number of each kind value of the share.

Dividend Right

Dividend capital and voting rights various classes of shares.

List of Directors

The names addresses and description of directors or proposed     directors.

Share Qualification

The number of shares if it is described in the Articles directors.

Remuneration of Directors

Any provisions in the Articles as to the remuneration of directors.

Minimum Subscription

The minimum subscription on which the directors may allot the shares. Amount payable on application and allotment.

Time of Opening

The lime of the opening of the subscription list.

Preliminary Expenses

The amount of the preliminary expenses commission so payable in this   regard.

Result of the Issue of the Shares

If the company has issued the various types of securities within the preceding two years, the results of the issue is to be given.

Underwriting Commission

The amount of underwriting commission paid within previous two years in respect of issue of shares. The names of underwriter of shares must be mentioned.

Property Purchased

The value and other detail of property purchased. The amount has been paid in cash or shares or debentures for such property.

Name of Vendor

The name and addresses of vendors. The amount paid or payable in cash or securities.

Material Contract

Date time and condition of contract made by founders with different parties.

Interest of Directors

Full particular of the nature of interest of each director in all the matters of the company.

Auditor’s report

If the company has already been carrying on business prior to the issue of prospectus, the auditor’s report must contain i.e. profit and losses, asset and liability, rate of dividend etc.

Accountant’s Report

By name accountant’s report must also be included in the prospectus if the procedure of the issue of shares are to be applied in the purchase of any business.

Auditors

The name the auditors of the company.

Promoter Benefit

The benefit given to any promoter in term of money or goods with the two previous years and the consideration given by him.

Preferential treatment

Particulars of .any preferential treatment given to any person to subscribe for any share or debenture of the company.

Duration

Duration for which the business is to be conducted where the period is less than three years.

Restriction

If there is any restriction imposed by the Articles upon the members of the company in respect of proxy, voting attending and speaking.

Filling of the Prospectus

Statement that a copy has been submitted to the registrar’s office.

Classes of Contract

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Agreement between two or more members is known as a contract. A partnership deed is the best example of contact. Contracts are signed in an opening bank account, taking a payday loan and everything you sign for buying product/service. It’s awful.

Main Classes of Contract

Valid

A valid contract is one which is enforceable by law. the object of such a bond is to create an outstanding obligation between the parties, one party shall be bound to some performance, the other shall have a legal right to enforce.

Void

An agreement which is not enforceable by law is void. Such an agreement creates no legal right and obligations on either side, e.g. an agreement with an alien enemy, an agreement by way of wages, an agreement in restraint of trade. It is, in fact, a mere nullity. It may be treated as of no legal effect because it is contrary to some law or opposed to public policy.

Voidable Contract

A voidable contract is “an agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others”. e.g. a contract induced by fraud or misrepresentation or coercion, in other words, this type is, where an aggrieved party, thereto may avoid or repudiate while the other party cannot do so.

Unenforceable

The court, under certain circumstances, will not enforce a contract which is otherwise valid because of the technical difficulty created by the law of procedure generally, Such contracts are also called unenforceable which are incapable of proof owing to the neglect of some formalities required by special provisions of law. The most important contracts in this class are of guarantee and for the sale or other disposition of land of any interest in land.

Illegal Contract

The term “illegal” is used generally the wider sense. These types of contract are considered contrary to law and prohibited by law on pain of penalty where a void contract does not. All illegal contracts are void, but all void contracts are not illegal such as wagering agreement is void but not illegal

Contract on the Basis of their Performance

Executed Contract

An executed contract is one that has been fully performed by all parties. It is obvious, of course, that a contract may at a give time be at one of the various stages of execution

A contract may be executed at once, as in the case of cash sale; or it may be executed or performed in the future.

Executory Contract

An executory contract is one upon which no performance has taken place. For example, if a utility company agrees to furnish electricity to another party for a specified period of time at a stipulated price, the contract is executory. If the entire price is paid in advance, the commitment is still deemed executory, although, strictly speaking, it is executed on one side an executory on the other.

Contract on the Basis of Creation

Express Contract

An express contract is the result of the written or spoken words of the parties; these words establish the contractual relationship. The agreement and its terms are declared by the parties and are not left to interference or to be understood.

Implied Contract

An implied contract is one in which the evidence of the agreement is not shown by words, written or spoken, but by the acts and conduct of the parties. Such an agreement arises, for example, when one person, without being requested to do so, renders services under circumstances indicating that he expects to be paid for them, and the other person, knowing such circumstances accepts the benefit of those services.

Quasi Contract

Under certain circumstances the law imposes an obligation to pay for a benefit received as through a contract had actually been made. This will be done in a limited number of situations in order to attain an equitable or just result.

For Example

when a homeowner permits repairs to be made on his home with the knowledge that they are being made by a stranger who would expect to be paid for such repairs, there is quasi-contractual duty to pay for the reasonable value of the improvements.

In order to distinguish this type of obligation from a true contract which is based upon the agreement of the parties, the obligation is called a Quasi.

Contracts on the Basis of Nature

Bilateral Contracts

A bilateral contracts is created by an exchange of promises

Illustration

X promises to marry Y, and Y promises to marry X, this is a bilateral agreement.

Unilateral Contract

This type of contract is an exchange of a promise for an act. Since only one party is obliged to perform after the contract has been made, this is called unilateral contract.

Illustration

At Y’s request, X extends Rs. 2 lacs worth of credit to Z, and Y agrees to pay this sum in the even of Z’s default. This is unilateral contract, consisting of X’s act in exchange for Y’s promise for repayment.

Contingent Contract

Where the performance of contract depends upon the happening of uncertain event in the future it is called contingent contract.

According to section 31, It is a contract, to do or not to do something, if some event, collateral, to such legal commitments, does or does not happen.

Formal Contract

Formal contractors are those which are required to meet established standards of form, such as negotiable instruments; or those executed under seal. Must have essentials to be a valid contract

  • Writing
  • Signature
  • Seal
  • Delivery

Informal Contract

Most contracts are not required to conform to a set form or pattern. Such is referred to as being informal or simple. It may be written or oral. It must have consideration to support it otherwise it is not enforceable.