CSEET Legal Aptitude

Legal Aptitude
CHAPTER NO. PARTICULARS PAGE NO.
1. Indian Constitution 1-31
2. Elements of General Laws

A. Indian Contract Act 32-69
B. Law of Torts 70-82
3. Elements of Company 83-95

Secretaries Legislation
4. Elements of Company Law 96-119
5. Legal Reasoning 120-147
n corporate law) YES Academy, Pune 8888 235 235 0

CSEET Legal Aptitude and Logical Reasoning Constitution
CHAPTER 1- INDIAN CONSTITUTION
SOME SALIENT FEATURES OF OUR INDIAN CONSTITUTION
- The Constitution of India is the Supreme Law of India and is popularly known as 'Mother of
all the laws' because all other laws derive their authority and force from the Constitution.
- The Constituent Assembly under the Chairmanship of Dr. B.R. Ambedkar, took almost 3
years (2 years, 11 months and 17 days) to draft the Constitution.
- It was adopted on 26th November, 1949 and came into force on 26th January, 1950. With
the adoption of the Constitution, India became modern Republic of India.
- It is a comprehensive document containing 395 Articles (divided into 22 Parts) and 12
Schedules.
- The Constitution of India is the longest written constitution of any sovereign country in the
world.
Adv Chirag Chotrani (B.com, LLB, LLM, Diploma in corporate law) YES Academy, Pune 8888 235 235 1
Note:
a. The vision of our founding fathers and the aim and objectives which they wanted to
achieve through the Constitution are contained in the Preamble
b. The vision of socio-economic change through the Constitution is reflected in its
Preamble.
c. The Preamble expresses the ideals and aspirations of the new India.
The Constitution places a pre-eminent emphasis on the values of liberty

and justice, on treating all citizens as equal before law and on
safeguarding the rights of minorities and the oppressed. The
people of India derive their existence as a political community from the
Constitution, which “we the people”, gave to ourselves and, in the process
established the Republic of India. It is because the
country is Republic, and not a mere democracy, that the people are enjoined
to nurture and indeed celebrate, their linguistic, ethnic, cultural and religious
diversity and to ensure that the citizens do not
What does the above-mentioned terms in the preamble mean?

a. The expression “Sovereign” signifies that the Republic is externally and internally sovereign.
Sovereignty in the strict and narrowest sense of the term implies independence all round,
within and without the borders of the country.
b. As discussed above, legal sovereignty is vested in the people of India and political sovereignty
is distributed between the Union and the States.
c. The democratic character of the Indian polity is illustrated by the provisions conferring on
the adult citizens the right to vote and by the provisions for elected representatives and
responsibility of the executive to the legislature.
d. The word “Socialist”, added by the 42nd Amendment, aims to secure to its people “justice—
social, economic and political”. The Directive Principles of State Policy, contained in Part IV
2
of the Constitution are designed for the achievement of the socialistic goal envisaged in the
preamble.
e. The expression “Democratic Republic” signifies that our government is of the people, by the
people and for the people.
WHETHER CONSTITUTION OF INDIA IS FEDERAL OR UNITARY?
a. Constitution of India is basically federal but with certain unitary features.

b. The majority of the Supreme Court judges in Kesavananda Bharati v. State of Kerala, were
of the view that the federal features form the basic structure of Indian Constitution.
c. However, there are discussions as to whether the Indian Constitution establishes a federal
system or it stipulates a unitary form of Government with some basic federal features. Thus,
to decide whether Constitution is federal, unitary or quasi federal, it would be better to have
a look at the contents of the Constitution.
d. The essential features of a Federal Polity or System are—dual Government, distribution
of powers, supremacy of the Constitution, independence of Judiciary, written
Constitution, and a rigid procedure for the amendment of the Constitution.
e. The political system introduced by our Constitution possesses all the aforesaid essentials of a
federal polity as both the Union and the State Governments and their respective organs
derive their authority from the Constitution and it is not competent for the States to secede
from the Union.
f. There is a division of legislative and executive powers between the Union and the State
Governments. The Supreme Court stands at the head of our judiciary to guard against the
violation of the constitutional provisions. The Supreme Court decides disputes between the
Union and the States, or the States inter se and interprets finally the provisions of the
Constitution.
FUNDAMENTAL RIGHTS
Fundamental rights are the very basic rights that are universally recognized as most essential
for human existence and indispensable for human development. These are required for the
attainment of intellectual, moral, spiritual status of an individual. Articles 12 to 35 contained
in Part III of the Constitution deal with Fundamental Rights. Fundamental Rights are
described as Magna Carta of India. Few fundamental rights are given only to citizens.
Classification of Fundamental Rights
Part III of the Indian Constitution guarantees six categories of fundamental rights.
These are:
a. Right to Equality — Articles 14 to 18;
b. Right to Freedom — Articles 19 to 22;
c. Right against Exploitation — Articles 23 and 24;
d. Right to Freedom of Religion — Articles 25 to 28;
e. Cultural and Educational Rights — Articles 29 and 30;
f. Right to Constitutional Remedies — Articles 32.
Note:
a. Previously the right to property under Article 31 was also guaranteed as a Fundamental
Right which has been removed by the 44th Constitutional Amendment Act, 1978. Now
right to property is not a fundamental right, it is now only a legal right.
b. Apart from this, Articles 12 and 13 deal with definition of ‘State’ and ‘Law’ respectively.
STATE
Under Article 12, unless the context otherwise requires, “the State” includes—
(a) the Government and Parliament of India;
(b) the Government and the Legislature of each of the States; and
(c) all local or other authorities:
- within the territory of India; or
- under the control of the Government of India.
The expression ‘local authorities’ refers to authorities like Municipalities, District Boards,
Panchayats, Improvement Trusts, Port Trusts and Mining Settlement Boards. In Ajay Hasia v.
Khalid Mujib, AIR 1981 SC 481, the Supreme Court has enunciated the following test for
determining whether an entity is an instrumentality or agency of the State:
1. If the entire share capital of the Corporation is held by the Government, it would go a long
way towards indicating that the corporation is an instrumentality or agency of the
Government.
2. Where the financial assistance of the State is so much as to meet almost the entire
expenditure of the corporation it would afford some indication of the corporation being
impregnated with government character.
3. Whether the corporation enjoys a monopoly status which is conferred or protected by the
State.
4. Existence of deep and pervasive State control may afford an indication that the corporation
is a State agency or an instrumentality.
5. If the functions of the corporation are of public importance and closely related to government
functions, it would be a relevant factor in classifying a corporation as an instrumentality or
agency of government.
6. If a department of government is transferred to a corporation, it would be a strong factor
supporting an inference of the corporation being an instrumentality or agency of government.
JUSTIFIABILITY OF FUNDAMENTAL RIGHTS
a. Article 13 gives teeth to the fundamental rights. It lays down the rules of interpretation in
regard to laws inconsistent with or in derogation of the Fundamental Rights.
b. Existing Laws: Article 13(1) relates to the laws already existing in force, i.e. laws which were
in force before the commencement of the Constitution. A declaration by the Court of their
invalidity, however, will be necessary before they can be disregarded and declares that pre-
constitution laws are void to the extent to which they are inconsistent with the fundamental
rights.
c. Future Laws: Article 13(2) relates to future laws, i.e., laws made after the commencement of
the Constitution. After the Constitution comes into force the State shall not make any law
which takes away or abridges the rights conferred by Part III and if such a law is made, it
shall be void to the extent to which it curtails any such right.
d. Law includes any Ordinance, order, bye-law, rule, regulation, notification, custom or usage
having in the territory of India, the force of law.”
AMENDIBILITY OF FUNDAMENTAL RIGHTS
a. Article 13 provides that any Law (pre/post constitution) will be invalid if the law is against
the Fundamental rights. It provides that, State shall not make any law which takes away,
amend or abridges the Fundamental rights.
b. The issue came up before the Supreme Court as to whether a Constitutional Amendment by
which a fundamental right is taken away or abridged is also a law within the meaning of
Article 13. The Court in the famous Golaknath case took the view that it includes such an
amendment and, therefore, even a Constitutional amendment would be void to the extent it
takes away or abridges any of the fundamental rights.
c. Finally, in Keshav Anand Bharti v. State of Kerala Supreme Court had held that the
fundamental rights can be affected by Constitutional Amendment provided basic
structure of Constitution is not amended.
RIGHT TO EQUALITY ARTICLE 14-18
ARTICLE 14: EQUALITY BEFORE THE LAW AND EQUAL PROTECTION OF THE LAWS
a. Article 14 of the Constitution says that “the State shall not deny to any person equality
before the law or the equal protection of the laws within the territory of India”.
b. As is evident, Article 14 guarantees to every person the right to equality before the law or
the equal protection of the laws. The expression ‘equality before the law’ which is barrowed
from English Common Law is a declaration of equality of all persons within the territory of
India, implying thereby the absence of any special privilege in favor of any individual. Every
person, whatever be his rank or position is subject to the jurisdiction of the ordinary courts.
c. The second expression “the equal protection of the laws” which is based on the last clause
of the first section of the Fourteenth Amendment to the American Constitution directs that
equal protection shall be secured to all persons within the territorial jurisdiction of the Union
in the enjoyment of their rights and privileges without favouritism or discrimination.
d. Article 14 applies to all persons and is not limited to citizens. A corporation, which is a
juristic person, is also entitled to the benefit of this Article (Chiranjit Lal Chowdhurary v.
Union of India, AIR 1951 SC 41). The right to equality is also recognised as one of the basic
features of the Constitution (Indra Sawhney v. Union of India, AIR 2000 SC 498)..
ARTICLE 15: PROHIBITION OF DISCRIMINATION ON GROUNDS OF RELIGION ETC.
Article 15(1) prohibits the State from discriminating against any citizen on grounds only of:
(I) Religion
(II) Race
(III) Caste
(IV) Sex
(V) place of birth or
(VI) any of them
Article 15(2) lays down that no citizen shall be subjected to any disability, restriction or
condition with regard to:
• access to shops, public restaurants, hotels and places of public entertainment; or
• the use of wells, tanks, bathing Ghats, roads and places of public resort, maintained wholly
or partially out of State funds or dedicated to the use of the general public.
Article 15(3) and 15(4) create certain exceptions to the right:
• Under Article 15(3) the State can make special provision for women and children.
• Article 15(4) permits the State to make special provision for the advancement of—(i)
Socially and educationally backward classes of citizens; (ii) Scheduled casts; and (iii)
Scheduled tribes
ARTICLE 16: EQUALITY OF OPPORTUNITY IN MATTERS OF PUBLIC EMPLOYMENT
Article 16 guarantees to all citizens’ equality of opportunity in matters relating to

employment or appointment of public office under the State. However, there are certain
exceptions provided in Article. These are as under:
• Parliament can make a law requiring residential qualifications within that State or Union
Territory prior to such employment or appointment for e.g. - domicile requirements.
• A provision can be made for the reservation of appointments or posts in favour of any
backward class of citizens which in the opinion of the State is not adequately represented in
the services under the State.
• A law shall not be invalid if it provides that the incumbent of an office in connection with
the affair of any religious or denominational institution or any member of the governing body
thereof shall be a person professing a particular religion or belonging to a particular
denomination.
ARTICLE 17: ABOLITION OF UNTOUCHABILITY
Article 17 says that “Untouchability” is abolished and its practice in any form is forbidden.
The enforcement of any disability arising out of “Untouchability” shall be an offence
punishable in accordance with law.
ARTICLE 18: ABOLITION OF TITLES
Article 18 abolish all the titles conferred on various Indian citizens by British government and
the use of those titles is prohibited as it results in creating superior and inferior classes of
citizens. No title, not being a military or academic distinction, shall be conferred by the
State. No citizen of India shall accept any title from any foreign State.
ARTICLE 19: RIGHTS RELATING TO FREEDOM
Articles 19-22 guarantee certain fundamental freedoms.
The Six Freedoms of Citizens

Article 19(1), of the Constitution, guarantees to the citizens of India six freedoms, namely:
(a) Freedom of speech and expression;
(b) Assemble peaceably and without arms;
(c) Form associations or unions
(d) Move freely, throughout the territory of India;
(e) Reside and settle in any part of the territory of India;

(f) Practice any profession, or to carry on any occupation, trade or business.
- These freedoms are those great and basic rights which are recognized as the natural rights
inherent in the status of a citizen. At the same time, none of these freedoms is absolute
but subject to reasonable restrictions specified under clauses (2) to (6) of the Article 19.
- The Constitution under Articles 19(2) to 19(6) permits the imposition of restrictions on
these freedoms subject to the following conditions:
a. The restriction can be imposed by law and not by a purely executive order issued under a
statute;
b. The restriction must be reasonable;
c. The restriction must be imposed for achieving one or more of the objects specified in the
respective clauses of Article 19.
Article 19(2) specifies the limits up to which the freedom of speech and expression may be
restricted. It enables the Legislature to impose by law reasonable restrictions on the freedom
of speech and expression under the following heads:
Permissible Restrictions
(1) Sovereignty and integrity of India
(2) Security of the State
(3) Friendly relations with foreign States
(4) Public Order
(5) Decency or morality
(6) Contempt of court
(7) Defamation
(8) Incitement to an offence
ARTICLE 21: RIGHT TO LIFE AND PERSONAL LIBERTY
Every person has a right to life which shall not be denied by the state. However, if due
procedure is followed then the right to life can be denied. So, this is not an absolute right.
For example, Imprisonment or death sentence to criminal.
Liberty means dignity of a person, so right to life is available with dignity.

Thus Article 21 seeks to prevent encroachment upon personal liberty by the executive except
in accordance with law and in conformity with the provisions of the law. The scope,
application and effect of Article 21 may be well understood through the following important
judicial decisions:
• Case Law- Philips Alfred Malvin v Y.J. Gonsalvis
It was held that right to life includes those things which make life meaningful. For instance,
the right of a couple to adopt a son.
• Case Law- A.K. Gopalan v State of Madras
In this case a very narrow meaning was given to the expression personal liberty confining it
to the liberty of the persons, i.e. of the body of a person.
• Case Law- Kharak Singh v State of U.P
That the expression “personal liberty” is not limited to bodily restraint or to confinement to
prison only is well illustrated by Kharak Singh v State of U.P. In this case, the question
raised was of the validity of the police regulation authorizing the police to conduct what are
called domiciliary visits against bad characters and to have surveillance over them. The court
held that such visits were an invasion on the part of the police, of the sanctity (purity or
holiness) of a man’s house and interruption into his personal security and his right to sleep,
and therefore violative of personal liberty of the individual, unless authorized by a valid law.
• Case Law- Satwant Singh Sawhney v Assistant Passport Officer, New Delhi (Very
Important)
In this case it was held that right to travel abroad is included within the expression ‘personal
liberty’ and therefore, no person can be deprived of his right to travel except according to
the procedure established by law. Since a passport is essential for the enjoyment of this
right, the denial of a passport amounts to deprivation of personal liberty. At present, personal
liberty includes various other liberties like right to bail, public interest, litigation, right to free
legal aid, right to speedy trial, etc. The expression “procedures establish law” means
procedure laid down by statute or prescribed by the law of the State.
ARTICLE 21A: RIGHT TO EDUCATION
This was introduced by the Constitution (Eighty sixth Amendment) Act, 2002. According to
this, the State shall provide free and compulsory education to all children of the age of six to
fourteen years in such manner as the State may, by law, determine.
RIGHT AGAINST EXPLOITATION
According to, Article 23 of Constitution of India traffic in human beings and beggar and
other similar forms of forced labour are prohibited and any contravention of Article 23 shall
be an offence punishable in accordance with law. Further, as per Article 24 of Constitution
of India, no child below the age of fourteen years shall be employed to work in any factory
or mine or engaged in any other hazardous employment
RIGHT TO FREEDOM OF RELIGION
Articles 25, 26, 27 and 28 of Constitution of India deals with right to Freedom of Religion.
ARTICLE 25: RIGHT TO FREEDOM OF RELIGION
Article 25 gives to every person the freedom of conscience, and the right freely to profess
practice and propagate religion. But this freedom is subject to restrictions imposed by the
State on the grounds of-public order, morality and health.
ARTICLE 26: FREEDOM TO MANAGE RELIGIOUS AFFAIRS
It grants to every religious denomination or any sect thereof the right:

• To establish and maintain institutions of religious and charitable purposes;
• To manage its own affairs in matters of religion;
• To own and acquire movable and immovable property; and
• To administer such property in accordance with law.
All these rights are subject to public order, morality
ARTICLE 27: FREEDOM AS TO PAYMENT OF TAX FOR THE PROMOTION OF ANY

PARTICULAR RELIGION
According to Article 27, no person can be compelled to pay any taxes, the proceeds of which
are specially appropriated in payment of expenses for the promotion or maintenance of any
particular religion or religious denomination.
ARTICLE 28: FREEDOM AS TO ATTENDANCE AT RELIGIOUS INSTRUCTION OR RELIGIOUS

WORSHIP IN EDUCATIONAL INSTITUTIONS
Article 28 states that no religious instruction can be provided in any educational institution
wholly maintained out of State funds. However, this prohibition does not extend to an
educational institution which is administered by the State but has been established under
any endowment or trust which requires that religious instruction shall be imparted in such
institution.
ARTICLE 32: RIGHT TO CONSTITUTIONAL REMEDIES
- Article 32 guarantees the enforcement of Fundamental Rights.

- Article 32 makes it a fundamental right that a person whose fundamental right is violated
has the right to move the Supreme Court by appropriate proceedings for the enforcement of
this fundamental right.
- A person need not first exhaust the other remedies and then go to the Supreme Court. On
the other hand, he can directly raise the matter before highest Court of the land and the
Supreme Court is empowered to issue directions or orders or writ.
- The right guaranteed by Article 32 cannot be suspended except as provided in the
Constitution. Constitution does not contemplate such suspension except by way of
President’s order under Article 359 when a proclamation of Emergency is in force.
DIRECTIVE PRINCIPLES OF STATE POLICY
The Sub-committee on Fundamental Rights constituted by the Constituent Assembly had

suggested two types of Fundamental Rights — one which can be enforced in the Courts of
law and the other which because of their different nature cannot be enforced in the law
Courts. Later on, however, the former was put under the head ‘Fundamental Rights' as Part
III which we have already discussed and the latter were put separately in Part IV of the
Constitution under the heading ‘Directive Principles of State Policy' which are discussed in
the following pages.
The Articles included in Part IV of the Constitution (Articles 36 to 51) contain certain
Directives which are the guidelines for the future Government to lead the country. Article 37
provides that the ‘provisions contained in this part (i) shall not be enforceable by any Court,
but the principles therein laid down are nevertheless (ii) fundamental in the governance of
the country and it shall be the duty of the state to apply these principles in making laws.
The Directives, however, differ from the Fundamental Rights contained in Part-III of the
Constitution or the ordinary laws of the land in the following respects:
i. The Directives are not enforceable in the courts and do not create any justiciable rights in
favour of individuals.
ii. The Directives require to be implemented by legislation and so long as there is no law
carrying out the policy laid down in a Directive neither the state nor an individual can violate
any existing law.
iii. The Directives per-se does not confer upon or take away any legislative power from the
appropriate legislature.
iv. The courts cannot declare any law as void on the ground that it contravenes any of the
Directive Principles.
v. The courts are not competent to compel the Government to carry out any Directives or to
make any law for that purpose.
Though it is the duty of the state to implement the Directives, it can do so only subject to
the limitations imposed by the different provisions of the Constitution upon the exercise of
the legislative and executive power by the state.
Important Directive Principles:

The important Directive Principles are enumerated below:
A. State to secure a social order for the promotion of welfare of the people:
i. The State must strive to promote the welfare of the people by securing and protecting as
effectively as it may a social order in which justice, social, economic and political should
inform all the institutions of the national life (Article 38).
ii. The State shall, in particular, strive to minimize the inequalities in income and endeavor to
eliminate inequalities in status, facilities, and opportunities, not only amongst individuals but
also among groups of people residing in different areas or engaged in different vocations.
(introduced by Constitution 44th Amendment Act).
B. Certain principles of policy to be followed by the State. The State, particularly, must direct
its policy towards securing:
i. that the citizens, men and women equally, have the right to an adequate means of livelihood;
ii. that the ownership and control of the material resources of the community are so distributed
as best to sub serve the common goods;
iii. that the operation of the economic systems does not result in the concentration of wealth
and means of production to the common detriment;
iv. equal pay for equal work for both men and women;
v. that the health and strength of workers and children is not abused and citizens are not
forced by the economic necessity to enter a vocation unsuited to their age or strength
vi. that childhood, and youth are protected against exploitation and against moral and material
abandonment (Article 39).
vii. the State shall secure that the operation of legal system promotes justice on a basis of
equal opportunity, and shall, in particular provide free legal aid, by suitable legislation or
schemes or in any other way, to ensure that opportunities for securing justice are not denied
to any citizen by reason of economic or other disabilities (Article 39A).
C. The State must take steps to organize the Village Panchayats and enable them to function
as units of self-government (Article 40).
D. Within the limits of economic capacity and development the State must make effective
provision for securing the right to work, to education and to public assistance in case of
unemployment, old age, etc. (Article 41).
E. Provision must be made for just and humane conditions of work and for maternity relief
(Article 42).
F. The State must endeavor to secure living wage and good standard of life to all types of
workers and must endeavor to promote cottage industries on an individual of co-operative
basis in rural areas (Article 43).
(ff) The State take steps, by suitable legislation or in any other way, to secure the participation
of workers in the management of undertakings, establishments or other organizations
engaged in any industry (Article 43A).
G. The State must endeavor to provide a uniform civil code for all Indian citizens (Article 44).
H. Provision for free and compulsory education for all children up to the age of fourteen years
(Article 45).
I. The State must promote the educational and economic interests of Scheduled Castes,
Scheduled Tribes and other weaker sections (Article 46).
J. The State must regard it one of its primary duties to raise the level of nutritional and the
standard of living and to improve public health and in particular it must endeavor to bring
about prohibition of the consumption, except for medicinal purposes, in intoxicating drinks
and of drugs which are injurious to health (Article 47).
K. The State must organize agriculture and animal husbandry on modern and scientific lines and
improve the breeds and prohibit the slaughter of cows and calves and other milch and
draught cattle (Article 48).
(kk) The State shall endeavor to protect and improve the environment and to safeguard the
forests and wild life of the country (Article 48A).
L. Protection of monuments and places and objects of national importance is obligatory upon
the State (Article 49).
M. The State must separate executive from judiciary in the public services of the State (Article
50).
N. In international matters the State must endeavour to promote peace and security, maintain
just and honourable relations in respect of international law between nations, treaty
obligations and encourage settlement of international disputes by arbitration (Article 51).
FUNDAMENTAL DUTIES
Article 51A imposing the fundamental duties on every citizen of India was inserted by the
Constitution Forty- second Amendment) Act, 1976.
The objective in introducing these duties is not laid down in the Bill except that since the
duties of the citizens are not specified in the Constitution, so it was thought necessary to
introduce them.
These Fundamental Duties are:
a. To abide by the constitution and respect its ideals and institutions, the National Flag and
the National Anthem;
b. To cherish and follow the noble ideals which inspired our national struggle for freedom;
c. To uphold and protect the sovereignty, unity and integrity of India;
d. To defend the country and render national service when called upon to do so;
e. To promote harmony and the spirit of common brotherhood amongst all the people of India
transcending religious, linguistic and regional or sectional diversities; to renounce practices
derogatory to the dignity of women;
f. To value and preserve the rich heritage of our composite culture;
g. To protect and improve the natural environment including forests, lakes, rivers and wild life,
and to have compassion for living creatures;

h. To develop the scientific temper, humanism and the spirit of inquiry and reform;
i. To safeguard public property and to abjure violence;
j. To strive towards excellence in all spheres of individual and collective activity so that the
nation constantly rises to higher levels of endeavour and achievement;
k. To provide opportunities for education to one's child or, as the case may be, ward between
the age of six and fourteen years.
Since the duties are imposed upon the citizens and not upon the States, legislation is
necessary for their implementation. Fundamental duties can't be enforced by writs
(Surya Narain v. Union of India, AIR 1982 Raj 1).
CITIZENSHIP
"The State is a compound made of citizens; and this compels us to consider who should
properly be called a citizen and what a citizen really is. The nature of Citizenship like
that of the State, is a question which is often disputed; there is no general agreement
on a single definition; the man who is a citizen in democracy is often not one in an
oligarchy."
- Aristotle
• National citizenship remains an essential and enduring feature of modern life in terms of
politics and elections, welfare state benefits, all round integration etc. Articles 5 to 9 of the
Constitution determine who Indian citizens at the commencement of the Constitution are.
Article 10 provides for their continuance as such citizens subject to the provisions of any law
that may be made by Parliament.
• Article 11 entrust the Parliament with powers to regulate the right of citizenship. In other
words, the Constitution under Article 11 expressly left acquisition and termination of
citizenship and all other matters relating thereto to the Parliament by way of legislation. The
legislation related to this matter is the Citizenship Act, 1955.
ARTICLE 5: CITIZENSHIP AT THE COMMENCEMENT OF THE CONSTITUTION
Article 5 provides that at the commencement of the Constitution, every person who has his
domicile in the territory of India and—
(a) Who was born in the territory of India; or
(b) Either of whose parents was born in the territory of India; or
(c) Who has been ordinarily resident in the territory of India for not less than five years
immediately preceding such commencement, shall be a citizen of India.
PARLIAMENT
There shall be a Parliament for the Union which shall consist of the President and two
Houses to be known respectively as the Council of States and the House of the People.
PRESIDENT
The President shall be elected by the members of an electoral college consisting of—
(a) the elected members of both Houses of Parliament; and
(b) the elected members of the Legislative Assemblies of the States.
Powers of President
In its Article 53 the Constitution lays down that the executive power of the union shall be
vested in the President. The President of India shall, thus, be the head of the ‘executive
power’ of the union. The executive power may be defined as the power of “carrying on the
business of Government” or “the administration of the affairs of the state”. Various powers
that are included within the comprehensive expression ‘executive power’ in a modern state
have been classified under following heads :
i. Administrative power, i.e., the execution of the laws and the administration of the
departments of Government.
ii. Military power, i.e., the command of the armed forces and the conduct of war.
iii. Legislative power, i.e., the summoning prorogation (The action of discontinuing a session of a
parliament), etc. of the legislature.
iv. Judicial power, i.e., granting of pardons, reprieves etc. to persons convicted of crime.
These powers vest in the President under each of these heads, subject to the limitations
made under the Constitution.
Power to Promulgate Ordinance

The most important legislative power conferred on the President is to promulgate Ordinances.
Article 123 of the Constitution provides that the President shall have the power to legislate
by Ordinances at any time when it is not possible to have a parliamentary enactment on the
subject, immediately. This is a special feature of the Constitution of India.
The ambit of this Ordinance-making power of the President is co-extensive with the
legislative powers of Parliament, that is to say it may relate to any subject in respect of
which Parliament has the right to legislate and is subject to the same constitutional
limitations as legislation by Parliament.
RAJYA SABHA (COUNCIL OF STATES)
• The Council of States shall consist of twelve members to be nominated by the President and
not more than two hundred and thirty-eight representatives of the States and of the Union
territories.
• The allocation of seats in the Council of States to be filled by representatives of the States
and of the Union territories shall be in accordance with the provisions in that behalf
contained in the Fourth Schedule of the Constitution. The members to be nominated by the
President shall consist of persons having special knowledge or practical experience in respect
of literature, science, art and social service. The representatives of each State in the Council
of States shall be elected by the elected members of the Legislative Assembly of the State
in accordance with the system of proportional representation by means of the single
transferable vote. The representatives of the Union territories in the Council of States shall
be chosen in such manner as Parliament may by law prescribe.
LOK SABHA (HOUSE OF THE PEOPLE)
Lok Sabha is composed of representatives of the people chosen by direct election on the
basis of the adult suffrage. The maximum strength of the House envisaged by the
Constitution is552, which is made up by election of up to 530 members to represent the
States, up to 20 members to represent the Union Territories and not more than two
members of the Anglo-Indian Community to be nominated by the Hon'ble President, if, in
his/her opinion, that community is not adequately represented in the House. The total
elective membership is distributed among the States in such away that the ratio between
the number of seats allotted to each State and the population of the State is, so far as
practicable, the same for all States.
COUNCIL OF MINISTERS
• There shall be a Council of Ministers with the Prime Minister at the head to aid and advise
the President who shall, in the exercise of his functions, act in accordance with such advice.
The Prime Minister shall be appointed by the President and the other Ministers shall be
appointed by the President on the advice of the Prime Minister. The total number of
Ministers, including the Prime Minister, in the Council of Ministers shall not exceed fifteen
per cent. of the total number of members of the House of the People.
• The Ministers shall hold office at the pleasure of the President. The Council of Ministers
shall be collectively responsible to the House of the People. Before a Minister enters upon his
office, the President shall administer to him the oaths of office and of secrecy. The salaries
and allowances of Ministers shall be such as Parliament may from time to time by law
determine and, until Parliament so determines, shall be as specified in the Second Schedule.
CONSTITUTION OF LEGISLATURES IN STATES
• For every State there shall be a Legislature which shall consist of the Governor, and in the
States of Andhra Pradesh, Bihar, Madhya Pradesh, Maharashtra, Karnataka, Tamil Nadu,
Telangana and Uttar Pradesh having two Houses in other States, one House.
• Where there are two Houses of the Legislature of a State, one shall be known as the
Legislative Council and the other as the Legislative Assembly, and where there is only one
House, it shall be known as the Legislative Assembly.
• The Legislative Assembly of each State shall consist of not more than five hundred, and not
less than sixty, members chosen by direct election from territorial constituencies in the
State. The total number of members in the Legislative Council of a State having such a
Council shall not exceed one third of the total number of members in the Legislative
Assembly of that State. The total number of members in the Legislative Council of a State
shall in no case be less than forty.
• Legislative Assembly of every State, unless sooner dissolved, shall continue for five years
from the date appointed for its first meeting and no longer and the expiration of the said
period of five years shall operate as a dissolution of the Assembly. The Legislative Council of
a State shall not be subject to dissolution, but as nearly as possible one third of the
members thereof shall retire as soon as may be on the expiration of every second year in
accordance with the provisions made in that behalf by Parliament by law.
GOVERNOR
• The executive power of the State is vested in the Governor and all executive action of the
State has to be taken in the name of the Governor. Normally there shall be a Governor for
each State but the same person can be appointed as Governor for two or more states. The
Governor of a State is not elected but is appointed by the President and holds his office at
the pleasure of the President. The head of the executive power to a State is the Governor
just as the President for the Union.
• The Governor possesses executive, legislation and judicial powers as the Presidents except
that he has no diplomat or military powers like the President.
• The Governor’s power to make Ordinances as given under Article 213 is similar to the
Ordinance making power of the President and have the force of an Act of the State
Legislature. He can make Ordinance only when the state Legislature or either of the two
Houses (where it is bicameral) is not in session. He must be satisfied that circumstances
exist which render it necessary to take immediate action. While exercising this power, the
Governor must act with the aid and advise of the Council of Ministers. But in following
cases, the Governor cannot promulgate any Ordinance without instructions from the
President:
a) if a Bill containing the same provisions would under this constitution have required the
previous section of the President.
b) he would have deemed it necessary to reserve a Bill containing the same provisions for the
consideration of the President.
c) an Act of the state legislature containing the same provisions would under this constitution
have been invalid under having been reserved for the consideration of the President, it had
received the assent of the President.
The Ordinance must be laid before the state legislature (when it re-assembles) and
shall automatically cease to have effect at the expiration of six weeks from the date of
the re-assembly unless disapproved earlier by that legislature.
THE JUDICIARY
1. The Supreme Court

• The Courts in the Indian legal system, broadly speaking, consist of (i) the Supreme Court,
(ii) the High Courts, and (iii) the subordinate courts. The Supreme Court, which is the
highest Court in the country (both for matters of ordinary law and for interpreting the
Constitution) is an institution created by the Constitution. Immediately before independence,
the Privy Council was the highest appellate authority for British India, for matters arising
under ordinary law. But appeals from High Courts in constitutional matters lay to the Federal
Court (created under the Government of India Act, 1935) and thence to the Privy Council.
The Supreme Court of India, in this sense, has inherited the jurisdiction of both the Privy
Council and the Federal Court. However, the jurisdiction of the Supreme Court under the
present Constitution is much more extensive than that of its two predecessors mentioned
above.
• The Supreme Court, entertains appeals (in civil and criminal and other cases) from High
Courts and certain Tribunals. It has also writ jurisdiction for enforcing Fundamental Rights. It
can advise the President on a reference made by the President on questions of fact and law.
It has a variety of other special jurisdictions.
2. High Courts
• The High Courts that function under the Constitution were not created for the first time by
the Constitution. Some High Courts existed before the Constitution, although some new High
Courts have been created after 1950. The High Courts in (British) India were established
first under the Indian High Courts Act, 1861 (an Act of the U.K. Parliament). The remaining
High Courts were established or continued under the Constitution or under special Acts. High
Courts for each State (or Group of States) have appellate, civil and criminal jurisdiction over
lower Courts. High Courts have writ jurisdiction to enforce fundamental rights and for certain
other purposes.
• Some High Courts (notably) Bombay, Calcutta and Delhi, have ordinary original civil
jurisdiction (i.e. jurisdiction to try regular civil suits) for their respective cities. High Courts
can also hear references made by the Income Tax Appellate Tribunal under the Income Tax
Act and other tribunals.
• It should be added, that the "writ" jurisdiction vested at present in all High Courts by the
Constitution was (before the Constitution came into force) vested only in the High Courts of
Bombay, Calcutta and Madras (i.e. the three Presidency towns).
3. Subordinate Courts
• Finally, there are various subordinate civil and criminal courts (original and appellate),
functioning under ordinary law. Although their nomenclature and powers have undergone
change from time to time, the basic pattern remains the same.
• These have been created, not under the Constitution, but under laws of the competent
legislature. Civil Courts are created mostly under the Civil Courts Act of each State. Criminal
courts are created mainly under the Code of Criminal Procedure.
4. Civil Courts
In each district, there is a District Court presided over by the District Judge, with a number
of Additional District Judges attached to the court. Below that Court are Courts of Judges
(sometimes called subordinate Judges) and in, some States, Munsiffs. These Courts are
created under State Laws.
5. Criminal Courts
Criminal courts in India primarily consist of the Magistrate and the Courts of Session.
Magistrates themselves have been divided by the Code of Criminal Procedure into 'Judicial'
and 'Executive' Magistrates.
6. Executive Magistrate
The Executive Magistrate do not try criminal prosecutions, and their jurisdiction is confined
to certain miscellaneous cases, which are of importance for public tranquillity and the like.
Their proceedings do not end in conviction or acquittal, but in certain other types of
restrictive orders. In some States, by local amendments, Executive Magistrates have been
vested with powers to try certain offences.
7. Justice Magistrate
• Judicial Magistrates, are of two classes: Second Class and First Class. Judicial Magistrates
are subject to the control of the Court of Session, which also in itself a Court of original
jurisdiction. The powers of Magistrates of the two classes, vary according to their grade. The
Court of Session can try all offences, and has power to award any sentence, prescribed by
law for the offence, but a sentence of death requires confirmation by the High Court.
• In some big cities (including the three Presidency towns and Ahmedabad and Delhi), the
Magistrates are called Metropolitan Magistrates. There is no gradation inter se. Further, in
some big cities (including the three Presidency towns and Ahmedabad and Hyderabad), the
Sessions Court is called the "City Sessions Court", its powers being the same as those of the
Courts of Session in the districts.
8. Special Tribunals
Besides these Courts, which form part of the general judicial set up, there are hosts of
specialised Tribunals dealing with Direct Taxes, Labour, Customs, Claims for accidents caused
by motor vehicles, Copyright and Environment, Anti- Competitive Agreement etc.
WRIT JURISDICTION OF HIGH COURTS AND SUPREME COURT
• In the words of Dicey, prerogative writs are ‘the bulwark of English Liberty’. The expression
‘prerogative writ’ is one of English common law which refers to the extraordinary writs
granted by the sovereign, as fountain of justice on the ground of inadequacy of ordinary legal
remedies. In course of time these writs were issued by the High Court as extraordinary
remedies in cases where there was either no remedy available under the ordinary law or the
remedy available was inadequate. Under the Constitution by virtue of Article 226, every High
Court has the power to issue directions or orders or writs including writs in the nature of
Habeas corpus, Mandamus, Prohibition, Quo warranto and Certiorari or any of them for the
enforcement of Fundamental Rights stipulated in Part III of the Constitution or for any other
purpose. This power is exercisable by each High Court throughout the territory in relation to
which it exercises jurisdiction. Where an effective remedy is available, the High Court should
not readily entertain a petition under Article 226 of the constitution of India e.g. under the
Companies Act, a shareholder has very effective remedies for prevention of oppression and
mismanagement. Consequently, High Court should not entertain a petition under the said
Article (Ramdas Motors Transport Company Limited v. T.A. Reddy, AIR 1997 SC 2189).
• The Supreme Court could be moved by appropriate proceedings for the issue of directions or
orders or writs, as referred to under Article 226 for the enforcement of the rights guaranteed
by Part III of the Constitution.
• Article 32 itself being a fundamental right, the Constitutional remedy of writ is available to
anyone whose fundamental rights are infringed by state action. Thus, we see the power of
the High Courts to issue these writs is wider than that of the Supreme Court
MAJOR CONSTITUTIONAL AMENDMENTS 1951 - 2019
THE CONSTITUTION (FIRST AMENDMENT) ACT, 1951
i. Added Ninth Schedule to protect the land reform and other laws included in it from the
judicial review.
ii. Added three more grounds of restrictions on freedom of speech and expression, viz.,
public order, friendly relations with foreign states and incitement to an offence. Also, made
the restrictions ‘reasonable’ and thus, justiciable in nature.
iii. Empowered the state to make special provisions for the advancement of socially and
economically backward classes.
THE CONSTITUTION (SECOND AMENDMENT) ACT, 1952
The scale of representation in the Lok Sabha by providing that one member could represent
even more than 7, 50,000 persons.
CONSTITUTION (FORTY - SECOND AMENDMENT) ACT, 1976
i. It is also known as Mini-Constitution. It was enacted to give effect to the recommendations

of Swaran Singh Committee.
ii. Added three new words (i.e., socialist, secular and integrity) in the Preamble.
iii. Added Fundamental Duties by the citizens (new Part IV A).
iv. Made the president bound by the advice of the cabinet.
v. Added three new Directive Principles viz., equal justice and free legal aid, participation of
workers in the management of industries.
vi. Shifted five subjects from the state list to the concurrent list, viz, education, forests,
protection of wild animals and birds, weights and measures and administration of
justice, constitution and organisation of all courts except the Supreme Court and the high
courts.
vii. Empowered the Centre to deploy its armed forces in any state to deal with a grave situation
of law and order.
CONSTITUTION (FIFTY - SECOND AMENDMENT) ACT, 1985
i. This amendment popularly known as Anti-Defection Law

ii. Provided for disqualification of members of Parliament and state legislatures on the
ground of defection
CONSTITUTION (SIXTY - FIRST AMENDMENT) ACT, 1989
Reduced the voting age from 21 years to 18 years for the Lok Sabha and state legislative
assembly elections.
CONSTITUTION (SIXTY - NINTH AMENDMENT) ACT, 1991
Accorded a special status to the Union Territory of Delhi by designing it as the National
Capital Territory of Delhi.
CONSTITUTION (SEVENTIETH AMENDMENT) ACT, 1989
Provided for the inclusion of the members of the Legislative Assemblies of National Capital
Territory of Delhi and the Union Territory of Puducherry in the Electoral College for the
election of the president.
CONSTITUTION (EIGHTY-FOURTH AMENDMENT) ACT, 2001
The number of seats in the Lok Sabha and the assemblies are to remain same till 2026.
CONSTITUTION (EIGHTY-SIXTH AMENDMENT) ACT, 2002
i. Made elementary education a fundamental right. Added Article 21-A which declares that
“the State shall provide free and compulsory education to all children of the age of six
to fourteen years in such manner as the State may determine”.
ii. Changed the subject matter of Article 45 in Directive Principles. It now reads “The State
shall endeavour to provide early childhood care and education for all children until they
complete the age of six years”.
iii. Added a new fundamental duty under Article 51-A which reads “It shall be the duty of
every citizen of India who is a parent or guardian to provide opportunities for education
to his child or ward between the age of six and fourteen years”.
CONSTITUTION (NINETY-FIRST AMENDMENT) ACT, 2003
i. The total number of ministers, including the Prime Minister, in the Central Council of
Ministers shall not exceed 15% of the total strength of the Lok Sabha [Article 75(1A)].
ii. The total number of ministers, including the Chief Minister, in the Council of Ministers in a
state shall not exceed 15% of the total strength of the legislative Assembly of that state.
But, the number of ministers, including the Chief Minister, in a state shall not be less than
12 [Article 164(1A)].
iii. The provision of the Tenth Schedule (anti-defection law) pertaining to exemption from
disqualification in case of split by one-third members of legislature party has been deleted. It
means that the defectors have no more protection on grounds of splits.
CONSTITUTION (ONE HUNDRED-ONE AMENDMENT) ACT, 2016
Goods and Services Tax (GST) has commenced with the enactment of the 101st Constitution
Amendment Act, 2016.
CONSTITUTION (ONE HUNDRED-SECOND AMENDMENT) ACT, 2018
i. Constitutional status to the National Commission for Backward Classes.

ii. Inserted a new Article 342-A which empowers President to notify the list of socially and
educationally backward classes of that state/union territory.
CONSTITUTION (ONE HUNDRED-THIRD AMENDMENT) ACT, 2019
It changed two fundamental rights, Article 15 and 16. It provides for the advancement of the
economically weaker sections of society. Ten (10%) of all government jobs and college
seats will be reserved for people outside the high-income bracket.
CSEET Legal Aptitude and Logical Reasoning Indian Contract Act
CHAPTER 2- ELEMENT OF GENERAL LAWS
A. INDIAN CONTRACT ACT
When a salesperson asks you to sign on the dotted line, it is important to understand
the contents of the agreement you are signing. After all, the agreement you are
entering into is a contract!
What is a Contract?
“Contract” as per Section 2(h) is “an agreement enforceable by law”.
So, by this definition it indicates that a contract essentially consists of two distinct parts.
a. First, there must be an agreement.
b. Secondly, such an agreement must be enforceable by law.
Note:
To be enforceable, an agreement must be coupled with an obligation. A contract therefore,
is a combination of the two elements:
a. An agreement, and
b. An obligation.
Revision
So, a contract is an agreement enforceable at law, made between two or more persons, by
which rights are acquired by one or more to acts or forbearances on the part of the other or
others.
Some Facts about Indian Contract Act, 1872

a. It constitutes the most important branch of Mercantile or Commercial Law. It may be said
that the contract is the foundation of the civilized world.
b. The Indian Contract Act, 1872 came into force on the first day of September, 1872.
c. The Act is by no means exhaustive on the law of contract. It does not deal with all the
branches of the law of contract.
d. Thus, contracts relating to partnership, sale of goods, negotiable instruments, insurance etc.
are dealt with by separate Acts.
e. The Indian Contract Act majorly deals with the general principles and rules governing
contracts.
f. The Act is divisible into two parts:
i. The first part (Section 1-75) deals with the general principles of the law of contract, and
therefore applies to all contracts irrespective of their nature.
ii. The second part (Sections 124-238) deals with certain special kinds of contracts, namely
contracts of Indemnity and Guarantee, Bailment, Pledge, and Agency.
AGREEMENT
- An agreement gives birth to a contract.

- As per Section 2(e) of the Indian Contract Act every promise and every set of promises,
forming the consideration for each other, is an agreement.
- It is evident from the definition given above that an agreement is based on a promise.
What is a promise? Section 2(b)

Let’s break this definition:
i. When the person to whom the proposal is made signifies his assent thereto, the proposal is
said to be accepted.
ii. A proposal, when accepted, becomes a promise. An agreement, therefore, comes into
existence when one party makes a proposal or offer to the other party and that other party
signifies his assent thereto.
iii. In a nutshell, an agreement is the sum total of offer and acceptance.”
An analysis of the definition given above reveals the following characteristics of an
agreement:
OBLIGATION
An obligation is the legal duty to do or abstain from doing what one has promised to do or
abstain from doing. A contractual obligation arises from a bargain between the parties to the
agreement who are called the promisor and the promisee. Section 2(b) says that when the
person to whom the proposal is made signifies his assent thereto, the proposal is said to be
accepted; and a proposal when accepted becomes a promise. In broad sense, therefore, a
contract is an exchange of promises by two or more persons, resulting in an obligation to do
or abstain from doing a particular act, where such obligation is recognised and enforced by
law.
RIGHTS AND OBLIGATIONS
Where parties have made a binding contract, they have created rights and obligations
between themselves. The contractual rights and obligations are correlative, e.g., A agrees with
B to sell his car for Rs.10, 00.000/- to him. In this example, the following rights and
obligations have been created:
(i) A is under an obligation to deliver the car to B. B has a corresponding right to receive the
car.
(ii) B is under an obligation to pay Rs.10, 00,000/- to A. A has a correlative right to receive
Rs.10, 00,000/-
AGREEMENTS WHICH ARE NOT CONTRACTS
Agreements in which the idea of bargain is absent and there is no intention to create legal
relations are not contracts. These are:
(a) Agreements relating to social matters
(b) Domestic arrangements between husband and wife:

In Balfour v. Balfour, a husband working in Ceylone, had agreed in writing to pay a
housekeeping allowance to his wife living in England. On receiving information that she was
unfaithful to him; he stopped the allowance. He was held to be entitled to do so. This was a
mere domestic arrangement with no intention to create legally binding relations. Therefore,
there was no contract.
Points to be noted:
- Intention is to create legal relationship.
- Which create obligations, and those obligations have their source in agreement.
- Agreement is the genus of which contract is the specie and, therefore, all contracts are
agreements but all agreements are not contracts.
ESSENTIAL ELEMENTS OF A VALID CONTRACT
Section 10 of the Indian Contract Act, 1872 provides that “all agreements are contracts if
they are made by the free consent of parties competent to contract, for a lawful
consideration and with a lawful object, and are not hereby expressly declared to be void”.
The essential elements of a valid contract are:
i. An offer or proposal by one party and acceptance of that offer by another party resulting in
an Agreement — consensus-ad-idem.
ii. An intention to create legal relations or intent to have legal consequences.
iii. The agreement is supported by a lawful consideration.
iv. The parties to the contract are legally capable of contracting.
v. Genuine consent between the parties.
vi. The object and consideration of the contract is legal and is not opposed to public policy. (vii)
The terms of the contract are certain.
vii. The agreement is capable of being performed i.e.it is not impossible of being performed.
Therefore, to form a valid contract there must be:
- An agreement
- Based on the genuine consent of the parties — Supported by a lawful consideration
- Made for a lawful object, and
- Between the competent parties.
1. OFFER OR PROPOSAL
- One of the early steps in the formation of a contract lies in arriving at an agreement
between the contracting parties by means of an offer and acceptance. Thus, when one party
(the offeror) makes a definite proposal to another party (the offeree) and the offeree
accepts it in its entirety and without any qualification, there is a meeting of the minds of
the parties and a contract comes into being, assuming that all other elements are also
present.
- A proposal is also termed as an offer. The word ‘proposal’ is synonymous with the English
word “offer”. An offer is a proposal by one person, whereby he expresses his willingness to
enter into a contractual obligation in return for a promise, act or forbearance. Section 2(a)
of the Indian Contract Act defines proposal or offer as “when one person signifies to another
his willingness to do or abstain from doing anything with a view to obtaining the assent of
that other to such act or abstinence, he is said to make a proposal”. The person making the
proposal or offer is called the proposer or offeror and the person to whom the proposal is
made is called the offeree.
Rules governing offers

A valid offer must comply with the following rules:
a. An offer must be clear, definite, complete and final. It must not be vague. For example, a
promise to pay an increased price for a horse if it proves lucky to promisor is too vague and
is not binding.
b. An offer must be communicated to the offeree. An offer becomes effective only when it has
been communicated to the offeree so as to give him an opportunity to accept or reject the
same.
c. The communication of an offer may be made by express words-oral or written-or it may be
implied by conduct.
d. The communication of the offer may be general or specific. Where an offer is made to a
specific person it is called specific offer and it can be accepted only by that person. But
when an offer is addressed to an uncertain body of individuals i.e. the world at large, it is a
general offer and can be accepted by any member of the general public by fulfilling the
condition laid down in the offer’.
Lapse of offer
Section 6 deals with various modes of lapse of an offer. It states that an offer lapse if:
a. It is not accepted within the specified time (if any) or after a reasonable time, if none is
specified.
b. It is not accepted in the mode prescribed or if no mode is prescribed in some usual and
reasonable manner, e.g., by sending a letter by mail when early reply was requested;
c. The offeree rejects it by distinct refusal to accept it;
d. Either the offeror or the offeree dies before acceptance;
e. The acceptor fails to fulfil a condition precedent to an acceptance.
f. The offeree makes a counter offer, it amounts to rejection of the offer and an offer by the
offeree may be accepted or rejected by the offeror.
Revocation of offer by the offeror

i. An offer may be revoked by the offeror at any time before acceptance.
ii. Revocation must be communicated to the offeree, as it does not take effect until it is
actually communicated to the offeree. Before its actual communication, the offeree, may
accept the offer and create a binding contract. The revocation must reach the offeree before
he sends out the acceptance.
iii. An offer to keep open for a specified time (option) is not binding unless it is supported by
consideration.
2. ACCEPTANCE
a. When one person to whom the proposal is made signifies his assent (to agree) then the
proposal is said to be accepted.
b. Acceptance of offer should be absolute and unqualified.
c. Acceptance must be communicated to the Offeror. Mere mental acceptance is no acceptance.
Essentials of a valid acceptance

a. Manner of acceptance – An acceptance must be made as per the manner prescribed by
Offeror and if no mode is prescribed, it should be accepted in some usual and reasonable
manner.
b. Acceptance must be absolute and unqualified.
c. Acceptance must be communicated to the Offeror.
d. Acceptance must be given within the prescribed time.
e. Acceptance cannot precede an offer
f. Acceptance must be given by the person to whom the offer is made.
- Incase of specific offer acceptance should be given by person to whom offer was made.
- In case of general offer, acceptance can be made by anyone who fulfills the terms and
conditions of offer and has knowledge of it.
g. Acceptance must be given before the offer lapses or before the offer is withdrawn.
h. Acceptance cannot be assumed from silence.

i. Acceptance can be either express or implied.
Contracts over the Telephone

Contracts over the telephone are regarded the same in principle as those negotiated by the
parties in the actual presence of each other. In both cases an oral offer is made and an oral
acceptance is expected. It is important that the acceptance must be audible, heard and
understood by the offeror. If during the conversation the telephone lines go “dead” and the
offeror does not hear the offeree’s word of acceptance, there is no contract at the moment.
If the whole conversation is repeated and the offeror hears and understands the words of
acceptance, the contract is complete (Kanhaiyalal v. Dineshwarchandra)
3. INTENTION TO CREATE LEGAL RELATIONS

The second essential element of a valid contract is that there must be an intention among
the parties that the agreement should be attached by legal consequences and create legal
obligations. If there is no such intention on the part of the parties, there is no contract
between them. Agreements of a social or domestic nature do not contemplate legal
relationship. As such they are not contracts.
4. CONSIDERATION
Consideration is an essential element in formation of a valid contract.
Definition of consideration:
- When, at the desire of the promisor,
- The Promisee or any other person
- Has done or Abstained from doing,
- Or does or abstains from doing,
- Or promises to do or to abstain from doing, something,
- Such act or abstinence or promise is called a consideration for the promise.
Note:
a. In layman’s term, ‘consideration’ means quid pro quo i.e. something in return.
b. It is an advantage moving from one person to another.
Essential elements of consideration

a. The consideration can be a positive or an abstinence from act.
b. It can be in the form of cash, goods or services.
c. It can be past, present or future.
d. The consideration should move at the desire of the promisor.
e. Consideration must not be illegal, immoral or against the public policy.
f. Consideration must be something which the promisor is not already bound to do.
g. Consideration must be real and not illusionary.
h. Consideration need not be adequate.
i. Consideration may be an act, abstinence, sacrifice or a return promise.
j. Consideration should not be impossible.
k. Consideration should be certain.
Exception to the rule that contract without consideration is void:

a. Agreement in writing and registered if required on account of natural love and affection
between parties standing in a near relation with each other.
b. Compensation for past voluntary services.
c. Promise to pay a time barred debt if it is in writing.
d. Completed gifts
e. Creation of Agency
PRIVITY OF CONTRACT
- (It means the relation between the parties which entitles them to sue each other but
prevents any third party from doing so.)
- A stranger to a contract cannot sue both under the English and Indian law for want of
privity of contract. The following illustration explains this point.

- In Dunlop Pneumatic Tyre Co. v. Selfridge Ltd. (1915) A.C. 847, D supplied tyres to a
wholesaler X, on condition that any retailer to whom X re-supplied the tyres should promise
X, not to sell them to the public below Ds list price. X supplied tyres to S upon this
condition, but nevertheless S sold the tyres below the list price. Held: There was a contract
between D and X and a contract between X and S. Therefore, D could not obtain damages
from S, as D had not given any consideration for Ss promise to X nor was he party to the
contract between D and X.
- Thus, a person who is not a party to a contract cannot sue upon it even though the contract
is for his benefit.
Kinds of consideration
Consideration may be:
(a) Executory or future which means that it makes the form of promise to be performed in the
future.
e.g., an engagement to marry someone; or
(b) Executed or present in which it is an act or forbearance made or suffered for a promise. In
other words, the act constituting consideration is wholly or completely performed.
e.g., if A pays today Rs.100 to a shopkeeper for goods which are promised to be supplied the
next day, A has executed his consideration but the shopkeeper is giving executory
consideration—a promise to be executed the following day. If the price is paid by the buyer
and the goods are delivered by the seller at the same time, consideration is executed by both
the parties.
(c) Past which means a past act or forbearance, that is to say, an act constituting consideration
which took place and is complete (wholly executed) before the promise is made.
5. CAPACITY OF PARTIES
- Capacity means the competency of party to enter into a contract. It basically means the
legal ability to enter into a contract.
- Who can enter into a contract :
• Person who have attained the age of majority.
• Person who is of sound mind.

• Person who is not disqualified by law.
- Hence minor, person of unsound mind and person disqualified by law are not competent to
enter into a contract.
LUNATICS AGREEMENT
- A person of unsound mind is a lunatic. That is to say for the purposes of making contract, a
person is of unsound mind if at the time when he makes the contract, he is incapable of
understanding it and of forming rational judgment as to its effect upon his interests.
- A person of unsound mind cannot enter into a contract. A lunatic’s agreement is therefore
void. But if he makes a contract when he is of sound mind, i.e., during lucid intervals, he will
be bound by it.
- If a contract entered into by a lunatic or person of unsound mind is for his benefit, it can
be enforced (for the benefit) against the other party but not vice-versa [Jugal Kishore v.
Cheddu, (1903) l All. L.J 43]
FREE CONSENT
- It is essential that the parties to the contract have ‘consensus ad idem’. In other words the
party must agree upon the same subject matter in the same sense and at the same time.
Their consent must be free.
- Consent means the act of agreeing to an offer.
- Section 13 – “Two or more persons are said to consent when they agree upon the same
thing in the same sense.”
- Free consent exists when it is not caused by the following –
• Willful Misrepresentation
• Fraud
• Coercion
• Undue influence
a) COERCION
- According to Section 15,
• Coercion is the
• Committing, or threatening to commit,
• Any act forbidden by the Indian Penal code, or
• The unlawful detaining, or threatening to detain any property,
• To the prejudice of any person whatever,
• With the intention of causing any person to enter into an agreement.
- The Act also provides an explanation with this Section, which states,
“It is immaterial whether the Indian Penal Code is or is not in force in the place where the
coercion is employed.”
- Effect of coercion:
• Voidable contract.
• Restitution is allowed if aggrieved party rescinds the contract
- Purpose of coercion is to compel person to enter into contract.
- Coercion may be exercised by party to contract or any third person.
- Coercion may be directed against party to contract or other person.
- All threats cannot be considered as coercion. Following threats are not coercion :
• Threat to sue
• Statutory compulsions
• Treat to strike
• Detaining property under mortgage.
b) UNDUE INFLUENCE
- A contract is said to be induced by “undue influence‟
• Where the relations subsisting between the parties are such
• That one of the parties is in a position to dominate the will of the other
• And uses that position to obtain an unfair advantage over the other
• Kind of moral coercion.
- Effect
• Voidable Contract
• Restitution is allowed if aggrieved party rescinds the contract.

- Dominance of will is presumed:
• When person holds real or apparent authority over other (Eg. Master and servant )
• When he stands in a fiduciary relationship over other. (Eg. Guardian and child, doctor and
patient)
• When he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness or bodily distress.
- However in the following cases there will be no presumption of dominance :
• Landlord and tenant
• Creditor and Debtor
• Husband and wife
• Principal and agent
Matter Coercion Undue Influence

Meaning Coercion is an act of Undue Influence is an act
threatening which involves the of influencing the will of
use of physical force. the other party.
Pressure Psychological pressure or Mental pressure or Moral
physical force. force.
Purpose To compel a person in such a To take unfair advantage
way that he enters into a of his position
contract with other party
Criminal in nature Yes No
Relationship The relationship between The act of undue influence
between parties parties is not necessary. is done only when the
parties to the contract are
in a relationship.
Aggrieved party has to prove In case of pardanasin
coercion. woman promisor has to
prove absence of undue
influence.
Eg. Extortion , Kidnapping Guru and discipline,

inspector and convict.
c) FRAUD
- According to Sec.17
• Fraud means and includes any of following acts-
a) The suggestion, as a fact, of that which is not true, by one who does not believe it to true.
b) The active concealment of a fact, by one having knowledge or belief of the fact;
c) A promise made without any intention of performing it;
d) Any other act fitted to deceive; and
e) Any such act or omission as the law specially declares to be fraudulent
• Committed by a party to a contract,
• Or with his connivance,
• Or by his agent
• With an intent to deceive another party there to or his agent,
• Or to induce him to enter into the contract
- Elements of fraud
• False representation should be knowingly or without belief in it truth or recklessly.
• Maker intended that other party to act upon it.
• There is concealment of material fact.
• Intention should be to deceive him to enter into a contract.
• Representation should be of material facts and not mere opinion or puffing experience.
- Mere making a false statement is not sufficient. Aggrieved party should have acted upon the
false statement .If the false statement did not influence his decision then there is no fraud.
- Aggrieved party should have sufficient loss or damages.
- Mere silence as to the facts likely to affect the willingness of a person to enter into a
contract is not fraud unless the circumstances of the case are such that regard them to be.
CONTRACTS OF UBERRIMAE FIDEI (UTMOST GOOD FAITH)
There are contracts in which the law imposes duty to act upon with the utmost good faith
i.e. to disclose all important information. Failure to disclose all material facts will make
contracts voidable at the option of the other party. Following are the example of Uberrimae
Fidei :
1. Insurance contracts of all types
2. Company prospectus
3. Contract for sale of land (good title )
4. Settlement of family property
d) MISREPRESENTATION
- According to Sec 18,
• Misrepresentation is any innocent or unintentional false statement or assertion of fact made
by one party to the other during the course of negotiation of a contract is called a
misrepresentation.
• The party making the statement honestly believes in it to be true and is made in honest
ignorance of its falsehood.
- Elements of misrepresentation
• Misrepresentation should be of material facts. Mere expression of opinion is not
misrepresentation.
• Misrepresentation should be with intention that other party should act upon it.
• The representation must have been acted upon. Thus, if a person makes a misstatement but
other person acts independently and not on the basis of wrong statement, person making the
wrong statement shall not be liable.
• Even suppression of material facts can be misrepresentation.
Effect of fraud or misrepresentation

- Effects of fraud misrepresentation
• Contract voidable
• Insisting for performance.
• Restitution. (no damages)

- Exceptions
In the following cases, the contract is not voidable or contract cannot be rescinded:
• If the Aggrieved party had the means of discovering the truth with ordinary diligence.
• A misrepresentation which did not cause the consent of the party.
• Where the party after becoming aware of the fraud affirms or ratifies the contract.
• The right of rescission can be claimed within a reasonable time after discovery of fraud.
• If a third party acquires rights or interest in the subject matter of the contract for value and
in good faith.
Basis Fraud Misrepresentation
Meaning Deliberate misstatement or It is representation of wrong

active concealment. fact without knowledge.
Person making representation No Yes

belief in the truth?
Intention to deceive Yes No
Action Contract can be avoided and Contract can be avoided but

damages can be demanded. damages cannot be
demanded.
Means for discovery of truth Contract is voidable if party Contract is not voidable if
has means of discovering party has means of
truth with normal effort. discovering truth with
normal effort.
6. LEGALITY OF OBJECT
- A valid contract must have a lawful object. If the object of an agreement is unlawful, the
agreement is void and cannot be enforced by law.
- Object or consideration in any agreement is regarded as unlawful :
• If it is forbidden by law.
• An act which would defeat the provisions of any law.
• If it create injury to person or to the property of public.
• Object or consideration of an agreement is fraudulent.
• When court consider it as immoral.
• When court consider it as against public policy.
- Agreements against public policy
• The word public policy is not defined.
• It means anything harmful to public or public good.
• An agreement against public policy is void.
• List of agreements against public policy :
1. Agreement to do trade with the enemy.
2. Agreement to commit crime
3. Agreement to interfere with course of justice
4. Agreement to interfere with administration or administrative duty of person.
5. Agreement in restraint of legal proceeding.
6. Agreement in opposing to duty.
7. Agreement in restraint of parental rights
8. Restricting personal freedom.
9. Agreement in restrain of marriage
10. Marriage brokerage
- Agreement in restraint of trade
• An agreement which restrains person from doing lawful profession, trade or business of any
kind is void.
• Following agreements which restraint person from doing business are valid :
1. In case of sale of goodwill, buyer can restraint seller to use goodwill or name.
2. Partners’ agreement
3. Service agreement during the time when person is under service

4. Sole selling agreement
5. Agreement between members of trade union.
- Agreement unlawful in part :
• Where lawful part can be separated from the unlawful part
If part of the consideration or the object which is unlawful can be separated from the lawful
part, the Court shall enforce the part that is lawful.
• Where lawful and unlawful part cannot be separated
Where the lawful and unlawful parts of the consideration or the object cannot be separated,
the whole agreement is void.
• Reciprocal promise to do things legal and also other things illegal
Where persons reciprocally promise, firstly to do things which are legal and secondly under
specified circumstances to do certain other things which are illegal the first set of promises
is a contract but the second part is void contract.
• Alternative promise , one branch is illegal
In the case of an alternative promise, one branch of which is legal and the other is illegal,
the legal branch alone can be enforced.
WAGERING AGREEMENT
- Wagering agreement is a promise to give money or money’s worth upon determination of

uncertain event. – Sir William Anson.
- An agreement between two persons is wagering agreement if money or money’s worth is
payable to one another on the happening or not happening of uncertain event.
- Essentials of wagering agreement are :
• There must be promise to pay money or money’s worth.
• Performance of promise must depend on uncertain event.
• There must be chance of gain or loss.
• Neither party should have control over event.
• Neither party should have any other interest in the event.
• One party is to win and one party is to lose.
- Effects of wagering agreement

• Wagering agreement is void.
• No suit can be filed for the recovery.
• It is not illegal. Any agreement collateral to wagering agreement is valid.
• However wagering agreement is illegal in the state of Maharashtra and Gujarat.
CONTINGENT AGREEMENT
- Contingent contract is a contract to do or not to do something, if some event collateral to

such contract, does or does not happen.
- Contingent contract contain conditional promise.
- Features of contingent contract
• Event must be in future.
• Event should be uncertain.
• Event should be collateral.
• Contingency should depend upon act of party.
• The event should not be the mere will of the promisor.
• The contingency event or act must not be a mere will of the promisor. It must rest upon the
pleasure and sweet will of the promisor.
Basis Wagering Agreement Contingent contract

Meaning Party may win or lose depend Performance of contract depends
upon uncertain event. upon future uncertain event
collateral to main event.
Nature of Uncertain event may be past or Uncertain event must be future.
uncertain event future.
Legal effect Void agreement Valid contract
Example Betting on cricket match Insurance contract
Nature of contract All wagering agreements are All contingent contracts are not
contingent in nature. wagering agreements.
TYPES OF CONTRACT
1. CLASSIFICATION ON BASIS OF ENFORCEABILITY / LEGALITY
1. Valid Agreement i.e. Contract

A valid agreement is a contract. It gives rise to legal obligations of all parties to it. Such an
agreement possesses all essentials of a contract laid down by Section 10.
2. Void Contract
- A contract which ceases to be enforceable by law becomes void when it ceases to be
enforceable.
- A contract is valid at the time of its making but later on due to change in circumstances or
in law, it becomes unenforceable, it is a void contract.
- Generally valid contract ceases to be enforceable on the change in circumstances or on
change of provisions of the Act.
- Effects
• Contract becomes void. Contract is void, when it is discovered to be void or it becomes void
due to change in circumstances.
• Restitution is allowed. Any person, who has received any advantage under void contract, is
bound to restore it to the person from whom he got it.
• Payment or compensation for performance. Any party who has received any advantage by
way of part performance of a void contract (i.e. which later on becomes void) is also bound
to pay or make compensation to the person from whom he received it.
3. Void Agreement
- An agreement not enforceable by law is said to be void.
- Such an agreement lacks essentials of a valid agreement and consequently does not create
legal obligations of the parties.
- It is also not maintainable in law and is, therefore, a nullity.
- Effects
• Void from beginning. The agreement is void from beginning. It does not create any legal
obligation of either party.
• No restitution. No restitution can be granted. Any consideration passed on by parties to
each other, cannot be generally restored.
4. Voidable Contract
- An agreement which is enforceable by law at the option of one or more of the parties but
not at the option of the others is a voidable
- Therefore, a voidable contract is an agreement, which is voidable at the option of the
aggrieved party. Voidable contracts may be of two types:
i. Voidable from beginning. There are certain contracts, which are voidable from the very
beginning. It is so when the consent of the party is caused either by
a) coercion,
b) undue influence,
c) fraud or
d) misrepresentation.
ii. Voidable subsequently. There are certain cases where one part may treat a contract as
voidable. In other words, when one of the parties to the contract elects to treat the contract
as void, then such a contract becomes voidable subsequently. A contract becomes voidable
subsequently in the following three circumstances.
a) On refusal of performance: When a party to a contract has refused to perform his promise
in entirety, the other party may put an end to the contract, unless he has signified by words
or conduct, his consent to its continuance.
b) When a party prevents another from performing. When one party to the contract prevents
the other from performing a reciprocal promise, the contract becomes voidable at the option
of the party so prevented.
c) When a party fails to perform within a specific time. When a party to a contract promises
to do a certain thing at or before a specific time and fails to perform it at or before such
time, the contract becomes voidable at the option of the promisee, if the parties intended
that the time should be of essence of the contract.
- Effects
i. Voidable at the option of aggrieved party.

ii. Valid till rescinded. A voidable contract continues to be valid till the aggrieved party rescinds
it.
iii. Other party relieved from performing. When aggrieved party rescinds the contract, the
other party need not perform any promise therein contained.
iv. Restitution / Compensation is allowed if aggrieved party rescinds the contract.
Basis Void Agreement Voidable Contract

An agreement not A contract, which is enforceable bylaw
Definition enforceable by law is said to at the option of the aggrieved party,
be void. is a voidable contract.
Period of validity It is void from the beginning It is valid till the aggrieved party to
i.e. void ab initio. the contract avoids it.
Legal existence It is nullity, hence does not It has its existence in the eye of law
exist in the eye of law. till it is repudiated.
Change in status Status of void agreement does Status of such contract change when
not change with the change the aggrieved party elects to avoid it
in circumstances. within a reasonable time.
Any agreement is void when A contract is voidable when the
it is made with incompetent consent of the party is caused by
Causes parties or for unlawful objects coercion or undue influence or fraud or
and consideration or it is misrepresentation. Moreover, parties
expressly declared to be void can treat the contract voidable under
under the law. the provisions of Secs.39, 53 and 55.
The party obtaining goods under
The party obtaining goods voidable agreement can transfera
Transfer of title under void agreement cannot good title to the third party if the
transfer a good title to the third party obtains it in good faith
third party. and for consideration and the
aggrieved party has not avoided the
contract before such transfer.
Parties do not have right to

restore the benefits passed on If the party rescinding the contract
to the other unless the has received may benefit under the
Restitution parties were unaware of the contract from other party, he must
impossibility of performance restore such benefit, so far as may
at the time of agreement or be, to the other party.
the
party to the agreement was
minor.
No party has a right to get If a party rightfully rescind (i.e. puts
compensation for damages an end) the contract, he can claim
Damages because such agreement has compensation or damages sustained
no legal effects. by him due to non-fulfillment of the
promise.
5. Illegal Agreement
- An agreement which is unlawful/illegal i.e. forbidden by law. Such an agreement is void-ab-
initio.
- Such an agreement may either be against the law of the land or opposed to public policy or
be criminal or immoral in nature.
- The term “illegal agreement” has not been defined in the Indian Contract Act. However,
Section 23 of the Act states that the object or consideration of an agreement is unlawful if-
(a) it is forbidden by law; or
(b) it is of such a nature that, if permitted, it would defeat the provisions of any law; or
(c) it is fraudulent; or
(d) it involves or implies, injury to the person or property of another; or
(e) The Court regards it as immoral; or
(f) The court regards it opposed to public policy.
- Thus, the term unlawful agreement is wider in its scope that the term illegal agreement.
- All the agreements covered under the above stated six heads are not illegal agreements.
- Only the agreements forbidden by law, agreements opposed to public policy, agreement of
criminal or immoral nature are included in illegal agreements.
- Therefore, it is true that every illegal agreement is unlawful but every unlawful agreement is
not necessarily illegal.
- Effects:
(i) Void agreement. The agreement is void ab initio.
(ii) Collateral agreement void. Every collateral agreement to an illegal agreement is also void. It
should be noted that if the main agreement were void but not illegal, its collateral agreement
would not be affected.
(iii) Legal part enforceable. If any part of a single agreement is illegal, the whole agreement will
be illegal and void. However, where the agreement consists of two parts, one legal and the
other illegal, and they are severable or separable from each other, the legal part is
enforceable and the illegal part will be void.
(iv) Punishment. The parties to an illegal agreement are punishable as per the law of the land.
6. Unenforceable Contract
- A contract, which is good in substance but cannot be forced in a law court due to some
technical defects, is said to be unenforceable contract.
- Technical defects in a contract may be due to non-compliance of some of the legal
formalities.
- For instance, a particular law may require that the contract must be in writing, witnessed,
stamped and registered. In such a case, the contract cannot be enforced if all the legal
formalities are not complied with properly.
- Even the absence of signature of witness or stamps of lesser amount than required on the
deed may render the contract unenforceable.
- As soon as the technical defect is removed, the contract becomes enforceable.
2. CLASSIFICATION OF CONTRACTS ON BASIS OF FORMATION
1. Express Contract
- ‘Express Contract’ is a contract made by use of words spoken or written.
- Example – A says to B ‘will you purchase my bike for Rs. 20,000? B says to A “Yes”
2. Implied Contract
- A contract which is made otherwise than by words spoken or written. Implied contract came
into existence on account of account of act or conduct of parties.
- Example – A stops a taxi by waving his hand and takes his seat. This is an implied contract
that A will pay him the prescribed fees.
3. Quasi Contract
- A quasi-contract is not a result of agreement, express or implied.
- It is a contract imposed by the law on the parties and gives rise to obligations similar to
that arising under a contract.
- The parties do not intentionally make such a contract.
- Quasi contract is based on principle of equity.
3. CONTRACTS BASED ON PERFORMANCE
1. Executed Contract
It is a contract which is completed i.e. performed by both the parties. In other words both
the parties have fulfilled their obligations.
2. Executory Contract
It is a contract which is yet to be fulfilled by either or both the parties. Executory contracts
are further divided into two types – bilateral contracts (both parties pending) and unilateral
contracts (one party pending).
DISCHARGE OF CONTRACT
- It means the termination of contractual obligation under contract.

- Grounds of discharge or types of discharge
1. Discharge by performance of contract
2. Discharge by mutual consent
3. Discharge by impossibility of performance
4. Discharge by operation of law
5. Discharge by lapse of time
6. Discharge by breach of contract
- Discharge by performance of contract

• Contract can be discharged by actual performance or actual performance.
• Attempted performance is also known as tender.
- Discharge my mutual consent

Contract can be discharged by mutual consent by following methods:
1. Novation
2. Alteration
3. Rescission
4. Remission
5. Waiver
6. Merger
➢ Novation: Novation occurs when a new contract is entered into in consideration of the old
one. The new contract is entered between the same parties or between the new parties. The
new contract must be valid and enforceable otherwise old contract will continue valid.
➢ Alteration: Alteration of a contract may take place when one or more terms of the contract
are altered by the mutual consent of all the parties to the contract. Alteration discharge
original contract and create new contract. Both the parties must remain same.
➢ Rescission: Rescission of a contract takes place when all or some of the terms of the
contract are cancelled. It may occur under any of the following circumstances:
i. By mutual consent
ii. Where one party fails in the performance of his obligation under the contract, the other
party may rescind the contract without prejudice to his right to claim compensation for
breach by the other party.
iii. In a voidable contract, the aggrieved party may cancel the contract. Rescission can be
affected by agreement between the parties at any time before the contract is discharged by
performance or in some other ways.
➢ Remission: Remission means acceptance of lesser fulfillment of the promise made, e.g.
acceptance of a lesser sum than what was contracted for in discharge of the whole of the
debt.
➢ Waiver: Waiver means the intentional relinquishment or giving up of a right by a party
entitled thereto under a contract so that the other party to the contract is released from his
obligation.
➢ Merger: Merger takes place when an inferior right accruing to party in a contract vanishes or
merges into the superior right accruing to the same party under the same contract. If, for
example, a higher security is accepted in place of a lower security, the security, which in the
eyes of law is inferior in operative power, merges and is extinguished in the higher security.
- Discharge of contract by impossibility

• Contract is discharge when contract or promise under contract becomes impossible to
perform. Impossibility can be divided into 3 categories :
1. Impossibility at the time making the contract, with the knowledge of the parties. In
this case the contract is void ab initio and the parties are discharged from the performance
of the contract.
2. Impossibility at the time of making the contract unknown to the parties. In this case,
the contract becomes void as soon as the impossibility is discovered.
3. Impossibility, which arises subsequent to the formation of the contract. Such
impossibility, as a general rule, is no excuse for the non-performance of the contract. But
where this impossibility is caused by the circumstances beyond the control of the parties,
they are discharged from the further performance of the obligation arising under the
contract.
- Discharge by operation of law

• Contract is discharge on happening of following event due to operation of law :
1. When contract require personal skill on death of promisor contract is discharged.
2. Merger
3. On declaration of insolvency, insolvent is discharged from all liability on contract entered into
up to the date of insolvency.
4. Unauthorized material alteration.
- Discharge by lapse of time

A contract is discharge if it is not performed or enforced within specified period called as
period of limitation.
- Discharge by breach of contract

• Breach of contract means failure of one party to fulfill his obligation or promise under the
contract.
• Breach of contract may be of two types :
1. Actual Breach
2. Anticipatory Breach
• Actual breach of contract means when one party to contract refuses or fails to perform his
promise on due date of performance or during performance.
• Anticipatory breach of contract means when any party declares his intention of not
performing the contract before the performance is due.
REMEDIES FOR BREACH OF CONTRACT
- On breach of contract aggrieved party has the following remedies :

i. Cancellation of suit
ii. Suit for damage
iii. Suit for specific performance
iv. Suit for injunction
v. Quantum Meruit
- Rescission (Cancellation) of contract

• Rescission of contract means right of party to cancel contract.
• In case of breach of contract other may rescind the contract.
• On cancellation of contract by aggrieved party :
i. He is not required to perform his part of obligation.
ii. Claim compensation for any loss
iii. Party is liable to restore benefit.
- Suit for damages

• Damage means monetary compensation allowed for loss suffered by aggrieved party.
• Purpose is to compensate aggrieved party and not to punish party at fault.
- Suit for specific performance

• It means the actual carrying out of the promise by the parties to the contract
• When is specific performance allowed?
i. When actual damages are not measurable
ii. Where monetary compensation is not adequate remedy.
• When is specific performance NOT allowed?
i. Where monetary compensation is an adequate remedy.
ii. Where the contract is not certain.
iii. Where the contract is in its nature revocable.
iv. Where the contract is of a personal nature, e.g., a contract to marry.
v. Where the contract is made by a company in excess of its powers as laid down in its charter
(ultra vires)
vi. Where the performance of a contract involves the performance of a continuous duty, which
the Court cannot supervise.
- Suit for injunction

• Suit for injunction is also known as Stay Order.
• Injunction is an order of the court restraining a person from doing a particular act.
• Where the defendant is doing something which he promised not to do, then the injured party
will get a right to file a suit for injunction.

• Where there is a breach of contract by one party and specific performance is not possible.
Court may grant injunction.
- Quantum Meruit
• Meaning
i. It means the payment in proportion to the amount of work done.
ii. It means “as much as is earned”.
iii. Claim on the basis of quantum meruit is allowed when contract has become impossible or
become void after some performance.
• When can claim on Quantum Meruit arise?
Claim on quantum meruit is allowed by party not at fault in following situations:
i. When one party prevents other from completion of contract.
ii. Where contract has become void before completion of the contract.
iii. Where agreement is discovered to be void.
• Claim on quantum meruit is allowed by party at fault in following situations :
i. If divisible contract is partly performed
ii. Invisible contract is performed completely but badly.
CONTRACT FOR INDEMNITY
- Definition
“Indemnity” means a promise to save the other from loss caused to him by the conduct of
the promisor himself, or by the conduct of any other person.
- Parties
• Person who gives the promise to save from loss is known as indemnifier.
• Person to whom promise is made to save from any loss is known as indemnity holder.
Example –Insurance contract
- Rights of indemnity holder

When sued the indemnity holder may recover from the promisor:
i. Damages he is compelled to pay
ii. Costs he is compelled to pay in defending the suit.
iii. Sums paid by way of compromise.
CONTRACT OF GUARANTEE
- Definition – A contract to perform the obligations or to discharge the liability of the third
party in case of default is called contract of guarantee.
- Parties:
i. The person who is granting the loan is the creditor.
ii. The person to whom the loan is granted is Principal Debtor.
iii. The person who is giving guarantee is called surety or guarantor or favored debtor.
iv. In case of guarantee contract there are two liabilities namely; Primary liability and secondary
liability.
v. Primary liability will be of the principal debtor and secondary liability goes to the surety.
- Types of Guarantee-
i. Continuing guarantee – which extends to a series of transaction.
ii. Specific guarantee – which extends to a single transaction,
CONTRACT OF AGENCY
- WHAT IS AN AGENCY?
• A person employed to do any act for another person or to represent another in dealing with
third person is known as an agent.
• Person for whom he acts is known as principal.
• Relation between agent and the principal is known as agency.
- ESSENTIAL OF AN AGENCY
• There should be an agreement between the principal and the agent. Agreement is not
necessary in writing or express form.
• Agent must have intention to act on behalf of principal. Any person can be appointed as an
agent. Even minor or person of unsound mind can be appointed as an agent.
- MODES OF CREATING AGENCY

1. Express Agency
A contract of agency may be made orally or in writing. The usual form of
written contract of agency is the Power of Attorney, which gives him the authority to act on
behalf of his principal in accordance with the terms and conditions therein. In an agency
created to transfer immovable property, the power of attorney must be registered. A power of
attorney may be general, giving several powers to the agent, or special, giving authority to
the agent for transacting a single act.
2. Implied Agency
They arise by conduct, situation parties or necessity of the case. Some examples are –
- Agency by ratification -
• Ratification means affirmation of unauthorized act later on.
• Essentials – Ratification is valid when :
i. Person act as agent without authority.
ii. Agent has acted upon for a principal in existence.
iii. Agent must have contractual capacity.’
iv. Ratified act should be lawful act.
v. It should be within reasonable time.
vi. It should be for the whole act.
vii. Ratification should be communicated.
viii. It should not put third party to damages.
- Agency by Estoppel (Section 237) :

Estoppel arises when you are precluded from denying the truth of anything which you have
represented as a fact, although it is not a fact. Thus, where P allows third-parties to believe
that A is acting as his authorized agent, he will be estopped from denying the agency if
such third-parties relying on it make a contract with A even when A had no authority at all.
- Wife as agent :
Where a husband and wife are living together, the wife is presumed to have her husband’s
authority to pledge his credit for the purchase of necessaries of life
suitable to their standard of living. But the husband will not be liable if he shows that
(i) he had expressly warned the tradesman not to supply goods on credit to his wife; or
(ii) he had expressly forbidden the wife to pledge his credit; or
(iii) his wife was already sufficiently supplied with the articles in question; or (iv) she was
supplied with a sufficient allowance.
Similarly, where any person is held out by another as his agent, the third-party can hold
that person liable for the acts of the ostensible agent, or the agent by holding out. Partners
are each other’s agents for making contracts in the ordinary course of the partnership
business.
- Agency of Necessity (Sections 188 and 189) :

In certain circumstances, a person who has been entrusted with another’s property, may have
to incur unauthorized expenses to protect or preserve it. Such an agency is called an agency
of necessity. For example, A sent a horse by railway and on its arrival at the destination
there was no one to receive it. The railway company, being bound to take reasonable steps to
keep the horse alive, was an agent of necessity of A. A wife deserted by her husband and
thus forced to live separate from him, can pledge her husband’s credit to buy all necessaries
of life according to the position of the husband even against his wishes
- TERMINATION OF AGENCY
i. By the performance of the contract of agency

ii. By an agreement between principal and agent
iii. By expiration of the period fixed for the contract of agency
iv. By revocation of authority of the agent by the principal
v. By death of the principal or agent.
vi. By the insanity of the principal or the agent.
vii. By the destruction of subject matter
viii. By the insolvency of the principal and in some cases of the agent
ix. When the principal or agent is an incorporated company by its dissolution
x. By the renunciation of authority by the agent
xi. By the revocation of authority by the principal
- AGENT
• Duties of Agent
i. To conduct business with skill and diligence.
ii. To render accounts
iii. To communicate in difficulty
iv. Not to deal in own account
v. Principal to get benefit
vi. To pay all the sums received
vii. To protect interests
viii. Not to make secret profit
• Rights of agent
i. Right to retain goods.
ii. Right to receive information
iii. Right to be indemnified if he has suffered loss due to principal’s neglect.
• When is agent personally liable?

i. When agent act for foreign principal
ii. When principal is undisclosed person.
iii. When principal cannot be sued
iv. When contract provide so,
v. When principal is not in existence
vi. When agent acts beyond authority
vii. When such custom exist in market
- PRINCIPAL
• Duties of Principal
i. Duty to indemnify when agent has sustained loss due to act of principal.
ii. Duty to exercise lien.
• Rights of Principal
i. Right to compensation if he has suffered loss due to act of agent.
ii. To recover secret profits
iii. To resist claim
iv. To revoke contract
- CLASSES OF AGENTS
Agents may be special or general or, they may be mercantile agents:

(a) Special Agent :
- A special agent is one who is appointed to do a specified act, or to perform a specified
function.
- He has no authority outside this special task.
- The third-party has no right to assume that the agent has unlimited authority.
- Any act of the agent beyond that authority will not bind the principal.
(b) General Agent :

- A general agent is appointed to do anything within the authority given to him by the
principal in all transactions, or in all transactions relating to a specified trade or matter.
- The third- party may assume that such an agent has power to do all that is usual for a
general agent to do in the business involved.
- The third party is not affected by any private restrictions on the agent’s authority.
(c) Sub-agent:
- A person who is appointed by the agent and to whom the principal’s work is delegated to
known as sub- agent.
- Section 191 provides that “a sub-agent is a person employed by, and acting under the control
of the original agent in the business of the agency.” So, the sub-agent is the agent of the
original agent.
- As between themselves, the relation of sub-agent and original agent is that of agent and the
principal.
- A sub- agent is bound by all the duties of the original agent.
- The sub-agent is not directly responsible to the principal except for fraud and willful wrong.
- The sub-agent is responsible to the original agent.
- The original agent is responsible to the principal for the acts of the sub-agent. As regards
third persons, the principal is represented by sub-agent and he is bound and responsible for
all the acts of sub-agent as if he were an agent originally appointed by the principal.
(d) Mercantile agents

Section 2(9) of the Sale of Goods Act, 1930, defines a mercantile agent as “a mercantile
agent having in the customary course of business as such agent authority either to sell goods
or consign goods for the purposes of sale, or to buy goods, or to raise money on the security
of goods”. This definition covers factors, brokers, auctioneers, commission agents etc.
Factors
- A factor is a mercantile agent employed to sell goods which have been placed in his
possession or contract to buy goods for his principal.
- He is the apparent owner of the goods in his custody and can sell them in his own name
and receive payment for goods.
- He has an insurable interest in goods and also a general lien in respect of any claim he may
have arising out of the agency.
(e) Brokers:
- A broker is a mercantile agent whose ordinary course of business is to make contracts with
other parties for the sale and purchase of goods and securities of which he is not entrusted
with the possession for a commission called brokerage.
- He acts in the name of principal.
- He has no lien over the goods as he is not in possession of them.
(f) Del credere agent:

- A del credere agent is a mercantile agent, who is in consideration of an extra remuneration
guarantees to his principal that the purchasers who buy on credit will pay for the goods they
take.
- In the event of a third-party failing to pay, the del credere agent is bound to pay his
principal the sum owned by third-party.
(g) Auctioneers:
- An auctioneer is an agent who sells goods by auction, i.e., to the highest bidder in public
competition.
- He has no authority to warrant his principal’s title to the goods.
- He is an agent for the seller but after the goods have been knocked down he is agent for
the buyer also for the purpose of evidence that the sale has taken place.
(h) Partners:
In a partnership firm, every partner is an agent of the firm and of his co-partners for the
purpose of the business of the firm.
(g) Bankers:
- The relationship between a banker and his customer is primarily that of debtor and creditor.
- In addition, a banker is an agent of his customer when he buys or sells securities, collects
cheques, dividends, bills or promissory notes on behalf of his customer.
- He has a general lien on all securities and goods in his possession in respect of the general
balance due to him by the customer.
E-C ONTRACT
- Electronic contracts are not paper based but rather in electronic form are born out of the
need for speed, convenience and efficiency.
- In the electronic age, the whole transaction can be completed in seconds, with both parties
simply affixing their digital signatures to an electronic copy of the contract.
- There was initially an apprehension amongst the legislatures to recognize this modern
technology, but now many countries have enacted laws to recognize electronic contracts. The
conventional law relating to contracts is not sufficient to address all the issues that arise in
electronic contracts.
- The Information Technology Act, 2000 solves some of the peculiar issues that arise in the
formation and authentication of electronic contracts.
CSEET Legal Aptitude and Logical Reasoning Law of Torts
CHAPTER 2- ELEMENT OF GENERAL LAWS
B. LAW OF TORTS
INTRODUCTION
a. The word 'Tort' is a French word which is derived from a Latin word 'Tortum'. Tort means
'Civil Wrong'. But every wrong or wrongful act is not a tort. Tort is really a kind of civil
wrong as opposed to criminal wrong. Example: A car accident where one driver hurts another
driver because he or she was not paying attention could be a tort Thus, simply stated ‘tort’
means wrong. But every wrong or wrongful act is not a tort.
b. Wrongs can be of 2 types

i. Public wrongs – It is violation against the state
ii. Private wrongs- It is wrongs against individuals
c. "Tort" means a civil wrong which is not exclusively the breach of a contract or the breach of
trust.
d. Section 2(m) of the Limitation Act, 1963, states: “Tort means a civil wrong which is not
exclusively a breach of contract or breach of trust.”
Note – It is Limitation Act, 1963 which defines Torts
IMPORTANT DEFINITIONS
a. Salmond defines it as” a civil wrong for which the remedy is a common law action for
unliquidated damages and which is not exclusively the breach of a contract or the breach of
a trust or other merely equitable obligation.”
b. Fraser describes it as “an infringement of a right in rem of a private individual giving a right
of compensation at the suit of the injured party.”
c. Winfield says: “Tortious liability arises from the breach of duty, primarily fixed by law; this
duty is towards persons generally and its breach is redressable by an action for unliquidated
damages”.
ELEMENTS OF TORTS
a. It is a species of civil injury of wrong as opposed to a criminal wrong, and
b. Every civil wrong is not a tort.
Accordingly, it is possible to distinguish tort from a crime and from a contract, a trust and a
quasi- contract.
GENERAL CONDITIONS OF LIABILITY FOR A TORT
a. There is no specific list of the Civil Wrong that will amount to Tort. A civil wrong becomes a
tort only if it satisfies some conditions. In general, a tort consists of some act or omission
done by the Tortfeasor whereby he has without just cause or excuse caused some harm to
the other party.
b. Tort has following components: -

i. a wrongful act or omission done by the Tortfeasor. (Tortfeasor is the party who commits a
tort);
ii. the wrongful act must cause legal damage to another; and
iii. the wrongful act must be of such a nature that a legal remedy can be offered.
Note: If any of the three conditions are missing, then it will not amount to Tort.
QUICK REVISION
So, what makes a Tort?

Wrongful Act + Legal Damage + Legal Remedy = TORT
1. Wrongful act: The act complained of, should under the circumstances, be legally wrongful as
regards the party complaining. In other words, it should prejudicially affect any of the above
mentioned interests, and protected by law. Thus, every person whose legal rights, e.g., right
of reputation, right of bodily safety and freedom, and right to property are violated without
legal excuse, has a right of action against the person who violated them, whether loss results
from such violation or not.
2. Legal damages: It is not every damage that is a damage in the eye of law. It must be a
damage which the law recognizes as such. In other words, there should be legal injury or
invasion of the legal right. In the absence of an infringement of a legal right, an action does
not lie. Also, where there is infringement of a legal right, an action lies even though no
damage may have been caused.
As was stated in Ashby v. White, legal damage is neither identical with actual damage nor
is it necessarily pecuniary.
Two maxims, namely:
i. Damnum sine injuria, and
ii. Injuria sine damnum, explain this proposition.
3. Legal remedy: The third condition of liability for a tort is legal remedy. This means that to
constitute a tort, the wrongful act must come under the law. The main remedy for a tort is
an action for unliquidated damages, although some other remedies, e.g., injunction, may be
obtained in addition to damages or specific restitution may be claimed in an action for the
detention of a chattel. Self-help is a remedy of which the injured party can avail himself
without going to a law court. It does not apply to all torts and perhaps the best example of
these to which it does apply is trespass to land.
For example, if “A” finds a drunken stranger in his room who has no business to be there,
and is thus a trespass, he (A) is entitled to get rid of him, if possible without force but if
that be not possible with such force as the circumstances of the case may warrant.
So now what is Damnum sine Injuria and Injuria Sine Damnum?
a. Injuria Sine Damnum

It means injury without damage, i.e., where there is no damage resulted yet it is an injury or
wrong in tort i.e., where there is infringement of a legal right not resulting in harm, but
plaintiff can still sue in tort. Thus, the act of trespassing upon another’s land is actionable
even though it has not caused the plaintiff even the slightest harm.
Note: Injuria sine domno covers such cases and action lies when the right is
violated even though no damage has occurred. Thus, the act of trespassing upon another’s
land is actionable even though it has not caused the plaintiff even the slightest harm.
Case Law- Ashby v White (1703)
In the leading case of Ashby v White (1703), the defendant,

Polling officer wrongfully refused to register a duly tendered vote
of plaintiff, a legally qualified voter at parliament election and
the candidate for whom the vote was to be tendered was elected
and no loss suffered by election of vote, nevertheless it was held
that an action lay and the plaintiff was entitled to recover
compensation.
b. Damnum sine Injuria

The maxim means that in a given case, a man has suffered damage and yet have no action
in tort, because the damages not to an interest protected by the law of torts. Therefore,
causing damage, however substantial to another person is not actionable in law unless there
is also violation of a legal right of the plaintiff. Thus, if I own a shop and you open a shop
in neighborhood, as a result of which I lose, same customers and my profits fall off. I cannot
sue you for the loss in profits, because you are exercising your legal rights. [Gloucester
Grammer School Case]
Question: How far a guilty mind of persons is required for liability for tort?
Answer: The general principle lies in the maxim, “actus non facit reum nisi mens sit res”
i.e., the act itself creates no guilt in the absence of guilty mind. It does not mean that for
the law' of torts, the act must be done with an evil motive, but simply means the act must
be done either with wrongful intention or negligence.
KINDS OF TORTIOUS LIABILITY
a. Strict or Absolute Liability

In some torts, the defendant is liable even though the harm to the plaintiff occurred without
intention or negligence on the defendant's part. In other words, the defendant is held liable
without fault. These cases fall under the following categories:
i. Liability for Inevitable Accident - Such liability arises in cases where damage is done by
the escape of dangerous substances brought or kept by anyone upon his land. Such cases are
where a man is made by law an insurer of other against the result of his activities.
ii. Liability for Inevitable Mistake - Such cases are where a person interferes with the
property or reputation of another.
iii. Vicarious Liability for Wrongs committed by others - Responsibility in such cases is
imputed by law on grounds of social policy or expediency. These cases involve liability of
master for the acts of his servant.
Case Law - Ryland v/s Fletcher
The rule in Rylands v. Flethcer (1868) L.R. 3 H.L. 330 is that a man acts
at his peril and is the insurer of the safety of his neighbour against
accidental harm. Such duty is absolute because it is independent of
negligence on the part of the defendant or his servants. It was held in that
case that: “If a person brings or accumulates on his land anything which,
if it should escape may cause damage to his neighbours, he does so at his
own peril. If it does not escape and cause damage, he is responsible,
however careful he may have been, and whatever precautions he may have
taken to prevent damage.”
The facts of this case were as follows:

i. B, a mill owner employed independent contractors, who were apparently competent to
construct a reservoir on his land to provide water for his mill. There were old disused mining
shafts under the site of the reservoir which the contractors failed to observe because they
were filled with earth.
ii. The contractors therefore, did not block them. When the water was filled in the reservoir, it
bursts through the shafts and flooded the plaintiff's coal mines on the adjoining land.
iii. It was found as a fact that B did not know of the shafts and had not been negligent, though
the independent contractors, had been, B was held liable.
Observation
Blackburn, J., observed; “We think that the true rule of law is that the person, who for his
own purposes brings on his lands and collects and keeps there anything likely to do mischief
if it escapes, must keep it at his peril and if, he does not do so is, prima facie answerable
for all the damage which is the natural consequence of its escape.”
Later in the case of Read v. Lyons [(1946) 2 All. E.R. 471 (H.L.)], it has been explained
that two conditions are necessary in order to apply the rule in Ryland v. Fletcher, these are:
i. Escape from a place of which the defendant has occupation or over which he has a
control to a place which is outside his occupation or control or something likely to do mischief
if it escapes; and
ii. Non-natural use of Land: The defendant is liable if he makes a non-natural use of land.
Note: If either of these conditions is absent, the rule of strict liability will not apply.
Exception to the rule of strict liability

• Damage due to natural use of land.
• Act of God, i.e., extraordinary rain, storm etc.
• Plaintiff’s own default.
• Consent of the plaintiff.
• An act done under the authority of a statute.
• Act of third party.
b. Vicarious Liability
Vicarious liability refers to a situation where someone is held responsible for the actions or
omissions of another person. Example: An employer can be liable for the acts or omissions of
its employees, provided it can be shown that they took place in the course of their
employment. In short, a person is liable for his own wrongful acts and one does not incur
any liability for the acts done by others is known as Vicarious liability. Following are Vicarious
Liability:
i. Principal and Agent: This is based on the maxim Qui facit per alium facit per se - he who
acts through another is acting himself, so that the act of the agent is the act of the
principal. When an agent commits a tort in the ordinary course of his duties as an agent, the
principal is liable for the same.
ii. Partners: All the partners are liable for tort committed by partner in the ordinary course of
the business of the firm. The liability of the partners is joint and several.
iii. Master and Servant: A master is liable for the tort committed by his servant while acting in
the course of his employment. The servant, of course, is also liable; their liability is joint
andseveral. The basis of the rule is in the maxim Respondent Superior (Let the principal be
liable)or on the maxim Qui facit per alium facit per se (he who does an act through another
is deemed to do it himself).
iv. Employer and Independent Contractor: An employer is vicariously liable for the torts of his
servants committed in the course of their employment, but he is not liable for the torts of
those who are his independent contractors.
c. Vicarious Liability of the State

Position in England
At common law the crown could not be sued in tort either for wrongs actually authorized by
it or committed by its servants, in the course of their employment with the passing of crown
Proceedings Act 1947 the crown is liable for the tort committed by its servants just like a
private individual.
Position in India
When a case of government liability in tort comes before the courts, the question is whether
the particular government activity, which government rise to the tort, was the sovereign
function or non-sovereign function. If it is a sovereign function, it could claim immunity from
tortuous liability otherwise not.
Torts or Wrongs to Personal Safety and Freedom

An action for damages lies in the following kinds of wrongs which are styled as injuries to
the person of an individual:
Battery
Any direct application of force on another individual without his consent or lawful justification is
a wrong of battery. Even though the force used is very trivial and does not cause any harm, the
wrong is committed. Thus, even to touch a person in anger or without lawful justification is
battery.
Assault
Assault is any act of the defendant which directly causes the plaintiff immediately to apprehend
a contract with his person.
To point a loaded gun at the plaintiff or to curse him in a threatening manner is to assault him
clearly if the defendant by his act intends to commit a battery and the plaintiff apprehends it
is an assault.
False imprisonment
It means imposition of local restraint for some period, however short upon liberty of another,
without sufficient lawful justification. It means unauthorized restraint on a person’s body. If a
man is restrained by a threat of force from leaving his own house or an open field there is false
imprisonment.
Malicious prosecution
It means instigating judicial proceedings against another, maliciously and without reasonable and
probable cause, which terminate in favor of that other and which results in damage to his
reputation personal freedom or property.
Nervous shock
Under this relief may be provided when a person gets some nervous shock through what he has
seen or heard. But mere shock is not enough to make it an actionable tort, some inquiry or
illness must take place as are a result of the emotional disturbance, fear etc.
IMPORTANT POINTS TO REMEMBER FOR MALICIOUS PROSECUTION
The following are the essential elements:

i. There must have been a prosecution of the plaintiff by the defendant.
ii. There must have been want of reasonable and probable cause for that prosecution.
iii. The defendant must have acted maliciously (i.e. with an improper motive and not to further
the end of justice)
iv. The plaintiff must have suffered damages as a result of the prosecution.
v. The prosecution must have terminated in favour of the plaintiff.
DEFAMATION
Concept of Defamation
Defamation is the publication of a statement which tends to affects the reputation of a
person. Actually, it is attack on the reputation of person.
It may be classified into two heads
LIBEL SLANDER
Libel is a representation made in some Slander is the publication of a defamatory
permanent form. E.g., written words, pictures statement in a transient form: statement of
etc. temporary nature such as spoken words or
gestures.
JUDICIAL REMEDIES
Three types of judicial remedies are available in tort:

1. Damages or Compensation,
2. Injunction, and
3. Specific Restitution of Property.
EXTRA JUDICIAL REMEDIES

Following Extra Judicial remedies are available: -
1. Self Defense: A person can use reasonable force to protect himself, or any other person
against any unlawful use of force.
2. Prevention of Trespass: An occupier of land or any authorized person may use reasonable
force to prevent trespassers from entering the land or eject them if they have already
entered the land.
3. Re-entry on Land: A person wrongfully disposed of land may retake possession of land in a
peaceful and reasonable manner.
4. Re-caption of Goods: A person who is entitled to possession of goods can take it back either
peacefully or by applying reasonable force.
5. Abatement of Nuisance: The occupier of land may lawfully abate or terminate any nuisance.
6. Distress Damage Pheasant: Distress Damage Feasant means to detain things which are
doing damage. Therefore, an occupier of land may lawfully detain cattle or other things on his
land doing damage until the compensation is paid.
CSEET Legal Aptitude and Logical Reasoning CS Legislations
CHAPTER 3- ELEMENTS OF COMPANY SECRETARIES LEGISLATION
WHO IS DIRECTOR?
Director means a Director appointed to the Board of the Company.
MINIMUM AND MAXIMUM NUMBER OF DIRECTORS
Private Company Public Company OPC
• min.- 2 • min.- 3 • min. - 1

• max.- 15 • max - 15 • max. - 15
If at all, company wishes to raise it beyond 15, it shall do so by passing a special resolution
in the general meeting.
DIRECTORSHIPS OF AN INDIVIDUAL (SEC. 105)
1. An individual can be a Director in 20 companies, which shall also include alternate

directorships.
2. Out of these 20 companies, he cannot be a Director in more than 10 public limited
companies.
3. The members of a company may by passing a special resolution specify any lesser number of
companies in which a Director of the company may act as a Director.
4. Such person shall not act as a Director in more than the specified number of companies
after dispatching the resignation or after the expiry of this Act, whichever is earlier.
5. For the purpose of sec 165 compliance, if a person is a Director in a Private Limited Company,
which is a subsidiary of Public Ltd, he will be considered as a Director of the Public Limited
Company.
6. If a person accepts an appointment as a director in contravention of above-mentioned
provisions, he shall be punishable with fine which shall not be less than Rs. 5,000 but which
may extend to Rs. 25,000 for every day after the first day during which the contravention
continues.
POINT TO BE NOTED-
Every company shall have at least one Director who has stayed in India for a total period of
not less than 182 days in the previous calendar year.
APPOINTMENT OF FIRST DIRECTOR
1. The name of the first Director is generally

mentioned in The Articles.
If no specific names are mentioned, the subscribers
to MOA and AOA who are individuals shall be
deemed to be the First Directors of the Company.
In case of an OPC, the sole member shall be treated

as a First Director, if a Director is not appointed by
such company.
The term of such Directors shall be upto the date of

the 1st GM of the company.
GENERAL PROVISIONS REGARDING THE APPOINTMENT OF DIRECTORS
1. Every Director shall be appointed by the company in general meeting.

2. DIN is compulsory for appointment as a Director.
3. The person to be appointed as a Director shall submit a declaration to the effect that he is
not disqualified to act as a director.
4. A consent to act as Director shall be filed in form DIR 2, in physical form with the
company. The company shall file form DIR 12, with the ROC intimating the appointment of
Director within 30 days from the date of appointment along with form DIR 2.
5. At every AGM of a public limited company, two third of the total number of Directors shall
be persons, whose period of office shall be liable to determination by retirement by rotation.
(proportional representation).
6. One third of such number of Directors are liable to retire by rotation, and are eligible for
reappointment. However, if there number is neither 3 nor a multiple of 3, then the number
nearest to 1/3rd shall retire from office.
7. The Directors whose term is longest in office shall retire first.
8. Independent directors shall not be included for the computation of total number of directors.
ANNUAL GENERAL MEETING
Section 96 provides that “every company” other than an OPC is required to hold an AGM
every year.
Businesses:-
A Consideration of financial statements

& the report of Board & Auditors.
D Declaration of any dividend.
D Appointment of Directors in place of

these retiring.
A Appointment of Auditors and fixing

their remuneration.
Holding of an Annual General Meeting:-

i. Annual General Meeting should be held once every year.
ii. First Annual General Meeting should be held within 9 months from the closing of first
financial year. However, an Annual General Meeting is not required to be held in the year of
its incorporation.
iii. All the subsequent Annual General Meetings shall be held within 6 months from the end of
Financial Year.
iv. The gap between 2 AGM’s should not exceed 15 months.
Default in holding the annual general meeting:
Section 99 provides that if any default is made in complying or holding a meeting of the
company, the company and every officer of the company who is in default shall be
punishable with fine which may extend to 1 lakh and in case of continuing default, with a
further fine which may extend to Rs. 5,000/- for each day during which such default
continues.
MEETING OF BOARD
- First Board Meeting of the Company shall be held within 30 days of the date of
incorporation.
- A minimum of four meetings shall be held every year and the gap between two such
meetings shall not be more than 120 days.
- In case of One Person Company, Small Company or Dormant Company, atleast one meeting
shall be conducted in each half of the calendar year and the minimum gap between these
two meetings shall be atleast 90 days.
- As per the Companies Act 2013, the company has to file the resolutions of the board
meetings of certain specified agenda to RoC in e-form MGT-14.
THE INSTITUTE OF COMPANY SECRETARIES OF INDIA
ICSI has been contributing to the initiatives of Government

of India that have potential to excel
the social-economic growth of India .
THE VISION, MOTTO, MISSION AND CORE VALUE OF THE INSTITUTE

- VISION- To be a global leader in promoting Good Corporate Governance
- MISSION- To develop high calibre professionals facilitating good Corporate Governance
- MOTTO- Speak the Truth, Abide by the Law
CORE VALUES
Core values are the expression of beliefs, followed by an individual, group or community in
their personal or professional behaviour, individually or collectively. The ICSI identifies for
itself and its members the following core values:
• Integrity
• Ethics
• Reliability
• Ownership
• Being ‘stakeholder-centric’
Integrity
- Etymologically, the word ‘integrity’ derives from the Latin word ‘integer’ which means whole
or complete.
- In this context, integrity may comprise the personal inner sense of wholeness deriving from
character, courage and consistency.
Ethics
- The term ‘ethics’ has its origin from a Greek word “ethos”, which means character or
custom - the distinguishing character, moral nature or guiding beliefs of a person, institution
or a group.
- ‘Ethics’ in its simplest form means possessing a sense of right and wrong. Whatever is
conscientiously right is ethical; whatever is not, is unethical. In other words, ethics is the
sense of right and wrong, coupled with a desire to do good in some measure for someone.
Being ‘stakeholder-centric’
The ICSI, its members and the Team ICSI pledge to uphold the established principles of
professional ethics, values and standards and will always promote honesty and transparency
in their behaviour, practices and processes.
Reliability
- Reliability is an assurance of quality of service and commitment.
- At the ICSI, reliability is a core value reinforced by stringent processes specially focusing on
quality of service, predictability and reliability.
- The values are an intrinsic component of work culture and sustainable growth. Quality and
predictability through commitment and value-added services is what would be the strongest
USP of the ICSI and its members.
Ownership
- Ownership is synonymous with responsibility, accountability and empowerment.
- The idea of ownership is much more than simply a willingness to accept own criticism,
deficiency or oversight.
- It is more about setting one’s priorities, placing rightful obligations on others as high as
obligations to self.
- To be responsible is to always do the right things in the eyes of valued stakeholders and the
public at large.
- It is to value the trust and confidence stakeholders put in them. It is about commitment to
keep a promise or make right some unintentional wrong, even when it is inconvenient to do
so.
Being Stakeholder-Centric
Stakeholder is our most valued constituency when it comes to being able to achieve our
goals. We believe in constant stakeholder consultation and in translating their aspirations into
achievable goals. We take pride in having a transparent and stakeholder focused approach in
having a trustworthy and collaborative relationship with them.
FUNCTIONS OF COMPANY SECRETARY
According to Section 205 of the Companies Act, 2013 the functions of the company
secretary shall include,—
- to report to the Board about compliance applicable to the company;
- to ensure that the company complies with the applicable secretarial standards;
- to discharge such other duties as may be prescribed;
- to provide to the directors, such guidance as they may require, with regard to their duties,
responsibilities and powers;
- to facilitate the convening of meetings and attend Board, committee and general meetings,
and maintain the minutes of these meetings;
- to obtain approvals from the Board, general meetings, the Government and such other
authorities as required under the provisions of the Act;
- to represent before various regulators, Tribunal and other authorities under the Act in
connection with discharge of various functions under the Act;
- to assist the Board in the conduct of the affairs of the company;

- to assist and advise the Board in ensuring good corporate governance practices;
- to discharge such other duties as may be assigned by the Board from time to time;
DUTIES OF COMPANY SECRETARY
The duties of Company Secretary shall also discharge, the following duties, namely:-
(1) to provide to the directors of the company, collectively and individually, such guidance as they
may require, with regard to their duties, responsibilities and powers;
(2) to facilitate the convening of meetings and attend Board, committee and general meetings
and maintain the minutes of these meetings;
(3) to obtain approvals from the Board, general meeting, the government and such other
authorities as required under the provisions of the Act;
(4) to represent before various regulators, and other authorities under the Act in connection
with discharge of various duties under the Act;
(5) to assist the Board in the conduct of the affairs of the company;
(6) to assist and advise the Board in ensuring good corporate governance and in complying
with the corporate governance requirements and best practices; and
(7) to discharge such other duties as have been specified under the Act or rules; and
(8) such other duties as may be assigned by the Board from time to time.
COMPANY SECRETARY IN PRACTICE
A member of the Institute shall be deemed “to be in practice” when, individually or in

partnership with one or more members of the Institute in practice or in partnership with
members of such other recognized professions as may be prescribed, he, in consideration of
remuneration received or to be received,—
(a) Engages himself in the practice of the profession of Company Secretaries to, or in relation to,
any company; or
(b) offers to perform or performs services in relation to the promotion, forming, incorporation,
amalgamation, reconstruction, reorganisation or winding up of companies; or
(c) offers to perform or performs such services as may be performed by—

- anauthorised representative of a company with respect to filing, registering, presenting,
attesting or verifying any documents (including forms, applications and returns) by or on
behalf of the company
- a share transfer agent,
- an issue house,
- a share and stock broker,
- a secretarial auditor or consultant,
- an adviser to a company on management, including any legal or procedural matters (vii)
issuing certificates on behalf of, or for the purposes of, a company; or
(d) holds himself out to the public as a Company Secretary in practice; or
(e) renders professional services or assistance with respect to matters of principle or detail
relating to the practice of the profession of Company Secretaries; or
(f) renders such other services as, in the opinion of the Council, are or may be rendered by a
Company
Company Secretary in Practice have been authorised by Government as well as Regulatory

Bodies including-
- Reserve Bank of India (RBI),
- Securities and Exchange Board of India (SEBI),
- NCLT & NCLAT,
- Insurance Regulatory Authority of India ((IRDA),
- Competition Commission of India (CCI),
- Real Estate Regulatory Authority of India (RERA) and
- Stock Exchanges (SE) to act as authorised representative and issue various certifications and
undertake Secretarial Audit of Bigger Companies.
A Company Secretary being multidisciplinary professional renders services in following areas:
CORPORATE GOVERNANCE AND SECRETARIAL SERVICES
(i) Corporate Governance Services

Advising on good governance practices and compliance of Corporate Governance norms as
prescribed under various Corporate, Securities and Other Business Laws and regulations and
guidelines made thereunder.
Corporate Secretarial Services
1. Promotion, formation and incorporation of companies and matters related therewith
2. Filing, registering any document including forms, returns and applications by and on behalf of
the company as an authorized representative
3. Maintenance of secretarial records, statutory books and registers
4. Arranging board/general meetings and preparing minutes thereof
5. All work relating to shares and their transfer and transmission
SECRETARIAL AUDIT
According to Section 204 of the Companies Act, 2013

- every listed company and
- every public company having a paid-up share capital of fifty crore rupees or more turnover of
two hundred fifty crore rupees or more or
- every company having outstanding loans or borrowings from banks or public financial
institutions of one hundred crore rupees or more
shall annex with its Board’s report made in terms of section 134(3), a secretarial audit
report, given by a company secretary in practice, in prescribed form .
It shall be the duty of the company to give all assistance and facilities to the company
secretary in practice, for auditing the secretarial and related records of the company.
The Board of Directors, in their report made in terms of section 134(3), shall explain in full
any qualification or observation or other remarks made by the company secretary in practice
in his report.
If a company or any officer of the company or the company secretary in practice,

contravenes the provisions of this section, the company, every officer of the company or the
company secretary in practice, who is in default, shall be punishable with fine which shall
not be less than one lakh rupees but which may extend to five lakh rupees
CORPORATE SOCIAL RESPONSIBILITY
- Every company having net worth of rupees five hundred crore or more, or turnover of rupees
one thousand crore or more or a net profit of rupees five crore or more during the
immediately preceding financial year shall constitute a Corporate Social Responsibility
Committee of the Board consisting of three or more directors, out of which at least one
director shall be an independent director.
- The Board's report shall disclose the composition of the Corporate Social Responsibility
Committee.
- The Corporate Social Responsibility Committee shall (a) formulate and recommend to the
Board, a Corporate Social Responsibility Policy which shall indicate the activities to be
undertaken by the company in areas or subject, specified in Schedule VII; (b) recommend
the amount of expenditure to be incurred on the activities; and (c) monitor the Corporate
Social Responsibility Policy of the company from time to time.
- The Board of every company shall ensure that the company spends, in every financial year,
atleast two per cent of the average net profits of the company made during the three
immediately preceding financial years or where the company has not completed the period of
three financial years since its incorporation, during such immediately preceding financial
years, in pursuance of its Corporate Social Responsibility Policy.
- In case the unspent amount does not relate to any on going project, unspent amounts to be
transferred to a Fund specified under Schedule VII within a period of six months of the
expiry of the financial year.
- In case the unspent amount relates to any on going project subject to fulfilling of prescribed
conditions, unspent amounts to be transferred by the company within a period of thirty
days from the end of the financial year to a special account to be opened by the company
in that behalf for that financial year in any scheduled bank to be called the
Unspent Corporate Social Responsibility Account.
- Such amount shall be spent by the company in pursuance of its obligation
towards the Corporate Social Responsibility Policy within a period of three financial years
from the date of such transfer, failing which, the company shall transfer the same to a
Fund specified in Schedule VII, within a period of thirty days from the date of completion of
the third financial year.
PENAL PROVISIONS UNDER
- The company - punishable with fine which shall not be less than Rs. 50,000 but which may
extend to Rs. 25 lakh
- Every officer of such company who is in default - shall be punishable with imprisonment for
a term which may extend to 3 years or with fine which shall not be less than Rs. 50,000
but which may extend to Rs. 5 lakh, or with both.
CSEET Legal Aptitude and Logical Reasoning Company Law
CHAPTER 4- ELEMENTS OF COMPANY LAW
WHAT IS COMPANY?
a. In common law, a company is a “legal person” or “legal entity” separate from, and
capable of surviving beyond the lives of its members.
b. An incorporated company owes its existence either to a special Act of Parliament or to
company law.
c. However, an association formed not for profit also acquires a corporate character and falls
within the meaning of a company by reason of a license issued under Section 8(1) of the
Act.
Definition?
Section 2 (20)
A Company means a company incorporated under this Act or under any previous company
law.
NATIONALITY & RESIDENCE OF A COMPANY
Though it is established through judicial decisions that a company cannot be a citizen, yet it
has nationality, domicile and residence.
In Gasque v. Inland Revenue Commissioners, (1940) 2 K.B. 88, Macnaghten. J. held that
A limited company is capable of having a domicile and its domicile is the

place of its registration and that domicile clings to it throughout its existence.
He observed in this case:
“It was suggested that a body corp3orate has no domicile. It is quite true that a body
corporate cannot have a domicile in the same sense as an individual. But by analogy with a
natural person the attributes of residence, domicile and nationality can be given to a body
corporate.”
TYPES OF COMPANIES
Private Company
Main Type
Public Company
One person Company
Small Governmen Foreign

Companies t Companies
Companies
Limited Producer
Association not for Profit
Companies Companies
Holding Subsidiary and Associate Company

WHAT IS PRIVATE COMPANY?
Sec 2 (68)
“private company” means a company having such paid-up share capital as may be prescribed,
and which by its articles:
i. Restricts the right to transfer its shares;
ii. limits the number of its members to two hundred;
iii. Prohibits any invitation to the public to subscribe for any securities of the company;
iv. The words “Private Limited” must be added at the end of its name by a private limited
company.
v. Section 149(1) further lays down that a private company shall have a minimum number of
two directors. The only two members may also be the two directors of the private company.
Additional Points to be remembered

Where two or more persons hold one or more shares in a company jointly, they be treated
as a single member;
Following persons shall not be included in the number of members:
A) Persons who are in the employment of the company; and
B) Persons who, having been formerly in the employment of the company, were members
of the company while in that employment and have continued to be members after the
employment ceased, and
C) It must be noted that it is only the number of members that is limited to two
hundred.
D) A private company may issue debentures to any number of persons, the only condition
being that an invitation to the public to subscribe for debentures is prohibited.
WHAT IS PUBLIC COMPANY?
Sec 2 (71)
A public company means a company which:
a) Is not a private company.
b) Has such paid-up capital, as may be prescribed.
Point to be Noted:
Company which is a subsidiary of a company, not being a private company, shall be deemed
to be public company.
WHAT IS ONE PERSON COMPANY?
As per section 2(62) of the Companies Act, 2013, “One

Person Company” means a company which has only one
person as a member.
Conditions-
i. It shall have a minimum of one director.
ii. An OPC may be formed either as a company limited by
shares or a company limited by guarantee; or an unlimited liability company.
iii. Only a natural person who is an Indian citizen and resident in India:
a) Shall be eligible to incorporate a One Person Company.
b) Shall be a nominee for the sole member of a One-person Company.
c) No person shall be eligible to incorporate more than a One Person Company or become
nominee in more than one such company.
d) No minor shall become member or nominee of the One Person Company or can hold share
with beneficial interest.
Points To be Noted:
- One Person Company will be registered as a private company with one member and one
director.
- Where a natural person, being member in One Person Company becomes a member in
another such Company by virtue of his being a nominee in that One Person Company, such
person shall meet the eligibility criteria within a period of one hundred and eighty-two days.
- Such company cannot be incorporated or converted into a company under section 8 of the
Act or can be converted into any other kind of company only if a period of 2 years is
required from date of incorporation unless threshold limit of paid up share capital is
increased beyond fifty lakh rupees or its average annual turnover during the relevant period
exceeds two crore rupees.
Benefits?
- It gives the individual entrepreneurs all the benefits of a
company, which means they will get credit, bank loans,
and access to market, limited liability, and legal protection
available to companies.
- One Person Company (OPC) would provide tremendous
opportunities for small businessmen and traders, including
those working in areas like handloom, handicrafts and
pottery.
- The amount of compliance by a one-person company is much lesser in terms of filing
returns, balance sheets, audit etc.
WHAT IS SMALL COMPANY?
Sec 2 (85)
‘Small company’ means a company, other than a public
company:
i) Paid-up share capital of which does not exceed fifty lakh
rupees or such higher amount as may be prescribed which
shall not be more than five crore rupees; or
ii) Turnover of which as per its last profit and loss account does not exceed two crore rupees or
such higher amount as may be prescribed which shall not be more than twenty crore rupees.
Exceptions:
(A) A holding company or a subsidiary company;
(B) A company registered under section 8; or
(C) A company or body corporate governed by any special Act.
WHAT IS GOVERNMENT COMPANY?
Sec 2 (45)
“Government Company” means any company in which
not less than fifty one per cent, of the paid-up share
capital is held by the Central Government, or by any State Government or Governments, or
partly by the Central Government and partly by one or more State Governments, and includes
a company which is a subsidiary company of such a Government company.
Points To be Noted:
- The Government company is neither a Government department nor a Government establishment.
- Since employees of Government companies are not Government servants, they have no legal right to
claim that the Government should pay their salary or that the additional expenditure incurred on
account of revision of their pay scales should be met by the Government. It is the responsibility of
the company to pay them the salaries.
WHAT IS FOREIGN COMPANIES?
Sec 2 (42)
A ‘foreign company’ means any company or body
corporate incorporated outside India which: -
a) Has a place of business in India whether by itself or through an agent, physically or through
electronic mode; and
b) Conducts any business activity in India in any other manner.
ASSOCIATION NOT FOR PROFIT
Sec 8
The Central Government may grant such a licence if:
i) It is intended to form a company for promoting commerce,
art, science, sports, education, research, social welfare,
religion, charity protection of environment or any such other object; and
ii) The company prohibits payment of any dividend to its members but intends to apply its
profits or other income in promotion of its object.
iii) The company is registered without paying any stamp duty on its Memorandum of Articles.
Conditions -
a. A company, which has been granted licence under Section 8 cannot alter the provisions of
its Memorandum or articles except with the previous approval of the Central Government.
b. The memorandum of a company shall state the name of the company with the last word
“Limited” in the case of a public limited company, or the last words “Private Limited” in the
case of a private limited company. However, Section 8(1) permits the registration, under a
licence granted by the Central Government, of associations not for profit with limited liability
without being required to use the word “Limited” or the words “Private Limited” after their
names. This is of great value to companies not engaged in business like bodies pursuing
charitable, educational or other purposes of great utility.
c. A firm may be a member of the company registered under this section.
WHAT IS A LIMITED COMPANY?
Limited by shares Limited by guarantee Unlimited guarantee
• As per section 2(21), • As per section 2(21) • Their is no limits on losses

‘company limited by shares’ ‘company limited by which owners have to bear.
means a company having guarantee’ means a
the liability of its members company having the liability
limited by the memorandum of its members limited by
to the amount, if any, the memorandum to such
unpaid on the shares amount as the members
respectively held by them. may respectively undertake
• Accordingly, no member of to contribute to the assets
a company limited by of the company in the
shares, can be called upon event of its being wound up
to pay more than the A company limited by
nominal value of the shares guarantee having share
held by him. capital share capital on
incorporation and it receives
the guaranteed amount
from its members on
liquidation.
• A company limited by
guarantee not having share
capital receives the
guaranteed amount from its
members on liquidation.
HOLDING SUBSIDIARY AND ASSOCIATE COMPANIES
Holding
Company:
• As per Section 2(46), holding company, in relation to one or more other companies, means a company
of which such companies are subsidiary companies.
Subsidiary
Company
• Section 2 (87) provides that subsidiary company or subsidiary, in relation to any other company (that
is to say the holding company), means a company in which the holding company :
i) Controls the composition of the Board of Directors; or
ii) Exercises or controls more than one half of the total share capital either at its own or together
with one or more of its subsidiary companies;
Provided that such class or classes of holding companies, shall not have layers of subsidiaries beyond
the prescribed limit.
Associate
Company
• An associate company in accounting and business valuation is a company in which another company
owns a significant portion of voting shares, usually 20–50%. In this case, an owner does not
consolidate the associate's financial statements.
WHAT IS PRODUCER COMPANIES?
Proviso to section 465(1) provides that the provisions of Part IX A of the Companies Act,
1956 shall be applicable mutatis mutandis to a Producer Company in a manner as if the
Companies Act, 1956 has not been repeated until a special Act is enacted for Producer
Companies.
DORMANT COMPANY
- Where a company is formed and registered for a future project

or to hold an asset or
intellectual property and has no significant accounting transaction,
such a company or an inactive company may make an
application to the Registrar for obtaining the status of a
dormant company.
- “inactive company” means a company which has not been carrying on any business or
operation, or has not made any significant accounting transaction during the last two
financial years, or has not filed financial statements and annual returns during the last two
financial years;
- In case of a company which has not filed financial statements or annual returns for two
financial years consecutively, the Registrar shall issue a notice to that company and enter
the name of such company in the register maintained for dormant companies.
- A dormant company shall have a minimum number of three directors in case of a public
company, two directors in case of a private company and one director in case of a One
Person Company.
- Provisions of the Act in relation to the rotation of auditors shall not apply on dormant
companies.
- The Registrar shall strike off the name of a dormant company from the register of dormant
companies, which has failed to comply with the requirements.
NIDHI COMPANY
NIDHI means a company which has been incorporated as a NIDHI with the object of
cultivating the habit of thrift and savings amongst its members, receiving deposits from, and
lending to, its members only, for their mutual benefit, and which complies with such rules as
are prescribed by the Central Government for regulation of such class of companies.
NON-BANKING FINANCIAL COMPANY (NBFC)
A Non-Banking Financial Company (NBFC) is a company registered under the Companies

Act, engaged in the business of loans and advances, acquisition of
shares/stocks/bonds/debentures/ securities issued by Government or local authority or other
marketable securities of a like nature,
leasing, hire-purchase, insurance business, chit business but does not include-
- Any institution whose principal business is that of agriculture activity, industrial activity,
purchase or sale of any goods (other than securities) or providing any services and
sale/purchase/construction of immovable property.
- A non-banking institution which is a company and has principal business of receiving
deposits under any scheme or arrangement in one lump sum or in installments by way of
contributions or in any other manner, is also a non-banking financial company (Residuary
non-banking company).
NATURE AND CHARACTERISTICS OF COMPANIES
1) Corporate Personality:
- A company incorporated under the Act is vested with a corporate personality which bears its
own name, acts under that name, has a seal of its own and its assets are separate and
distinct from those of its members.
- It is a different person from the members who compose it.
- Therefore, it is capable of owning property, incurring debts, borrowing money, having a bank
account, employing people, entering into contracts and suing or being sued in the same
manner as an individual.
- Its members are its owners however they can be its creditors simultaneously. In effect of
corporate personality, a member can be the master and servant at the same time and enjoy
the advantages of both [Ref. Lee v/s Lee’s Air Farming Ltd.].
- A shareholder cannot be held liable for the acts of the company even if he holds virtually
the entire share capital. The shareholders are not the agents of the company and so they
cannot bind it by their acts.
Case on Corporate Personality - Salomon v/s. Salomon and Co. Ltd.,
FACTS-
• Salomon carried on a prosperous business as leather merchant & boot manufacturer.
• But soon he formed a limited company consisting of himself, his wife, his daughter & his
four sons, each of whom subscribed to 1 share making the actual cash paid as capital of
the company as Pound 7.
• He sold the business to the company for Pound 38,782. The Company’s nominal capital
was Pound 40,000 in Pound 1 share.
• Salomon was holding debentures secured by a floating charge of Pound 10,000 & 20,000
Pound 1 fully paid shares. The remaining amount of Pound 8,782 was paid to him in cash.
• The company went into liquidation due to some difficulties and the total assets amounted
to Pound 6050, liabilities were Pound 10,000 secured by debentures, Pound 8,000 owing to
unsecured trade creditors.
• The trade creditors claimed the whole of the assets viz. pound 6050 on the grounds that
the company was a mere agent of Salomon & thus they were entitled to payment in
priority to the debenture holders who was Salomon itself.
Pronouncement: Lordships of the House of Lords observed:

• “The company is a different person altogether from the subscribers of memorandum. Thus
even if after incorporation, the same persons are the managers and receive the profits from
the company, it is not their agent or trustee”.
2) Limited Liability:
- The privilege of limited liability for business debts is one of the principal advantages of doing
business under the corporate form of organization.”
- The company, being a separate person, is the owner of its assets and bound by its liabilities.
- The liability of a member as shareholder extends to the contribution to the capital of the
company up to the nominal value of the shares held and not paid by him. For example, if A
holds shares of the total nominal value of Rs. 1,000 and has already paid Rs. 500/- (or 50%
of the value) as part payment at the time of allotment, he cannot be called upon to pay
more than Rs. 500/-, the amount remaining unpaid on his shares. If he holds fully-paid
shares, he has no further liability to pay even if the company is declared insolvent.
- In the case of a company limited by guarantee, the liability of members is limited to a
specified amount of the guarantee mentioned in the memorandum.
3) Perpetual Succession:
An incorporated company never dies, except when it is wound up as per law. A company,
being a separate legal person is unaffected by death or departure of any member and it
remains the same entity, despite total change in the membership. Members may come and
go, but the company can go on forever.
4) Separate Property:
- A company being a legal person and entirely distinct from its members, is capable of owning,
enjoying and disposing of property in its own name.
- The company is the real person in which all its property is vested, and by which it is
controlled, managed and disposed off.
- As per a decided case, dividend received from a company engaged in agricultural business is
not exempt from tan in the hands of the shareholder. Only the company enjoys certain
exemptions in taxation.
5) Transferability of Shares:
The capital of a company is divided into parts, called shares. The shares are said to be
movable property and, subject to certain conditions, freely transferable, so that no
shareholder is permanently or necessarily wedded to a company.
6) Common Seal:
- Upon incorporation, a company becomes a legal entity with perpetual succession and a
common seal. Since the company has no physical existence, it must act through its agents
and all contracts entered into by its agents must be under the seal of the company.
- The Common Seal acts as the official signature of a company. The name of the company
must be engraved on its common seal.
- A rubber stamp does not serve the purpose.
7) Capacity to sue and be sued:

- A company being a body corporate, can sue and be sued in its own name. To sue, means to
institute legal proceedings against (a person) or to bring a suit in a court of law.
- All legal proceedings against the company are to be instituted in its name. Similarly, the
company may bring an action against anyone in its own name.
8) Contractual Rights:
- A company, being a legal entity different from its members, can enter into contracts for the
conduct of the business in its own name.
- A shareholder cannot enforce a contract made by his company; he is neither a party to the
contract, nor is entitled to the benefit derived from of it, as a company is not a trustee for
its shareholders. Likewise, a shareholder cannot be sued on contracts made by his company.
ADVANTAGES AND DISADVANTAGES OF COMPANY
Advantages Disadvantages
Corporate Personality: Unlike a Formalities and expenses: Incorporation of
partnership firm, which has no existence a company is coupled with complex,
apart from its members, a company is a cumbersome and detailed legal formalities
distinct person. An incorporated company and procedures, involving considerable
is a distinct entity, from its shareholders. amount of time and money. Even after the
company is incorporated, its affairs and
Limited Liability: The Companies Act working must be conducted strictly in
provides that in the event of the company accordance with legal provisions.
being wound-up, the members shall have
liability to contribute to the assets of the Corporate disclosures: Notwithstanding
company in accordance with the Act. In the elaborate legal framework designed to
the case of companies limited by shares, ensure maximum disclosure of corporate
no member is bound to contribute information, the members of a company
anything more than the nominal value of are having comparatively restricted
the shares held by him which remains accessibility to its internal management
unpaid. and day-to-day administration of corporate
working.
Perpetual Succession: The death or
insolvency of individual members does not Separation of control from ownership:
in any way, affect the corporate entity, its Members of a company are not having as
existence or continuity. The company shall effective and intimate control over its
continue to exist indefinitely till it is working as one can have in other forms of
wound-up in accordance with the provisions business organisation, say, a partnership
of the Companies Act. “Members may firm. No member of a company can act in
come and members may go but the his individual capacity for and on behalf of
company can go on forever”. the company. The members may not have
an active and complete control over the
Transferable Shares: The Companies Act, company’s working as the partners may
2013 provides the shares or other interest have over the firm’s affairs.
of any member in a company shall be
movable property, transferable in the Greater social responsibility: Having
manner provided by the articles of the regard to the enormous powers wielded by
company. It provides liquidity to the the companies and the impact they have
investors as shares could be sold in the on the society, the companies are called
open market and in stock exchange. upon to show greater social responsibility
in their working
Separate Property: A company as a legal
entity is capable of owning its funds and Greater tax burden in certain cases: In
other assets. “The property of the certain circumstances, the tax burden on a
company is not the property of the company is more than that on other forms
shareholders, it is property of the of business organisation. A company is
company” liable to tax without any minimum taxable
limit as is prescribed in the cases of
Capacity to Sue: As a juristic legal person, registered partnership firms and others.
a company can sue in its name and be Also it has to pay income-tax other whole
sued by others. The managing director and of its income at a flat rate whereas others
other directors are not liable to be sued for are taxed on graduated scale or slab
dues against a company. system.
Flexibility and Autonomy: The company Detailed winding-up procedure: The Act
has an autonomy and independence to provides elaborate and detailed procedure
form its own policies and implement them, for winding-up of companies which is more
subject to the general principles of law, expensive and time consuming than that
equity and good conscience and in which is applicable to other forms of
accordance with the provisions contained in business organisation.
the Companies Act, Memorandum and
Articles of Association.
DISTINCTION BETWEEN COMPANY, LLP, PARTNERSHIP
Sr. Partnership Company LLP

No.
1. Unlimited Liability Limited Liability Limited Liability

2. No separate legal entity Separate legal entity Body corporate
3. Registration is not Compulsory registration. Compulsory registration

compulsory
4. Limit – Min 2 Unlimited members Unlimited members

Max. 10/20
5. Partnership Deed MOA and AOA LLP Agreement

6. Partners Directors Partners/ Designated partner
7. Personal assets can be Not allowed Not allowed.

utilized in case of losses
8. No perpetuity. Perpetual succession. Perpetual succession.
9. No cost Cost is too high Cost is too high

10. No compliance Compliance is strict No compliance.
DISTINCTION BETWEEN COMPANY AND HINDU UNDIVIDED FAMILY
1. A company consists of heterogeneous members, whereas a Hindu Undivided Family Business

consists of homogenous members since it consists of members of the joint family itself.
2. In a Hindu Joint Family business, the Karta (manager) has the sole authority to contract
debts for the purpose of the business, other coparceners cannot do so. There is no such
system in a company.
3. A person becomes a member of Joint Hindu Family business by virtue of birth. There is no
provision to that effect in the company.
4. No registration is compulsory for carrying on business for gain by a Hindu Joint Family even
if the number of members exceeds twenty. Registration of a company is compulsory.
DISTINCTION BETWEEN COMPANY AND CLUB
1. A company is a trading association. A club, on the other hand, is a non-trading association.

2. Registration of a company is compulsory. Registration of a club is not compulsory.
DISTINCTION BETWEEN COMPANY AND CORPORATION
“Body corporate” or “corporation” includes a company incorporated outside India, but does not
include –
(i) a co-operative society registered under any law relating to co-operative societies; and
(ii) any other body corporate (not being a company as defined in this Act),
which the Central Government may, by notification, specify in this behalf;
DOCTRINE OF LIEFTING OF OR PIERCING CORPORATE VEIL
- The separate personality of a company is a statutory privilege and it must be used for
legitimate business purposes only.
- Where a fraudulent and dishonest use is made of the legal entity, the individuals concerned
will not be allowed to take shelter behind the corporate personality.
- The Court will break through the corporate shell and apply the principle/doctrine of what is
called as lifting of or piercing the corporate veil.
- The Court will look behind the corporate entity and take action as though no entity separates
from the members existed and make the members or the controlling persons liable for debts
and obligations of the company.
- However, the shareholders cannot ask for the lifting of the veil for their purposes.
Case Example:
a) Gilford Motor Co. v. Horne
Where the corporate veil has been used for commission of fraud or improper conduct, Courts
have lifted the veil and looked at the realities of the situation. A former employee of a
company made a covenant not to solicit its customers. He formed a company which
undertook solicitation. The company was restrained by the Court.
b) R. G. Films Ltd.
In the said case, an American company produced a film in India through a British company.
In this British company, 90% of the capital was held by the President of the American
Company which financed the making of the film. Lifting the corporate veil, BOT refused to
register the film as American companies were not allowed to produce film in India and the
British company was an instrument of the American company,
c) Connors Bros. v/s. Connors

In the given case, a company whose affairs were de facto with the persons, residents of
Germany was at war with England. The corporate veil of the company was lifted & the alien
company was not allowed to proceed with the action as it was against public policy.
d) Sir Dinshaw Manekjee Petit

In the above mentioned case, the assessee formed four private companies and agreed to hold
a block of investment as an agent for it. The dividend & interest income received on such
investment was further given to Sir Dinshaw as a prehanded loan. This way his income was
divided in four parts which in turn reduced his tax liability lifting the corporate veil, it was
seen that these companies did not do any business and were just the means to evade tax.
e) The workmen Employed in Associated Rubber Industries Limited, Bhavnagar v/s. The
Associated Rubber Industries Ltd. Bhavnagar
In this case, the principal company was liable to pay bonus to its employee as a percent of
its Gross Profits under the Bonus Act or any other applicable law. In order to reduce its
liability the Principal company formed a new company which had no business or income of
its own except receiving dividends from the shares transferred to it by the principal company.
The SC held that the new Company was formed to reduce the gross profits & thereby reduce
the amount to be paid by way of bonus to workmen.
Points to be noted:
PROMOTERS
sec 2 (69)
Promoter means a person:
Who has control over the affairs of In accordance with whose advice,
Who has been named as such in a
the company, directly or indirectly directions or instructions the Board
prospectus or is identified by the
whether as a shareholder, director of Directors of the company is
company in the annual return or
or otherwise; or accustomed to act.
Provided that sub-clause (c) shall not apply to a person who is acting merely in a
professional capacity.
IS A DIRECTOR/ OFFICER / EMPLOYEE OF THE ISSUER A PROMOTER?
- A director/officer/employee who has control over the affairs of the company, directly or
indirectly whether as a shareholder, director or otherwise is considered as a promoter.
- As per section 2(27), control shall include the right to appoint majority of the directors or
to control the management or policy decisions exercisable by a person or persons acting
individually or in concert, directly or indirectly, including by virtue of their shareholding or
management rights or shareholders agreements or voting agreements or in any other manner.
- However, a director or officer or employee of the issuer or a person, if acting as such merely
in his professional capacity, shall not be deemed as a promoter.
PROMOTERS CONTRACT – RATIFICATION THEREOF
- A regards ratification of promoters’ contracts, the company could not ratify contract made
by a promoter before its incorporation.
- Specific performance of a contract may be enforced against a company in respect of
contracts entered into by promoters on behalf of the company, if such a contract is
warranted by the terms of incorporation and the company has accepted the contract and
communicated the acceptance to the other party.
- Specific Relief Act, 1963 provides that the other party can also enforce the contract if the
company has adopted it after incorporation and the contract is within the terms of
incorporation.
- As long as the company does not ratify, as required by the Specific Relief Act, 1963 the
position remains the same as under the common law.
LEGAL POSITION OF PROMOTER
- While the accurate description of a promoter may be difficult, his legal position is quite clear.
- A promoter is neither an agent of, nor a trustee for, the company because it is not in
existence. But he occupies a fiduciary position in relation to the company and therefore
requires making full disclosure of the relevant facts, including any profit made by him.
INCORPORATION OF COMPANY
1. An application for registration of a company shall be filed, with the Registrar within whose
jurisdiction the registered office of the company is proposed to be situated, in Form No. INC-
32 (SPICe) along with the fee as provided under the Companies (Registration offices and
fees) Rules, 2014 and the following documents and information required to e attached with
the application namely:
a. The memorandum and articles of the company duly signed by all the subscribers to the
memorandum;
b. Declaration in the prescribed form by an advocate, a chartered accountant, cost accountant

or company secretary in practice, who is engaged in the formation of the
company, and by a person named in the articles as a director, manager or secretary of
the company, that all the requirements of the Act and the rules made thereunder in
respect of registration and matters precedent or incidental thereto have been complied
with;
c. Directors, if any, in the articles that he is not convicted of any offence in connection with
the promotion, formation or management of any company, or that he has not been
found guilty of any fraud or misfeasance or of any breach of duty to any company under
this Act or any previous company law during the preceding five years and that all the
documents filed with the Registrar for registration of the company contain information
that is correct and complete and true to the best of his knowledge and belief;
d. Address for correspondence till its registered office is established;
e. Particulars of name, including surname or family name, residential address, nationality and
such other particulars of every subscriber to the memorandum along with proof of
identity; Particulars of the persons mentioned in the articles as the first directors of the
company, their names, including surnames or family names, the Director Identification
Number, residential address, nationality and such other particulars including proof of identity;
and
f. Particulars of the interests of the persons mentioned in the articles as the first directors of
the company in other firms or bodies corporate along with their consent to act as directors
of the company in such form and manner.
2. The Registrar on the basis of documents and information filed above shall register all the
documents and information referred to in that sub-section in the register and issue a
certificate of incorporation in to the effect that the proposed company is incorporated under
the Act.
3. On and from the date mentioned in the certificate of incorporation issued, the Registrar shall
allot to the company a corporate identity number, which shall be a distinct identity for the
company and which shall also be included in the certificate.
4. The company shall maintain and preserve at its registered office copies of all documents and
information as originally filed in point no. (1) above till its dissolution under the Act.
5. If any person furnishes any false or incorrect particulars of any information or suppresses any
material information, of which he is aware in any of the documents filed with the Registrar
in relation to the registration of a company, he shall be liable for action Punishment for
Fraud under section 447.
CORPORATE IDENTIFICATION NUMBER
Corporate Identification Number is a 21-digit number assigned to every company incorporated

on or after November 1, 2000. The Corporate Identitfication Number allotted to a company
indicates listing status, economic activity (industry), State, year of incorporation, ownership
and sequential number assigned by ROC (Registration number).
1st Digit Listing Status

Next 5 digits Economic Activity (industry)
Next 2 digits State
Next 4 digits Year of Incorporation
Next 3 digits Ownership
Next 6 digits Sequential number assigned by ROC (Registration Number)
SHARE CAPITAL
Share is a share in the share capital of the company, and includes stock except where a
distinction between stock and shares is expressed or implied. Share capital refers the funds
that a company raises in exchange for issuing an ownership interest in the company in the
form of shares. Share capital may also describe the number and types of shares that
compose a company's share structure.
In Company Law, Capital is the share capital of a company, which is classified as:
- Nominal, Authorized or Registered Capital: Such capital as is authorised by the

memorandum of a company to be the maximum amount of share capital of the company.
- Issued Capital: Such capital as the company issues from time to time for subscription. It is
that part of the authorised or nominal capital which the company issues for the time being
for public subscription and allotment. This is computed at the face or nominal value.
- Subscribed Capital: Such part of the capital which is for the time being subscribed by the
members of a company. It is that portion of the issued capital at face value which has been
subscribed for or taken up by the subscribers of shares in the company. It is clear that the
entire issued capital may or may not be subscribed.
- Called-up Capital: Such part of the capital, which has been called for payment. It is that
portion of the subscribed capital which has been called up or demanded on the shares by the
company.
- Paid-up Share Capital : Such aggregate amount of money credited as paid-up as is

equivalent to the amount received as paid-up in respect of shares issued and also includes
any amount credited as paid-up in respect of shares of the company, but does not include
any other amount received in respect of such shares, by whatever name called.
- Equity Share Capital : equity share capital with reference to any company limited by shares,
means all share capital which is not preference share capital.
- Preference Share Capital : preference share capital with reference to any company
limited by shares, means that part of the issued share capital of the company which carries
or would carry a preferential right with respect to—
(a) payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which
may either be free of or subject to income-tax; and
(b) repayment, in the case of a winding up or repayment of capital, of the amount of the share
capital paid-up or deemed to have been paid-up.
CSEET Legal Aptitude and Logical Reasoning Legal Reasoning
CHAPTER 5 – LEGAL REASONING
LEGAL TERMINOLOGY AND MAXIMS
Sr. Maxim Meaning

No.
1. A priori From the antecedent to the consequent.
2. Ab initio From the beginning

3. Absolute sententia Plain words require no explanation
expositore non-indigent
4. Actio mixta Mixed action.
5. Actio personalis moritur A personal right of action dies with the person
cum persona
6. Actionable per se The very act is punishable and no proof of damage
is required
7. Curiae Neminem Gravabit Act of the Court shall prejudice no one
8. Actus non facit reumnisi An act does not make a man guilty unless there be
mens sit rea guilty intention.
9. Actus reus Wrongful act
10. Ad hoc For the particular end or case at hand
11. Ad idem At the same point
12. Ad valorem According to value
13. Aliunde From another source
14. Amicus Curiae A friend of court member of the bar who is
appointed to assist the Court
15. Animus possidendi Intention to possess
16. Audi alteram partem Hear the other side
17. Benami Nameless.
18. Bona fide Good faith; genuine
19. Caveat A caution registered with the public court to indicate
to the officials that they are not to act in the

matter mentioned in the caveat without first giving
notice to the caveator
20. Caveat emptor :Let the buyer beware
21. Caveat actor Let the doer beware
22. Caveat venditor Let the seller beware
23. Certiorari A writ by which records of proceeding are removed
from inferior courts to High Court and to quash
decision that goes beyond its jurisdiction
24. Cestui que trust The person who has the equitable right to property
in India he is known as beneficiaries
25. Consensus ad idem Common consent necessary for a binding contract
26. Contemporanea expositio est A contemporaneous exposition or language is the
optima et fortissima lege best and strongest in Law
27. Corpus delicti Body/gist of the offence
28. Cy pres As nearly as may be practicable

29. Damnum sine injuria Damage without injury
30. De facto In fact
31. De jure By right (opposed to de facto) in Law
32. Dehors Outside; foreign to (French term)
33. De novo To make something new; To alter
34. Dies non Day on which work is not performed
35. Deceit Anything intended to mislead another
36. Del credre agent is a mercantile agent who in consideration of extra
remuneration called a del credre commission
undertakes to indemnify his employer against loss
arising from the failure of persons with whom he
contracts to carry out their contracts.
37. Delegate potestas non- A delegated power cannot be delegated further
potest delegari
38. Delegatus non potest A delegate cannot delegate

delegare
39. Dictum Statement of law made by judge in the course of
the decision but not necessary to the decision itself.
40. Dispono Convey legally
41. Ejusdem generis Where there are general words following particular
and specific words, the general words must be
confined to things of the same kind as those
specified.
42. Estoppel Stopped from denying
43. Ex parte Proceedings in the absence of the other party
44. Expressio unius est exclusio Express mention of one thing implies the exclusion
alterius of another or which is shortly put
45. Ex turpi causa non oritur No action arises from an illegal or immoral cause
actio
46. Fatum Beyond human foresight
47. Fait accompli Things done and no longer worth arguing against; an
accomplished act
48. Factum probandum Fact in issue which is to be proved
49. Factum probans Relevant fact
50. Ferae natureae Dangerous by nature
51. Force majeure Circumstance beyond one’s control, irresistible force
or compulsion
52. Generalia specialibus non General things do not derogate from special
derogant
53. Habeas corpus A writ to have the body to be brought up before the
judge
54. Ignorantia legis neminem Ignorance of law excuses no one
excusat
55. Injuria sine damno Injury without damage.
56. Interest reipublicae ut sit State or public interest requires that there should be
finis litium a limit to litigation.

57. Ispo facto By the very nature of the case
58. In prompt In readiness
59. In posse In a state of possibility
60. In limine Initial stage; at the outset
61. Instead of
In lieu of
62. Inter alia Among other things
63. Inter se Among themselves
64. In specie In kind
65. Inter vivos Between living persons
66. Intra vires Within the powers
67. In personam A proceeding in which relief is sought against a
specific person
68. Indicia A symbol; token; mark
69. Innuendo Allusive remark
70. Jus in personam Right against a person
71. Jus in rem Right against the world at large
72. Jus non scriptum Unwritten law; Customary Law
73. Jus scriptum Written Law
74. Lex Marcatoria The law merchant, is a body of legal principles
founded on the customs of merchants in their
dealings with each other, and though at first
distinct from the common law, afterwards became
incorporated into it
75. Lex fori The law of the forum of court
76. Lis A suit cause of action
77. Lis pendens A pending suit
78. Locus standi Right of a party to an action to appear and be heard
on the question before any tribunal
79. Mala fide In bad faith
80. Mandamus A writ of command issued by a Higher Court to a

Lower Court/Government/Public Authority
81. Mens rea Guilty mind
82. Manesuetae natureae Harmless by nature
83. Mesne profits The rents and profits which a trespasser has
received/made during his occupation of premises.
84. Misnormer A wrong name
85. Mutatis-mutandis With necessary changes in points of detail
86. Noscitur a sociis A word is known by its associated, one is known by
his companions
87. Obiter dictum An incidental opinion by a judge which is not
binding
88. Onus Probandi Burden of proof.
89. Pari passu On equal footing or proportionately
90. Per se By itself taken alone
91. Persona non-grata Person not wanted
92. Per incuriam Through want of care; through inadvertence
93. Prima facie At first sight; on the face of it
94. Profit a prendre A right for a man in respect of his tenement
95. Pro bono publico For the public good.
96. Pro forma As a matter of form
97. Pro rata In proportion
98. Posteriori From the consequences to the antecedent
99. Puisne mortgage Second mortgage
100. Pari causa Similar circumstances, with equal right
101. Pari materia Relating to same person or thing
102. Qui facit per alium facit per He who acts through another is acting by himself
se
103. Quo warranto A writ calling upon one to show under what
authority he holds or claims an office
104. Quia timet Protective justice for fear. It is an action brought to
prevent a wrong that is apprehended

105. Quid pro quo Something for something
106. Ratio decidendi Principle or reason underlying a decision
107. Res judicata A decision once rendered by a competent court on a
matter in issue between the parties after a full
enquiry should not be permitted to be agitated again
108. Res ipsa loquitur The things speak for itself
109. Respondent superior Let the principal be liable
110. Res sub judice Matter under consideration
111. Res gestae Facts relevant to a case and admissible in evidence
112. Rule nisi A rule which will become imperative and final unless
cause to be shown against it
113. Scire facias Your cause to know.
114. Status quo The existing state of things at any given date
115. Scientiet volenti non-fit Injury is not done to one who knows and wills it
injuria
116. Spes successionis Chance of a person to succeed as heir on the death
of another.
117. Supra Above; this word occurring by itself in a book refers
the reader to a previous part of the book.
118. Suppressio veri Suppression of previous knowledge
119. Sui juris Of his own right
120. Simpliciter Simply; without any addition
121. Scienter Being aware of circumstances, the knowledge of
which is necessary to make one liable, as applied to
the keeper of a vicious dog, means no more than
reasonable cause to apprehend that he might
commit the injury complained of
122. Sine qua non An indispensable condition
123. Situs Position; situation; location
124. Suo motu On its own motion
125. Stare decisis Precedent. Literally let the decision stand

126. Sine die Without a day being appointed
127. Travaux preparatotries Preparatory records
128. Tortum Civil wrong actionable without contract
129. Uberrimae fide Of utmost good faith.
130. Ubi jus ibi remedium Where there is a right there is remedy
131. Ultra vires Beyond the scope, power or authority
132. Ut lite pendente nihil Nothing new to be introduced during ligitation
innovertur
133. Usufructuary One who has the use and reaps the profits of
property, but not ownership.
134. Ut res magis valeat quam The words of a statue must be construed so as to
pereat give a sensible or reasonable meaning to them
135. Vis major Act of God
136. Vigilantibuset, non The laws help those who are vigilant and not those
dormientibus, jura who are slumber or lazy
subveniunt
137. Vice versa The order being reversed; other way round
138. Volenti non-fit injuria Damage suffered by consent gives no cause of
action.
LEGAL REASONING
- Legal reasoning is the method that a person uses to apply laws to facts in order to answer
legal questions.
- Good legal reasoning requires logical argument. In legal reasoning, legal principles have to be
applied to the given factual situations to arrive at the most reasonable conclusion.
- The meaning of a legal rule and how it should be applied are often subject to multiple
interpretations.
- When the meaning of a legal rule is ambiguous, a person uses legal reasoning to argue for
the interpretation that they find most convincing or that is most favorable to him.
Derive a conclusion from given statements provided in question, and no deviation from it is
allowed.
Questions in the Legal Reasoning may be asked mainly from the following areas:—
(A) Indian Constitution
(B) Indian Contract Act
(C) Law of Torts
(D) Element of Company Law
1. Legal Principle : All citizens shall have the right to freedom of speech and expression under
Article 19 of the Constitution of India and it is a Fundamental Right.
Factual Situation: Mr. Sinha a famous English writer and orator criticized another novelist,
Mr. Rahul stating that: “The novel of Mr. Rahul is irrational and indecent, his mind is
impure, he is a loose character, he should write decent and good novel.”
Decide
Can Mr. Rahul be sued for defamation?
(a) He is not liable because he has just expressed his personal views
(b) He is liable to be sued for defamation if his statement, was not true or said in
mala fide intention
(c) He cannot be liable because he has fundamental right to freedom of speech and expression
(d) He cannot be sued, because both are writer and novelists and both can criticize each other.
2. Legal Principle: Every citizen of India has a fundamental right to carry on any tradeor
business or profession of his choice subject to the imposition of reasonable restrictions
by the State.
Factual Situation: In pursuance of an order passed by the Institute of Company Secretary of

India (ICSI), prohibit a person from Practice the profession of Company Secretary unless
such person passed the Company Secretary ship Course and hold a certificate of practice
prom the ICSI. Mr. Manoj, a Executive Programme passed student of Company Secretary
ship Course challenges the ban as it violates his right to carry his profession.
Decide
(a) Institute of Company Secretary of India (ICSI) has a superior right to ban.
(b) The ban is justified, as the right of Mr. Manoj to carry his profession is not absolute
(c)The ban is not justified, as the Institute of Company Secretary of India (ICSI) cannot
deprive any person of his right to carry on his profession
(d) None of the above.
3. Legal Principle : A contract is an agreement which the law will enforce. all agreements are
contracts if they are made with free consent by parties competent to contract for
a lawful consideration and with a lawful object.
Factual Situation: Mr. Raja offered to buy Mr. Ram's Car for Rs. 5 lakhs but Mr. Ram
refused. Subsequently, Mr. Raja threatened to kill Mr. Ram and Mr. Ram agreed to the sale.
Mr. Ram subsequently rescinded from the contract.
Mr. Raja suit to enforce the contract—
Decide
(a) Will succeed because Mr. Raja was offering lawful consideration for the car
(b) Will succeed because buying and selling of car is lawful
(c) Will succeed because both parties have capacity to contract
(d) Will fail because Mr. Ram was forced to agree to the contract.
4. Legal Principle: A contract is an agreement which the law will enforce. All agreements are
contracts if they are made with free consent by parties competent to contract for
a lawful consideration and with a lawful object.
Factual Situation : Mr.Joy a young boy of 27 years without any consideration agrees to give
Ms. Jooly Rs. 10, 000/-. Mr. Joy fails to fulfil his promise. Ms. Jooly sues Mr. Joy for the
amount.
Decide
(a) Ms. Jooly will succeed as Mr. Joy made the promise of his own free will
(b) Ms. Jooly will fail as the agreement is without consideration
(c) Ms. Jooly will succeed as Mr. Joy has the capacity to make the contract
(d) Ms. Jooly will succeed as the money is not being paid for any illegal object.
5. Legal Principle: Constitution of India empowers the President of India to appoint the Judge
of the High Courts and Supreme Court.
Factual Situation: There is a deadlock between the Council of Minister including Prime
Minister of India and the President of India. President of India appointed Mr. Adarsh as the
Justice of Supreme Court of India and Mr. Garg appointed as Judge of Delhi High Court by
the Prime Minister of India.
Decide
(a) Appointment of Mr. Garg is valid in the eyes of law
(b) Appointment of Mr. Adarsh is valid as per the Constitution of India
(c) Appointment of Mr. Adarsh and Mr. Garg void abinitio

6. Legal Principle: A violation of a legal Right, with or without damage, gives rise to a tort.
Factual Situation: Mr. Ketan establishes a coaching class for Company Secretary Students of
Executive Programme and charges Rs.10, 000/- per year as tuition fees. Mr. Ketan's
neighbour Mr. Kalia establishes another coaching class for Company Secretary Students of
Executive Programme thereby creating a competition between them. This forces Mr. Ketan
to reduce his tuition fees to Rs. 7000/- per year.
Decide
Can Mr. Ketan claim damages from Mr. Kalia for the loss caused to him?
(a) Yes, he can as Mr. Kalia has violated his Legal Right
(b) No, Mr. Ketan has reduced the fees on his own
(c) No, because though, there was damage there was no legal injury
7. Legal Principle : Company means a company incorporated under the Companies Act, 2013, or
under any previous company law.
Factual Situation :
(i) ABC Limited is incorporated under the Companies Act, 1956;
(ii) ABC LLP incorporated under Limited Liability Partnership Act, 2008;
(iii) ABC & Co registered under Partnership Act, 1832 and
(iv) ABC Charitable Trust established under Trust Act, 1882.
Decide
Which of the above entity as mentioned in factual situation is a company?
(a) ABC Limited
(b) ABC LLP
(c) ABC & Co

(d) ABC Charitable Trust
8. Legal Principle : A master shall be responsible for the wrongful acts of his
servants in the course of his employment.
Factual Situation: ABC Limited is a Non-Banking Financial Company (NBFC) is registered

with Reserve Bank of India to accept deposit from public. Mr. Shyam appointed as
authorised agent by ABC Limited to collect deposit money from several people on daily basis.
Mr. Shyam, collecting deposits from people on daily basis. One day he disappeared. One Ms.
Shyamlee , who had been handing over her deposit money to Mr. Shyam found that
nearly for a month before his disappearance, he was not depositing her money at
all. Ms. Shyamlee when approached the ABC Limited, the NBFC took the stand that Mr.
Shyam was not its employee, he is his agent and therefore, ABC Limited is not responsible
for his misconduct. Ms. Shyamlee files a suit against the ABC Limited.
Decide
Who is liable?
(a) ABC Limited
(b) Mr. Shyam
(c) Ms. Shyamlee
9. Legal Principle : The members of both Lok Sabha and Rajya Sabha are eligible to
be Ministers of the Union Government.
Factual Situation : Mr. Ram Sing is siting member of Upper House of Parliament and as
Recommendations of Prime Minister of India, President of India appointed Mr. Ram Singh as
Minister for the Ministry of Education.
Decide
Appointment of Mr. Ram Singh as Minister for the Ministry of Education is valid?
(a) Yes
(b) No
(c) President of India cannot be appointed
(d) Prime Minister of India cannot be recommended
10. Legal Principle : Tort is a civil wrong for which the remedy is a common law action for
unliquidated damages and which is not exclusively the breach of a contract or the breach of
a trust or other merely equitable obligation.
Factual Situation : Mr. Sunil has six pet dogs which are very ferocious and bark a lot. Mr.
Surendra is his next door neighbor and feels that he is not able to enjoy his property due to
the presence of a large number of dogs in the adjacent house. He is contemplating initiating
a legal action against Mr. Sunil. Mr. Surendra can:
Decide
(a) Initiate action for breach of contract against Mr. Sunil as there is an implied contract
between the neighbours.
(b) Initiate action for unliquidated damages under torts because there is no contract between the
neighbours.
(c) Initiate criminal action against Mr. Sunil because having a large number of ferocious dogs is a
criminal act.
(d) Not be successful as Mr. Sunil has an unrestricted right to enjoy his personal property and
has no duty towards Mr. Surendra.
11. Legal Principle : Causing damage, however substantial to another person is not actionable in
law unless there is also a violation of a legal right of the plaintiff.
Factual Situation: Mr. Nandan opened a petrol pump next to earlier existing petrol pump of
Mr. Chandan as a result of which Mr. Chandan suffered huge losses. Mr. Chandan wants to
initiate action against Mr. Nandan for the losses suffered. He will
Decide
(a) Succeed because he has suffered losses because of Mr. Nandan.
(b) Fail because no legal right of Mr. Chandan was infringed.
(c) Succeed because Mr. Nandan was wrong in opening a petrol pump next to already existing
one.
(d) Succeed because Mr. Chandan is entitled to earn reasonable profit on his investments.
12. Legal Principle: Even where there is infringement of a legal right which does not result in
harm, plaintiff can still sue in tort.
Factual Situation: Cattle owned by Mr. Vinay entered the fields of Mr. Vipin and roamed
about freely for considerable time without causing any kind of loss to Mr. Vinay. Mr. Vinay
did not like Mr. Vipin and thought of imitating legal action against him using this
opportunity. Mr. Vinay will:
Decide
(a) Fail because he did not suffer any monetary loss.
(b) Fail because he did not suffer any infringement of his legal right.
(c) Succeed because his legal right was infringed.
(d) Fail because he initiated the legal action because of his dislike for the defendant.
13. Legal Principle : Normally, the tort-feasor is liable for his tort but in some cases a person
may be held liable for the tort committed by another.
Factual situation : Mr. Rahul’s car was being driven by his driver when it hit a pedestrian as
a result of which the pedestrian suffered heavy injuries. He brought a legal action against
Mr. Rahul because the car belonged to him and the driver was employed by him. The legal
action of the pedestrian against Mr. Rahul will:
Decide
(a) Fail because Mr. Rahul had nothing to do with the accident.
(b) Succeed because responsibility in such cases is imputed by law on grounds of social policy or
expediency.
(c) Succeed because a master is always liable for the acts of his or her servant.
(d) Fail because it was the duty of the driver to be careful while driving.
14. Legal Principle : The defendant is liable if he makes a non-natural use of land.
Factual Situation : Mr. Kundan had stored chemicals on his land which escaped and caused
damaged to the adjacent properties one of which belonged to Mr. Ankit. Mr. Ankit is
Decide
(a) Fail because Mr. Kundan had stored chemicals on his own property.
(b) Succeed because storing chemicals is a non-natural use of land.
(c) Fail because storing chemicals is a natural use of land.
(d) Fail because Mr. Ankit should have taken adequate precautions against the chemicals.
15. Legal Principle : Absolute or strict liability are exceptions to the requirement of mens rea.
Factual Situation : B, a mill owner employed independent contractors, who were apparently
competent to construct a reservoir on his land to provide water for his mill. There were old
disused mining shafts under the site of the reservoir which the contractors failed to observe
because they were filled with earth. The contractors therefore, did not block them. When the
water was filled in the reservoir, it bursts through the shafts and flooded the plaintiff ’s coal
mines on the adjoining land. It was found as a fact that B did not know of the shafts and
had not been negligent.
Decide
(a) Even though the independent contractors had been negligible, B will be held liable for the
losses suffered by the plaintiff.
(b) B will be held liable for the losses suffered by the plaintiff only if B was negligent and not
otherwise.
(c) Independent contractors would be liable to the plaintiff as there is privity of contract
between them.
(d) Neither B nor the independent contractors would be held liable as there was no guilty mind
at work.
16. Legal Principle : Consent of the Plaintiff is an exception to the rule of Strict liability.
Factual Situation : Mr. Jagdish was subjected to a risk owing to a defect in the machinery at
the factory at which he was employed. He complained of this to the person who had the
general management of the business, but was told nevertheless to go on with his work. He
did so and sustained the injury for which he brought his action against the factory.
Decide
(a) The suit will fail because it must be assumed Mr. Jagdish had assented to take upon himself
the risk.
(b) The suit will succeed because Mr. Jagdish had highlighted the risk to the Factory
management and his refusal to work might have led to his termination.
(c) The suit will fail because Mr. Jagdish should have stopped working at the factory if the
management had refused to address his concerns regarding safety.
(d) The suit will succeed because in a suit between an employer and an employee, the employee
is favoured because he/ she is generally poor.
17. Legal Principle : For the tort committed by a partner in the ordinary course of the business
of the firm, all the other partners are liable to the same extent as the guilty partner.
Factual Situation : A, B and C ran a Chartered Accountancy firm in partnership. In order to

solicit work from a big bank, A, one of the three partners bribed the Bank’s senior manager
and induced him to hand over the audit work to their firm.
Decide
(a) All the partners are liable for the tort committed by only one of them.
(b) Only the partner who paid the bribe is liable.
(c) Whether or not all partners are liable would depend on the fact whether B and C had
knowledge of bribe or not.
(d) The liability of B and C would be established only if they had given there written consent to
A to bribe the bank official.
18. Legal Principle : The State can claim immunity from the tortuous liability only in the cases
of sovereign function, otherwise not.
Factual Position : Chandra and his father Gopal were lodged in a jail, wherein one day bombs
were hurled at them by their rivals, causing the death of Gopal and injuries Chandra. The
victims were having previous knowledge of the impending attack, which they conveyed to the
authorities, but no additional security was provided to them. On the contrary, there was gross
negligence since there was a great relaxation in the number of police men who were to guard
the jail on that fateful day. Thus, on the grounds of negligence a suit was filed Chandra
against the Government. The suit will
Decide
(a) Succeed because there was gross negligence on part of the State.
(b) Fail because maintain jail facilities is part of the sovereign function of the State.
(c) Succeed because securing law and order is not a sovereign function of the State.
(d) Fail because the State cannot be held responsible in any way if people lose life because of
their personal rivalries even in facilities maintained and operated by the State.
19. Legal Principle : Under Article 12, unless the context otherwise requires, “the State”
includes—
(a) the Government and Parliament of India;
(b) the Government and Legislature of each of the States; and
(c) all local or other authorities:
(i) within the territory of India; or
(ii) under the control of the Government of India.
Factual Situation : Mr. Arvind is employed with Oil and Natural Gas Corporation (ONGC). He
faces discrimination at work at the hands of the Management and thinks that his right to
equality is violated. He contemplates moving a writ petition against ONGC but his colleague
suggests that Mr. Arvind will not succeed because ONGC is not ‘State’.
Decide
(a) ONCG is ‘State’ as per Article 12 of the Constitution.
(b) ONGC is not ‘State’ as per Article 12 of the Constitution.
(c) Mr. Arvind will not succeed because a writ cannot be brought against a Company.
(d) ONGC is not ‘State’ because its shares are listed in the stock market.
20. Legal Principle : No person shall be convicted of any offence except for violation of a law in
force at the time of the commission of the act charged as an offence.
Factual Situation : Ms. Chandni had an altercation with her classmate in her college and in
the heat of the moment she hurled a racist abuse at her classmate and her classmate was
deeply offended by it. Ms. Chandni had later apologized for it. In the next few months, a law
was passed which made racist abuse punishable. Aware of the fact that the law of limitation
does not apply to criminal acts, she moved an application to the court to initiate criminal
action against Ms. Chandni for the racist abuse. The classmate’s application will:
Decide
(a) Fail because racist abuse was not punishable when it was hurled.
(b) Succeed because the law made racist abuse punishable with imprisonment and it is undeniable
that Ms. Chandni has hurled that abuse.
(c) Succeed because law of limitation does not apply to criminal acts.
(d) Fail because it was not a serious offence and Ms. Chandni had already apologized for it.
21. Legal Principle : No person shall be subjected to a penalty greater than that which might
have been inflicted under the law in force at the time of the commission of the offence.
Factual Situation : A person was accused of cheating and before he was arrested and
committed to trial for it, the law relating to cheating was changed and the punishment for
it was increased to life imprisonment. The person was found guilty and sentenced to life
imprisonment. He decides to challenge his sentence of life imprisonment. He will
Decide
(a) Fail because the punishment for cheating was increased to life imprisonment before his trial
began.
(b) Succeed because the punishment for cheating was not life imprisonment when he committed
it.
(c) Fail because the law does not provide for such leniency to guilty persons.
(d) Succeed only if he is able to prove his innocence.
22. Legal Principle : Parliament can amend any part of the Constitution including the
Fundamental Rights but the Parliament cannot alter the basic structure or framework of the
Constitution.
Factual Situation : The Government of India passed a Constitutional amendment Act which
has the effect of curbing the independence of the judiciary. The Act has been challenged in
the Supreme Court of India by a group of NGOs and public spirited individuals as being
violative of the Constitution. The challenge will:
Decide
(a) Succeed because any amendment that compromises the independence of the judiciary is
unconstitutional.
(b) Fail because the Parliament has unlimited power to amend the Constitution as per the
Kesavananda Bharati judgment.
(c) Succeed because the amendment was not brought to the Parliament with the consent of the
Supreme Court of India.
(d) Fail because the Supreme Court cannot sit in judgment over a matter that affects its own
independence.
23. Legal Principle : Directive Principles of State Policy (DPSP) are non-justiciable in nature.
Factual Situation : Mr. Sumit works for the protection of cows. He has come to know that in
some states slaughtering of cows is permissible under law. He also knows that one of the
Directive Principles of State Policy calls upon the State to prohibit cow slaughter. Based on
this, Mr. Sumit approaches the Supreme Court of India for getting direction to the states to
enact anti-cow slaughtering law. His petition will:
Decide
(a) Succeed because DPSP clearly says that states should take steps to prevent cow slaughter.
(b) Fail because DPSP cannot be enforced by the Courts.
(c) Succeed because laws in contravention of DPSP are unconstitutional.
(d) Fail because only a section of Indian population holds cow as sacred and its views cannot be
forced on others.
24. Legal Principle : The right of all citizens to practise any profession or to carry on any
occupation, trade or business is a Fundamental Right.
Factual Situation : Due to a law passed by the Government, even a person with good
knowledge of law cannot appear in the Court as lawyer unless he has a law degree from a
recognized university and fulfils other mandatory conditions. Due to this Mr. Dinesh is not
able to appear in courts and believes that government is denying him of his Fundamental
Right to practice any profession or to carry on any occupation, trade or business. He decides
to challenge this as a violation of his Fundamental Right. He will
Decide
(a) Succeed because the requirements to be eligible to appear before the Court deny him the
opportunity to earn his livelihood.
(b) Succeed because government cannot abridge Fundamental Rights in any manner under any
condition.
(c) Fail because the Government is well within its rights to prescribe eligibility and other
conditions for profession, trade or business.
(d) Fail because Government has the power to abrogate the Fundamental Rights.
25. Legal Principle : Article 14 of the Constitution says that “the State shall not deny to any
person equality before the law or the equal protection of the laws within the territory of
India”.
Factual Situation : Due to the growing menace of terrorism in the country, the Government
of India decided to have a new substantive criminal laws for terrorists from other countries.
A foreign terrorist captured by the police and subjected to the new law claimed that his
rights under Article 14 of the Indian constitution were violated. His claim will:
Decide
(a) Fail because the rights under Article 14 are available only to the citizens of India.
(b) Fail because the rights under the Article cannot be made available to people who engage in
terrorist activities in India.
(c) Succeed because he is entitled to be subjected to the same laws as any other person charged
with the same offence.
(d) Succeed because once he is captured by the Indian authorities, he acquired all the
Fundamental Rights that are enjoyed by the citizens of India.
26. Legal Principle : The ambit of this Ordinance-making power of the President is co-extensive
with the legislative powers of Parliament.
Factual Situation : During a time when the Lok Sabha was not in session the President of
India promulgated an ordinance on a matter which was not very urgent. A non-governmental
organization decided to challenge the ordinance as ultra vires the Constitution. His challenge
will:
Decide
(a) Succeed because the ordinance is to be promulgated only in urgent matters.
(b) Fail because the use of the power to promulgate ordinance is left to the discretion of the
President.
(c) Fail because the use of the power to promulgate ordinance is left to the discretion of the
Government.
(d) Succeed because an ordinance can be issued only when both the houses of the Parliament
are not in session.
27. Legal Principle : The State shall not make any law which takes away or abridges the rights
conferred by Part III and if such a law is made, it shall be void to the extent to which it
curtails any such right.
Factual Situation : Right to Property was a Fundamental Right but was abolished as such by
a Constitutional amendment. Mr. Gautam decides to challenge the constitutional validity of
the amendment. He will
Decide
(a) Succeed because the State cannot make any law which takes away or abridges the rights
conferred by Part III.
(b) Fail because ‘law’ referred to in the above statement does not apply to Constitutional
amendment Acts.
(c) Succeed because even constitutional amendments cannot take away Part III rights.
(d) Fail because Right to Property was not conferred by Part III.
28. Legal Principle : There shall be a Council of Ministers with the Prime Minister at the head to
aid and advise the President who shall, in the exercise of his functions, act in accordance
with such advice.
Factual Situation : The Lok Sabha general elections in 1996 did not give any party a clear
majority and various political parties in their individual capacity and is association with other
parties staked claim with the President to form government. The President had to invite one
such party or a group to form the government. He was:
Decide
(a) Bound to follow the advice of the outgoing Prime Minister on who should be first called to
form the government.
(b) Free to exercise his discretion in such a situation.
(c) Bound to consult the Chief Justice of India in a situation of no clear majority in favour of a
party or an alliance.
(d) Bound to invite the single largest party to form the government.
29. Legal Principle: An agreement enforceable by law is a contract.
Factual Situation: Mr. A and Mr. B, father of a minor boy P and minor girl Q respectively
enter into an agreement that they would marry their children P and Q to each other. Mr. B,
later refused to honour this agreement. Aggrieved by this, Mr. A decided to sue Mr. B and
Ms. Q for breach. Mr. A will:
Decide:
(a) Succeed because Mr. B has refused to fulfil his obligation under the agreement.
(b) Fail because the agreement between them is not a contract.
(c) Succeed because the agreement between them is a contract.
(d) Fail because Mr. A should have sued Mr. B and Ms. Q together with Mr. P and not alone as
Mr. P has also suffered because of the breach.
30. Legal Principle : All agreements are contracts if they are made by the free consent of parties
competent to contract, for a lawful consideration and with a lawful object.
Factual Situation : A was planning to sell his property to B but B was not aware of it. Since
B was interested in the property, he threatened to harm the only child of A if A did not
enter into an agreement to sell the property to B. The price at which the agreement to sell
was agreed upon was much more than the expectation of A or the prevailing market price of
the property. Once the agreement was signed, B got to know that A was anyway interested
in selling the property to B and at a lower price. A later refused to execute the sale deed
and claimed that the contract between the parties was not valid. A will:
Decide:
(a) Fail because there was a valid contract between him and B.
(b) Succeed because the consent of A for the agreement to sell was not a free consent.
(c) Fail because in the given facts and circumstances even with the free consent the same
transaction would have taken place. A is even better placed because he is receiving a higher
price.
(d) Succeed because there is no lawful object in the contract.
32. Legal Principle : A person who is usually of unsound mind, but occasionally of sound mind,
may make a contract when he is of sound mind.
Factual Situation : Mr. Jamal is a patient in a lunatic asylum who experiences intervals of
sound mind. Jamal entered into a contract during such interval of sound mind. On having
suffered losses, he challenged the validity of the contract on the ground that he not only
was mentally unsound but also lived in lunatic asylum.
Decide
(a) The contract is valid.
(b) The contract is invalid.
(c) The contract is voidable at the option of Mr. Jamal.
(d) The contract is voidable at the option of the opposite party.
33. Legal Principle : A person who is usually of sound mind, but occasionally of unsound mind,
may not make a contract when he is of unsound mind.
Factual Situation : One of the purposes of the business party was to strike business deals
and Mr. Animesh was well aware of it. Still, Mr. Animesh drank so much at the party that
he could not understand the terms of a contract, or form a rational judgment as to its effect
on his interests. He still went ahead and entered into a few contracts at the party. One of
such agreements had very oppressive terms and conditions for Mr. Animesh and therefore he
challenges the validity of the contract. He will:
Decide
(a) Fail because he knew the purpose of the business party and should have behaved more
responsibly.
(b) Succeed because he was temporarily of unsound mind because of his drunk state.
(c) Fail because being drunk even to the extent of not being able to understand the terms of
the contract cannot be considered as ‘unsound mind’
(d) Succeed because oppressive terms and conditions in the contract show that it could have
been agreed to only by a person of unsound mind.
34. Legal Principle : A contract is said to be induced by “undue influence” where the relations
subsisting between the parties are such that one of the parties is in a position to dominate
the will of the other and uses that position to obtain an unfair advantage over the other.
Factual Situation : Mr. Ashwini having advanced money to his son, Bhuvan, during his
minority, upon Bhuvan’s coming of age obtains, by misuse of parental influence, a bond from
Bhuvan for a greater amount than the sum due in respect of the advance.
Decide
(a) Ashwini employed undue influence.
(b) Ashwini did not employ undue influence.
(c) Father and son cannot ever enter into a valid contract.
(d) Ashwini employed coercion.
35. Legal Principle : When consent to an agreement is caused by coercion, fraud or

misrepresentation, the agreement is a contract voidable at the option of the party whose
consent was so caused.
Factual Situation : Mr. Arun, intending to deceive Mr. Prakash, falsely represented that five
hundred tonnes of fertilizer are made annually at his factory, and thereby induced Mr.
Prakash to buy the factory.
Decide:
(a) The contract is voidable at the option of Mr. Prakash.
(b) The contract is voidable at the option of Mr. Arun.
(c) The contract is void.
(d) The contract is valid.
36. Legal Principle : Where both the parties to an agreement are under a mistake as to a matter
of fact essential to the agreement, the agreement is void.
Factual Situation : Mr. Rupesh agrees to buy from Mr. Jalaj a certain car. It turns out that
the car was scraped at the time of bargain, though neither party was aware of the fact.
Decide
(a) The agreement is valid.
(b) The agreement is void.
(c) The agreement is voidable at the instance of either parties.
(d) The agreement is void because Mr. Jalaj played a fraud upon Mr. Rupesh.
37. Legal Principle : Every agreement of which the object or consideration is unlawful is void.
Factual Situation : Mr. Thomas promises Mr. Jhonson to drop a prosecution which he has
instituted against Mr. Jhonson for robbery, and Mr. Jhonson promises to restore the value of
the things taken.
Decide:
(a) The agreement is void, as its object is unlawful.
(b) The agreement is valid.
(c) The agreement is voidable at the instance of Mr. Thomas.
(d) The agreement is voidable at the instance of Mr. Jhonson.
38. Legal Principle : A stranger to a contract cannot sue for want of privity of contract.
Factual situation : A, who is indebted to B, sells his property to C, and C the purchaser of
the property, promises to pay off the debt to B. C fails to pay B
Decide
(a) B has no right to sue C for there is no privity of contract between B and C.
(b) B has the right to sue C as there is privity of contract between B and C.
(c) C has no legal obligation to A to pay B off.
(d) Once the property is sold to C, B can only sue C and not A.
39. Legal Principle : All illegal agreements are void but all void agreements are not necessarily
illegal.
Factual Situation : A had borrowed Rs. 1,000 from B to buy a pistol to shoot C which he did.
He, however, failed to repay B and B decides to recover this money from A by filing a suit.
Decide
(a) The contract between A and B is illegal.
(b) The contract between A and B will be illegal only if it is established that B was aware of
the purpose at the time of the borrowing.
(c) The contract between A and B is void but not illegal.
(d) The contract between A and B is valid even if B was aware of the purpose at the time of
borrowing.

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Legal Aptitude

CHAPTER NO. PARTICULARS PAGE NO.

1. Indian Constitution 1-31

2. Elements of General Laws

3. Elements of Company 83-95

4. Elements of Company Law 96-119

5. Legal Reasoning 120-147

n corporate law) YES Academy, Pune 8888 235 235 0

CHAPTER 1- INDIAN CONSTITUTION

SOME SALIENT FEATURES OF OUR INDIAN CONSTITUTION

The Constitution places a pre-eminent emphasis on the values of liberty

What does the above-mentioned terms in the preamble mean?

WHETHER CONSTITUTION OF INDIA IS FEDERAL OR UNITARY?

a. Constitution of India is basically federal but with certain unitary features.

Classification of Fundamental Rights

JUSTIFIABILITY OF FUNDAMENTAL RIGHTS

AMENDIBILITY OF FUNDAMENTAL RIGHTS

RIGHT TO EQUALITY ARTICLE 14-18

ARTICLE 15: PROHIBITION OF DISCRIMINATION ON GROUNDS OF RELIGION ETC.

ARTICLE 16: EQUALITY OF OPPORTUNITY IN MATTERS OF PUBLIC EMPLOYMENT

Article 16 guarantees to all citizens’ equality of opportunity in matters relating to

ARTICLE 17: ABOLITION OF UNTOUCHABILITY

ARTICLE 18: ABOLITION OF TITLES

ARTICLE 19: RIGHTS RELATING TO FREEDOM

Articles 19-22 guarantee certain fundamental freedoms.

The Six Freedoms of Citizens

(e) Reside and settle in any part of the territory of India;

ARTICLE 21: RIGHT TO LIFE AND PERSONAL LIBERTY

Liberty means dignity of a person, so right to life is available with dignity.

ARTICLE 21A: RIGHT TO EDUCATION

RIGHT AGAINST EXPLOITATION

RIGHT TO FREEDOM OF RELIGION

ARTICLE 25: RIGHT TO FREEDOM OF RELIGION

ARTICLE 26: FREEDOM TO MANAGE RELIGIOUS AFFAIRS

It grants to every religious denomination or any sect thereof the right:

All these rights are subject to public order, morality

ARTICLE 27: FREEDOM AS TO PAYMENT OF TAX FOR THE PROMOTION OF ANY

ARTICLE 28: FREEDOM AS TO ATTENDANCE AT RELIGIOUS INSTRUCTION OR RELIGIOUS

ARTICLE 32: RIGHT TO CONSTITUTIONAL REMEDIES

- Article 32 guarantees the enforcement of Fundamental Rights.

DIRECTIVE PRINCIPLES OF STATE POLICY

The Sub-committee on Fundamental Rights constituted by the Constituent Assembly had

Important Directive Principles:

and to have compassion for living creatures;

ARTICLE 5: CITIZENSHIP AT THE COMMENCEMENT OF THE CONSTITUTION

Power to Promulgate Ordinance

RAJYA SABHA (COUNCIL OF STATES)

LOK SABHA (HOUSE OF THE PEOPLE)

CONSTITUTION OF LEGISLATURES IN STATES

1. The Supreme Court

WRIT JURISDICTION OF HIGH COURTS AND SUPREME COURT

MAJOR CONSTITUTIONAL AMENDMENTS 1951 - 2019

THE CONSTITUTION (FIRST AMENDMENT) ACT, 1951

THE CONSTITUTION (SECOND AMENDMENT) ACT, 1952

CONSTITUTION (FORTY - SECOND AMENDMENT) ACT, 1976

i. It is also known as Mini-Constitution. It was enacted to give effect to the recommendations

CONSTITUTION (FIFTY - SECOND AMENDMENT) ACT, 1985

i. This amendment popularly known as Anti-Defection Law

CONSTITUTION (SIXTY - FIRST AMENDMENT) ACT, 1989

CONSTITUTION (SIXTY - NINTH AMENDMENT) ACT, 1991

CONSTITUTION (SEVENTIETH AMENDMENT) ACT, 1989

CONSTITUTION (EIGHTY-FOURTH AMENDMENT) ACT, 2001

CONSTITUTION (EIGHTY-SIXTH AMENDMENT) ACT, 2002