Page 27 - DMGT407Corporate and Business Laws

Corporate and Business Laws

Notes A company incorporated under the Companies Act, 1956, or a statutory corporation brought
into existence by passing a Special Act of Parliament (corporate status). A company cannot go
beyond its objects mentioned in its memorandum of association. The company’s activities are
confined strictly to the objects mentioned in its memorandum, and if they go beyond these
objects, then such activities are ultra vires and void, and cannot be ratified even by the assent of
the whole body of shareholders.
Also, a statutory corporation cannot go beyond the objects mentioned in the Special Act of
Parliament. Similarly, Municipal Corporations (local bodies) are disqualified from entering
into contracts which are not within their statutory powers.

Insolvent persons (legal status). A person adjudicated as insolvent is incompetent to contract
until he obtains a certificate of discharge from the court.

Task Discuss the statement ‘Freedom to contract is a myth or an illusion’ in the light of
day-to-day transactions in the market and the essentials of the law.
Self Assessment

Fill in the blanks:
17. Every person is competent to contract if he is of the age of………………..
18. Section …………provides that a minor’s estate is liable to a person who supplies necessaries
of life to a minor.

Case Study Cut Your Teeth on Law

C ommunication of acceptance of an offer is complete as against the acceptor the
moment it comes to the knowledge of the offeror.
Correct: According to Section 4 of the Indian Contract Act, communication of acceptance is
complete as against an offeror when it is put into a course of transmission to him so as to
be out of the power of the acceptor and as against the acceptor when it comes to the
knowledge of the offeror.
The Indian Contract Act differs from the English law in this regard. Owing to this provision,
it is possible for the acceptor to withdraw the acceptance before the communication of
acceptance comes to the knowledge of the offeror.
In order to constitute a valid contract, consideration between two parties must be adequate.

Incorrect: According to the explanation to Section 25, an agreement to which consent is
freely given is not void merely because the consideration is inadequate; but the inadequacy
of consideration may be considered by the court to determine the question whether the
consent of the promise is freely given or not.

A threat to lodge criminal prosecution on a false charge amounts to coercion.
Correct: Coercion is committing, or threatening to commit, an offence with the intention
of causing any person to enter into an agreement. Here a threat to lodge criminal
Contd...

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