1.How do you get a formal contract? what are the characteristics and necessities of a real contract?

How to Get a Formal Contract

1. Identify the Need: Determine the specific terms and conditions that need to be legally documented.
2. Engage a Lawyer: It's advisable to consult with a lawyer who specializes in the relevant field.
3. Drafting the Contract:
o Initial Discussion: Discuss the main points, terms, and conditions with all parties involved.
o Drafting: Have the lawyer or a professional draft the contract based on these discussions.
4. Negotiation: Discuss and negotiate any terms that may need modification.
5. Finalization: Once all parties agree, the contract should be finalized.
6. Signatures: All parties should sign the contract. Signatures may need to be notarized, depending on
the nature of the contract.
Characteristics of a Real Contract
1. Offer and Acceptance:
o Offer: One party must make a clear and definite offer.
o Acceptance: The other party must accept the offer without any modifications.
2. Mutual Consent: Both parties must agree to the terms of the contract freely and without coercion.
3. Consideration: There must be something of value exchanged between the parties, which can be
money, services, or goods.
4. Capacity: Both parties must have the legal ability to enter into a contract. This means they must be of
legal age, sound mind, and not under the influence of substances or duress.
5. Legality: The contract's subject matter must be legal and not against public policy.
6. Intent to Create Legal Relations: Both parties must intend for the contract to be legally binding.
Necessities of a Real Contract
1. Identification of Parties: Clearly identify who the parties involved are.
2. Detailed Terms and Conditions: Clearly state the obligations, rights, and duties of each party.
3. Payment Terms: Specify how and when payments will be made.
4. Termination Clause: Outline how the contract can be terminated by either party.
5. Dispute Resolution: Include a clause on how disputes will be resolved, such as through arbitration or
litigation.
6. Signatures: Ensure that all parties sign the contract.
2. Classification of contracts?
1. Express and Implied Contracts:
 Express Contracts: These contracts are formed through explicit and direct communication, either
orally or in writing. The terms and conditions of the agreement are clearly stated and agreed
upon by the parties involved.
 Implied Contracts: These contracts are not explicitly stated in words but are inferred
from the actions, conduct, or circumstances of the parties involved.
2. Unilateral and Bilateral Contracts:
 Unilateral Contracts: In a unilateral contract, one party makes a promise or an offer to perform an
action upon the occurrence of a specific event or condition. The contract is formed when the other
party accepts the offer by performing the requested action.
 Bilateral Contracts: In a bilateral contract, both parties make promises or offers to each other, forming
mutual obligations. The contract is formed when both parties exchange promises and agree to be
bound by the terms.

3. Executed and Executory Contracts:

 Executed Contracts: An executed contract is one in which both parties have fulfilled their
obligations under the agreement. All terms and conditions have been performed, and the
contract is considered completed.
  Executory Contracts: An executory contract is a contract in which one or both parties still
have outstanding obligations to perform. The terms of the contract are yet to be fully
executed or completed.
4. Valid, Void, Voidable, and Unenforceable Contracts:
 Valid Contracts: A valid contract is one that meets all the essential elements required by law, such as
offer, acceptance, consideration, capacity, and legality. It is legally binding and enforceable by law.
 Void Contracts: A void contract is one that lacks legal validity right from the beginning. It is usually
unenforceable, and the parties involved are not legally bound by its terms.

3.Implied condition of contract?

1. Condition of Fitness for Purpose: This condition implies that the goods or services provided
under the contract are suitable for the purpose for which they are being acquired, provided
the buyer has made that purpose known to the seller.
Example: If you buy paint for a specific type of surface, it is implied that the paint will be
suitable for that surface.
2. Condition of Merchantable Quality: This condition implies that the goods supplied will be of
a quality that is acceptable in the market and fit for the general purpose for which such
goods are used.
Example: Buying a toaster that should toast bread properly without any defects.
3. Condition of Title: This condition implies that the seller has the right to sell the goods and
that the buyer will have undisturbed possession of the goods.
Example: When you purchase a car, it is implied that the seller has the legal right to sell the
car and that there are no undisclosed encumbrances on the vehicle.
4. Condition of Correspondence with Description: This condition implies that the goods will
correspond with the description provided at the time of the sale.
Example: If a product is described as a "100% cotton shirt," it is implied that the shirt will be
made entirely of cotton.
5. Condition of Sample: When a sale is made based on a sample, it is implied that the bulk of
the goods will correspond with the sample in quality.
Example: If you are shown a sample fabric and then order 100 meters of it, it is implied that
the 100 meters will match the quality of the sample shown.
6. Condition of Reasonable Care and Skill: In service contracts, it is implied that the service
provider will carry out the service with reasonable care and skill.
Example: If you hire a plumber to fix a leak, it is implied that the plumber will use reasonable
care and skill in repairing the leak.

4. comparison between undue influence and coercion?

Undue Influence Coercion

Exploitation of a relationship of trust and Use of threats or physical force
confidence
Psychological pressure, manipulation Physical or economic threats, actual harm
Compromised ability to exercise free will Lack of voluntary consent due to fear of harm
Contract is voidable at the option of the Contract is voidable at the option of the
influenced party coerced party
Often involves a pre-existing relationship No need for a pre-existing relationship
5. characteristics and importance consideration?
Characteristics of Consideration in Contracts
1. Something of Value: Consideration must involve something of value being exchanged between the
parties. This can be money, goods, services, or a promise to do or not do something.
2. Mutual Exchange: Both parties must provide consideration; one party's promise or performance is the
price for the other party's promise or performance.
3. Legality: The consideration must be legal. An agreement based on illegal acts or promises is not
enforceable.
4. Adequacy: While courts generally do not assess the fairness or adequacy of consideration, there must
be some value, even if minimal, exchanged. However, grossly inadequate consideration may indicate
issues like fraud or undue influence.
5. Possibility: The consideration must be possible to perform. A promise to do something impossible
does not constitute valid consideration.
Importance of Consideration in Contracts
1. Legal Binding Nature: Consideration is essential for a contract to be legally binding. Without it, a
contract may be considered a gift or a non-binding promise.
2. Ensures Reciprocity: Consideration ensures that there is a reciprocal exchange of value, making the
contract a mutual agreement where both parties gain something.
3. Evidence of Agreement: The presence of consideration demonstrates that the parties have entered
into an agreement intentionally and have committed to fulfilling their promises.
4. Protects Against Fraud: Requiring consideration helps prevent fraudulent or coerced agreements by
ensuring that there is a mutual exchange and that each party has something to lose if the contract is
not honoured.
5. Promotes Fairness: While courts do not usually evaluate the adequacy of consideration, the concept
encourages fairness in agreements by ensuring that each party provides something of value.
6. effect of breach of contract?

1. Damages: The non-breaching party can seek monetary compensation for losses resulting
from the breach. Damages can include:
o Compensatory Damages: Intended to cover direct losses and costs.
o Consequential Damages: Cover indirect and foreseeable losses.
o Punitive Damages: Intended to punish the breaching party for particularly egregious
behavior (less common in contract law).
2. Specific Performance: A court may order the breaching party to perform their obligations as
specified in the contract. This remedy is more common in unique or rare cases, such as real
estate transactions.
3. Rescission: The contract may be canceled, and both parties are returned to their positions
before the contract was made. This can occur when the breach is fundamental.
4. Restitution: The non-breaching party may be entitled to restitution, which involves returning
any benefits or payments made under the contract to prevent the breaching party from
being unjustly enriched.
5. Liquidated Damages: If the contract includes a liquidated damages clause, the breaching
party must pay the agreed-upon amount as compensation for the breach.
7. Consumer Protection Act?
The Consumer Protection Act (CPA) is a law that aims to protect consumers' rights and promote fair business
practices. It provides a framework of rules and regulations that businesses must adhere to when dealing with
consumers. Here are some key points about the Consumer Protection Act:
1. Purpose: The primary purpose of the Consumer Protection Act is to protect the interests of
consumers by ensuring fair trade practices, providing mechanisms for redressal of consumer
grievances, and promoting consumer awareness.
2. Consumer Rights: The CPA grants consumers several rights, including the right to safety, right to be
informed, right to choose, right to be heard, right to seek redressal, and the right to consumer
education.
3. Unfair Trade Practices: The Act prohibits businesses from engaging in unfair trade practices that may
deceive or mislead consumers. This includes practices such as false advertising, misleading product
information, and unfair contract terms.
4. Consumer Complaints: The CPA establishes consumer forums and commissions at various levels to
address consumer complaints and grievances. Consumers can file complaints against businesses for
defective products, deficient services, unfair trade practices, or any other violations of their rights.
5. Penalties and Remedies: The Act provides for penalties and remedies in case of violations. Businesses
found guilty of unfair trade practices or non-compliance with consumer protection regulations may
face fines, imprisonment, product recall, or other appropriate actions.
6. Consumer Awareness: The CPA emphasizes the importance of consumer education and awareness. It
encourages the government and consumer organizations to undertake campaigns and initiatives to
educate consumers about their rights, product standards, and available remedies.
8.Step Redressal System?
1. Informal Resolution: The first step in the redressal system is often an attempt to resolve the dispute
through informal means. This can involve direct communication between the parties involved,
negotiation, or mediation. The goal is to reach a mutually acceptable resolution without the need for
formal legal action. Parties may exchange information, discuss their concerns, and explore possible
solutions to the problem.
2. Alternative Dispute Resolution (ADR): If the informal resolution fails or is not feasible, the next step is
often resorting to alternative dispute resolution (ADR) methods. ADR refers to processes like
arbitration that provide a neutral third party to help the parties reach a resolution. In arbitration, the
arbitrator reviews the evidence and makes a binding decision
3. Legal Action: If informal resolution and ADR methods do not lead to a satisfactory resolution, the final
step is to initiate legal action. This involves filing a lawsuit in a court of law and following the formal
legal process. The parties present their case before a judge or jury, who will make a legally binding
decision based on the evidence and applicable law. Legal action can be more time-consuming and
expensive, but it provides a formal mechanism for resolving disputes and enforcing legal rights.
9. Contract vs Agreement
Contract Agreement
A contract is a legally binding agreement between An agreement refers to the mutual understanding
two or more parties that establishes their rights and between two or more parties regarding a specific
obligations. It can be in written or oral form, matter. It can be a formal or informal understanding,
although certain types of contracts must be in but it may or may not have the legal enforceability of
writing to be enforceable. a contract.

A contract is generally enforceable by law. If one An agreement may or may not be legally
party fails to fulfil their obligations under the enforceable. If an agreement lacks the necessary
contract, the other party may seek legal remedies elements to be considered a contract
such as damages or specific performance.

A contract is formed when there is a valid offer An agreement can be formed through various
made by one party, followed by an acceptance by means, such as informal discussions, emails, or even
the other party. a handshake
: A contract is based on the presumption that the an agreement may lack the intention to create legal
parties intend to create legally binding obligations relations.
10. important steps to follow while filling a complaint
1. Understand the Issue: Clearly identify the problem or issue you want to address. Gather all relevant
facts, documents, and evidence related to the matter.
2. Review Relevant Laws and Regulations: Research and familiarize yourself with the relevant laws and
regulations that apply to your situation.
3. Consult with an Attorney: If the issue is complex or if you are unsure about the legal aspects, consider
consulting with a business attorney. They can provide you with legal advice, help you assess the merits
of your complaint, and guide you through the process.
4. Determine the Appropriate Jurisdiction: Identify the appropriate court or administrative body where
you need to file your complaint. This will depend on the nature of the issue, the jurisdictional
requirements, and the remedies you seek.
5. Draft the Complaint: Prepare a written complaint that clearly and concisely states the facts of the
case, identifies the parties involved, and outlines the legal basis for your complaint
6. Follow the Court Rules and Procedures: Research and understand the specific court rules and
procedures that govern the filing of complaints. Pay attention to deadlines, formatting requirements,
and any other procedural details.
7. File the Complaint: File the complaint with the appropriate court or administrative body. Pay any
necessary filing fees and submit the required number of copies as per the rules
8. Serve the Complaint: Serve a copy of the filed complaint to the opposing party or parties involved in
accordance with the relevant rules of service. This typically involves delivering a copy of the complaint
to the opposing party by a specific method (such as certified mail or through a process server).
9. Await Response: After the complaint is served, the opposing party will have a certain period of time
to respond to the complaint. The response may include an answer, a motion to dismiss, or other legal
documents.

11.Indian Contract Act

The Indian Contract Act is a legislation that governs the law of contracts in India. It was enacted in 1872 and is
applicable to the whole of India. The act is based on the principles of English common law and aims to ensure
fairness, justice, and enforceability of agreements.
1. Definition of Contract: The act defines a contract as an agreement enforceable by law. An agreement
becomes a contract when it is made by the free consent of parties, for a lawful consideration, with a
lawful object, and is not expressly declared to be void.
2. Essential Elements of a Valid Contract: The act specifies certain essential elements that must be
present in a contract. These elements include an offer and acceptance, lawful consideration, lawful
object, competent parties, free consent, and a valid agreement not declared void.
3. Types of Contracts: The act recognizes various types of contracts, such as contracts of sale, contracts
of indemnity, contracts of guarantee, contracts of bailment, contracts of agency, etc. Each type of
contract has its own set of rules and provisions.
4. Offer and Acceptance: The act lays down rules regarding the communication of proposals, acceptance
of proposals, revocation of proposals, and acceptance by electronic means.
5. Consideration: Consideration refers to something of value given by one party to another as a part of
the contract. The Indian Contract Act requires that every contract must be supported by a lawful
consideration.
6. Capacity to Contract: The act specifies that parties to a contract must have the capacity to enter into a
contract. For example, minors, persons of unsound mind, and individuals disqualified by law cannot
enter into a valid contract.
7. Free Consent: The act emphasizes that consent must be freely given by the parties without any
coercion, undue influence, fraud, misrepresentation, or mistake. Contracts entered into under such
circumstances can be considered voidable.
8. Performance and Discharge of Contracts: The act deals with the performance of contracts and the
various ways in which a contract can be discharged, such as by performance, agreement, frustration,
breach, or impossibility of performance.
12. how does legal environment influence business in the Indian economy?
1. Regulatory Framework: The legal environment in India encompasses various laws, regulations, and
policies that businesses need to adhere to. These include company law, labor law, tax law, intellectual
property law, environmental regulations, consumer protection laws, and more.
2. Business Formation and Structure: The legal environment determines the processes and
requirements for business formation and structuring. Indian businesses can be established as sole
proprietorships, partnerships, private limited companies, or public limited companies, each with its
own legal obligations and benefits
3. Contractual Agreements: The legal environment sets the framework for creating and enforcing
contracts. Contracts are vital for conducting business transactions, and Indian law provides guidelines
for their formation, validity, interpretation, and enforcement.
4. Intellectual Property Protection: The legal environment in India offers protection for intellectual
property rights (IPR), including patents, trademarks, copyrights, and trade secrets. These protections
encourage innovation and creativity, allowing businesses to safeguard their inventions, brands, artistic
works, and confidential information
5. Employment Laws: Indian labor laws regulate aspects such as minimum wages, working hours,
employment contracts, social security, industrial disputes, and occupational health and safety.
Businesses must comply with these laws to ensure fair treatment of employees, maintain a safe work
environment, and prevent legal disputes.
13. caveat emptor
Definition: "Caveat emptor" is a Latin phrase meaning "let the buyer beware." It is a principle in contract law
that places the onus on the buyer to perform due diligence before making a purchase. Under this doctrine, the
buyer assumes the risk for the quality and condition of the goods or property purchased, unless protected by a
warranty or other legal guarantees.
Key Characteristics of Caveat Emptor
1. Buyer Responsibility: The buyer is responsible for inspecting the goods or property before the
purchase. They must ensure that it meets their needs and expectations.
2. Limited Seller Liability: The seller is generally not liable for any defects in the goods or property once
the sale is complete, unless they have made specific warranties or representations about the
condition or quality of the item.
3. No Implied Guarantees: There is no implied guarantee from the seller about the suitability or
condition of the product. The buyer cannot assume that the product is free from defects or fit for a
particular purpose.
4. Exceptions: There are exceptions to this rule, such as when the seller commits fraud, makes
misrepresentations, or there are implied warranties under consumer protection laws.
Practical Application
Real Estate Transactions: In real estate, caveat emptor is commonly applied. Buyers are expected to conduct
thorough inspections and due diligence, including hiring professionals to inspect the property for any
structural, mechanical, or environmental issues.
Purchases of Used Goods: When buying used goods, such as cars or electronics, the principle of caveat emptor
often applies. Buyers are encouraged to test and inspect the items thoroughly before purchasing.
14. Warranty vs condition

Warranty Condition
A warranty is a less critical term of the contract. It is A condition is a fundamental term that goes to the
a secondary obligation that does not go to the root root of the contract. It is a major stipulation that is
of the contract. essential to the main purpose of the agreement.
Warranties are less central to the contract’s main Conditions are critical to the contract's overall
purpose compared to conditions. performance and purpose.
Allows damages but not termination Allows termination and damages
Secondary to the contract's purpose Fundamental to the contract's purpose
Quality of goods, standard of service Delivery dates, essential qualifications
15. Sale vs Agreement
Sale Agreement
When in a contract of sale, the exchange of goods When in a contract of sale the parties to contract
for money consideration takes place immediately, it agree to exchange the goods for a price at a future
is known as Sale specified date is known as an Agreement to Sell.
Executed Contract Executory Contract
In sale, the title of goods transfers to the buyer with In an agreement to sell, the title of goods remains
the transfer of goods. with the seller as there is no transfer of goods.
VAT is charged at the time of sale. No tax is levied.
Right to sue for the price. Right to sue for the damages.
Responsibility of buyer Responsibility of seller
16. Partnership firm vs company
Partnership Firm Company

Partnership Firm is a mutual agreement between two or Company is an association of persons with a common
more persons to run the business and share profit and loss objective of providing goods and services to
mutually. customers.

Indian Partnership Act, 1932 Indian Companies Act, 2013

2 members for a partnership firm 7 for public limited, 2 for Private Limited,

Partnership Deed required for the creation of a partnership Memorandum of Association and article of association
firm is mandatory for incorporating a company

No such amount required 1 Lakh minimum for a Pvt Ltd and 5 lakhs in case of
Public Company

Consent required from all partners before transferring Can be transferred

17. Duties of a Partner

 Section 9: General duties of a partner
Partners are legally bound to carry on the business of the partnership firm. The general responsibilities of a
partner are listed below. A partner is required to carry on the business to the highest common advantage.
 Section 10: To indemnify for fraud
According to Section 10, a partner of the partnership firm is liable to compensate the firm for any damages
caused to its business or the firm because of a partner’s fraud in the conduct of the business of the firm.
 Section 16(a): To account for any profit
If a partner of a partnership firm derives any profit for himself for any transaction of the firm or from the
use of the property or business connection of the firm or firm’s name, then the partner is bound to
account for that profit and refund it to the firm.
 Section 16(b): To account and pay for profits of competing for business
If a partner carries on a company of the same nature as the firm and competes with that of the firm, the
partner must be accountable for and pay to the firm all the profits made in the business by the partner.
The partnership firm will not be held liable for any losses caused in the business.
 Section 13(f): To indemnify for wellful neglect
According to the Section, a partner of a partnership firm must compensate the firm for any damages or
loss caused to it by willful neglect in the conduct of the business of the firm.

18.Rights of a Partner
 Section 12(a): Right to take part in the conduct of the Business
All the partners of a partnership firm have the right to take part in the business conducted by the firm
as a partnership business is a business of the partners, and their management powers are generally
coextensive. If the management power of a particular partner is interfered with and the individual has
been wrongfully precluded from participating, the Court of Law can intervene under such
circumstances. The Court can, and will, restrain the other partner from doing so by injunction.
 Section 12(c): Right to be consulted
When a difference of any sorts arises between the partners of a firm concerning the business of the firm, it
shall be decided by the views of the majority among the partners. Every partner in the firm shall have the
right to express his opinion before the decision is made. However, there can be no changes like the
business of the firm without the consent of all the partners involved.

 Section 12(d): Right of access to books

Every partner of the firm, regardless of being an active or a sleeping partner, is entitled to have access to
any of the books of the partnership firm. The partner has the right to inspect and take a copy of the same
if required. However, this right must be exercised bonafide.

 Section 13(a): Right to remuneration

No partner of the firm is entitled to receive any remuneration along with his share in the profits of the
business by the firm as a result of taking part in the business of the firm. Although, this rule may always
vary by an express agreement, or by a course of dealings, in which case the partner will be entitled to
remuneration. Thus, a partner may claim remuneration even in the absence of a contract, when such
remuneration is payable under the continued usage of the firm

 Section 13(b): Right to share profits

Partners are entitled to share all the profits earned in the business equally. Similarly, the losses sustained
by the partnership firm is also equally contributed. The amount of a partner’s share must be ascertained
by inquiring whether there is an agreement in that behalf among the partners.

 Section 13(c): Interest on capital

If a partner subscribes interest on capital is payable to the partner under the partnership deed, then the
interest will be payable out of the profits only in such a case. In a general rule, the interest on a capital
subscribes by partners is not permitted unless there is an agreement or a usage to that effect.

 Section 13(d): Interest on advances

If a partner makes an advance to the partnership firm in addition to the amount of capital to be
contributed by him, the partner is entitled to claim interest thereon at 6 per cent per annum. While the
interest on capital account ceases to run on dissolution, the interest on advances keeps running even after
dissolution and up to the date of payment. It can be noted that the Partnership Act makes a distinction
between the capital contribution of a partner and the advance made by him to the firm

 Section 13(e): Right to be indemnified

All the partners of the firm have the right to be repaid by the firm in respect of the payments made and
the liabilities incurred by him in the ordinary and proper conduct of the business of the firm. This also
includes the performance of an act in an emergency for protecting the firm from a loss, if the payments,
liability and action are such as a prudent man would make, incur or perform in his case, under similar
circumstances.
19. Characteristics of a Partnership
A partnership is a business arrangement where two or more individuals share ownership and the
responsibilities of managing a company. Key characteristics of a partnership include:
1. Shared Ownership: Partners share ownership of the business, contributing resources such as capital,
skills, or labor.
2. Profit and Loss Sharing: Profits and losses are shared among partners according to the partnership
agreement or, in the absence of such an agreement, equally.
3. Joint Decision-Making: Partners participate in decision-making processes, and major decisions usually
require mutual consent.
4. Unlimited Liability: In general partnerships, each partner has unlimited liability, meaning they are
personally liable for the debts and obligations of the business.
5. Mutual Agency: Each partner can act as an agent of the partnership, binding the business to contracts
and agreements.
6. Flexibility: Partnerships are relatively easy to form and dissolve compared to corporations, providing
flexibility in operations and management.

20.Companies Act
The formation of a company goes through a number of steps, starting from idea generation to commencing of
the business. This whole process can be broken down into 4 major phases or steps,
1. Promotion Stage: Promotion is the first step in the formation of a company. In this phase, the idea of
starting a business is converted into reality with the help of promoters of the business idea. In this
stage the ideas are executed. The promotion stage consists of the following steps: Identify the
business opportunity and decide on the type of business that needs to be done. Perform a feasibility
study and determine the economic, technical and legal aspect of executing the business.
2. Registration stage: Registration stage is the second part of the formation process. In this stage, the
company gets registered, which brings the company into existence. A company is said to be in
existence, if it is registered as per the Companies Act, 2013. In order to get a company registered,
some documents need to be provided to the Registrar of Companies.
3. Certificate of Incorporation: Certificate of incorporation is issued when the registrar is satisfied with
the documents provided. This certificate validates the establishment of the company in the records.
4. Certificate of commencement of business: Certificate of commencement of business is required for a
public company to start doing business, while a private company can start business once it has
received the certificate of incorporation. Public companies receiving the certificate of incorporation
can issue prospectus in order to make the public subscribe to the share for raising capital. Once all the
minimum number of required shares have been subscribed, a letter should be sent to the registrar
along with a bank document stating the receiving of the money.

21. memorandum of Association

A Memorandum of Association (MoA) is a legal document that is required to form a company. It is one of the
fundamental documents in company formation and outlines the company's structure and purpose. The MoA
defines the company's relationship with the outside world and specifies the scope of its activities. Here are the
key components typically found in a Memorandum of Association:
1. Name Clause: This specifies the official name of the company. The name must be unique and should
not be similar to any existing company's name.
2. Registered Office Clause: This clause states the location of the company's registered office. It
determines the jurisdiction under which the company falls.
3. Objective Clause: This clause defines the purpose and objectives for which the company is
established. It details the main activities the company will engage in and any ancillary activities.
4. Liability Clause: This clause outlines the liability of the members. In the case of a limited company, it
specifies that the liability of its members is limited to the amount unpaid on their shares.
5. Capital Clause: This clause specifies the company's share capital. It details the total amount of capital
the company is authorized to raise through shares and the division of this capital into shares of a fixed
amount.
22.Characterestics of a company
1. Separate Legal Entity: A company is a separate legal entity from its owners. It can own property, enter
into contracts, sue and be sued in its own name.
2. Limited Liability: The liability of shareholders is limited to the amount unpaid on their shares.
Personal assets of shareholders are generally protected from the company’s debts and liabilities.
3. Perpetual Succession: A company has a continuous existence independent of its members. It is not
affected by changes in ownership or the death of shareholders or directors.
4. Transferability of Shares: Shares of a company can usually be transferred freely, which facilitates
changes in ownership without affecting the company’s operations.
5. Separate Management: The management of a company is typically separate from its ownership.
Shareholders elect a board of directors to oversee the company’s management.
6. Common Seal: A company often has a common seal, which acts as its official signature. This is used to
execute documents legally binding the company.
7. Capacity to Sue and Be Sued: A company, as a legal entity, can initiate legal proceedings and can also
be sued.
23. Article of Association
The Articles of Association (AoA) is a crucial document in the formation and governance of a company. It
outlines the rules and regulations for the management of the company and defines the responsibilities of
directors, the kind of business to be undertaken, and the means by which shareholders exert control over the
board of directors.
1. Preliminary: This section includes definitions and interpretations of terms used in the document.
2. Share Capital and Variation of Rights: Details about the company’s share capital, the division of
shares, and the rights attached to different classes of shares. It also covers the procedures for altering
share rights.
3. Issue of Shares and Other Securities: Procedures for issuing new shares or other securities, including
rights issues, bonus issues, and the allotment of shares.
4. Transfer of Shares: Regulations regarding the transferability of shares, the procedure for transferring
shares, and restrictions (if any) on the transfer of shares.
5. Share Certificates: Provisions regarding the issuance of share certificates, their form, and the process
for replacing lost or damaged certificates.
6. Lien on Shares: Conditions under which the company can exercise a lien on shares, including the
company’s rights in case of non-payment of calls or debts owed by shareholders.
7. Calls on Shares: Procedures for making calls on shares, the liability of shareholders to pay calls, and
consequences of non-payment.
24. porters five forces
Porter's Five Forces is a strategic framework developed by Michael E. Porter to analyse the competitive forces
within an industry and to understand its attractiveness and profitability. The model examines five key forces
that influence the competitive intensity and, consequently, the potential for profit in an industry.
1. Competitive Rivalry: This force looks at the level of competition among existing firms in the industry.
High rivalry can limit profitability due to price wars, advertising battles, and product innovations.
o Number and size of competitors
o Industry growth rate
o Exit barriers
2. Threat of New Entrants: This force examines how easily new competitors can enter the industry and
challenge existing firms. If the barriers to entry are low, the threat is high. Key factors include:
o Economies of scale
o Capital requirements
o Access to distribution channels
o Brand loyalty
3. Bargaining Power of Suppliers: This force analyzes how much power suppliers have over the prices
and quality of materials and services. High supplier power can erode industry profitability.
o Number of suppliers
 o Availability of substitute inputs
o Importance of the supplier’s product to the industry
o Forward integration by suppliers
4. Bargaining Power of Buyers: This force assesses the influence customers have over the pricing and
quality of goods and services. High buyer power can drive prices down and affect profitability.
o Number of buyers
o Volume of purchase per buyer
o Availability of substitute products
o Buyer’s price sensitivity
5. Threat of Substitutes: This force evaluates the presence of alternative products or services that can
perform the same function. A high threat of substitutes can limit industry profitability by putting a
ceiling on prices.
o Availability of substitute products or services
o Performance and cost of substitutes
o Buyer’s propensity to switch to substitutes
o Price-performance trade-off of substitutes
25.Pestle Model - The PESTLE model is a strategic framework used to analyze the external macro-
environmental factors that can impact an organization. PESTLE stands for Political, Economic, Social,
Technological, Legal, and Environmental factors.
1. Political Factors: These involve the influence of government policies and actions on the business
environment. Key elements include:
o Government stability and changes
o Tax policies and regulations
o Trade restrictions and tariffs
o Labor laws
o Foreign trade policies
2. Economic Factors: These include the economic conditions and variables that influence a business's
operations and profitability. Key elements include:
o Economic growth rates
o Inflation rates
o Interest rates
o Exchange rates
3. Social Factors: These pertain to the societal and cultural aspects that can affect an organization
o Demographic changes (age, gender, ethnicity, etc.)
o Cultural norms and values
o Education levels
o Lifestyle changes and trends
4. Technological Factors: These involve the impact of technological advancements and innovations on
the business environment. Key elements include:
o Rate of technological change
o Research and development (R&D) activity
o Automation and digitalization
o Technological infrastructure
5. Legal Factors: These encompass the laws and regulations that can affect an organization's operations
and compliance requirements. Key elements include:
o Employment laws
o Health and safety regulations
o Consumer protection laws
6. Environmental Factors: These relate to ecological and environmental aspects that can influence an
organization. Key elements include:
o Climate and weather conditions
o Environmental regulations and sustainability initiatives
o Corporate social responsibility (CSR) policies
o Waste management and recycling