Doctrine of Constructive Notice The Memorandum and Articles, on registration, assume the character of public documents. The office of the Registrar is a public office and documents registered there are open and accessible to the public at large. Therefore, every outsider dealing with the company is deemed to have notice of the contents of the Memorandum and Articles. This is known as Constructive Notice of Memorandum and Articles. Under the doctrine of ‘constructive notice’, every person dealing or proposing to enter into a contract with the company is deemed to have constructive notice of the contents of its Memorandum and Articles. Whether he actually reads them or not, it is presumed that he has read these documents and has ascertained the exact powers of the company to enter into contract, the extent to which these powers have been delegated to the directors and the limitations to such powers. He is Continue reading
Legal Environment of Business
The Corporate Personality and Piercing the Corporate Veil
Concept of Corporate Personality A company is a legal person, since in the eyes of law it is capable of having legal rights and obligations just like a natural person. Like any other person it can acquire and own property, transfer property, enter into contracts and sue and be sued in its own name. Being a legal person, a company has a separate legal entity, a personality distinct from its members or shareholders. The concept of separate entity of a company was established in the celebrated case of Salomon Vs Salomon & Co. Ltd. The facts of the case are that one Salomon, a boot manufacturer, formed a company with himself, his wife, and daughter and four sons as the sole shareholders. Salomon took 20,000 shares of £1 each, debentures worth £10,000 secured by the assets of the company and the balance in cash. His wife, daughter and four sons Continue reading
About Sarbanes-Oxley Act of 2002
Public Company Accounting Reform and Investor Protection Act of 2002 commonly known as Sarbanes-Oxley Act or SOX Act was enacted by US Congress to handle concerned issues surrounding business management and financial reporting as a way to restore and maintain investor confidence in the US capital market grappling with corporate scandals and accounting irregularities. With the integrity of the market further compromised by the failures of Enron’s bankruptcy and WorldCom, the act considered as the most significant corporate regulatory reform since the Securities and Exchange Act of 1934, sought to curb the ongoing-spectacular corporate failures and scandals occurring in North America. The WorldCom’s failure was the last straw, prompting the speed passage of most drastic legislation to affect the accounting profession since 1933. The major purpose of this act is to provide reliable and accurate information to the investors. The formation of this act had to undergo a detailed process Continue reading
Discharge of a Contract
When the rights and obligations arising out of a contract are extinguished, the contract is said to be discharged or terminated. In other words, discharge of a contract means termination of the relationship between the parties to a contract. The ways of discharging a contract can be discussed as:- i) Discharge of Contract By Performance: When a contract is duly performed by both the parties within the specified time and in the manner prescribed, the contract is said to have been performed and discharged. Performance may be: (a) Actual (b) Attempted. Actual Performance: When each party to a contract fulfils his obligation arising under the contract within the time and in the manner prescribed, it is called actual performance of the contract and the contract is discharged. Attempted Performance — When the promisor offers to perform his obligation under the contract, but is unable to do so because the Continue reading
Rule of Caveat Emptor
Rule of Caveat Emptor Caveat emptor is a Latin term meaning “let the buyer beware”. It is a general rule of law that a purchaser assumes the risk of his/her purchase. The intent of the rule is to place a duty of care on the buyer in selecting an item and putting forth appropriate inquiry before completing the sale. In this way, a seller is also protected from liability for buyer’s remorse. A seller is under no duty to reveal unflattered truths about the goods sold and therefore, whenever the buyer buys goods, he must exercise necessary care in his own interest. A buyer, in contract of sale of specific goods, purchases the goods at his own risk as regard as the quality, price of the goods except on the case of fraud or when any condition to that effect is laid down in the contract. A buyer cannot hold Continue reading
Legal Definition of a Contract
Definition of Contract According to section 2(h) of the Indian Contract Act: “An agreement enforceable by law is a contract.” A contract therefore, is an agreement the object of which is to create a legal obligation i.e., a duty enforceable by law. From the above definition, we find that a contract essentially consists of two elements: (1) An agreement and (2) Legal obligation i.e., a duty enforceable by law. We shall now examine these elements detail. 1. Agreement. As per section 2 (e): “Every promise and every set of promises, forming the consideration for each other, is an agreement.” Thus it is clear from this definition that a ‘promise’ is an agreement. What is a ‘promise’? The answer to this question is contained in section 2 (b) which defines the term.” When the person to whom the proposal is made signifies his assent thereto the proposal is said to be Continue reading