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Transcript of contract is the back bone of good business practice
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CERTIFICATE
I, Nadirshaw .K. Dhondy, Advocate Supreme court, have examined the thesis of
Mr. Manish Ashok Waghachourewho is enrolled in M.I.M.R.(Mumbai institute of
management and research) for the academic years 2010- 2012 in the Masters of
Management Studies programme. His unique roll no. is 1117.
Dated this _______ day of February 2011
Signature Signature
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Name: .Manish Ashok Waghachoure MR.NADIRSHAW K. DHONDY
ACKNOWLEDGEMENT
I sincerely thank Prof. Nadirshaw .k. Dhondy for giving me anopportunity to compile this project and also for providing
necessary information which helped me in completing this
project in a better manner.I will be looking for such types of
projects in near future and do my best.
We are eagerly waiting for fruitful comments and constructive
suggestions.
I would also thank my Institution and my faculty members
without whom this project would have been a distant reality. I
also extend my heartfelt thanks toAnmol sharma family and
well wishers.
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Prologue
A contract is a legally enforceable agreement between two or more
parties with mutual obligations.
The remedy at law for breach of contract is "damages" or monetary
compensation. In equity, the remedy can be specif ic performance of
the contract or an injunction.
Both remedies award the damaged party the "benef it of the bargain"
or expectation damages, which are greater than mere reliance
damages, as in promissory estoppel.
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Contract is the backbone of good business
Practice
DEFINATION OF CONTRACT:
Section 2(h)of the Indian Contract Act 1872 def ines contract as an
agreement enforceable by law is a contract and according to section
2(b) A proporsal, when accepted, becomes a promise
TYPES OF CONTRACT :
Express Contract
Contingent Contract
Quasi Contract
Executed Contract
Executory Contract
Contracts For Executed Consideration
Valid Contract
Voidable Contract
Void Contract
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Unenforceable Contract
Illegal Agreement
STEPS INVOLVED IN CONTRACT :
Proposal and its communication
Acceptance of proposal and its communication
Agreement by mutual promises
Contract
Performance of contract.
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The Indian Partnership Act, 1932
Section 9 in The Indian Partnership Act, 1932
9. General duties of partners. Partners are bound to carry on the business of the firm tothe greatest common advantage, to be just and faithful to each other, and to render true
accounts and full information of all things affecting the firm to any partner or his legal
representative.
Duty to indemnify for loss caused by fraud.
Section 30 in The Indian Partnership Act, 1932
(1) Minors admitted to the benefits of partnership. A person who is a minor according to the law
to which he is subject may not be a partner in a firm, but, with the consent of all the partners for
the time being, he may be admitted to the benefits of partnership.
(2) Such minor has a right to such share of the property and of the profits of the firm as may be
agreed upon, and he may have access to and inspect and copy any of the accounts of the firm.
(3) Such minor' s share is liable for the acts of the firm, but the minor is not personally liable for
any such act.
(4) Such minor may not sue the partners for an account or payment of his share of the property
or profits of the firm, save when severing his connection with the firm, and in such case the
amount of his share shall be determined by a valuation made as far as possible in accordance
with the rules contained in section 48: Provided that all the partners acting together or any
partner entitled to dissolve the firm upon notice to other partners may elect in such suit to
dissolve the firm, and thereupon the Court shall pro- ceed with the suit as one for dissolution
and for settling accounts between the partners, and the amount of the share of the minor shall
be determined along with the shares of the partners.
(5) At any time within six months of his attaining majority, or of his obtaining knowledge that he
had been admitted to the benefits of partnership, whichever date is later, such person may give
public notice that he has elected to become or that he has elected not to become a partner in the
firm, and such notice shall determine his position as regards the firm: Provided that, if he fails
to give such notice, he shall become a partner in the firm on the expiry of the said six months.
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(6) Where any person has been admitted as a minor to the bene- fits of partnership in a firm, the
burden of proving the fact that such person had no knowledge of such admission until a
particular
date after the expiry of six months of his attaining majority shall lie on the persons asserting that
fact.
(7) Where such person becomes a partner,-
(a) his rights and liabilities as a minor continue up to the date on which he becomes a partner,
but he also becomes personally liable to third parties for all acts of firm done since he was
admitted to the benefits of partnurship; and
(b) his share in the property and profits of the firm shall be the share to which he was entitled as
a minor.
(8) Where such person elects not to become a partner,-
(a) his rights and liabilities shall continue to be those of a minor under this section up to the
date on which he gives public notice,
(b) his share shall not be liable for any acts of the firm done after the date of the notice, and
(c) he shall be entitled to sue the partners for his share of the property and profits in accordance
with sub- section (4).
(9) Nothing in sub- sections (7) and (8) shall affect the provisions of section 28. CHAP
INCOMING AND OUTGOING PARTNERS CHAPTER V INCOMING AND OUTGOING
PARTNERS
Section 45 in The Indian Partnership Act, 1932
Liability for acts of partners done after dissolution.
(1) Notwithstanding the dissolution of a firm, the partners continue to be liable as such to thirdparties for any act done by any of them which would have been an act of the firm if done beforethe dissolution, until public notice is given of the dissolution: Provided that the estate of apartner who dies, or who is adjudicated an insolvent, or of a partner who, not having beenknown to the person dealing with the firm to be a partner, retires from the firm, is not liableunder this section for acts done after the date on which he ceases to be a partner.
(2) Notices under sub- section (1) may be given by any partner.
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Case index
CASE STUDY EXAMPLES
Equivalent citations: 1965 AIR 212, 1964 SCR (8) 233
Bench: Subbarao, K.
PETITIONER:
SHIVAGOUDA RAVJI PATIL AND OTHERS
Vs.
RESPONDENT:
CHANDRAKANT NEELKANTH SEDALGE AND OTHERS
DATE OF JUDGMENT:
08/05/1964
BENCH:
SUBBARAO, K.
BENCH:
SUBBARAO, K.
AYYANGAR, N. RAJAGOPALA
MUDHOLKAR, J.R.
CITATION:
1965 AIR 212 1964 SCR (8) 233
ACT:
Indian Partnership Act-A minor admitted to the benefits of a partnership-
Partnership dissolved-Thereafter theminor attains majority He did not exercise his
option not to become a partner-He cannot he adjudicatedinsolvent for the acts of
insolvency of other partners Indian Partnership Act, 1932 (IX of 1932), s.
30(5).234
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HEADNOTE:
The respondent No. 1 while he was a minor was admitted to the benefits of a
partnership constituted of
respondents 2 and 3. The partnership owed a certain amount to the appellants. The
partnership was dissolvedand subsequently respondent No. 1 became a major but
he did not exercise the option not to become a partnerunder s. 30(5) of the Indian
Partnership Act, 1932. Respondents 2 and 3 committed acts of insolvency and
theappellants filed an application for adjudicating the three respondents as
insolvents. The first respondentresisted the application without success but on
second appeal the High Court held that he was not a partner ofthe firm and hence
he could not be adjudicated an insolvent for the debts of the firm. The present
appeal wasfiled on a certificate granted by the High Court. The appellant
contended before this Court that the 1st
respondent had become a partner of the
firm by reason of the fact that he had not elected to become a partner under a.
30(5) of the Partnership Act and therefore he was liable to be adjudicated an
insolvent.
Held
:(i) A person under the age of majority cannot become a partner by contract and he
cannot be one of that group of persons called a firm. It therefore follows that if
during minority of the 1st respondent the partners of the firm committed an act of
insolvency, the minor could not have been adjudicated insolvent on the basis of the
said act of insolvency for the simple reason that he was not a partner of the firm.SanyasiCharanMandal v. KrishnadhanBanerji, (1922) I.L.R. 49 Cal. 560, relied on.
(ii)It is implicit in the terms of sub-s. (5) of s. 30 of the Partnership Act that the
partnership is in existence,. A minor, after attaining majority, cannot elect to
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become a partner of a firm which ceased to exist. The entire scheme of s. 30 of the
Partnership Act posits the existence of a firm and negatives any theory of its
application to a stage when the firms ceased to exist.
(iii)Since the 1st respondent became a major after the partnersship was dissolved s.
30 of the Partnership Act does not apply to him. He is not a partner of the firm and
therefore he cannot be adjudicated insolvent for the acts of insolvency committed
by respondents 2 and 3, the partners of the firm.
JUDGMENT:
CIVIL APPELLATE JURISDICTION: Civil Appeal No. 244 of 1964. Appeal
from the judgment and order dated September 21, 1962 of the Mysore High Court
in Civil Revision Petition No. 929 of 1958.
G. S. Pathak and R. Gopalakrishnan, for the appellants. S. G. Patwardhan, V.
Kumar and NaunitLal, for the
respondent No. 1.235
May, 8, 1964. The Judgment of the Court was delivered by SUBBA RAO, J.This
appeal by certificate raies the question whether a minor who was admitted to the
benefits of a partnership can be adjudicated insolvent on the basis of debt or debts
of the firm after the partnership was dis- solved, on the ground that he attained
majority subsequent to the said dissolution, but did not exercise his option to
become a partner or cease to be one of the said firm.
The facts are not in dispute and may be briefly stated.
MallappaMahalingappaSadalge and AppasahebMahalingappaSadalge, respondents
2 and 3 in the appeal, were carrying on the business of commission agents and
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manufacturing and selling partnership under the names of two firms "M. B.
Sadalge" and "C. N. Sadalge". The partnership deed between them was executed
on October 25, 1946. At that time ChandrakantNilakanthSadalge, respondent 1
herein, was a minor and he was admitted to the benefits of the partnership. The
partnership had dealings with the appellants and it had become indebted to them to
the extent of Rs. 1,72,484. The partnership was dissolved on April 18, 1951. The
first respondent became a major subsequently and he did not exercise the option
not to become a partner of the firm under s. 30(5) of the Indian Partnership Act.
When the appellants demanded their dues, the respondents 2 and 3 informed them
that they were unable to pay their dues and that they had suspended payment of the
debts.
On August 2, 1954, the appellants filed an application in the Court of the Civil
Judge, Senior Division, Belgam, for adjudicating the three respondents as
insolvents on the basis of the said debts. The 1st respondent opposed the
application. The learned Civil Judge found that respondents 2 and 3 committed acts
of insolvency and that the 1st respondent had also become partner as he did not
exercise his option under s. 30(5) of the Partnership Act and, therefore, he was also
liable to be adjudicated along with them. The first respondent preferred an appeal
to the District Judge, but the appeal was dismissed. On second appeal, the High
Court held that the 1st respondent was not apartner of the 236 firm and, therefore,
he could not be adjudicated insolvent for the debts of the firm. The creditors have
preferred the present appeal against the said decision of the High Court. Learned
counsel for the appellants, Mr.Pathak, contends that the 1st respondent had become
a partner of the firm by reason of the fact that he had not elected not to become a
partner of the firm under s. 30(5) of the Patnership Act and, therefore, he was
liable to be adjudicated insolvent along with his other partners.
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The question turns upon the relevant provisions of the, Provincial Insolvency Act,
1920 (5 of 1920) and the Indian Partnership Act. Under the provisions of the
Provincial Insolvency Act, a person can only be
adjudicated insolvent if he is a debtor and has committed an act of insolvency as
defined in the Act: see ss. 6 and 9. In the instant case respondents 2 and 3 were
partners of the firm and they be- came indebted to the appellants and they
committed an act of insolvency by declaring their inability to pay the debts .and
they were, therefore, rightly adjudicated insolvents But the question is whether the
first respondent could also be adjudicated insolvent on the basis of thE said acts of
insolvency committed by respondents 2 and 3. He could be, if he had become a
partner of the firm. It is contended that he had become a partner of the firm,
because lie did not exercise his option not to become a partner thereof under s.
30(5) of the Partnership Act.
Under s. 30(1) of the Partnership Act a minor cannot become a partner of a firm
but he may be admitted to the benefits of a partnership.
Under sub-ss. (2) and (3) thereof he will be entitled only to have a right to such
share of the properties and of the profits of the firm as may be agreed upon, but he
has no personal liability for any acts of the firm, though his share is liable for the
same. The legal position of a minor who is admitted to a partnership has been
succinctly stated by the Privy Council in SanyasiCharanMandal v.
K rishnadhanBanerji
(1) after considering the material provisions of the
Contract Act,
(1)[1922] I.L.R. 49 Cal. 560, 570.237
which at that time contained the provisions relevant to the law of partnership, thus :
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"A person under the age of majority cannot become a partner
bycontract...................... and so
according to the definition he cannot be one of that group of persons called a firm.
It would seem, therefore,that the share of which s. 247 speaks is no more than a
right to participate in the property of the firm after itsobligations have been
satisfied."
It follows that if during minority of the 1st respondent the partners of the firm
committed an act of insolvency,the minor could not have been adjudicated
insolvent on the basis of the said act of insolvency for the simplereason that he was
not a partner of the firm. But it is said that sub-s. (5) of s. 30 of the Partnership Act
madeall the difference in the case. Under that sub-section the quondam minor at
any time within six months of hisattaining majority, or of his obtaining knowledge
that he had been admitted to the benefits of partnership,whichever date is later,
may give public notice that he has elected to become or that he has elected not
tobecome a partner in the firm and such notice shall determine his position as
regards the firm. If he failed togive such a notice, he would become a partner in the
said firm after the expiry of the said period of sixmonths.
Under sub-s. (7) thereof where such person becomes a partner, his rights and
liabilities as a minorcontinue up to the date on which he becomes a partner, but he
also becomes personally liable to third partiesfor all acts of the firm done since he
was admitted to the benefits of partnership and his share in the propertyand profits
of the firm shall be the share to which he was entitled as a minor. Under the said
two sub-sections,if during the continuance of the partnership a person, who was
admitted at the time when he was a minor tothe benefits of the partnership, did not
within six months of his attaining majority elect not to become apartner, he would
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become a partner after the expiry of the said period and thereafter his rights and
liabilitieswould be the same as those of the other partners as from the date he was
admitted to the partnership.238
It would follow from this that the said minor would there- after be liable to the
debts of the firm and could beadjudicated insolvent for the acts of insolvency
committed by the partners. But in the present case thepartnership was dissolved
before the first respondent became a major; from the date of the dissolution of
thepartnership, the firm ceased to exist, though under s. 45 of the Act, the partners
continued to be liable as suchto third parties for the acts done by any of them
which would have been the acts of the firm if done before thedissolution until
public notice was given of the dissolution. Section 45 propriovigore applies only to
partnersof the firm. When the partnership itself was dissolved before the first
respondent became a major, it is legallyimpossible to hold that he had become a
partner of the dissolved firm by reason of his inaction after hebecame a major
within the time prescribed under s. 30(5) of the Partnership Act. Section 30 of the
said Actpresupposes the existence of a partnership. Sub- ss. (1), (2) and (3) thereof
describe the rights and liabilities ofa minor admitted to the benefits of partnership
in respect of acts committed by the partners; sub-s. (4) thereofimposes a disability
on the minor to sue the partners for an account or payment of his share of the
property orprofits of the firm, save when severing his connection with the firm.
This sub-section also assumes theexistence of a firm from which the minor seeks to
sever his connection by filing a suit. It is implicit in theterms of sub-s. (5) of s. 30
of the Partnership Act that the partnership is in existence. A minor after
attainingmajority cannot elect to become a partner of a firm which ceased to exist.
The notice issued by him alsodetermines his position as regards the firm. Sub-s. (7)
which describes the rights and liabilities of a personwho exercises his option under
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sub-s. (5) to become a partner also indicates that he is inducted from that dateas a
partner of an existing firm with co-equal rights and liabilities along with other
partners. The entirescheme of s. 30 of the Partnership Act posits the existence of a
firm and negatives any theory of its applicationto a stage when the firm ceased to
exist. One cannot become or remain a partner of a firm that does not exist.It is
common case that the first respondent became a major only after the firm was
dissolved. Section 30 of the239Partnership Act, therefore, does not apply to him.
He is not a partner of the firm and, therefore, he cannot be
adjudicated insolvent for the acts of insolvency committed by respondents 2 and 3,
the partners of the firm.
The order of the High Court is correct.
In the result, the appeal fails and is dismissed with costs. Appeal dismissed.
Prime time matter
Minor can not get into any contract
BIBLIOGRAPHY
Book business law by nabhikumarjain
http://www. http://indiankanoon.org/doc/91068
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Epilogue
A person under the age of majority cannot become a partner by contract
and he cannot be one of that group of persons called a firm.
It therefore follows that if during minority of the 1st respondent the partners of the
firm committed an act of insolvency, the minor could not have been adjudicated
insolvent on the basis of the said act of insolvency for the simple reason that he
was not a partner of the firm.