Business Law and Corporate Governance
This domain tests the Indian legal framework for contracts, sale of goods, negotiable instruments and companies, together with corporate-governance standards.
Core rules
- Contract (Indian Contract Act, 1872): offer + acceptance + consideration + capacity + free consent + lawful object. Invitation to treat is not an offer. Consideration must be real but need not be adequate; past consideration is valid in India.
- Void agreement is not enforceable; voidable contract is enforceable until avoided (e.g. consent by coercion, undue influence, fraud, misrepresentation).
- Minor's contract is void ab initio; no ratification on attaining majority.
- Sale of Goods Act, 1930: conditions versus warranties; caveat emptor subject to exceptions; unpaid seller's rights.
- Companies Act, 2013: incorporation, board composition, AGM, related-party transactions, CSR for companies meeting profit thresholds (2% of average net profit of three years), independent directors, audit committee.
- Corporate governance: SEBI LODR requires board structure, committees and disclosure; "comply or explain" in some areas; whistleblower policy; insider-trading prohibition.
Worked example. A 17-year-old borrows money and signs a promissory note. The agreement is void ab initio, so the lender cannot enforce it even after the borrower turns 18, because a minor's agreement cannot be ratified. This is the rule in Mohori Bibee v Dharmodas Ghose.
Traps. An invitation to treat (menu, auction notice, prospectus) is not an offer. Consideration need not be adequate. Free consent is different from capacity. CSR is a statutory obligation for covered companies, not discretionary charity. "Comply or explain" is not optional compliance.