Commercial Law

Contract law

A contract is an agreement enforceable by law, formed by offer, acceptance, consideration, capacity, free consent, lawful object, and certainty. Offer is a definite promise to be bound on acceptance, distinguished from an invitation to treat such as a shop display or an advertisement seeking offers. Acceptance must be communicated, must match the offer, and must be made while the offer remains open; revocation is effective only when communicated before acceptance, and postal or electronic communication rules depend on the parties' chosen method and the law's default for that channel. Consideration is something of value given in exchange, which may be an act, forbearance, or promise, and which must be real and lawful, though it need not be adequate. Past consideration, consideration from a third party in some systems, and promises without consideration are classic examination traps: a promise made after performance is complete, or a gratuitous promise with nothing in return, is generally unenforceable unless an exception applies, such as a promise to compensate for past voluntary service or a promise recorded in a prescribed form.

Capacity protects those who cannot fairly bargain: minors' agreements are generally void, persons of unsound mind are protected where incapacity is proved, and other incapacities follow from status or law. Free consent requires agreement without coercion, undue influence, fraud, misrepresentation, or mistake that vitiates consent; coercion makes a contract voidable at the victim's option, fraud involves intentional deception, misrepresentation involves false statements that may be innocent or negligent, and mistake excuses only where it goes to the substance of the agreement and is mutual or fundamental. Lawful object and consideration are essential: agreements whose object is illegal, immoral, or opposed to public policy are unenforceable, including agreements to commit wrongs, to stifle prosecution, or to restrain trade beyond reasonable limits. Performance, breach, and remedies complete the picture: performance must be exact unless the law excuses it, breach may be actual or anticipatory, and remedies include damages measured by loss actually suffered and foreseeably contemplated, specific performance where damages are inadequate for unique subject matter, injunction to prevent breach of a negative promise, and restitution to reverse unjust enrichment. The distinction between conditions, warranties, and innominate terms determines whether breach allows termination or only damages, a distinction that reappears in sale of goods.

Sale of goods and partnership

Sale of goods law governs transfer of ownership in movable property for a price. A sale transfers ownership immediately or at an agreed time, while an agreement to sell transfers ownership when the time elapses or conditions are fulfilled. The distinction matters for risk, for the seller's remedies, and for third-party buyers: risk generally passes with ownership unless the parties agree otherwise or delivery is delayed by fault, so a buyer who owns goods destroyed in transit bears the loss even though possession remains with the seller, subject to agreement and fault rules. Implied conditions protect buyers where they have not inspected or relied on the seller's skill: goods must correspond with description, be fit for a disclosed purpose where the buyer relies on the seller, be of merchantable quality, and correspond with sample where sale is by sample. Breach of a condition allows rejection and damages, while breach of a warranty allows damages only, unless the buyer has accepted the goods or the condition is treated as a warranty. An unpaid seller retains rights of lien, stoppage in transit, and resale where conditions are met, and a buyer in good faith from a person with a voidable title or in defined mercantile situations may acquire a better title than the seller had, balancing ownership protection against commercial certainty.

Partnership is the relation between persons who agree to share profits of a business carried on by all or any of them acting for all. It is not a separate legal person in the classic formulation: partners are agents of the firm and of each other for business purposes, and each partner is liable jointly and severally for firm debts, a risk that makes partnership suitable for small, trust-based ventures but dangerous without clear agreement. A partnership agreement should address capital, profit sharing, management, admission and retirement, and dissolution, because default rules fill gaps in ways partners may not expect, such as equal profit sharing regardless of capital contribution. Registration, while not always compulsory, affects the ability to sue and to enforce rights against third parties, and dissolution may occur by agreement, expiry, notice, or court order where the business cannot fairly continue. The contrast with a company is the examination point: partnership offers simplicity and direct control at the cost of personal liability and instability on death or retirement, while a company offers separate personality and limited liability at the cost of formality, disclosure, and regulation.

Negotiable Instruments

Negotiable instruments are written promises or orders to pay money that can be transferred by delivery or endorsement, allowing credit and payment to circulate without a fresh contract at each step. The main instruments are promissory notes, where the maker promises to pay the payee, bills of exchange, where the drawer orders the drawee to pay the payee, and cheques, a bill drawn on a bank payable on demand. Essential features include writing, unconditional promise or order, certainty of sum, certainty of parties, and payment in money, with signatures and, for cheques, the banking relationship shaping presentment and payment. Negotiation transfers title: bearer instruments pass by delivery, order instruments by endorsement plus delivery, and a holder who takes in good faith, for value, and without notice of defect acquires a protected position, taking free from many defences available against prior holders. This holder protection is what makes instruments circulate: a transferee need not investigate the whole history of the instrument, though fraud, forgery, and notice of dishonour still matter.

Presentment, dishonour, and notice complete the system. An instrument must be presented for acceptance where required and for payment at the proper time and place, and dishonour by non-acceptance or non-payment triggers a duty to give notice to parties liable, preserving recourse against drawers and endorsers. Forgery is a special danger: a forged signature is wholly inoperative, and a bank that pays on a forged drawer signature generally bears the loss, subject to customer negligence and mandate rules, while a holder who takes a forged instrument acquires no title through forgery. Cheque dishonour carries additional consequences, including criminal liability in defined circumstances where a cheque is returned for insufficiency of funds and statutory notice and complaint procedures are followed, reflecting the public interest in payment reliability. Electronic instruments and digital payment systems extend these principles to new forms, but the underlying questions remain: who promised to pay whom, was the instrument duly negotiated, was presentment and notice proper, and does the holder qualify for protection against prior defects?

Company law and CSR

Company law creates the legal person that modern business runs through. Incorporation brings separate personality: the company owns assets, incurs debts, contracts, and sues in its own name, while shareholders' liability is generally limited to unpaid amounts on their shares. Formation requires a constitution, registration, and compliance with disclosure and capital rules, after which the company is governed by its board of directors, who owe fiduciary duties of loyalty, care, and good faith to the company, and by shareholders, who exercise voting, dividend, and winding-up rights within the constitution and the law. Directors must avoid conflicts, must not profit secretly from office, and must act for proper purposes; breach may lead to rescission, accounting for profits, and personal liability. Minority shareholders are protected against oppression and mismanagement through court remedies, while creditors are protected through capital maintenance, wrongful trading, and insolvency rules that prevent assets being stripped before debts are paid. Winding up, whether voluntary or by court order, realises assets, pays creditors in statutory priority, and distributes any surplus to shareholders, ending the company's life in an orderly way.

Corporate social responsibility asks what companies owe beyond shareholders and creditors. In its voluntary form, it covers ethical sourcing, environmental care, community investment, and employee welfare as matters of reputation, long-term value, and social licence. In its mandatory form in some systems, larger companies must spend a defined proportion of profits on specified social activities, report on their activities, and constitute committees to oversee them, with disclosure making compliance visible to investors and the public. Critics argue that mandated spending becomes box-ticking or a substitute for state welfare, while supporters argue that companies benefiting from public infrastructure, educated workers, and natural resources should contribute measurably to the communities that make profit possible. The examination distinction is between legal duty and ethical aspiration: directors' fiduciary duties run to the company, CSR spending may be legally required or voluntarily adopted, and the two must not be conflated. A strong answer evaluates CSR by asking who decides, who benefits, how it is reported and audited, and whether it genuinely advances welfare or merely decorates a balance sheet.

Contract formation checklist

Partnership versus company