Unit -1: Legal Environment of Business 4) On the basis of contractual liability: 1) Right to cancel the contract

Meaning of Legal Environment of Business: a) Unilateral and Bilateral contract 2) Right to get performance
5) On the basis of nature of offer: 3) Right to claim compensation
Importance of Legal Environment of Business: a) Specific contract and General contract 4) Right to sue for injunction
1) For formulation and commencement of business 6) On the basis of enforceability of contract: 5) Right to claim for quantum meruit
2) For running the business a) Void agreement
3) For adaptation b) Void contract Contract of Sale of Goods:
4) For stability c) Voidable contract Sec 40 (1) of Nepalese Contract Act, 2056
5) For dynamism d) Unenforceable contract
6) For expansion of business e) Illegal contract Essentials elements of a Contract of Sale:
f) Valid or lawful contract 1) Seller and Buyer
Meaning of Law: 2) Movable goods for money
Austin – “Law is a rule of conduct imposed and Meaning of Offer: 3) Price
enforced by the sovereign.” Sec 2 (b) of Nepalese Contract Act, 2056 4) Change of ownership
5) Verbal or written contract
Nature/Characteristics of Law: Types of Offer: 6) Terms of contract
1) Law is of changeable nature. 1) Expressed or Implied offer
2) Law may vary according to politics, society, state, 2) Positive or Negative offer Difference between Condition and Warranty:
culture and religion. 3) Specific or General offer Condition Warranty
3) Main task of law is to regulate behavior. 4) Counter offer Warranty is only
4) Law punishes wrong doer. 5) Cross offer Condition is a term, which is
collateral to the main
5) The ultimate aim of law is justice. 6) Offer in option essential to the main purpose
purpose of the contract. It
6) Law defines the rights and duties of people in the 7) Open proposals and Standing offer of the contract. Without prior
is of a subsidiary
society. fulfillment of the condition
character. For
7) Law is pervasive Rules relating to Offer: given, the contract cannot be
performance of the
8) Law is enacted and administered by the state 1) Offer can be expressed or implied performed. Condition,
contract, prior fulfillment
authority. 2) Offer can be general or specific therefore, is of a fundamental
of warranty is not
3) Offer should be made with an intention to create character.
compulsorily necessary.
Classification of Law: legal relations Breach of condition gives the
1) Substantive law and Procedural law 4) Terms of offer must be clear and certain aggrieved party a right to Breach of warranty gives
2) Civil law and Criminal law 5) Offer must be communicated reject the contract. It also the injured party a right to
3) Public law and Private law 6) Offer is seeking acceptance of other party gives him a right to claim for claim only for damages.
4) National and International law 7) Invitation to offer is not an offer damages.
A breach of condition may be A breach of warranty
Importance of Law: Revocation/Lapse/Termination of Offer: treated as breach of warranty cannot be treated as a
1) It helps to maintain peace and order in the 1. By notice of revocation as well. breach of condition.
society/nation 2. By lapse of stipulated time
2) It helps to resolve disputes 3. By expiry of reasonable time Implied condition:
3) It helps to encourage people to do the 4. By death or insanity of offeror 1) Sale by description
right thing 5. By refusal of acceptance 2) Condition as to title (ownership)
4) It helps to regulate the behavior of the 6. By counter offer by the offeree 3) Condition as to fitness or quality of goods
individuals 7. By destruction of subject matter 4) Sale by sample
5) It helps to systematize the day to day 5) Sale by sample as well as by description
transaction Meaning of Acceptance: 6) Condition as to merchantability
6) It helps to protect public health, safety and Sec 2 (c) of Nepalese Contract Act, 2056
morals Transfer of Ownership:
7) It helps to protect property of individuals Rules relating to Acceptance: Rules regarding transfer of Ownership:
8) It helps to protect the interest of the 1) Acceptance only by offeree 1) Sale of unascertained and future goods
individuals 2) Offeree must have knowledge of offer 2) Intention of the parties
3) Acceptance must be absolute or unconditional a) Sale of specific goods
Sources of Law: 4) Acceptance can be expressed or implied b) Where goods are to be delivered
1) Legislation 5) Communication of acceptance 3) Delivery to the carrier
2) Precedent 6) Acceptance must be made before revocation or 4) Goods sent on approval or on ‘Sale or Return’ basis
3) Customs lapse of offer
4) Convention/Agreement Meaning of Unpaid Seller:
5) Writing and opinion of highly qualified person Revocation/Lapse/Termination of Acceptance: Characteristics of Unpaid Seller:
1. By notice of revocation of acceptance 1) Though the buyer has promised to pay the price, the
Meaning of Business Law: 2. By death or insanity of the offeree seller has not received it yet
M. C. Kuchhal—“Mercantile law is that branch 2) The seller is not paid the price either wholly or in
of law which comprises laws concerning trade, Meaning of Consideration: part
industry and commerce.” Sec 2 (d) of Nepalese Contract Act, 2056 3) The seller cannot received the payment due to
dishonor of negotiable instrument
Unit -2: Law of Contract Rules regarding Consideration: 4) The seller must not have refused to accept the
Meaning of Contract Law: 1) Consideration must be made at the desire of the payment at the time when the buyer has tried to
M. C. Kuchhal – “The law of contract is the promisor make it
foundation upon which the superstructure of modern 2) Consideration may move from the promisee
business is built.” 3) Consideration must be real Rights of Unpaid seller:
4) Consideration must be lawful a) Rights against the goods:
Essential elements of valid contract: 5) Consideration need not be adequate 1) Right of lien on goods
1) Two or more parties 6) Consideration may be either tangible or intangible 2) Right of stoppage of goods in transit
2) Competent parties 7) Consideration may be past, present or future 3) Rights of resale
3) Offer and Acceptance b) Rights against the buyer personally:
4) Legal relationship Meaning of Termination (Discharge) of Contract: 1) Right to sue for price
5) Free consent Methods of Termination of Contract: 2) Right to sue for damage
6) Consideration 1) Termination by performance 3) Right to sue for interest
7) Lawful of objective 2) Termination by breach of contract
8) Certainty 3) Termination by lapse of time
9) Possibility of performance 4) Termination by mutual agreement or consent
10) Meeting of mind 5) Termination by operation of law
6) Termination by subsequent impossibility of
Types of contract: performance
1) On the basis of creation of contract: 7) Termination by material alteration
a) Expressed and Implied contract
b) Direct and Indirect contract Meaning of Breach of Contract:
c) Formal and Simple contract Types of Breach of Contract:
2) On the basis of performance of contract: 1) Anticipatory breach of contract
a) Executed and Executory contract 2) Actual breach of contract
3) On the basis of origin of liability of contract:
a) General and Contingent contract Remedies for Breach of Contract:

Unit -4: Companies Law
Meaning of Company (Joint Stock Company):
Lord Lindley – “A joint stock company is an
artificial person created by law having a separate legal
entity with perpetual succession and a common seal for
the validity of its functions.”
Characteristics of Company:
1) Perpetual succession
2) Common seal
3) Legal entity
4) Number of shareholders
5) Limited liability
6) Share capital
Importance of Company:
1) Social obligation
2) Employment opportunity
3) Personal income rises
4) Global economy
5) National income growth
6) Domestic product
Process of Incorporation of Company:
1) Company may be incorporated either singly or
collectively
2) No. of promoters needed to incorporate
3) Application for incorporation of a company
4) Registration of company
5) Power to refuse to register a company
6) Information of refusal to register
Rights and Duties of Shareholders:
Rights of Shareholders:
1) To attend the Annual General Meeting
2) To vote
3) To transfer shares
4) To receive dividends
5) To inspect the company’s Articles of Association,
Minutes of meetings, Financial and Accounting
Reports
Duties of Shareholders:
1) To pay the subscription money
Rights and Duties of Promoters:
Rights of Promoters:
1) Right to receive preliminary Expenses
2) Right to recover proportionate amount from the
Co-promoters
3) Right to Remuneration
4) Disclosure of remuneration paid to promoter
Duties of Promoters:
1) To discover an idea for establishing a company.
2) To make detailed investigation about the demand
for the product, availability of labour, raw material
3) To find out suitable persons who are willing to act
as first directors of the company and are ready to
sign on the memorandum of association
4) To select bank, legal advisor, auditors, underwriters
for the company
5) To prepare essential documents of the company
Rights and Duties of Board of Directors:
Duties of Board of Directors:
1) To deliver annual report
2) Prepare a business plan
3) hold a General Meeting of Shareholders
4) To prepare essential documents of the company
Liquidation of a Company:
A company may be liquidated:
1) By Office of the Company Registrar
a) By application of Company Promoters
b) On failure to submit audit report & statement of
annual general meeting to the Registrar’s office
c) If the office has reasonable ground to believe
that the company is not in operation or is not
carrying on its business
2) By shareholder voluntarily through general meeting
Rights of Liquidator:
1) To take assets of the company into his custody
2) To take action against those who commit fraud or
deception
Rights of Liquidator:
1) To submit accounts to the Registrar’s Office
2) To furnish report to shareholders of the company
3) To pay out debts and liabilities of the creditors
4) To convene General Meeting of the company
5) To distribute remaining amounts to the shareholders
6) To prepare and submit the statements and audit
report to the Registrar’s Office
Corporate Personality (Legal Entity):
Simply, a company is an artificial person having
corporate personality. It is created by law and can be
dissolved only by law. Since company is an artificial
person created only by law, its establishment is not
easy. For the incorporation of a company, a number of
legal formalities are required to be fulfilled.
The single most important consequence of
incorporation is the separate corporate personality
which the company acquires on the registration of a
company as it is certified with the ‘Certificate of
Incorporation’. Thus, the company is born and comes
into being complete with its own birth certificate.
Corporate personality refers to the fact that as far as the
law is concerned a company personality really exists
apart and different from its owners. It means it has its
own legal entity separate from the entity of its
members. It is the concept that enables limited liability
for shareholders to occur as the debts belong to the
legal entity of the company and not to the shareholders
in that company.
Like an individual, corporate personality
includes the capacity of a corporation to have a name
of its own, to have the right to purchase, sell, lease, and
mortgage its property in its own name, can carry on
lawful business, can enter into contracts in its own
name and be liable for its own debts. Similarly, it can
sue or be sued in its own name.
Main Consequences of Companies' Corporate
Personality:
i) Companies can sue and be sued in their own name
ii) Companies enjoy perpetual succession
iii) Companies can hold property and members have no
property interest in company property
Meaning of Corporate Governance:
A) Corporate governance is about promoting
corporate fairness, transparency and accountability. It
is concerned with structures and processes for decision
making accountability, control and behavior at the top
level of organizations.
It influences (i) the organization’s objectives (ii) risk
monitoring (iii) performance optimization.
B) Corporate governance can be defined as the
formal system of accountability and control for ethical
and socially responsible organizational decisions and
use of resources.
Types of Corporate Governance Models:
1) The simple finance model
2) The stewardship model
3) The stakeholder model
4) The political model
Meaning of OCED:
OECD - Organization for Economic Cooperation and
Development
Relevance of OCED to company:
1) Availability of resources due to inter-county free
trade
2) Access of large market since member country could
export their product to other member country.
3) Large no of satisfied customer due to large market.
4) Specialization in particular product since the
company can sustain in same product due to large
market.
5) Development of cross culture in business
organization.
Risk of OECD:
1) There would be tough competition among multi-
national company.
2) Loss of resource since there would be high rate of
labor turnover.
3) There would be more cross culture challenge.
4) There is more rules and regulation that the corporate
has to follow including international law.
5) There would be high risk for local corporate house.
Principles of OCED:
1) Ensuring the basis for an effective corporate
governance Framework
2) The rights of shareholders and key ownership
functions
3) The equitable treatment of shareholders
4) The role of stakeholders in corporate governance
5) Disclosure and transparency
6) The responsibilities of the board
Meaning of Corporate Social Responsibility (CSR):
Corporate initiative to assess and take
responsibility for the company's effects on the
environment and impact on social welfare is called
Corporate Social Responsibility. The term generally
applies to company efforts that go beyond what may be
required by regulators or environmental protection
groups.  
Corporate social responsibility may also be
referred to as "corporate citizenship" and can involve
incurring short-term costs that do not provide an
immediate financial benefit to the company, but instead
promote positive social and environmental change. 
CSR’s Relevance to the company:
1) An easy way for company to build its brand,
reputation and public profile
2) CSR attracts and retains staff
3) Customers are attracted to socially responsible
companies
4) CSR attracts investors
5) CSR encourages professional (and personal) growth
6) CSR helps to cut your business costs
Benefits of Corporate Social Responsibility:
1) Achievement of long term objectives
2) Improved financial performance
3) Reduction in operating costs
4) Brand image and reputation
5) Increased sales and customers loyalty
6) Ability to attract and retain employees
7) Reduced regulatory oversight
8) Access to capital
9) Helps minimize ecological damage
Meaning of Criminal Liability of Company:
Negative impact of Criminal Liability of Corporate:
1) If company found for criminal liability the company
may lose its reputation
2) Loss of investors
3) Loss of market share
4) More intervention of government statuary body
5) Loss of professional
6) Loss of loyal customer
7) It leads corporate towards the unethical, immoral
business culture.
Meaning of Money Laundering:
Process of Money Laundering:
1) Placement Stage
2) Layering Stage
3) Integration Stage
Effects on Economic Development:
 It will distort the economic data and complicate
government’s efforts to manage economic policy.
 It will affect income distribution.
 It can deter the legal transaction by contamination.
 It can increase the potential for destabilizing and
economically inefficient movements.
 Reduce the annual GDP.
Meaning of Corporate Crime:
Competitors: stealing customers from competitors by
bribery or other ‘dirty tricks’
The state: evading taxes, making false claims for
subsidies, over-pricing of contracts
Investors: siphoning off investors money for personal
use, insider trading, share support operations
Employees: health and safety violations, diversion of
pension funds for other company use
Customers: price fixing, faulty or counterfeit products,
falsification of test results (e.g. on pharmaceutical
product)
The environment: pollution, dumping of toxic waste
products
Unit -3: Negotiable Instrument
Meaning of Negotiable Instrument:
Essential elements of Negotiable Instrument:
1) Negotiable instrument must be in writing and
signed by the maker of drawer
2) It must contain a promise or order of an
unconditional character to pay in money
3) It must be payable on demand or at a definite time
4) It must be payable to order or bearer and a party
who is drawee must be identified with reasonable
certainty
5) It creates legal obligation
Types of Negotiable Instrument:
1) Promissory note
2) Bills of Exchange
3) Cheque
4) Certificate of Deposit
Rights of Holder:
1) The holder can demand payment
2) The holder can bring suit for the collection of the
instrument in the court
3) The holder can give a discharge or release from the
liability on the instrument
4) The holder can cancel the liability of another party
to the instrument
Rights of Holder in Due Course:
1) Liability of prior parties
2) Negotiable instrument without consideration
3) Conditional delivery
4) Endorser not permitted to deny the capacity of the
prior parties
5) Every holder is a holder in due course
Modes of Discharge of an instrument:
1) Discharge by payment
2) By cancellation
3) By release
4) By party primarily liable becoming holder
Unit -5: Labour Law
Meaning of Labour Law:
 Labour law is also called employment law is the
body of laws, administrative rulings, and precedents
which addresses the legal rights of, and restrictions
on, working people and their organizations.
 As such, it mediates many aspects of the
relationship between trade unions, employers and
employees.
 In Canada, employment laws related to unionized
workplaces are differentiated from those relating to
particular individuals. In most countries however,
no such distinction is made.
 However, there are two broad categories of labour
law.
 First, collective labour law relates to the tripartite
relationship between employee, employer and
union.
 Second, individual labour law concerns
employees' rights at work and through the contract
for work.
Meaning of Collective bargaining:
 Collective bargaining is a process of negotiations
between employers and a group of employees
aimed at reaching agreements that regulate working
conditions. The interests of the employees are
commonly presented by representatives of a trade
union to which the employees belong. The
collective agreements reached by these negotiations
usually set out wage scales, working hours, training,
health and safety, overtime, grievance mechanisms,
and rights to participate in workplace or company
affairs.[1]
 The union may negotiate with a single employer
(who is typically representing a company's
shareholders) or may negotiate with a group of
businesses, depending on the country, to reach an
industry wide agreement. A collective agreement
functions as a labor contract between an employer
and one or more unions. Collective bargaining
consists of the process of negotiation between
representatives of a union and employers (generally
represented by management, in some countries such
as Austria, Sweden and the Netherlands by an
employers' organization) in respect of the terms and
conditions of employment of employees, such as
wages, hours of work, working conditions,
grievance-procedures, and about the rights and
responsibilities of trade unions. The parties often
refer to the result of the negotiation as a collective
bargaining agreement (CBA) or as a collective
employment agreement (CEA).
Power and function of Factory Officer:
1) To enter into premises of enterprises any time if
necessary.
2) To examine the building, land, plant, machine,
health and safety features of factory, to collect the
sample of finished and semi-finished material used
by factory.
3) To examine the document related to the factory as
per necessity and to record the statement of any
person if required.
4) To examine the boiler and pressure vessels and
permit their operation
5) To provide necessary advice and assistance
regarding the arrangement for the worker training
6) To exercise the power, function and duty of Labor
Officer in his absence.
7) To perform other task as directed by Government of
Nepal.
Power and function of Factory Labor Officer:
1) To enter into premises of enterprises any time if
necessary.
2) To examine the document, register relating to
worker or employee of the enterprises.
3) To function or advise as per necessity for improving
labor relation.
4) To attempt for solving dispute between workers and
proprietor.
5) To implement the welfare fund if it dose not exist
and to supervise the welfare fund if it is exists.
6) To supervise the implementation of minimum
remuneration prescribed by the Government of
Nepal.
7) To record the statement of any person to fulfill the
requirement under this Act.
8) To act as Factory Inspector in his absence except
technical task.
9) To perform any other task as prescribed by
Government of Nepal.
Following are the provisions regarding welfare:
1) Welfare fund: enterprise to establish welfare fund
as prescribed for the benefit and welfare of workers.
2) Compensation: in case any worker or employee
wounded, dies in course of performing his duty,
shall be provided to him/her or family
compensation as prescribe by law.
3) Gratuity, provided fund and medical expenses:
gratuity, provident fund and facility relating to the
medical expenses to be provided to worker or
employee as prescribed.
4) Leave: public holiday, sick leave, maternity leave,
annual leave, special leave with or without
remuneration shall be enjoyed by employee or
worker.
5) Provision for quarters: employee shall allocate not
less than 5% of gross profit to build the healthy
quarter and gradually build such quarter. A separate
fund to be maintained for depositing such amount
allocated. Operation of such fund shall be as
prescribed.
6) Provision relating to children: enterprises having 50
or more females workers engaged the proprietor of
such enterprises shall make arrangement a healthy
room for use of children of female worker as well as
arrange for the nurse and necessary toys for
children.
7) Relaxation room: enterprises where there is 50 or
more workers, the proprietor shall arrange for a
room for their relaxation with minimum facilities.
8) Canteen: where there is 50 or more worker at a
time, the proprietor shall make arrangement for the
canteen for the refreshment.
LABOUR EMPLOYMENT
(4A) provision regarding classification of jobs:
 The proprietor to classify the job of
employee as per the nature of job.
 As soon as the proprietor classify the job,
he should inform to Labor Officer
 If required the Labor Officer may direct
for amendment of such classification
 the Proprietor to abide by such directive
(4B) provision regarding of appointment of Worker
and Employee:
 The Manager to advertise in national daily
newspaper.
 Appointment letter to be given to selected
employee.
Meaning of Company (Joint Stock Company):
In simple term, company is a voluntary
association of a number of persons called shareholders.
The company collects its capital by issuing its shares to
the general public in the market. One, who buys shares,
is called the shareholder and he is the real owner of the
company in true sense. It is established to carry on
business towards the achievement of the objectives i.e.
profit.
In legal term, company is an artificial person
created by law, acts as a person towards achievement
of business profit. Therefore, it can be dissolved only
by law. As a person, it can perform transactions in its
own name, can buy and sell properties in its own name,
and can sue and can be sued by others in its own name.
It has a common seal of its own. The seal is affixed in
all the important documents as the signature of the
company.
Meaning of Legal Environment of Business:
Environment created by law to regulate the
economic, social, religious and political aspects of
human life in the country is called legal environment. It
is the environment where each person in the society is
acquainted with the law made in the county and
follows it in every walk of his/her life. In a county with
good legal environment, all are equal in the eyes of
law.
Legal environment of business refers to all the
surroundings of law that affect business economy of
the country. It refers to the collection of all the acts,
rules and regulations that are made and enforced by
sovereign for the development of each and every aspect
of business economy. For the development of
agriculture, industry, trade and commerce, mere
creation of law for such aspects is not enough, a
positive law should be made also for the development
of their prerequisites and infrastructures, such as
carriage and transport, import and export, taxation,
agency, bank, insurance, labour management etc. If the
laws pertaining to the above aspects are clean, clear
and positive, the legal environment of business may be
assumed as good and favorable. If the legal
environment is favorable to business, it not only
increases the volume of trade (home & foreign) but
also makes undoubtedly a big support to the national
economy.
Meaning of Law:
Law is the rule of conduct of the society. Law
refers that rule made by the authority for smooth and
proper regulation of the society. It is enacted by the
sovereign and is enforced in the society. A sovereign is
such a person, who enjoys the power to make law and
to ask people to follow it. It is enacted for maintaining
peace, justice, discipline and security in the society.
Law is co-related with justice. Law without justice and
justice without law is meaningless. Law binds
everyone in the society to control and limit their
activities, behaviour etc. It regulates and controls all
kinds of human behaviour and provides the punishment
and imposed appropriate penalty for violates these
principles or rules. It is common slogan among all that
“ignorance of law is no excuse”. That is why, it is
generally accepted that everybody is supposed to know
the law. Therefore everybody is bound to follow and
obey the principles and rules imposed by the
government or sometimes by the society. It treats all
people alike. It means everybody is equal in the eyes of
law. It applies to everyone without discrimination
according to the religion, caste and else. Since law is
made for all, it should be followed by all either. No one
can deny following it.