COMPARATIVE ANALYSIS OF THE CONTRACT LAW FOR SMALL, MEDIUM AND LARGE-SCALE ENTERPRISES IN INDIA

INTRODUCTION

The Indian Contract Act, 1872 defines a contract as an agreement enforceable by law under section 2(h). Essential for any contract as mentioned under this act include offer and acceptance with the intention of parties to make a contract; along with unlawful consideration involved and the parties being competent to make such a contract. Besides these conditions, free consent is something which plays the role of another vital essential to make a valid contract. The Indian Contract Act along with the Special Relief Act, 1963[1] primarily governed the commercial contract that is made for businesses of all kinds of enterprises, that is, small, medium and large scale. The Indian Contract Act provides the grounds on which one party can sue the other party, in case there is a breach or violation of any conditions mentioned under the contract made whereas, the Special Relief Act explain the remedies that are available for the suffering party in cases like recovering the position of any property involved, performing some specific obligations of the contract, rescission of contracts etc. Herein discussed below is a comparative analysis of the Contract Act for small, medium and large-scale enterprises in India.

CONTRACT ACT FOR SMALL SCALE ENTERPRISES

The medium and large-scale enterprises are in the capability of appointing good lawyers and have full knowledge of commercial laws available for the benefits. But the small-scale enterprises and the single entrepreneurs may not be able to hire such legal professionals, thunder price them after on benefits. Therefore, every small business owner knows the basic laws and government policies available. Also in recent times, the government has always been updating the rules and regulations for such businesses in a viable model on various websites provided by the government itself. These regulations can be divided into three parts, that is, taxes, relations with employees and regulations related to national or international trading. Some basic things that the entrepreneurs should know are that they must have some basic understanding of the general laws and government policies; they should keep in touch with some local business lawyer to be aware of the new laws or to understand a particular law. They should have a proper licence and need to have the paperwork completely done, so that did not face any problems while conducting their business. They should either hire a representative or trained themselves to be the one, as it would be required to handle all their business-related problems and issues. They should keep themselves updated with all the current business losses as well as government schemes. Hereinbelow are a detailed analysis of the various laws and contract acts that the small-scale enterprises should study and should know about:

The first one includes the real estate law[2]. While running a small-scale business, one must have a warranty deed or quitclaim deed. These deeds are a legal way to transfer the properties from the old honour to any new honour. Along with this, all the legal aspects of purchasing any real estate should be known.

The second one includes the tax law[3]. The primary concern of every small-scale enterprise is that tax payments and debts. Therefore, knowing tax law becomes crucial for small scale businesses.

The third one includes the intellectual property law[4]. This law talks about the ownership and about which ideas can be borrowed or copied from any other creator. The slow covers all the aspects including patent, plagiarism, copyright, trademark etc.

The next law that is talked about is the insurance law[5]. Getting insurance to protect various kinds of things like equipment, property etc. as well as insurance for employees and workers, is beneficial in case they have to receive or pay any kind of compensation. Also, providing health insurance for the workers can boost their business. Next comes the employment law[6] which usually differs from state to state. This law covers minimum wages, a ban on child labour laws, rules relating to overtime working along with the requirements of keeping records and tracks of employees. The last law includes the privacy law[7] which protects the data of any company which becomes important since the right to privacy is also one of the fundamental rights in India.

CONTRACT ACT FOR MEDIUM AND LARGE-SCALE ENTERPRISES

The medium and large-scale companies often have to go through various commercial contracts. Given below are the most common types of commercial contracts that are used in India:

  1. Partnership agreement: This agreement includes the duties, relationships, powers as well as obligations of the partners involved in the contract. This type of agreement revolves around partnership and issues like admitting or removing any partner.
  2. Licensing agreement: It is a contract between any two parties where 1 is called the licensor and the other is called a licensee. The licensor, therefore, grants the licensee some rights to produce as well as sell goods or use his/her patented work.
  3. Distributor agreement: This agreement is between the good supplier and the one who has to distribute post goods. The supplier here does not need to be the manufacturer himself. He can be the one reselling those goods.
  4. Security agreement: A security agreement is also known as a loan agreement and includes the terms and conditions regarding paying back loans. Thus, the parties involved are called the borrower and lender.
  5. Non-Disclosure agreement: This agreement was formed to protect the privacy of the parties and thus binds them from sharing any confidential information regarding the business which includes the trade secrets and client materials as well.
  6. Service agreement: This agreement is carried out with terms and conditions and is a general agreement where the consideration is paid by both parties.

CONCLUSION

Thus, we can conclude that the small, medium and large-scale enterprises have to focus on different aspects of the Contract Act available in India to benefit their businesses and gain the maximum profit.

Author(s) Name: Navjeet Kaur (University Institute of Legal Studies, Panjab University)

References:

[1]The Specific Relief Act, 1963 is an Act of the Parliament of India which provides remedies for persons whose civil or contractual rights have been violated. It replaced an earlier Act of 1877.

[2]The Central Acts, the local municipal laws of each state and union territory and the recently issued consolidated FDI Policy 2010 are some of the norms that govern the various transactions and 

practices in the Real Estate.

[3]The Income-tax Act, 1961 (ITA) was enacted to provide for levy and collection of tax on income earned by a person.

[4]India’s patent law operates under the ‘first to file’ principle – that is, if two people apply for a patent on an identical invention, the first one to file the application will be awarded the patent. The laws governing designs are the Designs Act 2000 and the Designs Rules 2001.

[5]The primary legislation governing the Indian insurance sector is the Insurance Act 1938 (the Insurance Act) and the Insurance Regulatory and Development Authority Act 1999 (the IRDA Act).

[6]Labour and employment laws are listed under the Concurrent List in the Constitution, which means that the Union Parliament (federal legislature) and State Legislatures have co-equal powers to enact laws relating to alllabour and employment matters in India.

[7]Section 43A of the Information Technology Act, 2000