Study Notes on Legal Environment for UGC NET Part-1

By Tanuj Bansal|Updated : March 4th, 2020


Legal Environment Affecting the Business Environment in India:

The legal environment of business is defined as the framework of rules and regulations, bylaws and various legislations that govern the day to day working of the business organisations. The legal environment dominates the business environment of a country.

  • The legislature of the country, being the law-making authority frames the laws and
  • The executive ensures that those rules are followed and;
  • If these rules are not implemented properly, the judiciary of the country comes into the picture in order to take necessary actions by imposing fines and penalties.

Various laws that govern the business environment in India are:

A. Business LawsB. Corporate Laws

C. Environment Laws

Indian Contract Act, 1872

Companies Act, 2013  The Environment Protection Act, 1986 

Sale of Goods Act, 1930

Consumer Protection Act, 1986

Air (Prevention and Control of Pollution) Act, 1981

Indian Partnership Act, 1932

Monopolies and Restrictive Trade Practices Act, 1969

Water (Prevention and Control of Pollution) Act, 1974

Negotiable Instruments Act, 1881

 Competition Act, 2002The National Green Tribunal Act, 2010

A. Business Laws:

The Business Laws of the company is also known as Mercantile Law. It helps in regulating the day to day business transactions.

Indian Contract Act, 1872

It contains all the rules and regulations which helps the business (as well as non-business entities) in entering into various contracts and agreements.


  • There must be a valid contract among parties of the contract.
  • A valid contract is enforceable by law.
  • A valid contract must involve at least two parties.
  • There must be an intention of the parties to enter the contract.
  • The parties must be competent enough to perform the contract.
  • The intention of the parties and the contract must be lawful in nature.
  • The contract must be certain of in nature so that it can be performed and must be possible to perform.
  • There must be a consideration for fulfilling the contract.

Sale of Goods Act, 1930

Sale of Goods Act constitutes one of the most important types of a contract under the law in India. All the contracts or agreements related to the sale of goods are governed under this Act.


  • There must be two different parties to a contract of sale, i.e. there must be a buyer and a seller. A person cannot buy his own goods. There must be a contract of sale between both the parties.
  • There must be a transfer of property in order to complete the process of the sale. Here, transfer of property means to transfer the ownership rights of the property.
  • The main subject of the contract must be ' goods '. As per section 2(7) “goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which is agreed to be severed before sale or under the contract of sale.”

Here, ‘Actionable claims' means claims which can be enforced by legal action, e.g., a book debt (i.e., a debt supported by an entry by the creditor in his Account Book). A book debt cannot be counted under the category of goods because it cannot be sold but can only be assigned as per the Transfer of Property Act.

  • There must be a consideration for the sale or transfer of the property. The consideration must be in monetary terms.
  • The contract to sell includes both sale and agreement to sell.
  • There is no particular format to constitute a sale. A contract of sale of goods can be made by just an offer and acceptance.

Indian Partnership Act, 1932

Indian Partnership Act defines a partnership as a relationship between persons who have agreed to share the profits of the business carried on by all or any of them acting for all. Those individuals who have entered into a partnership are individually known as 'partners' and collectively 'a firm’.

The essential characteristics of the Act are:

  • There should be at least two persons who are competent to form a partnership.
  • The partnership relation is contractual in nature. It arises from the contract and not from the status of the partners.
  • The agreement may be express, i.e. it should be oral or written or implied.
  • The agreement may be for a fixed period of time or for the execution of a particular venture.
  • The partnership agreement must have all the essential elements of a valid contract, like any other contract.
  • The object of the partnership must be to make profits. Profits from the venture must be distributed among the partners in an agreed ratio.

Negotiable Instrument Act, 1881  

A negotiable instrument can be a Cheque, Demand draft or a Promissory note. The basic property of a negotiable instrument is the presence of a certain amount of money, a particular date and time, transferability and legal credibility of the instrument and a promise/undertaking to pay. A Negotiable Instrument is a document which entitles a person to a sum of money and which is transferable either by delivery or by endorsement and delivery. 

Characteristics of negotiable instruments:

  • Freely transferable: If the instrument is payable to order, the property in the instrument passes by endorsement, and if the instrument is payable to bearer, the property in the instrument passes by delivery.
  • Title of holder free from all defects: Individual or any person, taking an instrument bona fide and for value is known as a holder in due course, receives the instrument free from all defects in the title of the individual (transferor). The holder in due course is not affected by any defect in any way in the title of any prior party, including the transferor.
  • Recovery: The holder in due course has a right to sue or claim upon a negotiable instrument in his/her own name for the recovery of the amount. Also, he need not give the notice to transfer to the party liable on the instrument to pay.
  • Presumptions: There are certain presumptions which apply to all negotiable instruments until and unless the contrary is proved. These presumptions are consideration, date, time of acceptance, time of transfer, the order of endorsements, stamp, holder presumed to be a holder in due course, proof of protest.

The topic will be continued in the next article Study Notes on Legal Environment for UGC NET Part-2.




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Tanuj BansalTanuj BansalMember since Aug 2019
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Simi Z

Simi ZNov 12, 2019

Tanuj bansal
I want to practice of my 2 paper Law
Only 1st paper mock test is going on
But I want to practice mock test related to my subject Law also
So please try or arrange it
...Read More
Venkat Mangai
In people development and environment..this topic is uesful
Diljeet singh Chauhan
Sir kya aap bta skte hai kya net m mines marking hai kya
Minakshi Kandari
Sir pls very short mai Sare topic k highlight point de dijiye kyuki mujhe kuch samajh nahi aa raha hai .. I hv learned whole topic but quickly I forgot all.
...Read More
Aishwarya Patel
Yeh paper 2 commerce k notes hai kya sir?
Laxmipriya Sahoo
paper 2 commerce
Sushma Sampathirao
Fauzia Mumtaj
I want to practice of my 2 paper zoology
Ch K Sharma
Thnx sir for compiling notes on legal aspects...
Sahanasbramnya 55
Thank u sir 😊

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