LEGAL ENVIORMENT

-The laws influencing business

*Indian Contract Act,1872
*Indian Partnership Act,1932
*Indian Companies Act,1956
*Income Tax Act,1961


*INDIAN CONTRACT ACT,1872

*Elements of a valid contract:

*Agreement
Every promise and set of promises forming the consideration of each other is called an agreement

*Free consent
Acceptance or giving assent to an offer is called consent and if it is not due to coercion,undue influence,fraud,misrepresentationor mistake it is called free consent.

*Competent to contract
Persons who have attained majority,who are in sound mind and who is not disqualified from any other law will be competent to enter into contract.

*Lawful consideration
A consideration which moves from one person to another must be lawful and it may be in kind or cash
*Lawful object
The object of a contract must not be illegal or immoral or opposed to public policy
*Enforcable
The contract must fulfil all formalities laid down by other acts also
*Certainity of performance
The performance of a contract should have the possiblity to fulfil and it should be certain and not vague
*Agreement not declared void
The agreement must not have been declared void under any law

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WORLD TRADE ORGANISATION (WTO)

According to the agreement made by the Uruguay Round, GATT was converted into an international organization called World Trade Organisation with effect from January 1,1995.This WTO will serve as single institutional framework encompassing GATT and also all the results of the Uruguay Round.WTO will be directed by a Ministerial Conference that will meet at least once in every two years.Its regular business will be overseen by a General Council.

Objectives of W.T.O

Inheriting the principles of GATT,the World Trade Organisation,based in Geneva,Switzerland,professes the following objectives.

1. Raising the standard of living and incomes,promoting full employment,expanding production and trade,and optimum utilization of world’s resources.
2. Introducing sustainable development-a concept which envisages that development and environment can go together.
3. Taking positive steps to ensure that developing countries,especially the least developed one’s,secure a better share of growth in world trade.

Functions of WTO

1. It shall provide the necessary framework for the implementation,administration and operation on Trade agreements made on multilateral basis. It should also facilitate the actual implementation,administration of the Multilateral Trade agreements and thereby promote the objectives of these agreements.
2. The WTO shall make necessary arrangements to provide negotiation facilities among the member countries concerning their multilateral trade relations and matters of agreements.
3. WTO shall administer the ‘Understanding on Rules and Procedures Governing the settlement of Disputes’
4. It is the duty to administer the ‘Trade Review Mechanism’.
5. It is the duty of the WTO to cooperate appropriately with the IMF and IBRD and its affiliated agencies to achieve greater coherence with them in shaping the global policy.

COMPARATIVE COST THEORY:DAVID RICARDO

Each country specializes in that commodity in which its comparative cost is the least .Therefore when a country enters into trade it will export those commodity in which it’s comparative costs are less and will import those commodities in which comparative costs are high.It follows that each country will specialize in this commodity in which it has greatest advantage or the least comparative advantage.The assumptions of this theory are as follows.

1. There are two countries.
2. There are two commodities.
3. There is similar taste in both the countries.
4. Labour is the only factor.
5. The supply of labour is unchanged.
6. All units of labour are homogeneous
7. Price of the two commodities are determined by labour costs.
8. Commodities are reduced under the law of constant cost.
9. Technical knowledge is unchanged.
10. Factors of production are perfectly mobile within each country but are immobile between each country.
11. All the factors are fully employed.
12. There are no trade barriers.