The Analysis and Comparison of the Contract Law for Small, Medium, and Large Enterprises in India.

Leezer Kaur
Apr 27, 2023
3 min read

"Written by Leezer Kaur, a student".

Introduction

The Indian Contract Act of 1872, under Section 2(h), defines the term contract as an agreement enforceable by law. Different kinds of business enterprises carry out business based on investments and other factors. Based on the amount of investment and the popularity of their business, there could be the following kinds of business enterprises:

Small-scale enterprises
Medium-scale enterprises
Large-scale enterprises.

Small-scale enterprises are the ones where there is a lesser number of officials, and the level of investment is also very small. So, they are expected to be aware of the general laws related to their business, like the ones related to real estate, taxation system, insurance law, employment-related conditions, etc. This prevents them from the need to hire a legal professional to assist them in their functioning. Large-scale enterprises, on the other hand, are capable of hiring law professionals. But, they are also expected to be aware of the aspects related to partnership, service, non-disclosure, security, non-disclosure, and distributor-related agreements.

Small Scale Enterprises

The small scale enterprises are incapable of appointing lawyers or hiring legal representatives, so it becomes important for them to be aware of the new laws concerning their business. They are also supposed to have proper licenses and to keep themselves updated with the latest government schemes. They are supposed to know the following:

Real Estate Law: The small-scale enterprise officials are supposed to have a warrant deed or quitclaim deed so that they could transfer the properties.
Taxation System: They are supposed to have proper knowledge of the tax laws prevalent in the country. They are also supposed to know about tax payments and debts.
Intellectual Property Law: They must not be deprived of their copyright, patent, or plagiarism-related rights. Their ideas cannot be borrowed by any third party.
Insurance Law: They must also be aware of the insurance law-related aspects so that they can claim their insurance compensations and benefits. It could be related to health insurance and disability-related aspects.
Employment Law: They must be aware of the laws related to the minimum wages, child labor abolition related, women-related special provisions, time duration of work, etc.
Privacy Law: They are also expected to be aware of the privacy law to protect the important information related to their enterprise from being disclosed to any third party.

Medium and Large-Scale Enterprises

Medium and large-scale enterprises are capable enough to appoint or hire legal professionals to assist them in the company's day-to-day activities. Further, these enterprises undergo the following types of agreements:

Partnership Agreement: This agreement is entered into by the enterprises to enter into partnership with other enterprises, admit or remove a partner from the agreement, etc.
Licensing Agreement: It is a type of contract whereby a licensor agrees to grant the rights related to certain goods and services to the licensee to use and sell them.
Distributors Agreement: This type of agreement is entered into by the supplier of the goods and services and the distributors for the efficient sale of the products and services.
Security Agreement: It is also called a ‘loan agreement’. It provides security for a particular loan.
Non-Disclosure Agreement: These are entered into by enterprises to prevent the disclosure of some confidential information to a third party.
Service Agreement: It is an agreement providing the terms and conditions of the service and other particulars.

Conclusion

To conclude, it can be said that for efficient and effective management of the business, small-scale, medium-scale, and large-scale enterprises are expected to be aware of the different aspects of the contract law. Small-scale enterprises are mostly unable to appoint a lawyer for their company so they are supposed to be aware of the laws related to their business. The large scale enterprises are also expected to be aware of the legal aspects of the contract law as they are more likely to enter into partnership agreements, non-disclosure, license-related agreements, etc. so, it can be said that the knowledge of contract law is very important to run their business efficiently.

References

"The comparative analysis of the Contract Law for Small, Medium, and Large enterprises", available at: https://www.juscorpus.com/comparative-analysis-of-the-contract-law-for-small-medium-and-large-scale-enterprises-in-india/.
"Contracts in small business", IPleaders, https://blog.ipleaders.in/contracts-small-business/.
"Contract law in India", available at: https://www.legalserviceindia.com/laws/contracts.htm.