contract-law india
Is it possible word a contract such that it brings in all the features of registering a company?
<p>I've just understood the concept of writing a contract. It is just an agreement between two people written on the paper and signed by all the parties involved. So, if it is possible to write contracts, then why do we need a specific law for companies? Can't we construct a company simply wording our terms and declaring all the rules of the "company" in a contract without registration?</p>

<p>For example, one of the benefits of registering a company is its liability shield it gives us. So why not mention in the contract "no individual mentioned in this contract is liable..." (please forgive me if my question is naive). Another benefit of a company is, being able to issue shares. So to cover this, the contract could contain "All assets mentioned have a shared ownership. Each person in the contract is assigned certain 'ownership points' (a different word for shares). And these ownership points declare each individual's ownership of the asserts..." </p>

<p>Couldn't we implement all the features of a company, one after the other, simply by writing a contract? Please tell me why this isn't possible and what I don't understand. And again, sorry for this naive question.  </p>

<p>I would like to hear this answer in the context of any country. Though I would be able to relate well, when answered in the context of India. </p>

<p>The liability shield is the big one, and it can't be achieved with a contract. </p>

<p>Just because the contract says you're not liable, that doesn't make it true.    If I sign a contract with my friend that says "Nate Eldredge is hereby the King of France", that won't make me the king, nor will it force anyone except maybe my friend to acknowledge me as the king.  By its nature, a contract can only bind the parties to the contract, and has no effect on the rights of anyone else. </p>

<p>Suppose, then, that Alice and Bob agree to start a pizza delivery business, using a contract like you suggest.  Their delivery car crashes, injuring Carol, a bystander, who incurs medical bills that exceed the assets of the business.  Carol decides to sue Alice and Bob personally.  Sure, Alice and Bob have a contract, and maybe it prevents them from suing each other, but it certainly doesn't prevent Carol from suing them; Carol never signed it.  So Carol can still go after Alice and Bob's personal assets.</p>

<p>Thus contract law cannot give them a liability shield.  However, the government can, since it makes the laws about who can sue whom under what circumstances.  And it has made laws saying that Alice and Bob can be protected from such suits, but only if they form a company according to the process that the law sets forth.  So that's what they have to do.</p>
