40621486 mb0035 legal aspects of business fall 2010

8/8/2019 40621486 MB0035 Legal Aspects of Business Fall 2010

1/36

Sikkim Manipal University

Legal Aspects of Business MB 0035 Set 1 & 2 Semester - 3 DEEP DHAR 520982162


2/36

ASSIGNMENT SET- 1Q.1 What do you mean by free consent? Under what circumstances consent is considered as free? Explain. Ans.: Free consent: One of the essential of a valid contract is free consent. Sec. 13 of the act defense consent has two or more personsare said to consent where they agree upon think in the same sense. There shouldbe consents at the ad idem or identity of minds. The validity of consent dependsnot only on consents parties but their consents must also be free. According to

section 14, consent is said to be free when it is not caused by 1) Coercion hasdefined under sec.15 or 2) Undue influence as defined under sec. 16 or 3) Fraudhas defined under sec. 17 or 4) Mis-representation or defined under sec. 18 or5) Mistake subject to the probations of sec. 21& 22. 1) Coercion: Sec. 15 coercion is the committing or threatening to commit any act forbidden by the Indian penal code or the unlawful detaining or threatening to detain any property, to theprejudice of any person whatever, with the intention of causing any person to enter into an agreement. It is immaterial weather the Indian penal code is or is not in force in the place where the coercion is employed. Under English Law, coercion must be applied to ones person only whereas under Indian Law it can be ones person or property. So also under English Law, the subject of it must be the contracting party himself or his wife, parent, child or other near relative. Under I

ndian Law, the act or threat may be against any person. It is to be noted that he act need not be committed in India itself. Unlawful detaining or threatening to detain any property it also coercion. While threat to sue does not amount to coercion threat to file a false suit amounts to coercion since Indian Penal Codeforbids such an act. 2) Undue influence: In the words of Holland, Undue influencerefers to the unconscious use of power over another person, such power being obtained by virtue of a present or previously existing dominating control arising out of relationship between the parties. According sec. 16(1) A contract is said to be induced by undue influence where the relation subsisting between the parties are such that one of the parties is in a position to dominate the will of theother and uses that position to obtain an unfair advantage over the other. A person is deemed to be in a position to dominate the will of other. (a) Where he holds a real or apparent authority over the other or where he stands in a fiduciary

relation to the other; or (b) Where he makes a contract with a person whose mental capacity is temporarily or permanently affected by reason of age, illness ormental or bodily distress: (c) Where a person, who is in a position to dominatethe will of another, enters into a contract with him and the transaction appears to be unconscionable. The burden of proving that such contract was not by undue influence shall lie upon the person in a position to dominate the will of theother. Both coercion and undue influence are closely related. What contributes coercion or undue influence depends upon the facts of each case.


3/36

Sec. 16(i) provides that two elements must be present. The first one is that therelations subsisting between the parties to a contract are such that one of them is in a position to dominate the will of the other. Secondly, he uses that position to obtain unfair advantage over the other. In other words, unlike coercionundue influence must come from a party to the contract and not a stranger to it. Where the parties are not in equal footing or there is trust and confidence between the parties, one party may be able to dominate the will of the other and u

se the position to obtain an unfair advantage. However, where there is no relationship shown to exit from which undue influence is presumed, that influence mustbe proved. 3) Fraud: A false statement made knowingly or without belief in itstruth or recklessly careless whether it be true or false is called fraud. Sec. 17 of the act instead of defining fraud gives various acts which amount to fraud.Sec. 17: Fraud means and includes any of the following acts committed by a party to a contract or with his connivance or by his agent to induce him to enter into contract: 1) The suggestion that a fact is true when it is not true by one who does not believe it to be true. A false statement intentionally made is fraud.An absence of honest belief in the truth of the statement made is essential toconstitute fraud. The false statement must be made intentionally. 2) The activeconcealment of a fact by a person who has knowledge or belief of the fact. Mere

non-disclosure is not fraud where there is no duty to disclose. 3) A promise made without any intention of performing it. 4) Any other act fitted to deceive. The fertility of mans invention in devising new schemes of fraud is so great that it would be difficult to confine fraud within the limits of any exhaustive definition. 5) Any such act or omission as the law specially declares to be fraudulent. 4) Misrepresentation: Before entering into a contract, the parties will may certain statements inducing the contract. Such statements are called representation. A representation is a statement of fact made by one party to the other at thetime of entering into contract with an intention of inducing the other party toenter into the contract. If the representation is false or misleading, it is known as misrepresentation. A misrepresentation may be innocent or intentional. Anintentional misrepresentation is called fraud and is covered under section 17 sec. 18 deals with an innocent misrepresentation. 5) Mistake: Usually, mistake re

fers to misunderstanding or wrong thinking or wrong belief. But legally, its meaning is restricted and is to mean operative mistake. Courts recognize only such mistakes, which invalidate the contract. Mistake may be mistake of fact or mistakeof law. Sec. 20Where both parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void. Sec.21 A contractis not voidable because it was caused by a mistake as to any law in force in India: but a mistake as to a law not in force in India has the same effect as a mistake of fact. Bilateral mistake: Sec.20 deals with bilateral mistake. Bilateral mistake is one where there is no real correspondence of offer and acceptance. Theparties are not really in consensus-ad-item. Therefore there is no agreement atall. A bilateral mistake may be regarding the subject matter or the possibilityof performing the contract.

Q.2 Define negotiable instrument. What are its features and characteristics? Which are the different types of negotiable instruments? If Mr. A is the holder ofa negotiable instrument, under what situations i. Will he be the Holder in due course? ii. He has the right to discharge?


4/36

iii.

He can make endorsements?

Ans.: Meaning of Negotiable Instruments To understand the meaning of negotiableinstruments let us take a few examples of day-to-day business transactions. Suppose Pitamber, a book publisher has sold books to Prashant for Rs 10,000/- on thr

ee months credit. To be sure that Prashant will pay the money after three months, Pitamber may write an Order addressed to Prashant that he is to pay after three months, for value of goods received by him, Rs.10, 000/- to Pitamber or anyoneholding the order and presenting it before him (Prashant) for payment. This written document has to be signed by Prashant to show his acceptance of the order.Now, Pitamber can hold the document with him for three months and on the due date can collect the money from Prashant. He can also use it for meeting differentbusiness transactions. For instance, after a month, if required, he can borrow money from Sunil for a period of two months and pass on this document to Sunil. He has to write on the back of the document an instruction to Prashant to pay money to Sunil, and sign it. Now Sunil becomes the owner of this document and he can claim money from Prashant on the due date. Sunil, if required, can further pas

s on the document to Amit after instructing and signing on the back of the document. This passing on process may continue further till the final payment is made. In the above example, Prashant who has bought books worth Rs. 10,000/- can also give an undertaking stating that after three month he will pay the amount to Pitamber. Now Pitamber can retain that document with himself till the end of three months or pass it on to others for meeting certain business obligation (like with Sunil, as discussed above) before the expiry of that three months time period. You must have heard about a cheque. What is it? It is a document issued to abank that entitles the person whose name it bears to claim the amount mentionedin the cheque. If he wants, he can transfer it in favour of another person. Forexample, if Akash issues a cheque worth Rs. 5,000/ - In favour of Bidhan, then Bidhan can claim Rs. 5,000/- from the bank, or he can transfer it to Chander to meet any business obligation, like paying back a loan that he might have taken fr

om Chander. Once he does it, Chander gets a right to Rs. 5,000/- and he can transfer it to Dayanand, if required. Such transfers may continue till the payment is finally made to somebody. In the above examples, we find that there is certaindocuments used for payment in business transactions and are transferred freelyfrom one person to another. Such documents are called Negotiable Instruments. Thus, we can say negotiable instrument is a transferable document, where negotiable means transferable and instrument means document. To elaborate it further, aninstrument, as mentioned here, is a document used as a means for making some payment and it is negotiable i.e., its ownership can be easily transferred. Thus, negotiable instruments are documents meant for making payments, the ownership ofwhich can be transferred from one person to another many times before the finalpayment is made. Definition of Negotiable Instrument According to section 13 ofthe Negotiable Instruments Act, 1881, a negotiable instrument means promissory note, bill of exchange, or cheque, payable either to order or to bearer. Types of Negotiable Instruments According to the Negotiable Instruments Act, 1881 there are just three types of negotiable instruments i.e., promissory note, bill of exchange and cheque. However many other documents are also recognized as negotiableinstruments on the basis of custom and usage, like hundis, treasury bills, sharewarrants, etc., provided they possess the features of negotiability. In the following sections, we shall study about Promissory Notes (popularly called pronotes), Bills of Exchange (popularly called bills), Cheque and Hundis (a popular indigenous document prevalent in India), in detail. i. Promissory Note Suppose youtake a loan of Rupees Five Thousand from your friend Ramesh. You can make a document stating that you will pay the money to Ramesh or the bearer on demand. Or you can mention in the document that you would like to pay the amount after three

months. This document, once signed by you, duly stamped and handed over to Ramesh, becomes a negotiable instrument. Now Ramesh can personally present it beforeyou for payment or give this document to some other person to collect money on


5/36

his behalf. He can endorse it in somebody elses name who in


6/36

turn can endorse it further till the final payment is made by you to whosoever presents it before you. This type of a document is called a Promissory Note. Section 4 of the Negotiable Instruments Act, 1881 defines a promissory note as an instrument in writing (not being a bank note or a currency note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to or to the order of a certain person or to the bearer of the instrument. Specimen of a Promissory Note Rs. 10,000/- New Delhi September 25, 2002 On demand, I pr

omise to pay Ramesh, s/o RamLal of Meerut or order a sum of Rs 10,000/- (RupeesTen Thousand only), for value received. To, Ramesh Sd/ Sanjeev Address Stamp Features of a promissory note Let us know the features of a promissory note. i. A promissory note must be in writing, duly signed by its maker and properly stampedas per Indian Stamp Act. ii. It must contain an undertaking or promise to pay. Mere acknowledgement of indebtedness is not enough. For example, if some one writes I owe Rs. 5000/- to Satya Prakash, it is not a promissory note. iii. The promise to pay must not be conditional. For example, if it is written I promise to paySuresh Rs 5,000/- after my sisters marriage, is not a promissory note. iv. It mustcontain a promise to pay money only. For example, if some one writes I promise to give Suresh a Maruti car it is not a promissory note. v. the parties to a promissory note, i.e. the maker and the payee must be certain. vi. A promissory note

may be payable on demand or after a certain date. For example, if it is written three months after date I promise to pay Satinder or order a sum of rupees Five Thousand only it is a promissory note. vii. The sum payable mentioned must be certain or capable of being made certain. It means that the sum payable may be in figures or may be such that it can be calculated. ii. Bill of Exchange Suppose Rajeev has given a loan of Rupees Ten Thousand to Sameer, which Sameer has to return. Now, Rajeev also has to give some money to Tarn. In this case, Rajeev can make a document Directing Sameer to make payment up to Rupees Ten Thousand to Tarnon demand or after expiry of a specified period. This document is called a billof exchange, which can be transferred to some other persons name by Tarn. Section5 of the Negotiable Instruments Act, 1881 defines a bill of exchange as an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or to the order of a c

ertain person, or to the bearer of the instrument. Specimen of a bill of exchangeRs. 10,000/New Delhi May 2, 2001 Five months after date pay Tarn or (to his) order the sum of Rupees Ten Thousand only for value received. To Sameer Address Accepted Sameer Stamp S/d Rajeev

iii. Cheques


7/36

Cheque is a very common form of negotiable instrument. If you have a savings bank account or current account in a bank, you can issue a cheque in your own nameor in favour of others, thereby directing the bank to pay the specified amount to the person named in the cheque. Therefore, a cheque may be regarded as a billof exchange; the only difference is that the bank is always the drawee in case of a cheque. The Negotiable Instruments Act, 1881 defines a cheque as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise th

an on demand. Actually, a cheque is an order by the account holder of the bank directing his banker to pay on demand, the specified amount, to or to the order of the person named therein or to the bearer. iv. Hundis A Hundi is a negotiableinstrument by usage. It is often in the form of a bill of exchange drawn in anylocal language in accordance with the custom of the place. Some times it can also be in the form of a promissory note. A Hundi is the oldest known instrument used for the purpose of transfer of money without its actual physical movement. The provisions of the Negotiable Instruments Act shall apply to hundis only when there is no customary rule known to the people. Types of Hundis There are a variety of hundis used in our country. Let us discuss some of the most common ones. Shah-jog Hundi: one merchant draws this on another, asking the latter to pay theamount to a Shah. Shah is a respectable and responsible person, a man of worth a

nd known in the bazaar. A shah-jog Hundi passes from one hand to another till itreaches a Shah, who, after reasonable enquiries, presents it to the drawee foracceptance of the payment. Darshani Hundi: This is a Hundi payable at sight. Theholder must present it for payment within a reasonable time after its receipt.Thus, it is similar to a demand bill. Muddati Hundi: A Muddati or miadi Hundi ispayable after a specified period of time. This is similar to a time bill. Thereare few other varieties like Nam-jog Hundi, Dhani-jog Hundi, and Jawabee Hundi,Jokhami Hundi, Fireman-jog Hundi, etc. Features of Negotiable Instruments Afterdiscussing the various types of negotiable instruments let us sum up their features as under. A negotiable instrument is freely transferable. Usually, when wetransfer any property to somebody, we are required to make a transfer deed, getit registered, pay stamp duty, etc. But, such formalities are not required whiletransferring a negotiable instrument. The ownership is changed by mere delivery

(when payable to the bearer) or by valid endorsement and delivery (when payableto order). Further, while transferring it is also not required to give a noticeto the previous holder. ii. Negotiability confers absolute and good title on the transferee. It means that a person who receives a negotiable instrument has aclear and undisputable title to the instrument. However, the title of the receiver will be absolute, only if he has got the instrument in good faith and for a consideration. Also the receiver should have no knowledge of the previous holderhaving any defect in his title. Such a person is known as holder in due course.For example, suppose Rajeev issued a bearer cheque payable to Sanjay. A person,who passed it on to Girish, stole it from Sanjay. If Girish received it in goodfaith and for value and without knowledge of cheque having been stolen, he willbe entitled to receive the amount of the cheque. Here Girish will be regarded asholder in due course. iii. A negotiable instrument must be in writing. This includes handwriting, typing, computer print out and engraving, etc. iv. In every negotiable instrument there must be an unconditional order or promise for payment.v. The instrument must involve payment of a certain sum of money only and nothing else. For example, one cannot make a promissory note on assets, securities, orgoods. vi. The time of payment must be certain. It means that the instrument must be payable at a time which is certain to arrive. If the time is mentioned as when convenient it is not a negotiable instrument. However, if the time of paymentis linked to the death of a person, it is nevertheless a negotiable instrumentas death is certain, though the time thereof is not. vii. The payee must be a certain person. It means that the person in whose favour the instrument is made must be named or described with reasonable certainty. The term person includes individual, body corporate, trade unions, even secretary, director or chairman of an

institution. The payee can also be more than one person. viii. A negotiable instrument must bear the signature of its maker. Without the signature of the draweror the maker, the instrument shall not be a valid one.


8/36


9/36

ix. Delivery of the instrument is essential. Any negotiable instrument like a cheque or a promissory note is not complete till it is delivered to its payee. Forexample, you may issue a cheque in your brothers name but it is not a negotiableinstrument till it is given to your brother. x. Stamping of Bills of Exchange and Promissory Notes is mandatory. This is required as per the Indian Stamp Act,1899. The value of stamp depends upon the value of the promote or bill and the time of their payment. Negotiation and indorsement Persons other than the origina

l obligor and obligee can become parties to a negotiable instrument. The most common manner in which this is done is by placing one

s signature on the instrument (indorsement): if the person who signs does so with the intention of obtaining payment of the instrument or acquiring or transferring rights to the instrument,the signature is called an indorsement. There are four types of indorsements contemplated by the Code: An indorsement which purports to transfer the instrumentto a specified person is a special indorsement; An indorsement by the payee or holder which does not contain any additional notation (thus puporting to make theinstrument payable to bearer) is an indorsement in blank; An indorsement whichpurports to require that the funds be applied in a certain manner (i.e. "for deposit only", "for collection") is a restrictive indorsement; and, An indorsementpurporting to disclaim retroactive liability is called a qualified indorsement (

through the inscription of the words "without recourse" as part of the indorsement on the instrument or in allonge to the instrument).

If a note or draft is negotiated to a person who acquires the instrument

1. in good faith; 2. for value; 3. without notice of any defenses to payment,the transferee is a holder in due course and can enforce the instrument withoutbeing subject to defenses which the maker of the instrument would be able to assert against the original payee, except for certain real defenses. These real defenses include (1) forgery of the instrument; (2) fraud as to the nature of the instrument being signed; (3) alteration of the instrument; (4) incapacity of thesigner to contract; (5) infancy of the signer; (6) duress; (7) discharge in bankruptcy; and, (8) the running of a statute of limitations as to the validity of t

he instrument. The holder-in-due-course rule is a rebuttable presumption that makes the free transfer of negotiable instruments feasible in the modern economy.A person or entity purchasing an instrument in the ordinary course of business can reasonably expect that it will be paid when presented to, and not subject todishonor by, the maker, without involving itself in a dispute between the makerand the person to whom the instrument was first issued (this can be contrasted to the lesser rights and obligations accruing to mere holders). Article 3 of theUniform Commercial Code as enacted in a particular State

s law contemplate realdefenses available to purported holders in due course. The foregoing is the theory and application presuming compliance with the relevant law. Practically, theobligor-payor on an instrument who feels he has been defrauded or otherwise unfairly dealt with by the payee may nonetheless refuse to pay even a holder in duecourse, requiring the latter to resort to litigation to recover on the instrument.

Q.3.a. Distinguish between guarantee and indemnity. Ans.:


10/36

Indemnity Comprise only two parties- the indemnifier and the indemnity holder.

Guarantee There are three parties namely the surety, principal debtor and the creditor The liability of the surety is secondary. The surety is liable only if the principal debtor makes a default. The primary liability being that of the principal debtor. The surety give guarantee only at the request of the principal debtor

Liability of the indemnifier is primary

The indemnifier need not necessarily act at the request of the indemnified. Thepossibility of any loss happening is the only contingency against which the indemnifier undertakes to indemnify.

There is an existing debt or duty, the performance of which is guarantee by thesurety

b. Give a short note on Rights of Surety. Ans.: Joint sureties or debtors: Whereseveral persons are bound together in any bond, bill or other writing as joint

debtors or as joint sureties, in any sum of money made payable to any person, his/her executors, administrators, order or assign and such bond, bill, or other writing shall be paid by any of such joint debtors or joint sureties, the creditor shall assign such bond, bill, or other writing, to the person paying the same;and such assignee shall, in his/her own name, as assignee, or otherwise, have such action or remedy as the creditor himself/herself might have had against theother joint debtors, or sureties, or their representatives, to recover such proportion of the money, so paid, as may be justly due from the defendants. Defenseof infancy to joint sureties or debtors: Where several persons are bound together in any bond, bill or other writing or judgment as joint debtors or as joint sureties, in any sum of money, made payable to any person or corporation, the executors, administrators, successors, order or assigns, and 1 or more of such persons was, at the time of making, signing or executing the same, or at the time of

the rendition of such judgment, an infant, such fact shall be no defense in anyaction, proceeding or suit for the enforcement of the liability of those bound there under, excepting as regards the person who was an infant at the time of making, signing or executing such bond, bill or other writing, or who was an infantat the time such judgment was rendered. Rights of surety or of joint debtor onpayment of judgment: (a) If a judgment recovered against principal and surety shall be paid by the surety, the creditor shall mark such judgment to the use of the surety so paying the same; and the transferee shall, in the name of the plaintiff, have the same remedy by execution or other process against


11/36

the principal debtor as the creditor could have had, the transfer by marking tothe use of the surety being first filed of record in the court where the judgment is. (b) Where there is a judgment against several debtors or sureties and anyof them shall pay the whole, the creditor shall mark such judgment to the use ofthe persons so paying the same; and the transferee shall, in the name of the plaintiff, be entitled to an execution or other process against the other debtorsor sureties in the judgment, for a proportion able part of the debt or damages p

aid by such transferee; but, no defendant shall be debarred of any remedy against the plaintiff or the plaintiff

s representatives or assigns by any legal or equitable course of proceeding whatever.

Q.4.a. Mention the remedies for breach of contract. How will the injured party claim it? Ans.: Breach of Contract & Remedies: Nature of breach A breach of contract occurs where a party to a contract fails to perform, precisely and exactly,his obligations under the contract. This can take various forms for example, thefailure to supply goods or perform a service as agreed. Breach of contract maybe either actual or anticipatory. Actual breach occurs where one party refuses to form his side of the bargain on the due date or performs incompletely. For example: Poussard v Spiers and Bettini v Gye. Anticipatory breach occurs where one

party announces, in advance of the due date for performance, that he intends notto perform his side of the bargain. The innocent party may sue for damages immediately the breach is announced. Hochster v De La Tour is an example. Effects ofbreach A breach of contract, no matter what form it may take, always entitles the innocent party to maintain an action for damages, but the rule established bya long line of authorities is that the right of a party to treat a contract asdischarged arises only in three situations. The breaches, which give the innocent party the option of terminating the contract, are: (a) Renunciation Renunciation occurs where a party refuses to perform his obligations under the contract. It may be either express or implied. Hochster v De La Tour is a case law exampleof express renunciation. Renunciation is implied where the reasonable inferencefrom the defendants conduct is that he no longer intends to perform his side of the contract. For example: Omnium DEnterprises v Sutherland. (b) Breach of conditi

on The second repudiator breach occurs where the party in default has committeda breach of condition. Thus, for example, in Poussard v Spiers the employer hada right to terminate the sopranos employment when she failed to arrive for performances. (c) Fundamental breach The third repudiator breach is where the party inbreach has committed a serious (or fundamental) breach of an in nominate term or totally fails to perform the contract. A repudiator breach does not automatically bring the contract to an end. The innocent party has two options: He may treat the contract as discharged and bring an action for damages for breach of contract immediately. This is what occurred in, for example, Hochster v De La Tour.He may elect to treat the contract as still valid, complete his side of the bargain and then sue for payment by the other side. For example, White and Carter Ltd v McGregor. 2 Introduction to remedies Damages are the basic remedy availablefor a breach of contract. It is a common law remedy that can be claimed as of right by the innocent party. The object of damages is usually to put the injured party into the same financial position he would have been in had the contract been properly performed. Sometimes damages are not an adequate remedy and this is where the equitable remedies (such as specific performance and injunction) may beawarded. 3 Damages 1 Nature: The major remedy available at common law for breach of contract is an award of damages. This is a monetary sum fixed by the courtto compensate the injured party.


12/36

In order to recover substantial damages the innocent party must show that he hassuffered actual loss; if there is no actual loss he will only be entitled to nominal damages in recognition of the fact that he has a valid cause of action. Inmaking an award of damages, the court has two major considerations: Remoteness for what consequences of the breach is the defendant legally responsible? The measure of damages the principles upon which the loss or damage is evaluated or quantified in monetary terms. The second consideration is quite distinct from the

first, and can be decided by the court only after the first has been determined.2.Remoteness of loss The rule governing remoteness of loss in contract was established in Hadley v Baxendale. The court established the principle that where one party is in breach of contract, the other should receive damages which can fairly and reasonably be considered to arise naturally from the breach of contractitself (in the normal course of things), or which may reasonably be assumed to have been within the contemplation of the parties at the time they made the contract as being the probable result of a breach. Thus, there are two types of loss for which damages may be recovered: 1. What arises naturally; and 2. What the parties could foresee when the contract was made as the likely result of breach. Asa consequence of the first limb of the rule in Hadley v Baxendale, the party inbreach is deemed to expect the normal consequences of the breach, whether he act

ually expected them or not. Under the second limb of the rule, the party in breach can only be held liable for abnormal consequences where he has actual knowledge that the abnormal consequences might follow or where he reasonably ought to know that the abnormal consequences might follow Victoria Laundry v Newman Industries. 3.The measure (or quantum) of damages In assessing the amount of damages payable, the courts use the following principles: The amount of damages is to compensate the claimant for his loss not to punish the defendant. Damages are compensatory not restitutionary. The most usual basis of compensatory damages is to put the innocent party into the same financial position he would have been in hadthe contract been properly performed. This is sometimes called the expectation loss basis. In Victoria Laundry v Newman Industries, for example, Victoria Laundrywere claiming for the profits they would have made had the boiler been installed on the contractually agreed date. Sometimes a claimant may prefer to frame his

claim in the alternative on the reliance loss basis and thereby recover expensesincurred in anticipation of performance and wasted as a result of the breach Anglia Television v Reed. In a contract for the sale of goods, the statutory (Saleof Goods Act 1979) measure of damages is the difference between the market priceat the date of the breach and the contract price, so that only nominal damageswill be awarded to a claimant buyer or claimant seller if the price at the dateof breach was respectively less or more than the contract price. In fixing the amount of damages, the courts will usually deduct the tax (if any) which would have been payable by the claimant if the contract had not been broken. Thus if damages are awarded for loss of earnings, they will normally be by reference to net, not gross, pay. Difficulty in assessing the amount of damages does not preventthe injured party from receiving them: Chaplin v Hicks. In general, damages arenot awarded for non-pecuniary loss such as mental distress and loss of enjoyment. Exceptionally, however, damages are awarded for such losses where the contracts purpose is to promote happiness or enjoyment, as is the situation with contracts for holidays Jarvis v Swan Tours. The innocent party must take reasonable steps to mitigate (minimise) his loss, for example, by trying to find an alternative method of performance of the contract: Brace v Calder. 4.Liquidated damages clauses and penalty clauses If a contract includes a provision that, on a breach of contract, damages of a certain amount or calculable at a certain rate will bepayable, the courts will normally accept the relevant figure as a measure of damages. Such clauses are called liquidated damages clauses. The courts will upholda liquidated damages clause even if that means that the injured party receivesless (or more as the case may be) than his actual loss arising on the breach. This is because the clause setting out the damages constitutes one of the agreed c

ontractual terms Cellulose Acetate Silk Co Ltd v Widnes Foundry Ltd. However, acourt will ignore a figure for damages put in a contract if it is classed as a penalty clause that is, a sum which is not a genuine pre-estimate of the expected


13/36

loss on breach. This could be the case where:


14/36

1. The prescribed sum is extravagant in comparison with the maximum loss that could follow from a breach. 2. The contract provides for payment of a certain sumbut a larger sum is stipulated to be payable on a breach. 3.The same sum is fixed as being payable for several breaches, which would be likely to cause varyingamounts of damage. All of the above cases would be regarded as penalties, even though the clause might be described in the contract as a liquidated damages clause. The court will not enforce payment of a penalty, and if the contract is brok

en only the actual loss suffered may be recovered (Ford Motor Co (England) Ltd vArmstrong).

b. What is the difference between anticipatory and actual breach? Ans.: Anticipatory Breach: A seller and a buyer have entered into a contract. Prior to the start of the contract, the buyer informs the seller that he no longer requires hisgoods. The seller writes back stating his intention to store the goods until thecontract expires and then sue for a breach of contract. The buyer replies withan angry letter stating that he could just sell the goods to someone else. Advise all parties. Actual breach: A breach of contract occurs where a party to a contract fails to perform, precisely and exactly, his obligations under the contract. This can take various forms for example, the failure to supply goods or perfo

rm a service as agreed. Breach of contract may be either actual or anticipatory.Actual breach occurs where one party refuses to form his side of the bargain onthe due date or performs incompletely. For example: Poussard v Spiers and Bettini v Gye.

Q. 5 a. Explain the term Privity of contract. Ans.: Privity of contract: The doctrine of privity in contract law provides that a contract cannot confer rights or impose obligations arising under it on any person or agent except the partiesto it. The premise is that only parties to contracts should be able to sue to enforce their rights or claim damages as such. However, the doctrine has proven problematic due to its implications upon contracts made for the benefit of third parties who are unable to enforce the obligations of the contracting parties. Third-party rights: Privity of contract occurs only between the parties to the cont

ract, most commonly contract of sale of goods or services. Horizontal privity arises when the benefits from a contract are to be given to a third party. Vertical privity involves a contract between two parties, with an independent contractbetween one of the parties and another individual or company. If a third party gets a benefit under a contract, it does not have the right to go against the parties to the contract beyond its entitlement to a benefit. An example of this occurs when a manufacturer sells a product to a distributor and the distributor sells the product to a retailer. The retailer then sells the product to a consumer.There is no privity of contract between the manufacturer and the consumer. This, however, does not mean that the parties do not have another form of action e.g. Donoghue v. Stevenson here a friend of Ms. Donoghue bought her a bottle of ginger beer, which was defective. Specifically, the ginger beer contained the partially decomposed remains of a snail.


15/36

Since the contract was between her friend and the shop owner, Mrs. Donoghue could not sue under the contract, but it was established that the manufacturer has aduty of care owed to their consumers and she was awarded damages in tort. Privity is the legal term for a close, mutual, or successive relationship to the sameright of property or the power to enforce a promise or warranty.

b. Define a company? What are the features of Joint Stock Company? Ans.: Company

: The term company implies an association of a number of persons for some common objective e.g. to carry on a business concern, to promote art, science or culturein the society, to run a sport club etc. Every association, however, may not bea company in the eyes of law as the legal import of the word company is differentfrom its common parlance meaning. In legal terminology its use is restricted toimply an association of persons, registered as a company

under the law of the land. The following are some of the definitions of the company given by legal luminaries and scholars of law. Company means a company formed and registered underthis Act or an existing company. Existing company means a company formed and registered under the previous company laws. Companies Act, 1956 Sec. 3(i & ii) A joint stock company is an artificial person invisible, intangible and existing onlyin the eyes of law. Being a mere creature of law, it possesses only those prope

rties which the charter of its creation confers upon it, either expressly or asincidental to its very existence. Justice Marshall A company is an association ofmany persons who contribute money or moneys worth to a common stock and employ itin some common trade or business and who share the profit or loss arising therefrom. The common stock so contributed is denoted in terms of money and is the capital of the company. The persons who contribute it or to whom it belongs are members. The proportion of capital to which each member is entitled is his share.Shares are always transferable although the right to transfer them is often more or less restricted." - Lord Lindley From the above definitions it is clear that a company has a corporate and legal personality. It is an artificial person and exists only in the eyes of law. It has an independent legal entity, a common seal and perpetual succession. Sometimes, the term corporation (a word derived fromthe Latin word corpus which means body) is also used for a company. At present th

e companies in India are incorporated under the Companies Act, 1956. Characteristics of Joint Stock Company: The various definitions reveal the following essential characteristics of a company 1. Artificial Person: A company is an association of persons who have agreed to form the company and become its members or shareholders with the object of carrying on a lawful business for profit. It comes into existence when it is registered under the Companies Act. The law treats it as a legal person as it can conduct lawful business and enter into contracts withother persons in its own name. It can sell or purchase property. It can sue andbe sued in its name. It cannot be regarded as an imaginary person because it has a legal existence. Thus company is an artificial person created by law. 2. Independent corporate existence: A company has a separate independent corporate existence. It is in law a person. Its entity is always separate from its members. The property of the company belongs to it and not to the shareholders. The company cannot be held liable for the acts of the members and the members can not be held liable for the acts or wrongs or misdeeds of the company. Once a company isincorporated, it must be treated like any other independent person. As a consequence of separate legal entity, the company may enter into contracts with its members and vice-versa.


16/36

3. Perpetual existence: The attribute of separate entity also provides a companya perpetual existence, until dissolved by law. Its life remains unaffected by the lunacy, insolvency or death of its members. The members may come and go but the company can go on forever. Law creates it and the law alone can dissolve it.4. Separate property: A company, being a legal entity, can buy and own propertyin its own name. And, being a separate entity, such property belongs to it alone. Its members are not the joint owners of the property even though it is purchas

ed out of funds contributed by them. Consequently, they do not have even insurable interest in the property of the company. The property of the company is not the property of the shareholders; it is the property of the company. 5. Limited liability: In the case of companies limited by shares the liability of every member of the company is limited to the amount of shares subscribed by him. If the member has paid full amount of the face value of the shares subscribed by him, his liability shall be nil and he cannot be asked to contribute anything more. Similarly, in the case of a company limited by guarantee, the liability of the members is limited up to the amount guaranteed by a member. The Companies Act, however, permits the formation of companies with unlimited liability. But such companies are very rare. 6. Common seal: As a company is devoid of physique, it cant act in person like a human being. Hence it cannot sign any documents personally. I

t has to act through a human agency known as Directors. Therefore, every companymust have a seal with its name engraved on it. The seal of the company is affixed on the documents, which require the approval of the company. Two Directors and the Secretary or such other person as the Board may authorize for this purpose, witness the affixation of the seal. Thus, the common seal is the official signature of the company. 7. Transferability of shares: The shares of a company arefreely transferable and can be sold or purchased through the Stock Exchange. A shareholder can transfer his shares to any person without the consent of other members. Under the articles of association, even a public limited company can putcertain restrictions on the transfer of shares but it cannot altogether stop it.A shareholder of a public limited company possessing fully paid up shares is atliberty to transfer his shares to anyone he likes in accordance with the mannerprovided for in the articles of association of the company. However, private li

mited company is required to put certain restrictions on transferability of itsshares. But any absolute restriction on the right of transfer of shares is void8. Capacity to sue and be sued: A company, being a body corporate, can sue and be sued in its own name.

Q. 6. Om is enrolled in a managerial course. He has to write an assignment on company management and various types of meetings that a company holds. You are asked to help him in preparing the assignment. Ans.: There are many types of businesses, and because of this, businesses are classified in many ways. One of the most common focuses on the primary profit-generating activities of a business: Agriculture and mining businesses are concerned with the production of raw material, such as plants or minerals. Financial businesses include banks and other companies that generate profit through investment and management of capital. Information businesses generate profits primarily from the resale of intellectual property and include movie studios, publishers and packaged software companies. Manufacturers produce products, from raw materials or component parts, which they thensell at a profit. Companies that make physical goods, such as cars or pipes, are considered manufacturers.


17/36

Real estate businesses generate profit from the selling, renting, and developmen

t of properties, homes, and buildings. Retailers and Distributors act as middle-men in getting goods produced by manufacturers to the intended consumer, generating a profit as a result of providing sales or distribution services. Most consumer-oriented stores and catalogue companies are distributors or retailers. See also: Franchising Service businesses offer intangible goods or services and typically generate a profit by charging for labor or other services provided to government, other businesses, or consumers. Organizations ranging from house decorators to consulting firms, restaurants, and even entertainers are types of servicebusinesses. Transportation businesses deliver goods and individuals from location to location, generating a profit on the transportation costs Utilities producepublic services, such as heat, electricity, or sewage treatment, and are usually government chartered.

There are many other divisions and subdivisions of businesses. The authoritativelist of business types for North America is generally considered to be the North American Industry Classification System, or NAICS. The equivalent European Union list is the Statistical Classification of Economic Activities in the EuropeanCommunity (NACE). Management The efficient and effective operation of a business, and study of this subject, is called management. The main branches of management are financial management, marketing management, human resource management, strategic management, production management, operation management, service management and information technology management. Reforming State Enterprises In recent decades, assets and enterprises that were run by various states have been modeled after business enterprises. In 2003, the People

s Republic of China reformed80% of its stateowned enterprises and modeled them on a company-type management

system.[2] Many state institutions and enterprises in China and Russia have been transformed into joint-stock companies, with part of their shares being listedon public stock markets. Organization and government regulation Most legal jurisdictions specify the forms of ownership that a business can take, creating a body of commercial law for each type. The major factors affecting how a business is organized are usually: The Bank of England in Threadneedle Street, London, England. The size, scope of the business firm and its structure, management, and ownership, broadly analyzed in the theory of the firm. Generally a smaller business is more flexible, while larger businesses, or those with wider ownership or more formal structures, will usually tend to be organized as partnerships or (morecommonly) corporations. In addition a business that wishes to raise money on astock market or to be owned by a wide range of people will often be required toadopt a specific legal form to do so. The sector and country. Private profit making businesses are different from government owned bodies. In some countries, certain businesses are legally obliged to be organized in certain ways. Limited liability. Corporations, limited liability partnerships, and other specific typesof business organizations protect their owners or shareholders from business failure by doing business under a separate legal entity with certain legal protections. In contrast, unincorporated businesses or persons working on their own areusually not so protected.


18/36

Tax advantages. Different structures are treated differently in tax law, and mayhave advantages for this reason. Disclosure and compliance requirements. Different business structures may be required to make more or less information public(or reported to relevant authorities), and may be bound to comply with differentrules and regulations.

Many businesses are operated through a separate entity such as a corporation ora partnership (either formed with or without limited liability). Most legal jurisdictions allow people to organize such an entity by filing certain charter documents with the relevant Secretary of State or equivalent and complying with certain other ongoing obligations. The relationships and legal rights of shareholders, limited partners, or members are governed partly by the charter documents andpartly by the law of the jurisdiction where the entity is organized. Generallyspeaking, shareholders in a corporation, limited partners in a limited partnership, and members in a limited liability company are shielded from personal liability for the debts and obligations of the entity, which is legally treated as a separate "person." This means that unless there is misconduct, the owner

s own po

ssessions are strongly protected in law, if the business does not succeed. Wheretwo or more individuals own a business together but have failed to organize a more specialized form of vehicle, they will be treated as a general partnership.The terms of a partnership are partly governed by a partnership agreement if oneis created, and partly by the law of the jurisdiction where the partnership islocated. No paperwork or filing is necessary to create a partnership, and without an agreement, the relationships and legal rights of the partners will be entirely governed by the law of the jurisdiction where the partnership is located. Asingle person who owns and runs a business is commonly known as a sole proprietor, whether he or she owns it directly or through a formally organized entity. Afew relevant factors to consider in deciding how to operate a business include:1. General partners in a partnership (other than a limited liability partnership), plus anyone who personally owns and operates a business without creating a se

parate legal entity, are personally liable for the debts and obligations of thebusiness. 2. Generally, corporations are required to pay tax just like "real" people. In some tax systems, this can give rise to so-called double taxation, because first the corporation pays tax on the profit, and then when the corporationdistributes its profits to its owners, individuals have to include dividends intheir income when they complete their personal tax returns, at which point a second layer of income tax is imposed. 3. In most countries, there are laws which treat small corporations differently than large ones. They may be exempt from certain legal filing requirements or labor laws, have simplified procedures in specialized areas, and have simplified, advantageous, or slightly different tax treatment. 4. To "go public" (sometimes called IPO) -- which basically means to allow a part of the business to be owned by a wider range of investors or the publicin generalyou must organize a separate entity, which is usually required to comply with a tighter set of laws and procedures. Most public entities are corporations that have sold shares, but increasingly there are also public LLCs that sellunits (sometimes also called shares), and other more exotic entities as well (for example, REITs in the USA, Unit Trusts in the UK). However, you cannot take ageneral partnership "public." Types of meetings: Common types of meeting include: 1. Status Meetings, generally leader-led, which are about reporting by one-way communication 2. Work Meeting, which produces a product or intangible result such as a decision 3. Staff meeting, typically a meeting between a manager and those that report to the manager


19/36

4. Team meeting, a meeting among colleagues working on various aspects of a teamproject 5. Ad-hoc meeting, a meeting called for a special purpose 6. Managementmeeting, a meeting among managers 7. Board meeting, a meeting of the Board of directors of an organization 8. One-on-one meeting, between two individuals 9. Off-site meeting, also called "offsite retreat" and known as an Awayday meeting inthe UK 10. Kickoff meeting, the first meeting with the project team and the client of the project to discuss the role of each team member 11. Pre-Bid Meeting,

a meeting of various competitors and or contractors to visually inspect a jobsite for a future project. The meeting is normally hosted by the future customer orengineer who wrote the project specification to ensure all bidders are aware ofthe details and services expected of them. Attendance at the Pre-Bid Meeting may be mandatory. Failure to attend usually results in a rejected bid.

Assignment Set- 2Q.1 a. What is an arbitration agreement? Discuss its essentials.


20/36

Ans.: Arbitration Agreement: The foundation of arbitration is the arbitration agreement between the parties to submit to arbitration all or certain disputes which have arisen or which may arise between them. Thus, the provision of arbitration can be made at the time of entering the contract itself, so that if any dispute arises in future, the dispute can be referred to arbitrator as per the agreement. It is also possible to refer a dispute to arbitration after the dispute hasarisen. Arbitration agreement may be in the form of an arbitration clause in a

contract or in the form of a separate agreement. The agreement must be in writing and must be signed by both parties. The arbitration agreement can be by exchange of letters, document, telex, telegram etc Court must refer the matter to arbitration in some cases: If a party approaches court despite the arbitration agreement, the other party can raise objection. However, such objection must be raised before submitting his first statement on the substance of dispute. The original arbitration agreement or its certified copy must accompany such objection. Onsuch application the judicial authority shall refer the parties to arbitration.Since the word used is shall, it is mandatory for judicial authority to refer thematter to arbitration. However, once the opposite party already makes first statement to court, the matter has to continue in the court. Once other party for referring the matter to arbitration makes an application, the arbitrator can conti

nue with arbitration and even make an arbitral award. 1. It must be in writing [Section 7(3)]: Like the old law, the new law also requires the arbitration agreement to be in writing. It also provides in section 7(4) that an exchange of letters, telex, telegrams, or other means of telecommunications can also provide a record of such an agreement. Further, it is also provided that an exchange of claim and defense in which the existence of an arbitration agreement is alleged byone party and not denied by the other, will also amount to be an arbitration agreement. It is not necessary that the parties should sign such written agreement.All that is necessary is that the parties should accept the terms of an agreement reduced in writing. The naming of the arbitrator in the arbitration agreementis not necessary. No particular form or formal document is necessary. 2. It must have all the essential elements of a valid contract: An agreement stands on the same footing as any other agreement. Every person capable of entering into a c

ontract may be a party to an arbitration agreement. The terms of the agreement must be definite and certain; if the terms are vague it is bad for indefiniteness. 3. The agreement must be to refer a dispute, present or future, between the parties to arbitration: If there is no dispute, there can be no right to demand arbitration. A dispute means an assertion of a right by one party and repudiationthereof by another. A point as to which there is no dispute cannot be referred to arbitration. The dispute may relate to an act of commission or omission, for example, with holding a certificate to which a person is entitled or refusal to register a transfer of shares. Under the present law, certain disputes such as matrimonial disputes, criminal prosecution, questions relating to guardianship, questions about validity of a will etc. or treated as not suitable for arbitration. Section 2(3) of the new Act maintains this position. Subject to this qualification Section 7(1) of the new Act makes it permissible to enter into an arbitration agreement in respect of a defined legal relationship whether contractual or not. 4. An arbitration agreement may be in the form of an arbitration clause in a contract or in the form of a separate agreement [Section 7(2)]. Appointment of Arbitrator: The parties can agree on a procedure for appointing the arbitrator orarbitrators. If they are unable to agree, each party will appoint one arbitratorand the two appointed arbitrators will appoint the third arbitrator who will act as a presiding arbitrator [Section 11(3)]. If one of the parties does not appoint an arbitrator within 30 days, or if two appointed arbitrators do not appointthird arbitrator within 30 days, the party can request Chief Justice to appointan arbitrator [Section 11(4)]. The Chief Justice can authorize any person or institution to appoint an arbitrator. [Some High Courts have authorized District Judge to appoint an arbitrator]. In case of international commercial dispute, the

application for appointment of arbitrator has to be made to Chief Justice of India. In case of other domestic disputes, application has to be made to Chief Justice of High Court within whose jurisdiction the parties are situated [Section 1


21/36

1(12)]


22/36

Challenge to Appointment of arbitrator: An arbitrator is expected to be independent and impartial. If there are some circumstances due to which his independenceor impartiality can be challenged, he must disclose the circumstances before his appointment [Section 12(1)]. Appointment of Arbitrator can be challenged onlyif (a) Circumstances exist that give rise to justifiable doubts as to his independence or impartiality (b) He does not possess the qualifications agreed to by the parties [Section 12(3)]. Appointment of arbitrator cannot be challenged on an

y other ground. The challenge to appointment has to be decided by the arbitratorhimself. If he does not accept the challenge, the proceedings can continue andthe arbitrator can make the arbitral award. However, in such case, application for setting aside arbitral award can be made to Court. If the court agrees to thechallenge, the arbitral award can be set aside [Section 13(6)]. Thus, even if the arbitrator does not accept the challenge to his appointment, the other partycannot stall further arbitration proceedings by rushing to court. The arbitration can continue and challenge can be made in Court only after arbitral award is made. Conduct of Arbitral Proceedings: The Arbitral Tribunal should treat the parties equally and each party should be given full opportunity to present his case[Section 18]. The Arbitral Tribunal is not bound by Code of Civil Procedure, 1908 or Indian Evidence Act, 1872 [Section 19(1)]. The parties to arbitration are

free to agree on the procedure to be followed by the Arbitral Tribunal. If the parties do not agree to the procedure, the procedure will be as determined by thearbitral tribunal. Law of Limitation Applicable: Limitation Act, 1963 is applicable. For this purpose, date on which the aggrieved party requests other party to refer the matter to arbitration shall be considered. If on that date, the claim is barred under Limitation Act, the arbitration cannot continue [Section 43(2)]. If Court sets Arbitration award aside, time spent in arbitration will be excluded for purpose of Limitation Act. So that case in court or fresh arbitration can start. Flexibility in respect of procedure, place and language: Arbitral Tribunal has full powers to decide the procedure to be followed, unless parties agree on the procedure to be followed [Section 19(3)]. The Tribunal also has powersto determine the admissibility, relevance, materiality and weight of any evidence [Section 19(4)]. Place of arbitration will be decided by mutual agreement. How

ever, if the parties do not agree to the place, the same will be decided by tribunal [Section 20]. Similarly, language to be used in arbitral proceedings can bemutually agreed. Otherwise, Arbitral Tribunal can decide [Section 22]. Submission of statement of claim and defense: The claimant should submit statement of claims, points of issue and relief or remedy sought. The respondent shall state his defense in respect of these particulars. All relevant documents must be submitted. Such claim or defense can be amended or supplemented any time [section 23].Hearings and Written Proceedings: After submission of documents and defense, unless the parties agree otherwise, the Arbitral Tribunal can decide whether therewill be oral hearing or proceedings can be conducted on the basis of documentsand other materials. However, if one of the parties requests the hearing shall be oral. Sufficient advance notice of hearing should be given to both the parties[Section 24]. [Thus, unless one party requests, oral hearing is not compulsory]. Settlement during Arbitration: It is permissible for parties to arrive at mutual settlement even when arbitration is proceeding. In fact, even the Tribunal can make efforts to encourage mutual settlement. If parties settle the dispute bymutual agreement, the arbitration shall be terminated. However, if both partiesand the Arbitral Tribunal agree, the settlement can be recorded in the form of an arbitral award on agreed terms. Such Arbitral Award shall have the same forceas any other Arbitral Award [Section 30]. Arbitral Award: Decision of Arbitral Tribunal is termed as

Arbitral Award

. Arbitrator can decide the dispute ex aquaET bono (In justice and in good faith) if both the parties expressly authorizehim to do so [Section 28(2)]. The decision of Arbitral Tribunal will be by majority. The arbitral award shall be in writing and signed by the members of the tribunal [Section 29]. The award must be in writing and signed by the members of Ar

bitral Tribunal [Section 31(1)]. It must state the reasons for the award unlessthe parties have agreed that no reason for the award is to be given [Section 31(3)]. The award should be dated and place where it is made should be mentioned.


23/36


24/36

Copy of award should be given to each party. Tribunal can make interim award also [Section 31(6)]. Cost of Arbitration- Cost of arbitration means reasonable cost relating to fees and expenses of arbitrators and witnesses, legal fees and expenses, administration fees of the institution supervising the arbitration and other expenses in connection with arbitral proceedings. The tribunal can decide the cost and share of each party [Section 3 1(8)]. If the parties refuse to pay the costs, the Arbitral Tribunal may refuse to deliver its award. In such case, an

y party can approach Court. The Court will ask for deposit from the parties andon such deposit, the Tribunal will deliver the award. Then Court will decide thecosts of arbitration and shall pay the same to Arbitrators. Balance, if any, will be refunded to the party [Section 39]. Intervention by Court - One of the major defects of earlier arbitration law was that the party could access court almost at every stage of arbitration - right from appointment of arbitrator to implementation of final award. Thus, the defending party could approach court at various stages and stall the proceedings. Now, approach to court has been drastically curtailed. In some cases, if the party raises an objection, Arbitral Tribunalitself can give the decision on that objection. After the decision, the arbitration proceedings are continued and the aggrieved party can approach Court only after Arbitral Award is made. Appeal to court is now only on restricted grounds. O

f course, Tribunal cannot be given unlimited and uncontrolled powers and supervision of Courts cannot be totally eliminated. Arbitration Act has Over-Riding Effect: Section 5 of Act clarifies that notwithstanding anything contained in any other law for the time being in force, in matters governed by the Act, the judicial authority can intervene only as provided in this Act and not under any otherAct. Modes of Arbitration (a) Arbitration without the intervention of the court.[Sec.3 to 19] (b) Arbitration with the intervention of the court when there isno suit pending [Sec.20] (c) Arbitration with the intervention of the court where a suit is pending. [Sec.21 to 25]

b. What do you mean by mediation? Ans.: Meditation is a holistic discipline during which time the practitioner trains his or her mind in order to realize some benefit. Meditation is generally an internal, personal practice and most often do

ne without any external involvement, except perhaps prayer beads to count prayers. Meditation often involves invoking or cultivating a feeling or internal state, such as compassion, or attending to a specific focal point. The term can referto the state itself, as well as to practices or techniques employed to cultivate the state. There are hundreds of specific types of meditation. The word,

meditation,

means many things dependent upon the context of its use. People practice meditation for many reasons, within the context of their social environment. Meditation is a component of many religions, and has been practiced since antiquity, particularly by monastics. A 2007 study by the U.S. government found that nearly 9.4% of U.S. adults (over 20 million) have used meditation within the past12 months, up from 7.6% (more than 15 million people) in 2002. To date, the exact mechanism at work in meditation remains unclear, while scientific research continues.

Q.2 a. What kinds of rights are considerable under consumer rights?


25/36

Ans.: Consumer right is defined as

the right to be informed about the quality,quantity, potency, purity, standard and price of goods or services, as the casemay be, so as to protect the consumer against unfair trade practices

Even though strong and clear laws exist in India to protect consumer rights, the actual plight of Indian consumers could be declared as completely dismal. Very few consumers are aware of their rights or understand their basic consumer rights. Of theseveral laws that have been enacted to protect the rights of consumers in India,

the most significant is the Consumer Protection Act, 1986. Under this law, everyone, including individuals, a Hindu undivided family, a firm, and a company, can exercise their consumer rights for the goods and services purchased by them. It is important that, as consumers, we know at least our basic rights and about the courts and procedures that deal with the infringement of our rights. In general, the rights of consumers in India can be listed as under:

* The right to be protected from all types of hazardous goods and services * Theright to be fully informed about the performance and quality of all goods and services * The right to free choice of goods and services * The right to be heardin all decision-making processes related to consumer interests * The right to seek redressal, whenever consumer rights have been infringed * The right to compl

ete consumer education The Consumer Protection Act, 1986 and various other lawslike the Standards, Weights & Measures Act have been formulated to ensure fair competition in the market place and free flow of true information from the providers of goods and services to those who consume them. However, the success of these laws would depend upon the vigilance of consumers about their rights, as wellas their responsibilities. In fact, the level of consumer protection in a country is considered as the correct indicator of the extent of progress of the nation. The production and distribution systems have become larger and more complicated today. The high level of sophistication achieved by the providers of goods and services in their selling and marketing practices and various types of promotional activities like advertising resulted in an increased need for higher consumer awareness and protection. In India, the government has realized the plight ofIndian consumers and the Ministry of Consumer Affairs, Food and Public Distribu

tion has established the Department of Consumer Affairs as the nodal organization for the protection of consumer rights, redressal of all consumer grievances and promotion of standards governing goods and services offered in India. A complaint for infringement of consumer rights could be made under the following circumstances in the nearest designated consumer court: * The goods or services boughtby a person or agreed to be bought by a person suffer from one or more deficiencies or defects in any respect * A trader or a service provider resorting to restrictive or unfair trade practices * A trader or a service provider charging a price in excess of the price displayed on the goods or the price that had been agreed upon between the parties or the price that had been stipulated under any law in force * Goods or services that pose a hazard to the safety and life of a person offered for sale, knowingly or unknowingly, causing injury to health, safety or life. Consumerdaddy.com is India

s only online consumer protection site offering consumer report, consumer review and different opinions on different products and companies.

b. Distinguish between Memorandum of Association and Articles of Association. Ans.: Memorandum of Association:


26/36

The memorandum of association of a company, often simply called the memorandum (and then often capitalised as an abbreviation for the official name, which is aproper noun and usually includes other words), is the document that governs therelationship between the company and the outside. It is one of the documents required to incorporate a company in the United Kingdom, Ireland and India, and isalso used in many of the common law jurisdictions of the Commonwealth. Requirements While it is still necessary to file a memorandum of association to incorpora

te a new company, it no longer forms part of the companys constitution and it contains limited information compared to the memorandum that was required prior to1 October 2009. It is basically a statement that the subscribers wish to form acompany under the 2006 Act, have agreed to become members and, in the case of acompany that is to have a share capital, to take at least one share each. It isno longer required to state the name of the company, the type of company (such as public limited company or private company limited by shares), the location ofits registered office, the objects of the company, and its authorised share capital.[1] Companies incorporated prior to 1 October 2009 are not required to amendtheir memorandum. Those details which are now required to appear in the Articles, such as the objects clause and details of the share capital, are deemed to form part of the Articles. Capacities The memorandum no longer restricts what a co

mpany is permitted to do. Since 1 October 2009, if a company

s constitution contains any restrictions on the objects at all, those restrictions will form part of the articles of association. Historically, a company

s memorandum of association contained an objects clause, which limited its capacity to act. When the first limited companies were incorporated, the objects clause had to be widely drafted so as not to restrict the board of directors in their day to day trading. Inthe Companies Act 1989 the term "General Commercial Company" was introduced which meant that companies could undertake "any lawful or legal trade or business."The Companies Act 2006 relaxed the rules even further, removing the need for anobjects clause at all. Companies incorporated on and after 1 October 2009 without an objects clause are deemed to have unrestricted objects. Existing companiesmay take advantage of this change by passing a special resolution to remove their objects clause. If the company is to be a non-profit making company, the artic

les will contain a statement saying that the profits shall not be distributed tothe members. Articles of association: The term articles of association of a company, or articles of incorporation, of an American or Canadian Company, are often simply referred to as articles (and are often capitalized as an abbreviation for the full term). The Articles are a requirement for the establishment of a company under the law of India, the United Kingdom and many other countries. Together with the memorandum of association, they constitute the constitution of a company. The equivalent term for LLC is Articles of Organization. Roughly equivalent terms operate in other countries, such as Gesellschaftsvertrag in Germany, statuts in France, statut in Poland.[1] The following is largely based on British Company Law, references which are made at the end of this Article. The Articles can cover a medley of topics, not all of which is required in a country

s law. Although all terms are not discussed, they may cover:


27/36

the issuing of shares (also called stock), different voting rights attached to different classes of shares valuation of intellectual rights, say,the valuationsof the IPR of one partner and,for example,the real estate of the other the appointments of directors - which shows whether a shareholder dominates or shares equality with all contributors directors meetings - the quorum and percentage of vote management decisions - whether the board manages or a founder transferabilityof shares - assignment rights of the founders or other members of the company d

o special voting rights of a Chairman,and his/her mode of election the dividendpolicy - a percentage of profits to be declared when there is profit or otherwise winding up - the conditions, notice to members confidentiality of know-how andthe founders

agreement and penalties for disclosure first right of refusal - purchase rights and counter-bid by a founder. A Company is essentially run by theshareholders, but for convenience, and day-to-day working, by the elected Directors. Usually, the shareholders elect a Board of Directors (BOD) at the Annual General Meeting (AGM), which may be statutory (e.g. India). The number of Directors depends on the size of the Company and statutory requirements. The Chairperson is generally a well-known outsider but he /she may be a working Executive of the company, typically of an American Company. The Directors may, or may not, beemployees of the Company.

3. Write a short note on unfair trade practices and Restrictive trade practice.Ans.: Unfair trade practices: The law of unfair competition serves five purposes. First, the law seeks to protect the economic, intellectual, and creative investments made by businesses in distinguishing themselves and their products. Second, the law seeks to preserve the good will that businesses have established withconsumers. Third, the law seeks to deter businesses from appropriating the goodwill of their competitors. Fourth, the law seeks to promote clarity and stability by encouraging consumers to rely on a merchant

s good will and reputation when evaluating the quality of rival products. Fifth, the law seeks to increase competition by providing businesses with incentives to offer better goods and services than others in the same field. Although the law of unfair competition helpsprotect consumers from injuries caused by deceptive trade practices, the remedie

s provided to redress such injuries are available only to business entities andproprietors. Consumers who are injured by deceptive trade practices must avail themselves of the remedies provided by state and federal Consumer Protection laws. In general, businesses and proprietors injured by unfair competition have tworemedies: injunctive relief (a court order restraining a competitor from engaging in a particular fraudulent or deceptive practice) and money damages (compensation for any losses suffered by an injured business). General Principles The freedom to pursue a livelihood, operate a business, and otherwise compete in the marketplace is essential to any free enterprise system. Competition creates incentives for businesses to earn customer loyalty by offering quality goods at reasonable prices. At the same time, competition can also inflict harm. The freedom tocompete gives businesses the right to lure customers away from each other. Whenone business entices enough customers away from competitors, those rival businesses may be forced to shut down or move.


28/36

The law of unfair competition will not penalize a business merely for being successful in the marketplace. Nor will the law impose liability simply because a business is aggressively marketing its product. The law assumes, however, that forevery dollar earned by one business, a competitor will lose a dollar. Accordingly, the law prohibits a business from unfairly profiting at a competitor

s expense. What constitutes unfair competition varies according to the Cause of Actionasserted in each case. These include actions for the infringement of Patents, Tr

ademarks, and copyrights; actions for the wrongful appropriation of Trade Dress,trade names, trade secrets, and service marks; and actions for the publicationof defamatory, false, and misleading representations. Restrictive trade practice: The restrictive trade practices, or antitrust, provisions in the Trade Practices Act are aimed at deterring practices by firms which are anti-competitive in that they restrict free competition. This part of the act is enforced by the Australian Competition and Consumer Commission (ACCC). The ACCC can litigate in theFederal Court of Australia, and seek pecuniary penalties of up to $10 million from corporations and $500,000 from individuals. Private actions for compensationmay also be available. These provisions prohibit: Most Price Agreements (see Cartel and Price-Fixing) Primary boycotts (an agreement between parties to excludeanother) Secondary boycotts whose purpose is to cause substantial lessen competi

tion (Actions between two persons engaging in conduct hindering 3rd person fromsupplying or acquiring goods or services from 4th) Misuse of market power takingadvantage of substantial market power in a particular market, for one or more proscribed purposes; namely, to eliminate or damage an actual or potential competitor, to prevent a person from entering a market, or to deter or prevent a person from engaging in competitive conduct. Exclusive dealing an attempt to interfere with freedom of buyers to buy from other suppliers, such as agreeing to supplya product only if a retailer does not stock a competitors product. Most forms ofexclusive dealing are only prohibited if they have the purpose or likely effectof substantially lessening competition in a market. Third-line forcing: A typeof exclusive dealing, third-line forcing involves the supply of goods or services on the condition that the acquirer also acquires goods or services from a third party. Third-line forcing is prohibited per se. Resale price maintenance fixin

g a price below which resellers cannot sell or advertise Mergers and acquisitions that would result in a substantial lessening of competition

A priority of ACCC enforcement action in recent years has been cartels. The ACCChas in place an immunity policy, which grants immunity from prosecution to thefirst party in a cartel to provide information to the ACCC allowing it to prosecute. This policy recognizes the difficulty in gaining information/evidence aboutprice-fixing behaviours.

Q.4. Present a detail note on Shops and Establishment Act.


29/36

Ans.: Shops and Establishment Act: Objectives - To provide statutory obligationand rights to employees and employers in the unorganized sector of employment, i.e., shops and establishments. Scope And Coverage - A state legislation; each state has framed its own rules for the Act. - Applicable to all persons employed in an establishments with or without wages, except the members of the employer

sfamily. - State government can exempt, either permanently or for a specified period, any establishments from all or any provisions of this Act. Main Provisions

- Compulsory registration of shop/establishment within thirty days of commencement of work. - Communications of closure of the establishment within 15 days fromthe closing of the establishment. - Lays down the hours of work per day and week. - Lays down guidelines for spread-over, rest interval, opening and closing hours, closed days, national and religious holidays, overtime work. - Rules for employment of children, young persons and women - Rules for annual leave, maternity leave, sickness and casual leave, etc. - Rules for employment and terminationof service. - Maintenance of registers and records and display of notices. - Obligations of employers. - Obligations of employees. About What: 1. To regulate conditions of work and employment in shops, commercial establishments, residentialhotels, restaurants, eating houses, theatres, other places of public entertainment and other establishments. 2. Provisions include Regulation of Establishments

, Employment of Children, Young Persons and Women, Leave and Payment of Wages, Health and Safety etc. Applicability & Coverage: 1. It applies to all local areasspecified in Schedule-I 2. Establishment means any establishment to which the Act applies and any other such establishment to which the State Government may extend the provisions of the Act by notification 3. Employee means a person whollyor principally employed whether directly or through any agency, whether for wages or other considerations in connection with any establishment 4. Member of thefamily of an employer means, the husband, wife, son, daughter, father, mother,brother or sister and is dependent on such employer Returns: 1. Form-A or Form-B(as the case may be) {Section 7(2)(a), Rule 5} Before 15th December of the calendar year, i.e. 15 days before the expiry date The employer has to submit theseforms to the authority notified along with the old certificate of registration and the renewal fees for minimum one years renewal and maximum of three years renew

al


30/36

2. Form-E (Notice of Change) {Rule 8} Within 15 days after the expiry of the quarter to which the changes relate in respect of total number of employees qualifying for higher fees as prescribed in Schedule-II and in respect of other changesin the original statement furnished within 30 days after the change has taken place. (Quarter means quarter ending on 31st March, 30th June, 30th September and31st December) Registers: 1. Form-A {Rule 5} Register showing dates of Lime Washing etc 2. Form-H, Form-J {Rule 20(1)} (if opening & closing hours are ordinari

ly uniform) Register of Employment in a Shop or Commercial Establishment 3. Form-I {Rule 20(3)}, Form-K (if opening & closing hours are ordinarily uniform) Register of Employment in a Residential Hotel, Restaurant, Eating-House, Theatre, orother places of public amusement or entertainment 4. Form-M {Rule 20(4)} Register of Leave This and all the above Registers have to be maintained by the Employer 5. Visit Book This shall be a bound book of size 7 x 6 containing at least 100pages with every second page consecutively numbered, to be produced to the visiting Inspector on demand. The columns shall be: i. Name of the establishment or Employer ii. Locality iii. Registration Number iv. Date and v. Time

Q. 5 a. What is a cyber crime? What are the categories of cyber crime? Ans.: Cyber crime It refers to all the activities done with criminal intent in cyberspace

or using the medium of Internet. These could be either the criminal activitiesin the conventional sense or activities, newly evolved with the growth of the new medium. Any activity, which basically offends human sensibilities, can be included in the ambit of Cyber crimes. Because of the anonymous nature of Internet,it is possible to engage in a variety of criminal activities with impunity, andpeople with intelligence, have been grossly misusing this aspect of the Internetto commit criminal activities in cyberspace. The field of cyber crime is just emerging and new forms of criminal activities in cyberspace are coming to the forefront each day. For example, child pornography on Internet constitutes one serious cyber crime. Similarly, online pedophiles, using Internet to induce minor children into sex, are as much cyber crimes as any others. Categories of cyber crimes: Cyber crimes can be basically divided in to three major categories: 1. Cyber crimes against persons; 2. Cyber crimes against property; and 3. Cyber crimes

against government. 1. Cyber crimes against persons: Cyber crimes committed against persons include various crimes like transmission of child-pornography, harassment of any one with the use of a computer and cyber stalking. The trafficking,distribution, posting, and dissemination of obscene material including pornography, indecent exposure, and child pornography constitute the most important cyber crimes known today. These threaten to undermine the growth of the younger generation and also leave irreparable scars on the minds of the younger generation,if not controlled. Similarly, cyber harassment is a distinct cyber crime. Various kinds of harassments can and do occur in cyberspace, or through the use of cyberspace. Harassment can be sexual, racial, religious, or of any other nature. Cyber harassment as a crime also brings us to another related


31/36

area of violation of privacy of citizens. Violation of privacy of online citizens is a cyber crime of a grave nature. Cyber stalking

40621486 mb0035 legal aspects of business fall 2010

Documents