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ASSIGNMENT SET- 1

Q.1 What do you mean by free consent? Under what circumstances consent is consideredas free? Explain.

Ans.: Free consent:

One of the essential of a valid contract is free consent. Sec. 13 of the act defense consent hastwo or more persons are said to consent where they agree upon think in the same sense. Thereshould be consents at the ad idem or identity of minds.

The validity of consent depends not 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 has defined under sec.15 or2) Undue influence as defined under sec. 16 or3) Fraud has defined under sec. 17 or4) 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 Indianpenal code or the unlawful detaining or threatening to detain any property, to the prejudice of anyperson whatever, with the intention of causing any person to enter into an agreement. It isimmaterial 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 itcan 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 Indian Law, the act or threat may be against anyperson. It is to be noted that he act need not be committed in India itself. Unlawful detaining orthreatening to detain any property it also coercion.

While threat to sue does not amount to coercion threat to file a false suit amounts to coercionsince Indian Penal Code forbids such an act.

2) Undue influence:In the words of Holland, Undue influence refers to the unconscious use of power over anotherperson, such power being obtained by virtue of a present or previously existing dominatingcontrol arising out of relationship between the parties.

According sec. 16(1) A contract is said to be induced by undue influence where the relationsubsisting between the parties are such that one of the parties is in a position to dominate the willof the other 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 or mental or bodily distress:(c) Where a person, who is in a position to dominate the will of another, enters into a

contract with him and the transaction appears to be unconscionable. The burden ofproving that such contract was not by undue influence shall lie upon the person in aposition to dominate the will of the other.

Both coercion and undue influence are closely related. What contributes coercion or undueinfluence depends upon the facts of each case.

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Sec. 16(i) provides that two elements must be present. The first one is that the relationssubsisting between the parties to a contract are such that one of them is in a position to dominatethe will of the other.

Secondly, he uses that position to obtain unfair advantage over the other. In other words, unlikecoercion undue influence must come from a party to the contract and not a stranger to it. Wherethe parties are not in equal footing or there is trust and confidence between the parties, one partymay be able to dominate the will of the other and use the position to obtain an unfair advantage.However, where there is no relationship shown to exit from which undue influence is presumed,that influence must be proved.

3) Fraud:A false statement made knowingly or without belief in its truth or recklessly careless whether it betrue 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 orwith 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 betrue. A false statement intentionally made is fraud. An absence of honest belief in thetruth of the statement made is essential to constitute fraud. The false statement must bemade intentionally.

2) The active concealment 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 anyexhaustive 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 oneparty to the other at the time of entering into contract with an intention of inducing the other partyto enter into the contract. If the representation is false or misleading, it is known asmisrepresentation. A misrepresentation may be innocent or intentional. An intentionalmisrepresentation is called fraud and is covered under section 17 sec. 18 deals with an innocentmisrepresentation.

5) Mistake:Usually, mistake refers to misunderstanding or wrong thinking or wrong belief. But legally, itsmeaning is restricted and is to mean operative mistake. Courts recognize only such mistakes,which invalidate the contract. Mistake may be mistake of fact or mistake of law.Sec. 20Where both parties to an agreement are under a mistake as to a matter of fact essentialto the agreement, the agreement is void.Sec.21 A contract is not voidable because it was caused by a mistake as to any law in force inIndia: 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 noreal correspondence of offer and acceptance. The parties are not really in consensus-ad-item.Therefore there is no agreement at all.A bilateral mistake may be regarding the subject matter or the possibility of performing thecontract.

Q.2 Define negotiable instrument. What are its features and characteristics? Which are thedifferent types of negotiable instruments? If Mr. A is the holder of a negotiable instrument,under what situations

i. Will he be the Holder in due course?ii. He has the right to discharge?

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iii. He can make endorsements?

Ans.:Meaning of Negotiable InstrumentsTo understand the meaning of negotiable instruments let us take a few examples of day-to-daybusiness transactions.Suppose Pitamber, a book publisher has sold books to Prashant for Rs 10,000/- on three monthscredit. To be sure that Prashant will pay the money after three months, Pitamber may write anOrder addressed to Prashant that he is to pay after three months, for value of goods received byhim, Rs.10, 000/- to Pitamber or anyone holding the order and presenting it before him (Prashant)for payment. This written document has to be signed by Prashant to show his acceptance of theorder. 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 different business transactions.For instance, after a month, if required, he can borrow money from Sunil for a period of twomonths and pass on this document to Sunil. He has to write on the back of the document aninstruction to Prashant to pay money to Sunil, and sign it. Now Sunil becomes the owner of thisdocument and he can claim money from Prashant on the due date. Sunil, if required, can furtherpass on the document to Amit after instructing and signing on the back of the document. Thispassing 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 anundertaking stating that after three month he will pay the amount to Pitamber. Now Pitamber canretain that document with himself till the end of three months or pass it on to others for meetingcertain business obligation (like with Sunil, as discussed above) before the expiry of that threemonths time period.You must have heard about a cheque. What is it? It is a document issued to a bank that entitlesthe person whose name it bears to claim the amount mentioned in the cheque. If he wants, hecan transfer it in favour of another person. For example, 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 toChander to meet any business obligation, like paying back a loan that he might have taken fromChander. 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 certain documents used for payment in businesstransactions and are transferred freely from one person to another. Such documents are calledNegotiable 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 itis negotiable i.e., its ownership can be easily transferred.Thus, negotiable instruments are documents meant for making payments, the ownership of which

can be transferred from one person to another many times before the final payment is made.

Definition of Negotiable InstrumentAccording to section 13 of the Negotiable Instruments Act, 1881, a negotiable instrument meanspromissory note, bill of exchange, or cheque, payable either to order or to bearer.

Types of Negotiable InstrumentsAccording to the Negotiable Instruments Act, 1881 there are just three types of negotiableinstruments i.e., promissory note, bill of exchange and cheque. However many other documentsare also recognized as negotiable instruments on the basis of custom and usage, like hundis,treasury bills, share warrants, etc., provided they possess the features of negotiability. In thefollowing sections, we shall study about Promissory Notes (popularly called pronotes), Bills ofExchange (popularly called bills), Cheque and Hundis (a popular indigenous document prevalent

in India), in detail.

i. Promissory NoteSuppose you take a loan of Rupees Five Thousand from your friend Ramesh. You can make adocument stating that you will pay the money to Ramesh or the bearer on demand. Or you canmention in the document that you would like to pay the amount after three months. Thisdocument, once signed by you, duly stamped and handed over to Ramesh, becomes anegotiable instrument.Now Ramesh can personally present it before you for payment or give this document to someother person to collect money on his behalf. He can endorse it in somebody elses name who in

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turn can endorse it further till the final payment is made by you to whosoever presents it beforeyou. 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 inwriting (not being a bank note or a currency note) containing an unconditional undertaking, signedby the maker, to pay a certain sum of money only to or to the order of a certain person or to thebearer of the instrument.Specimen of a Promissory NoteRs. 10,000/- New DelhiSeptember 25, 2002On demand, I promise to pay Ramesh, s/o RamLal of Meerut or order a sum ofRs 10,000/- (Rupees Ten Thousand only), for value received.

To, Ramesh Sd/ SanjeevAddress StampFeatures of a promissory noteLet us know the features of a promissory note.i. A promissory note must be in writing, duly signed by its maker and properly stamped as perIndian Stamp Act.ii. It must contain an undertaking or promise to pay. Mere acknowledgement of indebtedness isnot enough. For example, if some one writes I owe Rs. 5000/- to Satya Prakash, it is not apromissory 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 must contain a promise to pay money only. For example, if some one writes I promise togive 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 iswritten three months after date I promise to pay Satinder or order a sum of rupees FiveThousand only it is a promissory note.vii. The sum payable mentioned must be certain or capable of being made certain. It meansthat the sum payable may be in figures or may be such that it can be calculated.

ii. Bill of ExchangeSuppose Rajeev has given a loan of Rupees Ten Thousand to Sameer, which Sameer has toreturn.Now, Rajeev also has to give some money to Tarn. In this case, Rajeev can make a documentDirecting Sameer to make payment up to Rupees Ten Thousand to Tarn on demand or afterexpiry of a specified period. This document is called a bill of exchange, which can be transferred

to some other persons name by Tarn.Section 5 of the Negotiable Instruments Act, 1881 defines a bill of exchange as an instrument inwriting containing an unconditional order, signed by the maker, directing a certain person to pay acertain sum of money only to or to the order of a certain person, or to the bearer of theinstrument.Specimen of a bill of exchange

Rs. 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 Accepted Stamp

Sameer Sameer S/d

Address Rajeev

iii. Cheques

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Cheque is a very common form of negotiable instrument. If you have a savings bank account orcurrent account in a bank, you can issue a cheque in your own name or 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 bill of exchange; the only difference is that the bank isalways the drawee in case of a cheque.The Negotiable Instruments Act, 1881 defines a cheque as a bill of exchange drawn on aspecified banker and not expressed to be payable otherwise than on demand. Actually, a chequeis an order by the account holder of the bank directing his banker to pay on demand, the specifiedamount, to or to the order of the person named therein or to the bearer.

iv. Hundis

A Hundi is a negotiable instrument by usage. It is often in the form of a bill of exchange drawn inany local language in accordance with the custom of the place. Some times it can also be in theform of a promissory note. A Hundi is the oldest known instrument used for the purpose oftransfer of money without its actual physical movement. The provisions of the NegotiableInstruments Act shall apply to hundis only when there is no customary rule known to the people.Types of HundisThere 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 the amount to aShah. Shah is a respectable and responsible person, a man of worth and known in the bazaar. Ashah-jog Hundi passes from one hand to another till it reaches a Shah, who, after reasonableenquiries, presents it to the drawee for acceptance of the payment.Darshani Hundi: This is a Hundi payable at sight. The holder must present it for payment within areasonable time after its receipt. Thus, it is similar to a demand bill.Muddati Hundi: A Muddati or miadi Hundi is payable after a specified period of time. This issimilar to a time bill.There are few other varieties like Nam-jog Hundi, Dhani-jog Hundi, and Jawabee Hundi, JokhamiHundi, Fireman-jog Hundi, etc.Features of Negotiable InstrumentsAfter discussing the various types of negotiable instruments let us sum up their features as under.A negotiable instrument is freely transferable. Usually, when we transfer any property tosomebody, we are required to make a transfer deed, get it registered, pay stamp duty, etc.But, such formalities are not required while transferring a negotiable instrument. The ownership ischanged by mere delivery (when payable to the bearer) or by valid endorsement and delivery(when payable to order). Further, while transferring it is also not required to give a notice to theprevious holder.ii. Negotiability confers absolute and good title on the transferee. It means that a person whoreceives a negotiable instrument has a clear 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 aconsideration. Also the receiver should have no knowledge of the previous holder having anydefect in his title. Such a person is known as holder in due course. For example, suppose Rajeevissued a bearer cheque payable to Sanjay. A person, who passed it on to Girish, stole it fromSanjay. If Girish received it in good faith and for value and without knowledge of cheque havingbeen stolen, he will be entitled to receive the amount of the cheque. Here Girish will be regardedas holder in due course.iii. A negotiable instrument must be in writing. This includes handwriting, typing, computer printout 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. Forexample, one cannot make a promissory note on assets, securities, or goods.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 negotiableinstrument. However, if the time of payment is linked to the death of a person, it is nevertheless anegotiable instrument as 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 instrumentis made must be named or described with reasonable certainty. The term person includesindividual, 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 thedrawer or the maker, the instrument shall not be a valid one.

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ix. Delivery of the instrument is essential. Any negotiable instrument like a cheque or apromissory note is not complete till it is delivered to its payee. For example, you may issue acheque in your brothers name but it is not a negotiable instrument till it is given to your brother.x. Stamping of Bills of Exchange and Promissory Notes is mandatory. This is required as per theIndian Stamp Act, 1899. The value of stamp depends upon the value of the promote or bill andthe time of their payment.

Negotiation and indorsement

Persons other than the original obligor and obligee can become parties to a negotiableinstrument. 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 obtainingpayment of the instrument or acquiring or transferring rights to the instrument, the signature iscalled an indorsement. There are four types of indorsements contemplated by the Code:

An indorsement which purports to transfer the instrument to a specified person is aspecial indorsement;

An indorsement by the payee or holder which does not contain any additional notation(thus puporting to make the instrument payable to bearer) is an indorsement in blank;

An indorsement which purports to require that the funds be applied in a certain manner(i.e. "for deposit only", "for collection") is a restrictive indorsement; and,

An indorsement purporting to disclaim retroactive liability is called a qualifiedindorsement(through the inscription of the words "without recourse" as part of theindorsement 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. forvalue;

3. without notice of any defenses to payment,

the transferee is a holder in due courseand can enforce the instrument withoutbeing subject todefenses 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 the signer to contract; (5) infancy of the signer; (6) duress; (7) discharge inbankruptcy; and, (8) the running of a statute of limitations as to the validity of the instrument.

The holder-in-due-course rule is a rebuttable presumption that makes the free transfer ofnegotiable instruments feasible in the modern economy. A person or entity purchasing aninstrument in the ordinary course of business can reasonably expect that it will be paid whenpresented to, and not subject to dishonor by, the maker, without involving itself in a disputebetween the maker and the person to whom the instrument was first issued (this can becontrasted to the lesser rights and obligations accruing to mere holders). Article 3 of the UniformCommercial Code as enacted in a particular State's law contemplate real defenses available topurported holders in due course.

The foregoing is the theory and application presuming compliance with the relevant law.

Practically, the obligor-payor on an instrument who feels he has been defrauded or otherwiseunfairly dealt with by the payee may nonetheless refuse to pay even a holder in due course,requiring the latter to resort to litigation to recover on the instrument.

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

Ans.:

http://en.wikipedia.org/wiki/Signaturehttp://en.wikipedia.org/wiki/Good_faithhttp://en.wikipedia.org/wiki/Value_(economics)http://en.wikipedia.org/wiki/Defense_(legal)http://en.wikipedia.org/wiki/Holder_in_due_coursehttp://en.wikipedia.org/wiki/Holder_in_due_coursehttp://en.wikipedia.org/wiki/Lawsuithttp://en.wikipedia.org/wiki/Signaturehttp://en.wikipedia.org/wiki/Good_faithhttp://en.wikipedia.org/wiki/Value_(economics)http://en.wikipedia.org/wiki/Defense_(legal)http://en.wikipedia.org/wiki/Holder_in_due_coursehttp://en.wikipedia.org/wiki/Lawsuit

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Indemnity Guarantee

Comprise only two parties- theindemnifier and the indemnityholder.

There are three parties namelythe surety, principal debtor andthecreditor

Liability of the indemnifier isprimary

The liability of the surety issecondary. The surety is liableonly if the principal debtormakes a default. The primaryliability being that of the principaldebtor.

The indemnifier need notnecessarily act at the requestof the indemnified.

The surety give guarantee onlyat the request of the principaldebtor

The possibility of any losshappening is the onlycontingency against which theindemnifier undertakes toindemnify.

There is an existing debt orduty, the performance of whichis guarantee by the surety

b. Give a short note on Rights of Surety.

Ans.: Joint sureties or debtors:

Where several persons are bound together in any bond, bill or other writing as joint debtors oras 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, orotherwise, 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.

Defense of infancy to joint sureties or debtors:

Where several persons are bound together in any bond, bill or other writing or judgment asjoint debtors or as joint sureties, in any sum of money, made payable to any person orcorporation, the executors, administrators, successors, order or assigns, and 1 or more of suchpersons was, at the time of making, signing or executing the same, or at the time of the renditionof such judgment, an infant, such fact shall be no defense in any action, proceeding or suit for theenforcement 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 wasan infant at the time such judgment was rendered.

Rights of surety or of joint debtor on payment of judgment:

(a) If a judgment recovered against principal and surety shall be paid by the surety, thecreditor shall mark such judgment to the use of the surety so paying the same; and the transfereeshall, in the name of the plaintiff, have the same remedy by execution or other process against

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the principal debtor as the creditor could have had, the transfer by marking to the use of thesurety being first filed of record in the court where the judgment is.

(b) Where there is a judgment against several debtors or sureties and any of them shall paythe whole, the creditor shall mark such judgment to the use of the persons so paying the same;and the transferee shall, in the name of the plaintiff, be entitled to an execution or other processagainst the other debtors or sureties in the judgment, for a proportion able part of the debt ordamages paid by such transferee; but, no defendant shall be debarred of any remedy against theplaintiff or the plaintiff's representatives or assigns by any legal or equitable course of proceedingwhatever.

Q.4.a. Mention the remedies for breach of contract. How will the injured party claim it?

Ans.:Breach of Contract & Remedies:Nature of breachA breach of contract occurs where a party to a contract fails to perform, precisely and exactly, hisobligations under the contract. This can take various forms for example, the failure to supplygoods or perform 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 on the due date orperforms incompletely. For example: Poussard v Spiers and Bettini v Gye.Anticipatory breach occurs where one party announces, in advance of the due date forperformance, that he intends not to 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 of breach A breach of contract, no matter what form it may take, always entitles theinnocent party to maintain an action for damages, but the rule established by a long line ofauthorities is that the right of a party to treat a contract as discharged arises only in threesituations.The breaches, which give the innocent party the option of terminating the contract, are:(a) RenunciationRenunciation occurs where a party refuses to perform his obligations under the contract. It maybe either express or implied. Hochster v De La Tour is a case law example of expressrenunciation.Renunciation is implied where the reasonable inference from the defendants conduct is that heno longer intends to perform his side of the contract. For example: Omnium DEnterprises vSutherland.

(b) Breach of conditionThe second repudiator breach occurs where the party in default has committed a breach ofcondition. Thus, for example, in Poussard v Spiers the employer had a right to terminate thesopranos employment when she failed to arrive for performances.(c) Fundamental breachThe third repudiator breach is where the party in breach has committed a serious (orfundamental) 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 hastwo options: He may treat the contract as discharged and bring an action for damages for breachof 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 forpayment by the other side. For example, White and Carter Ltd v McGregor.2 Introduction to remedies

Damages are the basic remedy available for a breach of contract. It is a common law remedy thatcan 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 wouldhave been in had the contract been properly performed.Sometimes damages are not an adequate remedy and this is where the equitable remedies (suchas specific performance and injunction) may be awarded.3 Damages1 Nature:The major remedy available at common law for breach of contract is an award of damages. Thisis a monetary sum fixed by the court to compensate the injured party.

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In order to recover substantial damages the innocent party must show that he has suffered actualloss; if there is no actual loss he will only be entitled to nominal damages in recognition of the factthat he has a valid cause of action. In making an award of damages, the court has two majorconsiderations: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 orquantified in monetary terms. The second consideration is quite distinct from the first, and can bedecided by the court only after the first has been determined.2.Remoteness of lossThe rule governing remoteness of loss in contract was established in Hadley v Baxendale. Thecourt 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 thebreach of contract itself (in the normal course of things), or which may reasonably be assumedto have been within the contemplation of the parties at the time they made the contract as beingthe probable result of a breach.Thus, there are two types of loss for which damages may be recovered:1. What arises naturally; and2. What the parties could foresee when the contract was made as the likely result of breach.As a consequence of the first limb of the rule in Hadley v Baxendale, the party in breach isdeemed to expect the normal consequences of the breach, whether he actually expected them ornot. Under the second limb of the rule, the party in breach can only be held liable for abnormalconsequences where he has actual knowledge that the abnormal consequences might follow orwhere he reasonably ought to know that the abnormal consequences might follow VictoriaLaundry v Newman Industries.3.The measure (or quantum) of damagesIn 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 samefinancial position he would have been in had the contract been properly performed. This issometimes called the expectation loss basis. In Victoria Laundry v Newman Industries, forexample, Victoria Laundry were claiming for the profits they would have made had the boiler beeninstalled on the contractually agreed date.Sometimes a claimant may prefer to frame his claim in the alternative on the reliance loss basisand thereby recover expenses incurred in anticipation of performance and wasted as a result ofthe breach Anglia Television v Reed. In a contract for the sale of goods, the statutory (Sale ofGoods Act 1979) measure of damages is the difference between the market price at the date ofthe breach and the contract price, so that only nominal damages will be awarded to a claimant

buyer or claimant seller if the price at the date of breach was respectively less or more than thecontract 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 ifdamages 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 prevent the injured party fromreceiving them: Chaplin v Hicks. In general, damages are not awarded for non-pecuniary losssuch as mental distress and loss of enjoyment. Exceptionally, however, damages are awarded forsuch losses where the contracts purpose is to promote happiness or enjoyment, as is thesituation with contracts for holidays Jarvis v Swan Tours. The innocent party must takereasonable steps to mitigate (minimise) his loss, for example, by trying to find an alternativemethod of performance of the contract: Brace v Calder.4.Liquidated damages clauses and penalty clausesIf a contract includes a provision that, on a breach of contract, damages of a certain amount or

calculable at a certain rate will be payable, the courts will normally accept the relevant figure as ameasure of damages. Such clauses are called liquidated damages clauses.The courts will uphold a liquidated damages clause even if that means that the injured partyreceives less (or more as the case may be) than his actual loss arising on the breach. This isbecause the clause setting out the damages constitutes one of the agreed contractual terms Cellulose Acetate Silk Co Ltd v Widnes Foundry Ltd.However, a court will ignore a figure for damages put in a contract if it is classed as a penaltyclause that is, a sum which is not a genuine pre-estimate of the expected loss on breach.

This could be the case where:

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1. The prescribed sum is extravagant in comparison with the maximum loss that could follow froma breach.2. The contract provides for payment of a certain sum but a larger sum is stipulated to be payableon a breach.3.The same sum is fixed as being payable for several breaches, which would be likely to causevarying amounts of damage. All of the above cases would be regarded as penalties, even thoughthe clause might be described in the contract as a liquidated damages clause. The court will notenforce payment of a penalty, and if the contract is broken only the actual loss suffered may berecovered (Ford Motor Co (England) Ltd v Armstrong).

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 buyerinforms the seller that he no longer requires his goods. The seller writes back stating his intentionto store the goods until the contract expires and then sue for a breach of contract. The buyerreplies with an angry letter stating that he could just sell the goods to someone else. Advise allparties.Actual breach:A breach of contract occurs where a party to a contract fails to perform, precisely and exactly, hisobligations under the contract. This can take various forms for example, the failure to supplygoods or perform 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 on the due date orperforms 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 ofprivity in contract law provides that a contract cannot confer rights or imposeobligations arising under it on any person or agent except the parties to it.

The premise is that only parties to contracts should be able to sue to enforce their rights or claimdamages as such. However, the doctrine has proven problematic due to its implications uponcontracts made for the benefit of third parties who are unable to enforce the obligations of thecontracting parties.

Third-party rights:

Privity of contract occurs only between the parties to the contract, most commonly contract ofsale of goods or services. Horizontal privity arises when the benefits from a contract are to begiven to a third party. Vertical privity involves a contract between two parties, with an independentcontract between 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 partiesto the contract beyond its entitlement to a benefit. An example of this occurs when amanufacturer sells a product to a distributor and the distributor sells the product to a retailer. Theretailer then sells the product to a consumer. There is no privity of contract between themanufacturer and the consumer.

This, however, does not mean that the parties do not have another form of action e.g. Donoghuev. Stevenson here a friend of Ms. Donoghue bought her a bottle of ginger beer, which wasdefective. Specifically, the ginger beer contained the partially decomposed remains of a snail.

http://en.wikipedia.org/wiki/Privity_(law)http://en.wikipedia.org/wiki/Contract_lawhttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Contract_of_salehttp://en.wikipedia.org/wiki/Contract_of_salehttp://en.wikipedia.org/wiki/Donoghue_v._Stevensonhttp://en.wikipedia.org/wiki/Donoghue_v._Stevensonhttp://en.wikipedia.org/wiki/Privity_(law)http://en.wikipedia.org/wiki/Contract_lawhttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Contract_of_salehttp://en.wikipedia.org/wiki/Contract_of_salehttp://en.wikipedia.org/wiki/Donoghue_v._Stevensonhttp://en.wikipedia.org/wiki/Donoghue_v._Stevenson

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Since the contract was between her friend and the shop owner, Mrs. Donoghue could not sueunder the contract, but it was established that the manufacturer has a duty of care owed to theirconsumers and she was awarded damages in tort.

Privity is the legal term for a close, mutual, or successive relationship to the same right ofproperty 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 objectivee.g. to carry on a business concern, to promote art, science or culture in the society, to run asport club etc. Every association, however, may not be a company in the eyes of law as the legalimport of the word company is different from its common parlance meaning. In legal terminologyits use is restricted to imply an association of persons, registered as a company' under the law ofthe land. The following are some of the definitions of the company given by legal luminaries andscholars of law.

Company means a company formed and registered under this 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 only in the eyes of

law. Being a mere creature of law, it possesses only those properties which the charter of itscreation confers upon it, either expressly or as incidental to its very existence. Justice Marshall

A company is an association of many persons who contribute money or moneys worth to acommon stock and employ it in some common trade or business and who share the profit or lossarising there from. The common stock so contributed is denoted in terms of money and is thecapital of the company. The persons who contribute it or to whom it belongs are members. Theproportion of capital to which each member is entitled is his share. Shares are alwaystransferable 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 isan artificial person and exists only in the eyes of law. It has an independent legal entity, acommon seal and perpetual succession.

Sometimes, the term corporation (a word derived from the Latin word corpus whichmeans body) is also used for a company.At present the 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 thecompany and become its members or shareholders with the object of carrying on a lawfulbusiness for profit. It comes into existence when it is registered under the Companies Act. Thelaw treats it as a legal person as it can conduct lawful business and enter into contracts with otherpersons in its own name. It can sell or purchase property. It can sue and be sued in its name. Itcannot be regarded as an imaginary person because it has a legal existence. Thus company isan artificial person created by law.

2. Independent corporate existence: A company has a separate independent corporateexistence. It is in law a person. Its entity is always separate from its members. The property of thecompany belongs to it and not to the shareholders. The company cannot be held liable for theacts of the members and the members can not be held liable for the acts or wrongs or misdeedsof the company. Once a company is incorporated, it must be treated like any other independentperson. As a consequence of separate legal entity, the company may enter into contracts with itsmembers and vice-versa.

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3. Perpetual existence: The attribute of separate entity also provides a company a perpetualexistence, until dissolved by law. Its life remains unaffected by the lunacy, insolvency or death ofits members. The members may come and go but the company can go on forever. Law creates itand the law alone can dissolve it.

4. Separate property: A company, being a legal entity, can buy and own property in its ownname. 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 purchased out of funds contributed by them.Consequently, they do not have even insurable interest in the property of the company. Theproperty 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 ofthe company is limited to the amount of shares subscribed by him. If the member has paid fullamount of the face value of the shares subscribed by him, his liability shall be nil and he cannotbe 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 CompaniesAct, however, permits the formation of companies with unlimited liability. But such companies arevery 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. It has to act through a human agency known asDirectors. Therefore, every company must have a seal with its name engraved on it. The seal ofthe company is affixed on the documents, which require the approval of the company. TwoDirectors 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 are freely transferable and can be sold orpurchased through the Stock Exchange. A shareholder can transfer his shares to any personwithout the consent of other members. Under the articles of association, even a public limitedcompany can put certain restrictions on the transfer of shares but it cannot altogether stop it. Ashareholder of a public limited company possessing fully paid up shares is at liberty to transfer hisshares to anyone he likes in accordance with the manner provided for in the articles ofassociation of the company. However, private limited company is required to put certainrestrictions on transferability of its shares. But any absolute restriction on the right of transfer ofshares is void

8. Capacity to sue and be sued: A company, being a body corporate, can sue and be sued in itsown name.

Q. 6. Om is enrolled in a managerial course. He has to write an assignment on companymanagement and various types of meetings that a company holds. You are asked to helphim in preparing the assignment.

Ans.:There are many types of businesses, and because of this, businesses are classified inmany ways. One of the most common focuses on the primary profit-generating activities of abusiness:

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 throughinvestment and management ofcapital.

Information businesses generate profits primarily from the resale ofintellectual propertyand 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, areconsidered manufacturers.

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Real estate businesses generate profit from the selling, renting, and development ofproperties, homes, and buildings.

Retailers and Distributors act as middle-men in getting goods produced by manufacturersto the intended consumer, generating a profit as a result of providing sales or distributionservices. Most consumer-oriented stores and catalogue companies are distributors orretailers. See also: Franchising

Service businesses offer intangible goods or services and typically generate a profit bycharging for labor or other services provided to government, other businesses, orconsumers. Organizations ranging from house decorators to consulting firms,restaurants, and even entertainers are types of service businesses.

Transportation businesses deliver goods and individuals from location to location,

generating a profit on the transportation costs Utilities produce public services, such as heat, electricity, or sewage treatment, and are

usually government chartered.

There are many other divisions and subdivisions of businesses. The authoritative list of businesstypes for North America is generally considered to be the North American Industry ClassificationSystem, or NAICS. The equivalent European Union list is the Statistical Classification ofEconomic Activities in the European Community (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,marketingmanagement,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 modeledafter business enterprises. In 2003, the People's Republic of China reformed 80% of itsstate-owned enterprises and modeled them on a company-type management system.[2] Many stateinstitutions and enterprises in China and Russia have been transformed into joint-stockcompanies, with part of their shares being listed on public stock markets.

Organization and government regulation

Most legal jurisdictions specify the forms of ownership that a business can take, creating a bodyofcommercial 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, willusually tend to be organized as partnerships or (more commonly) corporations. In

addition a business that wishes to raise money on a stock market or to be owned by awide range of people will often be required to adopt 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 organizedin certain ways.

Limited liability. Corporations, limited liability partnerships, and other specific types ofbusiness organizations protect their owners or shareholders from business failure bydoing business under a separate legal entity with certain legal protections. In contrast,unincorporated businesses or persons working on their own are usually not so protected.

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Tax advantages. Different structures are treated differently in tax law, and may haveadvantages for this reason.

Disclosure and compliance requirements. Different business structures may berequired to make more or less information public (or reported to relevant authorities), andmay be bound to comply with different rules and regulations.

Many businesses are operated through a separate entity such as a corporation or a partnership(either formed with or without limited liability). Most legal jurisdictions allow people to organizesuch an entity by filing certain charter documents with the relevant Secretary of State orequivalent and complying with certain other ongoing obligations. The relationships and legalrights ofshareholders, limited partners, or members are governed partly by the charter

documents and partly by the law of the jurisdiction where the entity is organized. Generallyspeaking, shareholders in a corporation, limited partners in a limited partnership, and members ina limited liability company are shielded from personal liability for the debts and obligations of theentity, which is legally treated as a separate "person." This means that unless there ismisconduct, the owner's own possessions are strongly protected in law, if the business does notsucceed.

Where two or more individuals own a business together but have failed to organize a morespecialized form of vehicle, they will be treated as a general partnership. The terms of apartnership are partly governed by a partnership agreement if one is created, and partly by thelaw of the jurisdiction where the partnership is located. No paperwork or filing is necessary tocreate a partnership, and without an agreement, the relationships and legal rights of the partnerswill be entirely governed by the law of the jurisdiction where the partnership is located.

A single person who owns and runs a business is commonly known as a sole proprietor, whetherhe or she owns it directly or through a formally organized entity.

A few 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 anyonewho personally owns and operates a business without creating a separate legal entity,are personally liable for the debts and obligations of the business.

2. Generally, corporations are required to pay tax just like "real" people. In some taxsystems, this can give rise to so-called double taxation, because first the corporationpays tax on the profit, and then when the corporation distributes its profits to its owners,

individuals have to include dividends in their income when they complete their personaltax 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, havesimplified procedures in specialized areas, and have simplified, advantageous, or slightlydifferent tax treatment.

4. To "go public" (sometimes called IPO) -- which basically means to allow a part of thebusiness to be owned by a wider range of investors or the public in generalyou mustorganize a separate entity, which is usually required to comply with a tighter set of lawsand procedures. Most public entities are corporations that have sold shares, butincreasingly there are also public LLCs that sell units (sometimes also called shares), andother more exotic entities as well (for example, REITs in the USA, Unit Trusts in the UK).However, you cannot take a general partnership "public."

Types of meetings: Common types of meeting include:

1. Status Meetings, generally leader-led, which are about reporting by one-waycommunication

2. Work Meeting, which produces a product or intangible result such as a decision3. Staff meeting, typically a meeting between a manager and those that report to the

manager

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4. Team meeting, a meeting among colleagues working on various aspects of a teamproject

5. Ad-hoc meeting, a meeting called for a special purpose6. Management meeting, a meeting among managers

7. Board meeting, a meeting of the Board of directors of an organization8. One-on-one meeting, between two individuals

9. Off-site meeting, also called "offsite retreat" and known as an Awayday meeting in the UK

10. Kickoff meeting, the first meeting with the project team and the client of the project todiscuss 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 of the detailsand services expected of them. Attendance at the Pre-Bid Meeting may be mandatory.Failure to attend usually results in a rejected bid.

Assignment Set- 2

Q.1 a. What is an arbitration agreement? Discuss its essentials.

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Ans.:Arbitration Agreement:The foundation of arbitration is the arbitration agreement between the parties to submit toarbitration all or certain disputes which have arisen or which may arise between them. Thus, theprovision of arbitration can be made at the time of entering the contract itself, so that if anydispute arises in future, the dispute can be referred to arbitrator as per the agreement. It is alsopossible to refer a dispute to arbitration after the dispute has arisen. Arbitration agreement maybe in the form of an arbitration clause in a contract or in the form of a separate agreement. Theagreement must be in writing and must be signed by both parties. The arbitration agreement canbe by exchange of letters, document, telex, telegram etcCourt must refer the matter to arbitration in some cases: If a party approaches court despite thearbitration 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 arbitrationagreement or its certified copy must accompany such objection. On such application the judicialauthority shall refer the parties to arbitration. Since the word used is shall, it is mandatory for

judicial authority to refer the matter to arbitration. However, once the opposite party alreadymakes first statement to court, the matter has to continue in the court. Once other party forreferring the matter to arbitration makes an application, the arbitrator can continue with arbitrationand even make an arbitral award.

1. It must be in writing [Section 7(3)]: Like the old law, the new law also requires the arbitrationagreement 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 anagreement. Further, it is also provided that an exchange of claim and defense in which theexistence of an arbitration agreement is alleged by one party and not denied by the other, willalso amount to be an arbitration agreement.It is not necessary that the parties should sign such written agreement. All that is necessary isthat the parties should accept the terms of an agreement reduced in writing. The naming of thearbitrator in the arbitration agreement is not necessary. No particular form or formal document isnecessary.

2. It must have all the essential elements of a valid contract: An agreement stands on thesame footing as any other agreement. Every person capable of entering into a contract may be aparty to an arbitration agreement. The terms of the agreement must be definite and certain; if theterms are vague it is bad for indefiniteness.

3. The agreement must be to refer a dispute, present or future, between the parties toarbitration: If there is no dispute, there can be no right to demand arbitration. A dispute meansan assertion of a right by one party and repudiation thereof 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 oromission, for example, with holding a certificate to which a person is entitled or refusal to registera transfer of shares.

Under the present law, certain disputes such as matrimonial disputes, criminalprosecution, questions relating to guardianship, questions about validity of a will etc. or treated asnot suitable for arbitration. Section 2(3) of the new Act maintains this position. Subject to thisqualification Section 7(1) of the new Act makes it permissible to enter into an arbitrationagreement 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 inthe 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 arbitrator and the two

appointed arbitrators will appoint the third arbitrator who will act as a presiding arbitrator [Section11(3)]. If one of the parties does not appoint an arbitrator within 30 days, or if two appointedarbitrators do not appoint third arbitrator within 30 days, the party can request Chief Justice toappoint an arbitrator [Section 11(4)]. The Chief Justice can authorize any person or institution toappoint 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 bemade to Chief Justice of India. In case of other domestic disputes, application has to be made toChief Justice of High Court within whose jurisdiction the parties are situated [Section 11(12)]

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Challenge to Appointment of arbitrator: An arbitrator is expected to be independent andimpartial. If there are some circumstances due to which his independence or impartiality can bechallenged, he must disclose the circumstances before his appointment [Section 12(1)].Appointment of Arbitrator can be challenged only if(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)]. Appointmentof arbitrator cannot be challenged on any other ground. The challenge to appointment has to bedecided by the arbitrator himself. If he does not accept the challenge, the proceedings cancontinue and the arbitrator can make the arbitral award. However, in such case, application forsetting aside arbitral award can be made to Court. If the court agrees to the challenge, the arbitralaward can be set aside [Section 13(6)]. Thus, even if the arbitrator does not accept the challenge

to his appointment, the other party cannot stall further arbitration proceedings by rushing to court.The arbitration can continue and challenge can be made in Court only after arbitral award ismade.

Conduct of Arbitral Proceedings: The Arbitral Tribunal should treat the parties equally andeach party should be given full opportunity to present his case [Section 18]. The Arbitral Tribunalis not bound by Code of Civil Procedure, 1908 or Indian Evidence Act, 1872 [Section 19(1)]. Theparties to arbitration are free to agree on the procedure to be followed by the Arbitral Tribunal. Ifthe parties do not agree to the procedure, the procedure will be as determined by the arbitraltribunal.

Law of Limitation Applicable: Limitation Act, 1963 is applicable. For this purpose, date onwhich the aggrieved party requests other party to refer the matter to arbitration shall beconsidered. If on that date, the claim is barred under Limitation Act, the arbitration cannotcontinue [Section 43(2)]. If Court sets Arbitration award aside, time spent in arbitration will beexcluded 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 todecide the procedure to be followed, unless parties agree on the procedure to be followed[Section 19(3)]. The Tribunal also has powers to determine the admissibility, relevance,materiality and weight of any evidence [Section 19(4)]. Place of arbitration will be decided bymutual agreement. However, if the parties do not agree to the place, the same will be decided bytribunal [Section 20]. Similarly, language to be used in arbitral proceedings can be mutuallyagreed. Otherwise, Arbitral Tribunal can decide [Section 22].

Submission of statement of claim and defense: The claimant should submit statement ofclaims, 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 defensecan be amended or supplemented any time [section 23].Hearings and Written Proceedings: After submission of documents and defense, unless theparties agree otherwise, the Arbitral Tribunal can decide whether there will be oral hearing orproceedings can be conducted on the basis of documents and other materials. However, if one ofthe parties requests the hearing shall be oral. Sufficient advance notice of hearing should begiven to both the parties [Section 24]. [Thus, unless one party requests, oral hearing is notcompulsory].

Settlement during Arbitration: It is permissible for parties to arrive at mutual settlement evenwhen arbitration is proceeding. In fact, even the Tribunal can make efforts to encourage mutualsettlement. If parties settle the dispute by mutual agreement, the arbitration shall be terminated.However, if both parties and 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 force as anyother Arbitral Award [Section 30].

Arbitral Award: Decision of Arbitral Tribunal is termed as 'Arbitral Award'. Arbitrator can decidethe dispute ex aqua ET 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 arbitralaward shall be in writing and signed by the members of the tribunal [Section 29]. The award mustbe in writing and signed by the members of Arbitral Tribunal [Section 31(1)]. It must state thereasons for the award unless the 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.

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Copy of award should be given to each party. Tribunal can make interim award also [Section31(6)].

Cost of Arbitration- Cost of arbitration means reasonable cost relating to fees and expenses ofarbitrators and witnesses, legal fees and expenses, administration fees of the institutionsupervising the arbitration and other expenses in connection with arbitral proceedings. Thetribunal can decide the cost and share of each party [Section 3 1(8)]. If the parties refuse to paythe costs, the Arbitral Tribunal may refuse to deliver its award. In such case, any party canapproach Court. The Court will ask for deposit from the parties and on such deposit, the Tribunalwill deliver the award. Then Court will decide the costs of arbitration and shall pay the same toArbitrators. 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 partycould access court almost at every stage of arbitration - right from appointment of arbitrator toimplementation of final award. Thus, the defending party could approach court at various stagesand stall the proceedings. Now, approach to court has been drastically curtailed. In some cases,if the party raises an objection, Arbitral Tribunal itself can give the decision on that objection. Afterthe decision, the arbitration proceedings are continued and the aggrieved party can approachCourt only after Arbitral Award is made. Appeal to court is now only on restricted grounds. Ofcourse, Tribunal cannot be given unlimited and uncontrolled powers and supervision of Courtscannot be totally eliminated.

Arbitration Act has Over-Riding Effect: Section 5 of Act clarifies that notwithstanding anythingcontained in any other law for the time being in force, in matters governed by the Act, the judicialauthority can intervene only as provided in this Act and not under any other Act.

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 is no 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 hermind inorder to realize some benefit.

Meditation is generally an internal, personal practice and most often done without any externalinvolvement, except perhaps prayer beads to count prayers. Meditation often involves invoking orcultivating a feeling or internal state, such as compassion, orattending to a specific focal point.The term can refer to the state itself, as well as to practices or techniques employed to cultivatethe state.

There are hundreds of specific types of meditation. The word, 'meditation,' means many thingsdependent upon the context of its use. People practice meditation for many reasons, within thecontext of their social environment. Meditation is a component of many religions, and has beenpracticed since antiquity, particularly by monastics. A 2007 study by the U.S. government foundthat nearly 9.4% of U.S. adults (over 20 million) have used meditation within the past 12 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 researchcontinues.

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

http://en.wikipedia.org/wiki/Holismhttp://en.wikipedia.org/wiki/Disciplinehttp://en.wikipedia.org/wiki/Mindhttp://en.wikipedia.org/wiki/Prayer_beadshttp://en.wikipedia.org/wiki/Mettahttp://en.wikipedia.org/wiki/Anapanasatihttp://en.wikipedia.org/wiki/Holismhttp://en.wikipedia.org/wiki/Disciplinehttp://en.wikipedia.org/wiki/Mindhttp://en.wikipedia.org/wiki/Prayer_beadshttp://en.wikipedia.org/wiki/Mettahttp://en.wikipedia.org/wiki/Anapanasati

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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 case may be, so as to protect theconsumer against unfair trade practices'

Even though strong and clear laws exist in India to protect consumer rights, the actual plight ofIndian consumers could be declared as completely dismal. Very few consumers are aware oftheir rights or understand their basic consumer rights. Of the several laws that have beenenacted to protect the rights of consumers in India, the most significant is the ConsumerProtection Act, 1986. Under this law, everyone, including individuals, a Hindu undivided family, afirm, and a company, can exercise their consumer rights for the goods and services purchasedby them. It is important that, as consumers, we know at least our basic rights and about thecourts 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* The right 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 heard in all decision-making processes related to consumer interests* The right to seek redressal, whenever consumer rights have been infringed* The right to complete consumer education

The Consumer Protection Act, 1986 and various other laws like the Standards, Weights &Measures Act have been formulated to ensure fair competition in the market place and free flowof 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 theirrights, as well as their responsibilities. In fact, the level of consumer protection in a country isconsidered as the correct indicator of the extent of progress of the nation.

The production and distribution systems have become larger and more complicated today. Thehigh level of sophistication achieved by the providers of goods and services in their selling andmarketing practices and various types of promotional activities like advertising resulted in anincreased need for higher consumer awareness and protection. In India, the government hasrealized the plight of Indian consumers and the Ministry of Consumer Affairs, Food and PublicDistribution has established the Department of Consumer Affairs as the nodal organization forthe protection of consumer rights, redressal of all consumer grievances and promotion ofstandards governing goods and services offered in India.

A complaint for infringement of consumer rights could be made under the followingcircumstances in the nearest designated consumer court:

* The goods or services bought by a person or agreed to be bought by a person suffer from oneor 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 orthe price that had been agreed upon between the parties or the price that had been stipulatedunder 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:

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The memorandum of association of a company, often simply called the memorandum (andthen often capitalised as an abbreviation for the official name, which is a proper noun and usuallyincludes other words), is the document that governs the relationship between the company andthe outside. It is one of the documents required to incorporate a company in the United Kingdom,Ireland and India, and is also used in many of the common law jurisdictions of theCommonwealth.

Requirements

While it is still necessary to file a memorandum of association to incorporate a new company, itno longer forms part of the companys constitution and it contains limited information compared to

the memorandum that was required prior to 1 October 2009.

It is basically a statement that the subscribers wish to form a company under the 2006 Act, haveagreed to become members and, in the case of a company that is to have a share capital, to takeat least one share each. It is no longer required to state the name of the company, the type ofcompany (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 amend their memorandum.Those details which are now required to appear in the Articles, such as the objects clause anddetails of the share capital, are deemed to form part of the Articles.

Capacities

The memorandum no longer restricts what a company is permitted to do. Since 1 October 2009, ifa company's constitution contains any restrictions on the objects at all, those restrictions will formpart of the articles of association.

Historically, a company's memorandum of association contained an objects clause, which limitedits capacity to act. When the first limited companies were incorporated, the objects clause had tobe widely drafted so as not to restrict the board of directors in their day to day trading. In theCompanies Act 1989 the term "General Commercial Company" was introduced which meant thatcompanies could undertake "any lawful or legal trade or business."

The Companies Act 2006 relaxed the rules even further, removing the need for an objects clause

at all. Companies incorporated on and after 1 October 2009 without an objects clause aredeemed to have unrestricted objects. Existing companies may take advantage of this change bypassing a special resolution to remove their objects clause.

If the company is to be a non-profit making company, the articles will contain a statement sayingthat the profits shall not be distributed to the members.

Articles of association:

The term articles of association of a company, orarticles of incorporation, of an American orCanadian Company, are often simply referred to as articles (and are often capitalized as anabbreviation for the full term). The Articles are a requirement for the establishment of a companyunder the law ofIndia, the United Kingdom and many other countries. Together with thememorandum of association, they constitute the constitution of a company. The equivalent termforLLC is Articles of Organization. Roughly equivalent terms operate in other countries, such asGesellschaftsvertragin Germany, statuts in France, statutin Poland.[1]

The following is largely based on British Company Law, references which are made at the end ofthis Article.

The Articles can cover a medley of topics, not all of which is required in a country's law. Althoughall terms are not discussed, they may cover:

http://en.wikipedia.org/wiki/Company_(law)http://en.wikipedia.org/wiki/Company_(law)http://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/Jurisdictionhttp://en.wikipedia.org/wiki/Commonwealth_of_Nationshttp://en.wikipedia.org/wiki/#cite_note-0http://en.wikipedia.org/wiki/#cite_note-0http://en.wikipedia.org/wiki/Articles_of_incorporationhttp://en.wikipedia.org/wiki/Articles_of_incorporationhttp://en.wikipedia.org/wiki/Company_(law)http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Memorandum_of_associationhttp://en.wikipedia.org/wiki/Limited_liability_companyhttp://en.wikipedia.org/wiki/Articles_of_Organizationhttp://en.wikipedia.org/wiki/#cite_note-0http://en.wikipedia.org/wiki/Company_(law)http://en.wikipedia.org/wiki/Company_(law)http://en.wikipedia.org/wiki/Common_lawhttp://en.wikipedia.org/wiki/Jurisdictionhttp://en.wikipedia.org/wiki/Commonwealth_of_Nationshttp://en.wikipedia.org/wiki/#cite_note-0http://en.wikipedia.org/wiki/Articles_of_incorporationhttp://en.wikipedia.org/wiki/Company_(law)http://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Memorandum_of_associationhttp://en.wikipedia.org/wiki/Limited_liability_companyhttp://en.wikipedia.org/wiki/Articles_of_Organizationhttp://en.wikipedia.org/wiki/#cite_note-0

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the issuing ofshares (also called stock), different voting rights attachedto different classes of shares valuation of intellectual rights, say,the valuations of the IPR of onepartner and,for example,the real estate of the other the appointments of directors - which shows whether a shareholderdominates or shares equality with all contributors directors meetings - the quorum and percentage of vote management decisions - whether the board manages or a founder transferability of shares - assignment rights of the founders or othermembers of the company do special voting rights of a Chairman,and his/her mode of election the dividend policy - a percentage of profits to be declared when there isprofit or otherwise winding up - the conditions, notice to members confidentiality of know-how and the founders' agreement and penaltiesfor disclosure first right of refusal - purchase rights and counter-bid by a founder.

A Company is essentially run by the shareholders, but for convenience, and day-to-day working,by the elected Directors. Usually, the shareholders elect a Board of Directors (BOD) at the AnnualGeneral 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 thecompany, typically of an American Company. The Directors may, or may not, be employees ofthe 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 theirproducts. Second, the law seeks to preserve the good will that businesses have established withconsumers. Third, the law seeks to deter businesses from appropriating the good will of their

competitors. Fourth, the law seeks to promote clarity and stability by encouraging consumers torely 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 bettergoods and services than others in the same field.

Although the law of unfair competition helps protect consumers from injuries caused by deceptivetrade practices, the remedies provided to redress such injuries are available only to businessentities and proprietors. Consumers who are injured by deceptive trade practices must availthemselves of the remedies provided by state and federal Consumer Protection laws. In general,businesses and proprietors injured by unfair competition have two remedies: injunctive relief (acourt 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 themarketplace is essential to any free enterprise system. Competition creates incentives forbusinesses to earn customer loyalty by offering quality goods at reasonable prices. At the sametime, competition can also inflict harm. The freedom to compete gives businesses the right to lurecustomers away from each other. When one business entices enough customers away fromcompetitors, those rival businesses may be forced to shut down or move.

http://en.wikipedia.org/wiki/Shareshttp://en.wikipedia.org/wiki/Stockhttp://legal-dictionary.thefreedictionary.com/Consumer+Protectionhttp://en.wikipedia.org/wiki/Shareshttp://en.wikipedia.org/wiki/Stockhttp://legal-dictionary.thefreedictionary.com/Consumer+Protection

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The law of unfair competition will not penalize a business merely for being successful in themarketplace. Nor will the law