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MBA FINANCE

Semester 3

MB0035 Legal Aspects Of Business

Assignment Set- 1 & Set- 2

Submitted By:

Name : Jojo Joy

Reg No : 511035886

Center Name : Sensorium

Center Code : 205

Date of Submission : 22/06/2011

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SET - 1

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Q.1.Distinguish between fraud and misrepresentation.Ans.

MEANING OF FRAUD (Secs.17 and 19)

Fraud means and includes any of the following acts committed by a party to a contractwith an intent to deceive the other party thereto or to induce him to enter into a contract:

(i) The suggestion as a fact of that which is not true by one who does not believe it to be

true;

(ii) Active concealment of a fact by one having knowledge or belief of the fact;

(iii) Promise made without any intention of performing it; (iv) any other act fitted to deceive;

(v) Any such act or omission as the law specifically declares to be fraudulent.

MEANING OF MISREPRESENTATION

Misrepresentation is also known as simple misrepresentation whereas fraud is known as

fraudulent misrepresentation. Like fraud, misrepresentation is an incorrect or false statement but

the falsity or inaccuracy is not due to any desire to deceive or defraud the other party. Such a

statement is made innocently. The party making it believes it to be true. In this way, fraud is

different from misrepresentation.

Fraud is a crime punishable by the law because it is an intentional wrong committed by the party.

In misrepresentation there are no such consequences, generally speaking.

If a fraud is to proven, then each of the following parameters need to be proven in a court of law:

1. The physical proof presented by the defendant

2. The proof thus presented is incorrect

3. The defendant purposely made false representations (was aware of the falsehood)

4. The false proofs were made with the intention of duping the plaintiff

5. The defendant succeeded in duping the plaintiff

6. The plaintiff suffered loses due to the fraud

If you are a plaintiff involved in committing a misrepresentation then you must prove the

following parameters:

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1. Validity of the evidence presented by the plaintiff

2. The claims were with regard to some legal agreement between the defending and the

pleading party

3. False representation of facts at the time of entering into the agreement

4. The plaintiff was induced into entering the agreement by the defendant

5. The agreement resulted in loss for the plaintiff

6. This loss was a gain for the defendant

Although it may not be possible for the plaintiff to prove the defendant as a fraudster, it is still

possible for the former to validate his situation as that of a misrepresentation.

DIFFERENCE BETWEEN FRAUD AND MISREPRESENTATION:-

The main difference in fraud and misrepresentation are,

1) In misrepresentation the person making the false statement believes it to be true. In fraud

the false statement is person who knows that it is false or he does not care to know whether it is

true or false.

2) There is no intention to deceive the other party when there is misrepresentation of fact.

The very purpose of the fraud is to deceive the other party to the contract.

3) Misrepresentation renders the contract voidable at the option of the party whose consent

was obtained by misrepresentation. In the case of fraud the contract is voidable It also gives rise

to an independent action in tort for damages.

4) Misrepresentation is not an offence under Indian penal code and hence not punishable.

Fraud, in certain cases is a punishable offence under Indian penal code.

5) Generally, silence is not fraud except where there is a duty to speak or the relations

between parties is fiduciary. Under no circumstances can silence be considered as

misrepresentation.

6) The party complaining of misrepresentation cant avoid the contract if he had the means

to discover the truth with ordinary deligance. But in the case of fraud, the party making a falsestatement cannot say that the other party had the means to discover the truth with ordinary

deligance.

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Q.2.What are the remedies for breach of contract.Ans.

REMEDIES FOR BREACH OF CONTRACT

Remedies for breach of contract being a fountainhead of a correlative set of rights andobligations for the parties, would be of no value, if there were no remedies to enforce the rights

arising there under. The party committing breach of contract is called the guilt party and the

other party is called the injured or aggrieved party. In case of breach of contract, theaggrieved party would have one or more, butnot all, of the following remedies against the guilty

party.The remedies are:

1. Suit for rescission,

2. Suit for damages,

3. Suit for quantum meruit,

4. Suit for specific performance,

5. Suit for injunction,

1. Suit for rescission :

The breach of contract no doubt discharges the contract, but the aggrieved party may

sometimes need to approach the court to grant him a formal rescission, i.e. cancellation, of the

contract. This will enable him to be free from his own obligations under the contract.

2. Suit for damages :

The word damages means monetary compensation for loss suffered. Whenever a

breach of contract takes place, the remedy of damages is the one that comes to mindimmediately as the consequence of breach. A breach of contract may put the aggrieved party

to some disadvantage or inconvenience or may cause a loss to him. The court would desire the

guilty part to accept responsibility for any such loss of the aggrieved party and compensatehim adequately. The quantum of damages is determined by the magnitude of loss caused by

breach.

3. Suit for quantum meruit :The term quantum meruit means as much as earned. It implies a payment deserved

by a person for the reason of actual work done. When a party has done some work under a

contract, and the other party repudiates the contract or somehow the full performance of thecontract becomes impossible, then the party who has done the work can claim remuneration

for the work under a suit for quantum meruit. Likewise, where one party has expressly or

impliedly requested another to render him a service without specifying any remuneration, but

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the circumstances of the request imply that the service is to be paid for, there is implied a

promise to pay quantum meruit. Even in the case of where the person who has done the

work is the one who is guilty of breach of contract, he too is entitled to be paid quantummeruit. But there is an exception such a contract must have involved work that was

indivisible and it must not have been a contract for lumpsum remuneration.

4. Suit for specific performance:

In certain cases of breach of a contract, damages may not be an adequate

remedy. Then the Court may direct the party in breach to carry out his promise according to

he terms of the contract. This is a direction by the Court for specific performance of the

contract at the suit of the party not in breach. But in general, Courts do not wish to compel aparty to do that which he has already refused to do.

Chapter 2 of the Specific Relief Act,1963 lays down detailed rules on the specific performanceof Contracts. Cases where specific performance may be ordered:

(i) Where there exists no standard for ascertaining the actual damage caused to

the aggrieved party by the non- performance(ii) Where monetary compensation will not be adequate relief. Example a

contract for sale of a rare antique

(iii) Where plaintiffs property is held by the defendant in the capacity of his

agent or trustee(iv) Where the act to be done is in performance of trust

Cases where specific performance will not be ordered:

(i) Where monetary compensation is adequate relief(ii) Where contract is made by the agent or trustee in violation of his powers

(iii) Where the contract is of a personal nature, such as a contract to marry or a contract

of service(iv) Where the court cannot supervise the performance of promise as it involves

performance of a continuous duty

(v) Where the contract is in its nature revocable(vi) Where the contract is made by a company in excess of its powers as laid

down in its Memorandum of Association

5. Suit for injunction :

Injunction is a court order or decree to a person asking him to refrain from doing a

contemplated act or from continuing an ongoing act. Such an order of injunction becomes aremedy for the aggrieved party when the court orders the guilty party to refrain from doing

precisely that which is causing the breach of contract. In a way, injunction is a mode of securingthe specific performance of the negative terms of a contract. But for the performance of thepositive terms of the contract, the aggrieved party may seek other remedies like damages.

BUYERS REMEDIES AGAINST SELLER

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The buyer has the following rights against the seller for breach of contract: (i) damages

for non-delivery; (ii) right of recovery of the price; (iii) specific performance ; (iv) suit for breach

of condition; (v) suit for breach of warranty ; (vi) anticipatory breach; (vii) recovery of interest .)Q.3.Distinguish between indemnity and guarantee.

Ans.

INDEMNITY

For a contract of indemnity provides that a contract of indemnity is a contract whereby

one party promises to save the other from loss caused to him (the promisee) by the conduct of the

promisor himself or by the conduct of any other person. A contract of insurance is a glaring

example of such type of contracts.

A contract of indemnity may arise either by (i) an express promise or (ii) operation of

law, e.g. the duty of a principal to indemnify an agent from consequences of all lawful acts done

by him as an agent. The contract of indemnity, like any other contract, must have all the

essentials of a valid contract. These are two parties in a contraction of indemnifier and

indemnified. The indemnifier promises to make good the loss of the indemnified (i.e. the

promisee).

GUARANTEE

In law and common usage: A promise to answer for the payment of some debt, or the

performance of some duty, in case of the failure of another person, who is, in the first instance,

liable to such payment or performance, an engagement which secure or insures another against a

contingency, a warranty, a security. Same as guaranty.

Difference between indemnity and guarantee:-

There are distinguishing differences between Indemnity and Guarantee in the Indian Contract

Act.

Section 124 of the Indian Contract Act, 1872 defines the "Contract of Indemnity". It is a

contract by which one party promises to save the other from loss caused to him by the contract of

the promissory himself, or by the conduct of any other person. 'A' contracts to indemnify B

against the consequences of any proceedings which C may take against B in respect of a certain

sum of 20000 rupees. This is a contract of indemnity.

A contract of guarantee is defined in Section 126 of the Act. It is a contract to perform

the promise, or discharge the liability, of a third person in case of his default. The person who

gives the guarantee is called the surety; the person in respect of whose default the guarantee is

given is called the principal debtor and the person to whom the guarantee is given is called the

creditor.

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In contract of indemnity there are only two parties viz the indemnifier or provisory and

the indemnity holder or promise. In contract of guarantee there are three parties viz the creditor,

principal debtor and surety.

In indemnity, there is primary and independent liability. In guarantee the surety has

collateral liability.

There is no existing debt generally in the case of contract of indemnity where there is

existing debt in the case of guarantee.

There are two contracts in a contract of indemnity where there are three contracts in the

case of guarantee.

In Indemnity the promissory is discharged by payment. In guarantee the surety is

discharged by payment made by principal debtor.

Indemnifier may have some interest in the transaction where the surety will not have any

connection with the transaction.

Indemnity Guarantee

Comprise only two parties- the

indemnifier and the indemnity holder.

There are three parties namely the surety,

principal debtor and the creditor

Liability of the indemnifier is primary 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 indemnifier need not necessarily act

at the request of the indemnified.

The surety give guarantee only at the

request of the principal debtor.

The possibility 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 the

surety.

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Q.4.What is the distinction between cheque and bill of exchange.Ans.

Cheques and bills of exchange are negotiable instruments and have been used by many people worldwide for many decades. Understanding these two instruments would be a

fundamental task for any person who wishes to undertake banking as a career or even a past time

activity.

WHAT IS A NEGOTIABLE INSTRUMENT?

The term negotiable instrument literally means a written document transferable by

delivery. It can be a promissory note, bill of exchange or check payable either to order or to a

bearer.

BILL OF EXCHANGE

A bill of exchange is defined by Sec.5 as an instrument in writing, containing anunconditional order, signed by the maker, directing a certain person to pay a certain sum of

money only to or to the order of, a certain person, or to the bearer of the instrument.

CHEQUES

A cheque is the usual method of withdrawing money from a current account with abanker. Savings bank accounts are also permitted to be operated by cheques provided certain

minimum balance is maintained. A cheque, in essence, is an order by the customer of the bank

directing his banker to pay on demand, the specified amount, to or to the order of the personnamed therein or to the bearer. Sec.6 defines a cheque. The Amendment Act 2002 has substituted

new section for Sec.6. It provides that a cheque is a bill of exchange drawn on a specified

banker and not expressed to be payable otherwise than on demand and it includes the electronicimage of a truncated cheque and a cheque in the electronic from.

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Q.5.Distinguish between companies limited by shares and companies limited by guarantee.Ans.

A company limited by guarantee is normally incorporated for non-profit makingfunctions. The company has no share capital. A company limited by guarantee has members

rather than shareholders. The members of the company guarantee/undertake to contribute a

predetermined sum to the liabilities of the company which becomes due in the event of thecompany being wound up. The Memorandum normally includes a non-profit distribution clause

and these companies are usually formed by clubs, professional, trade or research associations.

The main difference between a company limited by guarantee and a company limited by sharesis that the company has no share capital.

A Company limited by guarantee is a lesser known type of business entity which is

generally formed by non-profit purposes and has members instead of shareholders. There are

both some similarities and differences between the two groups. Members and shareholders enjoy

limited liability, however in cases where a share based company is liquidated; the latter might berequired to pay all amounts of unpaid monies relating to the shares they hold. For example, if an

individual shareholder holds 100 shares of Rs.100 each, all of which remains unpaid at the time

of dissolution, then they would be required to pay Rs.10000 to the company. Most companieslimited by guarantee have a constitution which states that each member is only required to pay

Rs.100 should it be dissolved. Assuming that an average shareholder holds more than one share

in a company, members in a business limited by guarantee do appear to have less risk attached totheir positions.

PROFIT MAKING STATUS

Perhaps the most fundamental difference between the two types oflimited companies is that

those with shares generally exist for profit making purposes. Companies limited by guarantee

however, are non-profit making organisations and are usually registered to provide a specifiedservice to the public or a particular segment of the population. The memorandum and articles of

Cheque Bill of Exchange

It is drawn on a banker It may be drawn on any party or

individual

It has three parties - the drawer, the drawee,

and payee.

It has three parties - the drawer, the drawee, and

payee.

It is seldom drawn in sets Foreign bills are drawn in sets

It does not require acceptance by the drawee. It must be accepted by the drawee before hecan be made liable to pay the bill

Days of grace are not allowed to a banker tothe drawee.

Three days of grace are always allowed

No stamp duty is payable on checks Stamp duty has to be paid on bill of exchange.

It is usually drawn on the printed It may be drawn in any paper and need

not necessarily be printed.

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association of each would also differ as companies limited by shares usually have very general

objects clauses which allow them to pursue any legal trade or activity.

OBJECTS OF COMPANIES LIMITED BY GUARANTEE

Companies limited by guarantee however, often have very specific objects and detailed

rules pertaining to which areas they can engage in. Charities, which are often of this type, mighthave restrictions imposed on them by their major donors who wish to ensure that their donationswill be spent according to their wishes and not in a manner which they would not approve

REMOVING THE WORD LIMITED

Companies limited by guarantee can have the word limited removed from their name under

section 30 of the Companies Act.

COMPANY DIRECTORS, SECRETARY AND DECLARANT

Both types of companies are bound by the same requirements to have at least one

director, asecretary and adeclarant at the time of incorporation and throughout any period of its

existence. When forming a company limited by guarantee, members are listed in the same

manner in which shareholders would be, even though no allotments are made to them.

Q.6.What is the definition of cyber crime.Ans.

Computer crime, or cyber crime, refers to any crime that involves a computer and a

network. The computer may have been used in the commission of a crime, or it may be thetarget. Net crime refers, more precisely, to criminal exploitation of the Internet. Issues

surrounding this type of crime have become high-profile, particularly those surrounding hacking,

copyright infringement, child pornography, and child grooming. There are also problems ofprivacy when confidential information is lost or intercepted, lawfully or otherwise. Cyber crime

includes anything from downloading illegal music files to stealing millions of dollars fromonline bank accounts. Cyber crime also includes non-monetary offences, such as creating and

distributing viruses on other computers or posting confidential business information on theInternet.

Perhaps the most prominent form of cyber crime is identity theft, in which criminals use

the Internet to steal personal information from other users. Two of the most common ways this is

done is through phishing and pharming. Both of these methods lure users to fake websites, wherethey are asked to enter personal information. This includes login information, such as usernames

and passwords, phone numbers, addresses, credit card numbers, bank account numbers, and

other information criminals can use to "steal" another person's identity. For this reason, it is

smart to always check the URL or Web address of a site to make sure it is legitimate beforeentering your personal information.

CYBERCRIME

Cybercrime is defined as crimes committed on the internet using the computer as either a

tool or a targeted victim. It is very difficult to classify crimes in general into distinct groups asmany crimes evolve on a daily basis. Even in the real world, crimes like rape, murder or theft

need not necessarily be separate. However, all cybercrimes involve both the computer and the

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person behind it as victims, it just depends on which of the two is the main target. Hence, the

computer will be looked at as either a target or tool for simplicitys sake. For example, hacking

involves attacking the computers information and other resources. It is important to take notethat overlapping occurs in many cases and it is impossible to have a perfect classification system.

Computer as a tool

When the individual is the main target of Cybercrime, the computer can be considered asthe tool rather than the target. These crimes generally involve less technical expertise as the

damage done manifests itself in the real world. Human weaknesses are generally exploited. The

damage dealt is largely psychological and intangible, making legal action against the variantsmore difficult. These are the crimes which have existed for centuries in the offline. Scams, theft,

and the likes have existed even before the development in high-tech equipment. The same

criminal has simply been given a tool which increases his potential pool of victims and makeshim all the harder to trace and apprehend.

Computer as a target

These crimes are committed by a selected group of criminals. Unlike crimes using he

computer as a tool, these crimes requires the technical knowledge of the perpetrators. Thesecrimes are relatively new, having been in existence for only as long as computers have - which

explains how unprepared society and the world in general is towards combating these crimes.

There are numerous crimes of this nature committed daily on the internet. But it is worthknowing that Africans and indeed Nigerians are yet to develop their technical knowledge to

accommodate and perpetrate this kind of crime.

Cyber crime encompasses any criminal act dealing with computers and networks (calledhacking). Additionally, cyber crime also includes traditional crimes conducted through the

Internet. For example; hate crimes, telemarketing and Internet fraud, identity theft, and credit

card account thefts are considered to be cyber crimes when the illegal activities are committedthrough the use of a computer and the Internet. Crime committed using a computer and the

internet to steal a person's identity or sell contraband or stalk victims or disrupt operations with

malevolent programs

MODE AND MANNER OF COMMITING CYBER CRIME

1. Unauthorized access to computer systems or networks / Hacking-

This kind of offence is normally referred as hacking in the generic sense. However the

framers of the information technology act 2000 have no where used this term so to avoid any

confusion we would not interchangeably use the word hacking for unauthorized access asthe latter has wide connotation.

2. Theft of information contained in electronic form-

This includes information stored in computer hard disks, removable storage media etc.Theft may be either by appropriating the data physically or by tampering them through the

virtual medium.

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3. Email bombing-

This kind of activity refers to sending large numbers of mail to the victim, which may bean individual or a company or even mail servers there by ultimately resulting into crashing.

4. Data diddling-

This kind of an attack involves altering raw data just before a computer processes it andthen changing it back after the processing is completed. The electricity board faced similar

problem of data diddling while the department was being computerised.

5. Virus / worm attacks-Viruses are programs that attach themselves to a computer or a file and then circulate

themselves to other files and to other computers on a network. They usually affect the data

on a computer, either by altering or deleting it. Worms, unlike viruses do not need the host toattach themselves to. They merely make functional copies of themselves and do this

repeatedly till they eat up all the available space on a computer's memory. E.g. love bug

virus, which affected at least 5 % of the computers of the globe. The world's most famous

worm was the Internet worm let loose on the Internet by Robert Morris sometime in 1988.Almost brought development of Internet to a complete halt.

SET - 2

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Q.1.What is the situations which cannot be referred to arbitration.Ans.

Arbitration law is a process that involves the assistance of one or more neutral parties

known as arbitrators. Arbitrators are charged with hearing evidence from numerous involved

parties in a dispute, and their main duty is to issue an award deciding who gets what in order to

resolve the situation. In some instances of arbitration law, an arbitrator may also issue an opinion

in conjunction with the award, which is designed to explain the award and the reasoning that led

to it. Arbitration law and mediation law are two different processes and should not be confused.

The award and the opinion are not capable of being reviewed by a court, and there is no

availability for appeal. The purpose of arbitration law is to serve as a substitution to a trial and a

review of the decision by a trial court.

Subject matter of arbitration:

Any commercial matter including an action in tort if it arises out of or relates to a

contract can be referred to arbitration. However, public policy would not permit matrimonial

matters, criminal proceedings, insolvency matters anti-competition matters or commercial court

matters to be referred to arbitration. Employment contracts also cannot be referred to arbitration

but director - company disputes are abatable (as there is no master servant relationship here)5.

Generally, matters covered by statutory reliefs through statutory tribunals would be non-

abatable.

Arbitration is an Alternative Dispute Resolution process whereby a person chosen as an

arbitrator settles disputes between parties. Arbitration is similar to a court trial, with several

exceptions:

The arbitrator makes the decision called an "arbitration award

The arbitration does not take place in a courtroom

The arbitration award is binding. With rare exceptions, there is no right to appeal

Arbitration is not a matter of public record. It is private and confidential

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There is no court reporter or written transcripts

Lawyers generally prepare their cases in an extremely limited manner

The rules of evidence are relaxed so that the parties have a broader scope, more

expanded opportunity to tell their stories to present their cases

With very few exceptions, it is much less expensive than legal litigation

An arbitration time frame is substantially less than that of litigation and going to trial

No jury. The Arbitrator(s) maintain neutrality and conflicts of interests

Generally, all paperwork and evidence presented are destroyed after the Arbitration

The arbitration and arbitration award does not have to adhere to Judicial Case

precedent nor formality of traditional court proceedings

In India, Arbitration is one of the most effective and trusted proceedings in regard to

private dispute settlement are guided by the Arbitration & Conciliation Act, 1996.

Kind of matters cannot be referred for arbitration:

As per general practice, matters involving moral questions or questions of public law

cannot be resolved by arbitration. For instance, the following matters are not referred to

arbitration:

Matrimonial matters

Guardianship of a minor or any other person under disability

Testamentary matters

Insolvency, proceedings

Criminal proceedings

Questions relating to charity or charitable trusts

Matters relating to anti-trust or competition law

Dissolution or winding up of a company

Indian Arbitration Act follows the guideline of:

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The Geneva Convention on the Execution of Foreign Arbitral Awards, 1927

The New York Convention of 1958 on the Recognition and Enforcement of Foreign

Arbitral Awards

The Geneva Protocol on Arbitration Clauses of 1923

Q.2.What is the role of a Conciliator.Ans.

Conciliation:

Conciliation is a process in which the parties to a dispute, with the assistance of a neutral

third party (the conciliator), identify the disputed issues, develop options, consider alternatives

and endeavour to reach an agreement. The conciliator may have an advisory role on the content

of the dispute or the outcome of its resolution, but not a determinative role. The conciliator may

advise on or determine the process of conciliation whereby resolution is attempted, and may

make suggestions for terms of settlement, give expert advice on likely settlement terms, and may

actively encourage the participants to reach an agreement.

In order to understand what Parliament meant by Conciliation, we have necessarily to

refer to the functions of a Conciliator as visualized by Part III of the 1996 Act. It is true, section

62 of the said Act deals with reference to Conciliation by agreement of parties but sec. 89

permits the Court to refer a dispute for conciliation even where parties do not consent, provided

the Court thinks that the case is one fit for conciliation. This makes no difference as to the

meaning of conciliation under sec. 89 because; it says that once a reference is made to a

conciliator, the 1996 Act would apply. Thus the meaning of conciliation as can be gathered

from the 1996 Act has to be read into sec. 89 of the Code of Civil Procedure. The 1996 Act is, it

may be noted, based on the UNCITRAL Rules for conciliation.

Role of conciliator:

The conciliator shall assist the parties in an independent and impartial manner in theirattempt to reach an amicable settlement of their dispute.

The conciliator shall be guided by principles of objectivity, fairness and justice, givingconsideration to, among other things, the rights and obligations of the parties, the usages

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of the trade concerned and the circumstances surrounding the dispute, including any

previous business practices between the parties.

The conciliator may conduct the conciliation proceedings in such a manner as he

considers appropriate, taking into account the circumstances of the case, the wishes the

parties may express, including any request by a party that the conciliator hear oral

statements, and the need for a speedy settlement of the dispute. The conciliator may, at any stage of the conciliation proceedings, make proposals for a

settlement of the dispute. Such proposals need not be in writing and need not beaccompanied by a statement of the masons therefore.

Conciliators do not:

Make decisions for disputing parties

Make judgments about who is right, who is wrong or what the outcome of the disputeshould be.

Tell people what to do

Make rulings Force parties to participate in the conciliation process.

Q.3.What are the unfair trade practices under the MRTP Act.Ans.

THE MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969 -

OBJECTIVES AND POLICY:

The Monopolies and Restrictive Trade Practices Commission has been constituted under

Section 5(1) of the MRTP Act, 1969. The Commission is empowered to enquire into

Monopolistic or Restrictive Trade Practices upon a reference from the Central Government or

upon its own knowledge or information. The MRTP Act also provides for appointment of a

Director General of Investigation and Registration for making investigations for the purpose of

enquiries by the MRTP Commission and for maintenance of register of agreements relating to

restrictive trade practices.

The MRTP Commission receives complaints both from registered consumer and trade

associations and also from individuals. Complaints regarding Restrictive Trade Practices or

Unfair Trade Practices from an association are required to be referred to the Director General of

Investigation and Registration for conducting preliminary investigation. The Commission can

also order a preliminary investigation by the Director General of Investigation and Registration

when a reference on a restrictive trade practice is received from the Central/State Government, or

when Commission's own knowledge warrants a preliminary investigation. Enquiries are

instituted by the Commission after the Director General of Investigation and Registration

completes preliminary investigation and submits an application to the Commission for an

enquiry.

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Unfair Trade Practices:

An unfair trade practice means a trade practice, which, for the purpose of promoting any

sale, use or supply of any goods or services, adopts unfair method, or unfair or deceptive

practice.

1) False Representation:

The practice of making any oral or written statement or representation which:

Falsely suggests that the goods are of a particular standard quality, quantity, grade,

composition, style or model;

Falsely suggests that the services are of a particular standard, quantity or grade;

Falsely suggests any re-built, second-hand renovated, reconditioned or old goods as new

goods;

Represents that the goods or services have sponsorship, approval, performance,

characteristics, accessories, uses or benefits which they do not have;

Represents that the seller or the supplier has a sponsorship or approval or affiliation

which he does not have;

Makes a false or misleading representation concerning the need for, or the usefulness of,

any goods or services;

Gives any warranty or guarantee of the performance, efficacy or length of life of the

goods, that is not based on an adequate or proper test;

Makes to the public a representation in the form that purports to be-

warranty or guarantee of the goods or services,

a promise to replace, maintain or repair the goods until it has achieved a specified

result,

If such representation is materially misleading or there is no reasonable prospect that

such warranty, guarantee or promise will be fulfilled

Materially misleads about the prices at which such goods or services are available in the

market; or

Gives false or misleading facts disparaging the goods, services or trade of another person.

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2) False Offer Of Bargain Price:

Where an advertisement is published in a newspaper or otherwise, whereby goods or

services are offered at a bargain price when in fact there is no intention that the same may be

offered at that price, for a reasonable period or reasonable quantity, it shall amount to an unfair

trade practice. The bargain price, for this purpose means:

the price stated in the advertisement in such manner as suggests that it is lesser than the

ordinary price, or

The price which any person coming across the advertisement would believe to be better

than the price at which such goods are ordinarily sold.

3) Free Gifts Offer And Prize Scheme:

The unfair trade practices under this category are:

Offering any gifts, prizes or other items along with the goods when the real intention is

different, or

Creating impression that something is being offered free along with the goods, when in

fact the price is wholly or partly covered by the price of the article sold, or

Offering some prizes to the buyers by the conduct of any contest, lottery or game of

chance or skill, with real intention to promote sales or business.

4) Non-Compliance Of Prescribed Standards:

Any sale or supply of goods, for use by consumers, knowing or having reason to believe

that the goods do not comply with the standards prescribed by some competent authority, in

relation to their performance, composition, contents, design, construction, finishing or packing,

as are necessary to prevent or reduce the risk of injury to the person using such goods, shallamount to an unfair trade practice.

5) Hoarding, Destruction, Etc.:

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Any practice that permits the hoarding or destruction of goods, or refusal to sell the goods

or provide any services, with an intention to raise the cost of those or other similar goods or

services, shall be an unfair trade practice.

6) Inquiry Into Unfair Trade Practices:

The Commission may inquire into any unfair trade practice:

Upon receiving a complaint from any trade association, consumer or a registered

consumer association, or

Upon reference made to it by the Central Government or State Government

Upon an application to it by the Director General or

Upon its own knowledge or information.

Relief Available:

After making an inquiry into the unfair trade practices if the Commission is of the

opinion that the practice is prejudicial to the pubic interest, or to the interest of any consumer it

may direct that?

The practice shall be discontinued or shall not be repeated;

The agreement relating thereto shall be void in respect of such unfair trade practice or

shall stand modified.

Any information, statement or advertisement relating to such unfair trade practice shallbe disclosed, issued or published as may be specified

The Commission may permit the party to carry on any trade practice to take steps toensure that it is no longer prejudicial to the public interest or to the interest of the

consumer.

However no order shall be made in respect a trade practice which is expressly authorized

by any law in force. The Commission is empowered to direct publication of correctiveadvertisement and disclosure of additional information while passing orders relating to unfair

trade practices.

Q.4.What are essentials of a valid offer.

Ans.

OFFER

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A proposal is an expression of will or intention to do or not to do something. It is also

called an "offer". It is one of the essential elements of an agreement. It is the very basis of the

contract. It becomes a promise when it accepted. Section 2 (a) of the Contract Act defines theproposal as "when one person signifies to another his willingness to do or to abstain from doing

anything, with a view to obtaining the assent of that other, to such act or abstinence, he is said to

make a proposal". The person making the proposal is called the proposer or offer or thepromisor. The person to whom the proposal is made is called the offeree or promisee.

For example; Sunil offers to sell his car to Padmaja for Rs. 50000. This is a proposal. Sunil is the

offeror and Padmaja is the offeree.

An offer may be express or implied. An offer which is expressed by words, written or

spoken, is called an express offer. An offer which is expressed by conduct is called an implied

offer. An offer may be positive or negative. It may be in the form of a statement or a question.for example; Sridhar says to Radhika that he will sell his scooter to her for Rs.20000. This is an

express offer. The Karnataka State Road Transport Corporation runs omnibuses on various

routes to carry passengers at the scheduled fares. This is an implied offer by KSRTC. The offer

must be made in order to create legal relations otherwise there will be an agreement. If an offerdoes not give rise to legal obligations between the parties it is not a valid offer in the eye of law.

In business transactions there is a presumption that the parties propose to make legalrelationships. For example a person invite to another person to diner if the other person accepts

the invitation then it is not any legal agreement between the parties it is social agreement.

An offer must be definite and clear. If the terms of an offer are not definite and clear it

cannot be called a valid offer. If such offer is accepted it cannot create a binding contract. An

agreement to agree in future is not a contract because the terms of an agreement are not clear. A

person has two motorbikes. He offers to another person to sell his one bike for a certain price

then it is not a legal and valid offer because there is an ambiguity in the offer that whichmotorcycle the person wants to sell. There is a difference between the offer and invitation of

offer. Sometime people offer the invitation for the sale.

Essentials of a valid offer:

A valid offer must intend to create legal relations. It must not be a casual statement. If theoffer is not intended to create legal relationship, it is not an offer in the eyes of law e.g. Sunil

invites Sridhar to a dinner party and Sridhar accepts the invitation. Sridhar does not turn up

at the dinner party. Sunil cannot sue Sridhar for breach of contract as there was no intentionto create legal obligation. Hence, an offer to perform social, religious or moral acts without

any intention of creating legal relations will not be a valid offer.

The terms of an offer must be definite, unambiguous and certain. They must not be looseand vague. A promise to pay an extra Rs. 500 if a particular house proves lucky is too vague

to be enforceable. E.g. Sridhar says to Sunil "I will give you some money if you marry my

daughter". This is not an offer which can be accepted because the amount of money to be

paid is not certain.

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An offer may be made to a definite person or to the general public. When offer is made to a

definite person or to a special class of persons, it is called "specific offer". When an offer ismade to the world at large or public in general, it is called "general offer". A specific offer

can be accepted only by that person to whom it has been made and a general offer can be

accepted by any person. E.g. Sunil promises to give Rs.100 to Sridhar, if he brings back his

missing dog. This is a specific offer and can only be accepted by Sridhar. Sunil issues apublic advertisement to the effect that he would give Rs.100 to anyone who brings back his

missing dog. This is a general offer. Any member of the public can accept this offer by

searching for and bringing back Sunil's missing dog.

An offer to do or not to do must be made with a view to obtaining the assent of the other

party. Mere enquiry is not an offer.

An offer should may contain any term or condition. The offeror may prescribe any mode of

acceptance. But he cannot prescribe the form or time of refusal so as to fix a contract on theacceptor. He cannot say that if the acceptor does not communicate his acceptance within a

specified time, he is deemed to have accepted the offer.

The offeror is free to lay down any terms any terms and conditions in his offer. If the otherparty accepts it, then he has to abide by all the terms and conditions of the offer. It is

immaterial whether the terms and conditions were harsh or ridiculous. The special terms or

conditions in an offer must be brought to the notice of the offeree at the time of making aproposal.

An offer is effective only when it is communicated to the offeree. Communication is

necessary whether the offer is general or specific. The offeror may communicate the offer bychoosing any available means such as a word of mouth, mail, telegram, messenger, a written

document, or even signs and gestures. Communication may also be implied by his conduct.

A person can accept the offer only when he knows about it. If he does not know, he cannot

accept it. An acceptance of an offer, in ignorance of the offer, is no acceptance at all.

It should be noted that an invitation to offer is not an offer. The following are only invitations to

offer but not actual offers:

Invitations made by a trade for the sale of goods.

A price list of goods for sale.

Quotations of lowest prices.

An advertisement to sell goods by auction.

An advertisement inviting tenders.

Display of goods with price-tags attached.

Railway time-table.

Prospectus issued by a company.

Loud speaker announcements.

Q.5.Find out a case where a person appealed under the Consumer protection Act and won.

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Ans.

CONSUMER PROTECTION ACT 1986 ( CPA) IN INDIA

The Consumer Protection Act, 1986 was enacted for better protection of the interests of

consumers. The provisions of the Act came into force with effect from 15-4-87. ConsumerProtection Act imposes strict liability on a manufacturer, in case of supply of defective goods by

him, and a service provider, in case of deficiency in rendering of its services. The term defect

and deficiency, as held in a catena of cases, are to be couched in the widest horizon of therebeing any kind of fault, imperfection or shortcoming. Furthermore, the standard, which is

required to be maintained, in services or goods is not to be restricted to the statutory mandate but

shall extend to that claimed by the trader, expressly or impliedly, in any manner whatsoever.

The salient features of the Act are:

(I) it covers all the sectors whether private, public, and cooperative or any person. The provisions

of the Act are compensatory as well as preventive and punitive in nature and the Act applies to

all goods covered by sale of goods Act and services unless specifically exempted by the CentralGovernment;

(II) It enshrines the following rights of consumers:

(a) right to be protected against the marketing of goods and services which are hazardous to lifeand property; (b) right to be informed about the quality, quantity, potency, purity, standard and

price of goods or services so as to protect the consumers against unfair trade practices; (c) right

to be assured, wherever possible, access to a variety of goods and services at competitive prices;(d) right to be heard and to be assured that consumers interests will receive due consideration at

the appropriate fora; (e) right to seek redressal against unfair trade practices or unscrupulous

exploitation of consumers; and (f) right to consumer education;

(III) The Act also envisages establishment of Consumer Protection Councils at the central, stateand district levels, whose main objectives are to promote and protect the rights of consumers; (v)

To provide a simple, speedy and inexpensive redressal of consumer grievances, the Act

envisages a three-tier quasi-judicial machinery at thenational, state and district levels. These are:

National Consumer Disputes Redressal Commission known as National Commission, StateConsumer Disputes Redressal Commissions known as State Commissions and District Consumer

Disputes Redressal Forum known as District Forum; and

(IV) the provisions of this Act are in addition to and not in derogation of the provisions of any

other law for the time being in force.

Purview of a complaint

According to the CPA, Complaint means any of the following allegations made in writing by a

complainant-

i. any unfair trade practice or a restrictive trade practice has been adopted by a trader,ii. the goods hired or bought suffer from one or more defects

iii. The goods hired or availed of are deficient in any respect

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iv. A trader has charged price in excess of price fixed by law or displayed on the goods or any

package containing goods

v. Goods which will be hazardous to life and safety when used, are being offered for sale to thepublic in contravention of the provisions of any law requiring traders to display information in

regard to the contents, manner and effect or use of such goods.

Validity of Limitation of liability clauses

Contractual liability has a role to play in product liability claims under the CPA. Courts

in India have upheld limitation of liability clauses, which parties have specifically agreed to in

the contract as recognized by the Supreme Court in Bharathi Knitting Company v DHLWorldwide Express Courier (1996) 4 SCC 704. However, such clauses may be struck down if

found to be unconscionable in nature. In Maruti Udyog v. Susheel Kumar Gabgotra, [(2006) 4

SCC 644], the manufacturer of the vehicle had stipulated a warranty clause limiting its liabilityto merely repair the defects found if any. In view of this clause, the Supreme Court reversed the

findings of the National Commission to replace the defective goods and held that the liability of

the manufacture was confined to repairing the defect. Compensation was, however, awarded for

travel charges to the complainant, which was incurred due to the fault of the car manufacturer.Applicability of other laws

Section 3 of the CPA provides that the Act is in addition to and not in derogation of any

other law. The Supreme Court in Secretary, Thirumurugan Co-operative Agricultural Credit

Society v. M. Lalitha, [(2004) 1 SCC 305] has interpreted the above provision to mean that theremedies provided under the CP Act are in addition to the remedies provided under other

statutes. Hence, the fact that a remedy is specifically provided for under another statute would

not necessarily oust the jurisdiction of the appropriate authority under the CP Act. It has beenfurther held that if forums under one statute and the CP Act are approached, then it is for the

appropriate authority to permit the parties to opt between the consumer forum and the other

forum, depending on the facts and circumstances of the case.

Establishment of Consumer forums

At present, there are 34 State Commissions, one in each State/UT and 571 district fora

besides the National Commission. The state governments are responsible to set up the district

fora and the State Commissions. States have been empowered to establish additional DistrictForum and also additional members in the State Commission to facilitate constituting benches

and also for holding circuit benches. The Central Government is empowered to establish the

National Commission. It has been empowered to appoint additional members to facilitatecreation of more benches and holding of circuit benches. The second bench of the National

Commission started functioning from 24 September 2003. The government is monitoring the

disposal of cases by the consumer courts through National Commission. As per the currentstatistics, since its inception and up to 5.9.2008 , 2559451 cases were filed out of which 2327035

cases were disposed of by the District forums in various states of India .

Q.6. What does the Information Technology Act enable.

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Ans.

Information Technology Act:

In May 2000, at the height of the dot-com boom, India enacted the IT Act and became

part of a select group of countries to have put in place cyber laws. In all these years, despite the

growing crime rate in the cyber world, only less than 25 cases have been registered under the IT

Act 2000 and no final verdict has been passed in any of these cases as they are now pending with

various courts in the country. Although the law came into operation on October 17, 2000, it still

has an element of mystery around it. Not only from the perception of the common man, but also

from the perception of lawyers, law enforcing agencies and even the judiciary.

The prime reason for this is the fact that the IT Act is a set of technical laws. Another

major hurdle is the reluctance on the part of companies to report the instances of cyber-crimes, as

they don't want to get negative publicity or worse get entangled in legal proceedings. A major

hurdle in cracking down on the perpetrators of cyber-crimes such as hacking is the fact that most

of them are not in India. The IT Act does give extra-territorial jurisdiction to law enforcement

agencies, but such powers are largely inefficient. This is because India does not have reciprocity

and extradition treaties with a large number of countries.

The Indian IT Act also needs to evolve with the rapidly changing technology

environment that breeds new forms of crimes and criminals. We are now beginning to see new

categories and varieties of cyber-crimes, which have not been addressed in the IT Act. This

includes cyber stalking, cyber nuisance, cyber harassment, cyber defamation and the like.

Though Section 67 of the Information Technology Act, 2000 provides for punishment to

whoever transmits or publishes or causes to be published or transmitted, any material which is

obscene in electronic form with imprisonment for a term which may extend to two years and

with fine which may extend to twenty five thousand rupees on first convection and in the event

of second may extend to five years and also with fine which may extend to fifty thousand rupees,it does not expressly talk of cyber defamation. The above provision chiefly aim at curbing the

increasing number of child pornography cases and does not encompass other crimes which could

have been expressly brought within its ambit such as cyber defamation.