mb0051-legal aspects business

ASSIGNMENT SET - 1

LC CODE :- 02014

NAME :- Atul Upadhyay

ROLL NO. :- 521158436

COURSE :- MASTER OF BUSINESS ADMINISTRATION

SEMESTER :- 3

SUBJECT :- LEGAL ASPECTS OF BUSINESS

SUBJECT :- MB0051CODE

MASTER OF BUSINESS ADMINISTRATION

MBA SEMESTER – 3

MB0051 – LEGAL ASPECTS BUSINESS

ASSIGNMENT SET – 1

QUE NO.

QUESTION ANSWER PAGE

1“All agreements are not contracts, but all

contracts are agreements”. Comment.3-5

2What are the essentials of a contract of sale

under the sale of Goods Act, 1930?6

3Describe the main features of Consumer

Protection Act 1986.7-8

4What are the duties and powers of an ‘authorized

person’ under FEMA, 1999?9-10

5What do you mean by Memorandum of

Association? What does it contain?11-12

6

Write a note on the following:

(a) Copy Right Act

(b) Pledge

13

14

MB0051 – LEGAL ASPECTS BUSINESS 2

QUESTION – 1:- “All agreements are not contracts, but all contracts are agreements”. Comment.

ANSWER – 1:-

“All agreements are not contracts, but all contracts are agreements”

For the illustration of above mentioned statement we need clear concept

about contract and agreement. If we clear the concept about contract and

agreement, we can easily say that, “All contracts are agreement, but all

agreements are not contracts”.

The Contract Act, 1872, provides the definition of contract. According to

section 2 (h) of the Contract Act, 1872, “An agreement enforceable by law is

a contract.”

If we analyze the definition of the contract mentioned above, we get two

fundamental characteristics or features, viz.-

i) Agreement between the parties and

ii) This agreement must be enforced by law.

So agreement is the first step of contract. But after making agreement, it

may be enforceable by law or may not be enforceable at law. If that

agreement is enforced by law then it will be treated or turned into contract,

But if the agreement is not enforced by law that will not be treated as a

contract but merely an agreement. So all contracts are agreement, but all

agreements are not contract.

For example: - A minor “X” has agreed to sell an apartment that he has

inherited to his father, to another person named “Y”. Here, this will be called

agreement but not a contract. Because according to the law of contract, a

minor is not capable of entering into a contract. So this agreement is not

enforced by law. But from the definition of contract we know- every

agreement enforced at law is a contract. So, all contracts are agreement but

all agreements are not contract.

Unlawful consideration may create agreement but not a contract:-

Section 2(e) provides that- every promise and every set of promises, forming

consideration for each other, is an agreement.

Apart from this, section 2(a) and 2(b) provides that “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.” And when the person to whom the proposal is

made signifies his assent there to, the proposal is said to be accepted. A

proposal, when accepted becomes a promise. The person who making the

proposal is called- “promisor” and the person accepting the proposal called

“promise”.

Section 2 (d) provides the definition of consideration. According to this

section the definition of consideration is as follows:-

“When, at the desire of the promisor, the promise or any other party/person

has done or abstained from doing, or does or abstains from doing, or promise

to do or to abstain from doing, something such act or abstinence or promise

is called a consideration for the promise”.

But if under section 23 of the Contract Act, such consideration is forbidden

by law, if, is of such a nature that, if permitted, it would defeat the provision

of any law, or, is fraudulent; or

Involves or implies injury to the person or property of other, or the Courts

regards it as immoral; or opposed to public policy.

In these cases, the consideration or the object of the agreement is said to be

unlawful. Every agreement of which the object or consideration is unlawful is

void. So in agreement the consideration may be unlawful. But in a contract

that consideration must be lawful. From this view point it can be said that- all

agreement are not contract.

Further more, what agreements are contracts it is said in section 10, that- All

agreements are contract if they are made by the free consent of parties,

competent to contract, for a lawful consideration and with a lawful object,

and are not hereby expressly declared to be void. So one of the fundamental

elements of contract is consideration and which must be lawful.

In order to make a contract, the first and main step is agreement which must

be constituted through lawful consideration. This agreement does not crate

any duties and obligation. In order to create right, duties or obligation the

following extra elements are needed-

i) Capacity of the parties/Competent to contract: According to section 11,

every person is competent to contract who is of the age of majority

according to the law to which he is subject and who is of sound mind,

and is not disqualified from contracting by any law to which he is

subject.


ii) Free consent of the parties: According to section-14, consent is said to

be free when it is not caused by coercion, undue influence, fraud,

misrepresentation and mistake.

iii) Lawful object: The object of the contract must be lawful. Object must

not be illegal, immoral or opposed to public policy. Contract is not

valid if it is illegal, immoral or opposed to public policy.

iv) Contract is not prohibited by law: Contract will not be prohibited by

the existing law. Because such kind of contract has no/ will not have

legal effect.

After the above discussion, it is found that the first and main condition of

valid contract is lawful agreement. If the above mentioned elements exist in a

lawful agreement, then that agreement turned into a contract. In the absence

of above elements or in the presence of defective elements (i.e. unlawful

consideration/unlawful object) illegal or void contract can be formed/

constituted. But illegal or void contract has no legal status/existence, they are

proper to say illegal or void agreements.

Finally we can say that all agreements are not contract, the agreements

which are constituted under/ within the frame of the law of contract, that are

treated as a contract. On the other hand, in all contracts there must be

agreement as no contract can be formed without an agreement. So it can

undoubtly be said that – “All contracts are agreement but all agreements are

not contract”

**************


QUESTION – 2:- What are the essentials of a contract of sale under the Sale of Goods Act, 1930?

ANSWER – 2:-

Sec.4 defines a contract of sale as ‘a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price’.

The following are the essentials of contract of sale:-

1) There must be at least two parties. A sale has to be bilateral

because the property in goods has to pass from one person to another.

The seller and the buyer must be different persons. A person cannot

buy his own goods. However, a part-owner may sell to another part-

owner.

2) Transfer or agreement to transfer the ownership of goods. In a

contract of sale, it is the ownership that is transferred (in the case of

sale), or agreed to be transferred (in the case of agreement to sell), as

against transfer of mere possession or limited interest (as in the case

of bailment or pledge).

3) The subject matter of the contract must necessarily be goods. The sale of immovable property is not covered under Sale of Goods

Act. The expression ‘goods’ is defined in Sec.2(7).

4) Price is the consideration of the contract of sale. The

consideration in a contract of sale has necessarily to be ‘money’, (i.e.,

the legal tender money). If for instance, goods are offered as the

consideration for goods, it will not amount to sale. It will be called a

‘barter’.

5) Payment by installments. In the case of sale of goods, the parties

may agree that the price will be payable by installments. Also, the

terms may stipulate some amount by way of down payment and the

balance by installments.

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QUESTION – 3:- Describe the main features of Consumer Protection Act 1986.

ANSWER – 3:-

Main Features of the Consumer Protection Act, 1986

1) Social Welfare Law : It is a highly progressive piece of social welfare

legislation. It is acclaimed as the Magna Carta of Indian consumers.

This is a unique law which directly pertains to consumers in the

market place and seeks to redress complaints arising there from.

2) Comprehensive Provisions and Effective Safeguards: Its

provisions are very comprehensive. It provides effective safeguards to

the consumers against various types of exploitation and unfair trade

practices. In fact, it provides more effective protection to consumers

than any other law in India.

3) Special Consumer Courts: The Consumer Protection Act has created

special consumer courts for enforcement of the rights of consumers.

4) Three-Tier Grievance Redressal Machinery: The Consumer

Protection Act provides for a three-tier consumer grievance redressal

machinery — District Forums at the base, the State Commission at the

middle level and the National Commission at the apex level. The

redressal machinery is quasi-judicial in nature.

5) Simple and Inexpensive : There are no complicated or elaborate

procedures or other technicalities. The redressal machinery is merely

to observe the principles of natural justice. No court fee any other

charge is to be paid by the complainant. It is not mandatory to employ

any advocate. The complainant can write his grievance- on a simple

paper along with the name and address of the opposite party against

whom the complaint is made. Thus, the consumer protection Act

provides a simple, convenient and inexpensive redressal of consumer

grievances.

6) Covers Goods and Services : The Consumer Protection Act covers

both goods and services rendered for consideration by any person or

organization including public sector undertakings and Government

agencies. However, services rendered free of charge or under any

contract of personal service are excluded. All suppliers of goods and

services in private, public and cooperative sectors are covered under

the Act.


7) Time Frame : The Consumer Protection Act lays down time limits for

the disposal of cases so as to provide speedy redressal of grievances.

8) Class Action : The Consumer Protection Act allows filing of class

action complaints on behalf of groups of consumers having common

interest.

9) Check on Unfair Trade Practices : The Consumer Protection Act

also covers complaints relating to unfair trade practices. Thus, a

consumer can protect against food adulteration, short weighting and

overcharging, directly to the District Forums. The consumer can pick

up a food sample from a shop, get it analyzed by a chemist and file a

complaint on that basis.

10) Check on Overcharging : The Consumer Protection Act also provides

for complaints against charging in excess of the price of a product

fixed by a law or rule and/or displayed on the packaged commodities

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QUESTION – 4:- What are the duties and powers of an ‘authorized person’ under FEMA, 1999?

ANSWER – 4:-

Duties and Power of an “Authorized Person” under FEMA, 1999:-

Authorized Person:-

Sec.10 provides that the Reserve Bank may, on an application made to it in

this behalf, authorize any person to be known as authorized person to deal in

foreign exchange or in foreign securities, as an authorized dealer, money

changer or offshore banking unit or in any other manner as it deems fit. The

authorization shall be in writing and shall be subject to the conditions laid

down therein. An authorization so granted may be revoked by the Reserve

Bank at any time if it is satisfied that (a) it is in public interest to do so; or

(b) the authorized person has failed to comply with the condition subject to

which the authorization was granted or has contravened any of the provisions

of the Act or any rule, regulation, notification, direction or order made

thereunder.

Duties of an authorized person

The duties of an authorized person as provided in the Act are summarized

hereunder:

i) To comply with RBI directions [Sec.10(4)]. An authorized person

shall, in all his dealings in foreign exchange or foreign security, comply

with such general or special direction or order as the Reserve Bank

may, from time to time, think fit to give.

ii) Not to engage in unauthorized transactions [Sec.10(4)]. Except

with the previous permission of the Reserve Bank, an authorized

person shall not engage in any transaction involving any foreign

exchange or foreign security which is not in conformity with the terms

of authorization under this section.

iii) To ensure compliance of FEMA provisions [Sec.10(5)]. An

authorized person shall, before undertaking any transaction in foreign

exchange on behalf of any person, require that person to make such

declaration and to give such information, as will reasonably satisfy him

that the transaction will not involve and is not designed for the

purpose of any contravention or evasion of the provisions of this Act or

of any rule, regulation, notification, direction or order made


thereunder. Where the said person refuses to comply with any such

requirement or makes only unsatisfactory compliance therewith, the

authorized person shall refuse in writing to undertake the transactions

and shall, if he has reason to believe that any such contravention or

evasion as aforesaid is contemplated by the person, report the matter

to the Reserve Bank.

Powers of the authorized person

i) To deal in or transfer any foreign exchange or foreign security to

any person [Sec.3(a)]

ii) Receive any payment by order or on behalf of any person resident

outside India in any name. [Sec.3(c)]

However, an authorized person is not allowed to credit the account

of any person without any corresponding remittance from any place

outside India.

iii) To open NRO, NRE, NRNR, NRSR and FCNR accounts.

iv) To sell or purchase foreign exchange for current account

transactions. [Sec.5]

v) To sell or purchase foreign exchange for permissible capital

account transactions. [Sec.6].

Bank’s powers to issue directions to authorized persons (SEC.11)

The Reserve Bank may, for the purpose of securing compliance with the

provisions of this Act and of any rules, regulations, notifications or directions

made thereunder, give to the authorized persons any direction in regard to

making of payment or the doing or desist from doing any act relating to

foreign exchange or foreign security.

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QUESTION – 5:- What do you mean by Memorandum of Association? What does it contain?

ANSWER – 5:-

Memorandum of Association

Memorandum of Association is the fundamental charter which defines the

aims and objectives of a company. It contains fundamental rule regarding the

constitution and the activities of a company. It is the most significant

document on which the super-structure of the company is raised. It sets out

the limits with in which the company may function and defines the relations

of the company with the outside world. Any action beyond the scope of the

memorandum of association is void.

The memorandum of association contains the following:

- Name clause: This clause contains the name of the company. The

word limited is used after the name of a public limited company and

private limited is used after the name of a private company. The name

of the company should not be identical to the name of an existing

company. The words like Royal, King, Imperials, Emperor and the

words of patronage of the central government is not used in company.

- Object clause: This is an important clause of the memorandum of

association which states the objects with which the company has been

established. Any action beyond the stated objective is ultra vires and as

such a great deal of care will be taken in drawing up this clause. It

contains the broad objective along with subsidiary objectives.

- Situation clause: This clause states the place at which the registered

office will be situated. This clause is vital for determination of

jurisdiction of the court for legal matters. The place of registered office

should be intimated to the register within 30 days incorporation.

- Capital clause: This clause states the amount of authorized capital

with which a company is registered. The division of share capital into

different shares must be stated in the capital clause. The face value of

the share will be stated in this clause. This clause gives an idea of

exact capital structure of the company.

- Liability clause: This clause states that the liability of the

shareholders is limited to the extent of the face value of shares. A

company limited by guarantee should specify the amount of guarantee.


- Association clause: This clause states the names and addresses of

the signatories of the memorandum of association and articles of

association.

Each subscriber is required to take at least one share in the company.

The memorandum of association is signed by at least seven persons in

case of public limited company and at least by two persons in case of

private company.

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QUESTION – 6:- Write a note on the following:

(a) Copyright Act(b) Pledge

ANSWER – 6:-

(A) Copyright Act

The law relating to copyright is contained in the Copyright

Act, 1957. It extends to the whole of India and came into

force on January 21, 1958. The Act has been amended in

1983, 1984, 1992 and 1994 primarily to bring the Indian

law in conformity with the international conventions in

general and Bern Convention and the Universal Copyright

Convention in particular.

Secs.44 to 50 deal with the registration of copyright.

Sec.44 provides for a Register of copyright to be kept in

the copyright office. The names or titles of the works, the

names and addresses of authors, publishers and owners of

copyright and certain other prescribed particulars are

entered in the Register.

Copyright is a form of intellectual property which gives

the creator of an original work exclusive rights for a

certain time period in relation to that work, including its

publication, distribution and adaptation; after which time

the work is said to enter the public domain. Copyright

applies to any expressible form of an idea or information

that is substantive and discrete. Some jurisdictions also

recognize "moral rights" of the creator of a work, such as

the right to be credited for the work. Copyright has been

internationally standardized, lasting between fifty to a

hundred years from the author’s death, or a finite period

for anonymous or corporate authorship. It is enforceable

as a civil matter.

(B) Pledge


Sec.172, defines a pledge as the bailment of goods as

security for payment of a debt or performance of a

promise. The person, who delivers the goods as security,

is called the ‘pledgor’ and the person to whom the goods

are so delivered is called the ‘pledgee’. The ownership

remains with the pledgor. It is only a qualified property

that passes to the pledgee. He acquires a special

property, and lien which is not of ordinary nature and so

long as his loan is not repaid, no other creditor or

‘authority’ can take away the goods or its price. Thus, in

Bank of Bihar v. State of Bihar and Ors. (1971) Company

Cases 591, where sugar pledged with the Bank was seized

by the Government of Bihar, the Court ordered the State

Government of Bihar to reimburse the bank for such

amount as the Bank in the ordinary course would have

realised by the sale of sugar seized.

A pledge is created only when the goods are delivered by

the borrower to the lender or to someone on his behalf

with the intention of their being treated as security

against the advance. Delivery of goods may, however, be

actual or constructive. It is constructive delivery where

the key of a godown (in which the goods are kept) or

documents of title to the goods are delivered. The owner

of the goods can create a valid pledge by transferring to

the creditor the documents of title relating to the goods.

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mb0051-legal aspects business

Documents

unfair trade practices

purchase foreign exchange

consumer protection act

order made thereunder

public limited company

foreign exchange

redressal machinery

public policy