8/6/2019 Llegal Aspects of Business http://slidepdf.com/reader/full/llegal-aspects-of-business 1/29 Master of Business Administration – MBA Semester 3 Legal Aspects of Business - 4 Credits Assignment Set- 1 Q.1 Explain the characteristics of law and briefly describe the sources of Indian Law. [10 marks] Ans : The term ‘law’ is used in many senses; you may speak of the law of physics, mathematics, science, or the laws of the football or health. In its widest sense, ‘law’ means any rule of conduct, standard or pattern, to which actions are required to conform; if not conformed, sanctions are imposed. Characteristics of Law : 1. Law is a body of rules : These rules prescribe the conduct, standard or pattern to which actions of the persons in the state are required to conform. However, all rules of conduct do not become law in the strict sense. We resort to various kinds of rules to guide our lives. For example, our conduct may be guided by a rule such as “do not be arrogant” or “do not be disrespectful to elders or women”. These are ethical or moral rules by which our daily lives are guided. If we do not follow them, we may lose our friends and their respect, but no legal action can be taken against us. 2.Law is for the guidance or conduct of persons – both human and artificial : The law is not made just for the sake of making it. The rules embodies in the law are made, so as to ensure that actions of the persons in the society conform to some predetermined standard or pattern. This is necessary so as to ensure continuance of the society. No doubt, if citizens are ‘self-enlightened’ or ‘self-controlled’, disputes may be minimized, but will not be eliminated. Rules are, therefore,
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This law is created by legislation such as Parliament. It is sometimes called
‘enacted law’ as it is brought into existence by getting Acts passed by the
legislative body.
Personal Law :
Many times, a point of issue between parties to a dispute is not covered by
any statute or custom. In such cases, the courts are required to apply the
personal law of the parties.
Secondary Sources of Indian Law :
The secondary sources of Indian Law are English Law and Justice, Equity and
Good Conscience.
English Law
The chief sources of English Law are : (i) the common Law, (ii) Equity, (iii)
The law Merchant and (iv) The Statute Law.
Even though the bulk of our law is based on and follows the English law, yet
in its application our courts have to be selective. It is only when the courts donot find a provision on a particular problem in the primary sources of Indian
law that it may look to subsidiary sources such as English Law.
Q.2 Suman is an agent. In an agency contract, what will be Suman’s
2. Partnership must be the result of an agreement between two or
more persons.
An agreement presupposes a minimum number of two persons. As
mentioned above, a partnership to arise, at least two persons must make an
agreement. Partnership is the result of an agreement between two or more
persons (who are known as partners after the partnership comes into
existence).
3. The agreement must be to carry on some business. The term
‘business’ includes every trade, occupation or profession [Sec.2(b)]. Though
the word ‘business’ generally conveys the idea of numerous transactions, a
person may become a partner with another even in a particular adventure or
undertaking (Sec.8). Unless the person joins for the purpose of carrying on a
business, it will not amount to partnership.
4. The agreement must be to share profits of the business. The joint
carrying on of a business alone is not enough; there must be an agreement
to share profits arising from the business. Unless otherwise so agreed,
sharing of profits also involves sharing of losses. But whereas the sharing of profits is an essential element of partnership, sharing of losses is not.
Example: A, a trader, owed money to several creditors. He agreed to pay his
creditors out of the profits of his business (run under the creditors’
supervision) what he owed to them. Held, the arrangement did not make
creditors partners with A in business [Cox v. Hickman, (1860) 8 H.L.C., 268].
Q. 5 a. Explain the rights of unpaid seller. [5 marks]
A contract is comprised of reciprocal promises. In a contract of sale, if selleris under an obligation to deliver goods, buyer has to pay for it. In case buyerfails or refuses to pay, the seller, as unpaid seller, shall have certain rights.
Who is an unpaid seller?
A seller of goods is an unpaid seller when (i) the whole of the price has not
been paid or tendered. (ii) a bill of exchange or other negotiable instrument
has been received as conditional payment and the condition on which it was
received has not been fulfilled by reason of the dishonour of the instrument
or otherwise.
Rights of an unpaid seller
The rights of an unpaid seller may broadly be classified under two heads,
namely: (i) Rights under the Secs.73-74 of the Indian Contract Act, 1872, i.e.,
to recover damages for breach of contract. (ii) Rights under the Sale of
Goods Act, 1930: (a) rights against the goods; (b) rights against the buyer
personally. The rights against the goods are as follows:
Lien on goods (Secs. 47-49)
The word lien means to retain possession of. An unpaid seller who is in
possession of goods is entitled to retain them in his possession until paymentor tender of the price in three situations, namely, (a) where the goods have
been sold without any stipulation as to credit; (b) where the goods have been
sold on credit, but the term of credit has expired; (c) where the buyer
becomes insolvent. Lien can be exercised only for non-payment of the price
and not for any other charges due against the buyer. For Example, the seller
cannot claim lien for godown charges for storing the goods in exercise of his
lien for the price.
Right of stoppage in transit
This right of the unpaid seller consists in preventing the goods from being
delivered to the buyer and resuming and regaining their possession while in
transit, retaining them till the price is paid. The right of stoppage in transit is
earned only where the right of lien is lost and is available only where the
give Suresh a Maruti car’ it is not a promissory note.
v. the parties to a promissory note, i.e. the maker and the payee must be
certain.
vi. A promissory note may be payable on demand or after a certain date. For
example, if it is
written ‘three months after date I promise to pay Satinder or order a sum of rupees Five
Thousand only’ it is a promissory note.
vii. The sum payable mentioned must be certain or capable of being made
certain. It means
that the sum payable may be in figures or may be such that it can be
calculated
Cheque is a very common form of negotiable instrument. If you have asavings 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 namedin the cheque. Therefore, a cheque may be regarded as a bill of exchange; the onlydifference is that the bank isalways the drawee in case of a cheque. The Negotiable Instruments Act, 1881 defines a cheque as a bill of exchangedrawn on aspecified banker and not expressed to be payable otherwise than ondemand. 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. HundisA 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 itcan also be in theform of a promissory note. A Hundi is the oldest known instrument used forthe purpose of transfer of money without its actual physical movement. The provisions of the NegotiableInstruments Act shall apply to hundis only when there is no customary ruleknown to the people.Types of Hundis There are a variety of hundis used in our country. Let us discuss some of themost common ones.Shah-jog Hundi: one merchant draws this on another, asking the latter to paythe amount to a
Shah. Shah is a respectable and responsible person, a man of worth andknown 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 itfor 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 anyproperty tosomebody, we are required to make a transfer deed, get it registered, paystamp duty, etc.But, such formalities are not required while transferring a negotiableinstrument. The ownership ischanged by mere delivery (when payable to the bearer) or by validendorsement and delivery(when payable to order). Further, while transferring it is also not required togive a notice to the
previous holder.ii. Negotiability confers absolute and good title on the transferee. It meansthat a person whoreceives a negotiable instrument has a clear and undisputable title to theinstrument. However,the title of the receiver will be absolute, only if he has got the instrument ingood faith and for aconsideration. Also the receiver should have no knowledge of the previousholder having anydefect in his title. Such a person is known as holder in due course. Forexample, suppose Rajeev
issued a bearer cheque payable to Sanjay. A person, who passed it on toGirish, stole it fromSanjay. If Girish received it in good faith and for value and without knowledgeof cheque havingbeen stolen, he will be entitled to receive the amount of the cheque. HereGirish 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 orpromise for payment.
v. The instrument must involve payment of a certain sum of money only andnothing 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 mustbe payable at a timewhich is certain to arrive. If the time is mentioned as ‘when convenient’ it isnot a negotiableinstrument. However, if the time of payment is linked to the death of aperson, 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 orchairman of an institution. The payee can also be more than one person.viii. A negotiable instrument must bear the signature of its maker. Withoutthe signature of thedrawer or the maker, the instrument shall not be a valid one.
ix. Delivery of the instrument is essential. Any negotiable instrument like acheque or apromissory note is not complete till it is delivered to its payee. For example,you may issue acheque in your brother’s name but it is not a negotiable instrument till it isgiven to your brother.x. Stamping of Bills of Exchange and Promissory Notes is mandatory. This isrequired as per theIndian Stamp Act, 1899. The value of stamp depends upon the value of thepromote or bill andthe time of their payment.Negotiation and indorsementPersons other than the original obligor and obligee can become parties to anegotiableinstrument. The most common manner in which this is done is by placingone's signature on theinstrument (“indorsement”): if the person who signs does so with theintention of obtainingpayment of the instrument or acquiring or transferring rights to theinstrument, the signature is
called anin do rse me nt. There are four types of indorsements contemplatedby the Code:•An indorsement which purports to transfer the instrument to a specifiedperson is a
special indorsement;•An indorsement by the payee or holder which does not contain any additionalnotation(thus puporting to make the instrument payable to bearer) is an indorsementin blank ;•An indorsement which purports to require that the funds be applied in acertain manner(i.e. "for deposit only", "for collection") is a restrictive indorsement; and,•
An indorsement purporting to disclaim retroactive liability is called aqu a lif iedindorsement (through the inscription of the words "without recourse" as partof theindorsement on the instrument or in allonge to the instrument).If a note or draft is negotiated to a person who acquires the instrument1.in good faith;2.for value;3.without notice of any defenses to payment,the transferee is a holder in due course and can enforce the instrument wit ho ut being 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 theinstrument; (2)fraud as to the nature of the instrument being signed; (3) alteration of theinstrument; (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 validityof the instrument. The holder-in-due-course rule is a rebuttable presumption that makes the freetransfer of
negotiable instruments feasible in the modern economy. A person or entitypurchasing aninstrument in the ordinary course of business can reasonably expect that itwill be paid whenpresented to, and not subject to dishonor by, the maker, without involvingitself in a disputebetween the maker and the person to whom the instrument was first issued(this can be
contrasted to the lesser rights and obligations accruing to mere holders).Article 3 of the UniformCommercial Code as enacted in a particular State's law contemplate realdefenses available topurported holders in due course.
The foregoing is the theory and application presuming compliance with therelevant law.Practically, the obligor-payor on an instrument who feels he has beendefrauded or otherwiseunfairly dealt with by the payee may nonetheless refuse to pay even a holderin due course,requiring the latter to resort to litigation to recover on the instrument.
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Q.2 a Q.4. Discuss the Patents Act applicable to business organisation in detail.
A patent (a set of exclusive rights granted by a state (national government) to an inventor or their
assignee for a limited period of time in exchange for a public disclosure of an invention.
The procedure for granting patents, the requirements placed on the patentee, and the extent of the
exclusive rights vary widely between countries according to national laws and international agreements.
Typically, however, a patent application must include one or more claims defining the invention which
must be new, non-obvious, and useful or industrially applicable. In many countries, certain subject
areas are excluded from patents, such as business methods, treatment of the human body[citation needed ], and
mental acts. The exclusive right granted to a patentee in most countries is the right to prevent others from
making, using, selling, or distributing the patented invention without permission.[1] It is just a right to
prevent others' use. A patent does not give the proprietor of the patent the right to use the patented
invention, should it fall within the scope of an earlier patent.
Under the World Trade Organization's (WTO) Agreement on Trade-Related Aspects of Intellectual
Property Rights, patents should be available in WTO member states for any inventions, in all fields of
technology,[2] and the term of protection available should be the minimum twenty years.[3]Different types of
patents may have varying patent terms (i.e., durations).
Q. 5 a. What is a digital signature? Explain briefly. [6 marks]
A patent for an invention is the grant of a property right to the inventor, issued by the
Patent and Trademark Office. The term of a new patent is 20 years from the date on which
the application for the patent was filed in the United States or, in special cases, from the
date an earlier related application was filed, subject to the payment of maintenance fees. US
patent grants are effective only within the US, US territories, and US possessions.
The right conferred by the patent grant is, in the language of the statute and of the grant
itself, "the right to exclude others from making, using, offering for sale, or selling" the
invention in the United States or "importing" the invention into the United States. What is
granted is not the right to make, use, offer for sale, sell or import, but the right to exclude
others from making, using, offering for sale, selling or importing the invention.
(Excerpted from General Information Concerning Patents, U.S. Patent and Trademark Office
website)
Some additional differences between a copyright and a trademark are as follows:
1. The purpose of a copyright is to protect works of authorship as fixed in a tangible form
of expression. Thus, copyright covers: a) works of art (2 or 3 dimensional), b) photos,
pictures, graphic designs, drawings and other forms of images; c) songs, music and sound
recordings of all kinds; d) books, manuscripts, publications and other written works; and e)
plays, movies, shows, and other performance arts.
2. The purpose of a trademark is to protect words, phrases and logos used in federally
regulated commerce to identify the source of goods and/or services.
3. There may be occasions when both copyright and trademark protection are desired with
respect to the same business endeavor. For example, a marketing campaign for a new
product may introduce a new slogan for use with the product, which also appears in
advertisements for the product. However, copyright and trademark protection will coverdifferent things. The advertisement's text and graphics, as published in a particular vehicle,
will be covered by copyright - but this will not protect the slogan as such. The slogan may
be protected by trademark law, but this will not cover the rest of the advertisement. If you
want both forms of protection, you will have to perform both types of registration.
4. If you are interested in protecting a title, slogan, or other short word phrase, generally