Mb0051 “legal aspects of business answer

Ma ster of Business Administration

Semester III

MB0051- Legal Aspects Of Business

Assignment

Set- 1

1. What are the sources of law? Explain.

Answer:

Sources of Law

The main sources of modern Indian Law, as administered by Indian courts, may be divided into two broad categories: (i) Primary sources and (ii) Secondary sources.

Primary sources of law

The primary sources of Indian law are: (a) Customs, (b) Judicial precedents (stare decision),(c) Statutes and(d) Personal law.

Customary law:

Customs have played an important role in making the law and therefore are also known as customary law. ‘Customary Law’, in the words of Keeton, may be defined as “those rules of human action, established by usage and regarded as legally binding by those to whom the rules are applicable, which are adopted by the courts and applied as sources of law because they are generally followed by the political society as a whole or by some part of it”. In simple words, “it is the uniformity of conduct of all persons under like circumstances”. It is a generally observed course of conduct by people on a particular matter. When a particular course of conduct is followed again and again, it becomes a custom.Judicial precedents are an important source of law:

Judicial precedents are another important source of law. It is based on the principle that a rule of law which has been settled by a series of decisions generally should be binding on the court and should be followed in similar cases. These rules of law are known as judicial precedents. However, only such decisions which lay down some new rules or principles are treated as judicial precedents. Thus, were there is a settled rule of law, it is the duty of the judges to follow the same; they cannot substitute their opinions for the established rule of law. This is known as the doctrine of ‘stare decisis’. The literal meaning of this phrase is “stand by the decision”.

‘Statute’ – an important source of law:

The statutes or the statutory law or the legislation is the main source of law. This law is created by legislation such as Parliament. In India, the Constitution empowers the Parliament and state legislatures to promulgate law for the guidance or conduct of persons to whom the statute is,expressly or by implication, made applicable. It is sometimes called ‘enacted law’ as it is brought into existence by getting Acts passed by the legislative body. It is called Statute Law because it is the writ of the state and is in written form (jus scriptum).

Personal law:

Many times, a point of issue between the parties to a dispute is not covered by any statute or custom. In such cases, the courts are required to applythe personal law of the parties. Thus in certain matters, we follow the personal laws of Hindus, Mohammedan and Christians.

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.

Nowadays, English law is not very important source of Indian law. The English law, in its application to India, has to conform to the peculiar circumstances and conditions prevailing in this country. 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 do not find a provision on a

particular problem in the primary sources of Indian Law that it my look to subsidiary sources such as the English Law. For example, the greater part of the Law Merchant has been codified in India. The Indian Contract Act, 1872, the Indian Partnership Act, 1932, the Scale of Goods Act 1930 and the Negotiable Instruments Act, 1882, are some of the very important Acts relating to business transactions. Where, however, there is some doubt as to the interpretation of any provisions of these Acts or where certain branches of the Law Merchant have not been codified, the courts in India look to English decisions on the point, for guidance.

Justice, equity and good conscience

In India we do not have, no did we ever had separate courts (as in England) administering ‘equity’. But the equitable principles of law, i.e., justice, equity and good conscience, are the guiding force behind most of the statutes in our country and the decisions of the courts. Especially, where law is silent on any point or there is some lacuna in a statute, the principles of equity come handy to the judges who exercise their discretion often on equitable considerations. The frequent use of terms such as ’good faith’, ‘public interest’, ‘public policy’, in statutes and by the judges in their judgements is based on principles of equity.

Now we shall briefly describe the main sources of English law:

1. Common law. This source consists of all those unwritten legal doctrines embodying customs and traditions developed over centuries by the English courts. Thus, the common law is found in the collected cases of the various courts of law and is sometimes known as ‘case law’.

2. Equity. The literal meaning of the term ‘equity’ is ‘natural justice’. The development of equity as a source of law occurred due to rigours and hardships of the Common Law. Therefore, in its technical and narrower sense, ‘equity’ means a body of legal doctrines and rules emanating fromthe administrations of justice, developed to enlarge, supplement or override a narrow rigid system of existing law of the land. However, like the common law, the ‘equity’ is unwritten and is a supplement to common law as a source of law.

3. Statute law. The Statute law consists of the law passed by the Parliament and therefore, is ‘written’ law. The authority of parliament is supreme but is subject to natural limitations and those laid down by the Constitution. It can pass any law it pleases and can override its own previous Acts and the decisions of the courts. Statute law, therefore, is superior to and can override any rule of Common Law or equity.

4. The law merchant or lex mercatoria. It is another important source of law and is based to a great extent on customs and usages prevalent among merchants and traders of the middle ages. Its evolution like that of equity can be traced to unsuitability of Common Law so far as the commercial transactions were concerned. The Common Law was found to be unsatisfactory in dealing with disputes between merchants. The merchants, therefore, developed certain rules based upon customs and usages to govern their mercantile transactions. These rules were known as Lex Mercatoria or the Law Merchant.2. What is meant by contract? Explain about “quasi contracts”

Answer:

Contract

 A contract is an agreement, enforceable by law, made between at least two parties by which rights are acquired by one and obligations are created on the part of another. If the party, which had agreed to do something, fails to do that, then the other party has a remedy.

 Example:

 D Airlines sells a ticket on 1 January to X for the journey from Mumbai to Bangalore on 10 January. The Airlines is under an obligation to take X from Mumbai to Bangalore on 10 January. In case the Airlines fails to fulfill its promise, X has a remedy against it. Thus, X has a right against the Airlines to be taken from Mumbai to Bangalore on 10 January. A corresponding duty is imposed on the Airlines. As there is a breach of promise by the promisor (the Airlines), the other party to the contract (i.e., X) has a legal remedy.

Meaning of quasi contracts: ‘Quasi Contracts’ are so-called because the obligations associated with such transactions could neither be referred as tortuous nor contractual, but are still recognized as enforceable like contracts, in courts. According to Dr Jenks, quasi contract is “a situation in which law imposes upon one person, on grounds of natural justice, an obligation similar to that which arises from a true contract, although no contract, express or implied, has infact been entered into by them”.

Cases which are treated as quasi contracts

 Following are the cases which are to be deemed quasi contracts:

1. Claim for necessaries supplied to a person incapable of contracting or on his account.

If a person, incapable of entering into a contract or anyone whom he is legally bound to support is supplied by another person with necessaries suited to his condition in life, the person who furnished such supplies is entitled to be reimbursed from the property of such incapable person (Sec.68).

2. Reimbursement to a person paying money due by another in payment of which he is interested.

A person who is interested in the payment of money which another is bound by law to pay, and who, therefore, pays it, is entitled to be reimbursed by the other. (Sec. 69).

3. What are the rights of consumer under consumer protection act?

Answer:

Rights of Consumers

For the first time in the history of consumer legislation in India, the Consumer Protection Act, 1986 extended a statutory recognition to the rights of consumers.

Sec.6 of the Act recognizes the following six rights of consumers:

1. Right to safety, i.e., the right to be protected against the marketing of goods and services which are hazardous to life and property.

2. Right to be informed, i.e., the right to be informed about the quality, quantity, potency, purity, standard and price of goods or services, as the case may be, so as to protect the consumer against unfair trade practices.

3. Right to choose: It means right to be assured, wherever possible, access to a variety of goods and services at competitive prices. In case ofmonopolies, say, railways, telephones, etc., it means right to be assured of satisfactory quality and service at a fair price.

4. Right to be heard, i.e., the consumers’ interests will receive due consideration at appropriate forums. It also includes right to be represented in various forums formed to consider the consumers’ welfare.

5. Right to seek redressal: It means the right to seek redressal against unfair practices or restrictive trade practices or unscrupulous exploitation of consumers. It also includes right to fair settlement of the genuine grievances of the consumers.

6. Right to consumer education: It means the right to acquire the knowledge and skill to be an informed consumer.

4. Explain the purpose and meaning of contract of guarantee.

Answer:

Purpose of guarantee

 The contracts of guarantee are among the most common business contracts and are used for a number of purposes.

These are:

i) The guarantee is generally made use of to secure loans. Thus, a contract of guarantee is for the security of the creditor.

ii) The contracts of guarantee are sometimes called performance bonds. For example, in the case of a construction project, the builder may have to find a surety to stand behind his promise to perform the construction contract. Also employers often demand a type of performance bond known as a fidelity bond from employees who handle cash, etc., for the good conduct of the latter. If an employee misappropriates then the surety will have to reimburse the employer.

iii) Bail bonds, used in criminal law, are a form of contract of guarantee. A bail bond is a device which ensures, that a criminal defendant will appear for trial. In this way a prisoner is released on bail pending his trial. If the prisoner does not appear in the court as desired then the bond is forfeited.

Meaning of contract of guarantee:

A contract of guarantee is defined as “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 ‘surety’; the person for whom the guarantee is given is called the ‘principal debtor’, and the person to whom the guarantee is given is called the ‘creditor’. A contract of guarantee may be either oral or in writing.

5. What is partnership? Explain the nature of partnership under ‘law of partnership’.

Answer:

Meaning and Nature of Partnership

A partnership is defined as “the relationship between persons who have agreed to share profits of a business carried on by all, or by any of them acting for all”.

On analysis of the definition, certain essential elements of partnership emerge. These elements must be present so as to form a partnership and are discussed below:

1. Partnership is an association of two or more than two persons.

There must be at least two persons who should join together to constitute a partnership, because one person cannot become a partner with himself. These persons must be natural persons having legal capacity to contract.Thus, a company (which is an artificial person) cannot be a partner. Similarly, a partnership firm cannot be a partner of another partnership firm. As regards maximum number of partners in a partnership firm, Sec.11 of the Companies Act, 1956, puts the limit at 10 in case of banking business and 20 in case of any other business.

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 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.,

6. Write a note on the following on Copy Right Act.

Answer:

Meaning of copyright (Sec.14)

The term ‘copyright’ means the exclusive right, by virtue of, and subject to the provision of the Act:

(a) in the case of literary, dramatic or musical work, not being a computer programme – (i) to reproduce the work in any material form including the storing of it in any medium by electronic means; (ii) to issue copies of the work to the public not being copies already in circulation; (iii) to perform the work in public, or communicate it to the public; (iv) to make any cinematograph film or sound recording in respect of the work;(v) to make any translation of the work; (vi) to make any adaptation of the work; (vii) to do, in relation to a translation or an adaptation of the work, any of the acts specified in relation to the work in (i) to (vi);

(b) in the case of computer programme – (i) to do any of the acts specified in clause (a) above; (ii) to sell or give on hire, or offer for sale or hire any copy of the computer programme, regardless of whether such copy has been sold or given on hire on earlier occasions;

(c) in the case of an artistic work – (i) to reproduce the work in any material form including depiction in three dimensions of a two – dimensional work or in two dimensions of a three – dimensional work; (ii) to communicate the work to the public; (iii) to issue copies of the work to the public not being copies already in circulation; (iv) to include the work in any cinematograph film; (v) to make any adaptation of the work; (vi) to do in relation to an adaptation of the work any of the acts specified in relation to the work in (i) to (iv) above;

(d) in the case of a cinematograph film – (i) to make a copy of the film, including a photograph of any image forming part thereof; (ii) to sell or give on hire; or offer for sale or hire, any copy of the film, regardless of whether such copy has been sold or given on hire on earlier occasions; (iii) to communicate the film to the public.

(e) In the case of a sound recording – (i) to make any other sound recording embodying it; (ii) to sell or give on hire, or offer for sale or hire, any copy of the sound recording regardless of whether such copy has been sold or given on hire on earlier occasions; (iii) to communicate the sound recording to the public.

Ownership of copyright (Sec.17)

The author of the work is recognised to be the first owner of the copyright therein. This is however, subject to some exceptions given below:

1. In the case of a literary, dramatic or artistic work made by the author in the course of his employment or apprenticeship under the proprietor of a newspaper, magazine or similar periodical, for the purpose of publication, the said proprietor shall be the first owner of the copyright in the work (in the absence of any agreement to the contrary) insofar as the copyright relates to the publication in the newspaper, magazine or other periodical. Except in such cases, the author will be the first owner of the copyright in the work.

2. If the photograph is taken or a painting or portrait is drawn or an engraving or cinematograph film is made on payment at the instance of any person, such person, in the absence of any agreement to the contrary, shall be the first owner of the copyright therein.

3. If a work is made in the course of the author’s employment under a contract of service or apprenticeship, the employer (not being the proprietor of a newspaper, magazine or periodical) in the absence of any agreement to the contrary, the employer shall be the first owner of the copyright therein.

4. If any person has delivered any address or speech in public, then he shall be the first owner of the copyright. However, if the address or speech is delivered on behalf of any other person, then such other person shall be the owner of the copyright therein.

5. In the case of government work, the government is the owner of the copyright in the absence of any agreement to the contrary.

6. In the case of a work made or first published by or under the direction or control of any public undertaking, such public undertaking shall, in the absence of any agreement to the contrary, be the first owner of the copyright therein.

Term of copyright

Sec.22 provides that copyright shall subsist in any literary, dramatic, musical or artistic work (other than a photograph) published within the lifetime of the author until 60 years from the beginning of the calendar year next following the year in which the author dies. Sec.23 provides for the term of copyright in anonymous and pseudonymous works. In the case of a literary, dramatic, musical or artistic work (other than a photograph), which is published anonymously or pseudonymously, copyright shall subsist until 60 years from the beginning of the calendar year next following the year in which the work is first published.

Sec.24 provides for term of copyright in posthumous works. Where copyright subsists at the date of death of the author and adaptation of which has not been published before that date, the copyright will subsist until 60 years of from the beginning of the calendar year next following the year in which the work is first published.

Licenses

Licence by owners of copyright Compulsory licence in works withheld from public Compulsory Licence in unpublished Indian works (Sec.31A) Licence to produce and publish translation (Sec.32)

Copyright Societies

Registration of a copyright society (Sec.33)No person or association of persons shall commence or carry on business of issuing or granting licences in respect of any work in which copyright subsists or in respect of any other rights conferred by this Act except under or in accordance with the registration granted by the CentralGovernment.

The Central Government may, having regard to the interests of the authors and other owners of rights under this Act, the interest and convenience of the public and in particular of the groups of persons who are most likely to seek licences in respect of the relevant rights and the ability andprofessional competence of the applicant, register such association of persons as a copyright society subject to such conditions as may beprescribed.

However, the Central Government shall not ordinarily register more than one copyright society to do business in respect of the same class of works.

The Central Government may, if it is satisfied that a copyright society is being managed in a manner detrimental to the interests of the owners of rights concerned, cancel the registration of such society after such inquiry as may be prescribed.

Further, if the Central Government is of the opinion that in the interests of the owners of rights concerned, it is necessary so to do, it may suspend the registration of such society pending enquiry for such period not exceeding one year. In such a situation, the Government shall appoint an administrator to discharge the functions of the copyright society.

Administration of rights of owner by copyright society (Sec.34). A copyright society may accept from an owner of rights exclusive authorisation to administer any right in any work. But he shall have the right to withdraw such authorization without prejudice to the rights of the copyright society under the contract.

Payment of remuneration by copyrights society (Sec.4A). The copyright society is empowered to frame a scheme for determining the quantum of remuneration payable to individual copyright owners having regard to the number of copies of the work in circulation.

Control over the copyright society by the owner of rights (Sec.35). Every copyright society shall be subject to the collective control of the owners of rights under this Act whose rights it administers. The society shall (a) obtain the approval of such owners of rights for its procedures of collection and distribution of fees; (b) obtain their approval for the utilisation of any amounts collected as fees for any purpose other than distribution to the owner of rights; and (c) provide to such owners regular, full and detailed information concerning all its activities in relation to the administrator of their rights.

International Copyright

Sec.40 authorises the Central Government to extend copyright protection to foreign works. Accordingly the Central Government made the International copyright order, 1991.

Sec.41 provides that works made or published by certain International Organisations are granted copyright protection in India. Accordingly, the Central Government passed the copyright (International Organisations) Order (1958) under which copyright protection was granted to certain International Organisations.

Infringement of Copyright

Sec.51 provides that copyright in a work shall be deemed to be infringed in the following cases:(a) when any person without a licence from the owner or the Registrar of copyrights does anything, the exclusive right to do which is by this Act conferred upon the owner of copyright, or permits for profit, any place to be used for the communication of the work to the public, unless he was not aware and had no reasonable ground for believing that such communication would be an infringement of copyright; or

(b) when any person: (i) makes for sale or hire or sells or lets for hire or by way of trade displays or offers for sale or hire any infringing copies of the work covered by copyright; or (ii) distributes, either for the purpose of trade or to such an extent as to affect prejudicially the owner of the work; (iii) exhibits in public by way of trade any infringing copies of the work; or (iv) imports into India any infringing copies of the work except the copy of any work for the private and domestic use of the importer.

The reproduction of a literary, dramatic, musical or artistic work in the form of a cinematograph film shall be deemed to be infringing copyright.

Certain acts not to be infringement of copyright. (Sec.52). This section specifies acts which do not constitute an infringement of copyright.

(a) A fair dealing with a literary, dramatic, musical or artistic work, not being a computer program, for the purposes of

(i) private use, including research; (ii) criticism or review, whether of that work or of any other work.

(b) The making of copies or adaptation of a computer programme by the lawful possessor of a copy of such computer programme, from such copy(i) in order to utilise the computer programme for the purpose for which it was supplied; or (ii) to make back-up copies purely as a temporary protection against loss, destruction or damage in order only to utilise the computer programme for the purpose for which it was supplied.

(c) A fair dealing with a literary, dramatic, musical or artistic work for the purpose of reporting current events – (i) in a newspaper, magazine or similar periodical, or (ii) by broadcast or in a cinematograph film or by means of photographs.

(d) The reproduction of a literary, dramatic, musical or artistic work for the purpose of a judicial proceeding or for the purpose of a report of a judicial proceeding.

(e) The reproduction or publication of literary, dramatic, musical or artistic work in any work prepared by the Secretariat of a Legislature exclusively for the use of its members.

(f) The reproduction of any literary, dramatic or musical work in a certified copy made or supplied in accordance with any law for the time being in force.

(g) The reading or recitation in public of any reasonable extract from a published literary or dramatic work.

(h) The publication in a collection, mainly composed of non-copyright matter bonafide intended for the use of educational institutions and so described in the title and in any advertisement issued by or on behalf of the publisher, of short passages from published literary or dramatic works.

(i)The reproduction of a literary, dramatic, musical or artistic work (i) by a teacher or a pupil in the course of instruction; or (ii) as part of the questions to be answered in an examination; or (iii) in answer to such questions.

(j) The performance, in the course of the activities of educational institution of a literary, dramatic or musical work by the staff and students of the institution, or of a cinematograph film or a sound recording, if the audience is limited to such staff and students, the parents and guardians of the students and persons directly connected with activities of the institution or the communication to such an audience of a cinematograph film or sound recording.

(k) The making of sound recordings in respect of any literary, dramatic or musical work, if (i) sound recording of that work have been made by or with the licence or consent of the owner of the right in the work; (ii) the person making the sound recordings has given a notice of his intention to make the sound recordings, has provided copies of all covers or labels with which the sound recordings are to be sold, and has paid in the prescribed manner to owner of rights in

the work, royalties in respect of all such sound recordings to be made by him, at the rate fixed by the Copyright Board in this behalf.

(l) The causing of a recording to be heard in public by utilising it, (i) in an enclosed room or hall meant for the common use of residents in residential premises (not being a hotel or similar commercial establishment) as part of the amenities provided exclusively or mainly for residents,therein; or (ii) as part of the activities of a club or similar organisation which is not established or conducted for profit.

(m) The performance of a literary, dramatic or musical work by an amateur club or society, if the performance is given to a non-paying audience or for the benefit of a religious institution;

(n) The reproduction in a newspaper, magazine or other periodical of an article on current economic, political, social or religious topics, unless the author of such article has expressly reserved to himself the right of such reproduction.

(o) The publication in a newspaper, magazine or other periodical of a report of a lecture delivered in public.

(p) The making of not more than three copies of a book (including a pamphlet, sheet of music, map, chart or plan) by or under the direction of the person in charge of a public literary for the use of the library if such book is not available for sale in India.

(q) The reproduction for the purpose of research or private study or with a view to publication, of an unpublished literary, dramatic or musical work kept in a library, museum or other institution to which the public access.

(r) The reproduction or publication of (i) any matter which has been published in any Official Gazette except an Act of a Legislature; (ii) any Act of a Legislature subject to the condition that such Act is reproduced or published together with any commentary thereon or any other original matter; (iii) the report of any committee, commission, council, board or other like body appointed by the Government if such report has been laid on the Table of Legislature, unless the reproduction or publication of such report is prohibited by the Government; (iv) any judgment or order of a court, tribunal or other judicial authority, unless the reproduction or publication of such judgment or order is prohibited by the court, the tribunal or other judicial authority, as the case may be.

(s) The production or publication of a translation in any Indian language of an Act of a Legislature and of any rules or orders made there under (i) if no translation of such Act or rules or orders in that language has previously been produced or published by the Government; or(ii) Where a translation of such Acts or rules or orders in that language has been produced or published by the government if the translation is not available for sale to the public.

(t) The making or publishing of a painting, drawing, engraving or photograph of a work of architecture or photograph of a work of architecture or the display of a work of architecture.

(u) The making or publishing of a painting, drawing, engraving or photograph of a sculpture, or other artistic work falling under Sec.2(e) (iii), if such work is permanently situated in a public place or any premises to which the public has access.

(v) The inclusion in a cinematograph film of – (i) any artistic work permanently situated in a public place or any premises to which the public has access; or (ii) any other artistic work, if such inclusion is only by way of background or is otherwise incidental to the principal matters represented in the film.

(w) The use by the author of an artistic work where the author of such work in not the owner of the copyright therein, of any mould, cast, sketch, plan, model or study made by him for the purpose of the work.

(x) The reconstruction of a building or structure in accordance with the architectural drawings or plans by reference to which the building or structure was originally constructed.

(y) In relation to literary, dramatic or musical work recorded or reproduced in any cinematograph film, the exhibition of such film after the expiration of the term of copyright therein.

(z) The making of an ephemeral recording, by a broadcasting organisation using its own facilities for its own broadcast by a broadcasting organisation of a work which it has the right to broadcast, and the retention of such recording for archival purposes on the ground of its exceptional documentary character.

(za) The performance of a literary, dramatic or musical work or the communication to the public of such work or of a sound recording in the course of any bona fide religious ceremony or an official ceremony held by the Central Government or the State Government or any local authority.

Sec.52A requires certain particulars to be included in sound recording and video films. No person can publish a sound recording in respect of any work unless the following particulars are displayed on the sound recording and on any container thereof; (a) the name and address of the person who has made the sound recording; (b) the name and address of the owner of the copyright in such work; (c) the year of its publication.

In the case of a video film in respect of any work, the following particulars are to be displayed in the video film, when exhibited. Also, it is necessary that on the video cassette or other container thereof the following particulars are shown:

(a) If such work is a cinematograph film required to be certified for exhibition under the provisions of the Cinematograph Act, 1952, a copy of the certificate granted by the Board of Film Certification;(b) The name and address of the person who has made the video film and a declaration by him that he has obtained the necessary licence or consent from the owner of the copyright in such work for making such video film; and(c) The name and address of the owner of the copyright in such work.

Set – 2

1. Explain different modes of discharge of contracts.

Answer:

Different Modes of Discharge of Contracts (Secs.73-75)

A contract may be discharged by:

(i) Performance,

(ii) Tender;

(iii) Mutual consent;

(iv) Subsequent impossibility;

(v) Operation of law;

(vi) Breach.

Discharge of contracts by performance or tender:

The obvious mode of discharge of a contract is by performances that is where the parties have done whatever was contemplated under the contract; the contract comes to an end. Thus, where a contracts to sell his car to B for Rs 1, 85, 000, as soon as the car is delivered to B and B pays the agreed price for it, the contract comes to an end by performance. The tender or offer of performance has the same effect as performance. If a promisor tenders performance of his promise but the other party refuses to accept, the promisor stands discharged of his obligations.

Mutual consent (Sec.62):

If the parties to a contract agree to substitute a new contract for it, or to rescind it or alter it, the original contract is discharged. A contract may terminate by mutual consent in any of the six ways viz. novation, rescission, alteration and remission, waiver and merger. Novation meanssubstitution of a new contract for the original one.

Discharge of contracts by impossibility of performance:

A contract may be discharged because of impossibility of performance. There are two types of impossibility: (i) Impossibility may be inherent in the transaction (i.e., the contract), (ii) Impossibility may emerge later by the change of certain circumstances material to the contract.

Discharge of a contract by operation of law:

Discharge by operation of law may take place in four ways: (i) By death. Death of the promisor results in termination of the contract in cases involving personal skill or ability. (ii) By insolvency. The insolvency law provides for discharge of contracts under certain circumstances so where an order of discharge is passed by an insolvency court the insolvent stands discharged of all debts incurred previous to his adjudication. (iii) By merger.

Discharge of contracts by breach:

A breach of contract is one party’s failure, without a legal excuse, to live up to any of its promises under a contract. A contract terminates by breach of contract. If the promisor has not performed his promise in accordance with the terms of the contract or where the performance is not excused by tender, mutual consent or impossibility or operation of law, then this amounts to a breach of contract on the part of the promisor. The consequenceof this is that the promisee becomes entitled to certain remedies. The breach of contract may arise in two ways: i) anticipatory and (ii) actual.

Anticipatory breach of contracts:

The anticipatory breach of contract occurs when a party repudiates it before the time fixed for performance has arrived or when a party by his own act disables himself from performing the contract.

Actual breach of contracts:

The actual breach can occur by (i) failure to perform as promised, (ii) making it impossible for the other party to perform. The failure to perform means that one party must not have performed a material part of the contract by a stated deadline. The actual breach by failure to perform may take place (a) at the time when performance is due, or (b) during the performance of the contract. Thus, if a person does not perform his part of the contract at the stipulated time, he will be liable for its breach.

2. Distinguish between a contract of guarantee and a contract of indemnity

Answer:

A contract of guarantee and a contract of indemnity

Guarantees and indemnities are both long established forms of what the law terms surety ship. There are important legal distinctions between them. Append below some salient points pertaining to the difference/distinction between Indemnity and Guarantee:

Contracts of Indemnity:

A contract of indemnity is any agreement whereby one party agrees to indemnify, or pay, the other party for certain types of loss. Depending on the contract, those losses could be caused by the party promising to pay or by any other individual. The most common type of contracts of indemnity are insurance contracts. For instance, in an automobile insurance contract, the insurance company promises to indemnify (or pay) the insured for any losses he suffers as a result of automobile accidents.

Contracts of Guarantee:

In a contract of guarantee, or contract of guaranty, one party agrees to act on behalf of another should that second party default. In plain terms, this means that if an individual fails to pay her guaranteed debt or to perform some other duty or obligation, the guarantor -- the party who has agreed to act on behalf of another -- will step in to pay or perform the obligation. Common contracts of guarantee include a loan with a co-signer and a student loan, where the government guarantees payment if the student should default.

1. Section 124 of the Indian Contract Act 1872 defines a "contract of indemnity" as a contract by which one party promises to save the other from loss caused to him by the conduct of the Promisor himself, or by the conduct of any other person.

Example: = 'x' contracts to indemnify 'y' against the consequences of any legal proceedings which may take against B in respect of a certain sum of Rs.200/=, Where as Section 126 of the Indian Contract Act 1872 defines a contract of guarantee 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”. A guarantee may be either oral or written. e.g., 'P' lends Rs. 5000/= to 'Q' and 'R' promises to 'P' that if 'Q' does not pay the money back then 'R' will do so.

2. Indemnity comprise only two parties- the indemnifier and the indemnity holder, There are three parties in guarantee namely the surety, principal debtor and the creditor.

3. Liability of the indemnifier is Primary; in guarantee 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.

4. The indemnifier need not necessarily act at the request of the indemnified. In guarantee the surety give guarantee only at the request of the principal debtor.

5. The possibility of any loss happening is the only contingency against which the indemnifier undertakes to indemnify. Whereas there is an existing debt or duty, the performance of which is guarantee by the surety.

6. An indemnity is for reimbursement of a loss, a guarantee is for security of the creditor.

7. In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs, In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults.

8. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favor, Whereas in a contract of guarantee, the surety steps into the shoes of the creditor on discharge of his liability, and may sue the principal debtor.

9. In a contract of indemnity, the indemnifier promises without the request of debtor, Contract of Guarantee is for security of a debt or performance of promise.

3) Briefly state special features of a partnership on the basis of which its existence can be determined under the Indian Partnership Act?

Answer:Partnership

A partnership is defined as “the relationship between persons who have agreed to share profits of a business carried on by all, or by any of them acting for all”. On analysis of the definition, certain essential elements of partnership emerge.

Features of a partnership:

1. Partnership is an association of two or more than two persons.

There must be at least two persons who should join together to constitute a partnership, because one person cannot become a partner with himself. These persons must be natural persons having legal capacity to contract. Thus, a company (which is an artificial person) cannot be a partner. Similarly, a partnership firm cannot be a partner of another partnership firm. As regards maximum number of partners in a partnership firm, Sec.11 of the Companies Act, 1956, puts the limit at 10 in case of banking business and 20 in case of any other business.

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 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].

4) Distinguish between condition and warranty. State the circumstance under which a condition can be waived and treated as a warranty.

Answer:

In a contract of sale, parties make certain stipulations, i.e., agree to certain terms. All stipulations cannot be treated on the same footing. Some may be intended by the parties to be of a fundamental nature, e.g., quality of the goods to be supplied, the breach of which, therefore, will be regarded as a breach of the contract. Some may be intended by the parties to be binding, but of a subsidiary or inferior character, e.g., time of payment, so that a breach of these terms will not put an end to the contract but will make the party committing the breach liable to damages. The former stipulations are called ‘conditions’ and the latter ‘warranties’.

Difference between conditions and warranty

Condition: A condition is a stipulation which is essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated [Sec. 12(2)].

Thus, a condition is regarded as the very basis or foundation of the contract. If there is a breach of a condition, the contract will fail and it will entitle the aggrieved party to put an end to the contract.

Example: B asked a car dealer to suggest him a suitable car for touring purposes. The dealer suggested to buy a "Buggatti" car. B accordingly purchased the car but found it unfit for the purpose. Held, the suitability of the car for touring purposes was so important that its non-fulfdment defeated the very purpose. Hence B could return the car and get back the price [Baldry v. Marshal.

Warranty: A warranty is a stipulation collateral to the main purpose of the contract. The breach of which gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated [Sec. 12(3)].

A warranty is not regarded as the very basis of a contract or its foundation. Hence a breach of warranty does not give the aggrieved party, a right to reject the goods and repudiate the contract. The party will have to accept the goods but can claim damages for breach of warranty.

It should be noted that whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract and vice-versa [Sec. 12(4)].

Breach of condition to be treated as breach of warranty (Sec.13). Under certain circumstances a breach of condition is to be treated as a breach of warranty, i.e., the right to repudiate the contract is deemed to have been lost. These circumstances are:

i) Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may either (a) waive the condition, or (b) elect to treat the breach of the condition as a breach of warranty. In such situations, the buyer is active and is either waiving the condition or electing to treat the breach of condition as a breach of warranty. If the buyer decides to waive the condition, he cannot later on insist that the condition be fulfilled. Where the buyer treats the breach of condition as a breach of warranty, he has to give a notice to the seller to that effect.

ii) There is also a compulsory treatment of breach of condition as a breach of warranty. Where the contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty. However, the agreement may provide otherwise, i.e. may permit repudiation of the contract in spite of the acceptance of the goods by the buyer.

Express and implied conditions and warranties. Conditions and warranties may be either express or implied. They are said to the ‘express’ when the terms of the contract expressly, provide for them. They are said to be ‘implied’ when the law deems their existence in the contract even without their actually having been put in the contract. However, an implied condition or warranty may be negative by an express term to the contrary. Sec.62 recognizes the following two principles: (i) what is expressed makes what is implied to cease and (ii) custom and agreement overrule law.

Express condition or warranty. These may be of any kind that the parties may choose to agree upon, e.g., it may be agreed that delivery of goods shall be made or taken on or before a certain date. Similarly, in a contract of sale of a car, express warranty as to its soundness may be incorporated.

Implied conditions and warranties [Secs.14-17]. Implied conditions and warranties are deemed to be incorporated by law in every contract of sale of goods unless the terms of the contract show a contrary intention. The implied conditions: (i) condition as to title (Sec.14), (ii) sale by description (Sec.15), (iii) condition as to quality or fitness for buyer’s purpose (Sec.16(1)), (iv) condition as to merchantable quality [Sec.16(2)], (v) condition as to wholesomeness, (vi) implied condition in the case of sale by sample (Sec.17), (vii) implied condition in the case of sale by sample as well as description (Sec.15).

Doctrine of caveat emptor

The doctrine of caveat emptor is a fundamental principle of the law of sale of goods. It means ‘CAUTION BUYER’, i.e., ‘let the buyer beware’. In other words, it is no part of the seller’s duty to point out defects of his own goods. The buyer must inspect the goods to find out if they will suit his purpose.

5) What is meant by Memorandum of Association? Explain in brief.

Answer:

Meaning and purpose

The Memorandum of Association of a company is its charter which contains the fundamental conditions upon which alone the company can be incorporated. It tells us the objects of the company’s formation and the utmost possible scope of its operations beyond which its actions cannot go. Thus, it defines as well as confines the powers of the company. If anything is done beyond these powers, that will be ultra vires (beyond powers of) the company and so void.

The memorandum serves a two-fold purpose. It enables shareholders, creditors and all those who deal with the company to know what its powers are and what is the range of its activities. Thus, the intending shareholder can find out the field in, or the purpose for which his money is going to be used by the company and what risk he is taking in making the investment. Also, any one dealing with the company, say, a supplier of goods or money, will know whether the transaction he intends to make with the company is within the objects of the company and not ultra virus its objects.

Form and contents

Sec.14 requires that the memorandum of a company shall be in such one of the Forms in Tables B, C, D and E in Schedule I to the Act, as may be applicable in the case of the company, or in Forms as near thereto as circumstances admit. Sec.15 requires the memorandum to be printed, divided into paragraphs, numbered consecutively and signed by at least seven persons (two in the case of a private company) in the presence of at least one witness, who will attest the signature. Each of the members must take at least one share and write opposite his name the number of shares he takes. Sec.13 requires the memorandum of a limited company to contain: (i) the name of the company, with ‘limited’ as the last word of the name in the case of a public company and ‘private limited’ as the last words in the case of a private company; (ii) the name of the State, in which the registered officer of the company is to be situated; (iii) the objects of the company, stating separately ‘Main objects’ and ‘other objects’; (iv) the declaration that the liability of the members is limited; and (v) the amount of the authorised share capital, divided into shares of fixed amounts.

These contents of the memorandum are called compulsory clauses and are explained below:

The name clause. The promoters are free to choose any suitable name for the company provided:

(a) the last word in the name of the company, if limited by shares or guarantee is ‘limited’ unless the company is registered under Sec.25 as an ‘association not for profit’ [Sec.13(1) (a) & Sec.25].

(b) In the opinion of the Central Government, the name chosen is not undesirable [Sec.20 (1)].

Too similar name.

In case of too similar names, the resemblance between the two names must be such as to be calculated to deceive. A name shall be said to be calculated to deceive where it suggests some connection or association with the existing company.

Publication of name (Sec.147).

Every company shall: (a) paint or affix its name and the address of its registered office and keep the same painted or affixed, on the outside of every office or place of business in a conspicuous position in letters easily legible and in the language in general use in the locality.

Alteration of memorandum

Sec.16 provides that the company cannot alter the conditions contained in memorandum except in the cases and in the mode and to the extent express provision has been made in the Act. These provisions are explained herein below:

Change of name. Sec.21 provides that the name of a company may be changed at any time by passing a special resolution at a general meeting of the company and with the written approval of the Central Government. However, no approval of the Central Government is necessary if the change of the name involves only the addition or deletion of the word ‘private’ (i.e., when public company is converted into a private company or vice versa).

The change of name must be communicated to the Registrar of Companies within 30 days of the change. The Registrar shall then enter the new name on the register in the place of the old name and shall issue a fresh certificate of incorporation with necessary alterations [Sec.23 (1)]. The change of name becomes effective on the issue of fresh certificate of incorporation.

Change of registered office.

The procedure depends on whether the change is within the jurisdiction of same registrar of companies (Sec.146) or whether the shifting is to the jurisdiction of another registrar of companies in the same state (Sec.146 and Sec.17A). This may include:

(a)Change of registered office from one premises to another premises in the same city, town or village.

The company may do so anytime. A resolution passed by the Board of directors shall be sufficient. However, notice of the change should, within 30 days after the date of the change, be given to the Registrar who shall record the same (Sec.146).(b) Change of registered office from one town or city or village to another town or city or village in the same State (Sec.146).

In this case, the procedure is:

(i) A special resolution is required to be passed at a general meeting of the shareholders;

(ii) A copy of it is to be filed with the Registrar within 30 days.

(iii) Within 30 days of the removal of the registered office, notice of the new location has to be given to the Registrar who shall record the same.

(c) Shifting of the registered office from one place to another within the same state (Sec.17A):

The shifting of the registered office by a company from the jurisdiction of one registrar of companies to the jurisdiction of another registrar of companies within the same state shall (in addition to requirements under Sec.146) also require confirmation by the Regional Director. For this purpose, an application is to be made in the prescribed form and the confirmation shall be communicated within four weeks. Such confirmation is required to be field within two months with the registrar of companies who shall register and certify the same within one month. Such certificate shall be conclusive evidence of the compliance of all requirements under the Act.

6) Write short note on Right to Information Act.

Answer:

Right to Information Act

Right to information is a part of fundamental rights under Article 19 (1) of the Constitution.

Article 19 (1) says that every citizen has freedom of speech and expression. As early as in 1976, the Supreme Court said that people cannot speak or express themselves unless they know. India is a democracy and people are the masters. Therefore the masters have the rights to know how the Govts., meant to serve them, are functioning.

In Indian democratic system, the right of every citizen to know information is no doubt a revolutionary step. Since long the officials in the name of administrative secrecy hesitated to disclose information and thereby kept in darkness to general public about important decision of Govt. & other administrative bodies. This has widened the path of corruption in manifold. The main aim of this act is to eradicate the existing practice of concealing facts & events and to empower every citizen to exercise their legal right in obtaining information under RTI Act, 2005.

The ideal objectives of the RTI Act are to promote transparency and accountability in the working of public authority and to set up a practical regime for giving citizens access to information under the control of public authorities.

RTI Act, 2005 was implemented in our country on 15th June, 2005 and became operational on 12.10.2005. The act extends to the whole of India except the State of Jammu and Kashmir.

What rights are available under RTI Act, 2005

Right to Information Act, 2005 empowers every citizen to:

Ask any questions from the Government or seek any information.

Take copies of any Govt. documents.

Inspect any Govt. documents.

Inspect any Govt. works.

Take samples of materials of any Govt. work.

Coverage of the Act:

The RTI Act covers all level of Govt. – Center, State, District and Local self Governing Bodies like Panchyat and Municipal bodies. It also covers NGOs – that are financed substantially with public funds provided by Govt.

Every citizen of India are empowered to seek information from public authority. Information must be shared for the interest of public as the purpose of this Act is to evolve an interface between public authority and citizen.

Since the Act imposes liability on public authority, it should not be misinterpreted rather it makes the administration more responsive and removes sloth. Maximum possible information must be disclosed voluntarily.

For this openness and change of attitude is required.

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