MB0051-Legal Aspects of Business Completed

7/30/2019 MB0051-Legal Aspects of Business Completed

http://slidepdf.com/reader/full/mb0051-legal-aspects-of-business-completed 1/19

Master of Business Administration-MBA Semester 3

Legal Aspects of Business – MB0051

Assignment Set 1

Q.1 Distinguish between fraud and misrepresentation.

Ans : Meaning of fraud (Secs.17 and 19)

Fraud means and includes any of the following acts committed by a party to a contract with

an intent to deceive the other party thereto or to induce him to enter into a contract:

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

true;

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

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

deceive;

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

Meaning of misrepresentation

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

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

statement but the falsity or inaccuracy is not due to any desire to deceive or defraud the

other party. Such a statement is made innocently. The party making it believes it to be true.

In this way, fraud is different from misrepresentation.

Difference between Fraud and Misrepresentation:-

The main difference in fraud and misrepresentation are,

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

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

whether it is true or false.

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

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

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

consent was obtained by misrepresentation. In the case of fraud the contract is voidable It

also gives rise to an independent action in tort for damages.



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

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

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

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

6) The party complaining of misrepresentation can‟t avoid the contract if he had the

means to discover the truth with ordinary deligance. But in the case of fraud, the party

making a false statement cannot say that the other party had the means to discover the

truth with ordinary deligance.

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

Ans : Remedies for Breach of Contract

When someone breaches a contract, the other party is no longer obligated to keep its end of

the bargain. From there, that party may proceed in several ways:

(i) the other party may urge the breaching party to reconsider the breach;

(ii) if it is a contract with a merchant, the other party may get help from consumers‟

associations;

(iii) the other party may bring the breaching party to an agency for alternative dispute

resolution;

(iv) the other party may sue for damages; or

(v) the other party may sue for other remedies.

Rescission of the contract: When a breach of contract is committed by one party, the other

party may treat the contract as rescinded. In such a case the aggrieved party is freed from

all his obligations under the contract.

Damages (Sec.75): Another relief or remedy available to the promisee in the event of a

breach of promise by the promisor is to claim damages or loss arising to him therefrom.

Damages under Sec.75 are awarded according to certain rules as laid down in Secs.73-74.

Sec.73 contains three important rules:

(i) Compensation as general damages will be awarded only for those losses that directly and

naturally result from the breach of the contract.



(ii) Compensation for losses indirectly caused by breach may be paid as special damages

if the party in breach had knowledge that such losses would also follow from such act of

breach.

(iii) The aggrieved party is required to take reasonable steps to keep his losses to the

minimum.

The most common remedy for breach of contracts: The usual remedy for breach of

contracts is suit for damages. The main kinds of damages awarded in a contract suit are

ordinary damages. This is the amount of money it would take to put the aggrieved party in

as good a position as if there had not been a breach of contract. The idea is to compensate

the aggrieved party for the loss he has suffered as a result of the breach of the contract.

In addition to the rights of a seller against goods provided in Secs.47 to 54, the seller has

the following remedies against the buyer personally.

(i) suit for price

(ii) damages for non-acceptance of goods

(iii) suit for interest

Suit for price

Where under a contract of sale the property in the goods has passed to the buyer and the

buyer wrongfully neglects or refuses to pay the price, the seller can sue the buyer for the

price of the goods. Where the property in goods has not passed to the buyer, as a rule, the

seller cannot file a suit for the price; his only remedy is to claim damages.

Suit for damages for non-acceptance

Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller

may sue him for damages for non-acceptance. Where the property in the goods has not

passed to the buyer and the price was not payable without passing of property, the seller

can only sue for damages and not for the price. The amount of damages is to be determined

in accordance with the provisions laid down in Sec.73 of the Indian Contract Act, 1872.

Thus, where there is an available market for the goods prima facie, the difference between

the market price and the contract price can be recovered.

Suit for interest

When under a contract of sale, the seller tenders the goods to the buyer and the buyer

wrongfully refuses or neglects to accept and pay the price, the seller has a further right to

claim interest on the amount of the price. In the absence of a contract to the contrary, the

court may award interest at such rate as it thinks fit on the amount of the price. The



interest may be calculated from the date of the tender of the goods or from the date on

which the price was payable. It is obvious that the unpaid seller can claim interest only

when he can recover the price, i.e., if the seller‟s remedy is to claim damages only, then he

cannot claim interest.

Buyer’s remedies against seller

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

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

breach of condition; (v) suit for breach of warranty ; (vi) anticipatory breach; (vii) recovery

of interest .)

Q.3 Distinguish between indemnity and guarantee.

Ans:

Indemnity:-

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

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

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

glaring example of such type of contracts.

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

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

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

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

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

promisee).

Guarantee:-

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

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

instance, liable to such payment or performance, an engagement which secure or insures

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

Difference between indemnity and guarantee:-

There are distinguishing differences between Indemnity and Guarantee in the Indian

Contract Act.

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

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

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

indemnify B against the consequences of any proceedings which C may take against B in

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



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

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

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

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

is given is called the creditor.

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

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

the creditor, principal debtor and surety.

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

collateral liability.

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

is existing debt in the case of guarantee.

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

the case of guarantee.

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

discharged by payment made by principal debtor.

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

any connection with the transaction.

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

Ans:

Bill of exchange

A „bill of exchange‟ is defined by Sec.5 as „an instrument in writing, containing an

unconditional order, signed by the maker, directing a certain person to pay a certain sum of

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

Cheques

A cheque is the usual method of withdrawing money from a current account with a banker.

Savings bank accounts are also permitted to be operated by cheques provided certain

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

bank directing his banker to pay on demand, the specified amount, to or to the order of the

person named therein or to the bearer. Sec.6 defines a cheque. The Amendment Act 2002

has substituted new section for Sec.6. It provides that a „cheque‟ is a bill of exchange drawn

on a specified banker and not expressed to be payable otherwise than on demand and it

includes the electronic image of a truncated cheque and a cheque in the electronic from.



Cheque Bill of Exchange

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

It has three parties - the drawer, the

drawee, and payee.

It has three parties - the drawer, the

drawee, and payee.

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

It does not require acceptance by thedrawee.

It must be accepted by the drawee before hecan be made liable to pay the bill

Days of grace are not allowed to a banker to

the drawee.

Three days of grace are always allowed

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

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

not necessarily be printed.

Q.5 Distinguish between companies limited by shares and companies limited byguarantee.

Ans :

A company limited by guarantee is normally incorporated for non-profit making functions.

The company has no share capital. A company limited by guarantee has members rather

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

predetermined sum to the liabilities of the company which becomes due in the event of the

company being wound up. The Memorandum normally includes a non-profit distribution

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

associations.

The main difference between a company limited by guarantee and a company limited by

shares is that the company has no share capital.

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

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

are both some similarities and differences between the two groups.

Members and shareholders enjoy limited liability, however in cases where a share based

company is liquidated; the latter might be required to pay all amounts of unpaid monies

relating to the shares they hold.

For example, if an individual shareholder holds 100 shares of Rs.100 each, all of whichremains unpaid at the time of dissolution, then they would be required to pay Rs.10000 to

the company.

Most companies limited by guarantee have a constitution which states that each member is

only required to pay Rs.100 should it be dissolved.



Assuming that an average shareholder holds more than one share in a company, members

in a business limited by guarantee do appear to have less risk attached to their positions.

Q.6 what is the definition of cyber crime.

Ans:

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

network. The computer may have been used in the commission of a crime, or it may be the

target. Net crime refers, more precisely, to criminal exploitation of the Internet. Issues

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

hacking, copyright infringement, child pornography, and child grooming. There are also

problems of privacy when confidential information is lost or intercepted, lawfully or

otherwise.

Cyber crime includes anything from downloading illegal music files to stealing millions of

dollars from online bank accounts. Cyber crime also includes non-monetary offences, such

as creating and distributing viruses on other computers or posting confidential businessinformation on the Internet.

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

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

is done is through phishing and pharming. Both of these methods lure users to fake

websites, where they are asked to enter personal information. This includes login

information, such as usernames and passwords, phone numbers, addresses, credit card

numbers, bank account numbers, and other information criminals can use to "steal" another

person's identity. For this reason, it is smart to always check the URL or Web address of a

site to make sure it is legitimate before entering your personal information.

CYBERCRIME

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

tool or a targeted victim. It is very difficult to classify crimes in general into distinct groups

as many crimes evolve on a daily basis. Even in the real world, crimes like rape, murder or

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

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

Hence, the computer will be looked at as either a target or tool for simplicity‟s sake. For

example, hacking involves attacking the computer‟s information and other resources. It is

important to take note that overlapping occurs in many cases and it is impossible to have a

perfect classification system.

• Computer as a tool

When the individual is the main target of Cybercrime, the computer can be considered as

the tool rather than the target. These crimes generally involve less technical expertise as

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



exploited. The damage dealt is largely psychological and intangible, making legal action

against the variants more difficult. These are the crimes which have existed for centuries in

the offline. Scams, theft, and the likes have existed even before the development in high-

tech equipment. The same criminal has simply been given a tool which increases his

potential pool of victims and makes him all the harder to trace and apprehend.

• Computer as a target

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

computer as a tool, these crimes requires the technical knowledge of the perpetrators.

These crimes are relatively new, having been in existence for only as long as computers

have - which explains how unprepared society and the world in general is towards

combating these crimes. There are numerous crimes of this nature committed daily on the

internet. But it is worth knowing that Africans and indeed Nigerians are yet to develop theirtechnical knowledge to accommodate and perpetrate this kind of crime.

Cyber crime encompasses any criminal act dealing with computers and networks (called

hacking). Additionally, cyber crime also includes traditional crimes conducted through the

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

credit card account thefts are considered to be cyber crimes when the illegal activities are

committed through the use of a computer and the Internet. Crime committed using a

computer and the internet to steal a person's identity or sell contraband or stalk victims or

disrupt operations with malevolent programs

Q. 5 a. What is a cyber crime? What are the categories of cyber crime?

Ans.: Cyber crime

It refers to all the activities done with criminal intent in cyberspace or using the medium of

Internet. These could be either the criminal activities in the conventional sense or activities,

newly evolved with the growth of the new medium. Any activity, which basically offends

human sensibilities, can be included in the ambit of Cyber crimes.

Because of the anonymous nature of Internet, it is possible to engage in a variety of

criminal activities with impunity, and people with intelligence, have been grossly misusing

this aspect of the Internet to commit criminal activities in cyberspace. The field of cybercrime is just emerging and new forms of criminal activities in cyberspace are coming to the

forefront each day. For example, child pornography on Internet constitutes one serious

cyber crime. Similarly, online pedophiles, using Internet to induce minor children into sex,

are as much cyber crimes as any others.



Categories of cyber crimes:

Cyber crimes can be basically divided in to three major categories:

1. Cyber crimes against persons;

2. Cyber crimes against property; and

3. Cyber crimes against government.

1. Cyber crimes against persons: Cyber crimes committed against persons include

various crimes like transmission of child-pornography, harassment of any one with the use

of a computer and cyber stalking. The trafficking, distribution, posting, and dissemination of

obscene material including pornography, indecent exposure, and child pornography

constitute the most important cyber crimes known today. These threaten to undermine the

growth of the younger generation and also leave irreparable scars on the minds of the

younger generation, if not controlled.

Similarly, cyber harassment is a distinct cyber crime. Various kinds of harassments can and

do occur in cyberspace, or through the use of cyberspace. Harassment can be sexual, racial,

religious, or of any other nature. Cyber harassment as a crime also brings us to another

related area of violation of privacy of citizens. Violation of privacy of online citizens is a

cyber crime of a grave nature.

Cyber stalking: The Internet is a wonderful place to work, play and study. The net is merely

a mirror of the real world, and that means it also contains electronic versions of real life

problems. Stalking and harassment are problems that many persons especially women, are

familiar within real life. These problems also occur on the Internet, in the form of “cyber

stalking” or “online harassment”.

2. Cyber crimes against property: The second category of Cyber crimes is Cyber crimes

against all forms of property. These crimes include unauthorized computer trespassing

through cyberspace, computer vandalism, and transmission of harmful programs and

unauthorized possession of computerized information.

3. Cyber crimes against Government: The third category of Cyber crimes is Cyber

crimes against Government. Cyber Terrorism is one distinct kind of crime in this category.

The growth of Internet has shown that individuals and groups to threaten internationalgovernments as also to terrorize the citizens of a country are using the medium of

cyberspace. This crime manifests itself into Cyber Terrorism when an individual “cracks” into

a government or military maintained website, for the purpose of perpetuating terror.

Since Cyber crime is a newly emerging field, a great deal of development has to take place

in terms of putting into place the relevant legal mechanism for controlling and preventing

cyber crime. The courts in United States of America have already begun taking cognizance



of various kinds of fraud and cyber crimes being perpetrated in cyberspace. However, much

work has to be done in this field. Just as the human mind is ingenious enough to devise new

ways for perpetrating crime, similarly, human ingenuity needs to be canalized into

developing effective legal and regulatory mechanisms to control and prevent cyber crimes.

A criminal mind can assume very powerful manifestations if it is used on a network, given

the reachability and size of the network.

Legal recognition granted to Electronic Records and Digital Signatures would certainly boost

E – Commerce in the country. It will help in conclusion of contracts and creation of rights

and obligations through electronic

medium. In order to guard against the misuse and fraudulent activities over the electronic

medium, punitive measures are provided in the Act. The Act has recognized certain

offences, which are punishable. They are:

Tampering with computer source documents (Sec 65)

Any person, who knowingly or intentionally conceals, destroys or alters or intentionally orknowingly causes another person to conceal, destroy or alter any -

i. Computer source code when the computer source code is required to be kept by law

for the time being in force,

ii. Computer programme,

iii. Computer system and

iv. Computer network.

- Is punishable with imprisonment up to three years, or with fine, which may extend

up to two lakh rupees, or with both.

Hacking with computer system (Sec 66):

Hacking with computer system is a punishable offence under the Act. It means any person

intentionally or knowingly causes wrongful loss or damage to the public or destroys or

deletes or alters any information residing in the computer resources or diminishes its value

or utility or affects it injuriously by any means, commits hacking.

Such offenses will be punished with three years imprisonment or with fine of two lakh

rupees or with both.

Publishing of information which is obscene in electronic form (Sec 67): Whoever publishes

or transmits or causes to be published in the electronic form, any material which is

lascivious or appeals to prurient interest or if its effect is such as to tend to deprave and

corrupt persons who are likely, having regard to all relevant circumstances, to read, see or

hear the matter contained or embodied in it shall be punished on first conviction with

imprisonment for a term extending up to 5 years and with fine which may extend to one

lakh rupees. In case of second and subsequent conviction imprisonment may extend to ten

years and also with fine which may extend up to two lakh rupees.



Master of Business Administration-MBA Semester 3

Legal Aspects of Business – MB0051

Assignment Set 2

Question 1: What are the situations which cannot be referred to arbitration?

Answer:

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

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

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

what in order to resolve the situation. In some instances of arbitration law, an arbitrator

may also issue an opinion in conjunction with the award, which is designed to explain the

award and the reasoning that led to it. Arbitration law and mediation law are two different

processes and should not be confused. The award and the opinion are not capable of being

reviewed by a court, and there is no availability for appeal. The purpose of arbitration law is

to serve as a substitution to a trial and a review of the decision by a trial court.

Subject matter of arbitration:

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

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

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

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

arbitration but director - company disputes are abatable (as there is no master servant

relationship here)5. Generally, matters covered by statutory reliefs through statutory

tribunals would be non-abatable.

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

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

exceptions:

The arbitrator makes the decision called an "arbitration award”

The arbitration does not take place in a courtroom The arbitration award is binding. With rare exceptions, there is no right to appeal

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

There is no court reporter or written transcripts

Lawyers generally prepare their cases in an extremely limited manner The rules of evidence are relaxed so that the parties have a broader scope, more

expanded opportunity to tell their stories to present their cases

With very few exceptions, it is much less expensive than legal litigation An arbitration time frame is substantially less than that of litigation and going to trial

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

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

The arbitration and arbitration award does not have to adhere to Judicial Caseprecedent nor formality of traditional court proceedings



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

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

Kind of matters cannot be referred for arbitration:

As per general practice, matters involving moral questions or questions of public law cannot

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

arbitration:

Matrimonial matters

Guardianship of a minor or any other person under disability

Testamentary matters Insolvency, proceedings

Criminal proceedings

Questions relating to charity or charitable trusts Matters relating to anti-trust or competition law Dissolution or winding up of a company

Indian Arbitration Act follows the guideline of:

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

The New York Convention of 1958 on the Recognition and Enforcement of ForeignArbitral Awards

The Geneva Protocol on Arbitration Clauses of 1923



Question 2: What is the role of a Conciliator?

Answer:

Conciliation:

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

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

alternatives and endeavour to reach an agreement.

The conciliator may have an advisory role on the content of the dispute or the outcome of

its resolution, but not a determinative role.

The conciliator may advise on or determine the process of conciliation whereby resolution is

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

settlement terms, and may actively encourage the participants to reach an agreement.

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

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

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

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

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

as to the meaning of „conciliation‟ under sec. 89 because; it says that once a reference is

made to a „conciliator‟, the 1996 Act would apply. Thus the meaning of „conciliation‟ as can

be gathered from the 1996 Act has to be read into sec. 89 of the Code of Civil Procedure.

The 1996 Act is, it may be noted, based on the UNCITRAL Rules for conciliation.

Role of conciliator:

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

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

usages of the trade concerned and the circumstances surrounding the dispute,including any previous business practices between the parties.

The conciliator may conduct the conciliation proceedings in such a manner as heconsiders appropriate, taking into account the circumstances of the case, the wishes

the parties may express, including any request by a party that the conciliator hearoral statements, and the need for a speedy settlement of the dispute.

The conciliator may, at any stage of the conciliation proceedings, make proposals fora settlement of the dispute. Such proposals need not be in writing and need not beaccompanied by a statement of the masons therefore.

Conciliators do not:



Make decisions for disputing parties

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

dispute should be. Tell people what to do

Make rulings Force parties to participate in the conciliation process.

Question 3: What are the unfair trade practices under the MRTP Act?

Answer:

THE MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969 - OBJECTIVES

AND POLICY:

The Monopolies and Restrictive Trade Practices Commission has been constituted under

Section 5(1) of the MRTP Act, 1969. The Commission is empowered to enquire intoMonopolistic or Restrictive Trade Practices upon a reference from the Central Government or

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

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

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

relating to restrictive trade practices.

The MRTP Commission receives complaints both from registered consumer and trade

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

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

General of Investigation and Registration for conducting preliminary investigation. The

Commission can also order a preliminary investigation by the Director General of Investigation and Registration when a reference on a restrictive trade practice is received

from the Central/State Government, or when Commission's own knowledge warrants a

preliminary investigation. Enquiries are instituted by the Commission after the Director

General of Investigation and Registration completes preliminary investigation and submits

an application to the Commission for an enquiry.

Unfair Trade Practices:

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

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

1) False Representation:

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

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

composition, style or model;



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

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

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

characteristics, accessories, uses or benefits which they do not have; Represents that the seller or the supplier has a sponsorship or approval or affiliation

which he does not have; Makes a false or misleading representation concerning the need for, or the

usefulness of, any goods or services; Gives any warranty or guarantee of the performance, efficacy or length of life of the

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

Makes to the public a representation in the form that purports to be- warranty or guarantee of the goods or services,

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

specified result,If such representation is materially misleading or there is no reasonable prospect

that such warranty, guarantee or promise will be fulfilled

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

the market; or Gives false or misleading facts disparaging the goods, services or trade of another

person.

2) False Offer Of Bargain Price:

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

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

may be offered at that price, for a reasonable period or reasonable quantity, it shall

amount to an unfair trade practice.

The bargain price, for this purpose means:

the price stated in the advertisement in such manner as suggests that it is lesserthan the ordinary price, or

The price which any person coming across the advertisement would believe to bebetter than the price at which such goods are ordinarily sold.

3) Free Gifts Offer And Prize Scheme:

The unfair trade practices under this category are:

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

is different, or

Creating impression that something is being offered free along with the goods, whenin fact the price is wholly or partly covered by the price of the article sold, or

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

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

4) Non-Compliance Of Prescribed Standards:



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

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

authority, in relation to their performance, composition, contents, design, construction,

finishing or packing, as are necessary to prevent or reduce the risk of injury to the

person using such goods, shall amount to an unfair trade practice.

5) Hoarding, Destruction, Etc.:

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

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

similar goods or services, shall be an unfair trade practice.

6) Inquiry Into Unfair Trade Practices:

The Commission may inquire into any unfair trade practice:

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

Upon reference made to it by the Central Government or State Government Upon an application to it by the Director General or

Upon its own knowledge or information.

Relief Available:

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

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

may direct that?

The practice shall be discontinued or shall not be repeated;

The agreement relating thereto shall be void in respect of such unfair trade practiceor shall stand modified.

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

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

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

any law in force.

The Commission is empowered to direct publication of corrective advertisement and

disclosure of additional information while passing orders relating to unfair trade practices.



Question 4: What are essentials of a valid offer?

Answer:

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

called an "offer". It is one of the essential elements of an agreement. It is the very basis of the contract. It becomes a promise when it accepted. Section 2 (a) of the Contract Act

defines the proposal as "when one person signifies to another his willingness to do or toabstain from doing anything, with a view to obtaining the assent of that other, to such act

or abstinence, he is said to make a proposal". The person making the proposal is called theproposer or offer or the promisor. The person to whom the proposal is made is called the

offeree or promisee.

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

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

spoken, is called an express offer. An offer which is expressed by conduct is called animplied offer. An offer may be positive or negative. It may be in the form of a statement or

a question.for example; Sridhar says to Radhika that he will sell his scooter to her for Rs.20000. This isan express offer.

The Karnataka State Road Transport Corporation runs omnibuses on various routes to carrypassengers at the scheduled fares. This is an implied offer by KSRTC.

The offer must be made in order to create legal relations otherwise there will be an

agreement. If an offer does not give rise to legal obligations between the parties it is not a

valid offer in the eye of law. In business transactions there is a presumption that the parties

propose to make legal relationships. For example a person invite to another person to dinerif the other person accepts the invitation then it is not any legal agreement between the

parties it is social agreement.

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

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

An agreement to agree in future is not a contract because the terms of an agreement are

not clear. A person has two motorbikes. He offers to another person to sell his one bike for

a certain price then it is not a legal and valid offer because there is an ambiguity in the offer

that which motorcycle the person wants to sell. There is a difference between the offer and

invitation of offer. Sometime people offer the invitation for the sale.

Essentials of a valid offer: A valid offer must intend to create legal relations. It must not be a casual statement. If

the offer is not intended to create legal relationship, it is not an offer in the eyes of law

e.g. Sunil invites Sridhar to a dinner party and Sridhar accepts the invitation. Sridhar

does not turn up at the dinner party. Sunil cannot sue Sridhar for breach of contract asthere was no intention to create legal obligation. Hence, an offer to perform social,

religious or moral acts without any intention of creating legal relations will not be a valid

offer.



The terms of an offer must be definite, unambiguous and certain. They must not be

loose and vague. A promise to pay an extra Rs. 500 if a particular house proves lucky istoo vague to be enforceable. E.g. Sridhar says to Sunil "I will give you some money if

you marry my daughter". This is not an offer which can be accepted because theamount of money to be paid is not certain.

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

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

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

general offer can be accepted by any person. E.g. Sunil promises to give Rs.100 toSridhar, if he brings back his missing dog. This is a specific offer and can only be

accepted by Sridhar. Sunil issues a public advertisement to the effect that he would

give Rs.100 to anyone who brings back his missing dog. This is a general offer. Anymember of the public can accept this offer by searching for and bringing back Sunil'smissing dog.

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

other party. Mere enquiry is not an offer.

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

of acceptance. But he cannot prescribe the form or time of refusal so as to fix a contracton the acceptor. He cannot say that if the acceptor does not communicate hisacceptance within a specified time, he is deemed to have accepted the offer.

The offeror is free to lay down any terms any terms and conditions in his offer. If theother party accepts it, then he has to abide by all the terms and conditions of the offer.It is immaterial whether the terms and conditions were harsh or ridiculous. The special

terms or conditions in an offer must be brought to the notice of the offeree at the timeof making a proposal.

An offer is effective only when it is communicated to the offeree. Communication isnecessary whether the offer is general or specific. The offeror may communicate theoffer by choosing any available means such as a word of mouth, mail, telegram,messenger, a written document, or even signs and gestures. Communication may also

be implied by his conduct. A person can accept the offer only when he knows about it.If he does not know, he cannot accept it. An acceptance of an offer, in ignorance of theoffer, is no acceptance at all.

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

invitations to offer but not actual offers:

Invitations made by a trade for the sale of goods.

A price list of goods for sale. Quotations of lowest prices.

An advertisement to sell goods by auction.

An advertisement inviting tenders. Display of goods with price-tags attached.

Railway time-table. Prospectus issued by a company.

Loud speaker announcements.



Question 5: Find out a case where a person appealed under the Consumer

protection Act and won.

Answer:

The Consumer Protection Act was born in 1986. It is described as a unique legislation of its

kind ever enacted in India to offer protection to the consumers. The Act is claimed to havebeen designed after an in-depth study of consumer protection laws and arrangements in

UK, the USA, Australia and New Zealand. The main objective of this Act is to provide better

protection to the consumers. Unlike other laws, which are punitive or preventive in nature

the provisions of this Act are compensatory in nature. The Act intends to provide simple,

speedy and inexpensive re-dressal to the consumer‟s grievances.

Question 6: What does the Information Technology Act enable?

Answer:

Information Technology Act: In May 2000, at the height of the dot-com boom, India

enacted the IT Act and became part of a select group of countries to have put in place cyber

laws. In all these years, despite the growing crime rate in the cyber world, only less than 25

cases have been registered under the IT Act 2000 and no final verdict has been passed in

any of these cases as they are now pending with various courts in the country.

Although the law came into operation on October 17, 2000, it still has an element of mystery around it. Not only from the perception of the common man, but also from the

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

The prime reason for this is the fact that the IT Act is a set of technical laws. Another majorhurdle is the reluctance on the part of companies to report the instances of cyber-crimes, as

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

major hurdle in cracking down on the perpetrators of cyber-crimes such as hacking is thefact that most of them are not in India. The IT Act does give extra-territorial jurisdiction to

law enforcement agencies, but such powers are largely inefficient. This is because India

does not have reciprocity and extradition treaties with a large number of countries.

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

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

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

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

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

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

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

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

event of second may extend to five years and also with fine which may extend to fifty

thousand rupees, it does not expressly talk of cyber defamation. The above provision chiefly

aim at curbing the increasing number of child pornography cases and does not encompass

other crimes which could have been expressly brought within its ambit such as cyber

defamation.

-----------------------------------------------------------

MB0051-Legal Aspects of Business Completed

Documents