Sikkim Manipal MBA, MB 51 Third Semester MB51

7/30/2019 Sikkim Manipal MBA, MB 51 Third Semester MB51

http://slidepdf.com/reader/full/sikkim-manipal-mba-mb-51-third-semester-mb51 1/15

1

Name Manoj Kumar.H

Registration No 521132115Learning Center Code 01524

Course MB-0051

Subject Legal Aspects of Business

Semester 3rd



2

Question 1: Distinguish between fraud and misrepresentation.

Distinction between fraud and misrepresentation:

Somet imes the terms fraud and misrepresentat ion are used inter -changeably

by rea der show ever they are actually different. There is not a much difference between the two

but a little one as misrepresentation does not directly mean fraud. Below is a table on the salient

points to distinguish the terms:

Fraud Misrepresentation

The word fraud comes from the Middle English

word “fraude” taken from the Old French and

derived from the Latin “fraus”. The word fraud

means a deliberate form of deception that is

practiced to secure some sort of unlawful andunfair gain.

Misrepresentation is a type of lying or falsehood

in which a person says or does something that

would lead another person to believe something

that is not “in accordance with the facts”.

Implies on intention to deceive, hence it is

intentional or will ful wrong.

It is an innocent wrong without any intention to

deceive. The person making the statement

believes it to be true.

A civil wrong which entitles a party to claim

damages in addition to the right to rescind the

contract.

It gives only the right to rescind the contract and

there can be no suit for damages.

In fraud, the person making the representation

does not himself believe in the truth of the

statement he is making. In cases of fraud, the

person making the statement is a complete liarand is making the statement to deceive others to

enter into a contract.

In situations of innocent misrepresentation the

person making the statement may believe that

what he is saying is true. This is due to the fact

that the person making the statement is simplyrepeating what another person has asserted to

be true

Deceit, trickery, sharp practice, or breach of

confidence, perpetrated for profit or to gain

some unfair or dishonest advantage.

A misrepresentation or concealment with

reference to some fact material to a transaction

that is made with knowledge of its falsity or in

reckless disregard of its truth or falsity and with

the intent to deceive another and that is

reasonably relied on by the other who is injured

there by.

Fraud always has malicious intent. Misrepresentation may not have malicious intent

to deceive if it happens negligently through amisstatement and/or omission of a material

fact(s).

Types of fraud are: Fraud is fraud until you get

into a legal issue. Then there are differences but

there is only one type of fraud in realty.

Types of misrepresentation are:

Fraudulent misrepresentation

Negligent misrepresentation

Innocent misrepresentation



3

Question 2: What are the remedies for breach of contract?

Bus inesses both ind iv idua l and corporate enter into bus iness re lat ionsh ips

with either individuals or businesses to enable them to carry on their day-to-day commercial

transactions. Most of these relationships result in “contracts” that have legal consequences. Most

contracts do not have to be in writing to be enforceable.Definition of a Contract:

A contract is a legally enforceable agreement between two or more parties. The core of most

contracts is a set of mutual promises (in legal terminology, “consideration”). The

promises made by the parties define the rights and obligations of the parties. For every

contract there must be an agreement. An agreement is defined as every promise and

every set of promises forming the consideration for each other and a promise is an accepted

proposal. Contracts are enforceable in the courts. If one party meets its contractual

obligations and the other party doesn’t (“breaches the contract”), the non-breaching party is

entitled to receive relief through the courts. Generally, the non-breaching party’s remedy for breach

of contract is monetary damages that will put the non-breaching party in the position it would have

enjoyed if the contract had been performed. Under special circumstances, a court will order thebreaching party to perform its contractual obligations. Because contracts are enforceable, parties

who enter into contracts can rely on contracts in structuring their business relationships.

Essentials of a Contract:

The Indian Contract Act -1872 defines “contract” as an agreement enforceable by law.

The essentials of a (valid) contract are:

intention to create legal relations;

offer and acceptance;

consideration;

capacity to enter into a contract

free consent of the parties lawful object of the agreement

Remedy Clauses:

These clauses state what rights the non-breaching party has if the other party breaches

the contract. In contracts for the sale of goods, remedy clauses are usually designed to

limit the seller’s liability for damages. In a contract the agreement being enforceable by law, each

party to the contract is legally bound to perform his part of the obligation. The non-performance of

the duty undertaken by a party in a contract amounts to breach of contract for which it can be made

liable.

Remedies for breach of contract:

The legal remedies for breach of contract are:

a) Damages

b) Specific performance of the contract;

c) Injunction.

When a contract has been breached, the party who suffers by such breach i s

ent i t led to receive, from the party who has breached the contract, compensation for any loss or

damage caused to him thereby, being loss or damages which naturally arose in the usual

course of things from such breach or which the parties knew, when they made the contract, to be

likely to resul t from the br each of i t . S uch co mpensa t ion i s not to be give n for

any remo te a nd indirect loss of damage sustained by reason of the breach. A person who

rightfully rescinds a contract is entitled to compensation for any damage, which he has sustainedthrough non-fulfillment of the contract.



4

Liquidated damages and penal stipulations:

If a sum is named in the contract as the amount to be paid in case of breach of contract, or if the

contract contains any other stipulation by way of penalty, the party complaining of the

breach i s ent i t led , whether or not actua l damage of loss i s proved to have

been caused thereby, to receive, from the party who has broken the contract, reasonablecompensation, not exceeding the amount so named or the penalty stipulated for. A stipulation for

increased interest from the date of default may be regarded as a stipulation by “way of penalty”.

The court is empowered to reduce it to an amount which is reasonable in the circumstances.

Specific performance:

In certa in spec ia l cases (dea l t w i th in the Spec i f i c Re l ie f Act , 1963) , the court

may direct against the party in default “specific performance” of the contract, that is to say, the

party may be directed to perform the very obligation which he has undertaken, by the

contract. This remedy is discretionary and granted in exceptional cases. Specific performance

means actual execution of the contract as agreed between the parties. Specific Performance of any

contract may, in the discretion of the court be enforced in the following situations

When there exists no standard for ascertaining the actual damage caused by the

non-performance of the act agreed to be done; or

When the act agreed to be done i s such that monetary compensat ion for

its non-performance would not afford adequate relief.

Instances where compensation would be deemed adequate relief are:

A g r e e m e n t a s a c o n s e q u e n c e o f a b r e a c h b y a l a n d l o r d f o r r e p a i r

of the rented premises;

Contract for the sale of any goods, for instance machinery or goods.

Exceptions:

A contract which runs into such minute or numerous details or which is so dependenton the personal qualifications or volition of the parties, or otherwise from its nature is such, that

the court cannot enforce specific performance of its material terms, cannot be specifically enforced.

Another situation when a contract cannot be specifically enforced is where “the contract is in its

nature determinable”. A contract is said to be determinable, when a party to the contract can put it

to an end. A contract the performance of which involves the performance of a continuous duty,

which the Court cannot supervise, cannot be specifically enforced.

Persons who cannot obtain Specific Performance:

The specific performance of a contract cannot be obtained in favor of a person who could not be

entitled to recover compensation for the breach of contract. Speci fic per formance of a contr actcannot be enforced in favor of a person who has become incapable of performing the

contract that on his part remains to be performed, or who violates any essential term of the

contract that on his part remains to be performed, or who acts fraudulent ly

despite the contract, or who willfully acts at variance with, or in subversion, of the relation intended

to be established by the contract. I hope this gives you a relevant overview into the key aspect of

business contracts and if one takes adequate care when drafting contracts; needless to say

relationshi ps wil l be bett er and probably more profitable.



5

Question 3: Distinguish between indemnity and guarantee.

Answer: Introduction:

Guarantees and indemnities are both long established forms of what the law terms surety ship.

There are important lega l d is t inct ions between them. Append be low some

salient points pertaining to the difference/distinction between Indemnity and Guarantee:

Distinction between Indemnity and Guarantee:

Indemnity Guarantee

Section 124 of the Indian Contract Act1872

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.

e.g. = '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/=.

Section 126 of the Indian Contract Act1872

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 “principaldebtor”, 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.

Indemnity comprise only two parties- the

indemnifier and the indemnity holder. There are

three parties namely the surety, principal debtor

and the creditor Liability of the indemnifier is

primary The liability of the surety is secondary.

The surety is liable only if the principal debtormakes a default. The primary liability being that

of the principal debtor. The indemnifier need not

necessarily act at the request of the indemnified.

The surety give guarantee only at the request of

the principal debtor The possibility of any loss

happening is the only contingency against which

the indemnifier undertakes to indemnify. There

is an existing debt or duty, the performance of

which is guarantee by the surety An indemnity isfor reimbursement of a loss A guarantee is for

security of the creditor. 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.

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.

In a contract of indemnity, the indemnifierpromises without the request of debtor. Contract

of Guarantee is for security of a debt or

performance of promise.

Question 4: What is the distinction between cheque and bill of exchange?

Exchange of goods and services is the basis of every business activity. Goods are bought and sold for

cash as well as on credit. All these transactions require flow of cash either immediately or after a

certain time. In modern business, large number of transactions involving huge sums of money

takes place every day. It is quite inconvenient as well as risky for either party to makeand receive payments in cash. Therefore, it is a common practice for businessmen to



6

make use of certain documents as means of making payment. Some of these documents

are called negotiable instruments. In this lesson let us learn about these documents.

Distinction between Cheque and bill of exchange

Cheque Bill of Exchange

It is drawn on a banker It may be drawn on anyparty or individual. It has three parties - the drawer,

the drawee, and payee.

The drawer can also draw a bill in his ownname thereby he himself becomes the

payee. Here the words in the bill would be

Pay to us or order. In a bill where a

time There are three parties - the

drawer, the drawee, and the payee.

B r o a d l y s p e a k i n g , c h e q u e s a r e o f

four types.

1) open 2)bearer 3)order 4)crossed

1) open cheques r those which r paid across the

bank counter

2) bearer cheque are to be paid to the bearer of thecheque

3) order cheque is to be paid to the payee in person

4) crossed cheque to be paid to the payee's account

on submission

Per iod is m ent ion ed is called a Time

Bil l. But a b i l l may be made payable

on de m a nd al so . This is called a Demand

Bill

Question 5: Distinguish between companies limited by shares and companies limited by

guarantee.

The Companies Act, 1956 defines the word “company as a company formed andregistered under the Act or an exist ing company formed and registered under

any of the prev ious company laws (S ec.3)” . Th is def in i t ion does not br ing out

the meaning and nature of the company into a c lear perspect ive . A lso Sec .12

pe rm it s th e fo rm at io n of dif fe re nt ty pe s of companies. These may be:

Companies limited by shares

Companies limited by guarantee and Unlimited companies.

The vast majority of companies in India are with limited liability by shares.

Distinction between Cheque and bill of exchange Companies limited by shares Companies

limited by guarantee

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 anon-profit distribution

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

Limited by shares is defined by: a company that has shareholders, and that the financial

obligation of the share holders to creditors of the company is restricted to the capital invested

in the first place (i.e. the specified value of the shares and any premium paid off in exchange

for the issue of the shares by the company).Shareholder's individual’s assets are therebysecured in the case of the company's insolvency, but revenues invested in the company will



7

be unrecoverable. Limited companies could be either private or public. A private Ltd. (limited

company disclosure) involves are less demanding, associations. but for this reason its shares

might NOT be provided to the general public (and consequently can't be listed on a national

stock market exchange). This is the well-known distinctive characteristic between aprivate

limited company and a public limited company. The absolute majority of trading corporations

are private companies limited by shares. Companies limited by shares are more popularCompanies limited by guarantee are less popular than companies limited by shares.

Companies limited by shares are profit making companies. Companies limited by guarantee

are non-profit making In case of companies limited by shares, there are shareholders.

Companies limited by guarantee have members, and not share holders Companies limited by

shares can engage in legal trades and have general clauses. There is no share capital in case of

companies limited by guarantee and it also has self-imposed restrictions

Question 6: What is the definition of cyber-crime?

Introduction:

Crime and criminality have been associated with man since his fall. Crime remains elusive and everstrives to hide itself in the face of development. Different nations have adopted different strategies

to contend with crime depending on their nature and extent. One thing is certain, it is that a nation

with high incidence of crime cannot grow or develop. That is so because crime is the direct opposite

of development. It leaves a negative social and economic consequence.

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 p e r s o n b e h i n d i t a s v i c t i m s ; i t j u s t d e p e n d s o n w h i c h o f t h e t w o i st h e m a i n t a r g e t . H e n c e , t h e c o m p u t e r w i l l b e l o o k e d a t a s e i t h e r a t a r g e t o r

tool f or s impl ic i ty ’ s sake . F or example, hacking involves attacking the computer’s

information and other resources. It is important to take note that overlapping occurs in

many case s a nd it is impo ssibl e 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 thevariants more difficult. These are the crimes which have existed for centuries in the offline. S c a m s ,

t h e f t , a n d t h e l i k e s h a v e e x i s t e d e v e n b e f o r e t h e d e v e l o p m e n t i n h i g h -

t e c h equipment. The same criminal has simply been given a tool which increases his

potent ia l pool of victims and makes him all the harder to trace and apprehend.

Computer as a target:

These cr imes are committed by a se lected group of cr imina ls . Un l ike cr imes

using the computer as a tool, these crimes require the technical knowledge of the

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

as computer sh a v e - w h i c h e x p l a i n s h o w u n p r e p a r e d s o c i e t y a n d t h e

w o r l d i n g e n e r a l i s t o w a r d s combating these crimes. There are numerous crimes of thisnature committed daily on the internet. But it is worth knowing that Africans and indeed Nigerians



8

are yet to develop their technical knowledge to accommodate and perpetrate this kind of crime. The

internet in India is growing rapidly. It has given rise to new opportunities in every field we can think

of – be it entertainment, business, sports or education. There are two sides to a coin. Internet also

has its own disadvantages. One of the major disadvantages is Cybercrime – illegal activity

committed on the internet. The internet, along with its advantages, has also exposed us

to security risks that come with connecting to a large network. Computers today are being misusedfor illegal activities like e-mail espionage, credit card fraud, spams, and software piracy

and so on, which invade our privacy and offend our senses. Criminal activities in the

cyberspace are on the rise. Here we publish an article by Nandini Ramprasad in series for the benefit

of our netizens. Cybercrimes can be basically divided into 3 major categories:1)Cybercrimes

aga inst persons2)Cybercr imes aga inst property .3)Cybercr imes aga inst

government. Cybercrimes committed against persons include various crimes like

transmission o f c hild -p o r n o g r a p h y , h a r a s s m e n t o f a n y o n e w i t h t h e u s e o f a

c o m p u t e r s u c h a s e - m a i l . T h e trafficking, distribution, posting, and dissemination of

obscene material including pornography and indecent exposure, constitutes one of the most

important Cybercrimes known today. The potential harm of such a crime to humanity can

hardly be amplified. This is one Cyber crime which threatens to undermine the growth of theyounger generation as also leave irreparable scars and injury on the younger generation, if not

controlled. In the United States alone, the virus made its way through 1.2 million computers in one-

fifth of the country's largest businesses. David Smith pleaded guilty on Dec. 9, 1999 to

state and federal charges associated with his creation of the Melissa virus. There are numerous

examples of such computer viruses few of them being "Melissa" and "love bug". A Mumbai -based

upstart engineering company lost a say and much money in the business when the rival

company, an industry major, stole the technical database from their computers with the help of a

corporate cyber spy.

Using one's own programming abilities as also various programs with malicious intent to gainunauthorized access to a computer or network are very serious crimes. Similarly, the creation and

dissemination of harmful computer programs which do irreparable damage to computer

sys tems i s another k ind of Cybercr ime. Software p i racy i s a l so another d is t inct

kind of Cybercrime which is perpetuated by many people online who distribute illegal and

unauthorized pirated copies of the software.

Professionals who involve in these cybercrimes are called crackers and it is found that many of such

professionals are still in their teens. A report written near the start of the Information Age warned

that Amer ica 's computers were at r i sk f rom crackers . I t sa id that computers

that " control (our) power delivery, communications, aviation and financial services (and) store vital

information, from medical re-cords to business plans, to criminal records", were

vulnerab le from many sources, including deliberate attack.



9

Assignment Set: 2

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

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 inadispute, 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 op in ion are not capable of be ing rev iewed 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 arb i t rat ion. However , publ ic po l icy would not permit matr imonia lmatters, 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) .Generally, matters covered by statutory reliefs through statutory tribunals would

be non-abatable. Ar bit rat ion i s an Al ter nat ive D isp ute Re sol uti on pro ces s

whereby a person chosen as an arbitrat or settles disputes between parties.

Arbitrat ion is similar to a co urt tria l, with se veral 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 ru les of ev idence are re laxed so that the part ies have a broader

scope, more expanded opportunity to tell their stories to present their cases

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

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

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

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

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

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



10

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 Convent ion of 1958 on the Recogni t ion and Enforcement

of Fo re i g n Arbitral Awards

The Geneva Protocol on Arbitration Clauses of 1923

Question 2: What is the role of a Conciliator?

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 isone 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 1996Act has to be read into sec. 89 of the

Code of Civil Procedure. The 1996 Act is, it may be noted, based on the UNCITRAL Rules for

conciliation.

Role of conciliator:

The conciliator shall assist the parties in an independent and impartial manner in

their attempt to reach an amicable settlement of their dispute.

The conciliator shall be guided by principles of objectivity, fairness and justice,

giving consideration to, among other things, the rights and obligations of thepart ies, the usages of the trade concerned and the circumstances surrounding the dispute,

including any previous business practices between the parties.

The conc i l ia tor may conduct the conc i l ia t ion proceedings in such a

manner as he considers appropriate, taking into account the circumstances of the case,

the wishes the parties may express, including any request by a party that the

conciliator hear oral statements, and the need for a speedy settlement of the dispute.

The conciliator may, at any stage of the conciliation proceedings, make proposals for a

sett lement of the d ispute . Such proposa ls need not be in wr i t ing and

need not be accompanied by a statement of the masons therefore.

Conciliators do not:

Make decisions for disputing parties



11

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?

THE MONOPOLIES AND RESTRICTIVE TRADE PRACTICES ACT, 1969 - OBJECTIVESAND

POLICY:

The Monopolies and Restrictive Trade Practices Commission has been constituted under Section5(1)

of the MRTP Act, 1969. The Commission is empowered to enquire into Monopolistic or

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

own knowledge or information. The MRTP Act also provides for appointment of a Director General

of Investigation and Registration for making investigations for the purpose of enquiries

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

r est ri cti ve t rade practices. T h e M R T P C o m m i s s i o n r e c e i v e s c o m p l a i n t s b o t hfrom reg is tered consumer and t rade assoc iat ions and a lso f rom ind iv idua ls .

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

Commiss ion after the Director Genera l o f Invest igat ion and Regis t rat ion

completes pre l iminary invest igat ion and submits an appl icat ion to the

Commission for an enquiry.

Trade Practices:

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

supply of any goods or services, adopts unfair method, or unfair or deceptive practice.

1)False Representation:

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

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

grade, composition, style or model;

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

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

Represents that the goods or serv ices have sponsorsh ip , approva l ,

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

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

aff ili ation 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-

o warranty or guarantee of the goods or services,



12

o a p r o m i s e t o r e p l a c e , m a i n t a i n o r r e p a i r t h e g o o d s u n t i l i t

h a s a c h i e v e d 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 fa lse or mis lead ing facts d isparag ing the goods , serv ices or t rade

of an ot he r person.

2)False Offer Of Bargain Price

Where an advert i sement i s publ i shed 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

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

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

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

ordinary price, or

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

than the price at which such goods are ordinarily sold.

3)Free Gifts Offer And Prize Scheme

The unfair trade practices under this category are:

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

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

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 co nsumers, 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 rece iv ing a compla int f rom any t rade assoc iat ion , consumer or a

reg i s tere d consumer association, or

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



13

Upon an application to it by the Director General or

Upon its own knowledge or information.

Relief Available

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

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

The practice shall be discontinued or shall not be repeated;

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

stand modified.

Any information, statement or advertisement relating to such unfair trade practice shall be

disclosed, issued or published as may be specified

The Commission may permit the party to carry on any trade practice to take

steps to ensure that it is no longer prejudicial to the public interest or to the

interest of the consumer. However no order shall be made in respect a trade

practice which is expressly authorized by any law in force. The Commission is

empowered to direct publication of corrective advertisement and disclosure of additionalinformation while passing orders relating to unfair trade practices.

Question 4: What are essentials of a valid offer?

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 proposals

" when one person s ign i f ies to another h is w i l l ingness to do or to absta in f rom

doin g 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 ma king the proposal is called t he proposer or offeror the promisor . The person to whom the proposa l i s made i s ca l led the of feree

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

Sunil is the offeror and Padmaja is the offeree. An offer may be express or implied. An offer which is

expressed by words, written or spoken, is called an express offer. An offer whic h is expr esse d

by conduct is called an implied offer. An offer may be positive or negative. It may

be in the form of a statement or a question. for example; Sridhar says to Radhika that

he will sell his scooter to her for Rs.20000. This is an express offer. The Karnataka State Road

Transport Corporation runs omnibuses on various routes to carry passengers at the

scheduled fares. This is an implied offer by KSRTC. The offer must be made in order to create legal

relations otherwise there will be an agreement. If an 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 apresumption that the parties propose to make legal relationships. For example a person invite

to another person to diner if the other person accepts the invitation then it is not any

legal agreement between the parties it is social agreement. An offer must be definite

and clear. If the terms of an offer are not definite and clear it cannot be called a valid offer. If

such of fer i s accepted i t cannot create a b ind ing contract . An agreement to

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

person has two motorb ikes . He of fers to another person to se l l h i s one b ike for

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

which motorcyc le the person wants to se l l . There i s a d i f ference between the

o ff er a nd invitation of offer. Sometime people offer the invitation for the sale.

Essentials of a valid offer:



14

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 as there

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 validoffer.

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. 5 00 if a particular house proves lucky is

too vague to be enforceable. E.g. Sridhar says to Sunil "I will give you some

money if you marry my daughter". This is not an offer which can be accepted

becaus e the amo unt 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 an offer is

made to the world at large or public in general, it is called "general offer". A specific offercan be accepted only by that person to whom it has been made and a general offer can be

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

missing dog. This is a specific offer and can only be accepted by Sridhar. Sunil

issues 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. Any member of the public can accept

this of fer by searching for and bringing back Sunil's missing dog.

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

party. Mere enquiry is not an offer.

An offer should may contain any term or condition. The offer or may prescribe any mode of acceptance. But he cannot prescribe the form or time of refusal so as to fix a

contract on the acceptor. He cannot say that if the acceptor does not

communicate his acceptance within a specified time, he is deemed to have accepted the

offer.

The offer or is free to lay down any terms any terms and conditions in his offer. If the other

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

time of making a proposal.

An offer i s e f fect ive on ly when i t i s communicated to the of feree .

Communication is necessary whether the offer is general or specific. The offeror may

communicate the offer 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 the offer,

is no acceptance at all.It should be noted that an invitation to offer is not an offer. The

following are only invitations to offer but not actual offers:

Invitations made by a trade for the sale of goods.

A price list of goods for sale.



15

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.

The Consumer Protection Act was born in 198 6. 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

have been designed after an in-depth study of consumer protection laws and

arrangements in UK, the USA, Austral ia and New Zealand. The main object ive 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?

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. Anothermajor hurdle is the reluctance on the part of companies to report the instances of

cyber-crimes, as they don't want to get negative publicity or worse get entangled in legal

proceedings. A major hurdle in c racking down on the perpetrato rs o f c yber -crimes such as

hacking is the fact that most of them are not in India. The IT Act does give extra-

territorial jurisdiction to law enforcement agencies, but such powers are largely inefficient.

This is because India does not have reciprocity and extradition treaties with a large number of

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

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

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

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

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

Sikkim Manipal MBA, MB 51 Third Semester MB51

Documents