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MF0051 - Copy

MF0051 - Copy

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Master of Business Administration - MBA Semester 3Subject Code – MB0051Subject Name – Legal Aspects of Business4 Credits(Book ID: B1207)Assignment Set- 1 (60 Marks)
Q.1 Discuss the nature and significance of business law?Answer:
The term „law is used in many senses: you may speak of the law of physics,
 mathematics, science, or the laws of the football or health. In its widest sense, „law
 means any rule of conduct, standard or pattern, to which actions are required toconform; if not conformed, sanctions are imposed. When we speak of the law of a State,we use the term „law in a special and strict sense
Significance of law1.Law is a body of rules:
These rules prescribe the conduct, standard or patternto which actions of the persons in the state are required to conform. However, allrules of conduct do not become law in the strict sense. We resort to various kindsof rules to guide our lives. For example, our conduct may be guided by a rulesuch as “do not be arrogant” or “do not be disrespectful to elders or women”.These are ethical or moral rules by which our daily lives are guided. If we do notfollow them, we may lose our friends and their respect, but no legal action can betaken against us.
2.Law is for the guidance or conduct of persons:
both human and artificial. Thelaw is not made just for the sake of making it. The rules embodied in the law aremade, so as to ensure that actions of the persons in the society conform to somepredetermined standard or pattern. This is necessary so as to ensurecontinuance of the society. No doubt, if citizens are „self-enlightened or „self-
controlled, disputes may be minimized, but will not be eliminated. Rules are,
 therefore, drawn up to ensure that members of the society may live and worktogether in an orderly manner. Therefore, if the rules embodied in the law arebroken, is used to enforce obedience, and certain consequences ensue.
3.Law is imposed:
Law is imposed on the members to bring about an order in thegroup, enabling it to continue and prosper. It is not something which may or maynot be obeyed at the sweet will of the members of society. If you cannot imposea rule it is better not to have it. Thus, law is made obligatory on the members of the society.
4.Law is enforced by the executive:
Obviously, unless a law is enforced itceases to be a law and those persons subject to it will regard it as dead. For 
example, if A steals Bs bicycle, he may be prosecuted by a court and may be
 punished. Also, the court may order the restitution of the bicycle to its rightfulowner i.e., B. If the government passes many laws but does not attempt toenforce them, the citizens lose their respect for government and law, and societyis greatly weakened. The force used is known as sanction which the stateadministers to secure obedience to its laws.
5.The state:
A state is a territorial division, with people therein subject to a uniformsystem of law administered by some authority of the state. Thus, lawpresupposes a state.
6.Content of law:
The law is a living thing and changes throughout the course of history. Law responds to public opinion and changes accordingly. Law can never be static. Therefore, amendments are made in different laws from time to time.For example, the Monopolistic and Restrictive Trade Practices Act, 1969, hasbeen subjected to many amendments since its inception in 1969.
7.Two basic ideas involved in law:
The two basic ideas involved in any law are:(i) to maintain some form of social order in a group and (ii) to compel members of the group to be within that order. These basic ideas underlie formulation of anyrules for the members of a group. A group is created because first, there is asocial instinct in the people to live together and secondly, it helps them in self-preservation. Rules are made by the members of the group, so that the groupdoesnt whither away.
8.Law is made to serve some purpose which may be social, economic or political:
Some examples of „law in the widest sense of the term. „Law in its
 widest sense may include:
Moral rules or etiquettes, the non-observance of which may lead to publicridicule,
Law of the Land the non-observance of which may lead to arrest,imprisonment, fines, etc.,
Rules of international law, the non-observance of which may lead to socialboycott, trade-sanctions, cold war, hot war, proxy war, etc.
Q.2 Define contract of indemnity. Describe the rights of the indemnifier and theindemnity holder.Answer:
Meaning of indemnity:
Secs.124 and 125 provide for a contract of indemnity.Sec.124 provides that a contract of indemnity is a contract whereby one party promisesto 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 glaringexample of such type of contracts. A contract of indemnity may arise either by (i) anexpress promise or (ii) operation of law, e.g., the duty of a principal to indemnify anagent 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 validcontract. These are two parties in a contraction of identity indemnifier and indemnified.The indemnifier promises to make good the loss of the indemnified (i.e., the promisee).Example: A contracts to indemnify B against the consequences of any proceedingwhich C may take against B in respect of a certain sum of Rs 200. This is a contract of indemnity.
Rights of the indemnified (i.e., the indemnity holder):
He is entitled to recover fromthe promisor: (i) All damages which he may be compelled to pay in any suit in respect of any matter to which the promise to indemnify applies; (ii) All costs of suit which he mayhave to pay to such third party, provided in bringing or defending the suit (a) he actedunder the authority of the indemnifier or (b) if he did not act in contravention of orders of the indemnifier and in such a way as a prudent man would act in his own case; (iii) Allsums which may have been paid under the terms of any compromise of any such suit, if the compromise was not contrary to the orders of the indemnifier and was one which itwould have been prudent for the promise to make.
Rights of the indemnifier:
The Act makes no mention of the rights of indemnifier.However, his rights, in such cases, are similar to the rights of a surety under Sec.141,viz., he becomes entitled to the benefit of all the securities which the creditor hasagainst the principal debtor whether he was aware of them or not.
Q.3 What is Partnership? Briefly state special features of a partnership on thebasis of which its existence can be determined under the Indian Partnership Act?Answer:
Partnership is defined as “the relationship between persons who have agreedto share profits of a business carried on by all, or by any of them acting for all”. Onanalysis of the definition, certain essential elements of partnership emerge. Theseelements must be present so as to form a partnership and are discussed below.
1. Partnership is an association of two or more than two persons:
There must be atleast two persons who should join together to constitute a partnership, because oneperson cannot become a partner with himself. These persons must be natural personshaving legal capacity to contract. Thus, a company (which is an artificial person) cannotbe a partner. Similarly, a partnership firm cannot be a partner of another partnershipfirm. As regards maximum number of partners in a partnership firm, Sec.11 of theCompanies Act, 1956, puts the limit at 10 in case of banking business and 20 in case of any other business.
2. Partnership must be the result of an agreement between two or more persons:
 An agreement presupposes a minimum number of two persons. As mentioned above, apartnership to arise, at least two persons must make an agreement. Partnership is theresult of an agreement between two or more persons (who are known as partners after the partnership comes into existence)
3. The agreement must be to carry on some business:
The term „business includes
 every trade, occupation or profession [Sec.2(b)]. Though the word „business generally
 conveys the idea of numerous transactions, a person may become a partner withanother even in a particular adventure or undertaking (Sec.8). Unless the person joinsfor the purpose of carrying on a business, it will not amount to partnership.
4. The agreement must be to share profits of the business:
The joint carrying on of a business alone is not enough; there must be an agreement to share profits arisingfrom the business. Unless otherwise so agreed, sharing of profits also involves sharingof losses. But whereas the sharing of profits is an essential element of partnership,sharing of losses is not.
 A, a trader, owed money to several creditors. He agreed to pay his creditorsout of the profits of his business (run under the creditors supervision) what he owed to

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