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Assignment - MB0051 - Legal Aspects of Business - Set 1

Assignment - MB0051 - Legal Aspects of Business - Set 1

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Published by: Bhupinder Singh on May 17, 2011
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Sikkim Manipal University - MBA - MB0051 Legal Aspects of BusinessSemester: 3 - Assignment Set: 1Question 1: Distinguish between fraud and misrepresentation.Answer:Distinction between fraud and misrepresentation:
 Sometimes the terms fraud and misrepresentation are used inter-changeably by readershowever they are actually different. There is not a much difference between the two but a littleone as misrepresentation does not directly mean fraud. Below is a table on the salient points todistinguish the terms:
FraudMisrepresentation
The word fraud comes from the MiddleEnglish word “fraude” taken from the OldFrench and derived from the Latin “fraus”.The word fraud means a deliberate formof deception that is practiced to securesome sort of unlawful and unfair gain.Misrepresentation is a type of lying orfalsehood in which a person says or doessomething that would lead another personto believe something that is not “inaccordance with the facts”.Implies on intention to deceive, hence it isintentional or willful wrong.It is an innocent wrong without anyintention to deceive. The person makingthe statement believes it to be true.A civil wrong which entitles a party toclaim damages in addition to the right torescind the contract.It gives only the right to rescind thecontract and there can be no suit fordamages.In fraud, the person making therepresentation does not himself believe inthe truth of the statement he is making. ncases of fraud, the person making thestatement is a complete liar and is makingthe statement to deceive others to enterinto a contractIn situations of innocent misrepresentationthe person making the statement maybelieve that what he is saying is true. Thisis due to the fact that the person makingthe statement is simply repeating whatanother person has asserted to be trueDeceit, trickery, sharp practice, or breachof confidence, perpetrated for profit or togain some unfair or dishonest advantage.A misrepresentation or concealment withreference to some fact material to atransaction that is made with knowledgeof its falsity or in reckless disregard of itstruth or falsity and with the intent todeceive another and that is reasonablyrelied on by the other who is injuredthereby.Fraud always has malicious intent.Misrepresentation may not have maliciousintent to deceive if it happens negligentlythrough a misstatement and/or omissionof a material fact(s).Types of fraud are:Fraud is fraud until you get into a legalissue. Then there are differences but thereis only one type of fraud in realty.Types of misrepresentation are:
Fraudulent misrepresentation
Negligent misrepresentation
Innocent misrepresentation
Question 2: What are the remedies for breach of contract?
 
Bhupinder Singh Reg. No. 521063004 Page 1 of 9
 
Sikkim Manipal University - MBA - MB0051 Legal Aspects of BusinessSemester: 3 - Assignment Set: 1Answer:
Businesses both individual and corporate enter into business relationships with eitherindividuals 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 contractsdo 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 mostcontracts is a set of mutual promises (in legal terminology, “consideration”). The promisesmade by the parties define the rights and obligations of the parties. For every contract theremust be an agreement. An agreement is defined as every promise and every set of promisesforming the consideration for each other and a promise is an accepted proposal. Contracts areenforceable in the courts. If one party meets its contractual obligations and the other partydoesn’t (“breaches the contract”), the non-breaching party is entitled to receive relief throughthe courts.Generally, the non-breaching party’s remedy for breach of contract is monetary damages thatwill put the non-breaching party in the position it would have enjoyed if the contract had beenperformed. Under special circumstances, a court will order the breaching party to perform itscontractual obligations. Because contracts are enforceable, parties who enter into contracts canrely on contracts in structuring their business relationships.
Essentials of a Contract:
The Indian Contract Act -1872 defines “contract” as an agreement enforceable by law. Theessentials 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 thecontract. In contracts for the sale of goods, remedy clauses are usually designed to limit theseller’s liability for damages. In a contract the agreement being enforceable by law, each partyto 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 bemade liable.
Remedies for breach of contract:
 The legal remedies for breach of contract are: a)
Damages
b)
Specific performance of the contract; andBhupinder Singh Reg. No. 521063004 Page 2 of 9
 
Sikkim Manipal University - MBA - MB0051 Legal Aspects of BusinessSemester: 3 - Assignment Set: 1
c)
Injunction.
When a contract has been breached, the party who suffers by such breach is entitled toreceive, from the party who has breached the contract, compensation for any loss or damagecaused 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 likelyto result from the breach of it. Such compensation is not to be given for any remote andindirect loss of damage sustained by reason of the breach. A person who rightfully rescinds a contract is entitled to compensation for any damage, whichhe has sustained through non-fulfillment of the contract. 
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 thebreach is entitled, whether or not actual damage of loss is proved to have been causedthereby, to receive, from the party who has broken the contract, reasonable compensation, notexceeding 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 thecircumstances. 
Specific performance:
 In certain special cases (dealt with in the Specific Relief Act, 1963), the court may directagainst the party in default “specific performance” of the contract, that is to say, the party maybe directed to perform the very obligation which he has undertaken, by the contract. Thisremedy is discretionary and granted in exceptional cases. Specific performance means actualexecution of the contract as agreed between the parties. Specific Performance of any contractmay, 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 is such that monetary compensation for its non-performance would not afford adequate relief.
Instances where compensation would be deemed adequate relief are:
Agreement as a consequence of a breach by a landlord for repair of the rentedpremises;
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 dependent on thepersonal qualifications or volition of the parties, or otherwise from its nature is such, that thecourt cannot enforce specific performance of its material terms, cannot be specifically enforced. 
Bhupinder Singh Reg. No. 521063004 Page 3 of 9

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