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MB0051 set 1

MB0051 set 1

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Published by Piyush Varshney
MB0051 SET 1 FALL 2011
MB0051 SET 1 FALL 2011

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Published by: Piyush Varshney on Nov 10, 2011
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MB0051 – Legal Aspects of Business
 
- 4 Credits
(Book ID: B0764)Assignment Set- 160 Marks
Q.1 Distinguish between fraud and misrepresentation.Answer:Distinction between fraud and misrepresentation:
Sometimes the terms fraud and misrepresentation are used inter-changeably by readers however they are actuallydifferent. There is not a much difference between the two but a little one as misrepresentation does not directlymean fraud. Below is a table on the salient points to distinguish the terms:
FraudMisrepresentation
The word fraud comes from the Middle English word“fraude” taken from the Old French and derived fromthe Latin “fraus”. The word fraud means a deliberateform of deception that is practiced to secure some sort of unlawful and unfair gain.Misrepresentation is a type of lying or falsehood inwhich a person says or does something that would leadanother person to believe something that is not “inaccordance with the facts”.Implies on intention to deceive, hence it is intentional or willful 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 damagesin addition to the right to rescind the contract.It gives only the right to rescind the contract and therecan be no suit for damages.In fraud, the person making the representation does nothimself believe in the truth of the statement he ismaking. n cases of fraud, the person making thestatement is a complete liar and is making the statementto deceive others to enter into a contractIn situations of innocent misrepresentation the personmaking the statement may believe that what he is sayingis true. Thisis due to the fact that the person making the statement issimply repeating what another person has asserted to betrueDeceit, trickery, sharp practice, or breach of confidence, perpetrated for profit or to gain some unfair or dishonestadvantage.A misrepresentation or concealment with reference tosome fact material to a transaction that is made withknowledge of its falsity or in reckless disregard of itstruth or falsity and with the intent to deceive another and that is reasonably relied on by the other who isinjured thereby.
Q.2 What are the remedies for breach of contract.Answer:
Businesses both individual and corporate enter into business relationships witheither individuals or businesses to enable them to carry on their day-to-daycommercial transactions. Most of these relationships result in “contracts” thathave legal consequences. Most contracts do not have to be in writing to beenforceable.
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 andobligations 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
 piyushxcd@gmail.comMob- 09999624869
 
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 specialcircumstances, a court will order the breaching party to perform its contractual obligations. Because contracts areenforceable, parties who enter into contracts can rely oncontracts 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 contractsfor the sale of goods, remedy clauses are usually designed to limit the seller’s liability for damages. In a contractthe agreement being enforceable by law, each party to the contract is legally bound to perform his part of theobligation. 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; andc) Injunction.When a contract has been breached, the party who suffers by such breach is entitled to receive, from the partywho 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, whenthey made the contract, to be likely to result from the breach of it. Such compensation is not to be given for anyremote and 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. Liquidated damages and penal stipulations: If a sum is named in thecontract as the amount to be paid in case of breach of contract, or if the contract contains any other stipulation byway of penalty, the party complaining of the breach 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, not exceeding theamount so named or the penalty stipulated for. A stipulation for increased interest from the date of default may beregarded as a stipulation by “way of penalty”. The court is empowered to reduce it to anamount which is reasonable in the circumstances.
Specific performance:
In certain special cases (dealt with in the Specific Relief Act, 1963), the court may direct against the party indefault “specific performance” of the contract, that is to say, the party may be directed to perform the veryobligation which he has undertaken, by the contract. This remedy is discretionary and grantedin 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 situationsWhen 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 rented premises;
Contract for the sale of any goods, for instance machinery or goods.
 piyushxcd@gmail.comMob- 09999624869
 
Exceptions:
A contract which runs into such minute or numerous details or which is so dependent on the personalqualifications 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 bespecifically 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 performanceof 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 torecover compensation for the breach of contract. Specific performance of a contract cannot 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 fraudulentlydespite the contract, or who willfully acts at variance with, or in subversion, of the relation intended to beestablished by the contract. I hope this gives you a relevant overview into the key aspect of business contractsand if one takes adequate care when drafting contracts; needless to say relationships will be better and probablymore profitable.
Q.3 Distinguish between indemnity and guarantee.Answer:Introduction:
Guarantees and indemnities are both long established forms of what the law terms surety ship. There aremportant legal distinctions between them. Append below some salient points pertaining to theifference/distinction between Indemnity and Guarantee:
Distinction between Indemnity and Guarantee:IndemnityGuarantee
Section 124 of the Indian Contract Act 1872 defines a"contract of indemnity" as a contract by which one party promises to save the other from loss caused tohim bythe conduct of the Promisor himself, or by the conductof any other person.e.g. = 'x' contracts to indemnify 'y' against theconsequences of any legal proceedings which may takeagainst B in respect of a certain sum of Rs.200/=.Section 126 of the Indian Contract Act 1872 defines acontract of guarantee is a contract to perform the promise or discharge theliability 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 isgiven is called the “principal debtor”, and the person towhom the guarantee is given is called the “creditor”. Aguarantee may beeither 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 doso.Indemnity comprise only two parties- the indemnifier and the indemnity holder There are three parties namely the surety, principaldebtor and the creditor Liability of the indemnifier is primaryThe liability of the surety is secondary. The surety isliable only if the principal debtor makes a default. The primary liability beingthat of the principal debtor.The indemnifier need not necessarily act at the requestof the indemnified.The surety give guarantee only at the request of the principal debtor The possibility of any loss happening is the onlycontingency against which the indemnifier undertakesto indemnify.There is an existing debt or duty, the performance of which is guarantee by the suretyAn indemnity is for reimbursement of a lossA guarantee is for security of the creditor.
Q.4 What is the distinction between cheque and bill of exchange.
 piyushxcd@gmail.comMob- 09999624869

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