Professional Documents
Culture Documents
Q.1 What do you mean by free consent? Under what circumstances consent is considered
as free? Explain.
Ans.: Free consent:
One of the essential of a valid contract is free consent. Sec. 13 of the act defense consent has
two or more persons are said to consent where they agree upon think in the same sense.
There should be consents at the ad idem or identity of minds.
The validity of consent depends not only on consents parties but their consents must also be free.
According to section 14, consent is said to be free when it is not caused by
1) Coercion has defined under sec.15 or
2) Undue influence as defined under sec. 16 or
3) Fraud has defined under sec. 17 or
4) Mis-representation or defined under sec. 18 or
5) Mistake subject to the probations of sec. 21& 22.
1) Coercion:
Sec. 15 coercion is the committing or threatening to commit any act forbidden by the Indian
penal code or the unlawful detaining or threatening to detain any property, to the prejudice of any
person whatever, with the intention of causing any person to enter into an agreement. It is
immaterial weather the Indian penal code is or is not in force in the place where the coercion is
employed
Under English Law, coercion must be applied to ones person only whereas under Indian Law it
can be ones person or property.
So also under English Law, the subject of it must be the contracting party himself or his wife,
parent, child or other near relative. Under Indian Law, the act or threat may be against any
person. It is to be noted that he act need not be committed in India itself. Unlawful detaining or
threatening to detain any property it also coercion.
While threat to sue does not amount to coercion threat to file a false suit amounts to coercion
since Indian Penal Code forbids such an act.
2) Undue influence:
In the words of Holland, Undue influence refers to the unconscious use of power over another
person, such power being obtained by virtue of a present or previously existing dominating
control arising out of relationship between the parties.
According sec. 16(1) A contract is said to be induced by undue influence where the relation
subsisting between the parties are such that one of the parties is in a position to dominate the will
of the other and uses that position to obtain an unfair advantage over the other.
A person is deemed to be in a position to dominate the will of other.
(a) Where he holds a real or apparent authority over the other or where he stands in a
fiduciary relation to the other; or
(b) Where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness or mental or bodily distress:
(c) Where a person, who is in a position to dominate the will of another, enters into a contract
with him and the transaction appears to be unconscionable. The burden of proving that
such contract was not by undue influence shall lie upon the person in a position to
dominate the will of the other.
Both coercion and undue influence are closely related. What contributes coercion or undue
influence depends upon the facts of each case.
Sec. 16(i) provides that two elements must be present. The first one is that the relations
subsisting between the parties to a contract are such that one of them is in a position to dominate
the will of the other.
Secondly, he uses that position to obtain unfair advantage over the other. In other words, unlike
coercion undue influence must come from a party to the contract and not a stranger to it. Where
the parties are not in equal footing or there is trust and confidence between the parties, one party
may be able to dominate the will of the other and use the position to obtain an unfair advantage.
However, where there is no relationship shown to exit from which undue influence is presumed,
that influence must be proved.
3) Fraud:
A false statement made knowingly or without belief in its truth or recklessly careless whether it be
true or false is called fraud.
Sec. 17 of the act instead of defining fraud gives various acts which amount to fraud.
Sec. 17: Fraud means and includes any of the following acts committed by a party to a contract or
with his connivance or by his agent to induce him to enter into contract:
1) The suggestion that a fact is true when it is not true by one who does not believe it to be
true. A false statement intentionally made is fraud. An absence of honest belief in the
truth of the statement made is essential to constitute fraud. The false statement must be
made intentionally.
2) The active concealment of a fact by a person who has knowledge or belief of the fact.
Mere non-disclosure is not fraud where there is no duty to disclose.
3) A promise made without any intention of performing it.
4) Any other act fitted to deceive. The fertility of mans invention in devising new schemes of
fraud is so great that it would be difficult to confine fraud within the limits of any
exhaustive definition.
5) Any such act or omission as the law specially declares to be fraudulent.
4) Misrepresentation:
Before entering into a contract, the parties will may certain statements inducing the contract.
Such statements are called representation. A representation is a statement of fact made by one
party to the other at the time of entering into contract with an intention of inducing the other party
to enter into the contract. If the representation is false or misleading, it is known as
misrepresentation. A misrepresentation may be innocent or intentional. An intentional
misrepresentation is called fraud and is covered under section 17 sec. 18 deals with an innocent
misrepresentation.
5) Mistake:
Usually, mistake refers to misunderstanding or wrong thinking or wrong belief. But legally, its
meaning is restricted and is to mean operative mistake. Courts recognize only such mistakes,
which invalidate the contract. Mistake may be mistake of fact or mistake of law.
Sec. 20Where both parties to an agreement are under a mistake as to a matter of fact essential
to the agreement, the agreement is void.
Sec.21 A contract is not voidable because it was caused by a mistake as to any law in force in
India: but a mistake as to a law not in force in India has the same effect as a mistake of fact.
Bilateral mistake: Sec.20 deals with bilateral mistake. Bilateral mistake is one where there is no
real correspondence of offer and acceptance. The parties are not really in consensus-ad-item.
Therefore there is no agreement at all.
A bilateral mistake may be regarding the subject matter or the possibility of performing the
contract.
Q.2 Define negotiable instrument. What are its features and characteristics? Which are the
different types of negotiable instruments? If Mr. A is the holder of a negotiable instrument,
under what situations
i.
Will he be the Holder in due course?
ii.
He has the right to discharge?
iii.
He can make endorsements?
Ans.: Meaning of Negotiable Instruments
To understand the meaning of negotiable instruments let us take a few examples of day-to-day
business transactions.
Suppose Pitamber, a book publisher has sold books to Prashant for Rs 10,000/- on three months
credit. To be sure that Prashant will pay the money after three months, Pitamber may write an
Order addressed to Prashant that he is to pay after three months, for value of goods received by
him, Rs.10, 000/- to Pitamber or anyone holding the order and presenting it before him (Prashant)
for payment. This written document has to be signed by Prashant to show his acceptance of the
order. Now, Pitamber can hold the document with him for three months and on the due date can
collect the money from Prashant. He can also use it for meeting different business transactions.
For instance, after a month, if required, he can borrow money from Sunil for a period of two
months and pass on this document to Sunil. He has to write on the back of the document an
instruction to Prashant to pay money to Sunil, and sign it. Now Sunil becomes the owner of this
document and he can claim money from Prashant on the due date. Sunil, if required, can further
pass on the document to Amit after instructing and signing on the back of the document. This
passing on process may continue further till the final payment is made.
In the above example, Prashant who has bought books worth Rs. 10,000/- can also give an
undertaking stating that after three month he will pay the amount to Pitamber. Now Pitamber can
retain that document with himself till the end of three months or pass it on to others for meeting
certain business obligation (like with Sunil, as discussed above) before the expiry of that three
months time period.
You must have heard about a cheque. What is it? It is a document issued to a bank that entitles
the person whose name it bears to claim the amount mentioned in the cheque. If he wants, he
can transfer it in favour of another person. For example, if Akash issues a cheque worth Rs.
5,000/
- In favour of Bidhan, then Bidhan can claim Rs. 5,000/- from the bank, or he can transfer it to
Chander to meet any business obligation, like paying back a loan that he might have taken from
Chander. Once he does it, Chander gets a right to Rs. 5,000/- and he can transfer it to Dayanand,
if required. Such transfers may continue till the payment is finally made to somebody.
In the above examples, we find that there is certain documents used for payment in business
transactions and are transferred freely from one person to another. Such documents are called
Negotiable Instruments. Thus, we can say negotiable instrument is a transferable document,
where negotiable means transferable and instrument means document. To elaborate it further, an
instrument, as mentioned here, is a document used as a means for making some payment and it
is negotiable i.e., its ownership can be easily transferred.
Thus, negotiable instruments are documents meant for making payments, the ownership of which
can be transferred from one person to another many times before the final payment is made.
Definition of Negotiable Instrument
According to section 13 of the Negotiable Instruments Act, 1881, a negotiable instrument means
promissory note, bill of exchange, or cheque, payable either to order or to bearer.
Types of Negotiable Instruments
According to the Negotiable Instruments Act, 1881 there are just three types of negotiable
instruments i.e., promissory note, bill of exchange and cheque. However many other documents
are also recognized as negotiable instruments on the basis of custom and usage, like hundis,
treasury bills, share warrants, etc., provided they possess the features of negotiability. In the
following sections, we shall study about Promissory Notes (popularly called pronotes), Bills of
Exchange (popularly called bills), Cheque and Hundis (a popular indigenous document prevalent
in India), in detail.
i. Promissory Note
Suppose you take a loan of Rupees Five Thousand from your friend Ramesh. You can make a
document stating that you will pay the money to Ramesh or the bearer on demand. Or you can
mention in the document that you would like to pay the amount after three months. This
document, once signed by you, duly stamped and handed over to Ramesh, becomes a
negotiable instrument.
Now Ramesh can personally present it before you for payment or give this document to some
other person to collect money on his behalf. He can endorse it in somebody elses name who in
turn can endorse it further till the final payment is made by you to whosoever presents it before
you. This type of a document is called a Promissory Note.
Section 4 of the Negotiable Instruments Act, 1881 defines a promissory note as an instrument in
writing (not being a bank note or a currency note) containing an unconditional undertaking, signed
by the maker, to pay a certain sum of money only to or to the order of a certain person or to the
bearer of the instrument.
Specimen of a Promissory Note
Rs. 10,000/- New Delhi
September 25, 2002
On demand, I promise to pay Ramesh, s/o RamLal of Meerut or order a sum of
Rs 10,000/- (Rupees Ten Thousand only), for value received.
To, Ramesh Sd/ Sanjeev
Address Stamp
Features of a promissory note
Let us know the features of a promissory note.
i. A promissory note must be in writing, duly signed by its maker and properly stamped as per
Indian Stamp Act.
ii. It must contain an undertaking or promise to pay. Mere acknowledgement of indebtedness is
not enough. For example, if some one writes I owe Rs. 5000/- to Satya Prakash, it is not a
promissory note.
iii. The promise to pay must not be conditional. For example, if it is written I promise to pay
Suresh Rs 5,000/- after my sisters marriage, is not a promissory note.
iv. It must contain a promise to pay money only. For example, if some one writes I promise to
give Suresh a Maruti car it is not a promissory note.
v. the parties to a promissory note, i.e. the maker and the payee must be certain.
vi. A promissory note may be payable on demand or after a certain date. For example, if it is
written three months after date I promise to pay Satinder or order a sum of rupees Five
Thousand only it is a promissory note.
vii. The sum payable mentioned must be certain or capable of being made certain. It means
that the sum payable may be in figures or may be such that it can be calculated.
ii. Bill of Exchange
Suppose Rajeev has given a loan of Rupees Ten Thousand to Sameer, which Sameer has to
return.
Now, Rajeev also has to give some money to Tarn. In this case, Rajeev can make a document
Directing Sameer to make payment up to Rupees Ten Thousand to Tarn on demand or after
expiry of a specified period. This document is called a bill of exchange, which can be transferred
to some other persons name by Tarn.
Section 5 of the Negotiable Instruments Act, 1881 defines a bill of exchange 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.
Specimen of a bill of exchange
Rs. 10,000/-
New Delhi
May 2, 2001
Five months after date pay Tarn or (to his) order the sum of Rupees Ten Thousand
only for value received.
To
Accepted
Stamp
Sameer
Sameer
S/d
Address
Rajeev
iii. Cheques
Cheque is a very common form of negotiable instrument. If you have a savings bank account or
current account in a bank, you can issue a cheque in your own name or in favour of others,
thereby directing the bank to pay the specified amount to the person named in the cheque.
Therefore, a cheque may be regarded as a bill of exchange; the only difference is that the bank is
always the drawee in case of a cheque.
The Negotiable Instruments Act, 1881 defines a cheque as a bill of exchange drawn on a
specified banker and not expressed to be payable otherwise than on demand. Actually, a cheque
is an order by the account holder 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.
iv. Hundis
A Hundi is a negotiable instrument by usage. It is often in the form of a bill of exchange drawn in
any local language in accordance with the custom of the place. Some times it can also be in the
form of a promissory note. A Hundi is the oldest known instrument used for the purpose of
transfer of money without its actual physical movement. The provisions of the Negotiable
Instruments Act shall apply to hundis only when there is no customary rule known to the people.
Types of Hundis
There are a variety of hundis used in our country. Let us discuss some of the most common ones.
Shah-jog Hundi: one merchant draws this on another, asking the latter to pay the amount to a
Shah. Shah is a respectable and responsible person, a man of worth and known in the bazaar. A
shah-jog Hundi passes from one hand to another till it reaches a Shah, who, after reasonable
enquiries, presents it to the drawee for acceptance of the payment.
Darshani Hundi: This is a Hundi payable at sight. The holder must present it for payment within a
reasonable time after its receipt. Thus, it is similar to a demand bill.
Muddati Hundi: A Muddati or miadi Hundi is payable after a specified period of time. This is
similar to a time bill.
There are few other varieties like Nam-jog Hundi, Dhani-jog Hundi, and Jawabee Hundi, Jokhami
Hundi, Fireman-jog Hundi, etc.
Features of Negotiable Instruments
After discussing the various types of negotiable instruments let us sum up their features as under.
Guarantee
Q.4.a. Mention the remedies for breach of contract. How will the injured party claim it?
Ans.: Breach of Contract & Remedies:
Nature of breach
A breach of contract occurs where a party to a contract fails to perform, precisely and exactly, his
obligations under the contract. This can take various forms for example, the failure to supply
goods or perform a service as agreed. Breach of contract may be either actual or anticipatory.
Actual breach occurs where one party refuses to form his side of the bargain on the due date or
performs incompletely. For example: Poussard v Spiers and Bettini v Gye.
Anticipatory breach occurs where one party announces, in advance of the due date for
performance, that he intends not to perform his side of the bargain. The innocent party may sue
for damages immediately the breach is announced. Hochster v De La Tour is an example.
Effects of breach A breach of contract, no matter what form it may take, always entitles the
innocent party to maintain an action for damages, but the rule established by a long line of
authorities is that the right of a party to treat a contract as discharged arises only in three
situations.
The breaches, which give the innocent party the option of terminating the contract, are:
(a) Renunciation
Renunciation occurs where a party refuses to perform his obligations under the contract. It may
be either express or implied. Hochster v De La Tour is a case law example of express
renunciation.
Renunciation is implied where the reasonable inference from the defendants conduct is that he
no longer intends to perform his side of the contract. For example: Omnium DEnterprises v
Sutherland.
(b) Breach of condition
The second repudiator breach occurs where the party in default has committed a breach of
condition. Thus, for example, in Poussard v Spiers the employer had a right to terminate the
sopranos employment when she failed to arrive for performances.
(c) Fundamental breach
The third repudiator breach is where the party in breach has committed a serious (or
fundamental) breach of an in nominate term or totally fails to perform the contract.
A repudiator breach does not automatically bring the contract to an end. The innocent party has
two options: He may treat the contract as discharged and bring an action for damages for breach
of contract immediately. This is what occurred in, for example, Hochster v De La Tour.
He may elect to treat the contract as still valid, complete his side of the bargain and then sue for
payment by the other side. For example, White and Carter Ltd v McGregor.
2 Introduction to remedies
Damages are the basic remedy available for a breach of contract. It is a common law remedy that
can be claimed as of right by the innocent party.
The object of damages is usually to put the injured party into the same financial position he would
have been in had the contract been properly performed.
Sometimes damages are not an adequate remedy and this is where the equitable remedies (such
as specific performance and injunction) may be awarded.
3 Damages
1 Nature:
The major remedy available at common law for breach of contract is an award of damages. This
is a monetary sum fixed by the court to compensate the injured party.
In order to recover substantial damages the innocent party must show that he has suffered actual
loss; if there is no actual loss he will only be entitled to nominal damages in recognition of the fact
that he has a valid cause of action. In making an award of damages, the court has two major
considerations:
Remoteness for what consequences of the breach is the defendant legally responsible?
The measure of damages the principles upon which the loss or damage is evaluated or
quantified in monetary terms. The second consideration is quite distinct from the first, and can be
decided by the court only after the first has been determined.
2.Remoteness of loss
The rule governing remoteness of loss in contract was established in Hadley v Baxendale. The
court established the principle that where one party is in breach of contract, the other should
receive damages which can fairly and reasonably be considered to arise naturally from the
breach of contract itself (in the normal course of things), or which may reasonably be assumed
to have been within the contemplation of the parties at the time they made the contract as being
the probable result of a breach.
Thus, there are two types of loss for which damages may be recovered:
1. What arises naturally; and
2. What the parties could foresee when the contract was made as the likely result of breach.
As a consequence of the first limb of the rule in Hadley v Baxendale, the party in breach is
deemed to expect the normal consequences of the breach, whether he actually expected them or
not. Under the second limb of the rule, the party in breach can only be held liable for abnormal
consequences where he has actual knowledge that the abnormal consequences might follow or
where he reasonably ought to know that the abnormal consequences might follow Victoria
Laundry v Newman Industries.
3.The measure (or quantum) of damages
In assessing the amount of damages payable, the courts use the following principles:
The amount of damages is to compensate the claimant for his loss not to punish the defendant.
Damages are compensatory not restitutionary.
The most usual basis of compensatory damages is to put the innocent party into the same
financial position he would have been in had the contract been properly performed. This is
sometimes called the expectation loss basis. In Victoria Laundry v Newman Industries, for
example, Victoria Laundry were claiming for the profits they would have made had the boiler been
installed on the contractually agreed date.
Sometimes a claimant may prefer to frame his claim in the alternative on the reliance loss basis
and thereby recover expenses incurred in anticipation of performance and wasted as a result of
the breach Anglia Television v Reed. In a contract for the sale of goods, the statutory (Sale of
Goods Act 1979) measure of damages is the difference between the market price at the date of
the breach and the contract price, so that only nominal damages will be awarded to a claimant
buyer or claimant seller if the price at the date of breach was respectively less or more than the
contract price. In fixing the amount of damages, the courts will usually deduct the tax (if any)
which would have been payable by the claimant if the contract had not been broken. Thus if
damages are awarded for loss of earnings, they will normally be by reference to net, not gross,
pay. Difficulty in assessing the amount of damages does not prevent the injured party from
receiving them: Chaplin v Hicks. In general, damages are not awarded for non-pecuniary loss
such as mental distress and loss of enjoyment. Exceptionally, however, damages are awarded for
such losses where the contracts purpose is to promote happiness or enjoyment, as is the
situation with contracts for holidays Jarvis v Swan Tours. The innocent party must take
reasonable steps to mitigate (minimise) his loss, for example, by trying to find an alternative
method of performance of the contract: Brace v Calder.
4.Liquidated damages clauses and penalty clauses
If a contract includes a provision that, on a breach of contract, damages of a certain amount or
calculable at a certain rate will be payable, the courts will normally accept the relevant figure as a
measure of damages. Such clauses are called liquidated damages clauses.
The courts will uphold a liquidated damages clause even if that means that the injured party
receives less (or more as the case may be) than his actual loss arising on the breach. This is
because the clause setting out the damages constitutes one of the agreed contractual terms
Cellulose Acetate Silk Co Ltd v Widnes Foundry Ltd.
However, a court will ignore a figure for damages put in a contract if it is classed as a penalty
clause that is, a sum which is not a genuine pre-estimate of the expected loss on breach.
This could be the case where:
1. The prescribed sum is extravagant in comparison with the maximum loss that could follow from
a breach.
2. The contract provides for payment of a certain sum but a larger sum is stipulated to be payable
on a breach.
3.The same sum is fixed as being payable for several breaches, which would be likely to cause
varying amounts of damage. All of the above cases would be regarded as penalties, even though
the clause might be described in the contract as a liquidated damages clause. The court will not
enforce payment of a penalty, and if the contract is broken only the actual loss suffered may be
recovered (Ford Motor Co (England) Ltd v Armstrong).
under the contract, but it was established that the manufacturer has a duty of care owed to their
consumers and she was awarded damages in tort.
Privity is the legal term for a close, mutual, or successive relationship to the same right of
property or the power to enforce a promise or warranty.
of the company. Once a company is incorporated, it must be treated like any other independent
person. As a consequence of separate legal entity, the company may enter into contracts with its
members and vice-versa.
3. Perpetual existence: The attribute of separate entity also provides a company a perpetual
existence, until dissolved by law. Its life remains unaffected by the lunacy, insolvency or death of
its members. The members may come and go but the company can go on forever. Law creates it
and the law alone can dissolve it.
4. Separate property: A company, being a legal entity, can buy and own property in its own
name. And, being a separate entity, such property belongs to it alone. Its members are not the
joint owners of the property even though it is purchased out of funds contributed by them.
Consequently, they do not have even insurable interest in the property of the company. The
property of the company is not the property of the shareholders; it is the property of the company.
5. Limited liability: In the case of companies limited by shares the liability of every member of
the company is limited to the amount of shares subscribed by him. If the member has paid full
amount of the face value of the shares subscribed by him, his liability shall be nil and he cannot
be asked to contribute anything more. Similarly, in the case of a company limited by guarantee,
the liability of the members is limited up to the amount guaranteed by a member. The Companies
Act, however, permits the formation of companies with unlimited liability. But such companies are
very rare.
6. Common seal: As a company is devoid of physique, it cant act in person like a human being.
Hence it cannot sign any documents personally. It has to act through a human agency known as
Directors. Therefore, every company must have a seal with its name engraved on it. The seal of
the company is affixed on the documents, which require the approval of the company. Two
Directors and the Secretary or such other person as the Board may authorize for this purpose,
witness the affixation of the seal. Thus, the common seal is the official signature of the company.
7. Transferability of shares: The shares of a company are freely transferable and can be sold or
purchased through the Stock Exchange. A shareholder can transfer his shares to any person
without the consent of other members. Under the articles of association, even a public limited
company can put certain restrictions on the transfer of shares but it cannot altogether stop it. A
shareholder of a public limited company possessing fully paid up shares is at liberty to transfer his
shares to anyone he likes in accordance with the manner provided for in the articles of
association of the company. However, private limited company is required to put certain
restrictions on transferability of its shares. But any absolute restriction on the right of transfer of
shares is void
8. Capacity to sue and be sued: A company, being a body corporate, can sue and be sued in its
own name.
Agriculture and mining businesses are concerned with the production of raw material,
such as plants or minerals.
Financial businesses include banks and other companies that generate profit through
investment and management of capital.
Information businesses generate profits primarily from the resale of intellectual property
and include movie studios, publishers and packaged software companies.
Manufacturers produce products, from raw materials or component parts, which they then
sell at a profit. Companies that make physical goods, such as cars or pipes, are
considered manufacturers.
Real estate businesses generate profit from the selling, renting, and development of
properties, homes, and buildings.
Retailers and Distributors act as middle-men in getting goods produced by manufacturers
to the intended consumer, generating a profit as a result of providing sales or distribution
services. Most consumer-oriented stores and catalogue companies are distributors or
retailers. See also: Franchising
Service businesses offer intangible goods or services and typically generate a profit by
charging for labor or other services provided to government, other businesses, or
consumers. Organizations ranging from house decorators to consulting firms,
restaurants, and even entertainers are types of service businesses.
Transportation businesses deliver goods and individuals from location to location,
generating a profit on the transportation costs
Utilities produce public services, such as heat, electricity, or sewage treatment, and are
usually government chartered.
There are many other divisions and subdivisions of businesses. The authoritative list of business
types for North America is generally considered to be the North American Industry Classification
System, or NAICS. The equivalent European Union list is the Statistical Classification of
Economic Activities in the European Community (NACE).
Management
The efficient and effective operation of a business, and study of this subject, is called
management. The main branches of management are financial management, marketing
management, human resource management, strategic management, production management,
operation management, service management and information technology management.
Reforming State Enterprises
In recent decades, assets and enterprises that were run by various states have been modeled
after business enterprises. In 2003, the People's Republic of China reformed 80% of its stateowned enterprises and modeled them on a company-type management system. [2] Many state
institutions and enterprises in China and Russia have been transformed into joint-stock
companies, with part of their shares being listed on public stock markets.
Organization and government regulation
Most legal jurisdictions specify the forms of ownership that a business can take, creating a body
of commercial law for each type.
The major factors affecting how a business is organized are usually:
The Bank of England in Threadneedle Street, London, England.
The size, scope of the business firm and its structure, management, and ownership,
broadly analyzed in the theory of the firm. Generally a smaller business is more flexible,
while larger businesses, or those with wider ownership or more formal structures, will
usually tend to be organized as partnerships or (more commonly) corporations. In
addition a business that wishes to raise money on a stock market or to be owned by a
wide range of people will often be required to adopt a specific legal form to do so.
The sector and country. Private profit making businesses are different from government
owned bodies. In some countries, certain businesses are legally obliged to be organized
in certain ways.
Limited liability. Corporations, limited liability partnerships, and other specific types of
business organizations protect their owners or shareholders from business failure by
doing business under a separate legal entity with certain legal protections. In contrast,
unincorporated businesses or persons working on their own are usually not so protected.
Tax advantages. Different structures are treated differently in tax law, and may have
advantages for this reason.
Disclosure and compliance requirements. Different business structures may be
required to make more or less information public (or reported to relevant authorities), and
may be bound to comply with different rules and regulations.
Many businesses are operated through a separate entity such as a corporation or a partnership
(either formed with or without limited liability). Most legal jurisdictions allow people to organize
such an entity by filing certain charter documents with the relevant Secretary of State or
equivalent and complying with certain other ongoing obligations. The relationships and legal
rights of shareholders, limited partners, or members are governed partly by the charter
documents and partly by the law of the jurisdiction where the entity is organized. Generally
speaking, shareholders in a corporation, limited partners in a limited partnership, and members in
a limited liability company are shielded from personal liability for the debts and obligations of the
entity, which is legally treated as a separate "person." This means that unless there is
misconduct, the owner's own possessions are strongly protected in law, if the business does not
succeed.
Where two or more individuals own a business together but have failed to organize a more
specialized form of vehicle, they will be treated as a general partnership. The terms of a
partnership are partly governed by a partnership agreement if one is created, and partly by the
law of the jurisdiction where the partnership is located. No paperwork or filing is necessary to
create a partnership, and without an agreement, the relationships and legal rights of the partners
will be entirely governed by the law of the jurisdiction where the partnership is located.
A single person who owns and runs a business is commonly known as a sole proprietor, whether
he or she owns it directly or through a formally organized entity.
A few relevant factors to consider in deciding how to operate a business include:
1. General partners in a partnership (other than a limited liability partnership), plus anyone
who personally owns and operates a business without creating a separate legal entity,
are personally liable for the debts and obligations of the business.
2. Generally, corporations are required to pay tax just like "real" people. In some tax
systems, this can give rise to so-called double taxation, because first the corporation
pays tax on the profit, and then when the corporation distributes its profits to its owners,
individuals have to include dividends in their income when they complete their personal
tax returns, at which point a second layer of income tax is imposed.
3. In most countries, there are laws which treat small corporations differently than large
ones. They may be exempt from certain legal filing requirements or labor laws, have
appoint an arbitrator. [Some High Courts have authorized District Judge to appoint an arbitrator].
In case of international commercial dispute, the application for appointment of arbitrator has to be
made to Chief Justice of India. In case of other domestic disputes, application has to be made to
Chief Justice of High Court within whose jurisdiction the parties are situated [Section 11(12)]
Challenge to Appointment of arbitrator: An arbitrator is expected to be independent and
impartial. If there are some circumstances due to which his independence or impartiality can be
challenged, he must disclose the circumstances before his appointment [Section 12(1)].
Appointment of Arbitrator can be challenged only if
(a) Circumstances exist that give rise to justifiable doubts as to his independence or impartiality
(b) He does not possess the qualifications agreed to by the parties [Section 12(3)]. Appointment
of arbitrator cannot be challenged on any other ground. The challenge to appointment has to be
decided by the arbitrator himself. If he does not accept the challenge, the proceedings can
continue and the arbitrator can make the arbitral award. However, in such case, application for
setting aside arbitral award can be made to Court. If the court agrees to the challenge, the arbitral
award can be set aside [Section 13(6)]. Thus, even if the arbitrator does not accept the challenge
to his appointment, the other party cannot stall further arbitration proceedings by rushing to court.
The arbitration can continue and challenge can be made in Court only after arbitral award is
made.
Conduct of Arbitral Proceedings: The Arbitral Tribunal should treat the parties equally and each
party should be given full opportunity to present his case [Section 18]. The Arbitral Tribunal is not
bound by Code of Civil Procedure, 1908 or Indian Evidence Act, 1872 [Section 19(1)]. The parties
to arbitration are free to agree on the procedure to be followed by the Arbitral Tribunal. If the
parties do not agree to the procedure, the procedure will be as determined by the arbitral tribunal.
Law of Limitation Applicable: Limitation Act, 1963 is applicable. For this purpose, date on which
the aggrieved party requests other party to refer the matter to arbitration shall be considered. If on
that date, the claim is barred under Limitation Act, the arbitration cannot continue [Section 43(2)].
If Court sets Arbitration award aside, time spent in arbitration will be excluded for purpose of
Limitation Act. So that case in court or fresh arbitration can start.
Flexibility in respect of procedure, place and language: Arbitral Tribunal has full powers to
decide the procedure to be followed, unless parties agree on the procedure to be followed
[Section 19(3)]. The Tribunal also has powers to determine the admissibility, relevance, materiality
and weight of any evidence [Section 19(4)]. Place of arbitration will be decided by mutual
agreement. However, if the parties do not agree to the place, the same will be decided by tribunal
[Section 20]. Similarly, language to be used in arbitral proceedings can be mutually agreed.
Otherwise, Arbitral Tribunal can decide [Section 22].
Submission of statement of claim and defense: The claimant should submit statement of
claims, points of issue and relief or remedy sought. The respondent shall state his defense in
respect of these particulars. All relevant documents must be submitted. Such claim or defense
can be amended or supplemented any time [section 23].
Hearings and Written Proceedings: After submission of documents and defense, unless the
parties agree otherwise, the Arbitral Tribunal can decide whether there will be oral hearing or
proceedings can be conducted on the basis of documents and other materials. However, if one of
the parties requests the hearing shall be oral. Sufficient advance notice of hearing should be
given to both the parties [Section 24]. [Thus, unless one party requests, oral hearing is not
compulsory].
Settlement during Arbitration: It is permissible for parties to arrive at mutual settlement even
when arbitration is proceeding. In fact, even the Tribunal can make efforts to encourage mutual
settlement. If parties settle the dispute by mutual agreement, the arbitration shall be terminated.
However, if both parties and the Arbitral Tribunal agree, the settlement can be recorded in the
form of an arbitral award on agreed terms. Such Arbitral Award shall have the same force as any
other Arbitral Award [Section 30].
Arbitral Award: Decision of Arbitral Tribunal is termed as 'Arbitral Award'. Arbitrator can decide
the dispute ex aqua ET bono (In justice and in good faith) if both the parties expressly authorize
him to do so [Section 28(2)]. The decision of Arbitral Tribunal will be by majority. The arbitral
award shall be in writing and signed by the members of the tribunal [Section 29]. The award must
be in writing and signed by the members of Arbitral Tribunal [Section 31(1)]. It must state the
reasons for the award unless the parties have agreed that no reason for the award is to be given
[Section 31(3)]. The award should be dated and place where it is made should be mentioned.
Copy of award should be given to each party. Tribunal can make interim award also [Section
31(6)].
Cost of Arbitration- Cost of arbitration means reasonable cost relating to fees and expenses of
arbitrators and witnesses, legal fees and expenses, administration fees of the institution
supervising the arbitration and other expenses in connection with arbitral proceedings. The
tribunal can decide the cost and share of each party [Section 3 1(8)]. If the parties refuse to pay
the costs, the Arbitral Tribunal may refuse to deliver its award. In such case, any party can
approach Court. The Court will ask for deposit from the parties and on such deposit, the Tribunal
will deliver the award. Then Court will decide the costs of arbitration and shall pay the same to
Arbitrators. Balance, if any, will be refunded to the party [Section 39].
Intervention by Court - One of the major defects of earlier arbitration law was that the party
could access court almost at every stage of arbitration - right from appointment of arbitrator to
implementation of final award. Thus, the defending party could approach court at various stages
and stall the proceedings. Now, approach to court has been drastically curtailed. In some cases, if
the party raises an objection, Arbitral Tribunal itself can give the decision on that objection. After
the decision, the arbitration proceedings are continued and the aggrieved party can approach
Court only after Arbitral Award is made. Appeal to court is now only on restricted grounds. Of
course, Tribunal cannot be given unlimited and uncontrolled powers and supervision of Courts
cannot be totally eliminated.
Arbitration Act has Over-Riding Effect: Section 5 of Act clarifies that notwithstanding anything
contained in any other law for the time being in force, in matters governed by the Act, the judicial
authority can intervene only as provided in this Act and not under any other Act.
Modes of Arbitration
(a) Arbitration without the intervention of the court. [Sec.3 to 19]
(b) Arbitration with the intervention of the court when there is no suit pending [Sec.20]
(c) Arbitration with the intervention of the court where a suit is pending. [Sec.21 to 25]
general,
the
rights
of
consumers
in
India
can
be
listed
as
under:
* The right to be protected from all types of hazardous goods and services
* The right to be fully informed about the performance and quality of all goods and services
*
The
right
to
free
choice
of
goods
and
services
* The right to be heard in all decision-making processes related to consumer interests
* The right to seek redressal, whenever consumer rights have been infringed
*
The
right
to
complete
consumer
education
The Consumer Protection Act, 1986 and various other laws like the Standards, Weights &
Measures Act have been formulated to ensure fair competition in the market place and free flow
of true information from the providers of goods and services to those who consume them.
However, the success of these laws would depend upon the vigilance of consumers about their
rights, as well as their responsibilities. In fact, the level of consumer protection in a country is
considered
as
the
correct
indicator
of
the
extent
of
progress
of
the
nation.
The production and distribution systems have become larger and more complicated today. The
high level of sophistication achieved by the providers of goods and services in their selling and
marketing practices and various types of promotional activities like advertising resulted in an
increased need for higher consumer awareness and protection. In India, the government has
realized the plight of Indian consumers and the Ministry of Consumer Affairs, Food and Public
Distribution has established the Department of Consumer Affairs as the nodal organization for
the protection of consumer rights, redressal of all consumer grievances and promotion of
standards
governing
goods
and
services
offered
in
India.
A complaint for infringement of consumer rights could be made under the following
circumstances
in
the
nearest
designated
consumer
court:
* The goods or services bought by a person or agreed to be bought by a person suffer from one
or
more
deficiencies
or
defects
in
any
respect
* A trader or a service provider resorting to restrictive or unfair trade practices
* A trader or a service provider charging a price in excess of the price displayed on the goods or
the price that had been agreed upon between the parties or the price that had been stipulated
under
any
law
in
force
* Goods or services that pose a hazard to the safety and life of a person offered for sale,
knowingly
or
unknowingly,
causing
injury
to
health,
safety
or
life.
Consumerdaddy.com is India's only online consumer protection site offering consumer report,
consumer review and different opinions on different products and companies.
Capacities
The memorandum no longer restricts what a company is permitted to do. Since 1 October 2009, if
a company's constitution contains any restrictions on the objects at all, those restrictions will form
part of the articles of association.
Historically, a company's memorandum of association contained an objects clause, which limited
its capacity to act. When the first limited companies were incorporated, the objects clause had to
be widely drafted so as not to restrict the board of directors in their day to day trading. In the
Companies Act 1989 the term "General Commercial Company" was introduced which meant that
companies could undertake "any lawful or legal trade or business."
The Companies Act 2006 relaxed the rules even further, removing the need for an objects clause
at all. Companies incorporated on and after 1 October 2009 without an objects clause are
deemed to have unrestricted objects. Existing companies may take advantage of this change by
passing a special resolution to remove their objects clause.
If the company is to be a non-profit making company, the articles will contain a statement saying
that the profits shall not be distributed to the members.
Articles of association:
The term articles of association of a company, or articles of incorporation, of an American or
Canadian Company, are often simply referred to as articles (and are often capitalized as an
abbreviation for the full term). The Articles are a requirement for the establishment of a company
under the law of India, the United Kingdom and many other countries. Together with the
memorandum of association, they constitute the constitution of a company. The equivalent term
for LLC is Articles of Organization. Roughly equivalent terms operate in other countries, such as
Gesellschaftsvertrag in Germany, statuts in France, statut in Poland.[1]
The following is largely based on British Company Law, references which are made at the end of
this Article.
The Articles can cover a medley of topics, not all of which is required in a country's law. Although
all terms are not discussed, they may cover:
the issuing of shares (also called stock), different voting rights attached to
different classes of shares
valuation of intellectual rights, say,the valuations of the IPR of one partner and,for
example,the real estate of the other
the appointments of directors - which shows whether a shareholder dominates or
shares equality with all contributors
directors meetings - the quorum and percentage of vote
management decisions - whether the board manages or a founder
transferability of shares - assignment rights of the founders or other members of
the company do
special voting rights of a Chairman,and his/her mode of election
the dividend policy - a percentage of profits to be declared when there is profit or
otherwise
winding up - the conditions, notice to members
confidentiality of know-how and the founders' agreement and penalties for
disclosure
A Company is essentially run by the shareholders, but for convenience, and day-to-day working,
by the elected Directors. Usually, the shareholders elect a Board of Directors (BOD) at the Annual
General Meeting (AGM), which may be statutory (e.g. India).
The number of Directors depends on the size of the Company and statutory requirements. The
Chairperson is generally a well-known outsider but he /she may be a working Executive of the
company, typically of an American Company. The Directors may, or may not, be employees of the
Company.
3. Write a short note on unfair trade practices and Restrictive trade practice.
Ans.: Unfair trade practices:
The law of unfair competition serves five purposes. First, the law seeks to protect the economic,
intellectual, and creative investments made by businesses in distinguishing themselves and their
products. Second, the law seeks to preserve the good will that businesses have established with
consumers. Third, the law seeks to deter businesses from appropriating the good will of their
competitors. Fourth, the law seeks to promote clarity and stability by encouraging consumers to
rely on a merchant's good will and reputation when evaluating the quality of rival products. Fifth,
the law seeks to increase competition by providing businesses with incentives to offer better
goods and services than others in the same field.
Although the law of unfair competition helps protect consumers from injuries caused by deceptive
trade practices, the remedies provided to redress such injuries are available only to business
entities and proprietors. Consumers who are injured by deceptive trade practices must avail
themselves of the remedies provided by state and federal Consumer Protection laws. In general,
businesses and proprietors injured by unfair competition have two remedies: injunctive relief (a
court order restraining a competitor from engaging in a particular fraudulent or deceptive practice)
and money damages (compensation for any losses suffered by an injured business).
General Principles
The freedom to pursue a livelihood, operate a business, and otherwise compete in the
marketplace is essential to any free enterprise system. Competition creates incentives for
businesses to earn customer loyalty by offering quality goods at reasonable prices. At the same
time, competition can also inflict harm. The freedom to compete gives businesses the right to lure
customers away from each other. When one business entices enough customers away from
competitors, those rival businesses may be forced to shut down or move.
The law of unfair competition will not penalize a business merely for being successful in the
marketplace. Nor will the law impose liability simply because a business is aggressively
marketing its product. The law assumes, however, that for every dollar earned by one business, a
competitor will lose a dollar. Accordingly, the law prohibits a business from unfairly profiting at a
competitor's expense. What constitutes unfair competition varies according to the Cause of Action
asserted in each case. These include actions for the infringement of Patents, Trademarks, and
copyrights; actions for the wrongful appropriation of Trade Dress, trade names, trade secrets, and
service marks; and actions for the publication of defamatory, false, and misleading
representations.
Restrictive trade practice:
The restrictive trade practices, or antitrust, provisions in the Trade Practices Act are aimed at
deterring practices by firms which are anti-competitive in that they restrict free competition. This
part of the act is enforced by the Australian Competition and Consumer Commission (ACCC).
The ACCC can litigate in the Federal Court of Australia, and seek pecuniary penalties of up to
$10 million from corporations and $500,000 from individuals. Private actions for compensation
may also be available.
These provisions prohibit:
Exclusive dealing an attempt to interfere with freedom of buyers to buy from other
suppliers, such as agreeing to supply a product only if a retailer does not stock a
competitors product. Most forms of exclusive dealing are only prohibited if they have the
purpose or likely effect of substantially lessening competition in a market.
Third-line forcing: A type of exclusive dealing, third-line forcing involves the supply of
goods or services on the condition that the acquirer also acquires goods or services from
a third party. Third-line forcing is prohibited per se.
Resale price maintenance fixing a price below which resellers cannot sell or advertise
A priority of ACCC enforcement action in recent years has been cartels. The ACCC has in place
an immunity policy, which grants immunity from prosecution to the first party in a cartel to provide
information to the ACCC allowing it to prosecute. This policy recognizes the difficulty in gaining
information/evidence about price-fixing behaviours.
legislation;
each
state
And
has
framed
its
own
rules
for
Coverage
the Act.
- Applicable to all persons employed in an establishments with or without wages, except the
members
of
the
employer's
family.
- State government can exempt, either permanently or for a specified period, any establishments
from
all
or
any
provisions
of
this
Act.
Main
Provisions
- Compulsory registration of shop/establishment within thirty days of commencement of work.
- Communications of closure of the establishment within 15 days from the closing of the
establishment.
-
Lays
down
the
hours
of
work
per
day
and
week.
- Lays down guidelines for spread-over, rest interval, opening and closing hours, closed days,
national
and
religious
holidays,
overtime
work.
-
Rules
Rules
for
employment
for
annual
Rules
for
Maintenance
of
leave,
of
children,
maternity
leave,
employment
registers
and
young
sickness
and
records
persons
and
and
casual
termination
and
display
leave,
of
of
Obligations
of
employers.
Obligations
of
employees.
women
etc.
service.
notices.
About What:
1. To regulate conditions of work and employment in shops, commercial establishments,
residential hotels, restaurants, eating houses, theatres, other places of public
entertainment and other establishments.
2. Provisions include Regulation of Establishments, Employment of Children, Young
Persons and Women, Leave and Payment of Wages, Health and Safety etc.
Applicability & Coverage:
1. It applies to all local areas specified in Schedule-I
2. Establishment means any establishment to which the Act applies and any other such
establishment to which the State Government may extend the provisions of the Act by
notification
3. Employee means a person wholly or principally employed whether directly or through any
agency, whether for wages or other considerations in connection with any establishment
4. Member of the family of an employer means, the husband, wife, son, daughter, father,
mother, brother or sister and is dependent on such employer
Returns:
1. Form-A or Form-B (as the case may be) {Section 7(2)(a), Rule 5}
Before 15th December of the calendar year, i.e. 15 days before the expiry date
The employer has to submit these forms to the authority notified along with the old
certificate of registration and the renewal fees for minimum one years renewal and
maximum of three years renewal
2. Form-E
(Notice
of
Change)
{Rule
8}
Within 15 days after the expiry of the quarter to which the changes relate in respect of
total number of employees qualifying for higher fees as prescribed in Schedule-II and in
respect of other changes in the original statement furnished within 30 days after the
change has taken place. (Quarter means quarter ending on 31st March, 30th June, 30th
September and 31st December)
Registers:
1. Form-A
{Rule
5}
Register showing dates of Lime Washing etc
2. Form-H, Form-J {Rule 20(1)} (if opening & closing hours are ordinarily uniform)
Register of Employment in a Shop or Commercial Establishment
3. Form-I {Rule 20(3)}, Form-K (if opening & closing hours are ordinarily uniform)
Register of Employment in a Residential Hotel, Restaurant, Eating-House, Theatre, or
other places of public amusement or entertainment
4. Form-M
{Rule
20(4)}
Register of Leave This and all the above Registers have to be maintained by the
Employer
5. Visit
Book
This shall be a bound book of size 7 x 6 containing at least 100 pages with every
second page consecutively numbered, to be produced to the visiting Inspector on
demand. The columns shall be:
i.
Name of the establishment or Employer
ii.
Locality
iii.
Registration Number
iv.
Date and
v.
Time
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 international governments 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 or
knowingly 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.
Failure to comply with orders of the controller by a Certifying Authority or any employee of
such authority (Sec 68):
Failure to comply with orders of the Controller by any Certifying Authority or by any employees of
Certifying Authority is a punishable offence. Such persons are liable to imprisonment for a term
not exceeding three years or to a fine not exceeding two lakh rupees or to both.
Fails to assist any agency of the Government to decrypt the information (Sec 69):
If any subscriber or any person-in-charge of the computer fails to assist or to extend any facilities
and technical assistance to any Government agency to decrypt the information on the orders of
the Controller in the interest of the sovereignty and integrity of India etc. is a punishable offence
under the Act. Such persons are liable for imprisonment for a term, which may extend to seven
years.
of
complaint
The UK Border Agency defines a complaint as any expression of dissatisfaction about the
services provided by or for the UK Border Agency and/or about the professional conduct of UK
Border
Agency
staff,
including
contractors.
Letters relating to the decision to refuse a UK visa. Visa applicants are expected to raise
What
You
information
should
make
your
should
complaint
using
you
our
Complaints
send?
Registration
Form.
It is important that you give as much information about yourself as possible. The Complaints
Registration Form tells you the type of information we need. This will help us to find the
information relevant to your case and to contact you about it. If possible you should also include:
Full details about the complaint (including times, dates and locations);
The names of any UK Border Agency / Visa Application Centre staff you have dealt with;
What
happens
next?
What to do if you are not happy with the outcome of your complaint or how we have
handled it
What will happen after your complaint has been dealt with