Legal Aspects of Business

Q.1 Distinguish between fraud and misrepresentation. Ans : Meaning of fraud (Secs.17 and 19)

Fraud means and includes any of the following acts committed by a party to a contract with an intent to deceive the other party thereto or to induce him to enter into a contract: (i) the suggestion as a fact of that which is not true by one who does not believe it to be true; (ii) active concealment of a fact by one having knowledge or belief of the fact; (iii) promise made without any intention of performing it; (iv) any other act fitted to deceive; (v) any such act or omission as the law specifically declares to be fraudulent. Meaning of misrepresentation (Secs.18-19) Misrepresentation is also known as simple misrepresentation whereas fraud is known as fraudulent misrepresentation. Like fraud, misrepresentation is an incorrect or false statement but the falsity or inaccuracy is not due to any desire to deceive or defraud the other party. Such a statement is made innocently. The party making it believes it to be true. In this way, fraud is different from misrepresentation.

Q.2 What are the remedies for breach of contract. Ans : Remedies for Breach of Contract

When someone breaches a contract, the other party is no longer obligated to keep its end of the bargain. From there, that party may proceed in several ways: (i) the other party may urge the breaching party to reconsider the breach; (ii) if it is a contract with a merchant, the other party may get help from consumers associations; (iii) the other party may bring the breaching party to an agency for alternative dispute resolution; (iv) the other party may sue for damages; or (v) the other party may sue for other remedies. Rescission of the contract: When a breach of contract is committed by one party, the other party may treat the contract as rescinded. In such a case the aggrieved party is freed from all his obligations under the contract. Damages (Sec.75): Another relief or remedy available to the promisee in the event of a breach of promise by the promisor is to claim damages or loss arising to him therefrom. Damages under Sec.75 are awarded according to certain rules as laid down in Secs.73-74. Sec.73 contains three important rules: (i) Compensation as general damages will be awarded only for those losses that directly and naturally result from the breach of the contract. (ii) Compensation for losses indirectly caused by breach may be paid as special damages if the party in breach had knowledge that such losses would also follow from

such act of breach. (iii) The aggrieved party is required to take reasonable steps to keep his losses to the minimum. The most common remedy for breach of contracts: The usual remedy for breach of contracts is suit for damages. The main kinds of damages awarded in a contract suit are ordinary damages. This is the amount of money it would take to put the aggrieved party in as good a position as if there had not been a breach of contract. The idea is to compensate the aggrieved party for the loss he has suffered as a result of the breach of the contract. In addition to the rights of a seller against goods provided in Secs.47 to 54, the seller has the following remedies against the buyer personally. (i) suit for price (Sec.55); (ii) damages for non-acceptance of goods (Sec.56); (iii) suit for interest (Sec.56). Suit for price (Sec.55) Where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay the price, the seller can sue the buyer for the price of the goods. Where the property in goods has not passed to the buyer, as a rule, the seller cannot file a suit for the price; his only remedy is to claim damages. Suit for damages for non-acceptance (Sec.56) Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damages for non-acceptance. Where the property in the goods has not passed to the buyer and the price was not payable without passing of property, the seller can only sue for damages and not for the price. The amount of damages is to be determined in accordance with the provisions laid down in Sec.73 of the Indian Contract Act, 1872. Thus, where there is an available market for the goods prima facie, the difference between the market price and the contract price can be recovered. Suit for interest (Sec.61) When under a contract of sale, the seller tenders the goods to the buyer and the buyer wrongfully refuses or neglects to accept and pay the price, the seller has a further right to claim interest on the amount of the price. In the absence of a contract to the contrary, the court may award interest at such rate as it thinks fit on the amount of the price. The interest may be calculated from the date of the tender of the goods or from the date on which the price was payable. It is obvious that the unpaid seller can claim interest only when he can recover the price, i.e., if the sellers remedy is to claim damages only, then he cannot claim interest. Buyers remedies against seller The buyer has the following rights against the seller for breach of contract: (i) damages for non-delivery (Sec.57); (ii) right of recovery of the price; (iii) specific

performance (Sec.58); (iv) suit for breach of condition; (v) suit for breach of warranty (Sec.59); (vi) anticipatory breach (Sec.60); (vii) recovery of interest (Sec.61).)
Q.3 Distinguish between indemnity and guarantee. Ans: Distinction between a contract of guarantee and a contract of indemnity. L.C.

Mather in his book Securities Acceptable to the Lending Banker has very briefly, but excellently, brought out the distinction between indemnity and guarantee by the following illustration. A contract in which A says to B, If you lend 20 to C, I will see that your money comes back is an indemnity. On the other hand undertaking in these words, If you lend 20 to C and he does not pay you, I will is a guarantee. Thus, in a contract of indemnity, there are only two parties, indemnifier and indemnified. In case of a guarantee, on the other hand, there are three parties, the principal debtor, the creditor and the surety. Other points of difference are: 1. The liability of a promissory is primary and independent in a contract of indemnity. In a contract of guarantee, the liability of the surety is secondary, the primary liability being that of the principal debtor. 2. In the case of guarantee, there is an existing debt or obligation, the performance of which is guaranteed by the surety. In case of indemnity the possibility of any loss happening is a contingency against which the indemnifier undertakes to indemnify. 3. In a contract of guarantee, after discharging the debt, the surety is entitled to proceed against the principal debtor in his own name while in case of indemnity, the indemnifier cannot proceed against third parties in his own name, unless there is an assignment in his favour.
Q.4 What is the distinction between cheque and bill of exchange. Ans:

Bill of exchange A bill of exchange is defined by Sec.5 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. Cheques A cheque is the usual method of withdrawing money from a current account with a banker. Savings bank accounts are also permitted to be operated by cheques provided certain minimum balance is maintained. A cheque, in essence, is an order by the customer 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. Sec.6 defines a cheque. The Amendment Act 2002 has substituted new section for Sec.6. It provides that a cheque is

a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic from.

Check It is drawn on a banker It has three parties - the drawer, the drawee, and payee. It is seldom drawn in sets It does not require acceptance by the drawee. Days of grace are not allowed to a banker No stamp duty is payable on checks It is usually drawn on the printed

Bill of Exchange
It may be drawn on any party or individual. There are three parties - the drawer, the drawee, and the payee. Foreign bills are drawn in sets It must be accepted by the drawee before he can be made liable to pay the bill Three days of grace are always allowed to the drawee. Stamp duty has to be paid on bill of exchange. It may be drawn in any paper and need not necessarily be printed.

Q.5 Distinguish between companies limited by shares and companies limited by guarantee. Ans :

A company limited by guarantee is normally incorporated for non-profit making functions. The company has no share capital. A company limited by guarantee has members rather than shareholders. The members of the company guarantee/undertake to contribute a predetermined sum to the liabilities of the company which becomes due in the event of the company being wound up. The Memorandum normally includes a nonprofit distribution clause and these companies are usually formed by clubs, professional, trade or research associations. The main difference between a company limited by guarantee and a company limited by shares is that the company has no share capital.
Q.6 what is the definition of cyber crime.

Ans: Computer crime, or cyber crime, refers to any crime that involves a computer and a network. The computer may have been used in the commission of a crime, or it may be the target. Net crime refers, more precisely, to criminal exploitation of the Internet.

Issues surrounding this type of crime have become high-profile, particularly those surrounding hacking, copyright infringement, child pornography, and child grooming. There are also problems of privacy when confidential information is lost or intercepted, lawfully or otherwise. Cyber crime includes anything from downloading illegal music files to stealing millions of dollars from online bank accounts. Cyber crime also includes non-monetary offences, such as creating and distributing viruses on other computers or posting confidential business information on the Internet. Perhaps the most prominent form of cyber crime is identity theft, in which criminals use the Internet to steal personal information from other users. Two of the most common ways this is done is through phishing and pharming. Both of these methods lure users to fake websites, where they are asked to enter personal information. This includes login information, such as usernames and passwords, phone numbers, addresses, credit card numbers, bank account numbers, and other information criminals can use to "steal" another person's identity. For this reason, it is smart to always check the URL or Web address of a site to make sure it is legitimate before entering your personal information.