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Summer 2013


Summer 2013 Master of Business Administration- MBA Semester 3 MB0051 Legal aspects of Business -4 Credits (Book ID: B1725) Assignment- 60 marks Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme. Q1. It is important for any person to know law as ignorance of law is no excuse. Modern Indian law has been derived from some sources. Discuss the primary and secondary sources of Indian law. Answer : 1. Primary sources of law : The primary sources of Indian law are: (a) customs, (b) judicial precedents, (stare decisis) (c) statutes and (d) personal law. (a)Customary Law: Customs have played an important role in making the law and therefore are also known as customary law. Customary Law, in the words of Keeton, may be defined as those rules of human action, established by usage and regarded as legally binding by those to whom the rules are applicable, which are adopted by the courts and applied as sources of law because they are generally followed by the political society as a whole or by some part of it. (b) Judicial Precedents are an Important Source of Law: Judicial precedents are another important source of law. It is based on the principle that a rule of law which has been settled by a series of decisions generally should be binding on the court and should be followed in similar cases. These rules of law are known as judicial precedents. However, only such decisions which lay down some new rules or principles are treated as judges to follow the same. (c) Statute An Important Source of Law: The statutes or the statutory law or the legislation is the main source of law. This law is created by legislation such as Parliament. In India, the Constitution empowers the Parliament and state legislatures to promulgate law for the guidance or conduct of persons to whom the statute is,

expressly or by implication, made applicable. It is sometimes called enacted law as it is brought into existence by getting Acts passed by the legislative body. (d) Personal Law: Many times, a point of issue between the parties to a dispute is not covered by any statute or custom. In such cases the courts are required to apply the personal law of the parties. Thus in certain matters, we follow the personal laws of Hindus, Mohammedan and Christians. 2 Secondary Sources of Indian Law: Materials that discuss, explain, interpret, and analyze what the law is or what it should be, including treatises, law reviews, encyclopedias, ALR annotations, Restatements, and legal newspapers. Secondary sources also provide extensive citations to primary legal materials and other relevant secondary sources. The secondary sources of Indian Law are English Law and justice, Equity and Good Conscience. (a) English Law: The chief sources of English Law are: (1) the Common Law (2) Equity; (3) The law Merchant and (4) The statute Law. Nowadays, English law is not very important source of Indian law. The English law, in its application to India, has to conform to the peculiar circumstances and conditions prevailing in this country. Even though the bulk of our law is based on and follows the English law, yet in its application our courts have to be selective. It is only when the courts do not find a provision on a particular problem in the primary sources of Indian Law that it my look to subsidiary sources such as the English Law. For example, the greater part of the Law Merchant has been codified in India. (b)Justice, Equity and Good Conscience: In India we do not have, no did we ever had separate courts (as in England) administering equity. But the equitable principles of law, I.e., justice, equity and good conscience, are the guiding force behind most of the statutes in our country and the decisions of the courts. Especially, where law is silent on any point or there is some lacuna in a statute, the principles of equity come handy to the judges who exercise their discretion often on equitable considerations. The frequent use of terms such as good faith, public policy, in statutes and by the judges in their judgments is based on principles of equity. Q2. We all enter into many contracts in a day knowingly or unknowingly. Explain the definition of a valid contract. How are contracts classified? Answer : Definition of a valid contract : A contract that results when the elements necessary for contract formation (agreement, consideration, contractual capacity, and legal purpose) are present. A contract is an agreement having a lawful object entered into voluntarily by two or more parties, each of whom intends to create one or more legal obligations between them. The elements of a contract are "offer" and "acceptance" by "competent persons" having legal capacity who exchange "consideration" to create "mutuality of obligation." Proof of some or all of these elements may be done in writing, though contracts may be made entirely orally or by conduct. The remedy for breach of contract can be "damages" in the form of compensation of money or specific performance enforced through an injunction. Both of these remedies award the party at loss the "benefit of the bargain" or expectation damages, which are greater than mere reliance damages, as in promissory estoppels. The parties may be natural persons or juristic persons. A contract is a legally enforceable promise or undertaking that something will or will not occur.


Q3. The parties to bailment have certain rights and duties. Discuss the duties of both parties i.e. the bailor and bailee. Answer : Duties of bailor : 1. Explain the Defect :It is the basic duty of the bailor that he should disclose all the defects of the goods before delivering to bailee. If the bailor does not disclose then he himself will be responsible for loss. Example :- Mr. Wands hires a car from Mr. Zane. Car is defective. Mr. Zane does not disclose facts that car is defective. Mr. Wands drives a car and he is injured. Mr. Zane is responsible to Mr. Wands for damage. 2. Warning to the Bailee :If a bailor feels that bailee is showing carelessness and goods are in danger. He should give warning to the bailee. 3. Payment of Necessary Expenses :It is the duty of the bailor that he should also pay necessary expenses sustained by the bailee connection with the bailment. 4. To Indemnify The Bailee :It is the duty of the bailor that he should compensate the loss of bailed which he has suffered due any one of the following reasons : a. The bailor was not entitled to make the bailment. b. The bailor was not entitled to give direction in this respect. c. The bailor was not entitled to receive back the goods.


Q5. The Companies Act, 1956 deals with the formation and transaction of business of a company. Discuss the features of a company. Also explain the process of formation of a company. Answer : Features of a company : 1. An Association of Persons: At least two persons or seven persons must come together to form a private or a public company respectively. A single individual cannot constitute a company. This is the reason why a company is called on Association of Persons. 2. Incorporated Association: A company comes into existence only after a certificate of incorporation has been obtained from the Registrar of Joint Stock Companies. Without incorporation, it has no legal existence. 3. Artificial Legal Person: A company is an artificial person created by law to achieve the objectives for which it is formed. A company exists only in the contemplation of law. It is artificial person in the sense that it is created by a process other than natural birth and does not possess the physical attributes of a natural person.


Q6. With Information Technology Act, 2000, India has a set of cyber laws to provide legal infrastructure for e commerce. Discuss the objectives and limitations of this Act. Answer : Objectives of Information Technology Act , 2000 :

1. It is objective of I.T. Act 2000 to give legal recognition to any transaction which is done by electronic way or use of internet. 2. To give legal recognition to digital signature for accepting any agreement via computer. 3. To provide facility of filling document online relating to school admission or registration in employment exchange. 4. According to I.T. Act 2000, any company can store their data in electronic storage. 5. To stop computer crime and protect privacy of internet users. 6. To give legal recognition for keeping books of accounts by bankers and other companies in electronic form. 7. To make more power to IPO, RBI and Indian Evidence act for restricting electronic crime. Limitations of Informational Technology Act , 2000 : (1)The said step has come a bit late. With the phenomenon growth of Internet which doubles approximately every 100 days, the said Act should have been passed long time back. (2)It may be pertinent to mention that the said Act purports to be applicable to not only the whole of India but also to any offence or contravention there under committed outside of India by any person. This provisions in section 1 is not clearly and happily drafted. It is not clear as to how and in what particular manner, the said Act shall apply to any offence or contravention there under committed outside of India by any person. (3)It is also strange that section 1 of the said Act excludes numerous things from the applicability of the IT Act. The Act does not apply to (a) a negotiable instrument as defined in section 13 of the Negotiable Instruments Act, 1881; (b) a power of attorney as defined in section 1 A of the Powers-of-Attorney Act, 1882; (c) a trust as defined in section 3 of the Indian Trusts Act, 1882; (d) a will as defined in clause (h) of section 2 of the Indian Succession Act, 1925 including any other testamentary disposition by whatever name called; (e) any contract for the sale or conveyance of immovable property or any interest in such property.