Master of Business Administration MBA Semester 3 MB 0051: Legal Aspects of Business (4 credits) Assignment Set - 1 (60 Marks)

Q1. Discuss the nature and significance of business law. ANS. The term law is used in many senses: you may speak of the law of physics, mathematics, science, or the laws of the football or health. In its widest sense, law means any rule of conduct, standard or pattern, to which actions are required to conform; if not conformed, sanctions are imposed. When we speak of the law of a State, we use the term law in a special and strict sense. Characteristics of law1. Law is a body of rules. These rules prescribe the conduct, standard or pattern to which actions of the persons in the state are required to conform. However, all rules of conduct do not become law in the strict sense. We resort to various kinds of rules to guide our lives. For example, our conduct may be guided by a rule such as do not be arrogant or do not be disrespectful to elders or women. These are ethi cal or moral rules by which our daily lives are guided. If we do not follow them, we may lose our friends and their respect, but no legal action can be taken against us. 2. Law is for the guidance or conduct of persons both human and artificial. The law is not made just for the sake of making it. The rules embodied in the law are made, so as to ensure that actions of the persons in the society conform to some predetermined standard or pattern. This is necessary so as to ensure continuance of the society. No doubt, if citizens are self-enlightened or self-controlled, disputes may be minimized, but will not be eliminated. Rules are, therefore, drawn up to ensure that members of the society may live and work together in an orderly manner. Therefore, if the rules embodied in the law are broken, compulsion is used to enforce obedience, and certain consequences ensue. 3. Law is imposed- Law is imposed on the members to bring about an order in the group, enabling it to continue and prosper. It is not something which may or may not be obeyed at the sweet will of the members of society. If you cannot impose a rule it is better not to have it. Thus, law is made obligatory on the members of the society. 4. Law is enforced by the executive- Obviously, unless a law is enforced it ceases to be a law and those persons subject to it will regard it as dead. For example, if A steals Bs bicycle, he may be prosecuted by a court and may be punished. Also, the court may order the restitution of the bicycle to its rightful owner i.e., B. If the government passes many laws but does not attempt to enforce them, the citizens lose their respect for government and law, and society is greatly weakened. The

force used is known as sanction which the state administers to secure obedience to its laws. 5. The state- A state is a territorial division, with people therein subject to a uniform system of law administered by some authority of the state. Thus, law presupposes a state. 6. Content of law- The law is a living thing and changes throughout the course of history. Law responds to public opinion and changes accordingly. Law can never be static. Therefore, amendments are made in different laws from time to time. For example, the Monopolistic and Restrictive Trade Practices Act, 1969, has been subjected to many amendments since its inception in 1969. 7. Two basic ideas involved in law- The two basic ideas involved in any law are: (i) to maintain some form of social order in a group and (ii) to compel members of the group to be within that order. These basic ideas underlie formulation of any rules for the members of a group. A group is created because first, there is a social instinct in the people to live together and secondly, it helps them in self-preservation. Rules are made by the members of the group, so that the group doesnt whither away. 8. Law is made to serve some purpose which may be social, economic or political- Some examples of law in the widest sense of the term. Law in its widest sense may include: (i) Moral rules or etiquettes, the non-observance of which may lead to public ridicule, (ii) Law of the Land the non-observance of which may lead to arrest, imprisonment, fines, etc., (iii) Rules of international law, the non-observance of which may lead to social boycott, trade-sanctions, cold war, hot war, proxy war, etc.

Q2. What is Partnership? Briefly state special features of a partnership on the basis of which its existence can be determined under the Indian Partnership Act? ANS. A partnership is defined as the relationship between persons who have agreed to share profits of a business carried on by all, or by any of them acting for all. 1. Partnership is an association of two or more than two persons. There must be at least two persons who should join together to constitute a partnership, because one person cannot become a partner with himself. These persons must be natural persons having legal capacity to contract. Thus, a company (which is an artificial person) cannot be a partner. Similarly, a partnership firm cannot be a partner of another partnership firm. As regards maximum number of partners in a partnership

firm, Sec.11 of the Companies Act, 1956, puts the limit at 10 in case of banking business and 20 in case of any other business. 2. Partnership must be the result of an agreement between two or more persons. An agreement presupposes a minimum number of two persons. As mentioned above, a partnership to arise, at least two persons must make an agreement. Partnership is the result of an agreement between two or more persons (who are known as partners after the partnership comes into existence). 3. The agreement must be to carry on some business. The term business includes every trade, occupation or profession [Sec.2(b)]. Though the word business generally conveys the idea of numerous transactions, a person may become a partner with another even in a particular adventure or undertaking (Sec.8). Unless the person joins for the purpose of carrying on a business, it will not amount to partnership. 4. The agreement must be to share profits of the business. The joint carrying on of a business alone is not enough; there must be an agreement to share profits arising from the business. Unless otherwise so agreed, sharing of profits also involves sharing of losses. But whereas the sharing of profits is an essential element of partnership, sharing of losses is not. Example: A, a trader, owed money to several creditors. He agreed to pay his creditors out of the profits of his business (run under the creditors supervision) what he owed to them. Held, the arrangement did not make creditors partners with A in business [Cox v. Hickman, (1860) 8 H.L.C., 268].

Q3. Examine the rights of a consumer enshrined under the Consumer Protection Act, 1986. ANS. Rights of Consumers-For the first time in the history of consumer legislation in India, the Protection Act, 1986 extended a statutory recognition to the rights of consumers. Sec.6 of the Act recognizes the following six rights of consumers: 1. Right to safety, i.e., the right to be protected against the marketing of goods and services which are hazardous to life and property. 2. Right to be informed, i.e., the right to be informed about the quality, quantity, potency, purity, standard and price of goods or services, as the case may be, so as to protect the consumer against unfair trade practices. 3. Right to choose: It means right to be assured, wherever possible, access to a variety of goods and services at competitive prices. In case of monopolies, say,

railways, telephones, etc., it means right to be assured of satisfactory quality and service at a fair price. 4. Right to be heard, i.e., the consumers interests will receive due consideration at appropriate forums. It also includes right to be represented in various forums formed to consider the consumers welfare. 5. Right to seek redressal: It means the right to seek redressal against unfair practices or restrictive trade practices or unscrupulous exploitationof consumers. It also includes right to fair settlement of the genuine of the consumers. 6. Right to consumer education: It means the right to acquire the knowledge and skill to be an informed consumer.

Q4. What do you mean by bailment? What are the requisites of a contract of bailment? Explain. ANS. Definition of bailment (Sec.148) Bailment is defined as the delivery of goods by one to another person for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of person delivering them. The person delivering the goods is called the bailor and the person to whom the goods are delivered is called the bailee. The explanation to the above Section points out that delivery of possession is not necessary, where one person, already in possession of goods contracts to hold them as bailee. The bailee is under an obligation to re-deliver the goods, in their original or altered form, as soon as the time of use for, or condition on which they were bailed, has elapsed or been performed. Bailment is based on a contract. In bailment, the delivery of goods is upon a contract that when the purpose is accomplished, they shall be returned to the bailor. For example, where a watch is delivered to a watch repairer for repair, it is agreed that it will be returned, after repair, on the receipt of the agreed or reasonable charges. A contract of bailment terminates or comes to an end under the following circumstances: 1. On the expiry of the stipulated period. Where bailment is for a specific period, it comes to an end on the expiry of the specified period. Example: A room cooler is hired by X from Y for a period of 6 months. On the expiry of 6 months X must return the cooler.

2. On the accomplishment of the specified purpose. In case, bailment is for specific purpose it terminates as soon as the purpose is accomplished. 3. By bailees act inconsistent with conditions of bailment. If the bailee does any act with regard to the goods bailed, inconsistent with the conditions of the bailment, the bailor may terminate the bailment (Sec.153). Example: A lets to B for hire, a horse for his own riding. B drives the horse in his carriage. A shall have the option to terminate the bailment. 4. A gratuitous bailment may be terminated at any time (Sec.159). However, if premature termination causes any loss to the bailee exceeding the benefit derived from the bailment, the bailor must indemnify. Further, a gratuitous bailment terminates by the death of either the bailor or the bailee (Sec.162).

Q5. Name the instruments which are recognized as negotiable instruments by the Negotiable Instruments Act, 1881. ANS. Negotiable Instrument- An Instrument as referred to in the Act is a legally recognised written document, whereby rights are created in favour of one and obligations are created on the part of another. The word negotiable means transferable from one person to another either by mere delivery or by endorsement and delivery, to enable the transferee to get a title in the instrument. An instrument may possess the characteristics of negotiability either by statute or by usage. Promissory note, bill of exchange and cheque are negotiable instruments by statute as they are so recognised by Sec.13. There are certain instruments which are recognised as negotiable instruments by usage. Thus, bank notes, bank drafts, share warrants, bearer debentures, dividend warrants, scripts and treasury bills are negotiable by usage. An instrument is called negotiable if it possesses the following features: 1. Freely transferable. Transferability may be by (a) delivery, or (b) by endorsement and delivery. 2. Holders title free from defects. The term negotiability means that not only is the instrument transferable by endorsement and/or delivery, but that its holder in due course acquires a good title notwithstanding any defects in a previous holders title. A holder in due course is one who receives the instrument for value and without any notice as to the defect in the title of the transferor. 3. The holder can sue in his own name. Another feature of a negotiable instrument is that its holder in due course can sue on the instrument in his own name.

4. A negotiable instrument can be transferred infinitum, i.e., can be transferred any number of times, till its maturity. 5. A negotiable instrument is subject to certain presumptions. An instrument, which does not have these characteristics, is not negotiable, but is assignable, i.e., the transferee takes it subject to all equities and liabilities of the transferor.

Q6. a) Write short note on Intellectual property right. b) A leaves a cow in the custody of B to be taken care of. The cow gives birth to a calf. Who will take the calf and why? ANS. Intellectual Property Rights (IPR) - A trademark, a copyright, or a patent right are incorporeal assets. These are known as IPR. For instance, musical copyright in respect of songs, tunes and literary and artistic copyright belong to the author as his property. Thus, in this case of IPR, the subject matter of proprietary interest is not the product (such as a book, a cassette), but the exclusive right of the author or singer or inventor to publish a book, record music, or manufacture a particular thing or allow others to do so only at his behest. The 1970 Act was amended in 1999 and 2002 to meet Indias obligations under the Agreement of Trade Related Aspects of Intellectual Property Rights (TRIPs) which forms part of the agreement establishing the World Trade Organisation (WTO). The amendments primarily focused on the obligations which came into force from 1st January 1995 (in respect of amendments made in 1999) and obligations which came into force from 1st January, 2000 (in respect of amendments notified in 2002). b) A leaves a cow in the custody of B to be taken care of. The cow gives birth to a calf. B is bound to deliver the cow as well as the calf to A. Cause according to Duties of a bailee- To return any accretion to the goods bailed (Sec.163). In the absence of any contract to the contrary, the bailee is bound to deliver to the bailor , or according to his directions, any increase or profit which may have accrued from the goods bailed.