Business law

Assignment Part A

1. What is contract? Give its essentials

Ans : Contracts
Agreements between two entities, creating an enforceable obligation to do, or to refrain from doing, a particular thing.

Nature and Contractual Obligation

The purpose of a contract is to establish the agreement that the parties have made and to fix their rights and duties in accordance with that agreement. The courts must enforce a valid contract as it is made, unless there are grounds that bar its enforcement. Statutes prescribe and restrict the terms of a contract where the general public is affected. The terms of an insurance contract that protect a common carrier are controlled by statute in order to safeguard the public by guaranteeing that there will be financial resources available in the event of an accident. The courts may not create a contract for the parties. When the parties have no express or implied agreement on the essential terms of a contract, there is no contract. Courts are only empowered to enforce contracts, not to write them, for the parties. A contract, in order to be enforceable, must be a valid. The function of the court is to enforce agreements only if they exist and not to create them through the imposition of such terms as the court considers reasonable. It is the policy of the law to encourage the formation of contracts between competent parties for lawful objectives. As a general rule, contracts by competent persons, equitably made, are valid and enforceable. Parties to a contract are bound by the terms to which they have agreed, usually even if the contract appears to be improvident or a bad bargain, as long as it did not result from Fraud, duress, or Undue Influence. The binding force of a contract is based on the fact that it evinces a meeting of minds of two parties in Good Faith. A contract, once formed, does not contemplate a right of a party to reject it. Contracts that were mutually entered into between parties with the capacity to contract are binding obligations and may not be set aside due to the caprice of one party or the other unless a statute provides to the contrary.

Types of Contracts
Contracts under Seal Traditionally, a contract was an enforceable legal document only if it was stamped with a seal. The seal represented that the parties intended the agreement to entail legal consequences. No legal benefit or detriment to any party was required, as the seal was a symbol of the solemn acceptance of the legal effect and consequences of the agreement. In the past, all contracts were required to be under seal in order to be valid, but the seal has lost some or all of its effect by statute in many jurisdictions. Recognition by the courts of informal contracts, such as implied contracts, has also diminished the importance and employment of formal contracts under seal. Express Contracts In an express contract, the parties state the terms, either orally or in writing, at the time of its formation. There is a definite written or oral offer that is accepted by the offeree

(i.e., the person to whom the offer is made) in a manner that explicitly demonstrates consent to its terms. Implied Contracts Although contracts that are implied in fact and contracts implied in law are both called implied contracts, a true implied contract consists of obligations arising from a mutual agreement and intent to promise, which have not been expressed in words. It is misleading to label as an implied contract one that is implied in law because a contract implied in law lacks the requisites of a true contract. The term quasi-contract is a more accurate designation of contracts implied in law. Implied contracts are as binding as express contracts. An implied contract depends on substance for its existence; therefore, for an implied contract to arise, there must be some act or conduct of a party, in order for them to be bound. A contract implied in fact is not expressed by the parties but, rather, suggested from facts and circumstances that indicate a mutual intention to contract. Circumstances exist that, according to the ordinary course of dealing and common understanding, demonstrate such an intent that is sufficient to support a finding of an implied contract. Contracts implied in fact do not arise contrary to either the law or the express declaration of the parties. Contracts implied in law (quasicontracts) are distinguishable in that they are not predicated on the assent of the parties, but, rather, exist regardless of assent. The implication of a mutual agreement must be a reasonable deduction from all of the circumstances and relations that contemplate parties when they enter into the contract or which are necessary to effectuate their intention. No implied promise will exist where the relations between the parties prevent the inference of a contract. A contract will not be implied where it would result in inequity or harm. Where doubt and divergence exist in the minds of the parties, the court may not infer a contractual relation-ship. If, after an agreement expires, the parties continue to perform according to its terms, an implication arises that they have mutually assented to a new contract that contains the same provisions as the old agreement. A contract implied in fact, which is inferred from the circumstances, is a true contract, whereas a contract implied in law is actually an obligation imposed by law and treated as a contract only for the purposes of a remedy. With respect to contracts implied in fact, the contract defines the duty; in the case of quasi-contracts, the duty defines and imposes the agreement upon the parties. Executed and Executory Contracts An executed contract is one in which nothing remains to be done by either party. The phrase is, to a certain extent, a misnomer because the completion of performances by the parties signifies that a contract no longer exists. An executory contract is one in which some future act or obligation remains to be performed according to its terms. Bilateral and Unilateral Contracts The exchange of mutual, reciprocal promises between entities that entails the performance of an act, or forbearance from the performance of an act, with respect to each party, is a Bilateral Contract. A bilateral contract is sometimes called a twosided contract because of the two promises that constitute it. The promise that one party makes constitutes sufficient consideration (see discussion below) for the promise made by the other. A unilateral contract involves a promise that is made by only one party. The offeror (i.e., a person who makes a proposal) promises to do a certain thing if the offeree performs a requested act that he or she knows is the basis of a legally enforceable contract. The performance constitutes an acceptance of the offer, and the contract then becomes executed. Acceptance of the offer may be revoked, however, until the performance has been completed. This is a one-sided type of contract because only the offeror, who makes the promise, will be legally bound. The offeree may act as

requested, or may refrain from acting, but may not be sued for failing to perform, or even for abandoning performance once it has begun, because he or she did not make any promises. Unconscionable Contracts An Unconscionable contract is one that is unjust or unduly onesided in favor of the party who has the superior bargaining power. The adjective unconscionable implies an affront to fairness and decency. An unconscionable contract is one that no mentally competent person would accept and that no fair and honest person would enter into. Courts find that unconscionable contracts usually result from the exploitation of consumers who are poorly educated, impoverished, and unable to shop around for the best price available in the competitive marketplace. The majority of unconscionable contracts occur in consumer transactions. Contractual provisions that indicate gross one-sidedness in favor of the seller include limiting damages or the rights of the purchaser to seek court relief against the seller, or disclaiming a Warranty (i.e., a statement of fact concerning the nature or caliber of goods sold the seller, given in order to induce the sale, and relied upon by the purchaser). Unconscionability is ascertained by examining the circumstances of the parties when the contract was made. This doctrine is applied only where it would be an affront to the integrity of the judicial system to enforce such a contract. Adhesion Contracts Adhesion contracts are those that are drafted by the party who has the greater bargaining advantage, providing the weaker party with only the opportunity to adhere to (i.e., to accept) the contract or to reject it. (These types of contract are often described by the saying "Take it or leave it.") They are frequently employed because most businesses could not transact business if it were necessary to negotiate all of the terms of every contract. Not all adhesion contracts are unconscionable, as the terms of such contracts do not necessarily exploit the party who assents to the contract. Courts, however, often refuse to enforce contracts of adhesion on the grounds that a true meeting of the minds never existed, or that there was no acceptance of the offer because the purchaser actually had no choice in the bargain. Aleatory Contracts An aleatory contract is a mutual agreement the effects of which are triggered by the occurrence of an uncertain event. In this type of contract, one or both parties assume risk. A fire insurance policy is a form of aleatory contract, as an insured will not receive the proceeds of the policy unless a fire occurs, an event that is uncertain to occur. Void and Voidable Contracts Contracts can be either void or Voidable. A void contract imposes no legal rights or obligations upon the parties and is not enforceable by a court. It is, in effect, no contract at all. .

Elements of a Contract

The requisites for formation of a legal contract are an offer, an acceptance, competent parties who have the legal capacity to contract, lawful subject matter, mutuality of agreement, consideration, mutuality of obligation, and, if required under the Statute of Frauds, a writing. Offer An offer is a promise that is, by its terms, conditional upon an act, forbearance, or return promise being given in exchange for the promise or its performance. It is a demonstration of willingness to enter into a bargain, made so that another party is justified in understanding that his or her assent to the bargain is invited and will conclude it. Any offer must consist of a statement of present intent to enter a contract; a definite proposal that is certain in its terms; and communication of the offer to the identified, prospective offeree. If any of these elements are missing, there is no offer to form the basis of a contract.

Preliminary negotiations, advertisements, invitations to bid Preliminary negotiations are clearly distinguished from offers because they contain no demonstration of present intent to form contractual relations. No contract is formed when prospective purchasers respond to such terms, as they are merely invitations or requests for an offer. Unless this interpretation is employed, any person in a position similar to a seller who advertises goods in any medium would be liable for numerous contracts when there is usually a limited quantity of merchandise for sale.An advertisement, price quotation, or catalogue is customarily viewed as only an invitation to a customer to make an offer and not as an offer itself. The courts reason that an establishment might not have sufficient stock to satisfy potential demand and that it would not be reasonable for a customer to expect to form a binding contract by responding to advertisements that are intended to make consumers aware of a product for sale. In addition, the courts have held that an advertisement is an offer for a unilateral contract that can be revoked at the will of the offeror, the business enterprise, prior to performance of its terms. An exception exists, however, to the general rule on advertisements. When the quantity offered for sale is specified and contains words of promise, such as "first come, first served," courts enforce the contract where the store refuses to sell the product when the price is tendered. Where the offer is clear, definite, and explicit, and no matters remain open for negotiation, acceptance of it completes the contract. New conditions may not be imposed on the offer after it has been accepted by the performance of its terms. Mistake in sending offer If an intermediary, such as a telegraph company, errs in the transmission of an offer, most courts hold that the party who selected that method of communication is bound by the terms of the erroneous message. The same rule applies to acceptances. In reaching this result, courts regard the telegraph company as the agent of the party who selected it. Other courts justify the rule on business convenience. A few courts rule that if there is an error in transmission, there is no contract, on the grounds that either the telegraph company is an Independent Contractor and not the sender's agent, or there has been no meeting of the minds of the parties. Howe ver, an offeree who knows, or should know, of the mistake in the transmission of an offer may not take advantage of the known mistake by accepting the offer; he or she will be bound by the original terms of the offer. Termination of an offer An offer remains open until the expiration of its specified time period or, if there is no time limit, until a reasonable time has elapsed. A reasonable time is determined according to what a reasonable person would consider sufficient time to accept the offer. Irrevocable offers An option is a right that is purchased by a person in order to have an offer remain open at agreed-upon price and terms, for a specified time, during which it is irrevocable. It constitutes an exception to the general rule that an offer may be withdrawn prior to acceptance. The offeror may not withdraw this offer because that party is bound by the consideration given by the offeree. The offeree is free, however, to decide whether or not to accept the offer. Q2.

No Consideration No Contract. Give its exceptions with illustrations

Ans . Exceptions to the Rule, "No Consideration, No Contract"

Consideration being one of the essential elements of a valid contract the general rule is that "an agreement made without consideration is void. But there are a few exceptions to the rule, where an agreement without consideration will be perfectly valid and binding. These exceptions are as follows: 1. Agreement made on account of natural love and affection [Sec. 25 (1)]: An agreement made without consideration is enforceable. If it is

(i) Expressed in writing (ii) Registered under the law for the time being in force for the registration of documents (iii) Is made on account of natural love and affection (iv) Between parties standing in a near relation to each other. Thus there are four essential requirements which must be complied with to enforce an agreement made without consideration, as per Section 25 (1). Let us now study some some illustrations in this behalf (a) A promises, for no consideration, to give to B Rs 1,000. This is a void agreement (b) A for natural love and affection, promises to give his son B, Rs 1,000. A puts his promise to B into writing and registers it This is a contract. (c) A registered agreement, whereby an elder brother, on account of natural love and affection, promised to a the debts of his younger brother, was held to be valid and binding an the younger brother cause the elder brother in the event of his not carrying out the agreement (Venkatasamy vs Rangasami)

It should, however, be noted that mere existence of a near relation between the parties does not necessarily import natural love and affection. Thus where a Hindu husband, after referring to quarrels and disagreement between him and his wife, executed a registered document in favour of his wife, agreeing to pay for separate residence and maintenance, it was held that the agreement was void for want of consideration because it was not merely out of natural love, and affection. (Rajlakhi Devi vs Bhootnath) 2. Agreement to compensate for past voluntary service (Sec.25 (2)]. A promise made without consideration is also valid, if it is a promise to compensate, wholly or in part, a person who has already voluntarily done something for the promisor,' or done something which the promisor was legally compelled to do. Illustrations (a) A finds B's purse and gives it to him. B promises to give A Rs 50. This is a contract. (b) A supports B's infant son. B promises to pay A's expenses in so doing. This is a contract. (Note that B was legally bound to support his infant son). (c) A rescued B from drowning in the river, and B, appreciating the service that had been rendered, promises to pay Rs 1,000 to A. There is a contract between A and B. In order to attract this exception, the following points should be noted: (i) The service should have been rendered voluntarily for the promisor. If it is not voluntary but rendered at the desire of the promisor, then it is covered under 'past consideration' [as per Sec. 2(d) and not under this exception]. (ii) The promisor must be in existence at the time the service was, rendered. Thus where services were rendered by a promoter for a company not then in existence, a subsequent promise by the company to pay for them could not be brought within the exception. (Ahmedabad Jubilee Spinning Co. vs Chhotalal). (iii) The promise must be to compensate a person who has himself done something for the promisor and not to a person who has done nothing for the promisor. Thus, where B treated A during his illness but refused to accept payment from A; they being friends; and A in gratitude promises to pay Rs 1,000 to B's son D, the agreement between A and D is void for want. of consideration as it is not covered under the exception. (iv) The intention of the promisor ought to be to compensate the promisee. A promise given for any motive other than the desire to compensate the promisee would not fall within the exception. (Abdulla Khan vs Parshottam)

(v) The promisor to whom the service has been rendered needed competence to contract at the time the service was rendered. Thus a promise- made after attaining majority to pay for goods supplied voluntarily to the promisor during his minority has been held valid and the promisee could enforce it ,(Karam Chand vs Basant Kaur). The court in that case ob-served that they failed to see how an agreement made by a person of full age to compensate wholly or in part a promisee, who had already voluntarily done something for the promisor, even at a time when the promisor was a minor, did not fall within the purview of Sec. 25(2) of the Contract Act. The reasoning of the court is, that at the time the thing was done the minor was unable to contract, and therefore the person who did. it for the minor must in law be taken to have done it voluntarily. In their opinion the 'provisions of Sec. 25(2) applied equally to a contract by a major, as well as by a minor, to pay for past services. In this connection it is important to note that this exception does 'not cover a promise by a person on attaining majority to repay the money borrowed during his minority because such a promise cannot be said to be a promise to compensate a person who has already voluntarily (without any promise of compensation) done something for the promisor. 'Advancing money as a loan' necessarily implies a promise to compensate (i.e., a promise to repay the loan) on the part of the borrower, Thus a promise made by a minor after attaining majority to repay money advanced during his minority has been held invalid and beyond the purview of Section 25(2) of the Contract Act (Indran Ramaswami vs Anthappa). (vi) The service rendered must also be legal. Thus past cohabitation will not make a promise to pay for it enforceable under this exception (Sabava vs Yamanappa). 3. Agreement to pay a time-barred debt (Sec. 25 (3)]. Where there is an agreement, made in writing and signed by the debtor or by his authorised agent, to pay wholly or in part a debt barred by the law of limitation, the agreement is valid even though It is not supported by any consideration. A time barred debt cannot be recovered and therefore a promise to repay such a debt is without consideration, hence the importance of the present exception. But before the exception can apply, it is necessary that: (i) The debt must be such of which the creditor might' have enforced payment but for the law for the limitation of suits. (ii) The promisor himself must be liable for the debt. So a promissory note executed by a widow in her personal capacity in payment of time-' barred debt of her husband cannot be brought within the exception (Pestonji vs Maherbai28); (iii) There must be an 'express promise to pay' a time barred debt as distinguished from a mere 'acknowledgement of a liability' in respect of a debt. Thus. a debtor's letter to his creditor, "I owe you Rs. 1,000 on account of my time-barred promissory note" is not a contract. There must be a distinct promise to pay; and (iv) The promise must be in writing and signed by the debtor or his agent. An oral. promise to pay a time-barred debt is unenforceable.

The logic behind this exception is that by lapse of time the debt is not destroyed but only the remedy is" lost. The remedy is revived by a new promise under the exception. Illustration. A owes B Rs 1,000, but the debt is barred by the Limitation Act. A signs a written promise to pay B Rs 500 on account of the debt. This is Ii contract (Appended to Sec. 25). 4. Completed gift. A gift (which is not an agreement) does not require consideration in order to be valid "As between the donor and the done any lift actually made will be valid I and binding even though without consideration" [Explanation 1, to Section 25]. In order to attract this

exception there need not be natural love and affection or nearness of relationship between the donor and done. The gift must, however, be complete. 5. Contract of agency. Section 185 of the Contract Act lays down that no consideration is necessary to create an agency. 6. Remission by the promisee, of performance of the promise (Sec. 63). For compromising a due debt, i.e., agreeing to accept less than what is due, no consideration is necessary. In other words, a creditor can agree to give up a part of his claim and. there need be no consideration for such an agreement. Similarly, an agreement to extend time for performances of a contract need not be supported by consideration (Sec.63).

7. Contribution to charities. A promise to contribute to charity, though gratuitous, would be enforceable, if on the faith of the promised subscription, the promisee takes definite steps in furtherance of the object and undertakes a liability, to the extent of liability incurred, not exceeding the promised amount of subscription. In Kedar Nath vs Ghorie Mohammad, the defendant had agreed to subscribe Rs 100 towards the construction of a Town Hall at Howrah. The plaintiff (secretary of the Town Hall) on the faith of the promise entrusted the work to a contractor and undertook liability to pay him. The defendant was held liable. But where the promisee had done nothing on the faith on the promise, a promised subscription is not legally recoverable. Accordingly, in Abdul Aziz vs Masum Ali, the defendant promised to subscribe Rs 500 to a fund started for building, a Mosque but steps had been take to carry out the repairs. The defendant was held not liable and the suit was dismissed.

Q3. Write a note on Free Consent

Ans .
FREE CONSENT

Meaning of consent: it means an act of assenting to an offer. According to section 13, "Tow or more persons are said to consent when they agree upon the same thing in the same thing in same sense." Thus, consent involves identity of minds in respect of the subject matter of the contract. In English Law, this is called 'consensus-ad-idem'.

Effect of Absence of consent:

When there is no consent at all, the agreement is void ab-initio, i.e. it is not enforceable at the option of either party. Example: X has one Maruti car and one fiat car. He wants to sell fiat car. Y does not know that X has two cars. Y offers to buy X's Maruti car Rs 50,000. X accepts the offer thinking it to be an offer for his Fiat car. Here, there is no identity of mind in respect of the subject of the subject matter. Hence there is no consent at all and the agreement is void ab-initio.

Meaning of Free consent: It is one of the essential elements of a valid contract as it is evidenced by section 10 which provides that all agreements are contracts if they are made by the free consent of the parties... according to section 14, consent is said to be free when it is not caused by (a) Coercion, or (b)Undue influence, or (c) Fraud, or (d) Misrepresentation, or (e) Mistake.

Effect of Absence of free consent:

When there is consent but it is not free (i.e. when it is caused by coercion or undue influence or fraud or misrepresentation), the contract is usually voidable at the option of the party

whose consent was so caused. 1. COERCION Meaning of coercion[section 15]: It means compelling a person to enter into a contract, by use of physical force/activities forbidden by Indian penal code, OR threatens to do activities forbidden by I.P.C, OR threatens to damages the property. Effect of coercion: Voidable and can be canceled at the option of aggrieved party. OR A 'suicide and a 'threat to commit suicide' are not punishable but an attempt to commit suicide is punishable under the Indian penal code. X threatens to kill Y if he does not sell his house for Rs. 1,00,000 to X. Y sells his house to X and receives the payments. Here, V's consent has been obtained by coercion. Hence, this contract is voidable at the option of Y. If Y decides to avoid the contract, he will have to return Rs 1,00,000 which he had received from X. "Y" (aggrieved party) will return Rs. 1,00,000 "X" (defendant party) will return the house and any benefit from the goods. When voidable contract cannot be canceled: When the third party become interested into a voidable contract. E.g. A obtain the car of B through coercion. Let, A sold it to "C" an innocent buyer, now B cannot get the contract canceled. When the aggrieved party ratify/confirm/affirm then contract can not be cancel. 2. UNDUE INFLUENCE: Meaning of Undue influence[section 16(1)]: The term 'undue influence' means dominating the will of the other person to obtain an unfair advantage over the other. According to section 16(1), a contract is said to be induced by undue influence 1. where the relations subsisting between the parties are such that one of them is in a position to dominate the will of the other, and 2. the dominant party uses that position to obtain an unfair advantage over the other. When two-partner are in relation, and one of them is dominant and other is in weaker position and dominant person takes undue-Advantage, then it is called"Undue- influence." No presumption of domination of will According to judicial decisions held in various cases, there is no presumption of undue influence in the following relationships: 1. Husband and wife 2. landlord and tenant 3. Creditor and debtor Effect of undue influence [section 19A]: when consent to an agreement is caused by undue influence, the agreement is a contract voidable at the option of the party whose consent was so caused. Comparison between coercion and undue influence: Similarities: In case of both coercion and undue influence, the consent is not free and the contract is voidable at the option of the aggrieved party. 3. FRAUD Meaning and essential elements of fraud [section 17] : The term 'fraud' means a false

representation of fact made willfully with a view to deceive the other party. Fraud includes following:

Wrong suggestion about a fact, knowing that it is not-true;

E.g. X sells to Y locally manufactured goods as imported goods charging a higher price, it amounts to fraud. OR A seller claimed that his projector is made in Singapore, and sold it for Rs. 100,000/- However the fact is that "Projector was made in south India".

Active concealment (Hide) of defect in goods:

E.g. "A car-painter, uses paint to hide the scratches over the old furniture and sold it claiming that is Now". This is fraud. OR X a furniture dealer, conceals the cracks in furniture sold by him by using some packing material and polishing it in such a way that the buyer even after reasonable examination can not trace the defect, it would tent amount to fraud through active concealment.

Promise made without intention to perform:

E.g. "A man and a woman underwent a ceremony of marriage with the husband not regarding it as a real marriage. Held, the husband had no intention to perform the promise from the time he made it and hence the consent of the wife was obtained under fraud. OR "A farmer agrees to supply 100kg potato that will be produced by him out of his field, after three month". Two months has been lapsed, but the farmer neither implant seeds, nor does cultivation. This is case of fraud.

Any activity declared fraud as per other law; under companies act and insolvency acts, certain kinds of transfers have been declared to be fraudulent.

Note: In case of fraud, the seller is always liable even though buyer has an opportunity to check the fraud.

Any activity fitted (supported) to deceive. It covers those acts which deceive but are not covered under any other clause.

Effect of Fraud[section-19] The effects of fraud are as follows: (a) The party whose consent was caused by fraud can rescind (cancel) the contract but he cannot do so in the following cases:

Where silence amounts to fraud, the aggrieved party cannot rescind the contract if he had the means of discovering the truth with ordinary diligence; Where the party gave the consent in ignorance of fraud; Where the party after becoming aware of the fraud takes a benefit under the contract; Where an innocent third party before the contract is rescinded acquires for consideration some interest in the property passing under the contract. Where the parties cannot be restored to their original position.

(b) The party whose consent was caused by fraud may, if he thinks fit, insist that the contract shall be performed and that he shall be put in the position in which he would have been if the representation made had been true. 1. The party whose consent was caused by fraud, can claim damage if he suffers some loss.

Weather silence is fraud? Comment: General concept: According to explanation to section 17, "Mere silence as to facts likely

to affect the willingness of a person to enter into a contract is not fraud".

In other words, Silence is not fraud. It is buyer, who must check the goods & suitability. E.g. X purchased a used computer from Z thinking it as a computer imported from USA, Z failed to disclose the fact to X. On knowing the fact X wants to repudiate the contract. So, here X cannot repudiate/rescind/cancel the contract.

Exceptions to the general rule: The general rule that silence does not amount to fraud has the following exceptions. Where the circumstances of the case are such that, regard being had to them, it is the duty of the person keeping silence to speak. Such duty arises in the following two cases:

When silence is equivalent to speech: E.g. "A student of BBA select a Business law-book and asks the seller". If seller don't stop me from buying this book, I will assume that "it is best". The seller remained silent here the student will treat "silence" as speech. If the book was inferior, then it is a case of fraud.

Disclosure of dangerous nature: E.g. Shyam sold his horse to Ram a buyer for Rs. 11000/- Shyam knows that horse was "wicked" but fails to disclose it to buyer. Here seller has committed fraud by remaining silent.

4. Misrepresentation The term "misrepresentation" means a false representation of fact made innocently or nondisclosure of a material fact without any intention to deceive the other party. Section 18 defines the term "misrepresentation" as follows "Misrepresentation" means and includes

The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believes it to be true; Any breach of duly which, without an intent to deceive, gains an advantage to the person committing it, or anyone claiming under him, by misleading an other to his prejudice or to the prejudice of anyone claiming under him;

Causing, however innocently, a party to an agreement, to make a mistake as to the substance of the thing which is the subject of the agreement.

Essential elements of misrepresentation:

By a party to a contract: The representation must be made by a party to a contract or by anyone with his connivance or by his agent. Thus, the misrepresentation by a stranger to the contract does not affect the validity of the contract.

False representation: There must be a false representation and it must be made without the knowledge of its falsehood i.e. the person making it must honestly even it is to be true.

Representation as to fact: The representation must relate to a fact. In other words, a mere opinion, a statement of expression or intention does not amount to misrepresentation.

"Innocent misstatement made into good faith OR without any intention to cause loss" E.g. A farmer says that his land is very productive and produces 100 quintal per acre. This is misrepresentation and buyer can cancel the contract. Note: When the buyer has an opportunity to check the misrepresentation, but he fails then buyer cannot cancel the contract. E.g. An owner of factory, while selling his factory, express his opinion as my factory produces 1000 kg per ann-um and requested the buyer to find out exact production by checking "production-record". If the buyer fails to check the production record then buyer cannot blame seller. Effect of misrepresentation[section 19] The effects of misrepresentation are as follows: 1. Right to rescind the contract The party whose consent was caused by misrepresentation can rescind (cancel) the contract but he cannot do so in the following cases:

where the party whose consent was caused by misrepresentation had the means of discovering the truth with ordinary diligence; where the party gave the consent in ignorance of misrepresentation; where the party after becoming aware of the misrepresentation, takes a benefit under the contract; where an innocent third party, before the contract is rescinded, acquires for consideration some interest in the property passing under the contract; where the parties cannot be restored to their original position.

(b) Right to insist upon performance The party whose consent was caused by misrepresentation may if he thinks fit, insist that the contract shall be performed, and that he shall be put in the position in which he would have been if the representation made had been true. Comparison between fraud and misrepresentation Similarities: There are basically two similarities in case of fraud and misrepresentation as follows: 1. In both the cases, a false representation is made by a party; 2. In both the cases, the contract is voidable at the option of the party whose consent is obtained by fraud or misrepresentation.

5. Mistake Meaning of mistake [section 20] A mistake is said to have occurred where the parties intending to do one thing by error do something else. Mistake is "erroneous belief" concerning something. Classification of Mistake of Law: (a) Mistake of Indian Law(In sense of penalty): The contract is not voidable because everyone is supposed to know the law of his country. e.g. disobeying traffic rules" (b) Mistake of Foreign Law(void-ab-initio): A mistake of foreign law is treated as mistake of fact, i.e. the contract is void if both the parties are under a mistake as to a foreign law because one cannot be expected to know the law of other country.

Mistake of fact Mistake of fact be either Unilateral mistake or Bilateral mistake. Unilateral mistake [section 22]: The term 'unilateral mistake' means where only one party to the agreement is under a mistake. According to section 22, "A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to matter of fact." Bilateral mistake [section 22]: The term 'bilateral mistake' means where both the parties to the agreement are under a mistake. According to section 20, "where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void." thus, the following three conditions must be satisfied before declaring a contract void under this section: 1. Both the parties must be under a mistake 2. Mistake must be of fact but not of law. According to explanation to section 20. "An erroneous opinion as to the value of the thing which forms the subject matter of agreement is not to be deemed a mistake as to a matter of fact.

Q4 Distinguish between Sale and Agreement to Sell. Ans. A "sale" is (colloquially) a completed transaction where the only remaining duties of
the buyer may be timely rejection after inspection, and the only remaining duty of seller is to honor any express or implied warranty. This assumes the full price was paid during the sale and the goods were delivered, otherwise, the sale is not technically complete. An "agreement to sell" is a contract that envisions (or defines) a future sale, thus all conditions precedent and other terms (delivery, payment, etc), continue to be "executory", that is, are yet to be fully carried out. A breach of this contract could result in a court order of specific performance, or for damages caused by the loss of the opportunity to buy or sell.

1. DIFFERENCE BETWEEN SALE AND AGREEMENT TO SELL 2. Transfer of property (ownership): - In a 'sale' the property in goods passes to the buyer immediately at the time of making the contract In 'an agreement to sell' there is no transfer of property to the buyer at the time of the contract. Risk of loss. The general rule is that unless otherwise agreed, the risk of loss primarily passes with property (Sec. 26). Thus in case of sale, if the goods are destroyed the loss falls on the buyer even though the goods may never have come into his possession because the property in the goods has already passed to the buyer. On the other hand, in case of an agreement to sell where the ownership in the goods is yet to pass from the seller to the buyer, such loss has to be borne by the seller even though the goods are in the possession of the buyer. In

an Agreement to Sell : The transfer of property of the goods is to take place at a future time or subject to certain conditions to be fulfilled.

1. Type of goods Sale : A sale can only be in case of existing and specific goods only.

In an Agreement to Sell : An agreement to sell is mostly in case of future and contingent goods ( associated or dependent ). Although it may refer to uncertain existing goods.

2. Risk of loss Sale : In a sale if the goods are destroyed , the loss falls on the buyer even though the goods are in the posssession of the seller.

In an Agreement to Sell : In an Agreement to Sell if the goods are destroyed the loss falls on the seller even though the goods are in the posssession of the buyer.

3. Consequences of the breach Sale : In a sale the buyer fails to pay the price of goods (or) if there is a breach of contract by the buyer the seller can sue for the price even though the goods are still in his possession.

In an Agreement to Sell : If there is a breach of contract by the buyer the seller can only sue for the damages and not for the price.

4. Right to re-sell Sale : In a sale the seller cannot re-sell the goods.

In an Agreement to Sell : The buyer who takes the goods for consideration and without notice of the prior agreement gets him a good title. The original buyer can only sue the seller for damages.

5. General and particular property Sale : The sale of contract plus conveyance and creates Jus in rem i.e., gives right to the buyer to enjoy the goods as against the word and large including the seller.

In an Agreement to Sell : An agreement to sell is merely a contract pure and simple and creates Jus in personam i.e., gives a right to the buyer against the seller to sue for the damages.

6. Insolvency of buyer Sale : In a sale if the buyer becomes insolvent before he pays for goods, the seller in the absence of the lien over the goods, must return them to the official receiver or assignee. He can only claim the reteable dividend for the price of the goods.

In an Agreement to Sell : In an Agreement to Sell , If the buyer becomes insolvent and has not yet paid the price the seller is not bound to part with the goods until he is paid for.

7. Insolvency of the seller Sale : In a sale the seller becomes insolvent, the buyer being the owner is entitled to recover the goods from the official receiver of the assignee.

In an Agreement to Sell : If the buyer who has paid the price, finds that the seller has become insolvent he can only claim a reteable dividend and not the goods because property in them has not yet passed to him.

A "sale" is (colloquially) a completed transaction where the only remaining duties of the buyer may be timely rejection after inspection, and the only remaining duty of seller is to honor any express or implied warranty. This assumes the full price was paid during the sale and the goods were delivered, otherwise, the sale is not technically complete. An "agreement to sell" is a contract that envisions (or defines) a future sale, thus all conditions precedent and other terms (delivery, payment, etc), continue to be "executory", that is, are yet to be fully carried out. A breach of this contract could result in a court order of specific performance, or for damages caused by the loss of the opportunity to buy or sell. Difference between Sale and Agreement to Sell: Sale is an executed contract while agreement to sell is an executory contract.

In sale property transfers immediately at the time of sale but in agreement to sell property is transferred after sometime.

A sale creates jus-in-ram (right against the whole world). But agreement to sell create jus-in-personam (right against an individual)

In case of sale risk passes along with the property, in case of agreement to sell as the property is not transferred, risk is also not transferred.

Q5. What is Bailment? What is Pledge? Explain with illustration.

Ans.
Bailment is a kind of activity in which the property of one person temporarily goes into the possession of another. The ownership of the property remains with the giver, while only the possession goes to another. Several situations in day to day life such as giving a vehicle for repair, or parking a scooter in a parking lot, giving a cloth to a tailor for stitching, are examples of bailment. Section 148 of Indian Contract Act 1872, defines bailment as follows Section 148 - A bailment is the delivery of goods by one person to another 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 the person delivering them. The person delivering the goods is called the bailor and the person to whom they are delivered is called the bailee. Explanation - If a person is already in possession of the goods of another contracts to hold them as a baliee, he thereby becomes the bailee and the bailor becomes the bailor of such goods although they may not have been delivered by way of bailment. According to this definition the following are the essential elements of bailment -

1.

Delivery

of

goods

The possession of goods must transfer from one person to another. Delivery is not same as custody. For example, a servant holding his master's umbrella is not a bailee but only a custodian. The goods must be handed over to the bailee for whatever is the purpose of the bailment. In Ultzen vs Nicols 1894, the plaintiff went to a restaurant for dining. When he entered the room, the waiter took his coat and hung it on a hook behind him. When the plaintiff arose to leave, the coat was gone. It was held that the waiter voluntarily took the responsibility of keeping the coat while the customer was dining and was thus a bailee. Therefore, he was liable to return it. Contrasting this case with Kaliaperumal Pillai vs Visalakshmi AIR 1938, we can see the meaning of delivery. In this case, a woman gave some gold to a jeweler to make jewelery. Every evening she used to take the unfinished jewels, put it in a box, lock the box and take the keys of the box with her while leaving the box at the goldsmith. One morning, when the opened the box the gold was gone. It was held that, in the night, the possession of the gold was not with the jeweler but with the plaintiff because she locked the box and kept the keys with her. As the explanation to section 148 says, even if a person already has the possession of goods that he does not own, he can become a bailee by entering into a contract with the bailor. In such a case, the actual act of delivery is not done but is considered to be valid for bailment. Types of Delivery - As per section 149, the delivery to the bailee may be made by doing anything which has the effect of putting the goods in the possession of the intended bailee or of any person authorized to

hold them on his behalf. This means that the delivery can be made to either the bailee or to any other person whom the baliee authorizes. This person can be the bailor himself. This gives us two types of delivery - Actual and Constructive. In actual delivery, the physical possession of the goods is handed over to the bailee while in constructive delivery the possession of the goods remains with the bailor upon authorization of the bailee. In other words, the bailee authorizes the person to keep possession of the goods. In Bank of Chittor vs Narsimbulu AIR 1966, a person pledged cinema projector with the bank but the bank allowed him to keep the projector so as to keep the cinema hall running. AP HC held that this was constructive delivery because something was done that changed the legal possession of the projector. Even though the physical possession was with the person, the legal possession was with the bank.

2.

Delivery

upon

contract

For a valid bailment, the delivery must be done upon a contract that the goods will be returned when the purpose is accomplished. If the goods are given without any contract, there is no bailment. In Ram Gulam vs Govt. of UP AIR 1950, plaintiffs ornaments were seized by police on the suspicion that they were stolen. The ornaments were later on stolen from the custody or police and the plaintiff sued the govt. for returning the ornaments. It was held that the goods were not given to the police under any contract and thus there was no bailment. However, this decision was criticized and finally, in State of Gujarat vs Menon Mohammad AIR 1967 , SC held that bailment can happen even without an explicit contract. In this case, certain motor vehicles were seized by the State under Sea Customs Act, which were then damaged. SC held that the govt. was indeed the bailee and the State was responsible for proper care of the goods.

3.

Conditional

Delivery

The delivery of goods is not permanent. The possession is given to the bailee only on the condition that he will either return the goods or dispose them according to the wishes of the bailer after the purpose for which the goods were given. For example, when the stitching is complete, the tailor is supposed to return the garment to the bailor. If the bailee is not bound to return the goods to the bailor, then the relationship between them is not of bailment. This is a key feature of bailment that distinguishes it from other type of relations such as agency. J Shetty of SC in U Co. Bank vs Hem Chandra Sarkar 1990, observed that the distinguishing feature between a bailment and an agency is that the bailee does not represent the bailor. He merely exercises some rights of the bailor over the bailed property. The bailee cannot bind the bailor by his acts. Thus, a banker who was holding the goods on behalf of its account holder for the purpose of delivering them to his customers against payment, was only a bailee and not an agent. Pledge is a special kind of bailment in which a person transfers the possession of his property to another for securing the loan taken from the other. It only differs from bailment in the matter of purpose. When the purpose of the bailment is to secure a loan or a promise, it is called a pledge. Section 172 of Indian Contract Act 1872 defines Pledge as follows Section 172 - The bailment of goods as a security for the payment of a debt or performance of a promise is called Pledge. The bailor in this case is called a Pawnor and the bailee is called Pawnee. J Shelat in Lallan Prasad vs Rahmat Ali AIR 1967 observed that Pawn or pledge is a bailment of personal property as a security for some debt or engagement. The following are essential ingredients of a pledge -

1. Delivery of possession - As in bailment, the delivery of possession is essential in a pledge. Thus, in Revenue Authority vs Sudarsanam Pictures, AIR 1968, a film producer borrowed a sum of money from a financier and agreed to deliver the final prints of the film when ready. This was held not to be a pledge because there was no delivery of possession at the time of the agreement. It is possible to do delivery by atonement in which case a third person who has the possession of the property agrees to hold it on behalf of the pledgee upon direction of the pledger. Hypothecation - It is also possible to let the pawner keep the physical goods even though the legal possession is transfered to the pawner. Thus, in Bank of Chittor vs Narsimbulu AIR 1966, a cinema hall equipment was pledged to the bank but the bank allowed the hall owner to keep the equipment to show the movies. The hall owner then sold the equipment to another party. It was held that the sale was subject to the pledge. In Bank of India vs Binod Steel AIR 1977, MP HC held that in such cases where goods are hypothecated, other creditors cannot claim right on them until the claim of the pledgee is satisfied.

2. In return of a loan or a promise - The delivery must be in return of a loan or of acceptance of a promise to perform something. Thus, if A gives his bicycle to B in friendship, it is not a pledge but a simple bailment. However, if A gives his bicycle to B as a security for a debt of 100Rs it will be a pledge. 3. In pursuance of a contract - The delivery must be done under a contract though it is not necessary that the delivery and the payment of loan be at the same time. Delivery can be made even after the loan is received.

Rights

of

Pawnee

1. Right of retainer (Section 173- 174) - As per section 173, the pawnee may retain
the goods pledged, not only for a payment of a debt or the performance of the promise, but also for the interest of the debt, and all necessary expenses incurred by him in respect of the possession or for the preservation of the goods pledged. Further, as per section 174, in absence of any contract to the contrary, the pawner shall not retain the goods pledged for debt or promise other than the debt or promise for which they have been pledged. However, such contract shall be presumed in absence of any contract to the contrary with respect to any subsequent advances made by the pawnee. This means that if A pledges his gold watch with B for 1000 Rs and later on he promises to teach B's son for a month and takes for 500Rs for this promise , and if he does not teach B's son, B cannot retain A's gold watch after A pays 1000Rs. Thus, the right of retainer is a sort of particular lien. The difference was pointed out in Bank of Bihar vs State of Bihar 1972 by SC. It observed that a pawnee obtains a special interest in the pledged goods in the sense that he can transfer or pledge that special interest to somebody else. The lien only gives the right to detain the goods but not transfer. Thus, a pledgee get the first right to claim the goods before any other creditor can get them. The pledgee's loan is secured by the goods.

2. Right to extra ordinary expenses (Section 175) - As per section 175,

the pawnee is entitled to receive from the pawner extra ordinary expenses incurred by him for the preservation of the goods pledged. For such expenses, however, he does not have right to detain the goods. Section 175 says that the pawnee is entitled to receive from the pawner extraordinary expenses incurred by him for the preservation of the goods pledged.

3. Right of sale (Section 176) - As per section 176 (Pawnee's right where pawnor makes
default) - If the pawnor makes default in payment of the debt or performance at the stipulated time, of the promise, in respect of which the goods were pledged, the pawnee may bring a suit against the pawnor upon the debt or the promise and retain the goods pledged as a collateral security; or he may sell the thing pledged, on giving the pawnor reasonable notice of the sale. This right secures the debt for the pawnee up to the value of the goods pledged because it allows the pawnee to either sue the pawnor for recovering the debt or perform the promise or sell the goods pledged. If the value received after selling the goods, the pawner is still liable for the difference and if the value of the sale is more than the amount of debt, the pawnee is supposed to give the difference to the pawnor. However, if the pawnee has sold the goods, he cannot sue for the debt. In Lallan Prasad vs Rahmat Ali AIR 1967the defendant borrowed 20000Rs from the plaintiff on a promissory note and gave him aeroscrapes worth about 35000Rs, as a security for the loan. The plaintiff sued for repayment of the loan but was unable to produce the security, having sold it. SC rejected his action. It held that pledgee cannot maintain a suit for recovery of debt as well as retain the pledged property. The pawner is required to give a reasonable notice to the pawnee about the sale. The notice is not a mere notice but reasonable notice. In Prabhat Bank vs Babu Ram AIR 1966, the terms of an agreement of a loan enabled the bank to sell the securities upon default without notice. The pawnor defaulted in payment. The bank sent a reminder upon which the pawnor asked for more time. The bank sold the securities. SC held that this was bad in law. The bank is required to give a clear and specific notice of the impending sale. Pawner's request for more time cannot be interpreted as a notice of sale. When the goods are lost due to pawnee's negligence, the liability of the pawnor is reduced to the extent of value of the goods.

Pawnor's

Right

to

Redeem

(Section

177)

Section 177 provides a very important right to the pawnor. It allows the pawnor to redeem his property even

if he has defaulted. It says that if a time is stipulated for the payment of a debt or performance of the promise for which the pledge is made, and the pawnor make default in payment of the debt or performance of the promise at the stipulated time, he may redeem the goods pledged at any subsequent time before the actual sale of them; but he must, in that case, pay, in addition, any expense which have arisen from his default. J Shelat in Lallan Prasad vs Rahmat Ali AIR 1967 , observed that the pawnor has as absolute right to redeem his property upon satisfaction or the debt or the promise. This right is not extinguished by the expiry of the stipulated time for repayment of debt or performance of the promise but only by the actual sale of the goods. If the pawnor redeems his goods after the expiry of the stipulated time, he is bound to pay the expenses as have arisen on account of his default. The pawnor also has a right to take back any increase in the property. In M R Dhawan vs Madan Mohan AIR 1969, certain shares of a company were pledged. During the period of the pledge, the company issued bonus and rights shares. Delhi HC held that the pawnor was entitled to those at the time of redemption.

Pledge

made

by

non-owner

of

the

goods

Ordinarily goods may be pledged by the owner or by any person with the consent of the owner. A pledge made by any other person is not valid. Thus, in Biddomoy Dabee vs Sittaram, it was held that a pledge made by the servant who was holding the goods of his master was not valid. Similarly, in Purushottam Das vs Union of India AIR 1967, a railway company delivered goods on a forged railway receipt. The goods were then pledged with the defendants. In a suit by the railways to recover the goods it was held that the pledge was invalid. This is important to protect the interests of the owners. However, in many situations it is equally important to allow trade and commerces and so there are some situations where a person having the possession of the goods by owner's consent, is entitled to pledge those goods even without owner's consent for the pledge. These situations are discussed below -

1.

Pledge

by

Mercantile

agent

(Section

178)

When a mercantile agent is in possession of the goods with consent of the owner, any pledge made by him in ordinary course of business will be valid, provided that the pawnee acts in good faith and that he has no notice of the fact that the pawnor is not authorized to pawn the goods. The essential conditions of this rule are - he must be a mercantile agent, he must have possession of the goods by consent of the owner, and it must be done in ordinary course of business. Further, the pawnee should act in good faith and he must not have notice that the pawnor has no authority to pledge.

2. Pledge by a person in possession under voidable contract (Section 178 A)

When the goods are obtained by a person under a contract that is voidable under section 19 or 19 A, he can pledge the goods if the contract is not avoided at the time of the pledge. Thus, in Phillips vs Brooks Ltd 1919, a fraudulent person pretending to be a man of credit induced the plaintiff to give him a valuable ring in return for his cheque which proved worthless. Before the fraud could be discovered, he pledged the ring with the defendants. The pledge was held to be valid.

Part -B
Q1 What is agency? Give various modes of creating agency. ANS. Whenever such transaction comes into effect, the 'Law of Agency' comes into
limelight. In simplest term, the law of agency includes the above mentioned three parties related in a business transaction. The principle authorizes the agents to perform an action or activity with a third party and in doing so creates liability for the principle. In other words, despite the fact that the principle has not dealt directly with the client, the principle's agent has done so. In doing so, the agent has created a relationship of the third party with the principle. If the agent, through this activity, has committed some type of wrong-doing, the principle would be directly responsible.

1.

modes are as follows....

1- Agency by consent Consent may be express or implied. An agency can be expressly created either orally or in writing. There is only one exception to this, which is that if the agent is to execute a deed on the principal's behalf (for example a conveyance of land or a lease exceeding three years) then the agency must be created by deed. Essentially this means that the agent is given a power of attorney. 2-Agency by estoppel (or 'holding out') Agency by estoppel arises by operation of law and is no less effective than an agency expressly created. It arises ` When the words or conduct of the principal give to a third party the impression that the person who purports to contract with the third party is the agent of the principal, and ` The third party, as a result, acts upon this. The principal is 'estopped', or prevented, from denying the existence of the agency 3-Agency of necessity An agency of necessity is another way in which an agency can arise by operation of law. Its origins can be found in mercantile law, and in shipping law in particular. It may arise where a person is faced with an emergency in which the property or interests of another person are in imminent jeopardy and, in order to preserve that property or those interests, it becomes necessary to act for that person without his authority. An agency of necessity probably only applies where there is already some existing contractual relationship between the parties, as the law is highly unlikely to allow a person to be bound by the act of a complete stranger. 4-Ratification In certain circumstances the relationship of principal and agent can be created or extended with retrospective effect, that is, once the contract has been entered into by the agent and third party. Ratification only validates past acts of the purported agent. It gives no authority for the future. Thus, where A makes a contract on behalf of P at a time when A has no authority from P, P may later ratify

the contract. This will have the retrospective effect of establishing an agency as at the time the contract was made. All parties are then in the same position as if the principal had been the original contracting party,

Q2 What do you mean by IPR? Give various types of IPR in pictorial form
ANS. Intellectual property (IP) is a legal concept which refers to creations of the mind for
which exclusive rights are recognized. Under intellectual property law, owners are granted certain exclusive rights to a variety of intangible assets, such as musical, literary, and artistic works; discoveries and inventions; and words, phrases, symbols, and designs. Common types of intellectual property rights include copyright, trademarks, patents, industrial design rights, trade dress, and in some jurisdictions trade secrets. Modern usage of the term intellectual property goes back at least as far as 1867 with the founding of the North German Confederation whoseconstitution granted legislative power over the protection of intellectual [4] property (Schutz des geistigen Eigentums) to the confederation. When the administrative secretariats established by the Paris Convention (1883) and the Berne Convention (1886) merged in 1893, they located in Berne, and also adopted the term intellectual property in their new combined title, the United International Bureaux for the Protection of Intellectual Property. The organisation subsequently relocated to Geneva in 1960, and was succeeded in 1967 with the establishment of the World Intellectual Property Organization (WIPO) by treaty as an agency of the United Nations. According to Lemley, it was only at this point that the term really began to be [2] used in the United States (which had not been a party to the Berne Convention), and it did not [5] enter popular usage until passage of the Bayh-Dole Act in 1980. "The history of patents does not begin with inventions, but rather with royal grants by Queen Elizabeth I (15581603) for monopoly privileges... Approximately 200 years after the end of Elizabeth's reign, however, a patent represents a legal [right] obtained by an inventor providing for exclusive control over the production and sale of his mechanical or scientific invention... [6] [demonstrating] the evolution of patents from royal prerogative to common-law doctrine." In an 1818 collection of his writings, the French liberal theorist, Benjamin Constant, argued [7] against the recently introduced idea of "property which has been called intellectual." The term intellectual property can be found used in an October 1845 Massachusetts Circuit Court ruling in the patent caseDavoll et al. v. Brown., in which Justice Charles L. Woodbury wrote that "only in this way can we protect intellectual property, the labors of the mind, productions and [8] interests are as much a man's own...as the wheat he cultivates, or the flocks he rears." The statement that "discoveries are...property" goes back earlier. Section 1 of the French law of 1791 stated, "All new discoveries are the property of the author; to assure the inventor the property and temporary enjoyment of his discovery, there shall be delivered to him a patent for five, ten or [9] fifteen years." In Europe, French author A. Nion mentioned proprit intellectuelle in his Droits civils des auteurs, artistes et inventeurs, published in 1846. Until recently, the purpose of intellectual property law was to give as little protection possible in order to encourage innovation. Historically, therefore, they were granted only when they were [10] necessary to encourage invention, limited in time and scope.
[1]

The concept's origins can potentially be traced back further. Jewish law includes several considerations whose effects are similar to those of modern intellectual property laws, though the notion of intellectual creations as property does not seem to exist notably the principle of Hasagat Ge'vul (unfair encroachment) was used to justify limited-term publisher (but not author) [11] copyright in the 16th century. In 500 BCE, the government of the Greek state of Sybaris offered [12] one year's patent "to all who should discover any new refinement in luxury."

Types[edit]
Common types of intellectual property rights include patents, copyright, industrial design rights, trademarks, trade dress, and in some jurisdictions trade secrets. There are also more specialized varieties of sui generis exclusive rights, such as circuit design rights (called mask work rights in USA law, protected under the Integrated Circuit Topography Act in Canadian law, and in European Union law by Directive 87/54/EEC of 16 December 1986 on the legal protection of topographies of semiconductor products), plant breeders' rights, plant variety rights, industrial design rights,supplementary protection certificates for pharmaceutical products and database rights (in European law).

Patents[edit]
Main article: Patent A patent grants an inventor exclusive rights to make, use, sell, and import an invention for a limited period of time, in exchange for the public disclosure of the invention. An invention is a [13]:17 solution to a specific technological problem, which may be a product or a process.

Copyright[edit]
Main article: Copyright A copyright gives the creator of an original work exclusive rights to it, usually for a limited time. Copyright may apply to a wide range of creative, intellectual, or artistic forms, or [14][15] "works". Copyright does not cover ideas and information themselves, only the form or [16] manner in which they are expressed.

Industrial design rights[edit]

Main article: Industrial design rights An industrial design right protects the visual design of objects that are not purely utilitarian. An industrial design consists of the creation of a shape, configuration or composition of pattern or color, or combination of pattern and color in three dimensional form containing aesthetic value. An industrial design can be a two- or three-dimensional pattern used to produce a product, industrial commodity or handicraft. third party. The party upon whom the bill is drawn is called the drawee. He is the person to whom the bill is addressed and who is ordered to pay. He becomes an acceptor when he indicates his willingness to pay the bill. The party in whose favor the bill is drawn or is payable is called the payee. The parties need not all be distinct persons. Thus, the drawer may draw on himself

payable to his own order. Intellectual property (IP) is a creation of the mind. They are intangible assets for which exclusive rights are granted by law. These assets include artistic works, discoveries, inventions, designs, phrases, symbols, etc. Intellectual property is granted similar protective rights as those granted to physical property, and the stealing of that property is regulated in the U.S. at the federal level. Protection of intellectual property affords the owner of the property exclusive rights to create, use and distribute the work. Owners are granted a temporary monopoly on the idea, and with the exception of trade secrets, owners disclose their process and/or original works to the government and the public. In theory, by granting the owners protection from theft, IP regulation promotes creative and inventive progress. It allows owners to display their work to the public without the worry of losing profit through imitation. Depending on the work, intellectual property falls into one of four categories: copyrights, trademarks, patents and trade secrets. The following article is a brief overview of the various forms of intellectual property; for greater depth and information on how to apply for IP protection, select the links at the end of their respective sections.

1. Copyrights
Copyrights protect the expression of an idea. The expression can be in various forms, including but not limited to literary, musical and dramatic works, motion pictures and sound recordings, pictorial, graphic and sculptural art, even computer programs. Copyrights give the owner exclusive rights to copy, modify, distribute, perform and display his/her work. In general, copyrights last for the lifetime of the creator plus 70 years. But there are exceptions that can alter the term of a copyright. For more info on copyright duration, visit the U.S. Copyright Office website. For an in-depth guide on acquiring a copyright, click here.

2. Trademarks
A trademark is a word or symbol that represents and identifies a product or a brand. To qualify for trademark protection, the asset must be distinctive; it must distinguish your goods or services from those of others.

Trademarks grant exclusive rights of use to the owners. The trademark is protected by the U.S. Patent and Trademark Office, but it is ultimately the responsibility of the owner to identify and prosecute infringements. As long as the owner files the required maintenance fees and documents, protection of a trademark lasts indefinitely. The USPTO has a useful guide on maintaining and renewing trademarks. For a step-by-step guide on how to register a trademark, click here.

3. Patents
Patents protect inventions, original designs and novel processes. These inventions, however, must be new, non-obvious and useful to ensure the granting of a patent. Patents give exclusive rights to the holder to exclude competitors from making, using or selling the property throughout the U.S.; it also protects against importation of imitation properties. With the exception of design patents (which last for 14 years), patents offer 20 years of protection. In exchange for this protection, the holder must give full public disclosure of the work. Click here for a complete guide on applying for a patent.

4. Trade Secrets
A trade secret is any information that, by remaining covert, offers a business a competitive edge or some economic value. By definition, reasonable actions must be taken to maintain its secrecy in order for the information to be considered a trade secret. Unlike other forms of intellectual property, which are afforded protection by the government, trade secrets must be protected by the holder. The U.S. does not grant trade secrets; instead, it only regulates infringement when misappropriation claims are made. Trade secrets last indefinitely and are valid until disclosed to the public.

A bill of exchange may be endorsed by the payee in favour of a third party, who may in turn endorse it to a fourth, and so on indefinitely. The "holder in due course" may claim the amount of the bill against the drawee and all previous endorsers, regardless of any counterclaims that may have disabled the previous payee or endorser from doing so. This is what is meant by saying that a bill is negotiable. In some cases a bill is marked "not negotiable" see crossing of cheques. In that case it can still be transferred to a third party, but the third party can have no better right than the transferor.

Q3..

What do you mean by Negotiable Instruments? What is liability in case of dishonor of cheque?

Ans . A negotiable instrument is a document guaranteeing the payment of a specific amount

of money, either on demand, or at a set time, without conditions in addition to payment imposed on the payer. Cheques or promissory notes are common examples. Negotiable instruments are [1] often defined in legislation. Although often discussed as foundational in commercial law, their modern relevance is sometimes questioned. More precisely, it is a document contemplated by a contract, which (1) warrants the payment of money, the promise of or order for conveyance of which is unconditional; (2) specifies or describes the payee, who is designated on and memorialized by the instrument; and (3) is capable of change through transfer by valid negotiation (sale) of the instrument. When the instrument is transferred in accordance with certain conditions, the holder may become a holder in due course and be free from defenses which would apply to the original payee, such as defective goods or fraud. A negotiable instrument can serve to convey value constituting at least part of the performance of a contract, albeit perhaps not obvious in contract formation, in terms inherent in and arising from the requisite offer and acceptance and conveyance of consideration. The underlying contract contemplates the right to hold the instrument as, and to negotiate the instrument to, a holder in due course, the payment on which is at least part of the performance of the contract to which the negotiable instrument is linked. The instrument, memorializing (1) the power to demand payment; and, (2) the right to be paid, can move, for example, in the instance of a 'bearer instrument', wherein the possession of the document itself attributes and ascribes the right to payment. Certain exceptions exist, such as instances of loss or theft of the instrument, wherein the possessor of the note may be a holder, but not necessarily a holder in due course. Negotiation requires a validendorsement of the negotiable instrument.
If a cheque is dishonoured When a cheque is dishonoured, the drawee bank immediately issues a Cheque Return Memo to the banker of the payee mentioning the reason for non-payment. The payees banker then gives the dishonoured cheque and the memo to the payee. The holder or payee can resubmit the cheque within three months of the date on it, if he believes it will be honoured the second time. However, if the cheque issuer fails to make a payment, then the payee has the right to prosecute the drawer legally. The payee may legally sue the defaulter / drawer for dishonour of cheque only if the amount mentioned in the cheque is towards discharge of a debt or any other liability of the defaulter towards payee. If the cheque was issued as a gift, towards lending a loan or for unlawful purposes, then the drawer cannot be prosecuted in such cases. Legal action The Negotiable Instruments Act, 1881 is applicable for the cases of dishonour of cheque. This Act has been amended many times since 1881. According to Section 138 of the Act, the dishonour of cheque is a criminal offence and is punishable by imprisonment up to two years or with monetary penalty or with both. If payee decides to proceed legally, then the drawer should be given a chance of repaying the cheque amount immediately. Such a chance has to be given only in the form of notice in writing.

The payee has to sent the notice to the drawer with 30 days from the date of receiving Cheque Return Memo from the bank. The notice should mention that the cheque amount has to be paid to the payee within 15 days from the date of receipt of the notice by the drawer. If the cheque issuer fails to make a fresh payment within 30 days of receiving the notice, the payee has the right to file a criminal complaint under Section 138 of the Negotiable Instruments Act. However, the complaint should be registered in a magistrates court within a month of the expiry of the notice period. It is essential in this case to consult an advocate who is well versed and experienced in this area of practice to proceed further in the matter. Fine points: Conditions for prosecution Legally, certain conditions have to be fulfilled in order to use the provisions of Section 138. The cheque should have been drawn by the drawer on an account maintained by him. The cheque should have been returned or dishonoured because of insufficient funds in the drawer's account. The cheque is issued towards discharge of a debt or legal liability. After receiving the notice, if the drawer doesn't make the payment within 15 days from the day of receiving the notice, then he commits an offence punishable under Section 138 of the Negotiable Instruments Act. Punishment & penalty On receiving the complaint, along with an affidavit and relevant paper trail, the court will issue summons and hear the matter. If found guilty, the defaulter can be punished with monetary penalty which may be twice the amount of the cheque or imprisonment for a term which may be extended to two years or both. The bank also has the right to stop the cheque book facility and close the account for repeat offences of bounced cheques. If the drawer makes payment of the cheque amount within 15 days from the date of receipt of the notice, then drawer does not commit any offence. Otherwise, the payee may proceed to file a complaint in the court of the jurisdictional magistrate within one month from the date of expiry of 15 days prescribed in the notice. -

Q4 Who is a Consumer under Consumer Protection Act,1986? Explain with illustration. Give pecuniary jurisdiction for various Consumer forums. Ans . A consumer or customer is a person who buys goods or hires services. This person in exchange
of a consideration or a price seeks goods or hires services from a trader or service provider respectively. The Consumer Protection Act, 1986 has enlarged the definition of consumer and includes a person who has bought the goods or hired the services for earning a livelihood. The Supreme Court of India has held that the said Act excludes a person from the definition of the consumer who has purchased goods or hired services for any activity directly intended to generate profit or commercial activity and thereby all other persons who buy goods or hire services are consumers within the definition of consumer under the Consumer Protection Act and those who intend to buy goods or hire services for the above mentioned that is an activity to generate profit is excluded from the definition of consumer under the said act. The Consumer Protection Act, 1986

The Consumer Protection Act, 1986 is the special social welfare legislation passed by the Parliament of India to protect consumer interest and provide a speedy, inexpensive and an effective dispute resolution mechanism with respect to disputes pertaining to consumer interest. The act embodies: to safety whereby the consumer is protected against the marketing and advertising of goods and services that are harmful or hazardous to life of the consumer. The Consumer Protection Act, 1986 is the special social welfare legislation passed by the Parliament of India to protect consumer interest and provide a speedy, inexpensive and an effective dispute resolution mechanism with respect to disputes pertaining to consumer interest. The Consumer Protection Act, 1986 is the special social welfare legislation passed by the Parliament of India to protect consumer interest and provide a speedy, inexpensive and an effective dispute resolution mechanism with respect to disputes pertaining to consumer interest. Right to be informed about the quality, quantity, purity standard and price of goods and thereby protect the consumer from unfair trade practices that might be followed by some traders. Unfair trade practice includes for example selling food stuff below the quantity mentioned on the label of the packet selling that item or mixing of the food stuff with harmful substances. Right to choose includes that consumer shall have access to variety of goods or services at competitive prices that may include choice of consumer to reject the good in case it comes with an offer of something coming free with it and may ask for a that product without the said offer. Right to be heard advocates that consumer interest shall be heard and the consumer shall be provided with the opportunity to speak about his interest and violation in case it happens at the forums that are in existence for the respective cause. Right to seek redressal includes the right to seek damages or recovery from any loss accounted on the basis of any unfair trade practice. Right to consumer education includes providing adequate and essential knowledge with respect to goods and services offered so that the consumer can make informed choices. These include descriptions of contents, quantity displayed on the labels attached to the goods and services. The department of consumer affairs has also through campaigns like Jago Grahak Jago helped in spreading the message to the consumer to make informed choices about the goods or services which they wish to buy or hire and help in spreading awareness about the various rights held by consumers.

Q5 Write 5 lines each on TradeMark and Copyright.

Ans. 1. The purpose of a copyright is to protect works of authorship as fixed in a tangible form of expression. Thus, copyright covers: a) works of art (2 or 3 dimensional), b) photos, pictures, graphic designs, drawings and other forms of images; c) songs, music and sound recordings of all kinds; d) books, manuscripts, publications and other written works; and e) plays, movies, shows, and other performance arts. 2. The purpose of a trademark is to protect words, phrases and logos used in federally regulated commerce to identify the source of goods and/or services. 3. There may be occasions when both copyright and trademark protection are desired with respect to the same business endeavor. For example, a marketing

campaign for a new product may introduce a new slogan for use with the product, which also appears in advertisements for the product. However, copyright and trademark protection will cover different things. The advertisement's text and graphics, as published in a particular vehicle, will be covered by copyright - but this will not protect the slogan as such. The slogan may be protected by trademark law, but this will not cover the rest of the advertisement. If you want both forms of protection, you will have to perform both types of registration. 4. If you are interested in protecting a title, slogan, or other short word phrase, generally you want a trademark. Copyright law does not protect a bare phrase, slogan, or trade name. 5. Whether an image should be protected by trademark or copyright law depends on whether its use is intended to identify the source of goods or services. If an image is used temporarily in an ad campaign, it generally is not the type of thing intended to be protected as a logo. 6. The registration processes of copyright and trademark are entirely different. For copyright, the filing fee is small, the time to obtain registration is relatively short, and examination by the Copyright Office is limited to ensuring that the registration application is properly completed and suitable copies are attached. For trademark, the filing fee is more substantial, the time to obtain registration is much longer, and examination by the Trademark Office includes a substantive review of potentially conflicting marks which are found to be confusingly similar. While copyright registration is primarily an administrative process, trademark registration is very much an adversarial process. 7. Copyright law provides for compulsory licensing and royalty payments - there is no analogous concept in trademark law. Plus, the tests and definition of infringement are considerably different under copyright law and trademark law.

Assignment Part-c Q1. What

Ans .

is a company? Give its characteristics.

Company is an artificial person created by following a legal procedure.

Before a company is formed, a lot of preliminary work is to be performed. The lengthy process of formation of a company can be divided into four distinct stages : (I) Promotion; (ii) Incorporation or Registration; (iii) Capital subscription; and (iv) Commencement of business. However, a private company can start business as soon as it obtains the certificate of incorporation. It needs to go through first two stages

only. The reason is that a private company cannot invite public to subscribe to its share capital. But a public company having a share capital, has to pass through all the four stages mentioned above before it can commence business or exercise any borrowing powers (Section 149) Another comprehensive and clear definition of a company is given by Lord Justice Lindley, A company is meant an association of many persons who contribute money or moneys worth to a common stock and employ it in some trade or business, and who share the profit and loss (as the case may be) arising there from. The common stock contributed is denoted in money and is the capital of the company. The persons who contribute it, or to whom it belongs, are members. The proportion of capital to which each member is entitled is his share. Shares are always transferable although the right to transfer them is often more or less restricted.

According to Haney, Joint Stock Company is a voluntary association of individuals for profit, having a capital divided into transferable shares. The ownership of which is the condition of membership. From the above definitions, it can be concluded that a company is registered association which is an artificial legal person, having an independent legal, entity with a perpetual succession, a common seal for its signatures, a common capital comprised of transferable shares and carrying limited liability. 1.3 CHARACTERISTICS OF A COMPANY The main characteristics of a company are : 1. Incorporated association. A company is created when it is registered under the Companies Act. It comes into being from the date mentioned in the certificate of incorporation. It may be noted in this connection that Section 11 provides that an

association of more than ten persons carrying on business in banking or an association or more than twenty persons carrying on any other type of business must be registered under the Companies Act and is deemed to be an illegal association, if it is not so registered. For forming a public company at least seven persons and for a private company at least two persons are persons are required. These persons will subscribe their names to the Memorandum of association and also comply with other legal requirements of the Act in respect of registration to form and incorporate a company, with or without limited liability [Sec 12 (1)] 2. Artificial legal person. A company is an artificial person. Negatively

speaking, it is not a natural person. It exists in the eyes of the law and cannot act on its own. It has to act through a board of directors elected by shareholders. It was rightly pointed out in Bates V Standard Land Co. that : The board of directors are the brains and the only brains of the company, which is the body and the company can and does act only through them. But for many purposes, a company is a legal person like a natural person. It has the right to acquire and dispose of the property, to enter into contract with third parties in its own name, and can sue and be sued in its own name. However, it is not a citizen as it cannot enjoy the rights under the Constitution of India or Citizenship Act. In State Trading Corporation of India v C.T.O (1963 SCJ 705), it was held that neither the provisions of the Constitution nor the Citizenship Act apply to it. It should be noted that though a company does not possess fundamental rights, yet it is person in the eyes of law. It can enter into contracts with its Directors, its members, and outsiders.

Justice Hidayatullah once remarked that if all the members are citizens of India, the company does not become a citizen of India.
3. Separate Legal Entity : A company has a legal distinct entity and is independent

of its members. The creditors of the company can recover their money only from the company and the property of the company. They cannot sue individual members. Similarly, the company is not in any way liable for the individual debts of its members. The property of the company is to be used for the benefit of the company and nor for

the personal benefit of the shareholders. On the same grounds, a member cannot claim any ownership rights in the assets of the company either individually or jointly during the existence of the company or in its winding up. At the same time the members of the company can enter into contracts with the company in the same manner as any other individual can. Separate legal entity of the company is also recognized by the Income Tax Act. Where a company is required to pay Income-tax on its profits and when these profits are distributed to shareholders in the form of dividend, the shareholders have to pay income-tax on their dividend of income. This proves that a company that a company and its shareholders are two separate entities.

The principal of separate of legal entity was explained and emphasized in the famous case of Salomon v Salomon & Co. Ltd. The facts of the case are as follows : Mr. Saloman, the owner of a very prosperous shoe business, sold his business for the sum of $ 39,000 to Saloman and Co. Ltd. which consisted of Saloman himself, his wife, his daughter and his four sons. The purchase consideration was paid by the company by allotment of & 20,000 shares and $ 10,000 debentures and the balance in cash to Mr. Saloman. The debentures carried a floating charge on the assets of the company. One share of $ 1 each was

subscribed by the remaining six members of his family. Saloman and his two sons became the directors of this company. Saloman was the managing Director.
After a short duration, the company went into liquidation. At that time the statement of affairs was like this: Assets :$ 6000, liabilities; Saloman as debenture

holder $ 10,000 and unsecured creditors $ 7,000. Thus its assets were running short of its liabilities b $11,000 The unsecured creditors claimed a priority over the debenture holder on the ground that company and Saloman were one and the same person. But the House of Lords held that the existence of a company is quite independent and distinct from its members and that the assets of the company must be utilized in payment of the debentures first in priority to unsecured creditors. Salomans case established beyond doubt that in law a registered company is an entity distinct from its members, even if the person hold all the shares in the company. There is no difference in principle between a company consisting of only two shareholders and a company consisting of two hundred members. In each case the company is a separate legal entity.
The principle established in Salomans case also been applied in the following: Lee V. Lees Airforming Ltd. (1961) A.C. 12 Of the 3000 shares in Lees Air Forming Ltd., Lee held 2999 shares. He voted himself the managing Director and also became Chief Pilot of the company on a salary. He died in an aircrash while working for the company. His wife was granted compensation for the husband in the course of employment. Court held that Lee was a separate person from the company he formed, and compensation was due to the widow. Thus, the rule of corporate personality enabled

Lee to be the master and servant at the same time.

The principle of separate legal entity of a company has been, in fact recognized

much earlier than in Salomans case. In Re Kondoi Tea Co Ltd. (1886 ILR 13 Cal 43), it

was held by Calcutta High Court that a company was a separate person, a separate body altogether from its Shareholders. In Re. Sheffield etc. Society - 22 OBD 470), it has been held that a corporation is a legal person, just as much in individual but with no physical existence The characteristic of separate corporate personality of a company was also emphasized by Chief Justice Marshall of USA when he defined a company as a person, artificial, invisible, intangible and existing only in the eyes of the law. Being a mere creation of law, it possesses only those properties which the charter of its creation confers upon it either expressly or as accident to its very existence. [Trustees of Darmouth College v woodward (1819) 17 US 518)
4. Perpetual Existence. A company is a stable form of business organization. Its

life does not depend upon the death, insolvency or retirement of any or all shareholder

(s) or director (s). Law creates it and law alone can dissolve it. Members may come and go but the company can go on for ever. During the war all the member of one private company , while in general meeting, were killed by a bomb. But the company survived; not even a hydrogen bomb could have destroyed i. The company may be compared with a flowing river where the water keeps on changing continuously, still the identity of the river remains the same. Thus, a company has a perpetual existence, irrespective of changes in its membership Q2 What is LLP? Give the procedure for registration of LLP in India. The

answer should show steps of formation of LLP along with pictorial representation.
Ans Limited Liability Partnership entities, the world wide recognized form of business organization has been
introduced in India by way of Limited Liability Partnership Act, 2008. A Limited Liability Partnership, popularly known as LLP combines the advantages of both the Company and Partnership into a single form of organization. In an LLP one partner is not responsible or liable for another partner's misconduct or negligence, this is an important difference from that of a unlimited partnership. In an LLP, all partners have a form of limited liability for each individual's protection within the partnership, similar to that of the shareholders of a corporation. However, unlike corporate shareholders, the partners have the right to manage the business directly.An LLP also limits the personal liability of a partner for the errors, omissions, incompetence, or negligence of the LLP's employees or other agents.

Limited Liability Partnership is managed as per the LLP Agreement, however in the absence of such agreement the LLP would be governed by the framework provided in Schedule 1 of Limited Liability Partnership Act, 2008 which describes the matters relating to mutual rights and duties of partners of the LLP and of the limited liability partnership and its partners. LLP has a separate legal entity, liable to the full extent of its assets, the liability of the partners would be limited to their agreed contribution in the LLP. Further, no partner would be liable on account of the independent or un-authorized actions of other partners, thus allowing individual partners to be shielded from joint liability created by another partners wrongful business decisions or misconduct. Limited Liability Partnership Act, 2008 came into effect by way of notification dated 31st March 2009.

An LLP may apply to the registrar to be struck off the register and dissolved. The LLP can do this if it is no longer needed. For example , the members may wish to retire and there is no-one to take over from them; or the number of members may have fallen below the statutory requirement for 2 for more than 6 months, thereby exposing the remaining member to personal liability for the LLP's debts; or it is a subsidiary whose name is no longer needed; or it was set up to exploit an idea that turned out not to be feasible. Some LLP's who are dormant or non-trading choose to apply for strike off. If you have decided that you no longer want to retain your LLP and wish to have it struck off, the registrar will not normally pursue any outstanding late filing penalties unless you restore the LLP to the register at a later stage. What should I do before applying? There are safeguards for those who are likely to be affected by an LLP's dissolution. If your LLP has creditors, members etc,you must warn all the people listed in question 5, before applying, as any of them may object to the LLP being struck off. You should deal with any loose ends, such as closing the LLP's bank account, the transfer of any domain names before you apply. You may notify any other organisation or party who may have an interest in the LLP's affairs, otherwise they might later object to the application. Examples include Her Majesty's Revenue and Customs, local authorities, especially if the LLP is under any obligation involving planning permission or health and safety issues, training and enterprise councils and government agencies. How do I apply? You must complete the Striking off application by an LLP Form LL DS01. This is available from our website or available from the sources list The form must be signed and dated: by the majority of members if there are only 2 members, by them both if there is only 1 remaining member, by that member Who must I inform? The members making the application must send a copy to the following people, within 7 days of sending the application to the registrar: members of the LLP, except for the members making the application employees of the LLP

creditors of the LLP. Including all contingent (existing) and prospective (likely) creditors such as banks, suppliers, former employees if the LLP owes them money, landlords, tenants (for example, where a bond is refundable), guarantors and personal injury claimants. Also, you must notify appropriate offices of Her Majesty's Revenue and Customs (HMRC) and Department of Work and Pensions (DWP) if there are outstanding, contingent or prospective liabilities a manager or trustee of any employee pension fund of the LLP The members must also give a copy of the application to any person who, after the application has been made, becomes a member, employee or creditor of the LLP, or a manager or trustee of any employee pension fund of the LLP within 7 days of their appointment. This obligation continues until the dissolution of the LLP or the withdrawal of the application.

Q3 Write a note on Competition Law in India. Ans Competition laws requires economics cum legal mind.

A lawyer for

competition law should have thorough understanding about how the market operates, macro economics and foresightedness for end result of competition in the situation of discussion. A laws was needed in India which ensure the implementation of free economic policies and free flow of resources which protect the fair competition and restrict the anti-competitive practices. We have discussed here what is anti-competitive practices are? but in short it can be said that any practices or tactics of business houses to acquire a dominance in market and eliminate the competition is some thing called anti-competitive. Competition Act 2002 which further amended by amendment act 2007 and 2009, the modified version on an Act which we earlier use to know by the name of MRTP Act 1969. MRTP Act 1969 is repealed by the virtue of section 66 as amended through the act of 2007. MRTP commission wound up. The cases of unfair trade practices are already covered under consumer protection act, hence, same got transferred to relevant consumer court. As per section 66 of CA act the MRTP commission shall continue the operations for another period of two years and thereafter all the cases will stand transferred to Appellate tribunal (CAT) constituted under the Act. It is business law which control the fair competition in the market. This law prohibits the practice of price fixing among market players which it termed as enterprise. This law ensure that a dominant player should not abuse its dominant position in the market . It disallow all the agreements with a are anticompetitive in nature. Further it has brought the concept of combination where on person who own a competitor enterprise can not get merger/amalgamation in a way which adversely effect the competition. This law constitutes a statutory body competition commission of india (CCI) which is fully functional from May 2009. CCI has vide powers to enter into the matters of the Act even without any application to it. This act is directly affect to the top management of the company. It assume that the pricing and trade associations are in knowledge of top management. It lays down heavy penalty of the offense under this act. Appellate tribunal is constituted to file appeal against the order of competition commission.

Competition laws is equally applicable on written as well as oral agreement, arrangements between the enterprises. Components of competition laws: Anti-competitive agreement: Section 3 of The Competition Act 2002 deals with the anti-competitive agreements. An agreement which adversely effect the competition. It includes but not limited to: 1. Agreement which limit the production. 2. Agreement which limit the supply. 3. Agreement to allocate market. 4. Agreement to fix prices. 5. Agreement to collusive bidding. 6. Conditional purchase (Or tie-in-agreements) 7. Refusal to deal. 8. Exclusive supply agreement. 9. Exclusive distribution agreement. 10. Condition sale agreement to by second products as well compulsorily. Following are not an Anti competitive agreements: 1. 2. 3. 4. 5. Agreement Agreement Agreement Agreement Agreement to to to to to Protect IPRs. Viz trademark, copyright or patent. protect geographical indications. Design Act. lay out designs for Act 2000. export goods (with certain conditions).

Types of agreement : Competition law indentifies two type of agreement. First Horizontal agreements which are among the enterprises who are or may compete within same business. Second is the vertical agreement which are among independent enterprise. Horizontal agreement is presumed to be illegal agreement but rule of reasons would be applicable for vertical agreements.

Q4 What is RTI? Do you think it is good for governance?

Ans. The Right to Information Act (RTI) is an Act of the Parliament of India "to provide for
setting out the practical regime of right to information for citizens " and replaces the erstwhile Freedom of Information Act, 2002. The Act applies to all States and Union Territories of India except the State of Jammu and Kashmir. Under the provisions of the Act, any citizen may request information from a "public authority" (a body of Government or "instrumentality of State") which is required to reply expeditiously or within thirty days. The Act also requires every public authority to

computerise their records for wide dissemination and to pro-actively publish certain categories of information so that the citizens need minimum recourse to request for information formally. This law was passed by Parliament on 15 June 2005 and came fully into force on 13 October [1] 2005. Information disclosure in India was restricted by the Official Secrets Act 1923 and various other special laws, which the new RTI Act relaxes. Right to information (RTI) is harnessed as a tool for promoting participatory development, strengthening democratic governance and facilitating effective delivery of socio-economic services. In the knowledge society, in which we live today, acquisition of information and new knowledge and its application have intense and pervasive impact on processes of taking informed decisions, resulting in overall productivity gains. People who have access to information and who understand how to make use of the acquired information in the processes of exercising their political, economic and legal rights become empowered, which, in turn, enable them to build their strengths and assets, so as to improve the quality of life.

In view of this, almost every society has made endeavours for democratising knowledge resources by way of putting in place the mechanisms for free flow of information and ideas so that people can access them without asking for it. People are thus empowered to make proper choices for participation in development process. The efforts made thus far to disseminate information and knowledge through the use of communication technologies such as print media, radio and television as well as internet, have yielded positive results. Sharing of information, for instance, about the new techniques of farming, health care facilities, hazards of environmental degradation, opportunities for learning and earning, legal remedies for combating gender biases, etc., have made significant contributions to the well being of poor people.

Links between RTI and the Elements of Good Governance

The RTI Act was implemented in October 2005. Though a period of three years is too a short period to assess the success of this Act, it may be worthwhile to analyze some evidences for developing an understanding on how it works and what it does or does not do. We, therefore, propose to find an answer to the question: whether the objectives of the Act are being realized? It must be admitted that the assessment of the RTI on good governance and development is indeed a daunting task, since data are lacking to permit methodological rigor of analysis. However, reliance is made on (i) the responses of the RTI requesters and the activists, particularly during the course of hearings conducted by the Author in the cases listed before the Commission to resolve the disputes between information seekers and

providers; (ii) media reports on the issues pertaining to RTI matters; and (iii) preliminary research studies and publications of results, mainly those relating to corruption and accountability of public bodies The assessment of impact is proposed to be made in terms of the stated objectives of the RTI Act, which are outlined in its preamble, as under: An Act to provide for setting out the practical regime of right to information for citizens to secure access to information under the control of public authorities, in order to promote transparency and accountability in the working of every public authority.

Q5.Write a note on Doctrine of Ultra vires

Ans. Doctrine of Ultra vires

The doctrine of ultra vires played an important role in the development of corporate powers. Though largely obsolete in modern private corporation law, the doctrine remains in full force for government entities. An ultra vires act is one beyond the purposes or powers of a corporation. The earliest legal view was that such acts were void. Under this approach a corporation was formed only for limited purposes and could do only what it was authorized to do in its corporate charter. This early view proved unworkable and unfair. It permitted a corporation to accept the benefits of a contract and then refuse to perform its obligations on the ground that the contract was ultra vires. The doctrine also impaired the security of title to property in fully executed transactions in which a corporation participated. Therefore, the courts adopted the view that such acts were Voidable rather than void and that the facts should dictate whether a corporate act should have effect. Over time a body of principles developed that prevented the application of the ultra vires doctrine. These principles included the ability of shareholders to ratify an ultra vires transaction; the application of the doctrine of Estoppel, which prevented the defense of ultra vires when the transaction was fully performed by one party; and the prohibition against asserting ultra vires when both parties had fully performed the contract. The law also held that if an agent of a corporation committed a TORT within the scope of the agent's employment, the corporation could not defend on the ground that the act was ultra vires. Despite these principles the ultra vires doctrine was applied inconsistently and erratically. Accordingly, modern corporation law has sought to remove the possibility that ultra vires acts may occur. Most importantly, multiple purposes clauses and general clauses that permit corporations to engage in any lawful business are now included in the articles of incorporation. In addition, purposes clauses can now be easily amended if the corporation seeks to do business in new areas. For example, under traditional ultra vires doctrine, a corporation that had as its purpose the manufacturing of shoes could not, under its charter, manufacture motorcycles. Under modern corporate law, the purposes clause would either be so general as to allow the corporation to go into the motorcycle business, or the corporation would amend its purposes clause to reflect the new venture.

State laws in almost every jurisdiction have also sharply reduced the importance of the ultra vires doctrine. For example, section 3.04(a) of the Revised Model Business Corporation Act, drafted in 1984, states that "the validity of corporate action may not be challenged on the ground that the corporation lacks or lacked power to act." There are three exceptions to this prohibition: it may be asserted by the corporation or its shareholders against the present or former officers or directors of the corporation for exceeding their authority, by the attorney general of the state in a proceeding to dissolve the corporation or to enjoin it from the transaction of unauthorized business, or by shareholders against the corporation to enjoin the commission of an ultra vires act or the ultra vires transfer of real or Personal Property. Government entities created by a state are public corporations governed by municipal charters and other statutorily imposed grants of power. These grants of authority are analogous to a private corporation's articles of incorporation. Historically, the ultra vires concept has been used to construe the powers of a government entity narrowly. Failure to observe the statutory limits has been characterized as ultra vires. In the case of a private business entity, the act of an employee who is not authorized to act on the entity's behalf may, nevertheless, bind the entity contractually if such an employee would normally be expected to have that authority. With a government entity, however, to prevent a contract from being voided as ultra vires, it is normally necessary to prove that the employee actually had authority to act. Where a government employee exceeds her authority, the government entity may seek to rescind the contract based on an ultra vires claim.

Case study-1

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it can be bound by only those documents which bear its signature. Therefore, the law has provided for the use of common seal, with the name of the company engraved on it, as a substitute for its signature. Any document bearing the common seal of the company will be legally binding on the company. A company may have its own regulations in its Articles of Association for the manner of affixing the common seal to a document. If the Articles are silent, the provisions of Table-A (the model set of articles appended to the Companies Act) will apply. As per regulation 84 of Table-A the seal of the company shall not be affixed to any instrument except by the authority of a resolution of the Board or a Committee of the Board authorized by it in that behalf, and except in the presence of at least two directors and of the secretary or such other person as the Board may appoint for the purpose, and those two directors and the secretary or other person aforesaid shall sign every instrument to which the seal of the company is so affixed in their presence.

6.

Limited Liability : A company may be company limited by shares or a

company limited by guarantee. In company limited by shares, the liability of members is limited to the unpaid value of the shares. For example, if the face value of a share in a company is Rs. 10 and a member has already paid Rs. 7 per share, he can be called upon to pay not more than Rs. 3 per share during the lifetime of the company. In a company limited by guarantee the liability of members is limited to such amount as the member may undertake to contribute to the assets of the company in the event of its being wound up.
7. Transferable Shares. In a public company, the shares are freely transferable. The

right to transfer shares is a statutory right and it cannot be taken away by a provision

in the articles. However, the articles shall prescribe the manner in which such transfer of shares will be made and it may also contain bona fide and reasonable restrictions on the right of members to transfer their shares. But absolute restrictions on the rights of members to transfer their shares shall be ultra vires. However, in the case of a private company, the articles shall restrict the right of member to transfer their shares in companies with its statutory definition. In order to make the right to transfer shares more effective, the shareholder can apply to the Central Government in case of refusal by the company to register a transfer of shares.
8. Separate Property : As a company is a legal person distinct from its

members, it is capable of owning, enjoying and disposing of property in its own name. Although its capital and assets are contributed by its shareholders, they are not the private and joint owners of its property. The company is the real person in which all its property is vested and by which it is controlled, managed and disposed of.
Delegated Management : A joint stock company is an autonomous, self-governing and self-controlling organization. Since it has a large number of members, all of them cannot take part in the management of the affairs of the company. Actual control and management is, therefore, delegated by the shareholders to their elected representatives, know as directors. They look after the day-to-day working of the company. Moreover, since shareholders, by majority of votes, decide the general policy of the company, the management of the company is carried on democratic lines. Majority decision and centralized management compulsorily bring about unity of action