Legal Aspects of IT

SHORT NOTES

1. HADLEY vs BAXENDALE

Hadley v Baxendale [1854] is a leading English contract law case. It set the basic rule for how to determine
the scope of consequential damages arising from a breach of contract that one is liable for all losses that
ought to have been in the contemplation of the contracting parties.

Facts

The plaintiffs, Mr Hadley and another, were millers and mealmen and worked together in a partnership as
proprietors of the City Steam-Mills in Gloucester. They cleaned grain, ground it into meal and dressed it
into flour, sharps, and bran. A crankshaft of a steam engine at the mill had broken and Hadley and Anor
arranged to have a new one made by W. Joyce & Co. in Greenwich. Before the new crankshaft could be
made, W. Joyce & Co. required that the broken crankshaft be sent to them in order to ensure that the new
crankshaft would fit together properly with the other parts of the steam engine.

The plaintiffs contracted with defendants Baxendale and Ors, who were operating together as common
carriers under the name Pickford & Co., to deliver the crankshaft to engineers for repair by a certain date at
a cost of £2 sterling and 4 shillings. Baxendale failed to deliver on the date in question, causing Hadley to
lose business. Hadley sued for the profits he lost due to Baxendale's late delivery, and the jury awarded
Hadley damages of £25. Baxendale appealed, contending that he did not know that Hadley would suffer
any particular damage by reason of the late delivery.

Issue

The question raised by the appeal in this case was whether a defendant in a breach of contract case could
be held liable for damages that the defendant was not aware would be incurred from a breach of the
contract.

Judgment

The Court of Exchequer Chamber, led by Baron Sir Edward Hall Alderson, declined to allow Hadley to
recover lost profits in this case, holding that Baxendale could only be held liable for losses that were
generally foreseeable, or if Hadley had mentioned his special circumstances in advance. The mere fact that a
party is sending something to be repaired does not indicate that they would lose profits if it were not
delivered on time. The court suggested various other circumstances under which Hadley could have entered
into this contract that would not have presented such dire circumstances, and noted that where special
circumstances exist, provisions can be made in the contract voluntarily entered into by the parties to
impose extra damages for a breach.

Significance

In its second aspect Hadley v Baxendale may be regarded as giving a grossly simplified answer to the
question which its first aspect presents. To the question, how far shall we go in charging to the defaulting
promisor the consequences of his breach, it answers with what purports to be a single test, that of
foreseeability. This approach accords very much to what actually happens in practice; the courts have not

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been over-ready to pigeon-hole the cases under one or other of the so-called rules in Hadley v Baxendale,
but rather to decide each case on the basis of the relevant knowledge of the defendant.”

2. SOLOMEN vs SOLOMEN

Salomon v A Salomon & Co Ltd [1897] AC 22 is a landmark UK company law case. The effect of the Lords'
unanimous ruling was to firmly uphold the doctrine of corporate personality, as set out in the Companies
Act 1862.

Facts

Mr Aron Salomon was a leather boot and shoe manufacturer. His firm was in Whitechapel High Street, with
warehouses and a large establishment. He had had it for 30 years and "he might fairly have counted upon
retiring with at least £10,000 in his pocket." He had a wife, a daughter and five sons. Four of the sons
worked with him. The sons wanted to be partners, so he turned the business into a limited company. The
wife and five eldest children became subscribers and two eldest sons also directors. Mr Salomon took
20,001 of the company's 20,007 shares.

The price fixed by the contract was £39,000, which was "extravagent" and not "anything that can be called a
business like or reasonable estimate of value." Transfer of the business happened on June 1, 1892. Purchase
money for the business was paid, totalling £20,000, to Mr Salomon. £10,000 was paid in debentures to Mr
Salomon as well (ie, Salomon gave the company a loan, secured by a charge over the assets of the
company). The balance paid went to extinguish the business’ debts (£1000 of which was cash to Salomon).

But soon after Mr Salomon incorporated his business, there was economic trouble. A series of strikes in the
shoe industry led the government, Salomon's main customer, to split its contracts between more firms (the
Government wanted to diversify its supply base to avoid the risk of its few suppliers being crippled by
strikes). His warehouse was full of unsold stock. He and his wife lent the company money. He cancelled his
debentures. But the company needed more money, and they sought £5000 from a Mr Edmund Broderip.
They gave him a debenture, the loan with 10% interest and secured by a floating charge. But the business
still failed, and they could not keep up with the interest payments. In October 1893 Mr Broderip sued to
enforce his security. That was the end. The company was put into liquidation. Mr Broderip was paid but
other unsecured creditors were not.

The liquidator met Broderip’s claim with a counter claim, joining Salomon as a defendant, that the
debentures were invalid for being issued as fraud. The liquidator claimed all the money back that was
transferred when the company was started: rescission of the agreement for the business transfer itself,
cancellation of the debentures and repayment of the balance of the purchase money.

Judgement

High Court

In the first case, Broderip v Salomon [1893] B 4793, Vaughan Williams J said Mr Broderip’s claim was valid. It
was undisputed that the 20,000 shares were fully paid up. He said the company had a right of indemnity
against Mr Salomon. He said the signatories of the memorandum were mere dummies, the company was

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just Mr Salomon in another form, an alias, his agent. Therefore it was entitled to indemnity from the
principal. The liquidator amended the counter claim, and an award was made for indemnity.

Court of Appeal

The Court of Appeal [1895] 2 Ch 323 confirmed Vaughan Williams J's decision against Mr Salomon, though
on the grounds that Mr. Salomon had abused the privileges of incorporation and limited liability, which
Parliament had intended only to confer on "independent bona fide shareholders, who had a mind and will
of their own and were not mere puppets". Lindley LJ (an expert on partnership law) held that the company
was a trustee for Mr Salomon, and as such was bound to indemnify the company's debts. Lopes LJ and Kay
LJ variously described the company as a myth and a fiction and said that the incorporation of the business
by Mr Salomon had been a mere scheme to enable him to carry on as before but with limited liability.

House of Lords

The House of Lords unanimously overturned this decision, rejecting the arguments from agency and fraud.
They held that there was nothing in the Act about whether the subscribers (i.e. the shareholders) should be
independent of the majority shareholder. The company was duly constituted in law and it was not the
function of judges to read into the statute limitations they themselves considered expedient. Lord Halsbury
LC stated that the statute "enacts nothing as to the extent or degree of interest which may be held by each
of the seven [shareholders] or as to the proportion of interest or influence possessed by one or the majority
over the others."

Lord Halsbury remarked that - even if he were to accept the proposition that judges were at liberty to insert
words to manifest the intention they wished to impute to the Legislature - he was unable to discover what
affirmative proposition the Court of Appeal's logic suggested. He considered that identifying such an
affirmative proposition represented an "insuperable difficulty" for anyone putting forward the argument
propounded by the Lords Justices of Appeal.

Lord Herschell noted the potentially "far reaching" implications of the Court of Appeal's logic and that in
recent years many companies had been set up in which one or more of the seven shareholders were
"disinterested persons" who did not wield any influence over the management of the company. Anyone
dealing with such a company was aware of its nature as such, and could by consulting the register of
shareholders become aware of the breakdown of share ownership among the shareholders.

Lord Macnaghten asked what was wrong with Mr. Salomon taking advantage of the provisions set out in
the statute, as he was perfectly legitimately entitled to do. It was not the function of judges to read
limitations into a statute on the basis of their own personal view that, if the laws of the land allowed such a
thing, they were "in a most lamentable state", as Malins V-C had stated in an earlier case in point, In Re
Baglan Hall Colliery Co., which had likewise been overturned by the House of Lords.

The House held:

"Either the limited company was a legal entity or it was not. If it were, the business belonged to it and not
to Mr Salomon. If it was not, there was no person and no thing to be an agent [of] at all; and it is impossible
to say at the same time that there is a company and there is not."

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The House further noted:

"The company is at law a different person altogether from the subscribers to the Memorandum, and though
it may be that after incorporation of the business is precisely the same as it was before and the same
persons and managers, and the same hands receive the profits, the company is not in law the agent of the
subscribers or trustees for them. Nor are the subscribers or members liable in any shape or form except to
the extent and in the manner provided by the act."

On the issue of floating charges, Lord Macnaghten also said this.

“For such a catastrophe as has occurred in this case some would blame the law that allows the creation of a
floating charge. But a floating charge is too convenient a form of security to be lightly abolished. I have
long thought, and I believe some of your Lordships also think, that the ordinary trade creditors of a trading
company ought to have a preferential claim on the assets in liquidation in respect of debts incurred within a
certain limited time before the winding-up. But that is not the law at present. Everybody knows that when
there is a winding-up debenture holders generally step in and sweep off everything; and a great scandal it
is.”

Significance

In the decades since Salomon's case, various exceptional circumstances have been delineated, both by
legislatures and the judiciary, in England and elsewhere (including Ireland) when courts can legitimately
disregard a company's separate legal personality, such as where crime or fraud has been committed.

3. ASHBERY RAILWAY CARRIAGE CASE

Ashbury Railway Carriage and Iron Co Ltd v Riche (1875) LR 7 HL 653 is a UK company law case, which
concerned the objects clause of a company.

Its importance has been diminished as a result of the Companies Act 2006 s 31, which allows for unlimited
objects for which a company may be run. Furthermore, any limits a company does have in its objects clause
has no effect whatsoever for people outside a company (s 39 CA 2006), except as a general issue of
authority of the company's agents.

Facts

Incorporated under the Companies Act 1869, the Ashbury Railway Carriage and Iron Company Ltd’s
memorandum, clause 3, said its objects were ‘to make and sell, or lend on hire, railway-carriages…’ and
clause 4 said activities beyond needed a special resolution. But the company agreed to give Riche and his
brother a loan to build a railway in Belgium. Later, the company repudiated the agreement. Riche sued, and
the company pleaded the action was ultra vires.

Judgement

Exchequer Court

The judges of the exchequer chamber being equally divided, the decision of the court below was affirmed.
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Blackburn J said,

“ "If I thought it was at common law an incident to a corporation that its capacity should be limited
by the instrument creating it, I should agree that the capacity of a company incorporated under the
act of 1862 was limited to the object in the memorandum of association. But if I am right in the
opinion which I have already expressed, that the general power of contracting is an incident to a
corporation which it requires an indication of intention in the legislature to take away, I see no such
indication here. If the question was whether the legislature had conferred on a corporation, created
under this act, capacity to enter into contracts beyond the provisions of the deed, there could be
only one answer. The legislature did not confer such capacity. But if the question be, as I apprehend
it is, whether the legislature have indicated an intention to take away the power of contracting
which at common law would be incident to a body corporate, and not merely to limit the authority
of the managing body and the majority of the shareholders to bind the minority, but also to
prohibit and make illegal contracts made by the body corporate, in such a manner that they would
be binding on the body if incorporated at common law, I think the answer should be the other
way." ”

House of Lords

The House of Lords, agreeing with the three dissentient judges in the Exchequer Chamber, pronounced the
effect of the Companies Act to be the opposite of that indicated by Mr Justice Blackburn. It held that if a
company pursues objects beyond the scope of the memorandum of association, the company's actions are
ultra vires. Lord Cairns LC said,

“ It was the intention of the legislature, not implied, but actually expressed, that the corporations, should
not enter, having regard to this memorandum of association, into a contract of this description. The
contract in my judgment could not have been ratified by the unanimous assent of the whole
corporation.

4. TURQUANDS RULE ( ROYAL BRITISH BANK vs TURQUAND)

Royal British Bank v Turquand (1856) 6 E&B 327 is a UK company law case that held people transacting with
companies are entitled to assume that internal company rules are complied with, even if they are not. This
"indoor management rule" or the "Rule in Turquand's Case" is applicable in most of the common law world.
It originally mitigated the harshness of the constructive notice doctrine, and in the UK it is now
supplemented by the Companies Act 2006 sections 39-41.

Facts

Mr Turquand was the official manager (liquidator) of the insolvent ‘Cameron’s Coalbrook Steam, Coal, and
Swansea and London Railway Company’. It was incorporated under the Joint Stock Companies Act 1844.
The company had given a bond for £2000 to the Royal British Bank, which secured the company’s drawings
on its current account. The bond was under the company’s seal, signed by two directors and the secretary.
When the company was sued, it alleged that under its registered deed of settlement (the articles of

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association), directors only had power to borrow what had been authorised by a company resolution. A
resolution had been passed but not specifying how much the directors could borrow.

Judgement

Sir John Jervis CJ, for the Court of Exchequer Chamber affirmed the Queen’s Bench and said that it was
valid, so the Royal British Bank could enforce the terms of the bond. He said the bank was deemed to be
aware that the directors could borrow only up to the amount resolutions allowed. Articles of association
were registered in Companies House, so there was constructive notice. But the bank could not be deemed
to know about which ordinary resolutions passed, because these were not registrable. The bond was valid,
because there was no requirement to look into the company’s internal workings. This is the ‘indoor
management rule’, that the company’s indoor affairs are the company’s problem. Jervis CJ gave the
judgment of the Court.

“ I am of opinion that the judgment of the Court of Queen's Bench ought to be affirmed. I incline to think
that the question which has been principally argued both here and in that Court does not necessarily
arise, and need not be determined. My impression is (though I will not state it as a fixed opinion) that
the resolution set forth in the replication [332] goes far enough to satisfy the requisites of the deed of
settlement. The deed allows the directors to borrow on bond such sum or sums of money as shall from
time to time, by a resolution passed at a general meeting of the Company, be authorized to be
borrowed: and the replication shews a resolution, passed at a general meeting, authorizing the
directors to borrow on bond such sums for such periods and at such rates of interest as they might
deem expedient, in accordance with the deed of settlement and the Act of Parliament; but the
resolution does not otherwise define the amount to be borrowed. That seems to me enough. If that be
so, the other question does not arise. But whether it be so or not we need not decide; for it seems to us
that the plea, whether we consider it as a confession and avoidance or a special Non est factum, does
not raise any objection to this advance as against the Company. We may now take for granted that the
dealings with these companies are not like dealings with other partnerships, and that the parties
dealing with them are bound to read the statute and the deed of settlement. But they are not bound to
do more. And the party here, on reading the deed of settlement, would find, not a prohibition from
borrowing, but a permission to do so on certain conditions. Finding that the authority might be made
complete by a resolution, he would have a right to infer the fact of a resolution authorizing that which
on the face of the document appeared to be legitimately done.

Significance

The rule in Turquand's case was not accepted as being firmly entrenched in law until it was endorsed by the
House of Lords. In Mahony v East Holyford Mining Co Lord Hatherly phrased the law thus:

“ When there are persons conducting the affairs of the company in a manner which appears to be
perfectly consonant with the articles of association, those so dealing with them externally are not to
be affected by irregularities which may take place in the internal management of the company. ”

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So, in Mahoney, where the company's articles provided that cheques should be signed by any two of the
three named directors and by the secretary, the fact that the directors who had signed the cheques had
never been properly appointed was held to be a matter of internal management, and the third parties who
received those cheques were entitled to presume that the directors had been properly appointed, and cash
the cheques.

However, it is sometimes possible for an outsider to ascertain whether an internal requirement or procedure
has been complied with. If it is possible to ascertain this fact from the company's public documents, the
doctrine of disclosure and the doctrine of constructive notice will apply and not the Turquand rule. The
Turquand rule was formulated to keep an outsider's duty to inquire into the affairs of a company within
reasonable bounds, but if the compliance or noncompliance with an internal requirement can be
ascertained from the company's public documents, the doctrine of disclosure and the doctrine of
constructive notice will apply. If it is an internal requirement that a certain act should be approved by
special resolution, the Turquand rule will therefore not apply in relation to that specific act, since a special
resolution is registered with Companies House (in the United Kingdom), and is deemed to be public
information.

5. FOSS vs HARBOTTLE

Foss v Harbottle (1843) 67 ER 189 is a leading English precedent in corporate law. In any action in which a
wrong is alleged to have been done to a company, the proper claimant is the company itself. This is known
as "the rule in Foss v Harbottle", and the several important exceptions that have been developed are often
described as "exceptions to the rule in Foss v Harbottle". Amongst these is the 'derivative action', which
allows a minority shareholder to bring a claim on behalf of the company. This applies in situations of
'wrongdoer control' and is, in reality, the only true exception to the rule. The rule in Foss v Harbottle is best
seen as the starting point for minority shareholder remedies.

Facts

Richard Foss and Edward Starkie Turton were two minority shareholders in the "Victoria Park Company".
The company had been set up in September 1835 to buy 180 acres (0.73 km2) of land near Manchester and,
according to the report,

"enclosing and planting the same in an ornamental and park-like manner, and erecting houses thereon with
attached gardens and pleasure-grounds, and selling, letting or otherwise disposing thereof".

This became Victoria Park, Manchester. Subsequently, an Act of Parliament incorporated the company. The
claimants alleged that property of the company had been misapplied and wasted and various mortgages
were given improperly over the company's property. They asked that the guilty parties be held accountable
to the company and that a receiver be appointed.

The defendants were the five company directors (Thomas Harbottle, Joseph Adshead, Henry Byrom, John
Westhead, Richard Bealey) and the solicitors and architect (Joseph Denison, Thomas Bunting and Richard
Lane); and also H Rotton, E Lloyd, T Peet, J Biggs and S Brooks, the several assignees of Byrom, Adshead
and Westhead, who had become bankrupts.

Judgement
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The court dismissed the claim and held that when a company is wronged by its directors it is only the
company that has standing to sue. In effect the court established two rules. Firstly, the "proper plaintiff rule"
is that a wrong done to the company may be vindicated by the company alone. Secondly, the "majority rule
principle" states that if the alleged wrong can be confirmed or ratified by a simple majority of members in a
general meeting, then the court will not interfere

The Victoria Park Company is an incorporated body, and the conduct with which the Defendants are
charged in this suit is an injury not to the Plaintiffs exclusively; it is an injury to the whole corporation by
individuals whom the corporation entrusted with powers to be exercised only for the good of the
corporation. And from the case of The Attorney-General v Wilson (1840) Cr & Ph 1 (without going further) it
may be stated as undoubted law that a bill or information by a corporation will lie to be relieved in respect
of injuries which the corporation has suffered at the hands of persons standing in the situation of the
directors upon this record. This bill, however, differs from that in The Attorney-General v Wilson in this—
that, instead of the corporation being formally represented as Plaintiffs, the bill in this case is brought by
two individual corporators, professedly on behalf of themselves and all the other members of the
corporation, except those who committed the injuries complained of—the Plaintiffs assuming to themselves
the right and power in that manner to sue on behalf of and represent the corporation itself.

It was not, nor could it successfully be, argued that it was a matter of course for any individual members of
a corporation thus to assume to themselves the right of suing in the name of the corporation. In law the
corporation and the aggregate members of the corporation are not the same thing for purposes like this;
and the only question can be whether the facts alleged in this case justify a departure from the rule which,
primâ facie , would require that the corporation should sue in its own name and in its corporate character,
or in the name of someone whom the law has appointed to be its representative...

The first objection taken in the argument for the Defendants was that the individual members of the
corporation cannot in any case sue in the form in which this bill is framed. During the argument I intimated
an opinion, to which, upon further consideration, I fully adhere, that the rule was much too broadly stated
on the part of the Defendants. I think there are cases in which a suit might properly be so framed.
Corporations like this, of a private nature, are in truth little more than private partnerships; and in cases
which may easily be suggested it would be too much to hold that a society of private persons associated
together in undertakings, which, though certainly beneficial to the public, are nevertheless matters of
private property, are to be deprived of their civil rights, inter se , because, in order to make their common
objects more attainable, the Crown or the Legislature may have conferred upon them the benefit of a
corporate character. If a case should arise of injury to a corporation by some of its members, for which no
adequate remedy remained, except that of a suit by individual corporators in their private characters, and
asking in such character the protection of those rights to which in their corporate character they were
entitled, I cannot but think that the principle so forcibly laid down by Lord Cottenham in Wallworth v Holt (4
Myl & Cr 635; see also 17 Ves 320, per Lord Eldon) and other cases would apply, and the claims of justice
would be found superior to any difficulties arising out of technical rules respecting the mode in which
corporations are required to sue.

But, on the other hand, it must not be without reasons of a very urgent character that established rules of
law and practice are to be departed from, rules which, though in a sense technical, are founded on general

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principles of justice and convenience; and the question is whether a case is stated in this bill entitling the
Plaintiffs to sue in their private characters...

Now, that my opinion upon this case may be clearly understood, I will consider separately the two principal
grounds of complaint to which I have adverted, with reference to a very marked distinction between them.
The first ground of complaint is one which, though it might primâ facie entitle the corporation to rescind
the transactions complained of, does not absolutely and of necessity fall under the description of a void
transaction. The corporation might elect to adopt those transactions, and hold the directors bound by
them. In other words, the transactions admit of confirmation at the option of the corporation. The second
ground of complaint may stand in a different position; I allude to the mortgaging in a manner not
authorized by the powers of the Act. This, being beyond the powers of the corporation, may admit of no
confirmation whilst any one dissenting voice is raised against it. This distinction is found in the case of
Preston v The Grand Collier Dock Company (1840) 11 Sim 327, SC; 2 Railway Cases 335.

On the first point it is only necessary to refer to the clauses of the Act to shew that, whilst the supreme
governing body, the proprietors at a special general meeting assembled, retain the power of exercising the
functions conferred upon them by the Act of Incorporation, it cannot be competent to individual
corporators to sue in the manner proposed by the Plaintiffs on the present record. This in effect purports to
be a suit by cestui que trusts complaining of a fraud committed or alleged to have been committed by
persons in a fiduciary character. The complaint is that those trustees have sold lands to themselves,
ostensibly for the benefit of the cestui que trusts. The proposition I have advanced is that, although the Act
should prove to be voidable, the cestui que trusts may elect to confirm it. Now, who are the cestui que
trusts in this case? The corporation, in a sense, is undoubtedly the cestui que trust; but the majority of the
proprietors at a special general meeting assembled, independently of any general rules of law upon the
subject, by the very terms of the incorporation in the present case, has power to bind the whole body, and
every individual corporator must be taken to have come into the corporation upon the terms of being liable
to be so bound. How then can this Court act in a suit constituted as this is, if it is to be assumed, for the
purposes of the argument, that the powers of the body of the proprietors are still in existence, and may
lawfully be exercised for a purpose like that I have suggested? Whilst the Court may be declaring the acts
complained of to be void at the suit of the present Plaintiffs, who in fact may be the only proprietors who
disapprove of them, the governing body of proprietors may defeat the decree by lawfully resolving upon
the confirmation of the very acts which are the subject of the suit. The very fact that the governing body of
proprietors assembled at the special general meeting may so bind even a reluctant minority is decisive to
shew that the frame of this suit cannot be sustained whilst that body retains its functions...

The second point which relates to the charges and incumbrances alleged to have been illegally made on the
property of the company is open to the reasoning which I have applied to the first point, upon the question
whether, in the present case, individual members are at liberty to complain in the form adopted by this bill;
for why should this anomalous form of suit be resorted to, if the powers of the corporation may be called
into exercise? But this part of the case is of greater difficulty upon the merits. I follow, with entire assent, the
opinion expressed by the Vice-Chancellor in Preston v The Grand Collier Dock Company, that if a transaction
be void, and not merely voidable, the corporation cannot confirm it, so as to bind a dissenting minority of
its members. But that will not dispose of this question. The case made with regard to these mortgages or
incumbrances is, that they were executed in violation of the provisions of the Act. The mortgagees are not

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Defendants to the bill, nor does the bill seek to avoid the security itself, if it could be avoided, on which I
give no opinion. The bill prays inquiries with a view to proceedings being taken aliunde to set aside these
transactions against the mortgagees. The object of this bill against the Defendants is to make them
individually and personally responsible to the extent of the injury alleged to have been received by the
corporation from the making of the mortgages. Whatever the case might be, if the object of the suit was to
rescind these transactions, and the allegations in the bill shewed that justice could not be done to the
shareholders without allowing two to sue on behalf of themselves and others, very different considerations
arise in a case like the present, in which the consequences only of the alleged illegal Acts are sought to be
visited personally upon the directors. The money forming the consideration for the mortgages was received,
and was expended in, or partly in, the transactions which are the subject of the first ground of complaint.
Upon this, one question appears to me to be, whether the company could confirm the former transactions,
take the benefit of the money that has been raised, and yet, as against the directors personally, complain of
the acts which they have done, by means whereof the company obtains that benefit which I suppose to
have been admitted and adopted by such confirmation. I think it would not be open to the company to do
this; and my opinion already expressed on the first point is that the transactions which constitute the first
ground of complaint may possibly be beneficial to the company, and may be so regarded by the
proprietors, and admit of confirmation. I am of opinion that this question—the question of confirmation or
avoidance—cannot properly be litigated upon this record, regard being had to the existing state and
powers of the corporation, and that therefore that part of the bill which seeks to visit the directors
personally with the consequences of the impeached mortgages and charges, the benefit of which the
company enjoys, is in the same predicament as that which relates to the other subjects of complaint. Both
questions stand on the same ground, and, for the reasons which I stated in considering the former point,
these demurrers must be allowed.

Significance

The rule was later extended to cover cases where what is complained of is some internal irregularity in the
operation of the company. However, the internal irregularity must be capable of being
confirmed/sanctioned by the majority.

The rule in Foss v Harbottle has another important implication. A shareholder cannot generally bring a claim
to recover any reflective loss - a diminution in the value of his or her shares in circumstances where the
diminution arises because the company has suffered an actionable loss. The proper course is for the
company to bring the action and recoup the loss with the consequence that the value of the shares will be
restored.

Exceptions

Ultra vires and illegality

Actions requiring a special majority
Invasion of individual rights
"Frauds on the minority"

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6. QUASI CONTRACT

A quasi-contract (or implied-in-law contract) is a fictional contract created by courts for equitable, not
contractual purposes . A quasi-contract is not an actual contract, but is a legal substitute for a contract
formed to impose equity between two parties. The concept of a quasi-contract is that of a contract that
should have been formed, even though in actuality it was not. It is used when a court finds it appropriate to
create an obligation upon a non-contracting party to avoid injustice and to ensure fairness. It is invoked in
circumstances of unjust enrichment, and is connected with the concept of restitution.

Generally the existence of an actual or implied-in-fact contract is required for the defendant to be liable for
services rendered, and a person who provides a service uninvited is an officious intermeddle who is not
entitled to compensation. "Would-be plaintiffs cannot deliver unordered goods or services and demand
payment for the benefit....A corollary is that one who does have an enforceable contract is bound by the
contract's terms: subject to a few controversial exceptions, she cannot sue for restitution of the value of
benefits conferred..." However, in many jurisdictions under certain circumstances plaintiffs may be entitled
to restitution under quasi-contract (as in the example of Oklahoma below).

Quasi-contracts are defined to be "the lawful and purely voluntary acts of a man, from which there results
any obligation whatever to a third person, and sometime a reciprocal obligation between the parties."

Elements

According to the Oklahoma pattern jury instructions, the elements of quasi-contract are:

1. Plaintiff furnished / rendered valuable goods / services to Defendant with a reasonable

expectation of being compensated;

2. Defendant knowingly accepted the benefits of the goods / services; and

3. Defendant would be unfairly benefited by the services / receiving the goods if no

compensation were paid to the Plaintiff.[7]

Knowledge, the second element, is required, and if the defendant had no knowledge of the
benefits, there would be no contract of any kind, even a quasi-contract.

In contracts, it is the consent of the contracting parties which produces the obligation; in quasi-
contracts no consent is required, and the obligation arises from the law or natural equity, on the
facts of the case. These acts are called quasi-contracts, because, without being contracts, they bind
the parties as contracts do.[citation needed]

"A quasi-contract is not really a contract at all in the normal meaning of a contract," according to
one scholar, but rather is "an obligation imposed on a party to make things fair."

The Oklahoma Supreme Court has:

described the distinction between a contract and a quasi-contract in T & S Inv. Co. v. Coury, 593
P.2d 503 (Okla. 1979), as follows:

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A "quasi" or constructive contract is an implication of law. An "implied" contract is an implication

of fact. In the former the contract is a mere fiction, imposed in order to adapt the case to a given
remedy. In the latter, the contract is a fact legitimately inferred. In one the intention is disregarded;
in the other, it is ascertained and enforced. In one, the duty defines the contract; in the other, the
contract defines the duty. (quoting from Berry v. Barbour, 279 P.2d 335, 338 (Okla. 1954)).

—Oklahoma Uniform Jury Instructions, § 23.10 citing cases therein at [7].

Liability

The defendant's liability under quasi-contract is equal to the value of the benefit conferred by the
plaintiff. The value is the fair market value of the benefit and not necessarily the subjective value
that the defendant enjoys.[citation needed] A traditional measure of the fair market value is called
quantum meruit, for "as much as is deserved." [citation needed] For example, accountant prepares tax-
payer's taxes, finding a way to get him an unusually large refund. Tax-payer doesn't pay
accountant. Assuming a court finds no contract, tax-payer is only liable for the fair market value of
tax preparation services, which is not inflated up to account for the unusually large refund he
enjoyed.

Under Oklahoma law:

The measure of damages in a quasi-contract action is the amount which will compensate the party
aggrieved for the detriment proximately caused thereby, and, if the obligation is to pay money, the
detriment caused by the breach in the amount due by the terms of the obligation.

—Welling v. American Roofing & Sheet Metal Co., Inc., 617 P.2d 206, 209-210 (Okla. 1980), cited at

Example

An example of a quasi-contract is the case of a plumber who accidentally installs a sprinkler system
in the lawn of the wrong house. The owner of the house had learned the previous day that his
neighbor was getting new sprinklers. That morning, he sees the plumber begin installing them in
his own lawn. Pleased at the mistake, he says nothing, and then refuses to pay when the plumber
hands him the bill, claiming that he never agreed to pay for the sprinklers. If the plumber can
prove that the man knew that the sprinklers were being installed mistakenly on his property and
failed to prevent the installation, the court would make him pay under a quasi-contract theory. If
that knowledge could not be proven, he would not be liable.

Compare this example with the three elements from above:

1. The plumber conferred a benefit on the owner by installing the sprinkler system.

2. The owner accepted the installation of the sprinkler system by not stopping the plumber
when he first noticed the mistake.

3. Without payment, the owner will unfairly benefit at the expense of the mistaken plumber.

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Because the owner failed to stop the plumber from installing the sprinkler system, with the
intention of benefiting from the mistake, the court will create a quasi-contract. The owner's failure
to refuse the plumber's service will be interpreted as an implicit agreement to pay for it and the
court will treat it as if there was an actual contract. However, if the owner were away from home at
the time of the installation and had no chance to stop it, he could not be held liable and the
plumber will be forced to bear the costs of his mistake.

Examples of quasi-contracts vary by jurisdiction. A painter, who mistakenly paints a house with the
owner's knowledge, can sue in court to get paid. A mechanic who fixes the brakes to a car as
requested, but who also makes repairs to the axle (without which the brakes would not function
properly), has an implied quasi-contract. A homebuilder who signs a contract with a purported
agent, who actually has no authority, can recover the cost of the services and materials from the
homeowner

7. CONSUMER AND MANUFACTURER (Very Important)

8. CYBER LAW (Very Important)

9.

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Q 1. What are the Essentials of a Valid Contract?

A contract is an agreement that can be enforceable by law.   An agreement is  an offer and its
acceptance.  An agreement which can be enforceable by law must have some essential elements.
According to Section 10 "All agreements are contracts if they are made by the free consent of the
parties competent to contract, for a lawful consideration and with a lawful object, and are not hereby
expressly declared to be void" As per the above section, a contract must have the following
elements.

1.  Intention to create legal relationship.

2.  Lawful object

3.  Agreement not expressly declared void

4.  Proper offer and it s acceptance

5.  Free Consent

6.  Capacity of parties to contract

7.  Certainty of meaning.

8.  Possibility of performance.

9.  Lawful consideration

10.  Legal formalities

Intention to create legal relationship: The parties entering into a contract must have an
intention to create a legal relationship. If  there is no intention to create a legal relationship, that
agreement cannot be treated as a valid contract. Generally there is no intention to create a legal
relationship in social and domestic agreements. Invitation for lunch does not create a legal
relationship. Certain agreements and obligation between father and daughter, mother and son and
husband and wife does not create a legal relationship. An agreement wherein it is clearly
mentioned that "This agreement is not intended to create formal or legal agreement and shall not
be subject to legal jurisdiction in the law of courts." cannot be treated as a contract and not valid.

Lawful Object: The objective of the agreement must be lawful. Any act prohibited by law will not
be valid and such agreements cannot be treated as a valid contract. A rent out his house for the
business of prostitution or for making bomb, the acts performing there are unlawful. Hence such
agreement cannot be treated as a valid contract. Therefore the consideration as well as the object
of the agreement should be lawful.
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Agreement not expressly declared void: Section 24 to 30 specify certain types of agreement
which have been expressly declared void. For example Restraint of marriage which has been
expressly declared void under Section 26. If John promises to pay $50 to Mary if she does not
marry throughout her life and Mary promise not to marry at all. But this agreement cannot be
treated as a valid contract owing to the fact that, under section 26 restraint of marriage expressly
declared void. Some of the agreements which have been expressly declared void are agreement in
restraint of legal proceedings, agreement in restraint of trade, agreement in restraint of marriage
and agreement by way of wager.

Proper offer and it s acceptance: To create a valid contract, there must be two or more parties.
One who makes the offer and the other who accepts the offer. One person cannot make an offer
and accept it. There must be at least two persons. Also the offer must be clear and properly
communicated to the other party. Similarly acceptance must be communicated to the other party
and the proper and unconditional acceptance must be communicated to the offerer. Proper offer
and proper acceptance should be there to treat the agreement as a contract which is enforceable
by law.

Free Consent: According to section 14, consent is said to be free when it is not caused by (i)
coercion, (ii) undue influence (iii) fraud, (iv) misrepresentation, or (v) mistake. If the contract made by
any of the above four reason, at the option of the aggrieved party it could be treated as a void
contract. If the agreement induced by mutual mistake the agreement would stand void or
canceled. An agreement can be treated as a valid contract when the consent of the parties are free
and not under any undue influence, fear or pressure etc. The consent of the parties must be
genuine and free consent.

Capacity of parties to contract: Parties entering into an agreement must be competent and
capable of entering into a contract. If "A" agrees to sell a Government property to B and B agrees
to buy that property, it could not treated as a valid agreement as A is not authorized or owner of
the property. If any of the party is not competent or capable of entering into the agreement, that
agreement cannot be treated as a valid contract. According to Section 11 of the Act which says
that every person is competent to contract who is of the age of majority according to the law to
which he is subject and who is of sound mind, and is not disqualified from contracting by any law to
which he is subject. So it is clear that the party must be of sound mind and of age to enter into a
valid agreement which can be treated as a valid contract.

Certainty of meaning: Wording of the agreement must be clear and not uncertain or vague.
Suppose John agrees to sell 500 tones of oil to Mathew. But, what kind of oil is not mentioned
clearly. So on the ground of uncertainty, this agreement stands void. If the meaning of the
agreement can be made certain by the circumstances, it could be treated as a valid contract. For
example, if John and Mathew are sole trader of coconut oil, the meaning of the agreement can be
made certain by the circumstance and in that case, the agreement can be treated as a valid
contract. According to Section 29 of the Contract Act says that Agreements, the meaning of which
is not certain or capable of being made certain, are void.
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Possibility of performance: As per section 56, if the act is impossible of performance, physically
or legally, the agreement cannot be enforced by law. There must be possibility of performance of
the agreement. Impossible agreements like one claims to run at a speed of 1000km/hour or Jump
to a height of 100feet etc. would not create a valid agreement. All such acts which are impossible
of performance would not create a valid contract and cannot treated as a valid contract. In
essence, there must be possibility of performance must be there to create a valid contract.

Lawful consideration: An agreement must be supported by a consideration of something in

return. That is, the agreement must be supported by some type of service or goods in return of
money or goods. However, it is not necessary the price should be always in terms of money. It
could be a service or another goods. Suppose X agrees to buy books from Y for $50. Here the
consideration of X is books and the consideration of Y is $50. It can be a promise to act (doing
something) or forbearance (not doing something). The consideration may be present, future or can
be past. But the consideration must be real. For example If John agrees to sell his car of $ 50000 to
Peter for $20000. This is a valid contract if John agrees to sell his car not under any influence or
force. It can be valid only if the consideration of John is free. An agreement is valid only when the
acts are legal. Illegal works like killing another for money, or immoral works or illegal acts are
cannot be treated as a valid agreement. So, illegal works will not come under the contract act.

Legal formalities: The contract act does not insist that the agreement must be in writing, it could
be oral. But, in some cases the law strictly insist that the agreement must be in writing like
agreement to sell immovable property must be in writing and should be registered under the
Transfer of Property Act, 1882. These agreement are valid only when they fulfill the formalities like
writing, registration, signing by the both the parties are completed. If these legal formalities are
not completed, it cannot be treated as a valid contract.

Most important essentials of a valid contract are mentioned above. These elements should be
present in a contract to make it a valid contract. If any one of them is missing we cannot treat that
agreement as a valid contract.

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Q2. Under Sale of Goods Act what are Conditions and Warranties?

Traditionally a term of a contract -- whether an express or an Implied term -- can be classified as

representation, warranty, and condition.

A representation is something that is offered in order to induce the other party to contract; it is, in a way,
independent of the contract itself. If I offer to sell you my car, saying that `you won't find a nicer Ford
Fandango in London', no sensible person would assume that I intent to be contractually bound by that
statement. Representations are frequently referred to as `mere puff'. Of course, if it demonstrably false, the
statement may be a Misrepresentation.

A warranty, traditionally, is a term which is not fundamental to the contract and, if breached, does not give
the injured party the right to repudiate. He may, of course, have a right to Damages.

A condition is a term which, when breached, allows the injured party to treat the contract as discharged.
Here too there may be a remedy in damages, but also the injured party is freed from his obligations under
the contract.

More recently, the courts have started to recognise the existence of `innominate terms'. These are terms
whose status as conditions or warranties is not defined by the construction of the words, or the intentions
of the parties, but on the effect that breach would have. This usage appears to follow from The hongkong
fir 1961, in which Lord Diplock described how a contractual term could be treated as a condition or a
warranty.

How are terms distinguished from warranties? This is not always easy; where there is no statutory assistance
(e.g., Sale of goods act 1979) the courts will have to assess the intentions of the parties. Of course, the
parties themselves have the right to make specific terms into absolute conditions in the wording of the
contract; however, following Lschuler agvwickman machine tools ltd 1973 it appears that such wording is
only one factor that courts will consider when assessing whether a term is a condition or not.

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Q3. What are the Rights of an Unpaid Seller?

  45. "Unpaid seller" defined. - (1) The seller of goods is deemed to be an "unpaid seller" within the
meaning of this Act -

(a) when the whole of the price has not been paid or tendered;

(b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and
the condition on which it was received has not been fulfilled by reason of the dishonor of the instrument or
otherwise.

(2) In this Chapter, the term "seller" includes any person who is in the position of a seller, as, for instance, an
agent of the seller to whom the bill of landing has been endorsed, or a consignor or agent who has himself
paid, or is directly responsible for, the price.

46. Unpaid seller's rights. - (1) Subject to the provisions of the Act and of any law for the time being in
force, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of
goods, as such, has by implications of law -

(a) a lien on the goods for the price while he is in possession of them;

(b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted with
the possession of them;

(c) a right of re-sale as limited by this Act.

(2) Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to his other
remedies, a right of withholding delivery similar to and co-extensive with his rights of lien and stoppage in
transit where the property has passed to the buyer.

Unpaid Seller's Lien

47. Seller's lien. - (1) Subject to the provisions of this Act, the unpaid seller of goods who is in possession
of them is entitled to retain possession of them until payment or tender of the price in the following cases,
namely: -

(a) where the goods have been sold without any stipulation as to credit;

(b) where the goods have been sold on credit, but the term of credit has expired; 

(c) where the buyer becomes insolvent.

(2) The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent or
bailee for the buyer.

48. Part delivery. - Where an unpaid seller has made part delivery of the goods, he may exercise his right
of lien on the remainder, unless such part delivery has been made under such circumstance as to show an
agreement to waive the lien.
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49. Termination of lien. - (1) The unpaid seller of goods loses his lien thereon -

(a) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyer
without reserving the right of disposal of the goods;

(b) when the buyer or his agent lawfully obtains possession of the goods; 

(c) by waiver thereof.

(2) The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he has
obtained a decree for the price of the goods.

Stoppage in Transit

50. Right of stoppage in transit. - Subject to the provisions of this Act, when the buyer of goods becomes
insolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping them
in transit, that is to say, he may resume possession of the goods as long as they are in the course of transit,
and may retain them until the payment or tender of the price.

51. Duration of transit. - (1) Goods are deemed to be in course of transit from the time when they are
delivered to a carrier or other bailee for the purpose of transmission to the buyer, until the buyer or his
agent in that behalf takes delivery of them from such carrier or other bailee.

(2) If the buyer or his agent in that behalf obtains delivery of the goods before their arrival at the appointed
destination, the transit is at an end.

(3) If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges to
the buyer or his agent that he holds the goods on his behalf and continues in possession of them as bailee
for the buyer or his agent, the transit is at an end it is immaterial that a further destination for  the goods
may have been indicated by the buyer.

(4) If the goods are rejected by the buyer and the carrier or other bailee continues in possession of them,
the transit is not deemed to be at an end, even if the seller has refused to receive them back.

(5) When goods are delivered to a ship chartered by the buyer, it is a question depending on the
circumstances of the particular case, whether they are in the possession of the master as a carrier or as
agent of the buyer.

(6) Where the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in
that behalf, the transit is deemed to be at an end.

(7) Where part delivery of the goods has been made to the buyer or his agent in that behalf, the remainder
of the goods may be stopped in transit, unless such part delivery has been given in such circumstances as
to show an agreement to give up possession of the whole of the goods.

52. How stoppage in transit is effected. - (1) The unpaid seller may exercise his right of stoppage in
transit either by taking actual possession of the goods, or by giving notice of his claim to the carrier of
other bailee in whose possession the goods are. Such notice may be given either to the person in actual
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possession of the goods or to his principal. In the later case the notice, to be effectual, shall be given at
such time and in such circumstances that the principal, by the exercise of reasonable diligence, may
communicate it to his servant or agent in time to prevent a delivery to the buyer

(2) When notice of stoppage in transit is given by the seller to the carrier or other bailee in possession of
the goods, he shall re-deliver the goods to or according to the directions of the seller. The expenses of such
re-delivery shall be borne by the seller.

Transfer by Buyer and Seller

53. Effect of sub-sale or pledge by buyer. - (1) Subject to the provisions of this Act, the unpaid seller's
right of lien or stoppage in transit is not affected by any sale or other disposition of the goods which the
buyer may have made, unless the seller has assented thereto:

Provided that where a document of title to goods has been issued or lawfully transferred to any person as
buyer or owner of the goods, and that person transfers the documents to a person who takes the
documents in good faith and for consideration, then, if such last mentioned transfer was by way of sale, the
unpaid seller's right of lien or stoppage in transit is defeated, and if such last mentioned transfer was by
way of pledge or other disposition for value, the unpaid seller's right of lien or stoppage in transit can only
be exercised subject to the rights of the transferee.

(2) Where the transfer is by way of pledge, the unpaid seller may require the pledge to have the amount
secured by the pledge satisfied in the first instance, as far as possible, out of any other goods or securities
of the buyer in the hands of the pledgee and available against the buyer. 

54. Sale not generally rescinded by lien or stoppage in transit. - (1) Subject to the provision of this
section, a contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of lien or
stoppage in transit.

(2) Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right of
lien or stoppage in transit gives notice to the buyer of his intention to re-sell, the unpaid seller may, if the
buyer does not within a reasonable time pay or tender the price, re-sell the goods within a reasonable time
and recover from the original buyer damages for any loss occasioned by his breach of contract, but the
buyer shall not be entitled to any profit which may occur on the re-sale. If such notice is not given, the
unpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if
any, on the re-sale.

(3) Where in unpaid seller who has exercised his right of lien or stoppage in transit re-sells the goods, the
buyer acquires a good title thereto as against the original buyer, notwithstanding that no notice of the re-
sale has been given to the original buyer.

(4) Where the seller expressly reserves a right of re-sale in case the buyer should make default, and, on the
buyer making default, re-sells the goods, the original contract of sale is thereby rescinded, but without
prejudice to any claim which the seller may have for damages.

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Q4. What are the objectives of Consumer Protection Act?

The Consumer Protection Act 2007 came into force on 1 May 2007. It provides for the most comprehensive
reform of consumer legislation in 30 years.

It provides a range of measures aimed at fostering compliance with consumer legislation, through self
regulation (codes of practice) and through a suite of enforcement measures. The three main elements of
the Act are:

 Establishment of the National Consumer Agency on a statutory basis

 Updating and consolidating consumer legislation and repealing some old consumer laws

 Transposing the EU Directive on Unfair Commercial Practices (UCPD)

Consumer protection is essential for a healthy economy. We need Consumer Protection Act for the
following:-

Physical protection of the consumer.

Protection against deceptive and unfair trade practices.
Protection against all types of pollution.
Protection against the abuse of monopoly position and/or restrictive trade practices.
Protection of enjoying the rights.
The consumer interest in the market place is the focus or the art of enlightened marketing mix. The
business and consumerism both aim at the protection of consumer interest-business through self-
regulation and consumerism through self-help. Consumerism invokes government assistance when
business misbehaves and fails to fulfill special responsibilities. 

In exchange relationship normally, we have two 

Seller
Buyer

However, in the modern market, the seller is organized and has professional skill, whereas the buyer is
usually unorganized and amateur. Hence, we need consumer legislation and consumerism. 

RIGHT OF CONSUMERS

Right to Safety

It means right to be protected against the marketing of goods and services, which are hazardous to life and
property. The purchased goods and services availed of should not only meet their immediate needs, but
also fulfill long term interests. 

Before purchasing, consumers should insist on the quality of the products as well as on the guarantee of
the products and services. They should preferably purchase quality marked products such as ISI, AGMARK,
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etc.

Right to be Informed

It means right to be informed about the quality, quantity, potency, purity, standard and price of goods so as
to protect the consumer against unfair trade practices. 

Consumer should insist on getting all the information about the product or service before making a choice
or a decision. This will enable him to act wisely and responsibly and also enable him to desist from falling
prey to high pressure selling techniques.

Right to Choose

It means right to be assured, wherever possible of access to variety of goods and services at competitive
price. In case of monopolies, it means right to be assured of satisfactory quality and service at a fair price. 

It also includes right to basic goods and services. This is because unrestricted right of the minority to
choose can mean a denial for the majority of its fair share. This right can be better exercised in a
competitive market where a variety of goods are available at competitive prices.

Right to be Heard

It means that consumer's interests will receive due consideration at appropriate forums. It also includes
right to be represented in various forums formed to consider the consumer's welfare. 

The Consumers should form non-political and non-commercial consumer organizations which can be given
representation in various committees formed by the Government and other bodies in matters relating to
consumers.

Right to seek Redressal

It means right to seek redressal against unfair trade practices or unscrupulous exploitation of consumers. It
also includes right to fair settlement of the genuine grievances of the consumer. 

Consumers must make complaint for their genuine grievances. Many a times their complaint may be of
small value but its impact on the society as a whole may be very large. They can also take the help of
consumer organizations in seeking redressal of their grievances.

Right to Consumer Education

It means the right to acquire the knowledge and skill to be an informed consumer throughout his life.
Ignorance of consumers, particularly of rural consumers, is mainly responsible for their exploitation. They

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should know their rights and must exercise them. Only then real consumer protection can be achieved with
success.

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Q5. Which are the redressal Agencies under Consumer Protection Act?

i. Consumer Disputes Redressal Agencies

This part of the Act contains 22 sections i.e. Sections 9 to18, 18-A, 19 to 23, 24-A, 24-, 25, 26 and 27.

This part provides for establishment of consumer disputes redressal forum at district level, state level and
central levels known as “District Forum”, “State Commission” and “National Commission”.

It also makes provisions regarding the composition, jurisdiction, procedure to be followed by the District
forum, State commission & National commission. Any person aggrieved by an order of the District forum
may appeal to the State commission & an order of the State commission can be challenged before the
National Commission. Any person aggrieved by the order of the National Commission can resort to the
Supreme court as the last remedy.

It also provides for a limitation period for preferring appeals to the State Commission, National
Commission and Supreme Court. District forum, State Commission or National Commission shall not
entertain any appeal filed after expiry of 2 years from the date on which the cause of action has arisen.
However, the forums have the power to condone the delay in preferring appeals within such time limit if
sufficient cause is shown for not filing the appeal within the prescribed time limit. What is “sufficient
cause” will depend on the facts and circumstances of every particular case. 

It also makes provisions regarding enforcement of the orders of the District forum, State Commission and
National Commission and penalties to be levied under the Act.

http://www.fcamin.nic.in/Events/EventDetails.asp?EventId=594&Section=Acts%20and
%20Rules&ParentID=0&child_continue=1&child_check=0

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Q6. Detailed Note of Memorandum and Articles of Association?

http://www.authorstream.com/Presentation/gyaneshmahor-642435-presentation-memorandum-article-of-
association/

1) MoA:

MoA has 6 clauses:

@ The Name Clause

@ The Registered Office Clause
@ The Object Clause
@ The capital Clause
@ The Liability Clause
@ The Association Clause.

2) AoA:

It is internal management of the company. It shows what type of power / responsibilities / authority
the investors have.Its by laws that governs management of internal affairs defines duties / rights /
powers / number of directors of the company. It also show that what is mode & form in which
business is to be carried out subordinating to MoA & can not supersede object set by MoA.

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Q7. What are IPR’s, Explain Procedure for Getting a Patent?

Intellectual property rights are the rights given to persons over the creations of their minds. They usually
give the creator an exclusive right over the use of his/her creation for a certain period of time.

i) Copyright and rights related to copyright. back to top

The rights of authors of literary and artistic works (such as books and other writings, musical compositions,
paintings, sculpture, computer programs and films) are protected by copyright, for a minimum period of
50 years after the death of the author.

Also protected through copyright and related (sometimes referred to as “neighbouring”) rights are the
rights of performers (e.g. actors, singers and musicians), producers of phonograms (sound recordings) and
broadcasting organizations. The main social purpose of protection of copyright and related rights is to
encourage and reward creative work.

Industrial property can usefully be divided into two main areas:

 One area can be characterized as the protection of distinctive signs, in particular trademarks (which
distinguish the goods or services of one undertaking from those of other undertakings) and
geographical indications (which identify a good as originating in a place where a given characteristic
of the good is essentially attributable to its geographical origin).

The protection of such distinctive signs aims to stimulate and ensure fair competition and to protect
consumers, by enabling them to make informed choices between various goods and services. The
protection may last indefinitely, provided the sign in question continues to be distinctive.

 Other types of industrial property are protected primarily to stimulate innovation, design and the
creation of technology. In this category fall inventions (protected by patents), industrial designs and
trade secrets.

The social purpose is to provide protection for the results of investment in the development of new
technology, thus giving the incentive and means to finance research and development activities.

A functioning intellectual property regime should also facilitate the transfer of technology in the
form of foreign direct investment, joint ventures and licensing.

The protection is usually given for a finite term (typically 20 years in the case of patents).

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Q8. What are Trademarks? Explain Remedy for violation of Trademark?

A trademark or trade mark or trade-mark[1] is a distinctive sign or indicator used by an

individual, business organization, or other legal entity to identify that
the products or services to consumers with which the trademark appears originate from a unique source,
and to distinguish its products or services from those of other entities.

A trademark may be designated by the following symbols:

 ™ (for an unregistered trade mark, that is, a mark used to promote or brand goods)

 ℠ (for an unregistered service mark, that is, a mark used to promote or brand services)

 ® (for a registered trademark)

A trademark is typically a name, word, phrase, logo, symbol, design, image, or a combination of these

elements.[2] There is also a range of non-conventional trademarks comprising marks which do not fall into
these standard categories, such as those based on color, smell, or sound.

The owner of a registered trademark may commence legal proceedings for trademark infringement to

prevent unauthorized use of that trademark. However, registration is not required. The owner of a common
law trademark may also file suit, but an unregistered mark may be protectable only within the geographical
area within which it has been used or in geographical areas into which it may be reasonably expected to
expand.

The essential function of a trademark is to exclusively identify the commercial source or origin of products
or services, such that a trademark, properly called, indicates source or serves as a badge of origin. In other
words, trademarks serve to identify a particular business as the source of goods or services. The use of a
trademark in this way is known as trademark use. Certain exclusive rights attach to a registered mark, which
can be enforced by way of an action for trademark infringement, while unregistered trademark rights may
be enforced pursuant to the common law tort of passing off.

It should be noted that trademark rights generally arise out of the use or to maintain exclusive rights over
that sign in relation to certain products or services, assuming there are no other trademark objections.

Different goods and services have been classified by the International (Nice) Classification of Goods and
Services into 45 Trademark Classes (1 to 34 cover goods, and 35 to 45 services). The idea of this system is to
specify and limit the extension of the intellectual property right by determining which goods or services are
covered by the mark, and to unify classification systems around the world.

Infringement of a trademark

A registered trademark is infringed if a person uses the same/deceptively similar mark in the course of
trade, in respect to the same goods. The test for deceptive similarity is whether the defendant's use of a
mark is likely to cause confusion, i.e., whether an appreciable number of reasonably prudent consumers are
likely to be confused or deceived as to the source, affiliation or sponsorship of the parties and their goods
and services.
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Reliefs that the court may grant in an infringement suit are:

 Injunction, restraining the further use of the trademark;

 Damages or an account of profits; and

 An order for delivery of the infringing labels and marks for destruction.

 Infringement of Trade Mark-

 Trademark infringement is a violation of the exclusive rights attaching to a trademark without the
authorization of the trademark owner or any licensees (provided that such authorization was within
the scope of the license). Infringement may occur when one party, the "infringer", uses a trademark
which is identical or confusingly similar to a trademark owned by another party, in relation to
products or services which are identical or similar to the products or services which the registration
covers. An owner of a trademark may commence legal proceedings against a party which infringes
its registration.

 Trade mark Law in India-

 The Indian law of trademarks is enshrined the new Trade Marks Act, 1999 came into force with effect
from September 15, 2003. The old Trade and Merchandise Marks Act, 1958 was repealed at the
same time. The new Trademarks Act of 1999 is in line with the WTO recommendations and is in
conformity with the TRIPS Agreement to which India is a signatory.

 India has declared certain countries as convention countries, which afford to citizens of India similar
privileges as granted to its own citizens. A person or company from a convention country, may
within six months of making an application in the home country, apply for registration of the
trademark in India. If such a trademark is accepted for registration, such foreign national will be
deemed to have registered his or her trademark in India, from the same date on which he or she
made application in the home country.

Read more: http://www.articlesbase.com/intellectual-property-articles/trade-mark-law-in-india-its-
violation-an-analytical-study-543492.html#ixzz1EVt0sazf 
Under Creative Commons License: Attribution

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Q9. Explain salient features of IT Act 2000?

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