Master of Business Administration - MBA Semester III MB0051 Legal Aspects of Business - 4 Credits (Book ID: B0764) Assignment Set

- 1 (60 Marks) Question 1: Distinguish between fraud and misrepresentation. Answer: Distinction between fraud and misrepresentation: Sometimes the terms fraud and misrepresentation are used inter-changeably by readers however they are actually different. There is not a much difference between the two but a little one as misrepresentation does not directly mean fraud. Below is a table on the salient points to distinguish the terms: Fraud The word fraud comes from the Middle English word fraude taken from the Old French and derived from the Latin fraus . The word fraud means a deliberate form of deception that is practiced to secure some sort of unlawful and unfair gain. Implies on intention to deceive, hence it is intentional or willful wrong. Misrepresentation Misrepresentation is a type of lying or falsehood in which a person says or does something that would lead another person to believe something that is not in accordance with the facts .

It is an innocent wrong without any intention to deceive. The person making the statement believes it to be true. A civil wrong which entitles a party to claim It gives only the right to rescind the contract damages in addition to the right to rescind and there can be no suit for damages. the contract. In fraud, the person making the In situations of innocent misrepresentation representation does not himself believe in the person making the statement may the truth of the statement he is making. n believe that what he is saying is true. This is cases of fraud, the person making the due to the fact that the person making the statement is a complete liar and is making statement is simply repeating what another the statement to deceive others to enter person has asserted to be true into a contract Deceit, trickery, sharp practice, or breach of A misrepresentation or concealment with confidence, perpetrated for profit or to gain reference to some fact material to a some unfair or dishonest advantage. transaction that is made with knowledge of its falsity or in reckless disregard of its truth or falsity and with the intent to deceive

An agreement is defined as every promise and every set of promises forming the consideration for each other and a promise is an accepted proposal. If one party meets its contractual obligations and the other party doesn t ( breaches the contract ). Misrepresentation may not have malicious intent to deceive if it happens negligently through a misstatement and/or omission of a material fact(s). Types of fraud are: Types of misrepresentation are: Fraud is fraud until you get into a legal  Fraudulent misrepresentation issue. the non-breaching party s remedy for breach of contract is monetary damages that will put the non-breaching party in the position it would have enjoyed if the contract had been performed. Contracts are enforceable in the courts. Then there are differences but there  Negligent misrepresentation is only one type of fraud in realty. For every contract there must be an agreement. The core of most contracts is a set of mutual promises (in legal terminology. Under special circumstances. the non-breaching party is entitled to receive relief through the courts. Definition of a Contract: A contract is a legally enforceable agreement between two or more parties. parties who enter into contracts can rely on contracts in structuring their business relationships.another and that is reasonably relied on by the other who is injured thereby. a court will order the breaching party to perform its contractual obligations. The promises made by the parties define the rights and obligations of the parties. The essentials of a (valid) contract are: . Generally. Fraud always has malicious intent. Essentials of a Contract: The Indian Contract Act -1872 defines contract as an agreement enforceable by law. Because contracts are enforceable. Most of these relationships result in contracts that have legal consequences. Most contracts do not have to be in writing to be enforceable. consideration ).  Innocent misrepresentation Question 2: What are the remedies for breach of contract? Answer: Businesses both individual and corporate enter into business relationships with either individuals or businesses to enable them to carry on their day-to-day commercial transactions.

reasonable compensation. which he has sustained through non-fulfillment of the contract. the party who suffers by such breach is entitled to receive. consideration. When a contract has been breached. remedy clauses are usually designed to limit the seller s liability for damages. compensation for any loss or damage caused to him thereby. from the party who has breached the contract. A person who rightfully rescinds a contract is entitled to compensation for any damage. In contracts for the sale of goods. the party complaining of the breach is entitled.      intention to create legal relations. when they made the contract. Liquidated damages and penal stipulations: If a sum is named in the contract as the amount to be paid in case of breach of contract. The non-performance of the duty undertaken by a party in a contract amounts to breach of contract for which it can be made liable. to be likely to result from the breach of it. Remedies for breach of contract: The legal remedies for breach of contract are: a) Damages b) Specific performance of the contract. to receive. capacity to enter into a contract free consent of the parties lawful object of the agreement Remedy Clauses: These clauses state what rights the non-breaching party has if the other party breaches the contract. or if the contract contains any other stipulation by way of penalty. each party to the contract is legally bound to perform his part of the obligation. offer and acceptance. whether or not actual damage of loss is proved to have been caused thereby. from the party who has broken the contract. and c) Injunction. . In a contract the agreement being enforceable by law. not exceeding the amount so named or the penalty stipulated for. being loss or damages which naturally arose in the usual course of things from such breach or which the parties knew. Such compensation is not to be given for any remote and indirect loss of damage sustained by reason of the breach.

A contract the performance of which involves the performance of a continuous duty. which the Court cannot supervise. Another situation when a contract cannot be specifically enforced is where the contract is in its nature determinable . Specific Performance of any contract may. . cannot be specifically enforced. This remedy is discretionary and granted in exceptional cases. or otherwise from its nature is such. in the discretion of the court be enforced in the following situations  When there exists no standard for ascertaining the actual damage caused by the nonperformance of the act agreed to be done. the party may be directed to perform the very obligation which he has undertaken. Persons who cannot obtain Specific Performance: The specific performance of a contract cannot be obtained in favor of a person who could not be entitled to recover compensation for the breach of contract. The court is empowered to reduce it to an amount which is reasonable in the circumstances. the court may direct against the party in default specific performance of the contract. for instance machinery or goods. Exceptions: A contract which runs into such minute or numerous details or which is so dependent on the personal qualifications or volition of the parties. Specific performance: In certain special cases (dealt with in the Specific Relief Act. cannot be specifically enforced.A stipulation for increased interest from the date of default may be regarded as a stipulation by way of penalty . that is to say. that the court cannot enforce specific performance of its material terms. 1963). A contract is said to be determinable. by the contract. Specific performance means actual execution of the contract as agreed between the parties.  Instances where compensation would be deemed adequate relief are:  Agreement as a consequence of a breach by a landlord for repair of the rented premises.  Contract for the sale of any goods. when a party to the contract can put it to an end. or  When the act agreed to be done is such that monetary compensation for its nonperformance would not afford adequate relief.

or in subversion. the person in respect of whose default the guarantee is given is called the principal debtor .the There are three parties namely the surety. or who willfully acts at variance with. Guarantee Section 126 of the Indian Contract Act 1872 defines a contract of guarantee is a contract to perform the promise or discharge the liability of a third person in case of his default . Indemnity comprise only two parties.g. Append below some salient points pertaining to the difference/distinction between Indemnity and Guarantee: Distinction between Indemnity and Guarantee: Indemnity Section 124 of the Indian Contract Act 1872 defines a "contract of indemnity" as a contract by which one party promises to save the other from loss caused to him by the conduct of the Promisor himself. indemnifier and the indemnity holder. Question 3: Distinguish between indemnity and guarantee. or who violates any essential term of the contract that on his part remains to be performed. There are important legal distinctions between them. I hope this gives you a relevant overview into the key aspect of business contracts and if one takes adequate care when drafting contracts. or by the conduct of any other person. needless to say relationships will be better and probably more profitable. 'P' lends Rs. The person who gives the guarantee is called the surety .200/=. Answer: Introduction: Guarantees and indemnities are both long established forms of what the law terms surety ship. A guarantee may be either oral or written.g. 5000/= to 'Q' and 'R' promises to 'P' that if 'Q' does not pay the money back then 'R' will do so. principal debtor and the creditor . of the relation intended to be established by the contract.. = 'x' contracts to indemnify 'y' against the consequences of any legal proceedings which may take against B in respect of a certain sum of Rs.Specific performance of a contract cannot be enforced in favor of a person who has become incapable of performing the contract that on his part remains to be performed. and the person to whom the guarantee is given is called the creditor . e. or who acts fraudulently despite the contract. e.

It has three parties .Liability of the indemnifier is primary The indemnifier need not necessarily act at the request of the indemnified. Distinction between Cheque and bill of exchange Cheque Bill of Exchange It is drawn on a banker It may be drawn on any party or individual. The possibility of any loss happening is the only contingency against which the indemnifier undertakes to indemnify. the drawee. the indemnifier promises without the request of debtor. the performance of which is guarantee by the surety A guarantee is for security of the creditor. The primary liability being that of the principal debtor.the drawer. the There are three parties . Some of these documents are called negotiable instruments. In this lesson let us learn about these documents. The surety is liable only if the principal debtor makes a default. It is quite inconvenient as well as risky for either party to make and receive payments in cash. large number of transactions involving huge sums of money takes place every day. Contract of Guarantee is for security of a debt or performance of promise Question 4: What is the distinction between cheque and bill of exchange? Answer: Exchange of goods and services is the basis of every business activity. and may sue the principal debtor. Goods are bought and sold for cash as well as on credit. The surety give guarantee only at the request of the principal debtor There is an existing debt or duty. In case of contract of guarantee the liability of surety is secondary and arises when the principal debtor defaults. The liability of the surety is secondary. .the drawer. All these transactions require flow of cash either immediately or after a certain time. and payee. the surety steps into the shoes of the creditor on discharge of his liability. and the payee. it is a common practice for businessmen to make use of certain documents as means of making payment. drawee. Whereas in a contract of guarantee. Therefore. An indemnity is for reimbursement of a loss In a contract of indemnity the liability of the indemnifier is primary and arises when the contingent event occurs. In modern business. The indemnifier after performing his part of the promise has no rights against the third party and he can sue the third party only if there is an assignment in his favor. In a contract of indemnity.

But a bill may be made payable on demand also. just like the above specimen. c) Bearer cheque d) Order cheque Foreign bills are drawn in sets It must be accepted by the drawee before he can be made liable to pay the bill. cheques are of four types. Answer: The Companies Act. t is seldom drawn in sets It does not require acceptance by the drawee. Stamp duty has to be paid on bill of exchange.12 permits the formation of different types of companies. and that the financial . is called a Time Bill. The vast majority of companies in India are with limited liability by shares. 1956 defines the word company as a company formed and registered under the Act or an existing company formed and registered under any of the previous company laws (Sec.3) . a) Open cheque. Three days of grace are always allowed to the drawee. These may be:  Companies limited by shares  Companies limited by guarantee and  Unlimited companies. Question 5: Distinguish between companies limited by shares and companies limited by guarantee. In a bill where a time period is mentioned. Distinction between Cheque and bill of exchange Companies limited by shares Companies limited by guarantee A company limited by guarantee is normally Limited by shares is defined by: a company incorporated for non-profit making that has shareholders. It may be drawn in any paper and need not necessarily be printed. Days of grace are not allowed to a banker No stamp duty is payable on checks It is usually drawn on the printed format Broadly speaking. and b) Crossed cheque. This definition does not bring out the meaning and nature of the company into a clear perspective. Here the words in the bill would be Pay to us or order. This is called a Demand Bill.The drawer can also draw a bill in his own name thereby he himself becomes the payee. Also Sec.

The members of the company guarantee/undertake to contribute a predetermined sum to the liabilities of the company which becomes due in the event of the company being wound up. This is the wellknown distinctive characteristic between a private limited company and a public limited company. A company limited by guarantee has members rather than shareholders. but revenues invested in the company will be unrecoverable. but for this reason its shares might NOT be provided to the general public (and consequently can't be listed on a national stock market exchange). (limited company disclosure) involves are less demanding. professional.functions. Companies limited by guarantee are less popular than companies limited by shares. Companies limited by guarantee have members. there are shareholders. and not share holders There is no share capital in case of companies limited by guarantee and it also has self-imposed restrictions Question 6: What is the definition of cyber-crime? Answer: . obligation of the shareholders to creditors of the company is restricted to the capital invested in the first place (i.e. The company has no share capital. Companies limited by guarantee are nonprofit making In case of companies limited by shares. Limited companies could be either private or public. trade or research associations. The Memorandum normally includes a nonprofit distribution clause and these companies are usually formed by clubs. Shareholder's individual s assets are thereby secured in the case of the company's insolvency. The absolute majority of trading corporations are private companies limited by shares. the specified value of the shares and any premium paid off in exchange for the issue of the shares by the company). A private Ltd. Companies limited by shares can engage in legal trades and have general clauses. Companies limited by shares are more popular Companies limited by shares are profit making companies.

Even in the real world. But it is worth knowing that Africans and indeed Nigerians are yet to develop their technical knowledge to accommodate and perpetrate this kind of crime.  Computer as a target: These crimes are committed by a selected group of criminals. It leaves a negative social and economic consequence. these crimes requires the technical knowledge of the perpetrators. theft. crimes like rape. having been in existence for only as long as computers have . The same criminal has simply been given a tool which increases his potential pool of victims and makes him all the harder to trace and apprehend. Hence. sports or education. For example. the computer can be considered as the tool rather than the target. However. all cybercrimes involve both the computer and the person behind it as victims. That is so because crime is the direct opposite of development. These are the crimes which have existed for centuries in the offline. The damage dealt is largely psychological and intangible. It has given rise to new opportunities in every field we can think of be it entertainment. These crimes are relatively new. It is important to take note that overlapping occurs in many cases and it is impossible to have a perfect classification system. Cybercrime: Cybercrime is defined as crimes committed on the internet using the computer as either a tool or a targeted victim. One thing is certain. it just depends on which of the two is the main target. business. murder or theft need not necessarily be separate.which explains how unprepared society and the world in general is towards combating these crimes.Introduction: Crime and criminality have been associated with man since his fall. Human weaknesses are generally exploited. it is that a nation with high incidence of crime cannot grow or develop. Different nations have adopted different strategies to contend with crime depending on their nature and extent. Scams. Crime remains elusive and ever strives to hide itself in the face of development.  Computer as a tool: When the individual is the main target of Cybercrime. These crimes generally involve less technical expertise as the damage done manifests itself in the real world. There are two sides to a coin. It is very difficult to classify crimes in general into distinct groups as many crimes evolve on a daily basis. and the likes have existed even before the development in high-tech equipment. the computer will be looked at as either a target or tool for simplicity s sake. making legal action against the variants more difficult. Unlike crimes using he computer as a tool. hacking involves attacking the computer s information and other resources. Internet . The internet in India is growing rapidly. There are numerous crimes of this nature committed daily on the internet.

communications. which invade our privacy and offend our senses. The potential harm of such a crime to humanity can hardly be amplified. It said that computers that "control (our) power delivery. . 1999 to state and federal charges associated with his creation of the Melissa virus. 3) Cybercrimes against government. and dissemination of obscene material including pornography and indecent exposure. Criminal activities in the cyberspace are on the rise. Similarly. the creation and dissemination of harmful computer programs which do irreparable damage to computer systems is another kind of Cybercrime. constitutes one of the most important Cybercrimes known today. stole the technical database from their computers with the help of a corporate cyber spy. harassment of any one with the use of a computer such as e-mail. posting. A Mumbai-based upstart engineering company lost a say and much money in the business when the rival company. David Smith pleaded guilty on Dec. Cybercrimes committed against persons include various crimes like transmission of childpornography. This is one Cybercrime which threatens to undermine the growth of the younger generation as also leave irreparable scars and injury on the younger generation. if not controlled.also has its own disadvantages.2 million computers in one-fifth of the country's largest businesses. One of the major disadvantages is Cybercrime illegal activity committed on the internet. Unauthorized access: Using one's own programming abilities as also various programs with malicious intent to gain unauthorized access to a computer or network are very serious crimes. Here we publish an article by Nandini Ramprasad in series for the benefit of our netizens. Software piracy is also another distinct kind of Cybercrime which is perpetuated by many people online who distribute illegal and unauthorized pirated copies of software. an industry major. has also exposed us to security risks that come with connecting to a large network. the virus made its way through 1. In the United States alone. The internet. credit card fraud. There are numerous examples of such computer viruses few of them being "Melissa" and "love bug". Computers today are being misused for illegal activities like e-mail espionage. aviation and financial services (and) store vital information. The trafficking. Professionals who involve in these cybercrimes are called crackers and it is found that many of such professionals are still in their teens. distribution. Cybercrimes can be basically divided into 3 major categories: 1) Cybercrimes against persons 2) Cybercrimes against property. A report written near the start of the Information Age warned that America's computers were at risk from crackers. 9. along with its advantages. spams. and software piracy and so on.

.from medical re-cords to business plans. were vulnerable from many sources. including deliberate attack. to criminal records".

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