Business Law

September 2022 Examination

Arun is protesting the enforcement of a contract executed for sale of his flat. He claims that this
is a voidable contract. Please explain under which instances can Arun protest the agreement as
voidable agreement

Answer

What Is a Voidable Contract?

A voidable contract is a formal agreement between two parties that may be rendered unenforceable
for any number of legal reasons, which may include:

Failure by one or both parties to disclose a material fact

A mistake, misrepresentation, or fraud
Undue influence or duress
One party's legal incapacity to enter a contract (e.g., a minor)
One or more terms that are unconscionable
A breach of contract
The legal right to void such a contract is known as disaffirmance.

How Voidable Contracts Work

A voidable contract is initially considered legal and enforceable but can be rejected by one party if the
contract is discovered to have defects. If a party with the power to reject the contract chooses not to
reject the contract despite the defect, the contract remains valid and enforceable.

Most often, only one of the parties is adversely affected by agreeing to a voidable contract in which
that party fails to recognize the misrepresentation or fraud made by the other party.

Voidable vs. Void Contracts

A voidable contract occurs when one of the involved parties would not have agreed to the contract
originally if they had known the true nature of all of the elements of the contract prior to original
acceptance. With the presentation of new knowledge, the aforementioned party has the opportunity to
reject the contract after the fact. Alternatively, a contract is voidable when one or both parties were
not legally capable of entering into the agreement—for example, when one party is a minor.
In contrast, a void contract is inherently unenforceable. A contract may be deemed void should the
terms require one or both parties to participate in an illegal act, or if a party becomes incapable of
meeting the terms as set forth, such as in the event of one party’s death.

A contract that is deemed voidable can be corrected through the process of ratification. Contract
ratification requires all involved parties to agree to new terms that effectively remove the initial point
of contention that was present in the original contract.
If it was later discovered that one of the parties was not capable of entering into a legally enforceable
contract when the original was approved, for example, that party can choose to ratify the contract
when they are deemed legally capable.

Section 19 in The Indian Contract Act, 1872

Voidability of agreements without free consent.—When consent to an agreement is

caused by coercion,fraud or misrepresentation, the agreement is a contract voidable at the
option of the party whose consent was so caused. —When consent to an agreement is
caused by coercion, fraud or misrepresentation, the agreement is a contract voidable at the
option of the party whose consent was so caused." A party to a contract, whose consent
was caused by fraud or misrepresentation, may, if he thinks fit, insist that the contract
shall be performed, and that he shall be put in the position in which he would have been if
the representations made had been true.

If such consent was caused by misrepresentation or by silence, fraudulent within the

meaning of section 17, the contract, nevertheless, is not voidable, if the party whose
consent was so caused had the means of discovering the truth with ordinary diligence.

Explanation.—A fraud or misrepresentation which did not cause the consent to a

contract of the party on whom such fraud was practised, or to whom such
misrepresentation was made, does not render a contract voidable. Illustrations

(a) A, intending to deceive B, falsely represents that five hundred maunds of indigo are
made annually at A’s factory, and thereby induces B to buy the factory. The contract is
voidable at the option of B. (a) A, intending to deceive B, falsely represents that five
hundred maunds of indigo are made annually at A’s factory, and thereby induces B to
buy the factory. The contract is voidable at the option of B."

(b) A, by a misrepresentation, leads B erroneously to believe that five hundred maunds

of indigo are made annually at A’s factory. B examines the accounts of the factory,
which show that only four hundred maunds of indigo have been made. After this B buys
the factory. The contract is not voidable on account of A’s misrepresentation. (b) A, by a
misrepresentation, leads B erroneously to believe that five hundred maunds of indigo
are made annually at A’s factory. B examines the accounts of the factory, which show
that only four hundred maunds of indigo have been made. After this B buys the factory.
The contract is not voidable on account of A’s misrepresentation."

(c) A fraudulently informs B that A’s estate is free from incumbrance. B thereupon buys
the estate. The estate is subject to a mortgage. B may either avoid the contract, or may
insist on its being carried out and mortgage-debt redeemed. (c) A fraudulently informs
B that A’s estate is free from incumbrance. B thereupon buys the estate. The estate is
subject to a mortgage. B may either avoid the contract, or may insist on its being carried
out and mortgage-debt redeemed."

(d) B, having discovered a vein of ore on the estate of A, adopts means to conceal, and
does conceal the existence of the ore from A. Through A’s ignorance B is enabled to buy
the estate at an under-value. The contract is voidable at the option of A. (d) B, having
discovered a vein of ore on the estate of A, adopts means to conceal, and does conceal
the existence of the ore from A. Through A’s ignorance B is enabled to buy the estate at
an under-value. The contract is voidable at the option of A."

(e) A is entitled to succeed to an estate at the death of B; B dies: C, having received

intelligence of B’s death, prevents the intelligence reaching A, and thus induces A to
sell him his interest in the estate. The sale is voidable at the option of A. (e) A is entitled
to succeed to an estate at the death of B; B dies\: C, having received intelligence of B’s
death, prevents the intelligence reaching A, and thus induces A to sell him his interest in
the estate. The sale is voidable at the option of A."

Q2.Please give two (2) real life instances where individuals or entities are
prosecuted for violation of the Information Technology Act, 2000.

Answer:

Information Technology Act, 2000

Information Technology Act, 2000 (hereinafter referred to as “IT Act) was enacted in
India to provide legal recognition to transactions carried out through electronic
mediums, and to facilitate the electronic filing of documents with the Government
Agencies. It was enacted after the General Assembly of the United Nations adopted the
‘Model Law on Electronic Commerce’ through a resolution. This Act was largely based
on the Model Law that was adopted by the UN.In this article, I will discuss some
Important Case Laws inIT Act, of 2000.

Primarily, the Information Technology Act, 2000 provides the basic legal framework for
electronic transactions in India. Along with this Act, various rules notified under this
Act play a significant role in regulating the digital space. The rights of copyright owners
cannot be restricted by Section 79 of the IT Act, 2000. So, intermediaries who infringe
copyrights of anyone cannot seek protection under this section. Banyan Tree case
Judgment is a Landmark for determining the jurisdiction of the court,where neither
party to a suit, claiming online copyright infringement, resides within the territorial
jurisdiction of such court. Union Government notified Information Technology
(Intermediary Guidelines and Digital Media Ethics Code) Rules, 2021. But these Rules
have been challenged by various organizations as being violative of Fundamental
Rights.

Example

1. State of Tamil Nadu v. Dr. L Prakash (W.P.M.P.No. 10120 of 2002)

In this case, an FIR was registered against Dr. L Prakash under Section 67 of the IT
Act, 2000 read with Section 4 & 6 of the Indecent Representation of Women Act,
Section 27 of the Arms Act, and Sections 120B & 506 (2) of the IPC. The said case was
registered as Dr. L Prakash was accused of making pornographic videos and then
sending those to the US & France for publication on pornographic websites. The Fast
Track Court convicted the accused under the aforesaid provisions and sentenced him to
undergo imprisonment for life. A fine of Rs. 1.27 lakh was also imposed on him. This
case is a landmark in the Cyber Crime Law as it was the first time that pornographic
websites and their brokers were targeted in India.

2. Amar Singh v. Union of India [(2011) 4 AWC 3726 SC]

In this case, the petitioner had alleged that his calls were being tapped unauthorizedly by
his telecom service provider. He had claimed that the alleged tapping was violating his
fundamental right to privacy under Article 21 of the Constitution of India. The service
provider had argued that it was complying with the government orders. This case is
important in the context of Sections 69, 69A, and 69B of the IT Act, 2000. The court
observed that a telecom service provider performs a function of public nature. It is his
inherent duty to act carefully and in a responsible manner. Furthermore, it was observed
that when the orders of the government ‘to tap calls’ have gross mistakes, then the
service provider must verify the authenticity of such orders. The court also directed the
Central Government to frame certain directions/guidelines to prevent unauthorized
interception of calls.
 Q3. Namesh wants to obtain the details of regulatory approvals and other formulation details
of a cosmetic product manufactured by a FMCG company in India. These approvals and
details were filed with the Indian government by the FMCG company, at the time of launch of
the cosmetic product. The details provided to Indian government gave the FMCG company a
competitive position in the market.Please advise Namesh on the requisition of the information
from the government:

a. Under which law can Namesh obtain the details and information of the regulatory approval
and of formulation of the said cosmetic product?

b. Can Namesh’s request be declined? If yes, please give reasons?

ANSWER

(a)

The Drugs and Cosmetics Act 1940 and the Drug and Cosmetic Rules 1945 have
regulated cosmetic products in India for years. According to the Drugs and Cosmetics Act
1940, a cosmetic is defined as “any article intended to be rubbed, poured, sprinkled or
sprayed on, or introduced into, or otherwise applied to, the human body or any part
thereof for cleansing, beautifying, promoting attractiveness or altering the appearance,
and includes any article intended for use as a component of cosmetic”.

The manufacture of cosmetics is regulated under a system of inspection and licensing by

the State Licensing Authorities appointed by the respective State Governments. Import of
cosmetics into India is regulated through a system of registration by the Central Drugs
Standard Control Organization (CDSCO) under the provisions of the Drugs and
Cosmetics Act, 1940 and the Cosmetics Rules, 2020. CDSCO is the main regulatory
authority for the cosmetics industry.

If a product falls within the definition of cosmetic (under the 1940 Act), it is required to
be registered along with pack size, variant(s) and manufacturing premises before it is
imported into the country. If a cosmetic product is not registered under the existent rules,
it cannot be imported to India. On the other hand, if a cosmetic product does not comply
with the specifications set out and the standards of quality or safety, it cannot be imported
or manufactured in India.