Learnovate e-commerce

Week 4 – Task 15
12/11/2020 - Thursday

Topic : Answer the following questions.

Submitted By : Najiya.A

Q.1. A) Define holder. Explain the rights of holder in due course?

 Holder is a term used to any person that has
in his custody a promissory note, bill of exchange or cheque. He has a
possession of a legal instrument. That person must be entitled to
possess the instrument legally and also recover the amount which is
due from the instrument. He must also have the legal capacity to
enforce his rights in his own name.
Holder in due course acquiring the instrument for consideration and
in good faith gets the following rights under the act:
 Holder in due course can file a suit in his own name against the
parties liable to pay. He is deemed prima facie to be holder in
due course (Sec 118)
 The holder is due course gets a good title even though the
instruments were originally stamped but was an inchoate
instrument (Sec 20). The person who has signed and delivered
an inchoate instrument cannot plead as against the holder in
due course that the instrument has not been filled in
accordance with the authority given by him. However, a holder
who himself completes the instrument is not a holder in due
course.
 Every prior party to the instruments is liable to a holder in due
course until the instrument is duly satisfied (Sec 36).
 Acceptor cannot plead against a holder in due course that the
bill is drawn in a fictitious name (Sec 42).
 The other parties liable to pay cannot plead that the delivery of
the instrument was conditional or for a specific purpose only
(Sec 46).
 He gets a good title to the instrument even though the title of
the transferor or any price party to the instrument is defective
(Sec 53) He can recover the full amount unless he was a party
to fraud; or if the instrument is negotiated by means of a
forged endorsement.
  Even if the negotiable instrument is made without
consideration, if it gets into the hands of the holder in due
course, he can recover the amount on it from any of the prior
parties thereto.
 The person liable cannot plead against the holder in due course
that the instrument had been lost or was obtained by means of
an offence of fraud or for an unlawful consideration (sec 58).
 The validity of the instrument as originally made or dawn
cannot be denied by the maker of drawer of a negotiable
instrument or by acceptor of a bill of exchange for honour of
the drawer (Sec 120).
 The maker of a note or an acceptor of a bill payable to order
cannot deny the payee’s capacity to indorse the same at the
date of the note or bill (sec 121).
 Endorser is not permitted as against the holder in due course to
deny the signature or capacity to contract of any prior party to
the instrument (Sec 122).

B) ‘A’ sells a radio to ‘M’ a minor, who pays for it by cheque. ‘A’
indorses the cheque to ‘B’ who takes it in good faith and for more
values. The cheque is dishonoured on presentation. Can ‘B’ enforce
payment of the cheque against ‘A’ or ‘M’?

‘B’ can enforce payment against ‘A’ but not

against ‘M’ since ‘ M’ is a minor and even though the act permits
minor to negotiable instrument transactions, any liability caused
minor cannot be held liable for payment.
Q.2.A) Define promissory note. Explain the essential features of
promissory note.[specimen is required].
A promissory note is defined as “ an instrument in
writing (not being a bank note or a currency note), containing an
unconditional undertaking signed by the maker, to pay a certain sum
of money only to or to the order of a certain person, or to the
bearer.”
Essential features of promissory note are :
1. It must be in writing.
2. It must contain an unconditional promise to pay.
3. It should be signed by the maker.
4. The payment should be made to a certain person.
5. The certainty of the amount payable should be there.
6. It should be stamped.
Specimen:
B) ‘A’ is a payer of a bearer instrument, ‘A’ misplaces the
instrument in his office. It is picked by ‘B’. ‘B’ delivers it to ‘C’ who
takes it in good faith and for valuable consideration. Is ‘C’ a holder
in due course?
Yes. The instrument was payable to bearer as it was a
bearer instrument. It could be negotiated by delivery despite the
presence of special endorsements. Now, C is the holder of the bearer
instrument as he takes it from B in good faith. But only B knows that
he has taken from A.

Q.3.A)Define company. Differentiate between a

company and a partnership firm?
Under Companies Act 2013, a company is
defined as “ a company incorporated under this Act or any previous
Company Law”. A company is a legal entity formed by a group of
individuals to engage in and operate a business commercial or
industrial enterprise. A company may be organized in various ways
for tax and financial liability purposes depending on the corporate
law of its jurisdiction. The line of business the company is in will
generally determine which business structure it chooses such as a
partnership, proprietorship, or corporation. These structures also
denote the ownership structure of the company. They can also be
distinguished between private and public companies. Both have
different ownership structures, regulations, and financial reporting
requirements.

Difference between a Company and Partnership firm :

• The members of the partnership firm are called partners
whereas the members of company are called shareholders.
• The partnership business is to be governed by the Indian
Partnership Act, 1932 whereas the business of the company is
determined by Indian Companies act, 2013
• Partnership firm is created by contract between two or more
persons whereas company is created by law i.e. registration.
• The rules of a partnership are to be registered by the state
government whereas in the case of the company it is to be regulated
by the central government.
• Registration of a firm is not necessary whereas the company's
registration is mandatory.
• The mandatory document in case of partnership is partnership
deed whereas in the case of a company the mandatory document is
the memorandum of association and articles of association.
• A partnership firm is not a separate legal entity from its
partners whereas a company is a separate legal entity.
• Partners have unlimited liability whereas shareholders have
limited liability.
• Seal ( Stamp ) is not required for partnership whereas in case of
company stamp is required.
• In case of partnership, management is to be done by active
partners whereas in case of company management is done by the
board of directors.
• Decree against a firm can be executed against partners
whereas decree can't be executed against shareholders.
• In the case of a private company, the word is to be used Pvt.
Ltd and in case of a public company, the word is to be used Ltd. only
whereas such words are not required in case of partnership.
B) Define company. Differentiate between private company
and public company?
Under Companies Act 2013, a company is
defined as “ a company incorporated under this Act or any previous
Company Law”. A company is a legal entity formed by a group of
individuals to engage in and operate a business commercial or
industrial enterprise. A company may be organized in various ways
for tax and financial liability purposes depending on the corporate
law of its jurisdiction.
Differentiate between private company and public company :
 Minimum Paid-up Capital : A company to be incorporated as a
Private Company must have a minimum paid-up capital of
₹ 1, 00,000, whereas a Public Company must have a minimum
paid-up capital of ₹ 5, 00,000.
 Minimum Number of Members : Minimum number of
members required to form a private company is 2, whereas a
Public Company requires at least 7 members.
 Maximum Number of Members : Maximum number of
members in a Private Company is restricted to 50, there is no
restriction of maximum number of members in a Public
Company.
 Transferability of Shares : There is complete restriction on the
transferability of the shares of a Private Company through its
Articles of Association, whereas there is no restriction on the
transferability of the shares of a Public Company. Issue of
Prospectus- A Private Company is prohibited from inviting the
public for subscription of its shares, i.e. a Private Company
cannot issue Prospectus, whereas a Public Company is free to
 invite public for subscription i.e., a Public Company can issue a
Prospectus.

 Number of Directors : A Private Company may have 2 directors

to manage the affairs of the company, whereas a Public
Company must have atleast 3 directors.
 Consent of the Directors : There is no need to give the consent
by the directors of a Private Company, whereas the Directors of
a Public Company must have file with the Registrar a consent to
act as Director of the company.
 Qualification of Shares- The Directors of a Private Company
need not sign an undertaking to acquire the qualification
shares, whereas the Directors of a Public Company are required
to sign an undertaking to acquire the qualification shares of the
public Company.
 Commencement of Business : A Private Company can
commence its business immediately after its incorporation,
whereas a Private Company cannot start its business until a
Certificate to commencement of business is issued to it.
 Share Warrants : A Private Company cannot issue Share
Warrants against its fully paid shares, whereas a Private
Company can issue Share Warrants against its fully paid up
shares.
 Further Issue of Shares : A Private Company need not offer the
further issue of shares to its existing shareholders, whereas a
Public Company has to offer the further issue of shares to its
existing shareholders as right shares. Further issue of shares
can only be offer to the general public with the approval of the
existing shareholders in the general meeting of the
shareholders only.
 Statutory Meeting : A Private Company has no obligation to call
the Statutory Meeting of the member, whereas of Public
 Company must call its statutory Meeting and file Statutory
Report with the Register of Companies.

Q.4. Write short notes on the following :

A) Trade mark :
A trademark is a word, phrase, symbol, and/or design that identifies
and distinguishes the source of the goods of one party from those of
others. A service mark is a word, phrase, symbol, and/or design that
identifies and distinguishes the source of a service rather than goods.
Some examples include brand names, slogans, and logos. The term
"trademark" is often used in a general sense to refer to both
trademarks and service marks.
Unlike patents and copyrights, trademarks do not expire after a set
term of years. Trademark rights come from actual “use”. Therefore, a
trademark can last forever - so long as you continue to use the mark
in commerce to indicate the source of goods and services. A
trademark registration can also last forever - so long as you file
specific documents and pay fees at regular intervals.
Registration is not mandatory. You can establish “common law”
rights in a mark based solely on use of the mark in commerce,
without a registration. However, federal registration of a trademark
with the USPTO has several advantages, including a notice to the
public of the registrant's claim of ownership of the mark, a legal
presumption of ownership nationwide, and the exclusive right to use
the mark on or in connection with the goods or services set forth in
the registration. For more information about “common law”
trademark rights and the advantages of federal registration see the
Basic Facts About Trademarks booklet.
Each time you use your mark, it is best to use a designation with it. If
registered with the USPTO, use the ® symbol after your mark. If not
yet registered, you may use TM for goods or SM for services, to
indicate that you have adopted this as a “common law” trademark or
service mark.
B) Digital signature :
A digital signature is a mathematical technique used to validate the
authenticity and integrity of a message, software or digital
document. As the digital equivalent of a handwritten signature or
stamped seal, a digital signature offers far more inherent security,
and it is intended to solve the problem of tampering and
impersonation in digital communications.
Digital signatures can provide the added assurances of evidence of
origin, identity and status of an electronic document, transaction or
message and can acknowledge informed consent by the signer
in many countries, and are considered legally binding in the same
way as traditional document signatures.
How digital signatures work
Digital signatures are based on public key cryptography, also known
as asymmetric cryptography. Using a public key algorithm, such as
RSA, one can generate two keys that are mathematically linked: one
private and one public.
Digital signatures work through public key cryptography's two
mutually-authenticating cryptographic keys. The individual who is
creating the digital signature uses their own private key to encrypt
signature-related data; the only way to decrypt that data is with the
signer's public key. This is how digital signatures are authenticated.
Digital signature technology requires all the parties to trust that the
individual creating the signature has been able to keep their own
private key secret. If someone else has access to the signer's private
key, that party could create fraudulent digital signatures in the name
of the private key holder.
C) Who is a consumer and who is not a consumer? (with examples).

 Consumer :
A Consumer is a person who purchases a product or avails a service
for a consideration, either for his personal use or to earn his
livelihood by means of self-employment.
The consideration may be:
• Paid
• Promised
• Partly paid and partly promised. It also includes a beneficiary of
such goods/services when such use is made with the approval of
such person.
A consumer is a person or a group who intends to order, orders, or
uses purchased goods, products, or services primarily for personal,
social, family, household and similar needs, not directly related to
entrepreneurial or business activities.

 Not a consumer :

A person is not a consumer if he/she :

 Purchases any goods or avails any service with free of charge.

 Purchased a good or hire a service for commercial purposes.

 Avails any service under contract of service.

D) Patent:
A patent for an invention is the grant of a property right to the
inventor, issued by the United States Patent and Trademark Office.
Generally, the term of a new patent is 20 years from the date on
which the application for the patent was filed in the United States or,
in special cases, from the date an earlier related application was
filed, subject to the payment of maintenance fees. U.S. patent grants
are effective only within the United States, U.S. territories, and U.S.
possessions. Under certain circumstances, patent term extensions or
adjustments may be available.
The right conferred by the patent grant is, in the language of the
statute and of the grant itself, “the right to exclude others from
making, using, offering for sale, or selling” the invention in the
United States or “importing” the invention into the United States.
What is granted is not the right to make, use, offer for sale, sell or
import, but the right to exclude others from making, using, offering
for sale, selling or importing the invention. Once a patent is issued,
the patentee must enforce the patent without aid of the USPTO.

There are three types of patents:

1) Utility patents may be granted to anyone who invents or discovers
any new and useful process, machine, article of manufacture, or
composition of matter, or any new and useful improvement thereof;
2) Design patents may be granted to anyone who invents a new,
original, and ornamental design for an article of manufacture; and
3) Plant patents may be granted to anyone who invents or discovers
and asexually reproduces any distinct and new variety of plant.
E) Unfair Trade Practices :
It refers to the use of various deceptive, fraudulent, or unethical
methods to obtain business. Unfair business practices include
misrepresentation, false advertising or representation of a good or
service, tied selling, false free prize or gift offers, deceptive pricing,
and noncompliance with manufacturing standards. Such acts are
considered unlawful by statute through the Consumer Protection
Law, which opens up recourse for consumers by way of
compensatory or punitive damages. An unfair trade practice is
sometimes referred to as “deceptive trade practices” or “unfair
business practices”.