CIE 2

2 MARKS
1. IMPORTANCE OF MOA
• The MOA is a fundamental and vital document required for the registration of a
company.
• It clearly defines the span of operations and functions of the company. This document
has full control over the functioning of the company. The company cannot perform
activities outside this document limits unless necessary amendments have been made.
• It brings about transparency and is the medium via which all the stakeholders get full
information regarding the company.
• The clauses mentioned provide the complete details regarding the promoters of the
company. It contains name, address of all important persons associated with the
business.

2. DIFF BETWEEN CONDITION AND WARRANTY

 3. DEFINE COMPLAINTS
The first document that is filed in a legal matter that details the facts and legal reasons that led
the plaintiff to conclude he has a legitimate case against the defendant.
8 MARKS
1. DIFFERENCE BETWEEN SALES AND AGREEMENT TO SALE
SALES
Transfer of property The property in the goods
passes from the seller to the
buyer immediately so that
the seller, is no more the
owner of the goods sold.
A sale is an executed contract
Type of goods A sale can only be in case of
existing and specific goods
only
Risk of loss In a sale, if the goods are
destroyed, the loss falls on
the buyer even though the
goods are in the possession
of the seller.
Consequences of breach In a sale, if the buyer fails to
pay the price of the goods or
if there is a breach of contract
by the buyer, the seller can
sue for the price even though
the goods are still in his
possession.
Right to Re-sell In a sale, the seller cannot re-
sell the goods.
If he does so the subsequent
buyer does not acquire title
to the goods
General and particular A sale is a contract plus
property conveyance
And creates jus in rem, i.e.,
gives right to the buyer to
enjoy the goods as against
the world at large including
the seller
AGREEMENT TO SALE
The transfer of property in the
goods is to take place at a future
time or subject to certain
conditions to be fulfilled.
An agreement to sell is an
executory contract.
Agreement to sell is mostly in
case of future and contingent
goods.
In an agreement to sell, if the
goods are destroyed , then the
loss falls on the seller, even
though the goods are in the
possession of the buyer.
In an agreement to sell, If there is
a breach of contract by the buyer,
the seller can only sue for
damages and not for the price
even though the goods are in the
possession of the buyer
In an agreement to sell, in case of
a re-sell, the buyer, who takes the
goods for consideration and
without notice of the prior
agreement, gets a good title.
In such a case, the original buyer
can only sue the seller for
damages.
An agreement to sell is merely a
contract, pure and simple.
and creates jus in personam, i.e.,
gives right to the buyer against
the seller to sue for damages
Insolvency of buyer In a sale, if the buyer
becomes insolvent before he
pays for the goods, the seller,
in the absence of a lien over
the goods, must return them
to the Official Receiver or
Assignee.
Insolvency of seller In a sale, if the seller
becomes insolvent, the
buyer, being the owner. Is
entitled to recover the goods
from the Official Receiver or
Assignee.
In an agreement to sell, if the
buyer becomes insolvent and has
not yet paid the price, the seller is
not bound to part with the goods
until he is paid for
In an agreement to sell, If the
buyer, who has paid the price,
finds that the seller has become
insolvent, he can only claim a
rateable dividend and not the
goods because property in them
has not yet passed to him.

2. POWER AND LIABITLIES OF DIRECTORS

POWERS
According to Companies Act 2013, the Board of Directors of a Company has
the following powers in the Company.

• Power to make calls in respect of money unpaid on shares

• Call meetings on suo moto basis.
• Issue shares, debentures, or any other instruments in respect of the Company.
• Borrow and invest funds for the Company
• Approve Financial Statements and Board Report
• Approve bonus to employees
• Declare dividend in the Company
• Power to grant loans or give guarantee in respect of loans
• Authorize buy back of securities
• Approve Amalgamation/Merger/ Takeover
• Diversify the business of the Company

LIABILITIES
1. Liability to the Company-
The liability of directors to the company arises under few circumstances only for example
the directors have acted ultra vires the company.
The liability of the Director to the company may arise from:
(a) Breach of fiduciary duty.
(b) Ultra Vires acts
(c) Negligence, and
(d) Mala fide Acts.

2. Liability to third parties:

In addition to the statutory duties, directors also owe common law duties. As a result of
this, they may often find themselves liable to third parties. If, for example, you assumed
personal responsibility for a misstatement to a customer, you could find yourself sued by
that customer alongside the company.

The directors are not personally liable to outsiders or third parties if they act within the
scope of the powers vested in them. The directors are not personally liable to the third
parties for any contract on behalf of the company.

3. Liability for breach of statutory duties:

The Companies Act, 1956 imposes numerous statutory duties on the directors under various
sections of the Act. Where any Default in compliance of these duties attracts penal
consequences. The various statutory penalties which directors may incur by reason of non-
compliance with the requirements of Companies Act are referred to in their appropriate
places.

4. Liability for acts of co-directors:

Director is bound by the maxim delegates non- protest delegate i.e. authority once delegated
cannot be delegated again. Shareholders have appointed him because of their faith in his
skill, competence and integrity and they may not have the same faith in another person.
5. Criminal Liability-
Criminal Liability is basically defined as the liability of a person authorized by the
company, and the liability is such that the provisions of the Indian Penal Code can be
actually applied for the illegal act he committed.
 5 Marks
Telephone case
A company put up telephone wires in certain area. There was no power in the MOA to put
up wires there .The defendants cut them down. Can the company sue for the damage done
to the wires?
No, The company cannot sue for the damage done to the wires.
Facts:
1.The company installed telephone wires in a specific area.
2.There was no legal authority or power for the company to install these wires.
3.The defendants cut down the wires.
Issues :
1.Did the company have the legal authority to install telephone wires in the area?
2.Can the company sue for the damage done to the wires?
Judgements:
The company did not have any legal authority to install the wires ,as there was no power
or objectives outlined in its MOA to engage in such activities.
The object clause (sec.13(1)(d))of MOA says that “A company cannot do anything beyond
or outside its objects ,and any act done beyond them will be ultra vires (beyond power) and
void ,and cannot be ratified even by the assent of the whole body of shareholders”, it means
that no matter how much agreement or support is among all the shareholders of a company
,it cannot be officially approved or validated and the company cannot engage in the
activities that are not specified in this clause.
Since the act was beyond the companies powers, they cannot sue for the damages done to
the wires.
If they had mentioned that the company is a telephonic company, then they can have the
right to sue for the damages done.