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Q.1 Distinguish between fraud and misinterpretation? Ans: Fraud is generally defined in the law as an intentional misrepresentation of material existing fact made by one person to another with knowledge of its falsity and for the purpose of inducing the other person to act, and upon which the other person relies with resulting injury or damage. Fraud may also be made by an omission or purposeful failure to state material facts, which nondisclosure makes other statements misleading. Misrepresentation means a false statement of fact made by one party to another party, which has the effect of inducing that party into the contract. For example, under certain circumstances, false statements or promises made by a seller of goods regarding the quality or nature of the product that the seller has may constitute misrepresentation. A finding of misrepresentation allows for a remedy of rescission and sometimes damages depending on the type of misrepresentation. Difference between fraud and misinterpretation:1. In misrepresentation the person making the false statement believes it to be true. In fraud the false statement is person who knows that it is false or he does not care to know whether it is true or false. 2. There is no intention to deceive the other party when there is misrepresentation of fact. The very purpose of the fraud is to deceive the other party to the contract. 3. Misrepresentation renders the contract voidable at the option of the party whose consent was obtained by misrepresentation. In the case of fraud the contract is voidable It also gives rise to an independent action in tort for damages. 4. Misrepresentation is not an offence under Indian penal code and hence not punishable. Fraud, in certain cases is a punishable offence under Indian penal code. 5. Generally, silence is not fraud except where there is a duty to speak or the relations between parties is fiduciary. Under no circumstances can silence be considered as misrepresentation. 6. The party complaining of misrepresentation can’t avoid the contract if he had the means to discover the truth with ordinary diligence. But in the case of fraud, the party making a false statement cannot say that the other party had the means to discover the truth with ordinary diligence.
The other party may urge the breaching party to reconsider the breach.75): Another relief or remedy available to the promise in the event of a breach of promise by the promisor is to claim damages or loss arising to him there from. Damages under Sec. (ii) damages for non-acceptance of goods (Sec.LEGAL ASPECTS OF BUSINESS MB0051. In addition to the rights of a seller against goods provided in Secs. Compensation for losses indirectly caused by breach may be paid as special damages if the party in breach had knowledge that such losses would also follow from such act of breach. If it is a contract with a merchant. The other party may sue for damages. The idea is to compensate the aggrieved party for the loss he has suffered as a result of the breach of contract. Sec. the other party is no longer obligated to keep its end of the bargain. 3. (i) suit for price (Sec. In such a case the aggrieved party is freed from all his obligations under the contract. Rescission of the contract: When a breach of contract is committed by one party. Compensation as general damages will be awarded only for those losses that directly and naturally result from the breach of the contract.2 What are the remedies for breach of contract? Ans: When someone breaches a contract.75 are awarded according to certain rules as laid down in Secs. 2.73 contains three important rules: 1. the other party may treat the contract as rescinded.56). The aggrieved party is required to take reasonable steps to keep his losses to the minimum.56).73-74. From there.SET 1 Q. Suit for price (Sec. The other party may sue for other remedies. 3. The other party may bring the breaching party to an agency for alternative dispute resolution. that party may process in several ways: 1.55). The main kinds of damages awarded in a contract suit are ordinary damages. the other party may get help form consumers’ associations. 2. Damages (Sec. (iii) suit for interest (Sec. What is the most common remedy for breach of contracts: The usual remedy for breach of contracts is suit for damages.47 to 54. the seller has the following remedies against the buyer personally. This is the amount of money it would take to put the aggrieved party in as good a position as if there had not been a breach of contract. or 5. the seller can sue Page 21 . 4.55): Where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay the price.
the difference between the market price and the contract price can be recovered. the seller can only sue for damages and not for the price. (v) suit for breach of warranty (Sec. i. It is obvious that the unpaid seller can claim interest only when he can recover the price. Suit for interest (Sec. The amount of damages is to be determined in accordance with the provisions laid down in Sec.58).e. (iii) specific performance (Sec. (iv) suit for breach of condition. as a rule. the seller cannot file a suit for the price.60). the seller tenders the goods to the buyer and the buyer wrongfully refuses or neglects to accept and pay the price.59).73 of the Indian Contract Act. Where the property in goods has not passed to the buyer. if the seller’s remedy is to claim damages only. Suit for damages for non-acceptance (Sec. (vi) anticipatory breach (Sec.SET 1 the buyer for the price of the goods. the seller may sue him for damages for nonacceptance. 1872.61). The interest may be calculated from the date of the tender of the goods or from the date on which the price was payable.LEGAL ASPECTS OF BUSINESS MB0051. where there is an available market for the goods prima facie. the seller has a further right to claim interest on the amount of the price.56): Where the buyer wrongfully neglects or refuses to accept and pay for the goods. the court may award interest at such rate as it thinks fit on the amount of the price. Thus.) Page 22 . (vii) recovery of interest (Sec. Where the property in the goods has not passed to the buyer and the price was not payable without passing of property. his only remedy is to claim damages. (ii) right of recovery of the price. In the absence of a contract to the contrary. Buyer’s remedies against seller: The buyer has the following rights against the seller for breach of contract: (i) damages for non-delivery (Sec.57). then he cannot claim interest..61): When under a contract of sale.
principal debtor and the creditor Liability of the indemnifier is primary The liability of the surety is secondary. = '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. e.SET 1 Q. surety An indemnity is for reimbursement of a loss A guarantee is for security of the creditor.the There are three parties namely the surety. Indemnity comprise only two parties.LEGAL ASPECTS OF BUSINESS MB0051. indemnifier and the indemnity holder. The surety is liable only if the principal debtor makes a default. e. A guarantee may be either oral or written.. or by the conduct of any other person. and the person to whom the guarantee is given is called the “creditor”. 'P' lends Rs. 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”.g.g. of the principal debtor The possibility of any loss happening is the There is an existing debt or duty. There are important legal distinctions between them. the only contingency against which the performance of which is guarantee by the indemnifier undertakes to indemnify. the person in respect of whose default the guarantee is given is called the “principal debtor”.200/=. 5000/= to 'Q' and 'R' promises to 'P' that if 'Q' does not pay the money back then 'R' will do so. In a contract of indemnity the liability of the In case of contract of guarantee the liability indemnifier is primary and arises when the of surety is secondary and arises when the Page 23 . The primary liability being that of the principal debtor.3 Distinguish between indemnity and guarantee. 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. Ans: Introduction: Guarantees and indemnities are both long established forms of what the law terms surety ship. The indemnifier need not necessarily act at The surety give guarantee only at the request the request of the indemnified. The person who gives the guarantee is called the “surety”.
indemnifier and indemnified. Thus. 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.C. the surety is entitled to proceed against the principal debtor in his own name while in case of indemnity. the principal debtor. after discharging the debt. there are three parties. principal debtor defaults. 3. debt or performance of promise Distinction between a contract of guarantee and a contract of indemnity L. the surety steps into the shoes of the creditor on discharge of his liability. 2. If you lend 20 to C and he does not pay you. but excellently. I will see that your money comes back is an indemnity. In a contract of guarantee. Whereas in a contract of guarantee.LEGAL ASPECTS OF BUSINESS MB0051. The liability of a promisor is primary and independent in a contract of indemnity. A contract in which A says to B. the indemnifier Contract of Guarantee is for security of a promises without the request of debtor. Other points of difference are: 1. Page 24 . and may sue the principal debtor. In a contract of guarantee. there are only two parties. I will is a guarantee. In case of a guarantee. In a contract of indemnity. on the other hand. the performance of which is guaranteed by the surety. In case of indemnity the possibility of any loss happening is a contingency against which the indemnifier undertakes to indemnify. the indemnifier cannot proceed against third parties in his own name. brought out the distinction between indemnity and guarantee by the following illustration. Mather in his book Securities Acceptable to the Lending Banker has very briefly. the primary liability being that of the principal debtor.SET 1 contingent event occurs. In the case of guarantee. there is an existing debt or obligation. If you lend 20 to C. On the other hand undertaking in these words. the creditor and the surety. the liability of the surety is secondary. unless there is an assignment in his favour. in a contract of indemnity.
i. In case of a bearer bill. or to the bearer of the instrument. directing a certain person to pay a certain sum of money only to or to the order of. The drawee: The person on whom the bill is drawn.. A is the payee and X is the drawee. the endorsee.SET 1 Q. The drawer: The person to whom the amount of the bill is payable. The specimen given above is of a usance bill. Ans: Bills of exchange Bills of exchange is defined by Sec. The endorser: It is the person who endorses a bill. 16. In certain cases however a stranger may accept the bill on behalf of the drawee. 6. 2006. It may be the drawer himself or any other person.LEGAL ASPECTS OF BUSINESS MB0051. The endorsee: It is the person to whom the bill is negotiated by endorsement. payable after a specified period of time.5 as an instrument in writing. Parties to a bill of exchange The parties of bill of exchange are: 1. on demand or payable after certain time after sight also. 2. X will express his willingness to pay accepting the bill by writing words somewhat as below across the face of the bill: ACCEPTED Sd-X Jan. drawee is the person responsible for acceptance and payment of the bill. 3. Specimen of a bill of exchange Here Y is the drawer. 5. The holder: It is the original payee but where the bill has been endorsed. Page 25 . A bill of exchange may be drawn payable at sight. containing an unconditional order. The payee: The person to whom amount of the bill is payable. Thus. signed by the maker. 7. Drawee in case of need.e. a certain person.4 What is the distinction between cheque and bills of exchange. 4. the bearer or possessor is the holder.
law does not lay down any restrictions and therefore cheque may be written either with (a) pen (b) typewriter or may be (c) printed. Written instrument. Acceptor for honour.LEGAL ASPECTS OF BUSINESS MB0051. A cheque must be an instrument in writing. It provides that a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic from. and is generated. the specified amount. Specimen of a cheque Every bank has its own printed cheque forms which are supplied to the account holders at the time of opening the account as well as subsequently whenever needed. Savings bank accounts are also permitted to be operated by cheques provided certain minimum balance is maintained.SET 1 8. to or to the order of the person named therein or to the bearer.6. The Amendment Act 2002 has substituted new section for Sec. Page 26 . written and signed in a secure system ensuring the minimum safety standards with the use of digital signature and asymmetric crypto system. legally. Regarding the writing materials to be used. is an order by the customer of the bank directing his banker to pay on demand. Requisites of a cheque: 1. in essence. a customer may withdraw his money even by writing his directions to the banker on a plain paper but in practice bankers honour only those orders which are issued on the printed forms of cheques. Although.6 defines a cheque. These forms are printed on special security paper which is sensitive to chemicals and makes any chemical alterations noticeable. Cheques A cheque is the usual method of withdrawing money from a current account with a banker. Sec. A cheque in the electronic form means a cheque which contains the exact mirror image of a paper cheque. A cheque.
The order must be only for the payment of money and that too must be specified. Payable on demand. If the word please precedes pay the document will not be regarded as invalid merely on this account. clubs. except at the personal risk of the banks manager. To avoid any mistake. The drawer of a cheque is expected to date it before it leaves his hands. are valid instruments being payable to legal persons. A cheque to be valid must be payable to a certain person. 7. Generally. The drawer can date a cheque with the date earlier or later than the date on which it is drawn. A post-dated cheque is as much negotiable as a cheque for which payment is due.e. acquires a better title than its transferor. not necessary that the word order or its equivalent must be used to make the document a cheque.SET 1 2. Page 27 . the name and address of the banker should be specified. A post-dated cheque cannot be honoured. institutions. 3. etc. the order to bank is expressed by the word pay. Payee to be certain. till the date mentioned. local authorities. however. A cheque without a date is considered incomplete and is returned unpaid by the banks. instruments drawn in favour of a body corporate. A cheque must contain an unconditional order. the transferee of a post-dated cheque. like that of the cheque on which payment is due. 5. It is. Person should not be understood in a limited sense including only human beings. Use of the words on demand or their equivalent is not necessary. Thus. A cheque that bears a date earlier than six months is a stale cheque and cannot be claimed for. The term in fact includes legal persons also. is not a cheque as the sum payable is not certain.. 6. if he is a holder in due course.19). A cheque bearing an earlier date is antedated and the one bearing the later date is called post-dated. Similarly. the rate of interest not specified.. Unconditional order. Thus. A cheque must be drawn on a specified banker. the instrument is payable on demand (Sec. A cheque to be valid must be payable on demand and not otherwise. A certain sum of money. i. On a specified banker only. an order asking the banker to pay a specified amount with interest.LEGAL ASPECTS OF BUSINESS MB0051. 4. Dating of cheques. orders asking the banker to deliver securities or certain other things cannot be regarded as cheques. When the drawer asks the banker to pay and does not specify the time for its payment.
and that the financial obligation of the shareholders to creditors of the company is restricted to the capital invested in the first place (i. The absolute majority of trading corporations are private companies limited by shares. professional. but revenues invested in the company will be unrecoverable. Companies limited by guarantee are less popular than companies limited by shares. A company limited by guarantee has members rather than shareholders. Companies limited by shares are more popular Page 28 .e. This is the wellknown distinctive characteristic between a private limited company and a public limited company. Ans: The Companies Act.5 Distinguish between companies limited by shares and companies limited by guarantee. trade or research associations. Also Sec. (limited company disclosure) involves are less demanding.12 permits the formation of different types of companies. the specified value of the shares and any premium paid off in exchange for the issue of the shares by the company). The vast majority of companies in India are with limited liability by shares. 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. Companies limited by guarantee Limited by shares is defined by: a company that has shareholders. Distinction between Companies limited by shares and Companies limited by guarantee Companies limited by shares A company limited by guarantee is normally incorporated for non-profit making functions.3)”. Limited companies could be either private or public.SET 1 Q.LEGAL ASPECTS OF BUSINESS MB0051. This definition does not bring out the meaning and nature of the company into a clear perspective. A private Ltd. 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. 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). Shareholder's individual’s assets are thereby secured in the case of the company's insolvency. The Memorandum normally includes a nonprofit distribution clause and these companies are usually formed by clubs. The company has no share capital. These may be: Companies limited by shares Companies limited by guarantee and Unlimited companies.
there are shareholders. Companies limited by shares can engage in legal trades and have general clauses. profit making In case of companies limited by shares. Companies limited by guarantee have members.LEGAL ASPECTS OF BUSINESS MB0051.SET 1 Companies limited by shares are profit Companies limited by guarantee are nonmaking companies. and not share holders There is no share capital in case of companies limited by guarantee and it also has self-imposed restrictions Page 29 .
Even in the real world. has also Page 30 . Computer as a tool: When the individual is the main target of Cybercrime. The internet. sports or education. these crimes requires the technical knowledge of the perpetrators. Crime remains elusive and ever strives to hide itself in the face of development.SET 1 Q. One of the major disadvantages is Cybercrime – illegal activity committed on the internet. hacking involves attacking the computer’s information and other resources. It is important to take note that overlapping occurs in many cases and it is impossible to have a perfect classification system. It is very difficult to classify crimes in general into distinct groups as many crimes evolve on a daily basis. These crimes are relatively new. That is so because crime is the direct opposite of development. Computer as a target: These crimes are committed by a selected group of criminals. theft.which explains how unprepared society and the world in general is towards combating these crimes. The internet in India is growing rapidly. Human weaknesses are generally exploited. making legal action against the variants more difficult. However. murder or theft need not necessarily be separate. it is that a nation with high incidence of crime cannot grow or develop. There are numerous crimes of this nature committed daily on the internet. These crimes generally involve less technical expertise as the damage done manifests itself in the real world. and the likes have existed even before the development in high-tech equipment. the computer can be considered as the tool rather than the target. crimes like rape. all cyber crimes involve both the computer and the person behind it as victims. These are the crimes which have existed for centuries in the offline. having been in existence for only as long as computers have . Different nations have adopted different strategies to contend with crime depending on their nature and extent. it just depends on which of the two is the main target. Unlike crimes using he computer as a tool.6 What is the definition of cyber-crime? Ans: Introduction: Crime and criminality have been associated with man since his fall. 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. the computer will be looked at as either a target or tool for simplicity’s sake. 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. along with its advantages.LEGAL ASPECTS OF BUSINESS MB0051. It leaves a negative social and economic consequence. Internet also has its own disadvantages. There are two sides to a coin. It has given rise to new opportunities in every field we can think of – be it entertainment. Scams. 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. business. Hence. The damage dealt is largely psychological and intangible. For example.
aviation and financial services (and) store vital information. Criminal activities in the cyberspace are on the rise. The trafficking. distribution. constitutes one of the most important Cybercrimes known today. A report written near the start of the Information Age warned that America's computers were at risk from crackers. David Smith pleaded guilty on Dec. credit card fraud. 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. Cybercrimes committed against persons include various crimes like transmission of childpornography. 1999 to state and federal charges associated with his creation of the Melissa virus. the virus made its way through 1. Professionals who involve in these cybercrimes are called crackers and it is found that many of such professionals are still in their teens. and software piracy and so on. _____________****______________ Page 31 . including deliberate attack. 3) Cybercrimes against government. spams.2 million computers in one-fifth of the country's largest businesses. A Mumbai-based upstart engineering company lost a say and much money in the business when the rival company. 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. Similarly. stole the technical database from their computers with the help of a corporate cyber spy. to criminal records” were vulnerable from many sources. 9. harassment of any one with the use of a computer such as e-mail. 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. the creation and dissemination of harmful computer programs which do irreparable damage to computer systems is another kind of Cybercrime.LEGAL ASPECTS OF BUSINESS MB0051. Cybercrimes can be basically divided into 3 major categories: 1) Cybercrimes against persons 2) Cybercrimes against property. which invade our privacy and offend our senses. Computers today are being misused for illegal activities like e-mail espionage. posting. an industry major. Here we publish an article by Nandini Ramprasad in series for the benefit of our citizens. communications. The potential harm of such a crime to humanity can hardly be amplified. In the United States alone. and dissemination of obscene material including pornography and indecent exposure.SET 1 exposed us to security risks that come with connecting to a large network. if not controlled. It said that computers that "control (our) power delivery. from medical re-cords to business plans. There are numerous examples of such computer viruses few of them being "Melissa" and "love bug".
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