Legal Obligations in Business

Dr. Sairam Bhat

Civil Obligations
Tort Law: ubi jus ubi remedium
where there is right there is remedy.

Types of Tort: Defamation, Tresspass, Nuisance, Negligence Principles in tort law:

Contract for Service and of Service Vicarious liability: [theory of capacity: Ultra vires]
Master-Servant: During the course of employment Principal-Agent: Within the scope of authority

Spring Medows Hospital v S S Aluwalia Strict liability [Rylands v Fletcher 1868] Bhopal Disaster and Liability of MNC Absolute Liability M C Mehta v UOI [1987: J Bhagwati] Upahaar Cinema tragedy [Rs.20 crore exemplary damages] BP Oil disaster: Shareholder claiming reckless negligence on part of the management

Criminal Liability
mens rea and actus resu Corporate Criminal Liability: IPC and definition of Person A.K. Khosla v. T.S. Venkatesan 1992: Juristic Corporation cannot said to have mens rea In Standard Chartered Bank v. Directorate of Enforcement, A.I.R. 2005 S.C. 2622 was being prosecuted for violation of certain provisions of the Foreign Exchange Regulation Act of 1973 ("FERA"). Ultimately, the Indian Supreme Court held that the corporation could be prosecuted and punished, with fines, regardless of the mandatory punishment of imprisonment required under the respective statute Criminal Breach of Trust: Sec. 405 IPC [Employees State Insurance Corporation vs S K Aggarwal [EPF money misappropriated] Satyam case: Charges on criminal conspiracy, criminal breach of trust, cheating, forgery and falsification of accounts Madoff Ponzi scheme 2008: Investor fraud Vicarious Liability of Corporations for acts of their servants: Ex Essential Commodities Act, Prevention of Food Adulteration Act

Liability of Directors in a Company

Directors liability to the Company may arise where (1) the directors are guilty of negligence, (2) the directors committed breach of trust, (3) there has been misfeasance and (4) the director has acted ultra vires and the funds of the company have been applied for such an act.

Bhopal Disaster and its relevance

Case in 1984-Supreme Court-Out of Court settlement June 2010: Bhopal District Court sentences 7 Officers of UCC to 2 yrs imprisonment Curative petition in the SC
Enhancement of compensation Enhancement of the charges on the 7 Officials: Sec 304 B IPC Extradition of Warren Anderson

M P High Court: Writ petition on disposal of waste Dow Chemicals and liability of Successor-ininterest

Contract Law
Freedom of Contract Offer
Is Advertisement as offer? Tenders and Auctions Email contracts

Acceptance: Lalman Shukla v Gauri Dutt Intention to create Legal Relations: Balfaur v Balfaur Rule of Promissory Estoppel: M P Sugar Mills case Consideration: Carlill v Carbolic Smoke Ball Company Doctrine of privity of contract: Dunlop Pneumatic Tyre Co v Selfridge Capacity of Parties
Minor: void Mohari Bibi v Dharmodas Ghose Beneficial and Labour Contracts: Wayne Rooney Case Unsound mind Idols Juristic personality: Ashbury Railway Co case Ultravires

Free Consent
Coercion Economic Duress: Hawker Pacific helicopter case Undue influence: Tate v Williamson Misrepresentation Fraud: Ward v Hobbs Spice Girls v Aprilia World Service 2002 Whether Silence amounts to Fraud: uberrimae fidei i.e utmost good faith Mistake: Phillips v Brooks, Lewis v Avery

Void Agreement
Against Public Policy Forbidden by Law Agreements in Restraint of legal proceedings
Arbitration

Agreements in Restraint of Marriage Restraint of Trade

Absolute restraint and partial restraint Exceptions: Nordenfelt Guns case Gujarat Bottling case Brojonath Ganguly v State of WB

Quasi Contract: finder of lost goods: Sec. 71

Bailment and Pledge

Gratuitous Bailment and Bailment for reward Duty of care Pledge: Bailment for a loan advanced Pledge an Hypothecation

Indemnity and Guarantee

Role of Surety: Rule of Subrogation

Principal-Agent Contract
Agent v/s Independent Contractor Types of Agents
Del credere agent, auctioneer, broker, parnters Direct Sale Agent

Type of Authority Personal Liability of an Agent: Respondent superior for example: trademark infringement, misappropriation of trade secrets, copyright infringement, unfair competition and antitrust, and fraudulent misrepresentation

Sale of Goods Act, 1930

Distinction between Sale and Agreement to Sell Definition of Goods: Gannon Dunkerley case [works contract] Transfer of Ownership: risks Conditions and warranties Caveat emptor ----caveat venditor Unpaid seller rights
Right of lien Right to stop goods in transit Right of sale

Remedies for Breach

Anticipatory Breach Specific Performance
Contract of personal service When damages are adequate remedy When court would have to monitor compliance

Injunction
Temporary Perpetual Mandatory

Damages
Nominal Liquidated Exemplary

Consumer Protection Act, 1986

Sale of Goods Act, 1930 Who is a Consumer ? hire Defect in goods Deficiency in Services Validity of Liability excluding clause Consumer Forums [20 lakh]-State [20 lakh to 1 crore] and National Commission Ex: Coke contamination controversy

Product Liability
The Foods Adulteration Act, 1954 The Food Safety and Standards Act, 2006 The Drug & Cosmetics Act, 1940 The Indian Penal Code, 1860 The Standards of Weights and Measures Act, 1956 The Agricultural Produce (Grading and Marking) Act, 1937 for marking and grading of commodities like vegetables, butter, etc. The Indian Standards Institution (Certification Marks) Act , 1952 to formulate a number of standards for different products by ISI The Bureau of Indian Standards Act , 1986 All the above laws have civil as well as criminal liability Smt. Uma Deepak v. Maruti Udyog Ltd Ors (2003) CPJ 90(MRTP) the Complainant alleged that the car sold by the opposite party was not only accidental but the price, for the same, was also overcharged. The Court, in response to the allegations made by the complainant, directed arrest of the Directors as well as the manager of the dealers/agents who sold the said defective car to the complainant and remanded them to judicial custody. Subsequent thereto, the said officers of the opposite party were released on bail and were directed to replace the disputed car with a new car.

Product Liability: New initiatives

ISO standards for processes and Products Extend Producers Responsibility: Right to recall a product

E-Contract
IT Act 2000: Sec. 11-13 Shrink warp: ProCD Inc. v. Zeidenberg Click warp Avinash Bajaj case 2002 TCS v State of AP P R Transport Agency v UOI -2005: Where contract is concluded Unresolved issue: California Software Inc v Reliability Research Inc

New forms of Contracts

PPP JV Agreements IPR Licensing