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IQRA COMMERCE NETWORK

SIR KHALID AZIZ 0300-2540827

B-COM PART 2 REGULAR 2016

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BUSINESS AND INDUSTRIAL LAW
COMPILED BY SIR KHALID AZIZ

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SECTION A

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1 a) Differentiate between agreement and contract.
The basic difference between contract and agreement is that the remedies for breach
of contract and breach of an agreement are way too different.
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Contract becomes enforceable once three conditions of legally binding agreement are
met while agreement can be worked upon when two minds meet at a certain point.

A gentlemen agreement is not enforceable by law whereas a contract can be


enforceable by law.
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Contract starts when there is an offer and acceptance, whereas it is not necessary for
an agreement to be started from offer and acceptance.

Contracts come into existence through agreement. Agreement, if not legally binding
cannot be enforced by law. Contracts and agreements can be of various types. There
are certain presumptions of intention to create legal relation in contract. It is presumed
that in a domestic contract there is no intention to create legal relation and in a business
contract it is highly intended to create legal relation. Agreements , on the other hand, do
not have such presumptions. They can be between domestic as well as business
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parties until they intend to be legally bound on that.


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b) What are the remedies of breach of contract?

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Rescission of the Contract
When one party to the contract breaches the contract, the other party need not perform his part of the
obligations. The aggrieved party may rescind the contract. In such cases, the injured / aggrieved party
can either rescind the contract of file a suit for damages. In general, rescission of the contract is
accompanied by a suit for damages.

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Suit for damages
The aggrieved party of the contract is entitled for monetary compensation when the contract is breached.
The objective of Suit for damages is to put the aggrieved / injured party in a position in which he would
have been had there been performance and not breach. The aggrieved / injured party must be able to
prove the actual loss or no damages will be awarded. Damages can be of four kinds.

1. Ordinary or General Damages


2. Special Damages
3. Exemplary or Punitive Damages
4. Nominal Damages

Suit for Quantum Merit

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The term "Quantum Merit" is derived from Latin which means "what one has earned". The injured party
can file a suit upon quantum merit and may claim payment in proportion to work done or goods supplied.
Sections 65 to 70 deal with the provisions relating to suit for Quantum Merit.
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Suit for Specific Performance
The suit for Specific Performance is regulated by the Specific Relief Act, 1963. Specific Performance
means the actual carrying out of the contract as agreed. The Court may grant for specific performance
where it is just and equitable to do. Specific Performance may be granted under the following grounds.

1. Lack of standard for ascertaining the damages


2. Where compensation is not adequate relief
3. Substantial work done by the plaintiff.
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The Court cannot grant the remedy of specific performance in the following situations.

1. Where monetary compensation is an adequate relief


2. Where the Court cannot supervise the actual execution of the work
3. Where the Contract is for personal services
4. Where the Contract is not enforceable by either party against the other.

Suit for Injunctions


Injunction is an order of the Court restraining a person from doing a particular act. Where the defendant is
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doing something which he is promised not to do, then the injured party will get a right to file a suit for
injunction.
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IQRA COMMERCE NETWORK
SIR KHALID AZIZ 0300-2540827

Q 2 a) What are the exceptions under which non owner


can sell the goods?

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The general rule where goods are sold by a non-owner is that the eventual purchaser does not gain
good title. This means that if B wrongly sells goods belonging to A to a buyer called C, the items remain
the property of A. The fact that C has entirely innocently purchased items that he believed were owned

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by B is irrelevant. It is logical to protect the original owner's title.

Despite this, there are numerous exceptions that have arisen as a result of the obvious unfairness the
general rule might create where innocent buyers lose their money in difficult circumstances.

Exceptions to the General Rule


Estoppel
Estoppel essentially refers to a situation where someone is prevented by law from enforcing a particular
right. In this context, estoppel works to prevent an original owner from claiming ownership over items
that have been wrongfully sold by a third party.

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There are two ways in which estoppel can be relied upon by an innocent buyer: estoppel by
representation and estoppel by negligence.
Estoppel by representation
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Where the true owner has represented that the purported seller is in fact the true owner of the goods,
the law says he is estopped from later saying differently, that is, that he was joking, or spoke in error.
He cannot say one thing on one day and another thing later.

So, if the true owner indicates to the end buyer that the seller has the authority to perform the sale, the
end buyer will gain good title. This is despite the fact that the seller does not in fact have the authority
to sell the goods.
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So, even if the purported seller has no agreement from the true owner to sell (such as a sales agency
agreement), if the true owners says Yes, you can buy from this guy, then the buyer receives good
title.
Estoppel by negligence
Estoppel by negligence applies where the original owner has not taken sufficient care to ensure that his
belongings or stock are not sold by a rogue third party. Common examples of this include cases where
the original owner fails to take steps to register his title over goods, e.g. by info rming the relevant
authorities.
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This exception has been, however, interpreted very restrictively by courts in the past. Judges are highly
reluctant to remove title away from people who are even extremely careless with their own property. In
one case, for example, it was found that the victim of a vehicle theft could recover his property under
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the general rule even though he failed to report the theft to the police.
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Agency
An agency relationship exists if a person has the consent of the owner to possess his goods as a

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'mercantile agent'. This includes business arrangements where commercial agents are entrusted to
make certain decisions concerning property on behalf of a principal.

If a person is in possession of goods, with the consent of the owner, as a mercantile agent, any sale by
that person is valid even if the owner does not provide express authorisation for the sale. This means
that an innocent purchaser can gain good title to the items if wrongfully sold by the agent.

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Examples of agents passing good title to buyers include car dealership scenarios, where the owner of a
vehicle gives his consent to a dealer to try and sell the car on his behalf. The owner does not have to
be consulted on the particular sale for the transaction to be valid.

b) What are implied conditions?

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Q 3 a) What is the nature of suretys liability?


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b) What are the circumstances under which, contract of


bailment is terminated?

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Q 4 a) What are the duties and liabilities of carrier by


sea?

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b) Dishonor by non-acceptance and dishonor by non-
payment.
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Q 5 a) Procedure of Registration of partnership firm and
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effects of non- registration:


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b) Essentials of Frauds

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Q 6 a) Unlawful consideration and objects
According to Section 23, in the following cases consideration or object of an agreement is unlawful:

1. If it is forbidden by law:

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Where the object of a contract is forbidden by law, the agreement shall be void. An act is said to be
forbidden if it is punishable by criminal law or any special statute, or if it is prohibited by any law or
order made in exercise of powers or authority conferred by the legislature.
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Example:

(1) A and B agreed to deal in smuggled goods. It is forbidden by law and therefore void.

(2) A committed B's murder in the presence of C. A promises to pay Rs. 500 to C, if C does not
inform the police about the murder.

The agreement in example No. 2 given above is illegal as its object is unlawful. Besides, A and C will
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be liable for the act of murder and its concealment under the Indian Penal Code.

2. If it is of such a nature that if permitted, it would defeat the provisions of any other
law:

The object of an agreement may not be directly forbidden but indirectly, it may defeat the object of
any other law, the agreement would be void in such a case.

Example:

(1) A failed to pay his land revenue. Therefore, his estate was sold for arrears of revenue by the
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Government. By the law, the defaulter is prohibited from purchasing the land again. A asks B to
purchase the estate and later on, transfer the same to him at the same price. The agreement is void as
it will defeat the object of the law which prohibits a defaulter to purchase back the land, for indirectly
A will again become the owner of the estate.
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The second agreement is also void as it would defeat the provision or object of the law of limitation.
[Rama Murthy y Goppayya],
IQRA COMMERCE NETWORK
SIR KHALID AZIZ 0300-2540827
3. If it is fraudulent:

If the object of an agreement is fraudulent, i.e., to cheat people, it is void. Example:

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A, B & C enter into an agreement to sell bogus plots of land in Delhi. The agreement is void as it is
fraudulent and thereby unlawful.

4. If it involves or implies injury to the person or property of another: Law protects property and
person of its citizens. It cannot permit any contract which results in an injury to the person or
property of any one.

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Examples:

(1) A promises to pay Rs. 500 to B if B beats C. It involves injury to C, hence it is unlawful and void.

5. If the Court regards it as immoral or opposed to public policy: If the object of an agreement is
immoral or opposed to public policy, it will be void. Morality here means something which the law
regards as immoral.

Examples:

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A agrees to give his house on rent to a smuggler for her immoral purpose. A cannot recover the rent
of his house if he smuggler refuse to pay. However, he may be allowed to get his house vacated from
the smuggler as it will put an end to the immoral purpose.

b) Definition and essentials of an agency:


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Fiduciary relationship between two parties in which one (the 'agent') is under the control of (is
obligated to) the other (the 'principal') . The agent is authorized by the principal to perform certain
acts, for and on behalf of the principal. The principal is bound by the acts of the agent, performed in
carrying out entrusted duties and within the scope of agent's authority. An agency can be created by
(1) express agreement, whether oral or written, (2) implication, based on the custom or practice of
the trade, or (3) conduct of the principal. Under the legal doctrine of estoppel, the principal is
prohibited from denying the existence of a properly constituted agency.
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Q 7)
i)

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ii)
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iii)

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iv)

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v)
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