ASSIGNMENT SET- 1

Q.1 What do you mean by free consent? Under what circumstances consent is considered
as free? Explain.

Ans.: Free consent:

One of the essential of a valid contract is free consent. Sec. 13 of the act defense consent has
two or more persons are said to consent where they agree upon think in the same sense.
There should be consents at the ad idem or identity of minds.
The validity of consent depends not only on consents parties but their consents must also be free.
According to section 14, consent is said to be free when it is not caused by
1) Coercion has defined under sec.15 or
2) Undue influence as defined under sec. 16 or
3) Fraud has defined under sec. 17 or
4) Mis-representation or defined under sec. 18 or
5) Mistake subject to the probations of sec. 21& 22.

1) Coercion:
Sec. 15 “coercion is the committing or threatening to commit any act forbidden by the Indian
penal code or the unlawful detaining or threatening to detain any property, to the prejudice of any
person whatever, with the intention of causing any person to enter into an agreement. “ It is
immaterial weather the Indian penal code is or is not in force in the place where the coercion is
employed
Under English Law, coercion must be applied to one’s person only whereas under Indian Law it
can be one’s person or property.
So also under English Law, the subject of it must be the contracting party himself or his wife,
parent, child or other near relative. Under Indian Law, the act or threat may be against any
person. It is to be noted that he act need not be committed in India itself. Unlawful detaining or
threatening to detain any property it also coercion.
While threat to sue does not amount to coercion threat to file a false suit amounts to coercion
since Indian Penal Code forbids such an act.

2) Undue influence:
In the words of Holland,” Undue influence refers to “the unconscious use of power over another
person, such power being obtained by virtue of a present or previously existing dominating
control arising out of relationship between the parties.”
According sec. 16(1) “ A contract is said to be induced by undue influence where the relation
subsisting between the parties are such that one of the parties is in a position to dominate the will
of the other and uses that position to obtain an unfair advantage over the other.”
A person is deemed to be in a position to dominate the will of other.
(a) Where he holds a real or apparent authority over the other or where he stands in a
fiduciary relation to the other; or
(b) Where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness or mental or bodily distress:
(c) Where a person, who is in a position to dominate the will of another, enters into a
contract with him and the transaction appears to be unconscionable. The burden of
proving that such contract was not by undue influence shall lie upon the person in a
position to dominate the will of the other.
Both coercion and undue influence are closely related. What contributes coercion or undue
influence depends upon the facts of each case.
Sec. 16(i) provides that two elements must be present. The first one is that the relations
subsisting between the parties to a contract are such that one of them is in a position to dominate
the will of the other.
Secondly, he uses that position to obtain unfair advantage over the other. In other words, unlike
coercion undue influence must come from a party to the contract and not a stranger to it. Where
the parties are not in equal footing or there is trust and confidence between the parties, one party
may be able to dominate the will of the other and use the position to obtain an unfair advantage.
However, where there is no relationship shown to exit from which undue influence is presumed,
that influence must be proved.

3) Fraud:
A false statement made knowingly or without belief in its truth or recklessly careless whether it be
true or false is called fraud.
Sec. 17 of the act instead of defining fraud gives various acts which amount to fraud.
Sec. 17: Fraud means and includes any of the following acts committed by a party to a contract or
with his connivance or by his agent to induce him to enter into contract:
1) The suggestion that a fact is true when it is not true by one who does not believe it to be
true. A false statement intentionally made is fraud. An absence of honest belief in the
truth of the statement made is essential to constitute fraud. The false statement must be
made intentionally.
2) The active concealment of a fact by a person who has knowledge or belief of the fact.
Mere non-disclosure is not fraud where there is no duty to disclose.
3) A promise made without any intention of performing it.
4) Any other act fitted to deceive. The fertility of man’s invention in devising new schemes of
fraud is so great that it would be difficult to confine fraud within the limits of any
exhaustive definition.
5) Any such act or omission as the law specially declares to be fraudulent.

4) Misrepresentation:
Before entering into a contract, the parties will may certain statements inducing the contract.
Such statements are called representation. A representation is a statement of fact made by one
party to the other at the time of entering into contract with an intention of inducing the other party
to enter into the contract. If the representation is false or misleading, it is known as
misrepresentation. A misrepresentation may be innocent or intentional. An intentional
misrepresentation is called fraud and is covered under section 17 sec. 18 deals with an innocent
misrepresentation.

5) Mistake:
Usually, mistake refers to misunderstanding or wrong thinking or wrong belief. But legally, its
meaning is restricted and is to mean “operative mistake”. Courts recognize only such mistakes,
which invalidate the contract. Mistake may be mistake of fact or mistake of law.
Sec. 20”Where both parties to an agreement are under a mistake as to a matter of fact essential
to the agreement, the agreement is void”.
Sec.21” A contract is not voidable because it was caused by a mistake as to any law in force in
India: but a mistake as to a law not in force in India has the same effect as a mistake of fact”.
Bilateral mistake: Sec.20 deals with bilateral mistake. Bilateral mistake is one where there is no
real correspondence of offer and acceptance. The parties are not really in consensus-ad-item.
Therefore there is no agreement at all.
A bilateral mistake may be regarding the subject matter or the possibility of performing the
contract.

Q.2 Define negotiable instrument. What are its features and characteristics? Which are the
different types of negotiable instruments? If Mr. A is the holder of a negotiable instrument,
under what situations
i. Will he be the Holder in due course?
ii. He has the right to discharge?
iii. He can make endorsements?

Ans.: Meaning of Negotiable Instruments

To understand the meaning of negotiable instruments let us take a few examples of day-to-day
business transactions.
Suppose Pitamber, a book publisher has sold books to Prashant for Rs 10,000/- on three months
credit. To be sure that Prashant will pay the money after three months, Pitamber may write an
Order addressed to Prashant that he is to pay after three months, for value of goods received by
him, Rs.10, 000/- to Pitamber or anyone holding the order and presenting it before him (Prashant)
for payment. This written document has to be signed by Prashant to show his acceptance of the
order. Now, Pitamber can hold the document with him for three months and on the due date can
collect the money from Prashant. He can also use it for meeting different business transactions.
For instance, after a month, if required, he can borrow money from Sunil for a period of two
months and pass on this document to Sunil. He has to write on the back of the document an
instruction to Prashant to pay money to Sunil, and sign it. Now Sunil becomes the owner of this
document and he can claim money from Prashant on the due date. Sunil, if required, can further
pass on the document to Amit after instructing and signing on the back of the document. This
passing on process may continue further till the final payment is made.
In the above example, Prashant who has bought books worth Rs. 10,000/- can also give an
undertaking stating that after three month he will pay the amount to Pitamber. Now Pitamber can
retain that document with himself till the end of three months or pass it on to others for meeting
certain business obligation (like with Sunil, as discussed above) before the expiry of that three
months time period.
You must have heard about a cheque. What is it? It is a document issued to a bank that entitles
the person whose name it bears to claim the amount mentioned in the cheque. If he wants, he
can transfer it in favour of another person. For example, if Akash issues a cheque worth Rs.
5,000/
- In favour of Bidhan, then Bidhan can claim Rs. 5,000/- from the bank, or he can transfer it to
Chander to meet any business obligation, like paying back a loan that he might have taken from
Chander. Once he does it, Chander gets a right to Rs. 5,000/- and he can transfer it to Dayanand,
if required. Such transfers may continue till the payment is finally made to somebody.
In the above examples, we find that there is certain documents used for payment in business
transactions and are transferred freely from one person to another. Such documents are called
Negotiable Instruments. Thus, we can say negotiable instrument is a transferable document,
where negotiable means transferable and instrument means document. To elaborate it further, an
instrument, as mentioned here, is a document used as a means for making some payment and it
is negotiable i.e., its ownership can be easily transferred.
Thus, negotiable instruments are documents meant for making payments, the ownership of which
can be transferred from one person to another many times before the final payment is made.
Definition of Negotiable Instrument
According to section 13 of the Negotiable Instruments Act, 1881, a negotiable instrument means
“promissory note, bill of exchange, or cheque, payable either to order or to bearer”.
Types of Negotiable Instruments
According to the Negotiable Instruments Act, 1881 there are just three types of negotiable
instruments i.e., promissory note, bill of exchange and cheque. However many other documents
are also recognized as negotiable instruments on the basis of custom and usage, like hundis,
treasury bills, share warrants, etc., provided they possess the features of negotiability. In the
following sections, we shall study about Promissory Notes (popularly called pronotes), Bills of
Exchange (popularly called bills), Cheque and Hundis (a popular indigenous document prevalent
in India), in detail.
i. Promissory Note
Suppose you take a loan of Rupees Five Thousand from your friend Ramesh. You can make a
document stating that you will pay the money to Ramesh or the bearer on demand. Or you can
mention in the document that you would like to pay the amount after three months. This
document, once signed by you, duly stamped and handed over to Ramesh, becomes a
negotiable instrument.
Now Ramesh can personally present it before you for payment or give this document to some
other person to collect money on his behalf. He can endorse it in somebody else’s name who in
turn can endorse it further till the final payment is made by you to whosoever presents it before
you. This type of a document is called a Promissory Note.
Section 4 of the Negotiable Instruments Act, 1881 defines a promissory note 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 of the instrument’.
Specimen of a Promissory Note
Rs. 10,000/- New Delhi
September 25, 2002
On demand, I promise to pay Ramesh, s/o RamLal of Meerut or order a sum of
Rs 10,000/- (Rupees Ten Thousand only), for value received.
To, Ramesh Sd/ Sanjeev
Address… Stamp
Features of a promissory note
Let us know the features of a promissory note.
i. A promissory note must be in writing, duly signed by its maker and properly stamped as per
Indian Stamp Act.
ii. It must contain an undertaking or promise to pay. Mere acknowledgement of indebtedness is
not enough. For example, if some one writes ‘I owe Rs. 5000/- to Satya Prakash’, it is not a
promissory note.
iii. The promise to pay must not be conditional. For example, if it is written ‘I promise to pay
Suresh Rs 5,000/- after my sister’s marriage’, is not a promissory note.
iv. It must contain a promise to pay money only. For example, if some one writes ‘I promise to
give Suresh a Maruti car’ it is not a promissory note.
v. the parties to a promissory note, i.e. the maker and the payee must be certain.
vi. A promissory note may be payable on demand or after a certain date. For example, if it is
written ‘three months after date I promise to pay Satinder or order a sum of rupees Five
Thousand only’ it is a promissory note.
vii. The sum payable mentioned must be certain or capable of being made certain. It means
that the sum payable may be in figures or may be such that it can be calculated.

ii. Bill of Exchange

Suppose Rajeev has given a loan of Rupees Ten Thousand to Sameer, which Sameer has to
return.
Now, Rajeev also has to give some money to Tarn. In this case, Rajeev can make a document
Directing Sameer to make payment up to Rupees Ten Thousand to Tarn on demand or after
expiry of a specified period. This document is called a bill of exchange, which can be transferred
to some other person’s name by Tarn.
Section 5 of the Negotiable Instruments Act, 1881 defines a bill of exchange as ‘an instrument in
writing containing an unconditional order, signed by the maker, directing a certain person to pay a
certain sum of money only to or to the order of a certain person, or to the bearer of the
instrument’.
Specimen of a bill of exchange

Rs. 10,000/- New Delhi

May 2, 2001

Five months after date pay Tarn or (to his) order the sum of Rupees Ten Thousand
only for value received.

To Accepted Stamp
Sameer Sameer S/d
Address Rajeev

iii. Cheques
Cheque is a very common form of negotiable instrument. If you have a savings bank account or
current account in a bank, you can issue a cheque in your own name or in favour of others,
thereby directing the bank to pay the specified amount to the person named in the cheque.
Therefore, a cheque may be regarded as a bill of exchange; the only difference is that the bank is
always the drawee in case of a cheque.
The Negotiable Instruments Act, 1881 defines a cheque as a bill of exchange drawn on a
specified banker and not expressed to be payable otherwise than on demand. Actually, a cheque
is an order by the account holder of the bank directing his banker to pay on demand, the specified
amount, to or to the order of the person named therein or to the bearer.

iv. Hundis
A Hundi is a negotiable instrument by usage. It is often in the form of a bill of exchange drawn in
any local language in accordance with the custom of the place. Some times it can also be in the
form of a promissory note. A Hundi is the oldest known instrument used for the purpose of
transfer of money without its actual physical movement. The provisions of the Negotiable
Instruments Act shall apply to hundis only when there is no customary rule known to the people.
Types of Hundis
There are a variety of hundis used in our country. Let us discuss some of the most common ones.
Shah-jog Hundi: one merchant draws this on another, asking the latter to pay the amount to a
Shah. Shah is a respectable and responsible person, a man of worth and known in the bazaar. A
shah-jog Hundi passes from one hand to another till it reaches a Shah, who, after reasonable
enquiries, presents it to the drawee for acceptance of the payment.
Darshani Hundi: This is a Hundi payable at sight. The holder must present it for payment within a
reasonable time after its receipt. Thus, it is similar to a demand bill.
Muddati Hundi: A Muddati or miadi Hundi is payable after a specified period of time. This is
similar to a time bill.
There are few other varieties like Nam-jog Hundi, Dhani-jog Hundi, and Jawabee Hundi, Jokhami
Hundi, Fireman-jog Hundi, etc.
Features of Negotiable Instruments
After discussing the various types of negotiable instruments let us sum up their features as under.
A negotiable instrument is freely transferable. Usually, when we transfer any property to
somebody, we are required to make a transfer deed, get it registered, pay stamp duty, etc.
But, such formalities are not required while transferring a negotiable instrument. The ownership is
changed by mere delivery (when payable to the bearer) or by valid endorsement and delivery
(when payable to order). Further, while transferring it is also not required to give a notice to the
previous holder.
ii. Negotiability confers absolute and good title on the transferee. It means that a person who
receives a negotiable instrument has a clear and undisputable title to the instrument. However,
the title of the receiver will be absolute, only if he has got the instrument in good faith and for a
consideration. Also the receiver should have no knowledge of the previous holder having any
defect in his title. Such a person is known as holder in due course. For example, suppose Rajeev
issued a bearer cheque payable to Sanjay. A person, who passed it on to Girish, stole it from
Sanjay. If Girish received it in good faith and for value and without knowledge of cheque having
been stolen, he will be entitled to receive the amount of the cheque. Here Girish will be regarded
as ‘holder in due course’.
iii. A negotiable instrument must be in writing. This includes handwriting, typing, computer print
out and engraving, etc.
iv. In every negotiable instrument there must be an unconditional order or promise for payment.
v. The instrument must involve payment of a certain sum of money only and nothing else. For
example, one cannot make a promissory note on assets, securities, or goods.
vi. The time of payment must be certain. It means that the instrument must be payable at a time
which is certain to arrive. If the time is mentioned as ‘when convenient’ it is not a negotiable
instrument. However, if the time of payment is linked to the death of a person, it is nevertheless a
negotiable instrument as death is certain, though the time thereof is not.
vii. The payee must be a certain person. It means that the person in whose favour the instrument
is made must be named or described with reasonable certainty. The term ‘person’ includes
individual, body corporate, trade unions, even secretary, director or chairman of an institution.
The payee can also be more than one person.
viii. A negotiable instrument must bear the signature of its maker. Without the signature of the
drawer or the maker, the instrument shall not be a valid one.
ix. Delivery of the instrument is essential. Any negotiable instrument like a cheque or a
promissory note is not complete till it is delivered to its payee. For example, you may issue a
cheque in your brother’s name but it is not a negotiable instrument till it is given to your brother.
x. Stamping of Bills of Exchange and Promissory Notes is mandatory. This is required as per the
Indian Stamp Act, 1899. The value of stamp depends upon the value of the promote or bill and
the time of their payment.

Negotiation and indorsement

Persons other than the original obligor and obligee can become parties to a negotiable
instrument. The most common manner in which this is done is by placing one's signature on the
instrument (“indorsement”): if the person who signs does so with the intention of obtaining
payment of the instrument or acquiring or transferring rights to the instrument, the signature is
called an indorsement. There are four types of indorsements contemplated by the Code:

• An indorsement which purports to transfer the instrument to a specified person is a

special indorsement;
• An indorsement by the payee or holder which does not contain any additional notation
(thus puporting to make the instrument payable to bearer) is an indorsement in blank;
• An indorsement which purports to require that the funds be applied in a certain manner
(i.e. "for deposit only", "for collection") is a restrictive indorsement; and,
• An indorsement purporting to disclaim retroactive liability is called a qualified
indorsement (through the inscription of the words "without recourse" as part of the
indorsement on the instrument or in allonge to the instrument).
If a note or draft is negotiated to a person who acquires the instrument

1. in good faith;
2. for value;
3. without notice of any defenses to payment,

the transferee is a holder in due course and can enforce the instrument without being subject to
defenses which the maker of the instrument would be able to assert against the original payee,
except for certain real defenses. These real defenses include (1) forgery of the instrument; (2)
fraud as to the nature of the instrument being signed; (3) alteration of the instrument; (4)
incapacity of the signer to contract; (5) infancy of the signer; (6) duress; (7) discharge in
bankruptcy; and, (8) the running of a statute of limitations as to the validity of the instrument.

The holder-in-due-course rule is a rebuttable presumption that makes the free transfer of
negotiable instruments feasible in the modern economy. A person or entity purchasing an
instrument in the ordinary course of business can reasonably expect that it will be paid when
presented to, and not subject to dishonor by, the maker, without involving itself in a dispute
between the maker and the person to whom the instrument was first issued (this can be
contrasted to the lesser rights and obligations accruing to mere holders). Article 3 of the Uniform
Commercial Code as enacted in a particular State's law contemplate real defenses available to
purported holders in due course.

The foregoing is the theory and application presuming compliance with the relevant law.
Practically, the obligor-payor on an instrument who feels he has been defrauded or otherwise
unfairly dealt with by the payee may nonetheless refuse to pay even a holder in due course,
requiring the latter to resort to litigation to recover on the instrument.

Q.3.a. Distinguish between guarantee and indemnity.

Ans.:
Indemnity Guarantee

Comprise only two parties- the There are three parties namely
indemnifier and the indemnity the surety, principal debtor and
holder. the creditor

The liability of the surety is

Liability of the indemnifier is
primary
secondary. The surety is liable
only if the principal debtor
makes a default. The primary
liability being that of the principal
debtor.

The indemnifier need not The surety give guarantee only

necessarily act at the request at the request of the principal
of the indemnified. debtor

The possibility of any loss There is an existing debt or

happening is the only duty, the performance of which
 contingency against which the
indemnifier undertakes to is guarantee by the surety
indemnify.

b. Give a short note on Rights of Surety.

Ans.: Joint sureties or debtors:

Where several persons are bound together in any bond, bill or other writing as joint debtors or
as joint sureties, in any sum of money made payable to any person, his/her executors,
administrators, order or assign and such bond, bill, or other writing shall be paid by any of such
joint debtors or joint sureties, the creditor shall assign such bond, bill, or other writing, to the
person paying the same; and such assignee shall, in his/her own name, as assignee, or
otherwise, have such action or remedy as the creditor himself/herself might have had against the
other joint debtors, or sureties, or their representatives, to recover such proportion of the money,
so paid, as may be justly due from the defendants.

Defense of infancy to joint sureties or debtors:

Where several persons are bound together in any bond, bill or other writing or judgment as
joint debtors or as joint sureties, in any sum of money, made payable to any person or
corporation, the executors, administrators, successors, order or assigns, and 1 or more of such
persons was, at the time of making, signing or executing the same, or at the time of the rendition
of such judgment, an infant, such fact shall be no defense in any action, proceeding or suit for the
enforcement of the liability of those bound there under, excepting as regards the person who was
an infant at the time of making, signing or executing such bond, bill or other writing, or who was
an infant at the time such judgment was rendered.

Rights of surety or of joint debtor on payment of judgment:

(a) If a judgment recovered against principal and surety shall be paid by the surety, the
creditor shall mark such judgment to the use of the surety so paying the same; and the transferee
shall, in the name of the plaintiff, have the same remedy by execution or other process against
the principal debtor as the creditor could have had, the transfer by marking to the use of the
surety being first filed of record in the court where the judgment is.

(b) Where there is a judgment against several debtors or sureties and any of them shall pay
the whole, the creditor shall mark such judgment to the use of the persons so paying the same;
and the transferee shall, in the name of the plaintiff, be entitled to an execution or other process
against the other debtors or sureties in the judgment, for a proportion able part of the debt or
damages paid by such transferee; but, no defendant shall be debarred of any remedy against the
plaintiff or the plaintiff's representatives or assigns by any legal or equitable course of proceeding
whatever.

Q.4.a. Mention the remedies for breach of contract. How will the injured party claim it?

Ans.: Breach of Contract & Remedies:

Nature of breach
A breach of contract occurs where a party to a contract fails to perform, precisely and exactly, his
obligations under the contract. This can take various forms for example, the failure to supply
goods or perform a service as agreed. Breach of contract may be either actual or anticipatory.
Actual breach occurs where one party refuses to form his side of the bargain on the due date or
performs incompletely. For example: Poussard v Spiers and Bettini v Gye.
Anticipatory breach occurs where one party announces, in advance of the due date for
performance, that he intends not to perform his side of the bargain. The innocent party may sue
for damages immediately the breach is announced. Hochster v De La Tour is an example.
Effects of breach A breach of contract, no matter what form it may take, always entitles the
innocent party to maintain an action for damages, but the rule established by a long line of
authorities is that the right of a party to treat a contract as discharged arises only in three
situations.
The breaches, which give the innocent party the option of terminating the contract, are:
(a) Renunciation
Renunciation occurs where a party refuses to perform his obligations under the contract. It may
be either express or implied. Hochster v De La Tour is a case law example of express
renunciation.
Renunciation is implied where the reasonable inference from the defendant’s conduct is that he
no longer intends to perform his side of the contract. For example: Omnium D’Enterprises v
Sutherland.
(b) Breach of condition
The second repudiator breach occurs where the party in default has committed a breach of
condition. Thus, for example, in Poussard v Spiers the employer had a right to terminate the
soprano’s employment when she failed to arrive for performances.
(c) Fundamental breach
The third repudiator breach is where the party in breach has committed a serious (or
fundamental) breach of an in nominate term or totally fails to perform the contract.
A repudiator breach does not automatically bring the contract to an end. The innocent party has
two options: He may treat the contract as discharged and bring an action for damages for breach
of contract immediately. This is what occurred in, for example, Hochster v De La Tour.
He may elect to treat the contract as still valid, complete his side of the bargain and then sue for
payment by the other side. For example, White and Carter Ltd v McGregor.
2 Introduction to remedies
Damages are the basic remedy available for a breach of contract. It is a common law remedy that
can be claimed as of right by the innocent party.
The object of damages is usually to put the injured party into the same financial position he would
have been in had the contract been properly performed.
Sometimes damages are not an adequate remedy and this is where the equitable remedies (such
as specific performance and injunction) may be awarded.
3 Damages
1 Nature:
The major remedy available at common law for breach of contract is an award of damages. This
is a monetary sum fixed by the court to compensate the injured party.
In order to recover substantial damages the innocent party must show that he has suffered actual
loss; if there is no actual loss he will only be entitled to nominal damages in recognition of the fact
that he has a valid cause of action. In making an award of damages, the court has two major
considerations:
Remoteness – for what consequences of the breach is the defendant legally responsible?
The measure of damages – the principles upon which the loss or damage is evaluated or
quantified in monetary terms. The second consideration is quite distinct from the first, and can be
decided by the court only after the first has been determined.
2.Remoteness of loss
The rule governing remoteness of loss in contract was established in Hadley v Baxendale. The
court established the principle that where one party is in breach of contract, the other should
receive damages which can fairly and reasonably be considered to arise naturally from the
breach of contract itself (‘in the normal course of things’), or which may reasonably be assumed
to have been within the contemplation of the parties at the time they made the contract as being
the probable result of a breach.
Thus, there are two types of loss for which damages may be recovered:
1. What arises naturally; and
2. What the parties could foresee when the contract was made as the likely result of breach.
As a consequence of the first limb of the rule in Hadley v Baxendale, the party in breach is
deemed to expect the normal consequences of the breach, whether he actually expected them or
not. Under the second limb of the rule, the party in breach can only be held liable for abnormal
consequences where he has actual knowledge that the abnormal consequences might follow or
where he reasonably ought to know that the abnormal consequences might follow – Victoria
Laundry v Newman Industries.
3.The measure (or quantum) of damages
In assessing the amount of damages payable, the courts use the following principles:
The amount of damages is to compensate the claimant for his loss not to punish the defendant.
Damages are compensatory – not restitutionary.
The most usual basis of compensatory damages is to put the innocent party into the same
financial position he would have been in had the contract been properly performed. This is
sometimes called the ‘expectation loss’ basis. In Victoria Laundry v Newman Industries, for
example, Victoria Laundry were claiming for the profits they would have made had the boiler been
installed on the contractually agreed date.
Sometimes a claimant may prefer to frame his claim in the alternative on the ‘reliance loss’ basis
and thereby recover expenses incurred in anticipation of performance and wasted as a result of
the breach – Anglia Television v Reed. In a contract for the sale of goods, the statutory (Sale of
Goods Act 1979) measure of damages is the difference between the market price at the date of
the breach and the contract price, so that only nominal damages will be awarded to a claimant
buyer or claimant seller if the price at the date of breach was respectively less or more than the
contract price. In fixing the amount of damages, the courts will usually deduct the tax (if any)
which would have been payable by the claimant if the contract had not been broken. Thus if
damages are awarded for loss of earnings, they will normally be by reference to net, not gross,
pay. Difficulty in assessing the amount of damages does not prevent the injured party from
receiving them: Chaplin v Hicks. In general, damages are not awarded for non-pecuniary loss
such as mental distress and loss of enjoyment. Exceptionally, however, damages are awarded for
such losses where the contract’s purpose is to promote happiness or enjoyment, as is the
situation with contracts for holidays – Jarvis v Swan Tours. The innocent party must take
reasonable steps to mitigate (minimise) his loss, for example, by trying to find an alternative
method of performance of the contract: Brace v Calder.
4.Liquidated damages clauses and penalty clauses
If a contract includes a provision that, on a breach of contract, damages of a certain amount or
calculable at a certain rate will be payable, the courts will normally accept the relevant figure as a
measure of damages. Such clauses are called liquidated damages clauses.
The courts will uphold a liquidated damages clause even if that means that the injured party
receives less (or more as the case may be) than his actual loss arising on the breach. This is
because the clause setting out the damages constitutes one of the agreed contractual terms –
Cellulose Acetate Silk Co Ltd v Widnes Foundry Ltd.
However, a court will ignore a figure for damages put in a contract if it is classed as a penalty
clause – that is, a sum which is not a genuine pre-estimate of the expected loss on breach.

This could be the case where:

1. The prescribed sum is extravagant in comparison with the maximum loss that could follow from
a breach.
2. The contract provides for payment of a certain sum but a larger sum is stipulated to be payable
on a breach.
3.The same sum is fixed as being payable for several breaches, which would be likely to cause
varying amounts of damage. All of the above cases would be regarded as penalties, even though
the clause might be described in the contract as a liquidated damages clause. The court will not
enforce payment of a penalty, and if the contract is broken only the actual loss suffered may be
recovered (Ford Motor Co (England) Ltd v Armstrong).

b. What is the difference between anticipatory and actual breach?

Ans.: Anticipatory Breach:

A seller and a buyer have entered into a contract. Prior to the start of the contract, the buyer
informs the seller that he no longer requires his goods. The seller writes back stating his intention
to store the goods until the contract expires and then sue for a breach of contract. The buyer
replies with an angry letter stating that he could just sell the goods to someone else. Advise all
parties.
Actual breach:
A breach of contract occurs where a party to a contract fails to perform, precisely and exactly, his
obligations under the contract. This can take various forms for example, the failure to supply
goods or perform a service as agreed. Breach of contract may be either actual or anticipatory.
Actual breach occurs where one party refuses to form his side of the bargain on the due date or
performs incompletely. For example: Poussard v Spiers and Bettini v Gye.

Q. 5 a. Explain the term Privity of contract.

Ans.: Privity of contract:

The doctrine of privity in contract law provides that a contract cannot confer rights or impose
obligations arising under it on any person or agent except the parties to it.

The premise is that only parties to contracts should be able to sue to enforce their rights or claim
damages as such. However, the doctrine has proven problematic due to its implications upon
contracts made for the benefit of third parties who are unable to enforce the obligations of the
contracting parties.

Third-party rights:

Privity of contract occurs only between the parties to the contract, most commonly contract of
sale of goods or services. Horizontal privity arises when the benefits from a contract are to be
given to a third party. Vertical privity involves a contract between two parties, with an independent
contract between one of the parties and another individual or company.

If a third party gets a benefit under a contract, it does not have the right to go against the parties
to the contract beyond its entitlement to a benefit. An example of this occurs when a
manufacturer sells a product to a distributor and the distributor sells the product to a retailer. The
retailer then sells the product to a consumer. There is no privity of contract between the
manufacturer and the consumer.

This, however, does not mean that the parties do not have another form of action e.g. Donoghue
v. Stevenson – here a friend of Ms. Donoghue bought her a bottle of ginger beer, which was
defective. Specifically, the ginger beer contained the partially decomposed remains of a snail.
Since the contract was between her friend and the shop owner, Mrs. Donoghue could not sue
under the contract, but it was established that the manufacturer has a duty of care owed to their
consumers and she was awarded damages in tort.

Privity is the legal term for a close, mutual, or successive relationship to the same right of
property or the power to enforce a promise or warranty.

b. Define a company? What are the features of Joint Stock Company?

Ans.: Company:
The term ‘company’ implies an association of a number of persons for some common objective
e.g. to carry on a business concern, to promote art, science or culture in the society, to run a
sport club etc. Every association, however, may not be a company in the eyes of law as the legal
import of the word ‘company’ is different from its common parlance meaning. In legal terminology
its use is restricted to imply an association of persons,’ registered as a company' under the law of
the land. The following are some of the definitions of the company given by legal luminaries and
scholars of law.

“Company means a company formed and registered under this Act or an existing company.
Existing company means a company formed and registered under the previous company laws.”
Companies Act, 1956 Sec. 3(i & ii)

A joint stock company is an artificial person invisible, intangible and existing only in the eyes of
law. Being a mere creature of law, it possesses only those properties which the charter of its
creation confers upon it, either expressly or as incidental to its very existence.” – Justice Marshall

“A company is an association of many persons who contribute money or money’s worth to a

common stock and employ it in some common trade or business and who share the profit or loss
arising there from. The common stock so contributed is denoted in terms of money and is the
capital of the company. The persons who contribute it or to whom it belongs are members. The
proportion of capital to which each member is entitled is his share. Shares are always
transferable although the right to transfer them is often more or less restricted." - Lord Lindley

From the above definitions it is clear that a company has a corporate and legal personality. It is
an artificial person and exists only in the eyes of law. It has an independent legal entity, a
common seal and perpetual succession.
Sometimes, the term ‘corporation’ (a word derived from the Latin word ‘corpus’ which
means body) is also used for a company.
At present the companies in India are incorporated under the Companies Act, 1956.

Characteristics of Joint Stock Company:

The various definitions reveal the following essential characteristics of a company

1. Artificial Person: A company is an association of persons who have agreed to form the
company and become its members or shareholders with the object of carrying on a lawful
business for profit. It comes into existence when it is registered under the Companies Act. The
law treats it as a legal person as it can conduct lawful business and enter into contracts with other
persons in its own name. It can sell or purchase property. It can sue and be sued in its name. It
cannot be regarded as an imaginary person because it has a legal existence. Thus company is
an artificial person created by law.

2. Independent corporate existence: A company has a separate independent corporate

existence. It is in law a person. Its entity is always separate from its members. The property of the
company belongs to it and not to the shareholders. The company cannot be held liable for the
acts of the members and the members can not be held liable for the acts or wrongs or misdeeds
of the company. Once a company is incorporated, it must be treated like any other independent
person. As a consequence of separate legal entity, the company may enter into contracts with its
members and vice-versa.

3. Perpetual existence: The attribute of separate entity also provides a company a perpetual
existence, until dissolved by law. Its life remains unaffected by the lunacy, insolvency or death of
its members. The members may come and go but the company can go on forever. Law creates it
and the law alone can dissolve it.

4. Separate property: A company, being a legal entity, can buy and own property in its own
name. And, being a separate entity, such property belongs to it alone. Its members are not the
joint owners of the property even though it is purchased out of funds contributed by them.
Consequently, they do not have even insurable interest in the property of the company. The
property of the company is not the property of the shareholders; it is the property of the company.

5. Limited liability: In the case of companies limited by shares the liability of every member of
the company is limited to the amount of shares subscribed by him. If the member has paid full
amount of the face value of the shares subscribed by him, his liability shall be nil and he cannot
be asked to contribute anything more. Similarly, in the case of a company limited by guarantee,
the liability of the members is limited up to the amount guaranteed by a member. The Companies
Act, however, permits the formation of companies with unlimited liability. But such companies are
very rare.

6. Common seal: As a company is devoid of physique, it can’t act in person like a human being.
Hence it cannot sign any documents personally. It has to act through a human agency known as
Directors. Therefore, every company must have a seal with its name engraved on it. The seal of
the company is affixed on the documents, which require the approval of the company. Two
Directors and the Secretary or such other person as the Board may authorize for this purpose,
witness the affixation of the seal. Thus, the common seal is the official signature of the company.

7. Transferability of shares: The shares of a company are freely transferable and can be sold or
purchased through the Stock Exchange. A shareholder can transfer his shares to any person
without the consent of other members. Under the articles of association, even a public limited
company can put certain restrictions on the transfer of shares but it cannot altogether stop it. A
shareholder of a public limited company possessing fully paid up shares is at liberty to transfer his
shares to anyone he likes in accordance with the manner provided for in the articles of
association of the company. However, private limited company is required to put certain
restrictions on transferability of its shares. But any absolute restriction on the right of transfer of
shares is void

8. Capacity to sue and be sued: A company, being a body corporate, can sue and be sued in its
own name.

Q. 6. Om is enrolled in a managerial course. He has to write an assignment on company

management and various types of meetings that a company holds. You are asked to help
him in preparing the assignment.

Ans.: There are many types of businesses, and because of this, businesses are classified in
many ways. One of the most common focuses on the primary profit-generating activities of a
business:
 • Agriculture and mining businesses are concerned with the production of raw material,
such as plants or minerals.
• Financial businesses include banks and other companies that generate profit through
investment and management of capital.
• Information businesses generate profits primarily from the resale of intellectual property
and include movie studios, publishers and packaged software companies.
• Manufacturers produce products, from raw materials or component parts, which they then
sell at a profit. Companies that make physical goods, such as cars or pipes, are
considered manufacturers.
• Real estate businesses generate profit from the selling, renting, and development of
properties, homes, and buildings.
• Retailers and Distributors act as middle-men in getting goods produced by manufacturers
to the intended consumer, generating a profit as a result of providing sales or distribution
services. Most consumer-oriented stores and catalogue companies are distributors or
retailers. See also: Franchising
• Service businesses offer intangible goods or services and typically generate a profit by
charging for labor or other services provided to government, other businesses, or
consumers. Organizations ranging from house decorators to consulting firms,
restaurants, and even entertainers are types of service businesses.
• Transportation businesses deliver goods and individuals from location to location,
generating a profit on the transportation costs
• Utilities produce public services, such as heat, electricity, or sewage treatment, and are
usually government chartered.

There are many other divisions and subdivisions of businesses. The authoritative list of business
types for North America is generally considered to be the North American Industry Classification
System, or NAICS. The equivalent European Union list is the Statistical Classification of
Economic Activities in the European Community (NACE).

Management

The efficient and effective operation of a business, and study of this subject, is called
management. The main branches of management are financial management, marketing
management, human resource management, strategic management, production management,
operation management, service management and information technology management.

Reforming State Enterprises

In recent decades, assets and enterprises that were run by various states have been modeled
after business enterprises. In 2003, the People's Republic of China reformed 80% of its state-
owned enterprises and modeled them on a company-type management system.[2] Many state
institutions and enterprises in China and Russia have been transformed into joint-stock
companies, with part of their shares being listed on public stock markets.

Organization and government regulation

Most legal jurisdictions specify the forms of ownership that a business can take, creating a body
of commercial law for each type.

The major factors affecting how a business is organized are usually:

The Bank of England in Threadneedle Street, London, England.

 • The size, scope of the business firm and its structure, management, and ownership,
broadly analyzed in the theory of the firm. Generally a smaller business is more flexible,
while larger businesses, or those with wider ownership or more formal structures, will
usually tend to be organized as partnerships or (more commonly) corporations. In
addition a business that wishes to raise money on a stock market or to be owned by a
wide range of people will often be required to adopt a specific legal form to do so.
• The sector and country. Private profit making businesses are different from government
owned bodies. In some countries, certain businesses are legally obliged to be organized
in certain ways.
• Limited liability. Corporations, limited liability partnerships, and other specific types of
business organizations protect their owners or shareholders from business failure by
doing business under a separate legal entity with certain legal protections. In contrast,
unincorporated businesses or persons working on their own are usually not so protected.
• Tax advantages. Different structures are treated differently in tax law, and may have
advantages for this reason.
• Disclosure and compliance requirements. Different business structures may be
required to make more or less information public (or reported to relevant authorities), and
may be bound to comply with different rules and regulations.

Many businesses are operated through a separate entity such as a corporation or a partnership
(either formed with or without limited liability). Most legal jurisdictions allow people to organize
such an entity by filing certain charter documents with the relevant Secretary of State or
equivalent and complying with certain other ongoing obligations. The relationships and legal
rights of shareholders, limited partners, or members are governed partly by the charter
documents and partly by the law of the jurisdiction where the entity is organized. Generally
speaking, shareholders in a corporation, limited partners in a limited partnership, and members in
a limited liability company are shielded from personal liability for the debts and obligations of the
entity, which is legally treated as a separate "person." This means that unless there is
misconduct, the owner's own possessions are strongly protected in law, if the business does not
succeed.

Where two or more individuals own a business together but have failed to organize a more
specialized form of vehicle, they will be treated as a general partnership. The terms of a
partnership are partly governed by a partnership agreement if one is created, and partly by the
law of the jurisdiction where the partnership is located. No paperwork or filing is necessary to
create a partnership, and without an agreement, the relationships and legal rights of the partners
will be entirely governed by the law of the jurisdiction where the partnership is located.

A single person who owns and runs a business is commonly known as a sole proprietor, whether
he or she owns it directly or through a formally organized entity.

A few relevant factors to consider in deciding how to operate a business include:

1. General partners in a partnership (other than a limited liability partnership), plus anyone
who personally owns and operates a business without creating a separate legal entity,
are personally liable for the debts and obligations of the business.
2. Generally, corporations are required to pay tax just like "real" people. In some tax
systems, this can give rise to so-called double taxation, because first the corporation
pays tax on the profit, and then when the corporation distributes its profits to its owners,
individuals have to include dividends in their income when they complete their personal
tax returns, at which point a second layer of income tax is imposed.
3. In most countries, there are laws which treat small corporations differently than large
ones. They may be exempt from certain legal filing requirements or labor laws, have
 simplified procedures in specialized areas, and have simplified, advantageous, or slightly
different tax treatment.
4. To "go public" (sometimes called IPO) -- which basically means to allow a part of the
business to be owned by a wider range of investors or the public in general—you must
organize a separate entity, which is usually required to comply with a tighter set of laws
and procedures. Most public entities are corporations that have sold shares, but
increasingly there are also public LLCs that sell units (sometimes also called shares), and
other more exotic entities as well (for example, REITs in the USA, Unit Trusts in the UK).
However, you cannot take a general partnership "public."

Types of meetings: Common types of meeting include:

1. Status Meetings, generally leader-led, which are about reporting by one-way

communication
2. Work Meeting, which produces a product or intangible result such as a decision
3. Staff meeting, typically a meeting between a manpager and those that report to the
manager
4. Team meeting, a meeting among colleagues working on various aspects of a team
project
5. Ad-hoc meeting, a meeting called for a special purpose
6. Management meeting, a meeting among managers
7. Board meeting, a meeting of the Board of directors of an organization
8. One-on-one meeting, between two individuals
9. Off-site meeting, also called "offsite retreat" and known as an Awayday meeting in the UK
10. Kickoff meeting, the first meeting with the project team and the client of the project to
discuss the role of each team member
11. Pre-Bid Meeting, a meeting of various competitors and or contractors to visually inspect a
jobsite for a future project. The meeting is normally hosted by the future customer or
engineer who wrote the project specification to ensure all bidders are aware of the details
and services expected of them. Attendance at the Pre-Bid Meeting may be mandatory.
Failure to attend usually results in a rejected bid.
appoint an arbitrator. [Some High Courts have authorized District Judge to appoint an arbitrator].
In case of international commercial dispute, the application for appointment of arbitrator has to be
made to Chief Justice of India. In case of other domestic disputes, application has to be made to
Chief Justice of High Court within whose jurisdiction the parties are situated [Section 11(12)]

Challenge to Appointment of arbitrator: An arbitrator is expected to be independent and

impartial. If there are some circumstances due to which his independence or impartiality can be
challenged, he must disclose the circumstances before his appointment [Section 12(1)].
Appointment of Arbitrator can be challenged only if
(a) Circumstances exist that give rise to justifiable doubts as to his independence or impartiality
(b) He does not possess the qualifications agreed to by the parties [Section 12(3)]. Appointment
of arbitrator cannot be challenged on any other ground. The challenge to appointment has to be
decided by the arbitrator himself. If he does not accept the challenge, the proceedings can
continue and the arbitrator can make the arbitral award. However, in such case, application for
setting aside arbitral award can be made to Court. If the court agrees to the challenge, the arbitral
award can be set aside [Section 13(6)]. Thus, even if the arbitrator does not accept the challenge
to his appointment, the other party cannot stall further arbitration proceedings by rushing to court.
The arbitration can continue and challenge can be made in Court only after arbitral award is
made.

Conduct of Arbitral Proceedings: The Arbitral Tribunal should treat the parties equally and
each party should be given full opportunity to present his case [Section 18]. The Arbitral Tribunal
is not bound by Code of Civil Procedure, 1908 or Indian Evidence Act, 1872 [Section 19(1)]. The
parties to arbitration are free to agree on the procedure to be followed by the Arbitral Tribunal. If
the parties do not agree to the procedure, the procedure will be as determined by the arbitral
tribunal.

Law of Limitation Applicable: Limitation Act, 1963 is applicable. For this purpose, date on
which the aggrieved party requests other party to refer the matter to arbitration shall be
considered. If on that date, the claim is barred under Limitation Act, the arbitration cannot
continue [Section 43(2)]. If Court sets Arbitration award aside, time spent in arbitration will be
excluded for purpose of Limitation Act. So that case in court or fresh arbitration can start.

Flexibility in respect of procedure, place and language: Arbitral Tribunal has full powers to
decide the procedure to be followed, unless parties agree on the procedure to be followed
[Section 19(3)]. The Tribunal also has powers to determine the admissibility, relevance,
materiality and weight of any evidence [Section 19(4)]. Place of arbitration will be decided by
mutual agreement. However, if the parties do not agree to the place, the same will be decided by
tribunal [Section 20]. Similarly, language to be used in arbitral proceedings can be mutually
agreed. Otherwise, Arbitral Tribunal can decide [Section 22].
Submission of statement of claim and defense: The claimant should submit statement of
claims, points of issue and relief or remedy sought. The respondent shall state his defense in
respect of these particulars. All relevant documents must be submitted. Such claim or defense
can be amended or supplemented any time [section 23].
Hearings and Written Proceedings: After submission of documents and defense, unless the
parties agree otherwise, the Arbitral Tribunal can decide whether there will be oral hearing or
proceedings can be conducted on the basis of documents and other materials. However, if one of
the parties requests the hearing shall be oral. Sufficient advance notice of hearing should be
given to both the parties [Section 24]. [Thus, unless one party requests, oral hearing is not
compulsory].

Settlement during Arbitration: It is permissible for parties to arrive at mutual settlement even
when arbitration is proceeding. In fact, even the Tribunal can make efforts to encourage mutual
settlement. If parties settle the dispute by mutual agreement, the arbitration shall be terminated.
However, if both parties and the Arbitral Tribunal agree, the settlement can be recorded in the
form of an arbitral award on agreed terms. Such Arbitral Award shall have the same force as any
other Arbitral Award [Section 30].

Arbitral Award: Decision of Arbitral Tribunal is termed as 'Arbitral Award'. Arbitrator can decide
the dispute ex aqua ET bono (In justice and in good faith) if both the parties expressly authorize
him to do so [Section 28(2)]. The decision of Arbitral Tribunal will be by majority. The arbitral
award shall be in writing and signed by the members of the tribunal [Section 29]. The award must
be in writing and signed by the members of Arbitral Tribunal [Section 31(1)]. It must state the
reasons for the award unless the parties have agreed that no reason for the award is to be given
[Section 31(3)]. The award should be dated and place where it is made should be mentioned.
Copy of award should be given to each party. Tribunal can make interim award also [Section
31(6)].

Cost of Arbitration- Cost of arbitration means reasonable cost relating to fees and expenses of
arbitrators and witnesses, legal fees and expenses, administration fees of the institution
supervising the arbitration and other expenses in connection with arbitral proceedings. The
tribunal can decide the cost and share of each party [Section 3 1(8)]. If the parties refuse to pay
the costs, the Arbitral Tribunal may refuse to deliver its award. In such case, any party can
approach Court. The Court will ask for deposit from the parties and on such deposit, the Tribunal
will deliver the award. Then Court will decide the costs of arbitration and shall pay the same to
Arbitrators. Balance, if any, will be refunded to the party [Section 39].

Intervention by Court - One of the major defects of earlier arbitration law was that the party
could access court almost at every stage of arbitration - right from appointment of arbitrator to
implementation of final award. Thus, the defending party could approach court at various stages
and stall the proceedings. Now, approach to court has been drastically curtailed. In some cases,
if the party raises an objection, Arbitral Tribunal itself can give the decision on that objection. After
the decision, the arbitration proceedings are continued and the aggrieved party can approach
Court only after Arbitral Award is made. Appeal to court is now only on restricted grounds. Of
course, Tribunal cannot be given unlimited and uncontrolled powers and supervision of Courts
cannot be totally eliminated.

Arbitration Act has Over-Riding Effect: Section 5 of Act clarifies that notwithstanding anything
contained in any other law for the time being in force, in matters governed by the Act, the judicial
authority can intervene only as provided in this Act and not under any other Act.

Modes of Arbitration
(a) Arbitration without the intervention of the court. [Sec.3 to 19]
(b) Arbitration with the intervention of the court when there is no suit pending [Sec.20]
(c) Arbitration with the intervention of the court where a suit is pending. [Sec.21 to 25]
b. What do you mean by mediation?

Ans.: Meditation is a holistic discipline during which time the practitioner trains his or her mind in
order to realize some benefit.

Meditation is generally an internal, personal practice and most often done without any external
involvement, except perhaps prayer beads to count prayers. Meditation often involves invoking or
cultivating a feeling or internal state, such as compassion, or attending to a specific focal point.
The term can refer to the state itself, as well as to practices or techniques employed to cultivate
the state.

There are hundreds of specific types of meditation. The word, 'meditation,' means many things
dependent upon the context of its use. People practice meditation for many reasons, within the
context of their social environment. Meditation is a component of many religions, and has been
practiced since antiquity, particularly by monastics. A 2007 study by the U.S. government found
that nearly 9.4% of U.S. adults (over 20 million) have used meditation within the past 12 months,
up from 7.6% (more than 15 million people) in 2002.

To date, the exact mechanism at work in meditation remains unclear, while scientific research
continues.

Q.2 a. What kinds of rights are considerable under consumer rights?

Ans.: Consumer right is defined as 'the right to be informed about the quality, quantity, potency,
purity, standard and price of goods or services, as the case may be, so as to protect the
consumer against unfair trade practices'
Even though strong and clear laws exist in India to protect consumer rights, the actual plight of
Indian consumers could be declared as completely dismal. Very few consumers are aware of
their rights or understand their basic consumer rights. Of the several laws that have been
enacted to protect the rights of consumers in India, the most significant is the Consumer
Protection Act, 1986. Under this law, everyone, including individuals, a Hindu undivided family, a
firm, and a company, can exercise their consumer rights for the goods and services purchased
by them. It is important that, as consumers, we know at least our basic rights and about the
courts and procedures that deal with the infringement of our rights.

In general, the rights of consumers in India can be listed as under:

* The right to be protected from all types of hazardous goods and services
* The right to be fully informed about the performance and quality of all goods and services
* The right to free choice of goods and services
* The right to be heard in all decision-making processes related to consumer interests
* The right to seek redressal, whenever consumer rights have been infringed
* The right to complete consumer education

The Consumer Protection Act, 1986 and various other laws like the Standards, Weights &
Measures Act have been formulated to ensure fair competition in the market place and free flow
of true information from the providers of goods and services to those who consume them.
However, the success of these laws would depend upon the vigilance of consumers about their
rights, as well as their responsibilities. In fact, the level of consumer protection in a country is
considered as the correct indicator of the extent of progress of the nation.

The production and distribution systems have become larger and more complicated today. The
high level of sophistication achieved by the providers of goods and services in their selling and
marketing practices and various types of promotional activities like advertising resulted in an
increased need for higher consumer awareness and protection. In India, the government has
realized the plight of Indian consumers and the Ministry of Consumer Affairs, Food and Public
Distribution has established the Department of Consumer Affairs as the nodal organization for
the protection of consumer rights, redressal of all consumer grievances and promotion of
standards governing goods and services offered in India.

A complaint for infringement of consumer rights could be made under the following
circumstances in the nearest designated consumer court:

* The goods or services bought by a person or agreed to be bought by a person suffer from one
or more deficiencies or defects in any respect
* A trader or a service provider resorting to restrictive or unfair trade practices
* A trader or a service provider charging a price in excess of the price displayed on the goods or
the price that had been agreed upon between the parties or the price that had been stipulated
under any law in force
* Goods or services that pose a hazard to the safety and life of a person offered for sale,
knowingly or unknowingly, causing injury to health, safety or life.

Consumerdaddy.com is India's only online consumer protection site offering consumer report,
consumer review and different opinions on different products and companies.

b. Distinguish between Memorandum of Association and Articles of Association.

Ans.: Memorandum of Association:

The memorandum of association of a company, often simply called the memorandum (and
then often capitalised as an abbreviation for the official name, which is a proper noun and usually
includes other words), is the document that governs the relationship between the company and
the outside. It is one of the documents required to incorporate a company in the United Kingdom,
Ireland and India, and is also used in many of the common law jurisdictions of the
Commonwealth.

Requirements

While it is still necessary to file a memorandum of association to incorporate a new company, it

no longer forms part of the company’s constitution and it contains limited information compared to
the memorandum that was required prior to 1 October 2009.

It is basically a statement that the subscribers wish to form a company under the 2006 Act, have
agreed to become members and, in the case of a company that is to have a share capital, to take
at least one share each. It is no longer required to state the name of the company, the type of
company (such as public limited company or private company limited by shares), the location of
its registered office, the objects of the company, and its authorised share capital.[1]
Companies incorporated prior to 1 October 2009 are not required to amend their memorandum.
Those details which are now required to appear in the Articles, such as the objects clause and
details of the share capital, are deemed to form part of the Articles.

Capacities

The memorandum no longer restricts what a company is permitted to do. Since 1 October 2009, if
a company's constitution contains any restrictions on the objects at all, those restrictions will form
part of the articles of association.

Historically, a company's memorandum of association contained an objects clause, which limited

its capacity to act. When the first limited companies were incorporated, the objects clause had to
be widely drafted so as not to restrict the board of directors in their day to day trading. In the
Companies Act 1989 the term "General Commercial Company" was introduced which meant that
companies could undertake "any lawful or legal trade or business."

The Companies Act 2006 relaxed the rules even further, removing the need for an objects clause
at all. Companies incorporated on and after 1 October 2009 without an objects clause are
deemed to have unrestricted objects. Existing companies may take advantage of this change by
passing a special resolution to remove their objects clause.

If the company is to be a non-profit making company, the articles will contain a statement saying
that the profits shall not be distributed to the members.

Articles of association:

The term articles of association of a company, or articles of incorporation, of an American or

Canadian Company, are often simply referred to as articles (and are often capitalized as an
abbreviation for the full term). The Articles are a requirement for the establishment of a company
under the law of India, the United Kingdom and many other countries. Together with the
memorandum of association, they constitute the constitution of a company. The equivalent term
for LLC is Articles of Organization. Roughly equivalent terms operate in other countries, such as
Gesellschaftsvertrag in Germany, statuts in France, statut in Poland.[1]

The following is largely based on British Company Law, references which are made at the end of
this Article.

The Articles can cover a medley of topics, not all of which is required in a country's law. Although
all terms are not discussed, they may cover:

• the issuing of shares (also called stock), different voting rights attached
to different classes of shares
• valuation of intellectual rights, say,the valuations of the IPR of one
partner and,for example,the real estate of the other
• the appointments of directors - which shows whether a shareholder
dominates or shares equality with all contributors
• directors meetings - the quorum and percentage of vote
• management decisions - whether the board manages or a founder
• transferability of shares - assignment rights of the founders or other
members of the company do
• special voting rights of a Chairman,and his/her mode of election
• the dividend policy - a percentage of profits to be declared when there is
profit or otherwise
 • winding up - the conditions, notice to members
• confidentiality of know-how and the founders' agreement and penalties
for disclosure
• first right of refusal - purchase rights and counter-bid by a founder.

A Company is essentially run by the shareholders, but for convenience, and day-to-day working,
by the elected Directors. Usually, the shareholders elect a Board of Directors (BOD) at the Annual
General Meeting (AGM), which may be statutory (e.g. India).

The number of Directors depends on the size of the Company and statutory requirements. The
Chairperson is generally a well-known outsider but he /she may be a working Executive of the
company, typically of an American Company. The Directors may, or may not, be employees of
the Company.

3. Write a short note on unfair trade practices and Restrictive trade practice.

Ans.: Unfair trade practices:

The law of unfair competition serves five purposes. First, the law seeks to protect the economic,
intellectual, and creative investments made by businesses in distinguishing themselves and their
products. Second, the law seeks to preserve the good will that businesses have established with
consumers. Third, the law seeks to deter businesses from appropriating the good will of their
competitors. Fourth, the law seeks to promote clarity and stability by encouraging consumers to
rely on a merchant's good will and reputation when evaluating the quality of rival products. Fifth,
the law seeks to increase competition by providing businesses with incentives to offer better
goods and services than others in the same field.

Although the law of unfair competition helps protect consumers from injuries caused by deceptive
trade practices, the remedies provided to redress such injuries are available only to business
entities and proprietors. Consumers who are injured by deceptive trade practices must avail
themselves of the remedies provided by state and federal Consumer Protection laws. In general,
businesses and proprietors injured by unfair competition have two remedies: injunctive relief (a
court order restraining a competitor from engaging in a particular fraudulent or deceptive practice)
and money damages (compensation for any losses suffered by an injured business).

General Principles

The freedom to pursue a livelihood, operate a business, and otherwise compete in the
marketplace is essential to any free enterprise system. Competition creates incentives for
businesses to earn customer loyalty by offering quality goods at reasonable prices. At the same
time, competition can also inflict harm. The freedom to compete gives businesses the right to lure
customers away from each other. When one business entices enough customers away from
competitors, those rival businesses may be forced to shut down or move.

The law of unfair competition will not penalize a business merely for being successful in the
marketplace. Nor will the law impose liability simply because a business is aggressively
marketing its product. The law assumes, however, that for every dollar earned by one business, a
competitor will lose a dollar. Accordingly, the law prohibits a business from unfairly profiting at a
competitor's expense. What constitutes unfair competition varies according to the Cause of Action
asserted in each case. These include actions for the infringement of Patents, Trademarks, and
copyrights; actions for the wrongful appropriation of Trade Dress, trade names, trade secrets, and
service marks; and actions for the publication of defamatory, false, and misleading
representations.
Restrictive trade practice:

The restrictive trade practices, or antitrust, provisions in the Trade Practices Act are aimed at
deterring practices by firms which are anti-competitive in that they restrict free competition. This
part of the act is enforced by the Australian Competition and Consumer Commission (ACCC).
The ACCC can litigate in the Federal Court of Australia, and seek pecuniary penalties of up to
$10 million from corporations and $500,000 from individuals. Private actions for compensation
may also be available.

These provisions prohibit:

• Most Price Agreements (see Cartel and Price-Fixing)

• Primary boycotts (an agreement between parties to exclude another)

• Secondary boycotts whose purpose is to cause substantial lessen competition (Actions

between two persons engaging in conduct hindering 3rd person from supplying or
acquiring goods or services from 4th)

• Misuse of market power – taking advantage of substantial market power in a particular

market, for one or more proscribed purposes; namely, to eliminate or damage an actual
or potential competitor, to prevent a person from entering a market, or to deter or prevent
a person from engaging in competitive conduct.

• Exclusive dealing – an attempt to interfere with freedom of buyers to buy from other
suppliers, such as agreeing to supply a product only if a retailer does not stock a
competitor’s product. Most forms of exclusive dealing are only prohibited if they have the
purpose or likely effect of substantially lessening competition in a market.

• Third-line forcing: A type of exclusive dealing, third-line forcing involves the supply of
goods or services on the condition that the acquirer also acquires goods or services from
a third party. Third-line forcing is prohibited per se.

• Resale price maintenance – fixing a price below which resellers cannot sell or advertise

• Mergers and acquisitions that would result in a substantial lessening of competition

A priority of ACCC enforcement action in recent years has been cartels. The ACCC has in place
an immunity policy, which grants immunity from prosecution to the first party in a cartel to provide
information to the ACCC allowing it to prosecute. This policy recognizes the difficulty in gaining
information/evidence about price-fixing behaviours.

Q.4. Present a detail note on Shops and Establishment Act.

Ans.: Shops and Establishment Act:

Objectives
- To provide statutory obligation and rights to employees and employers in the unorganized
sector of employment, i.e., shops and establishments.
Scope And Coverage
- A state legislation; each state has framed its own rules for the Act.

- Applicable to all persons employed in an establishments with or without wages, except the
members of the employer's family.

- State government can exempt, either permanently or for a specified period, any establishments
from all or any provisions of this Act.

Main Provisions
- Compulsory registration of shop/establishment within thirty days of commencement of work.

- Communications of closure of the establishment within 15 days from the closing of the
establishment.

- Lays down the hours of work per day and week.

- Lays down guidelines for spread-over, rest interval, opening and closing hours, closed days,
national and religious holidays, overtime work.

- Rules for employment of children, young persons and women

- Rules for annual leave, maternity leave, sickness and casual leave, etc.

- Rules for employment and termination of service.

- Maintenance of registers and records and display of notices.

- Obligations of employers.

- Obligations of employees.

About What:
1. To regulate conditions of work and employment in shops, commercial establishments,
residential hotels, restaurants, eating houses, theatres, other places of public
entertainment and other establishments.
2. Provisions include Regulation of Establishments, Employment of Children, Young
Persons and Women, Leave and Payment of Wages, Health and Safety etc.
Applicability & Coverage:
1. It applies to all local areas specified in Schedule-I
2. Establishment means any establishment to which the Act applies and any other such
establishment to which the State Government may extend the provisions of the Act by
notification
3. Employee means a person wholly or principally employed whether directly or through any
agency, whether for wages or other considerations in connection with any establishment
4. Member of the family of an employer means, the husband, wife, son, daughter, father,
mother, brother or sister and is dependent on such employer
Returns:
1. Form-A or Form-B (as the case may be) {Section 7(2)(a), Rule 5}
Before 15th December of the calendar year, i.e. 15 days before the expiry date

The employer has to submit these forms to the authority notified along with the old
certificate of registration and the renewal fees for minimum one year’s renewal and
maximum of three year’s renewal
 2. Form-E (Notice of Change) {Rule 8}
Within 15 days after the expiry of the quarter to which the changes relate in respect of
total number of employees qualifying for higher fees as prescribed in Schedule-II and in
respect of other changes in the original statement furnished within 30 days after the
change has taken place. (Quarter means quarter ending on 31st March, 30th June, 30th
September and 31st December)
Registers:
1. Form-A {Rule 5}
Register showing dates of Lime Washing etc
2. Form-H, Form-J {Rule 20(1)} (if opening & closing hours are ordinarily uniform)
Register of Employment in a Shop or Commercial Establishment
3. Form-I {Rule 20(3)}, Form-K (if opening & closing hours are ordinarily uniform)
Register of Employment in a Residential Hotel, Restaurant, Eating-House, Theatre, or
other places of public amusement or entertainment
4. Form-M {Rule 20(4)}
Register of Leave – This and all the above Registers have to be maintained by the
Employer
5. Visit Book
This shall be a bound book of size 7” x 6” containing at least 100 pages with every
second page consecutively numbered, to be produced to the visiting Inspector on
demand. The columns shall be:
i. Name of the establishment or Employer
ii. Locality
iii. Registration Number
iv. Date and
v. Time

Q. 5 a. What is a cyber crime? What are the categories of cyber crime?

Ans.: Cyber crime

It refers to all the activities done with criminal intent in cyberspace or using the medium of
Internet. These could be either the criminal activities in the conventional sense or activities, newly
evolved with the growth of the new medium. Any activity, which basically offends human
sensibilities, can be included in the ambit of Cyber crimes.

Because of the anonymous nature of Internet, it is possible to engage in a variety of

criminal activities with impunity, and people with intelligence, have been grossly misusing this
aspect of the Internet to commit criminal activities in cyberspace. The field of cyber crime is just
emerging and new forms of criminal activities in cyberspace are coming to the forefront each day.
For example, child pornography on Internet constitutes one serious cyber crime. Similarly, online
pedophiles, using Internet to induce minor children into sex, are as much cyber crimes as any
others.

Categories of cyber crimes:

Cyber crimes can be basically divided in to three major categories:
1. Cyber crimes against persons;
2. Cyber crimes against property; and
3. Cyber crimes against government.
1. Cyber crimes against persons: Cyber crimes committed against persons include various
crimes like transmission of child-pornography, harassment of any one with the use of a computer
and cyber stalking. The trafficking, distribution, posting, and dissemination of obscene material
including pornography, indecent exposure, and child pornography constitute the most important
cyber crimes known today. These threaten to undermine the growth of the younger generation
and also leave irreparable scars on the minds of the younger generation, if not controlled.
Similarly, cyber harassment is a distinct cyber crime. Various kinds of harassments can
and do occur in cyberspace, or through the use of cyberspace. Harassment can be sexual, racial,
religious, or of any other nature. Cyber harassment as a crime also brings us to another related
area of violation of privacy of citizens. Violation of privacy of online citizens is a cyber crime of a
grave nature.

Cyber stalking: The Internet is a wonderful place to work, play and study. The net is merely a
mirror of the real world, and that means it also contains electronic versions of real life problems.
Stalking and harassment are problems that many persons especially women, are familiar within
real life. These problems also occur on the Internet, in the form of “cyber stalking” or “online
harassment”.

2. Cyber crimes against property: The second category of Cyber crimes is Cyber crimes
against all forms of property. These crimes include unauthorized computer trespassing through
cyberspace, computer vandalism, and transmission of harmful programs and unauthorized
possession of computerized information.

3. Cyber crimes against Government: The third category of Cyber crimes is Cyber crimes
against Government. Cyber Terrorism is one distinct kind of crime in this category. The growth of
Internet has shown that individuals and groups to threaten international governments as also to
terrorize the citizens of a country are using the medium of cyberspace. This crime manifests itself
into Cyber Terrorism when an individual “cracks” into a government or military maintained
website, for the purpose of perpetuating terror.
Since Cyber crime is a newly emerging field, a great deal of development has to take
place in terms of putting into place the relevant legal mechanism for controlling and preventing
cyber crime. The courts in United States of America have already begun taking cognizance of
various kinds of fraud and cyber crimes being perpetrated in cyberspace. However, much work
has to be done in this field. Just as the human mind is ingenious enough to devise new ways for
perpetrating crime, similarly, human ingenuity needs to be canalized into developing effective
legal and regulatory mechanisms to control and prevent cyber crimes. A criminal mind can
assume very powerful manifestations if it is used on a network, given the reachability and size of
the network.
Legal recognition granted to Electronic Records and Digital Signatures would certainly
boost E – Commerce in the country. It will help in conclusion of contracts and creation of rights
and obligations through electronic medium. In order to guard against the misuse and fraudulent
activities over the electronic medium, punitive measures are provided in the Act. The Act has
recognized certain offences, which are punishable. They are: -

Tampering with computer source documents (Sec 65)

Any person, who knowingly or intentionally conceals, destroys or alters or intentionally or
knowingly causes another person to conceal, destroy or alter any -
i. Computer source code when the computer source code is required to be
kept by law for the time being in force,

ii. Computer programme,

iii. Computer system and

iv. Computer network.

- Is punishable with imprisonment up to three years, or with fine, which may extend up to two lakh
rupees, or with both.

Hacking with computer system (Sec 66):

Hacking with computer system is a punishable offence under the Act. It means any person
intentionally or knowingly causes wrongful loss or damage to the public or destroys or deletes or
alters any information residing in the computer resources or diminishes its value or utility or
affects it injuriously by any means, commits hacking.
Such offenses will be punished with three years imprisonment or with fine of two lakh
rupees or with both.

Publishing of information which is obscene in electronic form (Sec 67): Whoever publishes
or transmits or causes to be published in the electronic form, any material which is lascivious or
appeals to prurient interest or if its effect is such as to tend to deprave and corrupt persons who
are likely, having regard to all relevant circumstances, to read, see or hear the matter contained
or embodied in it shall be punished on first conviction with imprisonment for a term extending up
to 5 years and with fine which may extend to one lakh rupees. In case of second and subsequent
conviction imprisonment may extend to ten years and also with fine which may extend up to two
lakh rupees.

Failure to comply with orders of the controller by a Certifying Authority or any employee of
such authority (Sec 68):
Failure to comply with orders of the Controller by any Certifying Authority or by any employees of
Certifying Authority is a punishable offence. Such persons are liable to imprisonment for a term
not exceeding three years or to a fine not exceeding two lakh rupees or to both.

Fails to assist any agency of the Government to decrypt the information (Sec 69):
If any subscriber or any person-in-charge of the computer fails to assist or to extend any facilities
and technical assistance to any Government agency to decrypt the information on the orders of
the Controller in the interest of the sovereignty and integrity of India etc. is a punishable offence
under the Act. Such persons are liable for imprisonment for a term, which may extend to seven
years.

Unauthorized access to a protected system (Sec 70):

Any person who secures access or attempts to secure access to a protected system in
contravention of the provisions is punishable with imprisonment for a term which may extend to
ten years and also liable to fine.

Misrepresentation before authorities (Sec 71):

Any person who obtains Digital Signature Certificate by misrepresentation or suppressing any
material fact from the Controller or Certifying Authority as the case may be punished with
imprisonment for a term which may extend two years or with fine up to one lakh rupees or with
both.

Breach of confidentiality and privacy (Sec 72):

Any person in pursuant of the powers conferred under the act, unauthorized secures access, to
any electronic record, books, register, correspondence, information, document or other material
without the consent of the person concerned discloses such materials to any other person shall
be punished with imprisonment for a term which may extend to two years, or with fine up to one
lakh rupees or with both.

Publishing false particulars in Digital Signature Certificate (Sec 73):

No person can publish a Digital Signature Certificate or otherwise make it available to any other
person with the knowledge that: -
a. The Certifying Authority listed in the certificate has not issued it; or
b. The subscriber listed in the certificate has not accepted it; or
c. The certificate has been revoked or suspended
Unless such publication is for the purpose of verifying a digital signature created prior to such
suspension or revocation. Any person who contravenes the provisions shall be punishable with
imprisonment for a term, which may extend to two years or with fine up to rupees one lakh or with
both.

b. Mention the provisions covered under IT Act?

Ans.: IT Act:

Publication of Digital Signature Certificate for fraudulent purpose (Sec 74):

Any person knowingly creates, publishes or otherwise makes available a Digital Signature
Certificate for any fraudulent or unlawful purpose shall be punished with imprisonment for a term
which may extend to two years or with fine up to one lakh rupees or with both.

Search and Arrest

Any Police Officer not below the rank of a Deputy Superintendent of Police or any other officer of
the Central Government or a State Government authorized in this behalf may enter any public
place, search and arrest without warrant any person found therein who is reasonably suspected
or having committed or of committing or of being about to commit any offence under this Act.

Q. 6 Ishaan is a fresher and recently is appointed as a part-time employee in Consumer

Redressal Dispute Agency. As his superior, how will you guide him regarding the
redressal forums, the nature of making complaints and the working of the agency?

Ans.: Redressal forum: Twenty-five years ago, consumer action in India was virtually unheard
of. It consisted of some action by individuals, usually addressing their own grievances. Even this
was greatly limited by the resources available with these individuals. There was little organized
effort or attempts to take up wider issues that affected classes of consumers or the general
public.

All this changed in the Eighties with the Supreme Court-led concept of public interest litigation. It
gave individuals and the newly formed consumer groups, access to the law and introduced in
their work the broad public interest perspective.

Telepress Features
Several important legislative changes took place during this period. Significant were the
amendments to the Monopolies and Restrictive Trade Practices Act (hereafter "MRTP Act") and
the Essential Commodities Acts, and the introduction of the Environment Protection Act and the
Consumer Protection Act. These changes shifted the focus of law from merely regulating the
private and public sectors to actively protecting consumer interests.

The Consumer Protection Act, 1986 (hereafter "the Act") is a remarkable piece of legislation for
its focus and clear objective, the minimal technical and legalistic procedures, providing access to
redressal systems and the composition of courts with a majority of non-legal background
members.

The Act establishes a hierarchy of courts, with at least one District Forum at the district level
(Chennai has two), a State Commission at the State capitals and the National Commission at
New Delhi. The pecuniary jurisdiction of the District Forum is up to Rs. one lakh and that of the
State Commission is above Rs. one lakh and below Rs. 10 lakhs. All claims involving more than
Rs. 10 lakhs are filed directly before the National Commission. Appeals from the District Forum
are to be filed before the State Commission and from there to the National Commission, within
thirty days of knowledge of the order.

How to make a complaint

This section explains how to make a complaint using our Complaints Registration Form. It tells
you what information you need to include on the form, and where you need to send your
completed form.

Definition of a complaint

The UK Border Agency defines a complaint as “any expression of dissatisfaction about the
services provided by or for the UK Border Agency and/or about the professional conduct of UK
Border Agency staff, including contractors.”

The following will not be treated as complaints:

• Letters relating to the decision to refuse a UK visa. Visa applicants are expected to raise
this using the existing appeal channels.
• Letters-chasing progress on an application unless it is outside our published processing
times.

What information should you send?

You should make your complaint using our Complaints Registration Form.

It is important that you give as much information about yourself as possible. The Complaints
Registration Form tells you the type of information we need. This will help us to find the
information relevant to your case and to contact you about it. If possible you should also include:

• Full details about the complaint (including times, dates and locations);
• The names of any UK Border Agency / Visa Application Centre staff you have dealt with;
• Details of any witnesses to the incident (if appropriate);
• Copies of letters or papers that are relevant; and
• Any travel details that relate to your complaint.

What happens next?

The 'How we will deal with your complaint' page explains:

• How we handle your complaint

• What to do if you are not happy with the outcome of your complaint or how we have
handled it
• What will happen after your complaint has been dealt with