Law: - Is an enforceable body of rules that governs the conduct of individuals in society i.e.

with each other and with the society as whole. Rules: Provide guidelines and boundaries within which an individual operates and specifies boundaries that are not to be crossed and provides penalty for violations if any. On the other hand Apart from the above it also provides certain rights, protection, and freedom to each individual. BASIC FEATURES OF LAW IN A SOCITY: If you look at any civilised country you will of find some feature which are common: Some of these are: (1) Law is a means of preserving the social order (2) It provides penalties for violation of such order (3) It provides a model code for conduct, at least to the extent that what conduct is considered illegal (e.g. ticket less travel, drunken driving, child marriage etc.) (4) It is also provides for rights of individuals in society (is right to property right to education, right to marry, right to speech etc.) (5) It acts as a compromiser i.e. takes into account the different segments/sections of society and their views and provides for a common set of enforceable laws. Law is not monolithic : - That is consisting of a commonly accepted and unchanging set of rules. It changes over time; (it is repealed like TADA, amended like PPOTO or sometimes scrapped altogether). People in society can agree on the need for law, but differ on what it should be the how it is to be implemented. This conflict of ideas are due to different belief, races, culture, custom that section of society hold. Which in turn leads to different structure and implementation of law differently in different countries. The study of the different belief and value bases of law is called Jurisprudence or the study of legal Philosophy. Sources of Law: (1) History (2) Traditions (3) Culture (4) Past Practices (5) Customs (6) Contribution by eminent scholars (7) Legal decisions. (8) Legislation (9) Religious Texts With these sources three broad categories of law evolved over a period of time

1Common Law 2Civil Law (Statutory Law) 3Religious Law Common law: It means, law based on past practices, traditions and precedence. Precedence means what has happened in the past judgements in similar cases. These judgements are referred to and they form the basis of new decisions given by the courts. This law operates on the premise that it is not possible to codify change contingency and the courts often look to past judgements. Usually followed in erstwhile colonies of the British in Americas, Asia, Africa and Australian continent. The origin of common law can be traced to U.K. around 1066 A.D. when William the Conqueror, conquered England. At that time England was divided and as such no law and order prevailed in different sections of the country. He tried to bring about uniformity in the law by ordering local courts to go by local traditions and decision of other courts of the country. By which he tried to bring about a consistency in the law over a period of time. Civil Law \Code Law: This type of law has all the laws written down in commercial, civil and criminal codes. Every possible contingency is intended to be covered. (If not legislation, ordinance and statutes can be framed. Origin of code law can be traced back to times of Hammurabi even before the birth of Christ. Code of Hammurabi and the Roman Code of the era of Julius Caesar are testimony to the codification of laws. Recent codification can be traced to the Napoleanic Code or the French code of 1804 A.D. Most of continental Europe including France, Germany, Italy, Spain, Portugal etc., and their erstwhile colonies in Latin America, Africa and Asia follows civil law system. While Mainland China, Japan, Taiwan and erstwhile Socialist countries follow civil laws with slight modifications. Religious Laws: Law based and derived from religious texts and its interpretation by religious leaders. Usually with civil law but rarely with common law. Examples are Nepal, which follows Hindu Law, and few Islamic countries, which follow Islamic Law (Sharia), which covers all aspects of life from dress code to basis contracts. Common Categories of Law (1) Criminal Law Vs Civil Law: - It deals with the wrongs done to the society. (Such as ticket- less travel, murder, kidnapping, arson, rioting etc.). -While Civil Law deals with wrong dove to individuals in society. Usually the distinction is the basis of penalty; if fines are paid to the state or/and imprisonment then it is a criminal case, or if payments are made to the affected party, then it is a case of Civil Law. (E.g. divorce, property disputes, harassment etc.). Usually most violation, tend to be the violations of both Laws. (2) Substantive Law Vs Procedural Law:-

Substantive law deals with the content of law i.e. what does the law say about a particular thing. While procedural law is concerned with the implementation of law. Such as to how the court notices are to be served, how should the trial be conducted, how to present the evidence, how the judgement is to be enforced etc, (3) Public Law Vs Private Law:Public Law: - Is the law enacted by the state or the central governments while Private Law is a set of rules agreed upon by individuals or groups. Most corporate dealing come under private law. But these laws here to conform to pubic law and must not violate them. Classifications of Law Besides statutory law made by the legislative branch and case law resulting from judicial interpretation of constitutions and statutes, there are several other classifications of law. Criminal Law and Civil Law Criminal law comprises those federal and state statutes that prohibit wrongful conduct such as arson, rape, murder, extortion, forgery and fraud. The purpose of criminal law is to punish offenders by imprisonment or fines. The plaintiff must prove beyond a reasonable doubt that the defendant committed a prime. Crimes are generally divided into felonies and misdemeanors. Felonies[2] are serious crimes (.e.g, rape, arson, fraud, etc) that are punishable by incarceration in a state penitentiary. Misdemeanors[3] are less serious crimes (e.g. driving while intoxicated) that are punishable by shorter periods of imprisonment in a county or city jail. A third type of crime is called infractions. An infraction is a crime that carries no possible jail time. Civil law comprises federal and state statutes governing litigation between two private parties. Neither the state nor the federal government is represented in most civil cases. Public and Private Law Public law deals with the relationship of government to individual citizens. Constitutional law, criminal law, and administrative law fit this classification. Constitutional law comprises the basic principles and laws of the nation as set forth in the U.S. Constitution. It determines the powers and obligations of the government and guarantees certain rights to individuals. Administrative law covers the process by which individuals or businesses can redress grievances against regulatory agencies such as the FTC and SEC. Private law is generally concerned with the enforcement of private duties between individuals, between an individual and a business, and between two businesses. Contracts, torts, and property law fall under this classification. Business Law: In broad sense all laws are applicable to individuals as well as business firms. But in the narrow sense business law is that part of law, which directly affects the management of business enterprise. Business Law deals with those laws which directly affect and regulate the Management of Business activity.

Business law as a discipline is dynamic; that is it keeps on changing with time and change in value system. There can be additions, deletion, modification etc such as FERA scrapped and FEMA put in place. Business law comprises of 1Contract law Sales of good act 2Product Liability laws 3Negotiable instrument laws 4Registry law 5Law of Torts 6Intellectual Property rights 7law of agency, 8law of bailment 9sale of goods THE INTERNATIONAL LEGAL ENVIRONMENT International businesses confront different sets of laws in the various countries in which in which they operate. And not only must they abide by the domestic laws of each nation; they are also subject to supranational laws (those of the Europe union for instance) which impose obligations beyond those of national legal systems. A countrys legal system derives from its political and socio-economic systems, as government and society determine the nations laws. Nevertheless, countries with very similar political systems and socio-economic characteristics sometimes have quite different laws. Major disparities in national law affecting international business occur in relation to: Protection of intellectual property Consumer among businesses The payment of bribes and other corrupt practices Advertising and sales promotions The formation and termination of contracts Marketing practices vis-a-vis product characteristics (safety, physical contents, dimensions, etc.), packaging and labeling, brand names, length of guarantees, pricing , advertising and other forms of promotion The carriage of goods. DOMESTIC, INTERNATIONALAND SUPRANATIONAL LAW The domestic law of every nation deals with aspects of international business. Foreigners whether individuals or firms are normally regarded as if they were citizens of the country in question and are treated and protected on the same terms as native inhabitants. Special laws might be passed to guarantee the safety of foreign investments, but in general the ordinary law of the relevant country is applied whenever conflicts arise and disputes have to be settled. International law (or the law of nation as it sometime called) applies to sovereign states (rather than individual citizens) and impose rights and duties on nations in their dealings with each other. It derives from international conventions which establish rules agreed by contesting states; from international custom accepted

as law within all nations; and from internationally recognized legal principles (Likta 1991; August 1993). Until the signing of the Treaty of Rome in 1957 (i.e. the treaty that set up the European Common Market ) it was the case that a business could not of itself resort to international law in the event of a conflict of interests across national borders. Businesses were subject entirely to the national laws of the countries in which they operated, although some of these laws might themselves be based on international agreements. In other words, an international business embroiled in a legal dispute had to seek redress from the national courts of the country in which the action was heard and could not obtain relief from any international legal system. The Treaty of Rome changed the situation by creating a new type of law that provided individual persons and businesses with the right to bring cases on their own accounts to a supranational legal body (Wyatt and Dashwood 1993). Equally, individuals and businesses assumed obligations extending beyond those imposed by the national legal systems of the countries in which they functioned. Thus, for example, EU companies subject to laws on competition established at the pan-European level, while employees can (and frequently do) appeal to the European court of justice (which can override the national courts of any EU member country) on equal opportunities matters. Other regional treaties of economic and/or Political co-operation followed the (then) European Economic Community in creating supranational judicial frameworks. NATIONAL LEGAL SYSTEM The legal systems of some countries are much better developed than others, particularly the mechanisms for the administration of justice and the enforcement of court rulings. Most nations have legal systems based on one of the following: a) Common law Common law approaches apply throughout the English-speaking world, including most countries of the former British Empire (English common law beign imposed on those countries by the British during the period of colonial rules). These systems rely on historical precedent, on judgements in specific cases, and on ad hoc legislation to create and interpret statutes. b) Code law Countries with code law systems have all their laws written down in Criminal, Civil and/or commercial codes which are used to determine all legal matters. Hence, the law on a particular issue can be looked up in the appropriate Article of the relevant code. Most continental European countries (and hence their former colonies) have code law systems. Note moreover that there are many similarities among these Continental systems due in part to the 1804 French Code Napoleaon, which was subsequently imposed on Belgium, Italy, Luxemburg, the Netherlands, Spain, Greece, Portugal, and regions of Germany (Westphalia, Baden and the Rhineland) occupied by France during the Napoleonic wars. Code laws also apply in Russia and Japan. c) Islamic Law Islamic law derives directly from the Koran and typically is mixed in with the pre-existing common law or civil code provisions of the country concerned (many

nations implementing islamic law are ex-colonial territories which inherited foreign imposed legal systems on independence). There are no fundamental differences between Islamic and other legal systems where international trade is concerned, although certain important practical rules apply to the conduct of business is Islamic countries, including the following: (i) The payment of interest on financial dealings is forbidden, since it is regarded as improper to reward those with excess funds while penalizing others (especially the poor) who need to borrow. This applies even to loans between businesses since it is perceived as unjust to levy interest on organisations that assume risk in order to produce (socially useful) goods and services, yet at the same time provide a return for people who simply lend money. (ii) The principle of profit sharing is extensively applied. Islamic banks, for example, do not pay interest on deposits but instead distribute to investors profit shares (the values of which are not known in advance) that result from the utilisation of the funds deposited. (iii) Instead of consumer credit being offered to customers via interest-bearing loan agreements or hire purchase, it is assumed that finance suppliers (the equivalent of finance houses or hire purchase companies in the non-Islamic world) themselves buy goods on behalf of clients and then resell them to clients at a higher price, with clients paying by instalments. The finance suppliers profit mark-up is the Islamic equivalent of interest on consumer credit. (iv) Written agreements witnessed by two independent outside parties are preferred to informal agreements reached by word of mouth. RESOLUTION OF DISPUTES Dispute arising from international transactions have to be resolved through negotiation, arbitration or litigation. The conflict of laws: Different laws, interpretations and legal methods apply to commercial litigation within each nation, and conflict between the legal systems of specific countries frequently occur. Important disparities among the business laws of various countries include the following: (a) Laws concerning the circumstance in which an offer may be withdrawn without penalty vary in detail between nations. Normally the law of the country in which obligations arising from a contract were intended to be performed will apply to this matter, although many disputes arise over the question of where exactly the performance was supposed to take place. (b) Some countries (especially in Continental Europe) draw important distinctions between commercial and non-commercial contract, with a lower burden of proof being necessary ti establish the existence of the former, and disputes arising from commercial contracts being heard in special commercial courts. (c) The intervals beyond which cases become statute barred 9 so that no one can sue for compensation) differs among countries. In Britain, for example, the period for most classes of contract is six years; in France it can be up to 30

years, while in Germany it depends on whether both the parties to the contract are traders. (d) Consideration does not necessarily have to be proven prior to suing for breach of contract in certain nations. Examples of consideration is the price paid for goods, the wages of employees (as consideration for providing labour), the hire fee paid for a lease of equipment, etc. Under English law a contract cannot exist without consideration. (e) National differences occur vis-a-vis the legality of exemption clauses and penalty clauses included in contracts. (f) In certain countries it is necessary to protest unpaid debts prior to suing for payment. This means getting a notary public (i.e. a local person legally qualified to attest and certify documents) to ask the customer for payment or for reasons for non-payment. The latter are put into a formal deed of protest which is then placed before a local court as evidence of refusal to pay. Nationalisation of foreign assets Although the domestic laws of many countries guarantees that foreign businesses will not be taken over, there is no international law on this matter. Indeed, Article 2 of the United Nations Charter of Economic Rights and Duties of States adopted by the UN General Assembly in 1974 asserts that every state has and shall freely exercise full permanent sovereignty, including possession, use and disposal, over all its wealth, natural resources and economic activities. In other words the UN supports the absolute right of member nations to nationalise or exercise partial control over businesses operating within their frontiers. This was not a unanimous decision: 120 countries voted for the article, six against (five west European countries plus the USA), with ten abstentions (including Japan, Canada and several other West European states). Hence the vote represented a conflict between underdeveloped and economically advanced nations. The latter insist that expropriation should not take place or, if it does, that compensation be adequate and paid swiftly. A number of the worlds poorer countries do not agree with this view, although virtually all nations today welcome foreign investment and specify precise rules regarding the payment of compensation to foreign companies whose assets are nationalised. Where cases are heard Each party to a contract is likely to want any dispute arising from it to be settled in that partys own country according to that nations laws. But this is obviously not possible when businesses from different countries are involved. Often, therefore, contracts include jurisdictional clauses, which specify that the law of every country will apply as agreed by the parties to the contract. This ensures that both parties know for certain their legal rights and obligations. Often the law of England specified even though nether party resides in the U.K. The reason for this is that English law has dealt with questions of international trade for many centuries, is well-documented, and has ready-made answers for most questions arising from international transactions. This may of course lead to courts outside the UK having to interpret English law. If a contract has no jurisdictional clause then the law of the country in which the case is heard (normally the defendants nation because the defendant cannot be

compelled to attend a court outside his or her own country) will apply. Jurisdictional issues within the European Union are covered by the Brussels convention of 1982 and the Rome Convention of 1990, which establish the (sometimes complex) circumstances in which cases will be heard in particular EU nations. Either the contract of sale will name a country, or the country with the closest connection with the contract must be chosen. The concept of residence Although an MNC operates on the global scale it cannot become an international legal entity as such. Its headquarters must be incorporated under the laws of a particular state, while its subsidiaries have to be set up through the laws different nations. Questions arise regarding the definition of the nationality of a multinational enterprise (bearing in mind that its head office might be little more than a nominal presence in a tax haven). This is important because the laws of the MNCs home country will govern many of its core activities plus such matters as the responsibilities and liabilities of shareholders. Taxation, availability of government grants and subsidies, and the degree of employment protection to be given to personnel. Countries apply differing legal tests when determining a companys nationality, for example: Where the company was first incorporated (this is the view adopted by the US authorities) The country intended to be the home nation by the people forming the company, regardless of where it is actually incorporated. Where decisions are taken concerning most of the firms worldwide business. This is to prevent a company pretending that what in reality is its head office is little more than a branch. Germany in particular has strict rules on this matter. The German authorities are empowered to assume that a branch of a foreign business is in act the decision-making centre of its worldwide operations, and will tax the branch as if it were the companys HQ and in receipt of all monies resulting from international activities. Force majeure (French for "greater force") is a common clause in contracts which essentially frees one or both parties from liabilities when an extraordinary event beyond the control of the parties, such as flood, war, riot, act of God, prevents one or both parties from fulfilling their obligations under the contract. Under international law it refers to an irresistible force or unforeseen event beyond the control of a State making it materially impossible to fulfill an international obligation. Force majeure precludes an international act from being wrongful where it otherwise would have been. DISPUTE RESOLUTION Resolved through either through Comity or reciprocity comity 1: "comity of nations"

2: the informal and voluntary recognition by courts of one jurisdiction of the laws and judicial decisions of another (called also judicial comity) Comity of nations 1: the courtesy and friendship of nations marked esp. by mutual recognition of executive, legislative, and judicial acts 2: the group of nations practicing international comity Comity is a term used in international law (and in the law governing relations between U.S. states) to describe an informal principle that nations will extend certain courtesies to other nations, particularly by recognizing the validity and effect of their executive, legislative, and judicial acts. This principle is most frequently invoked by courts, which will not act in a way that demeans the jurisdiction, laws or judicial decisions of another country. Part of the presumption of comity is that other nations will reciprocate the courtesy shown to them. Many statutes relating to the enforcement of foreign judgments require that the judgments of a particular country will only be recognized and enforced by a forum to the extent that the other country would recognize and enforce the judgments rendered by that forum. However, comity should not be misinterpreted as implying that all laws are of universal jurisdiction. In many countries, comity is effective only to the extent that foreign laws or judgments do not directly conflict with the forum country's public policy. For example, the United States of America will not enforce foreign judgments that present a direct conflict with the strong U.S. public policy in favor of free speech. Reciprocity: In international relations and treaties, the principle of reciprocity states that favors, benefits, or penalties that are granted by one state to the citizens or legal entities of another, should be returned in kind. For example, reciprocity has been used in the reduction of tariffs, the grant of copyrights to foreign authors, the mutual recognition and enforcement of judgments, and the relaxation of travel restrictions and visa requirements. The principle of reciprocity also governs agreements on extradition. Several theorists have drawn a distinction between these 'specific' forms of reciprocity and a more general concept of 'diffuse reciprocity'. Whilst specific reciprocity is exemplified by international trade negotiations, as suggested above, diffuse reciprocity points to a wider institutionalization of trust. Through consistent cooperation in an 'international society' states are seen as building generally accepted standards of behavior. These general standards exert their own normative pressure on state action, contributing to the development of long-term obligations between states which stress cooperation over conflict. Thus in a

system of diffuse reciprocity states need not seek the immediate benefit guaranteed by specific reciprocity, but can act in the confidence that their cooperative actions will be repaid in the long run. Arbitration Arbitration means the settlement of disputes through the appointment of independent referees who hear and adjudicate cases. The referees must be agreed by each party to the dispute. This differs from conciliation which is the use of an independent and fair minded intermediary to help resolve a dispute, with the conciliator acting as n honest broker between the disputants- advising each side of the others views and feelings and suggesting compromises (rather than reaching an independent decision, as happen with arbitration). Arbitration versus litigation Litigation has the advantage that the rights and duties of the parties are determined by known and definite laws, and that aggrieved parties can obtain redress that is legally enforceable. There are however a number of problems associated with litigation as means for setting disputes including: Lengthy delays High cost Possible bad publicity arising from the case Fears that courts will unfairly discriminate against foreigners The fact that certain business activities might have to be suspended while a case is being heard. The lack of business experience of judges who determine cases. An important practical problem is that of the proper translation of documents into a foreign language for consideration buy Court. The meanings of words can change during translation and the intentions of the contracting parties may become unclear. Matching words across languages is difficult enough; accurately translating legal concepts can be ear impossible. Arbitration is usually faster and cheaper than litigation. Cases are heard in secret so that neither party loses public goodwill through adverse media coverage. Arbitrators are themselves business people (advised by legal experts) with practical experience of the commercial world. No problems need arise from the conflict of national laws, because common sense approaches can be applied to problems. Cases are heard on neutral ground not in the national courts of one of the parties. However arbitration lacks legal precision, and still costs time and money. And one of the parties will not be happy with the outcome. Arbitration bodies A common procedure for resolving disputes between businesses is to insert an arbitration clause into the contract under which a certain international body will resolve the issue. The main arbitration bodies are the international chamber of commerce (ICC), the American arbitration association, the London Court of arbitration and the international centre for settlement of investment disputes (ICSID). In practice the ICC is the most frequently used arbitration organisation. It is based in Paris and offers arbitration facilities both to members to non

member companies. ICC proceedings begin with an attempt at conciliation by a panel of three persons nominated by the president of the ICC, followed by the appointment of an arbitration tribunal whose members are nationals of countries not involved in the disputes. The ICSID was founded in 1967 and is sponsored by the World Bank. It arbitrates disagreements between national governments and foreign investors. Note how some nations adhere to the doctrine that simply by entering a country a foreigner implicitly consents to being treated in exactly the same way as a national of that country, and thus revokes any right to protection by the foreigners home nation in the event of an investment dispute! ICSID has not itself lain down any rules on suggested rights and obligations of investing companies and host nations, but instead provides conciliation and arbitration services in cases where both parties agree to the Centres involvement. However, ICSID decisions are binding and legally enforceable in all countries that signed the ICSID convention (including all the industrialised nations). In the general, if the parties to a contract agree to arbitration then the arbitrators decision becomes legally binding under their domestic laws via the 1958 New York convention on the Recognition and Enforcement of Foreign Arbitratral Awards, the rules of which have been accepted by the overwhelming majority of the worlds nations The International Court of Justice (ICJ) This is a United Nations organisation, based at The Hague in The Netherlands, which adjudicates disputes between states. Only states that have agreed to accept the Courts jurisdiction need participate in cases. Private persons or businesses have no direct access to the ICJ, although private issues can be adjudicated if they are referred to the Court by national governments. And even if a private matter reaches the ICJ and is resolved, enforcement of the judgement is problematic as there is no international body to take action against a losing side that refuses to pay the compensation the Court has awarded. International Conventions A number of international agreements govern the legal frameworks to be applied to particular aspects of cross-border trade. Laws concerning the carriage of goods at sea follow the Hague-Visby Rules in the majority of the worlds trading nations. And notwithstanding this fact, nearly all bills of lading include clause explicitly stating that at least some of the Hague-Visby rules will apply. The Hague Rules were drafted in 1921 and subsequently extended (to become the Hague-Visby Rules( via the 1968 Brussels Protocol. Hague-Visby rules formally determine the legal status of the bill of lading and specify upper limits and a formula for calculating the carriers liability for damage to cargoes. Claims must be lodged within one year of delivery or the date a cargo was lost. Air transport is covered by the Warsaw Convention 1929 (subsequently amended) which sets maximum limits on liability for negligence and regulates the legal carrier relationships between air carriers and consignees Conditions and performance of contracts for rail transport are governed by the 1985 Convention Relative aux Transport Internationaux Ferroviaires (COTIF). European Road haulage is governed by the 1956 Convention de Merchandises par Route (CMR

Convention) which lays down standard international contractual conditions for road transport, covering liabilities for loss or damage to goods and the maximum value for insurance claims against haulier. Under the Convention the carrier is fully responsible for the acts and omissions of employees and agents, and specific documentations must be used. The convention stands to contracts involving successive carriers, e.g. road, rail, sea and air. Two international conventions have sought to harmonies the legal rules concerning the international sale of goods. The Hague Convention of 1964 drafted uniform laws for (i) the sale of goods across national frontiers, and (ii) the formation of contracts for international sales. These Uniform Laws were reconsidered, extended and developed by the United Nations Commission on International Trade Law (UNCITRAL), which organised a Vienna Convention to draft a commercial code for use in all international transactions. The resulting code included clearly defined procedure for arbitration. UNCITRAL does not itself provide arbitration facilities; rather it lays down a model set of rules and procedures which other bodies can follow (Dore 1993). The intention of The Hague and Vienna Conventions was that agreed Uniform Laws be incorporated into the domestic law of all United nations countries. This has indeed occurred in many states, including the USA, France, Italy, The Netherlands, and in is Scandinavia. In countries that have not exceeded to the Convention (Britain for example) the Uniform Laws only apply if both parties agree to this happening Uniform Laws UNCITRAL Uniform laws are extremely valuable for dealing with national differences in the law of contract. The basic requirements for the existence of a contract are that there be an offer and an acceptance, an intention to create legal relations and consent to the terms of the agreement. Also the contract must be legal and technically capable of being completed and in some countries (including the UK) there has to be consideration. National laws on these matters are similar in most respects, but with notable exceptions. Specific UNCITRAL rules on contract, (which apply automatically in some states, elsewhere if the contracting parties agree that this shall happen) are as follows: a) Consideration is not necessary for the existence of a contract. b) An offer that is accepted is deemed to have been accepted at the moment of receipt and not the moment the offer was transmitted (as is the case under English law) c) An offer must be addressed to one or more particular people or organisations. Otherwise proposals not addressed to specific persons are not offers but merely invitations to members of the public themselves to make offers to buy the goods. Examples of offers not addressed to specific persons include catalogues, circularized price lists, advertisements, etc. This does not contradict English law, but does reverse the rules on these matters of certain nations, d) If the party making an offer says it will remain open for a period, then it cannot be withdrawn during that period once has been received by the other side (a reversal of English law, which states that an offer may be withdrawn any time before acceptance).

CONTRACTS What is contract? A contract is an agreement, which is enforceable by law. Agreement: - is the result of a proposal or an offer by on party to another and its acceptance by the other . Example: A offers to sell his watch to B for Rs.1000. B accepts the proposal. Consideration for A is the money (Rs.1000) Consideration for B is the watch. So basically both the parties promise each other something of value to them, which implies that consideration is the price of promise. Consider the following 1A offer to take B for dinner/movie. B accepts. 2A offers to sell be his car for Rs.200,000. B accepts. In the first case it is an invitation to treat and there is no intention to create a legal relationship while in the second case there is an intention to create a legal relationship i.e. duly enforceable by law in case of non-performance by the parties. If B take delivery of the car but does not pay A, then A can take legal action against B. But in the first example it is not the case as non-performance is not enforceable by law. This is because in the first case there is no intention to create a legal relationship while it is so in the second case. Law makes a distinction between social, religious and legal obligations. From the above discussion it follows that All contract are agreements but not all agreements are contract. In light of the above let us discuss the essentials of a contract. Essentials of a valid contract: 1) There should be an agreement between the parties. 2) Intention to create legal relationship 3) Lawful consideration.(must be legal and should not be fraudulent or opposed to public policy). 4) Lawful object( subject matter should not be illegal e.g. kidnapping). 5) Capacity to Contract( Parties must be are 18 years, of sound mind and should not be disqualified by law to enter into a contract). 6) Free Contract (The parties must give their consent freely and it should not be obtained through force, coercion, duress or by fraud and misrepresentation) Voidable Contracts: is enforceable by law but the parties have the right to avoid it. Such as in a case where consent is obtained through fraud, such a contract will remain a valid contract until the aggrieved party cancels the contract. Void Contract: Contracts, which are valid but subsequently became void. This can be due to impossibility, destruction of subject matters, illegality etc.

For a Contract you need offer and acceptance. Acceptance: the act of consenting to a proposal. When a proposal is agreed upon it is called acceptance. Acceptance is made:12Either through an act of writing or verbal announcement Or by doing something which is required. (by conduct)

Example: A merchant receives an order from a customer to supply some household items. The merchant delivers the good to the customer. (the acceptance in this case is by conduct/ or by performance of the act) i.e. the act of sending the goods to the customer. Example:. Mr. A loses this dog. A announces a general offer of a reward of Rs.100 to anyone finding his dog. B finds the dog and claims the reward. He is entitled to the reward (B need not communicate his acceptance as he had accepted the offer by doing the required act). Example: You sit a bus going destination X. By merely sitting on the seat you imply that you accept the offer of the Transport Company to take you to destination X.. For a Contract you need an offer and an acceptance Acceptance: the act of consenting to a proposal. When a proposal is agreed upon it is called acceptance. Acceptance is:3Either through verbal or in writing, 4Or by doing something which is required or by conduct. Ex: A merchant receives an order from a customer to supply some household items. The merchant delivers the good to the customer. (the acceptance in this case is by conduct/ or by performance of the act i.e. the act of sending the goods). Ex. A loses this dog. A announces a general offer of a reward of Rs.100 to anyone finding his dog. B finds the dog and claims the reward. He is entitled to the award (B need not communicate his acceptance as he accepted by doing the required act). Who can accept? General offer anybody from the public at large Specific Offer to whom it has been made (no substitutions) e.g. A has made an offer to B, then C cannot substitute himself in place of B without As consent. Ex: Facts before the court

X Owner of a firm. Y Manager in the firm J A person who has loaned some money to X X- Sells the firm to Y J- Places can order with X for certain goods. Y- Dispatches the goods even though the order was not addressed to him and demands payment. J- Refuses to pay as he wanted to offset his debt with X by the goods that he had purchased. Judgement: J was not to pay Y as the offer was not meant for him (Y) therefore he (Y) was not a position to accept the same. Essentials of valid acceptance 1Absolute and unqualified: It should be according to the exact term of offer, no variation in acceptance will be allowed e.g. even a slight variation it will be considered be counter offer which the other party may accept or reject. Absolute: in totality not in parts Example: Mr X. says that he will be sell his bike and it accessories for Rs. 20,000 and 2000 respectively Acceptance: Mr Y. says that he will buy the bike minus accessions for Rs. 20000 This is not a valid acceptance, as offer is accepted in part. Unqualified: Example: Offer: I will sell my bike for 20000 Accept: I will buy it for Rs 20000 but will pay in instalments This is not an acceptance but a counter offer and even if he later on changes his it will be counter offer. 2It must be communicated: i) in writing or verbally ii) or through a required act or by conduct e.g. M/s Carlile, Merchant, Bus etc. Mental Acceptance : is not legal acceptance Mr. X purchase manager received an offer from xyz to supply certain items, the letter Mr. X wanted approved and put the d in his file. Later he forgot to write a letter for xyz co. It was held there was no contract as the manager had not communicated his acceptance to 3Acceptance must be according to the prescribed model. If in offer it is written that acceptance should be in particular mode, then the acceptance should be in that mode. (E.g. By carrier, or for or e-mail) Exception: But in case is the acceptance is not in prescribed made but is in reasonable made and time, it can be accepted and if there is no objection within a reasonable time by the offered it is considered acceptance. Communication of offer, acceptance and provocation. 1Offer must be communicated to the offerer 2Acceptance must be communicated to the offerer Similarly recreation of offers and acceptances should be communicated

AB Offer through part to B i. Communication of offer on side of A is c ii. When it is posted iii. On side of B when it is need by him. iv. Acceptance on side of B when he posts the letter v. On side of A when he receive the letter A can revoke his proposal before B has communicated his acceptance (i.e. before he posts letter not after words) B can revoke his acceptance before the letters of acceptance reach A but not after words.

Discharge of Contracts When two parties enter into a contract it becomes enforceable by law. Failure to perform would constitute breach of contract and non-performance They are basically four ways through which a contract can be discharged. 1By Performance 2By Breach of Contract 3By Impossibility of Contract 4By Agreement and Novation 1-By Performance: A contract is discharged when both the parties perform their part of the promise\bargain\contract. ExampleA offer to pay B Rs. 100 for painting his room. A has to pay Rs.100 to B B has to paint As room.

Exceptions: 1.When one party excuses the other: B start painting the room, and even before the room is painted, A pays B Rs. 100 and excuses him from further performance. Conclusion: Under law it will be assumed that both have performed their part of contract. 2.Excused by provision of law: A enters into a contract with B to supply Shahtoosh shawls for some amount. Before the contract can be fulfilled Shahtoosh trading becomes illegal. Hence A is excused from performance as it is excused under provision of law. Time & Place of Performance: -The parties are free to choose the time & place of performance. -Parties can claim compensation if there is a time delay. Compensation claim would be dependent on the following: 1If time is of essence (important/ vital) 2If time is not of essence. When time is of essence: (usually in case of goods/materials or spare parts in which there is high market fluctuation) The aggrieved party has two options: 1To avoid the contract & claim compensation 2To go ahead with the contract and claim for damages.(But in case the aggrieved party intends to claim damages, it has to notify the other party before accepting the goods).

When time is not essence Cannot avoid the contract but can claim compensation. Breach of Contract: When one of the party to the contract fails to perform or does not perform its part of the bargain as mentioned in the contract. It is of two types -Actual or Fundamental -Anticipatory Actual or Fundamental Breach: Occurs when one party fails to perform on the due date. Anticipatory Breach: Non performance before the due date of the contract. Example: A and B enter into a contract to supply goods on 1 st Jan, does not do so on even after 1st January has passed. Such type of Breach is known as actual or fundamental. Example: A and B enter into a contract on 15 th of October to supply certain goods on 1st November. But before the due date of performance A through his actions or words conveys to B that he will not perform his part of the bargain. Such type of Breach is known as anticipatory breach of contract. Note: If the contract were half performed even then it would classify as a breach of contract. In case of breach of contract the aggrieved party has the following options. Actual The aggrieved party is discharged from performance yet it can sue and claim damages arising to the party out of breach of contract. Anticipatory: 1Rescind the contract & sue immediately i.e. before the due date 2Waits till the due date has passed then sue for damages (because anticipatory breach does not automatically rescind the contract). Remedies for Breach of Contract: When it is established that a breach of contract has occurred the aggrieved party has the following remedies available to them.

1Damages: means compensation in terms of money for the loss suffered by the aggrieved or injured party. It can sue for losses including lost profits ( it is the must common remedy and requires no special circumstances) Indirect or remoteness of the damage: Every breach of contract upsets the calculations of the injured party. It may feel the consequences for a long time in a variety of ways. Example: A person agrees to supply to a shopkeeper pure mustard oil, but in reality supplies adulterated oil. This is a breach. The oil is seized by the inspector and destroyed. The shopkeeper is arrested, prosecuted and convicted for selling spurious oil. He suffers the loss of oil, reputation, loss of profits, loss of business prestige. Beside of course the loss of time, money and energy wasted on the defence and the mental agony and torture of the prosecution. Thus the consequence of a breach may be endless, but there must be an end to the liability. The defendant cannot be held liable for all that follows from the breach. There must be a limit to the liability beyond which the damage is said to be too remote to be recoverable. This led to classification of two types of damages Direct or general Damages: Are those that arise naturally in the usual course of things from the breach itself. Special Damages: Are those that arise on account of special circumstance affecting the aggrieved party. Such claims cannot be recovered unless the special circumstances where brought to the notice of the other party including the possibility of special loss. 2- Specific Performance: Can be forced the courts on a complaint by the aggrieved party and the guilty party would have to perform the part of their bargain as mentioned in the contract ( usually in case of monopoly goods or when goods are in short supply). 3-Quantum Merit: When one party of the contract has performed a part of the contract but stops in between because a breach has been committed by the other party which discharges him from further performance. The first party therefore must be compensated for the part that he has performed. This is called the doctrine of Quantum Merit which means as much as merited or as much as earned or deserved 4-By Suit of Injunction: An injunction is an order of the court directing a person to do or refrain from doing some act, which is the subject matter of the contract. The court can restrain a party, by an order of injunction from committing the breach. This injunction may be temporary or indefinite and grant of injunction depends on the discretion of the courts. Injunction in common parlance is also called a stay order. Injunction is used as a means of enforcing a promise or forbidding the party from committing a breach of contract. Example: A who owns some land enters into a contract with B, a builder to build Apartments on the land. Similarly B enters into a contract with C for the same without the knowledge or permission of A. B and C start building the apartments. A files a suit of injunction and get a restraining order from the court stopping construction by C.

Discharge by Impossibility: In such cases contract becomes void. There are two possibilities 1Impossible at the time of entering into the contract. (Does not mean physical impossibility but legal impossibility). 2The contract becomes impossible to perform after entering into the contract or subsequent impossibility.(e.g. earthquake, landslide, floods, destruction of subject matter etc.) Example: A, a singer enters into a contract with B, to perform in a theatre owned by B. On the morning of the scheduled performance the theatre catches fire. Held that B was not liable as his performance becomes impossible under the doctrine of impossibility. Doctrine of Frustration: When two parties enter into a contract, they have a certain purpose in mind and when this is not achieved then it is called frustration. Doctrine of frustration is essentially based upon the impossibility of performance of contract. Frustration can be due to 2345Note: Death of one party. Frustration due to change in circumstances Destruction of subject matter Frustration due to physical in possibility Delay in preference is not frustration Commercial difficulty does not mean frustration.

4-Discharged by Agreement and Novation : Novation means substituting an existing contract with a new one and it has to be by an agreement between the parties. Novation: It can be -By charge in terms of contract: substituting new terms and conditions in the contract. -By change in the parties to the contract: substituting one party by another in the contract.

Intellectual Property Rights THE CONCEPT OF INTELLECTUAL PROPERTY Intellectual property, very broadly, means the legal rights which result from intellectual activity in the industrial, scientific, literary and artistic fields. Countries have laws to protect intellectual property for two main reasons. One is to give statutory expression to the moral and economic rights of creators in their creations and such rights of the public in access to those creations. The second is to promote, as a deliberate act of Government policy, creativity and the dissemination and application of its results and to encourage fair trading which would contribute to economic and social development. Generally speaking, intellectual property law aims at safeguarding creators and other producers of intellectual goods and services by granting them certain timelimited rights to control the use made of those productions. Those rights do not apply to the physical object in which the creation may be embodied but instead to the intellectual creation as such, intellectual property is traditionally divided into two branches, "industrial property" and "copyright." The Convention Establishing the World Intellectual Property Organization (WIPO), concluded in Stockholm on July 14, 1967 (Article 2(viii)) provides that "'intellectual property shall include rights relating to: [1] [2] [3] [4] [5] [6] designations [7] literary, artistic and scientific works performances of performing artists, phonograms, and broadcasts inventions in all fields of human endeavor scientific discoveries industrial designs trademarks, service marks, and commercial names and protection against unfair competition

and all other rights resulting from intellectual activity in the industrial, scientific, literary or artistic fields." The areas mentioned under [1] belong to the copyright branch of intellectual property. The areas mentioned in [2] are usually called "neighboring rights," that is, rights neighboring on copyright. The areas mentioned under [3], [5] and [6] constitute the industrial property branch of intellectual property. The area mentioned under [7] may also be considered as belonging to that branch, the more so as Article 1(2) of the Paris Convention for the Protection of Industrial Property (Stockholm Act of 1967) (the "Paris Convention") includes "the repression of unfair competition" among the areas of "the protection of industrial property"; the said Convention states that "any act of competition contrary to honest practices in industrial and commercial matters constitutes an act of unfair competition".

The expression "industrial property" covers inventions and industrial designs. Simply stated, inventions are new solutions to technical problems, and industrial designs are aesthetic creations determining the appearance of industrial products. In addition, industrial property includes trademarks, service marks, commercial names and designations, including indications of source and appellations of origin, and protection against unfair competition. Here, the aspect of intellectual creations--although existent--is less prominent, but what counts here is that the object of industrial property typically consists of signs transmitting information to consumers, in particular, as regards products and services offered on the market, and that the protection is directed against unauthorized use of such signs which is likely to mislead consumers, and misleading practices in general. Scientific discoveries, the area mentioned in the WIPO Convention under [4], are not the same as inventions. The Geneva Treaty on the International Recording of Scientific Discoveries (1978) defines a scientific discovery as "the recognition of phenomena, properties or laws of the material universe not hitherto recognized and capable of verification". Inventions are new solutions to specific technical problems. Such solutions must, naturally, rely on the properties or laws of the material universe (otherwise they could not be materially or "technically" applied), but those properties or laws need not be properties or laws "not hitherto recognized." An invention puts to new use, to new technical use, the said properties or laws, whether they are recognized ("discovered") simultaneously with making the invention or whether they were already recognized ("discovered") before, and independently from, the invention.
i

PATENTS: This is a states grant of monopoly of an inventors right of ownership to his invention. By filing for a patent the inventor is able to retain a monopoly in the exploitation of his invention for a limited period of time in a states territory. In return the inventor has to disclose his invention. Inventions excluded from patent protection 1. inventions which violate social order or morality or are opposed to pubic policy 2. diagnostic, therapeutic and surgical method for the treatment of human and animals 3. no naturally occurring plants and animals TYPE OF PATENTS: An ordinary patents A patent of addition A design patent A plant patent REASONS FOR GRANTING PATENTS 1. recognition of efforts behind the invention and resources spent. 2. To encourage inventions and industrial development

Duration: 20 years International Agreement: TRIPS and Paris Convention , Indian patent Act1970 Scope: A patent is protected only in an area where it can be filed and accepted. Advantages and disadvantages 1. Provides protection against imitation: Protects an invention (a product), a chemical formula, or a new way of doing something (a process) from imitation for a specified duration. In practice however, the issuance of a patient does not guarantee the patent holder that no other person will try to copy it. 2. Monopoly: Grants exclusive rights, but only for a limited period of time and in certain cases the state can resort to compulsory licensing. 3. Wards of competitors: Sometimes new technologies are held off the market e.g. a patent holder anticipates that a present or potential rival will be able to successfully copy around its product. The patent holder may be unwilling do introduce the patented product formula or process preferring instead sit on the patent. - A firm may also decide against commercialising a patent in order in order to protect the sales of a current product that could be jeopardized if the firm were to introduce the new product to the market. - Or the firm may withhold introducing it in order to avoid setting off a round of technology based competition with rivals. - In many other cases an organization may lack the resources needed to capitalize on new technology and may not want to manufacture the product. in such cases it can license the technology to a third party COPYRIGHTS: Copyright is the legal protection extended to the owner of the rights in an original work that he has created. It comprises two main sets of rights: 1. The economic rights 2. The moral rights. The economic rights are the rights of reproduction, broadcasting, public performance, adaptation, translation, public recitation, public display, distribution, and so on. The moral rights include the author's right to object to any distortion, mutilation or other modification of his work that might be prejudicial to his honor or reputation. Criteria The criteria are artistic merit, skill and originality. Many reproductions are legitimate if they are used for research purposes. Applicable Act:

The Indian copyright act 1914 was adapted from the U.K copyright Act 1911. The copyright Act 1957 replaced the earlier acts and amendments in 1983 and 1984 were incorporated into it. Another amendment in 1992 extended the term of the copyright from 50 years after the death of the author to 60 years. At the international level, copyrights are conferred by the Berne Convention for the Protection of Literary and Artistic Works , commonly known as the "Berne Convention". (1986) Copyrights cover most creative works, such as: Literary works, both published and unpublished. Dramatic and Musical Works. Artistic works or works of architecture. Works of craftsmanship not falling within the other two categories. Lectures Sound recording and broadcasts. Film/Television broadcasts. Computer programs: .There are three legal protection available for computer programs: - the patenting system, the copyright system and the trade secret system however the international trend is to exclude patenting of programs. TRADE MARK: A trade mark is symbol, mark or name which is used to identify a trader or a manufacturer. Trademark can be variously taken to mean a service mark( identifies the person who provides the services), brand name or trade name. A trademark can serve both buyers and sellers. The seller uses a trademark to identify an exclusive source and as a report any of goodwill. A brand name is that part of brand that can be vocalized, including letters, words, and numbers. A brand mark symbol, design or a group of distinctive letters is a part of brand that is seen but not spoken. McDonalds golden arches the distinctive tick mark of Nike. If a brand or part of a brand is registered with the Indian patent and trademark office giving it legal protection for the exclusive use of seller it becomes a trademark i.e. a trademark is a legal term meaning those brand that have been legally registered. The Indian legal system includes two acts. *1940 trademark act *1958 Indian Trade and Merchandised Act The initial duration of registration for a trademark is for seven years, which can be renewed from time to time over a period of seven years. Geographical Indications

Geographical indications are, indications which identify a good as originating in the territory of a Member, or a region or locality in that territory, where a given quality, reputation or other characteristic of the good is essentially attributable to its geographical origin.

The notes have beenprepared for class discussion and internal use. No part of this article may be reproduced in any from without the permission of the author. Bilal Mustafa Khan December 27, 2005.