MB0051-LEGAL ASPECTS OF BUSINESS ID: 521146542

ASSIGNMENT Name: Registration No: Learning Center: Learning Center Code: Course: Subject: Semester: Subject Code: Date of submission: Marks awarded: Viwan Errol Noronha 521146542 Sandur Systems 03248 MBA-Marketing Legal Aspects Of Business 3rd Semester MB0051 06/12/2013

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MB0051-LEGAL ASPECTS OF BUSINESS ID: 521146542 Question 1:: Write short notes with examples: a) Offer and acceptance b) Capacity to contract Ans:1.a) Offer and acceptance are elements required for the formation of a legally binding contract: the expression of an offer to contract on certain terms by one person (the "offeror") to another person (the "offeree"), and an indication by the offeree of its acceptance of those terms. The other elements traditionally required for a legally binding contract are (i) consideration and (ii) an intention to create legal relations. Offer and acceptance analysis is a traditional approach in contract law. The offer and acceptance formula, developed in the 19th century, identifies a moment of formation when the parties are of one mind. This classical approach to contract formation has been weakened by developments in the law of estoppel, misleading conduct, misrepresentation and unjust enrichment. The basic building block on which a contract rests is called offer. An offer is synonymous with a proposal.As per the contract act the offeror or proposer expresses his/her willingness to do or not to do something with a view to obtain consent of the other party to such act or abstinence. The person making the offer is called the Offeror / Promisor / Proposer and the person to whom the offer is made is called the Offeree / Proposee. When the Offeree accepts the offer, he/she is called the Acceptor or Promisee.An offer can be made if a person commits an act or omission by which the person intends to communicate a proposal or which has the effect of communicating it to the other party according to Section 3 of the Contract Act. An offer can be either express or implied or specific or general. Treitel defines an offer as "an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed", the "offeree".[1] An offer is a statement of the terms on which the offeror is willing to be bound. It is the present contractual intent to be bound by a contract with definite and certain terms communicated to the offeree. The expression of an offer may take different forms, such as a letter, newspaper advertisement, fax, email and even conduct, as long as it communicates the basis on which the offeror is prepared to contract. Whether the two parties have reached agreement on the terms or whether a valid offer has been made is an issue which is determined by the courts using criteria known as 'the objective test' which was explained in the leading English case of Smith v. Hughes.[2] In Smith v. Hughes, the court emphasised that the important thing in determining whether there has been a valid offer is not the party's own (subjective) intentions, but how a reasonable person would view the situation. Unless the offer included the key terms of the contract, it cannot be the basis of a binding contract. For example, as a minimum requirement for sale of goods contracts, a valid offer must include at least the following 4 terms: Delivery date, price, terms of payment that includes the date of payment and detail description of the item on offer including a fair description of the condition or type of service. Unless the minimum requirements are met, an offer of sale is not classified by the courts as a legal offer but is instead seen as an advertisement.

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MB0051-LEGAL ASPECTS OF BUSINESS ID: 521146542 Ans:1.b) The capacity of both natural and legal persons determines whether they may make binding amendments to their rights, duties and obligations, such as getting married or merging, entering into contracts, making gifts, or writing a valid will. Capacity is an aspect of status and both are defined by a person's personal law: for natural persons, the law of domicile or lex domicilii in common law jurisdictions, and either the law of nationality or lex patriae, or of habitual residence in civil law states; for legal persons, the law of the place of incorporation, the lex incorporationis for companies while other forms of business entity derive their capacity either from the law of the place in which they were formed or the laws of the states in which they establish a presence for trading purposes depending on the nature of the entity and the transactions entered into. When the law limits or bars a person from engaging in specified activities, any agreements or contracts to do so are either voidable or void for incapacity. Sometimes such legal incapacity is referred to as incompetence. The legal ability to enter into a binding contract. Those who lack the capacity to contract include minors (with limited exceptions) and individuals who are so mentally impaired that they cannot understand the terms of the contract. If an individual who lacks the capacity to contract enters an agreement, that person may under most circumstances back out later. For example, if a 15-year-old signs a contract for cell phone service, the cell phone company won. Capacity to contract means the legal competence of a person to enter into a valid contract. Usually the capacity to contract refers to the capacity to enter into a legal agreement and the competence to perform some act. The basic element to enter into a valid contract is that s/he much have a sound mind. Certain class of people are exempted from the category of people who are capable of entering into contract: 1. infants/minors; 2. insane; 3. people under the influence of drug; Competency to contract A person must be competent to enter into a contract according to the law. According to Section 11 of the Act, a person is competent to enter into a contract if: That person is a major as per age That person is of sound mind That person is not disqualified from contracting by any law to which he/she is subject Minors contracts The law protects minors against their own inexperience and the possible improper designs of those who are experienced. The Contract Act states that only a person who is a major can enter into a contract. Section 3 of the Indian Majority Act, 1875, states that a minor is a person who has not completed 18 years of age. An agreement with a minor is void and cannot be ratified by him/her until he/she attains majority. However, a minor can be a promisee or beneficiary under a contract and can enter into special types of contracts for necessaries (articles that are reasonably required for a minor to maintain his/her status and position) of life.

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MB0051-LEGAL ASPECTS OF BUSINESS ID: 521146542 Question 2 : Discuss the rights and liabilities of a surety. Ans:2. A surety, surety bond or guaranty, in finance, is a promise by one party to assume responsibility for the debt obligation of a borrower if that borrower defaults. The person or company providing this promise is also known as a "surety" or as a "guarantor". Rights of surety may be classified under three heads: Rights against the creditor Rights against the principal debtor Rights against co-sureties Rights against the creditor Here in the case of fidelity guarantee, the surety can direct a creditor to dismiss the employee whose honesty he/she has guaranteed, in the event of proven dishonesty of the employee. The creditors failure to do so will exonerate the surety from his/her liability. Rights against the principal debtor Right of subrogation Section 140 provides that where a surety has paid the guaranteed debt on the due date or has performed the guaranteed duty on the default of the principal debtor, he/she is invested with all rights that the creditor has against the debtor. In other words, the surety is subrogated to all rights that the creditor had against the principal debtor. Hence, if the creditor loses or without the consent of the surety parts with any securities (whether known to the surety or not), the surety is discharged to the extent of the value of such securities (Section 141). Further, the creditor must hand over to the surety the securities in the same condition as they formerly stood in his/her hands. Right to be indemnified The surety has a right to recover from the principal debtor the amount that he/she has rightfully paid under the contract of guarantee. Liabilities of Surety The first and the foremost point in the suretys liability is that it is coextensive of the debtors liability. Surety will also be responsible to same amount of the liability, because he has given the surety and his liability is extensive to an extent of the debtors liability. Unless the contract provides otherwise, the liability of the surety is coextensive with that of the principal debtor (Section 128). In other words, the surety is liable for all those amounts that the principal debtor is liable for. Example: A guarantees to B the payment of a bill of exchange by C, the acceptor. The bill is dishonoured by C. A is liable not only for the amount of the bill, but also for any interest and charges due on the bill. The liability of a surety is called as secondary or contingent, as his/her liability arises only on default by the principal debtor. However, as soon as the principal debtor defaults, the liability of the surety begins and runs coextensive with the liability of the principal debtor. In other words, the surety will be liable for all those sums for which the principal debtor is liable. The creditor may file a suit against the surety without suing the principal debtor. Further, where the creditor holds securities from the principal debtor for his/her debt, the creditor need not first exhaust his/her remedies against the securities before suing the surety, unless the contract specifically provides such an option. The creditor is not even bound to gi Position of surety in case of a minor principal debtor According to the decision of the Bombay High 4|Page

MB0051-LEGAL ASPECTS OF BUSINESS ID: 521146542 Court in Kashiba vs. Shripat I.L.R. 10 Bom. 1927, the surety can be held liable, though a minor debtor is not liable. However, the later decisions of the Bombay High Court have taken a contrary view. In Manju Mahadeo vs. Shivappa Manju and in Pestonji Mody vs. Meherbai, it was held that under Section 128, the liability of the surety is co-extensive with that of the principal debtor. It can be no more than that of the principal debtor; therefore, the surety cannot be held liable on a guarantee given for default by a minor. If a minor could not default, the liability of the guarantor being a secondary liability does not arise at all. The same view has been endorsed by the Madras High Court in the case of Edavan Nambiar vs. Moolaki Raman (A.I.R. 1957 Mad. 164). It was held that unless the contract otherwise provides, a guarantor for a minor cannot be held liable. ve notice of the default to the surety, unless it is expressly provided for. Question 3 : How is an agency formed? Discuss the classification of agents. Ans:3. An agency relationship is formed between two parties when one party (the agent) agrees to represent the other party (the principal). A principal-agent relationship is fiduciary, meaning it is based on trust. Normally, all employees who deal with third parties are considered agents. As such, an agency relationship is governed by employment law. An agency agreement is a legal contract creating a fiduciary relationship whereby the first party ("the principal") agrees that the actions of a second party ("the agent") binds the principal to later agreements made by the agent as if the principal had himself personally made the later agreements. The power of the agent to bind the principal is usually legally referred to as authority. Agency created via an agreement may be a form of implied authority, such as when a person gives their credit card to a close relative, the cardholder may be required to pay for purchases made by the relative with their credit card.Many states employ the equal dignity rule whereby the agency agreement must be in writing if the later agreement would also necessarily be written, such as a contract to buy thousands of dollars worth of goods. An example of the existence of an agency agreement at issue in a 2006 court case arose when a tennis tournament sponsor sued Venus and Serena Williams for not participating. The sponsor argued that their father, Richard Williams, had committed to their participation in the tournament. The Williams sisters argued that their father did not have the authority to bind them to such an agreement. If their father did commit the sisters to play, the issue for the court to decide is whether a valid agency agreement existed between the Williams sisters and their father. If not, then they likely were not bound to his agreement under the law of agency. Formation of agency Agency by appointment a. An agency is created by express appointment when the principal appoints the agent by express agreement with the agent. This express agreement may be an oral or written agreement between the principal and the agent. b. Contract law principles apply to an agency agreement. An agent may agree to act in consideration for a reward. On the other hand, an agency is gratuitous if the agent agrees to act for no consideration. c. The general rule is that agency may be created orally and there is no formality for the creation of agency by express agreement, except for one situation which is discussed below. This 5|Page 1.

MB0051-LEGAL ASPECTS OF BUSINESS ID: 521146542 general rule applies even to cases of appointing agents for the signing of agreements for sale and purchase of immovable property, whether on behalf of the vendor or the purchaser.The one exception is where an agent is appointed to execute a deed on behalf of the principal. In this case, the agent will have to be appointed by deed, which is called a power of attorney. Agency by estoppel (implied appointment) a. Agency by estoppel arises when A makes a representation to a third party, whether by words or conduct, that B is his agent, and subsequently that third party deals with B as A's agent in reliance on such representation. A will not be permitted (is estopped) to deny the existence of the agency if to do so would cause damage (usually financial loss) to that third party. b. The person who makes such representation ("A" in paragraph (a) above) is treated as having created an agency relationship between himself as the principal and the other person ("B" in paragraph (a) above) as his agent, although there is in fact no agreement between the two parties ("A" and "B" in paragraph (a) above) as to the creation of the agency relationship. Agency by estoppel is sometimes called implied appointment of agent. c. In agency by estoppel, the authority of the agent is described as only apparent or ostensible but not actual, as the principal has, in fact, not granted the agent such authority to act on the principal's behalf. d. The extent of apparent or ostensible authority of the agent in an agency by estoppel depends largely upon the contents of the representation made by the principal to the third party who relies and acts on the representation. The principal is said to "hold out" a person as his agent with such authority as the principal may induce the third party to believe and is estopped from denying the existence of agency. Agency by ratification a. Agency by ratification arises when a person (the principal) ratifies (that is, approves and adopts) an act which has already been done in his name and on his behalf by another person (the agent) who in fact, had no actual authority (whether express or implied) to act on his (the principal's) behalf when the act was done. b. Ratification by itself only creates an agency relationship between the principal and the agent in respect of the act ratified by the principal, but not in respect of any other act, whether past or future. c. The person who ratifies an act of another person must have been in existence and have the legal capacity to carry out that act himself both at the time when the act was done and at the time of ratification. A person may lack legal capacity on grounds of bankruptcy, infancy or mental incapacity. 4. Agency of necessity a. Agency of necessity arises when a person ("A") is faced with an emergency in which the property of another person ("B") is in imminent jeopardy and it becomes necessary, in order to preserve the property for A to act for and on behalf of B. In this case, A acts as an agent of necessity of B. 3. 2.

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MB0051-LEGAL ASPECTS OF BUSINESS ID: 521146542 b. Agency of necessity arises only when it is practically impossible for the agent to communicate with the principal before the agent acts on behalf of the principal. (This would be difficult to establish with today's advanced communication systems and is the reason why agency of necessity does not often arise.) c. Authority to act in case of emergencies cannot usually prevail over express instructions to the contrary given by the principal. Classification of agents Agents may be classified from different points of view. One broad classification of agents is: Mercantile or commercial agents Non-mercantile or non-commercial agents. Another classification of agents is: General Special

General and Special agents A special agent is a person appointed to do some particular act or enter into some particular contract. A special agent, therefore, has only a limited authority to do the specified act. If he does anything beyond the specified act, he runs the risk of being personally liable since the principal may not ratify the same. Mercantile or commercial agents A mercantile or commercial agent may act as: Broker A broker is a mercantile agent engaged to buy and/or sell property or to make bargains and contracts between the engager and third party for a commission (called brokerage). A broker has no possession of goods or property. He is merely a connecting link between the engager and a third party.The usual method of dealing by a broker is to make entries of the terms of contract in a book, called the memorandum book, and to sign them. He/she then sends the particulars of the same to both parties. The document sent to the seller is called the sold note and the one sent buyer is called the bought note. Factor A factor is a mercantile agent who is entrusted with the possession of goods with an authority to sell the same. He/she can even sell the goods on credit and in his/her own name. A factor is also authorised to raise money on their security and has a general lien on the goods in his possession. A factor, however, cannot barter the goods, unless expressly authorised to do. Also, he/she cannot delegate authority. Commission agent A commission agent is an agent employed to buy or sell goods or transact business. The remuneration that he/she gets for this purpose is called commission. A commission agent is not liable in case the third party fails to carry out the agreed obligation and may have possession of goods or not. His/her lien in case of goods in his/her possession is a particular lien.

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MB0051-LEGAL ASPECTS OF BUSINESS ID: 521146542 Del credere agent A del credere agent is one who, in consideration of an extra remuneration, called a del credere commission, guarantees the performance of the contract by the other party.

Non-mercantile or non-commercial agents Some agents in this category are wife, estate agent, counsels (advocates) and attorneys. The following principles provide guidelines as regards wife as an agent of her husband: If the wife and husband are living together and the wife is looking for necessaries, she is agent. However, this presumption may be rebutted and the husband may escape liability if he can prove that: He had forbidden his wife from purchasing anything on credit or from borrowing money or goods purchased were not necessaries He had given sufficient money to his wife for purchasing necessaries The trader had been told not to give credit to his wife. Where the wife lives apart from the husband through no fault of hers, the husband is liable to provide for her maintenance. If he does not provide further maintenance, she has an implied authority to bind the husband for necessaries, i.e., he would be bound to pay her bills for necessaries.However, where the wife lives apart under no justifiable circumstances, she is not her husbands agent and thus cannot bind him even for necessaries.

Question 4: Discuss the registration of firm under section 58 of Indian Partnership Act, 1932. Explain what partnership deed is. Ans:4. Section 58 lays down the procedure for registration of partnership firms. A partnership firm may be registered at any time by post, or delivering to the Registrar of Firms of the area in which the business of the firm is situated or proposed to be situated, a statement in the prescribed form and accompanied by the prescribed fee, stating the following The name of the firm Physical place or the place of business Names of any other places where the firm carries out business Joining date of each partner to the firm Full names and address of the partners Firm duration The statement must be signed by all partners, or by their agents especially authorised in that behalf and duly verified. When the Registrar of Firms is satisfied that the provisions of Section 58 have been duly complied with, he/she registers the firm by recording an entry of the statement in a register called the Register of Firms and files the statement (Section 59). The Registrar then issues a Certificate of Registration. Registration is effective from the date when the Registrar files the statement and makes entries in the Register of Firms.

Partnership Deed

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MB0051-LEGAL ASPECTS OF BUSINESS ID: 521146542 A document containing an agreement that details the rights and obligations of each partner participating in a venture. For example, a deed of partnership could specify how proceeds from the partnership's business are to be divided among the partners. Partnership can be formed either by oral or written agreement. In France and Italy, the law requires all partnership agreements to be in writing. However, in the UK, USA and India, written agreement is not compulsory. In order to avoid misunderstanding and litigation, it is desirable to sign a written agreement that is called partnership deed or agreement.The partnership deed is required to be stamped according to the provisions of the Stamp Act, 1899.The copy of the deed must be possessed by each partner. Partnership agreements and contract law. Section 3 provides that the unrepealed provisions of the Indian Contracts Act, 1872, save insofar as they are inconsistent with the provisions of this Act, shall continue to apply to firms. Moreover, Section 2(e) provides that expressions used but not defined in this Act and defined in the Indian Contracts Act, 1872, shall have the meanings assigned to them in that Act.As a partnership agreement is a contract, the provisions of the Indian Contracts Act, 1872, are applicable to it. Question 5: What do you mean by negotiable instruments? What are the various types of negotiable instruments recognized by the negotiable instruments act, 1881? Ans:5. Negotiable instruments are those documents that are freely used in commercial transactions and monetary dealings if they satisfy certain conditions. The term negotiable instrument refers to a written document transferable by mere delivery or by indorsement and delivery to enable the transferee to get a title in the instrument. An instrument may possess the characteristics of negotiability either by statute or usage. Laws relating to negotiable instruments are contained in the Negotiable Instruments Act, 1881. This Act deals exclusively with promissory notes, cheques and bills of exchange, as defined under Section 13. An instrument is called negotiable if it possesses the following features: Freely transferable Transferability may be by either by delivery, or endorsement and delivery. Holders title free from defects The term negotiability means that not only is the instrument transferable by endorsement and/or delivery, but that its holder in due course or a bonafide transferee is not affected by defect in title, either of the transferor or any prior party. The transferee acquires a good title, notwithstanding any defects in a previous holders title. A holder in due course is the one who receives the instrument for value and without any notice as to the defect in the title of the transferor. Holder can sue in own name Another feature of a negotiable instrument is that its holder in due course can sue on the instrument in his/her own name and he/she need not give any notice to the transferor or third party liable for payment. Transfer infinitum A negotiable instrument can be transferred infinitum, i.e., it can be transferred any number of times till its maturity. Presumptions A negotiable instrument is subject to certain presumptions in law.

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MB0051-LEGAL ASPECTS OF BUSINESS ID: 521146542 A negotiable instrument also follows certain rules of evidence, as it is in writing and signed by the concerned parties. It also possesses the features of a valid contract. An instrument that does not possess the above characteristics is not negotiable, but is assignable, i.e., the transferee takes it, subject to all equities and liabilities of the transferor. Negotiable instruments are of two kinds: Bearer instrument where the property passes to transferee by mere delivery of the instrument Order instrument here both endorsement and delivery are required for transfer of property. Question 6: Who is a consumer? Examine the rights of a consumer enshrined under the consumer protection act, 1986. Ans:6. Consumer can refer to any of the following people: A person who buys any goods for a consideration of money. Such goods can be paid for in full or promised for payment. The goods can also be obtained by part payment or part promise under any system of deferred payment i.e., in respect of hire-purchase transactions. This term also includes any other user of such goods, when such use is made with the approval of the buyer. A person who hires or avails of any services for consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment. The term includes any other beneficiary of such services with the approval of the first mentioned person. Consumer right was enacted in order to give protection to consumers.The act ensures certain rights to consumers.Some of them are: Right to protection against marketing of goods and services which are hazardous to life and property Right to be informed about quality,quantity,potency,purity,standard and price of goods or services. Right to be assured,wherever possible,access to a variety of goods and services at competitive prices Right to be heard and assured that consumers interests will receive due consideration Right to seek redressal against unfair trade practices and unscrupulous exploitation of consumers Right to consumer education Right to consumers : In India, the Consumer Protection Act, 1986, extended a statutory recognition to the rights of consumers. Section 6 of the Act recognises the following six rights of consumers: Right to safety: The right to be protected against the marketing of goods and services that are hazardous to life and property. Right to be informed: The right to be informed about the quality,quantity, potency, purity, standard and price of goods or services, as the case may be, to protect the consumer against unfair trade practices. Right to choose: The right to be assured, wherever possible, access to a variety of goods and services at competitive prices. In case of monopolies, say, railways, telephones, etc., it means right to be assured of satisfactory quality and service at a fair price. Right to be heard: The consumers interests will receive due consideration at appropriate forums. It also includes right to be represented in various forums formed to consider the consumerswelfare.

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MB0051-LEGAL ASPECTS OF BUSINESS ID: 521146542 Right to seek redressal: The right to seek redressal against unfair practices or restrictive trade practices or unscrupulous exploitation of consumers. It also includes right to fair settlement of the genuine grievances of the consumers. Right to consumer education: It means the right to acquire the knowledge and skill to be an informed consumer.

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