Spring 2010(Jan-June)

MBA-SEM III
MB0035 Legal Aspects of Business - 4 Credits
(Book ID: B0764)
Assignment Set- 1 (60 Marks)
Note: Each question carries 10 Marks. Answer all the questions.

Q1. All contracts are agreements but all agreements are not contracts. Discuss

Answer:
Essentials of a Valid Contract :
All contracts are agreements but all agreements need not be contracts. The agreements that
create legal obligations only are contracts. The validity of an enforceable agreement depends
upon whether the agreement satisfies the essential requirements laid down in the Act. Section 10
lays down that all the agreements are contracts if they are made by the free consent of the
parties competent to contract for a lawful object and are not hereby expressly declared to be
void.
The following are the essentials:
a) Agreement : An agreement which is preliminary to every contract is the outcome of offer
and acceptance. An offer to do or not to do a particular act is made by one party and is
accepted by the other to whom the offer is made. Then we say that there is a meeting of the
minds of the parties. Such a position is known as consensus ad idem.
b) Free consent : The parties should agree upon the same thing in the same sense and their
consent should be free from all sorts of pressure. In other words it should not be caused by
coercion, undue influence, misrepresentation, fraud or mistake.
c) Contractual capacity: The parties entering into an agreement must have legal
competence. In other words, they must have attained the age of majority, should be of sound
mind and should not be disqualified under the law of the land. A contract entered into
between the parties having no legal capacity is nullity in the eyes of law.
d) Lawful consideration: There must be consideration supporting every contract.
Consideration means something in return for something. It is the price for the promise. An
agreement not supported by consideration becomes a nudum pactum i.e., naked
agreement. The consideration should be lawful and adequate. However, there are certain
exceptions to this rule.
 e) Lawful object : The object or purpose of an agreement must be lawful. It should not be
forbidden by law, should not be fraudulent, should not cause injury to the person or property
of another, should not be immoral or against public policy.
f) Not expressly declared void: The statute should not declare an agreement void. The Act
itself has declared certain types of agreements as void. E.g., agreements in restraint of
marriage, trade, legal proceedings. In such cases, the aggrieved party cant seek any relief
from the court of law.
g) Possibility of performance: The agreement should be capable of being performed. e.g.,
Mr. A agrees with Mr. B to discover treasure by magic. Mr. B cant seek redressal of the
grievance if Mr. A fails to perform the promise.
h) Certainty of terms: The terms of the agreement should be certain. E.g., Mr. A. agrees to
sell 100 tons of oil. The agreement is vague as it does not mention the types of oil agreed to
be sold.
i) Intention to create legal obligation: Though Sec. 10 is silent about this, under English
law this happens to be an important ingredient. Therefore, Indian courts also recognise this
ingredient. An agreement creating social obligation cant be enforced.
j) Legal formalities: Indian Contract Act deals with a simple contract supported by
consideration. Agreements made in India may be oral or written. However, Sec. 10 states that
where the statute states that the contract should be in writing and should be witnessed or
should be registered, the same must be observed. Otherwise, the agreement cant be
enforced e.g., Under Indian Companies Act, the Memorandum of Association and Articles of
Association must be registered.
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Q2. Not all persons have the capacity to enter into a contract. Discuss this statement.

Answer:
The legal ability of people or organizations to enter into a valid contract. A person entering into a
contract will have full, limited, or no capacity to contract.

Full capacity to contract:

The unlimited ability of a person to enter into a contract that is legally binding. Most adults,
including those who are illiterate, have full capacity to contract and are said to be competent
parties.

Limited capacity to contract:

The ability of a person to enter into a contract that is legally binding upon himself or herself only
under certain circumstances. For example, minors have limited ability to contract, which means
that the contract of a minor is valid only if the minor does not disaffirm a contract entered into
during his or her minority or shortly after reaching majority. Contracts made by minors to obtain
such necessities as food, clothing, and shelter, however, are not voidable by the minor and will be
enforced against him or her.

No capacity to contract:
The inability of a person to enter into a valid contract under any circumstances. Such inability can
arise when a person has been adjudicated insane or if he or she is an officer of a corporation who
is not authorized to execute a contract on behalf of the corporation. Lack of capacity would also
cover acts of a corporation beyond the powers as defined in the articles of incorporation.

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.
Natural persons
Standardized classes of person have had their freedom restricted. These limitations are justified
exceptions to the general policy of freedom of contract and the detailed human and civil rights
that a person of ordinary capacity might enjoy.
Infancy
The definition of an infant or minor varies, each state reflecting local culture and
prejudices in defining the age of majority, marriageable age, voting age, etc. In many
jurisdictions, legal contracts, in which (at least) one of the contracting parties is a minor,
are voidable by the minor. For a minor to undergo medical procedure, consent is
determined by the minor's parent(s) or legal guardian(s).

In contracts between an adult and an infant, adults are bound but infants may escape
contracts at their option (i.e. the contract is voidable). Infants may ratify a contract on
reaching age of majority. In the case of executed contracts, when the infant has obtained
some benefit under the contract, he/she cannot avoid obligations unless what was
obtained was of no value. Upon repudiation of a contract, either party can apply to the
court. The court may order restitution, damages, or discharge the contract. All contracts
involving the transfer of real estate are considered valid until ruled otherwise.
Minors and Contractual Capacity
A minor (typically under 18) can disaffirm a contract made, no matter the case. However,
the entire contract must be disaffirmed. The minor cannot keep any of the goods traded
for. Also, barter transactions such as purchasing a retail item in exchange for a cash
 payment is generally recognized through a legal fiction to not be a contract due to the
absence of promises of future action.
Insanity, mental illness, or mental/medical condition
Individuals may have an inherent physical condition which prevents them from achieving
the normal levels of performance expected from persons of comparable age, or their
inability to match current levels of performance may be caused by contracting an illness.
Whatever the cause, if the resulting condition is such that individuals cannot care for
themselves, or may act in ways that are against their interests, those persons are
vulnerable through dependency and deserve the protection of the state against the risks
of abuse or exploitation. Hence, any agreements that were made are voidable, and a
court may declare that person a ward of the state and grant power of attorney to an
appointed legal guardian (in England and Wales, this is a specific function of the Court of
Protection).
Drunkenness/drug abuse
Although individuals may have consumed a sufficient quantity of intoxicant or drug to
reduce or eliminate their ability to understand exactly what they are doing, such
conditions are self-induced and so the law does not generally allow any defense or
excuse to be raised to any actions taken while incapacitated. The most generous states
do permit individuals to repudiate agreements as soon as sober, but the conditions to
exercising this right are strict.
Bankruptcy
If individuals find themselves in a situation where they can no longer pay their debts, they
lose their status as creditworthy and become bankrupt.
Enemy aliens and/or terrorists
During times of war or civil strife, a state will limit the ability of its citizens to offer help or
assistance in any form to those who are acting against the interests of the state. Hence,
all commercial and other contracts with the "enemy", including terrorists, would be
considered void or suspended until a cessation of hostilities is agreed.
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Q3. Discuss how a contract can be discharged by breach.

Answer:
Discharge by breach of contract: Breach of contract by a party thereto is also a method of
discharge of a contract, because breach also brings to an end the obligations created by a
contract on the part of each of the parties. Of course the aggrieved party i.e., the party not at fault
can sue for damages for breach of contract as per law; but the contract as such stands
terminated.
Breach of contract may be of two kinds: (1) Anticipatory breach; and (2) Actual breach.
1. Anticipatory breach: An anticipatory breach of contract is a breach of contract occurring
before the time fixed for performance has arrived. It may take place in two ways: (a)
Expressly by words spoken or written. Here a party to the contract communicates to the
other party, before the due date of performance, his intention not to perform it. (b)
Impliedly by the conduct of one of the parties. Here a party by his own voluntary act
disables himself from performing the contract. When a party to a contract has refused to
perform or disabled himself from performing, his promise in its entirity, the promisee may
put an end to the contract, unless he has signed, by words or conduct his acquiscence in
its continuance.
2. Actual breach: Actual breach may also discharge a contract. It occurs when a party fails
to perform his obligations upon the date fixed for performance by the contract. Actual
breach entitles the party not in default to elect to treat the contract as discharged and to
sue the party at fault for damages for breach of contract.

Remedies for Breach of Contract

Whenver there is breach of a contract, the injured party becomes entitled to any one or more of
the following remedies against the guilty party:
1. Rescission of the contract.
2. Suit for damages.
3. Suit upon quantum merit.
4. Suit for specific performance of the contract.
5. Suit for an injunction.
As regards the last two remedies stated above, the law is regulated by the Specific Relief Act,
1963.
1 Rescission of the contract: When there is a breach of contract by one party, the other party
may rescind the contract and need not perform his part of obligations under the contract. But in
case the aggrieved party intends to sue the guilty party for damages for breach of contract, he
has to file a suit for rescission of the contract. When the court grants rescission, the aggrieved
party is free from all his obligations under the contract and becomes entitled to compensation for
any damage which he has sustained through the non-fulfilment of the contract (Sec. 75).
2.
Suit for damages: Damages are a monetary compensation allowed to the injured party for the
loss or injury suffered by him as a result of the breach of contract. The fundamental principle
underlying damages is not punishment but compensation. By awarding damages the court aims
to put the injured party into the position in which he would have been, had there been
performance and not to punish the defaulting party. As a general rule, compensation must be
commensurate with the injury or loss sustained, arising naturally from the breach. If actual loss
is not proved, no damages will be awarded.
Different kinds of damages: Damages may be of four kinds:
1. Ordinary or General or Compensatory damages (i.e., damages arising naturally from the
breach).
2. Special damages (i.e., damages is contemplation of the parties at the time of contract).
3. Exemplary, Punitive or Vindictive damages.
4. Nominal damages.
5. Ordinary damages: When a contract has been broken, the injured party can, as a rule,
always recover from the guilty party ordinary or general damages. These are such
damages as may fairly and reasonably be considered as arising naturally and directly in
the usual course of things from the breach of contract itself. In other words, ordinary
damages are restricted to the direct or proximate consequences of the breach of
contract and remote or indirect losses, which are not the natural and probable
consequence of the breach of contract, are generally not regarded.
6. Special damages: Special damages are those which arise on account of the special or
unusual circumstances affecting the plaintiff. In other words, they are such remote losses
which are not the natural and probable consequence of the breach of contract. Unlike
ordinary damages, special damages cannot be claimed as a matter of right. These can
be claimed only if the special circumstances which would result in a special loss in case
of breach of contract are brought to the notice of the other party. It is important that such
damages must be in contemplation of the parties at the time when the contract is entered
into. Subsequent knowledge of the special circumstances will not create any special
liability on the guilty party.
7. Exemplary or vindictive damages: These are such damages which are awarded with a
view to punish the guilty party for the breach and not by way of compensation for the loss
suffered by the aggrieved party. As observed earlier, the cardinal principle of the law of
damages for a breach of contract is to compensate the injured party for the loss suffered
and not to punish the guilty party. Hence, obviously, exemplary damages have no place
in the law of contract and are not recoverable for a breach of contract. There are,
however, two exceptions to this rule: (a) Breach of a contract to marry. In this case the
amount of the damages will depend upon the extent of injury to the partys feelings. (b)
Dishonour of a cheque by a banker when there are sufficient funds to the credit of the
customer. In this case the rule of ascertaining damages is, the smaller the cheque, the
 greater the damage. Of course, the actual amount of damages will differ according to the
status of the party.
8. Nominal damages: Nominal damages are those which are awarded only for the name
sake. These are neither awarded by way of compensation to the aggrieved party nor by
way of punishment to the guilty party. These are awarded to establish the right to decree
for breach of contract when the injured party has not actually suffered any real damage
and consist of a very small sum of money.
Duty to mitigate damage suffered: It is the duty of the injured party to mitigate damage suffered as
a result of the breach of contract by the other party. He must use all reasonable means of
mitigating the damage, just as a prudent man would, under similar circumstances in his own case.
He cannot recover any part of the damage, traceable to his own neglect to mitigate.
Liquidated damages and penalty: Liquidated damages means a sum fixed up in advance, which
is a fair and genuine pre-estimate of the probable loss that is likely to result from the breach.
Penalty means a sum fixed up in advance, which is extravagant and unconscionable in amount
in comparison with the greatest loss that could conceivably be proved to have followed from the
breach.
Courts in England usually allow liquidated damages as stipulated in the contract, without any
regard to the actual loss sustained. Penalty clauses, however, are treated as invalid and the
courts in that case calculate damages according to the ordinary principles and allow only
reasonable compensation.
Under the Indian Law the courts are not bound to treat the sum mentioned in the contract, either
by way of liquidated damages or penalty, as the sum payable as damages for the breach. Instead
the courts are required to allow reasonable compensation so as to cover the actual loss
sustained, not exceeding the amount so named in the contract. The court will award to the party
aggrieved only reasonable compensation not exceeding the amount named or penalty stipulated.
The principles governing the measure of damages discussed above may be summarised as
under:
1. The damages are awarded by way of compensation for the loss suffered by the
aggrieved party and not for the purpose of punishing the guilty party for the breach.
2. The injured party is to be placed in the same position, so far as money can do, as if the
contract had been performed.
3. The aggrieved party can recover by way of compensation only the actual loss suffered by
him, arising naturally in the usual course of things from the breach itself.
4. Special or remote damages i.e., damages which are not the natural and probable
consequence of the breach are usually not allowed until they are in the knowledge of both
the parties at the time of entering into the contract.
 5. The fact that damages are difficult to assess does not prevent the injured party from
recovering them.
6. When no real loss arises from the breach of contract, only nominal damages are
awarded.
7. If the parties fix-up in advance the sum payable as damages in case of breach of
contract, the court will allow only reasonable compensation so as to cover the actual loss
sustained, not exceeding the amount so named in the contract.
8. Exemplary damages cannot be awarded for breach of contract except in case of breach
of contract of marriage or wrongful refusal by the bank to honour the customers cheque.
9. It is the duty of the injured party to minimise the damage suffered.
10. The injured party is entitled to get the costs of getting the decree for damages from the
defaulter party.
3.
Suit upon quantum merit (Sections 65 and 70): The third remedy for a breach of contract
available to an injured party against the guilty party is to file a suit upon quantum merit. The
phrase quantum merit literally means as much as is earned or in proportion to the work done.
This remedy may be availed of either without claiming damages (i.e., claiming reasonable
compensation only for the work done) or in addition to claiming damages for breach (i.e., claiming
reasonable compensation for part performance and damages for the remaining unperformed
part).
The aggrieved party may file a suit upon quantum merit and may claim payment in proportion to
work done or goods supplied in the following cases:
1. Where work has been done in pursuance of a contract, which has been discharged by
the default of the defendant.
2. Where work has been done in pursuance of a contract which is discovered void or
becomes void.
3. When a person enjoys benefit of non-gratuitous act although there exists no express
agreement between the parties. One of such cases is provided in Section 70 (other cases
are covered under quasi-contracts). Section 70 lays down that when services are
rendered or goods are supplied by a person, (i) without any intention of doing so
gratuitously, and (ii) the benefit of the same is enjoyed by the other party, the latter must
compensate the former or restore the thing so delivered.
4. A party who is guilty of breach of contract may also sue on quantum merit provided both
the following conditions are fulfilled: (a) the contract must be divisible and (b) the other
party must have enjoyed the benefit of the part which has been performed, although he
had an option of declining it.
4.
Suit for specific performance: Specific performance means the actual carrying out of the
contract as agreed. Under certain circumstances an aggrieved party may file a suit for specific
performance, i.e., for a decree by the court directing the defendant to actually perform the
promise that he has made. Such a suit may be field either instead of or in addition to a suit for
damages.
A decree for specific performance is not granted for contracts of every description. It is only where
it is just and equitable so to do, i.e., where the legal remedy is inadequate or defective, that the
courts issue a decree for specific performance. It is usually granted in contracts connected with
land, buildings, rare articles and unique goods having some special value to the party suing
because of family association. In all these contracts monetary compensation is not an adequate
relief because the injured party will not be able to get an exact substitute in the market.
Specific performance is not granted, as a rule, in the following cases:
i) Where monetary compensation is an adequate relief.
ii) Where the court cannot supervise the actual execution of the contract, e.g., a building
construction contract. Moreover, in most cases damages afford an adequate remedy.
iii) Where the contract is for personal services, e.g., a contract to marry or to paint a picture.
In such contracts injunction (i.e., an order which forbids the defendant to perform a like
personal service for other persons) is granted in place of specific performance.
iv) Where the contract is not enforceable by either party against the other, that is, where one
of the parties does not possess competency to contract. Thus a minor cannot succeed in an
action for specific performance since he cannot himself be sued for breach of contract.
5.
Suit for an injunction: Injunction is an order of a court restraining a person from doing a
particular act. It is a mode of securing the specific performance of the negative terms of the
contract. To put it differently, where a party is in breach of a negative term of the contract (i.e.,
where he is doing something which he promised not to do), the court may, by issuing an
injunction, restrain him from doing, what he promised not to do. Thus injunction is a preventive
relief. It is particularly appropriate in cases of anticipatory breach of contract where damages
would not be an adequate relief.
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Q4. Discuss the essentials of a contract of guarantee.

Answer:
A contract of guarantee is a promise to answer for the debt, default or miscarriage of another. It is
a collateral engagement by which a parson undertakes to be liable for the debt of another's
default.
Section 126 of Contract Act "A contract of guarantee is a contract to perform the promise or
discharge the liability of a third person in case of his default".
A person who gives the guarantee is called the Surety or Guarantor and the person in respect to
whose default the guarantee is given is called the Creditor. The person to whom the guarantee is
given is called the Creditor.
A guarantee may be either oral or written. Though consideration is essential for a contract of
guarantee, it is not necessary, that benefit should accrue to the surety. It is sufficient if there is
some benefit to the principal debtor.
Section 127 of the Act clearly states, anything done, or any promise made, for the benefit of the
principal debtor, may be sufficient consideration to the surety for giving the guarantee.
Example: A and B visit a shop. C is the owner of the shop. B says to C that let A have the goods
on credit he does not pay I will. This is a contract of guarantee. Here B is the surety, C is the
creditor and A is the principal debtor.
Essentials of this Contract:
1. In a contract of guarantee there should be a consent and concurrence of the three parties
namely the principal debtor, the creditor, and the surety.
2. In this contract there must be a clear and distinct promise by the surety to answer for the
debt, default or miscarriage of the principal debtor. A vague or ambiguous promise is no
guarantee.
3. The liability of the principal debtor must be one which is legally enforceable. i.e. it should
not be time-barred, illegal etc. Where the liability is unenforceable, it does not exist. And
where the liability does not exist, there cannot be a contract of guarantee.

Continuing Guarantee:
A guarantee which extends to a series of transactions is called a "continuing guarantee". In case
of this kind of guarantee which extends, over two or more transactions, the liability the surety
extends over the successive transactions which come within its scope.
Revocation of continuing Guarantee: Continuing guarantee can be revoked in the following
ways.
1. Notice: A continuing guarantee may at any time be revoked by the surety as to future
transactions, by notice to the creditor.
2. Death of the Surety: The estate of the surety is liable for all transactions entered into prior
to the death of the surety unless there is a contract to the contrary. It is not necessary
that the creditor should have notice of the death.
Invalid Guarantees: A guarantee is invalid in case of an assent obtained by misrepresentation,
of if some material fact is concealed. Where person gives a guarantee on the condition that the
creditor shall act upon it until another person has joined in it as a co-surety, the guarantee is
invalid if the other person does not join.
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Q5. How can negotiable instruments be endorsed? Discuss in detail.

Answer:
A negotiable instrument is a specialized type of "contract" for the payment of money that is
unconditional and capable of transfer by negotiation. As payment of money is promised later, the
instrument itself can be used by the holder in due course frequently as money. Common
examples include cheques , banknotes (paper money), and commercial paper
A negotiable instrument can be endorsed on the following ways:
1. Blank or general endorsement: If the endorser signs his name only and does not
specify the name of the endorsee, the endorsement is said to be in bland. The effect
of a blank endorsement is to convert the order instrument into bearer instrument
which may be transferred merely by delivery.
2. Endorsement in full or special endorsement: If the endorser, in addition to his
signature, also adds a direction to pay the amount mentioned in the instrument to , or
to the order of, a specified person, the endorsement is said to be in full.
3. Partial endorsement: Section 56 provides that a negotiable instrument cannot be
endorsed for a part of the amount appearing to be due on the instrument. In other
words, a partial endorsement which transfers the right to receive only a part payment
of the amount due on the instrument is invalid.
4. Restrictive endorsement: An endorsement which, by express words, prohibits the
endorsee from further negotiating the instrument or restricts the endorsee to deal with
the instrument as directed by the endorser is called restrictive endorsement. The
endorsee under a restrictive endorsement gets all the rights of an endorser except
the right of further negotiation.
5. Conditional endorsement: if the endorser of a negotiable instrument, by express
words in the endorsement, makes his liability, dependent on the happening of
specified event. Although such event may never happen, such endorsement is called
a conditional endorsement.
In the case of a conditional endorsement the liability of the endorser would arise only
upon the happening of the event specified. But the endorsee can sue other prior parties,
 e.g., the maker, acceptor etc., if the instrument is not duly met at maturity, even though
the specified event did not happen.
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Q6. Why do you think an agreement to take a person to moon for a holiday cannot be a contract?
Spring 2010(Jan-June)

Answer:
A contract is an agreement between parties that is legally enforceable.

A Contract is enforceable by law while an Agreement is not enforceable by law. In this case of
taking a person to moon it cannot be enforced by law.
Its just a mutual agreement.

A valid contract must contain the ten valid elements which is not possible in terms of taking a
person to moon:
Offer and Acceptance
Intention to Create Legal Relations
Lawful Consideration
. Capacity of Parties
Free Consent
. Lawful Object
Writing and Registration
Certainty
Possibility of Performance
. Not Expressly Declared Void
Moreover the company which agrees to take the person to moon, cannot make it in a contract
that they will take him on what specific date or method or which space vehicle.
 MBA-SEM III
MB0035 Legal Aspects of Business - 4 Credits
(Book ID: B0764)
Assignment Set- 2 (60 Marks)
Note: Each question carries 10 Marks. Answer all the questions.

Q1. What is process for an enterprise to get incorporated as a company?

Answer:
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 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)
An enterprise can be incorporated as a company if it has:
Focus: Good companies stay focused on what they know and can do well. When companies
search for new ideas, they often drift into unknown territory and get in trouble. Good companies
just keep growing and expanding into familiar territory. Shutterfly is a wonderful example of a
company thats growing, but it grows by expanding within the social expressions business,
helping communities of people share photographs in hundreds of ways. Niches can be very large
markets.
Execution: Satisfying a customer requires relentless attention to execution. Building a companys
capability to deliver makes the difference between turning a great idea into a business or failure.
But execution is not just about delivering a product. Its also about service. Over the years, I have
observed that technology companies are particularly bad at recognizing and responding to the
service needs of their customers. Counter intuitively, high-tech requires a lot of high-touch.
Partsearch is a company that knows what its doing with customer service, helping customers find
what they need in an ocean of millions of parts and accessories for consumer electronic products.
Partsearch has tamed chaos in its industry.
Inspiration: Smart companies engage all of their associates in building the business, from idea
creation though delivery. Ideas dont just come tops-down; they also come bottoms-up and from
every other direction. Everyone in the company feels that they own a piece of the action and are
accountable for how the company performs. The inspiration for a company starts at the top, but
good leadership drives that inspiration deep into the company by engaging people broadly in
decision-making. People are more than mechanical parts of the enterprise, and the more they are
allowed to see customers, the better their business sensibilities.
Above all, it should follow companies Act.
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Q2. Describe in detail the clauses in the Memorandum of Association.

Answer:
A memorandum of association is a standard document that states the constitution of the
company. Memorandum is one of the very essential paper processes to incorporate a limited
company
Clauses in the Memorandum:
a. Name clause:
The name of the company is mentioned in the name clause. A public limited company must end
with the word 'Limited' and a private limited company must end with the words 'Private Limited'.
The company cannot have a name, which in the opinion of the Central Government, is
undesirable. A name, which is identical with or nearly resembles the name of another company in
existence, will not be allowed. A company cannot use a name, which is prohibited under the
Names and Emblems (Prevention of Misuse Act, 1950 or use a name, suggestive of connection
to government or State patronage.
The name of a company may be altered on obtaining prior approval of the Central Government
for the altered name, passing a special resolution at a general meeting of the company to that
effect and obtaining a new certificate of incorporation, signifying the name change.
b. Domicile clause:
The state, in which the registered office of company is to be situated, is mentioned in this clause.
If it is not possible to state the exact location of the registered office, the company must state it
provide the exact address either on the day on which commences to carry on its business or
within 30 days from the date of incorporation of the company, whichever is earlier. Notice in Form
no 18 must be given to the Registrar of Companies within 30 days of the date of incorporation of
the company.
Any change in the registered office must be intimated in Form No. 18 to the Registrar of
Companies within 30 days. The registered office of the company is the official address of the
company where the statutory books and records must be normally kept. Every company must
affix or paint its name and address of its registered office on the outside of the every office or
place at which its activities are carried on. The name must be written in one of the local
languages and in English.
Change of the registered office within the same city or village or town may be done by a
board resolution.
Change of the registered office from one place to another place within the same state
may be done by special resolution and obtaining approval of the Regional Director.
Change of Registered Office from one place to another place in another state may be
done by special resolution and obtaining order of Company Law Board on petition being
made.
c. Objects clause:
This clause is the most important clause of the company. It specifies the activities which a
company can carry on and which activities it cannot carry on. The company cannot carry on any
activity, which is not authorized by its MA. This clause must specify:
Main objects of the company to be pursued by the company on its incorporation;
Objects incidental or ancillary to the attainment of the main objects;
Any other objects.
In case the companies, other than trading corporations whose objects are not confined to one
state, the states to whose territories the objects of the company extend must be specified.
The objects clause may be amended by special resolution at a general meeting of members of
the company.
d. Liability clause:
A declaration that the liability of the members is limited in case of the company, limited by the
shares or guarantee, must be given. The Memorandum of a company, limited by guarantee, must
also state that each member undertakes to contribute to the assets of the company such amount
not exceeding specified amounts as may be required in the event of the liquidation of the
company. A declaration that the liability of the members is unlimited in case of the unlimited
companies must be given.
e. Capital clause:
The amount of share capital with which the company is to be registered, divided into shares must
be specified, giving details of the number of shares and types of shares. A company cannot issue
share capital, greater than the maximum amount of share capital, mentioned in this clause,
without altering the memorandum.

f. Association clause:
A declaration by the persons for subscribing to the Memorandum that they desire to form into a
company and an agreement to take the shares place against their respective name must be given
by the promoters.
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Q3. Discuss the need for the development of cyber laws.

Answer:
Cyber crime 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.

IMPORTANCE OF IT ACT :
The Information Technology Act:
Enables Legal recognition to Electronic Transaction / Record
Facilitates Electronic Communication by means of reliable electronic record
Provides for acceptance of contract expressed by electronic means
Facilitates Electronic Commerce and Electronic Data interchange.
Facilitates Electronic Governance.
Facilitates electronic filing of documents.
Enables retention of documents in electronic form.
Where the law requires the signature, digital signature satisfies the requirement.
Ensures uniformity of rules, regulations and standards regarding the authentication and
integrity of electronic records or documents.
Facilitates Publication of Official Gazette in the electronic form.
 Enables interception of any message transmitted in the electronic or encrypted form.
Prevents Computer Crime, forged electronic records, international alteration of electronic
records fraud, forgery or falsification in Electronic Commerce and electronic transaction.

WHY THE NEED FOR CYBER LAW?

Flourishing of the Internet.
Greatest cultural, economic, political and social transformation in the history of human society.
Complex legal issues arising leading to the development of cyber law.
Different approaches for controlling, regulating and facilitating electronic communication and
commerce.
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Q4. What do you mean by award with reference in arbitration?

Answer:
Award means an arbitral award. It is a final decision or judgment of the arbitral tribunal on all
matters referred to it. An award in order to be valid must be final, certain and must decide all the
matters referred to. An award by the arbitrator is as binding in its nature as the judgment of a
court.
Arbitral award includes an interim award
There are two types of decisions to be made by the arbitral tribunal i.e. decision on the
merits of the dispute is to be made by the majority of members of the arbitral tribunal but question
of procedure can be decided by the presiding arbitrator, if authorized by the parties or all
members of the arbitral tribunal. In the absence of such authorization by the parties or other
members of the tribunal, the decision on question of procedure is also to be made by majority of
members of the arbitral tribunal. In the absence of such authorization by the parties or other
members of the tribunal, the decision on question of procedure is also to be made by majority of
members of the arbitral tribunal. The presiding arbitrator has not been given any special power
and be acts like any other arbitrator. All arbitrators have been given equal power irrespective of
mode of appointment.

Essentials of an Arbitral Award

Section 31 deals with the form and contents of the arbitral award. The provisions of Section 31
are discussed in the form of essentials which are as under:
1. An arbitration agreement is required to be in writing. Similarly, a reference to
arbitration and award is also required to be made in writing. The arbitral ward is
 required to be made on stamp paper of prescribed value. An oral decision is not an
award under the law.
2. The award is to be signed by the members of the arbitral tribunal. However, the
signatures of majority of all the members of all the members of the tribunal are
sufficient if the reason for any omitted signature is stated.
3. Unless the agreement provides otherwise, the arbitrator must give reasons for the
award. Thus, the making of an award is a rational process which is accentuated by
recording the reasons. However, there are two exceptions where award without
reasons is valid i.e.
(a) Where the arbitration agreement expressly provides that no reasons are to be given,
or
(b) Where has been under section 30 of the new Act i.e. where the parties settled the
dispute and the arbitral tribunal has recorded the settlement in the form of an arbitral
award on agreed terms.
4. The award should be dated i.e. the date of the making of the award should be
mentioned in the award.
5. The arbitral tribunal shall state the place of arbitration in the award.
6. The arbitral tribunal may include in the sum for which award is made, interest up to
the date of award and also a direction regarding future interest. The rate of interest
shall be eighteen per cent.
7. The award may also include decisions and directions of the arbitrator regarding the
cost of the arbitration.
8. After the award in made, a signed copy should be delivered to each party for
appropriate action.
9. The arbitral tribune may, at any time during the arbitral proceeding, make an interim
arbitral award on m=any matter with respect to which it may make a final arbitral
award.

Finality of Arbitral Awards (Section 35)

An arbitral award shall be final and binding on the parties and persons claiming under them
respectively. Now, under the new Act, by virtue of section 35 and the Act, the award made by the
Arbitrator shall be fine and binding on the parties itself and shall be decree without being made
decree by the court.
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Q5. How is a consumer defined in the Consumer Protection Act? Discuss.

Answer:
Consumer protection laws are designed to ensure fair competition and the free flow of truthful
information in the marketplace. The laws are designed to prevent businesses that engage in fraud
or specified unfair practices from gaining an advantage over competitors and may provide
additional protection for the weak and those unable to take care of themselves. Consumer
Protection laws are a form of government regulation which protects the interests of consumers.
For example, a government may require businesses to disclose detailed information about
productsparticularly in areas where safety or public health is an issue, such as food. Consumer
protection is linked to the idea of "consumer rights" (that consumers have various rights as
consumers), and to the formation of consumer organizations which help consumers make better
choices in the marketplace.
Consumer is defined as someone who acquires goods or services for direct use or
ownership rather than for resale or use in production and manufacturing.
Consumer interests can also be protected by promoting competition in the markets which
directly and indirectly serve consumers, consistent with economic efficiency, but this topic is
treated in Competition law.
Consumer protection can also be asserted via non-government organizations and
individuals as consumer activism.
Consumer is a broad label for any individuals or households that use goods and services
generated within the economy. The concept of a consumer occurs in different contexts, so that
the usage and significance of the term may vary.
In economics and marketing
Typically when business people and economists talk of consumers they are talking about
person as consumer, an aggregated commodity item with little individuality other than that
expressed in the buy/not-buy decision. However there is a trend in marketing to individualize the
concept. Instead of generating broad demographic profiles and psycho-graphic profiles of market
segments, marketers have started to engage in personalized marketing, permission marketing,
and mass customization.
There is increasing backlash from the public over use of the label "consumer" rather than
"customer", with many finding it offensive and derogatory.
In law and politics
The law primarily uses the notion of "consumer" in relation to consumer protection laws,
and the definition of consumer is often restricted to living persons (i.e. not corporations or
businesses) and excludes commercial users. A typical legal rationale for protecting the consumer
is based on the notion of policing market failures and inefficiencies, such as inequalities of
bargaining power between a consumer and a business. As of all potential voters are also
consumers, consumer protection takes on a clear political significance.
 Concern over the interests of consumers has also spawned much activism, as well as
incorporation of consumer education into school curricula. There are also various non-profit
publications, such as Consumer Reports and Choice Magazine, dedicated to assist in consumer
education and decision making, and Consumer Direct in the UK.
In India, the Consumer Protection Act 1986 clearly differentiates a consumer as
consuming a commodity or service either for his personal domestic use or to earn his livelihood.
Only consumers are protected as per this act and any person, entity or organization purchasing a
commodity for commercial reasons are exempted from any benefits of this act. Furthermore,
Indian case law has quite a few references on how to distinguish a consumer from a customer.
In intelligence studies
Within intelligence studies, the concept of "consumer" refers to the political staff consuming and
requesting intelligence.
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Q6.Undertake a survey of 20 shops and write a report on the provisions being maintained in
these shops as per the Shops and Establishments Act.

Answer:
On making a survey on 20 different shops coming under shops and establishments acts, the
important findings are summarized:

-To provide statutory obligation and rights to employees and employers in the un organised 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.

When To Consult And Refer

- At the time of start of an enterprise.

- When framing personnel policies and rules