Legal Obligations in Business

Dr. Sairam Bhat

 Civil Obligations
• Tort Law: ‘ubi jus ubi remedium’
– where there is right there is remedy.
• Types of Tort:
– Defamation, Tresspass, Nuisance, Negligence
 Tort Law
• Principles in tort law:
– Product liability: Donoghue v Stevenson
– Privity: Spring Meadows Hospital v S S Aluwalia
– Strict liability [Rylands v Fletcher 1868]
– Bhopal Disaster and Liability of MNC
– Absolute Liability M C Mehta v UOI [1987: J Bhagwati]
– Upahaar Cinema tragedy [Rs.20 crore exemplary
damages]
– BP Oil disaster: Shareholder claiming reckless
negligence on part of the management.
– Vicarious liability:
• Master-Servant: During the course of employment
• Principal-Agent: Within the scope of authority
• Independent contractor
 General Defence
– Defamation: Fair criticism/truth
– Tresspass: Licensee/authorized
– Nuisance: Who came first rule: minor
discomfort
– Negligence: Volenti non fit injuria/ Contributor
negligence
– Strict liability: Act of God/third party
 Criminal Law
• General Exception
– Under 7 years of age
– Unsound mind: Sec. 84
– Intoxication
• Drunken driving: Salman Khan and Sanjiv Nanda [BMW] case
– Good faith-duty of law
• Extra territorial application of criminal Law: Right of hot pursuit, territorial
waters
• Of Private Defence
• Abetment of offence
• Unlawful assembly
• Giving false evidence
• Offences affecting the human body
– Murder v/s culpable homicide
– Negligently causing death: Sec. 304 IPC
– Causing miscarriage: Right of unborn
– Dowry death
– Attempt to suicide
– Wrongful confinement
– Kidnapping-theft-extortion-robbery
– Criminal tresspass
 Criminal procedure and Justice
delivery system
• Adversarial v/s Inquisitorial
• Complaint-FIR-Investigation-Charge sheet-trail-
appeal
• Bailable and non bailable
• Cognizable: can arrest without warrant [more 3
yr imprisonment. generally non bailable as well]
• Sec. 133, 144 Cr. P C
• Juvenile Justice Act 2000: special law
• Plea bargaining
• What is required: Wittness protection and victim
compensation
• Abolition of death penalty? ‘Rarest of rare’ test
 Evidence Law
• Proof beyond reasonable doubt
• Selvi v State of Karnataka: Narco analysis,
brain mapping, polygraph test without the
consent of the accused is violation of right
to privacy and inadmissible as evidence.
• Forensic evidence
 Contract Law
• Law of obligations
• Essentials of a valid Contract: Offer-Acceptance-
Consideration
• Intention to create Legal Relations: Balfour v Balfour
• Privity of contracts
• Capacity to contract
• Free Consent
• Void agreements: Against public policy
• Government Contracts: M P Sugar Mills case
• Remedies
– Injunction
– Damages [LD]
– Specific performance
 International law
• Public International law and Private International
Law
• Hard law or soft law?
• State Responsibility
• Nationality-Refugee-Convention on Diplomatic
immunity-asylum
• United Nations [ICJ] [ICC] v/s WTO [Appellate
Body]-Shrimp turtle case
• International law and ratification in India:
Legislative
• International Law and Judiciary:
Vishaka/Parmanand Khatar
 Free Consent
– Coercion
– Economic Duress: Hawker Pacific helicopter case
– Undue influence: Tate v Williamson
– Misrepresentation
– Fraud: Ward v Hobbs
– Spice Girls v Aprilia World Service 2002
– Whether Silence amounts to Fraud: uberrimae fidei
i.e utmost good faith
– Mistake: Phillips v Brooks, Lewis v Avery
 Void Agreement
• Against Public Policy
• Forbidden by Law
• Agreements in Restraint of legal proceedings
– Arbitration
• Agreements in Restraint of Marriage
• Restraint of Trade
– Absolute restraint and partial restraint
– Exceptions: Nordenfelt Guns case
– Gujarat Bottling case
– Brojonath Ganguly v State of WB
• Quasi Contract: finder of lost goods: Sec. 71
 Bailment and Pledge
• Gratuitous Bailment and Bailment for
reward
• Duty of care
• Pledge: Bailment for a loan advanced
• Pledge an Hypothecation
 Indemnity and Guarantee
• Role of Surety: Rule of Subrogation
 Principal-Agent Contract
• Agent v/s Independent Contractor
• Types of Agents
– Del credere agent, auctioneer, broker, parnters
– Direct Sale Agent
• Type of Authority
• Personal Liability of an Agent: Respondent
superior
• for example: trademark infringement,
misappropriation of trade secrets, copyright
infringement, unfair competition and antitrust,
and fraudulent misrepresentation
 Sale of Goods Act, 1930
• Distinction between Sale and Agreement to Sell
• Definition of Goods: Gannon Dunkerley case
[works contract]
• Transfer of Ownership: risks
• Conditions and warranties
• Caveat emptor ----caveat venditor
• Unpaid seller rights
– Right of lien
– Right to stop goods in transit
– Right of sale
 Remedies for Breach
• Anticipatory Breach
• Specific Performance
– Contract of personal service
– When damages are adequate remedy
– When court would have to monitor compliance
• Injunction
– Temporary
– Perpetual
– Mandatory
• Damages
– Nominal
– Liquidated
– Exemplary
Consumer Protection Act, 1986
• Sale of Goods Act, 1930
• Who is a Consumer ? ‘hire’
• Defect in ‘goods’ Deficiency in ‘Services’
• Validity of Liability excluding clause
• Consumer Forums [20 lakh]-State [20 lakh
to 1 crore] and National Commission
• Ex: Coke contamination controversy
 Product Liability
• The Foods Adulteration Act, 1954
• The Food Safety and Standards Act, 2006
• The Drug & Cosmetics Act, 1940
• The Indian Penal Code, 1860
• The Standards of Weights and Measures Act, 1956
• The Agricultural Produce (Grading and Marking) Act, 1937 for marking and
grading of commodities like vegetables, butter, etc.
• The Indian Standards Institution (Certification Marks) Act , 1952 to formulate
a number of standards for different products by ISI
• The Bureau of Indian Standards Act , 1986
• All the above laws have civil as well as criminal liability
• Smt. Uma Deepak v. Maruti Udyog Ltd Ors (2003) CPJ 90(MRTP) the
Complainant alleged that the car sold by the opposite party was not only
accidental but the price, for the same, was also overcharged. The Court, in
response to the allegations made by the complainant, directed arrest of the
Directors as well as the manager of the dealers/agents who sold the said
defective car to the complainant and remanded them to judicial custody.
Subsequent thereto, the said officers of the opposite party were released on
bail and were directed to replace the disputed car with a new car.
Product Liability: New initiatives
• ISO standards for processes and Products
• Extend Producers Responsibility: Right to
recall a product
 E-Contract
• IT Act 2000: Sec. 11-13
• Shrink warp: ProCD Inc. v. Zeidenberg
• Click warp
• Avinash Bajaj case 2002
• TCS v State of AP
• P R Transport Agency v UOI -2005: Where
contract is concluded
• Unresolved issue: California Software Inc v
Reliability Research Inc
 New forms of Contracts
• PPP
• JV Agreements
• IPR Licensing