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Master of Business Administration - Semester 3 MB 0051: Legal Aspects of Business (4 credits) (Book ID: B1207) ASSIGNMENT- Set 1 Marks 60 Note: Each Question carries 10 marks. Answer all the questions.
Q 1. All agreements are not contracts, but all contracts are agreements. Comment. Ans: An agreement becomes enforceable by law when it fulfils certain conditions. These conditions, which may be called the Essential Elements of a Contract, are explained below. Offer and Acceptance: There must be lawful offer by one party and lawful acceptance of the offer by the other party or parties. The adjective lawful implies that the offer and acceptance must conform to the rules laid down in the Contract Act regarding offer and acceptance. Intention to create Legal Relationship: There must be an intention (among the parties) that the agreement shall result in or create legal relations. An agreement to dine at a friends house is not an agreement. But agreement to buy and sell goods or an agreement to marry, are agreements intended to create some legal relationship and are therefore contracts, provided the other essential elements are present. Lawful consideration: Subject to certain exceptions, an agreement is legally enforceable when each of the parties to it gives something and gets something. An agreement to do something for nothing is usually not enforceable by law. The something given or obtained is called consideration. The consideration may be an act (doing something) or forbearance (not doing something) or a promise to do or not to do something. Consideration may be past (something already done or not done). It may be present or future. But only these considerations are valid which are lawful (what is meant by lawful consideration).

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Capacity of parties: The parties to an agreement must be legally capable of entering into an agreement; otherwise it cannot be enforced by a court of law. Want of capacity arises from minority, lunacy, drunkenness and similar other factors. If any of the parties to the agreement suffer from any such disability, the agreement is not enforceable by law, except in some special cases. Free consent: In order to be enforceable, an agreement must be based on the free consent of all the parties. There is absence of genuine consent if the agreement is induced by coercion (make sb agree by bullying), undue influence, mistake, misrepresentation, and fraud. A person guilty of coercion, undue influence etc. cannot enforce the agreement. The other party (the aggrieved party) can enforce it, subject to rules laid down in the Act. Legality of the object: The object for which the agreement has been entered into must not be illegal, or immoral or opposed to public policy. Certainly: The agreement must not be vague. It must be possible to ascertain the meaning of the agreement, for otherwise cannot be enforced. Possibility of performance: The agreement must be capable of being performed. A promise to do impossible thing cannot be enforced. Writing, Registration and Legal Formalities: An oral contract is a perfectly good contract except in those cases where writing and /or registration is required by some statute. The terms of an oral contract are sometimes difficult to prove. Therefore important agreements are usually entered into in writing even in cases where writing is not compulsory. The elements that mentioned above must all be present. If any of them is absent, the agreement does not become a contract. An agreement, which fulfils all the essential elements, is enforceable by law and is called a contract. From this it follows that every contract is an agreement but all agreements are not contracts. Every contract gives rise to certain legal obligations or duties on the part of the contracting parties. The courts enforce the legal obligations. Q 2. What are the essentials of a contract of sale under the sale of Goods Act, 1930? Ans: Sale of Goods Act is one of very old mercantile law. Sale of Goods is one of the special types of Contract. Initially, this was part of Indian Contract Act itself in chapter VII (sections 76 to 123). Later these sections in Contract Act were deleted, and separate Sale of Goods Act was passed in 1930. The Sale of Goods Act is complimentary to Contract Act. Basic provisions of Contract Act apply to contract of Sale of Goods also. Basic requirements of contract i.e. offer and acceptance, legally enforceable agreement, mutual consent, parties competent to contract, free consent, lawful object, consideration etc. apply to contract of Sale of Goods also.

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Contract of Sale - A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. [section 4(1)]. A contract of sale may be absolute or conditional. [section 4(2)]. Thus, following are essentials of contract of sale - * It is contract, i.e. all requirements of contract must be fulfilled * It is of goods * Transfer of property is required * Contract is between buyer and seller * Sale should be for price * A part owner can sale his part to another part-owner * Contract may be absolute or conditional. How Contract of sale is made - A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. The contract may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by instalments, or that the delivery or payment or both shall be postponed. [section 5(1)]. Subject to the provisions of any law for the time being in force, a contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied from the conduct of the parties. [section 5(2)]. Thus, credit sale is also a sale. - - A verbal contract or contract by conduct of parties is valid. e.g. putting goods in basket in super market or taking food in a hotel. Two parties to contract - Two parties are required for contract. - - Buyer means a person who buys or agrees to buy goods. [section 2(1)]. Seller means a person who sells or agrees to sell goods. [section 2(13)]. A part owner can sale his part to another part-owner. However, if joint owners distribute property among themselves as per mutual agreement, it is not sale as there are no two parties. Contract of Sale includes agreement to sale - Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. [section 4(3)]. An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. [section 4(4)]. The provision that contract of sale includes agreement to sale is only for the purposes of rights and liabilities under Sale of Goods Act and not to determine liability of sales tax, which arises only when actual sale takes place. Transfer of property - Property means the general property in goods, and not merely a special property. [section 2(11)]. In laymans terms property means ownership. General Property means full ownership. Thus, transfer of general property is required to constitute a sale. If goods are given for hire, lease, hire purchase or pledge, general property is not transferred and hence it is not a sale. POSSESSION AND PROPERTY - Note that property and possession are not synonymous. Transfer of possession does not mean transfer of property. e.g. if goods are handed over to transporter or godown keeper, possession is transferred but property remains with owner. Similarly, if goods remain in

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possession of seller after sale transaction is over, the possession is with seller, but property is with buyer. Goods - Goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. [section 2(7)]. Price - Price means the money consideration for a sale of goods. [section 2(10)]. Consideration is required for any contract. However, in case of contract of sale of goods, the consideration should be price i.e. money consideration. Ascertainment of price - The price in a contract of sale may be fixed by the contract or may be left to be fixed in manner thereby agreed or may be determined by the course of dealing between the parties. [section 9(1)]. Where the price is not determined in accordance with the foregoing provisions, the buyer shall pay the seller a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. [section 9(2)]. Conditions and Warranties - Opening para of section 16 makes it clear that there is no implied warranty or condition as to quality of fitness of goods for any particular purpose, except those specified in Sale of Goods Act or any other law. - - This is the basic principle of caveat emptor i.e. buyer be aware. However, there are certain stipulations which are essential for main purpose of the contract of sale of goods. These go the root of contract and nonfulfilment will mean loss of foundation of contract. These are termed as conditions. Other stipulations, which are not essential are termed as warranty. These are collateral to contract of sale of goods. Contract cannot be avoided for breach of warranty, but aggrieved party can claim damages. - A breach of condition can be treated as breach of warranty, but vice versa is not permissible. A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty. [section 12(1)]. A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated. [section 12(2)]. A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated. [section 12(3)]. Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract. [section 12(4)]. Where a particular stipulation in contract is a condition or warranty depends on the interpretation of terms of contract. Mere stating Conditions of Contract in agreement does not mean all stipulations mentioned are conditions within meaning of section 12(2). When condition to be treated as warranty - Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty and not as a ground for treating the contract as repudiated. [section 13(1)]. Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller

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can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect. [section 13(2)]. Nothing in this section shall affect the case of any condition or warranty fulfillment of which is excused by law by reason of impossibility or otherwise. [section 13(3)]. Time of payment is not essence of contract but time of delivery of goods is, unless specified otherwise - Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale. Whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract. [section 11]. As a general rule, time of payment is not essence of contract, unless there is specific different provision in Contract. In other words, time of payment specified is warranty. If payment is not made in time, the seller can claim damages but cannot repudiate the contract. Caveat Emptor - The principle termed as caveat emptor means buyer be aware. Generally, buyer is expected to be careful while purchasing the goods and seller is not liable for any defects in goods sold by him. This principle in basic form is embodied in section 16 that subject to provisions of Sale of Goods Act and any other law, there is no implied condition or warranty as to quality or fitness of goods for any particular purpose. As per section 2(12), Quality of goods includes their state or condition. Transfer of property as between seller and buyer - Transfer of general property is required in a sale. Property means legal ownership. It is necessary to decide whether property in goods has transferred to buyer to determine rights and liabilities of buyer and seller. Generally, risk accompanies property in goods i.e. when property in goods passes, risk also passes. If property in goods has already passed on to buyer, seller cannot stop delivery of goods even if in the meanwhile buyer has become insolvent. - - Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. [section 18]. Property passes when intended to pass - Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. [section 19(1)]. For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. [section 19(2)]. Unless a different intention appears, the rules contained in sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. [section 19(3)]. Specific goods in a deliverable state - Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed. [section 20]. Auction sale - Auction sale is special mode of sale. The sale is made in open after making public announcement. Buyers assemble and make offers on the spot. Person offering to pay highest price gets the goods. Usually, auctioneer is appointed to conduct auction. Higher and higher bids are offered and sale is

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complete when auctioneer accepts a bid.- - - In the case of a sale by auction (1) where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of sale; (2) the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner; and, until such announcement is made, any bidder may retract his bid; (3) a right to bid may be reserved expressly by or on behalf of the seller and, where such right is expressly so reserved, but not otherwise, the seller or any one person on his behalf may, subject to the provisions hereinafter contained, bid at the auction; (4) where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person; and any sale contravening this rule may be treated as fraudulent by the buyer; (5) the sale may be notified to be subject to a reserved or upset price; (6) if the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer. [section 64]. Delivery of goods to buyer - The Act makes elaborate provisions regarding delivery of goods to buyer. It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale. [section 31]. Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller shall be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer shall be ready and willing to pay the price in exchange for possession of the goods. [section 32]. - - Note that this is unless otherwise agreed, i.e. buyer and seller can agree to different provisions in respect of payment and delivery. Acceptance of goods by buyer - Contract of Sale is completed not by mere delivery of goods but by acceptance of goods by buyer. Acceptance does not mean mere receipt of goods. It means checking the goods to ascertain whether they are as per contract. - - - Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract. [section 41(1)]. - - Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract. [section 41(2)]. Buyers and Sellers duties - The Act casts various duties and grants certain rights on both buyer and seller. Rights of unpaid seller against the goods - After goods are sold and property is transferred to buyer, the only remedy with seller is to approach Court, if the buyer does not pay. Seller has no right to take forceful possession of goods from buyer, once property in goods is transferred to him. However, the Act gives some rights to seller if his dues are not paid. Suits for breach of the contract - Unpaid seller can exercise his rights to the extent explained above. In addition, seller can exercise following rights in case of breach of contract. Buyer has also rights in case of breach of contract. Measure for compensation and damages The Sale of Goods Act does not specify how to measure damages. However, since the Act is

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complimentary to Contract Act, measure of compensation and damages will be as provided in sections 73 and 74 of Contract Act. Q 3. Describe the main features of Consumer Protection Act 1986. Ans: The salient features of the Act are: (I) it covers all the sectors whether private, public, and cooperative or any person. The provisions of the Act are compensatory as well as preventive and punitive in nature and the Act applies to all goods covered by sale of goods Act and services unless specifically exempted by the Central Government; (II) It enshrines the following rights of consumers: (a) right to be protected against the marketing of goods and services which are hazardous to life and property; (b) right to be informed about the quality, quantity, potency, purity, standard and price of goods or services so as to protect the consumers against unfair trade practices; (c) right to be assured, wherever possible, access to a variety of goods and services at competitive prices; (d) right to be heard and to be assured that consumers interests will receive due consideration at the appropriate fora; (e) right to seek redressal against unfair trade practices or unscrupulous exploitation of consumers; and (f) right to consumer education; (III) The Act also envisages establishment of Consumer Protection Councils at the central, state and district levels, whose main objectives are to promote and protect the rights of consumers; (v) To provide a simple, speedy and inexpensive redressal of consumer grievances, the Act envisages a three-tier quasi-judicial machinery at the national, state and district levels. These are: National Consumer Disputes Redressal Commission known as National Commission, State Consumer Disputes Redressal Commissions known as State Commissions and District Consumer Disputes Redressal Forum known as District Forum; and (IV) the provisions of this Act are in addition to and not in derogation of the provisions of any other law for the time being in force. Definition of Defect and consumer Under the CPA, Consumer Forums at the District, State and National level have been specifically constituted to adjudicate claims of consumers for any defect in goods. A defect has been defined in Section 2(1) (f) of the Act as any fault, imperfection or shortcoming in the quality, quantity, potency, purity or standard which is required to maintained by or under any law for the time being in force or under any contract, express or implied, or as is claimed by the trader (which includes the manufacturer) in any manner whatsoever in relation to any goods. It is important to mention herein that by virtue of Section 2 (1)(d) persons/entities who had purchased goods for commercial purpose (other than those persons who have purchased goods for using them to earn their livelihood by means of self employment) are excluded from the scope of CPA; they cannot institute proceedings under the CPA even if there is any defect in the goods purchased by them for using the goods for commercial purposes. Purview of a complaint

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According to the CPA, Complaint means any of the following allegations made in writing by a complainanti. any unfair trade practice or a restrictive trade practice has been adopted by a trader, ii. the goods hired or bought suffer from one or more defects iii. The goods hired or availed of are deficient in any respect iv. A trader has charged price in excess of price fixed by law or displayed on the goods or any package containing goods v. Goods which will be hazardous to life and safety when used, are being offered for sale to the public in contravention of the provisions of any law requiring traders to display information in regard to the contents, manner and effect or use of such goods. Grant of Reliefs under CPA On arriving at a finding of defect in the goods according to Section 14 CPA, the jurisdictional Consumer Forum may direct one or more of the following: (i) to remove the defect; (ii) to replace the goods with new goods of similar description which shall be free from any defect; (iii) to return to the complainant the price; (iv) to pay such amount as may be awarded as compensation to the consumer for the loss or injury suffered by the consumer due to the negligence of the opposite party; (v) to discontinue the unfair trade practice or the restrictive trade practice or not to repeat them; (vi) to cease and desist manufacture of hazardous goods; (vii) to pay such sums as orders if injury/loss is suffered by a large number of consumers not identifiable conveniently; (viii) to issue corrective advertisement for neutralizing effect of misleading advertisement; (ix) not to offer the hazardous goods for sale; (x) to withdraw the hazardous goods from being offered for sale; (xi) to provide for adequate costs to parties (the Complainant). There exists no clear pronouncement of the Supreme Court (the apex court in India) till date on whether the liability under the CPA is strict or fault based. However, failure to conform to the standards required under any law, contract or representations of the trader are sufficient to constitute a defect. Furthermore, under Section 14 of the CPA as explained hereinabove, it is only the remedy of compensation that requires the claimant to necessarily prove negligence. In the case of Abhaya Kumar Panda v. Bajaj Auto [(1991) 2 CPJ 644], the Orissa State Commission directed repair of the goods, even though there was no intentional defect. Thus, the defence of no negligence may not be accepted by Consumer forums. Validity of Limitation of liability clauses Contractual liability has a role to play in product liability claims under the CPA. Courts in India have upheld limitation of liability clauses, which parties have specifically agreed to in the contract as recognized by the Supreme Court in Bharathi Knitting Company v DHL Worldwide Express Courier (1996) 4 SCC 704. However, such clauses may be struck down if found to be unconscionable in nature. In Maruti Udyog v. Susheel Kumar Gabgotra, [(2006) 4 SCC 644], the manufacturer of the vehicle had stipulated a warranty clause limiting its liability to merely repair the defects found if any. In view of this clause, the Supreme Court reversed the findings of the National Commission to replace the defective goods and held that the liability of the manufacture was confined to repairing the defect. Compensation was,

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however, awarded for travel charges to the complainant, which was incurred due to the fault of the car manufacturer. Applicability of other laws Section 3 of the CPA provides that the Act is in addition to and not in derogation of any other law. The Supreme Court in Secretary, Thirumurugan Co-operative Agricultural Credit Society v. M. Lalitha, [(2004) 1 SCC 305] has interpreted the above provision to mean that the remedies provided under the CP Act are in addition to the remedies provided under other statutes. Hence, the fact that a remedy is specifically provided for under another statute would not necessarily oust the jurisdiction of the appropriate authority under the CP Act. It has been further held that if forums under one statute and the CP Act are approached, then it is for the appropriate authority to permit the parties to opt between the consumer forum and the other forum, depending on the facts and circumstances of the case. Establishment of Consumer forums At present, there are 34 State Commissions, one in each State/UT and 571 district fora besides the National Commission. The state governments are responsible to set up the district fora and the State Commissions. States have been empowered to establish additional District Forum and also additional members in the State Commission to facilitate constituting benches and also for holding circuit benches. The Central Government is empowered to establish the National Commission. It has been empowered to appoint additional members to facilitate creation of more benches and holding of circuit benches. The second bench of the National Commission started functioning from 24 September 2003. The government is monitoring the disposal of cases by the consumer courts through National Commission. As per the current statistics, since its inception and up to 5.9.2008 , 2559451 cases were filed out of which 2327035 cases were disposed of by the District forums in various states of India . Jurisdiction under Consumer Protection Act 1986 The District Forum has the jurisdiction to entertain complaints where the value of the goods or services and the compensation , if any, claimed, is less than INR 50,000. A State Commission has the jurisdiction to entertain complaints where the value of the goods or services and the compensation , if any, claimed exceeds 500,000 rupees but does not exceed 2 million rupees. It is also appellate forum for orders of the District forum. The National Commisssion has the jurisdiction to entertain complaints where the value of goods and services and the compensation exceeds two million rupees and also hears the appeals against the orders of the State Commission. Period of limitation A complaint is only admitted by any of the competent forums under CPA if it is filed within two years from the date on which the cause of action has arisen but it may be entertained after the said period after recording its reasons for condoning such delay , if the complainant satisfies that he had a sufficient cause for not filing the complaint within period of two years . Procedure to file a complaint A complaint can be filed in a District Forum or as per pecuniary jurisdiction in another forum within local limits of whose jurisdiction the opposite party or

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any of the opposite parties resides or carries on business, or has a branch office or personally works for gain. Class actions Under CPA Section 2 (1) (b) permits filing of a complaint by a consumer, any voluntary consumer association registered under companies Act 1956 or under any other law, the State government or Central Government, one or more consumers where number of consumers have same interest, incase of death of a consumer , his legal representative may ,make a complaint. Penalty under Section 27 CPA According to CPA ,where a trader or the complainant fails to comply with an order made by the relevant consumer forum , such person is liable to a punishment with imprisonment for a term which is not less than one month but which may extend to three years or with fine of not less than two thousand rupees but which may extend to ten thousand rupees or with both Q 4. What are the duties and powers of an authorized person under FEMA, 1999? Ans: The duties of an authorised person as provided in the Act are 1. To comply with RBI directions [Sec.10 (4)]. An authorised person shall, in all his dealings in foreign exchange or foreign security, comply with such general or special direction or order as the Reserve Bank may, from time to time, think fit to give. 2. Not to engage in unauthorized transactions [Sec.10 (4)]. Except with the previous permission of the Reserve Bank, an authorised person shall not engage in any transaction involving any foreign exchange or foreign security which is not in conformity with the terms of authorization under this section. 3. To ensure compliance of FEMA provisions [Sec.10 (5)]. An authorised person shall, before undertaking any transaction in foreign exchange on behalf of any person, require that person to make such declaration and to give such information, as will reasonably satisfy him that the transaction will not involve and is not designed for the purpose of any contravention or evasion of the provisions of this Act or of any rule, regulation, notification, direction or order made there under. Where the said person refuses to comply with any such requirement or makes only unsatisfactory compliance therewith, the authorised person shall refuse in writing to undertake the transactions and shall, if he has reason to believe that any such contravention or evasion as aforesaid is contemplated by the person, report the matter to the Reserve Bank. Powers of the authorised person 1. To deal in or transfer any foreign exchange or foreign security to any person [Sec.3 (a)]

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2. Receive any payment by order or on behalf of any person resident outside India in any name. [Sec.3(c)] However, an authorised person is not allowed to credit the account of any person without any corresponding remittance from any place outside India. 3. To open NRO, NRE, NRNR, NRSR and FCNR accounts. 4. To sell or purchase foreign exchange for current account transactions. [Sec.5] 5. To sell or purchase foreign exchange for permissible capital account transactions. [Sec.6].

Q 5. What do you mean by Memorandum of Association? What does it contain? Ans: Memorandum of association is one of the documents which has to filed with the registrar of companies at the time of incorporation of a company. Section 2(28)defines a memorandum to mean the memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous company law or of this act. The definition, however, either does not give us any idea as to what a memorandum of association really is nor does it point out the role which it plays in the affairs of the company. The memorandum of association is an extremely important document in relation to the affairs of the company. It is a document which sets out the constitution of the company and is really the foundation on which the structure of the company is based. It contains the fundamental conditions upon which alone the company is allowed to be incorporated. A company may pursue only such objects and exercise only such powers as are conferred expressly in the memorandum or by implication therefore i.e. such powers as are incidental to the attainment of the objects. A company cannot depart from the provisions contained in its memorandum, however, great the necessity may be. If it does, it defines its relation with the outside world and the scope of its activities. The purpose of the memorandum is to enable shareholders, creditors and those who deal with the company to know what is the permitted range of the enterprise. It defines as well as confines the powers of the company; it not only shows the object of its formation, but also the utmost possible scope of its operation beyond which its action cannot go. Lord Cairns in Ashbury Railway Carriage Co. V. Riche pointed out, The memorandum is as it were, the area beyond which the action of the company cannot go; inside that area the shareholders may make such regulations for their own government as they think fit. Purpose of memorandum:

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The purpose of the memorandum is two fold. 1. The intending share holder who contemplates the investment of his capital shall know within what field it is to be put at risk. 2. Anyone who shall deal with the company shall know without reasonable doubt whether the contractual relation into which he contemplates entering with the company is one relating to a matter within its corporate objects. At least seven persons in the case of public company and at least two in the case of a private company must subscribe to the memorandum. The memorandum shall be printed, divided into consecutively numbered paragraphs, and shall be signed by each subscriber, with his address, description and occupation added, the presence of at least one witness who will attest the same. Contents of Memorandum: According to section 13, the memorandum of association of every company must contain the following clauses: 1. The name of the company with limited as the last word of the name in the case of a public limited company and with private limited as the last word in the case of a private limited company. 2. The state in which the registered office of the company is to be situated. 3. The objects of the company to be classified as: a. The main objects of the company to be pursued by the company on its incorporation and objects incidental to the attainments of the main objects, and b. Other objects not included above 4. In the case of companies with object not confined to one state, the states to whose territories the objects extend. 5. The liability of members is limited if the company is limited by shares or by guarantee. 6. In the case of a company having a share capital, the amount of share capital with which the company proposes to be registered and its division into shares of a fixed amount. An unlimited company need not include items 5 and 6 in its memorandum. In the case of a company limited by guarantee, its association shall state that each member undertakes to assets of the company, in the event of its being wound member or within or year after wards for the payment liabilities of the company. memorandum of contribute to the up while he is a of the debts and

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Every subscriber to the memorandum shall take at least one share and shall write opposite to his name the number of shares taken by him. Different clauses: A brief discussion of the various clauses are as follows: Name clause: A company may be registered with any name it likes. But no company shall be registered by a name which in the opinion of the central government is undesirable and in particular which is identical or which too nearly resembles the name of an existing company. Where a company is registered by a name so similar to that of another company, that the public are likely to be deceived, the court will grant an injunction restraining it from using that name. Every public company must write the word limited after its name and every private limited company must write the word private limited after its name. The use of the word company is however, not compulsory. Companies, whose liabilities are not limited, are prohibited from using the word limited. The words limited may be dispensed with in the name of charitable companies. But companies formed to promote art, science, religion etc, which do not propose to pay dividend but intend to apply all its profits towards the working of the company, can be registered without the word limited under licenses granted by the central government. A company cannot adopt a name which violates the provisions of the emblems and names act 1950. This act prohibits the use of the name and emblems of the united nation, and the world health organization, the official seal and emblem of the central and the state governments, the Indian National Flag, the name and pictorial representation of Mahatma Gandhi and the prime minister of India. If a limited company makes a contract without using the word limited the directors who make the contract on behalf of the company would be personally liable. Every company is required to publish its name outside its registered office, and outside every place where it carries on business, to have its name engraved on its seal and to have its name on all business letters, bill heads, notices and other official publications of the company. Registered office clause: This clause states the name of the state where the registered office of the company is to situate. The registered office clause is important for two reasons. Firstly, it ascertains the domicile and nationality of a company. This domicile clings to it throughout its existence. Secondly, it is the place where various registers relating to the company must be kept and to which all

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communications and notices must be sent. A company need not carry on its business at its registered office. A company shall have its registered office. Such office must be in existence from the date on which the company begins to carry on business or within 30 days after incorporation, whichever is earlier. Notice of situation of the registered office and every change therein must be given within 30 days from the date of incorporation of the company of after the date of change, as the case may be. Objects clause: The objects clause is the most important clause in the memorandum of association of a company. It is not merely a record of what is contemplated by the subscribers, but it serves a two-told purpose: (a) It gives an idea to the prospective shareholders the purposes for which their money will be utilized. (b) It enables the persons dealing with the company to ascertain its powers. In case of companies which were in existence immediately before the commencement of the companies act 1965, the objects clause has simply to state the objects of the company. But in the case of a company to be registered after the amendment, the objects clause must state separately: (a) Main objects. This sub-clause has to state the main objects to be pursued by the company on its incorporation and objects incidental or ancillary to the attainment of the main objects. (b) Other objects. This sub-clause shall state other objects which are not included in the above clause. Further, in the case of a non-trading company. Whose objects are not confined to one states clause must mention specifically the states to whose territories the objects extend. The subscribers to the memorandum of association may choose and object or objects for their company. There are, however, certain restrictions. 1. The objects should not be against the policy of the constitution. For example, the object should not be such as to encourage untouched ability which has been abolished under our constitution. 2. The objects should not include anything which is illegal or against public policy. For example, forming a company for dealing in lotteries or for trading with the alien enemies. 3. The object must not be against the provisions of the companies act, as for example, authorizing the company to purchase its own shares.

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On its being registered, the company has power to do whatever is necessary to do for attaining the objects stated in the memorandum, and to do whatever else is incidental to or consequential upon the attainment of the main object. It is, therefore, clear that any act of the company outside its stated, objects is ultra viruses and therefore void and cannot be ratified even by the whole body of shareholders. Liability clause: This clause states that the liability of the members of the company is limited. In the company is limited. In the case of a company limited by shares, the member is liable only to the amount unpaid on the shares taken by him. In the case of a company limited by guarantee the members are liable to the amount undertaken to be contributed by them to the assets of the company in the event of its being wound up. However, this clause is omitted from the memorandum of association of unlimited companies. Any alteration in the memorandum compelling a member to take up more shares, or which increases his liability, would be null and void. If a company carries on business for more than six months, while the number of members is less than 7, in the case of public company and less than 2 in case of a private company each member aware of this fact, is liable for all the debts contracted by the company after the period of six months has elapsed. Capital clause: The memorandum of a company limited by shares must state the authorized or nominal share capital, the different kinds of shares, the authorized or nominal share capital, the different kinds of shares, and the nominal value of each share. The capital clause need not state anything else and it is usually better that it should not do so. Association or subscription clause: This clause provides that those who have agreed to subscribe to the memorandum must signify their willingness to associate and form a company. According to section 12 of the act, at least seven persons are required to sign the memorandum in the case of a public company, and at least two persons in the case of a private company. The memorandum has to be signed by each subscriber in the presence of at least one witness who must attest the signatures. Each subscriber must write opposite his name the number of shares he shall take. No subscriber of the memorandum shall take less than one share. This clause need not be numbered. Q 6. Write a note on the following: a. Copy Right Act: The Indian Copyright Act, 1957 governs the system of copyrights in India. Copyright Law in the country was governed by the

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Copyright Act of 1914, was essentially the extension of the British Copyright Act, 1911 to India,and borrowed extensively from the new Copyright Act of the United Kingdom of 1956. Now Indian Copyright is governed by the Indian Copyright Act, 1957. The Indian Copyright Act today is compliant with most international conventions and treaties in the field of copyrights. India is a member of the Berne Convention of 1886 (as modified at Paris in 1971), the Universal Copyright Convention of 1951 and the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) Agreement of 1995. Though India is not a member of the Rome Convention of 1961, WIPO Copyrights Treaty (WCT) and the WIPO Performances and Phonograms Treaty (WPPT),the Copyright Act is compliant with it. Copyright Copyright is a right given by the law to creators of literary, dramatic, musical and artistic works and producers of cinematograph films and sound recordings. In fact, it is a bundle of rights including, inter alia, rights of reproduction, communication to the public, adaptation and translation of the work. There could be slight variations in the composition of the rights depending on the work. Indian work "Indian work" means a literary, dramatic or musical work,

The author of which is a citizen of India; or Which is first published in India; or The author of which, in the case of an unpublished work is, at the time of the making of the work, a citizen of India.

Descriptions of work

Artistic work - An artistic work means o A painting, a sculpture, a drawing (including a diagram, map, chart or plan), an engraving or a photograph, whether or not any such work possesses artistic quality; o A work of architecture; and o Any other work of artistic craftsmanship. Musical work o "Musical work" means a work consisting of music and includes any graphical notation of such work but does not include any words or any action intended to be sung, spoken or performed with the music. A musical work need not be written down to enjoy copyright protection. Sound recording

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"Sound recording" means a recording of sounds from which sounds may be produced regardless of the medium on which such recording is made or the method by which the sounds are produced. A phonogram and a CD-ROM are sound recordings. Cinematograph film o "Cinematograph film" means any work of visual recording on any medium produced through a process from which a moving image may be produced by any means and includes a sound recording accompanying such visual recording and "cinematograph" shall be construed as including any work produced by any process analogous to cinematography including video films. Government work - "Government work" means a work which is made or published by or under the direction or control of o The government or any department of the government o Any legislature in India, and o Any court, tribunal or other judicial authority in India.
o

An author

In the case of a literary or dramatic work the author, i.e., the person who creates the work In the case of a musical work, the composer. In the case of a cinematograph film, the producer. In the case of a sound recording, the producer. In the case of a photograph, the photographer. In the case of a computer generated work, the person who causes the work to be created.

b. Pledge: Sometimes called bailment, pledges are a form of security to assure that a person will repay a debt or perform an act under contract. In a pledge one person temporarily gives possession of property to another party. Pledges are typically used in securing loans, pawning property for cash, and guaranteeing that contracted work will be done. Every pledge has three parts: two separate parties, a debt or obligation, and a contract of pledge. The law of pledges is quite old, but in contemporary U.S. law it is governed in most states by the provisions for Secured Transactions in article 9 of the Uniform Commercial Code. Pledges are different from sales. In a sale both possession and ownership of property are permanently transferred to the buyer. In a pledge only possession passes to a second party. The first party retains ownership of the property in question, while the second party takes possession of the property until the terms of the contract are satisfied. The second party must also have a lienor legal claimupon the property in question. If the terms are not met, the second party can sell the property to satisfy the debt. Any excess profit from the sale must be paid to the debtor, or first party. But if the sale does not meet the amount of the debt, legal action may be necessary. A contract of pledge specifies what is owed, the property that shall be used as a pledge, and conditions for satisfying the debt or obligation. In a simple

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example, John asks to borrow $500 from Mary. Mary decides first that John will have to pledge his stereo as security that he will repay the debt by a specific time. In law John is called the pledgor, and Mary the pledgee. The stereo is referred to as pledged property. As in any common pledge contract, possession of the pledged property is transferred to the pledgee. At the same time, however, ownership (or title) of the pledged property remains with the pledgor. John gives the stereo to Mary, but he still legally owns it. If John repays the debt under the contractual agreement, Mary must return the stereo. But if he fails to pay, she can sell it to satisfy his debt. Pledged property must be in the possession of a pledgee. This can be accomplished in one of two ways. The property can be in the pledgee's actual possession, meaning physical possession (for example, Mary keeps John's stereo at her house). Otherwise, it can be in the constructive possession of the pledgee, meaning that the pledgee has some control over the property, which typically occurs when actual possession is impossible. For example, a pledgee has constructive possession of the contents of a pledgor's safety deposit box at a bank when the pledgor gives the pledgee the only keys to the box. In pledges both parties have certain rights and liabilities. The contract of pledge represents only one set of these: the terms under which the debt or obligation will be fulfilled and the pledged property returned. On the one hand, the pledgor's rights extend to the safekeeping and protection of his property while it is in possession of the pledgee. The property cannot be used without permission unless use is necessary for its preservation, such as exercising a live animal. Unauthorized use of the property is called conversion and may make the pledgee liable for damages; thus, Mary should not use John's stereo while in possession of it. For the pledgee, on the other hand, there is more than the duty to care for the pledgor's property. The pledgee has the right to the possession and control of any income accruing during the period of the pledge, unless an agreement to the contrary exists. This income reduces the amount of the debt, and the pledgor must account for it to the pledgee. Additionally, the pledgee is entitled to be reimbursed for expenses incurred in retaining, caring for, and protecting the property. Finally, the pledgee need not remain a party to the contract of pledge indefinitely. She can sell or assign her interest under the contract of the pledge to a third party. However, the pledgee must notify the pledgor that the contract of pledge has been sold or reassigned; otherwise, she is guilty of conversion.