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Master of Business Administration - Semester 3 MB0051: Legal Aspects of Business (4 credits)

(Book ID: B1207)

Q1 a. What are the sources of law? Explain.


Ans: The term law is used in many senses: you may speak of the law of physics, mathematics, science, or the laws of the football or health. In its widest sense, law means any rule of conduct, standard or pattern, to which actions are required to conform; if not conformed, sanctions are imposed. When we speak of the law of a State, we use the term law in a special and strict sense. Sources of Indian Law: The main sources of modern Indian Law, as administered by Indian courts, may be divided into two broad categories: (i) Primary sources and, (ii) Secondary sources. (i) Primary sources of Indian Law: The primary sources of Indian Law are: (a) customs, (b) judicial precedents (c) stare deices(c) statutes and (d) personal law. a)Customary Law: Customs have played an important role in making the law and therefore are also known as customary law. Customary Law, in the words of Keeton, may be defined as those rules of human action, established by usage and regarded as legally binding by those to whom the rules are applicable, which are adopted by the courts and applied as sources of law because they are generally followed by the political society as a whole or by some part of it. In simple words, it is the uniformity of conduct of all persons under like circumstances. It is a generally observed course of conduct by people on a particular matter. When a particular course of conduct is followed again and again, it becomes a custom. b) Judicial precedents are an important source of law: Judicial precedents are another important source of law. It is based on the principle that a rule of law which has been settled by a series of decisions generally should be binding on the court and should be followed in similar cases. These rules of law are known as judicial precedents. However, only such decisions which lay down some new rules or principles are treated as judicial precedents. Thus, were there is a settled rule of law, it is the duty of the judges to follow the same; they cannot substitute their opinions for the established rule of law. This is known as the doctrine of stare deices

. The literal meaning of this phrase is stand by the decision. c)Statute an important source of law: The statutes or the statutory law or the legislation is the main source of law. This law is created by legislation such as Parliament. In India, the Constitution empowers the Parliament and state legislatures to promulgate law for the guidance or conduct of persons to whom the statute is, expressly or by implication, made applicable. It is sometimes called enacted law as it is brought into existence by getting Acts passed by the legislative body. It is called Statute Law because it is the writ of the state and is in written form (jus scriptum) . d)Personal law :

Many times, a point of issue between the parties to a dispute is not covered by any statute or custom. In such cases, the courts are required to apply the personal law of the parties. Thus in certain matters, we follow the personal laws of Hindus, Mohammedan and Christians. (ii) Secondary sources of Indian law : The secondary sources of Indian Law are English Law and Justice, Equity and Good Conscience. English law : The chief sources of English Law are : (i) The Common Law (ii) Equity, (iii) The law Merchant and(iv) The Statute Law. Nowadays, English law is not very important source of Indian law. The English law, in its application to India, has to conform to the peculiar circumstances and conditions prevailing in this country. Even though the bulk of our law is based on and follows the English law, yet in its application our courts have to be selective. It is only when the courts do not find a provision on a particular problem in the primary sources of Indian Law that it my look to subsidiary sources such as the English Law. For example , the greater part of the Law Merchant has been codified in India. The Indian Contract Act, 1872, the Indian Partnership Act, 1932, the Scale of Goods Act 1930 and the Negotiable Instruments Act, 1882, are some of the very important Acts relating to business transactions. Where, however, there is some doubt as to the interpretation of any provisions of these Acts or where certain branches of the Law Merchant have not been codified, the courts in India look to English decisions on the point, for guidance. Justice, equity and good conscience:

In India, we do not have, no did we ever had separate courts (as in England) administering equity. But the equitable principles of law, i.e., justice, equity and good conscience, are the guiding force behind most of the statutes in our country and the decisions of the courts. Especially, where law is silent on any point or there is some lacuna n a statute, the principles of equity come handy to the judges who exercise their discretion often on equitable considerations. The frequent use of terms such as good faith, public interest, and public policy, in statutes and by the judges in their judgments is based on principles of equity. Now we shall briefly describe the main sources of English law: 1. Common law: This source consists of all those unwritten legal doctrines embodying customs and traditions developed over centuries by the English courts. Thus, the common law is found in the collected cases of the various courts of law and is sometimes known as case law. 2. Equity: The literal meaning of the term equity is natural justice. The development of equity as a source of law occurred due to rigors and hardships of the Common Law. Therefore, in its technical and narrower sense, equity means a body of legal doctrines and rules emanating from the administrations of justice, developed to enlarge, supplement or override a narrow rigid system of existing law of the land. However, like the common law, the equity is unwritten and is a supplement to common law as a source of law. 3. Statute law: The Statute law consists of the law passed by the Parliament and therefore, is written law. The authority of parliament is supreme but is subject to natural limitations and those laid down by the Constitution. It can pass any law it pleases and can override its own previous Acts and the decisions of the courts. Statute law, therefore, is superior to and can override any rule of Common Law or equity. 4. The law merchant or lex mercatoria : It is another important source of law and is based to a great extent on customs and usages prevalent among merchants and traders of the middle ages. Its evolution like that of equity can be traced to unsuitability of Common Law so far as the commercial transactions were concerned. The Common Law was found to be unsatisfactory in dealing with disputes between merchants. The merchants, therefore, developed certain rules based upon customs and usages to govern their mercantile transactions. These rules were known as Lex Mercatoria or the Law Merchant

Q 2 What is meant by contract? Explain about quasi contracts?

Answer: Contract A contract is an agreement, enforceable by law, made between at least two parties by which rights are acquired by one and obligations are created on the part of another. If the party, which had agreed to do something, fails to do that, then the other party has a remedy. Example: D An airline sells a ticket on 1 January to X for the journey from Mumbai to Bangalore on 10January. The Airlines is under an obligation to take X from Mumbai to Bangalore on 10 January. In case the Airlines fails to fulfill its promise, X has a remedy against it. Thus, X has a right against the Airlines to be taken from Mumbai to Bangalore on 10 January. A corresponding duty is imposed on the Airlines. As there is a breach of promise by the promisor (the Airlines), the other party to the contract (i.e., X) has a legal remedy. Meaning of quasi contracts: Quasi Contracts are so -called because the obligations associated with such transactions could neither be referred as tortuous nor contractual, but are still recognized As enforceable like contracts, in courts. According to Dr Jenks, quasi contract is a Situation in which law imposes upon one person, on grounds of natural justice, an obligation similar to that which arises from a true contract, although no contract, express or implied, has in fact been entered into by them.

Cases which are treated as quasi contracts Following are the cases which are to be deemed quasi contracts:1. Claim for necessaries supplied to a person incapable of contracting or on his account. If a person, incapable of entering into a contract or anyone whom he is legally bound to support is supplied by another person with necessaries suited to his condition in life, the person who furnished such supplies is entitled to be reimbursed from the property of such incapable person(Sec.68).2.Reimbursement to a person paying money due by another in payment of which he isinterested.A person who is interested in the payment of money which another is bound by law to pay, and who, therefore, pays it, is entitled to be reimbursed by the other. (Sec.69

Q3. What are the rights of consumer under consumer protection act? Rights of Consumers
For the first time in the history of consumer legislation in India, the Consumer Protection Act, 1986 extended a statutory recognition to the rights of consumers. Sec.6 of the Act recognizes the following six rights of consumers:1. Right to safety, i.e., the right to be protected against the marketing of goods and services which are hazardous to life and property.2. Right to be informed, i.e., the right to be informed about the quality, quantity, potency, purity, standard and price of goods or services, as the case may be, so as to protect the consumer against unfair trade practices.3. Right to choose: It means right to be assured, wherever possible, access to a variety of goods and services at competitive prices. In case of monopolies, say, railways, telephones, etc., it means right to be assured of satisfactory quality and service at a fair price.4. Right to be heard, i.e., the consumers interests wi ll receive due consideration at appropriate forums. It also includes right to be represented in various forums formed to consider the consumers welfare. 5. Right to seek redressal: It means the right to seek redressal against unfair practices or restrictive trade practices or unscrupulous exploitation of consumers. It also includes right to fair settlement of the genuine grievances of the consumers.6. Right to consumer education: It means the right to acquire the knowledge and skill to be an informed consumer

4. Explain the purpose and meaning of contract of guarantee

Ans. Purpose of guarantee

The contracts of guarantee are among the most common business contracts and are used for a number of purposes. These are: i) the guarantee is generally made use of to secure loans. Thus, a contract of guarantee is for the security of the creditor.ii) The contracts of guarantee are sometimes called performance bonds. For example, in the case of a construction project, the builder may have to find a surety to stand behind his promise to perform the construction contract. Also employers often demand a type of performance bond known as a fidelity bond from employees who handle cash, etc., for the good conduct of the latter. If an employee misappropriates then the surety will have to reimburse the employer.iii) Bail bonds, used in criminal law, are a form of contract of guarantee. A bail bond is a device which ensures, that a criminal defendant will appear for trial. In this way a prisoner is released on bail pending his trial. If the prisoner does not appear in the court as desired then the bond is forfeited. Meaning of contract of guarantee:

A contract of guarantee is defined as a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called surety; the person for whom the guarantee is given is called the principal debtor, and the person to whom the guarantee is given is called the creditor . A contract of guarantee may be either oral or in writing

Q 5. What is partnership? Explain the nature of partnership under law of partnership.


Answer: Meaning and Nature of Partnership

A partnership is defined as the relationship between persons who have agreed to share profits of a business carried on by all, or by any of them acting for all. On analysis of the definition, certain essential elements of partnership emerge.

These elements must be present so as to form a partnership and are discussed below.1. Partnership is an association of two or more than two persons. There must be at least two persons who should join together to constitute a partnership, because one person cannot become a partner with himself. These persons must be natural persons having legal capacity to contract. Thus, a company (which is an artificial person) cannot be a partner. Similarly, a partnership firm cannot be a partner of another partnership firm. As regards maximum number of partners in a partnership firm, Sec.11 of the Companies Act, 1956, puts the limit at 10 in case of banking business and 20 in case of any other business.2. Partnership must be the result of an agreement between two or more persons. An agreement presupposes a minimum number of two persons. As mentioned above, a partnership to arise, at least two persons must make an agreement. Partnership is the

result of an agreement between two or more persons (who are known as partners after the partnership comes into existence).3. The agreement must be to carry on some business. The term business includes every trade occupation or profession [Sec.2 (b)]. Though the word business generally conveys the idea of numerous transactions, a person may become a partner with another even in a particular adventure or undertaking (Sec.8). Unless the person joins for the purpose of carrying on business, it will not amount to partnership.4. The agreement must be to share profits of the business. The joint carrying on of a business alone is not enough; there must be an agreement to share profits arising from the business. Unless otherwise so agreed, sharing of profits also involves sharing of losses. But whereas the sharing of profits is an essential element of partnership, sharing of losses is not. Example: A, a trader, owed money to several creditors. He agreed to pay his creditors out of the profits of his business (run under the creditors supervision) what he owed to them. Held, the arrangement did not make creditors partners with A in business [Cox v. Hickman, (1860) 8H.L.C.,

Q 6. Write a note on the following on Copy Right Act.

Ans: Meaning of copyright (Sec.14) The term copyright means the exclusive right, by virtue of, and subject to the provision of the Act:(a)in the case of literary, dramatic or musical work, not being a computer program me (i) to reproduce the work in any material form including the storing of it in any medium by electronic means; (ii) to issue copies of the work to the public not being copies already in circulation; (iii)to perform the work in public, or communicate it to the public; (iv) to make any cinematograph film or sound recording in respect of the work;(v) to make any translation of the work; (vi) to make any adaptation of the work; (vii) to do, in relation to a translation or an adaptation of the work, any of the acts specified in relation to the work in (i) to (vi);(b) in the case of computer programme (i) to do any of the acts specified in clause (a) above;(ii) to sell or give on hire, or offer for sale or hire any copy of the computer programme, regardless of whether such copy has been sold or given on hire on earlier occasions;(c) in the case of an artistic work

(i) to reproduce the work in any material form including depiction in three dimensions of a two dimensional work or in two dimensions of a three dimensional work; (ii) to communicate the work to the public; (iii) to issue copies of the work to the public not being copies already in circulation; (iv) to include the work in any cinematograph film; (v) to make any adaptation of the work; (vi) to do in relation to an adaptation of the work any of the acts specified in relation to the work in (i) to (iv) above;(d) in the case of a cinematograph film (i) to make a copy of the film, including a photograph of any image forming part thereof; (ii) to sell or give on hire; or offer for sale or hire, any copy of the film, regardless of whether such copy has been sold or given on hire on earlier occasions; (iii)to communicate the film to the public.(e) In the case of a sound recording (i) to make any other sound recording embodying it; (ii) to sell or give on hire, or offer for sale or hire, any copy of the sound recording regardless of whether such copy has been sold or given on hire on earlier occasions; (iii) to communicate the sound recording to the public.

Ownership of copyright (Sec.17) The author of the work is recognized to be the first owner of the copyright therein. This is however, subject to some exceptions given below:1. In the case of a literary, dramatic or artistic work made by the author in the course of his employment or apprenticeship under the proprietor of a newspaper, magazine or similar periodical, for the purpose of publication, the said proprietor shall be the first owner of the copyright in the work (in the absence of any agreement to the contrary) insofar as the copyright relates to the publication in the newspaper, magazine or other periodical. Except in such cases, the author will be the first owner of the copyright in the work.

7 |Page 2. If the photograph is taken or a painting or portrait is drawn or an engraving or cinematograph film is made on payment at the instance of any person, such person, in the absence of any agreement to the contrary, shall be the first owner of the copyright therein. 3. If a work is made in the course of the authors employment under a contract of service or Apprenticeship, the employer (not being the proprietor of a newspaper, magazine or periodical) in the absence of any agreement to the contrary, the employer shall be the first owner of the copyright therein.4. If any person has delivered any address or speech in

public, then he shall be the first owner of the copyright. However, if the address or speech is delivered on behalf of any other person, then such other person shall be the owner of the copyright therein.5. In the case of government work, the government is the owner of the copyright in the absence of any agreement to the contrary.6. In the case of a work made or first published by or under the direction or control of any public undertaking, such public undertaking shall, in the absence of any agreement to the contrary, be the first owner of the copyright therein. Term of copyright Sec.22 provides that copyright shall subsist in any literary, dramatic, musical or artistic work (other than a photograph) published within the lifetime of the author until 60 years from the beginning of the calendar year next following the year in which the author dies. Sec.23 provides for the term of copyright in anonymous and pseudonymous works. In the case of a literary, dramatic, musical or artistic work (other than a photograph), which is published anonymously or pseudonymously, copyright shall subsist until 60 years from the beginning of the calendar year next following the year in which the work is first published.Sec.24 provides for term of copyright in posthumous works. Where copyright subsists at the date of death of the author and adaptation of which has not been published before that date, the copyright will subsist until 60 years of from the beginning of the calendar year next following the year in which the work is first published.

Licences Licence by owners of copyright Compulsory licence in works withheld from public Compulsory Licence in unpublished Indian works (Sec.31A)

Licence to produce and publish translation (Sec.32) Copyright Societies Registration of a copyright society (Sec.33)No person or association of persons shall commence or carry on business of issuing or granting licences in respect of any work in which copyright subsists or in respect of any other rights conferred by this Act except under or in accordance with the registration granted by the Central Government. The Central Government may, having regard to the interests of the authors and other owners of rights under this Act, the interest and convenience of the public and in particular of the groups of persons who are most likely to seek licences in respect of the relevant rights and the ability and professional competence of the applicant, register such association of persons as a copyright society subject to such conditions as may be prescribed .However, the Central Government shall not ordinarily register more than one copyright society to do business in respect of the same class of works. The Central Government may, if it is satisfied that a copyright society is being managed in a manner detrimental to the interests of the owners of rights concerned, cancel the registration of such society after such inquiry as may be prescribed. Further, if the Central Government is of the opinion that in the interests of the owners of rights concerned, it is necessary so to do, it may suspend the registration of such society pending enquiry for such period not exceeding one year. In such a situation, the

Government shall appoint an administrator to discharge the functions of the copyright society. Administration of rights of owner by copyright society (Sec.34). A copyright society may accept from an owner of rights exclusive authorisation to administer any right in any work. But he shall have the right to withdraw such authorization without prejudice to the rights of the copyright society under the contract. Payment of remuneration by copyrights society (Sec.4A). The copyright society is empowered to frame a scheme for determining the quantum of remuneration payable to individual copyright owners having regard to the number of copies of the work in circulation. Control over the copyright society by the owner of rights (Sec.35). Every copyright society shall be subject to the collective control of the owners of rights under this Act whose rights it administers. The society shall (a) obtain the approval of such owners of rights for its procedures of collection and distribution of fees; (b) obtain their approval for the utilisation of any amounts collected as fees for any purpose other than distribution to the owner of rights; and (c) provide to such owners regular, full and detailed information concerning all its activities in relation to the administrator of their rights.