ASSIGNMENT DRIVE FALL PROGRAM 2013 MBADS / MBAN2 / MBAHCSN3 / MBAFLEX (SEM 3) PGDENMN /PGDFMN/ PGDHRMN / PGDHSMN / PGDIB

B / PGDISMN / PGDMMN / PGDOMN / PGDPMN / PGDROMN / PGDSCMN / PGDTQMN (SEM 1) MB0051 - LEGAL ASPECTS OF BUSINESS B1725 4 60

SUBJECT CODE & NAME BK ID CREDITS MARKS

Note: Answer all questions. Kindly note that answers for 10 marks questions should be approximately of 400 words. Each question is followed by evaluation scheme. Q.1 Write short notes with examples: a) Offer and acceptance b) Capacity to contract Answer : Offer and acceptance with examples: Offer and acceptance are elements required for the formation of a legally binding contract: the expression of an offer to contract on certain terms by one person (the "offeror") to another person (the "offeree"), and an indication by the offeree of its acceptance of those terms. The other elements traditionally required for a legally binding contract are (i) consideration and (ii) an intention to create legal relations. Offer and acceptance analysis is a traditional approach in contract law. Example Of offer : A says to B, "I'll sell you my house for $100,000, if you give me a check right now for $10,000 and promise to pay the rest within 30 days." This is an offer. If B says, "Here is my $10,000 check, and I'll have the balance to you next week," this is an acceptance. After the acceptance occurs, the parties have an enforceable contract (assuming that there is no requirement of a writing, as there probably would be in this situation) For the acceptance, the essential requirement is that the parties had each from a subjective perspective engaged in conduct manifesting their assent. Under this meeting of the minds theory of contract, a party could resist a claim of breach by proving that he had not intended to be bound by the agreement, only if it appeared subjectively that he had so intended. Example of acceptance : A says to B, "I'll pay you $1,000 if you cross the Brooklyn Bridge." This can only be accepted by A's act of completely crossing the bridge. (However, the offer will be rendered temporarily irrevocable once B starts to perform. Capacity to contract with examples : Capacity to contract means the legal competence of a person to enter into a valid contract. Usually the capacity to contract refers to the capacity to enter into a legal agreement and the competence

to perform some act. The basic element to enter into a valid contract is that s/he much have a sound mind. Certain class of people are exempted from the category of people who are capable of entering into contract: 1. infants/minors; 2. insane; 3. people under the influence of drug; Minors (those under the age of 18, in most states) lack the capacity to make a contract. So a minor who signs a contract can either honour the deal or void the contract. There are a few exceptions, however. Example : Sean, 17, a snowboarder, signs a long-term endorsement agreement for sportswear. He endorses the products and deposits his compensation for the endorsements for several years. At age 19, he decides he wants to void the agreement to take a better endorsement deal. He claims he lacked capacity when he signed the deal at 17. A court probably will not permit Sean to now void the agreement.

Q.2 Discuss the rights and liabilities of a surety. Answer: 1. Rights of the Surety As you know when we have explained that there are three parties in a contract and there are three contracts. So the parties are the debtor, creditor and the surety. So the surety has got some right against creditor. Surety has got rights against debtor. But sometime in a contract of guarantee, the surety is not all alone. There are more than one surety or there are more than two sureties. Then sometime one surety can exercise his rights against the other co sureties. So the point of the co sureties will also be touched. So the suretys rights against the creditor, rights against debtor and rights against co sureties will be discussed now. Suretys Rights Against Debtor: First of all we discuss the right of the surety against debtor. The rights of the surety against debtor are and that first right is the right of subrogation. Now what is the meaning of the right of subrogation? Right of subrogation says that when a surety makes the payment to the creditor and creditor is out of the scene now, therefore now surety will deal with the debtor in a manner as if he is a creditor. Rights of a Surety Against Creditor : Now we move on to discuss the rights of the surety against creditor, because there is a contract between the creditor and the surety also. So when surety has got a right against the debtor he has got certain rights against the creditor also. The first and the foremost right is that he can claim certain securities from the creditor. 2. Suretys Liability :

The first and the foremost point in the suretys liability is that it is coextensive of the debtors liability. When we say the coextensive of debtors liability it means surety liability is as much as the debtors liability. Meaning thereby, in case the debtor makes a default in the making the payment to the creditor, then whatever the creditor can recover from the debtor, the same amount of the liability will fall on the shoulders of the surety. Surety will also be responsible to same amount of the liability, because he has given the surety and his liability is extensive to an extent of the debtors liability. For example, if a debtor is making a default in making the payment to the surety and later on the surety has to make the payment of the amount along with the some cost and the interest also, then surety can recover that principal amount along with the cost or interest from the debtor. So his liability will be the coextensive of the debtors liability. The second point is suretys liability may be limited. A surety at the time of giving the surety can limits his liability in whole of the debt.

Q.3 How is an agency formed? Discuss the classification of agents. Answer: Formation of agency : 1. Agency by appointment: a. An agency is created by express appointment when the principal appoints the agent by express agreement with the agent. b. Contract law principles apply to an agency agreement. An agent may agree to act in consideration for a reward. 2. Agency by estoppel (implied appointment): Agency by estoppel arises when A makes a representation to a third party, whether by words or conduct, that B is his agent, and subsequently that third party deals with B as A's agent in reliance on such representation. 3.Agency by ratification: Agency by ratification arises when a person (the principal) ratifies (that is, approves and adopts) an act which has already been done in his name and on his behalf by another person (the agent) who in fact, had no actual authority (whether express or implied) to act on his (the principal's) behalf when the act was done. 4. Agency of necessity: a. Agency of necessity arises when a person ("A") is faced with an emergency in which the property of another person ("B") is in imminent jeopardy and it becomes necessary, in order to preserve the property for A to act for and on behalf of B. In this case, A acts as an agent of necessity of B. Classification of agents : 1.Specific or particular agent: Specific or particular agent is an agent who is appointed to do a single act for the principal. He is appointed mostly by a special power of attorney. He is also called a Special Agent. His authority ends no sooner the particular act is performed.

2. General agent: General agent is an agent who is appointed to do all or general acts concerning a particular trade or business of the principal. He is appointed mostly by general power of attorney. His authority continues until it is terminated. 3. Broker: He brings two parties together into a contract. He is employed to find a buyer or seller. He is intermediary. He has no possession of the goods and the contract is entered into by parties directly. He buys and sells goods on behalf of another 4. Commission agent: He buys or sells the goods for the buyer or the seller and receives commission. He may or may not have possession of the goods. 5. Factor: He is entrusted with the possession of the goods with discretionary authority to sell, pledge or create any right on the goods with the third person. He sells the goods in his own name at such price as he thinks fit. He has the authority to receive the price of the goods. He has a general lien on the goods for the monies due to him.

Q. 4 Discuss the registration of firm under section 58 of Indian Partnership Act, 1932. Explain what partnership deed is. Answer: Registration of firm: The law relating to a partnership firm is contained in the Indian Partnership Act, 1932. Under Section 58 of the Act, a firm may be registered at any time ( not merely at the time of its formation but subsequently also ) by filing an application with the Registrar of Firms of the area in which any place of business of the firm is situated or proposed to be situated. Application shall contain: name of the firm place or principal place of business names of any other places where the firm carries on business. date on which each partner joined the firm name in full and permanent address of partners. duration of the firm Application shall be signed and verified by all the partners or their duly authorized agents. Application shall be accompanied by prescribed fee as well as the following documents: Prescribed Registration Form for Incorporation of a Company. (Form No. 1 and Specimen of Affidavit) certified true copy of the Partnership deed entered into. ownership proof of the principal place of business Name of the firm should not contain any words which may express or imply the approval or patronage of the government except where the government has given its written consent for the use of such words as part of the firms name.

Partnership deed : A partnership deed can be defined as a document that is prepared to explain important points so that the chances of clash among partners are minimized to a great extent. Whenever a partnership is formed, the partners are bound in two kinds of responsibilities. One is the individual responsibility of each partner and the other is the collective responsibility of all the concerned partners. The acts of partners in normal course of business unite the firm. If the partners work with understanding and collaboration, the company is sure to function flawlessly. If there is mistrust among them, conflicts are bound to surface every now and then. It is because business is so complex a job that various kinds of decisions are to be taken almost on a daily basis. The past experience of partnership firms show that there are disputes among partners over countless things and this results in the shutting down of the business. So, a partnership deed can be defined as a document that is prepared to explain important points so that the chances of clash are minimized to a great extent. Such a document consists of all the significant clauses like name of the business, contribution of capital, allocation of profit and the like. Partnership is a document containing all the matters according to which mutual rights, responsibilities and duties of the partners in the carrying out and administration of the matters of the firm are determined. The deed is surely to be signed by all the partners.

Q.5 What do you mean by negotiable instruments? What are the various types of negotiable instruments recognized by the negotiable instruments act, 1881? Answer: Negotiable instruments: A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. Examples of negotiable instruments include promissory notes, bills of exchange, bank notes and cheques. More specifically, it is a document contemplated by a contract, which warrants the payment of money without condition which may be paid on demand or at a future date. The payer will be named on the negotiable instrument. As payment of money is promised subsequently, the instrument itself can be used by the holder in due course as a store of value. The instrument can be transferred to a third party and it is the holder of the instrument who will ultimately get paid by the payer on the instrument. Types Of negotiable instrument : 1. Promissory note: A promissory note is an instrument in writing (not being a bank-note or a currency-note) containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or to the order of, a certain person, or to the bearer of the instrument. 2. Bill of exchange: A bill of exchange is an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument. A promise or order to pay is not conditional, within the meaning of this section and section 4, by reason of the time for payment of the amount or any instalment thereof being expressed to be on the lapse of a certain period after the occurrence of a

specified event which, according to the ordinary expectation of mankind, is certain to happen, although the time of its happening may be uncertain. The sum payable may be certain, within the meaning of this section and section 4, although it includes future interest or is payable at an indicated rate of exchange, or is according to the course of exchange, and although the instrument provides that, on default of payment of an instalment, the balance unpaid shall become due. 3. Cheque: A cheque is bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic form. A cheque in the electronic form means a cheque which contains the exact mirror image of a paper cheque, and is generated, written and signed in a secure system ensuring the minimum safety standards with the use of digital signature (with or without biometrics signature) and asymmetric crypto system.

Q.6 Who is a consumer? Examine the rights of a consumer enshrined under the consumer protection act, 1986. Answer: Definition of consumer : A consumer is defined as a person who buys goods or avails services against payment. Goods may include consumable goods (like wheat flour, salt, sugar, fruits, etc.) or durable consumer goods (like television, refrigerator, toaster, mixer, bicycle, etc.). Services that are paid for may include electricity, telephone, transport, theatre / cinema, postal / courier, etc. It is interesting to know that a beneficiary is also a consumer. For example, Sandeep sent an important medicine by courier to his sister, Sunitha, who was ill. The courier reached late by 4 days due to which Sunithas health condition worsened. She had to be taken to a city hospital for treatment and incurred heavy expenses. Later, being the beneficiary, she took up the issue with the courier company. A person who purchases goods for resale or for any commercial purpose does not come under the definition of consumer. However, when a self employed persons livelihood depends on his business, then he is considered a consumer. Rights of a consumer under the consumer protection act, 1986 The main objective of this Act is to provide better protection to the consumers. Unlike other laws, which are punitive or preventive in nature the provisions of this Act are compensatory in nature. The Act intends to provide simple, speedy and in consumers grievances. 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 will 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.