MB 0051: Legal Aspects of Business Question No.1 It is important for any person to know law as ignorance of law is no excuse.

Modern Indian law has been derived from some sources. Discuss the primary and secondary sources of Indian law. AnswerThe Indian law has been derived from many sources. The main source of modern Indian law, as administered by Indian courts may be divided into two broad categoriesI. Primary Source II. Secondary Source Primary source of Indian Law:The primary sources of Indian law are a) Customs b) Judicial Precedents c) Statutes d) Personal Law Customary Law:It is the uniformity of conduct of all persons under like circumstances. It is 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. Judicial Precedents: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. Statutory 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. It is called Statute Law because it is the writ of the state and is in written form (jus scriptum). 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. 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) (ii) (iii) (iv) The Common Law Equity The law Merchant and The Statute Law.

Justice, equity and good conscience- In India we do not have, no did we ever had separate courts (as in England) administering equity.Main sources of English law are:

1. Common law- This source consists of all those unwritten legal doctrines embodying customs and traditions developed over centuries by the English courts. 2. Equity- The literal meaning of the term equity is natural justice. The development of equity as a source of law occurred due to rigours and hardships of the Common Law. 3. Statute law- The Statute law consists of the law passed by the Parliament and therefore, is written law. 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.

Question No. 2 We all enter into many contracts in a day knowingly or unknowingly. Explain the definition of a valid contract. How are contracts classified? Answer- A contract is an agreement that can be enforceable by law. An agreement is an offer and its acceptance. An agreement which can be enforceable by law must have some essential elements. A contract must have the following elements. 1. Intention to create legal relationship. 2. Lawful object 3. Agreement not expressly declared void. 4. Proper offer and its acceptance. 5. Free Consent 6. Capacity of parties to contract 7. Certainty of meaning. 8. Possibility of performance. 9. Lawful consideration 10. Legal formalities Contracts can be classified as under: Contracts on the basis of creation: a) Express contract: Express contract is one which is made by words spoken or written. b) Implied contract: An implied contract is one which is made otherwise than by works spoken or written. c) Quasi or constructive contract: It is a contract in which there is no intention either side to make a contract, but the law imposes contract. Contracts on the basis of execution: a) Executed contract: It is a contract where both the parties to the contract have fulfilled their respective obligations under the contract. b) Executory contract: It is a contract where both the parties to the contract have still to perform their respective obligations. c) Partly executed and partly executory contract: It is a contract where one of the parties to the contract has fulfilled his obligation and the other party has still to perform his obligation. Contracts on the basis of enforceability: a) Valid contract: A contract which satisfies all the conditions prescribed by law is a valid contract. E.g. X offers to marry y. y accepts X offer. This is a valid contract. b) Void Contract: the term void contract is described as under section 2(j) of I.CA, 1872, A contract which cases to be enforceable by law becomes void when it ceases to be enforceable. c) Void Agreement: According to Section 2(g), an agreement not enforceable by law is said to be void. incompetent to contract. d) Voidable contract: According to section 2(i) of the Indian contract act, 1872,

arrangement which is enforceable by law at the option of one or more of the parties thereon but not at the option of the other or other, is a voidable contract. . e) Illegal Agreement: An illegal agreement is one the object of which is unlawful. Such an agreement cannot be enforced bylaw. Thus, illegal agreements are always void abinitio (i.e. void from the very beginning) e.g. X agrees to y Rs. 1 lakh Y kills Z. Y kill and claims Rs. 1 lakh. Y cannot recover from X because the agreement between X and Y is illegal and also its object is unlawful. f) Unenforceable contract: It is contract which is actually valid but cannot be enforced because of some technical defect (such as not in writing, under stamped). Such contracts can be enforced if the technical defect involved is removed.

Question No. 3 The parties to bailment have certain rights and duties. Discuss the duties of both parties i.e. the bailor and bailee. Answer:Bailment is defined as the delivery of goods by one to another person for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of person delivering them. The person delivering the goods is called the bailor and the person to whom the goods are delivered is called the bailee. Duties of a bailor1. To disclose know faults in the goods- The bailor is bound to disclose to the bailee faults in the goods bailed, of which the bailor is aware and which materially interfere with the use of them or expose the bailee to extraordinary risks. 2. Liability for breach of warranty as to title- The bailor is responsible to the bailee for any loss which the bailee may sustain by reason that the bailor was not entitled to make the bailment, or to receive back the goods or to give directions respecting them 3. To bear expenses in case of gratuitous bailments- Regarding bailments under which bailee is to receive no remuneration, Sec.158 provides that in the absence of a contract to the contrary, the bailor must repay to the bailee all necessary expenses incurred by him for the purpose of the bailment. 4. In case of non-gratuitous bailments, the bailor is held responsible to bear only extraordinary expenses. Duties of a bailee1. To take care of the goods bailed- In all cases of bailment, the bailee is bound to take as much care of the goods bailed to him as a man of ordinary prudence would, under similar circumstances, take of his own goods of the same bulk, quality and value as the goods bailed. 2. Not to make un auhorised use of goods- In case the bailee makes unauthorised use of goods, i.e., uses them in a way not warranted by the terms of bailment, he is liable to make compensation to the bailor for any damages arising to the goods from or during such use of them. 3. Not to mix bailors goods with his own- If the bailee without the consent of the bailor, mixes the goods of the bailor with his own goods and the goods can be separated or divided, the bailee shall be bound to bear the expense of separation or division and any damages arising from the mixture. 4. To return the goods bailed without demand- It is the duty of the bailee to return, or deliver according to the bailors directions, the goods bailed, without demand, as soon as the time for which they were bailed has expired, or the purpose, for which they were bailed has been accomplished.

Question No. 4 A contract comprises of reciprocal promises. In a contract of sale who is an unpaid seller? Discuss the remedies for breach of contract under Sale of Goods Act, 1930. Answer- A contract is comprised a reciprocal promises. In a contract of sale, if seller is under as obligation to deliver goods, buyers has to pay for it. In case buyer fails or refuse to pay, the seller shall have certain rights. Unpaid Seller: - A seller of goods is an unpaid seller when i) The whole of the price has not been paid or tendered. ii) A bill of exchange or other negotiable instrument has been received as conditional payment and the condition on which it was received has not been fulfilled by reasons of the dishonor of the instrument or otherwise. Remedies for breach of contractIn addition to rights of a seller against goods provided in Secs. 47 to 54, the seller has the following remedies against the buyer personally. i) Suit for price (Sec. 55) ii) Damage for non-acceptance of goods (Sec. 56) iii) Suit for interest (Sec. 61) Suit for Price- Where under a contract of sale the property in the goods has passed to the buyer and the buyer wrongfully neglects or refuses to pay the price, the seller can sue the buyer for the price of the goods. Suit for damage for non-acceptance- Where the buyer wrongfully neglects or refuses to accept and pay for the goods, the seller may sue him for damage for non-acceptance.. Suit for interest- When under a contract of sale, the seller tenders the goods to the buyer and the buyers wrongfully neglects or refuse to accept and pay the price. The seller has a further right to claim interest on the amount of the price. Buyers remedy against seller- The buyer has the following rights against the seller for breach of contract. I) Damages for non-delivery (Sec. 57) II) Right of recovery of the price III) Specific Performance (Sec. 58) IV) Suit for breach of condition V) Suit for breach of warranty (Sec.59) VI) Anticipatory breach (Sec. 60) VII) Recovery of interest (Sec. 61)

Question No.5 The Companies Act, 1956 deals with the formation and transaction of business of a company. Discuss the features of a company. Also explain the process of formation of a company Answer- Definition of Company- Section 3 (1) (i) of the Companies Act, 1956 defines a company as: A company registered and formed under this Act or an existing company. According to Haney, A company is an incorporated association which is an artificial person created for by law, having a separate entity, with a perpetual succession and a common seal. Also Sec. 12 permits the formation of different types of companies. These may be Companies limited by shares Companies limited by guarantee Unlimited Companies Features of a Company1. Registration: A company is to be compulsorily registered under the Companies Act. 2. Artificial Person:. Company is an artificial person, invisible, intangible and existing only in the eyes of law. 3. Separate Legal Entity: It functions through its board of directors. A company is a distinct person, with its own independent identity. Formation of a Company- The whole process of formation of a company is divided into four steps for convenience. A. Promotion of Company B. Incorporation or Registration of Company C. Floatation of Company D. Commencement of Business A. Promotion of Company- Promotion is a term of wide import denoting the preliminary steps taken for the purpose of registration and floatation of the company. The persons who assume the task of promotion are called promoters. B. Incorporation or Registration of Company- For a public company, the minimum number of members is seven, while it is two in the case of a private company. The following are the steps for the incorporation of a company: 1. Application for Availability of Name 2. Filing of Documents 3. Payment of Stamp Duty and Filing Fee 4. Declaration of Compliance of Act and Rules 5. Additional Requirement 6. Certificate of Incorporation or Registration C. Floatation of Company- Floatation means raising the required finances for

commencing and carrying on the business, satisfactorily. D. Commencement of Business- A public company, having share capital, cannot commence the business, without obtaining the certificate of commencement of business. Question No.6 With Information Technology Act, 2000, India has a set of cyber laws to provide legal infrastructure for e commerce. Discuss the objectives and limitations of this Act Answer- In May 2000, Indian Parliament passed the Information Technology Bill. The Bill received the assent of the President in August 2000 and came to be known as the Information Technology Act, 2000. This Act aims to provide the legal infrastructure for ecommerce in India. Main Objectives of I. T. Act - The following are its main objectives 1. It is objective of I.T. Act 2000 to give legal recognition to any transaction which is done by electronic way or use of internet. 2. To give legal recognition to digital signature for accepting any agreement via computer. 3. To provide facility of filling document online relating to school admission or registration in employment exchange. 4. According to I.T. Act 2000, any company can store their data in electronic storage. 5. To stop computer crime and protect privacy of internet users. 6. To give legal recognition for keeping books of accounts by bankers and other companies in electronic form. 7. To make more power to IPO, RBI and Indian Evidence act for restricting electronic crime. Limitation of Information Technology Act- it extends to the whole of India and save as otherwise provided in this Act, it applies to any offence or contravention thereunder committed India by any person.The Act is not applicable to the following:1. A negotiable instrument (other than a cheque) as defined in Sec. 13 of the Negotiable Instrument Act 1881. 2. A Power of Attorney as defined in Sec. 1A of the Power of Attorney Act, 1882 3. A trust as defined in Sec.3 of the India Trust Act, 1882. 4. A will as defined in Sec. 2 (h) of the Indian Succession Act, 1925 including any other testamentary disposition by whatever name called. 5. Any contract for the sale or conveyance of immovable property or any interest in such property. 6. Any such class of documents or transactions as may be notified by the Central Government in the Official Gazette.