Business Law- Page

ASSIGNMENT
Q1. Ans. According to Section 2(h) of the Indian contract Act: An agreement enforceable by law is a contract. A contract, therefore, is an agreement the object of which is to create a legal obligations between the arties entering into the contract. !h"s, the two essential elements of a contract are:# Agreement: As er section 2(e): $%ery romise and e%ery set of romises, forming the consideration for each other, is an agreement. Agreement comes into e&istence only when one arty ma'es a ro osal to the other arty and the other arty acce ts. To Parties: (or the formation of a contract the e&istence of two arties is com "lsory beca"se a erson cannot enter into a contract with himself. !he erson and the erson to whom the ro osal is made called the romise. Legal Obligation: An agreement to become a contract m"st gi%e rise to a legal obligation i.e. a d"ty enforceable by law. All contracts are agreements b"t all agreements are not contracts. !h"s, here an obligation means the legal d"ty to do or to abstain from doing something.

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Essential Elements of A Valid Contra t According to section )*, all agreement are contracts if they are made by the free consent of the arties, com etent to contract, for a lawf"l consideration, with a lawf"l object, are not e& ressly declared by the Act to be %oid, and, where necessary, satisfy the re+"irements of any law as to writing or attestation of registration. !he essential elements of a %alid contract can be re resented as:#

,awf"l -onsideration -a acity of 1arties (ree -onsent

.ffer / Acce tance

Intention to create ,egal 0elations

$ssential $lements of A 2alid -ontract

-ertainty

-om liance with ,egal (ormalities ,awf"l .bject 3ot $& ressly 4eclared 2oid

1ossibility of 1erformance

!he abo%e elements can be e& lained as:# i) Offer ! A e"tan e: !here m"st be a lawf"l offer and lawf"l acce tance of the offer, th"s res"lting in an agreement. !he offer or ro osal as well as acce tance sho"ld be definite. !he acce tance of the offer sho"ld also be in the mode rescribed and it m"st be comm"nicated to the offer.

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Intention To Create Legal #elations: !here m"st be an intention among the arties that the agreement sho"ld be attached by legal conse+"ences and create legal obligations. Agreements of a social or domestic nat"re do not contem late legal relations and as s"ch they do not gi%e rise to a contract. $.g. 5alfo"r 2s. 5alfo"r and 0ose / (ran'e -o. 2s. -rom ton / 5rothers ,td. were dismissed on the gro"nd that no legal relations had been contem lated.

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La$f%l Consideration: -onsideration has been defined as the rice aid by one arty for the romise of the other. It is an act or romise to do or not to do something. It need not necessarily be in cash or 'ind. 5"t, only those considerations are %alid which are 6lawf"l7. Ca"a it& of Parties: In order to be com etent to contract the arties m"st be of the age of majority, is of so"nd mind / m"st not be dis+"alified from contracting by any law to which they are s"bject (Sec. ))) 'ree Consent: 6-onsent7 means that the arties m"st ha%e agreed " on the same thing in the same sense (Sec. )8). !here is absence of 6free consent7, if the agreement is ind"ced by (a) -o"rier (b) "nder infl"ence (c) fra"d (d) misre resentation or (e) mista'e. La$f%l Ob(e t: !he object of the contract or agreement m"st necessarily be legal. !he object for which the agreement has been entered into m"st not be fra"d"lent or illegal or immoral or against "blic interest. $.g. th"s, if a landlord 'nowingly lets o"t his ho"se on rent to a rostit"te to carry on rostit"tion cannot reco%er the rent thro"gh a co"rt of law. Com"lian e )it* Legal 'ormalities: According to the Indian -ontract Act, a contract may be oral or in writing. 5"t in certain s ecial cases it lays down that the agreement, to be %alid, m"st be in writing or9and registered. (or e.g., it re+"ires that an agreement to ay a time barred debt m"st be in writing and an agreement to ma'e a gilt for nat"ral lo%e and affection m"st be in writing and registered.

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Certaint&: Section 2: of the contract act ro%ides that Agreements, the meaning of which is not certain or ca able of being made certain, are %oid. It m"st be ossible to ascertain the meaning of the agreement, for otherwise, it cannot be enforced. (og e.g.: A agrees to sell 5 a h"ndred tons of oil. !here is nothing to show what 'ind of oil was intended. !he agreement is %oid for "ncertainty.

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Possibilit& of Performan e: Section ;< lays down that, An agreement to do an act im ossible in itself is %oid. $%en a contract to do an act, which after the contract is entered into, becomes im ossible or "nlawf"l is said to be %oid. $.g. A agrees with 5 to bring gold by magic. !he agreement is not enforceable.

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Not E+"ressl& ,e lared Void: !he agreement to be entered into m"st not ha%e been e& ressly declared %oid by any law in force in the co"ntry. Sections 2=#8* s ecify certain ty es of agreements which ha%e been e& ressly declared to be %oid. $g. Agreements in restraint of marriage (Section 2<), agreements in restraint of trade (Section 2>), etc.

Con l%sion It has been rightly stated by Sir ?ohn Salmond, !he law of contracts is not the whole law of agreements, nor is it the whole law of obligations. It is the law of those agreements which create obligations, and those obligations, which ha%e their so"rce in agreements. !o be enforceable by law an agreement m"st osses the essential elements of a %alid contract.

Business Law- Page Q-. Ans.

)*at do &o% mean b& dis *arge of a ontra t. )*at are /ario%s $a&s in $*i * a ontra t ma& be dis *arged. @hen the rights and obligations arising o"t of a contract are e&ting"ished, the contract is said to be discharged or terminated. In other words, discharge of a contract means termination of the relationshi between the arties to a contract !here are many ways in which a contract may be discharged or dissol%ed. !hey can be diagrammatically re resented as:# ,is *arge of Contra t

5y erformance

5y ,a se of time 5y . eration of law

5y 5reach

5y Im ossibility of erformance 5y Assignment 5y Baterial Alteration

5y Agreement

!he ways of discharging a contract can be disc"ssed as:# i) ,is *arge of Contra t 0& Performan e: @hen a contract is d"ly erformed by both the arties within the s ecified time and in the manner rescribed, the contract is said to ha%e been erformed and discharged. 1erformance may be: (a) Act"al (b) Attem ted. Act"al 1erformance: @hen each arty to a contract f"lfils his obligation arising "nder the contract within the time and in the manner rescribed, it is called act"al erformance of the contract and the contract is discharged. Attem ted 1erformance A @hen the romisor offers to erform his obligation "nder the contract, b"t is "nable to do so beca"se the romise does not acce t the erformance, it is called attem ted. ,is *arge 01 M%t%al Consent Or Agreement: ,ine a contract is created by an agreement, it may also be discharged by another agreement between the same arties. !he methods of discharging a contract by m"t"al agreement are:# 3o%ation A 3o%ation occ"rs when a we contract is s"bstit"ted for an e&isting contract, either between the same arties or between different arties, the consideration being the discharge of old contract, m"t"ally. $.g.: A is indebted to 5 / - to -. 5y m"t"al agreement 57s debt to - / 57s loan to A are cancelled / - acce ts as his debtor. Alteration # Alteration of a contract means change in one or more of the material terms of a contract. !here lies a difference between 6no%ation7 / alteration. In no%ation7 there may be a well as a change in the arties. 5"t, in alteration the arties remain the same. !h"s the two are not the same

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0escission: A contract may be discharged, before the date of erformance, by agreement between the arties. S"ch a agreement acco"nts. !he contract may be cancelled by either both the arties m"t"al or any one of them, on certain gro"nds. 0emission: 0emission may be defined as the acce tance of a lesser s"m than what was contracted for or a lesser f"lfillment of the romise made. $.g.: A borrows 0s.2*** from 5. 5 re ays only 0s.)*** which A acce ts in will satisfaction of the whole debt.

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5y wai%er A @ai%er means the deliberate abandonment or gi%ing " of a right which a arty is entitled to "nder a contract. Berger A Cnder this an inferior right of one of the arties merges into a s" erior right of the same arty "nder the same contract or another. $.g.: D holds a ho"se on lease. ,ater he b"ys this ho"se. Eere, his right as a lessee merges into the right of an owner.

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.wing to the occ"rrence of an e%ent A It is agreed between the arties that a contract will be discharged on the ha ening of an e%ent and that e%ent occ"rs, the contract is discharged. 0& La"se of Time: $%ery contract m"st be erformed with a s ecified of reasonable time. If this is not done the contract is discharged. !his means that after the la se of time the contract cannot be enforced in the co"rt of law. 0& O"eration of La$: A contract termination, by the o eration of law in the following cases:# 4eath A where the contract is of ersonal nat"re i.e. ersonal s'ill or ability is re+"ired, the death of the romisor discharges the contract. In other cases, the right / liabilities ass on to the legal re resentati%es. Insol%ency A when a erson is declared insol%ent, he is released from his liabilities and the contract is discharged. Berger A @hen an inferior right contract merges with the s" erior right contract, the former stands discharged a"tomatically. -om lete loss of e%idence A If the e%idence ro%iding the e&istence of the contract is lost, it stands terminated. 0ights and liabilities %est in one and the same erson A In s"ch a case also the contract stands discharged. $.g. If a bill of e&change is acce ted by its acce tor, other arties are discharged. 0& 0rea * of Contra t: 5reach means fail"re of a arty to a contract to erform his obligations "nder a contract. 5reach may be of two 'inds:

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Act"al 5reach A It occ"rs when a arty fails to erform his obligation " on the date fi&ed for erformance by the contract. It is committed either at time when erformance is d"e or d"ring erformance. Antici atory 5reach A It is breach of contract occ"rring before the time fi&ed for erformance has arri%ed. It is e& ressly by words s o'en or written when a arty to the contract comm"nicates to the other arty, before the d"e date of erformance, his intention not the erform it. It is im lied by the cond"ct of the arty when a arty disables himself from erforming the contract. 0& Assignment: Assignment of contract means transfer of rights or benefits "nder a contract in e&istence. 0& Im"ossibilit& of Performan e: Section ;< states that An agreement to do an im ossible act is %oid. $%en if s"ch im ossibility occ"rs after the contract has been entered into, the contract will be discharged as and when the im ossibility occ"rs. 0& Material Alteration: If one of the arties ma'es any material alterations i.e. alterations that wo"ld affect the rights and liabilities of the arties, witho"t the consent of the other arty, the other arty can discharge the contract. !h"s, in s"ch a case the contract is discharged and cannot be enforced.

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Con l%sion !h"s, as a contract is formed so can it be discharged or determinate in the way ill"strated. A discharge act"ally terminates the rights and liabilities of the arties to contract that may 'ind them.

Business Law- Page Q2. Ans. Classif& and e+"lain different t&"es of agents.

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Section )F2 of the contract Act States, An agent is a erson em loyed to do any act for another or to re resent another in dealings with third ersons. !he erson for whom s"ch act is done, or who is re resented, is called the rinci al. !he contract which creates the relationshi of 6 rinci al / agent7 is called an 6agency7. $.g.: @here A a oints 5 to b"y )* bags of s"gar on his behalf, A is the 6 rinci al7. 5 is the 6agent7 and the contract between the two is 6agency7. Agents can be classified in %ario"s ways according to the oint of %iew ado ted. !heir classification can be e& lained as:# ,ifferent T&"es of Agents E+tent of A%t*orit& S ecial Agents General Agents Cni%ersal Agents -o#Agents S"bstit"ted Agents S"b Agents Mer antile Agents (actor 5ro'ers A"ctioneers -ommission Agents 4el -redere Agents (orwarding Agents -learing Agents Indenting Agents Non3Mer antile 5an'ers Cnderwriters Solicitors @ife $state Agent Attorneys

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Classifi ation on t*e 0asis of E+tent of A%t*orit& S"e ial Agents: A s ecial agent is one who is em loyed to do some artic"lar act or re resent his rinci al in some artic"lar transaction. As soon as the act is erformed, the a"thority of s"ch an agent comes to an end. If a s ecial agent does anything o"tside his a"thority, the rinci al is not bo"nd by it. A s ecial agent is also called a s ecific or a artic"lar agent. $.g.: A bro'er a ointed s ecially for the sale of a artic"lar ro erty. As soon as the ro erty is sold the a"thority of the bro'en will end.

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General Agent: A general agent is one who is em loyed to do all acts connected with a artic"lar b"siness or em loyment. Ee can bind the rinci al by doing anything which falls within the ordinary sco e of that b"siness. S"ch a"thority of an agent contin"o"s till it is "t to an end. If the rinci al secretly restricts the rights of his agent and if the agent still acts beyond that the rinci al will be bo"nd by the acts which fall within the sco e of b"siness, "nless the third arties ha%e notice of the limitation. 4ni/ersal Agents: A "ni%ersal agent is one whose a"thority is "nlimited, i.e. who is a"thoriHed to all the acts which the rinci al can lawf"lly do and can delegate. A "ni%ersal agent is ractically a s"bstit"tion for his rinci al for all those

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transactions wherein his rinci al cannot artici ate. A "ni%ersal agent has %ery e&tensi%e owers. i%) Co3agents: @hen a rinci al a oints two or more ersons as agents jointly or se%erally, s"ch agents are 'nown as co agents. If nothing is s ecified regarding their a"thority it is considered to be joint a"thority. @hen their a"thority is se%eral, any one of the co#agents can act witho"t the conc"rrence of other. S%bstit%ted Agents: @hen an agent holding an e& ress or im lied a"thority to name another erson to act for / on behalf of his rinci al in his b"siness, is 'nown as s"bstit"ted agent. !he s"bstit"ted agent is ta'en as the agent of his rinci al for s"ch art of the wor' as is entr"sted to whom. Sometimes a s"bstit"ted agent is also called a co#agent. $.g.: A is a solicitor / 5 directs A to sell his estate by a"ction and to a oint an a"ctioneer for the same. A names D to cond"ct the sale. Eere, D is s"bstit"ted agent. %i) S%b3Agents 5 Section ):) defines a s"b#agent as, A erson em loyed and acting "nder the control of the original agent in s"b agent of the original agent. !he relation of the s"b#agent with the rinci al de ends on the fact whether the agent has the a"thority to a oint a s"b#agent. If he is a"thoriHed to do so, then the acts of a s"b#agent will bind the rinci al as that for original agent. !he agent is res onsible to the rinci al for the acts of s"b#agent. If, howe%er, the agent is not a"thoriHed to a oint a s"b#agent and still he does so the rinci al will not be bo"nd by his acts 0ather, the agent will be res onsible both to the rinci al and the third arties. II. ME#CANTILE AGENTS A mercantile agent is one who has a"thority either to sell goods or to raise money on the sec"rity of goods or to b"y goods. !he %ario"s mercantile agents are: 'a tor: A facto is a mercantile agent to whom good are entr"sted for sale. Ee enjoys wide discretionary owers in relation to the sale of goods. Ee sells the goods in his own name " on the conditions which he thin's fa%o"rable. Ee may ledge the goods as well. Ee can erform all the f"nctions of b"siness on the behalf of his rinci al li'e selling goods, gi%ing their deli%ery, recei%e the rice of goods and can e%en gi%e a good discharge to the "rchaser. A factor is the best e&am le of a general mercantile agent. $g.: A deli%ers his car to a mercantile agent 5 for its sale at 0s. ),**,***. 5 sells it to - for 0s. :*,*** / hands o%er the f"ll amo"nt of 0s. :*,*** to A. A s"es 5 for the reco%ery of car. 5"t, since 5 is a mercantile agent a ointed by A he cannot be s"ed. !h"s, the transaction is binding on A. 0ro6ers: A bro'er is em loyed to ma'e contracts for the "rchase and sale of goods. Ee is not entr"sted with the ossession of goods b"t acts as a lin' between the seller and the b"yer. Ee brings the two arties together and if the transaction is

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com leted he is entitled to his commission called bro'erage. Eis a"thority ends when the transaction is com leted. A% tioneers: Ee is a mercantile agent a ointed to sell goods on behalf of the rinci al and he gets a reward in the form of a commission. An a"ction is a "blic sale of goods where the highest bidder gets the ossession of goods. An a"ctioneer cond"cts a"ction on behalf of the seller. Commission Agents: Ee is a mercantile agent who b"ys or sells goods for his rinci al on the best ossible terms in his own name and who recei%es commission for his labo"rs. Ee may ha%e ossession of goods are to be distrib"ted in distant mar'ets or are to be "rchased from far off mar'ets. ,el Credere Agents: Ee is a mercantile agent who is em loyed to sell goods on behalf of his rinci al. Ee is one who g"arantees the rinci al the ayment of the goods, sold by the agent, by the third arty and if the third arty is "nable to ma'e s"ch ayment, the agent will ay from his oc'et. !o ma'e good the loss ca"sed by bad debts, the agent charges on e&tra commission called the del -redere -ommission. !h"s, he ser%es an ins"re to his rinci al against bad debts on acco"nt of credit sales besides being an agent. 'or$arding Agents: !he ser%ice ro%ided by forwarding agents is that of collecting goods from their rinci al and forwarding them to shi ing com anies. (orwarding agents are of great hel s to rod"cers and e& orters in case of foreign trade. Clearing Agents: -learing agents ro%ide hel to im orters. !hey com lete %ario"s c"stoms and e&change formalities on behalf of the im orters who a oint them. !hese agents hel in sa%ing the time and energy of im orters. Indenting Agents: Ee is an im ortant mercantile agent who facilitates the distrib"tion of goods at international le%el. Ee is a commission agent who roc"res a sale or "rchase from a merchant abroad against a commission at the rate mentioned in the indent. NON3ME#CANTILE AGENTS 3on#mercantile agents also lay an im ortant role and erform %ario"s f"nctions for and on behalf of their rinci als. !he %ario"s ty es of non#mercantile agents can be listed as: 5an'ers Cnderwriters, Solicitors, ,ife, $state Agent, Attorneys, etc.

III

Con l%sion !h"s, to concl"de the agent is act"ally a re resentati%e of his rinci al. !he basic difference in different ty es of agents being the difference in their a"thority and the 'ind of wor' they do.

Business Law- Page )* Q7 Ans. E+"lain t*e rig*ts8 d%ties and res"onsibilities of an agent to *is "rin i"al. Section )F2 of the contract act defines, An agent is a erson em loyed to do any act for another or to re resent another in dealings with third ersons. !he erson for whom s"ch act is done, or who is re resented, is called the rinci al. !he f"nction of an agent is essentially to bring abo"t contract"al relations between the rinci al and third arties. An agent has certain rights, d"ties and liabilities towards the rinci al and third arties de ending " on the nat"re of b"siness. !hese rights, d"ties and liabilities can be generated as:# #ig*ts of an Agent i) #ig*t to #e ei/e #em%neration A !he agent is entitled to recei%e an agreed rem"neration or reasonable rem"neration "nless otherwise agreed " on. An agent has a right to claim his rem"neration on com letion of his wor', e%en if the contract ne%er materialiHes on acco"nt of breach. 5"t, if an agent is fo"nd g"ilty of miscond"ct or fra"d, etc. he has no right o%er rem"neration. In addition, he is entitled or liable to com ensate the rinci al for any s"ch loss. ii) #ig*t of #etainer: An agent has the right to retain any s"m, recei%ed by him on behalf of his rinci al from the third arties, which may fall d"e as art of his rem"neration, or ad%ances or e& enses inc"rred in the general cond"ct of b"siness. #ig*t of Lien: An agent has the right to retain any mo%able or immo%able ro erty, a ers or goods of the rinci al recei%ed by him, "ntil the amo"nt of commission d"e to him is recei%ed. !his 'ind of a lien is a 61artic"lar lien7 which will end as soon as the ossession is cost. Eowe%er, by a s ecial contract s"ch a lien can be e&tended to a 6General ,ien7. #ig*t to be Indemnified Against Conse9%en es of La$f%l A ts : An agent has also the right to be indemnified against the conse+"ences of all lawf"l acts done by him in e&ercise of a"thority conferred " on him. !his right of the agent is ob%io"s for the sim le reason that an agent is a re resentati%e of his rinci al. #ig*t to be Indemnified Against Conse9%en es of A ts ,one in Good 'ait* : An agent has the right to be indemnified against all acts done by him in "tmost good faith ,where one erson em loys another to do an act and the agent does the act in good faith, the em loyer or rinci al is liable to indemnify the agent. $g.: A em loys 5 to sell the goods in A7s ossession 5 sells the goods "naware of the fact that - is the act"al owner of the goods. - s"es 5 for the reco%ery of the %al"e of goods. In this case 5 has a right to be indemnified by A and to r"m b"rse the e& enses inc"rred by 5 is the liability of A. %i) #ig*t to Com"ensation: !he agent has a right to be com ensated for inj"ries s"stained by him d"e to the rinci al7s neglect or want of s'ill. Eowe%er, the rinci al is not liable for any com ensation for the inj"ries ca"sed by the own neglect of the agent.

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Business Law- Page )) %ii) a) b) c) #ig*t of Sto""ing of Goods in Transit: An agent has a right to sto the goods in transit if:# Ee has bo"ght goods either with his own money or by inc"rring a ersonal liability for the rice on behalf of the rinci al, !he rinci al has become insol%ent of9and @hen an agent, e.g. del -redere agent is ersonally liable to his rinci al to his rinci al for the rice of the goods sold, he can e&ercise the "n aid seller7s right and sto the goods in transit on the "nsol%ency of the b"yer. Agent:s #ig*t To do All La$f%l T*ings : A erson who is a ointed as an agent has the right to do all lawf"l things which fall "nder the "s"al co"rse of b"siness. #ig*t in Emergen &: An agent has a right to do all s"ch acts which co"ld rotect his rinci al from loss in case of emergency as wo"ld ha%e been done in his own case, in a similar sit"ation. #ig*t to A""oint S%b3Agent ! S%bstit%te Agent : An original agent has a right a ointed wo"ld be res onsible to the original agent, e&ce t in case of fra"d, etc. @here an agent has an e& ress or im lied a"thority he may name another erson as s"bstit"te agent to act for his rinci al. &i) &ii) #ig*t to #eno%n e ;is Agen & : An agent is in f"ll right to reno"nce his agency by gi%ing a reasonable notice to his rinci al. #ig*t to #e ei/e Com"ensation for #emat%re #e/o ation : If there is an e& ress or im lied cond"ct on the art of the agency that the agency wo"ld contin"e for a s ecified eriod and if there is re%io"s re%ocation witho"t any reasonable ca"se, the agent wo"ld ha%e a right to com ensation in s"ch a case.

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,4TIES O' AN AGENT i) ,%t& of 'ollo$ Prin i"al:s ,ire tions of C%stoms: !he first and the foremost d"ty of an agent is to act within the sco e of a"thority conferred " on him and act according to the directions gi%en by his rinci al. In the absence of any s"ch instr"ctions the agent sho"ld wor' according to the c"stoms re%ailing in the agency. If he acts otherwise he is liable to ma'e good the loss ca"sed by him. ii) ,%t& to Carr& O%t )or6 $it* #easonable S6ill ! ,iligen e : !he agent m"st cond"ct the b"siness with reasonable s'ill and diligence "nless otherwise s ecified i.e. if the rinci al has notice of want of s'ill. In general the agent is e& ected to wor' in the manner as he wo"ld do in his own name. ,%t& to #ender A o%nts: It is the d"ty of the agent to maintain ro er acco"nts of his rinci al7s ro erty and render it to him on demanded, or eriodically if so agreed " on. ,%t& to Comm%ni ate: It is the d"ty of the agent to comm"nicate to the rinci al with f"ll diligence any diffic"lty that may arise from time to time. Ee sho"ld obtain ro er instr"ctions from the rinci als, before ta'ing any ste s in facing

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Business Law- Page )2 the diffic"lty. 5"t, if d"e to certain reasons he is "nable to comm"nicate the diffic"lty, he has f"ll a"thority to ta'e all reasonable ste s to re%ent loss. %) ,%t& Not to deal on *is On A o%nt : It is the d"ty of the agent not to b"y from or sell goods to the rinci al in his own acco"nt, which he is act"ally as'ed to sell or b"y on his rinci al7s behalf, witho"t obtaining rior consent of his rinci al, all material facts being disclosed. ,%t& not to ma6e an& "rofit o%t of *is Agen & E+ e"t *is #em%neration : An agent stands in a fid"ciary relation to his rinci al and therefore he m"st not ma'e any secret rofits from the agency. Ee is a"thoriHed only to a fi&ed rem"neration or commission as the case may be. If the rinci al gets the notice of any s"ch secret rofit he can either reco%er the amo"nt of rofit from the agent, ref"se to ay his rem"neration, terminate the agency witho"t rior notice, file a s"it against his agent or can e%en re "diate the contract entered by his agent with the third arty. ,%t& on Termination of Agen & b& Prin i"al:s deat* or Insanit& : @hen an agency is terminated d"e to the death or insanity of his rinci al, it is the d"ty of the agent to ta'e all ste s to rotect and reser%e all the interests entr"sted to him. ,%t& not to delegate ;is A%t*orit&: It is the d"ty of an agent not to do his wor' i.e. to erform the wor' which he has e& ressly or im liedly "nderta'en to erform ersonally e&ce t of s ecifically agreed " on. ,%t& not to %se t*e Information Obtained in t*e o%rse of t*e Agen & Against *is Prin i"al: It is the d"ty of the agent not to "se the information obtained in the co"rse of b"siness against his rinci al. If he does so, he m"st com ensate the loss inc"rred by his rinci al. ,%t& to Pa& S%ms #e ei/ed for t*e Prin i"al : It is the d"ty of the agent to ay all s"ch s"ms to his rinci al which he may ha%e recei%ed for him. Ee has the right to ded"ct any amo"nt which may be o"tstanding in this acco"nt li'e rem"neration, etc. ,%t& not to set %" an Ad/an e Ad/erse Title : @hen an agent recei%es goods from his rinci al or other so"rces, on behalf of the rinci al, it is the d"ty of the agent not to set " on ad%erse titles i.e. his own title or title of third arties to it. If he does so, he can be held liable. ,%t& in Naming an Agent for *is Prin i"al : Selecting an agent for his rinci al, an agent is bo"nd to "t in same amo"nt of discretion, as he wo"ld do in his own case, "nder similar circ"mstances.

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LIA0ILITIES O' AN AGENT TO ;IS P#INCIPAL i) Liabilities in #es"e t of ,amages and Mis ond% t : In case of breach of contract by an agent, he is liable to ay damages. If he is fo"nd g"ilty of miscond"ct, the rinci al can hold bac' his rem"neration for that art of b"siness which he has mis#cond"cted.

Business Law- Page )8 ii) iii) i%) %) Personal Liabilit& of an Agent $*ere 'i+ed b& Trade C%stom or 4sage< If the trade c"stom or "sage in b"siness s ecifies the ersonal liability of an agent, then hill be held ersonally liable for his miscond"cts, "ntil "nless s ecified. )*en an Agent E+"ressl& Agrees to be Liable: @hen the contract e& ressly s ecifies that the agent shall be held ersonally liable in case of breach of contract, then he can be held liable ersonally. Liabilit& for *is $rongf%l A ts: An agent is held liable ersonally when he acts beyond his a"thority or commits fra"d or misre resentation. Liabilit& for t*e A ts of S%b3agents: @hen an agent a oints a s"b#agent, witho"t ha%ing the a"thority to do so, hill be liable for all acts of the s"b agent, both to the rinci al and the third arty.

Con l%sion 0ights and d"ties or liabilities are li'e the two sides of a coin. An agent cannot enjoy j"st his rights, witho"t erforming certain d"ties and owing certain liabilities. !he rights of an agent gi%e him the necessary freedom to erform a artic"lar 'ind of b"siness and on the other hand the d"ties and liabilities 'ind him to act in good faith, de ending " on the nat"re of b"siness.

Business Law- Page )= Q=. Ans. E+"lain t*e m%t%al rig*ts and liabilities of "artners in a "artners*i" firm. Section = of Indian 1artnershi Act, ):82 defines 1artnershi as, 1artnershi is the relation between ersons who ha%e agreed to share the rofits of a b"siness carried on by all or any of them acting for all. !he rights, d"ties and liabilities of artners ma'e the m"t"al relationshi between the artners more clear. 1artners can themsel%es determine their rights by contract, b"t the artnershi act confers certain rights " on the artners. !he rights and liabilities of artners can be ill"strated as:# #ig*ts of Partners i) #ig*t to ta6e "art in t*e Cond% t or Management of 0%siness : $%ery artner, irres ecti%e of the amo"nt contrib"ted by him, has an inherent right to artici ate in the cond"ct of b"siness of the firm. Eowe%er, by m"t"al agreement, some artners may be restricted to ta'e art b"t, the right to artici ate in the management m"st be a%ailable to all ii) #ig*t to be ons%lted ! To Ta6e ,e isions b& Ma(orit& : 5efore ta'ing " any major decisions, it is the right of the artners to be cons"lted and heard. Any disagreement sho"ld be sol%ed by majority decision. 5"t, no change in the nat"re or constit"tion of the b"siness can be done witho"t the consent of all artners. #ig*t of A ess to 0oo6s: $%ery artner has a right to ha%e access to and to ins ect and co y the boo's of firm. #ig*t to S*are t*e Profits: $%ery artner has a right to share the rofits e+"ally, "nless otherwise agreed " on, and bear the losses as well. #ig*t to #e ei/e Interest on Ca"ital: If the artnershi deed so decides that a artner is entitled to recei%e interest on ca ital at a fi&ed or certain rate, he has a right to recei%e it b"t, only o"t of rofits. #ig*t to be Indemnified: $%ery artner has a right to claim indemnity from the firm in res ect of ayments made or liabilities inc"rred by him in the ordinary and ro er cond"ct of b"siness and in emergency to rotect the firm from loss, ro%ided the act sho"ld be s"ch as wo"ld ha%e been done by a erson of ordinary r"dence, in his own case and "nder similar circ"mstances. #ig*t to #e ei/e Interest on Ad/an es : If a artner ma'es any ad%ances beyond the amo"nt of ca ital he has agreed to s"bscribe, he has a right to claim an interest at the rate of si& ercent er ann"m. #ig*t to A t in Emergen &: A artner has e%ery right and a"thority to act in emergency, in order to rotect the firm from loss, and the firm wo"ld be bo"nd by s"ch an act, ro%ided the act wo"ld similar in his own case, "nder same sit"ation. #ig*t to A""l& to t*e Pro"ert& of t*e 'irm for 0%siness of t*e 'irm : S"bject to contract between the artners, e%ery artner has a right to a ly and "se the ro erty of the firm e&cl"si%ely for b"siness of the firm.

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Business Law- Page ); &) #ig*t to Pre/ent Introd% tion of a Ne$ Partner : $%ery artner has a right to re%ent the introd"ction of any new artner in the firm. 3o erson can be admitted into artnershi firm witho"t the consent of all the artners. #ig*t to #etire: A artner has a right to retire with the consent of all the artners. If the artnershi is at will, he has the right to retire by gi%ing d"e notice in writing to all other artners. #ig*t not to be e+"elled : A artner has a right not to be e& elled by any majority of artners witho"t any ca"se. #ig*t of an O%tgoing Partner to Carr& on a Com"eting 0%siness : $%ery artners has a right to carry on a b"siness, similar to the artnershi b"siness, after his retirement with certain restrictions being that he cannot "se the firm name, re resent himself as carrying on the b"siness of the firm or solicit the c"stoms of ersons who were dealing with the firm before he ceased to be a artner. #ig*t of O%tgoing Partner in Certain Cases to S*are S%bse9%ent Profits : If any artner of the firm dies or otherwise ceases to be a artner and the contin"ing artners contin"e to carry on b"siness with the ro erty of the firm, witho"t any settlement being gi%en to the o"tgoing artner, then in the absence of any contract, he himself or his re resentati%e are entitled to a share of rofits made since he ceased to be a artner, as may be attrib"table to the "se of his share of ro erty or to interest at si& ercent er ann"m of his share in the ro erty of the firms.

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Liabilities of Partners i) >oint ! Se/eral: $%ery artner is liable jointly and se%erally for all the acts of the firm done while he was a artner. !he liability of a artner is always "nlimited. ii) Liabilit& for Losses a%ses b& ;IM : $%ery artner shall be liable to ma'e good any loss ca"sed to the firm by his fra"d or willf"l neglect in the cond"ct of b"siness. 3o artner can in any way e&em t himself from s"ch loss. Liabilit& for Se ret Profits: A artner is liable to acco"nt for and ay to the firm any ri%ate rofits earned from the b"siness of the firm or ro erty or goodwill of the firm. Liabilit& for Profits 'rom Com"eting 0%siness : If a artner carries on any b"siness of the same nat"re and com eting with that of the firm, he wo"ld be liable to acco"nt for and ay to the firm all rofits made by him in that b"siness. Liabilit& to #ender tr%e A o%nts: A artner is liable to render tr"e acco"nts to rofit to other artners. Ee is liable to disclose any legal or illegal acco"nts which fall within the sco e of b"siness of the firm. Liabilit& for Losses of t*e firm : As a artner has a right to share the rofits of the firm so is he liable to share the losses e+"ally "nless otherwise agreed " on.

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Business Law- Page )< Con l%sion $%ery artner acts as an agent of the firm in the ordinary co"rse of b"siness and so his acts 'ind the firm. !he rights and liabilities of the artners lay down the e&tent of freedom of wor' enjoyed by them and the e&tent of liability to the borne by them. !he rights and liabilities are according to the general conce t of artnershi deed and the artners are at ower to amend the agreement accordingly, b"t with the "nanimo"s consent of all the artners.

Business Law- Page )> Q?. Ans. )*at is t*e nat%re and e+tent of "artner:s a%t*orit& to bind t*e firm b& *is a ts. Sections )F declares that from the oint of %iew of the third arties a artner is an agent of the firm for the "r oses of the b"siness of the firm. $%en if only one artner acts on behalf of the firm liable, one artner can ma'e all the other artners liable only if he acts within his e& ress or im lied a"thority. !h"s, it is the e& ress and im lied a"thority of the artners which decides the nat"re and e&tent of their a"thority to 'ind the firm. E@P#ESS A4T;O#IT1 O' A PA#TNE# @hen a artner is e& ressly a"thoriHed by an agreement of all the artners to do certain acts on behalf of the firm, it is called the e& ress a"thority of a artner. A artner can 'ind the firm by any s"ch act which falls width the sco e of his a"thority, e%en if it does not fall within the sco e of b"siness. IMPLIE, A4T;O#IT1 O' A PA#TNE# S"ch acts of a artner which are incidental to, or are not "s"ally done in the co"rse of ro er cond"ct of b"siness come within the sco e of his im lied a"thority. Sections ):()) / 22 lays done certain ro%isions. (or an act to be co%ered within the im lied a"thority it is necessary that, (a) the act is done in the name of the form, (b) in the ordinary co"rse of the b"siness of the firm and, (c) with the intention to bind the firm. STAT4TO#1 #EST#ICTIONS ON IMPLIE, A4T;O#IT1 ASe tion 1BCDEF !he im lied a"thority of a artner does not em ower him to: (a) s"bmit a dis "te relating to the b"siness of the firm or arbitration, (b) o en a ban' acco"nt on behalf of the firm in his own name, (c) com romise or relin+"ish any claim or ortion of a claim by the firm, (d) withdraw a s"it or roceeding field on behalf of the firm, (e) admit a liability in a s"it on behalf of the firm, (f) ac+"ire or transfer any immo%able ro erty on behalf of the firm, (g) enter into artnershi on behalf of the firm. Eowe%er, the artners in a firm may, by contract among themsel%es, e&tend or restrict the im lied a"thority of any artner. PA#TNESS A4T;O#IT1 IN AN EME#GENC1 Section 2) e&tends the a"thority of a artner in an emergency. According to this section, a artner, in an emergency, has a"thority to do all s"ch acts to rotect the firm from loss, as wo"ld be done by a erson of ordinary r"dence, in his own name, "nder similar sit"ation and s"ch acts will 'ind the firm.

Business Law- Page )F E''ECT O' A,MISSIONS 01 A PA#TNE# If a artner ma'es any admission concerning the b"siness of the firm in the ordinary co"rse of b"siness, it is considered as s"fficient e%idence against the firm and it binds the firm. E''ECTO' NOTIVE TO ACTING PA#TNE# Any notice gi%en to a artner who habit"ally acts in the b"siness of the firm, for any matter relating to the affairs of the firm, acts as a notice to the firm, e&ce t in case of fra"d on the firm and that too by with the consent of that artner. !h"s, any s"ch notice to an acting artner, not to a dormant artner, cannot to ignored by other artners. Con l%sion !h"s, any act done by a artner within the e& ress or im lied a"thority of a artner will bind the firm. !he artner im lied a"thority is e&tended in certain s ecial cases in order to gi%e them the necessary s ace to ta'e actions to rotect the firm from any loss.

Business Law- Page ): QG. Ans. ,isting%is* bet$een a sale and an agreement to sell ! e+"lain f%ll& t*e essential of a ontra t of sale of goods. Section =()) of the sale of Goods Act defines a contract of sale of goods as A a contract whereby the seller transfers or agrees to transfer the ro erty in goods to the b"yer for a rice. !he definition of contract of sale of goods re%eals that either act"al sale or an agreement to sell both are co%ered "nder the act. 5"t, there are certain differences between the two. @here in a contract of sale, the ro erty in the goods is immediately transferred from the b"yer to the seller it is called a sale. @here "nder a contract of sale, the transfer of ro erty in the goods is to ta'e lace in the f"t"re or after the f"lfillment of certain conditions, it is called 6An agreement to sell. i) A sale and an agreement to sell can be disting"ished as:# Transfer of Pro"ert& CO$ners*i"E: In a sale, the ro erty in goods or the ownershi is immediately transferred from the seller to the b"yer. In an agreement to sell the ro erty in the goods is not transferred immediately at the time of contract, b"t the ownershi is transferred at a later time either at the e& iry of a certain eriod or f"lfillment of certain condition. Cntil then, the seller contin"es to be the owner of the goods. ii) #is6 of Loss: !he general r"le is that, "nless otherwise agreed, the ris' of loss asses with ro erty. In case of sale, if the goods are destroyed the loss falls on the b"yer, e%en if the b"yer is not in ossession of goods beca"se the ownershi has been transferred. In an agreement to sell, the loss is to be borne by the seller beca"se the ownershi has still not assed on to the b"yer, e%en if the b"yer has ossession of it. iii) Conse9%en es of 0rea *: In case of sale, if the b"yer fails or ref"ses to ay the rice of the goods, the seller can s"e for the rice, e%en if he has the ossession of goods. In an agreement to sell, if the b"yer fails to acce t and ay the rice, the seller can s"e him only for damages and not for the rice, e%en if the goods in ossession of the b"yer. i%) #ig*t of #esale: In a sale the ro erty of goods is immediately transferred to the b"yer and so the seller (e%en if the goods are in his ossession) cannot res"lt the goods. If the seller does so, the s"bse+"ent b"yer cannot ac+"ire the title to the goods. !he original b"yer can reco%er the goods from the third erson and can also s"e the seller for the breach of contract.

Business Law- Page 2* In an agreement to sell, the seller can sell the goods to anyone as he has the ro erty of goods and the new b"yer gets the title of goods as he "rchases the goods for consideration and witho"t any notice of rior agreement. In s"ch a case the original b"yer can only s"e for damages. %) 0%&ers Insol/en &: In a sale, if the b"yer becomes insol%ent before he ays the rice of the goods, the seller will ha%e to deli%er the goods to the official assignee or recei%er and he can only claim di%idend for the rice of the goods. In an agreement to sell, if the b"yer becomes insol%ent and has not aid the rice, the seller can ref"se to deli%er the goods to the official assignee or recei%er "ntil aid in f"ll. %i) Seller:s Insol/en &: If the seller becomes insol%ent then in case of sale the b"yer is entitled to reco%er the goods from the official assignee of recei%er since the ownershi has been transferred to the b"yer. In case of an agreement to sell, if the b"yer has aid the f"ll rice, he can only claim a rateable di%idend and not the goods beca"se the ro erty in the goods still rests with the seller. %ii) %iii) Nat%re of Contra t: A sale is an e&ec"ted contract. An agreement to sell is an e&ec"tary contract. T&"es of Goods: A sale can only be in the case of e&isting and s ecific goods. An agreement to sell mostly ta'es lace in the case of f"t"re and contingent goods. A sale and an agreement to sell both form a art of contract of sale. A contract of sale has certain essential elements. !hese elements can be ill"strated as:# ESSENTIALS O' A CONT#ACT O' SALE O' GOO,S i) T$o Parties: !he first essential is that there m"st be two distinct arties to a contract A a b"yer and seller, as a erson cannot b"y his own goods. A b"yer is a erson who b"ys or agrees to b"y and a seller is a erson who sells or agrees to sell. An e&ce tion to this r"le is li'e a"ction sale, e&ec"tion of a decree, etc. where a erson can b"y what he himself sells. ii) Transfer of Pro"ert&: 1ro erty here means ownershi transfer of ro erty in the goods means general ro erty and not s ecial ro erty. A mere transfer of ossession of the goods cannot be termed as sale. If 1 owns certain goods, he has general ro erty and if he ledges them to 0 then 0 is said to ha%e s ecial ro erty and 0 cannot sell them. iii) Goods: !he s"bject matter of contract of sale sho"ld be goods. Goods mean e%ery 'ind of mo%able ro erty other than actionable claim means against which a legal action can be ta'en.

Business Law- Page 2) i%) Pri e: !he consideration for a contract of sale m"st be money consideration called the 6 rice7. If goods are e&changed goods it is not co%ered "nder the contract of sale of goods. Any transfer of ro erty which is not for a rice i.e. gift, etc is also e&cl"ded. 5"t, where goods are e&changed arty for money and artly for goods, will be a contract of sale. In l%des 0ot* HSale: and HAn Agreement to Sell: A contract of sale may either be a sale or an agreement to sell. 6Sale7 is where "nder a contract of sale the ro erty is immediately transferred at the time of the contract from the seller to the b"yer. 6An agreement to sell7 is a contract of sale where the ro erty in the goods is transferred at a later eriod, either at time of e& iry of the eriod or at the time of f"lfillment of some condition as the case may be. %i) Essential Elements of A Contra t: A contract of sale, to be %alid, m"st ha%e all the essential elements of a contract as laid down in section )* of the -ontract Act e.g. consideration, m"t"al consent of the arties, etc.

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Con l%sion !he sale of goods act co%ers the law relating to sale of mo%able goods. !h"s, a contract of sale of goods is one whereby the seller transfers or agrees to transfer the ro erty in the goods to the b"yer for a rice. !his definition re%eals in itself the essentials of a contract of sale, witho"t which the contract will not be %alid.

Business Law- Page 22 QB. Ans. ,efine t*e term INegotiable Instr%ment: and e+"lain its t&"es and /ario%s "arties of t*e t&"es of negotiable instr%ments. Section )8 of 3egotiable Instr"ments Act defines 3egotiable instr"ment as, a negotiable instr"ment means a romissory note, bill of e&change or che+"e ayable either to order or to bearer. !h"s, the act mentions three 'inds of negotiable instr"ments, namely notes, bills and che+"es. !he word negotiable means transferable by deli%ery, and the word instr"ment means a written doc"ment by which a right is created in fa%o"r of some erson. ,iterally, the term means, a written doc"ment transferable by deli%ery. !he Act recogniHes only three instr"ments b"t it, does not rohibit to incl"de other instr"ments in the category of negotiable instr"ments which satisfy the conditions of negotiability, the conditions being:# It sho"ld be freely transferable either by deli%ery or by endorsement and deli%ery, and !he erson who obtains it in good faith and for %al"e, he gets it free from all defects and is entitled to reco%er the money of the instr"ment in his own name.

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T1PES O' NEGOTIA0LE INST#4MENTS a) Negotiable Instr%ments #e ognised b& Stat%te: !he 3egotiable Instr"ments Act, ):F) in section )8 mentions only three 'inds of negotiable instr"ments A bills of e&change, che+"es and romissory notes. b) Negotiable Instr%ments #e ogniJed b& 4sage or C%stoms of Trade : 5an' notes, e&che+"er bills, share warrants, bearer debent"res, di%idend warrants, share certificates attached with the blan' transfer deeds, etc are considered to be negotiable by c"stom in $ngland. In India 5an'er7s drafts, ay of orders, h"ndies, etc. are considered to be negotiable by c"stom or "sage. 0ill of E+ *ange: According to section ; a 5ill of $&change is an instr"ment in writing containing an "nconditional order, signed by the ma'ers, directing a certain erson to ay a certain s"m of money only to, or to the order of a certain erson or to the bearer of the instr"ment.

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!he essential characteristics of a bill of e&change are:# a) It m"st be in writing b) It m"st contain an order to ay and not re+"est c) !he order m"st be "nconditional d) !he arties to a bill of e&change i.e. drawer, drawee and ayee m"st be certain. e) It m"st be signed by the drawer and acce ted by the drawee f) !he s"m ayable m"st be certain g) It m"st contain an order to ay money only h) It m"st be stam ed ro erly i) 5ill of e&change originally drawn cannot be made ayable to bearer. ii) Promissor& Note: According to section = a romissory note is an instr"ment in writing (not being a ban' note or a c"rrency note) containing an "nconditional

Business Law- Page 28 "nderta'ing signed by the ma'er, to ay a certain s"m of money only to or to the order of a certain erson or the bearer of the instr"ment. !he essential characteristics are:# a) It m"st be in writing b) It m"st contain a romise or "nderta'ing to ay money only c) !he romise m"st be "nconditional d) B"st be signed by the ma'er e) !he ma'er m"st be a certain erson f) !he ayee m"st be certain g) !he s"m ayable m"st be certain h) !he romise m"st be definite i) (ormalities li'e n"mber, date, consideration, lace, etc are generally there j) It m"st be ro erly stam ed according to the ro%isions of the Indian stam act, )F::. iii) C*e9%e: Section < "ts that a che+"e is a bill of e&change which is drawn an a s ecified ban'er and is ayable only on demand and not otherwise. !he essential characteristics of a che+"e are: a) It is a negotiable instr"ment b) It is a bill of e&change c) It is always drawn on a ban'er d) It is always ayable on demand e) A che+"e can be bearer, order or crossed f) It re+"ires no acce tance as it is intended for immediate ayment g) In a che+"e A a drawee is always a s ecified ban', a drawer is a erson who draws a che+"e and who has an acco"nt in the ban' and ayee is a erson to whom the amo"nt of che+"e is made ayable. i%) Trade 0ill ! A ommodation 0ill : @hen a bill is drawn and acce ted for a gen"ine trade transaction it is termed as a trade bill. @hen a bill drawn and acce ted not for a trade transaction b"t to ro%ide financial hel or assistance to some arty is called an accommodation bill. !his bill may be for the accommodation bill. !his bill may be for the accommodation of both the drawer and acce tor. In s"ch a case they share the roceeds of the bill by disco"nting it. 'i titio%s 0ill: @hen in a bill of e&change the name of either drawer or ayee or both is fictitio"s, the bill is called a fictitio"s bill. @hen either ayee or drawer or both are fictitio"s, the acce tor is liable to a holder in d"e co"rse, ro%ided he ro%es that the signat"re of the drawer and ayee are the same. ,o %mentar& and Clean 0ills: @hen doc"ments relating to the goods re resented by the bill, e.g. in%oice, bill of lading, etc. are attached to a bill, it is called a doc"mentary bill. S"ch bills are deli%ered to the b"yer only on acce tance or ayment of the bill. S"ch bills are "s"ally "sed in foreign trade. @hen no doc"ments relating to the bills re resented by the bill are attached to it, the bill is called a clean bill and is generally "sed in inland trade.

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Business Law- Page 2= PA#TIES TO A NEGOTIA0LE INST#4MENT iE Parties to a Promissor& Note a) Ba'er A Ba'er is the erson who romises to ay the certain amo"nt stated in the romissory note. b) c) 1ayee A Ee is the erson to whom the amo"nt s ecified in the romissory note is made ayable Eolder# A holder can either be the ayee or the erson to whom the romissory note has been endorsed. Ee is a erson entitled to the ossession of the note and to recei%e or recei%er the amo"nt d"e from the liable arty. $ndorser / $ndorsee A @hen the holder of a romissory note endorses it to somebody else, he becomes the endorser and to whom it is endorsed is 'nown as the endorse.

d)

iiE

Parties to a *e9%e a) 4rawer A he is a erson who draws a che+"e on his ban' and is "s"ally the acco"nt holder of the ban' b) c) d) e) 4rawee A !he drawee is always the ban' of the drawer. !he ban' is directed to ay the amo"nt mentioned on the che+"e 1ayee A !he ayee is the erson to whom the ayment is made. It can be a erson or an organisation Eolder A Ee can be the ayee or any other erson to whom the che+"e is endorsed. $ndorser / $ndorsee A @hen the holder of the che+"e endorses it to somebody else, he is called the endorser and the erson to whom it is endorsed is called the endorsee.

iiiE

Parties to a 0ill of E+ *ange a) 4rawer A !he ma'er of a bill of e&change is called the drawer b) c) 4rawee A !he erson on whom the bill is drawn is called the drawee. Acce tor A Ee is the erson who acce ts the bill. .nce the drawee "ts his signat"re on the bill showing his assent, he is called the acce tor. At times a stranger acce ts the bill on behalf of the drawee. 1ayee A Ee is the erson to whom the bill is made ayable. Ee is the real beneficiary of the instr"ment and can be the drawer or any other erson $ndorser and $ndorsee A @hen a holder transfers the bill to somebody else he is called the endorser and to whom it is endorsed is called the endorsee.

d)

e)

Business Law- Page 2; f) Eolder A A erson who is legally entitled to the ossession of the bill of e&change in his an name and to recei%e the amo"nt of the bill is called a holder. Ee may be the ayee or endorse or bearer. 4rawee in -ase of 3eed A Ee is the erson who can be resort to in case of need. In s"ch a case, the holder has to resent the bill to him when the original drawee ref"ses to acce t the bill or ay the amo"nt of bill. Acce tor (or Eono"r: Any erson may become a arty to the bill on his own as an acce tor. @hen the original drawee ref"ses to acce t the bill, a erson who acce ts the bill or ay the amo"nt of bill, a erson who acce ts the bill in order to safeg"ard the hono"r of the drawer or endorser is called the acce tor for hono"r.

g)

h)

Con l%sion !h"s, a negotiable instr"ment is a iece of a er which entities a erson to a certain s"m of money and which is transferable from one to another erson by deli%ery or by endorsement and deli%ery. !he erson who recei%es it is entitled to money and also gets the right to transfer it f"rther. It is a s ecial ty e of a contract.

Business Law- Page 2< Q1D. E+"lain #ig*ts ,%ties and ,is9%alifi ation dire tor Ans. Section 2()8) defines a 4irector as, any erson occ" ying the osition of director by whate%er name called. !h"s, a erson will be deemed to be a director if he erforms the f"nctions of a director, tho"gh he may be named differently. A director is that erson who has f"ll control o%er the direct management and cond"ct of the com any. !he directors of a com any are collecti%ely referred as the 5oard of 4irectors, or 5oard. .nly indi%id"als can be directors. 3o body cor orate, association or a firm can be a ointed director of a com any. #IG;TS O' ,I#ECTO#S i) #ig*t to Parti i"ate in t*e Affairs of t*e Com"an& : A director, %alidly a ointed, has a right to attend the meetings and artici ate in the affairs of the com any regarding direction, s" er%ision and control, etc. ii) #ig*t to *a/e #em%neration: $%ery director has a right to rem"neration fi&ed either "nder any contract or "nder the articles of association of a com any. !he rem"neration of the directors is not directly related to the rofits of the com any i.e. e%en if the com any. !he rem"neration of the directors is not directly related to the rofits of the com any i.e. e%en if the com any does not earn rofit the directors will be aid their fi&ed rem"neration. #ig*t to Com"ensation: In case of remat"re termination of a director7s ser%ice, a director has a right to recei%e com ensation from his com any. $&ce tions to his right are:# a) If remat"re termination is d"e to either reconstr"ction or amalgamation of a com any. b) If his com any is wo"nd " . c) If the director has to %acate his office according to the ro%isions of the com anies Act of ):;<. d) If he is fo"nd to be g"ilty of fra"d or breach of tr"st e) If he himself is res onsible for ta'ing art in brining abo"t the termination of his office.

iii)

,4TIES O' ,I#ECTO#S i) ,%t& of Greatest Good 'ait* of '%di iar& ,%ties : !he directors of a com any are fid"ciary agents of their com any and so they m"st e&ercise their owers honestly and in best interest of the com any. !he b"siness o ort"nities sho"ld ne%er be e& loited for their ersonal benefits b"t for the ros erity of the com any. ii) ,%t& of #easonable Care8 S6ill ! ,iligen e : !he directors are e& ected to erform with reasonable care, s'ill and diligence and if not they are g"ilty of negligence. !he actions of a director sho"ld be s"ch as wo"ld be e& ected in similar circ"mstances on his behalf.

Business Law- Page 2> iii) i%) ,%t& to Attend 0oard Meetings : It is not com "lsory to attend all s"ch meetings b"t it is his d"ty to attend them whene%er he is able to do so. ,%t& to In/est Com"an&:s Mone& : It is an im ortant d"ty of the directors to in%est their com any7s f"nds ro erly and rofitably as er the ro%isions of articles of association, if any, made in this regard. ,%t& not to ,elegate '%n tions: It is the d"ty of the directors to attend ersonally to the b"siness of the com any in which they are directors. !hey sho"ld not delegate their f"nction "nless otherwise a"thoriHed to do so. Stat%tor& ,%ties: 4irectors are bo"nd to erform certain d"ties as rescribed by the -om anies Act of ):;<: a) 4"ty to see that the ros ect"s iss"ed by the com any ma'es a disclos"re of all the matters. b) 4"ty to see that no ros ect"s is "sed to the "blic "nless a co y of it has been deli%ered to the 0egistrar of -om anies for registration. c) !o call on e&tra ordinary general meeting when demanded by a %alid re+"isition. d) !o resent ann"al acco"nts and balance sheet and if any director fails to ta'e all reasonable ste s in this regard, he is "nishable in res ect of each offence with im risonment which may e&tend to si& month or a fine " to r" ees ten tho"sand or both. e) 4"ty to forward a stat"tory re ort to e%ery member and m"st also get it filed with the 0egistrar. !he board of directors m"st also call and hold the stat"tory meeting, which does not a ly to a ri%ate com any. f) 4"ty to ro%ide and ma'e good any losses in ca ital before recommending any di%idend. g) B"st re are and lace the re ort of the com any7s affairs with the 5alance Sheet and rofit and ,oss. h) !o disclose his interest while entering into any transaction with the com any. i) !o "niform is name, address, occ" ation, nationality and other information re+"ired by the Act for the "r ose or entering the same in the 0egister of 4irectors. j) !o disclose the n"mber of shares of the com any held by him. ') !o send to the 0egistrar his consent in writing to the ost of director l) !o hold certain +"alification shares according to the ro%isions of the articles of association. m) 4"ty not to enter into any contract with the com any witho"t the consent of 5oard of 4irectors for the sale, "rchase, etc. o) @hen the com any is li+"idated, a director m"st refrain himself from acting on behalf of com any e&ce t to the e&tent a"thoriHed by co"rt, li+"idator or shareholder in the general

%)

%i)

Business Law- Page 2F ,ISQ4ALI'ICATIONS O' ,I#ECTO#S i) ii) Offi e of Profit: A erson cannot be a ointed as director if he holds any office or lace of rofit "nder the com any. Age Limit: @ith he object of ens"ring hysical and mental fitness on the art of the director it has been ro%ided that no erson who is abo%e the age of >* years or below the age of 2; years sho"ld be a ointed as a director. Con/i ted: A erson who has been con%icted by co"rt of any offence in%ol%ing moral t"r it"de and sentenced to im risonment for not less than < months and a eriod of ; years has not ela sed from the date of e& iry of the sentence cannot be a ointed as a director. Calls 5 in3Arrears: A erson cannot be em loyed as a director whose calls in res ect of shares of a com any held by him are not aid within si& months from the lost date fi&ed. 4nso%nd Mind: 1ersons of "nso"nd mind are dis+"alified for a ointment as directors. Insol/ent: 1ersons who are "ndischarged insol%ents or declared fra"d"lent by co"rt or who has a lied to be adj"dicated as a sol%ent and an a lication is ending are dis+"alified from becoming a director. Not More t*an T$ent& ,ire tors*i": A erson holding more than 2* directorshi of "blic ,td -o. cannot be a ointed as director of any other "blic ltd. -o. by shares. Eowe%er, he can be a director of any n"mber of %t ltd cos. Additional Gro%nds: A ri%ate com any which is not a s"bsidiary of a "blic com any may by its articles ro%ide that a erson shall be dis+"alified for a ointment as a director on any additional gro"nds. Co%rt Order: An order dis+"alifying him for a ointment as a director has been assed.

iii)

i%)

%) %i) %ii) %iii) i&)

Con l%sion $%ery com any "blic ri%ate is re+"ired to ha%e directors to manage its affairs. 4irectors are the ersons elected by shareholders to direct, cond"ct, manage and s" er%ise the affairs of the com any. !he 5oard of 4irectors ha%e a i%otal role to lay and as s"ch it occ" ies %ery im ortant osition in a com any. 4irectors are the mains ring and brain of the com any.

Business Law- Page 2: Q1K. E+"lain t*e ob(e t of t*e ons%mer "rote tion a t and state e+"lain t*e follo$ing terms as %sed in t*e ons%mer "rote tion a t8 1BG= CaE ons%mer CbE ,is"%te C E ,efi ien & ! CdE #estri ti/e Trade Pra ti e and 4nfair Trade Pra ti e Ans. !he -ons"mer 1rotection Act ro%ides the for"m for redressal of cons"mer grie%ances. !his act ma'es a%ailable rights of the cons"mers to be the same as before. Section 8 of this Act clearly states that, the ro%isions of this Act shall be in addition to and not in derogation of the ro%isions of any other law for the time being in force. !his im lies that the remedies ro%ided "nder this Act are in addition to the ro%isions of any other law being in force for the time. !he cons"mer rotection act of ):F< e&tends to the whole of India e&ce t for the state of ?amm" and Iashmir. !he aims and objects of the Act can be stated as:# i) Prote t Interest of t*e Cons%mers : !he first and foremost object of the -ons"mer 1rotections Act is to rotect the general interest of the cons"mers. Bany times cons"mers are cheated and this act ro%ides a legal rotection. ii) Establis*ment of Cons%mer Co%n ils and Ot*er A%t*orities : !he act ma'es ro%isions for establishing %ario"s cons"mer co"ncils and other a"thorities to rotect the cons"mer7s interest. 'ast and Sim"le #edressal to Cons%mer ,is"%tes : !he other object of the Act is to ro%ide fast and sim le redressal to cons"mer dis "tes thro"gh a +"asi# j"dicial machinery set " at the 4istrict, state and central lea%es. !hese bodies obser%e the rinci le of nat"ral j"stice 'ee ing in %iew the ro%isions of the Act. !hese bodies ha%e been entr"sted with the ower to gi%e s ecific reliefs and to award com ensation to cons"mers on the basis of merit. S"ch bodies can e%en im ose enalties for non#com liance of their order. -ertain terms "sed in the -ons"mer 1rotection Act of ):F< can be e& lained as:# -ons"mer A A cons"mer is one who "rchases the commodities not for trading b"t for self cons"m tion. !he definition of cons"mer gi%en in Section 2()) (d) of the act lays down the following oints of a cons"mer:# A cons"mer is:# Any erson who b"ys or hires9a%ails any ser%ice or goods for a consideration. Any "ser of the goods who may not ha%e "rchased it b"t "ses it with the a ro%al of the erson who has "rchased the goods for consideration. Any erson who is a beneficiary of s"ch ser%ices with the consent of the original cons"mer. -onsideration for the goods is an im ortant factor. S"ch consideration m"st ha%e act"ally been aid or romised or artly aid and artly romised. !he intention of he resent "rchasing it sho"ld be cons"m tion and not sale

iii)

a)

i) ii) iii) i%) %)

Business Law- Page 8* b) 4is "te A -ons"mer dis "te has been co%ered "nder section 2())(e).Any cons"mer has a right to see' remedy or file a com laint against the man"fact"rer or trader in case of any dis "te between the two. According to section 2()) (e), cons"mer dis "te is a dis "te where the erson against whom a com laint has been made and he denies the allegations contained in s"ch com laint. c) 4eficiency A Section 2())(g), of the Act defines a deficiency as, deficiency means any fa"lt, im erfection, shortcoming or inade+"acy in the +"ality, nat"re and manner of erformance which is re+"ired to be maintained by or "nder any law for the time being in force or has been "nderta'en to be erformed by a erson in "rs"ance of a contract or otherwise in relation to any ser%ice. (or ma'ing any com laint in res ect of a ser%ice or ser%ice rendered, a com laint has to ro%e that ser%ices s"ffer from deficiency. !he cons"mer has been gi%en rotection "nder this act from any 'ind of incom etence, negligence, etc. and those res onsible for deficiency are "nished according to the ro%isions of the Act. d) 0estricti%e !rade 1ractice and Cnfair !rade 1ractice A A cons"mer has a free right to "rchase any 'ind of good according to his needs in order to get ma&im"m satisfaction. According to section 2()) (nn), a 0estricti%e trade 1ractice, refers to any ractice that re+"ires a cons"mer to b"y, hire or a%ail any goods or ser%ices rior to b"ying, hiring or a%ailing any other goods or ser%ices. !he cons"mer rotection act of ):F< ro%ides for better rotection of the interests of cons"mers and also has ro%isions to rotect their interests from "nfair trade ractices. Section 2())(r) states that an 6"nfair trade ractice7 means a trade ractice which for the "r ose of rom ting sale, "se or s" ly of any goods of for the ro%ision of any ser%ice, ado ts any "nfair methods or ractice, which may incl"de the following. ). i) ii) iii) i%) %) %i) %ii) !he ractice of ma'ing on oral or written statement which:# (alsely re resents that the goods are of a artic"lar standard +"ality, +"antity, style, etc. (alsely re resents the +"ality, +"antity or grade of ser%ices. (alsely re resents and old, re#b"ilt, reno%ated goods as new goods. 0e resenting that the goods ha%e certain characteristics, "ses, accessories, etc which they may not act"ally ha%e 0e resenting that the seller has a s onsorshi or a ro%al which is false Ass"ring of life of goods or gi%ing a g"arantee thereof witho"t ro er chec'ing Ba'ing a false re resentation which might seem to be a romise to re lace, maintain or re air an article

Business Law- Page 8)

%iii) i&) 2. 8. =. ;.

Bisleading regarding the rice Gi%ing misleading facts abo"t goods or other traders 1ermits the "blication of any ad%ertisement in any news a er or magaHine for sale at a bargaining rice in reference to ordinary rice or other rod"ct brand. 1ermitting the offers of gifts or other items with the intention of charging the amo"nt from the transaction, artly or as a whole. 1ermits the sale or s" general standards set. ly of goods or ser%ices which do not com ly with the

5oarding or destr"cting the goods or ref"sing to sell goods with a %iew to raise the rices.

Con l%sion -ons"mer is one of the im ortant com onents of an economy as he e&hibits his im ortant role both on demand and s" ly side. Eis major economic acti%ity is cons"m tion which act"ally leads to demand and s" ly. !his means that the cons"mer is the center of all economic acti%ities. In order to rotect the cons"mers from e& loitation the -ons"mer 1rotection Act of ):F< was laid, which "ts forward %ario"s ro%isions for them.