MB 0051: Legal Aspects of Business ASSIGNMENT- Set 1

Q-1. All agreements are not contracts, but all contracts are agreements. Comment. Ans. Introduction: Contracts and agreements are related in so many significant ways. Contracts mean agreeing on specific matters weather those are national or international aspects of agreements or not. In a broad sense, [1]contract is an agreement between two or more competent parties in which an offer is made and accepted, and each party benefits. The agreement can be formal, informal, written, oral or just plain understood. Some contracts are required to be in writing in order to be enforced. Examples of a contract are a lease, a promissory note, or a rental agreement.[2] According to legal scholar Sir John William Salmond, a contract is an agreement creating and defining the obligations between two or more parties Contract: In law, a contract is a legally binding agreement between two or more parties which, if it contains the elements of a valid legal agreement, is enforceable by law [3]or by binding arbitration. A legally enforceable contract is an exchange of promises with specific legal remedies for breach. These can include compensatory remedy, whereby the defaulting party is required to pay monies that would otherwise have been exchanged were the contract honored, or an Equitable remedy such as Specific Performance, in which the person who entered into the contract is required to carry out the specific action they have reneged upon. An agreement is said to be reached when an offer capable of immediate acceptance is met with a mirror image acceptance (i.e., an unqualified acceptance).[4] The parties must have the necessary capacity to contract and the contract must not be trifling, indeterminate, impossible, or illegal. Contract law is based on the principle expressed in the Latin phrase pacta sunt servanda (usually translated AGREEMENTS TO BE KEPT but more literally pacts must be kept).[5] Breach of contract is recognized by the law and remedies can be provided. As long as the good or service provided is legal, any oral agreement between two parties can constitute a binding legal contract. The practical limitation to this, however, is that generally only parties to a written agreement have material evidence (the written contract itself) to prove the actual terms uttered at the time the agreement was struck. In daily life, most contracts can be and are made

orally, such as purchasing a book or a sandwich. Sometimes written contracts are required by either the parties, or by statutory law within various jurisdictions for certain types of agreement, for example when buying a house[6] or land. Contract law can be classified, as is habitual in civil law systems, as part of a general law of obligations (along with tort, unjust enrichment or restitution). According to legal scholar Sir John William Salmond, a contract is an agreement creating and defining the obligations between two or more parties. As a means of economic ordering, contract relies on the notion of consensual exchange and has been extensively discussed in broader economic, sociological and anthropological terms (see Contractual theory, below). In American English, the term extends beyond the legal meaning to encompass a broader category of agreements. [7] This article mainly concerns contract law in common law jurisdictions (approximately coincident with the English-speaking world and anywhere the British Empire once held sway). Common-law jurisdictions usually offer proceedings in the English language, which has become to an extent a lingua franca of international business.[8] The common law retains a high degree of freedom of contract, with parties largely free to set their own terms, whereas civillaw systems typically apply certain over-arching principles to disputes arising out of contract (see, for example the French Civil Code). It is very common for businesses not located in common-law jurisdictions to opt in to the common law through a Choice of law clause. However, contract is a form of economic ordering common throughout the world, and different rules apply in jurisdictions applying civil law (derived from Roman law principles), Islamic law, socialist legal systems, and customary or local law. Agreement: 1. A mutual understanding between two or more legally competent individuals or entities about their rights and duties regarding their past or future performances and consideration. While an agreement usually leads to a contract, it could also be an executed sale, a gift or other transfer of property, or a promise without a legal obligation.

2. The understanding between two or more legally competent individuals or entities about the rights and duties regarding their past or future performances and consideration as manifested by their language (oral or written) or by implication from other circumstances such as the usage of trade and the course of performance. See also contract.

Binding agreement An enforceable agreement or contract is binding agreement. Divorce agreement An agreement between spouses made during a divorce concerning child custody, child and spousal support, property distribution, and other matters. Such agreements are usually incorporated into the parties divorce decree. See separation agreement. Postnuptial agreement An agreement between spouses made during their marriage to determine the right to support and each others property in case of death or divorce. Such agreements are not enforceable unless each party makes a full disclosure to the other of their assets and has consulted with their own attorneys. Even then, most such agreements are not enforceable unless made by spouses who are in the midst of a separation or divorce. Separation agreement An agreement between spouses made during a divorce or while obtaining a legal separation concerning child custody, child and spousal support, property distribution, and other matters is called separation agreement. Such agreements are usually incorporated into the parties divorce decree or into a judicial decree granting a separation to the parties. It is frequently referred to as property settlement agreement (PSA). Differences between Contract and Agreement: Contract- According to section 2 (h) of the Indian contract act an agreement enforceable by law is a contract. Hence every agreement and promise enforceable by law is a contract. Agreement- According to section 2(e) of the Indian contract act Every promise and every set of promise forming the consideration for each other is an agreement. When there is a proposal from one side and the acceptance of that proposal by other side. It results in a promise. This promise from the two parties to one another is known as an agreement.

As noted above, an agreement enforceable by law is a contract. All such agreement which satisfy the conditioned mentioned in sec 10 of Indian contract Act is contracts. Section 10 is as under 10. all agreements are contract if they are made by the free consent of parties competent to contract for a lawful consideration and with a lawful object , and are not hereby expressly declared to be void. For the validity of contract section 10 requires the following essentials to satisfy[9] 1- There should be an agreement between two parties. An agreement arises when one party makes a proposal or present and the other party accepts the offer. 2- The parties to the agreement should be proficient to contract. 3- There should be lawful deliberation and lawful object in respect of the agreement. 4- There should be free consent of the parties, when they enter in to agreement. 5- The agreement must not be one, which has been declared to be void. Conclusion: Contract is an agreement between two or more person creating rights and duties between them and which is enforceable by law. Pollock defines contract as every agreement and promise enforceable at law is contract. A contract is an agreement creating and stating responsibility between the parties. According to section2b of the contract act, an agreement enforceable by law is contract. So it is clear the contract consist of two elements: An agreement The agreement should be enforceable by law. According to section 2e every promise and combination of promises making the consideration for each other is an agreement. It is clear from the definition that promise is an agreement. Section 2 defines the promise as when any person with the suggestion is made indicate his assent thereto, it means the proposal is accepted. A proposal when accepted becomes a promise. We can say that an agreement is an accepted proposal. The process of definition shows that a contract is an agreement, an agreement is a promise and a promise is an accepted proposal. An agreement therefore comes into existence only when one party makes a proposal or offer to the other and that other signifies his assent thereto. In short every agreement is the result of a proposal from one side and its acceptability by the other.

Q-2. What are the essentials of a contract of sale under the sale of Goods Act, 1930? Ans. Sale of Goods Act is one of very old mercantile law. Sale of Goods is one of the special types of Contract. Initially, this was part of Indian Contract Act itself in chapter VII (sections 76 to 123). Later these sections in Contract Act were deleted, and separate Sale of Goods Act was passed in 1930. The Sale of Goods Act is complimentary to Contract Act. Basic provisions of Contract Act apply to contract of Sale of Goods also. Basic requirements of contract i.e. offer and acceptance, legally enforceable agreement, mutual consent, parties competent to contract, free consent, lawful object, consideration etc. apply to contract of Sale of Goods also. Contract of Sale - A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. There may be a contract of sale between one part-owner and another. [section 4(1)]. A contract of sale may be absolute or conditional. [section 4(2)]. Thus, following are essentials of contract of sale - * It is contract, i.e. all requirements of contract must be fulfilled * It is of goods * Transfer of property is required * Contract is between buyer and seller * Sale should be for price * A part owner can sale his part to another part-owner * Contract may be absolute or conditional. How Contract of sale is made - A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. The contract may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by instalments, or that the delivery or payment or both shall be postponed. [section 5(1)]. Subject to the provisions of any law for the time being in force, a contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth or may be implied from the conduct of the parties. [section 5(2)]. Thus, credit sale is also a sale. - - A verbal contract or contract by conduct of parties is valid. e.g. putting goods in basket in super market or taking food in a hotel. Two parties to contract - Two parties are required for contract. - - Buyer means a person who buys or agrees to buy goods. [section 2(1)]. Seller means a person who sells or agrees to sell goods. [section 2(13)]. A part owner can sale his part to another part-owner. However, if joint owners distribute property among themselves as per mutual agreement, it is not sale as there are no two parties.

Contract of Sale includes agreement to sale - Where under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but where the transfer of the property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell. [section 4(3)]. An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred. [section 4(4)]. The provision that contract of sale includes agreement to sale is only for the purposes of rights and liabilities under Sale of Goods Act and not to determine liability of sales tax, which arises only when actual sale takes place. Transfer of property - Property means the general property in goods, and not merely a special property. [section 2(11)]. In laymans terms property means ownership. General Property means full ownership. Thus, transfer of general property is required to constitute a sale. If goods are given for hire, lease, hire purchase or pledge, general property is not transferred and hence it is not a sale. POSSESSION AND PROPERTY - Note that property and possession are not synonymous. Transfer of possession does not mean transfer of property. e.g. - if goods are handed over to transporter or godown keeper, possession is transferred but property remains with owner. Similarly, if goods remain in possession of seller after sale transaction is over, the possession is with seller, but property is with buyer. Goods - Goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale. [section 2(7)]. Price - Price means the money consideration for a sale of goods. [section 2(10)]. Consideration is required for any contract. However, in case of contract of sale of goods, the consideration should be price i.e. money consideration. Ascertainment of price - The price in a contract of sale may be fixed by the contract or may be left to be fixed in manner thereby agreed or may be determined by the course of dealing between the parties. [section 9(1)]. Where the price is not determined in accordance with the foregoing provisions, the buyer shall pay the seller a reasonable price. What is a reasonable price is a question of fact dependent on the circumstances of each particular case. [section 9(2)]. Conditions and Warranties - Opening para of section 16 makes it clear that there is no implied warranty or condition as to quality of fitness of goods for any particular purpose, except those specified in Sale of Goods Act or any other law. - - This is the basic principle of caveat emptor i.e. buyer be aware. However, there are certain stipulations which are essential for main purpose of the contract

of sale of goods. These go the root of contract and non-fulfilment will mean loss of foundation of contract. These are termed as conditions. Other stipulations, which are not essential are termed as warranty. These are collateral to contract of sale of goods. Contract cannot be avoided for breach of warranty, but aggrieved party can claim damages. - - A breach of condition can be treated as breach of warranty, but vice versa is not permissible. A stipulation in a contract of sale with reference to goods which are the subject thereof may be a condition or a warranty. [section 12(1)]. A condition is a stipulation essential to the main purpose of the contract, the breach of which gives rise to a right to treat the contract as repudiated. [section 12(2)]. A warranty is a stipulation collateral to the main purpose of the contract, the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated. [section 12(3)]. Whether a stipulation in a contract of sale is a condition or a warranty depends in each case on the construction of the contract. A stipulation may be a condition, though called a warranty in the contract. [section 12(4)]. Where a particular stipulation in contract is a condition or warranty depends on the interpretation of terms of contract. Mere stating Conditions of Contract in agreement does not mean all stipulations mentioned are conditions within meaning of section 12(2). When condition to be treated as warranty - Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty and not as a ground for treating the contract as repudiated. [section 13(1)]. Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect. [section 13(2)]. Nothing in this section shall affect the case of any condition or warranty fulfillment of which is excused by law by reason of impossibility or otherwise. [section 13(3)]. Time of payment is not essence of contract but time of delivery of goods is, unless specified otherwise - Unless a different intention appears from the terms of the contract, stipulations as to time of payment are not deemed to be of the essence of a contract of sale. Whether any other stipulation as to time is of the essence of the contract or not depends on the terms of the contract. [section 11]. As a general rule, time of payment is not essence of contract, unless there is specific different provision in Contract. In other words, time of payment specified is warranty. If payment is not made in time, the seller can claim damages but cannot repudiate the contract.

Caveat Emptor - The principle termed as caveat emptor means buyer be aware. Generally, buyer is expected to be careful while purchasing the goods and seller is not liable for any defects in goods sold by him. This principle in basic form is embodied in section 16 that subject to provisions of Sale of Goods Act and any other law, there is no implied condition or warranty as to quality or fitness of goods for any particular purpose. As per section 2(12), Quality of goods includes their state or condition. Transfer of property as between seller and buyer - Transfer of general property is required in a sale. Property means legal ownership. It is necessary to decide whether property in goods has transferred to buyer to determine rights and liabilities of buyer and seller. Generally, risk accompanies property in goods i.e. when property in goods passes, risk also passes. If property in goods has already passed on to buyer, seller cannot stop delivery of goods even if in the meanwhile buyer has become insolvent. - - - Where there is a contract for the sale of unascertained goods, no property in the goods is transferred to the buyer unless and until the goods are ascertained. [section 18]. Property passes when intended to pass - Where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be transferred. [section 19(1)]. For the purpose of ascertaining the intention of the parties regard shall be had to the terms of the contract, the conduct of the parties and the circumstances of the case. [section 19(2)]. Unless a different intention appears, the rules contained in sections 20 to 24 are rules for ascertaining the intention of the parties as to the time at which the property in the goods is to pass to the buyer. [section 19(3)]. Specific goods in a deliverable state - Where there is an unconditional contract for the sale of specific goods in a deliverable state, the property in the goods passes to the buyer when the contract is made, and it is immaterial whether the time of payment of the price or the time of delivery of the goods, or both, is postponed. [section 20]. Auction sale - Auction sale is special mode of sale. The sale is made in open after making public announcement. Buyers assemble and make offers on the spot. Person offering to pay highest price gets the goods. Usually, auctioneer is appointed to conduct auction. Higher and higher bids are offered and sale is complete when auctioneer accepts a bid.- - - In the case of a sale by auction (1) where goods are put up for sale in lots, each lot is prima facie deemed to be the subject of a separate contract of sale; (2) the sale is complete when the auctioneer announces its completion by the fall of the hammer or in other customary manner; and, until such announcement is made, any bidder may retract his bid; (3) a right to bid may be reserved expressly by or on behalf of the seller and, where such right is expressly so reserved, but not otherwise, the seller or any one person on his behalf may, subject to the provisions hereinafter

contained, bid at the auction; (4) where the sale is not notified to be subject to a right to bid on behalf of the seller, it shall not be lawful for the seller to bid himself or to employ any person to bid at such sale, or for the auctioneer knowingly to take any bid from the seller or any such person; and any sale contravening this rule may be treated as fraudulent by the buyer; (5) the sale may be notified to be subject to a reserved or upset price; (6) if the seller makes use of pretended bidding to raise the price, the sale is voidable at the option of the buyer. [section 64]. Delivery of goods to buyer - The Act makes elaborate provisions regarding delivery of goods to buyer. It is the duty of the seller to deliver the goods and of the buyer to accept and pay for them, in accordance with the terms of the contract of sale. [section 31]. Unless otherwise agreed, delivery of the goods and payment of the price are concurrent conditions, that is to say, the seller shall be ready and willing to give possession of the goods to the buyer in exchange for the price, and the buyer shall be ready and willing to pay the price in exchange for possession of the goods. [section 32]. - - Note that this is unless otherwise agreed, i.e. buyer and seller can agree to different provisions in respect of payment and delivery. Acceptance of goods by buyer - Contract of Sale is completed not by mere delivery of goods but by acceptance of goods by buyer. Acceptance does not mean mere receipt of goods. It means checking the goods to ascertain whether they are as per contract. - - - Where goods are delivered to the buyer which he has not previously examined, he is not deemed to have accepted them unless and until he has had a reasonable opportunity of examining them for the purpose of ascertaining whether they are in conformity with the contract. [section 41(1)]. - Unless otherwise agreed, when the seller tenders delivery of goods to the buyer, he is bound, on request, to afford the buyer a reasonable opportunity of examining the goods for the purpose of ascertaining whether they are in conformity with the contract. [section 41(2)] Q-3. Describe the main features of Consumer Protection Act 1986. Ans. Consumer is at the core of business world in the present day economy. Quantity and quality of goods are produced as per the needs of the consumer. Advancement of any business unit depends on the satisfaction of the consumer. That product will be in great demand which gives maximum satisfaction to the consumer and so will be produced on large scale. As a result, the concerned production unit will develop and earn large profit. Despite the Fact that Importance of the consumer is widely recognized, he is deprived of his rights and privilege and is subjected to diverse kinds of exploitation. For instance exploitation in the form of short weight and measure poor quality of the product, adulteration, supply of fake goods, boarding and black marketing of the goods, delivery of goods not on schedule. Not only that, even doubtful and false

advertisements are indulged into by the producers to attract consumers. With a view to protecting the consumers from such exploitation and making them aware of their rights, a method of consumer protection has been launched. Need for protection arid satisfaction of the consumer is now being widely recognized across the world. India has also adopted the concept of consumer protection more seriously and vigoursly. Meaning of Consumer Protection: Consumer protection means the protection of the consumers from their exploitation by the unfair trade practices of the producers/sellers. In fact, providing proper protection of the fundamental rights and Interests of the consumers, freeing them from exploitation, creating consumer awareness, consumer providing the right to clean business environment to the consumers by means of Legal amendments Is all that protection means, Consumer Protection Act In India: In India, Central and State Governments have passed various legislative enactments regarding Consumer Protection. Among them, main Acts are: Drug and Cosmetics Act 1940, Industries Development and Regulation Act 1951 Indian Standards Institution (Certification Marks) Act 1952 Prevention of Food Adulteration Act 1954 Essential Commodities (Supply) Act 1955 The Trade and Merchandise Marks Act, 1958 Monopolies and Restrictive Trade Practices Act 1969 Packaged Commodities Regulation Order 1975 Standards of Weights and Measures Act 1976 Prevention of Black Marketing and Maintenance of Supplies of Essential Commodities Act 1980 Standards of Weights and Measures (Enforcement) Act. 1985. In spite of above Acts Interests of the consumers were not being properly safe guarded. There are many reasons for it, but main among them are two, First , consumer in general had no knowledge about the authority to whom complaints under these acts were to be addressed. Second, to seek remedy under these various acts consumer had to take legal action Involving lot of time and money. Need was therefore felt to enact such a legislative measure as provide quick and less expensive remedy to the aggrieved consumer. Consequently, to protect properly the interest of the consumers and to settle quickly their disputes, in December 1986Consumer Protection Act was passed in India. It was enforced with effect from April 15,1987. Last amendment In the Act was made in. 2002.

Main Elements/Features of Consumer Protection Act, 1986: Consumer Protection Act is the most progressive Act of Social well are and is referred to as Magna Carta of consumer protection. It is a land mark event In the history of Acts InIndia. Main features of the Act are as under It applies to all kinds of goods and services. Provisions of this Act are in addition to the provisions of any other Act in force In the country. Thus, this Act does not limit or reduce the scope of any other Act Under this Act, there Is a provision for the Centre and State Governments to setup Consumer Protection Councils composing of both official and non-official members. The objectives of the council are:- to promote the rights and Interests of the consumers,- to educate and protect them. This Act provides for the following rights to the consumer: Right to safety, Right to be heard, Right to consumer education, Right to seek redressed Right to Choose Right to be Informed This Act is based on the principle of compensation wherein fair compensation to the aggrieved party is provided for. To redress the grievance, there Is provision for three-tier judicial machinery District level State level and National Level This Act provides affective protection to the consumer from different types of exploitations, such as defective goods, adulteration, under-weight, excessive price, unsatisfactory or deficient services and unfair trade practices. This Act redresses in a simple, cheap and dynamic manner the grievance of the consumer in limited time. All suppliers of goods and services belonging to private, public and co-operative sectors come under the purview of this Act. Q-4. What are the duties and powers of an authorized person under FEMA, 1999? Ans. The Foreign Exchange Management Act (FEMA), 1999 (FEMA) replaces the Foreign Exchange Regulation Act (FERA) 1973. FERA was introduced in 1974 to consolidate and amend the then existing law relating to foreign exchange. FERA aimed at having stringent controls to conserve Indias foreign exchange. FERA was amended in 1993 to bring about certain changes, as a

result of introduction of economic reforms and liberalization of the Indian economy. Authorized person Sec.10 provides that the Reserve Bank may, on an application made to it in this behalf, authorize any person to be known as authorized person to deal in foreign exchange or in foreign securities, as an authorized dealer, money changer or offshore banking unit or in any other manner as it deems fit. The authorization shall be in writing and shall be subject to the conditions laid down therein. An authorization so granted may be revoked by the Reserve Bank at any time if it is satisfied that (a) it is in public interest to do so; or (b) the authorized person has failed to comply with the condition subject to which the authorization was granted or has contravened any of the provisions of the Act or any rule, regulation, notification, direction or order made there under. Duties of an authorized person The duties of an authorized person as provided in the Act are summarized hereunder: 1. To comply with RBI directions [Sec.10(4)]. An authorized person shall, in all his dealings in foreign exchange or foreign security, comply with such general or special direction or order as the Reserve Bank may, from time to time, think fit to give. 2. Not to engage in unauthorized transactions [Sec.10(4)]. Except with the previous permission of the Reserve Bank, an authorized person shall not engage in any transaction involving any foreign exchange or foreign security which is not in conformity with the terms of authorization under this section. 3. To ensure compliance of FEMA provisions [Sec.10(5)]. An authorized person shall, before undertaking any transaction in foreign exchange on behalf of any person, require that person to make such declaration and to give such information, as will reasonably satisfy him that the transaction will not involve and is not designed for the purpose of any contravention or evasion of the provisions of this Act or of any rule, regulation, notification, direction or order made there under. Where the said person refuses to comply with any such requirement or makes only unsatisfactory compliance therewith, the authorized person shall refuse in writing to undertake the transactions and shall, if he has reason to believe that any such contravention or evasion as aforesaid is contemplated by the person, report the matter to the Reserve Bank. Powers of the authorized person 1. To deal in or transfer any foreign exchange or foreign security to any person

2. Receive any payment by order or on behalf of any person resident outside India in any name. However, an authorized person is not allowed to credit the account of any person without any corresponding remittance from any place outside India. 3. To open NRO, NRE, NRNR, NRSR and FCNR accounts. 4. To sell or purchase foreign exchange for current account transactions. 5. To sell or purchase foreign exchange for permissible capital account transactions. Q-5. What do you mean by Memorandum of Association? What does it contain? Ans. Memorandum of association is one of the documents which has to filed with the registrar of companies at the time of incorporation of a company. Section 2(28)defines a memorandum to mean the memorandum of association of a company as originally framed or as altered from time to time in pursuance of any previous company law or of this act. The definition, however, either does not give us any idea as to what a memorandum of association really is nor does it point out the role which it plays in the affairs of the company. The memorandum of association is an extremely important document in relation to the affairs of the company. It is a document which sets out the constitution of the company and is really the foundation on which the structure of the company is based. It contains the fundamental conditions upon which alone the company is allowed to be incorporated. A company may pursue only such objects and exercise only such powers as are conferred expressly in the memorandum or by implication therefore i.e. such powers as are incidental to the attainment of the objects. A company cannot depart from the provisions contained in its memorandum, however, great the necessity may be. If it does, it defines its relation with the outside world and the scope of its activities. The purpose of the memorandum is to enable shareholders, creditors and those who deal with the company to know what is the permitted range of the enterprise. It defines as well as confines the powers of the company; it not only shows the object of its formation, but also the utmost possible scope of its operation beyond which its action cannot go. Lord Cairns in Ashbury Railway Carriage Co. V. Riche pointed out, The memorandum is as it were, the area beyond which the action of the company cannot go; inside that area the shareholders may make such regulations for their own government as they think fit.

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

In the case of a company limited by guarantee, its memorandum of association shall state that each member undertakes to contribute to the assets of the company, in the event of its being wound up while he is a member or within or year after wards for the payment of the debts and liabilities of the company. Every subscriber to the memorandum shall take at least one share and shall write opposite to his name the number of shares taken by him. Q-6. Write a note on the following: a. Copy Right Act : Copyright is a form of intellectual property protection granted under Indian law to the creators of original works of authorship such as literary works (including computer programs, tables and compilations including computer databases which may be expressed in words, codes, schemes or in any other form, including a machine readable medium), dramatic, musical and artistic works, cinematographic films and sound recordings. Copyright law protects expressions of ideas rather than the ideas themselves. Under section 13 of the Copyright Act 1957, copyright protection is conferred on literary works, dramatic works, musical works, artistic works, cinematograph films and sound recording. For example, books, computer programs are protected under the Act as literary works. Copyright refers to a bundle of exclusive rights vested in the owner of copyright by virtue of Section 14 of the Act. These rights can be exercised only by the owner of copyright or by any other person who is duly licensed in this regard by the owner of copyright. These rights include the right of adaptation, right of reproduction, right of publication, right to make translations, communication to public etc. Copyright protection is conferred on all Original literary, artistic, musical or dramatic, cinematograph and sound recording works. Original means, that the work has not been copied from any other source. Copyright protection commences the moment a work is created, and its registration is optional. However it is always advisable to obtain a registration for a better protection. Copyright registration does not confer any rights and is merely a prima facie proof of an entry in respect of the work in the Copyright Register maintained by the Registrar of Copyrights. As per Section 17 of the Act, the author or creator of the work is the first owner of copyright. An exception to this rule is that, the employer becomes the owner of copyright in circumstances where the employee creates a work in the course of and scope of employment.

Copyright registration is invaluable to a copyright holder who wishes to take a civil or criminal action against the infringer. Registration formalities are simple and the paperwork is least. In case, the work has been created by a person other than employee, it would be necessary to file with the application, a copy of the assignment deed. One of the supreme advantages of copyright protection is that protection is available in several countries across the world, although the work is first published in India by reason of India being a member of Berne Convention. Protection is given to works first published in India, in respect of all countries that are member states to treaties and conventions to which India is a member. Thus, without formally applying for protection, copyright protection is available to works first published in India, across several countries. Also, the government of India has by virtue of the International Copyright Order, 1999, extended copyright protection to works first published outside India. Indian perspective on copyright protection: The Copyright Act, 1957 provides copyright protection in India. It confers copyright protection in the following two forms: (A) Economic rights of the author, and (B) Moral Rights of the author. (A) Economic Rights: The copyright subsists in original literary, dramatic, musical and artistic works; cinematographs films and sound recordings. The authors of copyright in the aforesaid works enjoy economic rights u/s 14 of the Act. The rights are mainly, in respect of literary, dramatic and musical, other than computer program, to reproduce the work in any material form including the storing of it in any medium by electronic means, to issue copies of the work to the public, to perform the work in public or communicating it to the public, to make any cinematograph film or sound recording in respect of the work, and to make any translation or adaptation of the work. In the case of computer program, the author enjoys in addition to the aforesaid rights, the right to sell or give on hire, or offer for sale or hire any copy of the computer program regardless whether such copy has been sold or given on hire on earlier occasions. In the case of an artistic work, the rights available to an author include the right to reproduce the work in any material form, including depiction in three dimensions of a two dimensional work or in two dimensions of a three dimensional work, to communicate or issues copies of the work to the public, to include the work in any cinematograph work, and to make any adaptation of the work. In the case of cinematograph film, the author enjoys the right to make a copy of the film including a photograph of any image forming part thereof, to sell or give on hire or offer for sale or hire, any copy of the film, and to communicate the film to the public. These rights are similarly available to the author of sound recording. In addition to the aforesaid rights, the author of a painting, sculpture, drawing or of a manuscript of a literary, dramatic or musical work, if he was the first owner of the

copyright, shall be entitled to have a right to share in the resale price of such original copy provided that the resale price exceeds rupees ten thousand. (B) Moral Rights: Section 57 of the Act defines the two basic moral rights of an author. These are: (i) Right of paternity, and (ii) Right of integrity. The right of paternity refers to a right of an author to claim authorship of work and a right to prevent all others from claiming authorship of his work. Right of integrity empowers the author to prevent distortion, mutilation or other alterations of his work, or any other action in relation to said work, which would be prejudicial to his honour or reputation. The proviso to section 57(1) provides that the author shall not have any right to restrain or claim damages in respect of any adaptation of a computer program to which section 52 (1)(aa) applies (i.e. reverse engineering of the same). It must be noted that failure to display a work or to display it to the satisfaction of the author shall not be deemed to be an infringement of the rights conferred by this section. The legal representatives of the author may exercise the rights conferred upon an author of a work by section 57(1), other than the right to claim authorship of the work.. Indian Judiciary Response: The response of Indian judiciary regarding copyright protection can be grouped under the following headings: (1) Ownership of copyright, (2) Jurisdictional aspect, (3) Cognizance taken by the court, (4) Infringement of copyright, (5) Availability of alternative remedy, and (6) Rectification of copyright. b. Pledge: A pledge is a bailment that conveys possessory title to property owned by a debtor (the pledgor) to a creditor (the pledgee) to secure repayment for some debt or obligation and to the mutual benefit of both parties.[1][2] The term is also used to denote the property which constitutes the security. Pledge is the pignus of Roman law, from which most of the modern law on the subject is derived, but is generally a feature of even the most basic legal systems. It differs from hypothecation and from the more usual mortgage in that the pledge is in the possession of the pledgee. It is similar, however, in that all three can apply to personal and real property. A pledge of personal property is known as a pawn and that of real property is called an antichresis. In earlier medieval law, especially in Germanic law, two types of pledge existed, being either possessory (cf. Old English wed, Old French gage, Old High German wetti, Latin pignus depositum), i.e. delivered from the outset, or a non-

possessory (cf. OE bd, OFr nam, nant, OHG pfant, L pignus oppositum), i.e. distrained on the maturity date, and the latter essentially gave rise to the legal principle of distraint. This distinction still remains in some systems, e.g. French gage vs. nantissement and Dutch vuistpand vs. stil pand. Token, symbolic reciprocal pledges were commonly incorporated into formal ceremonies as a way of solidifying agreements and other transactions. The chief difference between Roman and English law is that certain things (e.g. apparel, furniture and instruments of tillage) could not be pledged in Roman law, while there is no such restriction in English law. In the case of a pledge, a special property passes to the pledgee, sufficient to enable him to maintain an action against a wrongdoer, but the general property, that is the property subject to the pledge, remains in the pledgor. As the pledge is for the benefit of both parties, the pledgee is bound to exercise only ordinary care over the pledge. The pledgee has the right of selling the pledge if the pledgor make default in payment at the stipulated time. No right is acquired by the wrongful sale of a pledge except in the case of property passing by delivery, such as money or negotiable securities. In the case of a wrongful sale by a pledge, the pledgor cannot recover the value of the pledge without a tender of the amount due. The law of Scotland and the United States generally agrees with that of England as to pledges. The main difference is that in Scotland and in Louisiana a pledge cannot be sold unless with judicial authority. In some of the U.S. states the common law as it existed apart from the Factors Acts is still followed; in others the factor has more or less restricted power to give a title by pledge.

ASSIGNMENT- Set 2
Q-1. Freedom to contract is a myth or an illusion. Discuss

Ans.
Freedom to contract is a myth or an illusion The freedom of the parties is limited by two factors. There are certain laws for the protection of the employees, and an employer cannot, therefore, induce his employees to enter into any contract favorable to the employer. What is a standard form contract? A standard form contract is a document which is generally printed, containing terms and conditions, with certain blanks to be filled in. It is prepared by the business people. The customer has only to sign it. Therefore, from his standpoint, the freedom to contract is restricted. Many of the contracts now being entered into by consumers are not the result of individual negotiations; rather they are one-sided contracts. The law of contract in India is contained in the Indian Contract Act, 1872. This Act is based mainly on English common law, which is to a large extent made up of judicial precedents. (there being a separate contract act in England). It extends to the whole of India except the state of Jammu and Kashmir and came into force on the first day of September 1872 (Sec.1 Indian Contract Act, 1872). The act is not exhaustive. Essentials of a contract Sec.10 provides that all agreements are contracts, if they are made by free consent of parties, competent to contract, for a lawful consideration, and with a lawful object, and are not expressly declared by law to be void. To constitute a contract, there must be an agreement between two or more than two parties. No one can enter into a contract with himself. An agreement is composed of two elements offer or proposal by one party and acceptance thereof by the other party.

Effect of absence of one or more essential elements of a valid contract: If one or more essentials of a valid contract are missing, then the contract may be either void able, void, illegal or unenforceable. The freedom of the parties is limited by two factors. There are certain laws for the protection of the employees, and an employer cannot, therefore, induce his employees to enter into any contract favorable to the employer. Further, the standard form of contract (with printed terms and conditions) is in vogue today, and several contracts entered into by laymen are not the result of individual negotiations. Thus, if a person is in need of electricity, or telephone connection, it is not possible for him to settle the terms of the agreement with the Electricity Board or the Telephone Corporation, etc. Each of them have their own printed contracts and the intending customer has either to accept on those terms, or go without electricity or telephone, as the case many be. In such a case, since one does not want to go without such necessary services, the individual is in effect compelled to accept all those standard terms. Thus, absolute freedom of contract is largely an illusion or mostly a myth. The freedom to contract has been intervened in three ways, thereby making it a myth. These are: (i)Enactment of laws by the welfare states to protect the interests of those parties to the contract which have a weak bargaining power, (ii) intervention by the courts, which refuse to enforce, and even rewrite terms in private contracts in order to protect the real or presumed victims of one sided or unfair or unconscionable contracts, (iii) widespread adoption of form contracting by business. Q-2. Distinguish between a contract of guarantee and a contract of indemnity. Ans. Understanding the various types of contracts by which one party can agree to compensate another for a loss can be confusing. This area of law uses many archaic terms, which add an additional layer of confusion for those unfamiliar with these terms. When a contract is boiled down to its essentials, however, including who is promising to pay whom and why, the differences between a contract of indemnity and a contract of guarantee become clear.

Contracts of Indemnity

Simply put, a contract of indemnity is any agreement whereby one party agrees to indemnify, or pay, the other party for certain types of loss. Depending on the contract, those losses could be caused by the party promising to pay or by any other individual. The most common type of contracts of indemnity are insurance contracts. For instance, in an automobile insurance contract, the insurance company promises to indemnify (or pay) the insured for any losses he suffers as a result of automobile accidents.

Contracts of Guarantee

In a contract of guarantee, or contract of guaranty, one party agrees to act on behalf of another should that second party default. In plain terms, this means that if an individual fails to pay her guaranteed debt or to perform some other duty or obligation, the guarantor -- the party who has agreed to act on behalf of another -- will step in to pay or perform the obligation. Common contracts of guarantee include a loan with a co-signer and a student loan, where the government guarantees payment if the student should default. Key Similarities

Contracts of indemnity and contracts of guaranty share certain core similarities. In each, one party is agreeing to pay on behalf of another. And each of these types of contracts is used as a guard against losses by individuals and businesses.

Key Differences

In spite of their basic similarities, contracts of indemnity are inherently different from contracts of guarantee. Most importantly, contracts of indemnity usually involve only two parties (the party who might suffer some loss and the party who agrees to pay), while contracts of guarantee involve, indirectly at least, a minimum of three (the party who might suffer a loss in the event of default or failure to pay, the party who might default, and the party agreeing to pay). In a contract of indemnity, there is a single promise, or contract: the promise to pay in the event of an unexpected loss. In a contract of guarantee, by contrast, there are multiple promises, including the original promise to pay or perform and the guarantor's promise to pay or perform in the event of default. While in a contract of indemnity only one party is liable or responsible to compensate for the loss, in a contract of guarantee there are at least two parties responsible.

Example Some of the differences were highlighted by the Court of Appeal in the 2007 case Pitts and Ors v Jones. The appellants bringing the claim were minority shareholders in a company of which the other party was managing director and majority shareholder. The majority shareholder had negotiated the sale of the company to a purchaser who had agreed to buy the shares of the minority at the same price. The appellants were summoned to the sale completion meeting and were told that as part of the terms agreed their shares would be purchased after a delay of six months. On being made aware of the risk of the purchaser becoming insolvent within this period they declined to sign the documents but relented when the majority shareholder undertook verbally to pay if the purchaser failed to do so. The purchaser did subsequently become insolvent and could not pay for the minority shareholders shares, so they sued the majority shareholder on his undertaking to pay them. The Court of Appeal found that, while all the other necessary elements of a legally binding contract were present (offer, acceptance, consideration and the intention to create legal relations), the undertaking given to the minority shareholders was unenforceable since it was a guarantee and was not in writing. The minority shareholders lost the value of their shares and were left with no recourse. What is what? A guarantee is For example: An indemnity is a promise to someone that a third party will meet its obligations to them if they dont pay you, I will a promise to be responsible for anothers loss, and to compensate them for that loss on an agreed basis

Q-3. What is Partnership? Briefly state special features of a partnership on the basis of which its existence can be determined under the Indian Partnership Act? Ans. A partnership is a strategic alliance or relationship between two or more
people. Successful partnerships are often based on trust, equality, and mutual understanding and obligations. Partnerships can be formal, where each party's roles and obligations are spelled out in a written agreement, or informal, where the roles and obligations are assumed or agreed to verbally. You may be able to choose your partner or, as is often the case, your partner may be assigned to you. Partners are often necessary when working in a foreign country, not only to bridge language barriers, but also to help you perform your work efficiently without falling into the traditional cross-cultural traps one encounters in a foreign setting. Working with Lao men and women allows you to become acquainted with Lao society rapidly. You will be able to meet the right people quickly instead of spending valuable time building up your own network. Your Lao partnerships can help you avoid cultural blunders along the way.

Working with a partner is, of course, fraught with pitfalls. A partnership that has gone sour can cause bitter feelings and spoil a business deal. It is important for both parties to be open-minded and accepting of each other's differences. There must be a willingness to learn and adapt. Both partners must be willing to exchange their technical knowledge and to relate as equals in a shared future.

The Indian Partnership Act was passed in 1932 to define and amend the law relating to partnership. Indian Partnership Act is one of very old mercantile law. Partnership is one of the special types of Contract. Initially, this was part of Indian Contract Act itself (Chapter IX - sections 239 to 266), but later converted into separate Act in 1932. The Indian Partnership Act is complimentary to Contract Act. Basic provisions of Contract Act apply to contract of partnership also. Basic requirements of contract i.e. legally enforceable agreement, mutual consent, parties competent to contract, free consent, lawful object, consideration etc. apply to partnership contract also. Partnership Contract is a concurrent subject - Contract, including partnership contract is a concurrent subject, covered in Entry 7 of List III (Seventh Schedule to Constitution). Indian Partnership Act is a Central Act, but State Government can also pass legislation on this issue. Though Partnership Act is a Central Act, it is administered by State Governments, i.e. work of registration of firms and related matters is looked after by each State Government. The Act is not applicable to Jammu and Kashmir. Unlimited liability is major disadvantage - The major disadvantage of partnership is the unlimited liability of partners for the debts and liabilities of the firm. Any partner can bind the firm and the firm is liable for all liabilities incurred by any firm on behalf of the firm. If property of partnership firm is insufficient to meet liabilities, personal property of any partner can be attached to pay the debts of the firm. Partnership Firm is not a legal entity - It may be surprising but true that a Partnership Firm is not a legal entity. It has limited identity for purpose of tax law. As per section 4 of Indian Partnership Act, 1932, 'partnership' is the relation between persons who have agreed to share the profits of a business carried on by all or any one of them acting for all. - - Under partnership law, a partnership firm is not a legal entity, but only consists of individual partners for the time being. It is not a distinct legal entity apart from the partners constituting it - Malabar Fisheries Co. v. CIT (1979) 120 ITR 49 = 2 Taxman 409 (SC). FIRM LEGAL ENTITY FOR PURPOSE OF TAXATION - For tax law, income-tax as well as sales tax, partnership firm is a legal entity - State of Punjab v. Jullender Vegetables Syndicate - 1966 (17) STC 326 (SC) * CIT v. A W Figgies AIR 1953 SC 455 * CIT v. G Parthasarthy Naidu (1999) 236 ITR 350 = 104

Taxman 197 (SC). Though a partnership firm is not a juristic person, Civil Procedure Code enables the partners of a partnership firm to sue or to be sued in the name of the firm. - Ashok Transport Agency v. Awadhesh Kumar 1998(5) SCALE 730 (SC). [A partnership firm can sue only if it is registered]. Partnership, partner, firm and firm name - Partnership is the relation between persons who have agreed to share the profits of business carried on by all or any to them acting for all. - - Persons who have entered into partnership with one another are called individually partners and collectively a firm, and the name under which their business is carried on is called the firm name. [section 4]. Business includes every trade, occupation and profession. [section 2(b)]. Thus, a partnership can be formed only with intention to share profits of business. People coming together for some social or philanthropic or religious purposes do not constitute partnership. PARTNERS ARE MUTUAL AGENTS - The business of firm can be carried on by all or any of them for all. Any partner has authority to bind the firm. Act of any one partner is binding on all the partners. Thus, each partner is agent of all the remaining partners. Hence, partners are mutual agents. ORAL OR WRITTEN AGREEMENT - As per normal provision of contract, a partnership agreement can be either oral or written. - - Agreement in writing is necessary to get the firm registered. Similarly, written agreement is required, if the firm wants to be assessed as partnership firm under Income Tax Act. A written agreement is advisable to establish existence of partnership and to prove rights and liabilities of each partner, as it is difficult to prove an oral agreement. - However, written agreement is not essential under Indian Partnership Act. SHARING OF PROFIT NECESSARY - The partners must come together to share profits. Thus, if one member gets only fixed remuneration (irrespective of profits) or one who gets only interest and no profit share at all, is not a partner. - Similarly, sharing of receipts or collections (without any relation to profits earned) is not sharing of profit and the association is not partnership. For example, agreement to share rents collected or percentage of tickets sold is not partnership, as sharing of profits is not involved. - - The share need not be in proportion to funds contributed by each partner. - - Interestingly, though sharing of profit is essential, sharing of losses is not an essential condition for partnership . - - Similarly, contribution of capital is not essential to become partner of a firm. NUMBER OF PARTNERS - Since partnership is agreement there must be minimum two partners. The Partnership Act does not put any restrictions on maximum number of partners. However, section 11 of Companies Act prohibits partnership consisting of more than 20 members, unless it is registered as a company or formed in pursuance of some other law.

Mode of determining existence of partnership - In determining whether a group of persons is or is not a firm, or whether a person is or is not a partner in a firm, regard shall be had to the real relation between the parties, as shown by all relevant facts taken together. [section 6]. MUTUAL AGENCY IS THE REAL TEST - The real test of partnership firm is mutual agency, i.e. whether a partner can bind the firm by his act, i.e. whether he can act as agent of all other partners. Partnership at will - Where no provision is made by contract between the partners for the duration of their partnership, or for the determination of their partnership, the partnership is partnership at will. [section 7]. - - Partnership at will means any partner can dissolve a firm by giving notice to other partners (or he may express his intention to retire from partnership) - - Partnership deed may provide about duration of partnership (say 10 years) or how partnership will be brought to end. In absence of any such term, the partnership is at will. - - In case of particular partnership, the partnership comes to end when the venture for which it was formed comes to end. Determination of rights and duties of partners by contract between the partners - Subject to the provisions of this Act, the mutual rights and duties of the partners of a firm may be determined by contract between the partners, and such contract may be express or may be implied by a course of dealing. - - Such contract may be varied by consent of all the partners, and such consent may be express or may be implied by a course of dealing. [section 11(1)]. - - Thus, partners are free to determine the mutual rights and duties by contract. Such contract may be in writing or it may be implied by their actions. Dutiesand mutual rights of partners - Subject to contract to contrary, partners have duties and mutual rights as specified in Partnership ActEVERY PARTNER HAS RIGHT TO TAKE PART IN BUSINESS - Subject to contract between partners (to the contrary), every partner has right to take part in the conduct of the business. [section 12(a)]. - - Thus, every partner has equal right to take active part in business, unless there is specific contract to the contrary. Even if authority of a partner is restricted by contract, outside party is not likely to be aware of such restriction. In such case, if such partner acts within the apparent authority, the firm will be liable for his acts. The property of the firm - Subject to contract between the partners, the property of the firm includes all property and rights and interests in property originally brought into the stock of the firm, or acquired, by purchase or otherwise, by or for the firm, or for the purposes and in the course of the business of the firm, and includes also the goodwill of the business. - - Unless the contrary intention appears, property and rights and interests in property

acquired with money belonging to the firm are deemed to have been acquired for the firm [section 14]. Partner to be agent of the firm - Subject to the provisions of this Act, a partner is the agent of the firm for the purposes of the business of the firm. [section 18]. Implied authority of partner as agent of the firm - Subject to the provisions of section 22, the act of a partner which is done to carry on, in the usual way, business of the kind carried on by the firm, binds the firm. The authority of a partner to bind the firm conferred by this section is called his implied authority. [section 19(1)]. PARTNERS JOINTLY AND SEVERALLY LIABLE ACTS OF THE FIRM - Every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner. [section 25]. An act of a firm means any act or omission by all the partners, or by any partner or agent of the firm which gives rise to a right enforceable by or against the firm [section 2(a)]. Joint and several means each partner is liable for all acts. Thus, if amount due cannot be recovered from other partners, any one partner will be liable for payment of entire dues of the firm. Partner by Holding out - Holding out means giving impression that a person is partner though he is not. This is principle of estoppel. If a person gives an impression to outsiders that he is partner of firm though he is not partner, he will he held liable as partner, if third party deals with the firm on the impression that he is a partner. Similarly, if a person retires from the firm but does not give notice of retirement, he will be liable as a partner, if some third party deals with the firm on the assumption that he is still partner. Minors admitted to the benefits of partnership - A person who is a minor according to the law to which he is subject may not be a partner in a firm, but, with the consent of all the partners for the time being, he may be admitted to the benefits of partnership. [section 30(1)]. RIGHTS OF MINOR - Minor (who is admitted to benefit of partnership) has a right to such share of the property and of the profits of the firm as may be agreed upon and he may have access to and inspect and copy any of the accounts of the firm. [section 30(2)]. [Since the word used is may, it seems that right of minor to inspect accounts can be restricted by agreement among partners]. MINORS SHARE LIABLE BUT NOT MINOR HIMSELF - Such minors share is liable for the acts of the firm, but the minor is not personally liable for any such act. [section 30(3)]. Reconstitution of a Partnership Firm - A partnership firm is not a legal entity. It has no perpetual existence as in case of a company incorporated under

Companies Act. However, the Act gives the partnership limited rights of continuity of business despite change of partners. In absence of specific provision in partnership deed, death or insolvency of a partner means dissolution of the firm. However, partnership can provide that the firm will not dissolve in such case. Change in partners may occur due to various reasons like death, retirement, admission of new member, expulsion, insolvency, transfer of interest by partner etc. After such change, the rights and liabilities of each partner are determined afresh. This is termed as reconstitution of a firm. Dissolution of a Firm - A partnership firm is an organisation and like every organ it has to either grow or perish. Thus, dissolution of a firm is inevitable part in the life of partnership firm some time or the other. Dissolution of a firm without intervention of Court can be (a) By agreement (section 40) (b) Compulsory dissolution in case of insolvency (section 41) (c) Dissolution on happening of certain contingency (section 42) (d) By notice if partnership is at will (section 43). A firm can also be dissolved by Court u/s 44. DISSOLUTION OF PARTNERSHIP AND DISSOLUTION OF FIRM - The dissolution of partnership between all the partners of a firm is called the dissolution of the firm. [section 39]. - - . As per section 4, Partnership is the relation between persons who have agreed to share profits of business carried on by all or any of them acting for all. - - Thus, if some partner is changed/added/ goes out, the relation between them changes and hence partnership is dissolved, but the firm continues. Hence, the change is termed as reconstitution of firm. However, complete breakage between relations of all partners is termed as dissolution of firm. After such dissolution, the firm no more exists. Thus, Dissolution of partnership is different from dissolution of firm. Dissolution of partnership is only reconstruction of firm, while dissolution of firm means the firm no more exists after dissolution. Mode of dissolution of firm - Following are various modes of dissolution of firm. * Dissolution by agreement - [section 40]. * Compulsory dissolution in case of insolvency - [section 41] * Dissolution on the happening on certain contingencies [section 42] * Dissolution by notice of partnership at will [section 43(2)] * Dissolution by the court Consequences of dissolution of firm - After firm is dissolved, business is wound up and proceeds are distributed among partners. The Act specifies what are the consequences of dissolution of a firm.

Q-4.Distinguish between condition and warranty. State the circumstance under which a condition can be waived and treated as a warranty. Ans. CONDITION :It is defined in the following words, "A condition is stipulation essential breach to the main purpose of the contract, the breach of which give rise to a right to treat the contract as repudiated." So according the above definition it is clear that condition is very essential for the performance of a contract. The breach of condition will be regarded as the breach of the whole contract. WARRANTY :Sales act defines the warranty in the following words, "A warranty is a stipulation collateral to the main purpose of the contract the breach of which gives rise to a claim for damages but not to a right to reject the goods and treat the contract as repudiated." The above definition shows that for the implementation of a contract warranty is not essential. For the breach of warranty only damages can be claimed. Difference or Distinction Between Condition and Warranty 1. Difference In Importance :Condition : A condition is essential to the main purpose of a contract. Warranty : Breach of warranty gives right to the party to claim the damage only. 2. Difference in Rights :Condition : Breach of condition gives right to the party to reject the contract. Warranty : Breach of warranty gives right to the party to claim the damages only. 3. Superiority of Condition :Condition : A breach of condition may be treated as a breach of warranty. Warranty : A breach of warranty may not be treated as a breach of condition. 4. Link With Contract :Condition : A condition has a direct link with the essential party of the contract. Warranty : A warranty has no direct link with the essential part of the contract.

When condition to be treated as warranty (1) Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty and not as a ground for treating the contract as repudiated. (2) Where a contract of sale is not severable and the buyer has accepted the goods are part thereof 5*** the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect. (3) Nothing in this section shall affect the case of any condition or warranty fulfilment of which is excused by law by reason of impossibility or otherwise.

Q-5 A cheque is a bill of exchange drawn on a banker. Comment. Ans. 1. Drawee: A cheque is always drawn on a bank or a banker while a bill of exchange can be drawn on any person including a banker. 2. Acceptance: A cheque does not require any acceptance while a bill must be accepted before the drawee can be made liable upon it. 3. Payment: A cheque is payable immediately on demand without any days of grace, but a bill of exchange is normally entitled to three days of grace unless it is payable on demand. 4. Crossing: A cheque may be crossed but there is no such provision in the case of a bill of exchange. 5. Notice of dishonor: When a cheque is not met, notice of dishonor is not necessary. Want of assets in the hands of the banker is sufficient notice. It is necessary to give a notice of dishonor in order to make the drawer of a bill liable. 6. Payable to bearer on demand: A cheque can be drawn payable to bearer on demand. But a bill of exchange cannot be so drawn.

7. Stamp: A bill of exchange must be stamped, whereas a cheque does not require any stamp. 8. Countermanding payment: A cheque may be revoked by countermand of payment. The payment of a bill, however cannot be countermanded. 9. Noting and protesting: A cheque is not noted or protested for dishonor and is generally inland. 10. Presentment: A bill of exchange must be duly presented for payment otherwise the drawer will be discharged. The drawer of a cheque is not discharged by failure of the holder to present it in due time unless the drawer has sustained damage by the delay. 11. Protection: A banker is given statutory protection with regard to payment of cheques in certain circumstances. No such protection is available to the drawee or acceptor of a bill of exchange. Both cheque and bill of exchanges are negotiable instruments. But they have some difference. They are 1. A bill of exchange may be drawn on any person on any organization and the person need not be necessarily a banker. On the other hand, a cheque is a bill of exchange drawn on a specified banker. 2. Use of bill of exchange is sinless in business and financial transaction. But the use of cheque is seen widely in financial and banking transaction. 3. A bill of exchange may be made payable on the expiry of a certain period after. But a cheque is not expressed to be payable otherwise than on demand. In the case bill of exchange it is necessary to get the acceptance from the person it is prepared. In the case if cheque the acceptance is not necessary or baseless. 4. Days of grace are allowed in the case of time bills. But in the case of cheque, days of grace are not allowed. 5. The bill of exchanges are never earned where as the cheque may be. The payment of cheque should be suspended on the receipt of notice of the death or insolvency of the drawer. But in the case of bill of exchange the payment should not be suspended for the above reason. 6. Cheque is drawn on a banker bot bill of exchange may be drawn on any party or individual.

7. Cheque has three parties the drawer, the drawee, and payee but on the other hand bill of exchange are three parties the drawer, the drawee, and the payee. 8. Cheque does not require acceptance by the drawee but on the other hand bill of exchange are must be accepted by the drawee before he can be made liable to pay the bill. Q-6. Write short note on a. Digital signature : A digital signature authenticates electronic documents in a similar manner a handwritten signature authenticates printed documents. This signature cannot be forged and it asserts that a named person wrote or otherwise agreed to the document to which the signature is attached. The recipient of a digitally signed message can verify that the message originated from the person whose signature is attached to the document and that the message has not been altered either intentionally or accidentally since it was signed. Also, the signer of a document cannot later disown it by claiming that the signature was forged. In other words, digital signatures enable the authentication and non-repudiation of digital messages, assuring the recipient of a digital message of both the identity of the sender and the integrity of the message. A digital signature is issued by a Certification Authority (CA) and is signed with the CAs private key. A digital signature typically contains the: Owners public key, the Owners name, Expiration date of the public key, the Name of the issuer (the CA that issued the Digital ID), Serial number of the digital signature, and the digital signature of the issuer. Digital signatures deploy the Public Key Infrastructure (PKI) technology. If you file electronically using digital signature you do not have to submit a physical copy of the return. Even if you do not have a digital signature, you can still e-File the returns. However, you must also physically submit the printed copy of the filled up Form along with the copy of the Provisional Acknowledgement Number of your e-Return. How legal is a Digital signature? India is one of the select band of nations that has the Digital Signature Legislation in place. This Act grants digital signatures that have been issued by a licensed Certifying Authority in India the same status as a physical signature. Digital signatures deploy the Public Key Infrastructure (PKI) technology.

How and where can I get a Digital Signature Certificate ( DSC)? The Information Technology Act, 2000 provides for use of Digital Signatures on the documents submitted in electronic form in order to ensure the security and authenticity of the documents filed electronically. Certification Agencies are appointed by the office of the Controller of Certification Agencies (CCA) under the provisions of IT Act, 2000. There are a total of seven Certification Agencies authorized by the CCA to issue the Digital Signature Certificates. Do I need a fresh digital signature, in case I already have one? A person who already has the specified class II or III DSC for any other application can use the same for filing the Income tax return and is not required to obtain a fresh PAN embedded DSC. Fresh PAN embedded DSC is required in cases where the existing DSC has expired. How much does a digital signature cost? The Digital Signature certificates are typically issued with one year validity and two year validity. It includes the cost of medium (a USB token which is a one time cost), the cost of issuance of Digital Signature and the renewal cost after the period of validity. The issuance costs in respect of each Certification Agency vary and are market driven. b. Prospectus : A formal legal document, which is required by and filed with the Securities and Exchange Commission, that provides details about an investment offering for sale to the public. A prospectus should contain the facts that an investor needs to make an informed investment decision, also known as an "offer document." There are two types of prospectuses for stocks and bonds: preliminary and final. The preliminary prospectus is the first offering document provided by a securities issuer and includes most of the details of the business and transaction in question. Some lettering on the front cover is printed in red, which results in the use of the nickname "red herring" for this document. The final prospectus is printed after the deal has been made effective and can be offered for sale, and supersedes the preliminary prospectus. It contains finalized background information including such details as the exact number of shares/certificates issued and the precise offering price. In the case of mutual funds, which, apart from their initial share offering, continuously offer shares for sale to the public, the prospectus used is a final prospectus. A fund prospectus contains details on its objectives, investment strategies, risks, performance, distribution policy, fees and expenses, and fund management. In finance, a prospectus is a document that describes a financial security for

potential buyers. A prospectus commonly provides investors with material information about mutual funds, stocks, bonds and other investments, such as a description of the company's business, financial statements, biographies of officers and directors, detailed information about their compensation, any litigation that is taking place, a list of material properties and any other material information. In the context of an individual securities offering, such as an initial public offering, a prospectus is distributed by underwriters or brokerages to potential investors. What are the parts of the prospectus? 1. A prospectus contains a clear, concise introduction to the topic of the research. 2. A prospectus states the main research question(s) that the researcher wishes to answer. 3. A prospectus summarizes the basic arguments that surround the research topic. 4. A prospectus lists the basic research materials; these may be listed according to title and author, or they may include annotations.If experts in the topic are to be consulted, their names are also included. (NOTE: The list of basic research materials may not be a complete list of all materials that are finally used in the research, but should indicate the research direction and the types of materials the researcher plans to examine and study.) 5. The prospectus usually does not include the researcher's thesis, except as the basis for the research questions. If the researcher believes a certain thing to be true, but has no substantive evidence to support that belief, then the researcher's belief drives the questions that must be answered in order to demonstrate the correctness of the belief. In certain types of research, especially scientific research, the investigator must state a hypothesis, what the researcher will attempt to prove or disprove, in the prospectus. The hypothesis gives the researcher's supposition or unproved theory as the basis for the investigation. To whom is a prospectus written? The audience for the prospectus is the reader who will determine whether or not the research project should be undertaken. This reader may be a professor, a research committee, a graduate degree committee, a funding agency, or the management of the company or agency for whom the researcher will conduct the study.

In what style should a prospectus be written? A formal style generally is preferred. Since the prospectus can not present the researcher's conclusion, i.e., the research has yet to be done, write the prospectus in the third person. More importantly, use active voice verbs and a writer's voice that demonstrates confidence that the research has merit. A prospectus that "sounds" dubious or not well considered typically indicates that the research project is dubious and not well considered. How long should a prospectus be? A prospectus needs to cover the basic points to assure the reader that the researcher plans a substantive project. Beyond that minimum, the length of the prospectus should be proportionate to that of the project. The research assignment may specify an optimal or maximum length.