MBA (MB 0051) Legal Aspects of Business

Q1. Discuss the nature and significance of business law. The term law is used in many senses: you may speak of the law of physics, mathematics, science, or the laws of the football or health. In its widest sense, law means any rule of conduct, standard or pattern, to which actions are required to conform; if not conformed, sanctions are imposed. Significance of law. Law is a body of rules These rules prescribe the conduct, standard or pattern to which actions of the persons in the state are required to conform. However, all rules of conduct do not become law in the strict sense. We resort to various kinds of rules to guide our lives. Law is for the guidance or conduct of persons Both human and artificial. The law is not made just for the sake of making it. The rules embodied in the law are made, so as to ensure that actions of the persons in the society conform to some predetermined standard or pattern. This is necessary so as to ensure continuance of the society. No doubt, if citizens are self-enlightened or selfcontrolled, disputes may be minimized, but will not be eliminated. Law is imposed Law is imposed on the members to bring about an order in the group, enabling it to continue and prosper. If you cannot impose a rule it is better not to have it. Thus, law is made obligatory on the members of the society. Law is enforced by the executive Obviously, unless a law is enforced it ceases to be a law and those persons subject to it will regard it as dead. The force used is known as sanction which the state administers to secure obedience to its laws. The state A state is a territorial division, with people therein subject to a uniform system of law administered by some authority of the state. Thus, law presupposes a state.

Content of law The law is a living thing and changes throughout the course of history. Law responds to public opinion and changes accordingly. Law can never be static. Therefore, amendments are made in different laws from time to time Two basic ideas involved in law The two basic ideas involved in any law are: (i) to maintain some form of social order in a group and (ii) to compel members of the group to be within that order. Law is made to serve some purpose which may be social, economic or political.

Q2. 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? Partnership is defined as the relationship between persons who have agreed to share profits of a business carried on by all, or by any of them acting for all. On analysis of the definition, certain essential elements of partnership emerge. These elements must be present so as to form a partnership and are discussed below. 1. Partnership is an association of two or more than two persons There must be at least two persons who should join together to constitute a partnership, because one person cannot become a partner with himself. These persons must be natural persons having legal capacity to contract. Thus, a company (which is an artificial person) cannot be a partner. Similarly, a partnership firm cannot be a partner of another partnership firm. As regards maximum number of partners in a partnership firm, Sec.11 of the Companies Act, 1956, puts the limit at 10 in case of banking business and 20 in case of any other business. 2. Partnership must be the result of an agreement between two or more persons An agreement presupposes a minimum number of two persons. As mentioned above, a partnership to arise, at least two persons must make an agreement. Partnership is the result of an agreement between two or more persons (who are known as partners after the partnership comes into existence) 3. The agreement must be to carry on some business

The term business includes every trade, occupation or profession [Sec.2 (b)]. Though the word business generally conveys the idea of numerous transactions, a person may become a partner with another even in a particular adventure or undertaking (Sec.8). Unless the person joins for the purpose of carrying on a business, it will not amount to partnership. 4. The agreement must be to share profits of the business The joint carrying on of a business alone is not enough; there must be an agreement to share profits arising from the business. Unless otherwise so agreed, sharing of profits also involves sharing of losses. But whereas the sharing of profits is an essential element of partnership, sharing of losses is not.

Q3. Examine the rights of a consumer enshrined under the Consumer Protection Act, 1986. For the first time in the history of consumer legislation in India, the Consumer Protection Act, 1986 extended a statutory recognition to the rights of consumers. Sec.6 of the Act recognizes the following six rights of consumers: Though consumer is the purpose and most powerful motivating force of production, yet at the same time consumer is equally vulnerable segment of the whole marketing system. Attempts have been made to guard the interest of the consumer in a sporadic way till 1986, when Government of India enacted a comprehensive legislation-Consumer Protection Act, to safe guard the interest of the consumer than ever before. The Consumer Protection Act, 1986, applies to all goods and services, excluding goods for resale or for commercial purpose and services rendered free of charge and under a contract for personal service. The provisions of the Act are compensatory in nature. It covers public, private, joint and cooperative sectors. The Consumer Protection Act, 1986 was born. It is described as a unique legislation of its kind ever enacted in India to offer protection to the consumers. The main objective of this Act is to provide better protection to the consumers. 1. Right to safety, i.e., the right to be protected against the marketing of goods and services which are hazardous to life and property.

2. Right to be informed, i.e., the right to be informed about the quality, quantity, potency, purity, standard and price of goods or services, as the case may be, so as to protect the consumer against unfair trade practices. 3. Right to choose: It means right to be assured, wherever possible, access to a variety of goods and services at competitive prices. In case of monopolies, say, railways, telephones, etc., it means right to be assured of satisfactory quality and service at a fair price. 4. Right to be heard, i.e., the consumers interests will receive due consideration at appropriate forums. It also includes right to be represented in various forums formed to consider the consumers welfare. 5. Right to seek redressal: It means the right to seek redressal against unfair practices or restrictive trade practices or unscrupulous exploitation of consumers. It also includes right to fair settlement of the genuine grievances of the consumers. 6. Right to consumer education: It means the right to acquire the knowledge and skill to be an informed consumer.

Q4. What do you mean by bailment? What are the requisites of a contract of bailment? Explain (Sec.148) Bailment is defined as the delivery of goods by one to another person for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of person delivering them. The person delivering the goods is called the bailor and the person to whom the goods are delivered is called the bailee. The explanation to the above Section points out that delivery of possession is not necessary, where one person, already in possession of goods contracts to hold them as bailee. The bailee is under an obligation to re-deliver the goods, in their original or altered form, as soon as the time of use for, or condition on which they were bailed, has elapsed or been performed. The requisites of a contract of bailment are 1. Delivery of goods. The essence of bailment is delivery of goods by one person to another for some temporary purpose. Delivery of goods may, however, be actual or constructive. Actual delivery may be made by handing over goods to the bailee.

Constructive delivery may be made by doing something which has the effect of putting the goods in the possession of the intended bailee or any person authorised to hold them on his behalf (Sec.149). Example: A holding goods on behalf of B, agrees to hold them on behalf of C, there is a constructive transfer of possession from C to A. 2. Bailment is based on a contract. In bailment, the delivery of goods is upon a contract that when the purpose is accomplished, they shall be returned to the bailor. For example, where a watch is delivered to a watch repairer for repair, it is agreed that it will be returned, after repair, on the receipt of the agreed or reasonable charges. 3. Return of goods in specie. The goods are delivered for some purpose and it is agreed that the specific goods shall be returned. Return of specific goods (in specie) is an essential characteristic of bailment. Thus, where an equivalent and not the same is agreed to be returned, there is no bailment. 4. Ownership of goods. In a bailment, it is only the possession of goods which is transferred and not the ownership thereof, therefore the person delivering the possession of goods need not be the owner; his business is to transfer possession and not ownership.

Q5. Name the instruments which are recognized as negotiable instruments by the Negotiable Instruments Act, 1881. An Instrument as referred to in the Act is a legally recognised written document, whereby rights are created in favour of one and obligations are created on the part of another. The word negotiable means transferable from one person to another either by mere delivery or by endorsement and delivery, to enable the transferee to get a title in the instrument. An instrument may possess the characteristics of negotiability either by statute or by usage. Promissory note A promissory note is an instrument in writing (not being a bank or a currency note) containing an unconditional undertaking, signed by the maker to pay a certain sum of money to, or to the order of, a certain person or to the bearer of the instrument (Sec.4). The following are two illustrations of promissory notes. Bill of exchange

A bill of exchange is defined by Sec.5 as an instrument in writing, containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or to the order of, a certain person, or to the bearer of the instrument. Cheques A cheque, in essence, is an order by the customer of the bank directing his banker to pay on demand, the specified amount, to or to the order of the person named therein or to the bearer. Sec.6 defines a cheque. The Amendment Act 2002 has substituted new section for Sec.6. It provides that a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand and it includes the electronic image of a truncated cheque and a cheque in the electronic from. A cheque in the electronic form means a cheque which contains the exact mirror image of a paper cheque, and is generated, written and signed in a secure system ensuring the minimum safety standards with the use of digital signature and asymmetric crypto system. Cheque are printed on special security paper which is sensitive to chemicals and makes any chemical alterations noticeable. Although, legally, a customer may withdraw his money even by writing his directions to the banker on a plain paper but in practice bankers honour only those orders which are issued on the printed forms of cheques.

Q6. a) Write short note on Intellectual property right. b) A leaves a cow in the custody of B to be taken care of. The cow gives birth to a calf. Who will take the calf and why? A) Intellectual property right The Patents Act, 1970 extends to the whole of India. The objective is to protect the intellectual property rights of a person to whom the patent has been granted. The Act describes the procedure for the grant of patent and protects his rights against infringement. The Act came into force from 21st September, 1970. The 1970 Act was amended in 1999 and 2002 to meet Indias obligations under the Agreement of Trade Related Aspects of Intellectual Property Rights (TRIPs) which forms part of the agreement establishing the World. Trade Organisation (WTO). The amendments primarily focused on the obligations which came into force from 1st January 1995 (in respect of amendments made in 1999) and obligations which came into force from 1st January, 2000 (in respect of amendments notified in 2002).

The Patents (Amendment) Act 1999 had, inter alia, provided for the modalities for a 10-year transition facility (which India had negotiated at the time of its accession to the WTO), commencing from January 1, 1995. As a consequence, the law was required to be amended further in respect of Indias obligations under the TRIPs Agreement, due from January 1, 2005. Consequently, it was necessary to bring in the required amendments in time and as Parliament was not in session the President of India promulgated the Patents (Amendment) Ordinance, 2004 on December 26, 2004. B). The cow and calf will be taken by A. the reason is. Duties of a bailee to return any accretion to the goods bailed (Sec.163). In the absence of any contract to the contrary, the bailee is bound to deliver to the bailer, or according to his directions, any increase or profit which may have accrued from the goods bailed. In the absence of a contract to the contrary, a bailee is bound to return any increase or accretion to the goods bailed. It is the duty of the bailee to take reasonable care of the goods bailed as a man of ordinary prudence would, under similar circumstance, take care of his own goods of the same bulk, quality and value as the goods bailed. It should be noted that the degree of care will be the same whether the bailment is gratuitous or non- gratuitous, i.e., for reward or not for reward. If he has taken reasonable care, he is no more liable. A bailee is under a duty to use the goods according to the terms of the agreement. In case he makes unauthorized use of the goods, he will be liable to make good the loss. (Sec. 154). The bailee should not mix the goods bailed with his own goods. He should keep these goods separately. If he mixes the goods.