ASSIGNMENT SET - 1
LC CODE :- 02014
NAME :- Atul Upadhyay
ROLL NO. :- 521158436
COURSE :- MASTER OF BUSINESS ADMINISTRATION
SEMESTER :- 3
SUBJECT :- LEGAL ASPECTS OF BUSINESS
SUBJECT :- MB0051CODE
MASTER OF BUSINESS ADMINISTRATION
MBA SEMESTER – 3
MB0051 – LEGAL ASPECTS BUSINESS
ASSIGNMENT SET – 1
QUE NO.
QUESTION ANSWER PAGE
1“All agreements are not contracts, but all
contracts are agreements”. Comment.3-5
2What are the essentials of a contract of sale
under the sale of Goods Act, 1930?6
3Describe the main features of Consumer
Protection Act 1986.7-8
4What are the duties and powers of an ‘authorized
person’ under FEMA, 1999?9-10
5What do you mean by Memorandum of
Association? What does it contain?11-12
6
Write a note on the following:
(a) Copy Right Act
(b) Pledge
13
14
MB0051 – LEGAL ASPECTS BUSINESS 2
QUESTION – 1:- “All agreements are not contracts, but all contracts are agreements”. Comment.
ANSWER – 1:-
“All agreements are not contracts, but all contracts are agreements”
For the illustration of above mentioned statement we need clear concept
about contract and agreement. If we clear the concept about contract and
agreement, we can easily say that, “All contracts are agreement, but all
agreements are not contracts”.
The Contract Act, 1872, provides the definition of contract. According to
section 2 (h) of the Contract Act, 1872, “An agreement enforceable by law is
a contract.”
If we analyze the definition of the contract mentioned above, we get two
fundamental characteristics or features, viz.-
i) Agreement between the parties and
ii) This agreement must be enforced by law.
So agreement is the first step of contract. But after making agreement, it
may be enforceable by law or may not be enforceable at law. If that
agreement is enforced by law then it will be treated or turned into contract,
But if the agreement is not enforced by law that will not be treated as a
contract but merely an agreement. So all contracts are agreement, but all
agreements are not contract.
For example: - A minor “X” has agreed to sell an apartment that he has
inherited to his father, to another person named “Y”. Here, this will be called
agreement but not a contract. Because according to the law of contract, a
minor is not capable of entering into a contract. So this agreement is not
enforced by law. But from the definition of contract we know- every
agreement enforced at law is a contract. So, all contracts are agreement but
all agreements are not contract.
Unlawful consideration may create agreement but not a contract:-
Section 2(e) provides that- every promise and every set of promises, forming
consideration for each other, is an agreement.
Apart from this, section 2(a) and 2(b) provides that “When one person
signifies to another his willingness to do or to abstain from doing anything,
MB0051 – LEGAL ASPECTS BUSINESS 3
with a view to obtaining the assent of that other to such act or abstinence, he
is said to make a proposal.” And when the person to whom the proposal is
made signifies his assent there to, the proposal is said to be accepted. A
proposal, when accepted becomes a promise. The person who making the
proposal is called- “promisor” and the person accepting the proposal called
“promise”.
Section 2 (d) provides the definition of consideration. According to this
section the definition of consideration is as follows:-
“When, at the desire of the promisor, the promise or any other party/person
has done or abstained from doing, or does or abstains from doing, or promise
to do or to abstain from doing, something such act or abstinence or promise
is called a consideration for the promise”.
But if under section 23 of the Contract Act, such consideration is forbidden
by law, if, is of such a nature that, if permitted, it would defeat the provision
of any law, or, is fraudulent; or
Involves or implies injury to the person or property of other, or the Courts
regards it as immoral; or opposed to public policy.
In these cases, the consideration or the object of the agreement is said to be
unlawful. Every agreement of which the object or consideration is unlawful is
void. So in agreement the consideration may be unlawful. But in a contract
that consideration must be lawful. From this view point it can be said that- all
agreement are not contract.
Further more, what agreements are contracts it is said in section 10, that- 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. So one of the fundamental
elements of contract is consideration and which must be lawful.
In order to make a contract, the first and main step is agreement which must
be constituted through lawful consideration. This agreement does not crate
any duties and obligation. In order to create right, duties or obligation the
following extra elements are needed-
i) Capacity of the parties/Competent to contract: According to section 11,
every person is competent to contract who is of the age of majority
according to the law to which he is subject and who is of sound mind,
and is not disqualified from contracting by any law to which he is
subject.
MB0051 – LEGAL ASPECTS BUSINESS 4
ii) Free consent of the parties: According to section-14, consent is said to
be free when it is not caused by coercion, undue influence, fraud,
misrepresentation and mistake.
iii) Lawful object: The object of the contract must be lawful. Object must
not be illegal, immoral or opposed to public policy. Contract is not
valid if it is illegal, immoral or opposed to public policy.
iv) Contract is not prohibited by law: Contract will not be prohibited by
the existing law. Because such kind of contract has no/ will not have
legal effect.
After the above discussion, it is found that the first and main condition of
valid contract is lawful agreement. If the above mentioned elements exist in a
lawful agreement, then that agreement turned into a contract. In the absence
of above elements or in the presence of defective elements (i.e. unlawful
consideration/unlawful object) illegal or void contract can be formed/
constituted. But illegal or void contract has no legal status/existence, they are
proper to say illegal or void agreements.
Finally we can say that all agreements are not contract, the agreements
which are constituted under/ within the frame of the law of contract, that are
treated as a contract. On the other hand, in all contracts there must be
agreement as no contract can be formed without an agreement. So it can
undoubtly be said that – “All contracts are agreement but all agreements are
not contract”
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MB0051 – LEGAL ASPECTS BUSINESS 5
QUESTION – 2:- What are the essentials of a contract of sale under the Sale of Goods Act, 1930?
ANSWER – 2:-
Sec.4 defines a contract of sale as ‘a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price’.
The following are the essentials of contract of sale:-
1) There must be at least two parties. A sale has to be bilateral
because the property in goods has to pass from one person to another.
The seller and the buyer must be different persons. A person cannot
buy his own goods. However, a part-owner may sell to another part-
owner.
2) Transfer or agreement to transfer the ownership of goods. In a
contract of sale, it is the ownership that is transferred (in the case of
sale), or agreed to be transferred (in the case of agreement to sell), as
against transfer of mere possession or limited interest (as in the case
of bailment or pledge).
3) The subject matter of the contract must necessarily be goods. The sale of immovable property is not covered under Sale of Goods
Act. The expression ‘goods’ is defined in Sec.2(7).
4) Price is the consideration of the contract of sale. The
consideration in a contract of sale has necessarily to be ‘money’, (i.e.,
the legal tender money). If for instance, goods are offered as the
consideration for goods, it will not amount to sale. It will be called a
‘barter’.
5) Payment by installments. In the case of sale of goods, the parties
may agree that the price will be payable by installments. Also, the
terms may stipulate some amount by way of down payment and the
balance by installments.
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MB0051 – LEGAL ASPECTS BUSINESS 6
QUESTION – 3:- Describe the main features of Consumer Protection Act 1986.
ANSWER – 3:-
Main Features of the Consumer Protection Act, 1986
1) Social Welfare Law : It is a highly progressive piece of social welfare
legislation. It is acclaimed as the Magna Carta of Indian consumers.
This is a unique law which directly pertains to consumers in the
market place and seeks to redress complaints arising there from.
2) Comprehensive Provisions and Effective Safeguards: Its
provisions are very comprehensive. It provides effective safeguards to
the consumers against various types of exploitation and unfair trade
practices. In fact, it provides more effective protection to consumers
than any other law in India.
3) Special Consumer Courts: The Consumer Protection Act has created
special consumer courts for enforcement of the rights of consumers.
4) Three-Tier Grievance Redressal Machinery: The Consumer
Protection Act provides for a three-tier consumer grievance redressal
machinery — District Forums at the base, the State Commission at the
middle level and the National Commission at the apex level. The
redressal machinery is quasi-judicial in nature.
5) Simple and Inexpensive : There are no complicated or elaborate
procedures or other technicalities. The redressal machinery is merely
to observe the principles of natural justice. No court fee any other
charge is to be paid by the complainant. It is not mandatory to employ
any advocate. The complainant can write his grievance- on a simple
paper along with the name and address of the opposite party against
whom the complaint is made. Thus, the consumer protection Act
provides a simple, convenient and inexpensive redressal of consumer
grievances.
6) Covers Goods and Services : The Consumer Protection Act covers
both goods and services rendered for consideration by any person or
organization including public sector undertakings and Government
agencies. However, services rendered free of charge or under any
contract of personal service are excluded. All suppliers of goods and
services in private, public and cooperative sectors are covered under
the Act.
MB0051 – LEGAL ASPECTS BUSINESS 7
7) Time Frame : The Consumer Protection Act lays down time limits for
the disposal of cases so as to provide speedy redressal of grievances.
8) Class Action : The Consumer Protection Act allows filing of class
action complaints on behalf of groups of consumers having common
interest.
9) Check on Unfair Trade Practices : The Consumer Protection Act
also covers complaints relating to unfair trade practices. Thus, a
consumer can protect against food adulteration, short weighting and
overcharging, directly to the District Forums. The consumer can pick
up a food sample from a shop, get it analyzed by a chemist and file a
complaint on that basis.
10) Check on Overcharging : The Consumer Protection Act also provides
for complaints against charging in excess of the price of a product
fixed by a law or rule and/or displayed on the packaged commodities
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MB0051 – LEGAL ASPECTS BUSINESS 8
QUESTION – 4:- What are the duties and powers of an ‘authorized person’ under FEMA, 1999?
ANSWER – 4:-
Duties and Power of an “Authorized Person” under FEMA, 1999:-
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
thereunder.
Duties of an authorized person
The duties of an authorized person as provided in the Act are summarized
hereunder:
i) 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.
ii) 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.
iii) 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
MB0051 – LEGAL ASPECTS BUSINESS 9
thereunder. 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
i) To deal in or transfer any foreign exchange or foreign security to
any person [Sec.3(a)]
ii) Receive any payment by order or on behalf of any person resident
outside India in any name. [Sec.3(c)]
However, an authorized person is not allowed to credit the account
of any person without any corresponding remittance from any place
outside India.
iii) To open NRO, NRE, NRNR, NRSR and FCNR accounts.
iv) To sell or purchase foreign exchange for current account
transactions. [Sec.5]
v) To sell or purchase foreign exchange for permissible capital
account transactions. [Sec.6].
Bank’s powers to issue directions to authorized persons (SEC.11)
The Reserve Bank may, for the purpose of securing compliance with the
provisions of this Act and of any rules, regulations, notifications or directions
made thereunder, give to the authorized persons any direction in regard to
making of payment or the doing or desist from doing any act relating to
foreign exchange or foreign security.
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MB0051 – LEGAL ASPECTS BUSINESS 10
QUESTION – 5:- What do you mean by Memorandum of Association? What does it contain?
ANSWER – 5:-
Memorandum of Association
Memorandum of Association is the fundamental charter which defines the
aims and objectives of a company. It contains fundamental rule regarding the
constitution and the activities of a company. It is the most significant
document on which the super-structure of the company is raised. It sets out
the limits with in which the company may function and defines the relations
of the company with the outside world. Any action beyond the scope of the
memorandum of association is void.
The memorandum of association contains the following:
- Name clause: This clause contains the name of the company. The
word limited is used after the name of a public limited company and
private limited is used after the name of a private company. The name
of the company should not be identical to the name of an existing
company. The words like Royal, King, Imperials, Emperor and the
words of patronage of the central government is not used in company.
- Object clause: This is an important clause of the memorandum of
association which states the objects with which the company has been
established. Any action beyond the stated objective is ultra vires and as
such a great deal of care will be taken in drawing up this clause. It
contains the broad objective along with subsidiary objectives.
- Situation clause: This clause states the place at which the registered
office will be situated. This clause is vital for determination of
jurisdiction of the court for legal matters. The place of registered office
should be intimated to the register within 30 days incorporation.
- Capital clause: This clause states the amount of authorized capital
with which a company is registered. The division of share capital into
different shares must be stated in the capital clause. The face value of
the share will be stated in this clause. This clause gives an idea of
exact capital structure of the company.
- Liability clause: This clause states that the liability of the
shareholders is limited to the extent of the face value of shares. A
company limited by guarantee should specify the amount of guarantee.
MB0051 – LEGAL ASPECTS BUSINESS 11
- Association clause: This clause states the names and addresses of
the signatories of the memorandum of association and articles of
association.
Each subscriber is required to take at least one share in the company.
The memorandum of association is signed by at least seven persons in
case of public limited company and at least by two persons in case of
private company.
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MB0051 – LEGAL ASPECTS BUSINESS 12
QUESTION – 6:- Write a note on the following:
(a) Copyright Act(b) Pledge
ANSWER – 6:-
(A) Copyright Act
The law relating to copyright is contained in the Copyright
Act, 1957. It extends to the whole of India and came into
force on January 21, 1958. The Act has been amended in
1983, 1984, 1992 and 1994 primarily to bring the Indian
law in conformity with the international conventions in
general and Bern Convention and the Universal Copyright
Convention in particular.
Secs.44 to 50 deal with the registration of copyright.
Sec.44 provides for a Register of copyright to be kept in
the copyright office. The names or titles of the works, the
names and addresses of authors, publishers and owners of
copyright and certain other prescribed particulars are
entered in the Register.
Copyright is a form of intellectual property which gives
the creator of an original work exclusive rights for a
certain time period in relation to that work, including its
publication, distribution and adaptation; after which time
the work is said to enter the public domain. Copyright
applies to any expressible form of an idea or information
that is substantive and discrete. Some jurisdictions also
recognize "moral rights" of the creator of a work, such as
the right to be credited for the work. Copyright has been
internationally standardized, lasting between fifty to a
hundred years from the author’s death, or a finite period
for anonymous or corporate authorship. It is enforceable
as a civil matter.
(B) Pledge
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Sec.172, defines a pledge as the bailment of goods as
security for payment of a debt or performance of a
promise. The person, who delivers the goods as security,
is called the ‘pledgor’ and the person to whom the goods
are so delivered is called the ‘pledgee’. The ownership
remains with the pledgor. It is only a qualified property
that passes to the pledgee. He acquires a special
property, and lien which is not of ordinary nature and so
long as his loan is not repaid, no other creditor or
‘authority’ can take away the goods or its price. Thus, in
Bank of Bihar v. State of Bihar and Ors. (1971) Company
Cases 591, where sugar pledged with the Bank was seized
by the Government of Bihar, the Court ordered the State
Government of Bihar to reimburse the bank for such
amount as the Bank in the ordinary course would have
realised by the sale of sugar seized.
A pledge is created only when the goods are delivered by
the borrower to the lender or to someone on his behalf
with the intention of their being treated as security
against the advance. Delivery of goods may, however, be
actual or constructive. It is constructive delivery where
the key of a godown (in which the goods are kept) or
documents of title to the goods are delivered. The owner
of the goods can create a valid pledge by transferring to
the creditor the documents of title relating to the goods.
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MB0051 – LEGAL ASPECTS BUSINESS 14