Business Law

Business Law

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Business Law

Q1. Define a contract and explain the essential elements of a valid contract.

Ans. The word "contract" derives from Latin words meaning "to draw together." Essentially, a contract does just that--it draws together the essential elements of an oral or written agreement. Unlike a gratuitous promise or a non-binding agreement, a valid contract is recognized at law and a party can be sued for not fulfilling the terms of the contract. As a result, contracts can just as easily draw people together into the courtroom.

The very fact that the word "contract" comes from Latin reflects that people have been negotiating for a very long time. As a result, the study of contracts is quite detailed. Law students often spend two years studying the principles of contracts. Some lawyers devote their practices to the interpretation, enforcement, and dissolution of contracts. Although a short article can hardly explore the intricacies of contracts, some generalities about contracts can be outlined.

Essentials of Valid Contracts

In determining whether or not a valid contract exists, courts usually look to three factors:

1. Was there an offer and an acceptance? 2. Was there consideration for the contract? 3. Are there any defenses to the contract?

 Offer and Acceptance

An offer from a person reflects a willingness to enter into a contract on the basis of the offered terms (such as, "I will sell you this book for $4.00"). The more definite and certain a statement is, the more likely that a court will consider it an offer, rather than just negotiations that may lead to an offer ("Can I buy this painting for $50" versus "What's the lowest amount you will take for this painting?").

An acceptance is another party's agreement to the terms of the offer. Like an offer, an acceptance should be definite and can be as simple as the word "yes." In addition, the method of acceptance must usually be in the same manner of the offer or in an agreed upon manner. For example, a person offering ties for sale on the street would not expect an acceptance by telegram several days later.

Once a person receives notice that an offer is no longer valid, it is usually too late to accept the offer. A common example is when an item for sale is sold out. However, many lawsuits hinge on whether an offer was revoked timely and properly.

Consideration

Consideration simply means that each party to the contract is giving up something in return for obtaining something else. For example, if a new car part costs $80, one person is giving up $80 while gaining the car part and the other person is giving up the car part to obtain $80. Consideration is often referred to as a "bargained-for-exchange" and is essential to a valid contract.

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Consideration gives a court the terms by which to enforce the agreement as a contract. When there is no consideration, a court may have to consider the transaction a gratuitous gift, rather than a contract. Consider the situation in which someone promises to give you a piece of jewelry. If the person changes her mind, a court will not enforce the gift because there was no consideration. If, however, you had contracted to buy the jewelry for cash (consideration), a court could enforce the terms of the contract.

 Defenses

Even is a court finds an offer, acceptance, and consideration in a transaction, no contract exists if there are certain defenses. A defense simply means that there was a defect regarding the transaction or the parties involved so that no contract was created. For example, the fact that an item no longer exists is a mutual mistake that prevents a contract from being formed. Similarly, an agreement that has an illegal purpose, such as hiring someone to kill a person, will not be considered an enforceable contract.

 To Write or Not to Write

There's an old saying that "An oral contract isn't worth the paper it's written on." Even so, an oral contract is valid in most instances. However, North Carolina has required by statute that certain contracts must be in writing to be enforceable. If an agreement falls under this "Statute of Frauds," a court will not require a party to fulfill the contract unless there is some type of written document signed by the party to be compelled.

The Statute of Frauds requires many documents to be in writing, including the following:

A promise which by its very terms cannot be performed with one year. A promise which creates an interest in land, such as for the sale of real

property. A lease with a term of more than one year.

A mortgage.

A promise which limits a person's right to do business in the state, such as a covenant not to compete signed by an employee.

Just because an agreement falls under the Statute of Frauds does not mean that a lengthy and complicated contract is required in all situations. The statute only requires that every "essential term" be in some written form. This language has usually been interpreted to require at least the following information: (1) The identity of the parties;(2) The subject matter of the contract;(3) The terms and conditions of the agreement; (4) The consideration given and received; (5) The signature of the parties.As long as some document, note, or combination of papers contain this essential information, a court will enforce the contract. A related rule states that if there is a writing no oral agreement will be entertained to contradict the written agreement.

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Written Contact Essentials:

Names of the parties Subject matter

Terms and conditions

Consideration, or money, exchanged

Signatures of parties

Q3. What do you mean by discharge of contract? What are the various ways in which a contract may be discharged?

Ans. A contract is deemed to be discharged, that is, completed and no longer binding, in the following circumstances.

Performance. That is, all parties have satisfied the requirements of the contract to the satisfaction of the other parties. The overwhelming majority of contracts are discharged this way. However, it not always clear when a contract has been performed, or what should happen in the event of part performance of contract.

Agreement. If the contract is still wholly executory (in progress) then there is no problem here, as neither party is set to lose out. However, if one party has fulfilled his obligation and the other has not, then the agreement to discharge must be supported by fresh consideration. For example, suppose I hire someone to paint my house, with an agreement to pay on completion. The painter does not turn up to do the job. If the painter and I agree to abandon the work, then the contract is discharged. However, suppose I pay in advance, and the painter does not turn up. I may decide that it is not worth my while to compel the painter to work, or to take legal action, and agree to write off the payment and discharge the contract. If I later decide to take legal action against the painter, the agreement to discharge will not be binding, because the painter offered no consideration

Legal reasons for discharge without performance. There are few of these; the most common is frustration of contract; if a contract is frustrated (i.e., impossible to perform) then it may be considered discharged without legal consequences.

Breach. A breach of contract is a refusal by one party to abide by its terms, without legal excuse (e.g., frustration).

Contracts may be discharged by: 1. Payment. 2. Accord and satisfaction.3. Release.4. Set off.5. The rescission of the contracts. 6. Extinguishment. 7. Confusion, where the duty to pay and the right to receive unite in the same

person. 8. Extinction, or the loss of the subject matter of the contract. 9. Defeasance. 10. The inability of one of the parties to fulfill his part.

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11. The death of the contractor, as where he undertook to teach an apprentice. 12. Bankruptcy.

12. By the act of limitations. 13. By lapse of time.14. By neglecting to give notice to the, person charged. 15. By releasing one of two partners. 16. By neglecting to sue the principal at the request of the surety, the latter is

discharged. 17. By the discharge of a defendant, who has been arrested under a capias ad

satisfaciendum. 18. By a certificate and discharge under the bankrupt laws.

Q4. Classify and explain different types of agents.

Ans. A person who performs services for another person under an express or implied agreement and who is subject to the other's control or right to control the manner and means of performing the services. The other person is called a principal. One may be an agent without receiving compensation for services.

There are various descriptions of agents, to whom different appellations are given according to the nature of their employments; as brokers, factors, supercargoes, attorneys, and the like; they are all included in this general term. The authority is created either by deed, by simple writing, by parol, or by mere employment, according to the capacity of the parties, or the nature of the act to be done. It is, therefore, express or implied. Vide Authority.

It is said to be general or special with reference to its object, i.e., according as it is confined to a single act or is extended to all acts connected with a particular employment.

With reference to the manner of its execution, it is either limited or unlimited; i. e. the agent is bound by precise instructions, or left to pursue his own discretion. It is the duty of an agent, 1, to perform what he has undertaken in relation to his agency. 2, To use all necessary care. 3, to render an account.

Agents are either joint or several. It is a general rule of the common law, that when an authority is given to two or more persons to do an act, and there is no several authority given, all the agents must concur in doing it, in order to bind the principal.

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Q5. Explain the rights, duties and responsibilities of an agent to his principal.

Ans. An agent has rights, which he can enforce, and is, liable to obligations, which he must perform.

The rights to which agents are entitled, arise from obligations due to them by their principals, or by third persons.

Their rights against their principals are: To receive a just compensation for their services, when faithfully performed, in

execution of a lawful agency, unless such services are entirely gratuitous, or the agreement between the parties repels such a claim; this compensation, usually called a commission, is regulated either by particular agreement or by the usage of trade or the presumed intention of the parties;

To be reimbursed all their just advances, expenses and disbursements made in the course of their agency, on account of, or for the benefit of their principal and also to be paid interest upon such advances, whenever from the nature of the business, or the usage of trade, or the particular agreement of the parties, it may be fairly presumed to have been stipulated for, or due to the agent.

Besides the personal remedies that an agent has to enforce his claims against his principal for his commissions and, advancements, he has a lien upon the property of the principal in his hand.

The liabilities of agents to their principals - arise from a violation of their duties and obligations to the principal, by exceeding their authority, by misconduct, or by any negligence or omission, or act by which the principal sustains a loss. Agents may become liable for damages and loss under a special contract, contrary to the general usages of trade.

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Q 6) Explain the mutual rights and liabilities of partners in a partnership firm.

Answer: - 1) Right to take part in a conduct or management of the partnership business: - Subject to the contract between partnership, every partner has a right to take part in the conduct of the business. As partnership business is common business of all the partners, every partner of a firm must have the right to take part in the management and conduct of the business.

2) Right to be consulted and right to take decision by majority: - Section 12 (c) lays down that " subject to contract between the partners, any difference arising as to ordinary matters connected with the business may be decided by a majority of the partners shall have right to express his opinion before before the matter is decided.

Every partner has a right to be consulted and to express his opinion before the matter is decided.

So far as ordinary matters connected with business are concerned, the partners have the right to take decision by majority.

So far as important or fundamental matters concerning the partnership business is concerned, no change is allow to be made without the consent to all partners.

3) Right to have access to books of the firm: - Subject to contract between the partners, every partner has a right to have access to and to inspect and copy any of the books of the firm [section 12 (d)].

4) Right to have equal share in the profits: - Subject to any contract to the contrary between the partners, the partners are entitle to share equally in the profits earned and shall contribute equally to the losses sustained by the firm.

5) Right to receive interest on capital: - In the partnership deep provides that a partner bringing in the business certain amount as a capital is entitled to receive an interest on it at a certain rate, such interest, subject to the contract between the partners, shall be payable only out of profits.

6) Right to receive interest on advances: - subject to contract between the partners partners making for the purpose of the business any payment or advance beyond the amount of capital.

7) Right to be indemnified: - A partner can perform all such acts for protecting his form losses as would be performed by any person of ordinary prudence for acting under similar circumstances and conditions and as consequences of such acts.

8) Right to apply property to the firm for the purpose of the business of the firm: - Every Partner has a right to apply and use the property of the partnership firm exclusively for the purpose of the business of the firm.

9) Other rights of the partners like: - Right to function as an agent of the firm, Right to prevent introduction of a new partner, Right to retrieve, Right not to be expelled, Right of an outgoing partner in certain cases to share subsequent profit.

Liabilities of a partner in a partnership firm 1) General duties of partners: - Section 9 provides for the general

duties of partners. It states that " Partners are bound to carry on the business of the firm to the greatest common advantage, to be just and faithful to each other."

a) Duties to carry on the business to the common advantage: - It implies that every partner use his skill, knowledge, and efficiency for the benefit of his firm.

b) Duty to be just and faithful to other partners of his firm: - Partners are expected to be just and faithful to each other because a partnership is always based on the principal of mutual trust and confidence.

c) Duty to render true accounts: - It implies that no partner should make a secret profit at the expenses of the partnership firm.

d) Duty to provide full information: - It is the duty of every partner to provide full information of various transactions, dealing etc.

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2) Duty to indemnify for loss caused by fraud: - According to section 10, "Every partner shall indemnify the firm any loss caused to it by his fraud in the conduct of the business of the firm.

3) Duty to attend diligently to his duties: - Section 12(b) states that " subject to contract between the partners, every partner is bound to attend diligently to his duties in the conduct of the business.

4) Duty to work without remuneration: - subject to contract between the partners, a partners is not entitled to receive any remuneration for taking part in the conduct and management of the partnership business .

5) Duty to contribute to the losses: - According to the section 31(b), the partners are entitled to share equally in the profits earned and shall contribute equally to the losses sustained by the firm.

6) Duty not to complete with the business or the partnership firm: - subject to contract between the partners not to carry on any business which is of similar nature or which is likely to compete with the business of his partnership firm.

7) Duty of partner not to assign his rights: - It is the duty and the responsibility of a partner not to assign his rights and interests in the firm to any outsider so as to constitute such outsider the partner of the firm.

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Q 7) What is the nature and extent of partner's authority to bind the firm by his acts?Ans.: - An act or instrument done or executed by a partner or other person on behalf

of the firm shall be done or executed in the firm name, or in any other manner expressing or implying intention to bind the firm.

Important points from the above provision of section 19 (1) and 22.a) The authority of a partner to bind the firm conferred by section 19(1) is called

the implied authority of a partner.b) In other to bind the firm, an act done by a partner should be done in the name

of the firm or in any manner implying the intention to bind the firm.c) In order to bind the firm such acts should be done to carry on, in

the usual way, business of the kind carried as by the firm. The implied authority of a partner cannot extend to his acts done beyond the scope of the partnership business.

A partner has implied authority to bind his firm by all his acts performed by him in all matters and transaction concerned with the business of a partnership and if such acts are done in the usual way and in no way beyond the scope of partnership.

In absence of usage or custom of trade to the contrary, the implied authority of a partner does not empower him to: -

a) Submit a dispute relating to the business of the firm to arbitration.b) Open a banking account on behalf of the firm in his own name.c) Compromise or relinquish any claim or portion of a claim by the

firm,d) Withdraw a suit or proceeding filed on behalf of the firm.e) Admit any liability in a suit or proceeding against the firm.f) Acquire immovable property on behalf of the firm.g) Transfer immovable property belonging to the firm,orh) Enter into partnership on behalf of the firm.

All partners of a partnership firm, however can ratify an act or various acts of any of the partners, which the partners has done in the excess of implied or express authority provided such act or acts should be as could be legally done. Not with any standing such restriction, any act done by a partners on behalf of the firm which falls within his implied authority binds the firm unless the person with whom he is dealing knows of the restriction or does not know or believe that partner to be a partner.

Effect of admission by a partner: - An admission or representation made by a partner concerning the affairs of the firm is evidence against the firm, if it is made in the ordinary course of the business. Thus if a partner makes any admission concerning the business of the firm in the ordinary course of business is considering as the sufficient evidence against the firm and that binds the firm.

Effects of notice given to an acting partner by third parties: - Notices to a partner who habitually acts in the business of the firm of any matter relating to the affairs of the firm operates as notice to the firm except in the case of a fraud on the firm committed by or with the consent of that partner.

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Q 8) Distinguish between a sale and an agreement to sell and explain fully the essentials of a contract of sale of goods.

Ans.: - When under a contract of sale, the property in 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 condition there after to be fulfilled, the contract is called an agreement to sell [section4 (3)].

Essentials of a contract of sale: - A) Two parties: - There should be two parties to a contract of a sale of goods

and obviously these two parties are a seller and a buyer. A buyer is a person who buys or agrees to buy [section 2(1)] and a seller is a person who sells or agrees to sell. These two terms are complimentary.

B) Goods - The subject matter of a contract: - The subject matter of a contract of a sale must be movable property or goods. Transactions involving purchase and sell of immovable property are out of the purview of the sale of goods Act.

C) Transfer of property: - There must be a transfer of general property i.e., ownership and not special property in the goods from the seller to the buyer. Suppose X owns certain types of goods, he has general property of goods. If he pledges the goods with Y, Y has special property in the goods, which he cannot sell.

D) Monetary consideration - price: - When goods are exchanged for goods that amount to barter exchange and not a sale of goods. Again where goods are transferred by one person to another without any consideration that is a gift and not a sale. Therefore, the consideration for a contract of a sale, called price, must be money.

E) Essential elements of a valid contract: - There must be consideration and mutual assent between the parties of the contract, all parties to a contract must be competent to enter into a contract, an object of a contract must be lawful etc. of course it is necessary that a contract of a sale should always be absolute. It may be absolute or conditional.

F) A contract of a sale includes sale as well as an agreement to sell: - A contract of a sale may either be a sell or an agreement to sell.

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Q 9) Define the term 'Negotiable instrument ' and explain its types and various parties of the types of negotiable instruments.

Ans.: - Negotiable instruments literally mean written documents, which creates a right in favor of somebody and is freely transferable. Free negotiable is an important characteristics of a negotiable instrument.

Types of negotiable instruments.a) Negotiable instruments recognized by state: - Bills of exchange,

cheques and promissory notes. The negotiable instruments Act 1881 mentions in section 13, these three kinds of negotiable instruments.

b) Negotiable instruments recognized by usage or custom of trade: - Banknotes, exchequer bills, share warrants, bearer debentures, divided warrants, share certificates attached with them blank transfer deeds etc.

i)Bill of Exchange: - A bill of exchange is an instruments in writing containing and unconditional order, signed by the makers, directing a certain person to pay a certain sum of money only to, the bearer of instrument [section 5].

Important essential characteristics of a bill of exchange.1) It must be in writing.2) It must contain an order to pay and not request.3) The order must be unconditional.4) The parties to the Bill of Exchange.5) Bill of exchange must be signed by the drawer and accepted by the drawer. 6) The sum payable must be certain.7) Bill of exchange must be containing an order to pay money only.8) Bill of exchange must be stamped properly.9) Bill of exchange originally drawn cannot be made payable to bearer.

ii) Promissory notes: - A promissory note is an instrument in writing containing

An unconditional undertaking, signed by the maker; to pay a certain sum of Money only to or to the order of a certain person or the bearer of the instrument

[section 4]. Essential characteristics of a promissory note: -

1) Promissory note is a negotiable instrument.2) It must be in writing.3) It is a promise to pay money only.4) It must be definite. The promise to pay must definite.5) It must be signed by maker.6) It must be unconditional.7) The maker of the promissory note must be a certain person and the payee must also be certain.8) Amount of the promissory note must be certain.

iii) Cheque: - Section 6 of the negotiable instrument Act defines that a Cheque as a bill of exchange drawn on a specified banker and not expressed to be payable otherwise that on demand.

Essential characteristics: - 1) A Cheque is a negotiable instrument.2) It is a Bill of Exchange.3) It is always drawn on specified bankers.

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4) It is always payable on demand.5) A Cheque can be bearer, order or crossed.6) A Cheque requires no acceptance in the ordinary course of business as it is intended for immediate payment.7) In the case of a Cheque, a drawee is always a specified bank.

iv) Trade bill and Accommodation bill: - A bill when drawn and accepted for a genuine trade transaction is termed as trade bill, while a bill drawn and accepted not for a genuine trade transaction but only to provide financial help or assistance to some party is termed as a accommodation bill.v) Fictitious bill: - when the name of the payee or drawer or both is fictitious on a bill, such bill is called a fictitious bill.vi) Documentary or clean bills: - when documentary of a title to goods and other necessary documents like invoice, insurance policy etc. such a bill is called a documentary bills. But no documents relating the goods represented by the bill are annexed to it. Such a bill is called as clean bill.vii) Inchoate instrument: - An inchoate instrument is an incomplete instrument in some respect. For example; a bill is drawn payable to or order ". A holder may write his name as a payee in the blank space and sue upon the instrument. The principal behind an inchoate instrument is essentially one of estoppel.viii) Ambiguous instruments: - where an instrument owing to its faulty drafting may be interpreted either as a bill of exchange or a promissory note, is called an ambiguous instrument.

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Q 10) Explain the object of the consumer protection act and state and explain the following terms as used in the consumer protection act, 1986.A consumer, b) A dispute c) Deficiency d) Restrictive trade practice and unfair trade practice.Ans.: - Many time consumers cheated and therefore they need some sort of legal

protection. For that purpose certain acts have been passed and the consumer protection act of 1986 is one of them.

i)Consumer: - consumer is any person who buys and goods for a consideration which has been paid or promised to pay or party paid and partly promised to pay or under any system of deferred payment.

ii) A dispute: - A consumer dispute is very important from the view point of consumer protection act. If there is any dispute between the consumer and manufacturer or the trader as the case may be the consumer gets the right to seek remedy or filling the complaint under the act.

iii) Restrictive trade practices [section 2(1) (nn)]: A consumer must be free to purchase any kind of goods considering his needs so that he can get maximum satisfaction from the consumption of the such goods. There should a trader to buy impose no compulsion in any way on a consumer, hire or wail of any goods as a condition precedent for buying, hiring or availing of other goods or services.

iv) Unfair trade practice [section 2(1) ( r)]: "Unfair trade practice means a trade practice which for the purpose of promoting the sale, use or supply of any goods or the provision of any service, adopts any unfair method or unfair or deceptive practice including any of the following practices, namely,1) The practice of making any statement, whether orally or in

writing or by visible representation.2) Permits the publication of any advertisement whether in any

newspaper or otherwise for the sale or supply at a bargaining price of goods or services that are not intended to be offered for a sale or supply at the bargain price.

3) Permits: - a) The offering of gifts, prices or other items with the intention of not providing them as offered or creating impression that something is being given or offered free of charge.

a) The conduct of any contest, lottery, game of chance or skill, for the purpose of promoting, directly or indirectly; the sale, use of supply of any product or any business interest.

4) Permits the sale or supply of goods intended to be used or are of a kind likely to be used, by consumer, knowing or having reason to believe that the goods do not comply with standard prescribed by competent authority relating to performance, composition etc.

Deficiency [section 2(1) (g)]: So far as defects in goods are concerned, a complainant has to established that the goods mentioned in his complaint suffer from any or more of the defects which are mentioned in the definition. Under section 2(1) (f) " Deficiency means any fault imperfection, short coming or in adequacy in quality, nature and manner of performance which is required to be maintained by or under any law for the time being in force or has been undertaken to be performed by a person in pursuance of a contract or otherwise in relation to any service."

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Q 11) how is a company formed under the companies Act of 1956? What are the documents to be filled with the registrar of companies?Ans.: - Registered companies are those companies, which are registered or

incorporated with the registrar of a company Act. In India, almost all companies are registered under the companies Act 1956.

Documents to be filled with the registrar of companies: - 1) Mode of forming incorporated company.

2) Registration of Memorandum and Articles. i) Memorandum ii) Articles of Association. iii) A letter of Approval iv) Declaration v) List of Directors vi) Sanction of the controller of capital issues. vii) Challan

1) Mode of forming incorporated company: - Any seven or more person or where the company to be formed will be a private company, any two or more persons associated for any lawful purpose may, by subscribing their names to a memorandum of association and otherwise complying with the requirements of this Act in respect of registration, form an incorporated company, with or without limited liability. Thus any seven person for forming a public company or any two persons for forming a private company may come together and apply to the registration by giving necessary information in the prescribed form.2) Registration of Memorandum and Articles: - According to section 33(1) "there shall be presented for registration, to the registered office of the state in which the registered office of the company is stated by the memorandum to be situated.

i) The memorandum of the company. ii) Its articles, if any, and iii) The agreement; if any which the company proposes to enter into with any Individual for appointment as its managing or whole- time director or

manager.a) Memorandum: - The memorandum of association of a company is very important

and fundamental document of the company. Memorandum contains the following clauses.

i) The nameii) The registered office clauseiii) The object clauseiv) The capital clausev) The liability clausevi) The association clause.No Company can be registered unless the memorandum of association is submitted

to the registrar.b) Articles of Association: - Articles of association contains the rules, regulation

bylaws etc. The following types of companies are required their own articles.i) Unlimited companies.ii) Companies limited by guarantee.iii) Private companies limited by ahares.

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b) A letter of Approval: - An application for availability of name under which the company proposes to be incorporated is required to be submitted to the registrar of the companies in prescribed form in the state where the registered office of the company to be situated.

c) Declaration: - A declaration as per the provision of section 33(2), making clear that all the requirements of the companies Act of 1956 relating to the registration have been complied with.

d) List of Directors: - A list of person duly signed by them along with their consent to act as directors. Such consent must be in writing and accompanied with the signed agreement with every such director to take the number of shaves required qualifying himself a director.

e) Sanction of the controller of capital issues: - The sanction of the controller of the capital issues is required if the capital exceeds RS one crore.

f)Challan: - A Challan showing that the registration fees filing fee have been duly paid as per the provisions of the companies act of 1956.

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Q 12) Explain rights, duties and disqualification of directors of a company.

Ans.: - Rights and duties of directors: - The directors of the company enjoy following important rights conferred on them by the companies Act 1956.

a) Rights to participate in the affairs of the company: - the director is entitled to attend the meetings and participate in the affairs of the company so far direction, supervision, control etc.

b) Rights to have remuneration: - Every director is entitled to remuneration as fixed either under any contract or the articles of association of a company. Even if the company does not earn profits, directors of the company are entitled for their remuneration already fixed.

Rights of compensation: - i) if premature termination is due to either reconsideration or amalgamation of a company.

ii) If his company wound up.iii) If the director has to vacate his office according to the provision of the company

Act of 1956.iv) If the director is found to be guilty of fraud or breach of trust.v) If the director is responsible for taking part in bringing about the termination of his

office.

Duties if the directors: - The important duties of a director of a company are as under: - i) Duties of grates good faith of fiduciary duties.

ii) Duty of reasonable skill and diligence. iii) Duties to attend board meetings.iv) Duty to invest company's money.v) Duty not to delegate functions.vi) Statutory duties.

i) Duty of greatest good faith of fiduciary duties: - The directors of a company are fiduciary agents of their company. They must exercise their powers honestly and in the best interest of their company.

ii) Duty of reasonable care skill and diligence: - Directors of a company are expected to carry out their duties with such care, skill and diligence as can be reasonable expected from persons of their status knowledge. If they do not perform their duties with reasonable care, skill and diligence, they are guilty of negligence.

iii) Duty to attend boards meetings: - It is one of the important duties of directors to attend the board meetings. Though it is not compulsory to attend all such meetings he ought to attend them when reasonably able to do so.

iv) Duty to invest company's money: - The directors of a company must always

Endeavor to invest their company's funds property and profitably as per the provisions of articles of association.

v) Duty not to delegate functions: - Delegate non-protest delegares is the Latin maximum which implies that the directors must attend personally to the business of the company in which they are appointed as directors.

vi) Statutory duties: - Directors are bound to perform certain duties as prescribed by the companies Act of 1956.

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Disqualification of directors: - According to section 274(1)," A person shall not be capable of being appointed director of a company if

a) He has been found to be of unsound mind by a court of competent jurisdiction and the finding is in force.

b) He is an undischarge insolvent.c) He has applied to adjudicated as an insolvent and his application is

pending.d) He has been convicted by a court of any offence involving moral turpitude

and sentenced in respect there of to imprison sentenced in respect there of to imprisonment for not less than six months, and a period of five years has not elapsed from the date of expiry of the sentence.

e) He has not paid any call in respect of shares of the company held by him, whether along or jointly with others.

f)An order disqualifying him for appointment as directors has been passed by a court in pursuance of section 203 and is in force.

A private company which is not a subsidiary of a public company, may by its articles, provide that a person shall be disqualified for appointment as a directors or any grounds in addition to those specified in sub-section (1) [section 274(3)].

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