Student Name: Pooja Sachan Registration No: 1302011667 Subject Name: LAB

Course: MBA LC Code:00918 Subject Code:MB0051

Question1. Write short notes with examples: a) Offer and acceptance b) Capacity to contract Ans: Offer and acceptance: Offer is the basic building block on which a contract rests. An offer is synonymous with a proposal. As per Section 2 (a) of the Contract Act, the offer or proposer expresses his/her willingness to do or not to do something (i.e., act or abstain from doing something) with a view to obtain consent of the other party to such act or abstinence. The person making the offer is called the Offer or / Promis or / Proposer and the person to whom the offer is made is called the Offeree / Proposee. When the Offeree accepts the offer, he/she is called the Acceptor or Promisee as per Section 2 (c). Modes of making an offer An offer can be made if a person commits an act or omission by which the person intends to communicate a proposal or which has the effect of communicating it to the other party according to Section 3 of the Contract Act. An offer can be either express or implied or specific or general.

Express offer It is an offer made by words (whether written or oral). The written offer can be made by letters, telegrams, telex messages, advertisements, etc. The oral offer can be made either in person or over the telephone.

Implied offer It is an offer made by conduct such as positive acts or signs, so that the person acting or making signs conveys something. However, silence of a party can, in no case, amount to an offer by conduct.

Offer by abstinence An offer can also be made by a party by omission to do something. This includes such conduct by a party that the other person takes it as his/her willingness or assent. 2. Acceptance of an offer According to Section 2 (b), when the person to whom the offer is made agrees and conveys his/her assent thereto, the offer is said to be accepted. Thus, acceptance is the act of giving consent to the proposal. The offeree is deemed to have accepted when he/she gives assent to the proposal. The acceptance of an offer may be express or implied. It is expressed when the acceptance has been signified in writing, by words of mouth or by the offeree performing some act. Acceptance is implied when it can be gathered from the surrounding circumstances or the conduct of the parties. 3. Communication of offer and acceptance

It is necessary for the offeror to communicate an offer to the offeree. It is also necessary for the offeree to communicate his/her acceptance to the offeror. Section 4 of the Indian Contract Act states that the communication of an offer is complete when it comes to the knowledge of the person to whom it is made. For example, when A proposes by a letter to sell his/her car to B at a certain price, the communication of the offer is complete when B receives the letter. The completion of communication of acceptance has two aspects namely: As against the offeror, when it is put into a course of transmission to him/her As against the acceptor, when it comes to the knowledge of the proposer

Capacity to contract: 1. Competency to contract A person must be competent to enter into a contract according to the law. According to Section 11 of the Act, a person is competent to enter into a contract if: That person is a major as per age That person is of sound mind That person is not disqualified from contracting by any law to which he/she is subject

2. Minors contracts The law protects minors against their own inexperience and the possible improper designs of those who are experienced. The Contract Act states that only a person who is a major can enter into a contract. Section 3 of the Indian Majority Act, 1875, states that a minor is a person who has not completed 18 years of age. 3. Soundness of mind Section 12 of the Contract Act states that a person is of sound mind to make a contract if that person is capable of understanding the terms of the contract at the time of its creation and is capable of making rational judgments in his/her interests. According to the Act, lunatics (deranged due to personal trauma), idiots (completely lost mental capacity) and drunken persons (intoxicated and under the influence of substances) do not have the mental capacity to enter into a contract.

Question2. Discuss the right and liabilities of a surty. Ans: Right: Rights of Surety can be classified into three groups, as follows; 1. Rights against Principal debtor. 2. Rights against Creditor. 3. Rights against Co-Sureties.

Rights against Principal Debtor Right to give Notice: When ever creditor comes to surety, for the purpose of seeking payment, surety can give a notice to principal debtor to settle the debt. Rights of Sub-rogation: Sub rogation is a process where rights will get shifted from one person to the other. If surety makes payment to creditor, surety gets all rights of creditor by sub-rogation and from then onwards surety can behave like a creditor. Right of Indemnity: Principal of indemnity operates between principal debtor and surety where principal debtor becomes implied indemnifier and surety becomes implied indemnity holder. Therefore, surety can make principal debtor answerable for all sufferings. Right to get Securities: In case where surety makes payment to creditor, surety has right to get the securities given by principal debtor to creditor. Right to ask for Relief: From the date of guarantee, besides creditor, surety also can bring pressure on principal debtor in connection with settlement of debt. Rights against Creditor Right to get Securities: If Surety makes payment to creditor, surety can get all securities into his possession from creditor. Right to ask for Set-off: Surety can give advice to creditor to sell away the security and to utilize the amount thus realized for set off. Rights of Sub-rogation: When ever surety makes payment to creditor, creditor foregoes or looses all of his rights in his capacity as creditor and those rights will be attained by surety. Right to advice to Sue Principal Debtor: Surety has right to give advice to creditor to proceed legally against principal debtor for the purpose of recovering the amount. Right to insist on Termination of Services: In case where guarantee is with regard to conduct of an employee, surety can insist on termination of services of employee. Here employees status is equal to that of creditor and employees status is equal to that of principal debtor. Rights against Co-Sureties Right to ask for Contribution: Surety can ask his co-sureties to contribute the amount when principal debtor comes across default. If they have given guarantee for equal amounts, they have to contribute equally. In case where guarantee is given for in equal amounts, the mode of contribution differs from England law to Indian law. As per England law contribution is to be made in the ratio of guarantee amounts. But as per Indian law the deficit amount is to be distributed to all sureties equally and every surety will contribute share of deficit or guarantee amount which ever is less. Right to claim Share in Securities: When co-Sureties make payment to creditor, they get securities from creditors procession. Then every surety can claim his share in those securities.

Liabilities: The first and the foremost point in the suretys liability is that it is coextensive of the debtors liability. When we say the coextensive of debtors liability it means surety liability is as much as the debtors liability. Meaning thereby, in case the debtor akes a default in the making the payment to the creditor, then whatever the creditor can recover from the debtor, the same amount of the liability will fall on the shoulders of the surety. Surety will also be responsible to same amount of the liability, because he has given the surety and his liability is extensive to an extent of the debtors liability. For example, if a debtor is making a default in making the payment to the surety and later on the surety has to make the payment of the amount along with the some cost and the interest also, then surety can recover that principal amount along with the cost or interest from the debtor. So his liability will be the coextensive of the debtors liability. The second point is

suretys liability may be limited. A surety at the time of giving the surety can limits his liability in whole of the debt.

Question3. How is an agency formed? Discuss the classification of agents. Ans: Formation of agency: A contract of agency may be created by: An express agreement Implication (implied agreement) Ratification

Thus, there are different kinds of agencies. Express agency (Section 187) A person may be appointed as an agent either by word of mouth or by writing. No particular form is required for appointing an agent. The usual form of a written contract of agency is the power of attorney on a stamped paper. Implied agency (Section 187) Implied agency arises from the conduct, situation or relationship of parties. Implied agency, therefore, includes agency by Estoppel, agency by holding out and agency of necessity. Agency by Estoppel (Section 237) When a person has, by his conduct or statements, induced others to believe that a certain person is his agent, he is stopped from subsequently denying it. The principal is precluded from denying the truth of agency that he himself has represented as a fact, although it is not a fact. Agency by holding out Some affirmative conduct by the principal is necessary to create an agency by holding out, though it is part of the Law of Estoppel. Agency of necessity (Section 189) This arises where there is no express or implied appointment of a person as an agent for another, but a person is forced to act on behalf of a particular person. Agency by ratification (Sections 196-200) Where an agent does an act for his principal, but without knowledge of authority, or where he exceeds the given authority, the principal is not held bound by the transaction. However, Section 196 permits the principal, if he so desires, to ratify the act of the agent. If he so elects, it will have the same effect as if the act was originally done by his authority. An agency in such a case is said to be created by ratification. Agency coupled with interest An agency is said to be coupled with interest when authority is given for the purpose of securing

some benefit to the agent. In other words, where the agent has himself an interest in the subjectmatter of the agency, the agency is one coupled with interest. Classification of agents: Agents may be classified from different points of view. One broad classification of agents is: Mercantile or commercial agents Non-mercantile or non-commercial agents.

Another classification of agents is: General Special

Special and general agents A special agent is a person appointed to do some particular act or enter into some particular contract. A special agent, therefore, has only a limited authority to do the specified act. If he does anything beyond the specified act, he runs the risk of being personally liable since the principal may not ratify the same. Mercantile or commercial agents A mercantile or commercial agent may act as: Broker A broker is a mercantile agent engaged to buy and/or sell property or to make bargains and contracts between the engager and third party for a commission (called brokerage). A broker has no possession of goods or property. He is merely a connecting link between the engager and a third party. The usual method of dealing by a broker is to make entries of the terms of contract in a book, called the memorandum book, and to sign them. He/she then sends the particulars of the same to both parties. The document sent to the seller is called the sold note and the one sent buyer is called the bought note.

Factor A factor is a mercantile agent who is entrusted with the possession of goods with an authority to sell the same. He/she can even sell the goods on credit and in his/her own name. A factor is also authorised to raise money on their security and has a general lien on the goods in his possession. A factor, however, cannot barter the goods, unless expressly authorised to do. Also, he/she cannot delegate authority. Commission agent A commission agent is an agent employed to buy or sell goods or transact business. The remuneration that he/she gets for this purpose is called commission. A commission agent is not liable in case the third party fails to carry out the agreed obligation and may have possession of goods or not. His/her lien in case of goods in his/her possession is a particular lien. Del credere agent A delcredere agent is one who, in consideration of an extra remuneration, called a del credere commission, guarantees the performance of the contract by the other party.

Non-mercantile or non-commercial agents Some agents in this category are wife, estate agent, counsels (advocates) and attorneys. The

following principles provide guidelines as regards wife as an agent of her husband:

If the wife and husband are living together and the wife is looking for necessaries, she is agent. However, this presumption may be rebutted and the husband may escape liability if he can prove that: He had forbidden his wife from purchasing anything on credit or from borrowing money or goods purchased were not necessaries He had given sufficient money to his wife for purchasing necessaries The trader had been told not to give credit to his wife. Where the wife lives apart from the husband through no fault of hers, the husband is liable to provide for her maintenance. If he does not provide further maintenance, she has an implied authority to bind the husband for necessaries, i.e., he would be bound to pay her bills for necessaries. However, where the wife lives apart under no justifiable circumstances, she is not her husbands agent and thus cannot bind him even for necessaries.

Sub-agent and substituted agent (Sections 190-195) The general rule is that an agent cannot appoint an agent. The governing rule is enshrined in a maxim a delegate cannot further delegate. An agent being a delegate cannot transfer his duties to another. The principle underlying the rule is that the principal engages an agent ordinarily on personal consideration and thus, may not have the same confidence in the person appointed by the agent. Hence, sub-agency is not generally recognised. However, Section 190 deals with the circumstances as to when and to what extent an agent can delegate his duties. An agent may appoint another agent in the following circumstances:

Where expressly permitted by the principal Where the ordinary custom of the trade permits delegation The nature of agency is such that it cannot be accomplished without the appointment of a sub-agent Where the nature of the job assigned to the agent is purely clerical and does not involve the exercise of discretion, e.g. if Anthony is appointed to type certain papers, because of lack of time, he assigns the job to another equally competent typist Bharat, the delegation is valid In an unforeseen emergency.

Question4. Discuss the registration of firm under section 58 of Indian partnership Act,1932. Explain what partnership deed is. Ans: Registration of Firm: Section 58 lays down the procedure for registration of partnership firms. A partnership firm may be registered at any time by post, or delivering to the Registrar of Firms of the area in which the business of the firm is situated or proposed to be situated, a statement in the prescribed form and accompanied by the prescribed fee, stating:

Firms name Place or the principal place of business Names of any other places where the firm carries on business Date when each partner joined the firm Names in full and addresses of the partners, and Duration of the firm

The statement must be signed by all partners, or by their agents especially authorised in that behalf and duly verified. When the Registrar of Firms is satisfied that the provisions of Section 58 have been duly complied with, he/she registers the firm by recording an entry of the statement in a register called the Register of Firms and files the statement (Section 59). The Registrar then issues a Certificate of Registration. Registration is effective from the date when the Registrar files the statement and makes entries in the Register of Firms. Partnership Deed: 1. Partnership can be formed either by oral or written agreement In France and Italy, the law requires all partnership agreements to be in writing. However, in the UK, USA and India, written agreement is not compulsory. In order to avoid misunderstanding and litigation, it is desirable to sign a written agreement that is called partnership deed or agreement. The partnership deed is required to be stamped according to the provisions of the Stamp Act, 1899. Each partner should possess a copy of the deed. 2. Partnership agreements and contract law Section 3 provides that the unrepealed provisions of the Indian Contracts Act, 1872, save insofar as they are inconsistent with the provisions of this Act, shall continue to apply to firms. Moreover, Section 2(e) provides that expressions used but not defined in this Act and defined in the Indian Contracts Act, 1872, shall have the meanings assigned to them in that Act. As a partnership agreement is a contract, the provisions of the Indian Contracts Act, 1872, are applicable to it. Question5. What do you mean by negotiation instruments? What are the various types of negotiation instruments recognized by the negotiable instruments Act,1881. Ans: Meaning: Documents that are freely used in commercial transactions and monetary dealings are known as negotiable instruments, if they satisfy certain conditions. The term negotiable instrument refers to a written document transferable by mere delivery or by indorsement 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 usage. Laws relating to negotiable instruments are contained in the Negotiable Instruments Act, 1881. This Act deals exclusively with promissory notes, cheques and bills of exchange, as defined under Section 13. An instrument is called negotiable if it possesses the following features: Freely transferable Transferability may be by either by delivery, or endorsement and delivery. Holders title free from defects The term negotiability means that not only is the instrument transferable by endorsement and/or delivery, but that its holder in due course or a bonafide transferee is not affected by defect in title, either of the transferor or any prior party. The transferee acquires a good title, notwithstanding any defects in a previous holders title. A holder in due course is the one who receives the instrument for value and without any notice as to the defect in the title of the transferor. Holder can sue in own name Another feature of a negotiable instrument is that its holder

in due course can sue on the instrument in his/her own name and he/she need not give any notice to the transferor or third party liable for payment. Transfer infinitum A negotiable instrument can be transferred infinitum, i.e., it can be transferred any number of times till its maturity. Presumptions A negotiable instrument is subject to certain presumptions in law.

Types: 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 to a specified person or to his order (Section 4). It does not include a bank or currency note. The following are two illustrations of promissory notes. Where A signs instruments in the following terms: I promise to pay B or order Rs. 500. I acknowledge myself to be indebted to B in Rs. 1,000 to be paid on demand, for value received.

However, the following are NOT promissory notes: Mr. B, I.O.U. (I owe you) Rs. 1,000. I am liable to pay you Rs. 500. I promise to pay B Rs. 500 and all other sums which shall be due to him. I promise to pay B Rs. 500, first deducting there out any money which he may owe me. I promise to pay B Rs. 1,500 on Ds death, provided he leaves me enough to pay that sum. I promise to pay B Rs. 500 seven days after my marriage with C. I promise to pay B Rs. 500 and to deliver to him my white Maruti Car 1 January next.

Parties to a promissory note The maker the person who makes the note promising to pay the amount stated therein. The payee the person to whom the amount of the note is payable. The holder is either the original payee or any other person in whose favour the note has been endorsed. The endorser the person who endorses the note in favour of another person. The endorsee the person in whose favour the note is negotiated by indorsement.

Bill of exchange A bill of exchange is defined by Section 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. Parties to a bill of exchange The parties of bill of exchange are:

The drawer: The person to whom the amount of the bill is payable. The drawee: The person on whom the bill is drawn. Thus, the drawee is the person responsible for acceptance and payment of the bill. In certain cases, however, a stranger may accept the bill on behalf of the drawee. The payee: The person to whom amount of the bill is payable. It may be the drawer himself or any other person. The holder: It is the original payee but where the bill has been endorsed, the endorsee. In case of a bearer bill, the bearer or possessor is the holder. The endorser: It is the person who endorses a bill. The endorsee: It is the person to whom the bill is negotiated by endorsement. Drawee in case of need. Acceptor for honour.

Question6. Who is a consumer? Examine the rights of a consumer enshired under the consumer protection Act,1986. Ans: Definition of Consumer: Indian consumers tend to be unaware of basic rights that are provided to them under law, compared to their Western counterparts. This can be attributed to the lack of education as well as disciplined organisation to fight for ones rights and a general attitude of apathy towards the system. The growth of legislation on protection of consumer rights has also been piecemeal in India, spread over several unrelated statutes such as the Indian Contracts Act, Sale of Goods Act, Essential Commodities Act, Drugs Control Act, Prevention of Food Adulteration Act, Standard of Weights and Measures Act and Monopolies and Restrictive Trade Practices Act. While all these Acts provide several remedies to the consumer, the process is both expensive and time consuming. Other salient features of the Act are that it: Applies to all goods and services unless specifically exempted by the Central Government Covers all sectors whether private, public or co-operative Confers certain rights on consumers Envisages establishment of consumer protection councils at the Central and State levels to promote and protect the rights of consumers

Right of Consumer: For the first time in the history of legislation in India, the Consumer Protection Act, 1986, extended a statutory recognition to the rights of consumers. Section 6 of the Act recognises the following six rights of consumers:

Right to safety: The right to be protected against the marketing of goods and services that are hazardous to life and property. Right to be informed: The right to be informed about the quality, quantity, potency, purity, standard and price of goods or services, as the case may be, to protect the consumer against unfair trade practices. Right to choose: The 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. Right to be heard: 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. Right to seek redressal: 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. Right to consumer education: It means the right to acquire the knowledge and skill to be an informed consumer.