Legal Aspects of Business

Compulsory Question from contract Law

2 questions 3m+2m

1. Significance of proper offer and acceptance.

For 2marks

Proper Offer and Acceptance: There must be at least two parties- one making the offer and
the other accepting it. Such offer any acceptance must be valid. An offer to be valid must
fulfil certain conditions, such as it must intend to create legal relations, its term, must be
certain and unambiguous, it must be communicated to the person to whom it is made, etc.
An acceptance to be valid must be absolute and unqualified, it must be made in the
prescribed manner, it must be communicated by an authorised person.

For 5marks+

The meaning of offer and acceptance is the basis of a contract. To form a contract, there
must be an offer made by one party which is, in turn, accepted by another party, and then,
in most cases goods and/or services must be exchanged between the two.

Elements to an Offer
In contract law, the party making the offer is called the “offeror.” Put simply, this is the
person or company that has ownership in some form of the goods and/or services being
offered.
The other party to the agreement is called the “offeree.” This is the person or company
willing to pay the other party some form of compensation in order to use or acquire
ownership of the goods and/or services. The result of this agreement is a legally binding
contract, which is usually, but not always, finalized through the signatures of both parties.
There are two parts to any offer:

● The Expression: This is where the parties articulate in some form an inclination to

enter into a contract and to make that contract legally binding upon the acceptance
by both parties. The expression may take a wide variety of forms, from a personal
discussion to a letter that lays out the basics of the terms.
● The Intention: This is a slightly more vague concept, and it is often left up to the
courts to determine whether or not intention was breached by a party. Essentially,
intention involves a presumption by both parties that the agreement will be legally
binding and comes down to the belief that neither party would begin discussions
without the intent to live up to their side of the bargain.

Offers can really cover anything, from a verbal agreement to provide a service, such as
housesitting, to a detailed contract with legal terminology that one may find in an
agreement to transfer real estate. It’s more than a promise, because it must be made with
the understanding that what is being agreed to will be legally binding. It can be for the sale
of goods, a pledge to perform a service, or even a promise not to engage in an activity. The
more complex the agreement, the greater the likelihood will be that each party would
engage legal counsel to negotiate the contract.
 Elements to Acceptance
Acceptance is the final agreement of both parties to consent to the terms of the offer. While
it is common for the terms of the offer to be negotiated before acceptance, if it can be
shown that through conduct and communications that the parties did in fact intend to agree
to the final terms of the contract, then formal acceptance of an offer is not required for it to
be legally binding.
It is also not always necessary that acceptance be in the form of a signature on a piece of
paper, although this is the most commonly accepted agreement between parties. For
instance, if a party performs an act that would not otherwise happen, such as a painting
contractor painting a house or a professional moving company moving furniture from one
location to another, it would be interpreted as acceptance and agreement to the terms of
the offer of payment for these services.

2. Discuss the incapacities of the person

Capacity of PartiesThe parties to an agreement must be competent to contract. In other
words, they must be capable of entering into a contract. According to Section 11 of Indian
Contract Act, 1872. “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.” The main aspects are- ϒ Not a minor as
per the law he is subject to ϒ Not of unsound mind (Insanity, Under Influence of Alcohol,
Temporary or Permanent) ϒ Not disqualified from entering into a contract by any law that he
is subject to (Alien Enemies , Convict, Company or Corporation acting ultra vires to the
objects in MOA)

3. Who is incompetent to the contractor?

The person entering a contract must be legally competent to contract. Section 11 of the
Indian Contract Act, 1872, states when a person is said major, sound and not disqualified by
law, then he is said to be competent to contract. Contract with a minor, unsound or
intoxicated person is void, as they are incompetent to contract. Incompetency has a critical
role in contracts. To avoid any legal consequences and difficulty arising due to this, one
should be cautious while entering into a contract.

4. Difference between fraud and misinterpretation?

2m answer

● Fraud - deceit by one of the parties, i.e. when one of the parties deliberately makes false
statements.
(suggesting a fact that is not true, and he does not believe it to be true, active concealment
of facts, a promise made without any intention of performing it, any other such act fitted to
deceive)
● Misrepresentation - when a party makes a representation which is false, inaccurate,
incorrect etc. The difference here is the misrepresentation is innocent/negligent i.e. not
intentional. (The party making the statement believes it to be true)

Longer answer
A deceptive act done intentionally by one party in order to influence another party to enter
 into a contract is known as fraud. You tell your client a house is 3,000 square feet, when you
know full well it is only 1,500 square feet. That is fraud.

Misrepresentation is a representation of a material fact made by a party who believed it to

be true, the other party relied on the statement and entered into a contract based upon the
statement, and it later turned out to be incorrect. Let's keep going with that square footage
example. So now I told my client the house was 3,000 square feet because I really thought it
was. Clearly if I did that I would be a terrible agent, but it makes the point.The
representation is made unintentionally and unknowingly, not to deceive the other party, but
it became a reason of loss to the other party.

5. Any two remedies which are available for breach of contract.

● Rescission: The injured party may sue to treat the contract rescinded
● Damages: Compensation can be claimed for loss.
● Specific Performance: The court may direct parties to actually perform the contract.
● Injunction: It is a restraining order from the court to a Party which had breached a negative
term, what is promised not to do. The court orders it to restrain from its action.
● Rectification: When either through fraud or mistake, performance is not possible, either of
parties may file a suit for rectification whereby either the contract is corrected or cancelled.

6. Who are the three parties in contract of guarantee?

A Contract to perform the promise, or discharge the liability, of a third person in case of his
default is called Contract of Guarantee. A guarantee may be either oral or written. The 3
parties are:
Principal Debtor – The one who borrows or is liable to pay and on whose default the
guarantee is given

Creditor – The party who has given something of value to borrow and stands to receive the
payment for such a thing and to whom the guarantee is given

Surety/Guarantor – The person who gives the guarantee to pay in case of default of the
principal debtor

7. Free Consent
Free ConsentThere must be free consent of the parties to the contact. If the consent of the
parties is not free, then no valid contract comes into existence. According to Section 14,
“Consent is said to be free when it is not caused by-

(i) Coercion- using force to compel a person to enter into a contract (committing or
threatening to commit any act forbidden by the law in the IPC)
(ii) Undue influence- when the relations between the two parties are such that one
party is in a position to dominate the other party, and uses such influence to
obtain an unfair advantage of the other party (holds real or even apparent
authority over the other person or is in a fiduciary relationship)
 (iii) Fraud - deceit by one of the parties, i.e. when one of the parties deliberately
makes false statements. (suggesting a fact that is not true, and he does not
believe it to be true, active concealment of facts, a promise made without any
intention of performing it, any other such act fitted to deceive)
(iv) Misrepresentation - when a party makes a representation which is false,
inaccurate, incorrect etc. The difference here is the misrepresentation is
innocent/negligent i.e. not intentional. (The party making the statement
believes it to be true)
(v) Mistake - refers to an erroneous belief held by one or both parties to a contract
at the time the agreement is entered into. (a mistake as to the subject matter,
nature of the transaction or the terms of the contract.)

Company Law

1. Features of Company Law

1] Incorporated Association

A company is required to be registered under the Companies Act 2013. Any association

of persons that is not registered and subsequently incorporated with the Registrar of
Companies is not recognized as a company at all.

2] Separate Legal Entity

A company in the eyes of the law is distinct (separate) from the people who constitute it. It
is capable of enjoying rights is also subject to duties under the law. A company can also own
and deal in property and other such assets. One point to be noted is that the company is not
the agent or the trustee of the subscribers, it has its own distinct legal identity.

3] Limited Liability

Since a company has its own legal identity, its members are not liable for its debts. The
liability of the members of a company is limited to the unpaid share of their share value.
There are some companies limited by guarantee, where the liability of each member is
determined by such a guaranteed amount.

4] Transferability of Shares

The shares held by a shareholder of a company are transferable by nature. So the ownership
in a company can be transferred in accordance with the manner provided in the Articles of
Association. In a private company, there may be some restrictions placed on the transfer of
shares. But the right is not taken away completely.

5] Perpetual Existence

A company is an artificial person, so it does not have a restricted span of life. Death,
insolvency, insanity, retirement etc of any or even all of its members does not affect the
status of a company.
 6] Common Seal

Directors of a company are essentially its agents. So when a director acts within his powers a
company is bound by his actions. The Common Seal is like a signature of the company. The
directors use the seal to sign documents on behalf of the company. So until there is such a
seal on the documents, they cannot be enforced.

2. What is lifting of a corporate wheel?/What is the concept of

corporate veil?
The separate legal entity of a company is one of its most unique features. The Corporate Veil
Theory is a legal concept which separates the identity of the company from its members.
Members are shielded from the liabilities arising out of the company’s actions. Therefore, if
the company incurs debts or contravenes any laws, then the members are not liable for
those errors and enjoy corporate insulation. In simpler words, the shareholders are
protected from the acts of the company. Lifting the Corporate Veil means looking beyond
the company as a legal person, disregarding the corporate identity and paying regard to
humans instead. In certain cases, the Courts ignore the company and concern themselves
directly with the members or managers of the company. This is called piercing the corporate
veil. Usually, Courts choose this option when the case involves a question of control rather
than ownership.
In the following scenarios the Courts may lift the corporate veil to look into the activities of
the company:
1] To Determine the Character of the Company
2] To Protect Revenue or Tax
3] If trying to avoid a Legal Obligation
4] Forming Subsidiaries to act as Agents
5] A company formed for fraud or improper conduct or to defeat the law
6] Ultra vires acts

3. Highlights of Memorandum of Association?

MOA:
Contains the objects for which the company is formed and therefore identifies the possible
scope of its operations beyond which its actions cannot go. It defines as well as confines the
powers of the company. If anything is done beyond these powers that will be ultra vires the
company and be void.
1. Name Clause:
● A Company is a legal entity. So, it must have a name to establish its identity.
● Confers protection against subsequent company registration in the same or
closely similar name.
2. Registered Office /Domicile Clause:
● Memorandum of Association must state the name of the State in which the
registered office of the company is to be situated.
● It will fix up the domicile of the company.
● Registered office of a company is the place of its residence for the purposes of
delivering or addressing any communication, service of any notice or process of
Court of Law and for determining the question of jurisdiction in any action against
the company.
 3. Objects Clause: It is the most important clause in the Memorandum of Association.
It defines and limits the scope of operations of the company. It explains to the
members the scope of activity of the company where their capital will be employed.
4. Liability Clauses:
● Liability clause mentions the liability of members of the company.
5. Capital Clause:
● Memorandum of Association of a limited company having share capital must
state the amount of share capital with which the company is to be registered.
6. Association/Subscription Clause:
● This clause states that the persons subscribing their signatures at the end of the
Memorandum are desirous of forming themselves into an association in
pursuance of the Memorandum.

SALES OF GOODS ACT

1. Give 5 circumstances of exemption doctorine of emptor and its

relevant?

1] Fitness of Product for the Buyer’s Purpose : When the buyer informs the seller of his
purpose of buying the goods, it is implied that he is relying on the seller’s judgment. It is the
duty of the seller then to ensure the goods match their desired usage.

2] Goods sold by Description : When the buyer buys the goods based only on the
description and goods do not match the description then in such a case the seller will be
responsible for the goods.

3] Goods of Merchantable Quality : Section 16 (2) deals with the exception of merchantable
quality. The sections state that the seller who is selling goods by description has a duty of
providing goods of merchantable quality, i.e. capable of passing the market standards.

4] Sale by Sample :

● If the buyer buys his goods after examining a sample and the rest of the goods do not
resemble the sample, the buyer cannot be held responsible. In this case, the seller will
be the one responsible.

● For example, A places an order for 50 toy cars with B. He checks one sample where the
car is red. The rest of the cars turn out orange. Here the doctrine will not apply and B
will be responsible.

5] Fraud or Misrepresentation by the Seller :

 ● If the seller obtains the consent of the buyer by fraud or if the seller conceals any material
defects of the goods which are later discovered on closer examination then again the buyer
will not be responsible. In both cases, the seller will be the guilty party.

2.Difference between conditions and warranty?

COMPETITION LAW

Q1. What are vertical and horizontal agreements Section 3 and 4

HORIZONTAL AGREEMENTS- Horizontal agreements are arrangements between

enterprises at the same stage of production. Section 3(3) of the Act provides that such
agreements includes cartels, engaged in identical or similar trade of goods or provision of
services, which-

1. Directly or indirectly determines purchase or sale prices

2. Limits or controls production, supply

3. Shares the market or source of production

4. Directly or indirectly results in bid rigging or collusive bidding

Under the Act horizontal agreements are placed in a special category and are subject to
the adverse presumption of being anti-competitive. This is also known as ‘per se’ rule.
 This implies that if there exists a horizontal agreement under Section 3(3) of the Act, then it
will be presumed that such an agreement is anti-competitive and has an appreciable adverse
effect on competition1.

VERTICAL AGREEMENTS- Vertical agreements are those agreements which are entered
into between two or more enterprises operating at different levels of production2. Any
agreement amongst enterprises or persons at different stages or levels of the production chain
in different markets-

 Tie-in Arrangement (requiring a purchaser of goods, as a condition of such purchase,

to purchase some other goods)

 Exclusive Supply Agreement (restricting in any manner the purchaser in the course of
his trade from acquiring or dealing in any goods other than those of the seller or any
other person)

 Exclusive Distribution Agreement (limit, restrict or withhold the output or supply of

any goods or allocate any area or market for the disposal or sale of the goods)

 Refusal To Deal (restricts, or is likely to restrict, by any method the persons or

classes of persons to whom goods are sold or from whom goods are bought)

 Resale Price Maintenance (sell goods on condition that the prices to be charged on
the resale by the purchaser shall be the prices stipulated by the seller

Q2. Abuse of dominant position of an enterprise.

There shall be an abuse of dominant position if an enterprise imposes directly or indirectly unfair or
discriminatory conditions in purchase or sale of goods or services or restricts production or technical
development or create hindrance in entry of new operators to the prejudice of consumers. The
provisions relating to abuse of dominant position require determination of dominance in the
relevant market. Dominant position enables an enterprise to operate independently or effect
competitors by action

The term ‘dominant position’ has been defined in the as “A position of strength, enjoyed by an
enterprise, in the relevant market, in India which enables it to operate independently of competitive
forces prevailing in the relevant market; or affect its competitors or consumers or the relevant
market in its favour” Activities that shall be deemed abuse of dominance of an enterprise in the
relevant market:

 Unfair or discriminatory trading conditions or prices or predatory prices

 denying market access in any manner
 limiting production/supply or scientific development to the prejudice of the customer
 imposing supplementary obligations having no connection with the subject of the contract
 using dominance in one market to enter into or protect another relevant market

Q3. Explain Intellectual Property Rights

The term Intellectual property is related to human brain applied for creativity and invention. Various
efforts in terms of inputs of manpower, time, energy, skill, money, etc are required to invent or
create something new. The ultimate idea by which invention or creation took place is an intangible
property of the person, who took pains for the invention or creation. Therefore, as per law, legal
rights or monopoly rights are given to creator or innovator to harvest the economic benefits on their
invention or creation.5, 6 The Intellectual property rights (IPR) are territorial rights by which owner
can sell, buy or license his Intellectual Property (IP) similar to physical property.7 Although one has
to register IPR at legal authority in some presentable or tangible form to claim their benefits. Each
type of IPR gives especial rights to its inventor and or creator to sustain and harvest economic
benefits which further motivates skill and societal developments.

The development of any society directly depends on IPR and it policy frame work.Lack of IPR
awareness resulted in the death of inventions, high risk of infringement, economic loss and decline
of an intellectual era in the country. Thus, there is a dire need for dissemination of IPR information
so as to boost indigenous inventions and developments in the field of research and technology.

Q4. Types of IPR with the work it protects

Intellectual Property can be easily understood as creations of the mind. There are three primary
types of Intellectual Property: copyrights, trademarks, and patents.

● A copyright is a legal term that is used to describe a person’s ownership rights to an original
expression of creativity. These creations could range from books, advertisements, or even
databases. It is important to note that a person cannot copyright an idea; rather, they can
copyright an expression of an idea that they’ve created.
● A trademark is a recognizable sign or logo created to distinguish an enterprise. The golden
“M” of McDonald’s or the Queen’s University crest are both examples of trademarks.
 ● Lastly, a patent protects inventions: it prevents a person’s invention from being used, made
or sold by others without their consent. Patents can be issued by the government for a fixed
period of time.
The intersection of Intellectual Property and the law is becoming an increasingly important topic as
our society continues to create innovative ideas that enhance our lives. Our laws play a strong role in
protecting a person’s intellectual property from being copied, stolen, or taken advantage of by
someone who had no part in its creation – activities that are ultimately harmful to a society that
wishes to encourage individuals to create valuable, intangible, ideas.

If the differences are asked:

Q5. Advantages of ADR
Advantages to Arbitration:

1. More flexibility. In the case of arbitration, the parties have far more flexibility to select what
procedural and discovery rules will apply to their dispute (they can choose to apply relevant industry
standards, domestic law, the law of a foreign country, etc.).

2. Select your own Arbitrator or Mediator. The parties can often select the arbitrator or mediator
that will hear their case, typically selecting someone with expertise in the substantive field involved
in the dispute. The arbitrator (or panel members) need not even be an attorney. In this way the
focus can be on the substantive issues involved rather than on technical procedural rules. In normal
litigation, the parties cannot select the judge, and the judge and/or jury may often need expert
witnesses to explain extremely complex issues. The greater the expertise of the arbitrator, the less
time that needs to be spent bringing him up to speed.

3. A jury is not involved. Juries are unpredictable and often damage awards are based solely on
whether they like the parties or are upset at one party because of some piece of evidence such as a
photo that inflames the passion of the jury. Juries have awarded claimants damages that are well
above what they would have received through alternative dispute resolution; and they have also
done the opposite.

4. Expenses are reduced. Attorneys and expert witnesses are very expensive. Litigating a case can
easily run into the tens of thousands of dollars. Alternative dispute resolution offers the benefit of
getting the issue resolved quicker than would occur at trial – and that means less fees incurred by all
parties.

5. ADR is speedy. Trials are lengthy, and in many states and counties it could take years to have a
case heard by a judge or jury. Appeals can then last months or years after that. In a matter of hours,
an arbitrator often can often hear a case that otherwise may take a week in court to try with live
witnesses. With arbitration, the evidence can be submitted by documents rather than by testimony
presented through witnesses. ADR can be scheduled by the parties and the panelist as soon as they
are all able to meet together.

6. The results can be kept confidential. The parties can agree that information disclosed during
negotiations or arbitration hearings cannot be used later even if litigation ensues. The final outcome
can also be made private if the parties so stipulate and agree. On the other hand, most trials and
related proceedings are open to the public and the press.

7. Party participation. ADR permits more participation by the litigants. ADR allows the parties the
opportunity to tell their side of the story and have more control over the outcome than normal trials
overseen by a judge. Many parties desire the opportunity to speak their piece and tell their side of
the story in their own words rather than just through counsel.

8. Fosters cooperation. ADR allows the parties to work together with the neutral arbitrator or
mediator to resolve the dispute and come to a mutually acceptable remedy.

9. Less stress. ADR is often less stressful than expensive and lengthy litigation. Most people have
reported a high degree of satisfaction with ADR.

10. Conclusion. Because of these advantages, many parties choose ADR (either mediation or
arbitration) to resolve disputes instead of filing or even proceeding with a lawsuit after it has been
filed. It is not uncommon after a lawsuit has been filed for the court to refer the dispute to a neutral
before the lawsuit becomes too costly. ADR has also been used to resolve disputes even after trial,
while an appeal is pending.

11. Sample subject matters. Some examples of disputes that can be settled by ADR include but are
not limited to:

● Business disputes- contracts, partnerships, ownership

● Property / Land use disputes- property transfers, boundaries, easements
● Family disputes- divorce, property, custody, visitation, support issues
● Consumer / Collection disputes- repairs, services, warranties, debts, loans
● Employment disputes- employment contracts, terminations, non-compete
● Landlord/tenant disputes- evictions, rent, repairs, security deposits
 ● Neighborhood disputes / Relational disputes or other civil or personal conflicts
● Personal Injury disputes / Insurance disputes- accidents, coverage, liability issues

Q. Compare Arbitration, Litigation and conciliation:

Q6. Compare conciliation, litigation and arbitration

What is Conciliation?
Conciliation is a form of dispute resolution that aids in the settlement of a disagreement
or dispute between two parties. The conciliation process is handled by an impartial
individual known as a conciliator, who meets with the parties involved and work with
them to arrive at a settlement or resolution. The conciliator, being an active participant in
this process, works continuously works with both parties to arrive at an agreement
acceptable to all. The conciliation process involves the conciliator going back and forth
between the parties, discussing the issues involved and what each party is willing to
sacrifice, and negotiate in coming to a settlement. The two parties to the process rarely
meet, and most discussions are done through the conciliator. One main advantage of
conciliation is that it is not legally binding and, therefore, parties can negotiate till a
settlement that is pleasing to all can be achieved.
What is Arbitration?
Arbitration much like conciliation is also a form of dispute resolution in which parties at
disagreement can find a resolution without having to go to courts. Arbitration is much like
a mini court in which the parties need to present their case to a panel of arbitrators,
along with supporting evidence. The parties are allowed to select one arbitrator each,
allowing the two chosen arbitrators to agree on a third arbitrator. A key disadvantage of
arbitration is that the decision put forth by the arbitrators are binding. However, in
comparison to court proceedings, arbitration can be more advantageous as the parties
involved could select their preferred arbitrator instead of having to present their case to
an unknown judge. The materials discussed also have more privacy than in a court
proceeding as no media or public are allowed to such arbitration proceedings. However,
since the decision provided is binding, the parties cannot appeal their case unless they
can prove with clear evidence that a fraud has been committed.
Definition of Litigation
By the term ‘litigation’, we mean going to court for settling the dispute between or among
parties. It is a legal proceeding initiated between the opposing parties, with the aim of
enforcing or defending the legal right.
In this process, the case is brought to the court, wherein the judge (appointed by the
court to act as the litigator) gives his/her verdict on the issue after considering the all the
arguments, evidence and facts presented by the lawyers of the parties. If the parties do
not agree with the decisions of the court, they can appeal to a superior court for getting
justice, provided certain conditions are fulfilled.
The court has a definite and formal procedure, for settling the conflict between the
parties concerned, which should be followed strictly.
Conciliation vs Arbitration
Conciliation and arbitration are both carried out with the purpose of peacefully and
agreeably resolving the conflict between parties. They are both processes that have
been adopted to avoid the hassle and cost involved in going to courts to resolve a
dispute. Despite their similarities in the outcome that they try to achieve, a number of
major differences between the two are there. In conciliation, most if not all
communication goes through the conciliator who is trusted by both parties. In arbitration,
a panel of arbitrators hear the cases of both parties and examine evidence to come at a
resolution. While the decision given by the conciliator is not binding, with room for
negotiation, the decision put forth by arbitrators are final and legally binding thereby
leaving little room for appeal.
What is the difference between Conciliation and Arbitration?
• Alternative dispute resolution (ADR) is a dispute resolution technique used to resolve
disagreements and disputes between parties by coming to an agreeable settlement
through discussion and negotiation. Conciliation and arbitration are two such forms of
ADR that are used as an alternative to going to courts to resolve conflicts.
• The conciliation process is handled by an impartial individual known as a conciliator,
who meets with the parties involved and works with the parties involved to arrive at a
settlement or resolution.
• Arbitration is much like a mini court in which the parties need to present their case to a
panel of arbitrators, along with supporting evidence.
1. Arbitration is a method of resolving the dispute in which a neutral
third party is appointed to study the dispute, listen to the parties and then
make recommendations. On the other hand, litigation is described as a
legal process in which the parties resort to the court for the settlement of
disputes.
2. Arbitration is always civil in nature. Conversely, litigation can be civil
litigation or criminal litigation.
3. Arbitration is a private method of resolving controversies between
the parties, wherein complete confidentiality is maintained. On the
contrary, litigation is a public proceeding.
4. The place for arbitration of the issue is decided by the parties seeking
the settlement, whereas, the litigation takes place in the court only.
5. In arbitration, it is the arbitrator, who is appointed by the parties, to
decide the matter. As against, in litigation, the parties have no say, as to
who will be the judge to decide their case. The judge is appointed by the
court only.
6. The cost of the arbitration process is comparatively lower than the
litigation.
7. The decision made by the arbitrator is final and binding in nature,
and so further appeal cannot be made. On the contrary, in litigation, the
litigants can appeal to higher court, if they do not agree with the decision
made by the court, but subject to certain conditions.