TASK 15

Sundarakrishnan T.V

1. A) Define holder. Explain the rights of holder in due course?

Holder: Holder is a term used to any person that has in his custody a promissory note, bill of
exchange or cheque. He has a possession of a legal instrument. That person must be entitled
to possess the instrument legally and also recover the amount which is due from the
instrument. He must also have the legal capacity to enforce his rights in his own name.

Holder in due course acquiring the instrument for consideration and in good faith gets the
following rights under the act:

 Holder in due course can file a suit in his own name against the parties liable to pay.
He is deemed prima facie to be holder in due course.
 The holder is due course gets a good title even though the instruments were originally
stamped but was an inchoate instrument. The person who has signed and delivered an
inchoate instrument cannot plead as against the holder in due course that the
instrument has not been filled in accordance with the authority given by him.
However, a holder who himself completes the instrument is not a holder in due
course.
 Every prior party to the instruments is liable to a holder in due course until the
instrument is duly satisfied.
 Acceptor cannot plead against a holder in due course that the bill is drawn in a
fictitious name.
 The other parties liable to pay cannot plead that the delivery of the instrument was
conditional or for a specific purpose only.
 He gets a good title to the instrument even though the title of the transferor or any
price party to the instrument is defective. He can recover the full amount unless he
was a party to fraud; or if the instrument is negotiated by means of a forged
endorsement.
  The person liable cannot plead against the holder in due course that the instrument
had been lost or was obtained by means of an offence of fraud or for an unlawful
consideration.
 The validity of the instrument as originally made or dawn cannot be denied by the
maker of drawer of a negotiable instrument or by acceptor of a bill of exchange for
honor of the drawer.
 The maker of a note or an acceptor of a bill payable to order cannot deny the payee’s
capacity to indorse the same at the date of the note or bill.
 Endorser is not permitted as against the holder in due course to deny the signature or
capacity to contract of any prior party to the instrument.

B)’A’ sells a radio to ‘M’ a minor, who pays for it by cheque. ‘A’ indorses
the cheque to ‘B’ who takes it in good faith and for more values. The
cheque is dishonored on presentation. Can ‘B’ enforce payment of the
cheque against ‘A’ or ‘M’?

B can enforce payment against A but not against M since M is a minor and even though the
act permits minor to negotiable instrument transactions, any liability caused minor cannot be
held liable for payment.

2. A) Define promissory notes. Explain the essential features of promissory

note (specimen is required)

A promissory note is defined as an instrument in writing (not being a bank note or a

currency note), 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 to the bearer.”
 It must be in writing.
 It must contain an unconditional promise to pay.
 It should be signed by the maker.
 The payment should be made to a certain person.
 The certainty of the amount payable should be there.
  It should be stamped.

B) ‘A’ is the payee of a bearer instrument ‘A’ misplaces the instrument in

his office. It is picked by ‘B’ ‘B’ delivers it to ‘C’ who takes it in good faith
& for valuable consideration. Is ‘C’ a holder in due course?

Yes. The instrument was payable to bearer as it was a bearer instrument. It could be
negotiated by delivery despite the presence of special endorsements.

Now, C is the holder of the bearer instrument as he takes it from B in good faith. But only B
knows that he has taken from A.

3. A) Define company. Differentiate between a company and a partnership

firm?

A company is a legal entity formed by a group of individuals to engage in and operate a

business commercial or industrial enterprise. A company may be organized in various ways
for tax and financial liability purposes depending on the corporate law of its jurisdiction. The
line of business the company is in will generally determine which business structure it
chooses such as a partnership, proprietorship, or corporation. These structures also denote the
ownership structure of the company. They can also be distinguished between private and
public companies. Both have different ownership structures, regulations, and financial
reporting requirements.

Difference between a company and partnership firm

 The members of the partnership firm are called partners whereas the members of
company are called shareholders.
 The partnership business is to be governed by the Indian Partnership Act, 1932
whereas the business of the company is determined by Indian Companies act,
2013
 Partnership firm is created by contract between two or more persons whereas
company is created by law i.e registration.
 The rules of a partnership are to be registered by the state government whereas in
the case of the company it is to be regulated by the central government.
  Registration of a firm is not necessary whereas the company's registration is
mandatory.
 The mandatory document in case of partnership is partnership deed whereas in the
case of a company the mandatory document is the memorandum of association
and articles of association.

Differentiate between private company and public company?

 Minimum Number of Members- Minimum number of members required to form a

private company is 2, whereas a Public Company requires at least 7 members.
 Maximum Number of Members- Maximum number of members in a Private
Company is restricted to 50, there is no restriction of maximum number of members
in a Public Company.
 Transferability of Shares- There is complete restriction on the transferability of the
shares of a Private Company through its Articles of Association, whereas there is no
restriction on the transferability of the shares of a Public Company.
 Issue of Prospectus- A Private Company is prohibited from inviting the public for
subscription of its shares, i.e. a Private Company cannot issue Prospectus, whereas a
Public Company is free to invite public for subscription i.e., a Public Company can
issue a Prospectus.
 Number of Directors- A Private Company may have 2 directors to manage the
affairs of the company, whereas a Public Company must have at least 3 directors.
 Consent of the Directors- There is no need to give the consent by the directors of a
Private Company, whereas the Directors of a Public Company must have file with the
Registrar a consent to act as Director of the company.
 Qualification of Shares- The Directors of a Private Company need not sign an
undertaking to acquire the qualification shares, whereas the Directors of a Public
Company are required to sign an undertaking to acquire the qualification shares of the
public Company.
 Commencement of Business- A Private Company can commence its business
immediately after its incorporation, whereas a Private Company cannot start its
business until a Certificate to commencement of business is issued to it.
4. Write short notes
A) Trade mark
The term "trademark" is often used in a general sense to refer to both trademarks and
service marks.
Unlike patents and copyrights, trademarks do not expire after a set term of years.
Trademark rights come from actual “use”. Therefore, a trademark can last forever - so
long as you continue to use the mark in commerce to indicate the source of goods and
services. A trademark registration can also last forever - so long as you file specific
documents and pay fees at regular intervals.
Registration is not mandatory. You can establish “common law” rights in a mark
based solely on use of the mark in commerce, without a registration. However, federal
registration of a trademark with the USPTO has several advantages, including a notice
to the public of the registrant's claim of ownership of the mark, a legal presumption of
ownership nationwide, and the exclusive right to use the mark on or in connection
with the goods or services set forth in the registration. For more information about
“common law” trademark rights and the advantages of federal registration see the
Basic Facts About Trademarks booklet.

B) Digital signature
A digital signature is a mathematical technique used to validate the authenticity and
integrity of a message, software or digital document. As the digital equivalent of a
handwritten signature or stamped seal, a digital signature offers far more inherent
security, and it is intended to solve the problem of tampering and impersonation in
digital communications.
Digital signatures can provide the added assurances of evidence of origin, identity and
status of an electronic document, transaction or message and can acknowledge
informed consent by the signer
in many countries, and are considered legally binding in the same way as traditional
document signatures.
C) Who is a consumer and who is not a consumer?
A Consumer is a person who purchases a product or avails a service for a
consideration, either for his personal use or to earn his livelihood by means of self-
employment. The consideration may be:
 Paid
 Promised
 Partly paid and partly promised. It also includes a beneficiary of such
goods/services when such use is made with the approval of such person.
Who is not a Consumer?
 Purchases any goods or avails any service free of charge.
 Purchases a good or hires a service for commercial purpose.
 Avails any service under contract of service.

D) Patent
A patent for an invention is the grant of a property right to the inventor, issued by the
United States Patent and Trademark Office.
There are three types of patents:
 Utility patents may be granted to anyone who invents or discovers any new
and useful process, machine, article of manufacture, or composition of matter,
or any new and useful improvement thereof;
 Design patents may be granted to anyone who invents a new, original, and
ornamental design for an article of manufacture; and
 Plant patents may be granted to anyone who invents or discovers and
asexually reproduces any distinct and new variety of plant.