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ASSIGNMENT 01

Name :_______________________________

Registration No. :_______________________________

Learning Center :_______________________________

Learning Center Code :_______________________________

Course :_______________________________

Subject :_______________________________

Semester :_______________________________

Module No. :_______________________________

Date of submission :_______________________________

Marks Awarded :_______________________________

Directory of Distance Education

Sikkim Manipal University

II Floor, Syndicate House,

Manipal 576 104

_____________________ _________________ __________________

Signature of Coordinator Signature of Center Signature of evaluator

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Q.1 Distinguish between fraud and misrepresentation.Fraud:A false statement made knowingly or without belief in its truth or recklesslycareless whether it be true or false is called fraud.Sec. 17 of the Act instead of defining fraud gives various acts which amount to

fraud.Sec. 17: Fraud means and includes any of the following acts committed by a

party to a contract or with his connivance or by his agent to induce him to enterinto contract:

1) The suggestion that a fact is true when it is not true by one who does notbelieve it to be true. A falsestatement intentionally made is fraud. An absence of honest belief in the truth ofthe statement made is essential to constitute fraud. The false statement must bemade intentionally.2) The active concealment of a fact by a person who has knowledge or belief ofthe fact. Mere non-disclosure is not fraud where there is no duty to disclose.3) A promise made without any intention of performing it.

4) Any other act fitted to deceive. The fertility of mans invention in devising newschemes of fraud is so great that it would be difficult to confine fraud within the

limits of any exhaustive definition.5) Any such act or omission as the law specially declares to be fraudulent.

Essentials of fraud:1) Making a false suggestion: There should be a false suggestion by a party whoknows it to be false or the statement must have been made recklessly withoutcaring to know its truthfulness. The false suggestion can be made by conduct ofthe party.2) The representation must be of a fact. The false suggestion or representation

must be of a fact and not of opinion or intention.Commendatory explanations as found in advertisements that a soap washes

whiter than white do not constitute representations of fact. It is usual for a traderto praise his own goods.

3) Active concealment of facts amounts to fraud: Instead of making a falserepresentation a person may conceal a material fact which according to him, ifstated, would be disadvantageous to him, such concealment of fact amounts tosuppression of truth.4) A promise made without any intention of performing it: A promise includes arepresentation to the effect that the promised has the intention of performing it.So if a party makes a promise without having any intention of performing it, hecommits fraud e.g., buying goods with no intention of paying for the same.

5) Any other act filled to deceive: Sec. 17 (4) brings within the purview of Sec.17all such acts which though apparently amount to misrepresentation of fact, may

amount to fraud considering the facts of the case.6) Any act of omission which the law specifically declares to be fraudulent.7) Misrepresentation should be addressed to the party misled: The idea behindmaking misrepresentation should be that the other person must act upon it. Onceit is shown that the misrepresentation was addressed to him, it becomes fraud ifthe person acts upon it though the person making representation may say that hedid not intend that the person to whom it was addressed, should act upon it.8) The representation must induce the contract: The person to whom the

representation is made should rely upon the same and should enter into acontract. A false representation is merely irrelevant if it has not induced the party

to whom it was made to act upon it by entering into a contract.9) The party acting on the representation should have been deceived and

suffered damage. The aggrieved party can not set aside the contract if he has not

sustained damage. If one knows that he is going to be deceived later he cannotcomplain of being deceived by entering into contract.

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Silence whether fraud ? While active concealment of a material fact is fraud,silence is not fraud except under two circumstances. There is no general dutycast upon a party to a contract to disclose to the other party material facts withinhis knowledge, but are unknown to the other party. This principle is known as

Caveat Emptor (let the buyer beware) in contracts of sale of goods. However,under the following two circumstances silence would amount to fraud:

(a) Circumstances of the case cast a duty upon the person keeping silence tospeak and (b) silence itself is equivalent to speech.

Duty to speak arises when the parties to a contract are in fiduciary relationships.Such contracts are known as uberrimae fide contracts, the most common

examples being insurance contracts, contracts of surety ship, releases orcompromises.When a person is under no duty to speak, he may become guilty of fraud by non-disclosure, if he voluntarily discloses something and then stops half the way.

4. Misrepresentation:Before entering into a contract, the parties will make certain statements inducingthe contract. Such statements are called representation. A representation is a

statement of fact made by one party to the other at the time of entering intocontract with an intention of inducing the other party to enter into the contract. If

the representation is false or misleading, it is known as misrepresentation. Amisrepresentation may be innocent or intentional. An intentional

misrepresentation is called fraud and is covered under Section 17. Sec. 18 dealswith an innocent misrepresentation. Sec. 18 misrepresentation means andincludes (i) the positive assertion in a manner not warranted by the informationof the person making it, of that which is not true, though he believed it to betrue. (ii) any breach of duty which, without an intent to deceive, gains anadvantage to the person committing it, by misleading another to his prejudice.

(iii) by causing however innocently, a party to an agreement to make a mistakeas to the substance of the thing which is the subject of the agreement.

1) Positive assertion of a fact: A person might have received information from anuntrustworthy source or hear-say. But he may assert positively that a particular

fact concerning the subject matter of the agreement is true. Then he is said tohave misrepresented the fact. A false statement need not be made direct to theplaintiff. It is sufficient if it is made to a third party so that the plaintiff becomesaware of it. However, if the misrepresentation has not been embodied in thecontract it creates no contractual obligation unless it turns out to be fraudulent.2) Breach of duty: A person may commit breach of duty without any intention todeceive the other party thus gaining an unfair advantage over the other. When aparty to the contract has a duty to disclose all the material facts concerning the

subject matter of the contract, but does not do so, he is said to be guilty ofmisrepresentation. A representation may be true at the time of making it, but

later becomes false. This should also be disclosed before the contract is enteredinto.

3) Causing mistake about the subject matter: If a party to an agreement inducesthe other to commit mistake as to the nature or quality of the subject matter ofthe agreement, he is guilty of misrepresentation.Distinction between fraud and misrepresentation:1) In misrepresentation the person making the false statement honestly believes

it to be true. In fraud, the false statement is made by person who knows that it isfalse or he does not care to know whether it is true or false.

2) There is no intention to deceive the other party when there ismisrepresentation of fact. The very purpose of fraud is to deceive the other party

to the contract.

3) Misrepresentation renders the contract voidable at the option of the partywhose consent was obtained by misrepresentation. In the case of fraud the

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contract is voidable. It also gives rise to an independent action in tort fordamages.4) Misrepresentation is not an offence under Indian Penal Code and hence notpunishable. Fraud, in certain cases is a punishable offence under Indian PenalCode.5) Generally, silence is not fraud except where there is a duty to speak or the

relation between parties is fiduciary. Under no circumstances can silence beconsidered as misrepresentation.

6) The party complaining of misrepresentation cant avoid the contract if he hadthe means to discover the truth with ordinary deligance. But in the case of fraud,

the party making a false statement cannot say that the other party had themeans to discover the truth with ordinary deligance.

Q.2 What are the remedies for breach of contract.

A contract is an agreement, enforceable by law, made between at least two

parties by which rights are acquired by one and obligations are created on thepart of another. If the party, which had agreed to do something, fails to do that,then the other party has a remedy.

Example: D Airlines sells a ticket on 1 January to X for the journey from Mumbaito Bangalore on 10 January. The Airlines is under an obligation to take X fromMumbai to Bangalore on 10 January. In case the Airlines fails to fulfil its promise,X has a remedy against it.

Thus, X has a right against the Airlines to be taken from Mumbai to Bangalore on10 January. A corresponding duty is imposed on the Airlines. As there is a breach

of promise by the promisor (the Airlines), the other party to the contract (i.e., X)

has a legal remedy.

Agreement

Sec.2(e) defines an agreement as every promise and every set of promisesforming consideration for each other. In this context, the word promise is definedby Sec.2(b). In a contract there are at least two parties. One of them makes aproposal (or an offer) to the other, to do something, with a view to obtaining theassent of that other to such act. When the person to whom the proposal is made

signifies his assent thereto, the proposal is said to be accepted. A proposal, whenaccepted becomes a promise (Sec.2(b)).

Enforceability by law: The agreement must be such which is enforceable by lawso as to become a contract. Thus, there are certain agreements which do notbecome contracts as this element of enforceability by law is absent.

Sec.10 provides that all agreements are contracts, if they are made by freeconsent of parties, competent to contract, for a lawful consideration, and with alawful object, and are not expressly declared by law to be void. To constitute a

contract, there must be an agreement between two or more than two parties. Noone can enter into a contract with himself. An agreement is composed of two

elements offer or proposal by one party and acceptance thereof by the otherparty.

Classification of contracts

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Contracts may be classified as follows:

Classification of contracts according to formation: A contract may be (a)Made in writing (b) By words spoken and (c) Inferred from the conduct of theparties or the circumstances of the case.

Formal and informal contracts: This is another way of classifying contracts onthe basis of their formation. A formal contract is one to which the law gives

special effect because of the formalities or the special language used in creatingit. The best example of formal contracts is negotiable instruments, such as

cheques. Informal contracts are those for which the law does not require aparticular set of formalities or special language.

Classification according to validity: Contracts may be classified according totheir validity as (i) Valid, (ii) Voidable, (iii) Void,(iv) Unenforceable. A contract to constitute a valid contract must have all theessential elements discussed earlier. If one or more of these elements are

missing, the contract is either voidable, void, illegal or unenforceable. As perSec.2(i) A voidable contract is one which may be repudiated (i.e., avoided) at the

will of one or more of the parties, but not by others.

Proposal (or Offer) and Acceptance

Offer is not only one of the essential elements of a contract but it is the basicbuilding block also. An offer is synonymous with proposal. The offerer or proposerexpresses his willingness to do or not to do (i.e., abstain from doing) somethingwith a view to obtain acceptance of the other party to such act or abstinence

(Sec.2(a)).

Modes of making an offer

An offer can be made by any act or omission of party proposing by which heintends to communicate such proposal or which has the effect of communicatingit to the other (Sec.3). An offer can be either express or implied, and specific orgeneral.

Express offer: It means an offer made by words (whether written or oral). Thewritten offer can be made by letters, telegrams, telex messages, advertisements,

etc. The oral offer can be made either in person or over telephone.

Implied offer: It is an offer made by conduct. It is made by positive acts or

signs so that the person acting or making signs means to say or conveysomething. However, silence of a party can, in no case, amounts to offer byconduct.

Offer by abstinence: An offer can also be made by a party by omission to dosomething. This includes such conduct or forbearance on ones part that the otherperson takes it as his willingness or assent.

Acceptance of an offer

When the person to whom the offer is made signifies his assent thereto, the offeris said to be accepted (Sec.2(b)). Thus, acceptance is the act of giving consent to

the proposal. The offeree is deemed to have given his acceptance when he giveshis assent to the proposal. The acceptance of an offer may be express or implied.

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It is express when the acceptance has been signified either in writing or by wordsof mouth or by performance of some required act of the offeree.

Implied acceptance: Acceptance is implied when it is said to be gathered fromthe surrounding circumstances or the conduct of the parties.

Completion of communication of offer and acceptance (Sec.4)

It is necessary to communicate offer to the offeree and the acceptance to the

offeror. When is it that the communication is considered to be completed? Thecommunication of an offer is complete when it comes to the knowledge of the

person to whom it is made. Where A proposes by a letter to sell his car to B at acertain price, the communication of the offer is complete when B receives theletter. The completion of communication of acceptance has two aspects, viz.; (i)As against the offer or and (ii) As against the acceptor. The communication ofacceptance is complete (i) As against the offer or when it is put into a course oftransmission to him so as to be out of the power of the acceptor; (ii) As against

the acceptor, when it comes to the knowledge of the offer or.

Capacity to Contract

Persons who are competent to contract

Any one cannot enter into a contract; he must be competent to contractaccording to the law. Every person is competent to contract if he (i) is of the ageof majority, (ii) is of sound mind, and (iii) is not disqualified from contracting byany law to which he is subject (Sec.11).

Capacity of a minor to enter into a contract

Age of a person determines enough maturity to make a contract. The contractlaw defines maturity as the age of majority. That usually is18 years. Does this mean that a minor is not competent to contract? No, a minormay make a contract, but he is not bound by the contract; however the minorcan make the other party bound by the contract.

Mental incompetence prohibits a valid contract

A person who is not of sound mind may not enter into a contract; he must be ofsound mind so as to be competent to contract. A test of soundness of mind has

been laid down by law.

A person is said to be of unsound mind for the purpose of making a contract if atthe time he makes it he is incapable of understanding it and of forming a rational

judgement as to its effect upon his interests.

The liability for necessaries of life supplied to persons of unsound mind is thesame as for minors.

A lunatic is a person who is mentally deranged due to some mental strain orother personal experience.

An idiot is a person who is of permanently unsound mind. He does not have lucidintervals.

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He is incapable of entering into a contract and therefore a contract with an idiot isvoid.

A person who is drunk, intoxicated or delirious from fever so as to beincapable of understanding the nature and effect of an agreement or form arational judgement as to its effect on his interests cannot enter into validcontracts whilst such drunkenness or delirium lasts.

When someone breaches a contract, the other party is no longer obligated tokeep its end of the bargain. From there, that party may proceed in several ways:

(i) the other party may urge the breaching party to reconsider the breach; (ii) if itis a contract with a merchant, the other party may get help from consumersassociations; (iii) the other party may bring the breaching party to an agency foralternative dispute resolution; (iv) the other party may sue for damages; or (v)the other party may sue for other remedies.

Rescission of the contract: When a breach of contract is committed by one

party, the other party may treat the contract as rescinded. In such a case theaggrieved party is freed from all his obligations under the contract.

Damages (Sec.75): Another relief or remedy available to the promisee in theevent of a breach of promise by the promisor is to claim damages or loss arisingto him therefrom. Damages under Sec.75 are awarded according to certain rulesas laid down in Secs.73-74. Sec.73 contains three important rules: (i)Compensation as general damages will be awarded only for those losses thatdirectly and naturally result from the breach of the contract. (ii) Compensation forlosses indirectly caused by breach may be paid as special damages if the party inbreach had knowledge that such losses would also follow from such act of breach.

(iii) The aggrieved party is required to take reasonable steps to keep his losses tothe minimum.

The usual remedy for breach of contracts is suit for damages. The main kind ofdamages awarded in a contract suit are ordinary damages. This is the amount ofmoney it would take to put the aggrieved party in as good a position as if therehad not been a breach of contract. The idea is to compensate the aggrieved partyfor the loss he has suffered as a result of the breach of the contract.

Q.3 Distinguish between indemnity and guarantee.

A contract of guarantee is defined as a contract to perform the promise, ordischarge the liability, of a third person in case of his default. The person whogives the guarantee is called surety; the person for whom the guarantee is givenis called the principal debtor, and the person to whom the guarantee is given iscalled the creditor. A contract of guarantee may be either oral or in writing.

From the above discussion, it is clear that in a contract of guarantee there must,in effect, be two contracts, a principal contract between the principal debtor and

creditor, and a secondary contract between the creditor and the surety. In acontract of guarantee there are three parties, viz., the creditor, the principal

debtor and the surety. Therefore, there is an implied contract also between theprincipal debtor and the surety.

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Example: When A requests B to lend Rs10,000 to C and guarantees that C willrepay the amount within the agreed time and that on C failing to do so, he willhimself pay to B, there is a contract of guarantee.

The contract of surety is not a contract collateral to the contract of the principaldebtor, but is an independent contract. There must be a distinct promise on theparty of the surety to be assumable for the debt. It is not necessary that the

principal contract, between the debtor and the creditor, must exist at the time thecontract of guarantee is made; the original contract between the debtor and

creditor may be about to come into existence. Similarly, under certaincircumstances, a surety may be called upon to pay though principal debtor is not

liable at all.

Also, where a person gives a guarantee upon a contract that the creditor shall notact upon it until another person has joined in it as co-surety, the guarantee is notvalid if that other person does not join (Sec.144).

Oral or written guarantee

A contract of guarantee may either be oral or in writing (Sec.126), though a

creditor should always prefer to put it in writing to avoid any dispute regardingthe terms, etc. In case of an oral agreement the existence of the agreement itselfis very difficult to prove.

Specific and continuing guarantee

From the point of view of the scope of guarantee a contract of guarantee mayeither by specific or continuing. A guarantee is a specific guarantee, if it is

intended to be applicable to a particular debt and thus comes to end on its

repayment. A specific guarantee once given is irrevocable.

Example: A guarantees the repayment of a loan of Rs. 10,000 to B byC (a banker). The guarantee in this case is a specific guarantee.

A guarantee which extends to a series of transactions is called a continuingguarantee (Sec.129)

Example: A guarantees payment to B, a tea-dealer, to the amount of Rs. 10,000for any tea he may from time to time supply to C. B supplies C with tea of the

value above Rs. 10,000 and C pays B for it. Afterwards B supplies C with tea tothe value of Rs. 15,000. C fails to pay. The guarantee given by A was a

continuing guarantee and he is accordingly liable to B to the extent of Rs. 10,000.

A guarantee regarding the conduct of another person is a continuing guarantee.Unlike a specific guarantee which is irrevocable, a continuing guarantee can berevoked regarding further transactions (Sec.130). However, continuing guaranteecannot be revoked regarding transactions that have ready taken place.

The death of the surety operates, in the absence of any contract to the contrary,

as a revocation of a continuing guarantee, so far as regards future transactions.(Sec.131).

guarantee may either be for the whole debt or a part of the debt

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Difficult questions arise in case of guarantee for a limited amount because thereis an important distinction between a guarantee for only a part of the whole debtand a guarantee for the whole debt subject to a limit.

For instance, where X owes Y Rs 50,000 and A has stood as surety forRs. 30,000, the question may arise whether A has guaranteed Rs. 30,000 out ofRs. 50,000 or whether he has guaranteed the full amount of

Rs. 50,000 subject to a limit of Rs. 30,000. This matter becomes important if X isadjudged insolvent and Y wants to prove in Xs insolvency and also enforce his

remedy against A. If A stood surety only for a part of the debt and if Xs estatecan pay only 25 paisa dividend in the rupee, then Y can get

Rs. 30,000 the full amount of guarantee from A and Rs. 5,000 from Xs estate,being of the balance, i.e., Rs. 50,000 Rs. 30,000 = Rs. 20,000 which was notguaranteed. Since after paying Rs. 30,000 to Y, A can claim from Xs estate, hewill get Rs. 7,500 being of Rs. 30,000 paid by A to Y. If on the other hand, A hadstood surety for the whole debt of Rs 50,000 subject to a limit of Rs. 30,000 thenY can recover from A Rs. 30,000 and from Xs estate Rs. 12,500, i.e., of Rs.50,000. A will not get any dividend unless Y has been fully paid. This can happen

only if Xs estate declares a higher dividend.

Meaning of indemnity

Secs.124 and 125 provide for a contract of indemnity. Sec.124 provides that acontract of indemnity is a contract whereby one party promises to save the otherfrom loss caused to him (the promisee) by the conduct of the promisor himself orby the conduct of any other person. A contract of insurance is a glaring exampleof such type of contracts. A contract of indemnity may arise either by (i) anexpress promise or (ii) operation of law, e.g., the duty of a principal to indemnifyan agent from consequences of all lawful acts done by him as an agent. The

contract of indemnity, like any other contract, must have all the essentials of a

valid contract. These are two parties in a contraction of identity indemnifier andindemnified. The indemnifier promises to make good the loss of the indemnified(i.e., the promisee).

Example: A contracts to indemnify B against the consequences of anyproceeding which C may take against B in respect of a certain sum of Rs 200.This is a contract of indemnity.

Rights of the indemnified (i.e., the indemnity holder)

He is entitled to recover from the promisor: (i) All damages which he may becompelled to pay in any suit in respect of any matter to which the promise to

indemnify applies; (ii) All costs of suit which he may have to pay to such thirdparty, provided in bringing or defending the suit (a) he acted under the authorityof the indemnifier or (b) if he did not act in contravention of orders of theindemnifier and in such a way as a prudent man would act in his own case; (iii)All sums which may have been paid under the terms of any compromise of anysuch suit, if the compromise was not contrary to the orders of the indemnifier and

was one which it would have been prudent for the promisee to make.

Rights of the indemnifier

The Act makes no mention of the rights of indemnifier. However, his rights, in

such cases, are similar to the rights of a surety under Sec.141, viz., he becomesentitled to the benefit of all the securities which the creditor has against theprincipal debtor whether he was aware of them or not.

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Commencement of indemnifiers liability

Indemnity requires that the party to be indemnified shall never be called upon topay. Indemnity is not necessarily given by repayment after payment. Theindemnified may compel the indemnifier to place him in a position to meetliability that may be cast upon him without waiting until the promisee(indemnified) has actually discharged it.

Distinction between a contract of guarantee and a contract of indemnity. L.C.Mather in his book Securities Acceptable to the Lending Banker has very briefly,

but excellently, brought out the distinction between indemnity and guarantee bythe following illustration. A contract in whichA says to B, If you lend 20 to C, I will see that your money comes back is anindemnity. On the other hand undertaking in these words, If you lend 20 to C andhe does not pay you, I will is a guarantee. Thus, in a contract of indemnity, thereare only two parties, indemnifier and indemnified. In case of a guarantee, on theother hand, there are three parties, the principal debtor, the creditor and thesurety. Other points of difference are:

1. The liability of a promised is primary and independent in a contract ofindemnity. In a contract of guarantee, the liability of the surety is secondary, the

primary liability being that of the principal debtor.

2. In the case of guarantee, there is an existing debt or obligation, theperformance of which is guaranteed by the surety. In case of indemnity thepossibility of any loss happening is a contingency against which the indemnifierundertakes to indemnify.

3. In a contract of guarantee, after discharging the debt, the surety is entitled to

proceed against the principal debtor in his own name while in case of indemnity,the indemnifier cannot proceed against third parties in his own name, unless

there is an assignment in his favour.

Q.4 What is the distinction between cheque and bill of exchange.

Cheque: It is drawn on a banker

It has three parties - the drawer, the drawee, and payee.

It is seldom drawn in sets

It does not require acceptance by the drawee.

Days of grace are not allowed to a banker

No stamp duty is payable on checks

Bill of Exchange

It may be drawn on any party or individual.

There are three parties - the drawer, the drawee, and the payee.

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Foreign bills are drawn in sets

It must be accepted by the drawee before he can be made liable to pay the bill.

Three days of grace are always allowed to the drawee.

Stamp duty has to be paid on bill of exchange.

It may be drawn in any paper and need not necessarily be printed.

A cheque is a bill of exchange payable on demand. A bill of exchange, is an orderfrom A to B to pay, a sum either to himself, A, or to a third party, C. When it ispayable forthwith it is a cheque and bears a penny stamp ; when it is payable ata futures date it is a bill of exchange and bears a stamp 'ad valorem, varying withthe amount of the sum named. It is characteristic of monetary nomenclature,which seems to try to confuse matters by applying illogical and confusing names,that the title "bill of exchange" should be given both to the genus and to one of

the species into which it is divided.Another distinction exists in the eye of the law, from the fact that a cheque,

according to its legal definition, must be drawn on a bank, whereas a bill may bedrawn on a bank but is more often drawn on a merchant or accepting house, or

any debtor who gives his creditor the right to draw on him.

A cheque differs from a bill of exchange in the following respects:

1. Drawee:

A cheque is always drawn on a bank or a banker while a bill of exchange can be

drawn on any person including a banker.

2. Acceptance:

A cheque does not require any acceptance while a bill must be accepted beforethe drawee can be made liable upon it.

3. Payment:

A cheque is payable immediately on demand without any days of grace, but a bill

of exchange is normally entitled to three days of grace unless it is payable ondemand.

4. Crossing:

A cheque may be crossed but there is no such provision in the case of a bill ofexchange.

5. Notice of dishonor:

When a cheque is not met, notice of dishonor is not necessary. Want of assets inthe hands of the banker is sufficient notice. It is necessary to give a notice of

dishonor in order to make the drawer of a bill liable.

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6. Payable to bearer on demand:

A cheque can be drawn payable to bearer on demand. But a bill of exchangecannot be so drawn.

7. Stamp:

A bill of exchange must be stamped, whereas a cheque does not require anystamp.

8. Countermanding payment:

A cheque may be revoked by countermand of payment. The payment of a bill,however cannot be countermanded.

9. Noting and protesting:

A cheque is not noted or protested for dishonor and is generally inland.

10. Presentment:

A bill of exchange must be duly presented for payment otherwise the drawer willbe discharged. The drawer of a cheque is not discharged by failure of the holderto present it in due time unless the drawer has sustained damage by the delay.

11. Protection:

A banker is given statutory protection with regard to payment of cheques incertain circumstances. No such protection is available to the drawee or acceptor

of a bill of exchange.

Q.5 Distinguish between companies limited by shares and companies limited by

guarantee.

There are several ways of structuring a company to start a business. Different

nomenclatures are adopted for the purpose of taxation and profit sharing. Two

such formations are Companies Limited by Shares and Companies Limited byGuarantee that are more prevalent in Britain and Ireland. People are oftenconfused between these two entities and do not know which one they shouldadopt for their purposes. This article will differentiate between Companies Limitedby Shares and Companies Limited by Guarantee by discussing their features andpros and cons.

There are both similarities as well as differences in the two types of companies. A

company limited by guarantee is lesser known of the two types and is generallyformed in case of non profit companies. It tends to have members rather than

shareholders. The most notable difference between these two entities is thatcompanies limited by shares exist for making profit whereas companies limited by

guarantee are non profit making companies. Guarantee companies are formed toprovide a specific service to public. These two entities also differ in their articlesof association and memorandum as companies limited by shares have very

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general clauses that give them liberty to engage in any legal trade or businessactivity.

On the other hand, companies limited by guarantee have specific clauses andrules dictating their areas of operation. Prominent example of companies limitedby guarantee are charities that have self imposed restrictions on them to assurethe donors that their donations are spent according to their wishes and not in a

manner that they do not approve. This one point helps companies limited byguarantee to raise funds more easily than companies limited by shares as they

can show how they propose to use the money.

There are no major differences in the structure of the two types of companies andboth Companies Limited by Shares and Companies Limited by Guarantee have atleast one director, a secretary and a declarant at the time of coming intoexistence.

Another major difference between Companies Limited by Shares and Companies

Limited by Guarantee is the absence of share capital in the case of companieslimited by guarantee. There are members and not shareholders in case of a

guarantee company where members pledge to contribute a predetermined sum atthe time of formation of the company (Pound 1). Guarantee company structure is

mostly used by schools, clubs, churches, research organizations and to purchasefreehold property.

Companies Limited by Shares vs Companies Limited by Guarantee

Companies limited by shares are more popular than companies limited by

guarantee

Companies limited by guarantee are non profit making while companies limitedby shares are profit making

Companies limited by guarantee have members, and not share holders whereasin case of companies limited by shares, there are shareholders.

There is no share capital in case of companies limited by guarantee and it alsohas self imposed restrictions while companies limited by shares can engage inlegal trades and have general clauses.

A company limited by guarantee is a lesser known type of business entitywhich is generally formed by non-profit purposes and has members instead of

shareholders.

There are both some similarities and differences between the two groups.

Members and shareholders enjoy limited liability, however in cases where a sharebased company is liquidated; the latter might be required to pay all amounts of

unpaid monies relating to the shares they hold.

For example, if an individual shareholder holds 100 shares of 1 each, all of

which remains unpaid at the time of dissolution, then they would be required topay 100 to the company.

Most companies limited by guarantee have a constitution which states that eachmember is only required to pay 1 should it be dissolved.

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Assuming that an average shareholder holds more than one share in a company,members in a business limited by guarantee do appear to have less risk attachedto their positions.

Profit Making Status

Perhaps the most fundamental difference between the two types oflimitedcompanies is that those with shares generally exist for profit making purposes.

Companies limited by guarantee however, are non-profit making organisationsand are usually registered to provide a specified service to the public or a

particular segment of the population.

The memorandum and articles of association of each would also differ ascompanies limited by shares usually have very general objects clauses whichallow them to pursue any legal trade or activity.

Objects of companies limited by guarantee

Companies limited by guarantee however, often have very specific objects and

detailed rules pertaining to which areas they can engage in.

Charities, which are often of this type, might have restrictions imposed on themby their major donors who wish to ensure that their donations will be spentaccording to their wishes and not in a manner which they would not approve.

By having a defined set of objects, companies limited by guarantee which areseeking to raise funds might find it easier to do so because they would be able to

demonstrate that sufficient restrictions exist to protect the donors intentions.

Removing the Word Limited

Companies limited by guarantee can have the word limited removed from theirname under section 30 of the Companies Act.

Company directors, secretary and declarant

Both types of companies are bound by the same requirements to have at least

one director, a secretary and a declarant at the time of incorporation andthroughout any period of its existence.

When forming a company limited by guarantee, members are listed in the samemanner in which shareholders would be, even though no allotments are made tothem.

Q.6 What is the definition of cyber crime.

The internet in India is growing rapidly. It has given rise to new opportunities in

every field we can think of be it entertainment, business, sports or education.There are two sides to a coin. Internet also has its own disadvantages. One of the

major disadvantages is Cybercrime illegal activity committed on the internet.The internet, along with its advantages, has also exposed us to security risks thatcome with connecting to a large network. Computers today are being misused for

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illegal activities like e-mail espionage, credit card fraud, spams, and softwarepiracy and so on, which invade our privacy and offend our senses. Criminalactivities in the cyberspace are on the rise.

"The modern thief can steal more with a computer than with a gun. Tomorrow'sterrorist may be able to do more damage with a keyboard than with a bomb".

National Research Council, "Computers at Risk", 1991.

What is this Cyber crime? We read about it in newspapers very often. Let's look

at the dictionary definition of Cybercrime: "It is a criminal activity committed onthe internet. This is a broad term that describes everything from electroniccracking to denial of service attacks that cause electronic commerce sites to losemoney".

Mr. Pavan Duggal, who is the President of cyberlaws.net and consultant, in areport has clearly defined the various categories and types of cybercrimes.

Cybercrimes can be basically divided into 3 major categories:

1. Cybercrimes against persons.

2. Cybercrimes against property.

3. Cybercrimes against government.

Cybercrimes committed against persons include various crimes like transmissionof child-pornography, harassment of any one with the use of a computer such as

e-mail. The trafficking, distribution, posting, and dissemination of obscenematerial including pornography and indecent exposure, constitutes one of the

most important Cybercrimes known today. The potential harm of such a crime tohumanity can hardly be amplified. This is one Cybercrime which threatens to

undermine the growth of the younger generation as also leave irreparable scarsand injury on the younger generation, if not controlled.

A minor girl in Ahmedabad was lured to a private place through cyberchat by aman, who, along with his friends, attempted to gangrape her. As some passersbyheard her cry, she was rescued.

Another example wherein the damage was not done to a person but to the

masses is the case of the Melissa virus. The Melissa virus first appeared on theinternet in March of 1999. It spread rapidly throughout computer systems in the

United States and Europe. It is estimated that the virus caused 80 million dollarsin damages to computers worldwide.

In the United States alone, the virus made its way through 1.2 million computersin one-fifth of the country's largest businesses. David Smith pleaded guilty onDec. 9, 1999 to state and federal charges associated with his creation of theMelissa virus. There are numerous examples of such computer viruses few ofthem being "Melissa" and "love bug".

Cyberharassment is a distinct Cybercrime. Various kinds of harassment can and

do occur in cyberspace, or through the use of cyberspace. Harassment can besexual, racial, religious, or other. Persons perpetuating such harassment are also

guilty of cybercrimes.

Cyberharassment as a crime also brings us to another related area of violation of

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privacy of citizens. Violation of privacy of online citizens is a Cybercrime of agrave nature. No one likes any other person invading the invaluable andextremely touchy area of his or her own privacy which the medium of internetgrants to the citizen.

The second category of Cyber-crimes is that of Cybercrimes against all forms of

property. These crimes include computer vandalism (destruction of others'property), transmission of harmful programmes.

A Mumbai-based upstart engineering company lost a say and much money in the

business when the rival company, an industry major, stole the technical databasefrom their computers with the help of a corporate cyberspy.

The third category of Cyber-crimes relate to Cybercrimes against Government.Cyberterrorism is one distinct kind of crime in this category. The growth ofinternet has shown that the medium of Cyberspace is being used by individualsand groups to threaten the international governments as also to terrorise thecitizens of a country. This crime manifests itself into terrorism when an individual

"cracks" into a government or military maintained website.

In a report of expressindia. com, it was said that internet was becoming a boonfor the terrorist organisations. According to Mr. A.K. Gupta, Deputy Director (Co-

ordination), CBI, terrorist outfits are increasingly using internet to communicateand move funds. "Lashker-e-Toiba is collecting contributions online from itssympathisers all over the world. During the investigation of the Red Fort shootoutin Dec. 2000, the accused Ashfaq Ahmed of this terrorist group revealed that themilitants are making extensive use of the internet to communicate with theoperatives and the sympathisers and also using the medium for intra-bank

transfer of funds".

Cracking is amongst the gravest Cyber-crimes known till date. It is a dreadfulfeeling to know that a stranger has broken into your computer systems without

your knowledge and consent and has tampered with precious confidential dataand information.

Coupled with this the actuality is that no computer system in the world is crackingproof. It is unanimously agreed that any and every system in the world can becracked. The recent denial of service attacks seen over the popular commercialsites like E-bay, Yahoo, Amazon and others are a new category of Cyber-crimeswhich are slowly emerging as being extremely dangerous.

Unauthorised access

Using one's own programming abilities as also various progra-mmes withmalicious intent to gain unauthorised access to a computer or network are veryserious crimes. Similarly, the creation and dissemination of harmful computerprogrammes which do irreparable damage to computer systems is another kind ofCybercrime. Software piracy is also another distinct kind of Cybercrime which isperpetuated by many people online who distribute illegal and unauthorisedpirated copies of software.

Professionals who involve in these cybercrimes are called crackers and it is found

that many of such professionals are still in their teens. A report written near thestart of the Information Age warned that America's computers were at risk from

crackers. It said that computers that "control (our) power delivery,

communications, aviation and financial services (and) store vital information,from medical re-cords to business plans, to criminal records", were vulnerable

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from many sources, including deliberate attack.

"Script-kiddies"

Crackers do more than just spoiling websites. Novices, who are called "script-kiddies" in their circles, gain "root" access to a computer system, giving them the

same power over a system as an administrator such as the power to modifyfeatures. They cause damage by planting viruses.

The Parliament of India passed its first Cyber law, the Information Technology Act

in 2000. It not only provides the legal infrastructure for E-commerce in India butalso at the same time, gives draconian powers to the Police to enter and search,without any warrant, any public place for the purpose of nabbing cybercriminalsand preventing cybercrime. Also, the Indian Cyber law talks of the arrest of anyperson who is about to commit a cybercrime.

The Act defines five cyber-crimes damage to computer source code, hacking,publishing electronic information which is lascivious or prurient, br-each of

confidentiality and publishing false digital signatures-res. The Act also specifiesthat cybercrimes can only be investigated by an official holding no less a rank

than that of Dy. Superintendent of Police (Dy.SP).

The Act simply says "Notwithstanding anything contained in any other law for thetime being in force, any Police Officer not below the rank of Dy.SP may enter,search and arrest any person without search warrant in any public place who hethinks is committing or about to commit a cybercrime".

It is common that many systems operators do not share information when they

are victimized by crackers. They don't contact law enforcement officers whentheir computer systems are invaded, preferring instead to fix the damage and

take action to keep crackers from gaining access again with as little publicattention as possible.

According to Sundari Nanda, SP, CBI, "most of the times the victims do notcomplain, may be because they are aware of the extent of the crime committedagainst them, or as in the case of business houses, they don't want to confesstheir system is not secure".

As the research shows, computer crime poses a real threat. Those who believeotherwise simply have not been awakened by the massive losses and setbacks

experienced by companies worldwide. Money and intellectual property have beenstolen, corporate operations impeded, and jobs lost as a result of computer

crime.

Similarly, information systems in government and business alike have beencompromised. The economic impact of computer crime is staggering.

As the cases of cybercrime grow, there is a growing need to prevent them.Cyberspace belongs to everyone. There should be electronic surveillance which

means investigators tracking down hackers often want to monitor a cracker as hebreaks into a victim's computer system. The two basic laws governing real-time

electronic surveillance in other criminal investigations also apply in this context,search warrants which means that search warrants may be obtained to gain

access to the premises where the cracker is believed to have evidence of thecrime. Such evidence would include the computer used to commit the crime, aswell as the software used to gain unauthorised access and other evidence of thecrime.

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There should also be analysing evidence from a cracker's computer by theofficials investigating the crime. A seized computer may be examined by aforensic computer examiner to determine what evidence of the crime exists onthe computer.

Researchers must explore the problems in greater detail to learn the origins,methods, and motivations of this growing criminal group. Decision-makers in

business, government, and law enforcement must react to this emerging body ofknowledge. They must develop policies, methods, and regulations to detect

incursions, investigate and prosecute the perpetrators, and prevent future crimes.In addition, Police Departments should immediately take steps to protect theirown information systems from intrusions.

Internet provides anonymity: This is one of the reasons why criminals try to getaway easily when caught and also give them a chance to commit the crime again.Therefore, we users should be careful. We should not disclose any personalinformation on the internet or use credit cards and if we find anything suspicious

in e-mails or if the system is hacked, it should be immediately reported to thePolice officials who investigate cyber-crimes rather than trying to fix the problem

by ourselves.

Computer crime is a multi-billion dollar problem. Law enforcement must seekways to keep the drawbacks from overshadowing the great promise of thecomputer age. Cybercrime is a menace that has to be tackled effectively not onlyby the official but also by the users by co-operating with the law. The foundingfathers of internet wanted it to be a boon to the whole world and it is upon us tokeep this tool of modernisation as a boon and not make it a bane to the society.

ASSIGNMENT 01

Name :_______________________________

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Registration No. :_______________________________

Learning Center :_______________________________

Learning Center Code :_______________________________

Course :_______________________________

Subject :_______________________________

Semester :_______________________________

Module No. :_______________________________

Date of submission :_______________________________

Marks Awarded :_______________________________

Directory of Distance Education

Sikkim Manipal University

II Floor, Syndicate House,

Manipal 576 104

_____________________ _________________ __________________

Signature of Coordinator Signature of Center Signature of evaluator

Q.1 What are the situations which cannot be referred to arbitration?

Indian legal system is known for its delays and disparities. It is a known fact thatour courts are over-burdened with the pending cases and it is almost impossible

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to provide quick and efficient relief to the aggrieved parties. Therefore, to meetthe situation, nowadays, the alternative Dispute Resolution (ADR) mechanism isused all over the world which is more effective, faster and less expensive.

Under ADR mechanism, there are basically four methods :-

(a) Negotiation

(b) Mediation

(c) Conciliation

(d) Arbitration

While the first two methods are not recognised by law, the methods ofconciliation and arbitration are quasi-judicial methods to resolve a dispute with

minimum court intervention. The same is now recognised by the Arbitration and

Conciliation Act, 1996 (Act 26 of 1996). The courts have always assisted inproper conduct of the arbitration proceedings and enforcement of arbitrationawards.

DEFINITION

ARBITRATIONcan be defined as a method by which parties to a dispute get thedispute settled through the intervention of a third independent person. Partiescan also settle their disputes through a permanent arbitral Institutions like,Indian Council of Arbitration, Chamber of Commerce, etc. Halsbury has definedArbitration as follows :

"Arbitration is the reference of dispute between not less than two parties, fordetermination, after hearing both sides in a judicial manner, by a person orpersons other than a court of competent jurisdiction.

ARBITRATION AGREEMENT

Section 7(1) of the Act mentions that Arbitration Agreement means an agreementby the parties to submit to arbitration all or certain disputes which have arisen or

which may arise between them in respect of a defined legal relationship, whethercontractual or not.

An arbitration agreement should be in writing and signed by both the parties. Itneed not be in a particular form. However, the intention to refer to arbitrationmust be established. Arbitration can be agreed by way of exchange of letter,telex, telegram fax, etc.

The reference in a contract to a document containing an arbitration clauseconstitutes an arbitration agreement if the contract is in writing and the reference

is such as to make that arbitration clause part of the contract.

An Arbitration Agreement is a contract and it must satisfy all the essential

elements of a contract. As per the Contract Act, 1872, an agreement betweentwo parties which is enforceable by law is a contract.

DISPUTES EXCLUDED FROM ARBITRATION

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Generally speaking all disputes of a civil nature can be referred to Arbitration e.g.breach of a contract, question of assignment or right to hold premises etc.However, certain disputes where the law has given jurisdiction to determinecertain matters to specified tribunal only, cannot be referred to arbitration.

An illustrative list of such matters is given below :

Testamentary matters involving questions about validity of awill.

Disputes relating to appointment of a guardian.

Disputes pertaining to criminal proceedings

Disputes relating to Charitable Trusts

Winding up of a company

Matters of divorce or restitution of conjugal rights

Lunacy proceedings

Disputes arising from an illegal contract

Insolvency matters, such as adjudication of a person as aninsolvent.

Matters falling within the preview of the M.R.T.P. Act.

Q2. What is the role of a Conciliator.

Conciliation is a method of alternative dispute resolution sometimes used to help

settle some sort of disagreement between two parties. This process utilizes aconciliator, who meets with both parties separately and then actively works withboth sides to achieve a resolution. Unlike arbitration, the conciliation process doesnot legally bind the parties in any way. There are subtle differences betweenconciliation and mediation, generally concerning the role of the conciliator, who is

a much more active participant than the mediator. European countries whichfocus on civil law are very reliant on conciliators to resolve disputes, and the

process is very common in Japan as well.

This differs from the process of mediation, which is a similar concept but one inwhich a mediator plays a more passive role. In conciliation, the two sides rarelymeet to discuss the dispute, leaving the conciliator with the heavy burden of

having to communicate between the two sides. The conciliator is trusted by bothparties to come up with a solution that's amenable to both.

Although the conciliation process is not legally binding, this is often a selling pointfor disputing parties to choose it over arbitration. The decisions of an arbitrator or

arbitration panel are final and often have the power of law, which means that aparty involved in a dispute has little recompense if a crucial aspect of the decision

goes the other way. By using a conciliator instead, the outcome is usually assuredto at least partially please both sides of the disagreement.

The process of conciliation is relatively rare in the United States, at leastcompared with certain European countries. Since civil law plays a more

predominant role in Europe than in the U.S., conciliators are heavily relied uponto settle disputes. Japan also makes great use of its own system of conciliatory

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law. In Japan, conciliators actually work in tandem with the court system andhelp to resolve everything from small lawsuits to domestic issues like particularlycontentious divorces.

When two parties engaged in a dispute agree to the process of conciliation, aconciliator is chosen with working knowledge of the dispute at hand. He or shethen goes back and forth between the two parties, seeking to dissolve tension

and get the principals to figure out what they want most out of the process andalso what they are willing to give up in the negotiations. In this way, a conciliator

can actively bring about the terms of a settlement.

The RTA's Dispute Resolution Service is staffed by trained conciliators. Theconciliator's role is to assist parties involved in a dispute to reach an agreementon issues that they have been unable to resolve themselves.

The conciliator can:

contact and interview disputing parties over the telephone provide information about the Residential Tenancies and Rooming

Accommodation Act 2008

assist the parties in the exchange of information including relevant

documents such as receipts

facilitate the resolution of disputes by sharing offers and suggestingoptions

provide a notice of unresolved dispute to enable an application to the

tribunal for a hearing where a dispute remains unresolved.

Conciliators do not:

make decisions for disputing parties

make judgements about who is right, who is wrong or what the outcomeof the dispute should be

tell people what to do

make rulings

force parties to participate in the conciliation process.

Q3. What are the unfair trade practices under the MRTP Act.

An unfair trade practice means a trade practice, which, for the purpose of

promoting any sale, use or supply of any goods or services, adopts unfairmethod, or unfair or deceptive practice.

Unfair practices may be categorised as under:

1.False Representation

The practice of making any oral or written statement or representation which:

1. Falsely suggests that the goods are of a particular standard quality,

quantity, grade, composition, style or model;2. Falsely suggests that the services are of a particular standard, quantity or

grade;

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3. Falsely suggests any re-built, second-hand renovated, reconditioned or oldgoods as new goods;

4. Represents that the goods or services have sponsorship, approval,performance, characteristics, accessories, uses or benefits which they donot have;

5. Represents that the seller or the supplier has a sponsorship or approval or

affiliation which he does not have;6. Makes a false or misleading representation concerning the need for, or the

usefulness of, any goods or services;7. Gives any warranty or guarantee of the performance, efficacy or length of

life of the goods, that is not based on an adequate or proper test;8. Makes to the public a representation in the form that purports to be-

o warranty or guarantee of the goods or services,

o a promise to replace, maintain or repair the goods until it has

achieved a specified result,

if such representation is materially misleading or there is no reasonableprospect that such warranty, guarantee or promise will be fulfilled

9. Materially misleads about the prices at which such goods or services areavailable in the market; or

10.Gives false or misleading facts disparaging the goods, services or trade of

another person.

2.False Offer Of Bargain Price

Where an advertisement is published in a newspaper or otherwise, wherebygoods or services are offered at a bargain price when in fact there is no intentionthat the same may be offered at that price, for a reasonable period or reasonablequantity, it shall amount to an unfair trade practice.

The 'bargain price', for this purpose means:

1. the price stated in the advertisement in such manner as suggests that it is

lesser than the ordinary price, or2. the price which any person coming across the advertisement would believe

to be better than the price at which such goods are ordinarily sold.

3. Free Gifts Offer And Prize Scheme

The unfair trade practices under this category are:

1. Offering any gifts, prizes or other items along with the goods when thereal intention is different, or

2. Creating impression that something is being offered free alongwith thegoods, when in fact the price is wholly or partly covered by the price of thearticle sold, or

3. Offering some prizes to the buyers by the conduct of any contest, lottery

or game of chance or skill, with real intention to promote sales orbusiness.

4.Non-Compliance Of Prescribed Standards

Any sale or supply of goods, for use by consumers, knowing or having reason to

believe that the goods do not comply with the standards prescribed by somecompetent authority, in relation to their performance, composition, contents,

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design, construction, finishing or packing, as are necessary to prevent or reducethe risk of injury to the person using such goods, shall amount to an unfair tradepractice.

5.Hoarding, Destruction, Etc.

Any practice that permits the hoarding or destruction of goods, or refusal to sellthe goods or provide any services, with an intention to raise the cost of those or

other similar goods or services, shall be an unfair trade practice.

6.Inquiry Into Unfair Trade Practices

The Commission may inquire into any unfair trade practice:

1. Upon receiving a complaint from any trade association, consumer or aregistered consumer association, or

2. Upon reference made to it by the Central Government or State

Government3. Upon an application to it by the Director General or

4. Upon its own knowledge or information.

Relief Available

After making an inquiry into the unfair trade practice if the Commission is of theopinion that the practice is prejudicial to the pubic interest, or to the interest ofany consumer it may direct that -

1. The practice shall be discontinued or shall not be repeated;

2. The agreement relating thereto shall be void in respect of such unfair

trade practice or shall stand modified.3. Any information, statement or advertisement relating to such unfair trade

practice shall be disclosed, issued or published as may be specified4. The Commission may permit the party to carry on any trade practice to

take steps to ensure that it is no longer prejudicial to the public interest orto the interest of the consumer.

However no order shall be made in respect a trade practice which is expressly

authorised by any law in force.

The Commission is empowered to direct publication of corrective advertisement

and disclosure of additional information while passing orders relating to unfair

trade practices.

Q4. What are essentials of a valid offer?

1. A valid offer must intend to create legal relations. It must not be a casualstatement. If the offer is not intended to create legal relationship, it is not an

offer in the eyes of law. for example; Sunil invites Sridhar to a dinner party andSridhar accepts the invitation. Sridhar does not turn up at the dinner party. Sunil

cannot sue Sridhar for breach of contract as there was no intention to create legalobligation. Hence, an offer to perform social, religious or moral acts without anyintention of creating legal relations will not be a valid offer.

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2. The terms of an offer must be definite, unambiguous and certain. They mustnot be loose and vague. A promise to pay an extra Rs. 500 if a particular houseproves lucky is too vague to be enforceable. for example; Sridhar says to Sunil "Iwill give you some money if you marry my daughter". This is not an offer whichcan be accepted because the amount of money to be paid is not certain.

3. An offer may be made to a definite person or to the general public. When offer

is made to a definite person or to a special class of persons, it is called "specificoffer". When an offer is made to the world at large or public in general, it is called

"general offer". A specific offer can be accepted only by that person to whom ithas been made and a general offer can be accepted by any person. for example;

Sunil promises to give Rs.100 to Sridhar, if he brings back his missing dog. This isa specific offer and can only be accepted by Sridhar. Sunil issues a publicadvertisement to the effect that he would give Rs.100 to any one who brings backhis missing dog. This is a general offer. Any member of the public can accept thisoffer by searching for and bringing back Sunil's missing dog.

4. An offer to do or not to do must be made with a view to obtaining the assent of

the other party. Mere enquiry is not an offer.

5. An offer should may contain any term or condition. The offeror may prescribe

any mode of acceptance. But he cannot prescribe the form or time of refusal soas to fix a contract on the acceptor. He cannot say that if the acceptor does notcommunicate his acceptance within a specified time, he is deemed to haveaccepted the offer.

6. The offeror is free to lay down any terms any terms and conditions in his offer.If the other party accepts it, then he has to abide by all the terms and conditions

of the offer. It is immaterial whether the terms and conditions were harsh orrediculous. The special terms or conditions in an offer must be brought to the

notice of the offeree at the time of making a proposal.

7. An offer is effective only when it is communicated to the offeree.Communication is necessary whether the offer is general or specific. The offerormay communicate the offer by choosing any available means such as a word ofmouth, mail, telegram, messenger, a written document, or even signs andgestures. Communication may also be implied by his conduct. A person canaccept the offer only when he knows about it. If he does not know, he cannotaccept it. An acceptance of an offer, in ignorance of the offer, is no acceptance at

all.

Q5. Find out a case where a person appealed under the Consumer protection Actand won.

Consumer. Consumer means any of the following persons:

1. A person who buys any goods for a consideration which has been paid or

promised or partly paid and partly promised or under any system of deferredpayment i.e., in respect of hire-purchase transactions. The term includes any

other user of such goods when such use is made with the approval of the buyer.

2. A person who hires or avails of any services for consideration which has beenpaid or promised or partly paid and partly promised, or under any system of

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deferred payment. The term includes any other beneficiary of such services withthe approval of the first mentioned person.

Consumer dispute [Sec.2(1)(c)]. It means a dispute where the person againstwhom a complaint has been made, denies or disputes the allegations contained inthe complaint.

Defect [Sec.2(1)(f)]. A defect is defined to mean any fault, imperfection or

shortcoming in the quality, quantity, potency, purity or standard which is requiredto be maintained by or under any law for the time being in force or under any

contract, express or implied, or as is claimed by the trader in any mannerwhatsoever in relation to any goods.

Deficiency. Parallel to defect in case of goods, deficiency is relevant in case ofservices. Accordingly, it is defined to mean any fault, imperfection, shortcomingor inadequacy in the quality, nature and manner of performance which is requiredto 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 otherwisein relation to any service.

District Forum. District Forum means a consumer Dispute Redressal Forumestablished under clause (a) of Sec.9. This section provides that for the purposesof the Act a Consumer Disputes Redressal Forum to be known as the DistrictForum established by the State Government in each district of the State bynotification. The State Government may, if it deems fit, establish more than oneDistrict Forum in a district.

Goods. Goods under this Act shall have the same meaning as assigned to themunder the Sale of Goods Act, 1930. Accordingly, Goods means every kind of

movable property other than actionable claims and money; and includes stockand shares, growing crops, grass and things attached to or forming part of the

land which are agreed to be severed before sale or under the contract of sale[Sec.2(7) of the Sale of Goods Act, 1930].

Manufacturer. The expression Manufacturer for the purpose of this Act, meansany of the following persons: (i) A person who makes or manufactures any goodsor part thereof. (ii) A person who does not make or manufacture any goods butassembles parts thereof made or manufactured by others. But, where a

manufacturer dispatches any goods or parts thereof to any branch officemaintained by him, such branch office shall not be deemed to be manufacturer

even though the parts so dispatched to it are assembled at such branch office andare sold or distributed from such branch office. (iii) A person who puts or causes

to be put his own mark on any goods made or manufactured by any othermanufacturer.

National Commission: National Commission means the National ConsumerDisputes Redressal Commission established under clause (c) of Sec.9. Thissection provides that there shall be established for the purposes of this Act aNational Consumer Disputes Redressal Commission established by the Central

Government by notification. The Government vide powers conferred upon it underthe said clause established a National Commission in 1987.

For the first time in the history of consumer legislation in India, the Consumer

Protection Act, 1986 extended a statutory recognition to the rights of consumers.Sec.6 of the Act recognizes the following six rights of consumers:

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1. Right to safety, i.e., the right to be protected against the marketing of goodsand services which are hazardous to life and property.

2. Right to be informed, i.e., the right to be informed about the quality,quantity, potency, purity, standard and price of goods or services, as the casemay be, so as to protect the consumer against unfair trade practices.

3. Right to choose: It means 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.

4. Right to be heard, i.e., the consumers interests will receive due considerationat appropriate forums. It also includes right to be represented in various forumsformed to consider the consumers welfare.

5. Right to seek redressal: It means 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 theconsumers.

6. Right to consumer education: It means the right to acquire the knowledgeand skill to be an informed consumer.

Q6. What does the Information Technology Act enable.

Information Technology Act

In May 2000, at the height of the dot-com boom, India enacted the IT Act and

became part of a select group of countries to have put in place cyber laws. In allthese years, despite the growing crime rate in the cyber world, only less than 25cases have been registered under the IT Act 2000 and no final verdict has beenpassed in any of these cases as they are now pending with various courts in thecountry.

Although the law came into operation on October 17, 2000, it still has an elementof mystery around it. Not only from the perception of the common man, but also

from the perception of lawyers, law enforcing agencies and even the judiciary.

The prime reason for this is the fact that the IT Act is a set of technical laws.

Another major hurdle is the reluctance on the part of companies to report the

instances of cyber crimes, as they don't want to get negative publicity or worseget entangled in legal proceedings. A major hurdle in cracking down on theperpetrators of cyber crimes such as hacking is the fact that most of them are notin India. The IT Act does give extra-territorial jurisdiction to law enforcementagencies, but such powers are largely inefficient. This is because India does nothave reciprocity and extradition treaties with a large number of countries.

The Indian IT Act also needs to evolve with the rapidly changing technology

environment that breeds new forms of crimes and criminals. We are nowbeginning to see new categories and varieties of cyber crimes, which have not

been addressed in the IT Act. This includes cyber stalking, cyber nuisance, cyberharassment, cyber defamation and the like. Though Section 67 of the Information

Technology Act, 2000 provides for punishment to whoever transmits or publishesor causes to be published or transmitted, any material which is obscene in

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electronic form with imprisonment for a term which may extend to two years andwith fine which may extend to twenty five thousand rupees on first convectionand in the event of second may extend to five years and also with fine which mayextend to fifty thousand rupees, it does not expressly talk of cyber defamation.The above provision chiefly aim at curbing the increasing number of childpornography cases and does not encompass other crimes which could have been

expressly brought within its ambit such as cyber defamation.

Objectives of the Act

The objectives of the Act as reflected in the preamble to the Act are:

(i) to provide legal recognition for transactions carried out by means of electronicdata interchange and other means of electronic communication, commonlyreferred to as electronic commerce, which involves the use of alternatives topaper-based methods of communication and storage of information;

(ii) to facilitate electronic filing of documents with the government agencies;

(iii) to facilitate electronic storage of data in place of paper-based methods ofstorage of data.

(iv) to amend the Indian Penal Code, the Indian Evidence Act, 1872, the BankersBooks Evidence Act, 1891, and the Reserve Bank of India Act, 1934, and

(v) to provide for matters connected therewith or incidental thereto.

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