7/31/2019 Business Law - Finalised Notes
1/40
Business Law
Module I Companies Act, 1956
1. Define a Company. Explain its characteristics. What is meant by Lifting of Corporate Veil? Under
what circumstances can it be lifted?
A Company is an incorporated association which is an artificial person created by law having
a separate entity with perpetual succession and a common seal
Definition - Lindley
An Association of many persons who contribute money or moneys worth to a common stock
and employ it in some common trade or business (i.e., for a common purpose) and who share the
profit or loss arising therefrom. The common stock so contributed is denoted in money and is the
capital of the company. The persons who contribute it, or to whom it belongs, are members. The
proportion of capital to which each member is entitled is his share. Shares are always transferable
although the transfer them is often more or less restricted
Characteristics of a Company
Voluntary Association
Separate Legal Entity
Limited Liability
Perpetual Succession
Common Seal
Transferability of Shares.
Own and Hold property in its own name
Capacity to be sue and sued
Representative Management
When a Company has been formed and registered under the Act, all dealings with the Company willbe in the name of the Company and the persons behind the Company will be disregarded, however
important they may be. This principle is referred to as the Veil of Incorporation
In case of a dishonest and fraudulent use of the facility of incorporation, the law will lift the
corporate veil and identify the persons who are behind the curtain and make them responsible for
the fraud and improper conduct. This is called as Lifting of Corporate Veil.
7/31/2019 Business Law - Finalised Notes
2/40
Cases falling under statutory provisions
Reduction in membership below statutory minimum
Misrepresentation in Prospectus
Failure to refund Application Money
Mis-description of Companys name
Subsidiary Company
Fraudulent conduct
Non-payment of tax
Ultra vires Acts
Cases falling under judicial interpretation:
Determination of the character; whether it is an enemy Company or not
Protection of Revenue
Prevention of fraud or improper conduct
Where the corporate faade is really only an agency and instrument
Where the doctrine conflicts with public policy
Avoidance of Welfare legislation
Quasi Criminal cases
Lifting of Corporate Veil:
In case of a dishonest and fraudulent use of the facility of incorporation, the law will lift the
corporate veil and identify the persons who are behind the curtain and make them responsible for
the fraud and improper conduct. This is called as Lifting of Corporate Veil.
2. Explain the basic characteristics of a Private Limited Company and state, how it differ from a
Public Limited Company?
Characteristics of Private Limited Company:
A Private company is normally what the Americans call a close corporation
According to Sec 3 (1) (iii),l a private company means a company which has a minimum paid-up
capital of Rs.1,00,000 or such higher paid-up capital as may be prescribed, and by its Articles
7/31/2019 Business Law - Finalised Notes
3/40
Restricts the right to transfer its shares.
Limits the number of members to fifty.
Prohibits any invitation to the public to subscribe to shares or debentures of the company.
Prohibits any invitation to deposits from persons other than its members, Directors or their
relatives.
It is a private company which is a subsidiary of a Public Company.
Distinction between a public company and a private company:
1. Minimum Capital :
Private: Minimum 1, 00,000
Public: Minimum 5, 00,000
2. Minimum Number :
Private: Minimum number required to form a public company is 2
Public: Minimum number required to form a public company is 7
3. Maximum Number:
Private: Maximum number of members cannot exceed 50
Public: There is no restriction on maximum number of members
4. Number of Directors:
Private: Must have at least 2 Directors
Public: Must have at least 3 directors
5. Restriction on appointment of directors:
Private: Need not registrar consent to act as directors or sign an undertaking
Public: The Directors must file with the Registrar consent to act as directors or sign an
undertaking for their qualification shares.
6. Restriction on invitation to subscribe for shares:
Private: Private Company by its articles prohibits any such invitation to public.
Public: A public company invites the general public to subscribe for the shares in, or the
debentures of the company.
7/31/2019 Business Law - Finalised Notes
4/40
7. Transferability of share/ debentures:
Private: Transferring of shares and debentures is restricted by the Articles
Public: The shares and debentures are freely transferable (Sec. 82)
8. Special Privileges:
Private: Enjoys some special privileges, Public : enjoys no such privileges.
9. Quorum:
Private: 2 members present for a private company for a meeting of the company
Public: Articles of a company do not provide for a larger quorum, 5 members personally
present in the case of a public company are quorum for a meeting of a company
10.Managerial remuneration:
Private: There is no such restriction applies for Managerial remuneration
Public: The Managerial remuneration cannot exceed 11 percent of the net profits
(Sec.174)
3. What do you mean by the term Memorandum of Association? State the requirements, which must
be stated in the Memorandum of Association. Explain the provisions regarding alteration of the Object
Clause and Situation Clause.
Memorandum It is in fact a companys charter. It defines its constitution and the scope of the
powers with which it has been established under the Companies Act
Contents of Memorandum of Association:
Name Clause Limited for Public and Private Limited for Private company
Situation Clause - This act provides that the company must have a registered office so that the
registrar may be able to send notice etc. to the company at the registered office (gives details
about where and which state the company is located
Objects Clause - This clause is quite important and must be very carefully drafted as it
determines the activities of the company. In the object clause each and every detail of activities
of the business to be carried out must be laid down. Once the object clause is completed, it
becomes very difficult to make any amendment. The value of the shares, the allotment money
must be given in detail.
Liability Clause - A declaration that the shareholders liability is limited.
Capital Clause - This clause must contain a statement as to the amount of capital with which the
company proposes to be registered and the division thereof into shares at certain fixed amount.
7/31/2019 Business Law - Finalised Notes
5/40
Alteration of the Object Clause and Situation Clause:
Sec. 17. The objects clause is the most important clause in the Memorandum of Association. The legal
personality of a company exists only for the particular purposes of incorporation as defined in the
objects clause.
The power of alteration of objects is subject to two limits, namely
1. Substantive or Physical Limit, and
2. Procedural Limited
Substantive or Physical Limit: By Sec.17 (1), the objects of a company may be altered by special
resolution so as to enable the company
a. To carry on its business more economically or more efficiently
b.
To attain its main purpose by new or improve means
c. To enlarge or change the local area of its operations
d. To carry on some business which may conveniently or advantageously by
Combined with the objects specified in the Memorandum
Procedure for alteration:
a. Special resolution
b.
Copy of special resolution to be filed
c. Certification of registration
d. Change in liability clause
e. Change in capital clause
3. What do you mean by the term Article of Association? In what manner can the Articles of
Association of a Company be altered? What are the limitations of such an alteration?
Articles of Association:
The Articles of Association are the rules, regulations and bye-laws for the internal
management of the affairs of the Company. They are framed with the object of carrying out the
objects as set out in the Memorandum of Association. The Articles should not contain anything
which is inconsistent with either the provisions of the Memorandum of Association or of the
Companies Act.
7/31/2019 Business Law - Finalised Notes
6/40
Contents of articles:
1. Share capital, rights of shareholders, variation of these rights, and payment of commissions share
certificates
2. Lien on shares, 3. Calls on shares 4. Transfer of shares
5. Transmission of shares 6. Forfeiture of shares 7. Conversion of shares into stock
8. Share warrants 9. Alteration of capital 10. General meetings and proceedings
11. Voting rights of members, voting and poll, proxies 12. Manager 13. Secretary
14. Directors, their appointment, remuneration, qualifications, powers and proceedings of Board of
Directors, Dividends and reserves
15.Accounts, audit and borrowing powers 16. Capitalization of profits 17. Winding up
Alteration of Articles: According to Sec. 31. A company may, by passing a special resolution, alter its
Articles any time. Again any articles may be adopted which could have been lawfully included originally.
A copy of every special resolution altering the Articles shall be filed with the Registrar within 30 days of
its passing and attached to every copy of the Articles issued thereafter. Any alteration so made in the
Articles shall be as valid as if originally contained in the Articles.
Limitation of Alteration:
Must not be inconsistent with the Act ; Must not conflict with the memorandum ; Must not
sanction anything illegal ; Must be for the benefit of the company ; Must not increase liability of
members ; Alteration by special resolutions only ; Approval of Central Government when a publiccompany is converted into a private company ; Breach of contract ; No power of the Tribunal to amend
Articles ; Alteration may be with retrospective effect.
15.Explain Doctrine of Constructive Notice and Doctrine of Indoor Management. Enumerate the
exceptions to Doctrine of Indoor Management
Doctrine of Constructive Notice:
Every outsider dealing with a company is deemed to have notice of the contents of the
Memorandum and the Articles of Association. These documents, on registration with the Registrar,
assume the character of public documents. This is known as constructive notice of Memorandumand Articles.
Doctrine of Indoor Management:
There is one limitation to the doctrine of constructive notice of the Memorandum and the
Articles of a company. The outsiders dealing with the company are entitled to assume that as far as
the internal proceedings of the company are concerned, everything has been regularly done.
7/31/2019 Business Law - Finalised Notes
7/40
They are presumed to have read these documents and to see that the proposed dealing is not
inconsistent therewith, but they are not bound to do more; they need not inquire into the regularity
of the internal proceedings as required by the Memorandum and the Articles. They can presume
that all is being done regularly. This limitation of the doctrine of constructive notice is known as the
Doctrine of Indoor Management or the rule in Royal British Bank v. Turquand, or just Turquand
Rule.
16.Classes of companies?
Chartered, Statutory and Registered Company
Limited by shares, Limited by Guarantees and Unlimited
Private and Public
Holding and Subsidiary
Government and Non-Government
Foreign, Investment, Financial and Association not for profit
17.Memorandum and Articles of Association?
Memorandum of Association:
Person dealing with the Company should know whether the contract relation he
contemplates entering with the Company is one relating to a matter within its corporate
objects.
Contents of Memorandum Association:
Name Clause
Situation Clause
Objects Clause
Liability Clause
Capital Clause
Association Clause
Articles of Association: The Articles of Association are the rules, regulations and bye-laws for the
internal management of the affairs of the Company. They are framed with the object of carrying out the
objects as set out in the Memorandum of Association. The Articles should not contain anything which is
inconsistent with either the provisions of the Memorandum of Association or of the Companies Act.
7/31/2019 Business Law - Finalised Notes
8/40
Contents of Articles of Association:
Exclusion wholly or in Part of Table A
Adoption of Preliminary contracts.
Number and value of shares.
Allotment of shares
Calls on shares
Lien on shares.
Transfer and Transmission of shares
Forfeiture of shares
Alteration of capital
Share certificate
Conversion of shares into stock
Voting rights and proxies
Meetings
Directors, their appointment, etc.
Borrowing powers
Dividends and reserves
Account and audit
Winding up.
Alteration of Articles: Power to alter the Articles is vested with the company under section 31. A
Company cannot divest itself of the power to alter Articles. Alteration is to be effected by special
resolution passed by the shareholders.
18.Explain Doctrine of Ultravires?
Ultra means beyond. Vires means powers. Ultravires a Company means an act done beyond
the legal power and authority of the Company. An act Ultravires the Companies Act is illegal and
void. An act ultra vires the Company is void.
Purpose of Doctrine: To protect the shareholders and To safeguard the interest of the creditors
7/31/2019 Business Law - Finalised Notes
9/40
19.Explain of Doctrine of Constructive Notice?
The MoA and AoA are registered with the Registrar of Companies. The RoC is a public
office and consequently they are public documents open and accessible to all. Any person
dealing with the Company is persumed to have read the MoA and AOA.irrespective of whether
he actually reads it or not. This is called as Doctrine of Constructive Notice. If a person dealswith the Company and the transaction is inconsistent with these documents, he cannot plead
ignorance of the provisions of these documents.
20.Explain Doctrine of Indoor Management?
This doctrine is an exception to the doctrine of constructive notice.
According to it, persons dealing with the Company are persumed to have read the registered
documents and to see that the proposed dealing is not inconsistent therewith, but they are not
bound to do more; they need not enquire into the regularity of internal proceedings as required
by MoA and AoA. They can presume that all this is being done regularly
21.Explain in detail the Incorporation of companies?
In the case of a public company with or without limited liability any 7 or more persons can
form a company by subscribing their names to memorandum and otherwise complying with
the requirements of the Companies Act, 1956.
In exactly the same way, 2 or more persons can form a private company [Section 12].
Persons who form the company, who conceive the idea of forming the company are known
as promoters. They take all necessary step for its registration.
(a) Lawful purpose: The essence of validly incorporated company is that it must consist of a
particular number of persons and be an association for a lawful purpose. Unless the purpose
appears to be unlawful ex facie or is transparently illegal or prohibited by way ofstatute, it
cannot be regarded as an unlawful purpose.
(b) Applying for the name: The promoters of the company should decide upon at least three
suitable names in order of preference to afford flexibility to the Registrar to decide the
availability of the name.
(c)Documents to be filed:
After getting the name approved, three copies of a approved
MOA and AOA along with the registration and filing fee, documents like form 1,18,32 and
consent etc. and prescribed fees, are to be filed with the Registrar.
(d) Subscribing their names: Subscribing name means signing the names. Section 15
stipulates that the Memorandum should be signed by each subscriber who should add his
address, description and occupation in the presence of one witness.
7/31/2019 Business Law - Finalised Notes
10/40
(e) Certificate of incorporation: Upon the registration of the documents mentioned earlier
and the payment of the necessary fees, the Registrar of Companies issues a certificate that
the company is incorporated, and in the case of a limited company that it is limited.
(f) Commencement of business
(g) Statement in Lieu of Prospectus: If a public company does not issue a prospectus inviting
the public to purchase its share because, the directors think they can sell the shares even
without the issue of the prospectus, it can do so.
22.Explain the types of Shares?
Types of Share Capital
Preference Shares
Equity Shares
a) With voting rights, or
b) With differential rights as to dividend, voting or otherwise in accordance with rules and
subject to such conditions as may be prescribed.
Preference Shares:
That part of the capital of the Company which -
a) Carries a preferential right as to payment of dividend during the life time of the Company
b) Carries on winding up a preferential right to be repaid the amount of the capital paid up.
Types of Preference Shares :
On the basis of participation
a) Participating Preference Shares b) Non-participating Preference Shares
On the basis of Accumulation
a) Cumulative Preference Shares b) Non-cumulative Preference Shares
On the basis of Redemption
a) Redeemable Preference Shares b) Irredeemable Preference Shares
On the basis of Conversion
a) Convertible Preference Shares b) Non-convertible Preference Shares
7/31/2019 Business Law - Finalised Notes
11/40
Equity Shares:
Voting rights at the general Meeting.
Right to control management of the company.
Right to share in profit.
On winding up, equity share capital is repaid after repayment to the creditors and
preference shareholders
Issue of Shares:
Public Issue, Right Issue
Issue at Discount and Premium
Module II Contract Act, 1872
1. What are the Essentials of a Valid Contract?
In terms of Section 10 of the Act, all agreements are contracts if they are
made by the free consent of the parties competent to contract, for a lawful
consideration and with a lawful object and are not expressly declared to be
void
Thus in order to create a valid contract, the following elements should be present:
Intention to create legal obligation through offer and acceptance should be present
Free consent of the parties is necessary.
Competency or capacity to enter into contract must be ensured.
Lawful consideration should be present and
Lawful object should be the subject matter of contract.
The above important elements may be further analyzed as under:
In the first place, there must be an offer and the said offer must have been accepted.
Such offer and acceptance should create legal obligations between parties. This
should result in a moral duty on the person who promises or offers to do something.
Similarly this should also give a right to the promisee to claim its fulfillment. Such
duties and rights should be legal and not merely moral.
2. Explain Offer and Acceptance in details?The word proposal and the word offer mean one and the same thing and
therefore are used interchangeably.
According to Section 2(a) of the Act a person is said to make a proposal when
he signifies to another, his willingness to do or abstain from doing anything with a
view to obtaining the assent of that other to such act or abstinence. Doing an act
and not doing an act both have the same effect in the eyes of the law, though one is
a positive act and the other is a negative act.
7/31/2019 Business Law - Finalised Notes
12/40
7/31/2019 Business Law - Finalised Notes
13/40
Capacity to Contract
Every person who (a) has attained the age of majority (b) is of sound mind and (c) is
not otherwise disqualified from contracting, is competent to contract.
(a) Age of majority
In terms of Indian Majority Act 1875, every domiciled Indian attains majority on thecompletion of 18 years of age. However where a guardian is appointed by a court to
protect the property of a minor and the court takes charge of the property before the
person attains 18 years, then he or she would attain majority on completion of 21
years.
(b) Sound mind
A person will be considered to be of sound mind if he at the time of entering into a
contract is capable of understanding it and forming a rational judgment as to its effect
upon his interest. A person who is of unsound mind but occasionally of sound mind
can enter into a contact when he is in sound mind though for temporary periods.
For example a person who is in lunatic asylum during intervals of sound mind can
enter into contracts.
Similarly a person who is generally of sound mind, but occasionally of unsound mind
cannot enter into a contract when he is of unsound mind.
From the above it clears that the period of lucidity would be crucial as much as the
periods of lunacy. But the burden of proof of unsound mind is on the person who
challenges the validity of the contract.
4. Explain Free Consent and Discharge of Contract?In terms of section 13 of the Act, two or more persons are said to have
consented when they agree upon the same thing in the same manner. This is referred
to as identity of minds or consensus ad-idem. Absence of identity of minds would
arise when there is an error on the part of the parties regarding (a) nature oftransaction or (b) person dealt with or (c) subject matter of agreement .In such cases
there would be no consent.
Example: Where the persons refer to a ship of a name in the contract but
each of them had a different ship in mind though of same name, there is no identity
of minds and hence there is no consent.
Discharge of Contract: A contract may be discharged in eight ways as discusshereunder.
(a) Discharge by performance: Discharge by performance will take place
when there is (i) Actual performance or (ii) Attempted performance
Actual performance / discharge takes place when parties to the contract fulfill theirobligations within time and in the manner prescribed. Here each party has done what
he has to do under the contract. In attempted performance the promisor offers to
perform his part but the promisee refuses to accept his part. This is also known as
tender.
(b) Discharge by mutual agreement: Discharge also takes place where there
is substitution [novation] rescission, alteration and remission. In all these cases old
contract need not be performed.
7/31/2019 Business Law - Finalised Notes
14/40
(c) Discharge by impossibility of performance:A situation of impossibility
may have existed at the time of entering into the contract or it may have transpired
subsequently (also known as supervening impossibility) Impossibility can arise
when
There is an unforeseen change in law.
Destruction of subject matter.
non-existence or nonoccurrence of a state of thing to facilitate
Happening of the Agreement.
Personal incapacity of the promisor.
Declaration of war.
(d) Discharge by lapse of time: Performance of contract has to be done
within certain prescribed time. In other words it should be performed before it is
barred by law of limitation. In such a case there was no remedy for the promisee. For
example where, then the debt is barred by law of limitation.
(e) Discharge by operation of law: Where the promisor dies or goes insolvent
there is discharge by operation of law.
(f) Discharge by breach of contract: Where there is a default by one party
from performing his part of contract on due date then there is breach of contract.
Breach of contract can be actual breach or anticipatory breach. Where a person
repudiates a contract before the stipulated due date, it is anticipatory breach. In both
the events, the party who has suffered injury is entitled for damages. Further he is
discharged from performing his part of the contract.
(g) A promisee may remit the performance of the promise by the promisor.
Here there is a discharge. Similarly the promisee may accept some other satisfaction.
Then again there is a discharge on the ground of accord and satisfaction
(h) When a promisee neglects or refuses to afford the promisor reasonable
facilities or opportunities for performance, promisor is excused by such neglect orrefusal.
5. Explain Breach of Contract? And remedy of breach ofcontract?
Anticipatory Breach of Contract
Where the promisor refuses to perform his obligation even before the specified time
for performance and signifies his unwillingness, then there is an anticipatory breach.
Leading case on this point is Huckster vs. Dela Tour. In this case defendant had
engaged the services of plaintiff as his attendant for a tour of the continent from June
1st on a fee of 10 per month for three months. However defendant changed his
mind before June 1st and informed the plaintiff that his services are not required.This is thus a case of anticipatory breach of contract. It was held in this case that
plaintiff could put an end to the contract even before the due date viz 1st June and he
need not wait for the date meant for performance of the promise.
Actual Breach of Contract
Where one of the parties breaches the contract by refusing to perform the promise
on due date, it is known as actual breach of contract. In such a case the other party to
contract obtains a right of action against the one who breached the contract.
7/31/2019 Business Law - Finalised Notes
15/40
Measurement of Damages
Compensation for damages suffered by the promisee. The compensationcan be classified as:
those for damages that usually arise in the event of breach of contract and
those for damages which parties know and anticipated at the time of
entering into the contract called special damages. This kind of special
damages can be claimed only on previous notice.
However no compensation is payable for any remote or any indirect loss. While
assessing the damage the inconvenience caused to the aggrieved party on
account of non-performance should be assessed carefully, as the party entitled
for compensation, he has a duty to take steps to minimize the loss.
Liability for Damages:
The liability to pay damages is of four kinds. They are:
liability for special damages
liability for exemplary damages
liability to pay nominal damages and
liability to pay damages for deterioration caused by delay.
Now let us discuss each one of them-
Liability for special damages: Where it is understood between parties that in
the event
of breach of contract, there would be special damages also in addition to
normal damages, then special damages would be payable. In our given
example above if the tailor had informed about the special circumstances,
special damages would have become payable.
Liability for exemplary damages: These situations may arise mainly in two
cases namely(i) Breach of promise to marry and
(ii) Wrongful dishonor of cheques of customer by bank. In case of breach of
promise to marry the damages are awarded taking into account the injury or
humiliation which the aggrieved person would have suffered. In case of
wrongful dishonour of cheques the damages would depend upon the loss of
credit and reputation suffered by the customer. The damages could be very
heavy if loss had been suffered by a businessman, when compared to a non-
businessman customer.
Liability to pay nominal damages: Nominal damages are awarded in those
cases ofbreach of contract where no damage has been suffered. Such damages
are awarded only to establish the right to decree for breach of contract. Suchdamages are for nominal amounts like ten rupees or even ten paise.
Damages for deterioration caused by delay: Compensation can be recovered even
without notice for damages or deterioration caused to goods on account of delay by
carriers amounting to breach of contract. Here the word deterioration means not
only physical damages but also loss of opportunity.
7/31/2019 Business Law - Finalised Notes
16/40
Module III Sale of Goods Act, 1930
1. What is sales and explain Formation of Contract of Sales?
The contract of sale of goods is a contract whereby the seller transfers
or agrees to transfer the property in goods to the buyer for a price.
There may be a contract of sale between one part owner and another.
A contract of sale may be absolute or conditional.
Where under a contract of sale the property in the goods is transferred
from the seller to the buyer, the contract is called a sale, but where the
transfer of property in the goods is to take place at a future time or
subject to some conditions thereafter to be fulfilled, the contract is
called an agreement to sell.
An agreement to sell becomes a sale when the timeelapses; all the
conditions subject to which the property in the goods is to be
transferred are fulfilled
Essential Requisites of Sale:
In order to constitute a sale, it is necessary that there should be an
agreement between the parties for the purpose of transferring title to
goods, which presupposed capacity to contract, that it must be
supported by money consideration, that as a result of transaction, the
property must actually pass in the goods. Unless all these elements are
present there would be no sale.
Formalities of a Contract of Sale:
A contract of sale is made by an offer to buy or sell goods for a price and
the acceptance of such price. A contract may provide for the immediatedelivery of goods or immediate payment of the price or both, or for the
delivery or payment by instalments. Or that the delivery of payments or
both shall be postponed.
Subject to the provisions of any law for the time being in force, a
contract of sale may be in writing or by the word of mouth or may be
implied from the conduct of the parties.
A statement or conduct inviting the making of an offer such as by
display of goods in a shop does not buy itself bind the shopkeeper to
accept the customers offer even at the price displayed or advertised.
Such invitation to treat therefore differs from an offer, which is
intended to be binding on the person making it and is capable of being
accepted without any further negotiation.
Where, however, the accessibility to goods in intended to an offer
capable of acceptance by customers act such as filling the petrol tank of
a car from a self service pump or choosing items in a self service shop or
7/31/2019 Business Law - Finalised Notes
17/40
taking goods intended for sale for an automatic vending machine the
question of obtaining sellers assent does not arise.
A sale can be complete even without effecting immediate delivery and
immediate payment.
In a contract of sale, the title in goods passes immediately on thepayment of price while in an agreement to sale the title in goods passes
at a future time subject to conditions to be fulfilled thereafter
However, when the goods are accepted by the buyer and the price is
received by the seller the sale is deemed to be complete.
---------------------- -------------------------- --------------------- ------------------- --------------------- ------------------------ ------------------------ ----------------------- ------------------------ ----------------------- ------------------------ ----------------------- ------------------------ ------------------------ --------------------- ------------------------ ----------------------- --------------------------- --------------------- ------------------------ ------------------------- ---------------------- ------------------------ ----------------------- ------------------------ ------------------------ ----------------------- ------------------------ --------------------- -------------------------- ----------------------- ---------------------- ------------------------ ----------------------- ------------------------ ------------------------ ----------------------- ------------------------ ----------------------- ------------------------ ------------------------ --------------------- -------------------------- --------------------- ------------------------ ------------------------ ----------------------- ---------------------- ---------------------- ----------------------- ------------------------ ------------------------ ----------------------- ---------------------- ------------------------ ----------------------- ------------------------ ------------------------ ----------------------- ------------------------ -----------
2. Explain Conditions and Warranties?
Sec. 11 - Stipulation as to time Unless a different intentionappears from the terms of the contract, stipulation as to time of
payment are not deemed to be of the essence of a contract ofsale.
Whether any other stipulation as to time is of the essence of thecontract or not depends on the terms of the contract.
Section 12, Condition and Warranty,
1. A stipulation in a contract of sale with reference to goods which are
subject thereof may be a condition or a warranty.
2. A condition is a stipulation essential to the main purpose of the
contract, the breach of which gives rise to a right to treat the
contract as repudiated.
3. A warranty is a stipulation collateral to the main purpose of the
contract, the breach of which gives rise to a claim for damages but
not to a right to reject the
4. Whether a stipulation in a contract of sale is a condition or a
warranty depends in each case on the construction of the contract.
A stipulation may be a condition, though called a warranty in the
contract.
Express Conditions:The parties if they wish, may put the contents of any particular statement orpromise which passes between them on the same footing as the description of
the thing contracted for, so that if it is not made good by the party undertaking
it, the failure is deemed to be a total failure of the performance, and the other
is at least wholly discharged, and may in addition recover damages for such
failure of performance.
7/31/2019 Business Law - Finalised Notes
18/40
Express Warranties:
There may also be, and there occur in common practice, auxiliary promises or
undertakings of which the breach is not intended to avoid the contract, but
only to give a remedy in damages. These are warranties in the proper sense,
as defined in sub-s (3).
A condition of sale, protecting a seller in respect of misdescription, may beoverridden by a warranty given before the sale takes place and damages may
be recovered for breach of the warranty.
Whether a statement is to be regarded as warranty must be objectively
ascertained by asking whether adopting the standard of a reasonable man,
the other party assumed that the representor was to be regarded as
undertaking legal liability for his assertions.
3. Difference between Sale and Bailment?
In a sale the property in goods is transferred from the seller to thebuyer.
In a bailment, there is only transfer of possession from the bailor to thebailee.
Bailment may be for safe custody, use, carriage from one place toanother.
In a sale the buyer can deal with the goods in any way he likes.
The bailee can deal with the goods according to the directions of thebailor.
4. Explain Hire Purchase Agreement? A hire purchase agreement is a contract whereby the owner of the
goods lets them on hire to another person called the hirer or hirepurchaser on the payment of rent to be paid in installments & upon anagreement that when a certain number of such installments is paid, theproperty in the goods will pass to the hirer.
The hirer may return the goods any time without any obligation to paythe balance rent.
A Hire purchase agreement is not a contract of sale but only a bailment& the property in the goods remains with the owner during thecontinuance of bailment.
It is a Bailment plus an agreement to sell.
---------------------- -------------------------- --------------------- ------------------- --------------------- ------------------------ ------------------------ ----------------------- ------------------------ ----------------------- ------------------------ ----------------------- ------------------------ ------------------------ --------------------- ------------------------ ----------------------- --------------------------- --------------------- ------------------------ ------------------------- ---------------------- ------------------------ ----------------------- ------------------------ ------------------------ ----------------------- ------------------------ --------------------- -------------------------- ----------------------- ---------------------- ------------------------ ----------------------- ------------------------ ------------------------ ----------------------- ------------------------ ----------------------- ------------------------ ------------------------ --------------------- -------------------------- --------------------- ------------------------ ------------------------ ----------------------- ---------------------- ---------------------- ----------------------- ------------------------ ------------------------ ----------------------- ---------------------- ------------------------ ----------------------- ------------------------ ------------------------ ----------------------- ------------------------ -----------
5. Difference between Sale and Hire Purchase Agreement?Sale Hire Purchase Agreement
Ownership is transferred from the Ownership is transferred from the
Seller to the buyer as soon as the Seller to the hire-purchaser onlyContract is entered into when a certain agreed number of
Installments is paid
7/31/2019 Business Law - Finalised Notes
19/40
The Position of the buyer is that of the the position of the hire-purchaser
Owner is that of the bailee. Owner
The buyer cannot terminate the the hire-purchaser has an option
Contract & as such is bound to pay the to terminate the contract at anyprice of the goods stage & cannot be forced to pay
further installments
If the payment is made by the buyer the installments paid by the hire
In installments, the amount payable purchaser are regarded as hire
By the buyer to the seller is reduced charges & not as payment
For the payment made by the buyer is towards the price of the goods
toward the price of the goods till the option to purchase the
goods is exercised---------------------- -------------------------- --------------------- ------------------- --------------------- ------------------------ ------------------------ ----------------------- ------------------------ ----------------------- ------------------------ ----------------------- ------------------------ ------------------------ --------------------- ------------------------ ----------------------- --------------------------- --------------------- ------------------------ ------------------------- ---------------------- ------------------------ ----------------------- ------------------------ ------------------------ ----------------------- ------------------------ --------------------- -------------------------- ----------------------- ---------------------- ------------------------ ----------------------- ------------------------ ------------------------ ----------------------- ------------------------ ----------------------- ------------------------ ------------------------ --------------------- -------------------------- --------------------- ------------------------ ------------------------ ----------------------- ---------------------- ---------------------- ----------------------- ------------------------ ------------------------ ----------------------- ---------------------- ------------------------ ----------------------- ------------------------ ------------------------ ----------------------- ------------------------ -----------
6. Bail Agreement or Bailment?Bailment means handing over or change of possession.
As per Section 148 of the Act, bailment is an act whereby goods are delivered by one person toanother for some purpose, on a contract, that the goods shall, when the purpose isaccomplished, be returned or otherwise disposed of according to the directions of the persondelivering them.
The person who delivers the goods is the bailor and the person to whom the goods are deliveredis the bailee.
For example where X delivers his car for repair to Y, X is the bailor and Y is the bailee.The essential characteristics of bailment are-
(a) Bailment is based upon a contract. Sometimes it could be implied by law as it happens in the
case of finder of lost goods.
(b) Bailment is only for moveable goods and never for immovable goods or money.(c) In bailment possession of goods changes. Change of possession can happen by physicaldelivery or by any action which has the effect of placing the goods in the possession of bailee.(d) In bailment bailor continues to be the owner of goods as there is no change of ownership.
(e) Bailee is obliged to return the goods physically to the bailor. The bailee cannot deliver someother goods, even not those of higher value.
General issues
In bailment both custody and possession must change but not the ownership. But where aperson is in custody without possession he does not became a bailee. For example servants of a
master who are in custody of goods of the master do not become bailees.
Possession and custody do not however mean physical delivery of goods.Constructive delivery could also create a bailor and bailee relationship. This arises in situationswhere the bailee is already in possession of goods but agrees to be a bailee through a contract.
7/31/2019 Business Law - Finalised Notes
20/40
Deposit of money in a bank is not bailment since the money returned by the bank would not beidentical currency notes.
Similarly depositing ornaments in a bank locker is not bailment, because ornaments are kept in a
locker whose key are still with the owner and not with the bank. The ornaments are in
possession of the owner though kept in a locker at the bank.
Different forms of Bailment:
Following are the popular forms of bailment
(1) Delivery of goods by one person to another to be held for the bailors use.
(2) Goods given to a friend for his own use without any charge(3) Hiring of goods.
(4) Delivering goods to a creditor to serve as security for a loan.(5) Delivering goods for repair with or without remuneration.
(6) Delivering goods for carriage.
Bailors Duties and Rights:The duties of bailor are spelt out in a number of Sections. These are enumerated hereunder:
(i) the bailor must disclose all defects/faults in the goods bailed. If the bailor does not disclose,he would be responsible for any loss or damage suffered by the bailee while keeping the goodsin his custody. The bailor is particularly responsible for defects in goods hired to bailee whetherbailor was aware of such defects or not.(ii) where the bailment is gratuitous, the bailor must reimburse the bailee for any expenditureincurred in keeping the goods.
(iii) the bailor should reimburse any expense which the bailee may incur by way of loss in the
process of returning the goods or complying with other directions for returning the goods.
(iv) the bailor must compensate the bailee for the loss or damage suffered by
the bailee that is in excess of the benefit received, where he had lent the goods
gratuitously and decides to terminate the bailment before the expiry of the
period of bailment.
(v) the bailor is bound to accept the goods after the purpose is accomplished.
If bailor fails, he is responsible for any loss or damage to the goods and has to
reimburse for expenses incurred by the bailee for keeping the goods safely.
Rights of Bailor
The following are the rights of bailor:
(1)Bailor has a right to enforce the duties of the bailee such as -
(a) right to claim damages for loss caused to the goods by the negligence of bailee;
(b) right to claim compensation for loss caused by an unauthorized use of thegoods bailed;c) right to claim damages arising out of mixing the goods of the bailor with his
own goods.(2) Bailor has a right to terminate the contract if the bailee does
anything which is inconsistent with the conditions of bailment.
7/31/2019 Business Law - Finalised Notes
21/40
For example A lets on hire his horse to B for his own ridingbut B uses the horse for driving his carriage. A has a right toterminate the contract of bailment.
(3) Bailor in the case of gratuitous bailment has a right to demandthe goodsback even before the expiry of the period of bailment. If in the
process, loss is caused to the bailee, bailor is bound to compensate.
(4) Bailor has a right to claim the increase or profit from the goods
bailed which may have occurred from the goods value.
For example where A bails his cow to B and if the
cow gives birth to a calf, B is bound to return the cow and the calf to A.
Care to be taken by Bailee
The bailee is bound to take as much care of the goods bailed to him as a man
ofordinary prudence with regard to quantity, bulk and value would take.
In such a case he will not be responsible, in the absence of special contract, for
any special loss or destruction or deterioration of the goods bailed, since he hastaken as much care as a man of ordinary prudence.
For example if X bails his ornaments to Y and Y keeps these ornaments in his
own locker at his house along with his own ornaments and if all the ornaments
are lost/stolen in a riot Y will not be responsible for the loss to X. If on the
other hand X specifically instructs Y to keep them in a bank, but Y keeps
them at his residence, then Y would be responsible for the loss [caused on
account of riot].
Bailee has right to terminate
The bailee has the right to terminate a contract of bailment if the bailor
does anything inconsistent with bailment conditions.Duties and Rights of a Bailee.
In addition to the two important duties of having to take care of the goods
bailed and being responsible for loss/injury/damage to goods, bailee has other
following duties under the Act.
(i) Bailee has no right to make unauthorized use of goods bailed
(ii) Bailee has no right to mix the goods bailed with his own goods without the consent of the bailor.
(iii) Bailee has to return the goods on expiration of period of bailment
(iv) Bailee has a duty to return any extra profit accruing from goods bailed.
Where A bails his cow to B and if the cow gives birth to a calf, B must return both
the cow and the calf to A
(v) Bailee has duty not to do anything inconsistent with the condition of bailment.
7/31/2019 Business Law - Finalised Notes
22/40
Rights of bailee
The bailee has the following rights [These rights are also the duties of the bailor
to claim compensation for any loss arising from non-disclosure of knowndefects in the goods
to claim indemnification for any loss or damage as a result of defective title. to deliver back the goods to joint bailors according to the agreement or
directions
to deliver the goods back to the bailor whether or not the bailor has the right to
the goods
to exercise his right of lien. This right of lien is a right to retain thegoods and is exercisable where charges due in respect of goods retained
have not been paid. The right of lien is a particular lien for the reason that
the bailee can retain only these goods for which the bailee has to receive his
fees/remuneration.
to take action against third parties if that party wrongfully denies the baileeof his right to use the goods
Rights and Duties of Finder of Goods
The duties of finder of lost goods is that of the bailee. Such a finder of lost
goods is as good as a bailee and he enjoys all the rights and carries all the
responsibilities of a bailee.
In addition, the finder of lost goods can ask for reimbursement for
expenditure incurred for preserving the goods but also for searching the true
owner. If the real owner refuses to pay compensation, the finder cannot sue but
retain the goods so found.
Further where the real owner has announced any reward, the finder is entitledto receive the reward. The right to collect the reward is a primary and a
superior right even more than the right to seek reimbursement of expenditure.
Lastly the finder though has no right to sell the goods found in the normal course,
he may sell the goods if the real owner cannot be found with reasonable efforts
or if the owner refuses to pay the lawful charges subject to the following
conditions.
a) when the article is in danger of perishing and losing the greater part of the value or
b) when the lawful charges of the finder amounts to two-third or more of the value of the
article found.
General Lien and Particular LienA general lien is the right to retain the property of another for a general balance of account.
In contract the particular lien is the right to retain the particular goods bailed for non-paymentof
charges/remuneration. Bankers, factors, wharfingers, policy brokers and attorneys of law havea general lien in respect of goods which come into their possession during the course of theirprofession. For instance a banker enjoys the right of a general lien on cash, cheques, bills of
exchange and securities deposited with him for any amounts due to him.
7/31/2019 Business Law - Finalised Notes
23/40
For instance A borrows ` 500/- from the bank without security and subsequently again borrows
another ` 1000/- but with security of say certain jewellery. In this illustration, even where A has
returned ` 1000/- being the second loan, the banker can retain the jewellery given as security to
the second loan towards the first loan which is yet to be repaid.
Under the right of general lien the goods cannot be sold but can only be retained for dues.
The right of lien can be waived through a contract.
Chartered Accountants have a general lien against the books of their clients which come into
their possession against professional fees not paid to them by those clients.
Particular lien
In accordance with the purpose of bailment if the bailee by his skill or labourimproves
the goods bailed, he is entitled for remuneration for such services. Towards such remuneration,
the bailee can retain the goods bailed if the bailor refuses to pay the remuneration. Such a right
to retain the goods bailed is the right of particular lien. He however does not have the right to
sue.
Where the bailee delivers the goods without receiving his remuneration, he has a right to
sue the bailor. In such a case the particular lien may be waived. The particular lien is also lost ifthe bailee does not complete the work within the time agreed.
Difference between general lien and particular lien.
The difference between the two can be summarized as follows:
(a) Particular lien is exercisable only on such goods in respect of which charges are due.
General lien is a right to detain/retain any goods of the bailor for general balance ofaccount outstanding
(b) Particular lien is automatic. A general lien is not automatic but is recognized through on
agreement. It is exercised by the bailee only by name
(c) Particular lien comes into play only when some labour or skill is involved. A general lien can
be exercised against goods even without involvement of labour or skill.
7. Rights of an unpaid seller against the goods?
The seller of goods is deemed to be an unpaid seller
(a) When the whole of the price has not been paid or tendered;
(b) When a bill of exchange or other negotiable instrument has been received
as conditional payment and the condition on which it was received has not
been fulfilled by reason of the dishonour of the instrument or otherwise.
A lien is a right to retain possession of goods until payment of the price.
It is available to an unpaid seller of the goods who is in possession of them
where
(a) Goods have been sold without any stipulation as to credit
(b) Goods have been sold on credit, but the term of credit has expired
(c) Buyer becomes insolvent.
7/31/2019 Business Law - Finalised Notes
24/40
Rules regarding Lien:
1) The Seller may exercise his right of lien notwithstanding that he is in
possession of the goods as agent or bailee for the buyer. If he loses
possession of the goods, he loses the right of lien also.
2) The lien depends on actual possession & not on title. It is not affected even ifthe seller has parted with the document capable of transferring title.
3) The possession of the goods by the seller must not expressly exclude the right
of lien.
4) The lien can be exercised by the unpaid seller only for the price & not for any
other charges such as warehouse & dock charges.
5) Where unpaid seller has made part delivery of the goods, he may exercise his
right of lien on the reminder.
6) The unpaid seller of goods having a lien does not lose his lien by reason only
that he has obtained a decree for the price.
8. Distinction between Right of Lien & Right of stoppage in transit?
The unpaid sellers right to stop the goods in transit arises only when the
buyer is insolvent, but right of lien can be exercised even when the buyer is
able to pay but does not pay.
The right of lien can be exercised on goods which are in actual or construction
possession of the seller, while right of stoppage in transit when the goods are
in possession of a middleman between the seller who has parted with the
possession of the goods & the buyer who has not yet acquired the possession
The right of lien comes to an end when the possession of the goods is
surrendered by the seller but the right of stoppage in transit commences
when the goods have left the possession of the seller & continues until the
buyer or his agent acquires possession.
The right of lien is to retain possession, while the right of stoppage in transit is
to regain or resume possession.
Module IV
Objectives
To provide legal recognition for transactions Carried out by means of electronic datainterchange, and
Other means of electronic communication commonly referred to as "electronic
commerce", involving the use of alternatives to paper-based methods of
communication and storage of information.
To facilitate electronic filing of documents with the Government agencies
To amend the Indian Penal Code, the Indian Evidence Act, 1872, the Banker's Book
Evidence Act, 1891 and the Reserve Bank of India Act, 1934.
7/31/2019 Business Law - Finalised Notes
25/40
Short title, extent, commencement and application:
This Act may be called the Information Technology Act, 2000.
It shall extend to the whole of India.
Exception:
Nothing in this Act shall apply to-
(a) a negotiable instrument as defined in section 13 of the Negotiable Instruments Act, 1881
(26 of 1881);
(b) a power-of-attorney as defined in section 1A of the Powers-of-Attorney Act, 1882 (7 of
1882);
(c) a trust as defined in section 3 of the Indian Trusts Act, 1882 (2 of 1882);
(d) a will as defined in clause (h) of section (2) of the Indian Succession Act, 1925 (39 of 1925),
including any testamentary disposition by whatever name called;
(e) Any contract for the sale or conveyance ofimmovable property or any interest in such
property;
(f) Any such class of documents or transactions as may be notified by the Central Government
in the Official Gazette.
Definitions. -
"access", means gaining entry into, instructing or communicating with the logical, arithmetical
or memory function resources of a computer, computer system or computer network;
"Addressee" means a person who is intended by the originator to receive the electronic record
but does not include any intermediary;
"Adjudicating officer" means an adjudicating officer appointed under sub-section (1) of section
46;
"Affixing digital signature", means adoption of any methodology or procedure by a person for
the purpose of authenticating an electronic record by means of digital signature;
"Appropriate Government means as respects any matter- enumerated in List II of the Seventh
Schedule to the Constitution;
Relating to any State law enacted under List III of the Seventh Schedule to the Constitution,
7/31/2019 Business Law - Finalised Notes
26/40
(i) the State Government and
(ii) in any other case, the Central Government;
"asymmetric crypto system" means a system of a secure key pair consisting of a private key for
creating a digital signature and a public key to verify the digital signature;
"Certifying Authority" means a person who has been granted a license to issue a Digital
Signature Certificate under section 24;
"Certification practice statement" issued by a Certifying Authority to specify the practices that
the Certifying Authority employs in issuing Digital Signature Certificates;
"Computer" means
electronic, magnetic, optical or other high-speed data processing device or system
which performs logical, arithmetic and memory functions by manipulations of
electronic, magnetic or optical impulses, and
includes all input, output, processing, storage, computer software or communication
facilities which are connected or relates to the computer in a computer system or
computer network;
"Computer network" means the inter-connection of one or more computers through-
(i) the use of satellite, microwave, terrestrial lime or other communication media; and
(ii) terminals or a complex consisting of two or more interconnected computers whether or
not the interconnection is continuously maintained;
"Computer resources" means computer, computer system, computer network, data, computer
database or software;
"computer system" means a device or collection of devices, including input and output support
devices and excluding calculators which are not programmable and capable being used in
conjunction with external files which contain computer programmes, electronic instructions,
input data and output data that performs logic, arithmetic, data storage and retrieval,
communication control and other functions;
"Controller" means the Controller of Certifying Authorities appointed under sub-section (1) ofsection 17
"Cyber Appellate Tribunal" means the cyber Regulations Appellate Tribunal established under
sub-section (1) of section 48;
"Data" means a representation of information, knowledge, facts, concepts or instruction which
are being prepared or have been prepared in a formalized manner, and is intended to be
7/31/2019 Business Law - Finalised Notes
27/40
processed, is being processed or has been processed in a computer system or computer
network, and may be in any form (including computer printouts magnetic or optical storage
media, punched cards, punched tapes) or stored internally in the memory of the computer.
"Digital Signature" means authentication of any electronic record by a subscriber by means of
an electronic method or procedure in accordance with the provisions of section 3;
"Digital Signature Certificate means a Digital Signature Certificate issued under sub-section (4)
of section 35;
"Electronic Form", with reference to information, means, any information generated, sent,
received or stored in media, magnetic, optical, computer memory, micro film, computer
generated micro fiche or similar device;
"Electronic Gazette" means Official Gazette published in the electronic form;
"Electronic Record" means data, record or data generated, image or sound stored, received or
sent in an electronic form or micro film or computer generated micro fiche;
Electronic Signature means authentication of any electronic record by a subscriber by means
of the electronic techniques specified in the Second Schedule & includes digital signature.
Electronic Signature Certificate means an Electronic Signature Certificate issued under
section 35 & includes Digital Signature Certificate.
"Function" in relation to a computer, includes logic, control, arithmetical process, deletion,
storage and retrieval and retrieval and communication or telecommunication from or within acomputer;
"Information includes data, text, images, sound, voice, codes, computer programmes,
software and databases or micro film or computer generated micro fiche;
"Intermediary" with respect to any particular electronic message, means any person who on
behalf of another person receives, stores or transmits that message or provides any service
with respect to that message;
"Key Pair", in an asymmetric crypto system, means a private key and its mathematically relatedpublic key., which are so related that the public key can verify a digital signature created by the
private key;
"Law" includes any Act of Parliament or of a State Legislature, Ordinances promulgated by the
President under article 240, Bills enacted as Presidents Act under sub-clause (a) of clause (1) of
article 375 of the Constitution and includes rules, regulations, bye-laws and order issued or
made thereunder;
7/31/2019 Business Law - Finalised Notes
28/40
"License" means a license granted to a Certifying Authority under section 24;
"Originator" means a license granted to a Certifying Authority under section 24;
"Prescribed" means prescribed by rules made under the Act;
"Private Key" means the key of a key pair used to create a digital signature;
"Public Key" means the key of a key pair used to verify a digital
Signature and listed in the Digital Signature Certificate;
"Secure System" means computer hardware, software and procedure that-
(a) Are reasonably secure from unauthorized access and misuses;
(b) Provide a reasonable level of reliability and correct operation;
(c) Are reasonably suited to performing the intended functions; &
(d) Adhere to generally accepted security procedures;
"Security Procedure" means the security procedure prescribed under section 16 by the Central
Government;
"Subscriber" means a person in whose name the Digital Signature Certificate is issued;
"Verify", in relation to a digital signature, electronic record or public key, means to determine
whether-
(a) The initial electronic record was affixed with the digital signature by the sue of private keycorresponding to the public key of the subscriber;
(b) The initial electronic record is retained intact or has been altered since such electronic
record was so affixed with the digital signature.
Digital Signature & Electronic SignatureAuthentication of electronic records. -
Authentication is a process used to confirm the identity of a person or to prove the
integrity of the information.
Message authentication involves determining its source & verifying that it has not beentampered or replaced in transit.
Any subscriber may authenticate an electronic record by affixing his digital signature.
The authentication of the electronic record shall be effected by the use ofasymmetric
crypto system and hash function which envelop and transform the initial electronic
record into another electronic record.
7/31/2019 Business Law - Finalised Notes
29/40
"asymmetric crypto system" means a system of a secure key pair consisting of a private
key for creating a digital signature and a public key to verify the digital signature;
"electronic record" means data, record or data generated, image or sound stored,
received or sent in an electronic form or micro film or computer generated micro fiche;
"digital signature" means authentication of any electronic record by a subscriber by
means of an electronic method or procedure in accordance with the provisions of
section 3;
Hash function" means an algorithm mapping or translation of one sequence of bits
into another, generally smaller, set known as "hash result" such that
(i) an electronic record yields the same hash result every time the algorithm is
executed with the same electronic record as its input(ii) making it computationally infeasible for a message to derive or reconstruct the
original electronic record from the hash result produced by the algorithm;
(iii) It is computationally infeasible that two electronic records can produce the same
hash result using the same algorithm.
Verification:
Any person by the use of a public key of the subscriber can verify the electronic record.
The private key and the public key are unique to the subscriber and constitute a functioning key
pair.
Electronic Signature: Section 3A1. A subscriber may authenticate any electronic record by such electronic signature or
electronic authentication technique which
(a) Is considered reliable &
(b)May be specified in the Second Schedule.
2. For the purpose of this section, any electronic signature or electronic authentication
technique shall be considered reliable if
(a)The signature creation data or the authentication data are within the context in
which they are used, linked to the signatory or, as the case may be, the
authenticator & to no other person.
(b)The signature creation data or the authentication data were at the time of
signing, under the control of the signatory or, as the case may be, theauthenticator & of no other person.
(c) Any alteration to the electronic signature made after affixing such signature is
detectable.
(d)Any alteration to the information made after its authentication by electronic
signature is detectable &
(e) It fulfills such other conditions which may be prescribed.
7/31/2019 Business Law - Finalised Notes
30/40
3. The Central Government may prescribe the procedure for the purpose of ascertaining
whether electronic signature is that of the person by whom it is purported to have been
affixed or authenticated.
4. The Central Government may by notification in the official Gazette, add to or omit any
electronic signature or electronic authentication technique & the procedure for affixing
such signature from the Second Schedule. Provided that no electronic signature orauthentication technique shall be specified in the second Schedule unless such
signature or technique is reliable.
5. Every notification issued under sub-section (4) shall be laid before each house of
parliament.
Electronic Governance
Legal recognition of electronic records -
Where any law provides that information or any other matter shall be in writing or in the
typewritten or printed form, then, such requirement shall be deemed to have been satisfied ifsuch information or matter is-
(a) Rendered or made available in an electronic form; and
(b) Accessible so as to be usable for a subsequent reference.
Legal Recognition of Digital Signatures:
Where any law provides that information or any other matter shall be authenticated by affixing
the signature or any document shall be signed or bear the signature of any person, then, such
requirement shall be deemed to have been satisfied if such information or matter is
authenticated by means of digital signature affixed.
Attribution, Acknowledgment and Dispatch Of Electronic
Records:
Attribution of Electronic Records:
An electronic record shall be attributed to the originator if it was sent
(a) by the originator himself;
(b) by a person who had the authority to act on behalf of the originator in respect
of that electronic record; or
(c) By an information system programmed by or on behalf of the originator tooperate automatically.
Acknowledgement of Receipt:
(1) Where the originator has not stipulated that the acknowledgment of receipt of electronic
record be given in a particular form or by a particular method, an acknowledgment may be
given by -
7/31/2019 Business Law - Finalised Notes
31/40
(a) Any communication by the addressee, automated or otherwise; or
(b) Any conduct of the addressee, sufficient to indicate to the originator that the
electronic record has been received.
Secure Electronic Records and Secure Electronic SignatureSecure Electronic Record:
Where any security procedure has been applied to an electronic record at a specific point of
time, then such record shall be deemed to be a secure electronic record from such point of
Time to the time of verification.
Secure Electronic Signature:
An electronic signature shall be deemed to be a secure electronic signature if-
(i) the signature creation data, at the time of affixing signature, was under the exclusive control
of signatory and no other person; and
(ii) the signature creation data was stored and affixed in such exclusive manner as may beprescribed
Explanation- In case of digital signature, the "signature creation data" means the private key of
the subscriber
Security procedures and Practices:
The Central Government may for the purposes of sections 14 and 15 prescribe the security
procedures and practices
Provided that in prescribing such security procedures and practices, the Central Government
shall have regard to the commercial circumstances, nature of transactions and such other
Related factors as it may consider appropriate.Regulation of Certifying Authorities
Appointment of Controller and other officers:
(1) The Central Government may, by notification in the Official Gazette, appoint a Controller of
Certifying Authorities for the purposes of this Act and may also by the same or subsequent
notification appoint such number of Deputy Controllers and Assistant Controllers, other officers
and employees as it deems fit.
(2) The Controller shall discharge his functions under this Act subject to the general control and
directions of the Central Government.
(3) The Deputy Controllers and Assistant Controllers shall perform the functions assigned to
them by the Controller under the general superintendence and control of the Controller.
(4) The qualifications, experience and terms and conditions of service of Controller, Deputy
Controllers and Assistant Controllers other officers and employees shall be such as may be
prescribed by the Central Government.
(5) The Head Office and Branch Office of the Office of the Controller shall be at such places as
the Central Government may specify, and these may be established at such places as the
Central Government may think fit.
7/31/2019 Business Law - Finalised Notes
32/40
(6) There shall be a seal of the Office of the Controller.
Functions of the Controller:
The Controller may perform all or any of the following functions, namely:
(a) Exercising supervision over the activities of the Certifying Authorities;
(b) Certifying public keys of the Certifying Authorities(c) Laying down the standards to be maintained by the Certifying Authorities;
(d) Specifying the qualifications and experience which employees of the Certifying Authorities
should possess;
(e) Specifying the conditions subject to which the Certifying Authorities shall conduct their
business;
(f) Specifying the content of written, printed or visual material and advertisements that may be
distributed or used in respect of a Electronic Signature Certificate and the Public Key;
(g) Specifying the form and content of a Electronic Signature Certificate and the key;
(h) Specifying the form and manner in which accounts shall be maintained by the Certifying
Authorities;
(i) Specifying the terms and conditions subject to which auditors may be appointed and the
remuneration to be paid to them;
(j) Facilitating the establishment of any electronic system by a Certifying Authority either solely
or jointly with other Certifying Authorities and regulation of such systems;
(k) Specifying the manner in which the Certifying Authorities shall conduct their dealings with
the subscribers;
(l) Resolving any conflict of interests between the Certifying Authorities and the subscribers;
(m) Laying down the duties of the Certifying Authorities;
(n) Maintaining a data-base containing the disclosure record of every Certifying Authority
containing such particulars as may be specified by regulations, which shall be accessible to
public.Procedure for grant or rejection of license:
The Controller may, on receipt of an application after considering the documents accompanying
the application and such other factors, as he deems fit, grant the license or reject the
application:
However, no application shall be rejected under this section unless the applicant has been given
a reasonable opportunity of presenting his case.
Suspension of License:
(1) The Controller may, if he is satisfied after making such inquiry, as he may think fit, that a
Certifying Authority has -(a) Made a statement in, or in relation to, the application for the issue or renewal of the license,
which is incorrect or false in material particulars;
(b) Failed to comply with the terms and conditions subject to which the license was granted;
(c) Failed to maintain the standards specified by the Central Government;
(d) Contravened any provisions of this Act, rule, and regulation or order made there under,
revoke the license:
7/31/2019 Business Law - Finalised Notes
33/40
However, no license shall be revoked unless the Certifying Authority has been given a
reasonable opportunity of showing cause against the proposed revocation.
(2) The Controller may, if he has reasonable cause to believe that there is any ground for
revoking a license under sub-section (1), by order suspends such license pending the
completion of any enquiry ordered by him:
However, no license shall be suspended for a period exceeding ten days unless the CertifyingAuthority has been given a reasonable opportunity of showing cause against the proposed
suspension.
(3) No Certifying Authority whose license has been suspended shall issue any Electronic
Signature Certificate during such suspension.
Notice of suspension or revocation of license:
(1) Where the license of the Certifying Authority is suspended or revoked, the Controller shall
publish notice of such suspension or revocation, as the case may be, in the database
maintained by him.
(2) Where one or more repositories are specified, the Controller shall publish notices of such
suspension or revocation, as the case may be, in all such repositories.
However, the data-base containing the notice of such suspension or revocation, as the case
may be, shall be made available through a web site which shall be accessible round the clock
However, that the Controller may, if he considers necessary, publicize the contents of the data-
base in such electronic or other media, as he may consider appropriate.
Access to computers and data:
(1)The Controller or any person authorized by him shall, if he has reasonable cause to suspect
that any contravention of the provisions of this chapter made there under has been committed,
have access to any computer system, any apparatus, data or any other material connected with
such system, for the purpose of searching or causing a search to be made for obtaining any
information or data contained in or available to such computerSystem.
(2)The Controller or any person authorized by him may, by order, direct any person in charge
of, or otherwise concerned with the operation of the computer system, data apparatus or
material, to provide him with such reasonable technical and other assistant as he may consider
necessary.
Duties of Certifying Authorities:
This section provides that every Certifying Authority shall follow certain procedures in respect
of Digital Signatures as given below:
Every Certifying Authority shall(a) Make use of hardware, software, and procedures that are secure from intrusion and misuse.
(b) Provide a reasonable level of reliability in its services which arc reasonably suited to the
performance of intended functions;
(c) Adhere to security procedures to ensure that the secrecy and privacy of the Electronic
Signature are assured
(ca) be the repository of all Electronic Signature Certificates issued under this Act
7/31/2019 Business Law - Finalised Notes
34/40
(cb) publish information regarding its practices, Electronic Signature Certificates and current
status of such certificates; and
(d) observe such other standards as may be specified by regulations.
Certifying Authority to ensure compliance of the Act, etc.:
Every Certifying Authority shall ensure that every person employed or otherwise engaged by itcomplies, in the course of his employment or engagement, with the provisions of this Act,
Rules, regulations and orders made there under.
Display of license:
Every Certifying Authority shall display its license at a conspicuous place of the premises in
which it carries on its business.
Duties of SubscribersGenerating Key Pair:
Where any Digital Signature Certificate, the public key of which corresponds to the private key
of that subscriber which is to be listed in the Digital Signature Certificate, has been acceptedby a subscriber, then the subscriber shall generate the key pair by applying the security
procedure.
Duties of subscriber of Electronic Signature Certificate:
In respect of Electronic Signature Certificate the subscriber shall perform such duties as may be
prescribed.
Acceptance of Digital Signature Certificate:
(1) A subscriber shall be deemed to have accepted a Digital Signature Certificate if he publishes
or authorizes the publication of a Digital Signature Certificate -(a) to one or more persons;
(b) in a repository, or otherwise demonstrates his approval of the Digital Signature Certificate in
any manner.
(2) By accepting a Digital Signature Certificate the subscriber certifies to all who reasonably rely
on the information contained in the Digital Signature Certificate that
(a) the subscriber holds the private key corresponding to the public key listed in the Digital
Signature Certificate and is entitled to hold the same;
(b) all representations made by the subscriber to the Certifying Authority and all material
relevant to the information contained in the Digital Signature Certificate are true;
(c) all information in the Digital Signature Certificate that is within the knowledge of thesubscriber is true.
The subscriber shall exercise all reasonable care to retain control of his private key
corresponding to the public key. If such private key has been compromised (i.e., endangered
or exposed), the subscriber must immediately communicate the fact to the Certifying Authority.
7/31/2019 Business Law - Finalised Notes
35/40
Otherwise, the subscriber shall be liable till he has informed the Certifying Authority that the
private key has been compromised.
Control of Private Key:
(1) Every subscriber shall exercise reasonable care to retain control of the private key
corresponding to the public key listed in his Digital Signature Certificate and take all steps to
prevent its disclosure.
(2) If the private key corresponding to the public key listed in the Digital Signature Certificate
has been compromised, then, the subscriber shall communicate the same without any delay to
the Certifying Authority in such manner as may be specified by the regulations.
The subscriber shall be liable till he has informed the Certifying Authority that the private key
has been compromised.
On acceptance of the Digital Signature Certificate the subscriber shall generate a key pair using
a secure system.
Module V Consumer Protection Act, 1986 The consumer protection Act, 1986 is a milestone in the history of socio-economic legislation in
the country.
The main objective of the act is to provide for the better protection of consumers. Unlike
existing laws which are punitive or preventive in nature, the provisions of this Act are
compensatory in nature.
The main objectives of the Act are:
1. Better Protection of Interests of the consumers:
The Act seeks to provide for better protection of the interests of the consumers. For this
purpose the Act makes provision for establishment of Consumer Councils & other authorities for
settlement of consumer disputes.
2. Protection of Rights of the consumers:
a. the right to be protected against marketing of goods and services which are hazardous to life
and property
b. the right to be informed about the quality, quantity, potency, purity, standard and price of
goods, or services so as to protect the consumer against unfair trade practices
c. the right to be assured, wherever possible, access to variety of goods and services at
competitive prices
d. the right to be heard and be assured that consumers' interests will receive due consideration
at appropriate forums
7/31/2019 Business Law - Finalised Notes
36/40
e. the right to seek redressal against unfair trade practices or restrictive trade practices or
unscrupulous exploitation of consumers
f. the right to consumer education
3. Consumer Protection Councils:
The objects are sought to be promoted & protected by the Consumer Protection
Councils established at the Central & State Levels.
4. Quasi-Judicial Machinery for speedy redressal of Consumer disputes:
The Act seeks to provide speedy & simple redressal to consumer disputes. For
this purpose a quasi-judicial machinery has been set up at the District, State & Central Levels.
Definitions:
Appropriate laboratory means a laboratory or organization
(i) Recognized by the Central Government;
(ii) recognised by a State Government, subject to such guidelines as may be prescribed
by the Central Government in this behalf; or
(iii) any such laboratory or organisation which is maintained, financed or aided by the
Central Government or a State Government for carrying out analysis or test of any goods with a
view to determining whether such goods suffer from any defect;
"Branch Office" means
(i) any establishment described as a branch by the opposite party; or
(ii) any establishment carrying on either the same or substantially the same activity as
that carried on by the head office of the establishment.
Complainant" means
(i) a consumer; or
(ii) Any voluntary consumer association registered under the Companies Act, 1956 or under any
other law for the time being in force; or
(iii) The Central Government or any State Government,
(iv) One or more consumers, where there are numerous consumers having the same interest;
7/31/2019 Business Law - Finalised Notes
37/40
(v) In case of death of a consumer, his legal heir or representative; who or which makes a
complaint
Complaint: Means an allegation of unfair trade practice
Restrictive trade practice Defect in goods
Deficiency in service
Overcharging
Sale of hazardous goods, etc.
No court fee is required for lodging a complaint
Consumer means a person who buys any goods or avails of any service for a consideration,
including any user of such goods or service with the approval of the buyer.
It excludes a buyer for resale or commercial purposes.
Use for earning livelihood is not commercial use
Customer: is a buyer
Buyer [S.2 (1) of Sale of Goods Act 1930]: A person who buys or agrees to buy goods for
a consideration
Goods: as defined in the Sale of Goods Act 1930
Consumer Dispute" means a dispute where the pers
Top Related