mb0051 set 1 -fair
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MB0051 – Legal Aspects of Business - 4 Credits
Assignment Set- 1
Q.1 Distinguish between fraud and misrepresentation?
Answer:
Distinction between fraud and misrepresentation:
Sometimes the terms fraud and misrepresentation are used inter-changeably by readers however they are actually
different. There is not a much difference between the two but a little one as misrepresentation does not directly
mean fraud. Below is a table on the salient points to distinguish the terms:
Fraud Misrepresentation
The word fraud comes from the Middle English word
“fraude” taken from the Old French and derived from
the Latin “fraus”. The word fraud means a deliberate
form of deception that is practiced to secure some sortof unlawful and unfair gain.
Misrepresentation is a type of lying or falsehood in
which a person says or does something that would lead
another person to believe something that is not “in
accordance with the facts”.
Implies on intention to deceive, hence it is intentional or
willful wrong.
It is an innocent wrong without any intention to deceive.
The person making the statement believes it to be true.
A civil wrong which entitles a party to claim damages
in addition to the right to rescind the contract.
It gives only the right to rescind the contract and there
can be no suit for damages.
In fraud, the person making the representation does not
himself believe in the truth of the statement he is
making. n cases of fraud, the person making the
statement is a complete liar and is making the statement
to deceive others to enter into a contract
In situations of innocent misrepresentation the person
making the statement may believe that what he is saying
is true. This is due to the fact that the person making the
statement is simply repeating what another person has
asserted to be true
Deceit, trickery, sharp practice, or breach of confidence,
perpetrated for profit or to gain some unfair or dishonest
advantage.
A misrepresentation or concealment with reference to
some fact material to a transaction that is made with
knowledge of its falsity or in reckless disregard of its
truth or falsity and with the intent to deceive another
and that is reasonably relied on by the other who is
injured thereby.
Q.2 What are the remedies for breach of contract.
Answer:
Businesses both individual and corporate enter into business relationships with either individuals or businesses to
enable them to carry on their day-to-day commercial transactions. Most of these relationships result in contracts”
that have legal consequences. Most contracts do not have to be in writing to be enforceable.
Definition of a Contract:
A contract is a legally enforceable agreement between two or more parties. The core of most contracts is a set of
mutual promises (in legal terminology, “consideration”). The promises made by the parties define the rights and
obligations of the parties. For every contract there must be an agreement. An agreement is defined as every
promise and every set of promises forming the consideration for each other and a promise is an accepted
proposal. Contracts are enforceable in the courts. If one party meets its contractual obligations and the other party
doesn’t (“breaches the contract”), the non-breaching party is entitled to receive relief through the courts.
Generally, the non-breaching party’s remedy for breach of contract is monetary damages that will put the non- breaching party in the position it would have enjoyed if the contract had been performed. Under special
circumstances, a court will order the breaching party to perform its contractual obligations. Because contracts are
enforceable, parties who enter into contracts can rely on contracts in structuring their business relationships.
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Essentials of a Contract:
The Indian Contract Act -1872 defines “contract” as an agreement enforceable by law. The essentials of a (valid)
contract are:
intention to create legal relations;
offer and acceptance;
consideration;
capacity to enter into a contract
free consent of the parties
lawful object of the agreement
Remedy Clauses:
These clauses state what rights the non-breaching party has if the other party breaches the contract. In contracts
for the sale of goods, remedy clauses are usually designed to limit the seller’s liability for damages. In a contract
the agreement being enforceable by law, each party to the contract is legally bound to perform his part of the
obligation. The non-performance of the duty undertaken by a party in a contract amounts to breach of contract for
which it can be made liable.
Remedies for breach of contract:
The legal remedies for breach of contract are:
a) Damages b) Specific performance of the contract; and
c) Injunction.
When a contract has been breached, the party who suffers by such breach is entitled to receive, from the party
who has breached the contract, compensation for any loss or damage caused to him thereby, being loss or
damages which naturally arose in the usual course of things from such breach or which the parties knew, when
they made the contract, to be likely to result from the breach of it. Such compensation is not to be given for any
remote and indirect loss of damage sustained by reason of the breach.
A person who rightfully rescinds a contract is entitled to compensation for any damage, which he has sustained
through non-fulfillment of the contract. Liquidated damages and penal stipulations: If a sum is named in the
contract as the amount to be paid in case of breach of contract, or if the contract contains any other stipulation by
way of penalty, the party complaining of the breach is entitled, whether or not actual damage of loss is proved to
have been caused thereby, to receive, from the party who has broken the contract, reasonable compensation, notexceeding the amount so named or the penalty stipulated for. A stipulation for increased interest from the date of
default may be regarded as a stipulation by “way of penalty”. The court is empowered to reduce it to an
amount which is reasonable in the circumstances.
Specific performance:
In certain special cases (dealt with in the Specific Relief Act, 1963), the court may direct against the party in
default “specific performance” of the contract, that is to say, the party may be directed to perform the very
obligation which he has undertaken, by the contract. This remedy is discretionary and granted in exceptional
cases. Specific performance means actual execution of the contract as agreed between the parties. Specific
Performance of any contract may, in the discretion of the court be enforced in the following situations
When there exists no standard for ascertaining the actual damage caused by the non-performance of the act
agreed to be done; or
When the act agreed to be done is such that monetary compensation for its non-performance would not afford
adequate relief.
Instances where compensation would be deemed adequate relief are:
Agreement as a consequence of a breach by a landlord for repair of the rented premises;
Contract for the sale of any goods, for instance machinery or goods.
Exceptions:
A contract which runs into such minute or numerous details or which is so dependent on the personal
qualifications or volition of the parties, or otherwise from its nature is such, that the court cannot enforce specific
performance of its material terms, cannot be specifically enforced. Another situation when a contract cannot bespecifically enforced is where “the contract is in its nature determinable”. A contract is said to be determinable,
when a party to the contract can put it to an end. A contract the performance of which involves the performance
of a continuous duty, which the Court cannot supervise, cannot be specifically enforced.
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Persons who cannot obtain Specific Performance:
The specific performance of a contract cannot be obtained in favor of a person who could not be entitled to
recover compensation for the breach of contract. Specific performance of a contract cannot be enforced in favor
of a person who has become incapable of performing the contract that on his part remains to be performed, or
who violates any essential term of the contract that on his part remains to be performed, or who acts fraudulently
despite the contract, or who willfully acts at variance with, or in subversion, of the relation intended to be
established by the contract. I hope this gives you a relevant overview into the key aspect of business contracts
and if one takes adequate care when drafting contracts; needless to say relationships will be better and probablymore profitable.
Q.3 Distinguish between indemnity and guarantee.
Answer: Introduction:
Guarantees and indemnities are both long established forms of what the law terms surety ship. There are
important legal distinctions between them. Append below some salient points pertaining to the
difference/distinction between Indemnity and Guarantee:
Distinction between Indemnity and Guarantee:
Indemnity Guarantee
Section 124 of the Indian Contract Act 1872 defines a"contract of indemnity" as a contract by which one
party promises to save the other from loss caused to
him by the conduct of the Promisor himself, or by the
conduct of any other person.
e.g. = 'x' contracts to indemnify 'y' against the
consequences of any legal proceedings which may take
against B in respect of a certain sum of Rs.200/=.
Section 126 of the Indian Contract Act 1872 defines acontract of guarantee is a contract to perform the
promise or discharge the liability of a third person in
case of his default”. The person who gives the
guarantee is called the “surety”; the person in respect of
whose default the guarantee is given is called the
“principal debtor”, and the person to whom the
guarantee is given is called the “creditor”. A guarantee
may be either oral or written.
e.g., 'P' lends Rs. 5000/= to 'Q' and 'R' promises to 'P'
that if 'Q' does not pay the money back then 'R' will do
so.
Indemnity comprise only two parties- the indemnifier
and the indemnity holder
There are three parties namely the surety, principal
debtor and the creditor
Liability of the indemnifier is primary The liability of the surety is secondary. The surety is
liable only if the principal debtor makes a default. The
primary liability being that of the principal debtor.
The indemnifier need not necessarily act at the request
of the indemnified.
The surety give guarantee only at the request of the
principal debtor
The possibility of any loss happening is the only
contingency against which the indemnifier undertakes
to indemnify.
There is an existing debt or duty, the performance of
which is guarantee by the surety
An indemnity is for reimbursement of a loss A guarantee is for security of the creditor.
Q.4 What is the distinction between cheque and bill of exchange.
Answer:
Exchange of goods and services is the basis of every business activity. Goods are bought and sold for cash as
well as on credit. All these transactions require flow of cash either immediately or after a certain time. In modern
business, large number of transactions involving huge sums of money takes place every day. It is quite
inconvenient as well as risky for either party to make and receive payments in cash. Therefore, it is a common practice for businessmen to make use of certain documents as means of making payment. Some of these
documents are called negotiable instruments. In this lesson let us learn about these documents.
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Distinction between Cheque and bill of exchange
Cheque exchange
It is drawn on a banker It may be drawn on any party or individual.
It has three parties - the drawer, the drawee, and payee.
The drawer can also draw a bill in his own name
thereby he himself becomes the payee. Here the
words in the bill would be Pay to us or order . In a bill
where a time period is mentioned, just like the abovespecimen, is called a Time Bill . But a bill may be made
payable on demand also. This is called a Demand Bill .
There are three parties – the drawer, the drawee, and
the payee.
Broadly speaking, cheques are of four types.
a) Open cheque, and
b) Crossed cheque.c) Bearer cheque
d) Order cheque
t is seldom drawn in sets Foreign bills are drawn in sets
It does not require acceptance by the drawee It must be accepted by the drawee before he can be
made liable to pay the bill.
Days of grace are not allowed to a banker Three days of grace are always allowed to the drawee
No stamp duty is payable on checks Stamp duty has to be paid on bill of exchange.
It is usually drawn on the printed format It may be drawn in any paper and need not necessarily
be printed.
Q.5 Distinguish between companies limited by shares and companies limited by guarantee.
Answer:
The Companies Act, 1956 defines the word “company as a company formed and registered under the Act or an
existing company formed and registered under any of the previous company laws (Sec.3)”. This definition does
not bring out the meaning and nature of the company into a clear perspective. Also Sec.12 permits the formation
of different types of companies. These may be:
Companies limited by shares
Companies limited by guarantee and
Unlimited companies.
The vast majority of companies in India are with limited liability by shares.
Distinction betweenCompanies limited by shares Companies limited by guarantee
A company limited by guarantee is normally
incorporated for nonprofit making functions. The
company has no share capital. A company limited by
guarantee has members rather than shareholders. The
members of the company guarantee/undertake to
contribute a predetermined sum to the liabilities of the
company which becomes due in the event of the
company being wound up. The Memorandum normally
includes a non-profit distribution clause and these
companies are usually formed by clubs, professional,
trade or research associations.
Limited by shares is defined by: a company that has
shareholders, and that the financial obligation of the
shareholders to creditors of the company is restricted to
the capital invested in the first place (i.e. the specified
value of the shares and any premium paid off in
exchange for the issue of the shares by the company).
Shareholder's individual’s assets are thereby secured in
the case of the company's insolvency, but revenues
invested in the company will be unrecoverable. Limited
companies could be either private or public. A private
Ltd. (limited company disclosure) involves are lessdemanding, but for this reason its shares might NOT be
provided to the general public (and consequently can't
be listed on a national stock market exchange). This is
the well-known distinctive characteristic between a
private limited company and a public limited company.
The absolute majority of trading corporations are
private companies limited by shares.
Companies limited by shares are more popular Companies limited by guarantee are less popular than
companies limited by shares.
Companies limited by shares are profit making
companies.
Companies limited by guarantee are non-profit making
In case of companies limited by shares, there are
shareholders.
Companies limited by guarantee have members, and
not share holders
Companies limited by shares can engage in legal trades
and have general clauses.
There is no share capital in case of companies limited
by guarantee and it also has self-imposed restrictions
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Q.6 What is the definition of cyber crime.
Answer:
Introduction:
Crime and criminality have been associated with man since his fall. Crime remains elusive and ever strives to
hide itself in the face of development. Different nations have adopted different strategies to contend with crime
depending on their nature and extent. One thing is certain, it is that a nation with high incidence of crime cannot
grow or develop. That is so because crime is the direct opposite of development. It leaves a negative social andeconomic consequence.
Cybercrime:
Cybercrime is defined as crimes committed on the internet using the computer as either a tool or a targeted
victim. It is very difficult to classify crimes in general into distinct groups as many crimes evolve on a daily
basis. Even in the real world, crimes like rape, murder or theft need not necessarily be separate. However, all
cybercrimes involve both the computer and the person behind it as victims; it just depends on which of the two is
the main target. Hence, the computer will be looked at as either a target or tool for simplicity’s sake. For
example, hacking involves attacking the computer’s information and
other resources. It is important to take note that overlapping occurs in many cases and it is impossible to have a
perfect classification system.
Computer as a tool:
When the individual is the main target of Cybercrime, the computer can be considered as the tool rather than the
target. These crimes generally involve less technical expertise as the damage done manifests itself in the real
world. Human weaknesses are generally exploited. The damage dealt is largely psych logical and intangible,
making legal action against the variants more difficult. These are the crimes which have existed for centuries in
the offline. Scams, theft, and the likes have existed even before the development in high-tech equipment. The
same criminal has simply been given a tool which increases his potential pool of victims and makes him all the
harder to trace and apprehend.
Computer as a target:
These crimes are committed by a selected group of criminals. Unlike crimes using he computer as a tool, these
crimes requires the technical knowledge of the perpetrators. These crimes are relatively new, having been inexistence for only as long as computers have - which explains how unprepared society and the world in general is
towards combating these crimes. There are numerous crimes of this nature committed daily on the internet. But it
is worth knowing that Africans and indeed Nigerians are yet to develop their technical knowledge to
accommodate and perpetrate this kind of 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 that come with connecting to a large
network. Computers today are being misused for illegal activities like e-mail espionage, credit car fraud, spams,
and software piracy and so on, which invade our privacy and offend our senses. Criminal activities in the
cyberspace are on the rise. Here we publish an article by Nandini Ramprasad in series for the benefit of our netizens.
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 transmission of child-pornography,
harassment of any one with the use of a computer such as e-mail. The trafficking, distribution, posting, and
dissemination of obscene material including pornography and indecent exposure, constitutes one of the most
important Cybercrimes known today. The potential harm of such a crime to humanity can hardly be amplified.
This is one Cybercrime which threatens to undermine the growth of the younger generation as also leaveirreparable scars and injury on the younger generation, if not controlled. In the United States alone, the virus
made its way through 1.2 million computers in one-fifth of the country's largest businesses. David Smith pleaded
guilty on Dec. 9, 1999 to state and federal charges associated with his creation of the Melissa virus. There are
numerous examples of such computer viruses few of them being "Melissa" and "love bug". A Mumbai-based
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upstart engineering company lost a say and much money in the business when the rival company, an industry
major, stole the technical database from their computers with the help of a corporate cyber spy.
Unauthorized access:
Using one's own programming abilities as also various programs with malicious intent to gain unauthorized
access to a computer or network are very serious crimes. Similarly, the creation and dissemination of harmful
computer programs which do irreparable damage to computer systems is another kind of Cybercrime. Software
piracy is also another distinct kind of Cybercrime which is perpetuated by many people online who distributeillegal and unauthorized pirated 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 the start 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 from many sources, including deliberate
attacks.