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MBA Semester - 3

MB 00 51 : Legal Aspects of Business

Assignment Set - 1

Q1. What are the sources of Indian law? Discuss any one important

source of law and

Ans.Sources of Indian Law-

The main sources of modern Indian law may be divided into two broad

categories :

(A)Primary sources

(B)Secondary sources

The primary sources of Indian Law are

(1) Custom

(2)Judicial precedent (stare decisis)

(3) Statute

(4)Personal law

Secondary sources of Indian law

The secondary sources of Indian Law are English Law and principles of Justice,

Equity and Good Conscience.

English Law

The chief sources of English law are:

(1)Common law

(2)Equity

(3)Law merchant

(4)Statute law

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Custom important source of law

Customs have played an important role in making law and therefore are also known

as customary laws. In the words of Keeton, customary law may be defined as those

rules of human action, established by usage and regarded as legally binding by those

to whom the rules are applicable, which are adopted by the courts and applied as

sources of law because they are generally followed by the political society as a

whole or by some part of it.

Q2. What is a contract? Which test would you apply to ascertain whether

an agreement is a contract?

Ans. Contract :-

According to Section 2 (h) of the Indian Contracts Act, 1872, a contract is an

agreement

enforceable by law made between at least two parties as per which rights and

obligations are mutually created for both parties. If the party who had agreed to do

something fails to do that, then the other party has a remedy in law.

Example:D Airlines sells a ticket on 1 January to X for the journey from Mumbai to

Bangalore on 10 January. The airline is under an obligation or duty to take X from

Mumbai to Bangalore on 10 January. In case the airline fails to fulfil its promise, X

has the right to sue the airlines for breach of contract.

Agreement :-

Section 2 (e) of the Contracts Act defines an agreement as every promise and every

Set of promises forming a consideration for each other. For an agreement, a

promise becomes essential. The word promise is defined by Section 2 (b) of the

Contracts Act. In a contract, there are at least two parties. One of them makes a

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proposal (or offer) to the other to do something with a view of getting approval of

the other to such an act. When the person to whom the proposal is made provides

his/her assent, the proposal is said to be accepted. A proposal, when accepted,

becomes a promise according to Section 2 (b).

Enforceability by law :-The agreement must be enforceable by law to become a

contract. Thus, there are certain agreements that do not become contracts as the

element of enforceability by law is absent.

Q3. Write short notes on:

a.Agent and agency

b.Bailor and bailee

Ans.(3.a)Agent and Agency

According to Section 182, an agent is defined as a person employed to do any act

for another or to represent another in dealings with a third person. Thus, an agent

is a person who acts in place of another. The person for whom or on whose behalf

he acts is called the principal. For example, Anil appoints Bharat, a broker, to sell his

Maruti car on his behalf. Anil is the principal and Bharat is his agent. The

relationship between Anil and Bharat is called an agency and is based on an

agreement whereby one person acts for another in transaction with a third person.

Example:Rahim appoints Kiran, a minor, to sell his car for not less than Rs.

90,000. Kiran sells it for Rs. 80,000. Rahim will be held bound by the transaction

and further shall have no rights against Kiran for claiming the compensation for

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having not obeyed instructions, since Kiran is a minor and a contract with a minor

is void ab initio.

Ans.(3.b)Bailor and bailee

The word bailment is derived from the French word Bailer, which means to

deliver. In law, bailment is a voluntary change of possession from one person to

another. It is defined as the delivery of goods from one person to another for some

purpose upon a contract. Upon the attainment of the purpose, the goods are

returned or disposed off, according to the directions of the person delivering them.

According to Section 148 of the Contracts Act, the person delivering the goods is

called the bailor and the person to whom the goods are delivered is called the

bailee. Delivery of the possession is not necessary where one person, already in

possession of goods, contracts to hold them as the bailee.

Q4. What is the meaning of dissolution of firm? Is it different from

dissolution of partnership?

Ans. Dissolution of firm

When the relationship between all the partners of the firm comes to an end, it is

called dissolution of the firm. It naturally involves closing down the business.

There is no question of reconstituted firm in such a case. A firm may be dissolved

in any of the following ways:

(a)By mutual consent Section 40 provides that a firm may, at any time, be

dissolved with the consent of all the partners. This applies to all cases whether

the firm is for a fixed period or otherwise.

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(b) By agreement Section 40 also provides for the dissolution of a firm in

Accordance with a contract between the partners. The contract providing for

dissolution may have been incorporated in the partnership deed itself or in a

separate agreement.

(c) By the insolvency of all the partners but one If all the partners or all

The partners but one become insolvent, it leads to dissolution of the firm. Section

41 calls this as compulsory dissolution.

(d) By business becoming illegal Section 41 provides that a firm is dissolved

by the happening of any event that makes it unlawful for the business of the firm

to be carried on or for the partners to carry it on in partnership. However, if the

partnership relates to more than one adventure, the illegality of one or more of them

does not prevent the lawful adventure from being carried on by the firm.

(e) Partners becoming alien enemies Section 41 also covers cases of

partnership between persons who become alien enemies by a subsequent

declaration of war. In such a case, the partnership is dissolved because trading with

an alien enemy is against public policy.

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Q5. What do you mean by negotiable instruments? Explain the difference

between bill of exchange and promissory note.

Ans.Negotiable Instruments

Documents that are freely used in commercial transactions and monetary dealings

are known as negotiable instruments, if they satisfy certain conditions. The term

negotiable instrument refers to a written document transferable by mere delivery

or by endorsement and delivery to enable the transferee to get a title in the

instrument. An instrument may possess the characteristics of negotiability either by

statute or usage. Laws relating to negotiable instruments are contained in the

Negotiable Instruments Act, 1881. This Act deals exclusively with promissory notes,

cheques and bills of exchange, as defined under Section 13. There are certain

instruments that are recognised as negotiable instruments by usage. Thus, bank

notes, bank drafts, share warrants, bearer debentures, dividend warrants, scripts

and treasury bills are negotiable by usage.

Promissory notes

A promissory note is an instrument in writing containing an unconditional

undertaking, signed by the maker to pay a certain sum of money to a specified

person or to his order (Section 4). It does not include a bank or currency note.

Bill of exchange

A bill of exchange is defined by Section 5 as an instrument in writing, containing

an unconditional order, signed by the maker, directing a certain person to pay a

certain sum of money only to or to the order of, a certain person, or to the bearer of

the instrument.

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Q6. Discuss the provisions of Right to information act, 2005 and

information technology act, 2000.

Ans. Rights under RTI Act, 2005

The ideal objectives of the RTI Act are to promote transparency and accountability

in the working of public authority and to set up a practical regime for giving

citizens access to information under the control of public authorities.

Right to Information Act, 2005, empowers every citizen to:

(a)Pose any questions to the Government or seek any information

(b)Obtain copies of any Government documents

(c)Inspect any Governments documents

(d)Inspect any Governments works

(e)Take samples of materials of any Government work

Coverage of the Act.

(f)All levels of the Government Centre, State, District and Local Self Governing

Bodies like Panchayat and Municipal bodies.

(g)NGOs that are financed substantially with public funds provided by

Government.

Information Technology Act, 2000

At the height of the dotcom boom, India enacted the Information Technology Act,

2000, in May 2000 and became part of a select group of countries to have cyber

laws. This Act was enacted so as to provide legal infrastructure for e-commerce and

alternatives to paper- based methods of information storage and communication.

The Act aims to provide legal sanctity to all electronic records and was instrumental

in pioneering corresponding changes in other legislations such as the Indian Penal

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Code, Indian Evidence Act, Bankers Book .

Evidence Act and Reserve Bank of India Act.

This Act is not applicable to the following:

(a)A negotiable instrument (other than a cheque) as defined in Section13 of the

Negotiable Instruments Act, 1881

(b)A power-of-attorney as defined in Section 1A of the Power of Attorney Act,

1882

(c)A trust as defined in Section 3 of the Indian Trust Act, 1882

(d)A will as defined in Section 2 (h) of the Indian Succession Act, 1925.

(e)Any such class of documents or transactions as may be notified by the Central

Government in the Official Gazette.