Legal Aspects of Business

i.e.

Business Law
Dr. Narendra Y. Phadnis. Professor-IMT- Nagpur.

LAW

Set/Body of Rules & Regulations. About conduct in a civilized society. Regulates & Controls Relationships. Creates Rights & Obligations/Duties. Created & Recognized by Authority/Govt. Administered & Implemented by Authority/ Govt. Sanctions- Penalties/Punishments. Enforced by Law Courts. (Justiciable) Remedy in the Law Courts/Authority.

Business

Any Commercial Dealing or Activity or Mercantile transaction for the purpose of Material Gains/Profits. Manufacture/Transportation/Supply of Goods and/or Services (Products) for sale/resale/use/consumption of customers & consumers. (B to B and B to C) Does not cover purely Social, Cultural, Religious, Charitable, Humanitarian & Missionary, Domestic (Family) Activities & Sovereign Functions of State.

Industry

Employer- Employee (Boss-Subordinate) relationship & working together Well Organized, Systematic, Continuous Activity. Offers Goods and/or Services to customers, Consumers/Society for its use or consumption. Profit Making & Capital investments are not essential. Except Family & Sovereign functions of the State under the constitution, all activities under the Sun satisfying above criteria are Industries.

Industry=Business=Trade=Commerce These are Synonymous Terms in the eyes of Law. Legally these are equivalent terms.

Business Law

Also referred to as Commercial or Mercantile Law concerning Trade, Commerce & Industry. A branch of Civil law mostly dealing with Contractual Business Relationships. Also covers commercial transactions amongst relatives & friends (social groups) but not social transactions. Creates Legal/Regulatory Business Environment Regulates, Controls & Governs Formation & execution of business transactions. Ensures & Assures Certainty in business dealings. Provides Legal Remedies for breach of business commitments.

Law in India means & includes Article 13

Constitution of India. Acts made by legislature (Statutory Law) Rules & Regulations made by Govt. Notifications, Resolutions (GR), Orders etc issued by the Govt. Officials. Policies & Rules of organizations for its internal administration & discipline. Contracts made by Parties including Business Contracts.

Constitution of India. Salient Features.

Supreme, Basic & Fundamental Law of the Land. Written & Lengthiest World Constitution. Sovereign, Socialist, Secular, Democratic Republic. Parliamentary form of Govt. President as elected Constitutional but nominal head. Unique blend of Federal & Unitary Constitutions. Adult Suffrage- 18 years- Article- 326. An Independent & Impartial Judiciary. Fundamental Rights & Duties. Directive Principles of State policy. Separation/ Distribution of Powers & Functions between organs of state. Structure, functions & powers of the state organs & bodies detailed out Single Citizenship Uniformity.

Constitutional Provisions for Business, Trade & Commerce.

Fundamental Rights :- Freedom of Speech & Expression Article 19(1)(a)- includes Commercial speech, advertising and product promotional activities. Freedom to assemble & form unions & associations to protect & promote business interest. Art. 19(1)(b) & (c) For business & other purposes freedom to move any where in India, settle in any part of India & carry out any lawful business, trade, occupation, job, profession. Art. 19(1) (d) (e) (g). All the above freedoms are not absolute & are subjected to reasonable restrictions/limitations-Art . 19(2) to 19(6) Finance, property, Contracts, Suits, Freedom of Trade, Commerce & Intercourse. Articles 264 to 307.(Part XII Chapters I to IV & Part XIII)

Constitutional Provisions on Advertising.

Advertising & Promotional Activity being a Commercial Speech & an Industry, is Part of Fundamental Rights & Freedoms under the Indian Constitution- Articles 19 (1) (a), (c), (d), (g) & 21. Advertising is also Consumers Fundamental Right to receive Right Reliable & Timely information Art. 19 (1) (a) Fundamental Right to Advertise is not Absolute & Unfettered. Reasonable Restrictions & Controls can be imposed through Regulations in the larger interest of Public & Nation i.e. health, safety, security, decency, morality, social order, communal harmony, unity & integrity. Articles 19 (2) to 19 (6).

Is Company a Citizen? Can it enforce its Fundamental Rights ?

Company is not a citizen but has Nationality, domicile & residence. Only Natural Persons (Human Beings) can be citizens [Article 5 Part II & Citizenship Act 1955].Company is an Artificial & Juristic person created under the law. Can enforce Fundamental Rights conferred on Persons- Equality before Law (Article 14) & Right to acquire & own/hold Property (Article 300A) Cannot enforce FR conferred on Citizens right to carry on Business/Industry [Article 19(1)(g)] Share Holders & Directors are Citizens who can enforce their FR to carry on Business under the name & style as a company. Company can indirectly enforce FR-Right to carry on Business through its Directors & share holders who should also be joined as Petitioners in the writ petition.

Case Law on Company & its FR

State Trading Corporation case 1963 (SC) TELCO case- 1965 (SC) Heavy Engineering Mazdoor Union Case1969 (SC) Bank Nationalization Case-1970 (SC) Bennet Coleman Co Case- 1972 (SC) Godhra Electric Co case-1975 (SC)

Supreme Court of India. Articles 13, 32,124 to 147.

Judicial Review & Doctrine of Ultra vires. Fundamental Right to approach SC The Final Interpreter, Custodian & Guardian of Constitution & Laws. A Court of Record- Can punish for its contempt. Jurisdiction- Original, Appellate, SLP, Advisory. Doctrine of Precedent Article-141(Stare decisis) Verdicts are binding on all authorities in India. All authorities to act in aid & support to SC. Article 144.

Prerogative Writ Petitions Articles 32(SC) &226(HC)

Types of Writs Habeas Corpus Mandamus Prohibition Certiorari Quo Warranto Public Interest Litigations (PIL)

Contract
Contract = Agreement + Legal obligation & Enforceable by Law. [sec. 2(h)] Agreement=Offer/Proposal+ its Acceptance [sec.2(e)]. Promise= Proposal+ Acceptance- sec 2(b) Agreement = Promise or set of promises forming consideration for each other. Agreement, commitment, Undertaking & promise are synonymous terms. Offer, Acceptance & Consideration are essential components of a contract.

Essentials of a Contract Sec.10

Offer/Proposal + its Acceptance= Agreement.( Proper Offer, its Proper Acceptance, Proper Communication & Consensus-ad-idem) Consent- free & genuine.(sec.10,13 to 22) Create Legal Relationship i.e Legal Obligation Competent to Contract.(sec.10 to 12) Lawful Consideration on both sides.(sec.2(d),10, 23- 25) Lawful Object.(sec23 & 24) Not declared void or illegal. (sec 26 to 30) Terms should be clear. (sec 29) Performance must be possible. (sec 56) Legal Formalities if any.( Writing, Registration, Stamping & Attestation etc if required by law)

Void Agreements- No Contracts. Not Enforceable.

Agreement with Incompetent &Unauthorized Personsec.11.(Minor, unsound mind, incompetence under law) Mutual Mistake of Facts- sec.20. Unlawful object & consideration-sec.25. Restraint of Marriage- sec.26. Restraint of trade or business-sec 27. Restraint of Legal/Court Proceedings-28 Uncertain Agreements-sec29. Wagering (Bet) Agreements-sec.30. Impossible Agreements- sec. 56. Agreement to enter future Agreement.

Purpose is to obtain Acceptance. Intend to create legal relationship. Specific offer must be communicated to offeree. General offer is made to public at large. Terms must be definite, clear & certain Positive or Negative. Express or Implied. Special terms must be communicated. Invitation to offer & declaration of intention are not offers. Offers can be conditional. Offer should not say that non- communication of rejection/denial amounts to acceptance of offer. Cross Offer & Counter Offer is no acceptance & hence no contract. (it only indicates negotiations) Counter offer & cross offer terminates the earlier offer.

Essentials of Valid Offer/Proposal

Offer/Proposal

Offer can be modified/altered before acceptance but not afterwards. Offer can be withdrawn/revoked before acceptance but not afterwards. Offer is the final say or act of offerer awaiting acceptance/consent from the offeree. Offer lapses after the specified period or reasonable period (if not specified) Open offer can also be withdrawn before the agreed/specified period unless supported by consideration.

Invitation to offer

The communication which precedes offer. The purpose is information sharing, further enquiry & negotiations. It solicits or invites or generates offers. Whether a communication is offer or invitation to offer depends on the essence or contents of the communication. Acceptance of or response to Invitation (to offer) does not result in a contract.

Essentials of valid Acceptance

Absolute & unqualified. Must be made by offeree himself or his agent/attorney. Acceptance of Specific offer Must be communicated to offeror. Acceptance of General offer (public offer) is deemed to be communicated by compliance of conditions of the General Offer. Must be in prescribed manner if asked for. Must be in response to offer. (Can not precede offer) Made within reasonable time or specified time. Before the offer lapses. (before the deadline mentioned) Can be express or Implied. Any change/alteration in acceptance makes it a counter offer which is an implied rejection of the original offer. Counter offers and Cross offers is not acceptance and hence do not make a contract. Original offer lapses due to counter/cross offer.

Consideration-sec.2(d) & 25

Material benefit which parties exchange. Some thing of value in return to both the parties.(May not be sufficient/adequate) To promise do or promise not to do something for the other party. It can be benefit/interest/right to one and loss/sufferance or detriment to other. The promise or commitment of one party is consideration for the other & vice versa. It should be legal however legal obligation

Consideration Rule- No Consideration- No Contract

Exceptions1. written & registered gift deed on account of natural love & affection between persons standing in near social & blood relations. 2. Completed Gift. (not promise to gift) 3. Promise to compensate for past voluntary services. 4. Agreement to pay time barred debt. 5. Contract of Agency, Contract of Guarantee & Gratuitous Bailment. 6. Remission. 7. Promise to charity where the other party has incurred liability based on promise. (To pay whichever is less)

Contracts with Minor (not completed 18 years of age)

Is void & inoperative ab-initio. Cannot be ratified on attaining major age. Cannot be asked to repay or compensate for benefits received. Can claim & receive benefits (law protects interests, rights & benefits of Minor) Does not incur any loss, risk or obligation. Can plead & not stopped from pleading minority. Minor can be an agent but not liable to principle or third party for his/her acts. Minor cannot be a partner but can be admitted to benefits (not losses) of the partnership.

Formation of Contract

Contract is formed when communication of Acceptance is complete. Contract is formed at a place & time where/when communication of acceptance is complete. Cause of Action for breach of contract arises at the place of its formation. Parties may expressly agree the place of formation of Contract (i.e. cause of action if contract is breached) which must be place of business or place of permanent residence of either party.

Jurisdiction of Court

Place where the Cause of Action arose i.e. where the contract is formed. And Place where the defendant/respondent permanently reside and/or carry on its business. Parties may expressly agree to opt for either of the two jurisdictions above but not any third place. Mere unilateral declarations about jurisdiction on business documents by itself will not confer jurisdiction on Courts. Parties do not confer jurisdiction on courts. They mutually select any one jurisdiction which already exists as per law.

Privity of Contract

Contract is a Legal Relationship between Contracting Parties. (Reciprocal Material Considerations- viz. Money, Goods, Services) Creating Rights/Benefits & Duties/Obligations/Liabilities. In Personam (i.e. as against specific person (s) or parties) & not in rem (i.e. not against the whole world). By & Large Third parties & Strangers are not bound by the terms of contract. (No Rights- No obligations). Third Party-Beneficiaries of the contract would acquire Rights & Benefits specified in the contract but not liabilities. Successors, LRs, Administrators/Executors, Assigns would acquire Rights/Benefits and/or Duties/Liabilities.

Performance of Contract

A Contracts creates Legal Obligations. Parties to carry out their respective obligations. (i.e. Promises) Types- Actual (Executed) Performance- Liability ends. Attempted Performance or Tender Performance- Performance or Willingness to perform is not acceptable to other side. Liabilities of Performer in both the above types ends but their rights/benefits under the contract are alive till satisfied by the other party.

Performance of Contract

Who can Demand?- Promisee himself or its Authorized Representative, LR in case of death of promisee Third party specified in contract who acquires rights/benefits under the contract. Who should perform?- Promisor himself when performance involves personal skills. Promisor or his agent or successor in office or property, LR of promisor in case of his death. Third Party with acceptance of Promisee & Third party. Joint promise by Promisors jointly.

Discharge or Termination of Contract

By Performance of all parties (Executed) By Mutual Consent/Agreement (Rescission) Discharge by Subsequent Impossibility (Frustration) or illegality or Operation of Law. By Lapse of Time- Period of limitation. By Breach of Contract- Either or both parties fails or refuses to perform its promises. Anticipatory breach & Actual breach.

Damages (Sec.74) (Monetary Compensation)

Liquidated Damages- Fair & Genuine Amount/Sum fixed and stipulated in the contract (Pre-estimated) payable on breach of contract. Penalty- Amount/Sum so fixed/agreed but disproportionate to loss/injury caused. Interest Payable-Agreed/fixed/Stipulated. Remote Consequential Business loss amounts to penalty. Unreasonable interest charges is penalty.

Remedies for Breach of Contract Sections 73 to 75

Rescission of the Contract (To put an end to, To Withdraw from, To terminate) Suit for Damages for loss or injury (Monetary Compensation) Suit for Specific Performance Suit for Injunction. Suit upon Quantum Meruit.

Court Vis--vis Damages

Court grants liquidated damages being reasonable. Parties cannot claim penalty as a matter of right being unreasonable. Court grants reasonable interest @ equal to current Bank FD Rate. Court grants reasonable compensation whether by way of liquidated damages and/or penalty but not exceeding the sum stipulated in the contract. If No sum is so fixed or stipulated then reasonable compensation with reasonable interest is granted. If Damages+ Compensation+ Penalty= Actual Loss is awarded but not exceeding the sum fixed in the contract if any. If No Sum is so fixed then Actual Loss (not remote loss) is granted. Principles applicable in Quasi- Contracts are followed by Courts while deciding reasonability of compensation. The object is to restore that position of parties where they would be immediately on performance of contract but not further.

Quasi- Contracts

It is Neither a Contract & Nor a Tort (Civil wrong) but resembles a Contract. (out come is like a contract) An Obligation imposed by law based on equity (Fairness), natural justice, ethics & morality. Implied by circumstances & situations. Benefiting or enriching unjustly at the cost/expenses or services of the other is not allowed. (To pay back)

Quantum Meruit

It is a Quasi- Contract. As much as earned or merited. (To claim money in proportion to work done in terms of Quantity and/or Quality) One party has performed partly & the other party has terminated the contract before its completion. The claim arises only on discharge of contract not by way of damages flowing out of contract but based on principles of Quasi- contract.

Special Contracts (Under Indian Contract Act 1872)

Indemnity- Sec. 124 & 125 Guarantee- Sec. 126, 127 &128 Bailment- Sec. 148,151,152, 154,160,161 Pledge (Pawn)-Sec.172 (Mortgage, Hypothecation) Agency Sec. 182 to 185, 211 to 220.

Contract of Agency

Nominating & Authorizing a person to act for & on his behalf or to represent in dealing with third person. Delegation of Authority for dealing with third person. Person who is so nominated is an Agent. The Person who nominates is Principal. Agent is merely a connecting link or a Conduit between principal & third person creating contract between Principal & third party i.e agent binds the principal by his acts. Acts of Agent are Acts of Principal. Agency does not create any relation or contract between an agent & third party.

Agency

Minor & Person of unsound mind can be an agent but Principal cannot take any action against such agent. i.e. such agent is not liable to Principal. (sec.184) Principal & third Party must however be competent to contact. No consideration for agency is necessary.(sec.185) An Employee can also act as Agent but an agent may not be an employee. (Agents are generally independent persons) Sub Agents & Substituted agents are permitted only in exceptional & emergent situations with Knowledge & No Objection of Principal. Rights of Principal are duties of an Agent & vice versa. Agent must carry out his duties towards the Principal faithfully, honestly, with utmost skills & Care & sincerity & Transparently.

Irrevocable Agency or Power of Attorney

1. 2. 3.

General rule is An Agency can always be revoked i.e. Power of Attorney is revocable. Exceptions are:- (i.e. Principal cannot revoke) Agency coupled with substantial interest of Agent other than agents remuneration or commission. Where the authority has been partly exercised by an agent so as to bind principle with third party. When the agent has incurred personal liability acting within the scope of his role as agent.

Manager in the eyes of Law (Managerial Powers & Authority)

He is an Employee + An Agent. (Both) Binds & Creates contractual relations between organization & outside world (Third Parties). Authority to Appoint or Terminate or take disciplinary action against subordinates. Authority to sanction leave & grant facilities to staff. Drawing & Disbursing Authority or operating organizations financial accounts.

Contract of Service (Employment)

Master-Servant or Employer- Employee or BossSubordinate Relationship. On the Pay-Roll or Muster roll. Receives Fixed & Periodical salary/wages from employer. (masters obligation to pay) Performance under strict control & Supervision of the Boss/Employer/Master. Masters Right to Hire & Fire. Masters Right to discipline. Can not take up any other assignment or job without Employers consent during subsistence of Contract.

Contract for Service (Non- Employment)

No Master- Servant Relationship. Parties are independent & have only contractual relationships. Minimal or No Supervision & Control from the other party. Not on the Pay-Roll. Does not receive salary/wages. Receives Bill payment or remuneration in the form of Honorarium. What to do but not how to do it. It is outsourcing of the Services through external Service Provider. Free to take any other assignment or contract.

Tenders & Auctions

Tenders are written offers or e-offers in response to notice or Advertisement (invitation to offer). Parties need not be physically present. Offerers do not know each others offers. In Auction parities or their agents are physically present (or through video conference) at the venue & time & verbally offer their bids. They know each others offers/bids. E- auctions are gaining popularity due to convenience as parties get advantages of both the systems i.e. tenders & auctions. In Auction Without Reserve- but with reserve price Highest bid more than reserve price must be accepted.

Tender & Auction Sale

Both tenders & auction bids are offers which may or may not be accepted. There is No legal obligations on the other party to accept a lowest tender or a highest Auction Bid. Withdrawal/revocation of tenders & auction bids is valid before its acceptance. Insistence on non-withdrawal of tenders or Auction bids is possible by separate agreement with consideration to the bidders. Auction seller i.e auctioneer cannot bid unless he reserves his right expressly & notifies it to bidders. Auction sale can be cancelled by the auctioneer any time before acceptance of bid. Auction sale will be held on the terms suitable & convenient to auctioneer with notice to bidders. Auctioneer can protect his interest with reserve secret price to nullify Knockout agreements of bidders. Auctioneer can fix & notify a minimum starting price for a bid.

Indemnity

To make good the loss of other party or to save him from the loss. To Compensate the other person who suffered loss. (sec.124) Indemnity holder or Indemnified can recover from indemnifier damages, cost, sums on loss in a suit. (sec.125). Indemnifier is liable only on loss to the indemnified/ Indemnity holder & on his liability becoming certain & absolute. It is a contingent contract. (Loss to indemnity holder is must) Indemnity is not Repayment after Payment. Indemnifier has to pay when loss to indemnity holder is ascertained. Contract of Insurance is Contract of Indemnity. Indemnity is given for anticipated loss to indemnity holder by any one & is acted upon as soon as the loss is quantified.

Guarantee

Guarantor/Surety has to pay to creditor on default by the Principal debtor. Guarantee is given for existing liability or debt of Principal debtor. End of Liability is end of guarantee. Liability of Surety arises only on default of the Principal debtor. It is a tripartite Contract & there are three contracts. There is an implied contract of Indemnity between Surety & Principle debtor.

Guarantee

Consideration or benefit to Principal debtor itself is treated as consideration to surety for giving guarantee (sec.127). Liability of Principal debtor is primary. Liability of surety is secondary & contingent but once PD defaults the suretys liability is co-extensive/concurrent with PD. On default by PD both PD & Surety are jointly & severally liable to creditor. Creditor may opt to sue surety alone for the debt without proceeding against PD. (sec128)

Bailment

Delivery i.e Possession of Goods to a person (Bailee) who is not owner of goods for some purpose with time limit on returnable basis. (To be returned to Bailor i.e. owner of Goods) The Risk of Loss/damages etc is with the Bailor (owner) if Bailee is in no way at fault & has acted timely, diligently & prudently. (sec.152) The Risk of Loss is with Bailee if he defaults in taking proper care & unauthorized use & non returning goods in agreed time. (sec 160 &161)

Pledge (Pawn)

Bailment as a security for repayment of debt Bailor is called Pawnor & Bailee as Pawnee. Rights & Duties are same as in Bailment. Pawnor defaults in repayment of debt Pawnee can recover his dues by sale of goods on notifying to pawnor. Pledge of Goods (movable) is called as hypothecation where as Pledge of Immovable property is called as Mortgage.

Contract of Sale of Goods (Sale of Goods Act 1930)

Transfer of Property in goods i.e ownership of goods (executed or completed sale ) or agreement to sell of goods (intended sale or conditional sale) for price (money) Goods are movable property other than money & actionable claims. Contract of Sale i.e. Sale or Agreement to sell is concerned with Transfer of property in goods i.e. Ownership of Goods (Title) & not with delivery/possession of goods. Payment of Price can also be deferred. Possession/Custody of Goods without ownership is Bailment or Pledge. Transfer of Immovable Property is governed by TP Act.

Contract of Sale of Goods Vs Contract for Work (Work Order)

In Contract of Sale Ownership & Delivery of Goods is Primary & Goods are sold on here & now or as it is basis. In Work Contract/Order there is processing of material/goods with application of labour/skills & then delivery of goods to buyer. Raw material can be supplied either by buyer or buyer instructs the service provider to purchase requisite raw material & process it further. Application of Skills & Labour is primary & more relevant in Work Orders.

Contract of Sale (sec.4 of Sale of goods Act)

It covers both Sale and Agreement to Sell. Sale is Executed Contract- immediate transfer of right to property i.e. ownership to buyer. Agreement to sell is a conditional transfer of ownership in future. (Executory) Both Sale & Agreement to sell is not necessarily linked with Delivery of goods & Payment for goods. Contract of sale can be made without making delivery &/or receiving payment. The Risk is associated with & passes with ownership & not with Possession of goods. Ownership passes as specifically & expressly

Hire-Purchase Agreement (Hire-Purchase Act 1972)

It must be in Writing. It is Hiring goods on installments with intention to Purchase. (Hiring with a view to Buy) It is Bailment + Agreement To Sell. Initially Consumer is Bailee & becomes owner subsequently. (i.e on Full payment) Sale is effected i.e ownership is transferred on Payment of Last installment. (Pre-final installments are treated as Hire charges or rental) Both Hire-vendor & Hirer have an option to terminate the contract & take back & return goods respectively before the sale is effective i.e before the last installment.

Condition

It is a Core Term or Stipulation which forms the basis of contract. (Primary & Main Term of a Contract) It is a root cause or the very purpose of a contract. It is a main & essential term without which contract becomes redundant. On breach contract can be repudiated i.e terminated + damages if any can be claimed. Goods can be returned or replaced & Price and/or damages can be claimed. Condition can be converted to a Warranty mutually.

Warranty

It is a term or stipulation secondary, collateral or subsidiary to a contract. On breach, contract cannot be terminated only damages can be claimed. Goods cannot be returned or replaced. Price can not be recovered. Only loss incurred due to wrong assurance can be recovered. Only repairs or replacement of defective parts or components of goods can be done free of cost. Breach of Warranty is not breach of condition.

Condition & Warranty

Depends on the intentions of parties & construction of a contract. (i.e drafting of the terms of contract- Intent & content) The situation & circumstances which led to formation of contract. (Context) Intentions are inferred from terms of contract, background situation & conduct of parties. It is desirable to put clear, specific & precise terms in contract with details. Generally specific & special requirements of buyer are conditions where as extra/additional assurances of seller (not sought after by buyer) are warranties.

Caveat Emptor (Let the Buyer beware)

Its a caution or warning to buyer. It Buyers responsibility & duty to buy goods as per his requirements/suitability & satisfaction. Buyer buy at his risk. Buyer has to thank or blame himself for goods received. Seller is under no obligation to disclose defects in goods. General rule has few exceptions. An outdated concept replaced by Let the seller beware on passing of Consumer Law for end users.

The Consumer Protection Act 1986 (CPA)

Applicable- Whole of India except J &K Covers Goods, Services & Related Unfair & Restrictive Trade Practices. Protects Consumers from defective & hazardous goods, deficient services, Unfair & Restrictive Trade Practices. Excess Pricing (Above MRP) Seeks to stop Exploitation of Consumers by Business Leaders, Managers & Service Providers, Manufacturers, Dealers, Retailers, Traders, Distributors etc. Provides Effective Remedies & Fast Relief to Consumers. Remedies under CPA are Quick, Inexpensive, Simplified & comprehensive as compared to civil suit.

Consumer Disputes Resolution Agency/ Machinery

Quasi-Judicial in nature & functions Three Tier System District Forum, State Commission & National Commission. District Forum- up to 20 lakhs. State Commission- >20 lakhs to 1 core. National Commission- > 1 core.

Applicability of CPA

Consumer Disputes resolution mechanism under CPA is available only to Consumers & their Family Members, registered consumer associations & govt. Non-Consumers have to approach Courts under Sale of Goods/Contract Act. Commercial organizations & companies cannot avail remedy under CPA. Consumers may also approach Courts under Sale of Goods/Contract Act.

Machinery Provides Remedies & Relief.(Sec.14 of CPA)

To remove defects in goods (Repairs & Replacements of Parts/ Components) To remove deficiency in services. To Replace/Substitute defective goods with defect free goods. To order return of price or charges to the Consumer. To order withdrawal or prohibit sale of goods which are risky to life, safety & property of consumers. To Return Excess Price Charged. (Price in excess of MRP labeled on the Package or in excess of Law/Contract) Compensation & damages for injury & loss to the Consumers due to negligence of goods/service providers. (Negligence must precede & result in loss/Injury to consumer) Reasonable compensation for harassment/mental agony can be claimed & allowed at the discretion of the consumer courts. To discontinue/prohibit unfair & restrictive trade practices.

Consumer Sec 2(1) (d) (i) & (ii)

Buys Goods and/or avails Services for personal & family use/benefit. Goods are bought or Services are availed for some consideration paid or agreed to be paid under any system of payment. Facilities (goods or services) given free of cost will not be covered. No consideration- No Consumer. End/Ultimate/Final User of Goods/Services. Persons buying goods and/or availing services for Resale or for Commercial Purposes are not Consumers.

Commercial Purpose

Goods/ Services used/availed personally & exclusively for earning livelihood by self employed persons is not a commercial purpose. Such Persons are consumers. Deployment/Engagement of other persons, large scale profit making activity is treated as commercial purpose & hence such persons are not consumers.

Manipulation of Price. Terms/Conditions of supply or delivery so as to put unjustified costs on consumers. Delay in Supply beyond agreed period so as to lead to rise in prices. Requiring consumers to compulsory buy (for price) goods or avail services as a pre-condition to buying other goods. (schemes relating to free goods (gifts) on minimum purchase value or on minimum number of goods is allowed)

Restrictive Trade Practices. [sec. 2(1) (nnn)] Practices relating to

Unfair Trade Practices [Sec. 2 (1) (r)]

Advertisements are Commercial Speeches about Promotion of Products & form the part of Freedom of speech & expression under Article 19(1) (a) of the Constitution. It covers every kind of misrepresentation about a product (goods or services) in relation to Quality, Quantity, Potency, Purity, Standards, Grade, composition, Style or model etc. False or Misleading facts about its products. Comparative Advertisements disparaging the products of identifiable Business competitors. Claiming to give some thing Free which actually is not so. Game Shows & Contents held, Gifts & Prizes offered for product promotion are not unfair trade practices by & large. (HMM case-Apex court AIR 1998 SC 2691) Comparative Advertisements & Disparaging the products of Business competitors are allowed so long as it is based on objective facts & Scientific/Technical Tests & Evidence or Out come of a Systematic & Empirical Business Research.

Drafting of Business Contracts.

Careful & Comprehensive Contract design is sine qua non for any business. Examine the Indian Legal & Judicial System. (Statutory/Legislative Law + Latest Case Law i.e. Latest SC Verdict if any) Prefer Dispute Resolution through Commercial Arbitration under the Arbitration Act of 1996. (ADR) . For overseas contracts prefer International commercial Arbitration. Incorporate Express & Exhaustive provisions in the Contract. Put all important & relevant Business terms in the contract to suit your purpose. Do not leave any scope for the courts to interpret your terms differently than you intend to. Be sufficiently elaborate, precise & specific in drafting your terms. You are free to add or alter any term (s) where the Law is silent or expressly permits such modifications. Make sure you expressly specify special terms & conditions in your offer documents based on your business needs. Terms & Conditions of the Contract document should be consistent with the Law of the land. The Express Provisions of Law should not be breached. Mention that the prevailing Policies, Practices & Rules of the Company form the part of the contract & be read into it. Ensure that your policies, practices & Rules are in tune with the Law.

Format of a Business Contract

Date & Place of Execution of Contract Full Particulars of parties & authorized representatives with stipulation that contract would bind their legal heirs administrators, successors & assignees. Short Recital- Background introduction. Mention- Agreed by & between parties & witnessed by required number witnesses. Technical specifications/norms etc goods/ services, Joint ventures, collaborations etc with sufficient, specific & precise details either in the main body or annexure Mention that exhibits/ annexure/ schedule form the part of the contract. All pages are to be initialed by parties & full signature with stamps on the last page (by parties & Two witnesses)

Terms & Clauses of Contract Price & Payment Terms

Fix/Firm, Escalations, how to get paid, form of payment, Advance payments & deposits, discounts, Agreed payment/deductions for nonperformance/cancellations with time frames. Interest rates. Etc. Financial Consequences, Obligations of Parties.

Payment Guarantees

Advance payment guarantees Performance Guarantees. Bank Guarantees. Indemnity. Penalty Clauses. Liquidated damages clauses

Dispute resolution clauses

Jurisdiction of Courts or Trial forum. Force-Majeure & disclaimer clauses. Reference to commercial arbitration (ADR) i.e. Arbitration Act or Conciliation. ADR- Alternate Dispute Resolution Mechanisms. Prefer the sequence of Negotiations, Conciliation, Pvt. Arbitration, i.e out of court settlements. Prefer international commercial arbitration in case of overseas contracts. Lokadalat & Adjudication (Court settlements)

Core Principles of Law

Law of the land overrides the contracts made by parties. The special law (if any) about an issue prevails upon the general law/law of contracts. General law is in a supporting role to the special law. By & large general rules have few exceptions to cover special cases.

Core Principles of law (contd.)

Law is not devoid of logic, commonsense & rationality but does not necessarily goes by it always. Law is based on the principles of equity (fairness), justice, reasonableness & balanced approach to solving issues between the litigants. Law cannot be used as a tool or a technique to exploit others & to get unduly enriched.

Core Principles (contd.)

Courts look at the Intent, Content & Context while interpreting & enforcing the contracts. Intent is inferred from the content & the context of the contract. The intent, content & context (of contracts)are honoured & given effect to until it does not breach law of the land & are reasonable.