ASSIGNMENT

SUBJECT CODE & NAME: MB0051 LEGAL ASPECTS

OF BUSINESS
Q1. Explain the performance of contracts.
Ans.
Definition: Sections 37-67 of the Contracts Act deal with the
performance of a contract. A contract creates obligations.
Performance of a contract takes effect when the parties to the
contract fulfill their obligations within the time and manner
specified under the contract. The parties to a contract must either
perform or offer to perform their respective promises unless such
performance is dispensed with or excused under the provisions of
law (Section 37).
Offer of performance: It may happen that the promisor offers
performance of his/her obligation under the contract at the proper
time and place, but the promisee refuses to accept the
performance. This is called tender or attempted performance. If
a valid tender is made and is not accepted by the promisee, the
promisor shall not be responsible for non-performance nor shall
he/she lose his/her rights under the contract (Section 38).
Onus of performance:
The promise may be performed by the promisor himself/herself,
his/her agent or his/her legal representative. In case there was an
intention of the parties that the promise must be performed by
the promisor himself/herself, such a promise is to be performed
by him/her only. Thus, where A promises to paint a pitcure for B,
then A must perform this promise personally. If there is no such
intention of the parties, then the promisor may employ a
competent person to perform the promise. If A had promised to
deliver some items of grocery to B, A may perform this promise

either personally or have it delivered to B through someone. In

case of death of the promisor, the legal representative must
perform the promise unless a contrary intention is mentioned in
the contract.

Q2. Elaborate the rights of surety.

Ans.
Rights against the creditor: In case of fidelity guarantee, the
surety can direct can direct a creditor to dismiss the employee
whose honesty he/she has guaranteed, in the event of proven
dishonesty of the employee. The creditors failure to do so will
exonerate the surety from his/her liability.
Rights against the principal debtor:
Right of subrogation: Section 140 provides that where a
surety has paid the guaranteed debt on the due date or has
performed the guaranteed duty on the default of the
principal debtor, he/she is invested with all rights that the
creditor has against the debtor. In other words, the surety is
subrogated to all rights that the creditor had against the
principal debtor. Hence, if the creditor loses or without the
consent of the surety parts with any securities (Whether
known to the surety or not), the surety is discharged to the
extent of the value of such securities (Section 141). Further,
the creditor must hand over to the surety the securities in
the same condition as they formerly stood in his/her hands.
Right to be indemnified: The surety has a right to recover
from the principal debtor the amount that he/she has
rightfully paid under the contract of guarantee.
Rights against co-sureties:

 Right of contribution: Where a debt has been guaranteed by

more than one person, they are called co-sureties. Section
146 provides for a right of contribution between them. When
a surety has paid more than his/her share or a decree has
been passed against the surety for more than his/her share,
he/she has a right of contribution from the other sureties
who are equally bound to pay with him/her.
Example: A, B and C are sureties to D for Rs. 3,000 lent to
E.E defaults in making the payment. A, B and C are liable to
pay Rs. 1,000 each, and if any one of them has to pay more
than his/her share, i.e. Rs. 1,000 he/she can claim
contribution from the others.

Q3. Discuss the termination of bailment.

Ans.
A contract of bailment is terminated under the following
circumstances:
On the expiry of the stipulated period: Where a
bailment is for a specific period, it comes to an end on the
expiry of the specified period.
Example: A room cooler is hired by X from Y for six months.
On the expiry of six months, X must return the cooler to Y.
On the accomplishment of the specified purpose: In
case the bailment is for specific purpose, it terminates as
soon as the purpose is accomplished.
When bailees act is inconsistent with the conditions
of bailment: If the bailee does any act with regard to the
goods bailed, inconsistent with the conditions of the
bailment, the bailor may terminate the bailment( section
153).

Example: A lets B for hire a horse for his own riding. B

drives the horse in his carriage. A will have the option to
terminate the bailment.
A gratuitous bailment may be terminated at any
time (Section 159): However, if premature termination
causes any loss to the bailee exceeding the benefit
derived from the bailment, the bailor must indemnify.
Further, a gratuitous bailment terminates by death of
either the bailor or the bailee ( Section 162).

Q4. Explain the performance of a contract of sale of goods.

Ans.
The contract of sale of goods is to be performed. In this context,
Sections 31-44 provide for duties of the seller and the buyer and
the rules regarding delivery of goods.
Duties of the seller and the buyer: It is the duty of the seller to
deliver goods and the buyer to accept and pay for them, in
accordance with the terms of the contract of sale ( Section 31).
However, no delivery need be given, if the buyer is not willing to
pay the price, nor need the buyer pay the price, unless the seller
is ready and willing to give delivery, as unless otherwise agreed,
delivery and payment of price are concurrent conditios (senction
32).
The seller has the duty of giving delivery of goods according to
the
Terms of the contract, and

 Rules contained in the Act.

The buyer of goods has to pay for the goods, accept delivery and
pay compensation to the seller in case he/she wrongfully refuses
to accept delivery.
Delivery: Delivery is defined as a voluntary transfer of possession
from one person to another( section 2(2)). Section 33 provides
that delivery of goods sold may be made by doing anything that
the parties agree, shall be treated sa delivery or which has the
effect of putting goods in the possession of the buyer or of any
person authorised to hold them on his behalf.
Passing of property in goods in the case of foreign trade:
There are certain terms that are used in the contract of sale of
goods in foreign trade. These terms reflect a number of conditions
that are either attached by the parties or by custom and practice
of business people.
Usually such contracts are:
Free on board ( F.O.B) or Free on Airport ( F.O.A), and
Cost, Insurance and Freight (C.I.F) and Ex-ship.
Q5. Discuss the law related to the prohibition of anticompetitive agreements.
Ans.
Section 3 provides for prohibition of entering into anti-competitive
agreements. Accordingly no enterprice of person or association of
enterprises/persons shall enter into any agreement in respect of
production, suppy, distribution, storage, acquisition or control of
goods or provision of services, which causes or is likely to cause
an appreciable adverse effect on competition within india. Any

agreement entered into in contravertion of this provision shall be

void.
Further, this section also specifies certain activities that shall be
presumed to heve an appreciable adverse effect on competition.
Any enterprise or person or association of enterprises/persons,
including cartels, shall be presumed to heve an appreciable
adverse effect on competition if they do any of the following:
Directlyor indirectly determine purchase or sale prices
Limit or control production,supply, markets, technical
development, investment or provision of services
Share the market or source of production or provision of
services by way of allocation of geographical area of market,
or type of goods and services, or number of customers in the
market or any other similar way
Directly or indirectly results in bid rigging or collusive bidding
Factors that adversely affect competiton: Section 19 enumerates
the factors that are to be kept in mind by the commission while
determining not under section 3.

Q6.Explain the need and types of meetings.

Ans.
Need for meeting:
A company is an artificial person and therefore, must act through
some human intermediary. The various provisions of law empower
shareholders to do certain things. They are specifically reserved

for them to be done in companys general meetings. Section 291

empowers the board of directors to manage the affirs of the
company. In this context, meetings of shareholders and directors
become necessary. The Act has made provisions for following
different types of meetings of shareholders: (i) Statutoy meetings;
(ii) Annual General meeting; (iii) Extraordinary General meeting;
and (iv) Class Meetings.
Statutory meetings: The most important legal provisions
regarding statutory meetings are:
It is required to be held only by a public company having
share capacity. A private company or a public company
rigistered without share capital is under no obligation to hold
such a meeting.
It must be held within a period of not less than month and
not more than six months from the date on which the
company is entitled to commence business.
At least 21 days before the day of meeting, a notice of the
meeting is to be sent to every member starting it to be a
statutory meeting.
Annual general meeting (AGM) (Sections 166-168):
As the name signifies, this is an annual meeting of a company.
The provisions relating to this meeting are:
Every company, where public or private, having a share
capital or not, limited or unlimited must hold this meeting.
The meeting must be held in each calendar year and not
more than 15 months shall elapse between two meetings.
However, the first AGM may be held within 18 months from
the date of its incorporation and if such general meeting is
held within that period, it need not hold any such meeting in
the year of its incorporation or in the following year. The
maximum gap between two such meetings may be extended

by three months by taking permission of the registrar, who

may so allow for any special reason.
The meetings must be held
i.
On a day that is not a public holiday
ii.
During business hours
iii. At the registered office of the company.
Extraordinary meeting (EGM) section 169:
Clause 47 of table A (section -1) provides that all general
meetings other than AGMs shall be called the EGMs. The legal
provisions as regards such meetings are:
EGM is convened for transacting some special or urgent
business that may arise in between two AGMs, for instance,
change in the objects or shift of registered office or alteration
of capital. All business transacted at such meetings is called
special business.
An EGM may be called by:
i.
Directors of their own accord
ii.
Directors on requisition
iii. Requisitionists themselves
iv. The Tribunal
Class Meetings: A company has two classes of shares- eauality
shares and preference share. The class meetings are held for
these different classes of shareholders, as and when their rights
are affected.