Business Law: Concepts and Theories

Business Law: Concepts and Theories

Caveat Emptor

Caveat emptor (Latin term) means “let the buyer beware”. It means the buyer is responsible if the product fails to meet expectations or has some defects. This doctrine places the responsibility on buyers to reasonably examine the product/service before accepting it and take responsibility for its condition. The term was commonly used in real estate related things, but also applied to few other goods, as well as some services.

Over time, this approach resulted in several dis-satisfied buyers who felt cheated with the sellers. Over time, the caveat emptor got replaced with the caveat venditor, which now places the onus on the seller.

Question: Rakesh had planned to go for short holiday in Goa along with his wife. He started looking out for hotels in Goa and based on various websites and reviews he had booked a Le Grand Hotel in North Goa. He paid the money in advance and the booking was confirmed. On reaching this hotel, he found that the hotel was not as per the hotel’s website and reviews. Further, on reaching the hotel he realized that the pictures displayed on the website were in such angle so as to conceal the real look and image of the hotel property. Rakesh demanded a refund, but the Hotel refused stating that Rakesh was supposed to check before booking and quoted the principle of “Caveat Emptor”.

Please help Rakesh in the following:

a. Is Rakesh’s claim defeated under the principle of Caveat Emptor? Please give reasons for your answers. (5 Marks)
b. Assuming if Rakesh wanted to pursue this case before a Consumer Court, what are the remedies he would apply for?

Consumer Protection Law

India’s Consumer Protection Law came into existence in 1986. The law protects hassled consumers from deficient products and services that are offered by sellers.

Management (MBA) question on this topic

Q. Explain in details two (2) real-life instances or cases dealing with any or all “Rights of Consumer” under Consumer Protection Act, 1986.

Website: CONSUMER PROTECTION ACT, 1986

Q) Explain two (2) instances in which the consumer courts in India have given directions/orders awarding reliefs in respect to defect of goods/deficiency of service. Each instance should in detail explain (i) facts of the case and (ii) what relief and damages the consumer courts has granted.

Contracts in India

The Indian Contract Act, 1872 prescribes the law relating to contracts in India. Based on the circumstances, the act ensures that promises made by the parties to a contract are legally binding and the law enforces these rights and duties.

Website: The Indian Contract Act, 1872

MBA questions on employment contracts:

Q. Explain the statement “All Contracts are Agreement but all Agreements are not Contract” and provide two (2) examples demonstrating this statement

Q) Nisha, just fresh out of college, entered into an employment contract with Sriram Enterprises having its base in Mumbai. Please give your answer in 2 circumstances arising below:
a. Nisha at the time of entering into employment contract was 17 years 11 months but she joined the company after completing 18 years and started working only after competing 18 years. After being employed for more than a month, Ram another employee on realizing this complained to HR. Upon realizing this, HR cancelled her employment without any notice and kept her salary on hold, thus refused to pay any salary due and payable. Can Nisha sue the company for wrongful termination?
b. Nisha was appointed for the post of junior sales executive and assuming if the appointment and contract were valid, the company had inserted a non-compete clause where Nisha could not forever join any competitor of the company? Is such a clause legally valid under the Contract Act, 1872

Q) What is the difference between valid, void or voidable contract. Please explain the instances when a contract becomes valid, void or voidable contract.

Q) Please give at least two (2) real life examples on how the recent amendments in Companies Act, 2013 has brought about sweeping changes in corporate scenario of India.

Q) Arun and Smitha are good friends since a long time. Smitha is in need of a house loan with a bank and Arun has agreed to be a be a co-applicant cum “guarantor” to help Smitha secure the house loan. Smitha after taking possession of the Flat started defaulting payments of the house loan and absconded. In light of the above instance, you are called to advise the bank on the following queries:
a. What is the contract between Arun, Smitha and the bank termed as? Identify Arun, Smitha and the bank according to their roles in such contract?
b. Does the bank have any right against Arun? If yes please explain in detail? If, Arun voluntarily offers to pay the loan to the Bank, what are his rights? Please explain in detail?

Q) Karan and Arjun had entered into a contract where Karan was to supply 50,000 phones to Arjun within 2 months from the date of signing of contract. Karan was to procure the phones from China and deliver the same to Arjun. The rate of the phone was Rs. 5000/- a piece (inclusive of all taxes and duties). At the time of the execution of the contract, the duty was at 5% (five percent). Immediately after the execution of the Agreement, India had increased the duties to 1000% (one thousand percent). Therefore, Karan was finding it difficult to sell the phones at the price agreed earlier. In the circumstances, kindly advice:

a. How can Karan discharge such a contract?
b. How can Arjun enforce such a contract?

Alternate Dispute Resolutions (ADR)

Alternative Dispute Resolution (“ADR”) refers to any means of settling disputes outside of the courtroom. ADR typically includes early neutral evaluation, negotiation, conciliation, mediation, and arbitration. Mediation is also an informal alternative to litigation.

If there’s a major problem related to money, something is not delivered as per contract, if a product/service is inferior, the more common approach is to take a legal action and go to court, which is a lengthy process in India (and in most places)
But thankfully there are quicker ways to settle their disputes, other than through litigation, which people are resorting to. Want a share in your ancestral property? Not happy with the way you were terminated from the company? You always have the option of going to court. But you also have access to another method (Alternative Dispute Resolution) of resolving disputes that is easier to pursue, is quicker and much cheaper, compared to going to court. More and more high-profile labour disputes, divorce actions, and personal injury claims, are getting settled using ADR, that would otherwise result in litigation.
Alternative Dispute Resolution (ADR) involves resolving disputes without having to go through the formal process of filing a court case. Also commonly known as mediation, ADR is a great method to help resolve conflict without getting into a lot of hassle. We all are well aware of how court cases can drag on for years, wasting valuable time as well as lot of money. That is why many parties are keen to look for alternate methods that will help them resolve their problems; ADR works in most situations and has become a sought after method to resolve issues among warring parties.

MBA questions on this topic:

In today’s corporate scenario undergoing long drawn litigation is expensive and time consuming. The senior management of your company has given you a project to find the feasibility of Alternate Dispute Resolutions (ADR). Please prepare a short brief on what is ADR, its types, advantages and practical examples where ADR is feasible than conventional litigation.

If you were to advise your team on guidelines for external dispute resolution scheme, how would you do it?

Competition Law in India

Competition laws are required to protect the market from distortions and abuse of power. These laws also help in the promotion of domestic industries ensuring they are not crushed by the fat wallet of global players. However, it is also important to be in tune with the needs of the business mind. Keeping all these factors in mind, the Competition Act was enacted in India. Competition Commission of India (CCI) was established under the Competition Act, 2002 for the administration, implementation and enforcement of the Act. The objectives of the Commission include preventing practices having adverse effect on competition, promote and sustain competition in markets, protect the interests of consumers and ensuring freedom of trade.

So, for example, if businesses are planning for merger or acquisition, they need to take the approval of the CCI who will then check if the deal is likely to cause any appreciable adverse effect on competition in a market in India, or may lead to a situation where the new company becomes very strong and could abuse its dominance in the market by driving out existing companies, or it may lead to market monopoly which may result in reduced quality of services to the consumer.

Any person can file an application or information before the Secretary of Commission to investigate a matter and if the CCI finds that there is a prima facie case, it has to investigate the case further.

Academic Questions / Assignments / Case Studies on Business Law

Q. Explain the constitution of CCI under the Competition Act, 2002 and the procedure of handling complaints and enquiries.

Q. AVEC a global fast food burger chain had been recently granted permission to operate in India. But understanding the fast food chain business in India is extremely competitive, it started offering burger at Rs. 5/- each. The other fast food chain businesses started agitating the move of AVEC, but AVEC paid no heed to it. Hence, other fast food chain business are contemplating filing action against AVEC under the Competition Act, 2002. Kindly assist them on what is the process followed by Competition Commission of India in dealing with such complaint.

Q. Explain in details two (2) real-life instances of Anti-Competitive Agreements which have been prohibited by the Competition Commission of India.

Bailment vs Pledge

Key differences between Bailment and Pledge.

• Bailment refers to hand over or transfer of goods from one party to another party for some specific purpose. Pledge, on the other hand, implies a contract, where an article/thing is deposited with the money lender, as security for repayment of a debt.
• The use of goods is prohibited in pledge, whereas in bailment the goods can be used them.
• The word Bailment is derived from the French word ‘Bailor’, which means ‘to deliver’. It means possession goes voluntarily from one person to another.
• Pledge is a special kind of bailment. If the goods are bailed as a security for payment of a debt or performance of a promise, it is called Pledge.
• Example of Bailment: Sam delivers a cloth to John, a tailor making a shirt . The contract between Sam and John is bailment
• Example of Pledge: If a Farmer delivers to bank 50 bags of wheat as security for obtaining a loan, it is called pledge.

Commonly asked MBA question:
Explain Bailment and Pledge along with its features and difference. Also give practical examples of Bailment and Pledge.