question bank answers - law

8/7/2019 Question Bank Answers - LAW

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SHORT NOTES

1.

HADLEY vs BAXENDALE

H adley v Baxendale [1854] is a leading English contract law case. It set the basic rule for how to determinethe scope of consequential damages arising from a breach of contract that one is liable for all losses thatought to have been in the contemplation of the contracting parties.

Facts

The plaintiffs, Mr Hadley and another, were millers and mealmen and worked together in a partnership asproprietors of the City Steam-Mills in Gloucester. They cleaned grain, ground it into meal and dressed itinto flour, sharps, and bran. A crankshaft of a steam engine at the mill had broken and Hadley and Anorarranged to have a new one made by W. Joyce & Co. in Greenwich. Before the new crankshaft could bemade, W. Joyce & Co. required that the broken crankshaft be sent to them in order to ensure that the newcrankshaft would fit together properly with the other parts of the steam engine.

The plaintiffs contracted with defendants Baxendale and Ors, who were operating together as commoncarriers under the name Pickford & Co., to deliver the crankshaft to engineers for repair by a certain date ata cost of 2 sterling and 4 shillings. Baxendale failed to deliver on the date in question, causing Hadley tolose business. Hadley sued for the profits he lost due to Baxendale's late delivery, and the jury awardedHadley damages of 25. Baxendale appealed, contending that he did not know that Hadley would sufferany particular damage by reason of the late delivery.

Issue

The question raised by the appeal in this case was whether a defendant in a breach of contract case couldbe held liable for damages that the defendant was not aware would be incurred from a breach of the

contract.

Judgment

The Court of Exchequer Chamber, led by Baron Sir Edward Hall Alderson, declined to allow Hadley torecover lost profits in this case, holding that Baxendale could only be held liable for losses that weregenerally foreseeable, or if Hadley had mentioned his special circumstances in advance. The mere fact that aparty is sending something to be repaired does not indicate that they would lose profits if it were notdelivered on time. The court suggested various other circumstances under which Hadley could have enteredinto this contract that would not have presented such dire circumstances, and noted that where specialcircumstances exist, provisions can be made in the contract voluntarily entered into by the parties toimpose extra damages for a breach.

Significance

In its second aspect H adley v Baxendale may be regarded as giving a grossly simplified answer to thequestion which its first aspect presents. To the question, how far shall we go in charging to the defaultingpromisor the consequences of his breach, it answers with what purports to be a single test, that of foreseeability. This approach accords very much to what actually happens in practice; the courts have not


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been over-ready to pigeon-hole the cases under one or other of the so-called rules in H adley v Baxendale ,but rather to decide each case on the basis of the relevant knowledge of the defendant.

2.

SOLOMEN vs SOLOMEN

Salomon v A Salomon & Co Ltd [1897] AC 22 is a landmark UK company law case. The effect of the Lords'unanimous ruling was to firmly uphold the doctrine of corporate personality, as set out in the Companies

Act 1862.

Facts

Mr Aron Salomon was a leather boot and shoe manufacturer. His firm was in Whitechapel High Street , withwarehouses and a large establishment. He had had it for 30 years and "he might fairly have counted uponretiring with at least 10,000 in his pocket." He had a wife, a daughter and five sons. Four of the sonsworked with him. The sons wanted to be partners, so he turned the business into a limited company. Thewife and five eldest children became subscribers and two eldest sons also directors. Mr Salomon took20,001 of the company's 20,007 shares.

The price fixed by the contract was 39,000, which was "extravagent" and not "anything that can be called abusiness like or reasonable estimate of value." Transfer of the business happened on June 1, 1892. Purchasemoney for the business was paid, totalling 20,000, to Mr Salomon. 10,000 was paid in debentures to MrSalomon as well (ie, Salomon gave the company a loan, secured by a charge over the assets of thecompany). The balance paid went to extinguish the business debts (1000 of which was cash to Sal omon).

But soon after Mr Salomon incorporated his business, there was economic trouble. A series of strikes in theshoe industry led the government, Salomon's main customer, to split its contracts between more firms (theGovernment wanted to diversify its supply base to avoid the risk of its few suppliers being crippled bystrikes). His warehouse was full of unsold stock. He and his wife lent the company money. He cancelled hisdebentures. But the company needed more money, and they sought 5000 from a Mr Edmund Broderip.They gave him a debenture, the loan with 10% interest and secured by a floating charge. But the businessstill failed, and they could not keep up with the interest payments. In October 1893 Mr Broderip sued toenforce his security. That was the end. The company was put into liquidation. Mr Broderip was paid butother unsecured creditors were not.

The liquidator met Broderips claim with a counter claim, joining Salomon as a defendant, that thedebentures were invalid for being issued as fraud. The liquidator claimed all the money back that wastransferred when the company was started: rescission of the agreement for the business transfer itself,cancellation of the debentures and repayment of the balance of the purchase money.

Judgement

High Court

In the first case, Broderip v Salomon [1893] B 4793, Vaughan Williams J said Mr Broderips claim was valid. Itwas undisputed that the 20,000 shares were fully paid up. He said the company had a right of indemnityagainst Mr Salomon. He said the signatories of the memorandum were mere dummies, the company wasjust Mr Salomon in another form, an alias, his agent. Therefore it was entitled to indemnity from theprincipal. The liquidator amended the counter claim, and an award was made for indemnity.


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Court of Appeal

The Court of Appeal [1895] 2 Ch 323 confirmed Vaughan Williams J's decision against Mr Salomon, thoughon the grounds that Mr. Salomon had abused the privileges of incorporation and limited liability, whichParliament had intended only to confer on "independent bona fide shareholders, who had a mind and willof their own and were not mere puppets". Lindley LJ (an expert on partnership law) held that the companywas a trustee for Mr Salomon, and as such was bound to indemnify the company's debts. Lopes LJ and KayLJ variously described the company as a myth and a fiction and said that the incorporation of the businessby Mr Salomon had been a mere scheme to enable him to carry on as before but with limited liability.

House of Lords

The House of Lords unanimously overturned this decision, rejecting the arguments from agency and fraud.They held that there was nothing in the Act about whether the subscribers (i.e. the shar eholders) should beindependent of the majority shareholder. The company was duly constituted in law and it was not thefunction of judges to read into the statute limitations they themselves considered expedient. Lord HalsburyLC stated that the statute "enacts nothing as to the extent or degree of interest which may be held by each

of the seven [shareholders] or as to the proportion of interest or influence possessed by one or the majorityover the others."

Lord Halsbury remarked that - even if he were to accept the proposition that judges were at liberty to insertwords to manifest the intention they wished to imput e to the Legislature - he was unable to discover whataffirmative proposition the Court of Appeal's logic suggested. He considered that identifying such anaffirmative proposition represented an "insuperable difficulty" for anyone putting forward the argumentpropounded by the Lords Justices of Appeal.

Lord Herschell noted the potentially "far reaching" implications of the Court of App eal's logic and that in

recent years many companies had been set up in which one or more of the seven shareholders were"disinterested persons" who did not wield any influence over the management of the company. Anyonedealing with such a company was aware of its nature as such, and could by consulting the register of shareholders become aware of the breakdown of share ownership among the shareholders.

Lord Macnaghten asked what was wrong with Mr. Salomon taking advantage of the provisions set out inthe statute, as he was perfectly legitimately entitled to do. It was not the function of judges to readlimitations into a statute on the basis of their own personal view that, if the laws of the land allowed such athing, they were "in a most lamentable state", as Malins V-C had stated in an earlier case in point, In ReBaglan Hall Colliery Co., which had likewise been overturned by the House of Lords.

The House held:

"Either the limited company was a legal entity or it was not. If it were, the business belonged to it and notto Mr Salomon. If it was not, there was no person and no thing to be a n agent [of] at all; and it is impossibleto say at the same time that there is a company and there is not."

The House further noted:

"The company is at law a different person altogether from the subscribers to the Memorandum, and thoughit may be that after incorporation of the business is precisely the same as it was before and the same


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persons and managers, and the same hands receive the profits, the company is not in law the agent of thesubscribers or trustees for them. Nor are the subscribers or members liable in any shape or form except tothe extent and in the manner provided by the act."

On the issue of floating charges, Lord Macnaghten also said this.

For such a catastrophe as has occurred in this case some would blame the law that allows the creation of a

floating charge. But a floating charge is too convenient a form of security to be lightly abolished. I havelong thought, and I believe some of your Lordships also think, that the ordinary trade creditors of a tradingcompany ought to have a preferential claim on the assets in liquidation in respect of debts incurred within acertain limited time before the winding-up. But that is not the law at present. Everybody knows that whenthere is a winding-up debenture holders generally step in and sweep off everything; and a great scandal itis.

Significance

In the decades since Salomon's case, various exceptional circumstances have been delineated, both by

legislatures and the judiciary, in England and elsewhere (including Ireland) when courts can legitimately disregard a company's separate legal personality, such as where crime or fraud has been committed.

3.

ASH BERY RAILWAY CARRIAGE CASE

Ashbury Railway Carriage and Iron Co Ltd v Riche (1875) LR 7 HL 653 is a UK company law case, whichconcerned the objects clause of a company.

Its importance has been diminished as a result of the Companies Act 2006 s 31, which allows for unlimitedobjects for which a company may be run. Furthermore, any limits a company does have in its objects clausehas no effect whatsoever for people outside a company (s 39 CA 2006), except as a general issue of authority of the company's agents.

Facts

Incorporated under the Companies Act 1869, the Ashbury Railway Carriage and Iron Company Ltdsmemorandum, clause 3, said its objects were to make and sell, or lend on hire, railway-carriages andclause 4 said activities beyond needed a special resolution. But the company agreed to give Riche and hisbrother a loan to build a railway in Belgium. Later, the company repudiated the agreement. Riche sued, andthe company pleaded the action was ultra vires.

Judgement

Exchequer Court

The judges of the exchequer chamber being equally divided, the decision of the court below was affirmed.

Blackburn J said,


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"If I thought it was at common law an incident to a corporation that its capacity should be limitedby the instrument creating it, I should agree that the capacity of a company incorporated under theact of 1862 was limited to the object in the memorandum of association. But if I am right in theopinion which I have already expressed, that the general power of contracting is an incident to acorporation which it requires an indication of intention in the legislature to take away, I see no suchindication here. If the question was whether the legislature had conferred on a corporation, createdunder this act, capacity to enter into contracts beyond the provisions of the deed, there could beonly one answer. The legislature did not confer such capacity. But if the question be, as I apprehendit is, whether the legislature have indicated an intention to take away the power of contractingwhich at common law would be incident to a body corporate, and not merely to limit the autho rityof the managing body and the majority of the shareholders to bind the minority, but also toprohibit and make illegal contracts made by the body corporate, in such a manner that they wouldbe binding on the body if incorporated at common law, I think the answer should be the otherway."

House of LordsThe House of Lords, agreeing with the three dissentient judges in the Exchequer Chamber , pronounced theeffect of the Companies Act to be the opposite of that indicated by Mr Justice Blackburn. It held that if acompany pursues objects beyond the scope of the memorandum of association, the company's actions areultra vires . Lord Cairns LC said,

It was the intention of the legislature, not implied, but actually expressed, that the corporations, shouldnot enter, having regard to this memorandum of association, into a contract of this description. Thecontract in my judgment could not have been ratified by the unanimous assent of the whole

corporation.

4.

TURQUANDS RULE ( ROYAL BRIT ISH BANK vsTURQUAND)

Royal British Bank v Turquand (1856) 6 E&B 327 is a UK company law case that held people transacting withcompanies are entitled to assume that internal company rules are complied with, even if they are not. This"indoor management rule" or the "Rule in Turquand's Case" is applicable in most of the common law world.It originally mitigated the harshness of the constructive notice doctrine, and in the UK it is nowsupplemented by the Companies Act 2006 sections 39-41.

Facts

Mr Turquand was the official manager (liquidator) of the insolvent Camerons Coalbrook Steam, Coal, andSwansea and London Railway Company. It was incorporated under the Joint Stock Companies Act 1844.The company had given a bond for 2000 to the Royal British Bank , which secured the companys drawingson its current account. The bond was under the companys seal, signed by two directors and the secretary.When the company was sued, it alleged that under its registered deed of settlement (the articles of association), directors only had power to borrow what had been authorised by a company resolution. Aresolution had been passed but not specifying how much the directors could borrow.


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Judgement

Sir John Jervis CJ, for the Court of Exchequer Chamber affirmed the Queens Bench and said that it wasvalid, so the Royal British Bank could enforce the terms of the bond. He said the bank was deemed to beaware that the directors could borrow only up to the amount resolutions allowed. Articles of associationwere registered in Companies House, so there was constructive notice. But the bank could not be deemedto know about which ordinary resolutions passed, because these were not registrable. The bond was valid,because there was no requirement to look into the companys internal workings. This is the indoormanagement rule, that the companys indoor affairs are the companys problem. Jervis CJ gave thejudgment of the Court.

I am of opinion that the judgment of the Court of Queen's Bench ought to be affirmed. I incline to thinkthat the question which has been principally argued both here and in that Court does not necessarilyarise, and need not be determined. My impression is (though I will not state it as a fixed opinion) thatthe resolution set forth in the replication [332] goes far enough to satisfy the req uisites of the deed of settlement. The deed allows the directors to borrow on bond such sum or sums of money as shall from

time to time, by a resolution passed at a general meeting of the Company, be authorized to beborrowed: and the replication shews a resolution, passed at a general meeting, authorizing thedirectors to borrow on bond such sums for such periods and at such rates of interest as they mightdeem expedient, in accordance with the deed of settlement and the Act of Parliament; but theresolution does not otherwise define the amount to be borrowed. That seems to me enough. If that beso, the other question does not arise. But whether it be so or not we need not decide; for it seems to usthat the plea, whether we consider it as a confession and avoidance or a special Non est factum, doesnot raise any objection to this advance as against the Company. We may now take for granted that thedealings with these companies are not like dealings with other partnerships, and that the partiesdealing with them are bound to read the statute and the deed of settlement. But they are not bound todo more. And the party here, on reading the deed of settlement, would find, not a prohibition fromborrowing, but a permission to do so on certain conditions. Finding that the authority might be madecomplete by a resolution, he would have a right to infer the fact of a resolution authorizing that whichon the face of the document appeared to be legitimately done.

Significance

The rule in Turquand's case was not accepted as being firmly entrenched in law until it was endorsed by theHouse of Lords. In M ahony v East H olyford M ining Co Lord Hatherly phrased the law thus:

When there are persons conducting the affairs of the company in a manner which appears to beperfectly consonant with the articles of association, those so dealing with them exter nally are not tobe affected by irregularities which may take place in the internal management of the company.

So, in M ahoney , where the company's articles provided that cheques should be signed by any two of thethree named directors and by the secretary, the fact that the directors who had signed the cheques hadnever been properly appointed was held to be a matter of internal management, and the third parties who


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received those cheques were entitled to presume that the directors had been properly appointed, and cashthe cheques.

However, it is sometimes possible for an outsider to ascertain wh ether an internal requirement or procedurehas been complied with. If it is possible to ascertain this fact from the company's public documents, thedoctrine of disclosure and the doctrine of constructive notice will apply and not the Turquand rule. TheTurquand rule was formulated to keep an outsider's duty to inquire into the affairs of a company withinreasonable bounds, but if the compliance or noncompliance with an internal requirement can beascertained from the company's public documents, the doctrine of disclosure and the doctrine of constructive notice will apply. If it is an internal requirement that a certain act should be approved byspecial resolution, the Turquand rule will therefore not apply in relation to that specific act, since a specialresolution is registered with Companies House (in the United Kingdom), and is deemed to be publicinformation.

5.

FOSS vs HARBOTT LE

F oss v H arbottle (1843) 67 ER 189 is a leading English precedent in corporate law. In any action in which a

wrong is alleged to have been done to a company, the proper claimant is the company itself. This is knownas "the rule in F oss v H arbottle ", and the several important exceptions that have been developed are oftendescribed as "exceptions to the rule in F oss v H arbottle ". Amongst these is the 'derivative action', whichallows a minority shareholder to bring a claim on behalf of the company. This applies in situations of 'wrongdoer control' and is, in reality, the only true exceptio n to the rule. The rule in F oss v H arbottle is bestseen as the starting point for minority shareholder remedies.

Facts

Richard Foss and Edward Starkie Turton were two minority shareholders in the "Victoria Park Company".T

he company had been set up in September 1835 to buy 180 acres (0.73 km2

) of land near Manchester and,according to the report,

"enclosing and planting the same in an ornamental and park-like manner, and erecting houses thereon withattached gardens and pleasure-grounds, and selling, letting or otherwise disposing thereof".

This became Victoria Park, Manchester. Subsequently, an Act of Parliament incorporated the company. Theclaimants alleged that property of the company had been misapplied and wasted and various mortgageswere given improperly over the company's property. They asked that the guilty parties be held accountableto the company and that a receiver be appointed.

The defendants were the five company directors ( Thomas Harbottle, Joseph Adshead, Henry Byrom, JohnWesthead, Richard Bealey) and the solicitors and architect (Joseph Denison, Thomas Bunting and RichardLane); and also H Rotton, E Lloyd, T Peet, J Biggs and S Brooks, the several assignees of Byrom, Adsheadand Westhead, who had become bankrupts.

Judgement

The court dismissed the claim and held that when a company is wronged by its directors it is only thecompany that has standing to sue. In effect the court established two rules. Firstly, the "proper plaintiff rule"is that a wrong done to the company may be vindicated by the company alone. Secondly, th e "majority rule


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principle" states that if the alleged wrong can be confirmed or ratified by a simple majority of members in ageneral meeting, then the court will not interfere

The Victoria Park Company is an incorporated body, and the conduct with which the Defendants arecharged in this suit is an injury not to the Plaintiffs exclusively; it is an injury to the whole corporation byindividuals whom the corporation entrusted with powers to be exercised only for the good of thecorporation. And from the case of The Attorney-General v Wilson (1840) Cr & Ph 1 (without going further) itmay be stated as undoubted law that a bill or information by a corporation will lie to be relieved in respectof injuries which the corporation has suffered at the hands of persons standing in the situation of thedirectors upon this record. This bill, however, differs from that in The Attorney-General v Wilson in thisthat, instead of the corporation being formally represented as Plaintiffs, the bill in this case is brought bytwo individual corporators, professedly on behalf of themselves and all the other members of thecorporation, except those who committed the injuries complained ofthe Plaintiffs assuming to themselvesthe right and power in that manner to sue on behalf of and represent the corporation itself.

It was not, nor could it successfully be, argued that it was a matter of course for any individual members of a corporation thus to assume to themselves the right of suing in the name of the corporation. In law thecorporation and the aggregate members of the corporation are not the same thing for purposes like this;and the only question can be whether the facts alleged in this case justify a departure from the rule which,prim facie , would require that the corporation should sue in its own name and in its corporate character,or in the name of someone whom the law has appointed to be its representative...

The first objection taken in the argument for the Defendants was that the individual members of thecorporation cannot in any case sue in the form in whic h this bill is framed. During the argument I intimatedan opinion, to which, upon further consideration, I fully adhere, that the rule was much too broadly statedon the part of the Defendants. I think there are cases in which a suit might properly be so framed.Corporations like this, of a private nature, are in truth little more than private partnerships; and in caseswhich may easily be suggested it would be too much to hold that a society of private persons associatedtogether in undertakings, which, though certainly beneficial to the public, are nevertheless matters of private property, are to be deprived of their civil rights, inter se , because, in order to make their commonobjects more attainable, the Crown or the Legislature may have conferred upon them the benefit of acorporate character. If a case should arise of injury to a corporation by some of its members, for which noadequate remedy remained, except that of a suit by individual corporators in their private characters, andasking in such character the protection of those rights to which in their corporate character they wereentitled, I cannot but think that the principle so forcibly laid down by Lord Cottenham in Wallworth v H olt (4Myl & Cr 635; see also 17 Ves 320, per Lord Eldon) and other cases would apply, and the claims of justice

would be found superior to any difficulties arising out of technical rules respecting the mode in whichcorporations are required to sue.

But, on the other hand, it must not be without reasons of a very urgent character that established rules of law and practice are to be departed from, rules which, though in a sense technical, are founded on generalprinciples of justice and convenience; and the question is whether a case is stated in this bill entitling thePlaintiffs to sue in their private characters...

Now, that my opinion upon this case may be clearly understood, I will consider separately the two principalgrounds of complaint to which I have adverted, with reference to a very marked distinction between them.


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The first ground of complaint is one which, though it might prim facie entitle the corporation to rescindthe transactions complained of, does not absolutely and of necessity fall under the description of a voidtransaction. The corporation might elect to adopt those transactions, and hold the directors bound bythem. In other words, the transactions admit of confirmation at the option of the corporation. The secondground of complaint may stand in a different position; I allude to the mortgaging in a manner notauthorized by the powers of the Act. This, being beyond the powers of the corporation, may admit of no

confirmation whilst any one dissenting voice is raised against it. This distinction is found in the case of P reston v The Grand Collier Dock Company (1840) 11 Sim 327, SC; 2 Railway Cases 335.

On the first point it is only necessary to refer to the clauses of the Act to shew that, whilst the supremegoverning body, the proprietors at a special general meeting assembled, retain the power of exercising thefunctions conferred upon them by the Act of Incorporation, it cannot be competent to individualcorporators to sue in the manner proposed by the Plaintiffs on the present record. This in effect purports tobe a suit by cestui que trusts complaining of a fraud committed or alleged to have been committed bypersons in a fiduciary character. The complaint is that those trustees have sold lands to themselves,ostensibly for the benefit of the cestui que trusts. The proposition I have advanced is that, although the Act

should prove to be voidable, the cestui que trusts may elect to confirm it. Now, who are the cestui quetrusts in this case? The corporation, in a sense, is undoubtedly the cestui que trust; but the majority of theproprietors at a special general meeting assembled, independently of any general rules of law upon thesubject, by the very terms of the incorporation in the present case, has power to bind the whole body, andevery individual corporator must be taken to have come into the corporation upon the terms of being liableto be so bound. How then can this Court act in a suit constituted as this is, if it is to be assumed, for thepurposes of the argument, that the powers of the body of the proprietors are still in existence, and maylawfully be exercised for a purpose like that I have suggested? Whilst the Court may be declaring the actscomplained of to be void at the suit of the present Plaintiffs, who in fact may be the only proprietors whodisapprove of them, the governing body of proprietors may defeat the decree by lawfully resolving uponthe confirmation of the very acts which are the subject of the suit. The very fact that the governing body of proprietors assembled at the special general meeting may so bind even a reluctant minority is decisive toshew that the frame of this suit cannot be sustained whilst that body retains its functions...

The second point which relates to the charges and incumbrances alleged to have been illegally made on theproperty of the company is open to the reasoning which I have appli ed to the first point, upon the questionwhether, in the present case, individual members are at liberty to complain in the form adopted by this bill;for why should this anomalous form of suit be resorted to, if the powers of the corporation may be calledinto exercise? But this part of the case is of greater difficulty upon the merits. I follow, with entire assent, theopinion expressed by the Vice-Chancellor in P reston v The Grand Collier Dock Company , that if a transactionbe void, and not merely voidable, the corporation cannot confirm it, so as to bind a dissenting min ority of its members. But that will not dispose of this question. The case made with regard to these mortgages orincumbrances is, that they were executed in violation of the provisions of the Act. The mortgagees are notDefendants to the bill, nor does the bill seek to avoid the security itself, if it could be avoided, on which Igive no opinion. The bill prays inquiries with a view to proceedings being taken aliunde to set aside thesetransactions against the mortgagees. The object of this bill against th e Defendants is to make themindividually and personally responsible to the extent of the injury alleged to have been received by thecorporation from the making of the mortgages. Whatever the case might be, if the object of the suit was to


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rescind these transactions, and the allegations in the bill shewed that justice could not be done to theshareholders without allowing two to sue on behalf of themselves and others, very different considerationsarise in a case like the present, in which the consequences only of the alleged illegal Acts are sought to bevisited personally upon the directors. The money forming the consideration for the mortgages was received,and was expended in, or partly in, the transactions which are the subject of the first ground of c omplaint.Upon this, one question appears to me to be, whether the company could confirm the former transactions,

take the benefit of the money that has been raised, and yet, as against the directors personally, complain of the acts which they have done, by means whereof the company obtains that benefit which I suppose tohave been admitted and adopted by such confirmation. I think it would not be open to the company to dothis; and my opinion already expressed on the first point is that the transactions wh ich constitute the firstground of complaint may possibly be beneficial to the company, and may be so regarded by theproprietors, and admit of confirmation. I am of opinion that this question the question of confirmation oravoidancecannot properly be litigated upon this record, regard being had to the existing state andpowers of the corporation, and that therefore that part of the bill which seeks to visit the directorspersonally with the consequences of the impeached mortgages and charges, the benefit of which thecompany enjoys, is in the same predicament as that which relates to the other subjects of complaint. Bothquestions stand on the same ground, and, for the reasons which I stated in considering the former point,these demurrers must be allowed.

Significance

The rule was later extended to cover cases where what is complained of is some internal irregularity in theoperation of the company. However, the internal irregularity must be capable of beingconfirmed/sanctioned by the majority.

The rule in F oss v H arbottle has another important implication. A shareholder cannot generally bring a claimto recover any reflective loss - a diminution in the value of his or her shares in circumstances where thediminution arises because the company has suffered an actionable loss. The proper course is for thecompany to bring the action and recoup the loss with the consequence that the value of the shares will berestored.

Ex ceptions

U ltra vires and illegality

Actions requiring a special majority

Invasion of individual rights

"Frauds on the minority"


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6.

QUASI CONTRACT

A quasi-contract (or implied-in-law contract) is a fictional contract created by courts for equitable, notcontractual purposes . A quasi-contract is not an actual contract, but is a legal substitute for a contractformed to impose equity between two parties. The concept of a quasi-contract is that of a contract thatshould have been formed, even though in actuality it was not. It is used when a court finds it appropriate tocreate an obligation upon a non-contracting party to avoid injustice and to ensure fairness. It is invoked incircumstances of unjust enrichment, and is connected with the concept of restitution.

Generally the existence of an actual or implied-in-fact contract is required for the defendant to be liable forservices rendered, and a person who provides a service uninvited is an officious intermeddle who is notentitled to compensation. "Would-be plaintiffs cannot deliver unordered goods or services and demandpayment for the benefit....A corollary is that one who does have an enforceable contract is bound by thecontract's terms: subject to a few controversial exceptions, she cannot sue for restitution of the value of benefits conferred..." However, in many jurisdictions under certain circumstances plaintiffs may be entitledto restitution under quasi-contract (as in the example of Oklahoma below).

Quasi-contracts are defined to be "the lawful and purely voluntary acts of a man, from which there results

any obligation whatever to a third person, and sometime a reciprocal obligation between the parties."

E lements

According to the Oklahoma pattern jury instructions , the elements of quasi-contract are:

1.

Plaintiff furnished / rendered valuable goods / services to Defendant with a reasonableexpectation of being compensated;

2.

Defendant knowingly accepted the benefits of the goods / services; and3.

Defendant would be unfairly benefited by the services / receiving the goods if nocompensation were paid to the Plaintif f. [7]

Knowledge , the second element, is required, and if the defendant had no knowledge of thebenefits, there would be no contract of any kind, even a quasi -contract.

In contracts, it is the consent of the contracting parties which produces the obligation; in quasi -contracts no consent is required, and the obligation arises from the law or natural equity, on thefacts of the case. T hese acts are called quasi -contracts, because, without being contracts, they bindthe parties as contracts do. [citation needed ]

"A quasi-contract is not really a contract at all in the normal meaning of a contract," according to

one scholar, but rather is "an obligation imposed on a party to make things fair."

The Oklahoma Supreme Court has:

described the distinction between a contract and a quasi -contract in T & S Inv. Co. v. Coury, 593P.2d 503 (Okla. 1979), as follows:

A "quasi" or constructive contract is an implication of law. An "implied" contract is an implicationof fact. In the former the contract is a mere fiction, imposed in order to adapt the case to a givenremedy. In the latter, the contract is a fact legitimately inferred. In one the intention is disregarded;


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in the other, it is ascertained and enforced. In one, the duty defines the contract; in the other, thecontract defines the duty. (quoting from Berry v. Barbour, 279 P.2d 335, 338 (Okla. 1954)).

Oklahoma Uniform Jury Instructions, 23.10 citing cases therein at [7].

Liability

The defendant's liability under quasi -contract is equal to the value of the benefit conferred by theplaintiff. The value is the fair market value of the benefit and not necessarily the subjective valuethat the defendant enjoys. [citation needed ] A traditional measure of the fair market value is calledquantum meruit , for "as much as is deserved." [citation needed ] For example, accountant prepares tax-payer's taxes, finding a way to get him an unusually large refund. T ax -payer doesn't payaccountant. Assuming a court finds no contract, tax-payer is only liable for the fair market value of tax preparation services, which is not inflated up to account for the unusually large refund heenjoyed.

Under Oklahoma law:

The measure of damages in a quasi -contract action is the amount which will compensate the partyaggrieved for the detriment proximately caused thereby, and, if the obligation is to pay money, thedetriment caused by the breach in the amount due by the terms of the obligation.

Welling v. American Roofing & Sheet M etal Co., Inc., 617 P.2d 206, 209-210 (Okla. 1980), cited at

Ex ample

An example of a quasi-contract is the case of a plumber who accidentally installs a sprinkler systemin the lawn of the wrong house. The owner of the house had learned the previous day that hisneighbor was getting new sprinklers. That morning, he sees the plumber begin installing them inhis own lawn. Pleased at the mistake, he says nothing, and then refuses to pay when the plumberhands him the bill, claiming that he never agreed to pay for the sprinklers. If t he plumber canprove that the man knew that the sprinklers were being installed mistakenly on his property andfailed to prevent the installation, the court would make him pay under a quasi -contract theory. If that knowledge could not be proven, he would n ot be liable.

Compare this example with the three elements from above:

1.

The plumber conferred a benefit on the owner by installing the sprinkler system.

2. The owner accepted the installation of the sprinkler system by not stopping the plumberwhen he first noticed the mistake.3.

Without payment, the owner will unfairly benefit at the expense of the mistaken plumber.

Because the owner failed to stop the plumber from installing the sprinkler system, with theintention of benefiting from the mistake, the court will create a quasi-contract. The owner's failureto refuse the plumber's service will be interpreted as an implicit agreement to pay for it and thecourt will treat it as if there was an actual contract. However, if the owner were away from home at


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the time of the installation and had no chance to stop it, he could not be held liable and theplumber will be forced to bear the costs of his mistake.

Examples of quasi-contracts vary by jurisdiction. A painter, who mistakenly paints a house with theowner's knowledge, can sue in court to get paid. A mechanic who fixes the brakes to a car asrequested, but who also makes repairs to the axle (without which the brakes would not function

properly), has an implied quasi-contract. A homebuilder who signs a contract with a purportedagent, who actually has no authority, can recover the cost of the services and materials from thehomeowner

7.

CONSUMER AND MANUFACTURER (V ery Important )

8.

CYBER LAW (V ery Important )


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A g reement not exp ressly de cla red void: Section 24 to 30 specify certain types of agreementwhich have been expressly declared void. For example Restraint of marriage which has beenexpressly declared void under Section 26. If John promises to pay $50 to Mary if she does notmarry throughout her life and Mary promise not to marry at all. But this agreement cannot betreated as a valid contract owing to the fact that, under section 26 restraint of marriage expresslydeclared void. Some of the agreements which have been expressly declared void are agreement in

restraint of legal proceedings, agreement in restraint of trade, agreement in restraint of marriag e and agreement by way of wager.

Pr ope r offe r and it s acceptan ce: To create a valid contract, there must be two or more parties.One who makes the offer and the other who accepts the offer. One person cannot make an offerand accept it. There must be at least two persons. Also the offer must be clear and properlycommunicated to the other party. Similarly acceptan ce must be communicated to the other partyand the proper and unconditional acceptance must be communicated to the offerer. Proper offerand proper acceptance should be there to treat the agreement as a contract which is enforceableby law.

Free Consent: According to section 14, consent is said to be free when it is not caused by (i)coercion, (ii) undue influence (iii) fraud, (iv) misrepresentation, or (v) mistake. If the contract made byany of the above four reason, at the option of the aggrieved party it could be treated as a voidcontract. If the agreement induced by mutual mistake the agreement would stand void orcanceled. An agreement can be treated as a valid contract when the consent of the parties are freeand not under any undue influence, fear or pressure etc. T he consent of the parties must begenuine and free consent.

Capa city of pa rties to cont ract: Parties entering into an agreement must be competent andcapable of entering into a contract. If "A" agrees to sell a Government property to B an d B agreesto buy that property, it could not treated as a valid agreement as A is not authorized or owner of the property. If any of the party is not competent or capable of entering into the agreement, thatagreement cannot be treated as a valid contract. According to Section 11 of the Act which saysthat every person is competent to contract who is of the age of majority according to the law towhich he is subject and who is of sound mind, and is not disqualified from contracting by any law towhich he is subject. So it is clear that the party must be of sound mind and of age to enter into avalid agreement which can be treated as a valid contract.

Ce r tainty of meaning: Wording of the agreement must be clear and not uncertain or vague.Suppose John agrees to sell 500 tones of oil to Mathew. But, what kind of oil is not mentionedclearly. So on the ground of uncertainty, this agreement stands void. If the meaning of theagreement can be made certain by the circumstances, it could be treated as a valid cont ract. Forexample, if John and Mathew are sole trader of coconut oil, the meaning of the agreement can bemade certain by the circumstance and in that case, the agreement can be treated as a validcontract. According to Section 29 of the Contract Act says that Agreements, the meaning of whichis not certain or capable of being made certain, are void.


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Possi b ility of pe rfo rman ce: As per section 56, if the act is impossible of performance, physicallyor legally, the agreement cannot be enforced by law. T here m ust be possibility of performance of the agreement. Impossible agreements like one claims to run at a speed of 1000km/hour or Jumpto a height of 100feet etc. would not create a valid agreement. All such acts which are impossibleof performance would not c reate a valid contract and cannot treated as a valid contract. Inessence, there must be possibility of performance must be there to create a valid contract.

Lawful conside ration: An agreement must be supported by a consideration of something inreturn. T hat is, the agreement must be supported by some type of service or goods in return of money or goods. However, it is not necessary the price should be always in terms of money. Itcould be a service or another goods. Suppose X agrees to buy books from Y for $50. Here theconsideration of X is books and the consideration of Y is $50. It can be a promise to act (doingsomething) or forbearance (not doing something). The consideration may be present, future or canbe past. But the consideration must be real. F or example If John agrees to sell his car of $ 50000 toPeter for $20000. This is a valid contract if John agrees to sell his car not under any influence orforce. It can be valid only if the consideration of John is free. An agreement is valid only when t heacts are legal. Illegal works like killing another for money, or immoral works or illegal acts arecannot be treated as a valid agreement. So, illegal works will not come under the contract act. Legal fo rmalities: T he contract act does not insist that the agreement must be in writing, it couldbe oral. But, in some cases the law strictly insist that the agreement must be in writing likeagreement to sell immovable property must be in writing and should be registered under theTransfer of Property Act, 1882. These agreement are valid only when they fulfill the formalities likewriting, registration, signing by the both the parties are completed. If these legal formalities arenot completed, it cannot be treated as a valid contract.

Most important essentials of a valid contract are mentioned above. These elements should bepresent in a contract to make it a valid contract. If any one of them is missing we cannot treat thatagreement as a valid contract.


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Q2. Under Sale of Goods Act what are Conditions and Warranties?

T raditionally a term of a contract -- whether an express or an Implied term -- can be classified asrepresentation, warranty, and condition.

A representation is something that is offered in order to induce the other party to contract; it is, in a way,independent of the contract itself. If I offer to sell you my car, saying that `you won't find a nicer FordFandango in London', no sensible person would assume that I intent to be contractually bound by thatstatement. Representations are frequently referred to as `mere puff'. Of course, if it demonstrably false, thestatement may be a Misrepresentation.

A warranty, traditionally, is a term which is not fundamental to the contract and, if breached, does not givethe injured party the right to repudiate. He may, of course, have a right to Damages.

A condition is a term which, when breached, allows the injured party to treat the contract as discharged.Here too there may be a remedy in damages, but also the injured party is freed from his obligations underthe contract.

More recently, the courts have started to recognise the existence of `innominate terms'. These are termswhose status as conditions or warranties is not defined by the construction of the words, or the intentionsof the parties, but on the effect that breach would have. This usage appears to follow from The hongkongfir 1961, in which Lord Diplock described how a contractual term could be treated as a condition or awarranty.

How are terms distinguished from warranties? This is not always easy; where there is no statutory assistance(e.g., Sale of goods act 1979) the courts will have to assess the intentions of the parties. Of course, theparties themselves have the right to make specific terms into absolute conditions in the wording of thecontract; however, following Lschuler agvwickman machine tools ltd 1973 it appears that such wording isonly one factor that courts will consider when assessing whether a term is a condition or not.


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Q3. What are the Rights of an Unpaid Seller?

45. "Unpaid selle r" defined . - (1) The seller of goods is deemed to be an "unpaid seller" within themeaning of this Act -

(a) when the whole of the price has not been paid or tendered;

(b) when a bill of exchange or other negotiable instrument has been received as condit ional payment, andthe condition on which it was received has not been fulfilled by reason of the dishonor of the instrument orotherwise.

(2) In this Chapter, the term "seller" includes any person who is in the position of a seller, as, for instance, anagent of the seller to whom the bill of landing has been endorsed, or a consignor or agent who has himself paid, or is directly responsible for, the price.

46. Unpaid selle r' s rights . - (1) Subject to the provisions of the Act and of any law for the time being inforce, notwithstanding that the property in the goods may have passed to the buyer, the unpaid seller of goods, as such, has by implications of law -

(a) a lien on the goods for the price while he is in possession of them;

(b) in case of the insolvency of the buyer a right of stopping the goods in transit after he has parted withthe possession of them;

(c) a right of re-sale as limited by this Act.

(2) Where the property in goods has not passed to the buyer, the unpaid seller has, in addition to h is otherremedies, a right of withholding delivery similar to and co -extensive with his rights of lien and stoppage intransit where the property has passed to the buyer.

Unpaid Selle r' s Lien

47. Selle r' s lien . - (1) Subject to the provisions of this Act, the unpaid seller of goods who is in possessionof them is entitled to retain possession of them until payment or tender of the price in the following cases,namely: -

(a) where the goods have been sold without any stipulation as to credit;

(b) where the goods have been sold on credit, but the term of credit has expired;

(c) where the buyer becomes insolvent.

(2) The seller may exercise his right of lien notwithstanding that he is in possession of the goods as agent orbailee for the buyer.

48. Part deli very. - Where an unpaid seller has made part delivery of the goods, he may exercise his rightof lien on the remainder, unless such part delivery has been made under such circumstance as to show anagreement to waive the lien.


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49. Termination of lien . - (1) The unpaid seller of goods loses his lien thereon -

(a) when he delivers the goods to a carrier or other bailee for the purpose of transmission to the buyerwithout reserving the right of disposal of the goods;

(b) when the buyer or his agent lawfully obtains possession of the goods;

(c) by waiver thereof.

(2) The unpaid seller of goods, having a lien thereon, does not lose his lien by reason only that he hasobtained a decree for the price of the goods.

Stoppage in Transit

50. R ight of stoppage in t ransit . - Subject to the provisions of this Act, when the buyer of goods becomesinsolvent, the unpaid seller who has parted with the possession of the goods has the right of stopping themin transit, that is to say, he may resume possession of the goods as lo ng as they are in the course of transit,

and may retain them until the payment or tender of the price.

51. Du ration of t ransit . - (1) Goods are deemed to be in course of transit from the time when they aredelivered to a carrier or other bailee for the purpose of transmission to the buyer, until the buyer or hisagent in that behalf takes delivery of them from such carrier or other bailee.

(2) If the buyer or his agent in that behalf obtains delivery of the goods before their arrival at the appointeddestination, the transit is at an end.

(3) If, after the arrival of the goods at the appointed destination, the carrier or other bailee acknowledges tothe buyer or his agent that he holds the goods on his behalf and continues in possession of them as bailee

for the buyer or his agent, the transit is at an end it is immaterial that a further destination for the goodsmay have been indicated by the buyer.

(4) If the goods are rejected by the buyer and the carrier or other bailee continues in possession of them,the transit is not deemed to be at an end, even if the seller has refused to receive them back.

(5) When goods are delivered to a ship chartered by the buyer, it is a question depending on thecircumstances of the particular case, whether they are in the possession of the master as a carrier or asagent of the buyer.

(6) Where the carrier or other bailee wrongfully refuses to deliver the goods to the buyer or his agent in

that behalf, the transit is deemed to be at an end.

(7) Where part delivery of the goods has been made to the buyer or his agent in that behalf, the remainderof the goods may be stopped in transit, unless such part delivery has been given in such circumstances asto show an agreement to give up possession of the whole of the goods.

52. How stoppage in t ransit is effe cted . - (1) The unpaid seller may exercise his right of stoppage intransit either by taking actual possession of the goods, or by giving notice of his claim to the carrier of other bailee in whose possession the goods are. Such notice may be given either to the person in actual


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possession of the goods or to his principal. In the later case the notice, to be effectual, shall be given atsuch time and in such circumstances that the principal, by the exercise of reasonable diligence , maycommunicate it to his servant or agent in time to prevent a delivery to the buyer

(2) When notice of stoppage in transit is given by the seller to the carrier or other bailee in possession of the goods, he shall re-deliver the goods to or according to the directions of the seller. The expenses of suchre-delivery shall be borne by the seller.

Transfe r b y Buye r and Selle r

53. Effe ct of su b- sale o r pledge b y b uye r . - (1) Subject to the provisions of this Act, the unpaid seller'sright of lien or stoppage in transit is not affected by any sale or other disposition of the goods which thebuyer may have made, unless the seller has assented thereto:

Provided that where a document of title to goods has been issued or lawfully transferred to any person asbuyer or owner of the goods, and that person transfers the documents to a person who takes the

documents in good faith and for consideration, then, if such last mentioned transfer was by way of sale, theunpaid seller's right of lien or stoppage in tran sit is defeated, and if such last mentioned transfer was byway of pledge or other disposition for value, the unpaid seller's right of lien or stoppage in transit can onlybe exercised subject to the rights of the transferee.

(2) Where the transfer is by way of pledge, the unpaid seller may require the pledge to have the amountsecured by the pledge satisfied in the first instance, as far as possible, out of any other goods or securitiesof the buyer in the hands of the pledgee and available against the buy er.

54. Sale not gene rally res cinded b y lien o r stoppage in t ransit . - (1) Subject to the provision of thissection, a contract of sale is not rescinded by the mere exercise by an unpaid seller of his right of lien orstoppage in transit.

(2) Where the goods are of a perishable nature, or where the unpaid seller who has exercised his right of lien or stoppage in transit gives notice to the buyer of his intention to re -sell, the unpaid seller may, if thebuyer does not within a reasonable time pay or tender the price, re-sell the goods within a reasonable timeand recover from the original buyer damages for any loss occasioned by his breach of contract, but thebuyer shall not be entitled to any profit which may occur on the re -sale. If such notice is not given, theunpaid seller shall not be entitled to recover such damages and the buyer shall be entitled to the profit, if any, on the re-sale.

(3) Where in unpaid seller who has exercised his right of lien or stoppage in transit re -sells the goods, thebuyer acquires a good title thereto as against the original buyer, notwithstanding that no notice of the re -sale has been given to the original buyer.

(4) Where the seller expressly reserves a right of re-sale in case the buyer should make default, and, on thebuyer making default, re-sells the goods, the original contract of sale is thereby rescinded, but withoutprejudice to any claim which the seller may have for damages.


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Q4. What are the objectives of Consumer Protection Act?

The Consumer Protection Act 2007 came into force on 1 May 2007. It provides for the most comprehensivereform of consumer legislation in 30 years.

It provides a range of measures aimed at fostering compliance with consumer legislation, through self regulation (codes of practice) and through a suite of enforcement measures. The three main elements of the Act are:

y

Establishment of the National Consumer Agency on a statutory basis

y

Updating and consolidating consumer legislation and repealing some old consumer laws

y

T ransposing the EU Directive on Unfair Commercial Practices (UCPD)

Consumer protection is essential for a healthy economy. We need Consumer Protection Act for thefollowing:-

Physical protection of the consumer.Protection against deceptive and unfair trade practices.Protection against all types of pollution.Protection against the abuse of monopoly position and/or restrictive trade practices.Protection of enjoying the rights.The consumer interest in the market place is the focus or the art of enlightened marketing mix. Thebusiness and consumerism both aim at the protection of consumer interest-business through self-regulation and consumerism through self-help. Consumerism invokes government assistance whenbusiness misbehaves and fails to fulfill special responsibilities. In exchange relationship normally, we have twoSellerBuyer However, in the modern market, the seller is organized and has professional skill, whereas the buyer isusually unorganized and amateur. Hence, we need consumer legislation and consumerism. RIGHT OF CONSUMERS

Right to Safety It means right to be protected against the marketing of goods and services, which are hazardous to life andproperty. The purchased goods and services availed of should not only meet their immediate needs, butalso fulfill long term interests. Before purchasing, consumers should insist on the quality of the products as well as on the guarantee of the products and services. They should preferably purchase quality marked products such as ISI, AGMARK,etc.


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Right to be Informed It means right to be informed about the quality, quantity, potency, purity, standard and price of goods so asto protect the consumer against unfair trade practices.

Consumer should insist on getting all the information about the product or service be fore making a choiceor a decision. This will enable him to act wisely and responsibly and also enable him to desist from fallingprey to high pressure selling techniques. Right to Choose It means right to be assured, wherever possible of access to variety of goods and services at competitiveprice. In case of monopolies, it means right to be assured of satisfactory quality and service at a fair price. It also includes right to basic goods and services. This is because unrestricted right of the minority tochoose can mean a denial for the majority of its fair share. This right can be better exercised in acompetitive market where a variety of goods are available at competitive prices. Right to be Heard It means that consumer's interests will receive due consideration at appropriate forums. It also includesright to be represented in various forums formed to consider the consumer's welfare. The Consumers should form non-political and non-commercial consumer organizations which can be given

representation in various committees formed by the Government and other bodies in matters relating toconsumers. Right to seek Redressal It means right to seek redressal against unfair trade practices or unscrupulous exploitation of consumers. Italso includes right to fair settlement of the genuine grievances of the consumer. Consumers must make complaint for their genuine grievances. Many a times their complaint may be of small value but its impact on the society as a whole may be very large. They can also take the help of

consumer organizations in seeking redressal of their grievances. Right to Consumer Education It means the right to acquire the knowledge and skill to be an informed consumer throughout his life.Ignorance of consumers, particularly of rural consumers, is mainly responsible for their exploitation. Theyshould know their rights and must exercise them. Only then real consumer protection can be achieved withsuccess.


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Q6. Detailed Note of Memorandum and Articles of Association?

http://www.authorstream.com/Presentation/gyaneshmahor-642435-presentation-memorandum-article-of-association/

1)

MoA: MoA has 6 clauses: @ The Name Clause@ The Registered Office Clause@ The Object Clause@ The capital Clause@ The Liability Clause@ The Association Clause.

2) AoA: It is internal management of the company. It shows what type of power / responsibilities / authoritythe investors have.Its by laws that governs management of internal affairs defines duties / rights / powers / number of directors of the company. It also show that what is mode & form in whichbusiness is to be carried out subordinating to MoA & can not supersede object set by MoA.


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Q7. What are IPRs, Explain Procedure for Getting a Patent?

Intellectual property rights are the rights given to persons over the creations of their m inds. They usuallygive the creator an exclusive right over the use of his/her creation for a certain period of time.

i) Copy right and rights related to copy right . back to top

The rights of authors of literary and artistic works (such as books and other writings, musical compositions,paintings, sculpture, computer programs and films) are protected by copyright, for a minimum period of 50 years after the death of the author.

Also protected through copyright and related (sometimes referred to as neighbouring) rights are therights of performers (e.g. actors, singers and musicians), producers of phonograms (sound recordings) andbroadcasting organizations. The main social purpose of protection of copyright and related rights is toencourage and reward creative work.

Industrial property can usefully be divided into two main areas:

y

One area can be characterized as the protection of distinctive signs, in particular trademarks (whichdistinguish the goods or services of one undertaking from those of other undertakings) andgeographical indications (which identify a good as originating in a place where a given characteristicof the good is essentially attributable to its geographical or igin). The protection of such distinctive signs aims to stimulate and ensure fair competition and to protectconsumers, by enabling them to make informed choices between various goods and services. Theprotection may last indefinitely, provided the sign i n question continues to be distinctive.

y

Other types of industrial property are protected primarily to stimulate innovation, design and the

creation of technology. In this category fall inventions (protected by patents), industrial designs andtrade secrets. The social purpose is to provide protection for the results of investment in the development of newtechnology, thus giving the incentive and means to finance research and development activities. A functioning intellectual property regime should also f acilitate the transfer of technology in theform of foreign direct investment, joint ventures and licensing. The protection is usually given for a finite term (typically 20 years in the case of patents).


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Q8. What are Trademarks? Explain Remedy for viol ation of Trademark?

A t radema rk or t rade ma rk or t rade -ma rk [1] is a distinctive sign or indicator used by anindividual, business organization , or other legal entity to identify thatthe products or services to consumers with which the trademark appears originate from a unique source,and to distinguish its products or services from those of other entities.

A trademark may be designated by the following symbols:

(for an unregistered trade mark , that is, a mark used to promote or brand goods)

(for an unregistered service mark , that is, a mark used to promote or brand services)

(for a registered trademark)

A trademark is typically a name, word, phrase, logo , symbol , design, image, or a combination of theseelements. [2] There is also a range of non-conventional trademarks comprising marks which do not fall intothese standard categories, such as those based on color, smell, or sound.

The owner of a registered trademark may commence legal proceedings for trademark infringement toprevent unauthorized use of that trademark. However, registration is not required. The owner of a commonlaw trademark may also file suit, but an unregistered mark may be protectable only within the geographicalarea within which it has been used or in geographical areas into which it may be reasonably expected toexpand.

The essential function of a trademark is to exclusively ident ify the commercial source or origin of productsor services, such that a trademark, properly called, indicates source or serves as a badge of origin . In otherwords, trademarks serve to identify a particular business as the source of goods or services. The use of a

trademark in this way is known as trademark use . Certain exclusive rights attach to a registered mark, whichcan be enforced by way of an action for trademark infringement , while unregistered trademark rights maybe enforced pursuant to the common law tort of passing off .

It should be noted that trademark rights generally arise out of the use or to maintain exclusive rights overthat sign in relation to certain products or services, assuming there are no other trademark objections.

Different goods and services have been classified by the International (Nice) Classification of Goods andServices into 45 T rademark Classes (1 to 34 cover goods, and 35 to 45 services). The idea of this system is tospecify and limit the extension of the intellectual property right by determining which goods or services arecovered by the mark, and to unify classification systems around the world.

Inf ringement of a t radema rk

A registered trademark is infringed if a person uses the same/deceptively similar mark in the course of trade, in respect to the same goods. The test for deceptive similarity is whether the defendant's use of amark is likely to cause confusion, i.e., whether an appreciable number of reasonably prudent consumers arelikely to be confused or deceived as to th e source, affiliation or sponsorship of the parties and their goodsand services.

R eliefs that the cou rt may g rant in an inf ringement suit are:


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