Pes University Business Regulatory Framework PDF

PES UNIVERSITY, BENGALURU (Established under Karnataka Act No. 16 of 2013) BUSINESS REGULATORY FRAMEWORK Unit - I The Laws of Contract and Intellectual Property Laws Int...

PES UNIVERSITY, BENGALURU (Established under Karnataka Act No. 16 of 2013) BUSINESS REGULATORY FRAMEWORK Unit - I The Laws of Contract and Intellectual Property Laws Introduction – 1) INDIAN CONTRACT ACT, 1872 governs law relating to contracts in India. 2) The Act was passed by British India and is based on the principles of English CommonLaw. 3) This Act is applicable to whole of India including Jammu and Kashmir. 4) The Act came into effect from 1st September, 1872 and applies to all contracts in India. Important Definitions under the Act – 1) Proposal – Sec 2(a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. 2) Acceptance – Sec 2(b) When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise Person making the proposal is called the “promisor”, and the person accepting the proposal is called the “promisee”. 3) Agreement – Sec 2(e) Every promise and every set of promises, forming the consideration for each other, is an agreement. In simple words, Agreement = Offer + Acceptance 4) Void Agreement – Sec 2(g) An agreement not enforceable by law is said to be void. 5) Contract – Sec 2(h) An agreement enforceable by law is called as contract. In simple words, Contract = Agreement + Enforceability 6) Voidable Contract – An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others. Karishma Birthare, PES University pg. 1  Is every agreement contract? 1) No, every agreement is not a contract. 2) An agreement to become a contract must give rise to a legal obligation(duty) 3) An agreement can be – Social obligation Legal obligation a) An agreement giving rise to social a) Agreement giving rise to legal obligation is not a contract. obligation is a contract b) Not covered under ICA, 1872 (Indian b) Covered under ICA, 1872 Contract Act, 1872) Example – a) An agreement between two persons to go together to the cinema, orfor a walk, or for a dinner is an agreement of social nature and not covered under Indian Contract Act, 1872. b) Domestic agreement between husband and wife is also not acontract. 4) Every contract is an agreement, but every agreement is not a contract Difference Between Agreement and Contract – BASIS FOR AGREEMENT CONTRACT COMPARISON Meaning When a proposal is accepted by the person When an agreement is enforceable by to whom it is made, with requisite law, it becomes a contract. consideration, it is an agreement. Elements Offer and Acceptance Agreement and Enforceability Defined in Section 2 (e) Section 2 (h) In writing Not necessarily Normally written and registered Legal obligation Does not creates legal obligation Creates legal obligation One in other Every agreement need not be a contract. All contracts are agreement Scope Wide Narrow Karishma Birthare, PES University pg. 2  Essential elements of a valid contract – Essential elements of a valid contract – Under Section 10 – Not given under section 10 but still are a) Agreement essentials of valid contract – b) Free Consent a) Two parties c) Competency of the parties b) Intention to create legal d) Lawful Consideration relationship e) Legal object c) Legal formalities f) Not expressly declared to be d) Certainty of meaning void e) Possibility of performance 1) Two parties – There should be at least 2 parties for a contract. 2) Offer – There shall be an offer or proposal by one party 3) Acceptance – Offer made should be accepted by the other party 4) Lawful consideration – The agreement shall be supported by lawful consideration 5) Lawful object – The object and consideration of the contract shall be legal 6) Competent (capacity) to contract – Section 11 a) The parties to the contract shall be competent to contract b) For a person to become competent to contract – - Such person should be major (18+) - Such person should be of sound mind (Section 12) - Such person should not be disqualified by law 7) Free consent – a) There shall be free consent between the parties to the contract b) Consent is said to be free when the following elements are absent (Section14) - Coercion (Section 15) - Undue influence (Section 16) - Fraud (Section 17) - Misrepresentation (Section 18) - Mistake (Section 20, 21, 22) Karishma Birthare, PES University pg. 3  8) Intention to create legal relationships – The intention of the parties to a contract must be to create a legal relationship between them. Example: A husband promising his wife to buy her a ‘necklace’ on occasion of her birthday is not a contract. 9) Possibility of performance – The agreement should be capable of being performed Example - if A promises B to bring rainfall through magic. Such agreement cannot be enforced 10) Legal formalities – Legal formalities if any required for particular agreement such as registration, writing, they must be followed Offer – A) Definition – Section 2(a) When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal B) Types of offer – 1) General Offer - It is an offer to the whole world. 2) Specific offer - It is an offer made to a particular person or groupof persons. 3) Express offer - It is an offer which is made by words either oral or in writing. 4) Implied offer - It is an offer which is made by conduct or gesture of the parties. 5) Counter offer - When a person to whom the offer is made does not accept the offer [as it is] he counters the condition. This is called counter offer. 6) Cross offer - When two offers of same terms and conditions cross each other at same time, it is called cross offer. 7) Standing offer - An offer is a standing offer if it is intended to remain open for a specified period C) Essentials of valid offer – 1) Offer may be expressed or implied – An offer may be expressed or may be implied from the conduct of the parties or circumstances of the case. 2) Offer may be specific or general – a) A specific offer is one which is made to a particular person. It can be accepted by the person to whom it has been made, no one else can accept such anoffer. b) A general offer is an offer made to the public at large. 3) Offer must create Legal Relations – Karishma Birthare, PES University pg. 4  An offer to be valid must create legal relationship between the parties. Say for examplea dinner invitationextended by A to B is not a valid offer. 4) Offer must be Clear, not Vague – The terms of an offer should not be vague (not clear / confusing) For e.g. - A offers to sell B fruits worth Rs 5000/-. This is not a valid offer since what kinds of fruits or their specific quantities are not mentioned. 5) Offer must be Communicated to the Offeree – No offeree can accept the proposal without knowledge of the offer (Lalman Shukla v. Gauri Dutt.) 6) A statement of price is not an offer 7) Offer cannot contain a Negative Condition – The non-compliance of any terms of the offer cannot lead to automatic acceptance of the offer Example: A offers to sell his cow to B for 5000/-. If the offer is not rejected by Monday it will be considered as accepted. This is not a valid offer. 8) A mere statement of intention is not an offer. Thus, a person who attended theadvertised place of auction could not sue for breach of contract if the auction was cancelled 9) Offer must be distinguished from an invitation to offer – BASIS FOR OFFER INVITATION TO OFFER COMPARISON Meaning When one person expresses his When a person expresses something will to another person to do or not to another person, to invite him to to do something, to take his make an offer, it is known as invitation approval, is known as an offer. to offer. Defined in Section 2(a) of the Indian Not Defined Contract Act, 1872. Objective To enter into contract. To receive offers from people and negotiate the terms on which the contract will be created. Essential to Yes No make an agreement Consequence The Offer becomes an An Invitation to offer, becomes an agreement when accepted. offer when responded by the party to whom it is made. Karishma Birthare, PES University pg. 5  Harvey v Facey Facts – a) Harvey was interested in buying a Jamaican property owned by Facey. He sent Facey a telegram stating “Will you sell us Bumper Hall Pen? Telegraph lowest cash price – answer paid.” b) Facey responded stating “Bumper Hall Pen £900” c) Harvey responded stating that he would accept £900 and asking Facey to send the title deeds. d) Facey then stated he did not want to sell. e) Harvey sued, stating that the telegram was an offer and he had accepted, therefore there wasa binding contract. Decision – Telegram was an invitation to treat, not a valid offer. Therefore, no valid contract existed. The telegram only advised of the price, it did not explain other terms or information and therefore could not create any legal obligation. Harvey’s telegram “accepting” the £900 was instead an offer which Facey could either accept or reject. He rejected it so there was no contract created. Acceptance A) Definition – Section 2(b) “When the person to whom an offer is made signifies his assent thereto the proposal is said to be accepted, A proposal when accepted becomes a promise.” B) Essentials of valid Acceptance – 1) Acceptance must be absolute - There must be an absolute acceptance of all the terms of theoffer. 2) Acceptance must be communicated – Acceptance must be communicated by the acceptor 3) Acceptance must be in a prescribed or reasonable mode – a) Offer should be accepted in a prescribed mode. b) If the offer or prescribes no mode of acceptance, the acceptances must be communicated according in any reasonable mode such as in writing or oral. 4) Acceptance must be given within a reasonable time and before the offer lapses – a) Acceptance must be given within specified time. b) If no time is specified, then acceptance may be made within reasonable time. c) Acceptance should be made before offer lapses (expires). 5) Acceptance cannot precede an offer – a) Acceptance must be given after receiving the offer. b) It should not precede the offer. 6) Acceptance must be given only by the person to whom the offer is made– a) An offer can be accepted only by the person or persons to whom it is made b) It cannot be accepted by another person without the consent of theofferor. 7) Rejected offer can be accepted only on renewal – Rejected offer can be accepted only, on renewal; offer once rejected can’t be accepted again unless a fresh offer is made. Karishma Birthare, PES University pg. 6  Consideration (quid pro quo) A) Definition – 2(d) ‘When at the desire of the promisor, the promisee or any other person had done or abstained from doing, or does or abstains from doing, or promises to do or to abstain fromdoing, something, such act or abstinence or promise is called a consideration for the promise.’ B) Meaning – a) Consideration means something in return b) It may be an act or abstinence or promise Note – As per Section 25 of the Indian Contract Act, 1872 “An agreement made without consideration is void” C) Types of consideration – Past Consideration – Present consideration Future Consideration In case of past consideration, (Executed consideration) – (Executory the promisor had received the Present consideration is one in consideration)– consideration before the date of which one of the parties to the when consideration is to promise contract has performed his part move at a future date of the promise, which then it is called as future Constitutes the consideration consideration for the promise by the other side it is known as present consideration. D) Essentials of valid consideration – 1) Consideration must move at the desire of the promisor – a) Consideration must move at the desire of the promisor. b) whatever is done must have been done at the desire of the promisor and not voluntarily or not at the desire of a third party Example: If Munna rushes to Circuit’s help whose house is on fire, there is no consideration but a voluntary act. But if Munna goes to Circuit’s help at Circuit’s request, there is good consideration as Circuit’s did not wish to do the act gratuitously (without consideration) Uday Bhai agrees to sell his horse to Majnu Bhai for ` 50,000. Here consideration for Uday Bhai for selling horse to Majnu Bhai is consideration of ` 50,000 from Majnu Bhai and consideration for Majnu Bhai paying ` 50,000 to Uday Bhai, is Uday Bhai selling his horse. Here considerations had come at the desire of Promisor. Uday Bhai is a promisor for Majnu Bhai and similarly Majnu Bhai is a promisor for Uday Bhai. 2) Consideration may move from the promisee or any otherperson: Karishma Birthare, PES University pg. 7  a) Consideration may be furnished even by a stranger under Indian Law. b) Consideration can be from any direction, even a stranger to contractcan offer consideration. Case law: Chinnayya v/s Ramayya Chinnaya v. Ramaya, (1882) 4 Mad. 137 A lady by a deed (agreement) of gift made over certain property to her daughter directing her to pay an annuity to the donors brother as had been done by the donor herself before she gifted the property. On the same day, her daughter executed in writing in favour of the donors brother agreeing to pay the annuity. Afterwards the donee (the daughter) declined to fulfil her promise to pay her uncle saying that no consideration had moved from him. The Court, however, held that the uncle could sue even though no part of the consideration received by his niece moved from him. The consideration from her mother was sufficient consideration. 3) Consideration must be something of value – Consideration must have some value in the eyes of law, and it should be real. 4) It may be past, present or future which the promisor is already not bound to do– a) According to Indian Law Consideration may be past, present or future. b) But under English Law Consideration may be present or future. Pastconsideration is no consideration according to English Law 5) It must not be unlawful – The consideration or object of an agreement is lawful, unless — It is forbidden (prohibited) by law; or is of such a nature that, if permitted, it would defeat the provisions of any law; or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral, or opposed to publicpolicy NO CONSIDERATION – NO CONTRACT- Section 25 A) Meaning – The general rule is ex-nudopacto non oritur actio i.e. an agreement made without consideration is void. Example – If Salman promises to pay Aishwarya ` 1000 without any obligation from Aishwarya then it will be void contract as there is no consideration from Aishwarya towards Salman. B) Exceptions – Exceptions - 1) Promise made on account of natural love and affection Under following 2) Promise to compensate for voluntary services cases, a contract 3) Promise made to pay a time barred debt will be valid even 4) Completed Gifts without consideration 5) Creation of agency 6) Contract of Guarantee Karishma Birthare, PES University pg. 8 7) Remission pg. 9  1) Promise made on account of natural love and affection – An agreement made without consideration is valid – a) It is expressed in writing. b) It is registered under the law. c) It is made on account of natural love and affection. d) It is between parties standing in near relation to each other. 2) Promise to compensate for voluntary services – Voluntary service means service done without any request. It will be valid if the following conditions are satisfied – a) The service should have been done voluntarily. b) The service should have been done for the promisor. c) The promisor must have been in existence at the time when the service was done. d) The intention of promisor must have been to compensate thepromisee. e) The service rendered must also be legal. Example: Jethalal finds Babita’s purse and gives it to ‘her. Babita promises to give Jethalal 50 rupees. This is a valid contract. 3) Promise to pay time-barred debt – a) A promise by a debtor to pay a time-barred debt is also a validcontract. b) But the promise must be in writing. c) It must be signed by the promisor or his authorised agent. d) The promise may be to pay the whole or part of the debt. Example: Ram owes Laxman 1,000 rupees but the debt is barred by the Limitation Act. Ram signs a written promise to pay 500 rupees on account of the debt. The promise will be valid and binding without any fresh consideration. 4) Creation of Agency – a) No consideration is necessary to create an agency. b) Thus, when a person is appointed as an agent, his appointment is valid even if thereis no consideration. 5) Completed Gifts – a) Gifts once made cannot be recovered on the ground of absence of consideration. b) Absence of consideration will not affect the validity of any gift already made. Example: Virat gave a watch as a gift to Anushka on his birthday. Later on Virat cannot demand the watch back on the ground that there was no consideration. 6) Contract of guarantee – Contract of guarantee needs no consideration. 7) Remission – Remission means lesser performance of the contract than what is actually to be performed. Free consent A) Meaning – Section 13 ‘Two or more persons are said to consent when they agree upon pg. 10 Karishma Birthare, PES University  the same thing in the same sense. B) When consent is said to be free? As per section 14 of the Contract act consent is said to be free when following are absent – -Coercion (Section -Mistake -Undue influence -Fraud (Section -Misrepresentation 15) (Section 20, 21, (Section 16) 17) (Section 18) 22) Coercion – Section 15 A) Meaning of coercion – Coercion means – a) committing or threatening to commit any act forbidden (prohibited) by Indian Penal Code against another person; or b) unlawful detaining or threatening to detain the property of another person c) with a view to obtain consent of another person B) Who can exercise coercion – Coercion may come from a person party to the contract or even third person not connected with the contract directly. C) Important points – a) Prosecution – A mere (only) threat to prosecute a man or file suit againsthim does not constitute a coercion. b) High prices and high interest Rates – Charging high interest rate, high price etc. is nota coercion as the same is not prohibited under the Indian Penal code. c) A threat to commit suicide – Consent to an agreement may at times be obtainedby threatening to commit suicide. Threat to commit suicide also amounts to coercion. D) What will be the effect if the consent is caused by coercion – Section 19 a) Agreement is voidable at the option of aggrieved party. b) Aggrieved party has the option to cancel (rescind) the contract. c) If the aggrieved party decides to rescind the contract, he must return (restore) allthe benefits received by such person. Undue Influence – Section 16 A) Meaning of undue influence – A contract is said to be induced (caused) by “undue influence” where the relations subsisting (existing) between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. B) When a person is deemed to be in a dominating position? a) Where he holds a real or apparent authority over the other (e.g. master and servant) b) where he stands in a fiduciary (trust) relation to theother (e.g. Doctor and patient) c) Where he makes a contract with a person whose mental Karishma Birthare, PES University pg. 11  capacity is temporarily or permanently affected by reason of age, illness, or mental or bodily distress (pain) Note – The burden of proving that the contract was not induced by undue influence shall lie upon the person in a position to dominate the will of the other C) There is presumption of undue influence in the following relationships – a) Parent and child b) Guardian and ward c) Doctor and patient d) Solicitor and client e) Trustee and beneficiary f) Religious advisor and disciple g) Fiancé and fiancée D) However, there is no presumption of undue influence in case of relationship of — a) landlord and tenant b) debtor and creditor c) husband and wife. E) What will be the effect if the consent is caused by Undue influence – Section 19 a) Agreement is voidable at the option of aggrieved party. b) Aggrieved party has the option to cancel (rescind) the contract. c) If the aggrieved party decides to rescind the contract, he must return (restore) allthe benefits received by such person Fraud – Section 17 A) Meaning of fraud – “Fraud” means andincludes any of the following actscommittedby a partyto acontract, or with his connivance, or by his agent, with intent to deceive another party or his agent, or to induce him to enter into the contract: a) The suggestion, as a fact, of that which is nottrue by one who does not believe it to betrue; a) The active concealment (to hide) of a fact byone having knowledge or belief of the fact; b) A promise made without any intention of performing it; c) Any other act fitted to deceive; d) Any such act which the law specially declares to be fraudulent Note – Deceive – intentionally cause (someone) to believe something that is not true Connivance – willingness for being secretly involved in an immoral or illegal act. B) Is silence fraud? a) Whether silence is fraud or not depends upon various factors. b) Normally speaking, silence does not amount to fraud. c) However, silence will be considered as fraud in the following situations – When there is a duty to speak Where silence is equivalent to speech. Where there is change in circumstances Karishma Birthare, PES University pg. 12  C) What will be the effect if the consent is caused by Fraud – Section 19 a) Agreement is voidable at the option of aggrieved party. b) Aggrieved party has the option to cancel (rescind) the contract. c) If aggrieved party decides not to cancel the contract then he may continue thecontract and claim damages from the other party. d) If the aggrieved party decides to rescind the contract, he must return (restore) allthe benefits received by such person. Contracts Uberrimae Fidei – There are contracts in which the law imposes a special duty to act with the utmost good faith i.e., to disclose all material information. Failure to disclose such information will render the contract voidable at the option of the other party Examples – a) Contract of insurance of all kinds b) Company prospectus c) Contract for the sale of land d) Contracts of family arrangements Misrepresentation – Section 18 A) Meaning – a) A representation when wrongly made either innocently or intentionally is a misrepresentation. When it is made innocently or unintentionally it is misrepresentation and when made intentionally or willfully it is fraud. b) Misrepresentation means making any statement as true but actually that statement is false. B) What will be the effect if the consent is caused by Undue influence – Section 19 d) Agreement is voidable at the option of aggrieved party. e) Aggrieved party has the option to cancel (rescind) the contract. f) If the aggrieved party decides to rescind the contract, he must return (restore) allthe benefits received by such person Karishma Birthare, PES University pg. 13  Mistake Mistake of Mistake of law fact Bilateral Unilateral Indian law Foreign law mistake mistake Valid Void Void Valid Mistake of law – Section 21 5) The principle in this case is ignorance of law is not an excuse. Mistake of fact – Section 20 A) Bilateral mistake - 1) Where both the parties to an agreement are under a mistake as to a matter of fact essential tothe agreement, the agreement is void. 2) Mistake must be mutual i.e. both the parties should misunderstand each other Types of mistakes falling under bilateral mistake are as follows – (a) Mistake as to existence of subject matter: If both the parties are at mutual mistake asto existence of the subject matter the agreement is void. (b) Mistake as to identity of subject matter: It usually happens when both the parties have different subject matter of contract in their mind. The contract is void due to mistake of identify of subject matter. (c) Mistake as to the quality of the subject matter: If the subject matter is something essentially different from what the parties thought to be, the agreement isvoid. (d) Mistake as to quantity of subject matter: Bilateral mistake as to quantity of subjectmatter would render the contract void. (e) Mistake as to title of subject matter: The agreement is void due to bilateral mistake as totitle of the subject matter. (f) Mistake as to price of the subject matter: Mutual mistake as to price of the subject matter would render the agreement void. (g) Mistake as to possibility of performance of Contract - Impossibility may be: Physical impossibility: A contract is void if it is identified to be non-feasible (not possible) due to physical factors, like time, distance, height, etc. Legal impossibility: A contract is void if it provides that something shall be done which as a matter of law cannot be done. Karishma Birthare, PES University pg. 14  B) Unilateral Mistake as to fact – Section 22 1) A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact. 2) A unilateral mistake is not allowed as a defense in avoiding a contract unless the mistakes brought about by another party’s fraud or misrepresentation. Legality of Object – Section 23 Section 23 of the Indian Contract Act, 1872 provides that the consideration or object of an agreement is unlawful if it is – forbidden by law; or it is of such nature that if permitted it would defeat the provisions of law;or is fraudulent; or involves or implies injury to the person or property of another; or the Court regards it as immoral or opposed to publicpolicy. In each of these cases the consideration or object of an agreement is said to be unlawful. Every agreement of which the object or consideration is unlawful is void. Wagering Agreements – A) Meaning of wagering agreements – The literal meaning of the word “wager” is a “bet”. Wagering agreements are nothing but ordinary betting agreements. Example – A and B enter into an agreement that if England’s Cricket Team wins the test match, A will pay B Rs.100 and if it loses B will pay Rs.100 to A. This is a wagering agreement and nothing can be recovered by winning party under the agreement. B) Essentials of wagering agreements – a) One party should win and one part should loose b) There should be mutual chance of gain or loss c) No parties should have control over the event. Performance of contract Meaning – a) Every contract has certain obligations (duties) which are to be performed by the parties to the contract. b) When both the parties to the Contract fulfill their obligations towards each other, the contract is said to be performed. c) When both the parties to the contract have performed their obligations, the contract is said to be discharged by performance Karishma Birthare, PES University pg. 15  Who will perform the contract? - Section 40 Promisor himself Legal Representative However, if the contract involves personal skills and if the promisor dies, the contract becomes void Agent of promisor 4. Third persons, if promisee Karishma Birthare, PES University pg. 16  Example - Adi promises to pay Manav 5,000 rupees. Adi may perform the obligation of giving 5,000 rupees to Manav either by himself or he may appoint agent to perform the obligation. If Adi dies before making the payment then legal reprentative of Adi must perform the promise. Effect of Refusal to accept offer of performance -Section 38 When the promisor make offer to the promise for the performance of the contract and promise does not accept it, then the promisor is not responsible for non-performance Conditions – 1. It must be unconditional 2. Performance must be at a proper time and place 3. Performance must be within reasonable time. 4. Performance must give reasonable opportunity for inspection Example: Jay contracts to deliver to Veeru at his warehouse 100 Kg of Basmati rice of A grade quality on the 1st March, 2014,. In order to make an offer of a performance as per section 38, Jay must bring the rice to Veeru's warehouse, on the fixed date (1st March, 2014), under such circumstances that Veeru may have a reasonable opportunity of satisfying himself that the thing offered is Basmati rice of the quality contracted for, and that there are 100 kg of rice. Effect of Refusal of Party to Perform Promise Wholly - Section 39 a) If the promisor refuses to perform the contract wholly, the promisee may put an end to the contract. b) However, if the promisee has agreed to accept the performance even if it is not performed wholly then the contract will continue. Example: Kanika Kapoor, a singer, enters into a contract with Neha Dhupia, the manager of a theatre, to sing at his theatre two nights in every week during the next two months, and Neha Dhupia promises to pay her 100 Neha is at liberty to put an end to the contract and it depends on her choice Effect of accepting performance from third person - Section 41 When a promisee accepts performance of the promise from a third person, he cannot afterwards enforce it against the promisor. Karishma Birthare, PES University pg. 17  Example: Narendra and Rahul enter into a contract in which Narendra will supply raw materials to Rahul. The raw material of Narendra is in Chennai's warehouse which is managed by Mr. Shah. Narendra gave direction to Mr Shah to deliver raw material to Rahul which Mr Shah did and it was accepted by Rahul. Now, Rahul cannot demand delivery of raw materials from Narendra. Devolution (transfer) of Joint Liabilities - Section 42 and 43 and 44 1. Liability of joint promisor is joint and several 2. If any joint promisor dies, his legal representatives must jointly with the surviving promisors fulfil the promise. 3. On the death of all the joint promisors, the representatives of all of them must jointly fulfil the promise. 4. The promisee may compel (force) anyone of the joint promisor to perform the promise – Section 43 5. Where a promisee releases one of the joint promisors, the release of one promisor does not discharge the other joint promisors – Section 44 Note – a) Each promisor may compel contribution– Everyone will contribute equally or as per the terms and conditions agreed between the joint promisor. b) Sharing of loss by default in contribution– If any one of two or more joint promisors makes default in such contribution, the remaining joint promisors must bear the loss arising from such default in equal shares. Examples: 1) Raju, Shyam and Baburao jointly promise to pay Totla Seth `3,000. Totla Seth may compel (force) either Raju or Shyam or Baburao to pay him ` 3,000. 2) Raju, Shyam and Baburao jointly promise to pay Totla Seth the sum of `3,000. Baburao is compelled to pay the whole. Raju is insolvent, but his assets are sufficient to pay one-half of his debts, Baburao is entitled to receive ` 500 from Raju’s estate, and ` 1,250 from Shyam. 3) Raju, Shyam and Baburao are under a joint promise to pay Totla Seth `3,000. Baburao is unable to pay anything, and Raju is compelled to pay the whole. Raju is entitled to receive `1,500 from Shyam. 4) Raju, Shyam and Baburao are under a joint promise to pay Totla Seth ` 3,000, Raju and Shyam being only sureties (gurantor) for Baburao. Baburao fails to pay. Raju and Shyam are compelled to pay the whole sum. They are entitled to recover it from Baburao. Devolution of Joint Rights (Section 45) When a person has made a promise to two or more persons jointly then the right to claim performance rests with all the joint promisee and if any of the joint promisee dies then the legal representative of that joint promisee along with the surviving joint promisee shall claim the performance. If all the joint promise die the legal representative of all joint promisee shall claim the performance. Karishma Birthare, PES University pg. 18  Example: Bhuvam, in consideration of ` 5,000, lent to him by Ashish and Carry, promises Ashish and Carry jointly to repay them 5,000 with interest on a day specified, but Ashish dies. after the death of Carry with the representatives of Ashish and Carry jointly. Time and place for performance of contract – Section 46-50 1) Time for Performance of Promise, where no application is to be made and no time is specified– Section 46 - Where the promise is to be performed without application by the promisee and no time for the performance is specified then the contract shall be performed within reasonable time. - Reasonable time differs case to case and if there is any dispute then court will decide the reasonable time. 2) Time and Place for Performance of Promise, where time is specified and no application to be made – Section 47 Where the promise is to be performed on fixed day without application by the promisee then the promisor may perform the promise on that day during business hours and on such place as specified. Example: Mukesh promises to deliver goods at Rahul’s warehouse on the 1st January. On that day Mukesh brings the goods to Rahul’s warehouse, but after the usual hour for closing it, and they are not received. Mukesh has not performed his promise. 3) Application for Performance on certain day to be at proper time and place – Section48 When a promise is to be performed on a certain day and for that promisee has to make application to promisor then it is the duty of the promisee to apply for performance at a proper place and within the usual hours of business. 4) Place for Performance of Promise, where no application to be made and no place fixed for performance – Section 49 When a promise is to be performed without application by the promisee and place of performance is not fixed then it is the duty of the promisor to apply to the promisee to appoint a reasonable place for the performance of the promise Example: John Cena promises to deliver a Car to Batista on a fixed day. John must apply to Batista to appoint a reasonable place for the purpose of receiving it and must deliver it to him at such place. 5) Performance in Manner or at time prescribed or Sanctioned by Promisee – Section 5 Karishma Birthare, PES University pg. 19  Where promisee specifies the manner or time of performance then promisor should perform promise in the manner or time specified by the promisee. Performance of Reciprocal Promises – Section 51 – 54 and 57 1) Simultaneous performance – Section 51 Promises are to be performed together by the promisor as well as promisee. Example: Kabir and Priti contract that Kabir shall deliver goods to Priti and Priti will pay the price for the goods. Kabir need not deliver the goods, unless Priti is ready and willing to pay for the goods on delivery. Priti need not pay for the goods, unless Kabir is ready and willing to deliver them on payment. 2) Order of performance – Section 52 promises should be performed in the fixed order and if no order is fixed then it can be performed in any manner Example: A and B contract that A shall build a house for B at a fixed price and B shall make the payment after the house is ready. A’s promise to build the house must be performed before B’s promise to pay for it. 3) Liability of party preventing event on which the contract is to take effect – Section 53 Where one party to a reciprocal promise prevents the other party from performing his promise, the contract becomes voidable at the option of the party who is so prevented. The aggrieved party can also recover compensation. Example: Karan and Amir contract that Karan shall execute certain work for Amir for 200 rupees. Karan is ready to perform the work, but Amir prevents him from doing so. The contract is voidable at the option of Karan; and, if Karan elects to rescind the contract then Karan is entitled to recover from Amir compensation for any loss which he has incurred by its non-performance 4) Conditional and dependent – Section 54 Performance of the promise by one party depends on the prior performance of the promise by the other party. Example: Karan contracts with Raj to execute certain builder ’s work for a fixed price, Raj supplying the raw materials and timber necessary for the work. Raj refuses to furnish raw materials or timber, and the work cannot be executed (done). Karan need not execute the work, and Raj is bound to make compensation to Karan for any loss caused to him by the non-performance of the contract. 5) Legal and Illegal Reciprocal Promises – Section 57 Karishma Birthare, PES University pg. 20  legal part illegal part Valid Voi d NOTE – But if the things are inseparable then the entire agreement is void Time is Essence of the Contract – Section 55 Effect of failure to perform at a fixed time in a contract in which time is essential – When the element of time is essential When the element of time is not essential in the contract in the contract if the promisor fails to perform the if the promisor fails to perform the contract within the fixed period contract within the fixed period Promisee has 2 options in this case, promisee can only claim damages Option 1 Option 2 Promisee can Promisee can rescind (cancel) affirm (accept) the contract the contract and can claim and can claim damages damages if he notifies to the promisor Quasi Contracts – Section 68-72 Meaning of quasi contract – 1) It is an implied contract. It is imposed by law and does not arise byagreement 2) The duty of a party and not the promise of any party isthe basis of such contract. 3) It is based on the principle of “prevention of unjust enrichment of oneperson at the cost of another” 4) It is imposed by law and does not arise by agreement. 5) No essential of valid contract is required 6) The right is available against specific persons and not the wholeworld Karishma Birthare, PES University pg. 21  Types of Quasi-Contracts: Claims for necessaries Payment by an Benefits of non- Responsibility of Money paid by supplied to a person interested person. gratuitous act. (Sec finder of goods. mistake or under incompetent to (Sec 69) 70) (Sec 71) coercion.S- 72 contract. (Sec 68) A) Claims for necessaries supplied – Section 68 Where necessaries are supplied to a person who is incompetent to contract, the supplier is entitled to recover the price from the property of the incompetent person. Example: Gopal supplies Madhav, a minor, with necessaries suitable to his condition in life. Gopal is entitled to be reimbursed from Madhav’s property. B) Payment by a Person Having Some Interest in Payment – Section 69 a) The person making the payment must have some interest in paying theamount. The person making the A person who is interested in the payment of money of which another is bound (liable) by law to pay, and who therefore, pays it, is entitled to be reimbursed by the other Conditions: b) payment must not be bound by law to pay theamount. c) The other person from whom the money is sought to be recovered must be legally bound to pay the money. C) Claim for any benefit received under a non-gratuitous act – Section 70 When a person lawfully does anything for another person or delivers anything to him, not intending to do so gratuitously, such person who enjoys the benefit must reimburse the former or must restore to him the thing so delivered. Conditions: a) The person must lawfully do something for another person or deliver something tohim. b) The person doing some act or delivering something must not intend to actgratuitously c) The other person must voluntarily accept the acts or goods and he must have enjoyedtheir benefits D) Responsibility of finder of goods – Section 71 A person who finds goods belonging to another and takes them into his custody is liable as a bailee. The finder of goods must try to find out the real owner of the goods and deliver the goods to him on demand. E) Money paid by mistake or under coercion – Section 72 A person to whom money has been paid or anything delivered by mistake or under coercion, must repay or return it. Example: Ram and Shyam jointly owe 1,000 rupees to Malinga. Ram alone pays the amount to Malinga, and Shyam, not knowing this fact, later on also pays 1,000 to Malinga. Malinga is bound to repay the amount to B. Karishma Birthare, PES University pg. 22  Contingent Contract – Section 31-36 A contract may be - Absolute contract - Contingent contract- it is a type of contract where the promisor promises it is a type of contract where perfromance is to the perform the contract without conditions. It is dependant on some conditions which may happen or also known as unconditional contract may not happen. A) Section 31 defines contingent contract as follows – “acontract to do or not to do something if some event, collateral to such contract, does or does not happen” Example – Vasuli Bhai contracts to pay Bappi Bhai 5 lakh rupees if Bappi Bhai’s house is burnt. This is a contingent contract. Contracts of insurance, indemnity and guarantee are also example of contingent contracts. B) Essentials of Contingent Contract – a) There must be a contract to do or not to do something b) The performance of the contract depends upon the happening or non-happening of some event in future c) The event must be uncertain (not fixed) d) The event must be collateral or incidental to the contract C) Rules regarding contingent contract – 1) Enforcement of contingent contracts on an event happening – Section 32 Contracts which are contingent upon the happening of a future uncertain event cannot be enforced by law unless and until that event has happened. If the event becomes impossible, such contracts become void. Example: a) Alex promises to pay Peter 5,000 rupees if the ship reaches port. Now, contract will be enforceable (valid) if ship reaches the port. On the other hand if ship does not reaches port then contract will be void. b) Janvi contracts to pay Hitesh a sum of 1 lakh rupees when Hitesh marries Makarand. Makarand dies without being married to Hitesh. The contract becomesvoid. 2) Enforcement of contracts contingent on an event not happening – Section 33 Contracts contingent upon the non-happening of an uncertain future event can be enforced when the happening of that event becomes impossible Example: Alex agrees to pay Peter a sum of 10 lakh rupees if a certain ship does not return. The ship is sunk. The contract can be enforced after the ship sinks. On the other hand, if ship would have returned the contract would have become void. 3) Contingent Contracts Dependent on future conduct of a living person – Section 34 Karishma Birthare, PES University pg. 23  If the future event on which a contract is contingent is dependent on the future act of a living person then contract will become void if that person acts otherwise Example – Sharvi agrees to pay Makarand 1 lakh rupees if Makarand marries Hitesh. Hitesh marries Gaurang. The marriage of Makarand to Hitesh must now be considered impossible, although it is possible that Gaurang may die and that Hitesh may afterwards marry Makarand. 4) When contracts become void which are contingent on happening of specified event within fixed time – Section 35 Contracts which are contingent upon the happening of a future uncertain event within a fixed time will becomes void if the contract does not happen within fixed time. Example – a) Alex promises to pay Peter 5,000 rupees if the ship reaches port within 1 year. Now, contract will be enforceable (valid) if ship reaches the port within one year. On the other hand, if ship does not reach port within 1 year then contract will bevoid. b) Alex promises to pay Peter 5,000 rupees if the ship does not reach port within 1 year. Now, contract will be enforceable (valid) if ship does not reach the port within one year. On the other hand, if ship reaches port within 1 year then contract will bevoid. 5) Agreements contingent on impossible events void – Section 36 Contingent agreements based on impossible event are void. Example – Anuradha promised Shyam to pay 1 crore rupees if he brings Taj Mahal from Delhi to Mumbai. This contract is void contract. Breach of Contract and Remedies for breach of contract – Section 73-75 Meaning of breach of contract – When a promise or agreement is broken by any of the parties, we call it a breach of contract. So when either of the parties does not keep their end of the agreement or does not fulfil their obligation as per the terms of the contract, it is a breach of contract. Breach of contract can be actual breach or anticipatory breach. A) Anticipatory Breach of Contract As the name suggests, an anticipatory breach is a breach of contract before the time of performance. So, if a promisor denies to perform his promise and signifies his unwillingness before the time for performance, then it is an anticipatory breach of contract. Examples – a) Peter enters into a contract with John on May 30, 2018. In the contract, Peter agrees to sell his house to John provided he receives a token amount of Rs 5,00,000 from John on or before June 30, 2018. However, on June 15, 2018, John informs Peter that he will not be able to provide the token amount on the said date, thereby expressing rejection of thecontract. b) Peter enters into a contract with John on June 01, 2018. As per the contract, Peter agrees to sell his guitar to John on June 10, 2018, for an amount of Rs 5,000. However, he sells this guitar to Oliver on June 07, 2018. Hence, it is an anticipatory breach of contract due to Peter’s conduct. When a promisor refuses to perform his promise leading to an anticipatory breach of contract, the promisee is excused from performance or from further performance of his obligations. Also, he can either: Karishma Birthare, PES University pg. 24  - Treat the contract as cancelled and file a suit against the other party for damages arising from the breach. This suit can be filed immediately without waiting until the date of performance specified in the contract. OR - Choose not to cancel the contract but treat it as an operative and wait until the time of performance has passed before holding the other party responsible for the damages caused due to non- performance. B) Actual Breach of Contract While an anticipatory breach is before the time of perfromance, an actual breach of contract is on the scheduled time of performance of the contract. An actual breach of contract can be committed either: 1] At the time when the Performance of the Contract is Due Peter enters into a contract with John promising to deliver 50 bags of cotton to him on June 30, 2018. However, on the scheduled day, he fails to deliver the same. This is an actual breach of contract. Also, this breach is at the time the performance of the contract is due. 2] During the Performance of the Contract An actual breach of contract can also occur when one party fails to perform his obligation, during the performance of the contract. This refusal can be expressed in words or by action. Summary – Breach of contract Anticipatory breach Actual breach Breach before the due date Breach on the due date Promise has 2 options Actual breach of Actual breach of Contract on the contract during Option 1 Option 2 due date of its performance Performance rescind the wait till the due date contract and rescind the contract promisee can rescind Promisee can immediately on the due date and the contract on the reject the and claim claim damages due date and claim performance damages damages and claim damages Following are the remedies for the breach of contract – A) Recession of Contract When one of the parties to a contract does not fulfil his obligations, then the other party can rescind the contract and refuse the performance of his obligations. As per section 65 of the Indian Contract Act, the party that rescinds the contract must restore any benefits he got under the said agreement. And section 75 states that the party that rescinds the contract is entitled to receive damages and/or compensation for such a recession B) Sue for Damages Karishma Birthare, PES University pg. 25  Section 73 clearly states that the party who has suffered, since the other party has broken promises, can claim compensation for loss or damages caused to them in the normal course of business. Such damages will not be payable if the loss is abnormal in nature, i.e. not in the ordinary course of business. There are two types of damages according to the Act, Liquidated damages - Sometimes the parties to a contract will agree to the amount payable in case of a breach. This is known as liquidated damages. Unliquidated Damages - Here the amount payable due to the breach of contract is assessed by the courts or any appropriate authorities. C) Sue for Specific Performance This means the party in breach will actually have to carry out his duties according to the contract. In certain cases, the courts may insist that the party carry out the agreement. So if any of the parties fails to perform the contract, the court may order them to do so. This is a decree of specific performance and is granted instead of damages. For example, A decided to buy a parcel of land from B. B then refuses to sell. The courts can order B to perform his duties under the contract and sell the land to A. D) Injunction An injunction is basically like a decree for specific performance but for a negative contract. An injunction is a court order restraining a person from doing a particular act. So, a court may grant an injunction to stop a party of a contract from doing something he promised not to do. In a prohibitory injunction, the court stops the commission of an act and in a mandatory is injunction, it will stop the continuance of an act that is unlawful. E) Quantum Meruit Quantum meruit literally translates to “as much is earned”. At times when one party of the contract is prevented from finishing his performance of the contract by the other party, he can claim quantum meruit. So, he must be paid a reasonable remuneration for the part of the contract he has already performed. This could be the remuneration of the services he has provided or the value of the work he has already done. Part – II - What is Intellectual Property Rights? Intellectual property (IP) refers to creations of the mind which are original in nature and have not been duplicated from any one or anywhere. Some of the examples of intellectual property can be for example inventions, literary and artistic works, symbols, names, images and designs used in commerce. The term intellectual property has been used since centuries. The concept of intellectual property can be broadly categorized in to two major categories, viz., (i) Individual property and (ii) Copyright. Individual property: The properties which are original and intangible in nature and are related to commercial as well as industry related products which includes inventions (patents), trademarks, industrial designs, and geographic indications of source comes under the category of individual property. Copyright: The creations which are original and intangible in nature, such as the literary and artistic works such as novels, poems and plays, films, musical works, articles as well as artistic works such as drawings, paintings, photographs and sculptures, and architectural designs. Rights related to copyright include those of performing artists in their performances, producers of phonograms in their recordings, and those of broadcasters in their radio and television programs. Like any other tangible property, an individual has the right to own and protect the original creation of its mind. Such a right is called intellectual property. An intellectual property right provides an ownership and others need to Karishma Birthare, PES University pg. 26  take permission from the concerned owners before using it. If such creations are used without taking prior permissions, legal action can be taken against such persons. Intellectual property refers to the right over the intellectual work and not the work itself. Intellectual property rights can be categorized into various types as per the nature of work. The most common types of intellectual property are copyrights, trademarks, patents, industrial design rights and trade secrets which can be explained as follows: 1) Copyright: It is a right that is provided to the owner of a literary or artistic work. It is an exclusive right to control the publication, distribution and adaptation of creative works. Copyright laws deal with the intellectual property of creative works like articles, books, music, software, painting, etc. The right lies with the owner cum copyright holder for a certain period of time. As time lapses, the work can be republished or reproduced by others. Usually, the timespan of a copyright extends through the entire life of the owner and lasts up to a period of about 50 to 100 years after death. In case of anonymous works, the right lasts for 95 years after publication or 120 years after the creation. 2) Trademarks: Companies, political parties, governmental bodies and several running institutions can be identified or recognised on basis of certain symbols assigned by them. These symbols are nothing but the trademark, which is generally used to identify a particular product, which indicates its source. A trademark can be a combination of words, phrases, symbols, logos, designs, images or devices, used by an individual, legal entity or business organisation to distinguish their products from that of others. For example, one can identify the products of Reebok/LG/Whirlpool/Godrej through their logo, which is embossed on their products. Another example can be the logo of NGO’s like WHO, UNICEF and so on which differentiates these institutions with each other. The organisations get their trademarks registered and these trademarks are protected legally. If these trademarks are ever misused, then the owners can claim legal actions against those persons who use their trademarks. The right of trade marks defends the products and services of the company or institutions which helps in developing their brand, including pharmaceuticals. They can be registered nationally or internationally, enabling the use of the symbol ®. An unregistered trade mark is followed by the letters ™. This can also be enforced in court if a competitor or anyone else uses the same or similar name to trade in the same or a similar field. 3) Patents: Patents are rights related to new discoveries. Patents are used to protect new product, process, apparatus. The right to patent says that the invention is not obvious in light of what has been done before or has not been duplicated and has not been disclosed anywhere in the world at the time of the application. But of course the patent can only be given to those inventions which have a practical purpose. This right is conferred on persons who invent any new machine, process, article of manufacture or composition of matter, biological discoveries, etc. There are certain set criteria of patent which may differ from country to country and ones’ invention should meet the set criteria in order to get their rights protected. In general, the invention must be new, inventive and should be useful or can be applied in industries. The person needs to get registered in order to receive the patent for his/her invention. Once the individual has been granted the patent for the invention then he or she has an exclusive right to control others from making, using, selling, or distributing the patented invention without permission. Generally, the time limit of a patent is 20 years from the date of filing the application (for the patent). 4) Industrial design rights: These rights also come under intellectual property and protect the visual design of objects. These rights are assigned to the products distinguished by their novel shape or pattern. The design may be in form of a shape, colour, pattern or a combination of all these things. It can be an industrial commodity or a handicraft. The design can be either two-dimensional Karishma Birthare, PES University pg. 27  (based on pattern, colours and lines) or three-dimensional (as per shape and surface). The right is assigned on basis of several factors like, novelty, originality and visual appeal. The person who has an industrial design right has the exclusive right to make or sell any objects in which the design is applicable. The right is conferred for a period of 10 to 25 years. The design is required to be registered either nationally or under an EU (European)-wide single right. 5) Trade secrets: Trade secrets are the rights assigned to the designs, practice, formulas, instrument, processes, recipes, patterns or ideas being used or owned by a company to gain economic advantage over its competitors. 6) Geographical Designs: A geographical indication is a sign used on goods that have a specific geographical origin and possess qualities, reputation or characteristics that are essentially attributable to that place of origin. Most commonly, a geographical indication includes the name of the place of origin of the goods. Agricultural products typically have qualities that derive from their place of production and are influenced by specific local factors, such as climate and soil. Geographical indications are protected in accordance with international treaties and national laws. Under the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS), there is no obligation for other countries to extend reciprocal protection unless a geographical indication is protected in the country of its origin. India, as a member of the World Trade Organization (WTO), enacted the Geographical Indications of Goods (Registration & Protection) Act, 1999. Process of examination of Patent Application Before the grant, a Patent has to undergo a strong filtering as to eligibility for the grant of the patent. This requires a structured examination of the patent as provides in the law of the land. The process which is exclusive of its own channel, is multi-stage process. For instance, the examination of a patent application by the Examiner and then subsequent processing by the Controller constitute one such filtering mechanism. In the Patent Office the invention as described in the specification is subjected to a comprehensive search in different databases to find out the appropriate prior arts for ascertaining novelty and inventiveness of an alleged invention during the process of examination as per provisions of the Act and Rules. Patent Infringement Before the grant, a Patent has to undergo a strong filtering as to eligibility for the grant of the patent. This requires a structured examination of the patent as provides in the law of the land. The process which is exclusive of its own channel, is multi-stage process. For instance, the examination of a patent application by the Examiner and then subsequent processing by the Controller constitute one such filtering mechanism. In the Patent Office the invention as described in the specification is subjected to a comprehensive search in different databases to find out the appropriate prior arts for ascertaining novelty and inventiveness of an alleged invention during the process of examination as per provisions of the Act and Rules. A patent grants proprietary rights on an invention, allowing the patent holder to exclude others from making, selling, or using the invention. Inventions allow many businesses to be successful because they develop new or better processes or products that offer competitive advantage on the marketplace. One could get a patent by filing a patent application with the Patent Office in India. Patent, in general parlance means, a monopoly given to the inventor on his invention to commercial use and exploit that invention in the market, to the exclusion of other, for a certain period. As per Section 2(1) (j) of the Patents Act, 1970, “invention” includes any new and useful; art, process, method or manner of manufacture; machine, apparatus or other article; substance produced by manufacture, and includes any new and useful improvement of any of them, and an alleged invention; Karishma Birthare, PES University pg. 28  The definition of the word “Invention” in the Patents Act, 1970 includes the new product as well as new process. Therefore, a patent can be applied for the “Product” as well as “Process” which is new, involving inventive step and capable of industrial application can be patented in India. The invention will not be considered new if it has been disclosed to the public in India or anywhere else in the world by a written or oral description or by use or in any other way before the filing date of the patent application. The information appearing in magazines, technical journals, books etc, will also constitute the prior knowledge. If the invention is already a part of the state of the art, a patent cannot be granted. Examples of such disclosure are displaying of products in exhibitions, trade fairs, etc. explaining its working, and similar disclosures in an article or a publication. It is important to note that any invention which falls into the following categories is not patentable: (a) frivolous, (b) obvious, (c) contrary to well established natural laws, (d) contrary to law, (e) morality, (f) injurious to public health, (g) a mere discovery of a scientific principle, (h) the formulation of an abstract theory; (i) a mere discovery of any new property or new use for a known substance or process, machine or apparatus, (j) a substance obtained by a mere admixture resulting only in the aggregation of the properties of the components thereof or a process for producing such substance, (k) a mere arrangement or rearrangement or duplication of known devices, (l) a method of agriculture or horticulture, and (m) inventions relating to atomic energy or the inventions which are known or used by any other person, or used or sold to any person in India or outside India. The application for the grant of patent can be made by either the inventor or by the assignee or legal representative of the inventor. In India, the term of the patent is for 20 years. The patent is renewed every year from the date of patent. Nature of a Patent - A Patent is a grant (in the form of a document) by the Government, given for disclosing a new invention by an Inventor or a group of Inventors or otherwise an applicant. Once the Patent is issued, it gives to the Inventor or the applicant, as the case may be, an exclusive right to sell, manufacture and use the invention disclosed in the Patent. The legal exclusive right in the Patent can be exercised by the Inventor/ applicant only in the country which grants the right. This right can be exercised only for a limited period of time, normally known as the ‘Term of the Patent’. Therefore, on the expiry of the Term of the Patent, the invention becomes a public property. Patent vis-à-vis Property Rights- A Patent is akin to a property, like a car, a house or a business. When one receives a Patent, the person would have achieved something that few have accomplished. Therefore, securing a Patent is an achievement worthy of celebration. When someone infringes the Patent of others, it is similar to the act of stealing somebody’s car, house or business. For the term prescribed under the Patents Act, 1970, the legal rights under the Patent are the property of the Patent Holder, provided the Patent is in force, meaning that the prescribed renewal fees are paid within the prescribed period. Rights vested on the Patentee - Patent represent one of the most powerful Intellectual Property Rights. These rights can be a very important economic tool if used effectively and diligently. For instance, Patent rights can bring a substantial income through the manufacture or licensing of the invention covered in the Patent. Patent also represents a long-term security. Patent provides a right to the Patentee to prevent a third party from commercially using the patented invention without the permission of the Patentee. Role of Patents - Patent gives the Patentee the right to take legal action to prevent others from commercially exploiting the patented invention in the country which grants the Patent without the permission of the Patentee (Proprietor). The grant of a Patent for an invention however does not guarantee the merit of the invention disclosed therein. The country that grants the Patent does not guarantee the legitimacy of the Patent. The Government does not give any financial or any other award/assistance to the Inventor(s)/Patentee(s) along with the grant of the Patent. Karishma Birthare, PES University pg. 29  It is left to the Patentee to commercially exploit the Patent and make profit from it. Objective of securing a Patent - It is commonly believed that securing a Patent automatically brings in Wealth and Prosperity. This is not correct. Securing a Patent is only one aspect of the process that may lead to success if one is able to commercially use the invention. Though each invention is different but the objectives of securing a Patent protection for the inventions are basically the same, they are: – To make money.- One has to evaluate the invention and its potential to be converted into wealth. To gain security.- It is required to protect the invention from any unauthorized commercial use. To gain knowledge.- Learning the patenting process is easy and when mastered, it can save one from substantial professional charges. Furthermore, through the knowledge thus gained one can extend the life of the Patent and consequently the earnings from it. To have fun.- Patenting can be an enjoyable exercise because it motivates one to innovate new things and to make them succeed. Therefore, the success of a Patent would depend upon the actions taken by the Patentee. Although the basic purpose of granting a Patent is to encourage inventive activities, in practice, this system is formulated and revised from time to time in the context of political, socio-economic and industrial environment of a nation, so as to safeguard the interests of the nation. Product/Process Patent - Section 5 of the Patents Act, 1970 (as it stood prior to its repeal under the Patents (Amendment) Act, 2005) provided for grant of Process Patents only in certain categories of inventions. It may be noted here that under the Patents Act, 1970, in all other areas, Product and Process Patents could be issued and have been issued. The TRIPs Agreement under Article 27.1 stipulates that Patents shall be available for any invention, whether Products or Processes, in all fields of technology except for the exclusion stipulated under Article 27.2 and 27.3. Pursuant to the TRIPs agreement, the Patents Act, 1970 was amended in the year 2002. Section 5 of the Patents Act, 1970 (as it stood after the 2002 amendments) provided that, in the case of inventions being claimed relating to food, medicine, drugs or chemical substances, only Patents relating to the methods or processes of manufacture of such substances could be obtained. PATENTABLE SUBJECT MATTER AND PATENTABILITY CRITERIA Elements of Patentability - A Patent is granted for an invention which may be related to any process or product. An invention is different from a discovery. A discovery is something that already existed but has now been discovered. Not all inventions are Patentable. An invention must fulfill certain requirements in order to be qualified as Patentable. These requirements are known as ‘conditions of Patentability’. The term ‘invention’ under the Patents Act, 1970 has been defined as ‘a new product or process involving an inventive step and capable of industrial application.’ (Section 2(1)(j)). The Patent must be in respect of an invention and not a mere discovery. The fundamental principle of the Patent Law is that a Patent is granted only for an invention which must be new and useful. That is to say, it must have novelty and utility. It is essential for the validity of a Patent that it must be the inventor’s own discovery as opposed to mere verification of what was already known before the date of the Patent. It is important to bear in mind that in order to be Patentable an improvement on something known before or a combination of different matters already known, should be something more than a mere workshop improvement; and must independently satisfy the test of invention or an ‘inventive step’. Karishma Birthare, PES University pg. 30  To be Patentable the improvement or the combination must produce a new result, or a new article or a better or cheaper article than before. The term ‘New invention’ is defined as any invention or technology which has not been anticipated by publication in any document or used in the country or elsewhere in the world before the date of filing of Patent application with complete specification, i.e., the subject matter has not fallen in public domain or that it does not form part of the state of the art [Section 2(1)(l)] where, ‘capable of industrial application’, in relation to an invention, means that the invention is capable of being made or used in an industry [Section 2(1)(ac)]. In the case of Raj Prakash v. Mangat Ram Choudhary, AIR 1978 Del 1, it was held that an invention, as is well known, is to find out something or discover something not found or discovered by anyone before. It is not necessary that the invention should be anything complicated. The essential thing is that the inventor was first to adopt it. The principle, therefore, is that every simple invention that is claimed, so long as it is something which is novel or new, it would be an invention and the claims and specifications have to be read in that light. DURATION OF PATENTS The legal rights accrued by securing a Patent for an invention can be exercised for a limited period, which is specified in the Patent legislation of the country concerned. This period is called as the ‘Term of the Patent’. Currently, in all member countries of WTO, including India, the term is twenty years from the date of filing the application. It should be noted that this term is not automatically renewed and depends on the payment of the prescribed annual fee within the stipulated time. If this fee (maintenance fee) is not paid, the Patent will lapse and become the public property. Subsequently, a fresh application for Patent for the said invention cannot be filed, as the novelty of the invention has been lost. Therefore, one has to be very careful to keep the Patent alive by paying the prescribed renewal fee within the time prescribed. Section 53 of the Patents Act, 1970 provides that the term of every Patent granted after the commencement of the Patents (Amendment) Act, 2002 and the term of every Patent which has not expired and has not ceased to have effect, on the date of such commencement, shall be twenty years from the date of filing of application for the Patent. ELEMENTS OF PATENTABILITY - NOVELTY AND NON-OBVIOUSNESS (INVENTIVE STEPS AND INDUSTRIAL APPLICATION The conditions of Patentability are: Novelty Inventive step (non-obviousness) and Industrial applicability (utility) Novelty - A novel invention is one which has not been disclosed in the prior art where ‘prior art’ means everything that has been published, presented or otherwise disclosed to the public on the date of Patent (The ‘Prior Art’ includes documents in foreign languages disclosed in any format in any country of the world). For an invention to be judged as novel, the disclosed information should not be available in the ‘Prior Art’. This means that there should not be any prior disclosure of any information contained in the application for Patent (anywhere in the public domain, either written or in any other form, or in any language) before the date on which the application is first filed i.e. the ‘priority date’. Therefore, an invention shall be considered to be new, if it does not form part of the prior art. Although the term ‘Prior art’ has not been defined under the Patents Act, 1970 it shall be determined by the provisions of Section 13 read with the provisions of Sections 29 to 34. (a) An invention shall not be considered to be novel if it has been anticipated by publication before the date of filing of the application in any of the specification filed in pursuance of application for Patent in India on or after the 1st day of January 1912. (b) An invention shall not be considered to be novel if it has been anticipated by publication made before the date of filing of the application in any of the documents in any country. Karishma Birthare, PES University pg. 31  (c) An invention shall not be considered to be novel if it has been claimed in any claim of any other complete specification filed in India which is filed before the application but published after said application. (d) An invention shall not be considered to be novel if it has been anticipated having regard to the knowledge, oral or otherwise, available within any local or indigenous community in India or elsewhere. Inventive Step (Non-obviousness)- ‘Inventive step’ is a feature of an invention that involves technical advancement as compared to existing knowledge or having economic significance or both, making the invention non-obvious to a person skilled in that art. Here definition of ‘inventive step’ has been enlarged to include economic significance of the invention apart from already existing criteria for determining the inventive step. An invention shall not be considered as involving an inventive step, if, having regard to the state of the art, it is obvious to a person skilled in the art. The term ‘obvious’ means that something which does not go beyond the normal progress of technology but merely follows plainly or logically from the prior art, i.e., something which does not involve the exercise of any skill or ability beyond that to be expected of the person skilled in the art. For this purpose, a ‘person skilled in the art’ should be presumed to be an ordinary practitioner aware of what was general common knowledge in the relevant art at the relevant date. In some cases, the person skilled in the art may be thought of as a group or team of persons rather than as a single person. Industrial Applicability - An invention is capable of industrial application if it satisfies following three conditions, cumulatively: - can be made; can be used in at least one field of activity; can be reproduced with the same characteristics as many times as necessary. An invention to be Patentable must be useful. If the subject matter is devoid of utility it does not satisfy the requirement of invention. For the purpose of utility, the element of commercial or pecuniary success has no relation to the question of utility in Patent law. The usefulness of an alleged invention depends not on whether by following the directions in the complete specification all the results not necessary for commercial success can be obtained, but on whether by such directions the effects that the application/patentee professed to produce could be obtained. The meaning of usefulness is therefore useful for the purpose indicated by the applicant or patentee whether a non-commercial utility is involved. NON- PATENTABLE SUBJECT MATTER Inventions Non-Patentable - Under section 3 of the Patents Act, 1970, the following are not inventions and hence are not considered to be patentable. However, examples given are mere illustrations and may not be conclusive on the subject. Objective decisions may be taken on case to case basis. (a) An invention which is frivolous or which claims anything obviously contrary to well established laws is not an invention. Some examples of a frivolous nature and contrary to natural laws are:- A machine purporting to produce perpetual motion. A machine alleged to be giving output without any input. A machine allegedly giving 100% efficiency. (b) An invention, the primary or intended use or commercial exploitation of which would be contrary to public order or morality or which causes serious prejudice to human, animal or plant life or health or to the environment is not an invention. (c) The mere discovery of a scientific principle or the formulation of an abs