Business Law 2081 Board Question Paper

Concept of Law

Law is a system of binding, enforceable rules, standards, and principles established by the sovereign authority of the state to regulate human interactions, protect civil rights, maintain public order, and administer justice in society.

Judicial Precedent

A judicial precedent is a formal principle or rule of law established in a previous legal case that is either binding on or persuasive for a court or other tribunal when deciding subsequent cases with similar issues or facts (doctrine of stare decisis).

Disqualified Persons to Contract

Under Nepalese law (National Civil Code, 2074), persons disqualified from entering valid contracts include:

1. Minors: Persons under 18 years of age.
2. Persons of Unsound Mind: Idiots, lunatics, or persons temporarily incapacitated by extreme intoxication.
3. Persons Disqualified by Statute: Alien enemies during wartime, undischarged insolvent debtors, and convicts serving prison sentences.

Quantum Meruit

Quantum Meruit is an equitable legal doctrine meaning “as much as he has earned.” It provides that where one person has partially performed an agreed contractual service and the other party repudiates or prevents further completion, the performing party can recover reasonable compensation for the actual value of work completed.

Termination (Discharge) of Contract

Termination of a contract refers to the legal cessation and release of the contractual relationship and binding obligations between parties, which may occur through performance, mutual agreement, impossibility (frustration), lapse of statutory time, or breach.

Meaning of Contract of Indemnity

Under Section 620 of the National Civil Code, 2074, a contract of indemnity is a contract whereby one party (the Indemnifier) promises to save and protect the other party (the Indemnity Holder) from financial loss caused to them by the conduct of the promisor or by the conduct of any other person.

Unjust Enrichment

Unjust enrichment is a foundational equitable and legal principle establishing that no person should be permitted to unfairly enrich themselves at the expense of another. Under quasi-contract law, the law compels the enriched party to make restitution or restore the benefit received without lawful justification.

Types of Agents

1. Special Agent: Appointed to perform a single, specific commercial act.
2. General Agent: Authorized to handle all acts connected with a particular business or trade.
3. Universal Agent: Holds unlimited authority to transact all lawful business for the principal.
4. Mercantile Agents: Factors, Brokers, Commission Agents, and Del Credere Agents.

Minutes of Company Meetings

Minutes are the official, written permanent legal records documenting the proceedings, discussions, member attendances, voting outcomes, and formal resolutions passed at a company’s Board of Directors meeting or General Meeting of shareholders, signed by the meeting chairperson pursuant to Section 76 of the Company Act, 2063.

Intellectual Property Law

Intellectual property law is the legal framework governing the statutory rights and protections granted to creators and inventors over creations of the human mind, encompassing Industrial Property (patents, trademarks, industrial designs) and Copyright (literary, artistic, musical, and software works).

Classification of Law

Law is systematically classified into distinct branches based on jurisdiction, subject matter, and enforcement:

1. Substantive Law vs. Procedural Law:

   • Substantive Law: Defines legal rights, duties, and liabilities (e.g., Civil Code, Penal Code).
   • Procedural Law: Prescribes the machinery, rules, and procedures for enforcing substantive rights in court (e.g., Civil Procedure Code).

2. Public Law vs. Private Law:

   • Public Law: Regulates relationships between citizens and the state (Constitutional Law, Administrative Law, Criminal Law).
   • Private (Civil) Law: Regulates relationships and disputes between private individuals or commercial entities (Contract Law, Tort Law, Company Law).

3. Civil Law vs. Criminal Law:

   • Civil Law: Focuses on compensating aggrieved individuals for private wrongs through damages.
   • Criminal Law: Punishes social wrongs against the state through fines or imprisonment.

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Differences Between National Law and International Law

Concept and Definition of Contingent Contract

Under Section 515 of the National Civil Code, 2074, a contingent contract is a contract to do or not to do something, if some event collateral to such contract does or does not happen.

• Essential Character: Performance is dependent upon the happening or non-happening of an uncertain future event (e.g., contracts of insurance, guarantee, and indemnity).

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Legal Rules Regarding Contingent Contracts

1. Contingency Dependent on the Happening of an Uncertain Event:

   • Such contracts cannot be enforced by law unless and until that event has happened. If the event becomes impossible, the contract becomes void.

2. Contingency Dependent on the Non-Happening of an Event:

   • Enforceable when the happening of that event becomes legally or physically impossible, and not before (e.g., promising payment if a cargo ship does not return within one year).

3. Contingency Dependent on the Conduct of a Living Person:

   • If the event is how a person will act at an unspecified time, the event is deemed impossible when that person does anything that renders it impossible for them to act that way within a definite time.

4. Contingency Dependent on Happening of Event Within a Fixed Time:

   • Becomes void if, at the expiration of the fixed time, the event has not happened, or if before the time expires, the event becomes impossible.

5. Contingency Dependent on Impossible Events:

   • Contingent agreements to do or not to do anything, if an impossible event happens, are void ab initio, whether the impossibility was known to the parties or not.

Differences Between Public (Common) Carrier and Private Carrier

Appointment of Auditor under Nepal Company Act, 2063

Under Sections 110-111 of the Company Act, 2063, the auditor can be appointed by:

1. Board of Directors: Appoints the first auditor of the company within three months of incorporation, who holds office until the first Annual General Meeting (AGM).
2. Shareholders at the AGM: Appoints subsequent regular statutory auditors by passing an ordinary resolution at each AGM.
3. Office of the Company Registrar (CRO): If the AGM fails to appoint an auditor or cannot be convened, the Registrar appoints an independent auditor.
4. Board of Directors (Casual Vacancy): Can appoint an interim auditor to fill a casual vacancy caused by death or resignation, subject to CRO approval.

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Disqualifications of an Auditor (Section 112, Company Act 2063)

The following persons are legally disqualified from being appointed or acting as an auditor of a company:

1. A director, officer, employee, or promoter of the company, or an employee of such director or promoter.
2. A partner of a director, officer, or employee of the company.
3. A debtor who owes money to the company, or a person who has given a guarantee on behalf of a debtor of the company.
4. A person holding shares or debentures in the company or its subsidiary/holding company.
5. A person convicted of a criminal offense involving moral turpitude or corporate fraud, until three years have elapsed from sentence completion.
6. An undischarged insolvent.
7. A person who is not a licensed Chartered Accountant (CA) or Registered Auditor (RA) holding an active Certificate of Practice from ICAN.

Essential Elements of a Valid Arbitral Award

Under the Arbitration Act, 2055 (Section 27) and UNCITRAL model law, for an arbitral award to be legally valid, binding, and enforceable in civil courts, it must satisfy the following essentials:

1. Must Be in Writing: An oral decision is completely invalid; the award must be formally drawn up as a written legal document.
2. Must Be Signed by the Arbitrators: Must be signed by the sole arbitrator or by the majority of the members of the arbitral tribunal.
3. Must State Reasons (Reasoned Award): The award must articulate the clear legal and factual reasons upon which the decisions are based, unless the parties explicitly agreed that no reasons are required or it is an award on agreed terms.
4. Must State Date and Place: Must explicitly record the date of delivery and the designated legal place (seat) of arbitration.
5. Must Be Final and Definite on All Referred Issues: Must resolve all matters submitted within the terms of reference, leaving no referred issue undecided or ambiguous.
6. Must Not Exceed the Terms of Reference: Must strictly address disputes within the scope of the arbitration agreement (Ultra vires decisions are liable to be set aside by the High Court).
7. Must Be Certain, Possible, and Lawful: The directions and remedy awarded must be capable of physical and legal execution, and not contrary to Nepalese public policy.
8. Allocation of Costs and Interest: Must clearly specify the interest rate on awarded sums and allocate arbitration expenses between the parties.

Major Provisions of the Patent, Design and Trademark Act, 2022 (1965)

The Patent, Design and Trademark Act, 2022 is the foundational industrial intellectual property legislation in Nepal, administered by the Department of Industry (DoI):

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1. Patents (Inventions):

• Eligibility Criteria: Novelty, inventive step, and industrial applicability.
• Term of Protection (Section 8): Granted for an initial period of 7 years, renewable twice for 7 years each upon payment of statutory fees (maximum 21 years).
• Rights: Exclusive statutory monopoly to manufacture, use, sell, or license the patented invention in Nepal.

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2. Industrial Designs (Aesthetic Shapes):

• Eligibility Criteria: Novel visual design, shape, configuration, or pattern applied to an industrial article.
• Term of Protection (Section 14): Granted for an initial period of 5 years, renewable twice for 5 years each (maximum 15 years).

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3. Trademarks (Brand Identity):

• Eligibility Criteria: Distinctive word, logo, symbol, or brand name distinguishing goods/services from rivals.
• Term of Protection (Section 18): Valid for 7 years from registration, renewable indefinitely every 7 years.
• Grounds of Refusal: Deceptively similar marks, marks harming national sovereignty, or hurting religious sentiments.

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4. Enforcement and Penalties:

• The Act prohibits unauthorized commercial copying or counterfeit manufacturing, empowering the Department of Industry to confiscate infringing goods and impose financial fines.

Agreements Opposed to Public Policy: Conceptual Foundation

Under Section 504 and Section 517 of the National Civil Code, 2074, any agreement whose consideration or object is opposed to public policy is illegal and void ab initio (ex turpi causa non oritur actio).

Public policy represents the public interest, social morality, state security, and the welfare of the community. Courts will never lend their enforcement machinery to agreements that violate fundamental public interest.

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Categories of Agreements Opposed to Public Policy

1. Trading with an Alien Enemy:

   • Any commercial contract entered into with a national or corporation of an enemy state during wartime is void because it enhances the enemy’s resources and harms national security.

2. Agreements Stifling Criminal Prosecution:

   • An agreement to drop, withdraw, or compromise criminal charges involving public offenses (e.g., murder, forgery, theft) in exchange for money is void, as justice cannot be bought or sold.

3. Agreements in Restraint of Parental Rights:

   • Agreements whereby parents surrender natural guardianship and custody over minor children are void, as child welfare is paramount.

4. Agreements in Restraint of Personal Liberty:

   • Agreements unduly restricting an individual’s fundamental personal freedom (e.g., involuntary servitude or bonded labor) are unconstitutional and void.

5. Marriage Brokerage Contracts:

   • Agreements promising monetary commission to a third party in return for procuring a marriage are void, as marriage is a sacred personal institution.

6. Agreements Interfering with the Administration of Justice:

   • Agreements attempting to bribe judges, corrupt witnesses, or induce perjury.

7. Traffic in Public Offices and Honors:

   • Agreements involving the sale, purchase, or corrupt procurement of public administrative jobs, judicial posts, or civil honors.

8. Agreements Promoting Corruption and Monopolistic Exploitation:

   • Cartel agreements designed to create artificial shortages of food staples or rig public bids.

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Conclusion:

Public policy is famously characterized as an “unruly horse”; courts apply it with judicial restraint to strike down only agreements that clearly injure the public welfare, upholding commercial integrity and the rule of law.

The General Rule: Nemo Dat Quod Non Habet

The foundational legal maxim governing the transfer of ownership in the sale of goods is:

$$\text{Nemo Dat Quod Non Habet}$$

“No one can give what they do not have.”

Under general commercial law, a buyer acquires no better title to the goods than the seller had. Therefore, if a person who is not the true owner sells goods without authority, the buyer generally acquires a defective title and must surrender the goods to the lawful owner.

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Exceptions to the Rule (When a Non-Owner Can Pass Valid Title)

To protect commercial certainty and innocent purchasers, statutory commercial law (National Civil Code, 2074) recognizes critical exceptions where a non-owner transfers perfectly valid title to a bona fide buyer for value without notice:

1. Sale by a Mercantile Agent (Section 550):

   • If a mercantile agent (broker, factor) is in possession of goods or documents of title with the owner’s consent, any sale made by the agent in the ordinary course of business passes valid title to an innocent buyer acting in good faith.

2. Sale by One of Several Joint Owners:

   • If one of several co-owners has sole physical possession of goods with the permission of the other co-owners, a sale made by that co-owner passes good title to an innocent buyer.

3. Sale by a Person in Possession Under a Voidable Contract:

   • A person who obtained possession of goods through fraud or coercion holds a voidable title. If that person sells the goods before the contract is rescinded to a buyer acting in good faith without notice of the defect, the buyer acquires valid legal ownership (Phillips v. Brooks).

4. Sale by Seller in Possession After Sale:

   • If a seller, having sold goods, continues to retain physical possession of the goods or documents of title, and resells or pledges them to a new bona fide buyer, the second buyer acquires valid title.

5. Sale by Buyer in Possession Before Ownership Passes:

   • Where a buyer obtains possession of goods with the seller’s consent before ownership officially transfers, and resells them to an innocent third party, the new buyer acquires valid title.

6. Sale by an Unpaid Seller Exercising Right of Lien or Stoppage:

   • An unpaid seller who has exercised a lien or stopped goods in transit lawfully resells the goods to a new buyer, who acquires an unimpeachable legal title against the original defaulting buyer.

7. Sale by a Finder of Lost Goods or Pawnee:

   • A finder of goods (if perishable or where lawful expenses equal two-thirds of value) or a pawnee (after giving due notice of default) can sell the goods and pass good title.

Major Provisions of the Copyright Act, 2059 (2002)

The Copyright Act, 2059, administered by the Nepal Copyright Registrar’s Office, protects original literary, artistic, scientific, and musical creations:

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1. Scope of Protected Works (Section 2 & 3):

• Protects original books, software programs, musical compositions, films, architectural designs, sculptures, and photographic works.
• Automatic Protection: Copyright protection originates automatically upon the creation of the original work; formal registration is not mandatory to claim legal protection, though a registration certificate provides prima facie proof in court.

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2. Term of Copyright Protection (Sections 14-22):

• General Rule: Protects works during the lifetime of the author plus 50 years after the author’s death.
• Work of Joint Authorship: Lifetime of the last surviving author plus 50 years.
• Anonymous / Pseudonymous / Corporate Works: 50 years from the date of first publication.

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3. Statutory Rights of the Copyright Owner

Copyright confers two distinct bundles of rights upon the creator:

I. Economic Rights (Exclusive Commercial Exploitation):

1. Right of Reproduction: Exclusive right to make copies of the work in any physical or digital form (printing, photocopying, digital recording).
2. Right of Translation: Exclusive right to translate the work into other languages.
3. Right of Adaptation & Arrangement: Right to modify, dramatize, or convert a novel into a film or theatrical script.
4. Right of Public Communication & Broadcasting: Right to broadcast, stream, perform, or display the work publicly via television, radio, or the internet.
5. Right of Commercial Distribution & Rental: Right to sell, lease, or rent copies to the public.

II. Moral Rights (Non-Transferable Personal Rights):

1. Right of Paternity (Attribution): Right to claim authorship and have the creator’s name clearly acknowledged on all copies.
2. Right of Integrity: Right to object to any distortion, mutilation, or derogatory modification of the work that damages the author’s professional reputation or honor.

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4. Exceptions and Fair Use Provisions (Chapter 4):

• Permits fair use of copyrighted material without prior permission for personal study, research, quotation, critical review, and non-profit educational instruction.

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5. Infringement and Remedies:

• Piracy, unauthorized digital copying, and bootlegging constitute civil and criminal offenses punishable with statutory compensation, destruction of infringing copies, and criminal fines.