Business Law PPT

1. Business Laws
Introduction
Tina K. Stephen
Tina K. Stephen

2.  Contract Management Process

3. Contract Management Process
1. Single Contract
2. Pre-contractual Documents
 LOI, MoU

4. Dresser Rand S. A. v. Ms. Bindal Agro Chem.
Ltd. & Another, AIR 2006 SC 871
 the Apex Court held that it is now well settled that a letter of
intent merely indicates a party's intention to enter into a contract
with the other party in future. A letter of intent is not intended to
bind either party ultimately to enter into any contract. It is no
doubt true that a letter of intent may be construed as a letter
of acceptance if such intention is evident from its terms. It is
not uncommon in contracts involving detailed procedure, in
order to save time, to issue a letter of intent communicating
the acceptance of the offer and asking the contractor to start
the work with a stipulation that a detailed contract would be
drawn up later. If such a letter is issued to the contractor,
though it may be termed as a letter of intent it may amount to
acceptance of the offer resulting in a concluded contract
between the parties. But the question whether the letter of
intent is merely an expression of an intention to place an
order in future or whether there is a final acceptance of the
offer thereby leading to a contract, is a matter that has to be
decided with reference to the terms of the letter.

5. Entire Agreement Clause
L.E.B Tina K. Stephen
 2.1The Contract constitutes the entire agreement of
Parties with respect to the subject matter hereof and
supersedes all previous agreements, negotiations and
undertakings in respect thereof.
 Parties shall not be bound by or liable in respect of any
statement, representation, promise or understanding not
set forth in the Contract.

6. Contract Management Process
3. Big deals have multitude of contract documents
a.Tender specification/LOI
b. GCC – it contains general terms
i Scope of the Contract
ii Governing Law
iii Force majeure
iv Representation,Warranties and Guarantee
v Confidentiality
vi Dispute Resolution.
c. SCC/SLA- Procurement, IT services, security services
d.Work-order

7. General Conditions of Contract (GCC)
L.E.B Tina K. Stephen
GCC
IR
Outsourcing
Employment of
Contract labour
MARKETING PROCUREMENT

8. SCC/SLA
L.E.B Tina K. Stephen
SCC/SLA-
1. What specific services needs to be provided will be
defined
2. Manner in which the services are to be rendered.
3. Performance measure matrix
 An SCC in a service context is called an SLA

9. Work-order
L.E.B Tina K.
Stephen
 A company generates a specific work order after a GCC
and SCC is created and signed.
 The rigts of the vendor/party begins only once the work
order is generated.

10. Order of Precedence.
 All Contract Documents and subsequently issuedAlteration
Orders are essential parts of the Contract and will be in full
force and effect as if they were expressly set out in the body of
the Contract. In resolving conflicts or inconsistencies between
the Contract Documents, the following order of precedence
shall be followed:

11. Order of Precedence.
 i.) Alteration Orders / Amendment orders;
 ii.) Work Order;
 iii.) Special Conditions of Contract;
 iv.) General Conditions of Contract;
 v.) Instructions;
 vi.) Letter of Intent or Letter of Award issued by Reliance in favour
of Contractor.
 vii.) Scope of work & technical specifications

12. .
Authentication of documents, proceedings
and contracts – Section 21 Companies Act
L.E.B Tina K. Stephen
(b) contracts made by or on behalf of a company,
may be signed by any key managerial personnel or an officer
of the company duly authorised by the Board in this behalf.

13. “key managerial personnel”,
L.E.B Tina K.
Stephen
 “key managerial personnel”, in relation to a company,
means—
 (i) the Chief Executive Officer or the managing director or the
manager;
 (ii) the company secretary;
 (iii) the whole-time director;
 (iv) the Chief Financial Officer; and
 (v) such other officer as may be prescribed;

14. Different Kinds of Contracts
Tina K. Stephen
 ORAL AGREEMENTS
 The simplest form of agreement.
 Implied from the situations or the acts of the parties .
 Specifically excluded in certain situations
 Difficult to enforce in the court of law as it is not in a written
form.

15. Different Kinds of Contracts
Tina K. Stephen
 GENTLEMAN’S AGREEMENT
 Informal in character
 Oral in form
 Through mutually beneficial etiquette

16. Different Kinds of Contracts
 WRITTEN CONTRACTS
 Contracts with your service provider
 Contract with your vendor
 Contract with your employees etc…
Tina K. Stephen

17. Different Kinds of Contracts
Tina K. Stephen
 STANDARD FORM OF CONTRACT
 Often referred to as the take it or leave it contracts.
 Where companies have to enter into a large number of
contracts on a day to day basis
 Eg: standard form construction contract.

18. Tina K. Stephen
 Formation of Contracts

19. What is a contract
Agreement Enforceable Contract
by law
An agreement enforceable by law is a CONTRACT

20. Agreement
✓ Is there any difference between agreement and
contract?

21. Agreement
 Agreement = Offer + Acceptance

22. OFFER/PROPOSAL
 When one person signifies to another his willingness
to do or to abstain from doing anything with a view of
obtaining the assent of the other to such act or
abstinence, we say there is a proposal.

23. Proposal or offer
 There may be,
 an express offer or
 an implied offer.

24. Proposal
 A proposal may be by
1. Word of mouth
2. In writing
3. By the conduct of a party

25. Contract
 Proposal
 Eg:
 Traveling by bus
 Entering into a restaurant and having food

26. General Offers
Tina K. Stephen
 Mongrel goes missing in Chennai, woman offers Rs 5 lakh
reward
 http://timesofindia.indiatimes.com/city/chennai/Mongrel-
goes-missing-in-Chennai-woman-offers-Rs-5-lakh-
reward/articleshow/35321295.cms

27. General Offers
 Get well pharma are the producers of or drugs for
curing fever. They advertise that if any one who takes
this medicine and then contracts fever has be given
Rs.10.000/- as compensation. Ms.Susan takes the
same but still falls ill.
 Carlil v. Carbolic Smoke Balls Com.

28. Offers inviting offer
 Mr.Satya: What is the price of the Mime Hall
 Mr.Srivastava: The price is 10 Lakh Rupees.
 Mr.Satya: Immediately sends a reply, wants to buy.
 Mr.Srivastava: does not want to sell.
Stating the lowest price is not an offer.

29. Offers inviting offer
 Where a party without expressing his final willingness,
proposes certain terms on which he is willing to
negotiate does not make an offer but only invites the
other party to make an offer on those terms.
 Eg:
 Catalogue kept in a shop
 Announcements to hold auction

30. Agreement
 Agreement = Offer + Acceptance

31. Contract Management
AGREEMENT
CP FC LO CON
CONTRACT

32. Contract
Proposal Promise Agreement Contract
(Proposal Accepted) (Consideration)

33. Contract
Tina K. Stephen
 In order that an agreement becomes enforceable there
should be the following elements
 Agreement not to merely social in character
 There should be an intention to create a legal obligation
 There must be consensus ad idem
 There must be lawful consideration
 Parties should have the capacity to contract
 Object must be lawful

34. Tina K. Stephen
Thank you

35. Legality of Object
L.E.B

36. Sec 23- What considerations and
objects are lawful and what not
 The consideration or object of an agreement is lawful,
unless-
 it is forbidden 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 public
policy.
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.

37. Forbidden by law
 Nandalal v.ThomasWilliam
To the plaintiff was licensed under the Excise Act to
work a liquor shop.The Act forbade the sale, transfer
or sublease of the license.The plaintiff did that and
then wanted to enforce the contract.
Held : cannot be enforced as it is an act forbidden by
the law.

38.  To defeat the provision law

39. Injury to person or property
 Where A took a loan of Rs. 100 from B and in turn
executed a bond to serve him for two years without any
further payment it amounted to slavery and injurious to
the [person of the promisor.

40. Object Clause in a Security Services
Agreement
 Object of the Contract
 Security Services
 The first object of this Contract is to engage the Service
Provider for providing safety, surveillance and security
services in the Premises
 Stopping the governmental agencies
 The Second object of this contract is to engage the
Service Provider to stop entry of governmental agencies
including, law enforcement agencies, labour inspectors etc
into premises notified by the Company

41.  If the court regards it as immoral

42. If the court regards it as opposed to public
policy
 Trading with alien enemy
 Trafficking in public office
 Interference with the course of justice

43. Section 27 – Restraint of trade- Void
Agreements
 Section 27- "Every agreement by which any one is
restrained from exercising a lawful profession, trade or
business of any kind, is to that extent void."

44. Void Agreements
 Limits of the Restraint
 Should be reasonable with time and territorial scope.
 Should not be greater than required to protect the legitimate
interest of the employer
 Should not impose undue hardship on the employee
 Not to be injurious to public policy.

45. Statutory Exception to restraint of trade
➢ Sale of goodwill
➢ One who sells the goodwill of a business may agree with
the buyer to refrain from carrying on a similar business
within specified local limits, so long as the buyer, or any
person deriving title to the goodwill from him, carries on
a like business therein: provided that such limits appear
to the court reasonable, regard being had to the nature of
the business.
Sale of goodwill includes sale of the companies trade
secrets, knowledge, business relations and other
information relating to and in connection with the
business.

46. Void Agreements
 Limits of the Restraint
 Agreement should specify the local limits of the restraint.
 Time also can be specified.

47. Void Agreements
 Statutory Exception
 Partnership Act
 Sec. 11 restricts the mutual liberty of partners with regards to the
carrying on any other business
 Sec. 36 restraining an outgoing partner from carrying on a similar
business.


48. In Restraint of Legal Proceedings
 Every agreement,-
 (a) by which any party thereto is restricted absolutely from
enforcing his rights under or in respect of any contract, by the
usual legal proceedings in the ordinary tribunals, or which limits
the time within which he may thus enforce his rights; or
 (b) which extinguishes the rights of any party thereto, or
discharges any party thereto from any liability, under or in
respect of any contract on the expiry of a specified period so
as to restrict any party from enforcing his rights, is void to that
extent.

49. Arbitration clause
 Any dispute under this contract will be settled through
arbitration as per Indian Arbitration and Conciliation Act,
1996.
 Place of arbitration: Mumbai

50. Arbitration clause
 Any dispute, controversy or claim arising out of or relating to
this contract, or the breach, termination or invalidity thereof,
shall be settled by arbitration in accordance with the
UNCITRAL Arbitration Rules as at present in force.”
 Note – Parties should consider adding:
 (a) The appointing authority shall be … [name of institution or
person];
(b)The number of arbitrators shall be … [one or three];
(c)The place of arbitration shall be … [town and country];
(d)The language(s) to be used in the arbitral proceedings shall
be …”
(e)The law governing the proceedings shall be…”

51. CONSIDERATION
L.E.B

52. What is a contract
Agreement Enforceable Contract
by law
An agreement enforceable by law is a Contract

53. Contract Management
AGREEMENT
CP FC LO CON
CONTRACT

54. Section 2(d) in The Indian Contract Act,
1872
 When, at the desire of the promisor, the promisee or any
other person has done or abstained from doing, or does
or abstains from doing, or promises to do or to abstain
from doing, something, such act or abstinence or promise
is called a consideration for the promise

55.  A consideration clause should answer questions of ;
 Who is paying,What,To whom?
 When , why and how?

56. CONSIDERATION
 Section 25
 An agreement made without consideration is void.
 Consideration is based on the principle of “quid pro quo” which means
“something in return.”
 Consideration is the price at which the promise of the other is bought.
 When, at the desire of the promisor, the promisee or any other person has
done or abstained from doing, or does or abstains from doing, or promises
to do or to abstain from doing, something, such Act or abstinence or
promise is called a consideration for the promise
 “No Consideration, No Contract”


57. Value of a Consideration
 Sec.25 of the Act lays down that the agreement to
which the consent of the promiser is freely given is not
void merely because the consideration is inadequate.

58. Value of a Consideration
The English common law has always insisted that “consideration” should be of some value.
Though the Indian Act has not stated anything regarding the value of a consideration still it is considered
as something of value.
Inadequacy of consideration may be taken into account to find out whether the consent was freely given.

59. Free Consent
L.E.B

60. Contract
AGREEMENT
CP FC LO CON
CONTRACT

61. Free Consent
 Basic principle of contract law is
 “Consensus ad idem”
 (consent at the same time)
 Sec. 13 – Consent
 Two or more persons are said to consent when they
agree upon the same thing in the same sense.

62. Free Consent
 " Free consent" defined.- Consent is said to be free when it is
not caused by-
1. coercion, as defined in section 15, or
 2. undue influence, as defined in section 16, or
 3. fraud, as defined in section 17, or
 4. misrepresentation, as defined in section 18, or
 5. mistake, subject to the provisions of sections 20, 21 and 22.
Consent is said to be so caused when it would not have been
given but for the existence of such coercion, undue influence,
fraud, misrepresentation or mistake.

63.  Fraud

64. Fraud
 Fraud means an act committed by a party to a contract, or with his
connivance or by his agent, with intent to deceive another party thereto or his agent,
or to induce him to enter into the contract :
 1. the suggestion as to a fact, of that which is not true, by one who
 does not believe it to be true;
 2. the active concealment of a fact by one having knowledge or belief
 of the fact;
 3. a promise made without any intention of performing it;
 4. any other act fitted to deceive; and
 5. any such act or omission as the law specially declares to be
 fraudulent

65. Fraud
 WHAT CONSTITUTES FRAUD -
1. Suggestion of a fact which he does not believe to be true
2. Active concealment of a fact
3. Promise without intention of performing
4. Any act fitted to deceive
5. Any act or omission which the law declares as fraudulent

66. Fraud
• There must be a positive assertion made by one party.
• Assertion is regarding something that he knows to be
untrue

• It should not be made innocently but knowingly and with
a view to defraud the other party.
• The assertion must have actually deceived
• Some loss must have been suffered by the party

67. Fraud
 In certain situation silence will also amount to fraud.This
happens in relations such as
1. Partnership agreements
2. Insurance contracts
3. Family settlements
4. Contract about trusts


68. Fraud
 EXCEPTIONS
• When the party had the means to verify the truth
• When the party had become aware of the fraud and still
taken some benefits out of it.


69.  MISREPRESENTATION

70. MISREPRESENTATION
• Positive assertion by the person, of something which is
not true, though he believes it to be true.
 Remedies
• Avoid the contract
• Insist that the contract be performed with some required
changes .

71. MISREPRESENTATION
 Ingredients
• False statement without intention to deceive
• Effect of agreement caused by misrepresentation is
voidable.
• Wrong statement of facts may be made to a third party
with an intention of communicating it to the plaintiff
• it is made before the conclusion of a contract

72. MISREPRESENTATION
 Remedies
• Avoid performance of the contract
• Insist that the contract be performed with some changes

73. Coercion
 Sec. 15 " Coercion"

 “Coercion" is the committing, or threatening to commit, any
act
 forbidden by the Indian Penal Code, or the unlawful detaining,
or
 threatening to detain, any property, to the prejudice of any
person
 whatever, with the intention of causing any person to enter
into an
 agreement.

74. Coercion
 Essential ingredients of Coercion
• Consent obtained by a threat
• Freedom of will is impaired
• Agreement is voidable at the option of the party whose
consent was so caused
• Burden of proof on the plaintiff
• Party avoiding the contract has to restore the benefits
received.

75. Economic duress inquiry
1. Whether the threatening party has done it under good
faith or not.
2. Whether the threatened party had some other option or
not

76. “Good Faith”
 When “A” asks for a price increase we need to know
whether;
 1. “A” had a commercially legitimate reason for
requesting the modification
 2. the modification is in tune with commercial
practice.

77. Remedy: Section 72
 Liability of person to whom money is paid, or thing
delivered, by mistake or under coercion.—A person to
whom money has been paid, or anything delivered, by
mistake or under coercion, must repay or return it.
 "Illustrations"(a) A railway company refuses to deliver up
certain goods to the consignee except upon the payment
of an illegal charge for carriage.The consignee pays the
sum charged in order to obtain the goods. He is entitled
to recover so much of the charge as was illegal and
excessive.

78.  Undue Influence

79. Undue Influence
 16.‘Undue influence’ defined.—(1) A contract is said to be induced by "undue
influence" where the relations subsisting 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.

 (2) In particular and without prejudice to the generally of the foregoing principle, a
person is deemed to be in a position to dominate the will of another -

 (a) where he hold a real or apparent authority over the other, or where he stands in a
fiduciary relation to the other; or

 (b) where he makes a contract with a person whose mental capacity is temporarily or
permanently affected by reason of age, illness, or mental or bodily distress.

 (3) Where a person who is in a position to dominate the will of another, enters into a
contract with him, and the transaction appears, on the face of it or on the evidence
adduced, to be unconscionable, the burden of proving that such contract was not
induced by undue influence shall be upon the person in a position to dominate the will
of the other.

80. Undue Influence
 Instances of undue influence, as these persons are
presumed to have a dominant character
• Doctor – patient
• Parent – child
• Guardian – ward
• Lawyer – client
• Spiritual Guru – disciple


81. Undue Influence
 AbilityTo Dominate The Will Of Other:
 MANNU SINGHVS UMADAT PANDEY (1890)
 “A spiritual advisor induced the plaintiff , his devotee , to gift to
him the whole of plaintiff ’s property , to secure benefit to his
soul in the next world.
 It was held that such a contract is void as the consent was
obtained by undue influence.”



82. IPR LAW
TINA K. STEPHEN
XLRI School of Business and Human Resource
Tina K. Stephen, XLRI

83. Categories of IPR
 Trademarks
 Copyrights
 Patents
 Geographical Indication
 Industrial Designs

84.  Development of IPR.
Tina K. Stephen, XLRI

85. Criteria for protection
Tina K. Stephen, XLRI
PATENT NOVELTY
TRADEMARK DISTINCTIVENESS
COPYRIGHT ORGINALITY
DESIGN NOVELTY /ORGINALITY
GI
SPECIFIC GEOGRAPHICAL
ORIGIN

86.  TRADEMARKS
Tina K. Stephen, Senior Lecturer, XLRI

87.  Section 2(1)(zb) of theTRADEMARKS ACT
1999 defines ‘Trademark’ as a mark which is:
 capable of being represented graphically,
 capable of distinguishing the goods or services of one
person from those of others,
 it may include shape of goods, their packaging and
combination of colours.

88. ‘Trademark’
 A mark can include a device, brand, heading, label, ticket,
name, signature, word, letter, numeral, shape of goods,
packaging or combination of colors or any such
combinations.
Tina K. Stephen, Senior Lecturer, XLRI

89. ‘Trademark’
 A trademark can be a registered trademark as well as an
unregistered trademark.
 Registration is not mandatory in India, but it is advisable
to do so.
Tina K. Stephen, Senior Lecturer, XLRI

90. Prior use
 What happens if you apply for a trademark
application and get the trademark registration,
but later find that someone else has been using
that same trademark since before you had filed?
 the principle of “Priority in adoption and use
prevails over priority in registration” holds good
in this context. It is a well accepted judicial
principle that the rights of a prior user of the
mark are kept on a higher pedestal than even
that of the proprietor of a registered
trademark. Tina K. Stephen, Senior Lecturer, XLRI

91. Prior use
 According to Section 34 of the Trademarks Act, 1999
“the proprietor of registered trademark, or a
registered user cannot interfere with the use of any
identical or similar mark if the person has been using
the mark from an earlier date”.
Tina K. Stephen, Senior Lecturer, XLRI

92. ⚫ Distinctiveness:
- distinctiveness may be classified as inherent or
acquired.
- inherent words are generally invented words.
- a trademark acquires distinctiveness through use.
Essentials of a Trademark

93. Deceptive Similarity
 The concept of deceptive similarity implies one
mark resembling the other so as to likely deceive the
consumer with regards the original product.
Coca-Cola
Cok-Cola
TM

94. A trademark shall be refused registration if:
- It is deceptive and causes confusion in the minds of
the public.
- It is likely to hurt religious sentiments.
- It contains obscene or scandalous matter
Principles of Registration of
Trademark (contd..)

95. Principles of Registration of
Trademark
 Grounds for refusal of registration section 9(1);
Trademarks which indicate kind, quality,
geographical origin, or are purely descriptive of
the goods or rendering services.
Eg. Trade marks like ‘Fair and Rosy’

96. Principles of Registration of
Trademark (contd..)
A trademark shall be refused registration if:
- It is prohibited under the emblems and names
(Prevention of Improper use) Act, 1950.
- For example: The name, emblem or official seal of
the UNO, WHO, the Indian National Flag, etc. are
prohibited registration or use as trademark under the
Emblems and Names Act.

97. Registration (contd..)
®
This symbol is attached to the mark once it gets registered.
™
This symbol denotes that theTrade Mark is not yet
registered.

98. Patent Law
Tina K. Stephen, XLRI

99. PATENT LAW
Tina K. Stephen, XLRI
PATENT LAW
A PATENTABLE INVENTION
Must be new Must be non-obvious Must be useful

100. Copyright Law

101. Introduction
 Copyright means the exclusive right to do or
authorise others to do certain acts in relation to (1)
literary, dramatic or musical works,
(2) artistic work,
(3)cinematograph film and
(4) record.

102. Copyright
 Exclusive rights of a Copyright holder
 To reproduce work in any material form
 To issue copies
 To make translation
 To make any adaptation
 Reproduce two dimensional drawing in three
dimensional object

103.  The period of protection for a computer programme is
60 years form the date on which it was made available to
the public or the date on which it was made.
Tina K. Stephen, XLRI

104. Copyright is protection in form and not in
idea.
 Copyrights is a right given in works and it is not a right
in the novelty of ideas.
 There is no copyright in ideas, copyright subsists only in
the material form to which the ideas are translated.

105. Owner of a work
 Usually the author of a work is the owner of the work
 Copyright belongs to the person who gives a concrete
form to the idea.
 In case an author has created a work in the course of his
employment then the employer shall be the first owner
of the Copyright in the work.

106.  THANKYOU
Tina K. Stephen, XLRI

107. ADVERTISING
“Advertising is like electricity, which not only illuminates
but electrocutes. Its worth to civilization depends upon
how it is used.”

108.  Monopolies and RestrictiveTrade Practices Act, 1969
 Consumer Protection Act
 Drugs and Magic Remedies (Objectionable
Advertisements) Act,
 Trademarks Act
 Cigarettes and Other Tobacco Products (Prohibition of
Advertisement and Regulation of Trade and Commerce,
Production, Supply and Distribution) Act, 2003
 Emblems and Names (Prevention of Improper Use) Act
 Indecent Representation ofWomen (Prohibition) Act
Advertising Laws: Laws that affect advertising in
India

109.  MRTP – Section 36-A – Unfair trade practise
 falsely represents that the goods are of a particular standard, quality,
quantity, grade, composition, style or mode;
 falsely represents that the services are of a particular standard,
quality or grade;
 falsely represents any re-built, second-hand, renovated, re-
conditioned or old goods as new goods;
 represents that the goods or services have sponsorship, approval,
performance, characteristics, accessories, uses or benefits which
such goods or services do not have;
 represents that the seller or the supplier has a sponsorship or
approval or affiliation which such seller or supplier does not have;
 makes a false or misleading representation concerning the need for,
or the usefulness of, any goods or services

110. Consumer Protection Act
 The MRTP Act 1969 was repealed, but Section 36A has
been adopted in section 2(1)(r) of the Consumer
Protection Act.

111. The Drugs and Magic Remedies
(Objectionable Advertisements) Act, 1954
 The intention behind the enactment of this law was to
curb advertisements with a view to prevent self-
medication and self-treatment.

112. The Drugs and Magic Remedies
(Objectionable Advertisements) Act, 1954
 "Magic Remedy" includes a talisman, mantra, kavacha and any other
charm of any kind which is alleged to possess miraculous powers
for or in the diagnosis, cure, mitigation, treatment or prevention of
any disease in human beings or animals or for affecting or
influencing in any way the structure or any organic function of the
body of human beings or animals.

113. The Drugs and Magic Remedies
(Objectionable Advertisements) Act, 1954
 Under Section 3 of the Act a list of diseases and disorders
has been provided in respect of which advertising is
banned.

114. The Drugs and Magic Remedies (Objectionable
Advertisements) Act, 1954
Sec. 4 - Prohibition of misleading advertisements relating to drugs
 no person shall take any part in the publication of any advertisement
relating to a drug if the advertisement contains any matter which
(a) directly or indirectly gives a false impression regarding the true
character of the drug; or
(b) makes a false claim for the drug; or
(c) is otherwise false or misleading in any material particular.

115. The Drugs and Magic Remedies (Objectionable
Advertisements) Act, 1954
 One area of concern of-late in India is the advertisements
relating to certain magic remedies especially astrological
products. But the Act does not mention anything
regarding such products which make broad promises such
as good fortune, peace, prosperity and all those claims
which cannot be technically or scientifically proved.

116. ASCI
 All 4 sections connected with advertising viz.:
 Advertisers
 Advertising Agencies
 Media (owners of press, television, Radio etc.)
 Related sectors (outdoor agencies, PR, market researchers, ad producers, business schools etc.)
come together & agree to voluntarily comply with a set of guidelines or rules ie the code to protect:
 Consumer interest
 Ensure fair play amongst competitors

117. Rule 7(9) of the Cable TV network Act
 States that
“no advertisement which violates the Code for self-
regulation in advertising, as adopted by the Advertising
Standard Council of India (ASCI), Mumbai for public
exhibition in India, from time to time, shall be carried in
the cable service”.

118. UNSUBSTANTIATED CLAIMS

119. Puffery
 Puffery is where the advertiser seeks to draw the consumer’s
attention by making superlative claims about his product which
no reasonable person would take literally
 It is claims which cannot be proved or disproved eg: The best
bread in the world
 Humorous and imaginative advertisements often use this
technique.
 It can also be a comparative advertisement

120. Comparative Ad
 No specific legislation bans comparative advertisement
per se
 Possesses Two elements Puffery and Denegration
 Puffery is where the advertiser seeks to draw the
consumer’s attention by making superlative claims about
his product

121. Land mark case

122.  Calcutta High Court has stayed HUL’s RIN
ADVERTISEMENT and has said that the ad is a clear case of
disparagement. An injunction has been granted on the
grounds that the voice-over in the ad spoke of Tide whereas
the ad showed Tide Naturals and that there were inherent
defects in the affidavits submitted by HUL to support its
claim of superior whiteness

123. Fundamental Law Governing Comparative
Advertisement
Trade Marks Act
Sec 29(8) A registered trade mark is infringed by any
advertising of the trade mark
if such advertising---
(a) takes unfair advantage of and is contrary to honest
practices in
industrial or commercial matters or
(b) is detrimental to its distinctive character or
(c) is against the reputation of the trade mark.

124. Sec 30 – Trademark Act
Nothing in section 29 shall be construed as preventing the use
of a
registered trade mark by any person for the purpose of
identifying goods or services as those of the proprietor
provided the use---
(a) is in accordance with honest practices in industrial or
commercial
matters. and
(b) is not such as to take unfair advantage of or be
detrimental to the
distinctive character or repute of the trade mark.

125. Sec.103 - Penalty for applying false trade
marks, trade descriptions, etc.—
Any person who—
 (a) falsifies any trade mark; or
 (b) falsely applies to goods or services any trade mark; or
 (c) makes, disposes of, or has in his possession, any die, block, machine, plate or other
instrument for the purpose of falsifying or of being used for falsifying, a trade mark; or ...
 (g) be punishable with imprisonment for a term which shall not be less than six months
but which may extend to three years and with fine which shall not be less than fifty
thousand rupees but which may extend to two lakh rupees:

126. Hindustan Unilever Ltd.
v.
Reckitt Benckiser (India) Ltd.

127.  Vim was the leading dish wash with 80 % market share
the Court held that S.30, Trademarks Act permitted
comparative advertisements to the extent that they were
the puffing up of the trader’s own product. However, a
serious comparative advertisement that lowered the
reputation of the other goods would be hit by S.30 as it
would be unfair or detrimental to the rival trader’s
trademark. The test was whether a reasonable person
would understand the comparative advertisement to be
making a serious claim disparaging the rival trader’s
product.

128. 2. In the advertisement
Lifebuoy soap was compared
to Dettol anti septic
The Court held that an unfair
comparison is made between two
products that were not meant for
the same purpose. Dettol is an
antiseptic that is supposed to be
used as a supplement to soap/
bathing gel while Lifebuoy is used
predominantly for cleansing.
Therefore, the Court held that
disparaging Dettol after showing it
in an improper context and dilution
was unfair and hit by S.30.
Therefore, an injunction was issued
against the advertisement

129.  Advertisement, did not directly refer to Dettol. Instead it
showed a bottle with an amber coloured liquid which was
termed as an antiseptic. This, the Court said would be
understood by reasonable persons to refer to Dettol. Moreover,
the Court held that the advertisement’s reference to the
dangerous nature of antiseptics when consumed had a real
possibility of deterring consumers from purchasing the
Dettol Kitchen Gel. The Court ruled that this was a serious
comparative advertisement that declared one product to be
safer and consequently, more superior than the other. This
resulted in denigration of that product which lowered the
reputation of the product. The advertisement was therefore
held to be detrimental and violative of S.30.

130. Law relating to disparagement of goods
 a) A trader can laud his product.
 b) He can even say that his product is the best in the
world.
 c) He can declare that his product is better than his rival's
and in what respect it is better.
 d) He cannot say that his rival's product is bad, injurious
or deleterious or make an intentional misrepresentation
to mislead customers.

131. Test of a ‘misleading advertisement’ - in a
comparative ad
 In relation to the test of a ‘misleading
advertisement’ the court holds:
 “two essential elements must be satisfied.
 First, misleading advertising must deceive the persons to whom it
is addressed or at least, must have the potential to deceive them.
 Secondly, as a consequence of its deceptive nature, misleading
advertising must be likely to affect the economic behaviour of the
public to whom it is addressed, or harm a competitor of the
advertiser.”

132.  The question as to whether the comparison is disparaging
the other’s product has to be answered considering
factors such as:
 intent of the commercial;
 manner of the commercial; and
 storyline of the commercial and the message sought to be
conveyed

133. Right to speech
 An advertisement is commercial speech and is protected
by Article 19(1) (a) of the Constitution.
 “False, misleading, unfair or deceptive” advertising is not
protected commercial speech as given in Article 19(1) (a)
of the Constitution.

134. Colgate v. HUL
 The TV commercial (TVC) as well as the
print advertisement claim that the
Pepsodent product is “130%” better than
the Colgate product. Both ads clearly
show the Pepsodent and the Colgate
products being compared, with brand
names clearly visible, making this a classic
case of comparative advertising.

135. Colgate v. HUL
 The Single Judge has used the “Average Viewer Test”, in which the
Court determines whether the product has been disparaged in the
mind of the average viewer of the advertisement.
 It was held that one of the considerations for disparagement was
whether there was truth in the allegations made in the
advertisement.
 The High Court reconciled the two principles by clarifying that
advertisers can compare two products and claim that one is better,
as long as it is truthful. However, this is only permissible as long as
the object of the advertisement must be to promote one’s own
product, and not to disparage the rival one

136. Havells V Eveready
 The ad warned the consumer “check lumens and price before you
buy”. The comparison was limited to the these two factors
 The comparison was not done on features such as
 ‘power factor’
 ‘over all life’.
Judgment
there was no requirement in law to disclose and compare every
feature in a comparative advertisement.
Further, the law allowed an advertiser to compare and highlight the
advantages of his goods over the goods of a competitor.

137. Havells V Eveready
 In relation to the test of a ‘misleading advertisement’ the
court holds:“two essential elements must be satisfied.
 First, misleading advertising must deceive the persons to whom it is
addressed or at least, must have the potential to deceive them.
 Secondly, as a consequence of its deceptive nature, misleading advertising
must be likely to affect the economic behaviour of the public to whom it is
addressed, or harm a competitor of the advertiser.”

138. Surrogate Advertising/Brand Extension
 Soda, MineralWater, Music CD, Mega Cricket team clubs,
Friends clubs are shown in advertisement.
 Eg: Bagpiper Club Soda. Intention behind such
advertisement is to popularize the whisky, liquor
products.
 Deeply under-regulated in India courts have more often
taken the side of the advertisers.

139. Ex-Union Health Minister Mr .
Anbumani Ramadoss had
challenged the name of the
Bangalore Indian Premier League
(IPL) cricket team, “Royal
Challengers”, as a form of surrogate
advertising for liquor brand “Royal
Challenge”. But the Supreme Court
of India has pointed out that the
team was not named Royal
Challenge the liquor brand Only
those who drink can be attracted

140.  Some regulations do exist for example Indian Broadcasting Federation has ruled
that if liquor companies promote any juice, mineral water or soda, these should be
shown in a proper manner and not as trimmings to liquor advertisement.
 ASCI has very specific regulation for surrogate advertising as per ASCI code
 Brand Extension Product or Service should be registered with appropriate
Government authority eg. CENVAT /VAT/FDA/FSSAI/TM etc.,
 2a. In store availability of the product must be at least 10% of the leading brand in
category the product competes as measured in the Metro Cities where the
product is advertised.
OR
 2b. Sales Turnover of the product or service should exceed Rs.5 cr per annum
nationally or Rs 1 cr per annum per state where distribution has been established.

141. Dabur Chyawanprash on their packaging claims that it provides "3 times more immunity". The fine print says that
the claim of "3 times more immunity" is based on "preclinical study on NK cells". It also claims that it is
scientifically proven. 1. Preclinical studies means that it has not been tested on humans yet. Any drug or compound
cannot claim to bring said benefits unless Phase - III trials are done. If it works for rats then it doesn't mean that it
works for humans too.
Hence asked to discard 3 times more immunity claim.

142. Section 24 - Food Safety and Standards Act,
Restrictions of advertisement and prohibition as to unfair trade practices.-
(1)No advertisement shall be made of any food which is misleading or deceiving or contravenes the
provisions of this Act, the rules and regulations made thereunder.
(2) No person shall engage himself in any unfair trade practice for purpose of promoting the sale,
supply, use and consumption of articles of food or adopt any unfair or deceptive practice
including the practice of making any statement, whether orally or in writing or by visible
representation which-
(a) falsely represents that the foods are of a particular standard, quality, quantity or grade-
composition;
(b) makes a false or misleading representation concerning the need for, or the usefulness;
(c) gives to the public any guarantee of the efficacy that is not based on an adequate or scientific
justification thereof: Provided that where a defence is raised to the effect that such guarantee is
based on adequate or scientific justification, the burden of proof of such defence shall lie on the
person raising such defence.

143. Section 53
 Food Safety and Standards Act, 2006 (FSSA) expressly
provides that
"any person who is party to an advertisement" that falsely
describes any food, or is likely to mislead as to the nature
or quality of the food can be held liable for a penalty of up
to Rs 10 lakh.”

144. Indian Penal Code
 Indian Penal Code under
1. Sections 270 (malignant act likely to spread infection of
disease dangerous to life),
2. 273 (sale of noxious food or drink), and
3. 420 (cheating and dishonesty)