All about Aristotle’s theory of justice

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February 28, 2022

This article is written by Akshita Rohatgi, from Guru Gobind Singh Indraprastha University, New Delhi. It talks about Aristotle’s concept of teleological reasoning, links it to contemporary cases and finally, highlights the various criticisms posed.

Introduction

In 1992, Cheryl Hopwood filed a case in the US Supreme Court claiming that she was being discriminated against because she was white. She argued that black applicants with the same test scores as hers got accepted into the University of Texas Law School. The only reason she did not was her race. Thus, she ‘deserved’ to get in too.

Hopwood’s case stands in stark contrast to a 1950s case involving the same University. In this case, the university was sued for not allowing in any Black applicant. Instead, it had established a separate and inferior university for people of colour.

In both of these cases, it was argued that the applicants had no “right” to be accepted to their institution. Instead, their candidature was accepted based on which candidate would best fulfil their objectives. In the first case, the University opposed Hopwood’s contention, arguing that 40% of Texas was made of African-Americans. The mission of its Law School was to produce future leaders across various fields- be it social, political or legal. Different perspectives are essential to obtain that end, and diversity brings these varying perspectives to the table. Thus, affirmative action benefits the entire student body.

In the second case too, the University invoked the argument of its ultimate ‘mission’. It claimed that this mission was to promote professionals for the Texas bar and law firms. Since law firms at the time did not welcome black people, it was impractical for them to have people from the community.

The dichotomy between these two cases gives rise to various questions. What is the distinction between these cases? Can institutions arbitrarily decide their objective? What should their objective be? What do these institutions ‘owe’ applicants? And what do the applicants ‘deserve’?

Aristotle’s Theory

Aristotle is one of the most widely-known thinkers in the world. He is credited with being ‘the father of political science’. Aristotle’s theory of justice is built around a central supposition- justice means giving people what they deserve.

A person’s rightful due is determined by their worth. This worth, in turn, is determined by the roles that people play in society.

The acceptable way to choose what roles one must play in society is determined by the virtues of the people. Aristotle defined virtue as a situation and a state, whether good or bad, that a person chooses against their actions and reactions. Virtue is ‘a state or monarch’, i.e. the reason that causes a man and his actions to be good.

Those who hold the virtues necessary for a role are best adept at the role. So, they are bound to play it. This was called teleological reasoning. This way of life is the path towards a ‘good life’ for individuals as well as the collective society.

Teleological reasoning

In Ancient Greece, the word ‘telos’ was understood to mean the aim or purpose. Teleological reasoning is based on the ‘end’ that the particular institution wants to achieve. Aristotle works back from this end to connect it with the people who are most likely to achieve them.

For instance, the object of a Bar exam preparation centre should be who is most likely to clear the test. Those who have the most influence or can pay the maximum amount should not be favoured over another who can get more marks in the test.

What people deserve

Equals should be treated equally

Aristotelian ‘Equality’ does not align with the modern understanding of the term. It is instead determine⁄d based on what is being given. He opines that equals should be treated equally. Thus, equals should be assigned equal things.

Aristotle argues that giving people their due and thus justice, involves discrimination. The basis of discrimination must, however, be fair. According to this reasoning, promoting an activist who wants to make legal aid more accessible should not be preferred over another who simply wants to gain money. One of them might encourage the ‘greater good’ for the entire society. However, this greater good is not the object of the centre. The sole consideration must be the ability of candidates to clear the exam.

Thus, it looks only at the proximate object of any institution or practice. Here, this object is candidates clearing the test. Seat allocation is based on who can perform best simply because that’s what the exam centre is for. Better lawyers may be a by-product, but that shouldn’t be the central criterion for decision making.

Against arbitrariness

Denial of honours or rewards to a person must be based only on the object of an institution, not arbitrary factors. To illustrate, take the case of Manjunath Gouli v. Union of India and Others (2021). Here, the petitioner challenged the respondent’s denial of a gallantry award to him. He claimed others from his team from a Naxalite encounter were considered for the award, while he wasn’t. However, he had played an integral role in an encounter and thus, deserved the award. On further inquiry, it was stated that the petitioner’s gallantry in the encounter was not up to the level of an award.

The Court rejected the petitioner’s contention, holding that he had no ‘legal right’ to the award and was only entitled to be considered for it. It stated that in case of irregularity in decision making, the court could intervene. However, there was no irregularity here.

This aligns with Aristotle’s conception of justice. The object of the award was to honour bravery in the field, not the result of the act, i.e., taking out high profile targets. Aristotle would disapprove of the award being denied for reasons that did not have a causal connection with the object of the award. Some of these arbitrary factors are social status, unpopularity or corruption. Denial of the award because the level of gallantry is not up to par is the only reasonable ground. Any other reason for not honouring the petitioner would violate his theory.

The ‘good life’

Politics to obtain the good life

The ultimate objective of politics is a good life for the people. To obtain this good life, cultivating good character and virtue is essential. So, politics form social institutions to that end. Social institutions connect people to the roles they would best perform and pave the way for a good life.

Those with the greatest contribution to political institutions should be rewarded with greater power and influence. This is because they can contribute best to the objective of politics, the reason that politics exists. If all social institutions work together with the people most adept at performing their functions, the end of ‘good life’ would be realised.

Social institutions act as intermediaries

All social institutions are simply means to obtain a good life. Institutions like religion, politics and personal relationships exist to connect people to the roles that they ‘fit’ in.

However, finding one’s role and developing virtues is not easy. Thus, we have to practice virtues by doing. This is why social systems that encourage virtues are integral to Aristotle’s setup. Once individuals find the virtues they excel at and can contribute best towards, they have found their place in society.

Social institutions then perform the role of giving due credit to selected virtues for those who perform them well. As an incentive, excelling at their chosen roles on account of virtue, merit or simply for the effort put in allows them credit, honour and influence. Those who have the best human virtues hold the highest offices. This is because of two main reasons-

They can contribute best to the end of the institution.
They must be honoured for their contribution.

Thus, all social institutions work together to help people obtain a ‘good life’.

Positive role of law

According to Aristotle’s view, the law shouldn’t just be something that secures the rights of people against each other. It shouldn’t just stop injustice. It should also have a positive role.

Interaction in a social and political community is the best way to the full realisation of our potential and for a good life. So, the law should take a proactive part in human life and facilitate this interaction. This view invariably supports legislation on morals for better interaction between people.

Features

Not utilitarianism

Several theorists criticise Aristotle claiming that his theory resembles utilitarianism. The theory of utilitarianism advocates maximising pleasure for the majority, at the cost of the pain of a minority. They hold the view that Aristotle argues for connecting people with their virtues and performing the best role for the collective good of the entire community. Just like utilitarianism, it focuses on the pleasure of the maximum number of people. The greatest good of the collective community takes precedence over everything else, even if the cost is the pain of a minority.

For instance, utilitarians would prefer hospitals to choose a cardiologist based on who would maximise pleasure for the maximum number. This is because it would be most beneficial for the maximum number of patients. Critiques of Aristotle claim that he would support this too. However, this critique is fallacious. It misunderstands Aristotle’s ideas.

Aristotle does not argue for the best people to perform the role most suited to them for the good of the collective society. He argues that they should simply because that is what the role is for. The hospital would not choose a cardiologist who takes big risks that are usually successful; someone who saves most lives but makes others a lot worse. It would not choose one who has the best lives saved to lives lost ratio.

The hospital would instead choose the cardiologist who is best equipped at treating and providing care to patients. T The hospital would choose the cardiologist who would try their best to treat people without taking big risks, in favour of trying to save as many as they can. The hospital would choose the second doctor even if their lives saved to lives lost ratio is much worse. Having good doctors and treating patients is the purpose of the hospital. So, hospitals must focus on mitigating the pain and treating all patients to the best of their ability. They should not save most and forsake others. This is the difference between Aristotle and utilitarians.

The natural world

Aristotle limits the application of teleological reasoning to social interactions and institutions. He reasoned that the natural order was a well thought out one. Everything in it was the way it is ‘supposed’ to be. The people were tasked with identifying and understanding the objective behind all these natural practises and finding where they fit in them.

However, modern science has given us a better understanding of nature. The ‘natural’ order is deeply coloured by the lens of what the powerful in an ancient society constructed. For instance, the caste system was upheld because elites in ancient times felt lower castes were ‘naturally born’ for manual jobs. As science and logical reasoning spread in the world, people realised that these ideals were irrational. No certain class of people, here- lower castes, had any ‘hereditary disposition’ towards menial jobs. This distinction wasn’t made by nature, but by society.

Regardless, this has led many to criticise that Aristotle’s views are not relevant today. They found favour with an ancient society that was deeply involved with nature and had simplistic ideas of the world, disregarding its real complexity. Contemporary society has a better understanding of the diversity and intricacies of the world.

Defence of slavery

Aristotle has been widely criticized for promoting slavery as necessary to society. He holds that some people are “meant to be ruled”. They can’t reason for themselves, only be reasoned with. So, they are meant to work as slaves and being enslaved is the right role for them. Moreover, to allow more virtuous people to be free from menial, manual work and pursue their true virtues, other people need to do that. Thus, the institution of slavery was just.

Nonetheless, Aristotle conceded that the Athenian practice of slavery was not just. In ancient Athen, those who were losers in war were forced to be slaves. Aristotle conceded that the act of forcing them to be slaves shows that those coerced were not be meant to be slaves. They simply had the misfortune of being losers in a war.

He was not against coercing people to be slaves. Forcing them was simply an indication that they were not naturally fit for that role. If they had to be coerced into the role, it wasn’t their true calling. Thus, they should not be forced into it.

Criticisms

Prejudices attached to the natural world

The justification of slavery brings us to a broader critique of Aristotle. In the ancient world, some people and communities were considered to be ‘naturally fit’ or ‘born’ for some roles. Those with light skins were considered rulers and those with darker ones were meant to ‘be ruled’. These prejudices were based on ill-reasoned justifications like dark skin being meant for work in the sun.

Ancient and mediaeval society was rife with such practises that were justified by pseudo-scientific reasoning. For instance, women were placed under the subjugation of men. The reason attributed was that most ancient societies considered biological women as weak because of the ability to menstruate and bear children. Aristotle seems to have not only supported but laid down the groundwork for these discriminatory practices.

Whether or not these arbitrary discriminatory practices are justified by Aristotle’s theory of justice though, is a matter of contentious debate. Modern supporters of Aristotle may argue that there isn’t enough of a causal connection between childbirth and menstruation and treating biological women as weaker. Conversely, the ability to withstand pain may prove they’re strong. This disagreement brings forth another criticism.

Differing views on the object

Aristotle argues that all institutions have a specific object or end. Yet, today’s world is awash with multitudes of opinions. Take the example of affirmative action. Some hold that it is an apology for past wrongs. Others opine that it is meant for the economic upliftment of the historically marginalised. Still, others argue that it is a means of social mobility instead of economic. Agreeing about the ‘intrinsic object’ of any practice or institution often feels like an unwinnable battle. This highlights the practical difficulty in implementing teleological reasoning.

This disagreement isn’t limited to public policy or the law, but also the social arena. People have different views of the objectives of various social institutions. For some, family is a means to understand and learn to navigate the world as a child; less involved in later stages. For another, it is a lifelong companion to guide them throughout life. Both of these views resonate in some cases and are inapplicable in others.

The intrinsic worth of individuals

A major criticism of Aristotle comes from individual rights theorists who believe in the intrinsic worth of individual people. Teleological reasoning ends up treating people based on what the collective society needs from them, instead of acknowledging their worth independent from what they can give to others.

For instance, a judge who works 10 hours a day might prefer to have more personal time for leisure activities. Yet, Aristotle’s theory encourages them to perform their role as a judge over taking time off. It exploits people by seeing them primarily as means to an end, not as an end in themselves.

Liberal critique

Liberals place the highest weight on the freedom of choice and dignity of all individuals. Liberal democracy, the most popular form of government in today’s world, supports this idea. It promotes the idea of intrinsic human worth and freedom to pursue one’s perception of a good life.

On one hand, liberals claim that people must be given the freedom to choose their life. If someone exceptional at science enjoys art better, they must have the choice to pursue that. In contrast, Aristotle’s theory of justice pushes people to do what they would do best, disregarding individual choice. Someone who has the qualities to be a great scientist must be one.

Equality of opportunity

According to equal rights theorists, awarding the result of the virtues is in itself, a fallacious idea. The question is that if people aren’t given equal opportunity to prove themselves, how they will be rewarded based on what they are due? If a poor person has the virtues to be a great chess player but was never allowed to learn that, how do we give him his real due?

This critique is a misinterpretation of Aristotle’s theory. The theory holds that social institutions must function towards connecting people to their true role, not inhibiting that. He advocates for allowing everyone the right to pursue the role they are best at, without arbitrary discrimination.

Social institutions must work to ensure the poor kid has the option to pursue his best virtues too. Equality of opportunity being denied because of arbitrary factors like familial wealth violates his equality since it does not let people realise their best and true virtues.

Genetic lottery

This critique works in tangent with using people as means to an end. People are chosen based on the skills society wants from them. They win honours, titles and roles due to no effort of their own. Their skills just happen to be valued by society at that particular time.

For instance, at one point in time, manual labour might be valued. Later, they might be replaced by machines. So, those with physical strength, dubbed ‘virtuous’ here, are just those who lucked out in a genetic lottery. By luck of chance, their skill coincided with the one valued by their society.

Supporters of Aristotle, however, argue that people put in the effort to inculcate the skills they think society needs. Therefore, they deserve credit for it. The truth lies somewhere in between. The virtuous are rewarded for both, their genetic and familial privileges as well as the effort they put in. Aristotle does not separate the two, simply focuses on the result.

Contemporary relevance

In our everyday social, political and personal life, we face questions on ‘why’ we are doing a particular thing- be it creative writing college classes, interacting at a boring dinner or even reading this article. Teleological reasoning helps us look at our self-perceived end to why we perform an act and work our way back to see if we fit in it. It can help us make causal decisions like what shirt to buy for work; or life-altering ones, like a student choosing what course to pursue at college.

On the social level too, there are discussions on the object of any law or policy. Newsroom debates are full of people arguing in support of or against various policies. Take the debate on labour laws. Some hold that they are essential to the dignity of people. Others contend they will lead to a well-rested, more productive workforce. Sceptics maintain that they would interfere with the demand and supply of labour and create unemployment.

In such cases, it is useful to identify the telos the practice serves, and then work backwards from it. Teleological reasoning can act as a useful means to avoid logical fallacies and make better-reasoned decisions.

Conclusion

Despite the spread of liberalism, freedom of choice and ideas of the enlightenment today, it would be a fallacy to deny any contemporary relevance of Aristotle’s views. After all, this article started with a discussion trying to find the ‘mission’ or end of Texas Law School. With an idea of the working of teleological reasoning, we are now better equipped to settle this debate.

According to the Aristotelian view, law schools like other social institutions connect people to the roles and virtues they excel at. Thus, the object of the Texas Law School was to take the people who would best utilise this knowledge of the law to perform their role in society.

In the 1950s, the University of Texas aimed at getting their students through the bar or into law firms. A few decades later, this shifted to promoting future leaders. The difference in the two cases lies in reasonable and arbitrary factors.

In the first case, the mission is defined as promoting future leaders in varying fields. This is a reasonable conception of the end of this institution. Various empirical studies have proven that inclusion, diversity and affirmative action better social welfare. Thus, affirmative action is a reasonable means to that end.

In the second case, the objective of law schools was defined in an unreasonably narrow manner. Law schools aren’t just for producing lawyers, but also miscellaneous leaders. The law school must be open to anyone who would use their knowledge of the law in a useful manner- be it as a solicitor, social activist or president. There was prejudice attached to black people based on arbitrary factors to systematically exclude them. Intelligible differentia or a reasonable basis of the difference is absent here. Thus, it falls afoul of Aristotle’s reasoning.

Moreover, the US Court observed that the law is an intensely practical profession. Law school is a ground for legal learning and practice. It cannot be effective in isolation from the people and institutions with which the law interacts. No one who has practised law would choose to study in an academic vacuum, removed from society. Flowing from this logic, the existing student body would not be able to exchange ideas with around 15% of the population of the state. Thus, the object of giving students a practical legal education would fail.

However, there is still considerable debate about these cases. This is by virtue of different conceptions of the object of a law school, what they should teach and which virtues they should inculcate.

Here, it becomes important to note that these theories are to form perfect principles for an imperfect society. What people deserve, what they get and what society needs are subjective considerations. They are shaped by a multitude of factors including personal experiences, ideas and vision of a good life. It is difficult to lay down as universal principles for people because humans are all different and diverse. Teleological reasoning and Aristotle’s theory of justice can help us choose a path out for ourselves. However, we must be the ones to choose it.

References

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WTO agreements : a comprehensive overview

By

Rachit Garg

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February 28, 2022

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This article is authored by Anindita Deb, pursuing BBA LLB from Symbiosis Law School, NOIDA. This article briefly talks about the prominent WTO agreements which regulate international trade in present times. Provisions of the agreement and the principles behind them have also been described.

Table of Contents

Introduction

Following World War II, the global organisation in the development of the multilateral trading system, providing rules trading system adopted multilateralism. The World Trade Organisation has appeared as a model international or multilateral trade and assisting in the creation of an environment for global commercial interdependence.

Goods, services, and intellectual property are all covered by WTO agreements. They lay out the liberalisation principles as well as the permitted exceptions. Commitments made by individual countries to lower customs, tariffs and other trade barriers, as well as to open and maintain open services markets, are among them. They establish procedures for resolving disputes. They advise that developing countries receive special treatment. They require governments to make their trade policies transparent by notifying the WTO about laws in force and measures adopted, as well as reporting on countries’ trade policies on a regular basis by the Secretariat.

These agreements are known as the WTO’s trade rules, and the WTO is frequently referred to as a ‘rules-based’ system. It’s important to remember, however, that the rules are actually negotiated agreements between governments. The WTO currently has 60 agreements that are in force, and this article intends to cover exhaustively all the prominent agreements in which the WTO members are actively participating.

A brief overview of the WTO agreements

WTO agreements, also known as WTO trade rules, are the heart of the organisation. WTO is said to be rule-based, but these rules are nothing more than WTO negotiated agreements. The Uruguay Round updated the General Agreement on Tariffs and Trade, and GATT 1994 was established under the World Trade Organization to define rules for goods trade. The Uruguay Round also resulted in the creation of rules for trade-in-services (covered under GATS), relevant aspects of intellectual property (covered under TRIPS), dispute resolution, and trade policy review with the establishment of the WTO (TPRM). Although the three major components of WTO agreements are goods, services, and intellectual property, the structure of WTO agreements has four major areas, which are as follows:

The umbrella agreement (agreement establishing the WTO)

The umbrella agreement includes not only the WTO’s founding agreement but also its annexes. The Marrakesh Agreement led to the formation of the World Trade Organization (WTO) and established a framework for future negotiations among member countries. The agreement contains provisions pertaining to the WTO’s establishment, membership, framework, decision-making bodies, and so on.

WTO agreements for each of the three broad components (goods, services, intellectual property) of trade

The two largest areas of trade, goods and services, have three common outlines but differ in details.

To begin, there are broad (or fundamental) principles, which cover goods under the provisions of the General Agreement on Tariffs and Trade (GATT), and services under the provisions of the General Agreement on Trade-in-Services (GATS). TRIPs (Trade-Related Aspects of Intellectual Property Rights) are also included in this category only, and not in the other.
The second outline, the additional details, includes any additional agreements and/or annexes dealing with the specific needs of a particular industry or issue.
The commitments to market access are covered in the third outline. The number of specific foreign products or service providers who have access to a member nation’s market is defined as the extent of their market access. A detailed schedule or list of market access commitments can be provided to members. Commitments under the GATT can take the form of tariffs on goods in general or a combination of tariffs and quotas for certain agricultural goods. The commitments under GATS are defined in terms of how much access services providers will have to the foreign market for a particular service.

Dispute settlement in case of violation of WTO agreements

The World Trade Organization’s Dispute Settlement Mechanism ensures a smooth flow of trade while also enforcing WTO rules. Agreement and commitment are the foundations of dispute resolution. A dispute arises when one of the member nations violates the WTO’s agreements or commitments. Because an agreement is the result of negotiations among member nations, the member nation bears the ultimate responsibility for dispute resolution through dispute settlement.

Transparency-Trade Policy Review Mechanism (TPRM)

TPRM entails a periodic, collective, and in-depth assessment of all member countries’ trade policies and practises, as well as an assessment of their impact on the multilateral trading system’s operation. The goal of the TPRM is to improve all members’ adherence to rules and commitments made under the multilateral trading system, as well as to smoothen the operation of WTO agreements, in order to achieve greater transparency and understanding of member countries’ trade policies and practises.

The Marrakesh agreement establishing World Trade Organisation (WTO)

The World Trade Organization Agreement, also known as the “Marrakesh Agreement,” was signed on April 15, 1994, in Marrakesh, Morocco, at the conclusion of the Uruguay Round of Multilateral Trade Negotiations. The World Trade Organization’s scope, operations, and framework are defined by this agreement (WTO). The Marrakesh Agreement’s Annexes include agreements previously negotiated under the General Agreement on Tariffs and Trade (GATT), as well as agreements reached during the Uruguay Round. These agreements are now classified as World Trade Organization (WTO) agreements.

The Marrakesh Agreement is binding on all WTO members, including those that have joined since it was signed. This agreement became effective on January 1, 1995. It does not have an expiration date.

The nations that agreed to sign the Marrakesh Agreement wanted to create an integrated multilateral trading system that included the General Agreement on Tariffs and Trade (GATT) as well as the outcomes of all previous trade rounds (including the Uruguay Round) since the GATT was signed in 1947.

The Marrakesh agreement is known as the umbrella agreement for a reason; it establishes all the further WTO agreements, most of which have been covered below in the following sections.

Basic principles of the WTO agreements

As already stated earlier, the WTO Agreements are based on the idea of lowering trade barriers and enforcing non-discriminatory rules. These ideals are enshrined in the WTO’s basic principles, which are listed below.

Principle of Most-Favoured-Nation (MFN) Treatment

Article I of the GATT states that when it comes to tariffs, etc. on exports and imports, the most favourable treatment given to one country’s products must be given to the like products of all other members immediately and absolutely.

Principle of National Treatment

Article III of the GATT stipulates that all other members must receive treatment that is not less favourable than that given to similar domestic products when it comes to internal taxes, internal laws, and other regulations that apply to imports.

Principle of General Prohibition of Quantitative Restrictions

Article XI of the GATT states that “no prohibitions or restrictions other than duties, taxes, or other charges shall be instituted or maintained by any contracting party,” and quantitative restrictions are generally prohibited. The prohibition is based on the fact that quantitative restrictions are thought to have a greater preventive role than tariff measures and are more likely to distort the free flow of trade.

Principle regarding Tariffs as Legitimate Measures for the Protection of Domestic Industries

GATT accepts tariffs as the only means of trade control and attempts to gradually lower tariff rates for individual items through tariff negotiations. According to GATT Article XXVIII, member countries make ‘concessions’ (‘bind’ themselves to maximum rates), and the imposition of tariffs beyond such maximum rates (‘bound rates’) or the unilateral increase in bound rates is prohibited. Furthermore, GATT Article XXVIII requires tariff rates to be reduced “on a reciprocal and mutually advantageous basis” during negotiations.

Now that we’ve become familiar with the basic overview and the principles that govern the WTO agreements, this article further moves on to discuss the specific agreements in detail. Let’s find out which are the major WTO agreements in force that govern the international laws relating to import and export.

Multilateral Agreement on Trade in Goods

Through sector-specific or issue-specific agreements, the Multilateral Agreement on Trade in Goods establishes the rules for goods trade. Its core is the GATT 1994, which includes the GATT 1947, as well as the GATT 1947 amendments, understandings, protocols, and decisions from 1947 to 1994, collectively known as the GATT-acquis, and six Uruguay Round Understandings on Articles of the GATT 1947. Each agreement constitutes sector-specific or issue-specific rules and standards in addition to clarifying the core WTO principles. The schedule of commitments identifies each member’s specific binding commitments on tariffs in general and tariff-quota combinations for some agricultural goods. Members agreed to the current level of trade liberalisation after a series of negotiating rounds.

WTO members aimed at expanding international trade rules beyond tariff reductions in the last four rounds of negotiations to identify barriers in other areas. Technical Barriers to Trade (TBT) and Sanitary and Phytosanitary (SPS) agreements, for instance, seek to protect a country’s right to enforce domestic standards and regulations while making sure that they do not discriminate against trading partners or restrict trade unreasonably.

The agreements covered under the Multilateral Agreement on Trade in Goods

General Agreement on Tariffs and Trade 1994 (GATT)

The General Agreement on Tariffs and Trade (GATT), which was signed on October 30, 1947, by 23 countries, was a legal agreement that aimed to reduce trade barriers by eliminating or minimizing quotas, tariffs, and subsidies while retaining significant regulations. The GATT was created to help the world economy recover after World War II by revamping and liberalising global trade.

On January 1, 1948, the GATT came into effect. 2 It has been improved since then, culminating in the creation of the World Trade Organization (WTO) on January 1, 1995, which absorbed and expanded it. By this time, 125 countries had signed on to its agreements, which covered roughly 90% of global trade. The GATT is overseen by the Council for Trade in Goods (Goods Council), which is made up of representatives from all WTO member countries. Market access, agriculture, subsidies, and anti-dumping measures are among the topics addressed by the Council’s ten committees.

The GATT was established to establish rules to eliminate or limit the most costly and inefficient features of the prewar protectionist period, namely quantitative trade barriers like trade controls and quotas. The agreement also established a system for resolving international commercial disputes, as well as a framework for multilateral tariff reduction negotiations. In the postwar years, the GATT was considered a significant success.

The most-favoured-nation principle was one of the GATT’s major achievements (discussed above in this article). As a result, once a country had negotiated a tariff reduction with a few other countries (usually its most important trading partners), the same reduction would be applied to all GATT signatories. There were escape clauses in place, allowing countries to negotiate exceptions if tariff cuts would disproportionately harm domestic producers.

When it came to setting tariffs, most countries used the most-favoured-nation principle, which largely replaced quotas. Tariffs (which are preferable to quotas but are still a trade barrier) were gradually reduced in successive rounds of negotiations.

Agreement on Agriculture (AoA)

The Agreement on Agriculture (AoA) includes market access rules and commitments, as well as restrictions on certain domestic agricultural support programmes and export subsidies. Its goal was to give WTO members a framework for reforming certain aspects of agricultural trade and domestic farm policies so that more market-oriented and open trade could be achieved. In terms of market access, members agreed not to impose quotas or other non-tariff restrictions on agricultural imports, but instead convert them to tariff-equivalent levels of protection, such as tariff-rate quotas, a process known as ‘tariffication.’ Developed countries agreed to cut tariffs (or out-of-quota tariffs, which apply to any imports that exceed the agreed-upon quota threshold) by an average of 36 per cent over six years in equal increments while developing countries agreed to cut tariffs by 24 per cent over ten years. In certain circumstances, such as falling prices or a surge in imports, special safeguards to temporarily restrict imports were allowed for product lines considered sensitive by a member nation.

Members must submit notifications on the implementation of AoA commitments on market access, domestic subsidies, and export competition on a regular basis, though some countries, including the United States, have expressed concerns that these requirements are not followed consistently.

Further agricultural trade reform was a top priority for the Doha Development Round, but progress on major issues has been slow. Members have made progress in some areas of reform; for example, in 2015, members agreed to eliminate all agricultural export subsidies.

Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures

The Sanitary and Phytosanitary Measures Agreement (SPS) lays out the groundwork for food safety as well as animal and plant health standards. It gives countries the freedom to establish their own standards. However, it also states that regulations must be based on scientific evidence. They should only be used to the extent that they are required to protect human, animal, or plant life or health. They should also not discriminate arbitrarily or unjustifiably between countries with similar or identical conditions.

Where international standards, recommendations, and guidelines exist, member countries are encouraged to use them. Members may, however, use scientifically justified measures that result in higher standards. They also set higher standards based on proper risk assessment, as long as the approach is consistent rather than arbitrary.

The agreement still allows states to use different product inspection standards and methods.

All countries take steps to ensure that food is safe for consumers and to keep pests and diseases from spreading to animals and plants. These sanitary and phytosanitary measures can take a variety of forms, including requiring products to come from a disease-free area, inspecting products, requiring specific treatment or processing of products, establishing optimum pesticide residue levels, or allowing the use of only selective additives in food. Sanitary (human and animal health) and phytosanitary (plant health) regulations apply to both domestically produced foods and local animal and plant diseases, as well as imported goods.

Agreement on Textiles and Clothing

On January 1, 2005, the Agreement on Textiles and Clothing (ATC) and all of its restrictions came to an end. The ten-year transition period for ATC implementation has ended, and trade in textile and clothing products is now governed by the general rules and disciplines embodied in the multilateral trading system, rather than quotas under a special regime outside of normal WTO/GATT rules.

Agreement on Technical Barriers to Trade (TBT)

One of the goals of the WTO Agreement on Technical Barriers to Trade (TBT) is to ensure that technical regulations, product quality standards, and “conformity assessment procedures” (testing and certification procedures) do not create unnecessary trade barriers.

The Uruguay Round of Multilateral Trade Negotiations ended in April 1994, and the TBT Agreement was negotiated during that time. It built on a more limited set of standards that had been adopted during a previous round of trade negotiations. The TBT Agreement, which went into effect on January 1, 1995, and has no expiration date, applies to all WTO members.

Certain provisions of the TBT Agreement can benefit any corporation in a WTO member country that engages in international trade. Transparency provisions in the Agreement work to minimize discriminatory or trade-restrictive measures at a preliminary phase in the regulatory process, so that businesses are not faced with unwarranted trade barriers. These provisions include notice and comment regulations that allow relevant stakeholders to request copies of proposed technical regulations, guidelines, and conformity assessment procedures that may have an impact on trade, as well as evaluate and comment on them.

Agreement on Trade-Related Investment Measures (TRIMs)

WTO members have agreed not to apply certain investment measures related to trade in goods that restrict or distort trade under the World Trade Organization’s Agreement on Trade-Related Investment Measures, also known as the TRIMs Agreement.

Certain initiatives that violate the General Agreement on Tariffs and Trade’s national treatment and quantification constraints requirements are prohibited under the TRIMs Agreement.

Prohibited TRIMs may include requirements to:

achieve a specific level of local content;
produce locally;
export a particular level/percentage of goods;
balance the amount/percentage of imports with the amount/percentage of exports;
transfer technology or proprietary business information to local persons; or
balance inflows and outflows of foreign exchange.

These requirements could be imposed as a condition of investment, or they could be linked to financial or other incentives. Services are not covered by the TRIMs Agreement.

This agreement is signed by all WTO member countries. On January 1, 1995, the Agreement went into effect. It does not have an expiration date.

All WTO member countries were required to notify their nonconforming trade-related investment measures when the TRIMs Agreement went into effect in 1995, and then to bring those measures into compliance with the Agreement after a transition period. The length of the transition period was determined by the Member’s individual development level. All transition periods have now ended, though a small number of nations have been granted extensions for specific programmes. These extensions normally ended in December 2003 or before.

Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-Dumping Agreement)

The Agreement on the Implementation of Article VI of the General Agreement on Tariffs and Trade (1994), famously referred to as the Antidumping Agreement, establishes stringent guidelines and disciplines for Members to follow in order to counteract injurious dumping of products imported from another Member. If a business exports a product at a lower price than it normally charges on its own market, or alternatively, lower than its cost of production or the price it charges in third-country markets, it is known as “dumping.” The Antidumping Agreement establishes the rules for Members to take antidumping intervention in order to protect their domestic industries.

The Council on Trade in Goods has a subsidiary body called the Committee on Antidumping Practices. The Committee meets twice a year to supervise the execution of the WTO Antidumping Agreement. Members can discuss antidumping measures and procedures that are deemed problematic, obtain information about specific issues of concern, and clarify and feasibly resolve issues before they become disputes at these biannual Committee meetings.

Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (Customs Valuation Agreement)

The Uruguay Round of agreements includes the WTO Agreement on Implementation of Article VII of the GATT 1994, also known as the Custom Valuation Agreement. The agreement lays out the rules for determining the value of goods for the purposes of calculating customs duties and taxes that apply at the time of importation. The transaction value is the preferred method of valuation under the Valuation Agreement, which implies the value based on the price actually paid or payable for the goods.

Agreement on Pre-shipment Inspection (PSI)

The WTO Agreement on Preshipment Inspection (PSI) stipulates that the pre-shipment inspection process should not create undue delays or unequal treatment. It creates an independent, impartial review body to resolve disputes between importers and pre-shipment inspection companies by establishing an agreed set of transparent procedures, such as deadlines, for these inspections.

Many developing countries use pre-shipment inspections to inspect potential imports before they can be shipped from the exporting country. Inspections are carried out by private companies to ensure that the price, exchange rate, financial implications, quantity, quality, and customs classification of the transaction match what was ordered.

Agreement on Rules of Origin

The WTO Agreement on Rules of Origin (the ROO Agreement) aims to improve the transparency, predictability, and uniformity of rules of origin preparation and application.

The ROO Agreement establishes important guidelines for conducting preferential and non-preferential origin regimes, including the requirement to provide traders with binding origin rulings within 150 days of their request. The ROO Agreement not only establishes disciplines for the administration of rules of origin but also lays out a work plan for multilateral harmonisation of non-preferential trade rules of origin.

The Committee on Rules of Origin (the ROO Committee) oversees the ROO Agreement, which meets officially twice a year and for informal consultations throughout the year. The Committee also serves as a platform for Members to share their perspectives on notifications regarding their national rules of origin, as well as pertinent judicial decisions and administrative rulings of general application.

Agreement on Import Licensing Procedures

When granting import licences, members of the WTO have agreed to follow the procedures outlined in the Import Licensing Agreement. They’ve also agreed that these procedures should be carried out fairly and equally.

This agreement is ratified by all WTO members. On January 1, 1995, the Agreement went into effect. It does not have an expiration date.

WTO member countries can use the Licensing Agreement to implement either automatic or non-automatic import licensing systems. To collect trade data, origin statistical data, or other details, automatic licences, which are freely granted by a government and do not restrict imports, may be required. Non-automatic licences, on the other hand, are not always granted. They’re used to manage import quotas and other import restrictions. Non-automatic licences must not have trade-distorting effects on imports in addition to those induced by the restriction they impose, and they must be no more strenuous to administer than is absolutely necessary.

Agreement on Subsidies and Countervailing Measures

The Agreement on Subsidies and Countervailing Measures, or “SCM Agreement,” covers two distinct concepts. The importance of including both concepts in the same agreement is that they are closely related topics, with one involving the application of other fundamentals. Subsidies are multilateral disciplines governed by the WTO’s SCM Agreement, whereas countervailing measures are a type of solution for subsidy damage. Multilateral disciplines are international commercial rules that involve the rights and obligations of member countries.

Although the WTO’s system of regulations is connected to multilateral practise, countervailing duties are unilateral practises in which one nation imposes countervailing duties on another member who tries to influence the importer’s country market by offering subsidies to its domestic economy. The victim nation can conduct the investigation and file a complaint with the WTO Dispute Resolution Body (DSB) with their findings to either warn or impose countervailing duties on the accused country.

Agreement on Safeguards

The WTO Agreement on Safeguards establishes rules for the application of safeguard measures by WTO members. A safeguard is a temporary import restriction (such as a quota or a tariff increase) that a country may impose on a product if imports of that product are increasing to the point where they are causing or threatening to cause serious injury to a domestic industry that produces a similar or directly competitive product.

WTO member countries must investigate the matter before applying a safeguard measure, and they must make a formal commitment that imports of the product are significantly impeding or threatening to impede a domestic industry, according to the WTO rules outlined in this Agreement. Countries must also notify all interested parties of their intention to implement a safeguard measure as well as provide exporters with adequate opportunities to express their opinions.

This agreement is ratified by all WTO members. On January 1, 1995, the Agreement went into effect. It does not have an expiration date.

General Agreement on Trade in Services (GATS)

The Uruguay round of multilateral trade negotiations produced the General Agreement on Trade in Services (GATS). GATS is regarded as the first multilateral and legally enforceable set of rules governing international services trade. GATS covers a wide range of services, including business, communication, construction and engineering, distribution, education, the environment, financial services, health, tourism and travel, entertainment, sports and cultural activities, transportation, and so on. However, there are two exceptions to GATS coverage: services in the exercise of governmental authority and air traffic rights.

All of these services, including education, can be traded. Depending on the method of supply, the services can be traded in four different ways.

A customer of the service from country X travels to the supplier country (Y). For example, a patient undergoing treatment or a student pursuing studies at a foreign university.
X is a consumer country that receives supplies from across the border. Take, for example, country Y, which offers distance education in country X.
In consumer country X, the supplier is commercially available. For example, offshore foreign healthcare facilities, foreign universities, and so on.
In the consumer country X, the supply of service providers (in person). Doctors, researchers, professionals, and other skilled workers, for example, may travel to country X.

Under GATS, two major categories of WTO rules are covered. To begin with, the Most-Favoured-Nation treatment (MFN) ensures that all foreign trading partners are treated equally. Second, market access and national treatment are important considerations. GATS imposes some restrictions on market access, such as limiting the number of service providers, the value of transactions, and so on. National treatment, on the other hand, ensures that both foreign and domestic services (service providers) are treated equally.

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

The TRIPS Agreement, which went into effect on January 1, 1995, is the most comprehensive multilateral intellectual property agreement to date. The TRIPS Agreement safeguards intellectual property to a significant degree in trade-related regions and is considered as a comprehensive framework for intellectual property standards protection. The TRIPs Agreement also has the distinction of being the first legal agreement to include a set of specific clauses that address all aspects of intellectual property.

The following are the three main issues covered by the agreement:

Standards

Each of the IP classifications covered by the Agreement requires all member states to provide a minimal level of requirements for the protection of IPRs. The critical components of protection, such as the subject matter to be protected, the rights to be allowed, and potential exceptions to such rights, as well as the minimum period of protection, are all explicitly stated in each area of IP.

Enforcement

The second set of clauses focuses on intellectual property enforcement processes and remedies on a national level. The Agreement establishes a set of broad guidelines for all IPR enforcement actions. It also provides rules on civil and administrative processes and remedial measures, interim measures, specific border requirements, and criminal prosecutions, all of which outline the guidelines and remedies that must be provided in order for right holders to satisfactorily exercise their rights.

Dispute settlement

Disputes between WTO Members over TRIPS obligations are subject to the WTO’s dispute resolution procedures, according to the agreement.

In addition, the Agreement establishes some basic principles, such as national and most-favoured-nation treatment, as well as some general rules to ensure that procedural difficulties in obtaining or maintaining IPRs do not negate the substantive benefits that the Agreement should bring. All Member countries will be bound by the Agreement’s obligations, but developing countries will have a longer time to implement them. If a developing country does not currently provide product patent protection in the pharmaceuticals sector, special transition arrangements are used.

TRIPS is a minimum standards agreement that allows members to have more extensive intellectual property protection if they so desire. Members are free to choose the best method for implementing the Agreement’s provisions within their own legal system and practice.

Plurilateral trade agreements

Agreement on Trade in Civil Aircraft

On January 1, 1980, this plurilateral agreement went into effect. There are 33 nations that have signed the agreement. The majority of WTO agreements are multilateral because all WTO members sign them. The Agreement on Civil Aviation Trade is one of the plurilateral agreements that a smaller number of WTO members have signed. It removes import tariffs on all aircraft, except military aircraft, as well as all other products covered by the agreement, such as civil aircraft engines and their parts and components, civil aircraft components and subassemblies, and flight simulators and their parts and components.

Concurrent with the Uruguay Round, talks were ongoing to revise the civil aircraft agreement (a Tokyo Round agreement) and enhance subsidy discipline. However, no agreement has yet been reached, and the Tokyo Round agreement is still in effect.

Agreement on Government Procurement

The Government Procurement Agreement (GPA), which was first developed as a code in the 1979 Tokyo Round, is an early example of a plurilateral agreement with limited WTO membership. The GPA currently has 48 WTO members (including EU members individually and the United States); non-GPA signatories do not have any rights under the agreement. The GPA gives its signatories access to the market for a variety of non-defence government projects. Each GPA member specifies which government entities, goods, and services (along with thresholds and limitations) are accessible to procurement bids from other GPA members’ foreign firms.

Information Technology Agreement

Participants in the Information Technology Agreement, or ITA, have removed all import duties on a wide range of information technology (IT) products. Below is a list of the current signatory countries, which account for roughly 95% of global trade in IT products, as well as a list of a few countries that were allowed to postpone duty reductions on a few products.

Computers, telecommunications equipment, semiconductors, semiconductor manufacturing equipment, software, and scientific equipment are the six main categories of goods that are duty-free.

The ITA was negotiated under the WTO and signed on December 13, 1996, in Singapore at a WTO Ministerial Conference. On March 13, 1997, it went into effect. It does not have an expiration date.

Any company wishing to export any of the information technology products listed in the Agreement to any of the signatory nations can benefit from this agreement. Reduced trading costs, enhanced access to markets, higher sales, and higher export revenues are all benefits of eliminating duties.

Trade Facilitation Agreement

The Trade Facilitation Agreement (TFA) is the latest WTO multilateral trade agreement, having come into force on February 22, 2017, and may be the Doha Round’s lasting legacy, as it is the only key element of the negotiations that have been completed. 70 By streamlining, modernising, and accelerating customs processes for cross-border trade, as well as making them more transparent, the TFA aims to address multiple barriers to trade faced by exporters and importers and decrease trade costs. Some experts see the TFA as proof that new multilateral agreements can be reached, and that the TFA’s design, which includes special and differential treatment provisions, could serve as a model for future agreements.

According to estimates, fully implementing the TFA could reduce trade costs by 14.3% on average and boost global trade by up to $1 trillion per year, with the poorest countries benefiting the most. For the first time in WTO history, the obligation to implement the Agreement is tied to a country’s capacity to do so. The Trade Facilitation Agreement Facility (TFAF) was established to ensure that developing and least-developed countries receive the assistance they need to fully benefit from the TFA.

Preferential Free Trade Agreements

This phrase can be interpreted in two ways. For starters, it’s one of the names given to Free Trade Agreements (FTAs) to shed more light upon their preferential characteristics over WTO-mandated trade liberalisation or unilateral reduction of trade barriers. Second, partial scope agreements can be referred to as “preferential trade agreements.” These agreements provide preferential market access for a limited number of goods by lowering import tariffs.

(FTAs) remove barriers to trade between member nations and provide reciprocal preferential access to markets. In addition to trade in goods, FTAs usually include provisions for trade in services and investment, as well as the removal of tariff and non-tariff trade barriers. They can also consist of a variety of provisions relating to customs cooperation and trade facilitation, as well as harmonisation standards and encourage regulatory cooperation in a range of aspects.

Conclusion

The WTO agreements lie at the very core of the management of international trade among member nations. These agreements have been constantly evolving since the inception of the WTO in order to accommodate the developing nations so that such nations do not face an undue disadvantage at the discretion of the developed countries. Their objective is to ensure equality and equal opportunity among the signatories of such agreements and negotiations rounds are held frequently to change the terms and conditions of the agreements.

The future of the multilateral trading system is a hot topic of discussion, as it faces serious challenges, some of which have existed for a long time and others that have only recently emerged. Some experts believe the system has been stagnant for a long time and is now in crisis, while others believe the current situation will spur new reforms and alternative negotiating approaches in the future. Several events are putting pressure on WTO members to resolve differences and assess progress. COVID-19’s challenges have put global cooperation to the test, disrupted global supply chains, and resulted in trade protectionism. In response to the problem, several nations have reaffirmed the trading system, lifted restrictions, and liberalised trade, and see the WTO as playing a critical role in addressing trade policy obstacles. While some proposed reforms have stalled and the WTO dispute settlement system has ceased to function completely, an alternative arbitration mechanism involving the EU, China, and a few other WTO members continues to operate in parallel with the WTO.

Despite divergent viewpoints, there is a broad consensus that the status quo is no longer sustainable, and that the framework must be improved and innovative compromises must be found if the WTO is to continue to stay the cornerstone of the trading system. The path forward is still being debated. Recent proposals for WTO reforms and potential new rules are being discussed, and they’ve sparked new ideas, though concrete solutions and the next steps have yet to be agreed upon among the nations involved in the discussions and the broader WTO membership.

References

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All you need to know about a Limited Liability Partnership

By

Sneha Mahawar

-

February 28, 2022

0

This article is written by Vihanka Narasimhan, currently studying law at Jindal Global Law School, O.P. Jindal University. This article attempts to explain the concept of Limited Liability Partnerships in India and the world. The concept has also been compared with other forms of organisations for a comprehensive understanding of the subject matter.

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

Up until a few decades, businesses were limited to being either a company, partnership or sole proprietorship. Each kind of organisation had its own advantages and disadvantages; for instance, Partnership and proprietorship were easier to form and operate but did not have a limited liability which was a prominent feature of a company. The development in the way businesses function has resulted in the formation of a Limited Liability Partnership (LLP) which could be termed as a fusion between the benefits of a company and a partnership. This article will tell you all about limited liability partnerships, their advantages and the procedure to set up an LLP.

Meaning and features of a Limited Liability Partnership (LLP)

LLP is a fairly new concept in the world of businesses. Section 3 of the Limited Liability Partnership Act, 2008 defines an LLP as “a body corporate formed and incorporated under this Act and is a legal entity separate from that of its partners.” In layman’s terms, it can be understood as an amalgamation of a company and partnership due to its business model which allows the organisation to reap the benefits of limited liability to the partners at relatively low costs compared to traditional models. This form of organisation is suitable for small and medium-size businesses.

Salient features of a Limited Liability Partnership

To understand the concept of limited liability partnership, let us understand its features which have been stated below: –

Corporate Body

It is stated under Section 3(1) of the Limited Liability Partnership Act, 2008 that an LLP comes under the head of a ‘corporate body’. In simpler terms, it is a corporate entity that has a legal existence and such legal existence is a result of the registration of incorporation with a registered LLP office.

Separate Legal Entity

Section 3(1) of the Limited Liability Partnership Act, 2008, also mentions that an LLP is a separate legal entity. The term can be understood as ‘a person recognised by law.’ The term separate legal entity was discussed in the landmark case of Salomon vs Salomon & Co. Ltd. (1897) wherein it was established that an entity that has its own legal rights and obligations, separate from those running the business operations.

Perpetual succession

Section 3(2) of the Limited Liability Partnership Act, 2008, states that an “LLP”, just like a “joint-stock company”, has a “perpetual succession” i.e., it can only be formed and dissolved by a legal process. This also implies that the assets and liabilities of the LLP belong to itself irrespective of the retirement, insanity, insolvency or even death of one or more partners. In a nutshell, no partner is allowed to claim any part of the company in case of either continuance or winding up.

Mutual agency

Mutual Agency can be described as a type of agreement between the partners of a firm in which the actions of one partner are binding on the others. In the case of an LLP, there is no mutual agency unlike in a traditional partnership firm. This implies that all the partners simply serve as an agent to the LLP and the action of one partner does not bind the other.

Artificial legal person

As an LLP is created by a legal process, it is assumed that it is a non-fictitious legal person with all the rights bestowed upon an individual. It however is deemed artificial as it has no physical existence, thereby becoming invisible, intangible and immortal. It cannot hence exercise rights like marrying and divorcing or be sentenced to jail or taking an oath.

Limited liability

Section 26 of the Limited Liability Partnership Act, 2008 states that every partner is regarded as an agent to an “LLP”, i.e.,They share a relationship of principal and agent. This however is not applicable amongst the partners as they do not serve as each other’s agents. In a nutshell, the liability of each partner is limited to the agreed amount in the LLP agreement.

Common seal

It is not mandatory for an LLP to have a common seal. A common seal can be defined as an official seal of an organisation that is used to execute contracts. However, Under Section 14(c) of the Limited Liability Partnership Act, 2008, it is possible to create a common seal if desired under an authorised official of the organisation.

Profit-driven

In order to form an LLP, it is crucial that the business should be formed in accordance of law with the aim of earning a profit. This implies that a Limited Liability Partnership cannot be formed for organisations that are charitable or not-for-profit in nature.

Composition of a Limited Liability Partnership

In order to form a limited liability partnership, it is mandatory to have at least two persons with no limitation to the maximum number of persons. The following ‘persons’ can be involved as partners:-

Individuals
Limited Liability Partnerships
Companies
Foreign Limited Liability Partnerships
Foreign Companies

Apart from the above conditions, it is mandatory that one of the partners is a resident in India.

Structure of a Limited Liability Partnership

The LLP Act states that an LLP shall be a ‘body corporate’ and a ‘legal entity’ which is separate from its partners. It is also given that the organisation would have perpetual succession. The term perpetual succession is defined by Merriam-Webster as “the capacity of a corporation to have continuous enjoyment of its property so long as it is legally in existence.”

The only factors excluding an individual from being capable of becoming a partner of an LLP are: –

In case an individual has been found to be of unsound mind by the Court of a competent jurisdiction and the same holds true in present;
In case an individual is an undischarged insolvent; or
In case an individual has applied to be adjudicated as an insolvent and his application is pending

Responsibilities of partners in a Limited Liability Partnership

Section 2(g) of the Limited Liability Partnership Act, 2008 states that in an LLP, a “Partner” is regarded to be a person who becomes a “partner in the LLP in accordance with the LLP agreement.” The partners act as an agent to the LLP and hence are one of the most important parts in the functioning of the organisation. Some of the important duties and responsibilities of a partner have been mentioned below: –

They need to carry on their limited liability with respect to the business in a manner which is –

advantageous to both the business and the partner
all the partners are faithful to each other
to render true accounts and full information of all things affecting the firm to any partner

In case of any fraud which has taken place in relation to the business due to one partner, it is his responsibility to indemnify for the same.
Notification by the partners to the Registrar of companies with regards to the following situations: –

Changes in LLP’s structure or business;
Changes in partner’s names & residential addresses;
Changes in registered office address;
Filing of any annual return, statement of accounts and other documents specified under the provisions of LLP Act;
To preserve and to produce documentation related to the LLP as and when necessary;
To sign all the e-forms filed.

The documents such as the statement of accounts & solvency should be signed by the designated partners of the company.

How to set up a Limited Liability Partnership

In order to set up a Limited Liability Partnership, one has to follow the following steps: –

Step 1: Obtaining the Digital Signature Certificate (DSC)

The first step is to acquire the digital signatures of all the designated partners. It is crucial as all the documents of the LLP are to be filed online as a result of which digital signatures are required.

Step 2: Applying for the Director Identification Number (DIN)

The next step is to apply for the DIN of all the designated partners or those intending to be designated partners of the proposed LLP. The application for the allotment of DIN has to be made in Form DIR-3.

Step 3: Approval of name for the LLP

A form by the name of Limited Liability Partnership-Reserve Unique Name (LLP-RUN) has to be filed in order to get a name that is unique in nature. A total of two names can be proposed in the form. The uniqueness can be checked on the MCA portal by using the free name search facility as it does not resemble any existing business organisation or trademark. The form will be then further processed by the Central Registration Centre under Non-STP. Straight through Process (STP) is the procedure used by India’s Ministry of Corporate Affairs (MCA) when it comes to approving electronic forms filed with it. The fees have to be paid in accordance with Annexure A. A person has the provision to resubmit the form in case of mistakes within 15 days.

Step 4: Incorporation of LLP

The form used in incorporation is known as the Form for incorporation of Limited Liability Partnership (FiLLiP). This particular file has to be filed with the registrar of the state in which the LLP is registered and as per Annexure A needs to be paid for the same. In cases where the name of the LLP has not yet been approved one has to fill it with the proposed name.

Step 5: Filing the LLP agreement

The Limited Liability Partnership act, 2008 governs the rights and duties created for the partners and between the partners and the LLP. The final step is to file an LLP agreement which has to be filed in the MCA Portal via Form no. 3 within 30 days of the date of incorporation. It is crucial that this is filed on a stamp paper, the value of which varies from state to state.

Drawbacks of setting a Limited Liability Partnership

Just as a coin has two sides, Limited Liability Partnerships have a few disadvantages. Some of them have been enlisted below: –

Unequal partner rights

Unlike a company where each share has an equal value, each partner does not have an equal voting value in LLP, meaning that equal rights are not employed. The rights of a partner depends on the LLP agreement.

Heavy penalties

At first glance it may seem like an advantage that there are minimal compliances while forming an LLP. It is crucial to note that irrespective of the LLPs business activities, it is mandatory to file an income tax return and MCA annual return each year. In case of failure of the same a penalty of Rs. 100 per day is levied on the LLP which sometimes appears to be costlier than the fines paid for violations in a company.

Funding problems

LLPs do have the concept of equity or shareholders as the organisation is simply composed of partners, which in turn makes it impossible for the investors to fund the business. This makes the business operations of an LLP rely on funding from promoters and debt funding.

Difference between LLP and general partnership

Basis	Limited Liability Partnership	General Partnership
Regulating Act	The Limited Liability Partnership Act, 2008.	The Indian Partnership Act, 1932.
Registration	Mandatory	Not mandatory
No. of Partners	Minimum- 2Maximum- No limit	Minimum- 2Maximum- 20
Mutual Agency	A partner can bind the LLP by his own acts but not the conducts of the other partners.	A partner can bind the firm as well as other partners by his own conduct.
Agreement between the partners	LLP Agreement	Partnership Deed
Conversion	Conversion to private Limited company or Limited company is easy	Conversion to a company or LLP is a lengthy process.
Compliance	Mandatory to file the annual returns to MCA	Not Mandatory to file returns.
Liability	Limited to the amount invested	Unlimited liability
Dissolution	Winding up is either voluntary or by the order of the national company law tribunal.	Winding up takes place by· Mutual agreement· Certain contingency· By court order

Difference between LLP and LLC

Basis	LLP	LLC
Regulating Act	The Limited Liability Partnership Act, 2008.	The Companies Act, 1956
No. of members/ partners	Minimum- 2Maximum- No limit	Private company: Minimum – 2 members Maximum – 50 members Public company: Minimum – 7 members Maximum – No Limit
Motive	Can be created to fulfil economic or non-economic motives.	Has to be profit-driven
Name	Must consist of LLP in the suffix.	Must consist of public limited or private limited as a suffix.
Minimum contribution required	Private company – Rs.1 lakh Public Company – Rs 5 lakh	No provision specified
Management	The business is managed by the board of directors elected by the Shareholders under the companies act.	Managed by the partners on the basis of the LLP Agreement.
Whistle-blowing	No provision specified	Protection has been provided to the whistle-blowers under Section 31.

Laws applicable on Limited Liability Partnerships in India

In India, the term Limited Liability Partnership (LLP) was first introduced in the year 2008 through a legislation of Limited Liability Partnership Act, 2008 which governs all the LLPs in the country. With such a distinct status, the contract amongst the partners in an LLP instead of being regulated by the Indian Partnership Act, 1932 are dealt with under this Act. One should also take note that the Central Government has the authority to make applicable any provision of Companies Act, 1956 to LLP with suitable modifications by issuing a notification.

A brief overview of Limited Liability Partnerships functioning in other countries

Limited liability partnerships are recognized all over the world which includes countries such as the United Kingdom, United States of America, Australia, Singapore etc. There are two types of LLPs, they are as follows: –

Texas LLP model: In this model, the partners’ vicarious liability is limited to the wrongful acts of the partnership and not for liability arising in the ordinary course of business.
Delaware model: In this model, all liability is shifted on LLP and the partners are not responsible for any action arising in tort, contract, etc.

In India, the LLP act is based more on the Delaware model than the Texas model. In order to understand LLP at a global perspective, let us look at the following countries: –

Japan

In Japan, Limited liability partnerships are known as ‘yūgen sekinin jigyō kumiai’. This concept was introduced in the year 2006 with the aim to innovate the structure of business organisations. It is interesting to observe that the LLPs in Japan do not have the concept of a separate legal entity but merely a contractual relationship between the partners like American LLPs. They also have a structure called ‘godo kaisha’ which is similar to the UK LLPs.

United Kingdom

The concept of LLPs was introduced in the early 2000s in the United Kingdom. The provisions in Limited Liability Partnerships Act ,2000 were applicable in Great Britain and the provisions of Limited Liability Partnerships Act (Northern Ireland), 2002 were applicable in Northern Ireland which came into force in the year 2009. In the UK, LLP is recognised as a corporate body which has a perpetual legal existence independent of its members.

United States

The concept of LLP was introduced in the late 90s. Each state has varying laws for LLPs bu most of the country follows Section 306(c) of the Revised Uniform Partnership Act (1997) (RUPA) grants LLPs a form of limited liability similar to that of a corporation however although in minority, some states hold partners in an LLP can be personally liable for contract.

Singapore

In Singapore, the concept of Limited Liability Partnerships was introduced in the year 2005. This legislation is inspired by both US and UK models of LLP. Just like the UK, Singapore also regards an LLP as a body corporate.

Conclusion

Over time it has become evident that LLPs are certainly very profitable for business purposes as it is the union of the advantages of both a joint-stock company and a traditional partnership. It eliminates risks and encourages people to enter into partnerships, which in turn helps in the creation of new business ventures which are both economically and socially progressive. In a nutshell, one can say that the versatility of the concept has proved to be one of the major factors which have made it popular all around the world.

References

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:

https://t.me/lawyerscommunity

Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.

UK- Intellectual Property strategies for Artificial Intelligence

By

Sneha Mahawar

-

February 28, 2022

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This article is written by Shradha Jain pursuing a Diploma in Intellectual Property, Media and Entertainment Laws. This article has been edited by Zigishu (Associate, Lawsikho).

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

Artificial Intelligence (AI) is the world’s fastest-growing deep technology, with enormous potential to rewrite industry regulations, produce significant economic development, and revolutionise all aspects of life. The United Kingdom is a worldwide superpower in artificial intelligence, and it is well-positioned to dominate the globe over the next decade as a true research and innovation powerhouse, a hive of global talent, and a progressive regulatory and commercial hub. Many of the UK’s AI achievements have been aided by the Government’s 2017 Industrial Strategy, which outlined the Government’s goal of making the UK a global leader in AI innovation. The Government and the UK’s AI ecosystem agreed on a near £1 billion AI Sector Deal in April 2018 to strengthen the UK’s worldwide position as a leader in AI technology development.

A consultation on artificial intelligence and intellectual property is being held by the UK Intellectual Property Office (the Consultation). The consultation intends to support the long-term goals set forth in the UK Innovation Strategy and the National AI Strategy. The purpose of the Consultation is to evaluate potential reforms to IP legislation that will foster AI technology innovation and promote its use for the public benefit while maintaining the fundamental role of intellectual property e in supporting human creativity and innovation. In this article, we will briefly discuss the National AI strategy and the Consultation.

National AI strategy

Earlier in 2021 UK released a new strategy to make it a global hub for the research, commercialization, and deployment of responsible AI. UK’s standing among the global AI heavyweights will be secured by the new National AI Strategy. By concentrating on fostering innovation while safeguarding the public, the plan will guarantee that we invest in the long-term requirements of the UK’s AI ecosystem and that every industry and area can benefit from the transition to an AI economy.

The National AI Strategy will guide AI development for the next ten years, based on three important predictions for the decade ahead:

Access to people, data, computing, and finance—all of which confront fierce global competition—are the fundamental drivers of AI advancement, discovery, and strategic advantage.
AI will become commonplace in many sectors of the economy, and effort will be necessary to guarantee that every industry and location in the United Kingdom benefits from this transformation.
The UK’s governance and regulatory systems will need to keep up with the fast-changing needs of AI in order to maximise development and competitiveness, drive UK innovation excellence, and safeguard peoples’ safety, security, choices, and rights.

It lists “people,” “data,” “computing power,” and “finance” as important drivers of AI advancement, discovery, and strategic advantage, and it provides specific activities to pursue, anticipating that AI will become mainstream in the economy and that governance and policy would need to keep up.

Three main pillars are identified in the National AI Strategy:

Investment in long term needs of the AI ecosystem-to ensure competitiveness
Supporting the transition to an AI-enabled economy-considering all sectors and regions
Ensuring the right national and international governance of AI technologies-working with global partners to promote responsible AI development

For each of the above pillars, the National AI Strategy sets out several actions that the UK Government intends to undertake over the next 10 years. Some of the actions that have been identified are:

Potential for new AI regulation
Centre for Data Ethics and Innovation (CDEI) AI assurance roadmap to integrate use of AI standards as part of the AI governance model.
It offers a consultation on the patentability of AI-derived technologies, as well as copyright considerations in the context of computer-generated works and the usage of copyright materials in AI systems.
AI in Health and Social Care: A New National Strategy- This particular plan is expected to be released in 2022, harmonising with the larger strategy and, perhaps, integrating with the recently released draft plan “Data Saves Lives: Reshaping Health and Social Care with Data.” It will expand on the current NHS AI Lab in NHSX to speed up the development of AI technologies in health and social care in a safe, ethical, and effective manner.
The UKRI has announced a new National AI Research and Innovation Programme, which will be designed to align funding programmes, encourage investment in AI research, enable cross-discipline collaboration to support research and innovation, and support the continued development of new capabilities around AI technology trustworthiness, acceptability, adoptability, and transparency.

The Consultation

The purpose of the Consultation is to evaluate potential reforms to IP legislation that will foster AI technology innovation and promote its use for the public benefit while maintaining the fundamental role of intellectual property in supporting human creativity and innovation. The Consultation is divided into three sections:

copyright protection for computer-generated works without a human author;
licensing or exceptions to copyright protection of material used for text and data mining; and
patent protection for AI-devised ideas.

The consultation’s goal is to “support AI technology innovation and promote its usage for the public good.” The consultation also intends to “preserve the important role of intellectual property in encouraging human innovation.” Similarly, the UK Government has said that any new policies resulting from the consultation must similarly satisfy these objectives and be based on the best available economic research.

In the Consultation, four policy options are considered:

Maintaining the existing status quo, with patents available only when the inventor is a human.
Expanding the definition of “inventor” to include the people in charge of the AI system that creates the innovation. This is a minor legal amendment that would make the person(s) in charge of programming, configuring, running (and so on) the AI system the inventors of the patent produced by that AI system. This option avoids the need for the specified human to reveal whether AI was employed to create the idea.
Allowing AI to be listed as the inventor in patent applications by allowing AI to be named as the inventor or eliminating the necessity to name an inventor if the innovation was conceived by AI. In both circumstances, the AI system’s human respondent would be entitled to patent rights in the first place (these rights passing to a legal person such as a corporate entity by virtue of contractual rights where applicable). AI would not be allowed to file for patents or possess them. The Consultation believes that disclosing whether an invention was created by AI might encourage its adoption and investment.
A new form of right to protect AI-created creations. To work alongside the present patent system, the Consultation proposes a quasi-patent right with restricted exclusive rights and a shorter lifespan. The Consultation also makes recommendations for a legal framework based on the present system for these AI quasi-patents, including a stronger test of inventive step, because AI may create in ways that humans would not consider evident. Alternatively, there should be no obviousness test, ensuring that new AI-created ideas are immediately protected. A new quasi-patent right may be less desirable than a patent if it provides less protection, or it may be more attractive if the legal obstacles are simpler to surmount, depending on the circumstances. The Consultation takes notice of this problem, as well as the possibility that inventors seeking patent protection may fraudulently admit the use of AI or be unconcerned about their odds of success under each regime.

Following the consultation, the UK Government will review the comments and, in due time, issue an official response document. The information gathered will be used to inform Government decisions on any legislative changes that may be required as a result of the consultation, and will aid in achieving the goals of encouraging AI innovation and implementation while still promoting and protecting human creativity, according to the consultation.

Conclusion

Later this year, the National AI Strategy offered more comprehensive, quantifiable plans for the first stage of the strategy’s implementation. These will be required to determine the practical implications of several of the recommendations. Within six months, we may anticipate a White Paper on AI policy, but the National AI Research and Innovation Programme will not be launched until next year. In addition, the Centre for Data Ethics and Innovation’s AI assurance roadmap is expected to be released within the quarter, while the IPO’s consultation on copyright and patents for AI is expected to be released within the next three months. A number of additional papers and techniques addressing relevant topics have been offered to organisations. Without a question, these are exciting times. Will the Government maintain the status quo or break the mould by introducing a stronger legislative agenda in support of its national vision to transform Britain into an AI superpower? In any case, the rapid rate of technological advancement and significant advances in AI capabilities will continue to test established IP notions and principles in the coming years.

References

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All you need to know about distribution agreements

By

Rachit Garg

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February 27, 2022

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This article has been written by Ayush Tiwari, a student of Symbiosis Law School, NOIDA. This article aims to discuss why one should get a distribution agreement made with their distributor, what should be included in a distribution agreement and how it is different from other commercial agreements.

Table of Contents

Introduction

When a business produces a product, it must be sold. Now, if the firm is well-established, it may be able to sell directly to its clients; but, there are occasions when the company lacks the competence to sell and advertise its products at the retail or wholesale level. In such a situation, it will work with a distributor that has the knowledge and a presence in the target market. It will need to enter into a legal agreement with the distributor for this reason, which will control their partnership and explicitly specify the terms of their agreement, as well as allow the distributor to sell and advertise the items.

In its most basic form, a distribution agreement is a legally binding agreement between a supplier and a distributor of products.

An informal distribution agreement between the supplier or manufacturer and the distributor is also possible. Many do, but these verbal agreements frequently result in misunderstandings, which can lead to disagreements and the need for legal action.

A comprehensive distribution agreement, with clearly specified transaction conditions, gives clarity for all parties, ensuring that they know precisely what they need to accomplish. When one side fails to fulfil the provisions of the agreement, the non-defaulting party will be saved by the agreement, which will protect it legally and provide legal remedies.

If you want to work with or learn more about distributors, you’ll need to understand distribution agreements and how they may safeguard your end of the business deal.

What are distribution agreements

The distribution agreement (also known as a “wholesale distribution agreement”) governs the distribution of items made by a producer (also known as a “supplier”) and sold by a distributor. There are two primary parts to the distribution agreement.

On one hand, like in a normal sales agreement, the supplier agrees to provide and sell its items to the distributor under specific conditions. The distributor agrees to acquire and accept delivery of the supplier’s products at regular intervals over the life of the agreement (sales agreement with successive deliveries), and the supplier agrees to deliver them at frequent intervals.

The parties’ economic goal, on the other hand, is to promote the supplier’s products in a certain region. This implies that the distributor is responsible for promoting and marketing the supplier’s goods. In this case, the supplier frequently offers the distributor exclusive rights to its items in the agreed-upon zone. It is natural for a distribution deal to be signed for a long period of time. As a result, the agreement’s wording is critical, because disagreements might occur long after the agreement has been signed.

The details of the agreement are defined in the distribution contract, which includes the cost of the items or the commission rate, the length of the contract, the distributor’s operating area, and other data.

Need for distribution agreements

Despite the fact that reselling is frequently done on the basis of an informal agreement, there are a few reasons why one should get into a formal distribution agreement:

A misunderstanding may result from a verbal or informal agreement, and the parties may believe that it is not necessary to observe all of the provisions of an informal agreement.
The possibilities of misunderstanding and misinterpretation are reduced when an agreement contains explicit terms and conditions expressed in straightforward words.
In the event that one party willfully violates the terms and conditions agreed upon, the victim party will have a lot easier time obtaining legal protection.

Contents of a basic distribution agreement

Territory

The clause must specify the territory in which the distributor is permitted to sell and advertise the goods. It might be claimed that the distributor can increase or reduce the region after consulting with the supplier.

Duties and obligations

It is by far the most significant provision in the agreement since it specifies what both parties must do in order to fulfil their obligations under the agreement.

Some of the responsibilities for the manufacturer will include:

Deliver the goods which are agreed-upon.
Provide all necessary product information, education, and technical assistance.
Follow the delivery dates and timetables.
Allow for advertising or promotional expenses.
Provide any additional information or data requested by the distributor.
On-time payments

Some of the responsibilities of the distributor will include:

Maintain a sufficient inventory.
Purchase expectations at a minimum.
Set goals for sales, accountability, and customer service.
Other distributor responsibilities include sales quotas, sales campaigns, paperwork, and customer service after the sale.

Duration of the agreement

One must address the terms such as how long this agreement will be valid when it will come into force, when it will terminate, and if it will be renewed or not in this clause.

Confidential information

All of the supplier’s intellectual property rights are guaranteed to be preserved. The clause must provide directions for the distributor’s use of the intellectual property. It should also limit the distributor’s ability to reveal trade secrets.

Marketing rights

The distributor, supplier, or both may be in charge of marketing the product. If the distributor advertises the goods, the supplier may specify what resources it may use to market the product, what activities it engages in for the purpose of advertising, and what marketing rules it must follow.

Reporting obligations

The supplier may seek to report on sales, inventory, advertising, or other aspects of the agreement, which will be provided by the distributor at agreed-upon intervals. This is especially crucial if the distributor is paid a commission or if the supplier is required to purchase back unsold goods.

Details of the payment

One of the most significant aspects of a distribution agreement is how the distributor will make money, whether through sales commissions or earnings left over after purchasing things wholesale and reselling them for a profit. The contract should specify what happens to unbought inventory and whether there is any minimum or maximum pricing at which the distributor must sell the items, regardless of how it is set up.

Consumer training obligations

Many technological goods specify the degree of training and assistance that the supplier will offer to the distributor, as well as who is responsible for delivering customer training and assistance.

Forecasts

Just as the distributor is expected to satisfy minimum sales standards, so is the supplier. Occasionally, the distributor will be forced to buy a certain amount of the product. These minimum standards will be based on predictions that will be issued at intervals indicated in the contract over the duration of the agreement.

Trademark licensing

It’s critical to detail the distributor’s rights in terms of using intellectual property, such as brand names and trademarks. For instance, may one:

just display the trademark on a sign in his window?
Apply for the trademark on his letterhead or other printed materials?
use a trademark in his name?

Otherwise, unless the trademark owner has specifically granted permission, the distributor cannot use the trademark without risking liability. The manufacturer must exercise caution when providing this right and in what way, since he does not want to lose his unique trademark ownership rights by allowing the distributor such rights.

Competition

These conditions are optional, and they prohibit the distributor from selling identical products from rival suppliers, selling similar items from the same supplier, or competing with the supplier during or after the agreed time. These normally only apply to things that are very unique, rather than those with dozens or hundreds of variations on the market.

If the parties disagree on the definition of “competition” and the matter goes to court, the judge will consider the following factors:

the length of the prohibition;
the restriction’s geographical region;
the particular action that is prohibited;
the level of difficulty imposed on the distributor; and
any topics of public concern that may arise.

Restrictions on competition, on the other hand, may not apply to all products. They usually apply when the product is one-of-a-kind or when the distributor has more negotiating power.

Circumstances of termination

The circumstances under which either party can terminate the agreement, as well as the repercussions of such termination, must be specified, as one party or the other may need to nullify the agreement at some time.

Types of distribution agreements

The sort of distribution agreement one choose is determined by the type of transaction you’re conducting. It’s critical to select the correct agreement to ensure that it fulfils its contractual objective of safeguarding both parties’ rights.

There are five different types of distribution agreements:

Agreement on exclusive distribution
Agreement on non-exclusive
Wholesale distribution agreement
Distribution agreements for commission
Developer distribution agreements

Let’s take a deeper look at each of the many types of distribution agreements:

Agreement on exclusive distribution

An exclusive distribution agreement can be used in a variety of ways by both parties. In certain cases, a distributor is the sole distributor of a supplier’s goods in a given geographic area. Other exclusive agreements provide the distributor unique permission to distribute the goods to certain clients, preventing any other distributor from doing so. Exclusive agreements are frequently utilised when the product is costly or unique and technological, necessitating a specialised understanding of the item and the market.

Agreement on non-exclusive distribution

There can be more than one distributor under a non-exclusive arrangement, and the seller is not obligated to offer exclusive rights to the distributor. With different distributors, the provider might enter into multiple distribution agreements.

Wholesale distribution agreement

A wholesale company sells its items in bulk at a lower price than it would if it sold them individually. While the phrase “wholesale distribution agreement” is often made up to characterise the sort of transaction, the basic premise is that the distributor contracts with a wholesale corporation to distribute things in bulk, either to retail stores for consumer purchase or directly to customers. When a wholesaler buys a product from a supplier, he or she becomes the owner of the product, allowing the wholesaler to sell it to the next firm for a profit.

Distribution agreements for commission

Many distribution agreements include a provision that specifies the amount paid to the distributor for selling the product, as well as a commission depending on the number of goods sold. Commissions provide an additional incentive for the distributor to sell as many of the supplier’s products as feasible. Because the distributor is paid a proportion of total sales, the more it sells, the more money both sides make.

Developer distribution agreements

Developer distribution agreements specify how software and application developers want their products distributed. They also describe the distributor’s and developer’s overall relationship. To eliminate the possibility of a future conflict, it’s critical to create an official agreement the first time.

Distribution arrangements : exclusive or non-exclusive

Business owners should consider if they want to designate an exclusive or non-exclusive distributor. Providing exclusivity to a distributor, for instance, would imply that only that distributor could sell their items in a specified geographic region. The supplier or vendor may provide other distributors as well in the same region if the agreement is non-exclusive.

In general, manufacturers believe that the benefits of offering exclusivity to potential distributors is appealing and can be related to meeting sales objectives. Suppliers, on the other hand, should be aware of any previous distributors they have designated in a certain geographic region. They may find it more cost-effective and beneficial to select a number of non-exclusive distributors in the very same region, allowing them to collaborate and pool resources to advertise items in the same territory.

Distinction with other commercial agreements

Difference between agency and distribution agreement

On behalf of the provider, an agent is engaged to negotiate or close contracts. Contracts are formed directly between the distributor and the customer, and the distributor essentially becomes the provider.
A percentage-based commission is given to an agent. A distributor sells a product to clients, generally with a profit margin to cover expenses and profit.
The products are not owned by the agency. A distributor owns the products and is willing to take the risk that they will not sell.

Difference between a distribution agreement and a dealer agreement

Dealers, such as retailers or value-added resellers, buy products from distributors and resell them to their consumers. The distributor operates as an intermediary between a supplier and dealers in a distributor-dealer relationship.
A dealership agreement often outlines the conditions of sales for items acquired from the distributor, as well as the dealer’s expected obligations and responsibilities and the circumstances under which the agreement may be cancelled.
A dealership agreement may also include the method of payment, delivery date, and territory rights of the dealer.

Difference between a distribution agreement and a franchise agreement

The franchisee is allowed and encouraged to use the franchisor’s trademarks and brand name in ordinary business procedures under the terms of the franchise agreement. To aid the franchisee’s success, the franchisor also gives advertising and training assistance. To retain the franchisor’s brand identity, a franchisee must follow precise criteria while promoting and selling items. A distributor is not allowed to use the company’s trademarked name when distributing its items. Instead, the distributor does business under its own identity. It serves as a product reseller, but it does not conduct business on behalf of the firm that manufactures the things.
A franchisee also pays an initial fee and continuing royalties to the franchisor in exchange for allowing it to continue operating under the franchisor’s trademark name. A distributor merely pays for the products it purchases from the manufacturer.

Advantages and disadvantages of a distribution agreement

Using a distributor has a number of apparent disadvantages. Under which the most apparent downside is the loss of control over the distributor’s actions, such as how items are sold in each area, how pricing is determined, and how products are eventually promoted.

Where customised items are supplied, the supplier may find it more acceptable to have direct contact with the final consumer and be more in control of their sales. At first, the provider may find it constraining to select an exclusive distributor in a territory. Suppliers should assess whether there is a chance to generate more revenue through a range of distribution channels in a certain area, which might lead to healthy competition and increased sales in the future.

It’s also vital to consider the advantages when deciding whether or not a distributor is the best option for your company. Like, the ability to raise worldwide awareness of the supplier’s brand and access a market in other countries that would otherwise be impossible to reach without investing the time and expense of establishing a permanent presence abroad.

By selling directly to distributors, suppliers can pass on the high level of risk that comes with medical items, as well as duties like adhering to local regulations and acquiring particular rights and consents to sell pharmaceutical products or medical devices in other countries.

Other advantages include the fact that the supplier is not responsible for selling items directly to end consumers; and, finally, the distributor is responsible for monitoring sales for various clients in other countries, reducing the provider’s administrative expenditures.

Sample of an exclusive distribution agreement

This Exclusive Distributor Agreement (“Agreement”) is made and effective on this, the 30th day of September 2005, by and between Laser Shot, Inc., a Texas corporation having offices at 12818 Century Drive, Stafford, Texas, 77477, United States of America (“Company”) and Lamperd Less Lethal, Inc., a Canadian Corporation with its principal place of business at 1200 Michener Road, Sarnia, Ontario, Canada N7T 7H8, (“Distributor”).

In consideration of the mutual promises contained herein, the parties agree as follows:

1. Definitions

As used herein, the following terms shall have the meanings set forth below:

a. “Products” shall mean the following Company products to be sold by Distributor:

All products as referred to in “Attachment 1: Products” are incorporated herein by reference.

b. “Territory” shall mean the following described geographic areas and/or particular accounts:

All areas and accounts as referred to in “Attachment 2: Territory” are incorporated herein by reference.

c. “Other Terms and Conditions” shall mean all terms, conditions, limitations, and modifications as described in “Attachment 3: Other Terms and Conditions” incorporated herein by reference.

2. Appointment

Company hereby appoints Distributor as its exclusive Distributor for the Products in the Territory. Distributor’s sole authority shall be to solicit orders for the Products in the Territory in accordance with the terms of this Agreement. Distributor shall not have the authority to make any commitments whatsoever on behalf of Company.

3. General Duties

The distributor shall use its best efforts to promote the Products and maximize the sale of the Products in the Territory. Distributor shall also provide reasonable assistance to Company in promotional activities of Company with respect to the Products. Distributor shall also provide reasonable “after-sale” support to Product purchasers and generally perform such sales related activities as are reasonable to promote the Products and the goodwill of the Company in the Territory. Distributor shall report monthly to Company by written report due by the 15^th of the following month concerning sales of the Products and marketing activities of the previous month. This report, known as the monthly “Sales and Marketing Report”, shall include two parts, the “Product Sales Report” and the Marketing Activity Report”. The Product Sales Report shall include orders written and should include customer name and address, Product or Products ordered, and date of sale. Marketing Activity Report shall include a general synopsis of activities, such as advertisements, articles, trade shows, etc. The distributor will devote adequate time and effort to perform its obligations. Distributor shall neither advertise the Products outside the Territory nor solicit sales from purchasers located outside the Territory without the prior written consent of Company. The distributor’s task is to solicit orders from all potential customers in the Territory including individuals, businesses, government entities, resellers, dealers, retailers, and others.

4. Reserved Rights

The company reserves the right to exhibit, advertise, market, attend trade shows, and solicit orders directly from and sell directly to any end-users or other retail buyers within the Territory. Company further reserves the right to enter into any agreements, partnerships, associations, joint ventures, OEM contracts, or other business relationships with manufacturers, suppliers, or other parties. Any sales or leads of Products made directly by the Company in the Territory will be credited and attributed to the Distributor, except that such sales will not count towards any quarterly or annual minimum sales quotas that Distributor may be subject to elsewhere in this Agreement.

5. Conflict of Interest

Distributor warrants to Company that it does not currently represent or promote any lines or products that compete with the Products. During the term of this Agreement, Distributor shall not represent, promote or otherwise try to sell within the Territory any lines or products that, in Company’s judgment, compete with the Products covered by this Agreement. Distributor shall provide Company with a list of the companies and products that it currently represents and shall notify Company in writing of any new companies and products at such time as its promotion of those new companies and products commence.

6. Independent Contractor

The distributor is an independent contractor, and nothing contained in this Agreement shall be construed to (1) give either party the power to direct and control the day-to-day activities of the other; (2) constitute the parties as partners, joint venturers, co-owners or otherwise; or (3) allow Distributor to create or assume any obligation on behalf of Company for any purpose. The distributor is not an employee of the Company and is not entitled to any employee benefits. Distributor shall be responsible for paying all income taxes and other taxes charged to Distributor on amounts earned hereunder. All financial and other obligations associated with the Distributor’s business are the sole responsibility of the Distributor.

7. Indemnification

A. Indemnification by Distributor

Distributor shall indemnify and hold Company free and harmless from any and all claims, damages, or lawsuits (including attorneys’ fees) arising out of intentional or negligent acts or omissions by Distributor, its employees or agents.

B. Indemnification by Company

Company shall indemnify and hold Distributor free and harmless for any and all claims, damages, or lawsuits (including attorneys’ fees) arising out of defects in the Products caused by Company.

8. Software invention and video scenario creation

Distributor may at its own cost and expense construct special software or video scenarios (“Custom Software and Video Scenarios”) for use and sale with the Products. All Custom Software and Video Scenarios shall be deemed to be “work made for hire” and all copyrights shall vest with Company. Distributor agrees to execute any and all forms, documents, licenses, and releases to fully transfer all copyrights of Custom Software and Video Scenarios from Distributor to Company. A company must review and approve all Custom Software and Video Scenarios before it will be released back to the Distributor to sell as part of the Products. The Distributor shall be allowed to sell the Custom Software and Video Scenarios royalty-free. However, the Company reserves the right to charge a reasonable royalty in future distributor agreements or renewals.

9. Purchase and Sale of Products

A. Company agrees to sell to Distributor and Distributor agrees to purchase from Company the Products subject to the terms and conditions as referred to in “Attachment 3: Terms and Conditions of Sale of Products” incorporated herein by reference.

B. Orders. All orders for the Products shall be submitted to the Company in writing by fax or mail (regular postal mail and other delivery services are acceptable) sent to the attention of the Controller. All fax orders must be followed up with a written order by mail sent to the attention of Controller. All orders received shall be verified by email sent from the Controller.

C. Inquiries from Outside the Territory. Distributor shall promptly submit to Company, for Company’s attention and handling, all inquiries received by Distributor from customers outside the Territory. All inquiries shall be submitted to the Company by email within five (5) business days and shall be included in the next monthly Sales and Marketing Report.

10. Product Warranty

Any warranty for the Products shall run directly from the Distributor to the purchaser of the Products. Pursuant to any such warranty, the purchaser shall contact the Distributor directly to make arrangements for repair, return, or replacement of any allegedly defective Products. Distributor shall have sole authority to deal with customers regarding any such warrantable repairs, returns, or replacement. Upon receipt of any such warrantable products, Distributor shall separately contact Company to arrange for return or credit for these defective products. The decision for determination of defect and replacement or credit for these products shall be solely at the Company’s discretion.

NOTE: The existing Company Containerized Shooting Range (“CSR”) is provided to the Distributor on an “as is” basis. The company specifically disclaims any maintenance, warranty or support obligations on the existing CSR.

11. Product Availability

The company shall use its best efforts in filling orders submitted by the Distributor in a reasonable and timely fashion. Company shall immediately notify Distributor of any known or anticipated delays in filling new or previously entered orders and the estimated duration of any delays so that Distributor may fairly represent this information to existing or potential customers. Under no circumstances shall Company be responsible to Distributor or anyone else for its failure to fill accepted orders, or for its delay in filling accepted orders, when such failure or delay is due to strike, accident, labour trouble, acts of nature, freight embargo, war, civil disturbance, vendor problems, or any cause beyond Company’s reasonable control.

12. Product Samples

It is not the policy of the Company to provide or loan Product Samples to its Distributors. However, in the exceptional case where a Product Sample is provided or loaned to a Distributor, the following language shall apply: Any Product Samples of the Products provided by the Company to the Distributor shall remain the property of the Company. Distributor shall have full responsibility of keeping each Product Sample in proper operating condition during the entire time the Product Sample is in the possession of Distributor. Upon written notice from Company, Distributor shall, within thirty (30) days, arrange for return of each Product Sample to Company in good condition less reasonable wear and tear.

13. Additional Responsibilities of Distributor

A. Forecasts

Not later than the 15th day of every month, Distributor shall provide Company with a three (3) month rolling forecast of orders showing Products requested.

B. Expense of Doing Business

The distributor shall bear the entire cost and expense of conducting its business in accordance with the terms of this Agreement.

C. Facilities

Distributor shall provide itself with, and be solely responsible for, (1) such facilities, employees, and business organization, and (2) such permits, licenses, and other forms of clearance from governmental or regulatory agencies, if any, as are necessary for the conduct of Distributor’s business operations in accordance with this Agreement.

D. Promotion of the Products

Distributor shall, at its own expense, vigorously promote the sale of and stimulate demand for the Products within the Territory by direct solicitation. In no event shall Distributor make any representation, guarantee, or warranty concerning the Products except as expressly authorized by Company.

E. Customer Service

Distributor shall diligently assist customers’ personnel in using the Products and shall perform such additional customer services as good salesmanship requires and as Company may reasonably request.

F. Advising of Changes

Distributor shall promptly advise Company of any changes in Distributor’s status, organization, personnel, and similar matters; any changes in the key personnel, organization, and status of any major customers of Company in the Territory; and any political, financial, legislative, industrial, or other events in the Territory that could affect the mutual business interests of Distributor and Company, whether harmful or beneficial.

G. Books and Records

Distributor shall maintain and make available to Company accurate books, records, and accounts relating to the business of Distributor with respect to the Products. Distributor shall also maintain a record of any customer complaints regarding either the Products or Company and immediately forward to Company the information regarding those complaints.

14. Additional Obligations of Company

A. Assistance in Promotion

Company shall provide Distributor with marketing and technical information concerning the Products, including samples of brochures, instructional materials, advertising literature, and other Product data in the English language. Distributor shall be responsible for translating these materials to other languages, the costs related to translation and printing of the translated materials as a cost of doing business.

B. Assistance in Technical Problems

Company shall assist Distributor and customers of the Products in all ways deemed reasonable by Company in the solution of any technical problems relating to the functioning and use of the Products.

C. New Developments

Company shall inform Distributor of any new product developments that are competitive with the Products and other market information and competitive information as discovered from time to time.

15. Trademarks and Trade names

A. Use

During the term of this Agreement, Distributor shall have the right to indicate to the public that it is an authorized Distributor of Company’s Products and to advertise within the Territory such Products under the trademarks, service marks, and trade names that Company may adopt from time to time (“Company’s Trademarks”). Nothing herein shall grant Distributor any right, title, or interest in Company’s Trademarks. At no time during the term of this Agreement or at any time thereafter shall Distributor challenge or assist others in challenging Company’s Trademarks or the registration thereof or attempt to register any trademarks, service marks, or trade name confusingly similar to those of Company. Company indemnifies Distributor for all use of Company’s Trademarks.

B. Approval of Representations

All presentations of the Company’s Trademarks that the Distributor intends to use shall first be submitted to Company for written approval (which shall not be unreasonably withheld) of design, colour, and other details or shall be exact copies of those used by Company.

16. Term

This Agreement shall commence on the date first written above and shall continue for ___ year(s) unless terminated earlier as provided herein. Thereafter, this Agreement shall continue until terminated upon at least ninety (90) days notice by Company or ninety (90) days notice by Distributor.

17. Termination

A. Termination for Breach

If either party defaults in the performance of any material obligation in this Agreement, then the non-defaulting party may give written notice to the defaulting party and if the default is not cured within thirty (30) days following such notice, the Agreement will be terminated.

B. Termination for Insolvency

Either party shall have the option to terminate this Agreement without notice, (1) upon the institution of actions against the other party for insolvency, receivership or bankruptcy, or any other proceedings for the settlement of other party’s debts, (2) upon other party’s making an assignment for the benefit of creditors, or (3) upon initiation of dissolution proceedings against the other party.

C. Termination of Exclusivity

Company retains option upon termination to terminate Distributor’s exclusivity rights and may allow Agreement to continue as a non-exclusive distributor agreement.

D. Return of Materials

All of Company’s trademarks, trade names, patents, copyrights, designs, drawings, formula, or other data, photographs, demonstrators, literature, and sales aids of every kind shall remain the property of Company. Within thirty (30) days after the termination of this Agreement, the Distributor shall return all such materials to Company at the Distributor’s expense. The distributor shall not make or retain copies of any materials or confidential items that may have been entrusted to it. Effective upon the termination of this Agreement, Distributor shall cease to use all trademarks, service marks, and trade names of Company.

18. Limitation on Liability

In the event of termination by either party in accordance with any provisions of this agreement, neither party shall be liable to the other, because of termination, for compensation, reimbursement or damages on account of the loss of prospective profits or anticipated sales or on account of expenditures, investment, leases or commitments in connection with the business or goodwill of Company or Distributor. The company’s sole liability under the terms of this Agreement shall be for any unpaid commissions if applicable.

19. Export Law

Distributor acknowledges and agrees that the Products may be subject to export restrictions and controls. Distributor agrees and certifies that neither the Products nor any component thereof is being or will be acquired, shipped, transferred, exported or re-exported, directly or indirectly, into any country prohibited by export restrictions and controls. Distributor bears all responsibility for export law compliance. Without limiting the generality of the foregoing obligation, Distributor hereby expressly agrees that, without the prior written authorization of Company and the United States Government, Distributor will not, and will cause its representatives to agree not to, export, re-export, divert or transfer any Product to any destination, company or person prohibited by the Export Administration Regulations or other export control laws and regulations. Distributor shall make its records available to Company at Company’s request, in order to permit Company to confirm Distributor’s compliance with its obligations as set forth in this Section 19. Distributor will indemnify Company against all claims based on Distributor’s exporting the product.

20. Confidentiality

Distributor acknowledges that by reason of its relationship to Company hereunder it will have access to certain information and materials concerning Company’s business plans, customers, technology, and products that is confidential and of substantial value to Company, which value would be impaired if such information were disclosed to third parties. Distributor agrees that it shall not disclose to any third party, any such confidential information revealed to it by Company. Without other notice, the Distributor shall treat all information as confidential in nature. Upon specific request, Company shall advise the Distributor whether or not it considers any particular information or materials to be confidential. Distributor shall not publish any technical description of the Products beyond the description published by Company. In the event of termination of this Agreement, there shall be no use or disclosure by Distributor of any confidential information of Company, and Distributor shall not manufacture or have manufactured any devices, components or assemblies utilizing Company’s patents, inventions, copyrights, know-how or trade secrets.

21. Notices

All notices required or permitted by this agreement shall be deemed given if sent by certified mail, postage prepaid, return receipt requested or by recognized overnight delivery service. Notices shall be made as follows:

Conclusion

In this article, we have analysed all the information regarding distribution agreements and after reading the whole article one can easily conclude that using distributors can give a low-risk, cost-effective approach for entering into new, expanding international markets. However, before going down the path of a distribution agreement, make sure you have a clear written distribution agreement in place. Signing up for a distribution agreement may be exciting and productive, but one should always think about all of your alternatives before committing to one such agreement.

References

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All you need to know about organised crime in India

By

Sneha Mahawar

-

February 27, 2022

0

This article is written by Arya Mittal from Hidayatullah National Law University. The article seeks to provide a brief analysis of the different kinds of organised crimes in Indian society along with the legal framework surrounding it.

This article has been published by Sneha Mahawar.

Introduction

A criminal wrong is considered to be graver than a civil wrong as it is considered as an act against the whole society. Increasing crimes in any legal system are an example of a chaotic and alarming situation for the country. Amidst all crimes, certain crimes are performed repeatedly by certain criminals, to not take revenge but to gain profits. Such instances fall under the scope of organised crimes. This article makes an attempt to identify some of the most prominent forms of organised crimes in India, the legal framework surrounding these crimes and the challenges faced by the State to curb these crimes.

Concept of organised crime

Organised crime means the commission of a crime at regular intervals in order to make money or profits. Some examples could include human trafficking, money laundering, smuggling, etc. Certain characteristics of organised crimes have been discussed hereafter to get a better understanding of the concept.

Nature and characteristics of organised crime

Presence of mens rea and actus reus

The very first step in any crime is the intention. The presence of mens rea and actus reus are the two imperative essentials to prove that a certain crime has been committed. The former implies a guilty mind i.e. a person being mindful of his/her actions and knowing that a successful attempt would result in a crime and the latter implies a physical activity or omission by the person which gives effect to the crime. To know more about these two elements, check out this article.

Commission of crime

To commit a crime (including organised crime), there are four stages that needs to be fulfilled. First, there should be an intention to commit a crime. Secondly, there must be some preparation to give effect to the crime. Third, there should be an attempt, i.e., presence of some action in pursuance of the crime being committed. Lastly, the attempt should be accomplished for the commission of that crime.

Objective of earning profits

It is important to understand that the purpose of committing an organised crime is not to take revenge or harm someone, rather it is a kind of illegal business or a way for people to earn profits. However, the crime which is committed is incidental to such activity and ultimately, there is some kind of physical and/or mental injury.

Regularity

Another important characteristic of an organised crime is that it is not a one-time event, but rather on a regular basis, just as a business. It is because of this aspect of continuity that the term is referred to as ‘organised’, since a structure has been created wherein similar activities (crimes) are being conducted regularly to earn profits.

Types of organised crimes

There are various activities that may be termed as organised crimes. Though there cannot be a definite list, some of the most common types of organised crimes in India have been discussed below.

Money laundering

Money laundering is one of the most serious crimes which can severely affect any economy in several aspects. This crime is specifically governed by the Prevention of Money Laundering Act, 2002. It is a way by which illegal money earned from sources such as drug trafficking, human trafficking, etc. are diverted to create an impression that such money comes from a legitimate source. Many criminals are engaged in this profession where they help people with an illegal income to convert it into a legitimate income.

Smuggling

Smuggling is another major economic offence in a form of organised crime. This is mostly governed by the Customs Act, 1962. It is natural that the goods which are illegal in the territory of India or heavily taxed are smuggled to continue their trade or maintain profits. With a change in fiscal policy, the definition of smuggled goods vary but it is mostly items such as contraband substances, valuable jewels, electronics, certain fabrics, etc. which are smuggled in India. Due to the vast coastline, it becomes easy for people to smuggle goods.

Drug trafficking

Drug trafficking is another major crime that poses a threat to the younger population of India, considering its drastic effects on physical and mental health. It is usually considered that the most important reason for the high rate of drug trafficking is the geographical condition of India. It is located between the Golden Triangle (Myanmar, Thailand, and Laos) on the northeast and Golden Crescent (Pakistan, Afghanistan, and Iran) on the northwest- both of which are the two largest sources of illicit drugs in Asia. Resultantly, this form of organised crime has become more prevalent and significant in the country.

Human trafficking

Article 23 of the Indian Constitution explicitly prohibits human trafficking. Further, there are various trafficking prohibition laws discussed in the latter part of the article. Human trafficking is one of the most significant and heinous organised crimes. This involves women trafficking, child trafficking, trading in sex workers, etc. A book titled “Indian Mafia” by S.K. Ghosh has revealed that there are more than twenty-five lakh prostitutes in the country and roughly, three lakh prostitutes get into the profession every year. Prostitution per se is not a crime but forcefully dragging young girls or running a brothel imposes criminal liability. Moreover, human trafficking is undoubtedly a crime.

Contract killings and kidnapping

These are governed by the Indian Penal Code. Contract killings means murdering someone for money on a contractual basis. This is usually prevalent among the highly influential and public personalities who are being murdered by their enemies/competitors through some other criminal for a ransom. Similarly, kidnapping incidents are also prevalent wherein people pay a certain sum of money to get someone kidnapped or these criminals ask someone for a ransom. Such crimes are performed by organised criminals who do such tasks on a regular basis.

Laws governing organised crimes in India

Indian Penal Code

Criminal conspiracy

Section 120A of the Indian Penal Code, 1860 (IPC) deals with criminal conspiracy. Where two or more persons agree to commit a crime, then they can be punished for criminal conspiracy. The exception clearly provides that it is immaterial whether the object of such crime committed is the main intention or incidental. Hence, organised crimes shall definitely be governed by this provision. Further, Section 120B of the IPC imposes criminal liability which can extend up to death punishment and even heavy fines.

Specific crime under the IPC

Additionally, these organised criminals shall also be charged for the specific crime which they have committed. For instance, criminals engaged in contract killings shall be liable under Section 300 and Section 302 of the IPC which deals with murder. Similarly, an organised criminal engaged in kidnapping shall be dealt with under Section 360, Section 363 and Section 364A of the IPC. A person engaged in human trafficking shall be charged under Section 370 and Section 370A of the IPC.

Organised crime-specific law

There is no central legislation on organised crime. However, owing to the high rates of organised crimes in Mumbai, Maharashtra came up with the Maharashtra Control of Organised Crime Act, 1999. It provides for different provisions dealing with the evidence to be admitted, protection of witnesses, presumption of the court to consider the accused as criminals on fulfilment of certain conditions, etc.

Preventive laws

National Security Act, 1980

There are various preventive laws existent in India which are applicable to organised crimes, explicitly and implicitly. One of them is the National Security Act, which provides for the detention of individuals “acting in any manner prejudicial to the defence of India, the relations of India with foreign powers, or the security of India”. The scope of the term ‘defence’ is very wide and it includes operations carried out by gangsters and since the preventive detention is carried out by the executive, there is very little role of courts to play.

Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act, 1988

Prevention of Illicit Traffic in Narcotic Drugs and Psychotropic Substances Act is another preventive law enacted with the aim of controlling the actions of people engaged in the illicit trafficking of drugs and other narcotic substances. Under this law, a person can be detained for upto one year if found to be engaged in drug trafficking. In certain cases, this period can be further extended to one more year depending on the severity of the case.

Miscellaneous laws

Apart from these laws, there are various other laws that govern certain specific organised crimes. To exemplify, the Narcotics Drugs and Psychotropic Substances Act, 1884 govern the cases relating to trafficking of different narcotic substances; Customs Act, 1962 governs and imposes liability for cases related to smuggling; Prevention of Money Laundering Act, 2002 governs the cases relating to money laundering. Apart from these, there are many other laws such as the Immoral Traffic (Prevention) Act, 1956; the Foreign Exchange Regulation Act, 1973, the Public Gambling Act, 1867 etc.

Legal problems associated with organised crimes

Law-making and enforcement

There is no central legislation specifically governing organised crime in India. It is important that specialised steps are taken to curb this menace. Specific laws are required and the executive needs to be empowered to take steps accordingly. Moreover, the enforcement should also be stringent failing which, the whole object of enacting such a law would defeat.

Slow trials

Though these organised criminals are tried under different laws, the whole process of trials is very slow and there is a very low conviction rate because in most of the cases, in such a long period of time, the witnesses deny to come out of fear and in some cases, the pieces of evidence are lost.

Obtaining proof

As mentioned earlier, most of the witnesses deny coming out of fear, so even if they are arrested, they are later acquitted because of insufficient evidence and longevity of time. These players are really strong and influential in their area of operations and naturally, people would not wish to risk their lives by providing statements against them.

Lack of resources

A major part of the country is still unorganised and lack of proper resources and technology become an obstacle in way of curbing organised crime. The lower-ranked police officers are not given sufficient powers and a statement before them is not an admissible evidence. Further, these officers do not have sufficient equipment to tap these criminals.

Lack of coordination

Since there is no central agency controlling these activities, every state has its own way of functioning. These criminals do not stay for long at one place and keep migrating every now and then. In such cases, due to lack of coordination, it becomes difficult and sometimes, impossible to catch them.

Conclusion

The aforesaid discussion reveals the concept of organised crime where the ultimate intention of the criminals is not to harm someone but rather make profits, however, some form of injury is caused. Some common features of these crimes have also been mentioned above. Such crimes occur in various forms including drug trafficking, human trafficking, money laundering, contract killings, etc. There are various central and state laws such as the Indian Penal Code, PMLA, NDPS Act, preventive laws, etc. to govern and curb organised crimes. Despite the existence of various legislation, the State has not been successful in curbing these crimes to a considerable extent. This is because of various challenges faced by the State such as lack of proper enforcement, lack of resources, slow trials, difficulty in obtaining proof, etc. In light of these circumstances, it is imperative that the Parliament bring in some laws specifically governing organised crimes and form diplomatic relations with other nations since many of these crimes are transnational in nature.

References

https://unafei.or.jp/publications/pdf/RS_No54/No54_10VE_Sharma.pdf
https://www.svpnpa.gov.in/images/npa/pdfs/CompletedResearchProject/22_organizedcrimeindia.pdf
B.M. Gandhi’s Indian Penal Code, 4th ed. (2017)

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

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How Non-fungible token (NFT) marketplace could facilitate licensing and selling of IP

By

Sneha Mahawar

-

February 27, 2022

0

This article is written by Dhruvi Bambal. This article has been edited by Yashprada (Associate, Lawsikho), Ruchika Mohapatra (Associate, Lawsikho), and Indrasish (Intern, Lawsikho).

This article has been published by Sneha Mahawar.

Table of Contents

Introduction

NFT was first made in 2014 and since then, NFTs have surged in popularity. In early 2021, former Twitter CEO Jack Dorsey made a tokenized version of the first tweet ever written, which was sold for over $2.9 million. Now in 2022, NFT trading has taken the digital world by storm. NFT trading platform Opensea is now worth $13.3bn. After the Internet boom, NFTs have the potential of being the next big thing.

What are NFTs

Before going into what NFTs are, let us first understand the fungible bit. In economics, a fungible asset is something having easily interchangeable units, such as money. So, for example, you may exchange a ₹10 note for two ₹5 coins and the value will be the same making this translation extinguishable. However, if something is non-fungible, the above transaction would be impossible. It has a unique feature that prevents it from being interchanged with anything else. The token portion of NFTs is related to digital. A digital asset can be tracked by its TokenID from the day of its minting to subsequent owners.

So, Non-fungible tokens are a new form of digital assets offering unique characteristics managed on a decentralised ledger (Blockchain). These tokens are not interchangeable, which means they cannot be traded for another token of the same type.

NFT’s : An evolution over the concept of cryptocurrency

Cryptocurrencies, just like actual money, are fungible/ interchangeable. While on the other hand, NFTs represent a paradigm leap from crypto. They are non-fungible, irreplaceable, and unique, but can be extended, which means they can be merged with other NFTs to generate another NFT.

This concept of digital representation of physical assets is not a new thing but non-centralised storage of information over blockchain technology is what makes it a game-changer.

This form of ownership of digital assets has gained prominence only after the COVID-19 pandemic when people learned to work from home, leisure activities shifted online and people were consuming more digital content online instead of going out. The rise of NFT has been a massive opportunity for digital art creators and other content creators to make money online. It’s also an opportunity to get recognition for their work making digital content and their artwork relevant.

NFTs can be programmed in innumerable ways. NFTs can be backed by assets both tangible and intangible. A painter can link their painting with NFT and incorporate the contractual right to earn a certain percentage of commission on every subsequent sale of NFT. For example – the first tweet sold as NFT was an intangible asset while Nike shoes tokenized and NFTied and stored in a vault for the buyer is an example of a tangible asset.

Why NFTs

Ownership of real estate is recorded by the registrar. Patent registration is kept at the patent filing office of a country. But the process further remains non- transparent. Assignment or selling of patents is not recorded anywhere and it is difficult to get information about the current owner of any patent. Here, NFTs kick in to play a game-changing role. If some patent is sold via NFT, the information would be instantly available and the general public would know the owner of it. The absence of intermediaries makes it market efficient.

In the same way, the need arose for ownership of digital content as distinguishable assets. In this digital age, anything can be duplicated endlessly- be it any document, a photo, a painting, memes, GIFs, gaming characters and even content such as memes, videos, digital avatars and other digital content difficult to secure Intellectual property rights. With the help of NFTs, such artwork can be tokenized to create a digital certificate of ownership. Thus, tokenizing these intangible assets could become a unique solution that allows them to be bought, sold, and traded more efficiently while reducing the probability of fraud.

NFTs can democratise the economics of buying and selling. Many people can own digital ownership of the physical asset. Multiple people can be made owners of the painting and share revenues. Since NFTs are based on blockchain, they can remove the intermediaries and make sales directly connect artists and audiences.

Are NFTs real assets

NFTs aren’t real assets. These are the metadata of assets that are added to a blockchain. Call them as a record of the real estate but not real property. This record is set up on the Internet that runs on gas. They are uniquely linked to a particular asset but that doesn’t mean the asset is unique. When you tend to mint and sell your art on the NFT platform you’re required to give information on how many copies of such pieces exist. NFTs are not limited to virtual currencies like Bitcoin and can be minted as per the creation of the NFT creator.

Smart contract on a blockchain

A smart contract on a blockchain is something very different from any traditional contract that we might imagine as a lawyer. It’s quintessentially a program that implies an automatic transfer of digital assets. There are Ethereum smart contracts for NFTs such as ERC721 and ERC 1155(Though such contracts do not provide Intellectual property rights) A smart contract is software that executes when certain circumstances are satisfied and is recorded on a blockchain. Because blockchains can execute contractual protocols, they have the potential to revolutionise digital rights management and other IP transactions. Smart contracts may be used to enforce intellectual property agreements such as licensing and ensure that payments to IP owners are made in real-time. These are not contracts that explore the scope of assets. Smart contracts are programs that are used to verify the ownership of assets.

Intellectual property rights involved when dealing with NFTs

Proponents of NFTs talk about an advantage NFT marketplace has for selling creative art because of the scope of continuing royalties and commission to marketplace platforms. Usage of NFT may simplify transactions with the added benefit of security.

That being said, NFTs do indeed have the potential to offer us a new way to monetize our Intellectual Property. IP owners should educate themselves on the merits and drawbacks of utilising this new technology to increase the value of their portfolio. As a result, seeking the guidance of IP counsel in these instances is critical to minimise the risk of possible difficulties.

As Intellectual property law deals with the creation of the mind, it makes them one of the most valuable assets for any business and persons of creativity. It’s an ultimate competitive advantage. Given the expanding scope of NFTs, Intellectual property rights are going to play a huge role in facilitating licensing and selling of Intellectual property. We see how NFTs are bound to shape the monetisation of the IPs.

Copyright and NFTs

Ownership of an NFT is simply a display on the shelf. There is a difference between having NFT ownership and the ownership of underlying IP or assets within the NFT. So when you buy an NFT, it’s just like you would buy a painting from an artist. You don’t get any copyrights with it. It’s just a representation of a physical asset without any of the 5 rights entailed in copyright- reproducing, performing, displaying, modifying, adaptation, publication.

Selling an NFT does not necessarily mean the transfer of copyright ownership unless an explicit contract is made. Once it passes the bridge of ownership and infringement issues, the transferor may via contract give away the right of reproduction adaptation, distribution, and display. However, the NFT buyer owns a “token” that proves they own the “original” work. It helps brand owners use NFTs for brand authentication and marketing of goods and services.

Since it requires reproducing the original work and transferring it to the client, any unlawful reproduction, distribution, or adaptation of an NFT may be deemed copyright infringement. Due to the decentralised nature of NFT ownership and the immutability of blockchain transactions, enforcing IP rights against a purchaser can be difficult once the NFT is sold. An NFT is often tied to a digital wallet address (similar to a bank account), although establishing the wallet owner’s identity may be difficult without advanced digital forensics. As a result, deploying forceful (but legal) takedown letters might prohibit the NFT from ever being marketed.

Discussing licensing agreements is important as they would be the backbone in buying and selling of NFT. The intellectual property of the works must be established within a licensing agreement, omission of which would lead to legal complications.

If the works are digital assets (tweet, photo, email, etc.), they don’t need digitisation and are ready to be minted and sold as NFTs in accordance with the licence agreement. If the works are physical assets, such as paintings or print materials, the first step is to digitise them. Once the physical work has been digitised, the licensee must decide how the NFT will be used. One alternative is to utilise an NFT as an authentication certificate or another way could be to redeem that physical asset.

Assignment of copyright would be a really interesting thing to watch as it unfolds in the future. The owner of NFT will be able to do all those things a copyright owner would have. NFT owner has the right to sue based on i.e to exclude others of its use.

Trademark and NFTs

NFTs do hold a connection with the trademark laws but no standard has been devised yet when it comes to trademark protection. Law offers no clarity on what could constitute trademark infringement, or if consumers are confused about the source or sponsorship of the NFT.

The artwork/digital asset can be registered as a trademark. The fact that the artwork has been tokenized does make choosing the goods or services for which the artwork will be utilised as a trademark any easier. Merchandising items are frequently of interest (e.g. T-Shirts, bags, screensavers, etc.). Another possibility is that a tokenized artwork will be utilised as a brand for a company’s goods/services. In this instance, the trademark for such things must be safeguarded.

When a business or any organisation is trying to mint their NFT, they want to make sure that their NFT and the underlying asset are unique. Law is too complex to answer whether a trademark owned by big fashion companies is for the underlying asset or does it also entail the right over the trademark/Copyright. Violations could include unauthorised parties committing trademark infringement when they mint an NFT connected to the underlying asset without the asset owner’s consent and market, offer for sale, and/or sell the NFT using the asset owner’s registered trademarks. If one wishes to mint a collaborative work, the permission of other creators must be sought expressly.

Patent law and NFTs

One of the most significant concerns with patent filing and application is that approvals take a long time. Inventors can utilise blockchain technology to collect royalties from others who utilise their intellectual property.

Here, a patent holder may choose to convert a granted patent into an NFT. This may make it simpler for investors and entrepreneurs to sell, exchange, and market patents. IBM is working with IPwe to create a patent marketplace on a blockchain. Nike has a patent for “cryptographic digital assets for footwear” which allows purchasers to confirm the validity of their purchases while also carrying a digital collectible version of their shoe in their wallet.

A smart contract would enable transactions that could be built into a token with the standard term of the patent assignment. Some caveats still lie in the implementation of NFTs for patents. Ownership of an NFT does not automatically result in ownership of the patent asset. Buying the NFT means you are the owner of the NFT in the blockchain. Although a proper agreement in writing will be necessary to complete the transfer of ownership and rights associated.

Ocean of possibilities

The introduction of NFTs has opened different avenues and vulnerabilities in terms of misuse of their intellectual property by any third party hence requiring way more protection for their IP. Metaverse is knocking at our doors. Fashion houses are launching their fashion clothing and conducting fashion shows in the Metaverse. This calls for Brands to plan to respond promptly to safeguard their intellectual property rights in the virtual world before third-party infringers in the metaverse infringe on their rights.

There is a need to explore licensing and assigning trademarks to digital innovators and artists in the metaverse in order to maintain and market their IPR as much as possible in the metaverse.

There are still a lot of questions to be answered. When there has been a breach of rights who would be responsible, would the platform be held liable as the asset didn’t hold on rarity or seller? So essentially a lot lies on the contract language of that platform and layered on that the description of NFT by the seller.

Because of the decentralised structure and immutability of blockchain transactions, enforcing intellectual property rights against a purchaser can be difficult once the NFT is sold. An NFT is often tied to a digital wallet address (similar to a bank account), although establishing the wallet owner’s identity may be difficult without advanced digital forensics. As a result, utilising forceful (but legal) takedown letters may prevent the NFT from ever being sold in the first place.

A lot of initial work would be required to create the digital representations of ownership of existing patents as NFTs. Difficulties may arise if transfers or licences were made but not recorded on the blockchain, thus creating conflicting records of ownership; however, work on such a marketplace has begun. Cryptokitties makers, Dapper labs proposed licence 2.0 to provide commercial use of bought NFTs.

NFTs and their real-world utility

Being able to secure and track ownership could open up far-fetching possibilities. They are just unique digital representations of real-world assets. Ever wondered about having got a University degree via NFT.

Into the unknown

Because NFTs are an unregulated market, there have been several cases of art copying and fraud in this field. Critics believe that could be another bubble ready to burst. This idea of buying something non-tangible for a million dollars still seems strange to many.

Other analysts worry NFT marketplaces are prone to so-called wash-trading where investors sell and then buy back an NFT they own intending to boost the demand.

It tends to have a huge impact on environmental well-being. The record of who owns which NFT is stored on a shared ledger known as the blockchain, a process maintained by thousands of computers worldwide. Keeping those computers up and running creates considerable demand for electricity. The same reason makes it expensive. Putting your asset as NFT is expensive which means you have to pay for gas, prices of which fluctuate.

It is assumed NFTs which use blockchain technology just like cryptocurrency, is mostly secure. The distributed nature of blockchains makes NFTs difficult, not impossible, to hack. One security risk for NFTs is that one could lose access to NFTs if the platform hosting the NFT goes out of business.

Difficulties may emerge if transfers or licences are completed but not registered on the blockchain, resulting in contradictory ownership records; nonetheless, development on such a marketplace has begun.

Conclusion

The boom of NFT has brought us to the precipice of a new era. Hence there is investment potential, trading potential and functional potential to authenticate things. Just like there was a gold rush we will witness an NFT rush, and we need to watch succinctly how things unfold.

NFTs are going to be both an opportunity and a threat. Complexities around legalities will only unfold later. For good or for worse NFTs are here to stay. What we need is legal reform to welcome them, make them a part of our life and have a copacetic existence. We need to make sure they add value to the current system of doing business. Legal standardisation must be insured in order to be sustainable. Lawlessness over its scope is not good.

References

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:

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All about the doctrine of Common Employment

By

Rachit Garg

-

February 26, 2022

0

This article is written by R Sai Gayatri, from Post Graduate College of Law, Osmania University. This article deals in detail with the doctrine of Common Employment, its definition, history, essentials, exceptions and its position in India along with case laws.

Table of Contents

Introduction

Let us understand a scenario before entering into the concept of the doctrine of Common Employment. There is a person by the name of Dennis, who works in a factory along with a few coworkers. One of such coworkers was Mennis. Dennis was hurt due to the negligent act done by Mennis while working at the factory during the course of his employment. Now Dennis goes to their boss and sues him for the act of Mennis. Will Dennis become successful in suing his boss for the act done by his coworker or not is dependent on the doctrine of Common Employment.

The doctrine of Common Employment states that the master shall not be liable for the negligent act done by one servant affecting the another in their course of employment. This principle is also known as the ‘Fellow Servant Rule’. The doctrine of Common Employment is premised on the concept of an implied contract of service. One employee is impliedly at the risk of causing injury to the other employees. The doctrine of Common Employment is an exception to the rule of vicarious liability wherein the master is vicariously liable for the act done by his employee. Since the said doctrine entails ambiguity, it is restricted to limited use.

Definition of the doctrine of Common Employment

The doctrine of Common Employment is a legal principle that restricts an injured worker from suing their employer if a coworker negligently caused the injury. The doctrine of Common Employment originates from common law. It states that when an employer has given safe, efficient and suitable machinery, tools and appliances as per the duty imposed upon such an employer by law, then such employer is not liable for any injury caused to an employee as a result of the act of another employee.

Fellow servant

A fellow servant is a co-worker who has the same employer. Further, a fellow servant may be an employee who is primarily related to another employee’s work which means that if either of the employees is negligent then there exists a high degree of risk of harm.

Fellow Servant Rule, 1905

The Fellow Servant Rule is also known as the Common Employment rule. It is a common-law doctrine which holds that an employer is not liable for the injuries of an employee that are caused by a negligent co-employee. The fellow servant rule was not favoured by the workers or the compensation statutes. When a group of employees come and work together towards achieving a common goal then such a group of employees shall be considered as fellow servants in certain jurisdictions. However, in certain other jurisdictions, the relationship amongst the fellow servants was tested by two principles, namely, the doctrine of vice-principal or the Superior-Servant rule. These principles state that an employer shall be held liable for the injuries and harm caused to an employee resulting from the negligent act of another employee who is given a higher level of control and power over the injured employee.

Different Department Rule

Different department rule is a common law doctrine that states that the individuals who work for the same employer shall not be considered as fellow servants if they do not work in the same department having a similar nature of work. However, since this rule is an exception to the fellow servant rule, many jurisdictions have repudiated it.

History of the doctrine of Common Employment

The Doctrine of Common Employment originated from English Law. This doctrine was discussed in the case of Priestly v. Fowler (1837).

Priestley v. Fowler (1837)

In this case, an accident occurred at midnight on 30^th May 1835 between Peterborough and Norman Cross. There was a van that was drawn by four horses being driven by William Beeton. The driver herein i.e., William Beeton was the employee of Thomas Fowler, a wholesale butcher of Market Deeping. Later, on the same day at half-past nine at night, the van from Thomas Fowler’s shop set out near Bull Inn in Market Deeping. The final destination was London, but some of the meat was to be sold en route at Buckden, which is twenty miles away from Peterborough. Charles Priestley, another employee of Thomas Fowler, was travelling to Buckden to sell this meat. Later, while the van was approaching Peterborough, it passed over a few stones and a cracking noise was heard.

As soon as the van left the city, it tumbled over. As a result, Charles Priestley’s thigh was fractured and his shoulder was dislocated, however, William Beeton was not badly injured. Subsequently, Charles Priestley’s father, Brown Priestley sued Thomas Fowler for damages as Charles Priestly was a minor aged 19 at that time. Until 1836, no one had sought damages from their employer for such an accident by a tort action. The court held that Thomas Fower was not liable as Charles Priestly was injured due to the negligent overloading of his fellow servant. This judgement mainly laid down the limit regarding the liability of the employer for the actions of their servants done during the course of employment.

The doctrine of Common Employment at the beginning of the 19^th century was considered to be fair, however, the usage of the said doctrine was later extended to any kind of injury sustained by the employee for any ordinary risk of service. Therefore, the scope of the said doctrine became the reason for its criticism. The main point of defence put forwards in the favour of the said doctrine was that the employees based on their own will enter into the company and therefore they have all the knowledge of the potential risks and losses.

When it comes to the case of India, the Workmen’s Compensation Act was introduced in 1923, i.e., 26 years after it was introduced in England and England borrowed this concept from Germany, which it introduced in 1884. This newly established law secured the workers by providing them with a right to get compensation from their employer for injuries suffered in the course of employment, irrespective of any fault or breach of duty on the part of the employers.

Meaning of the doctrine of Common Employment

The doctrine of Common Employment refers to the rule wherein the employer is not liable for the negligent act done by one employee to another in the course of their employment. This doctrine is an exception to the principle that the master is vicariously liable for the act done by his employee. The said doctrine is based on the implied contract of service. This means that the employee impliedly is at the risk of injuring another employee. Here, the act of an employee done during the course of employment refers to the situations where such an employee –

Is involved and engaged in the business of the employer.
The act occurs during the course of the employment, i.e., during the time and within the limits authorized for employment.
The act must be done to fulfil the requirements of the work regarding such employment
The act should have been done by the employee against another employee without the knowledge of the employer.

Essentials of the doctrine of Common Employment

The injured person and the wrongdoer should be co-employees. The employer cannot be held liable if the employee is injured by some outsider who is not employed in such an establishment. For instance, Bean is employed in an establishment by his employer and during the course of his employment, an outsider by the name of Teddy injures Bean and escapes. Here, Bean cannot sue his employer for damages as he was injured by an outsider and not a co-employee.
During the time of the accident, the employees must be engaged in Common Employment. For instance, two employees by the names of Bean and Teddy are employed in an establishment working for the same employer and towards achieving a common goal. During the course of such Common Employment, Bean injures Teddy gravely. Here, Teddy can sue his employer since Bean caused him injuries by doing a negligent act during the course of their Common Employment.

Exceptions to the doctrine of Common Employment

The exceptions to the doctrine of Common Employment are as follows –

If the employer is negligent regarding the action in question. For instance, if an employer does not repair a faulty machine and still negligently allows their employees to work on it.
If the employee acts on behalf of the employer. For instance, when an employer gives authority to an employee to give further directions/instructions to other employees, such an employee acts on behalf of the employer with the consent of the employer.
If the employer is aware of the cause and consequences of the action. For instance, when an employer knows that their action of allowing the employees to work in a particular working environment will lead to certain consequences and they still allow such action.

Position of the doctrine of Common Employment in India

The doctrine of Common Employment in India has been discussed in various cases and one such case is Secretary of State v. Rukmini Bai (1937). In this case, the plaintiff’s husband along with one other employee were killed because of the negligent act of a fellow employee. After perusing the facts of the case, the High Court of Nagpur allowed the action based on the doctrine of Common Employment.

Further, in the case of T. and J. Brocklebank Ltd. v. Noor Ahmode (1940), the Privy Council referred to the aforementioned case of the High Court of Nagpur but it did not establish any final opinion. In the case of Governor-General in Council v. Constance Zena Wells (1949), the Privy Council held that doctrine of Common Employment can be applied in India. However, the scope of the said doctrine is limited by Section 3(d) of the Indian Employer’s Liability Act, 1938. In this case, the plaintiff’s husband was a fireman in the defendant’s railways. The plaintiff’s husband was killed in an accident caused by the negligence of a fellow employee who was a railway driver. The Privy Council held that the defence of Common Employment can be resorted to by the defendant and the plaintiff’s claim for compensation was dismissed by the Privy Council. The doctrine of Common Employment is considered an exception to the doctrine of vicarious liability wherein the employer is made liable for the negligent acts of their employees and agents.

Judicial approach towards the doctrine of Common Employment

Young v. Edward Box (1951)

This case is one of the landmark cases dealing with the doctrine of Common Employment. In the instant case, the owner of a lorry sent his servant on some work and he also instructed the servant to also give a lift to people under any circumstances. As a result, the owner of the lorry will be liable for the acts of the servant done during the journey since such acts were done by him during the course of his employment.

Sitaram Motilal Kakal v. Santanuprasad Jaishankar Bhatt (1966)

In this case, the decision of the aforementioned case was reiterated. The instant case further established that the employer’s liability can arise only when a wrongful act was authorized by the employer or when a wrongful or unauthorized mode of doing some act was authorized by the employer. The vicarious liability of the employer is applied irrespective of the lawful or unlawful nature of the acts of the servant and the employer would be liable for the alleged wrongful or negligent act of the servant taken place during the course of employment.

Pushpabai Purshottam Udeshi and Others v. Ranjit Ginning and Pressing Co. (P) Ltd. and Another (1977)

In this case, it was held that the owner shall be liable in the case where a driver with the consent of the owner drives the car during the course of the owner’s business or its purpose. The Supreme Court based on the facts of the instant case held that since the accident took place during the course of employment, the decision taken in the aforementioned case of Sitaram Motilal Kakal v. Santanuprasad Jaishankar Bhatt (1966) cannot be considered.

Sadu Ganaji v. Shankerrao Deoraoji Deshmukh And Another (1954)

In this case, the issue was whether the doctrine of Common Employment which originated in England in 1837 in the case of Priestley v. Fowler (1837) should be followed in India as a principle as per justice, equity and good conscience or not. It was held that in any case, the doctrine of Common Employment must be applied based on the unique facts and circumstances of such case by also giving importance to the Statute law which modifies the common law.

Critical analysis of the doctrine of Common Employment

The decision of the Privy Council in the case of Governor-General in Council v. Constance Zena Wells (1949) recognized the defence of Common Employment in India and thus Section 3 of Employers’ Liability Act, 1938 was amended in 1951. This amendment abolished the defence of Common Employment in India. Therefore, the doctrine of Common Employment in India and England only entails historical value.

Further, the law concerning vicarious liability is evolving and developing. Moreover, the approach of the Courts has become more liberal and the trend is heading towards making the employer liable for the acts of the employee. The concept of no-fault liability has also been introduced in the Motor Vehicles Act, 1988. Thus it can be understood that there is a shift in the ideology from the doctrine of Common Employment to the doctrine of vicarious liability which makes the employer responsible for the acts of the employees.

Conclusion

The doctrine of Common Employment refers to the rule wherein the employer is not liable for the negligent act done by one employee to another in the course of their employment. This doctrine is an exception to the principle that the master is vicariously liable for the act done by his employee. The doctrine of Common Employment is also known as the Fellow Servant Rule.

It is a common-law doctrine that holds that an employer is not liable for the injuries of an employee that are caused by a negligent co-employee. Section 3 of the Employers’ Liability Act, 1938 was amended in 1951 and by this amendment, the doctrine of Common Employment was abolished in India.

References

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All about the doctrine of Stare Decisis and its position in India

By

Rachit Garg

-

February 26, 2022

0

This article is written by R Sai Gayatri from Post Graduate College of Law, Osmania University. This article explains the doctrine of Stare Decisis in detail along with case laws. The position of the doctrine of Stare Decisis in India as per the Constitution of India has also been discussed.

Table of Contents

Introduction

The term ‘Stare Decisis’ originates from Latin. It means ‘to abide by things decided.’ The doctrine of Stare Decisis is used by all courts in all cases/legal issues. A doctrine is nothing but a principle or instruction, however, it is not essentially a hard and fast rule that can not be broken. For instance, if the Supreme Court passes a judgement and it becomes a precedent, then as per the doctrine of Stare Decisis, the lower courts must follow such a judgement. The same principle has been mentioned in Article 141 of the Constitution.

The doctrine of Stare Decisis means that courts refer to the previous, similar legal issues to guide their decisions. Such previous decisions that courts refer to are known as “precedents”. Precedents are legal principles or rules that are created by the decisions given by courts. Such decisions become an authority or an example for the judges to decide similar legal cases/issues in the future. The doctrine of Stare Decisis creates an obligation on courts to refer to precedents when taking a certain decision. Let us know more about the doctrine of Stare Decisis through this article.

Essential objectives of the doctrine of Stare Decisis

The doctrine of Stare Decisis refers to the concept that courts must follow previously made judicial decisions in cases where the same legal issues are brought before them in subsequent matters. The concept of Stare Decisis aims to pursue four essential objectives, they are as follows –

The doctrine of Stare Decisis builds confidence amongst the people in planning their economic and social transactions by acknowledging that their actions are in compliance with the law.
The doctrine of Stare Decisis encourages the private resolution of disputes as the court may give its decision based on the decision of a similar previously decided case or legal issue. Since the parties to an issue already know the outcome of a similar legal issue, they might look for private dispute resolution rather than going through the conventional court procedure.
The doctrine of Stare Decisis reduces the burden on the courts as well. It eliminates the requirement to litigate again in the cases wherein the decisions have already been given. It also curbs the need for fresh litigation whenever the judge/bench changes.
The doctrine of Stare Decisis strengthens the confidence of the people in the judiciary as the said doctrine establishes certain restrictions and constraints on the powers of the judges. For instance, the doctrine of Stare Decisis requires the judges to decide legal matters before them in a foreseeable and rational manner.

The doctrine of Stare Decisis is premised on the maintenance of certainty, stability and consistency in the legal system. A precedent interests the primary need in a legal system which includes the factors of regularity, rationality and stability. The said doctrine ensures that a legal issue is resolved based on the previously decided cases irrespective of the judiciary and its jurisdiction. In the case of Hari Singh v. the State of Haryana (1993), it was held that in a judicial system that is administered by courts, one of the primary principles to keep note of is that the courts under the same jurisdiction must have similar opinions regarding similar legal questions, issues and circumstances. If opinions given on similar legal issues are inconsistent then instead of achieving harmony in the judicial systems, it will result in judicial chaos. The decision regarding a particular case that has been held for a long time cannot be disturbed merely because of the possibility of the existence of another view.

Further, in the case of ICICI Bank v. Municipal Corporation of Greater Bombay (2005), it was held that the decision given by the Apex Court must be read following the context of the statutory provisions which have been interpreted by the competent court. It was also stated that no judgement can be read if it is a statute. Since the law cannot always be static, based on the relevant principles and rules, the Judges must cautiously make use of the precedents in deciding cases.

Illustration on the doctrine of Stare Decisis

Let us assume that James borrows Bond’s bike while James is on a holiday. Bond does not ask James for permission to borrow his bike. Bond accidentally crashes and breaks James’s bike, but he does not tell James about it. Later, Bond simply places back James’s bike at James’s garage. When James returns home and discovers his broken bike, he demands that Bond must buy him a new one. The two bring their issue before the court, and the Court decides in favour of James stating that Bond is liable and owes James the money required for James to fix his bike, however, Bond does not have to buy James a new bike.

The aforesaid judgement given by the court now becomes precedent. Now onwards, based on the precedent established in this case, the lower courts in the same jurisdiction must abide by this new rule i.e., whenever a borrower breaks a thing or an item belonging to a borrowee and such borrower was using the borrowee’s thing or item without the permission of the borrowee in the first place, then the borrower is liable to pay as far as the damages done by them to the borrowee’s item. The lower courts must follow this newly established precedent because the doctrine of Stare Decisis obligates them to do so.

Effect of precedents on future decisions of courts

The doctrine of Stare Decisis is favoured in judicial systems because it encourages predictable, impartial and consistent development of legal principles, the said doctrine also promotes reliance on judicial decisions and contributes to the actual and perceived integrity of the judicial process. Stare Decisis aims to ensure that the public is guided in its personal and professional transactions by previously given court decisions, through established rules and principles. Stare Decisis reflects a concept wherein the applicable rule of law must be settled rather than that it be settled right. Further, the doctrine of Stare Decisis abides by the application of decision-making in a consistent and certain manner which in turn reflects in our legal culture and it is a prima facie display of the belief that such decision-making consistency has a normative value within itself.

The doctrine of Stare Decisis allows the public to presume that the foundational principles are rooted in the law rather than in the bias of the individuals and thereby the said doctrine contributes to the integrity of our judicial system and the government in the branches of application and sustainability. The doctrine of Stare Decisis is indispensable when it comes to the judicial system because it ensures unbiased adjudication and the predictability and certainty of law.

Advantages and disadvantages of the doctrine of Stare Decisis

Like every coin has its two sides, the doctrine of Stare Decisis also has its advantages and disadvantages. They are as follows –

Advantages of the doctrine of Stare Decisis

The doctrine of Stare Decisis reduces the need for successive litigation and it further saves time and energy of the judiciary as it is not required to determine the same question of law or any legal issue repeatedly if it has been previously settled in some other case.
When it comes to deciding a question of law it is often witnessed that there is a huge possibility of arbitrariness and bias trying to creep in. The doctrine of Stare Decisis curbs such unwanted and vicious elements from affecting fair and reasonable adjudication by obligating the judges to abide by the established precedents thereby preventing any kind of arbitrariness or bias.
The element of predictability is one of the primary needs in the efficient functioning of a judicial system. The doctrine of Stare Decisis thus ensures that the judgements given by the courts are predictable thereby boosting the confidence of the people in the judicial system.
The doctrine of Stare Decisis inculcates flexibility in the law. It can further be said that, by the virtue of the said doctrine, the law is moulded as per the social, cultural, economic and other circumstances.
The doctrine of Stare Decisis also brings stability, certainty and consistency in the law. The said doctrine not only helps in the smooth operation of the judiciary but also records the application of law in deciding cases.

Disadvantages of the doctrine of Stare Decisis

The doctrine of Stare Decisis may lead to the preservation and propagation of certain cases which might have been judged wrongly. It cannot be denied that there is a possibility of the existence of some case that has been decided in an arbitrary manner and because of the doctrine of Stare Decisis such case will be given primary importance at the expense of an aggrieved party.
The doctrine of Stare Decisis is also considered as a doctrine that is against the principles of democracy since it allows unelected judges to make law through their judgements.
The doctrine of Stare Decisis can also be supporting erroneous precedents that are moderately inconsistent with the Constitution, however, such error in the interpretation may be propagated and increased by further judgements premised on such precedent until such an interpretation is made out that contradicts the original understanding of the Constitution.
Sometimes the doctrine of Stare Decisis is applied in a biased manner by particular judges in order to amend the precedents regarding which they might have had a dissenting opinion.
The doctrine of Stare Decisis can also greatly hinder the all-around development of the law. As society and its ideologies change and as per the requirement of each legal question, there must be some reasonable variation in the approach towards the application of the law. The said doctrine basically echoes the concept of “one size fits all” i.e., it is not static in nature. Thus, the said doctrine might greatly affect the proper interpretation of the law as per the changing cultural, social, economic and other circumstances.

Position of the doctrine of Stare Decisis in India

The doctrine of Stare Decisis did not exist in India during the ancient or mediaeval period. It was only during the advent of British rule in the country that the concept of binding precedent was introduced and applied in India. The adoption of the doctrine of Stare Decisis was suggested by Dorin in the year 1813. The British legal establishment led to the concept of the hierarchy of courts along with the reporting of decisions, these two elements are the preconditions for the functioning of the doctrine of Stare Decisis.

The Britishers established the Sardar Diwani Adalats and the Supreme Courts at Calcutta, Bombay and Madras. The High Court Act, 1861 was enacted enabling the establishment of High Courts by the issue of letters of patent. Such High Courts had original and appellate jurisdiction. Therefore, a system of hierarchy of courts was established by the Britishers.

The Government of India Act, 1935 distinctly made the decisions of the Federal Court and the Privy Council binding on all courts in British India and in this way the doctrine of Stare Decisis gained statutory recognition in India. However, the Federal Courts were not bound by their own decisions. Post-independence, the doctrine of precedent continues to be followed in India.

Article 141 of the Constitution of India, 1950 establishes that the ‘law declared’ by the Supreme Court of India is binding on all courts within the territory of India. The term ‘law declared’ implies the law-making role of the Supreme Court. However, the Supreme Court is not bound by its own decisions. In Bengal Immunity Co. v. the State of Bihar (1955), the Apex Court held that there is nothing in the Indian Constitution that prevents the Supreme Court from departing from its own previously made decision if it is convinced of its error and the detrimental effect such decision might have on public interest. As far as the High Courts are concerned, the decisions of the High Courts are binding on all subordinate courts within the jurisdiction of such High Courts. In the case of Suganthi Suresh Kumar v. Jagdeesham (2002), the Apex Court held that a High Court does not have the permission to overrule the decision given by the Supreme Court merely based on the ground that such decision given by the Supreme Court had laid down principles without considering any of the legal factors. Further, in the case of Pandurang Kalu Patil v. State of Maharashtra (2002), the Supreme Court had further reiterated that the decisions of the High Court shall be binding until the Supreme Court overrules them.

Doctrine of Stare Decisis under Article 141 of the Indian Constitution

The Constitution of India, 1950 under Article 141 states that when the Supreme Court declares any law then such law shall be binding on all courts that are within the territory of India. Article 141 further states that the ratio decidendi of a case shall be binding and not the obiter dicta or the facts of the case. Thus, whenever a lower court wants to follow or apply the decision of the Supreme Court, the law laid down by the Apex Court in such a decision must be interpreted correctly in the case at hand.

Binding nature of the doctrine of Stare Decisis under Article 141 of the Indian Constitution

All the courts within the territory of India are bound by the law to abide by the decision of the Supreme Court. The lower courts are bound to hold a uniform and constant approach towards the principle of following such a decision given by the Apex Court.
The Supreme Court is however not restricted or bonded by its own judgement or decision. Even special leave petitions are also binding in nature, they must be followed by the lower courts. The reasons such as mere procedural irregularity or immateriality do not alone invalidate the binding nature of the judgement or decision.
A judgement passed by the higher court can be considered as a precedent by the lower courts if and only when such judgement is capable of resolving a legal matter.
The decision given by the court must be read together as a whole. Further, the observations from such a decision given by a higher court must be determined in accordance with the questions presented before the court.
In certain cases, the bench might be of different opinions and in such cases, the opinion that has the support of the majority shall prevail as a precedent. In the case of Siddharam Satlingappa Mhetre v. State of Maharashtra and Others. (2011), it was held by the Apex Court that the judgement of a bench that is larger in strength shall be binding not only on a judgement of a bench smaller in strength but also on a Bench of Judges of co-equal strength.
The cases where the Supreme Court has pronounced ex-parte decisions, even though one of the parties to the case was not present, still such decisions can be considered as a precedent.

Non-binding nature under Article 141 of the Indian Constitution

The decisions that are not expressed properly. In the case of State v. Synthetics and Chemicals Ltd. and Anr. (1991), it was stated that a decision that lacks expression and rational grounds and further where it did not proceed on consideration of the legal issue, such decision shall not have a binding effect as per Article 141 of the Constitution of India.
The decisions that are not founded on appropriate grounds.
The decisions that did not proceed based on consideration of the legal issue. In the case of Dr. Shah Faesal and Others v. Union Of India and Another (2020), it was observed by the Supreme Court that only the principle laid down in a judgement shall be considered as binding law under Article 141 of the Constitution.
As per the doctrine of Stare Decisis, the Obiter dicta of a case is not binding, thus it cannot be considered solely as a reason to declare any statutory rule invalid. It only has a persuasive value.
The decision rendered per incuriam is not binding in nature. This means any decision made on per incuriam, must not be used as a precedent.
In the case wherein the decision is rendered sub-silentio, even then such decision is not used as a precedent. Sub-silentio means when a question of law was not correctly and reasonably determined.
The scenario wherein the Court’s observations regarding the facts of the cases are not binding.

Types of judicial precedents

Declaratory precedent – A declaratory precedent refers to such a precedent wherein an already existing rule is applied in deciding a question of law.
Original precedent – In the case of an original precedent, a new law is established to apply it in a legal issue. It can be said that the original precedents are primarily the reason for the making of new laws.
Persuasive Precedent – A persuasive precedent is a kind of precedent wherein there is no compulsion for the judge to abide by a certain precedent regarding a legal issue, however, such a judge has the responsibility to consider the precedent before taking any action.
Absolutely Authoritative Precedents – In the case of an absolutely authoritative precedent, it is a mandate for the judges to follow a particular precedent in deciding a legal matter. Moreover, the judge must abide by the precedent even if they have a dissenting opinion regarding such precedent.
Conditionally Authoritative Precedents – When it comes to the case of conditionally authoritative precedents, the concerned judge has to follow the authoritative precedent as it is, but in certain special cases. A judge may disregard the decision of a court if it fails to be rational and lawful.

Precedents and treatment by Higher Courts

For a case that has been earlier decided by a lower court, a higher court can do the following –

Reversal of decision – By order of a higher court, the judgement of the lower courts shall cease to have any effect on the parties or the public.
Refusal to follow a decision – A High Court has the power to refuse to follow the decision of a lower court in cases where the High Court cannot reverse or overrule the lower court’s decision.
Distinguish from the decision – Where a High Court finds that the material facts of the case differ and the principles decided in the precedence is extremely narrow to be adequately applied to the facts of the case before it, then the High Court may distinguish such case from the previously given decision by the lower court.
Overrule of decision – In a situation where a High Court decides that the decision taken by the lower court regarding a particular is wrong, then it overrules such decision of the lower court.

Doctrine of prospective overruling

Generally, the courts follow the doctrine of Stare Decisis, however, the higher courts may overrule the decisions that may be arbitrary, erroneous or which are not applicable to the facts of the new case. The court may also overrule a decision where there is divided opinion.

Further, a court can overrule a decision where such a decision is vague, lacks clarity or causes inconvenience and hardship or the error in the prior decision cannot be easily corrected only with the help of the legislative process. When an earlier decision is overruled, it no longer is a binding precedent. In a case of overruling the decision of a previous case, the re-opening of old disputes on the ground of a change in the legal standing may arise, as a consequence, a multiplicity of proceedings may also arise.

Conclusion

The statutes and enactments of the legislature lay down the rules to be applied in the adjudication of disputes between parties and the final authority for the interpretation of these rules is the judiciary. The doctrine of Stare Decisis makes the decisions of courts, generally, the higher courts, binding on the subordinate courts in cases wherein similar questions of law are brought before the court. The applicability of the said doctrine ensures that there is predictability and certainty within the law. The said doctrine saves the time, energy and efforts of the judiciary and helps in eliminating the arbitrary and biased action on part of the judges. The doctrine of Stare Decisis is therefore within the interest of public policy and it creates confidence in the public by ensuring that their actions are in accordance with the law.

References

Students of Lawsikho courses regularly produce writing assignments and work on practical exercises as a part of their coursework and develop themselves in real-life practical skills.

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Sources of law in jurisprudence

By

Sneha Mahawar

-

February 26, 2022

0

This article is written by Adhila Muhammed Arif, a student of Government Law College, Thiruvananthapuram. This article seeks to explain the sources of law in jurisprudence, its classification, essential features and characteristics of those sources.

This article has been published by Sneha Mahawar.

Introduction

The word ‘Jurisprudence’ is derived from the Latin word jurisprudentia, which means science or knowledge of law. It is a very vast area of study and it consists of several ideologies and theories on how law has been made. It also includes the relationship of law with individuals and other social institutions within the scope of its study. There are various sources from which we derive law. Several jurists and scholars have attempted to classify the sources of law. However, the most common sources in all these classifications are legislations, judicial precedents, and customs.

Law and sources of law

According to John Chipman Grey, who was a Harvard Law School professor, “the Law of the State or of any organised body of men is composed of the rules which the courts, that is the judicial organ of the body, lays down for the determination of legal rights and duties”. Though Gray’s definition has been criticised for being narrow, he distinguished law from the sources of law. According to him, law has evolved through case laws and sources of law are where we get the content and validity of law from. Essentially, law refers to the rules or code of conduct and its sources refer to the materials from which it gets its content.

Types of sources of law

John Salmond, a legal scholar renowned for his ideologies on law in the field of jurisprudence, classified the sources of law into mainly two categories,i.e., material sources and formal sources.

Material sources

Material sources of law are those sources from which the law gets its content or matter, but not its validity. There are two types of material sources which are legal sources and historical sources.

Legal sources

Legal sources are the instruments used by the state which create legal rules. They are authoritative in nature and followed by courts of law. These are the sources or instruments that permit newer legal principles to be created. According to Salmond, legal sources of English law can be further classified into four categories-

Legislation,
Precedent,
Customary law, and
Conventional law.

Historical sources

Historical sources are sources that influence the development of law without giving effect to its validity or authority. These sources influence legal rules indirectly. The difference between legal and historical sources is that all laws have a historical source but they may or may not have a legal source. Decisions given by foreign courts serve as an example for this kind of source.

Formal sources

Formal sources of law are the instruments through which the state manifests its will. In general, statutes and judicial precedents are the modern formal sources of law. Law derives its force, authority, and validity from its formal sources.

According to Keeton, the classification given by Salmond was flawed. Keeton classified sources of law into the following:

Binding sources

Judges are bound to apply such sources of law in cases. Examples of such sources are statutes or legislation, judicial precedents, and customs.

Persuasive sources

Persuasive sources are not binding but are taken into consideration when binding sources are not available for deciding on a particular subject. Examples of such sources are foreign judgements, principles of morality, equity, justice, professional opinions, etc.

Precedent as a source of law

Judicial precedents refer to the decisions given by courts in different cases. A judicial decision has a legal principle that is binding on the subordinate courts. Once a court has delivered a judgement on a particular case, the courts subordinate to it must abide by the precedent while deciding on similar cases with similar facts. Some of the most influential judicial precedents in India are the following:

Kesavananda Bharati v. the State of Kerala (1973): This case is what introduced the concept of the basic structure doctrine in India, protecting the fundamental features of the Indian Constitution from being removed.
Gian Kaur v. the State of Punjab (1996): This judgement affirmed that the right to die does not come within the scope of Article 21 of the Indian Constitution. The court affirmed that every person has the right to die with dignity. The court also stated that the right to die in a dignified manner is not the same as the right to die in an unnatural way.
Maneka Gandhi v. the Union of India (1978): The court held Section 10(3)(c) of the Passports Act, 1967 as void since it violated Article 14 and 21 of the Indian Constitution.
Indra Sawhney v. the Union of India (1992): This judgement set a ceiling of 50% for reservation of backward classes. It also held that the criteria of classifying groups as backward classes cannot be limited to economic backwardness.

The doctrine of Stare Decisis

The authority of judicial precedents is based on the doctrine of stare decisis. The term stare decisis means to not disturb the undisturbed. In other words, precedents that have been valid for a long time must not be disturbed.

In India, subordinate courts are bound by the precedents of higher courts, and higher courts are bound by their own precedents. But when it comes to High Courts, the decision of one High Court is not binding on the other High Courts. Their decisions are binding on the subordinate courts. In cases where there are conflicts between decisions of court with the same authority, the latest decision is to be followed. As per Article 141 of the Constitution of India, the Supreme Court’s decisions are binding on all the courts across the country. However, the Supreme Court’s decisions are not binding on itself. In subsequent cases where there are sufficient reasons to deviate from the earlier decision, the Supreme Court can do so.

Doctrine of Res Judicata

The term res judicata means subject matter adjudged. As per this doctrine, once a lawsuit has been decided upon, the parties are barred from raising the same issue in courts again, unless new material facts have been discovered. They can’t raise another issue arising from the same claim either since they could have raised the same in the previous suit.

Ratio Decidendi

As per Salmond, a precedent is a judicial decision that contains a legal principle with an authoritative element called ratio decidendi. Ratio decidendi means reason for the decision. Whenever a judge gets a case to decide on, he has to adjudicate it even when there is no statute or precedent concerning it. The principle that governs such a decision is the reason for the decision which is also called ratio decidendi.

Obiter Dicta

The term obiter dictum means mere say by the way. This term is used to refer to statements of law that are not required for the case at hand. A judge may in the judgement of a case declare some legal principles to be applied in a hypothetical situation. It does not have much impact or authority. However, the subordinate courts are bound to apply the principles.

Types of precedents

Authoritative and Persuasive

Authoritative precedents are those precedents that must be followed by subordinate courts whether they approve of it or not. They create direct and definite rules of law. They fall into the category of legal sources of law. Persuasive precedents on the other hand do not create a binding obligation on the judges. Persuasive precedents can be applied as per the discretion of the judge.

Authoritative precedents can be classified into the following two types:

Absolute authoritative

An absolutely authoritative precedent is binding on subordinate courts in an absolute manner and it cannot be disobeyed even if it is wrong.

Conditional authoritative

A conditionally authoritative precedent is binding on other judges but it can be disregarded in certain special circumstances as long as the judge shows the reason for doing so.

Original and Declaratory

According to Salmond, a declaratory precedent is a precedent that simply declares an already existing law in a judgement. It is a mere application of law. An original precedent creates and applies a new law.

Factors increasing the authority of a precedent

The number of judges constituting the bench that makes the decision.
A unanimous decision has more weight.
Approval by other courts, especially the higher courts.
The enactment of a statute that carries the same law subsequently.

Factors decreasing the authority of a precedent

Abrogation of judgement by reversal or overrule of a higher court.
Abrogation of judgement by a statutory rule enacted subsequently.
Affirmation or reversal of decision on a different ground.
Inconsistency with the previous decision of a higher court.
Inconsistency with previous decisions of the court of the same rank.
Inconsistency with already existing statutory rules.
Erroneous decision.

Legislation as a source of law

Legislation refers to the rules or laws enacted by the legislative organ of the government. It is one of the most important sources of law in jurisprudence. The word legislation is derived from the words legis and latum, where legis means law and latum means making.

Types of legislation

According to Salmond, legislation can be classified into two types- Supreme and Subordinate.

Supreme legislation

Legislation is said to be supreme when it is enacted by a supreme or sovereign law-making body. The body must be powerful to the extent that the rules or laws enacted by it cannot be annulled or modified by another body. Indian Parliament cannot be said to be a sovereign law-making body as the laws passed by the parliament can be challenged in the courts. The British Parliament, on the other hand, can be said to be a sovereign law-making body since the validity of laws passed by it cannot be challenged in any court.

Subordinate legislation

Legislation enacted by a subordinate law-making body is said to be subordinate legislation. The subordinate body must have derived its law-making authority from a sovereign law-making body. It is subject to the control of the supreme legislative body. The following are the different kinds of subordinate legislation:

Executive legislation: This is a form of subordinate legislation where the executive is granted or conferred certain rule-making powers in order to carry out the intentions of the legislature.
Colonial legislation: Many territories across the globe were colonised by Britain and such territories were called colonies. The legislation passed by the legislature of such colonies was subject to the control of the British Parliament.
Judicial legislation: Courts also have a role in enacting laws that aid in regulating the internal affairs and functioning of courts.
Municipal legislation: Municipal authorities also possess the law-making power as they enact bye-laws.
Autonomous legislation: Another kind of legislation is autonomous legislation, which is concerned with bodies like universities, corporations, clubs, etc.
Delegated legislation: Sometimes legislative powers may be delegated to certain bodies by the parliament through principal legislation. A principal act may create subsidiary legislation that can make laws as provided in the principal legislation.

Custom as a source of law

Custom refers to the code of conduct that has the express approval of the community that observes it. In primitive societies, there were no institutions that acted as authority over the people. This led to people organising themselves to form cohesive groups in order to maintain fairness, equality, and liberty. They started developing rules with coordinated efforts to make decisions. They eventually started recognising the traditions and rituals practised by the community routinely and formed a systematised form of social regulation. In India, laws relating to marriage and divorce are mostly developed from customs followed by different religious communities. Additionally, several communities belonging to the Scheduled Tribes category have their own customs related to marriage. As a result of that Section 2(2) of the Hindu Marriage Act, 1955 has exempted Scheduled Tribes from the application of this Act.

Requisites of a valid custom

Reasonability: The custom must be reasonable or practical and must conform with the basic morality prevailing in the modern-day society.
Antiquity: It must have been practised for time immemorial.
Certainty: The custom must be clear and unambiguous on how it should be practised.
Conformity with statutes: No custom must go against the law of the land.
Continuity in practice: Not only the custom must be practised for time immemorial, but it should also be practised without interruption.
Must not be in opposition to public policy: The custom must adhere to the public policy of the state.
Must be general or universal: There must be unanimity in the opinion of the community or place in which it is practised. Hence, it should be universal or general in its application.

Sir Henry Maine’s views on customs

According to Sir Henry Maine, “Custom is conception posterior to that of Themistes or judgments”. Themistes refers to the judicial awards dictated to the King by the Greek goddess of justice. The following are the different stages of development of law according to Henry Maine:

At the first step, law is made by rulers who are inspired by the divine. Rulers were believed to be messengers of God.
At the second stage, following rules becomes a habit of the people and it becomes customary law.
At the third stage, knowledge of customs lies in the hands of a minority group of people called the priestly class. They recognise and formalise customs.
The final stage is the codification of customs.

Types of customs

Customs without a binding obligation

There are customs that are followed in society that do not have a legal binding force. Such customs are related to clothing, marriage, etc. Not abiding by such customs can only result in a social boycott and not legal consequences.

Customs with a binding obligation

Customs that are meant to be followed by law are called customs with a binding obligation. They are not related to social conventions or traditions. There are mainly two types of customs with binding obligations- Legal customs and Conventional customs.

Legal customs: Legal customs are absolute in sanction. They are obligatory in nature and attract legal consequences if not followed. Two types of legal customs are general customs and local customs. General customs are enforced throughout the territory of a state. Local customs on the other hand operate only in particular localities.
Conventional customs: Conventional customs are those customs that are enforceable only on their acceptance through an agreement. Such a custom is only enforceable on the people who are parties to the agreement incorporating it. Two types of conventional customs are general conventional customs and local conventional customs. General Conventional Customs are practised throughout a territory. Local Conventional Customs on the other hand is restricted to a particular place or to a particular trade or transaction.

Difference between custom and prescription

The main difference between the two is that custom gives rise to law and prescription gives rise to a right. Custom is generally observed as a course of conduct and is legally enforceable. Prescription refers to the acquisition of a right or title. When local custom applies to society, the prescription is applicable only to a particular person. For example, when a person X’s forefathers have been grazing their cattle on a particular land for years without restriction, X acquires the same right to graze his cattle on the land. The right acquired by X is called a prescription. For a prescription to be valid, it must be practised from time immemorial. In India, uninterrupted enjoyment for 20 years is essential to acquire a right to light and air as per the Indian Easements Act, 1882.

Conclusion

To conclude, sources of law in jurisprudence can be classified on the basis of several grounds. But the most notable or common classification divides it into legislation, precedent, and custom. Precedent refers to the previous judicial decisions. The legislation refers to the statutory rules enacted by the legislature. Custom refers to the age-old practises of a community that has solidified its presence so much that it becomes the law. Though legislation seems to be the agency through which we get laws, it is just the primary source. Many laws that we have are a reflection of what we as a society have followed for generations. Also, many cases show how sometimes the law of the land is inadequate or incapable of predicting what issues could arise in subsequent disputes. This calls for the judiciary to elaborate or interpret the law of the land, setting judicial precedents for several issues.

References

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All about Aristotle’s theory of justice

Introduction

Aristotle’s Theory

Teleological reasoning

What people deserve

Equals should be treated equally

Against arbitrariness

The ‘good life’

Politics to obtain the good life

Social institutions act as intermediaries

Positive role of law

Features

Not utilitarianism

The natural world

Defence of slavery

Criticisms

Prejudices attached to the natural world

Differing views on the object

The intrinsic worth of individuals

Liberal critique

Equality of opportunity

Genetic lottery

Contemporary relevance

Conclusion

References

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Introduction

A brief overview of the WTO agreements

The umbrella agreement (agreement establishing the WTO)

WTO agreements for each of the three broad components (goods, services, intellectual property) of trade

Dispute settlement in case of violation of WTO agreements

Transparency-Trade Policy Review Mechanism (TPRM)

The Marrakesh agreement establishing World Trade Organisation (WTO)

Basic principles of the WTO agreements

Principle of Most-Favoured-Nation (MFN) Treatment

Principle of National Treatment

Principle of General Prohibition of Quantitative Restrictions

Principle regarding Tariffs as Legitimate Measures for the Protection of Domestic Industries

Multilateral Agreement on Trade in Goods

The agreements covered under the Multilateral Agreement on Trade in Goods

General Agreement on Tariffs and Trade 1994 (GATT)

Agreement on Agriculture (AoA)

Agreement on the Application of Sanitary and Phytosanitary (SPS) Measures

Agreement on Textiles and Clothing

Agreement on Technical Barriers to Trade (TBT)

Agreement on Trade-Related Investment Measures (TRIMs)

Agreement on Implementation of Article VI of the General Agreement on Tariffs and Trade 1994 (Anti-Dumping Agreement)

Agreement on Implementation of Article VII of the General Agreement on Tariffs and Trade 1994 (Customs Valuation Agreement)

Agreement on Pre-shipment Inspection (PSI)

Agreement on Rules of Origin

Agreement on Import Licensing Procedures

Agreement on Subsidies and Countervailing Measures

Agreement on Safeguards

General Agreement on Trade in Services (GATS)

Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS)

Standards

Enforcement

Dispute settlement

Plurilateral trade agreements

Agreement on Trade in Civil Aircraft

Agreement on Government Procurement

Information Technology Agreement

Trade Facilitation Agreement

Preferential Free Trade Agreements

Conclusion

References

All you need to know about a Limited Liability Partnership

Introduction

Meaning and features of a Limited Liability Partnership (LLP)

Salient features of a Limited Liability Partnership

Corporate Body

Separate Legal Entity

Perpetual succession

Mutual agency

Artificial legal person

Limited liability

Common seal

Profit-driven

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