Sikkim Manipal University - MBA - MB0051 – Legal Aspects of BusinessSemester: 3 - Assignment Set: 1
When a contract has been breached, the party who suffers by such breach is entitled toreceive, from the party who has breached the contract, compensation for any loss or damagecaused to him thereby, being loss or damages which naturally arose in the usual course of things from such breach or which the parties knew, when they made the contract, to be likelyto result from the breach of it. Such compensation is not to be given for any remote andindirect loss of damage sustained by reason of the breach.A person who rightfully rescinds a contract is entitled to compensation for any damage, whichhe has sustained through non-fulfillment of the contract.
Liquidated damages and penal stipulations:
If a sum is named in the contract as the amount to be paid in case of breach of contract, or if the contract contains any other stipulation by way of penalty, the party complaining of thebreach is entitled, whether or not actual damage of loss is proved to have been causedthereby, to receive, from the party who has broken the contract, reasonable compensation, notexceeding the amount so named or the penalty stipulated for.A stipulation for increased interest from the date of default may be regarded as a stipulation by “way of penalty”. The court is empowered to reduce it to an amount which is reasonable in thecircumstances.
In certain special cases (dealt with in the Specific Relief Act, 1963), the court may directagainst the party in default “specific performance” of the contract, that is to say, the party maybe directed to perform the very obligation which he has undertaken, by the contract. Thisremedy is discretionary and granted in exceptional cases. Specific performance means actualexecution of the contract as agreed between the parties. Specific Performance of any contractmay, in the discretion of the court be enforced in the following situations
When there exists no standard for ascertaining the actual damage caused by the non-performance of the act agreed to be done; or
When the act agreed to be done is such that monetary compensation for its non-performance would not afford adequate relief.
Instances where compensation would be deemed adequate relief are:
Agreement as a consequence of a breach by a landlord for repair of the rentedpremises;
Contract for the sale of any goods, for instance machinery or goods.
A contract which runs into such minute or numerous details or which is so dependent on thepersonal qualifications or volition of the parties, or otherwise from its nature is such, that thecourt cannot enforce specific performance of its material terms, cannot be specifically enforced.
Bhupinder Singh Reg. No. 521063004 Page 3 of 9
Q.1 Write the differences between Auditing and Accounting?Ans:- Difference between accounting and auditingAccounting
is process of identifying, measuring, and communicating economic information tovarious users.Accounting is defined (by the American Institute of Certified Public Accountants) (AICPA) as"the art of recording, classifying, and summarizing in a significant manner and in terms of money, transactions and events which are, in part at least, of financial character, and interpretingthe results thereof. Today, accounting is called "the language of business" because it is thevehicle for reporting financial information about a business entity to many different groups of people. Accounting that concentrates on reporting to people inside the business entity iscalled management accounting and is used to provide information to employees,managers, owner-managers and auditors..Accounting requires that an accountant must have accounting knowledge while auditing work required that an auditor must have accounting as well as auditing knowledge. Accounting isconcerned with current data. It is constructive in nature. Accounting is done on a day-to-day basis in business. It is the recording of transactions, the accounting for depreciation, debt,revenue, etc., that are all a part of reporting the company's financial activities.The main goal of accounting is to provide a company with clear, comprehensive, and reliableinformation about its economic activities and status of its assets and liabilities. This informationis presented in the form of accounting reports like the balance sheet, income statement, statementof changes in equity (also called
shareholders’ equity statement
), and statement of cash flows(also called
cash flow statement
). By means of accounting reports it is possible to perform thefollowing (list non-inclusive):
Understand and re-allocate internal resources of the company to ensure its financialstability
Review profitability of the company’s economic activities
Understand the company’s cash inflows and outflows
Verify conformity of a company’s economic activities to government regulationsInternal users of accounting reports are managers, owners, and employees. External users of accounting reports are investors, creditors, and government.
is independent appraisal performed by an independent expert of an activity or event. Thereare operational, technical, ecological and other types of audit. Most commonly, nevertheless, thisterm refers to audits of financial statements.Audit of financial statements is the process of examining the financial statements and theunderlying records of the company in order to render an opinion as to whether the statements are