TOPIC 1

Insurance
Insurance is a means of protection from financial loss. It is a form of risk management primarily
used to hedge against the risk of a contingent, uncertain loss.
An entity which provides insurance is known as an insurer, insurance company, or insurance
carrier. A person or entity who buys insurance is known as an insured or policyholder. The
insurance transaction involves the insured assuming a guaranteed and known relatively small
loss in the form of payment to the insurer in exchange for the insurer's promise to compensate
the insured in the event of a covered loss. The loss may or may not be financial, but it must be
reducible to financial terms, and must involve something in which the insured has an insurable
interest established by ownership, possession, or preexisting relationship.
The insured receives a contract, called the insurance policy, which details the conditions and
circumstances under which the insured will be financially compensated. The amount of money
charged by the insurer to the insured for the coverage set forth in the insurance policy is called
the premium. If the insured experiences a loss which is potentially covered by the insurance
policy, the insured submits a claim to the insurer for processing by a claims adjuster.
Basic terminologies used in Insurance
 The policy. The written document or contract between you or your company and the
insurance company.
 Premium. The periodic payment paid to the insurance company for the benefits provided
under the policy.
 Rider. A special provision, sometimes referred to as an endorsement, attached to a policy
that either expands or restricts the policy.
 Claim. Notification to an insurance company that you believe a payment is due to you or
your company under the terms of the policy.
 Commission. A fee or percentage of the premium paid to an insurance broker or agent.
 Deductible. The amount of out-of-pocket expenses that you or your business must pay
before the payment is made by an insurer. For example, if the deductible for business
equipment loss is $1,000 per year and you suffer $1,000 in damage in one year, there will
be no payment under the policy.
 Exclusions. Losses an insurance policy will not cover.
 Underwriter. The person or company that evaluates your business and determines if it
qualifies for insurance coverage.

Meaning of insurance principle

A principle of risk management, based on assumptions of expected outcomes, in which the law
of averages is applied in theory, or in practice to approximate those outcomes. Used by insurance
companies to quantify risk factors and determine the cost of indemnity.
Seven Insurance Principles
1) Principal of Utmost Good Faith
 Both parties, insurer and insured should enter into contract in good faith
 Insured should provide all the information that impacts the subject matter

pg. 1
  Insurer should provide all the details regarding insurance contract
For example - John took a health insurance policy. At the time of taking policy, he was a smoker and he
didn't disclose this fact. He got cancer. Insurance company won't pay anything as John didn't reveal the
important facts.
2) Principle of Insurable Interest
 Insured must have the insurable interest on the subject matter
 In case of life insurance spouse and dependents have insurable interest in the life of a person.
Corporations also have insurable interests in the life of it's employees
 In case of life or marine insurance, insured must be the owner both at the time of entering of
entering into the insurance contract and at the time of accident.
3) Principle of Indemnity
 Insured can't make any profit from the insurance contract. Insurance contract is meant for
coverage of losses only
 Indemnity means a guarantee to put the insured in the position as he was before accident
 This principle doesn't apply to life insurance contracts

4) Principle of Contribution
 In case the insured took more than one insurance policy for same subject matter, he/she can't
make profit by making claim for same loss more than once
For example - Raj has a property worth Rs.5,00,000. He took insurance from Company A worth
Rs.3,00,000 and from Company B - Rs.1,00,000.
In case of accident, he incurred a loss of Rs.3,00,000 to the property. Raj can claim Rs. Rs.3,00,000 from
A but after that he can't make profit by making a claim from Company B. Now Company A can make a
claim from Company B to for proportional loss claim value.

5) Principle of Subrogation
After the insured gets the claim money, the insurer steps into the shoes of insured. After making the
payment insurance claim, the insurer becomes the owner of subject matter.
For example :- Ram took a insurance policy for his Car. In an accident his car totally damaged. Insurer
paid the full policy value to insured. Now Ram can't sell the scrap remained after the scrap.  
6) Principle of Loss Minimisation
 This principle states that the insured must take all the necessary steps to minimize the losses to
inured assets.
For example - Ram took insurance policy fo his house. In an cylinder blast, his house burnt. He should
have called nearest fire station so that the loss could be minimised.
7) Principle of Causa Proxima
 Word "Cause Proxima" means "Nearest Cause"
 An accident may be caused by more than one cause. In case property insured for only one cause.
In such case nearest cause of the accident is found out. 
 Insurer pays the claim money only if the nearest cause is insured

Other principles of insurance

1. Nature of contract:
Nature of contract is a fundamental principle of insurance contract. An insurance contract comes
into existence when one party makes an offer or proposal of a contract and the other party
accepts the proposal.

pg. 2
A contract should be simple to be a valid contract. The person entering into a contract should
enter with his free consent.
2. Principal of utmost good faith:
Under this insurance contract both the parties should have faith over each other. As a client it is
the duty of the insured to disclose all the facts to the insurance company. Any fraud or
misrepresentation of facts can result into cancellation of the contract.
3. Principle of Insurable interest:
Under this principle of insurance, the insured must have interest in the subject matter of the
insurance. Absence of insurance makes the contract null and void. If there is no insurable
interest, an insurance company will not issue a policy.

An insurable interest must exist at the time of the purchase of the insurance. For example, a
creditor has an insurable interest in the life of a debtor, A person is considered to have an
unlimited interest in the life of their spouse etc.
4. Principle of indemnity:
Indemnity means security or compensation against loss or damage. The principle of indemnity is
such principle of insurance stating that an insured may not be compensated by the insurance
company in an amount exceeding the insured’s economic loss.
In type of insurance the insured would be compensation with the amount equivalent to the actual
loss and not the amount exceeding the loss.
This is a regulatory principal. This principle is observed more strictly in property insurance than
in life insurance.
The purpose of this principle is to set back the insured to the same financial position that existed
before the loss or damage occurred.
5. Principal of subrogation:
The principle of subrogation enables the insured to claim the amount from the third party
responsible for the loss. It allows the insurer to pursue legal methods to recover the amount of
loss, For example, if you get injured in a road accident, due to reckless driving of a third party,
the insurance company will compensate your loss and will also sue the third party to recover the
money paid as claim.
6. Double insurance:
Double insurance denotes insurance of same subject matter with two different companies or with
the same company under two different policies. Insurance is possible in case of indemnity
contract like fire, marine and property insurance.
ADVERTISEMENTS:
Double insurance policy is adopted where the financial position of the insurer is doubtful. The
insured cannot recover more than the actual loss and cannot claim the whole amount from both
the insurers.
7. Principle of proximate cause:
Proximate cause literally means the ‘nearest cause’ or ‘direct cause’. This principle is applicable
when the loss is the result of two or more causes. The proximate cause means; the most dominant
and most effective cause of loss is considered. This principle is applicable when there are series
of causes of damage or loss.

pg. 3
Types of insurance

Life Insurance – Pays out a specified figure to the insured or specified beneficiaries on a
specific event such as death of the insured.

Personal Accident Insurance – This will compensate you if at any single time an external
violent event causes you disability, injury or death.

Medical and Health Insurance – You’ll need it to ascertain continued flow of income if you
fall sick or get injured to the extent that you can’t work and earn as before. It also covers cost of
medication, hospitalization and surgery.

Vehicle Insurance – If you own a car, motor cycle or any other motor vehicle, this insurance
covers it against accident or theft. A compressive package covers all possible losses as well as
damages to third parties such as pedestrians.

Home Insurance – Take this cover to insure your home against loss or damage as a result of
fire, electricity fault, plumping malfunction, flood, etc.

Travel Insurance – When traveling alone or with your family, this cover ensures you’re
compensated for any loss, damage, injury, sickness or inconvenience that comes up as a result. It
may cover personal accidents, hijackings, travel delays and more.

Burial Insurance – This is a practical way to ease the burden of your funeral expenses on your
family and the loved ones you leave behind in the unfortunate event of death. The cover
addresses all your funeral costs.

Wedding Insurance – The cover comes in handy when certain aspects of your wedding go
wrong. For instance, if a caterer you already paid goes out of touch when approaching the
wedding day, the cover will provide an alternative.

Dog Bite Insurance – An aggressive dog may bite children, the elderly or even postal carriers
within your home compound. Thus, you need this insurance to protect your assets if sued for dog
bite.

Portable Electronic Device Insurance – This covers portable devices such as cell phones,
laptops or tablets. The cover ensures replacement or repair of such devices if they’re stolen, lost
or damaged.

Crime Insurance – This covers you or your business against loss or damage as a result of
criminal acts of third parties. Covered risks include loss of funds through embezzlement by
employees.

Political Risk Insurance – This cover protects your business against loss or damage arising
from politically-related conditions such as civil unrest, coups, riots and revolutions.

Workers Compensation – An employer takes this policy on behalf of their employees to cover
loss of income or medical expenses resulting from a work-related injury or sickness.

pg. 4
Disability Overhead Insurance – This is a cover against overhead expenses for business
owners who are unable to work.

Aviation Insurance – This covers aircraft operations against aviation risks. Specific policies
will offer compensation for damaged aircraft as well as cover third party liabilities such as
injured or killed passengers, damaged crops or property etc.

Crop Insurance – If you’re a farmer, the cover protects you from losses associated with crop
failure as a result of bad weather, infection or infestation.

Earth Quake Insurance – This is a good way to cover your home or property against loss or
damage emanating from an earthquake.

Terrorism Insurance – The cover duly compensates you for loss or damage that results from
acts of terrorism such as bombings or mass shootings.

Kidnap and Ransom Insurance – This cover comes to the rescue where ransom payment is
necessary to secure the release of someone you love or associated with if they’re kidnapped,
detained or hijacked.

Plant Insurance – This cover protects industrial equipment, machinery and plant such as
tractors and earth movers against loss or damage.

Professional Liability Insurance – This protects professionals such as doctors and architects
when their clients bring negligence claims against them.

Mortgage Insurance – The cover comes to the aid of a lender if a homebuyer defaults.

The bottom line is that different types of insurance can give you peace of mind by offering
protection against uncertainty. Thus, ascertain what a specific insurance policy covers to decide
which one best protects your assets.

TOPIC 2

Consumer credit
Hire purchase (abbreviated (HP) this is an arrangement whereby a company acquires an asset by paying
an initial installment (e.g. 40% of the total) and repays the other part of the cost of the asset over a period
of time or term for a contract, in which a purchaser agrees to pay for goods in parts or a percentage over a
number of months. In Canada and the United States, a hire purchase is termed an installment plan
although these may differ slightly as in a hire purchase agreement the ownership of the good remains with
the seller until the last payment is made. Other analogous practices are described as closed-end leasing or
rent to own.

Agreement includes:-

 Possession of goods is delivered by the owner thereof to a person on condition that such
person pays the agreed amount in periodical instalments.

pg. 5
 The property in the goods is to pass to such person on the payment of the last of such
instalments

 Such person has a right to terminate the agreement at any time before the property so passes.

“Hire-Purchase Price” means the total sum payable by the hirer under a hire-purchase agreement
in order to complete the purchase of, or the acquisition of property in, the good to which the
agreement relates and includes and sum so payable by the hirer under hire-purchase agreement
by way of a deposit or other initial payment, or credited or to be credited to him under such
agreement on account of any such deposit or payment, whether that sum is to be or has been paid
to the owner or to any other person or is to be or has been discharged by payment of money or by
transfer or delivery of goods or by any other means; but does not include any sum payable as a
penalty or as compensation or damages for breach of the agreement.

“Hirer” means the person who obtains or has obtained possession of goods from an owner under
a hire-purchase agreement, and includes a person to whom the hirer’s rights or liabilities under
the agreement have passed by agreement or by operation of law.

“Owner” means the person who lets or has let, delivers or has delivered possession of goods; to a
hirer under a hire-purchase agreement have passed and includes a person to whom the owner’s
property in the goods or any of the owner’s right or liabilities under the agreement has passed by
the assignment or by operation of law.

Contents of Hire-Purchase Agreement

According to the Act , every hire-purchase agreement shall state:

 The Hire-Purchase price of the goods to which the agreement relates.

 The cash price the goods, that is to say, the price at which the goods may be purchased by the
hirer for cash.

 The date on which the agreement shall be deemed to have commenced.

 The number of installments by which the hire-purchase price is to be paid, the amount of each
of those installment, and the date, or the mode of determining the date, upon which it is payable,
and the person to whom and the place where it is payable.

 The goods to which the agreement relates, in a manner sufficient to identify them.

Right of Hirer to Purchase

The hirer may, at any item during the continuance of hire-purchase agreement and after giving
the owner at least 14 days’ notice in writing of his intention so to do, complete the purchase of
the goods by paying to the owner the hire-purchase price or the balance thereof as reduced by the
rebate which shall be equal to two-thirds of an amount which bears to the hire-purchase charges
the same proportion as the balance of the hire-purchase price. ‘Hire Purchase’ charges means the
difference between the hire-purchase price and the cash price as stated in the hire-purchase
agreement.

pg. 6
Rights of Hirer to Terminate

The hirer has a right to terminate the agreement at any time before the property so passes and the
final payment under the hire-purchase agreement falls due, after giving 14 days’ notice and
returning the goods. Payments made by the hirer prior to the final payment are treated as
payments in respect of hire and are not returned to the hirer in case he does not continue the
contract.

Obligation of hirer in respect of care of the goods

The hire-purchaser, during that period when he is in possession of the goods, is supposed to take
all such care of the goods as a prudent person does in his own case. He cannot damage, destroy,
pledge or sell such good.

Hire-Purchase, Hire & Sale Contracts

Hire-purchase contract is different from:-

 Hire

 Sale contracts –

In the case of hirer the ownership in property is never transferred to the hirer by the owner, and
that is, the property must be returned to its owner. In the case of sale, the ownership in property
is transferred to the buyer immediately at the time of the contract, that is, the property cannot be
returned to its seller. Hire-purchase contract provides special type of provision which
distinguishes it from both hire and sale contracts. In the hire-purchase contract the buyer of
goods which is termed as hire- purchaser is given the right of retaining or rejecting the property
at his own option.

Hire-Purchase Price

Hire-Purchase price must not be confused with cash retail price or cash price. Cash retail price is
arrived at by the hire-vendor by adding profit to the cost price of goods. Hire purchase price, on
the other hand, is arrived at by adding:-

 Profit

 Interest to the cost price of goods. Hire- vendor charges interest partly for the credit granted by
him and partly for covering the risks attached to the business. Thus, hire purchase price is more
than retail price.

KEY DEFINATIONS: 1. Hire Purchase Price: This is the total sum payable by the Hirer under
the Hire Purchase agreement so as to purchase the goods. It includes any deposit payable.
2. Contract of Guarantee : This is a contract made at the expression or implied request of the
Hirer under which a 3 rd party guarantees the performance of the Hires obligations.
3. Owner : This is a person who lets or has let goods to a hirer under a Hire Purchase agreement.
4. Hirer : This is a person who has taken goods from owner under a Hire Purchase agreement.
5. Conditional sale
6. Credit sale
pg. 7
7. Depreciation clause

Guarantee
Guarantee is a legal term more comprehensive and of higher import than either warranty or
"security". It most commonly designates a private transaction by means of which one person, to
obtain some trust, confidence or credit for another, engages to be answerable for him. It may also
designate a treaty through which claims, rights or possessions are secured.

The giver of a guarantee is called the surety or the "guarantor". The person to whom the
guarantee is given is the creditor or the "obligee"; while the person whose payment or
performance is secured thereby is termed "the obligor", "the principal debtor", or simply "the
principal".

Suretys have been classified as follows:

1. Those in which there is an agreement to constitute, for a particular purpose, the relation
of principal and surety, to which agreement the secured creditor is a party;
2. those in which there is a similar agreement between the principal and surety only, to
which the creditor is a stranger;

those in which, without any such contract of suretyship, there is a primary and a secondary
liability of two persons for one and the same debt, the debt being, as between the two, that of
one of those persons only, and not equally of both, so that the other, if he should be
compelled to pay it, would be entitled to reimbursement from the person by whom (as
between the two) it ought to have been paid

A “contract of guarantee” is a contract of perform the promise or discharge the liability, of a third
person in case of his default. The person who gives a guarantee is called the “surety”; the persons in
respect of those default the guarantee is given is called the “principal debtor”, and the person the
whom the guarantee is given is called the “creditor”. A guarantee may be either oral or written.

Contract guarantee
There can be no contract of guarantee without a liability enforceable a law. The primary idea
of surety ship is an undertaking to indemnify if some other person does not fulfill his
promise. Therefore person sought to be made liable as a surety should undertake to perform
the promise or discharge the liability of a third party in case of his default. Where the
husband deposits the fixed deposit receipt of his wife in the Bank as security for his overdraft
account, the wife would be a surety within the meaning.

A mere recommendation by Ca that A should buy goods of B will not entail on C the
consequences that might flow his guarantee that A will not suffer any loss if he takes up B’s
offer of sale.

Form of guarantee letter

The name of the guarantor need not appear in the body of the letter of guarantee. If he has
signed it as guarantor he is liable under it. It is also not a requirement of law that the
signatures of the guarantor should be attested by a witness.

pg. 8
 Personal guarantee
In a letter of guarantee world “director” below signature of guarantor does not mean it to be
executed on behalf of company or director. Guarantors were mentioned as directors for the
purposes of identification although intended to furnish personal security.

Blank guarantee
Where a blank document was given to plaintiff Bank, unless otherwise proved, presumption
would be that guarantor had give implied authority to fill in the blank in accordance with
agreement and understanding between the parties.

Bailment describes a legal relationship in common law where physical possession of personal
property, or a chattel, is transferred from one person (the "bailor") to another person (the
"bailee") who subsequently has possession of the property. It arises when a person gives property
to someone else for safekeeping, and is a cause of action independent of contract or tort.

Bailment is distinguished from a contract of sale or a gift of property, as it only involves the
transfer of possession and not its ownership. To create a bailment, the bailee must both intend to
possess, and actually physically possess, the bailable chattel. Bailment is a typical common law
concept although similar concepts exists in civil law (Spain- Depósito).

In addition, unlike a lease or rental, where ownership remains with the lessor but the lessee is
allowed to use the property, the bailee is generally not entitled to the use of the property while it
is in his possession.

A common example of bailment is leaving your car with a valet. Leaving your car in an
unattended parking garage is typically a license rather than a bailment, as the car park's intent to
possess your car cannot be shown. However, bailments arise in many other situations, including
terminated leases of property, warehousing (including store-it-yourself) or in carriage of goods.

Purposes

There are three types of bailment:

1. for the benefit of the bailor and bailee

2. for the sole benefit of the bailor; and
3. for the sole benefit of the bailee.

A bailment occurs when a person takes possession of property that was formerly in the
possession of someone else, for a special purpose and for a limited period of time.

For a transaction to be a valid bailment, there must be a transfer of possession of personal

property from one person to another and the eventual return of the property bailed. Title to
property is not essential for a bailment, only possession.

Most bailments arise from an express agreement. They may also arise based on the actions of the
parties, known as bailments implied in fact. They sometimes arise because justice and fair play
require it; such bailments are known as bailments implied by law. A bailment is a temporary
transaction. It may end in many ways, such as through agreement of the parties, acts of the
parties, destruction of the bailed property, and operation of law.
pg. 9
There are many situations that are similar to bailments but that are treated differently. These
situations include depositing money in a bank account, using a safe-deposit box, and renting a
public locker. These situations are not considered bailments but either debtor-creditor or landlord
tenant relationships.

The degree of care required in a bailment depends on the type of bailment involved. It is
therefore important to classify bailments to determine the standard of care that is required. The
most common classification is based on whether the bailment arises from an agreement.

The most common bailment is a mutual benefit bailment, in which both parties benefit. There are
five types of mutual benefit bailments: renting, work and services, pledging, consigning, and
storage and parking.

In a mutual benefit bailment, the standard of care is that of reasonable care. Failure to use
reasonable care may subject the bailee to liability for any damages that may occur, unless the
bailee limits its liability. In a mutual benefit bailment, the bailor has certain rights and
responsibilities. The bailor has the right to be paid for the services rendered and to have the
bailed property returned in good condition when the bailment ends.

A gratuitous bailment is one in which only one party benefits and there is no charge for services
rendered. In a bailment for the sole benefit of the bailor, the bailor has a right to have the bailed
property stored properly and to have the property returned when the bailment ends. The bailee
has the obligation to store the bailed property with a slight degree of care and to return the
property when the bailment ends. The bailor is obliged to warn the bailee of any defects or
dangers connected with the property bailed.

In a bailment for the sole benefit of the bailee, the bailee must use a high degree of care in taking
care of the property bailed, must use the property only as agreed, and must return it when the
bailment ends. The bailor has the right to have the property returned in a safe condition when the
bailment ends. The bailor has a duty to warn the bailee of any defects or dangers in the property
bailed.

Some bailments arise without agreement between the parties. These are known as constructive
bailments. One type is a bailment of lost property. Another is a bailment by necessity, which
arises when someone obtains possession of another's property by mistake. In both cases, the
standard of care is that of reasonable care.

TOPIC 3

CONSUMER PROTECTION

Consumer protection is a group of laws and organizations designed to ensure the rights of
consumers as well as fair trade, competition and accurate information in the marketplace. The
laws are designed to prevent the businesses that engage in fraud or specified unfair practices
from gaining an advantage over competitors. They may also provide additional protection for
those most vulnerable in society. Consumer protection laws are a form of government regulation
that aim to protect the rights of consumers. For example, a government may require businesses to
disclose detailed information about products—particularly in areas where safety or public health
is an issue, such as food. Consumer protection is linked to the idea of consumer rights, and to the
pg. 10
formation of consumer organizations, which help consumers make better choices in the
marketplace and get help with consumer complaints.

Consumer rights
 
Chapter 2 of the Act introduces a formal set of consumer rights into law by referring to eight
specific consumer rights, namely the right to:
 
 Equality in the consumer market
 Privacy
 Choose
 Disclosure and information
 Fair and responsible marketing
 Fair and honest dealing
 Fair, just and reasonable terms and conditions
 Fair value, good quality and safety.

Fair trade is a social movement whose stated goal is to help producers in developing
countries achieve better trading conditions and to promote sustainability. Members of the
movement advocate the payment of higher prices to exporters, as well as improved social
and environmental standards. The movement focuses in particular on commodities, or
products which are typically exported from developing countries to developed countries,
but also consumed in domestic markets (e.g. Brazil, India and Bangladesh) most notably
handicrafts, coffee, cocoa, wine,[1] fresh fruit, chocolate, flowers and gold.[2] The
movement seeks to promote greater equity in international trading partnerships through
dialogue, transparency, and respect. It promotes sustainable development by offering
better trading conditions to, and securing the rights of, marginalized producers and
workers in developing countries.[3] Fair trade is grounded in three core beliefs; first,
producers have the power to express unity with consumers. Secondly, the world trade
practices that currently exist promote the unequal distribution of wealth between nations.
Lastly, buying products from producers in developing countries at a fair price is a more
efficient way of promoting sustainable development than traditional charity and aid.[4]

 Fair trade labeling organizations most commonly use a definition of fair trade developed
by FINE, an informal association of four international fair trade networks: Fairtrade
Labelling Organizations International, World Fair Trade Organization (WFTO), Network
of European Worldshops and European Fair Trade Association (EFTA). Specifically, fair
trade is a trading partnership, based on dialogue, transparency, and respect, that seeks
greater equity in international trade. Fair trade organizations, backed by consumers, are
engaged actively in supporting producers, awareness raising, and in campaigning for
changes in the rules and practice of conventional international trade.

pg. 11
 PRINCIPLES OF FAIR TRADE
 Principle One: Creating Opportunities for Economically Disadvantaged Producers
Poverty reduction through trade forms a key part of the organisation's aims. The
organisation supports marginalised small producers, whether these are independent
family businesses, or grouped in associations or co-operatives. It seeks to enable them to
move from income insecurity and poverty to economic self-sufficiency and ownership.
The organisation has a plan of action to carry this out.
 
Principle Two: Transparency and Accountability
The organisation is transparent in its management and commercial relations. It is
accountable to all its stakeholders and respects the sensitivity and confidentiality of
commercial information supplied. The organisation finds appropriate, participatory ways
to involve employees, members and producers in its decision-making processes. It
ensures that relevant information is provided to all its trading partners. The
communication channels are good and open at all levels of the supply chain.
 Principle Three: Fair Trading Practices
The organisation trades with concern for the social, economic and environmental well-
being of marginalised small producers and does not maximise profit at their expense. It is
responsible and professional in meeting its commitments in a timely manner. Suppliers
respect contracts and deliver products on time and to the desired quality and
specifications.
 Fair Trade buyers, recognising the financial disadvantages producers and suppliers face,
ensure orders are paid on receipt of documents and according to the attached guidelines.
For Handicraft Fair Trade products, an interest free pre-payment of at least 50 % is made
on request. For Food Fair Trade products, pre-payment of at least 50% at a reasonable
interest is made if requested. Interest rates that the suppliers pay must not be higher than
the buyers’ cost of borrowing from third parties. Charging interest is not required. 
 Where southern Fair Trade suppliers receive a pre payment from buyers, they ensure that
this payment is passed on to the producers or farmers who make or grow their Fair Trade
products.
 Buyers consult with suppliers before canceling or rejecting orders. Where orders are
cancelled through no fault of producers or suppliers, adequate compensation is
guaranteed for work already done. Suppliers and producers consult with buyers if there is
a problem with delivery, and ensure compensation is provided when delivered quantities
and qualities do not match those invoiced.
 The organisation maintains long term relationships based on solidarity, trust and mutual
respect that contribute to the promotion and growth of Fair Trade. It maintains effective
communication with its trading partners. Parties involved in a trading relationship seek to
increase the volume of the trade between them and the value and diversity of their
product offer as a means of growing Fair Trade for the producers in order to increase
their incomes. The organisation works cooperatively with the other Fair Trade
Organisations in country and avoids unfair competition. It avoids duplicating the designs
of patterns of other organisations without permission.
 Fair Trade recognises, promotes and protects the cultural identity and traditional skills of
small producers as reflected in their craft designs, food products and other related
services.
 Principle Four:  Payment of a Fair Price
A fair price is one that has been mutually agreed by all through dialogue and

pg. 12
 participation, which provides fair pay to the producers and can also be sustained by the
market. Where Fair Trade pricing structures exist, these are used as a minimum. Fair pay
means provision of socially acceptable remuneration (in the local context) considered by
producers themselves to be fair and which takes into account the principle of equal pay
for equal work by women and men. Fair Trade marketing and importing organisations
support capacity building as required to producers, to enable them to set a fair price.
 Principle Five:  Ensuring no Child Labour and Forced Labour
The organisation adheres to the UN Convention on the Rights of the Child, and national /
local law on the employment of children. The organisation ensures that there is no forced
labour in its workforce and / or members or homeworkers.
 Organisations who buy Fair Trade products from producer groups either directly or
through intermediaries ensure that no forced labour is used in production and the
producer complies with the UN Convention on the Rights of the Child, and national /
local law on the employment of children. Any involvement of children in the production
of Fair Trade products (including learning a traditional art or craft) is always disclosed
and monitored and does not adversely affect the children's well-being, security,
educational requirements and need for play.
 Principle Six:  Commitment to Non Discrimination, Gender Equity and Women’s
Economic Empowerment, and Freedom of Association
The organisation does not discriminate in hiring, remuneration, access to training,
promotion, termination or retirement based on race, caste, national origin, religion,
disability, gender, sexual orientation, union membership, political affiliation, HIV/Aids
status or age.
 The organisation has a clear policy and plan to promote gender equality that ensures that
women as well as men have the ability to gain access to the resources that they need to be
productive and also the ability to influence the wider policy, regulatory, and institutional
environment that shapes their livelihoods and lives. Organisational constitutions and by-
laws allow for and enable women  to become active members of the organisation in their
own right (where it is a membership based organisation),  and to take up leadership
positions in the governance structure regardless of women’s status in relation to
ownership of assets such as land and property.  Where women are employed within the
organisation, even where it is an informal employment situation, they receive equal pay
for equal work.  The organisation recognises women’s full employment rights and is
committed to ensuring that women receive their full statutory employment benefits. The
organisation takes into account the special health and safety needs of pregnant women
and breast-feeding mothers.
 The organisation respects the right of all employees to form and join trade unions of their
choice and to bargain collectively. Where the right to join trade unions and bargain
collectively are restricted by law and/or political environment, the organisation will
enable means of independent and free association and bargaining for employees. The
organisation ensures that representatives of employees are not subject to discrimination in
the workplace.
 Principle Seven:  Ensuring Good Working Conditions
The organisation provides a safe and healthy working environment for employees and /
or members. It complies, at a minimum, with national and local laws and ILO
conventions on health and safety.
 Working hours and conditions for employees and / or members (and any homeworkers)
comply with conditions established by national and local laws and ILO conventions.

pg. 13
  Fair Trade Organisations are aware of the health and safety conditions in the producer
groups they buy from. They seek, on an ongoing basis, to raise awareness of health and
safety issues and improve health and safety practices in producer groups.
 Principle Eight:  Providing Capacity Building
The organisation seeks to increase positive developmental impacts for small,
marginalised producers through Fair Trade.
 The organisation develops the skills and capabilities of its own employees or members.
Organisations working directly with small producers develop specific activities to help
these producers improve their management skills, production capabilities and access to
markets - local / regional / international / Fair Trade and mainstream as appropriate.
Organisations which buy Fair Trade products through Fair Trade intermediaries in the
South assist these organisations to develop their capacity to support the marginalised
producer groups that they work with.
 Principle Nine:  Promoting Fair Trade
The organisation raises awareness of the aim of Fair Trade and of the need for greater
justice in world trade through Fair Trade. It advocates for the objectives and activities of
Fair Trade according to the scope of the organisation. The organisation provides its
customers with information about itself, the products it markets, and the producer
organisations or members that make or harvest the products. Honest advertising and
marketing techniques are always used.
 Principle Ten: Respect for the Environment
Organisations which produce Fair Trade products maximise the use of raw materials from
sustainably managed sources in their ranges, buying locally when possible. They use
production technologies that seek to reduce energy consumption and where possible use
renewable energy technologies that minimise greenhouse gas emissions. They seek to
minimise the impact of their waste stream on the environment. Fair Trade agricultural
commodity producers minimise their environmental impacts, by using organic or low
pesticide use production methods wherever possible.
 Buyers and importers of Fair Trade products give priority to buying products made from
raw materials that originate from sustainably managed sources, and have the least overall
impact on the environment.
 All organisations use recycled or easily biodegradable materials for packing to the extent
possible, and goods are dispatched by sea wherever possible.

Manufacturer’s liability, legal concept or doctrine that holds manufacturers or sellers

responsible, or liable, for harm caused by defective products sold in the marketplace.
Manufacturer’s liability is usually determined on any of three bases: (1) negligence, which is the
failure to exercise reasonable care to prevent product defects arising out of the manufacturing
process, or which is the failure to give consumers appropriate warning of a danger attending the
use of a manufactured product, (2) breach of warranty, which entails failure to fulfill the terms of
a claim or promise concerning the quality or performance of a particular product, and (3) strict
liability, in which a seller or manufacturer can be held liable for a defective product even if the
conditions of negligence or breach of warranty do not apply. An active consumerism movement
is credited with the courts’ increasing acceptance of arguments based on manufacturer’s liability.

pg. 14
seller liability
Definition
The obligation of a seller to disclose a product's faults to the buyer or else be liable for correcting those
faults after the sale.

Remedies Available to Consumers

(a) Removal of Defects:

If after proper testing the product proves to be defective, then the ‘remove its defects’ order can
be passed by the authority concerned.

(b) Replacement of Goods:

Orders can be passed to replace the defective product by a new non-defective product of the
same type.

(c) Refund of Price:

Orders can be passed to refund the price paid by the complainant for the product.

(d) Award of Compensation:

If because of the negligence of the seller a consumer suffers physical or any other loss, then
compensation for that loss can be demanded for.

(e) Removal of Deficiency in Service:

If there is any deficiency in delivery of service, then orders can be passed to remove that
deficiency. For instance, if an insurance company makes unnecessary delay in giving final touch
to the claim, then under this Act orders can be passed to immediately finalise the claim.

(f) Discontinuance of Unfair/Restrictive Trade Practice:

If a complaint is filed against unfair/restrictive trade practice, then under the Act that practice can
be banned with immediate effect. For instance, if a gas company makes it compulsory for a
consumer to buy gas stove with the gas connection, then this type of restrictive trade practice can
be checked with immediate effect.

(g) Stopping the Sale of Hazardous Goods:

Products which can prove hazardous for life, their sale can be stopped.

pg. 15
(h) Withdrawal of Hazardous Goods from the Market:

On seeing the serious adverse effects of hazardous goods on the consumers, such goods can be
withdrawn from the market. The objective of doing so that such products should not be offered
for sale.

(i) Payment of Adequate Cost:

In the end, there is a provision in this Act that the trader should pay adequate cost to the victim
concerned.

TOPIC 4

DISPUTE RESOLUTION

Commercial litigation is the area of the law which covers the settlement of legal disputes
between companies and other market participants. A company might suddenly be confronted
with all kinds of disputes. These disputes can weigh heavily on the company, making it difficult
to focus on its normal business activities. Disputes like these demand a quick and suitable
approach by specialists who are trained to win.

We handle cases such as:

 disputes about purchase agreements, such as guarantees in take-over contracts between a

former shareholder as a seller and a new shareholder as a buyer;
 disputes between contracting parties such as suppliers, financiers, clients and contractors;
 disputes with independent professionals such as accountants, civil-law notaries, tax
lawyers etc;
 disputes with banks and other financial institutions;
 disputes between a legal person and a former director about a breach of non-competition
clauses;
 disputes with trustees in insolvency cases about transactions that occurred (shortly)
before the insolvency.

Arbitration, a form of alternative dispute resolution (ADR), is a technique for the resolution of
disputes outside the courts. The parties to a dispute refer it to arbitration by one or more persons
(the "arbitrators", "arbiters" or "arbitral tribunal"), and agree to be bound by the arbitration
decision (the "award"). A third party reviews the evidence in the case and imposes a decision that
is legally binding on both sides and enforceable in the courts.

pg. 16
.
Definition of Arbitration Agreement
Arbitration agreement is a contact according to which some persons commit to relegate their
actual or possible dispute and argument to the investigation and comments of a person or persons
other than official judicial authorities. In arbitration agreement the arbiter or arbiters might have
been appointed and it might have been only stated that they refer their dispute to the arbitration
of one or several persons. (Madani, 1996, P. 676). The law has
not predicted a special form for arbitration agreement; thus, it might be as an official document
or might be regulated as a normal document and also it does not greatly dif
fer if it is fulfilled in the statement of the court or outside the court and in the main deal (Ibid).
3.Types of Arbitration Agreement
Arbitration is a code based on the agreement of both sides of the contract and this agreement is
expressed in the arbitration contract. Arbitration contract refers either to arbitration contract or
arbitration clause since clause is also considered as a kind of contract which is based on the
agreement of both sides and is listed in another contract only at the will of both sides
Arbitration clause is mostly used when no dispute has arisen yet and even when no dispute might
occur.
considers the arbitration clause as an agreement according to which both sides commit to settle
the disputes resulting from that contract through arbitration. If, after the occurrence of dispute,
both sides make an autonomous agreement in the presence of the arbiter so as to settle their
dispute, the agreement will be called “arbitration contract”. In French law, this contract is an
agreement that is made after the occurrence of dispute and the subject of dispute is evident there
(Karimi & Parto, 2012, P. 105). However, it seems that this type of distinction between
arbitration clause and contract has not been strongly considered by the legislator since the sides
can, by signing a separate contract before the occurrence of dispute, also agree by arbitration; as
this issue can be inferred from International Commercial Arbitration Law and Paragraph Article
of the Code for Service Provision of the
Arbitration Center of the Iran Chamber (ACIC).
4.Specific Conditions of Arbitration Agreement
Arbitration agreement, either as arbitration contract or conditions terms of contract, must have
several specific conditions which include:
if the arbiter is determined after the dispute, the subject of dispute which is referred to
arbitration must be clarified and the details must be notified to the arbiters.
Specification of the subject of dispute that is referred to the arbiter generally suffices in
arbitration contract; nevertheless, it must be clear enough to specify the scope of assignment of
the arbiters. In fact, the arbiters must investigate and issue appropriate verdicts within the scope
of their assignment; thus, they can’t investigate into the subjects that are not within the scope of
their assignment and must therefore investigate into all the subjects that are within that scope.
Determination of Arbiter or Arbiters In any case, in various types of arbitration agreements
(autonomous agreement or arbitration clause), in addition to agreement on referring to the
arbiter, the arbiter selectionorder might have been decided as well or the arbiter or arbiters are
basically determined. Article 455confirms this (Karimi, 2012, P. 104).
By means of the referent of Articles 460and 464
q.a.d.m. with regard to the determination of arbiter in arbitration contract, although in arbitration
contract the arbiter or arbiters are usually determined but determination of arbiter in the contract
is not the validation condition of the contract (Shams, 2008, P. 213). Nevertheless, based on
Article 458 in each case that the arbiter is determined, the features of the arbiter or arbiters must

pg. 17
be appointed in a way that mistakes can be corrected. Thus, based on this Article, it can be
argued that determination of the arbiter or arbiters is binding in the domestic arbitration contract.
In international arbitration, determination of the arbiter is not required at the time the arbitration
agreement is made; thus, determination of the arbiters can be conducted after the main agreement
and in the
In case in arbitration contract, the arbiter or arbiters are determined, their acceptance is not the
validation condition of the arbitration contract since even if the arbiter has been determined and
that person does not want to or can’t judge, based on the criterion of Article 463
q.a.d.m., the sides can agree by other arbiter or arbiters. However, in case of disagreement by
another arbiter, the arbitration agreement will become ineffective.

5The Effects of Arbitration Agreement with regard to the Persons Arbitration agreement,
whether as autonomous contract or as conditions terms of contract, is effective only with regard
to the persons that have regulated it and is ineffective with regard to the third persons. In fact,
according to
Article 457of Civil Procedure Code, “the third person that has been drawn to the Procedure
against the law or has entered the dispute before or after referring the dispute to arbitration, can
agree with both sides of the main argument in referring the issue to arbitration and determining
the appointed arbiter or arbiters; and in case no agreement is made, his/her argument before the
regulations will be autonomously investigated”. Additionally, agreement by arbitration is also
ineffective even regarding the heirs of each of the sides. Thus, if after agreement one of the
sides passes away, arbitration will be eliminated and the heirs are not taken to the agreement (the
protection of each of the sides also eliminates arbitration. (Paragraph 2 of Article 481of Civil
Procedure Code); but the question is: if after the arbitration contract is made, the subject of the
main contract is relegated to another, is the assignee taken to the arbitration clause as well? In
answer to this, it should be said that as the “third” assignee is not considered and elimination of
arbitration has been predicted only in case of death and protection and agreement, positive
response should be given.

6.Arbitration Contract; Formal or Non-formal. The legislator who in the past leg
Is relative periods made a special effort to regulate arbitration, tried to legislate and pass the
International Commercial Arbitration Law and General and Revolutionary Courts Procedure in
civil matters in the years 1997and 2000 by distinguishing between domestic and international
arbitration
. Domestic arbitration is basically included in the Civil Procedure Code and international
arbitration is subject to International Commercial Arbitration Law. By investigating
International Commercial Arbitration Law and the Civil Procedure Code and also drawing on the
doctrine votes concerning the form of arbitration contract, it is attempted to discover the will of
the 317 Mohammad Nevisandeh / Procedia Economics and Finance 36 ( 2016 ) 314 – 320
legislator with regard to the formal or non- formal nature of arbitration contract (Safaei, 1998,
Journal of the Faculty of Law, N. 40).

pg. 18
Arbitration: Advantages and Disadvantages
Advantages

There are numerous advantages to arbitration as a way to resolve a case.

1. The parties to the dispute usually agree on the arbitrator, so the arbitrator will be
someone that both sides have confidence will be impartial and fair.
2. The dispute will normally be resolved much sooner, as a date for the arbitration can
usually be obtained a lot faster than a court date. In Virginia, a trial date is normally
about twelve months from the date the lawsuit is filed.
3. Arbitration is usually a lot less expensive. Partly that is because the fee paid the
arbitrator is a lot less than the expense of paying expert witnesses to come and testify at
trial. (Most of the time the parties to arbitration split the arbitrator's fee equally). There
are also lower costs in preparing for the arbitration than there are in for preparing for a
trial. Partly this is due to the fact that the rules of evidence are often more relaxed than in
a trial, so that documents can be submitted in lieu of having a witness come to trial and
testify. For instance, if a claimant has several doctors who are out-of-state, the cost of
bringing them to trial or going out-of-state to take their depositions may be prohibitive
for trial, but in arbitration you can usually use just their records and reports.
4. Unlike a trial, arbitration is essentially a private procedure, so that if the parties desire
privacy then the dispute and the resolution can be kept confidential.
5. If arbitration is binding, there are very limited opportunities for either side to
appeal, so the arbitration will be the end of the dispute. That gives finality to the
arbitration award that is not often present with a trial decision.

Disadvantages

There are, however, also some disadvantages to arbitration as a method of resolving a dispute.

1. If arbitration is binding, both sides give up their right to an appeal. That means there
is no real opportunity to correct what one party may feel is an erroneous arbitration
decision.
2. If the matter is complicated but the amount of money involved is modest, then the
arbitrator's fee may make arbitration uneconomical. It may be cheaper to try the case
before a judge in General District Court, where medical evidence can be presented by
affidavits instead of paying the doctor to testify. However, the amount that can be
awarded in that court is currently limited to $15,000.00.
3. Rules of evidence may prevent some evidence from being considered by a judge or a
jury, but an arbitrator may consider that evidence. Thus, an arbitrator's decision may
be based on information that a judge or jury would not consider at trial.
4. If certain information from a witness is presented by documents, then there is no
opportunity to cross-examine the testimony of that witness.
5. Discovery may be more limited with arbitration. In litigation, Discovery is the process
of requiring the opposing party -- or even a person or business entity who is not a party to
the case - to provide certain information or documents. As a result, many times
arbitration is not agreed to until after the parties are already in litigation and discovery is

pg. 19
 completed. By that time, the opportunity to avoid costs by using arbitration may be
diminished.
6. If arbitration is mandatory or required by a contract, then the parties do not have
the flexibility to choose arbitration only when both parties agree. Mandatory
arbitration allows one party to force the other party to use arbitration. In situations where
the arbitrator is reliant on one party for repeat business (1), then the potential for abuse is
present and the advantage of impartiality is lost (2).
7. The standards used by an arbitrator are not clear, although generally the arbitrator is
required to follow the law. However, sometimes arbitrators may consider the "apparent
fairness" of the respective parties' positions instead of strictly following the law, which
would result in a less favorable outcome for the party who is favored by a strict reading
of the law. Although this issue has been present since antiquity (Aristotle said "? an
arbitrator goes by the equity of a case, a judge by the law, and arbitration was invented
with the express purpose of securing full power for equity." (3)), this consideration is
often overlooked in evaluating the applicability of arbitration.

pg. 20