Business Laws Solved Question Papers | Nov' 2013 (Old Course) | Dibrugarh University

Business Laws Solved Question Papers
B.Com 1st Sem
Dibrugarh University
2013 (November) – Old Syllabus Semester System

1.       (a) Discuss the various modes of discharge of contracts.
Ans: Meaning of Discharge of a Contract
Discharge of a contract means termination of the contractual relations between the parties to a contract. A contract is said to be discharged when the rights and obligations of the parties under the contract come to an end.
Modes of discharge of a contract: A Contract is said to be discharged when the rights and obligations created by it come to an end. A contract may be discharged in the following modes:-
a)      Discharge by performance: Discharge by performance takes place when the parties to a contract fulfill their obligations arising under the contract within the time and in the manner prescribed. Performance may be actual performance or attempted performance.
b)      Discharge by Agreement or Consent: A Contract comes into existence by an agreement and it may be discharged also by an agreement. The following are modes of discharge of a contract by an agreement:
Ø  By Waiver: Waiver takes place when the parties to a contract agree that they shall no longer be bound by the contract. For e.g. A an actor promised to make a guest performance in the film made by B. Later B forbids A from making the guest appearance. B is discharged of his obligation.
Ø  By Novation: Novation occurs when a we contract is substituted  for an existing contract, either between the same parties or between different parties, the consideration being the discharge of old contract, mutually. E.g.: A is indebted to B & C to C. By mutual agreement B’s debt to C & B’s loan to A are cancelled & C accepts as his debtor.
Ø  By Rescission: Rescission of a contract takes place when all or some of the terms of the contract are cancelled. It may occur by mutual consent or where one party fails in the performance of his obligations, the other party may rescind the contract.
Ø  By alteration: Alteration of a contract may take place when one or more of the terms of the contract is/are altered by mutual consent of the parties to the contract.
Ø  By Remission: Remission means acceptance of a lesser fulfillment of the promise made, E.g. Acceptance of a lesser sum than what was contracted for, in discharge of the whole of the debt.
Ø  By Merger: Merger takes place when an inferior right accruing to a party under a contract merges into a superior right accruing to the same party under the same or some other contract. For e.g. P holds a property under a lease. He later buys the property. His rights as a lessee merge into his rights as an owner.
c)       Discharge by impossibility of performance: If a contract contains an undertaking to perform impossibility, it is void ab initio. As per Section 56, impossibility of performance may fall into either of the following categories –
Ø  Impossibility existing at the time formation of the contract: This is known as pre-contractual impossibility. The fact of impossibility may be:
Ø  Known to the parties: Both the parties are aware or know that the contract is to perform an impossible act. For e.g. A agrees with B to put life into dead wife of B, the agreement is void.
Ø  Unknown to the parties: Both the parties are unaware of the impossibility. The contract could be on the ground of mutual mistake of fact. For e.g. contract to sell his house at Andaman to B. Both the parties are in Mumbai and are unknown to the fact that the house is actually washed away due to Tsunami.

Ø  Impossibility arising subsequent to the formation of the contract: Where impossibility of performance of the contract is caused by circumstances beyond the control of the parties, the parties are discharged from further performance of the obligation arising under the contract.
d)      Discharge by lapse of time:  The Limitation Act, 1963 lays down certain specified periods within which different contracts are to be performed and be enforceable. If a party to a contract does not perform, action can be taken only within the time specified by the Act. Failing which the contract is terminated by lapse of time. For e.g. A sold a gold chain to B on credit without any period of credit, the payment must be made or the suit to recover it, must be instituted within three years from the date of delivery of the instrument.
e)      Discharge by Operation of Law: A contract may be discharged independently of the wished of the parties i.e. by operation of law. This includes discharge:
Ø  By death: In contract involving personal skill or ability, the contract is terminated on the death of the promisor. In other contracts the rights and liabilities of a deceased person pass on to the legal representatives of the deceased person.
Ø  By insolvency: When a person is declared insolvent, he is discharged from all liabilities incurred prior to such declaration.
Ø  By unauthorized material alteration of the terms of a written agreement: Any material alteration made by a party to the contract, without the prior permission of the other party, the innocent party is discharged.
Ø  By rights and liabilities becoming vested in the same person: When the rights and liabilities under a contract vests in the same person.
f)       Discharge by Breach of Contract: A breach of contract occurs when a party thereto without lawful excuse does not fulfill his contractual obligation or by his own act makes it impossible that he should perform his obligation under it. A breach to a contract occurs in two ways:-
Ø  Actual Breach: When a party fails, or neglects or refuses or does not attempt to perform his obligation at the time fixed for performance, it results in actual breach of contract. For e.g. A promises to deliver 100 packs of ice-cream to B on his wedding day. A does not deliver the packs on that day. A has committed actual breach of the contract.
Ø  Anticipatory Breach: Anticipatory Breach is a breach before the time of the performance of the contract has arrived. This may take place either by the promisor doing an act which makes the performance of his promise impossible or by the promisor, in way showing his intention not to perform it.
(b) Write the rules of contingent contracts.
Ans: Contingent Contract
According to the Contract Act a contingent contract is one whose performance us uncertain. The performance of the contract which comes under this category depends on the happening or non- happening of certain uncertain-events. On the other hand, an ordinary or absolute contract is such where performance is certain or absolute in itself and not dependent on the happening or non-happening of an event. A contingent contract is defined as a contract to do or not to do something, if some event, collateral to such contract, does or does not happen (sec. 31).
(A) A contracts to pay Rs. 50,000 if B’s house is destroyed by five. This is a contingent contract as the performance depends on the happening of an event.
(B) A asks B to give loan to M and promises that he (A) will repay the loan if M does not return it in time.
Characteristics of a Contingent Contract: A Contingent Contract must have three essential characteristics. There are:
(1)  The performance of the contract depends on the happening or non-happening of a certain event in future. This dependence on a probable future event distinguishes a contingent contract from an ordinary contract.
(2)  This event must be uncertain, that means happening or non-happening of the future event is not certain, i.e., it may or may not happen. If the event is hundred percent sure to happen, and the contract in that case has to be performed any way, such a contract is not called a contingent contract.
(3)  The event must be collateral or incident to the contract. Therefore, contracts of indemnity, guarantee and insurance are the most common instances of a contingent contract.
Rules regarding contingent contracts: To enforce the performance of a contingent contract the following rules have to be followed:
1.    Where the performance of a contingent depends on the happening of an uncertain future event, it cannot be enforced till the event takes place. And if the happening of the event becomes impossible, such contracts become void (sec. 32). Example- A contracts to sell B a piece of land if he (A) wins the legal case involving that piece of land. A loses the case. The contract becomes void.
2.    Where the performance of a contingent contract depends on the non-happening of a future event, the contract can be enforced if the happening becomes impossible (sec. 33). Example- A agrees to sell his house to B if Y dies. This contract cannot be enforced till Y is alive.
3.    If the contract is dependent on the manner in which a person will act at an unspecified time, the event shall be considered to become impossible when such person does anything which makes it impossible that he should so act within any definite time or otherwise than under further contingencies (sec. 34). 
4.    Contingent contract to do or not to do anything, if a specified uncertain event happens within a fixed time, becomes void if the event does not happen and the time expires or its happening becomes impossible before the time expires [sec. 35(1)].
5.    Contingent contract to do or not to do anything, if a specific event does not happen within a specified time, may be enforced when the time so specified expires and such event does not happen, or before the time so specified it becomes certain that such event will not happen [sec. 35(1)].
6.    Contingent agreements to do or not to do any thing, if an impossible event happens, are void, whether or not the fact is known to the parties at the time when it is made (sec. 36). 
2. (a) Distinguish between sale and agreement to sale.
Ans:   Difference between ‘Sale’ and ‘agreement to sell’.
According to Section 4 of the Sale of Goods Act, 1930, ‘A contract of sale of goods is a contract whereby the seller transfers or agrees to transfer the property in the goods to the buyer for a price.’
The term ‘Contract of sale’ is a generic term and includes both a sale and an agreement to sell. Where under a contract of sale, the property in the goods is transferred from the seller to the buyer (i.e. at once), the contract is called a ‘sale’ but where the transfer of the property in the goods is to take place at a further time or subject to some condition thereafter to be fulfilled, the contract is called an ‘agreement of sell’. [Section 4(3)].

Difference between Sale and Agreement to Sale:-
Agreement to Sell
Where under a contract of sale, the property in the goods is transferred from the seller to the buyer (i.e. at once); the contract is called a ‘sale’.
where the transfer of the property in the goods is to take place at a further time or subject to some condition thereafter to be fulfilled, the contract is called an ‘agreement of sell’
Transfer of ownership
Transfer of ownership of goods takes place immediately.
Transfer of ownership of goods is to take place at a future time or subject to fulfillment of some condition.
Executed contract or Executory contract
It is an executed contract because nothing remains to be done.
It is an Executory contract because something remains to be done.
Conveyance of property
Buyer gets a right to enjoy the goods against the whole world including seller.
Buyer does not get such right.
Transfer of risk
Transfer of risk of loss of goods takes place immediately because ownership is transferred.
Transfer of risk of loss of goods does not take place because ownership is not transferred.
Right of seller against the buyer’s breach
Seller can sue the buyer for the price, even though the goods are in his possession.
Buyer can sue the seller for damages only.
Rights of buyer against the seller’s breach
Buyer can sue the seller for damages and can sue the third party who bought those goods for goods.
Buyer can sue the seller for damages only.
Effect of insolvency of seller having possession of goods.
Buyer can claim the goods from the official receiver or assignee because the ownership of goods has transferred to the buyer.
Buyer cannot claim the goods, even when he has paid the price because the ownership has not transferred to the buyer. The buyer who has paid the price can only claim rateable dividend.
Effect of insolvency of the buyer before paying the price.
Seller must deliver the goods to the official receiver or assignee because the ownership of goods has transferred to the buyer. He can only claim rateable dividend for the unpaid price.
Seller can refuse to deliver the goods unless he is paid full price of the goods because the ownership has not transferred to the buyer.
Right in rem / personam
It is a right in rem i.e. right against the whole world.
It creates a right in personam i.e. right against a person.
In risk of destruction of goods.
Buyer has to bear the risk even if possession is with the seller as ownership has passed.
Seller has to bear the risk, even if possession is with the buyer, as ownership has not passed.
(b) What is warranty? Mention its essential elements. When a condition is treated as a warranty?
Ans: Warranty: Section 12(3) states that a warranty is a stipulation which is collateral to the main purpose of the contract. The breach of a warranty gives rise to a claim for damages but not a right to reject the goods and treat the contract as repudiated. The above definition shows that for the implementation of a contract warranty is not essential. For the breach of warranty only damages can be claimed.
Example: A while selling his car to B, stated the car gives a mileage of 12 kms per litre of petrol. The car gives only 10 kms per litre. B cannot reject the car. It is breach of warranty. He can only claim damages for the loss due to extra consumption of petrol.
Features or elements of Warranty

A stipulation which is collateral to the main purpose of the contract.
The aggrieved party cannot terminate the contract.
The aggrieved party cannot terminate the contract but can only claim damages.
A breach of warranty cannot be treated as breach of condition.
It is a subsidiary provision related to the object of the contract.
When condition to be treated as warranty.
a)      Where a contract of sale is subject to any condition to be fulfilled by the seller, the buyer may waive the condition or elect to treat the breach of the condition as a breach of warranty and not as a ground for treating the contract as repudiated.
b)      Where a contract of sale is not severable and the buyer has accepted the goods or part thereof, the breach of any condition to be fulfilled by the seller can only be treated as a breach of warranty and not as a ground for rejecting the goods and treating the contract as repudiated, unless there is a term of the contract, express or implied, to that effect.
c)       Nothing in this section shall affect the case of any condition or warranty fulfillment of which is excused by law by reason of impossibility or otherwise.
3. (a) Define Bills of Exchange. Discuss its essential elements.  
Ans: Bills of Exchange
A bill of exchange or “draft” is a written order by the drawer to the drawee to pay money to the payee. It is an unconditional order issued by a person or business which directs the recipient to pay a fixed sum of money to a third party at a future date. The future date may be either fixed or negotiable. A bill of exchange must be in writing and signed and dated. Bills of exchange are used primarily in international trade, and are written orders by one person to his bank to pay the bearer a specific sum on a specific date.
As per Section 5 a “bill of exchange” is “an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of, a certain person or to the bearer of the instrument.”
Essentials of a Bills of exchange
1)      Number of parties:  A bill of exchange has 3 parties:
Ø  the drawer, who draws the bill of exchange
Ø  the drawee, who has to make the payment
Ø  the payee, who is entitled to the payment.
Sometimes the drawer and the payee can be one and the same person.
2)      It Must be in writing: The Bill of Exchange must be in writing.
3)      Express order to pay:  This is the essence of a bill of exchange. There must be an ‘order by the drawer to the drawee to pay’. The order must be a command and not an excessive request.
4)      Order must be unconditional:  The order to pay must be unconditional. In other words the happening of the condition must be certain.
5)      Order to pay money only:  Just as a promissory note, the instrument must be for money only.
6)      Sum payable to be certain:  The amount payable must be certain. There should be no ambiguity in the amount to be paid through the Bill of Exchange.
7)      Must be signed:  The instrument is complete only when it is signed by the drawer and the drawee.
8)      Must bear the stamp:  A Bill of Exchange must be properly stamped in accordance with the Indian Stamp Act, 1899 and must also be properly cancelled.
9)      Other formalities:  Formalities such as date, place, consideration, etc. are usually found in a Bill of Exchange.
10)   Requisites of a contract to be complied with:  All requisites of a valid contract like capacity to contract, consideration, free consent, lawful object must be present.
(b) Write a note on the presumptions in respect of negotiable instruments.
Ans: Meaning of Negotiable Instruments
Negotiable Instruments are money/cash equivalents. These can be converted into liquid cash subject to certain conditions. They play an important role in the economy in settlement of debts and claims. The transactions involving the Negotiable Instruments in our country are regulated by law and the framework of the Statute which governs the transaction of these instruments is known as The Negotiable Instruments Act. This act was framed in our country in the year 1881 when the British ruled our country. Prior to 1881 the transactions governing Negotiable Instruments were regulated under the cover of Indian Contract Act 1872.
The term ‘negotiable’ means transferable and the word ‘document’ means ‘in writing’. Therefore, negotiable means a written promise or order to pay money which may be transferred from one person to another.
Section 13 of the Negotiable Instruments Act, 1881 states, “A negotiable instrument means a promissory note, bill of exchange or cheque payable either to order or to bearer.” A negotiable instrument may be made payable to two or more payees jointly, or it may be made payable in the alternative to one of two, or one or some of several payees.
Unless contrary proved certain presumptions are in the made case of all negotiable instruments. Consideration, date, signature of holder in due course, for example, is presumed in the case of all instruments. The presumptions from Special rules of Evidence under section 118 to 119. Sec. 118 and 119 deal with the following presumptions:
1. Consideration: It is presumed that every negotiable instrument was made or drawn, accepted, endorsed, negotiated or transferred for consideration. As such the holder need not prove consideration. However, this presumption would not arise if it is proved that the instrument was obtained from its owner by any offence, fraud, or for unlawful consideration.
2. Date: Every negotiable instrument is presumed to have been made on the date which it bears.
3. Time of acceptance: It is presumed that every accepted bill was accepted within a reasonable time and before its maturity.
4. Time of transfer: It is presumed that every transfer was made before maturity.
5. Order of endorsements: The endorsements are presumed to have been made in the same order in which they appear.
6. Stamp: In case an instrument is lost, it is presumed that it was duly stamped and the stamp was duly cancelled.
7. Every holder is a holder in due course: Every holder is presumed to be a holder in due course.
8. Dishonour of instrument: In case a suit is filed for dishonour of an instruments the Court, on the proof of protest presumes that the instrument was dishonoured.
It should be noted that where the promisor denies the execution of the promissory note taking the plea that he signed on a blank paper, then the burden is on the plaintiff to prove execution.
It should be noted further that presumption, as consideration, is not conclusive. If execution of promissory note is proved, then burden to prove lack of consideration is on the defendant.
4.   (a) What is ‘complaint’ under the Consumer Protection Act? Who can file a complaint? 
Ans: Complaint

In Section 2 (1) (c) "complaint" means any allegation in writing made by a complainant that:
a)      an unfair trade practice or a restrictive trade practice has been adopted by any trader;
b)      the goods bought by him or agreed to be bought by him suffer from one or more defect;
c)       the services hired or availed of or agreed to be hired or availed of by him suffer from deficiency in any respect;
d)      a trader has charged for the goods mentioned in the complaint a price in excess of the price fixed by or under any law for the time being in force or displayed on the goods or any package containing such goods;
e)      goods which will be hazardous to life and safety when used are being offered for sale to the public in contravention of the provisions of any law for the time being in force requiring traders to display information in regard to the contents, manner and effect of use of such goods.
With a view to obtaining any relief provided by or under this Act; the essential features of a “Complaint” are:
a)      The complaint must be in writing;
b)      The complaint must be made with a view to obtain any relief under the Act;
c)       The Complaint must make any of the five allegations stated under section 2 (1) (c), against a trader or manufacturer;
d)      The complaint must be filed in a manner prescribed under law i.e. under section 12 of the Act.
e)      The complaint must be filed before appropriate consumer commission having jurisdiction to entertain complaint. Section 17 & Section 21.
Ordinarily, the complaint must contain name, description and address of the Complainant and the purpose for which he bought the goods. It must also contain the name, description and address of the trader or manufacturer. It must state clearly, the facts of the case e.g. when the things was purchase? For what purpose? When the things were consumed or used? Defects in goods or deficiency in the service etc., what injury suffered etc. These facts must be supported by all relevant and proper documents. Lastly, the complaint must mention the relief or relief’s asked for against the trader or manufacturer i.e. the opposite party.
Section 2 (1) (b) of the Consumer Protection Act, 1986 defines the term "complainant" as: Complainant means
a)      a consumer; or
b)      any voluntary consumer association registered under the Companies Act, 1956 (1 of 1956), or under any other law for the time being in force; or
c)       the Central Government or any State Government,
d)      one or more consumers, where there are numerous consumers having the same interest;
e)      who or which makes a complaint;
A person seeking redress before the Consumer Redressal Forum must come within any of the four categories stated above; otherwise he has no locus standi to proceed with his case. The ‘Complainant’ among others means a ‘consumer’ generally. The expression ‘complainant’ as defined in section 2 (1) (b), is comprehensive to enable consumer as well as any voluntary consumer association. This definition is very suitable in a country like India, where majority of the people are illiterate and therefore, power to file a complaint is given to the voluntary consumer associations. The only restriction laid down under the Section in this regard is that, the association must be registered under the Companies Act, 2013 or any other law for the time being in force.
However, a consumer association cannot file a complaint on behalf of unspecified or unidentified number of consumers. In the Case of Upbhokta Sanrakshan Samiti V/s. Winsard foods Ltd., the consumers association found that, the biscuit packets sold by a food company were less in weights. A complainant demanding compensation for the public of the State of Rajasthan was not maintainable.
The act contemplates an identified consumer in order to make the application of its provisions or any consumer association to represent it. An act also contemplates an action in representative capacity, by providing that, when there are numerous consumers having same interest, one or more consumers must file complaint on behalf of others.
(b) Discuss the composition of State Commission and its jurisdiction.
Ans: The State Consumer Protection Councils
The State Government may, by notification, establish with effect from such date as it may specify in such notification, a council to be known as the Consumer Protection Council (hereinafter referred to as the State Council).
a.       The Minister in-charge of consumer affairs in the State Government who shall be its Chairman;
b.      Such number of other official or non-official members representing such interests as may be prescribed by the State Government.
The objects of every State Council shall be to promote and protect within the State the rights of the consumers laid down in clauses (a) to (f) of section 6. (Objects of National Council)
State Consumer Disputes Redressal Commission: The State Consumer Disputes Redress Commission is established in each state and these have jurisdiction to entertain complaints where the value of goods or services and the compensation if any, claimed exceeds Rs.20,00,000 (TWENTY LAKHS) but does not exceed Rs.1,00,00,000 (ONE CRORE).
5.    (a) Explain ‘person’ and person resident in India’ under FEMA.
(b) Who is authorised person’? Elucidate the power of RBI to inspect authorized person.
6.    Write short notes on: Void contract, Days of grace, Price, Coercion
7.    Choose the correct answer:
(a) Offer and acceptance make contract/ agreement.
(b) Quasi-contracts are created by circumstances/ parties.
(c) Sale of goods Act was passed in 1830/ 1930.
(d) Implied warranties are written/ not written in a contract of sale.
(e) In promissory note there are three/ two parties.
(f) Days of grace is allowed/ not allowed in cheque.
(g) Consumer protection Act recognizes eight/ six rights of consumers.

(h) FEMA came into force from June 1, 1999/ 2000.