Business Laws Solved Question Papers | Nov' 2018 | Dibrugarh University

2. Write True or False:              1x4=4

3. Define consideration. Explain the rules regarding consideration.                 14

Ans: Consideration and Its Essentials

Section 2 (d) of Indian Contract Act, 1872, defines consideration as “When at the desire of the promisor the promise or any other person has done or abstained from doing or does or abstains from doing something, such act abstinence or promise is called a consideration for the promisor.”

Consideration is based on the term ‘quid-pro-quo’ which means ‘something in return’. When a person makes a promise to other, he does so with an intention to get some benefit from him. This act to do or to refrain from doing something is known as consideration.

Consideration is an advantage or benefit which moves from one party to another. It is the essence of bargain. It is the reciprocal promise i.e. to do something or abstain from doing something in return of a promise. It is necessary for an agreement to be enforceable by law. In consideration both the parties give something & get something in return. It may be in cash or kind.

The following are the rules related to the consideration

(i) Consideration must move at the desire of promisor. If it is done at the instance of a third party without the desire of the promisor, it is not consideration. Act done at the desire of a third party is not a consideration. Act must be done voluntarily at the desire of the promisor.

(ii) It may move from the Promisee or any other person in the Indian Law so that a stranger to the consideration may maintain a suit. A consideration may move from the promise or any other person. Consideration from a third party is a valid consideration. Under English Law, however, consideration must move from the Promisee only.

(iii) Consideration may be past, present or future. The words used in Section 2(d) are “has done or abstained from doing (past), or does or abstains from doing (present), or promises to do or to abstain from doing (future) something” This means consideration may be past, present or future.

(iv) There must be mutuality in consideration.

(v) It must be real & not illusory, infinite or vague. Although consideration need not be adequate, it must be real, competent and of some value in the eye of law. Physical impossibility, legal impossibility, uncertain consideration & illusory consideration.

(vi)  Consideration must not be unlawful, illegal, immoral or opposed to public policy. The consideration given for an agreement must not be unlawful. Where it is unlawful, the courts do not allow an action on the agreement.

(vii) Consideration need not be adequate. Consideration as already explained means “something in return”. This “something given”. The law simply provides that a contract should be supported by consideration. So long as consideration exists, the courts are not concerned as to its adequacy, provided it is of some value. “The adequacy of the consideration is for the parties to consider at the time of making the agreement, not for the court when it is sought to be enforced.”

Or

What is meant by contingent contract? Describe its essentials and rules.            2 +(3+9)=14

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).

Example

(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). 

4. Elucidate the differences between condition and warranty. Describe the implied conditions in the Sale of Goods Act with examples.       4+10=14

Ans: ‘Condition’ and ‘Warranty’

In a contract of sale, the subject matter is ‘goods’. There are millions of sale transactions which occur in the normal course, all around the world. There are certain provisions which need to be fulfilled because it is demanded by the contract. These prerequisites can either be a condition and warranty. The condition is the fundamental stipulation of the contract of sale whereas Warranty is an additional stipulation.

Condition: Section 12(2) states that a condition is a stipulation which is essential to the main purpose of the contract. The breach of a condition gives rise to a right to treat the contract as repudiated or broken. So according the above definition it is clear that condition is very essential for the performance of a contract. The breach of condition will be regarded as the breach of the whole contract.

Example: A buys from B hair oil advertised as pure coconut oil. The oil turns out to be mixed with herbs. A can return the oil and claim the refund of price.

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.

Difference between Condition and warranty:

Implied Conditions:

1. Condition as to title: In a contract of sale, unless the circumstances of the contract are such as to show a different intention, there is an implied condition on the part of the seller that –

(a) In the case of a sale, he has a right to sell the goods and

(b) In the case of an agreement to sell, he will have a right to sell the goods at the time when the property is to pass.

2. Sale by description: Where there is a contract for the sale of goods by description, there is an implied condition that the goods shall correspond with the description (Section 15). If you contract to sell peas, you cannot oblige a party to take beans.

3. Sale by sample: In a case of a contract for sale by sample, there is an implied condition:

(a) That the bulk shall correspond with the sample in quality

(b) That the buyer shall have a reasonable opportunity of comparing the bulk with the sample.

(c) That the goods shall be free from any defect, rendering them unmerchantable.

4. Sale by description as well as sample: Section 15 further provides that if the sale is by sample as well as by description, the goods must correspond both with the sample and with the description.

5. Condition as to quality or fitness: Normally, in a contract of sale there is no implied condition as to quality or fitness of goods for a particular purpose. The buyer must examine the goods thoroughly before he buys them in order to satisfy himself that the goods will be suitable for the purpose for which he is buying them. However, in the following instances, the condition as to quality or fitness applied –

(a) Where the buyer, expressly or by implication makes known to the seller the particular purpose for which he needs the goods and depends upon the skill and judgement of the seller whose business it is to supply goods of that description, there is an implied condition that the goods are reasonable fit for that purpose. [Section 16(1)]. For e.g. an order was placed for some Lorries to be used “for heavy traffic in a hilly area”. The Lorries supplied were unfit and broke down. Held, there is a breach of condition as to fitness.

(b) An implied condition as to quality or fitness for a particular purpose may also be annexed by the usage of trade. [Section 16(3)]

6. Condition as to merchantability: Where goods are bought by description from a seller who deals in goods of that description, here is an implied condition that the goods are of merchantable quality. This means that the goods should be such as are commercially saleable under the description by which they are known in the market at their full value.

7. Condition as to wholesomeness: In the case of eatable and provisions, in addition to the implied condition as to merchantability, there is another implied condition that the goods shall be wholesome. For e.g. C bought a bun containing a stone which broke one of C’s teeth. Held, he could recover damages.

8. Condition implied by custom: An implied condition as to quality or fitness for a particular purpose may also be annexed by the usage of trade in the locality concerned.

Or

Elucidate District Forum and its composition.       14

Ans: Section 8-A as inserted by the Consumer Protection (Amendment) Act, 2002. The State government shall establish for every district, by notification, a council to be known as the District Consumer Protection Council.

Objects of the District Council:

The Objects of every District Council shall be to promote and protect within the district the rights of consumers laid down in the clause (a) to (f) of Section 6 (National Consumer Protection Council).

Membership

The District Consumer Protection Council (hereinafter referred to as the District Council) shall consist of the following members:

Value for filling complaint in district forum: At the lowest level are the District Forums and these are established in each District and have jurisdiction to entertain complaints where the value of goods or services and the compensation if any, claimed does not exceed Rs.20, 00,000 (TWENTY LAKHS), and a complaint can be filed in a District Forum within the local limits of which

5. Define Promissory Note. Describe the essential elements of a promissory note.         4+10=14

Ans: Promissory Note, in the law of negotiable instruments, is a written instrument containing an unconditional promise by a party, called the maker, who signs the instrument, to pay to another, called the payee, a definite sum of money either on demand or at a specified or ascertainable future date. The note may be made payable to the bearer, to a party named in the note, or to the order of the party named in the note.

According to the Section 4 of the Negotiable Instrument Act, 1881 “A Promissory Note is an instrument in writing not being a bank note or a current note containing an unconditional undertaking, signed by the maker, to pay a certain sum of money only to, or do the order of, a certain person, or to the bearer of the instrument.”

In other words, we can say that a promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand to the payee, or at fixed or determinable future time, certain in money, to order or to bearer.

There are two parties to a Promissory Note:

a) Maker: It is the debtor, who promises to make the payment. It must be signed by its maker.

b) Payee: The person who receives the payment of the promissory note is the payee.

A signs instruments in the following terms:

(a) "I promise to Pay B or order Rs.500".

(b) "I acknowledge myself to be indebted to B in Rs.1, 000, to be paid on demand, for value received”.

(c) “I promise to pay B Rs.500/- on 01-10-2005. etc are promissory notes”.

The essentials of a valid Promissory note

Or

Discuss the various ways of crossing of cheque with examples.             14

Ans: Crossing of a cheque

A cheque is said to be crossed when two parallel transverse line with or without any words are drawn on the left hand corner of the cheque. The negotiability of a cheque doesn’t affect for crossing. Crossing of a cheque refers to the instruction to the banker relating to the payment of the cheque. A crossing is the direction to the paying banker that the cheque should be paid only to a banker. Crossing of cheque is very safety because the holder of the cheque is not allowed to cash it across the counter. A crossed cheque provides protection not only to the holder of the cheque but also to the receiving and collecting bankers.

The following parties can cross a cheque:

Types of crossing:

1. General crossing: A general crossing is a crossing where a cheque simply bears two parallel lines with or without any words and without any specification. According to Sec. 123 of the Negotiable Instrument Act, 1881, “When a cheque bears across its face an addition of the words. “And company” or any abreactions thereof between two parallel transverse line or of two parallel transverse lines simply either or without the words, “Not Negotiable” that addition shall be deemed a general crossing. Simplify, In case of General Crossing words such as “and company”, “not Negotiable”, “Account payee” etc. may be inserted between the lines.

A general crossing cheque protects the drawer and also the payee or the holder thereof. Whenever a drawer desires to make payment to an outstation party, he can cross the cheque so that even if the cheque is lost, only a piece of paper is lost and nothing beyond that. If by any chance, it is encashed by a third and unauthorized person, it is possible to find out to whose account the amount is credited and the unauthorized person can be identifies and suitable action taken against him.

2. Special crossing: Section 124 of the Negotiable Instruments Act, 1881 defines special crossing as “where a cheque bears across its face, an addition of the name of a banker with or without the words “not negotiable”, that addition shall be deemed a crossing and the cheque shall be deemed to be crossed specially and to be crossed to that banker.”

Thus, in case of special crossing, the name of a particular bank is written in between the parallel lines. The main implication of this type of crossing is that the amount of the cheque will be paid to the specified banker whose name is written in between the lines. Special crossing is in a particular bank and by special crossing, he is assured of double safety, safety to the drawer and safety to the payee.

3. Account payee crossing: This type of crossing is done by adding the words ‘Account Payee’. This can be made both in general crossing and special crossing. The implication of this type of crossing is that the collecting banker has to collect the amount of the cheque only for the payee. If he wrongly credits the amount of the cheque to another account, he will be held responsible for the same. 

4. Not negotiable crossing: When the words ‘not negotiable’ is added in generally or specially crossed cheques, it is called not negotiable crossing. A cheque bearing not negotiable crossing cannot be transferred. If a cheque bearing ‘Not negotiable crossing’ is transferred, care must be taken regarding the ownership of title of both the transferor and transferee.

6. Explain the main objectives and features of the Industrial Disputes Act, 1947.          14

Ans: Objectives and Features of Industrial Dispute Act:

The Industrial Disputes Act, 1947 was enacted to promote industrial peace by providing appropriate machinery for amicable settlement of disputes arising between employers and employees.

Objectives of the Act:

Main Features or Characteristics of the Act:

Some of the important features of the Act may be summarized as below:

1. Any industrial dispute may be referred to an industrial tribunal by mutual consent of parties to dispute or by the State Government, if it deems expedient to do so.

2. An award shall be binding on both the parties to the dispute for the operated period, not exceeding one year;

3. Strike and lockouts are prohibited during: (a) The pendency of conciliation and adjudication proceedings; (b) the pendency of settlements reached in the course of conciliation proceedings, and (c) the pendency of awards of Industrial Tribunal declared binding by the appropriate Government.

4. In public interest or emergency, the appropriate Government has power to declare the transport (other than railways), coal, cotton textiles, food stuffs and iron and steel industries to be public utility services for the purpose of the Act, for a maximum period of six months.

5. In case of lay-off or retrenchment of workmen, the employer is requested to pay compensation to them. This provision stands in the case of transfer or closure of an undertaking.

6. A number of authorities (Works Committees, Conciliation Officers, and Board of conciliation, Courts of Inquiry, Labour Courts, Tribunal and National Tribunal) are provided for settlement of Industrial disputes. Although the nature of powers, functions and duties of these authorities differ from each other, everyone plays important role in ensuring industrial peace.

Or

Write notes on:             7x2=14

Ans: "Public utility service" means: (i) any railway service or any transport service for the carriage of passengers or goods by air; (ii) any service in, or in connection with the working of, any major port or dock; 

(ii) any section of an industrial establishment, on the working of which the safety of the establishment or the workmen employed therein depends; 

(iii) any postal, telegraph or telephone service; 

(iv) any industry which supplies power, light or water to the public; 

(v) any system of public conservancy or sanitation; 

(vi) any industry specified in the First Schedule which the appropriate Government may, if satisfied that public emergency or public interest so requires, by notification in the Official Gazette, declare to be a public utility service for the purposes of this Act, for such period as may be specified in the notification 

Ans: Workman: 'Workman" means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, .and for the purpose of any proceeding under this Act.

"Workman" does not include any such person - (i) who is subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957, or (ii) who is employed in the Police Service or as an officer or other employee of a prison, or (iii) who is employed mainly in a managerial or administrative capacity, or (iv) who, being employed in a supervisory capacity, draws wages exceeding Rs. 1600/- per mensem, or exercises functions mainly of management nature.

7. Write short notes on (any four):       4x4=16

Ans: Undue influence: Undue influence is the term used to demonstrate unfair use of one’s position or power. There is once party who is in a dominant position, while the other party is in a sub-ordinate position. The dominant party exercising its influence over the subordinate party and getting an unfair advantage. Unlike Coercion where there is physical pressure, in undue influence, there is mental pressure.

Section 16 defines as – “ Where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other.” 

Ans: The parties competent to contract must be capable of contracting i.e. they must be of the age of majority, they must be of sound mind & they must not be disqualified from contracting by any law to which they are subject to.  An agreement with minors, lunatics, drunkards, etc. is not contract & does not get a legal title.

Ans: Consumer: Section 2 (1) (d) of the Consumer Protection Act, 1986 defines the term "consumer". It says ‘consumer’ means any person:

Who is not a consumer?

Ans: A strike is a very powerful weapon used by trade unions and other labor associations to get their demands accepted. It generally involves quitting of work by a group of workers for the purpose of bringing the pressure on their employer so that their demands get accepted. When workers collectively cease to work in a particular industry, they are said to be on strike.

According to Industrial Disputes Act 1947, a strike is “a cessation of work by a body of persons employed in an industry acting in combination; or a concerted refusal of any number of persons who are or have been so employed to continue to work or to accept employment; or a refusal under a common understanding of any number of such persons to continue to work or to accept employment”. This definition throws light on a few aspects of a strike. Firstly, a strike is a referred to as stoppage of work by a group of workers employed in a particular industry. Secondly, it also includes the refusal of a number of employees to continue work under their employer.

The analysis of the definition would show that there are the following essential elements or requirements for the existence of a strike:

Ans: The essentials of a contract of sale are:-

1. Numbers of parties: Since a contract of sale involves a change of ownership, it follows that the buyer and the seller must be different persons. A sale is a bilateral contract. A man cannot buy from or sell goods to himself. To this rule there is one exception provided for in section 4(1) of the Sale of Goods Act. A part-owner can sell goods to another part-owner. Therefore a partner may sell goods to his firm and the firm may sell goods to a partner.

2. Goods: The subject-matter of the contract of sale must be ‘goods’. According to Section 2(7) “goods means every kind of movable property other than actionable claims and money; and includes stock and shares, growing crops, grass, and things attached to or forming part of the land which are agreed to be severed before sale or under the contract of sale.” Goodwill, trademarks, copyrights, patents right, water, gas, electricity,, decree of a court of law, are all regarded as goods. In the case of land the grass which forms part of land have to be separated from the land. Thus where trees sold so that they could be cut out and separated from the land and then taken away by the buyer, it was held that there was a contract for sale of movable property or goods (Kursell vs Timber Operators & Contractors Ltd.). But contracts for sale of things ‘forming part of the land itself’ are not contracts for sale of goods. 

3. Price: The consideration for a contract of sale is price. Price means money consideration. If it is anything other than money, it will not be sale. But if the exchange is made partly for goods and partly for price, it will still amount to sale. However, the price may be paid or promises to be paid.

4. Transfer of property: 'Property' here means ownership. Transfer of property in the goods is another essential of a contract of sale of goods. A mere transfer of possession of the goods cannot be termed as sale. To constitute a contract of sale the seller must either transfer or agree to transfer the property in the goods to the buyer. Further, the term 'property', as used in the Sale of Goods Act, means 'general property' in goods as distinguished from 'special property' [Sec. 2(11)]. If P, who owns certain goods, pledges them to R, he has general property in the goods, whereas R (the Pawnee) has special property or interest in the goods to the extent of the amount of advance he has made to the pawnor. Similarly, in the case of bailment of goods for the purpose of repair, the bailee has special interest in goods bailed to the extent of his labour charges.

5. No formalities to be observed (Sec. 5): The sale of Goods Act does not prescribe any particular form to constitute a valid contract of sale. A contract of sale of goods can be made by mere offer and acceptance. The offer may be made either by the seller or the buyer and the same must be accepted by the other. Neither payment nor delivery is necessary at the time of making the contract of sale. Further, such a contract may be made either orally or in writing or partly orally and partly in writing or may be even implied from the conduct of the parties. Where articles are exhibited for sale and a customer picks up one and the sales assistant packs the same for him, there has resulted a contract of sale of goods by the conduct of the parties.

Ans: 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

Sometimes the drawer and the payee can be one and the same person.