ASSAM UNIVERSITY SOLVED QUESTION PAPERS
TDC (CBCS) Odd Semester Exam, 2018
COMMERCE (1ST Semester)
Course No.: COMHCC – 102T (Business Law)
Full Marks: 70 (Pass
Marks: 28)
Time: 3 hours
The figures in the margin indicate full marks for the
questions
Answer all questions
UNIT – I: Indian Contract Act, 1872
1. Answer any two of the
following: 2x2=4
a)
Define
contract.
Ans: Section 2 (h) defines ‘Contract’ as an
agreement enforceable by law. If we
analyse the definition it has two components viz.
1. An agreement
between two or more persons "To Do" or "Not to Do"
something.
2. An
enforceability of such an agreement at law i.e. personal rights and personal
obligations created and defined by agreement must be recognized by law.
b)
What
is quasi contract?
Ans: It means a contract which lacks one or more of the essentials
of a contract. In a contract, a promisor voluntarily undertakes an obligation
in favour of the promisee. When a similar obligation is imposed by law upon a
person for the benefit of another even in the absence of a contract. Such
contracts are the quasi-contracts. Quasi contract are declared by law as valid
contracts on the basis of principles
of equity i.e. no person
shall be allowed to enrich himself at the expense of another the legal obligations
of parties remains same.
c)
Define
contingent contract.
Ans: 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).
2. Answer any one of the
following: 10
a)
“All contracts are
agreement but all agreements are not contracts.” Discuss.
Ans: Section 2
(h) defines ‘Contract’ as an agreement enforceable by law. If we analyse the definition it has two
components viz.
1. An agreement
between two or more persons "To Do" or "Not to Do"
something.
2. An
enforceability of such an agreement at law i.e. personal rights and personal
obligations created and defined by agreement must be recognized by law.
Section 2 (e) defines ‘agreement’ as “every
promise and set of promises forming consideration for each other”. For a
contract to be enforceable by law there must be an agreement which should be
enforceable by law. To be enforceable, the agreement must be coupled with
obligation. Obligation is a legal duty to do or abstain from doing what one
promised to do or abstain from doing. All
contracts are agreements but for agreement to be a contract it has to be
legally enforceable.
Section10 of the Act provide “All agreements
are contracts if they are made by the free consent of the parties competent to
contract for lawful object & are not hereby expressly declared void.”
An agreement in
order to become a contract must be enforceable by law. Agreements, which do not
fulfill the essential requirements of a contract, are not enforceable. Thus when an agreement enables a person to
compel another to do something or not to do something it is called a contract.
Thus all contracts are agreements but all agreements are not contracts. In order to become a valid contract an
agreement must posses the following essential elements:
a) Offer & Acceptance: There
must be two parties to an agreement i.e. one making the offer & other party
accepting it. Acceptance of must be unconditional & absolute. A part of an
offer cannot be accepted. The terms of an offer must be definite. The
acceptance must be in the mode as prescribed & must be communicated. The
acceptor of an offer must accept it in the same way & same sense & at
the same time as offered by the offeror i.e. there must be consensus ad idem.
b) Intention to create legal relationship: When two
parties enter into a contract their intention must be to create legal
relationship. If there is no such intention between the parties, there is no
contract between them. Agreements of a social or domestic nature to do not
constitute contracts.
c) Lawful consideration: An
agreement to be enforceable by law must be supported by consideration.
“Consideration” means an advantage or benefit which one party receives from
another. It is the essence of bargain. The agreement is legally enforceable
only when both parties give something or get something in return. An agreement
to do something without getting anything in return is not a contract. Contract
must be in cash or kind.
d) Capacity to Contract-Competency: 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.
e) Free Consent: It is
necessary between the contracting parties to have a free & genuine consent
to an agreement. The consent of parties is said to be free when the contracting
parties are of the same mind on the materials of a contract. They must mean the
same thing at the same time the parties must not enter into a contract under
undue influence, coercion, misrepresentation etc. If these flaws are present in
an agreement it does not become a contract.
f) Lawful object: The
object of an agreement must be lawful. It should not be illegal, immoral or it
should not oppose public policy. If an agreement suffers from a legal flaw with
respect to object it is not enforceable by law & so it is not a contract.
g) Agreement not declared void: For an
agreement to be a contract it is necessary for the agreement must not be
expressly declared void by any law in force in the country.
h) Possibility & Certainty of performance: The terms
of an agreement must not be vague or indefinite. It should be certain. The
agreement must be to do a thing which is possible. For e.g. an agreement to
sell a car for Rs. 100/- if sun does not rise tomorrow. This agreement is
impossible & so not enforceable by law.
Thus,
agreement is the genus of which contract is the specie.
b)
What do you mean
by discharge of contracts? What are the different modes of discharge contracts?
Discuss.
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:-
1.
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.
2.
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:
a) 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.
b) 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.
c) 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.
d) 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.
e) 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.
f) 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.
3.
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 –
(i)
Impossibility existing at the time formation of the contract: This is
known as pre-contractual impossibility. The fact of impossibility may be:
a) 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.
b) 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.
(ii) 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.
4.
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.
5.
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:
a) 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.
b) By insolvency: When a
person is declared insolvent, he is discharged from all liabilities incurred
prior to such declaration.
c) 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.
d) By rights and liabilities becoming vested in
the same person: When the rights and liabilities under a
contract vests in the same person.
6.
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:-
a) 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.
b) 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.
UNIT – II: Specific Contract
3. Answer any two of the
following: 2x2=4
a)
What is Contract
of Indemnity?
Ans:
Contract of indemnity: Section 124 of the Indian Contract
Act defines it as “a contract by which one party promises to save the other
from loss caused to him by the conduct of the promisor himself or by the
conduct of any other person”. The person who promises is called the Indemnifier
and the person to whom the promise is made is called the Indemnified or
Indemnity Holder. To indemnify does not merely means to reimburse in respect of
moneys paid, but to save from loss in respect of the liability for which the
indemnity has been given.
For example: A promises not to construct buildings on a particular
site so as to prevent light and air to B’s house and in case of breach of such
promise, to indemnify for the consequent loss. This is a contract of indemnity.
A contract of insurance is also a contract of indemnity.
b) Define the Contract of Guarantee.
Ans:
Contract of Guarantee: Section 126 of Indian Contract Act
defines it as “a contract to perform the promise, or discharge the
liability, of a third person in case of his default”. The person who gives the
guarantee is called the “surety”, the person in respect of whose default, the
guarantee is given is called the “principal debtor”, and the person to whom the
guarantee is given is called the “creditor”. A guarantee may be either oral or
written. It is a tripartite agreement which contemplates the principal debtor,
the creditor and the surety.
For example: A purchases goods from B on credit. C agrees to stand as a surety which means that if A does not pay the price of the goods, he will pay. Here, A is the principal debtor, B is the creditor and C is the surety or guarantee.
c)
What is Agency by
Ratification?
Ans: Agency By Ratification: According to Sec. 196, where acts are done by
one person on behalf of another, but without his knowledge or authority, he may
elect to ratify or to disown such acts. If he accepts, it is called agency by
ratification. Soon after ratification, the person who has done the activity
becomes agent and that person who has given ratification becomes principal. Ratification
is of two types. Namely;
a) Express Ratification and
b) Implied Ratification.
The ratification
where there is wording and expression is called express ratification. For example: Without A`s
direction, B has purchased goods for the sake of A from C. There after, A has
given his Support to B`s activity, it is called ratification and now A is
principal and b is agent.
4. Answer any one of the
following: 10
a)
Compare the
Contract of Indemnity and Contracts of Guarantee.
Ans: Distinction between a contract of Indemnity and a contract of
guarantee
The contract of indemnity differs from the contract of guarantee
in the aspects shown in the following table:
|
Contract of
Indemnity |
Contract of
Guarantee |
|
1. In a contract of indemnity the promisor
undertakes an independent liability. |
1. A contract of guarantee is a contract to
discharge the liability of a third person in case of default made by him. |
|
2. A contract of indemnity involves two
persons, viz., the indemnifier and the indemnity-holder. |
2. A contract of guarantee requires the
concurrence of three person viz. the principal debtor, the creditor and the
surety. |
|
3. The primary liability is on the
indemnifier. |
3. The principal liability is on the
principal debtors. Secondary liability is on the surety. |
|
4. The loss to be indemnified in such
contract is contingent. |
4. There is an existing debt for which the
surety gives guarantee. |
|
5. The contract of indemnity is for the
reimbursement of the loss. |
5. The contract of guarantee is for the
security of the creditor. |
|
6. In the case of indemnity, there is one
contract between the indemnifier and indemnified. |
6. in the case of guarantee there are at
least three contract between the principal debtor - creditor, surety -
creditor; principal debtor – surety |
|
7. The indemnifier cannot sue the third
party in his own, unless there is an assignment. |
7. The surety is entitled to proceed against
the principal debtor when he is obliged to perform the guarantee. |
b)
Discuss the rights
and duties of Bailor.
Ans: Rights and Duties of Bailer
Rights
of bailer
1. Right
to take back: As the purpose completes, the bailor has right to get back the
property bailed and if any damage is caused to the property, he is entitled for
compensation from the bailee.
2. Right
in case of unauthorized use: If the bailee uses property in unauthorized
manner, the bailor can terminate the bailment as well as can claim for
compensation also.
3. Right
to gratuitous bailor: The bailor has right to terminate the contract of
gratuitous bailment at any time even before the specified time, subject to the
limitations that where such termination of bailment causes loss in excess of
benefit, the bailor must compensate the bailee.
4. Right
to get benefit/profit: If the bailed property has been accredited, the bailor
has right to the benefit/profit.
Duties of Bailer
1. Duty
to dispose faults: Bailer
should disclose faults present in goods at the time of making delivery. Faults
are of two types namely; Known faults and Un-known faults. On the other hand bailment
also is of two type’s namely Gratuitous bailment and Non-Gratuitous bailment.
In case of gratuitous bailment, bailer is liable to compensate for bailee
injuries arising out of known faults. In Gratuitous bailment, bailer is not
answerable to un-known faults. In case of Non-Gratuitous bailment, bailer is
answerable to both known faults and Un-known faults.
2. Duty
to contribute for expenses: Bailer
should contribute for expenses incurred by bailee. In case of Gratuitous
bailment, bailer need not contribute for ordinary expenses and extra ordinary
expenses or to the contributed by bailer. In case of Non-Gratuitous bailment,
bailer should contribute for both ordinary expenses and extra ordinary
expenses.
3. Duty
with regard to defective title: In case where bailer has delivered the goods with
defective title, the bailee may come across suffering from the side of true
owner due to bailer’s defective title. In such a case bailer with defective
title should compensate bailee.
4. Duty
to Indemnify: Principal
of indemnity operates between bailer and bailee, where bailer becomes implied
indemnifier and bailee becomes implied indemnity holder. So bailer has duty to
indemnify bailee.
5. Duty
to take the Goods back: After
fulfillment of purpose bailee returns the goods to bailer. Then bailer should
take them back. If bailer refuses to take the goods back, bailer has to
compensate bailee.
UNIT – III: Sale of Goods Act, 1930
5. Answer any one of the
following: 2x2=4
a)
Define goods.
Ans: 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.
b)
Write down two
essential elements of Contract of Sale.
Ans: Essential Elements of Sale of Goods Act are listed below:
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.
c)
What is 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.
6. Answer any one of the
following: 10
a)
Distinguish
between Sale and Agreement to Sale.
Ans: Difference between ‘Sale’ and
‘agreement to sell’:
|
Basis |
Sale |
Agreement to Sell |
|
Definition |
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. |
It is an Executory contract. |
|
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)
Who is an unpaid
seller and what are the rights of an unpaid seller?
Ans: Unpaid Seller and His Rights
Section 45 define an unpaid seller as “One who
has not been paid or tendered the whole of the price or one who receives a bill
of exchange or other negotiable instrument as conditional payment and the
condition on which it was received has not been fulfilled by reason of
dishonour of the instrument or otherwise.” The following conditions must be
fulfilled before a seller can be deemed to be an unpaid seller:
(i) He must be unpaid and the price must be
due.
(ii) He must have an immediate right of action
for the price.
(iii) A bill of exchange or other negotiable
instrument was received but the same has been dishonoured.
Rights of
an Unpaid Seller against the Goods
According to Section 46, an unpaid seller’s right
against the goods is:
(a) A lien or right of retention
(b) The right of stoppage in transit.
(c) The right of resale.
(d) The right to withhold delivery
The above rights of the unpaid can be broadly divided
under 2 main headings:
I] Rights against the goods and
II] Rights against the buyer
I] Rights
against the goods:
A] Where
the property in the goods has passed to the buyer: Where
the ownership in the goods has already been transferred to the buyer the
following rights are available to an unpaid seller –
1. Right
of Lien: The right of lien means the right to retain the possession of
goods until the full price is paid or tendered.
When can lien be exercised:
(a) Where the goods have been sold without
any stipulation as to credit.
(b) Where the goods have been sold on
credit, but the term of credit has expired, and
(c) Where the buyer becomes insolvent.
The right can be exercised even if the seller
holds the goods as an agent or bailee. Where part delivery of goods has been
made, it can be exercised on the remaining goods, unless circumstances show he
has waived his right.
Termination of lien: The right gets terminated
under following circumstances:
(a) When the goods are delivered to a carrier
or bailee but without reserving the right of disposal.
(b) When the possession is acquired by the
buyer or his agent lawfully.
(c) When the right of lien is waived by the
seller.
(d) When the buyer has disposed of the goods
by sale of in any manner with the consent of the seller.
2. Right
of stoppage of goods in transit: The right of stoppage in transit
means the right to stopping the goods while they are in transit, to regain
possession and to retain them until the price is paid. The essential feature of
stoppage in transit is that the goods should be in the possession of someone
intervening between the seller and the buyer. The unpaid seller can exercise
the right of stoppage in transit if:
(a) The seller has parted with the possession
of the goods.
(b) The buyer has not taken possession of
goods.
(c) Buyer has become insolvent.
The unpaid seller may exercise the right to stoppage in transit in
any one of the following 2 ways:
(a) By taking actual possession of the goods,
or
(b) By giving notice of his claim to the
carrier or other bailee in whose possession the goods are.
The right to stoppage in transit is lost under
the following circumstances:
(a) If the buyer or his agent obtains
possession.
(b) If after arrival of the goods at the
appointed destination, the carrier or the bailee acknowledges to the buyer that
he holds the goods on his (buyer’s) behalf.
(c) If the carrier or bailee wrongfully
refuses to deliver the goods to the buyer or his agent.
(d) Where the part delivery of the goods has
been made to the buyer or his agent, the remainder of goods may be stopped in
transit. But if such part delivery has been given in such circumstances as to
show an agreement to give up possession of the whole of the goods the transit
comes to an end at the time of part delivery.
3. Right
of resale: Where the unpaid seller has exercised his right of lien or
resumes possession of the goods by exercising his right of stoppage in transit
upon insolvency of the buyer, he can re-sell the goods under the following
circumstance:
(a) where the goods are of perishable nature.
(b) Where the seller has given notice of his
intention to re-sell the goods and yet the price remains unpaid.
(c) Where the seller expressly reserves a
right of resale if the buyer commits a default in making the payment.
B] Where
the property in the goods has not passed to the buyer: Where
the property in the goods has not passed to the buyer, the unpaid seller can
exercise the right to withholding delivery of the goods. This right is similar
to and co-extensive with the right of lien and stoppage in transit where the
property has passed to the buyer. Other remedies may include the right to claim
damages for the loss suffered, special damages, etc.
II] Rights
of an unpaid seller against the buyer personally
In addition to the unpaid seller’s rights
against the goods, he has rights even against the buyer personally. They are as
follows:
1. Suit
for Price: Generally the seller can sue for the price of the goods only when
the property in the goods has passed to the buyer and the price is not paid as
per the terms of the contract. In cases where the property in the goods has not
passed to the buyer, suit for price generally, cannot be maintained, unless
under the contract, price is payable on a certain date irrespective of the
delivery of passing of the ownership of the goods.
2. Suit
for damages: The unpaid seller can bring an action for damages where the
buyer wrongfully refuses to accept the goods or repudiates the contract.
3. Suit for repudiation: Where the
buyer repudiates the contract before the date of delivery, the seller may wait
till the date of delivery or may
treat the contract as cancelled and sue for damages for breach.
4. Suit
for interest: In case of breach of contract on the part of the buyer, the
unpaid seller can claim for interest from the date of tender of the goods or
from the date, the price becomes payable along with a suit for price.
UNIT – IV: Indian Partnership Act, 1932
7. Answer any two of the
following: 2x2=4
a)
What is
Partnership Deed?
Ans: Partnership deed: A
partnership is formed by an agreement. This agreement may be oral or in
writing. Though the law does not expressly require that the partnership
agreement should be in writing, it is desirable to have it in writing. A
written agreement, which contains the terms of partnership, as agreed to by the
partners is called ‘Partnership Deed.’
b)
Write two features
of Limited Liability Partnership.
Ans:
Features of LLP:
a) An LLP is a
body corporate formed and incorporated under this Act and is legal entity
separate from its partners.
b) It is an
alternative corporate business from that gives the benefit of limited liability
of a company and the flexibility of the partnership;
c)
State any two
properties of partnership firm.
Ans:
Properties of partnership firm:
(i)
Agreement: Partnership is the result of an
agreement, either written or oral, between two or more persons. An agreement
between the partners may be expressed or implied. It arises from contract and
not from status or process of law.
a)
Number of Persons: In a partnership firm there must be at
least two people to form the business. Partnership Act 1932, does not specifies
the maximum numbers of persons, but Section 464 of the Indian Companies Act
2013, restricts the number of Partners to 50 for a partnership firm. But in
case of limited liability partnership there is no maximum limit.
8. Answer any one of the
following: 10
a)
Discuss the mutual
rights and duties of partners.
Ans: Rights and Duties of Partners of a Firm
The Rights of a partner are as under:
(i) To take active part in the business: Every
partner has a right to take active part in the conduct and management of the
business of the firm.
(ii) To share Profits: Every partner
has a right to share profits earned and are liable to contribute to the losses
incurred by the firm.
(iii) To be consulted: Every partner
has a right to be consulted in all matters affecting the business of the
partnership firm before any decision is been taken. In case of difference of
opinion it may be settled by decision of majority of the partners.
(iv) To have access to the accounts: Every
partner has a right to have access, inspect and copy the books of accounts of
the firm.
(v) To be indemnified: Every partner
has a right to be indemnified for the expenses incurred or payments made in the
ordinary course of business.
(vi) To use the property of the firm: Every
partner has a right to use the property of the firm for the purposes of the business
of the firm. If the partner uses the firm’s property for private purpose then
he is liable to compensate the firm for the same.
(vii) Interest on capital: Every
partner has a right to receive interest on capital at a certain rate as may be
specified and agreed in the partnership agreement. Such interest is payable
only out of profits, in any, earned by the firm.
The duties of a partner are as under:
(i) To carry on the business to the
common advantage: Every partner is bound to:
(a) Carry on the business of the firm
to the greatest common advantage.
(b) To be just and faithful to each
other in the mutual dealings.
(c) To use reasonable care and skill
in the performance of his duties and
(d) Render true accounts and full
information of all things, affecting the firm, to any partner or his legal
representative.
(ii) To indemnify: Every
partner is bound to indemnify the firm:
(a) For any loss cause to it by his
fraud in the conduct of business of the firm.
(b) For any loss incurred due to his
willful neglect in the conduct of the business of the firm.
(iii) To attend diligently to his
duties: Every partner is bound to attend diligently to his duties in the
conduct of the business of the firm. He must use his knowledge and skill for
the benefit of the firm.
(iv) To account for private
profits: If a partner derives any benefit, without the consent of the other
partners from any transactions of the firm or from any use of the partnership
property, name or business connection. He must account for it and compensate it
to the firm. There exists a fiduciary relationship between partners and
therefore no partner is entitled to make any personal profit.
(v) To account for profit in
competing business: A partner must not carry a business as of competing
nature with the firm. If he does that then he is bound to account for and
compensate to the firm all the profits made by him in that competing business.
(vi) To act within authority: Every
partner is bound to act within the scope of his actual or implied authority.
(vii) To hold and use the property
of the firm exclusively for firms business: Every partner is bound to hold
and use the property of the firm exclusively for the purposes of the business
of the firm.
b)
Distinguish
between Partnership and Joint Stock Company.
Ans: Difference between Partnership and Company:
|
Basis |
Partnership |
Company |
|
1.Definition |
Partnership is the relation between persons who have agreed to
share the profits of a business carried on by all or any of them acting for
all. |
A Company means a company formed and registered under this Act
or an existing Company. |
|
2.A Legal Person |
A firm is not a legal Entity. |
A Company on the other hand, is a Legal Person. |
|
3. Liability |
In a Partnership, the liability of partners is unlimited. |
In case of a company, which is limited, the liability of the
members is limited to the extent of its share capital. |
|
4.Transfer of Shares |
In a firm, a partner cannot transfer or assign the whole of his
share without the consent of all the partners of the firm |
In a company, a shareholder can transfer his share subject to
the provisions of the Articles of the Company. |
|
5.Mutual Agents |
In a firm, all partners are mutual agents. |
In a company, a member is not an agent of |
|
6.Registration |
Registration of a firm is not compulsory under the Partnership
Act, 1932. |
Registration of a company is compulsory under the Companies Act,
2013. |
|
7.Management |
Management vests in the hands of the Partners except in the case
of Sleeping Partners. |
Management vests in the board of Directors, elected periodically
by the shareholders. |
|
8.Creditors |
Creditors of firm are also creditors of the partners
individually as well. |
Creditors are only the creditors of the company and not of the
individual shareholders. |
|
9.Statutory obligations |
A partnership has less statutory obligations |
A company is strictly regulated under the Companies Act, 2013. |
|
10.Accounts |
Accounts of a partnership firm need not be audited by the
auditor. |
Accounts of a company must be audited by an auditor. |
|
11. To whom property belong. |
The property of affirm belongs collectively to the partners. |
The property of a company, on the other hand, belongs to the
company, and not to the shareholders. |
|
12.Effect of death of partners and members |
In the case of a firm, death or insolvency of a partner
resolution the dissolution of the firm, unless there is a contract to the
contrary. |
In the case of a company, death or insolvency of a member of the
company does not result in the dissolution of the company. |
|
13.Contract with the firm or company |
A Partner cannot enter into a contract with the firm, in which
he is a partner, because the firm is not a legal person. |
A shareholder, on the other hand, can enter into a contract with
the company, of which he is a member, because the company is a legal person. |
|
14.Power to dispose of property |
A partner can dispose of the property of the firm. |
A Shareholder cannot dispose of the property of the company. |
|
15.Limit on number of members |
There is a
statutory limit on maximum number of Partners. Section 464 of the Indian Companies
Act 2013, restricts the number of Partners to 50 for a partnership firm. |
In the case of a company, a Private Company: Minimum 2 and
Maximum 200 and in case of Public Company: Minimum 7 and Maximum unlimited. |
UNIT – V: Negotiable Instruments Act, 1881
9. Answer any two of the
following: 2x2=4
a)
What is meant by
‘payment in due course’?
Ans: The payment of a negotiable instrument should be made to the right person by the paying banker or the acceptor of the bill; otherwise the latter shall be responsible for the same. The negotiable instrument Act provides protection to the paying banker or the acceptor of the bill only when payment is made as per the provisions of the Act. Payment of the amount due as per the provisions of the Act is called payment in due course.
b)
What is negotiable
instrument?
Ans: Negotiable instrument: Negotiable
Instrument means a written document which guarantees the specific amount of
money to the person named therein and is transferable by delivery or by
endorsement. According to Section 13 of the Negotiable Instrument Act 1881, “A
Negotiable Instrument means a Promissory Note, Bill of Exchange and Cheque,
payable either to order or to bearer.
c)
What is meant by
‘crossing of cheque’?
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. It is simply a direction to the
paying banker that the cheque should be paid only to a banker. Crossing of
cheque is very safe because the holder of the cheque is not allowed to encashed
it across the counter of the bank. A crossed cheque provides protection not
only to the holder of the cheque but also to the receiving and collecting
bankers.
10. Answer any one of the
following: 10
a)
What is meant by
‘holder in due course’ and what are his privileges?
Ans: Holder and Holder in due course
According to Section 8 of the Negotiable
Instrument Act, 1881, “Holder of a promissory note, bills of exchange or cheque
means any person entitled in his own name to the possession thereof and to
receive or recover the amount due thereon from the parties there to.”
According to Section 9 of the Negotiable
Instrument Act, 1881, “Holder in due course means any person who, for
consideration, become the possessor of a promissory note, bill of exchange or
cheque, if payable to bearer, or the payee or endorsee thereof if payable to
order, before the amount mentioned, in it became payable and without having
sufficient course to believe that defect existed in the title of the person
from whom he derived his title.”
A person is said to be holder in due course in
the following cases:
a) A
negotiable instrument must be in the possession of the holder-in-due-course.
b) A negotiable
instrument must be regular and complete in all aspects.
c) The
instrument must have been obtained for valuable consideration.
d) The
instrument must have been obtained before the amount mentioned therein becomes
payable or before maturity.
The Holder
of a Negotiable Instrument enjoys the following rights:
a) He can
claim payment of the instrument and can sue in his own name on the instrument.
b) An
endorsement in blank may be converted by him into an endorsement in full.
c) He is
entitled to cross a cheque either generally or special and also with the words
“Not Negotiable”.
d) He can
negotiate a cheque to a third person, if such negotiation is not prohibited by
the direction given in the cheque.
e) A
duplicate copy of a lost cheque may be obtained by a holder.
Holder in
Due Course enjoys the following rights and privileges:
a) He
possesses better title free from all defects: He always possesses better title
than that of his transferor or any of the previous parties and can give to the
subsequent parties the good title that he possesses. The holder in due course
is entitled to recover the amount of the instrument from any or all of the
previous parties.
b) All prior
parties liable: All prior parties to the instrument i.e. its maker or drawer,
acceptor or endorser, is liable thereon to a holder in due course until the
instrument is duly satisfied. The holder in due course can file a suit against
the parties liable to pay in his own name.
c) No effect
of conditional delivery: Where a negotiable instrument delivered conditionally
or for a special purpose and is negotiated to a holder in due course, a valid
delivery of it is conclusively presumed and he acquires good title to it.
d) Right in
case of fictitious bills: Where both drawer and payee of a bill are fictitious
persons, the acceptor is liable on the bill to a holder in due course.
e) Right of
the holder in due course in case of inchoate instrument: If a negotiable
instrument was originally an inchoate (incomplete) instrument and subsequent
transferor completed the instrument for a sum greater than what was the
intention of the market, the right of a holder in due course to recover the
money of the instrument is not at all affected.
f) Right is
cane the instrument is obtained by unlawful means or for unlawful
consideration: A person liable on negotiable instrument cannot denied himself
against payment to a holder in due course on the ground that the instrument was
lost or obtained from him by means of an offense or fraud or far an unlawful
consideration.
g) Estoppel
against endorser to deny capacity of prior parties: The endorser of a
negotiable instrument in a suit thereon by the holder-in-due-course cannot deny
the signatures or capacity to contract of any prior party to the instrument.
b) What are the distinctions between bill of exchange and
Cheque?
Ans: Difference between cheque and bill of exchange
|
Basis |
Cheque |
Bills of Exchange |
|
Drawee |
A cheque is always
drawn on a bank or banker. |
A bill of exchange
can be drawn on any person including a banker. |
|
Acceptance |
A cheque does not
require any acceptance. |
It requires acceptance by the Drawee or someone else on his
behalf. |
|
Payment |
A cheque is payable
on demand without any days of grace. |
A bill of exchange
may or may not be payable on demand. |
|
Stamp |
A cheque does not
require any stamp. |
A bill of exchange
must be stamped. |
|
Payee |
A cheque may be
issued payable to the bearer. |
A bill can never be
issued payable to bearer. |
|
Days of grace |
No days of grace are
allowed for a payment of a cheque. |
3 days of grace are
allowed for payment of a bill unless it is payable on demand. |
|
Crossing |
A cheque may be
crossed. |
A bill of exchange
cannot be crossed. |
Difference between
Promissory Note and Cheque: 2015,
2020
|
Basis |
Promissory Note |
Cheque |
|
Nature |
It is an unconditional promise by the maker
to pay the money. |
It is an unconditional order to the bank to
pay certain sum of money. |
|
Days of Grace |
Three days of grace are allowed for payment. |
No days of grace are allowed for payment. |
|
Crossing |
A promissory note cannot be crossed. |
A cheque can be crossed. |
|
Stamping |
A promissory note must be stamped. |
A cheque does not require a stamp. |
|
Drawer |
The maker of a promissory note is one who
pays the money. |
The drawer of a cheque is one who withdraws
the money from the drawee. |
|
Payee |
The maker of promissory note cannot be
payee. |
The drawer of a cheque can be the payee. |
***
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