Business Laws Solved Question Papers
Dibrugarh University
2 0 2 1
(March)
COMMERCE
(Core)
Paper:
C–102 (Business Law)
1. Write True or False: 1×8=8
a)
The Indian Contract Act was passed in 1873. False, 1872
b)
A quasi-contract is a contract created by law, not
by the parties. True
c)
Registration of a partnership firm is not compulsory. True
d)
The rights and liabilities of partners of LLP are
stated in the LLP agreement.
e)
A cheque is not payable on demand. False
f)
Days of grace is counted in cheque. False
g)
To execute a contract of sale; seller and buyer
must be there. True
h)
Implied warranties are not written in a contract
of sale. True
2. Write short notes on (any four): 4×4=16
a) Free consent.
Ans: Section 13 defines consent as “Two or more
persons are said to consent when they agree upon the same thing in the same
sense.” Consent of the party’s means, the parties to a contract must mean the
same thing in the same sense. It means ‘Consensus
ad idem’. For e.g. A have 2 cars – Maruti 800 and Maruti Zen. An offer
to sell the Maruti 800 while B accepts the offer thinking the car to be sold is
Maruti Zen. Here there is no consent.
Free
consent refers to consent which has been rendered by free will of the parties
i.e. consent is voluntary. Section 10 of the Act, specifically states that a
contract is valid and enforceable if it is made with the free consent of the
parties.
Section 14 defines ‘Free Consent’ as – Consent is said to be free
consent when it is not caused by:
(i) Coercion, as defined in Section 15, or
(ii) Undue influence, as defined in Section 16, or
(iii) Fraud as defined in Section 17, or
(iv) Misrepresentation as defined in Section 18, or
b) Elements of a contract of sale.
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.
c) Rights of partners.
Ans:
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.
d) Kinds of bailment.
Ans: Bailments are divided into two parts on the basis of reward and
on the basis of benefit.
On the basis of reward it is of two types: Gratuitous
bailment and non-gratuitous bailment.
On the basis of benefit it is divided into three
categories: For the exclusive benefit of the bailor, for the exclusive benefit
of the bailee and for mutual benefit of bailor and bailee.
Gratuitous bailment: It is a contract of bailment where
no consideration passes between the bailor and the bailee.
Non-Gratuitous bailment: It is a contract of bailment
where consideration passes between the bailor and the bailee.
For the exclusive benefit of the bailor: It is a
contract of bailment where only bailer is benefited and not benefit is derived
by bailee. For example: A delivers his car to B for proper care and handling.
For the exclusive benefit of the bailee: It is a
contract of bailment where only bailee is benefited and no benefit is derived
by bailee. For example: A delivers his car to B for free driving.
For mutual benefit of bailor and bailee: It is a
contract of bailment where both bailor and bailee are benefited. For example: X
gives his car to Y on hire.
e) Voidable agreements.
Ans:
Voidable Agreements:
An agreement,
which is enforceable by law at the option of one more of the parties, but not
at the option of the other (s), is a voidable agreement.
For example: - Mr. A, at knife -
point, asks B to sell his scooter for Rs. 50. Mr. B gives consent. The
agreement is voidable at the option of B, whose consent is not free.
Features
of Voidable agreements
1.
It is a contract, which is enforceable
by law at the option of one or more parties thereof, but not at the option of
others.
2.
A voidable contract takes its full and
proper legal effect unless it is disputed and set aside by the person entitled
to do so.
3.
A contract may be voidable since very
beginning or may subsequently become voidable.
4.
A voidable contract gives right to the
aggrieved party to rescind the contract and claim the damages, etc in certain
cases.
5.
A
voidable contract does not affect the collateral transactions.
f) Negotiable instrument.
Ans:
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.
Essentials
or Characteristics of Negotiable Instruments:
a)
Witting and
Signature according to the rules: A Negotiable Instrument must be in
writing and signed by the parties according to the rules relating to (a)
promissory notes, (b) Bills of Exchange and (c) Cheques.
b)
Payable by
Money: Negotiable Instruments are payable by the legal tender money of
India. The Liabilities of the parties are governed in terms of such money only.
c)
Unconditional
Promise: If the instrument is a promissory note, it
must contain an unconditional promise to pay. If the instrument is a bill or
cheque, it must be an unconditional order to pay money.
d)
Freely
transferable: A negotiable instrument is transferable from
one person to another by delivery or by endorsement and delivery.
Also Read Business Laws Solved Papers (CBCS Patter) - Dibrugarh University
1. Business Laws Solved Paper 2019
2. Business Laws Solved Paper 2020 (Held in 2021)
3. Business Laws Solved Paper 2021 (Held in 2022)
3. (a) “A contract
is an agreement enforceable by law.” Explain. 11
Ans:
Meaning of Contract: 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 possess 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.
Or
(b) Discuss in brief the various modes of discharge of a contract.
11
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.
4. (a) What is a continuing guarantee? When and how is
it revoked? 4+7=11
Ans: Continuing Guarantee:
Where a guarantee does not come to an end in single
transaction rather it extends to series of transactions such guarantee is
called continuing guarantee. ‘The guarantee may’ be worded so as to cover,
within an agreed limit, the fluctuating debit balance of an account from time
to time during the continuance of the guarantee. This is called a continuing
guarantee’.3 Whether in a particular case a guarantee is continuing
or not is a question of the intention of the parties as expressed by the
language they have employed, understanding it fairly in the sense in which it us
used; and this intention is best ascertained by looking to the relative
position of the parties at the time the instrument is written,1 A
‘continuing guarantee’ is different from an ordinary guarantee.2
Continuing guarantee is defined in section 129 as under.
“Continuing
Guarantee”: A guarantee which extends to a series
of transactions is called a “continuing guarantee”.
For Example:
(a) A, in consideration that B will employ C in
collecting the rent of B’s Zamindari, promises B to be responsible, to the
amount of 5,000 rupees, for the due collection and payment by C of those rents.
This is continuing guarantee.
(b) A guarantees payment to B, a tea-dealer, to the
amount of pound 100, for any tea he may from time to time supply to C. B
supplies C with tea to above the value of pound 100, and C pays B for it.
Afterwards B supplies C with tea to the value of pound 200, C fails to pay. The
guarantee given by A was a continuing guarantee, and he is accordingly liable
to B to the extent of pound 100.
(c) A guarantees payment to B of the price of five
sacks of flour to be delivered by B to C and to be paid for in a month. B
delivers five sacks to C, C pays for them. Afterwards B delivers four sacks to
C, which C does riot pay for. The guarantee given by A was not a continuing
guarantee, and accordingly he is not liable for the price of the four sacks.
Revocation of
Continuing Guarantee:
As we know continuing guarantee extends to series of
transaction hence such guarantee is already in force if not withdrawn/revoked.
The natural way of revocation of such guarantee is death of the surety as
provided in section 131. But, after death of surety also his property will be
liable for past transactions. Like this section 130 provides that a continuing
guarantee may at any time be revoked by the surely, as to future transactions,
by notice to the creditor.
Or
(b) Briefly explain the duties of an agent towards his principal.
What are his rights against the principal?
5+6=11
Ans: Rights and duties of agent
Rights of agent
a)
Right
to remuneration: Every agent has a right to receive
remuneration from his principal for performing his duties. But, if an agent is
guilty of misconduct in the business is not entitled to any remuneration in
that part of the business which he has mis-conducted.
b)
Right
of retaining cash: Agent has the right to retain cash, received
by selling goods of the principal, to the extent of amount spent and advances
given to the principal by him in carrying out his business.
c) Right of lien: In
the absence of any contract to the contrary, an agent is entitled to retain
goods, papers and other property, whether movable or immovable, of the
principal received by him, until the amount due to himself for commission,
disbursements and services in respect of the same has been paid or accounted
for to him.
d) Right to compensation: if
any loss or injury caused to agent due to negligence or lack of skill of
principal, then the agent has the right to claim compensation for the same.
e) Right to indemnity: The
employer of an agent is bound to indemnify him against the consequences of all
lawful acts done by such agent in exercise of the authority conferred upon him.
Further, where one person employs another to do an act, and the agent does the
act in good faith, the employer is liable to indemnify the agent against the
consequences of that act.
Duties of
Agents
a)
Duty to follow
instructions given by the principal: Agent should follow the
instructions given by the principal while conducting business and in the
absence of any such directions, according to the custom which prevails in doing
business of the same kind at the same place.
b)
Duty of reasonable
care:
Agent must take due care and skill while performing his duties. If agent comes
across any complicated situation, he has to communicate that situation to
principal and his advice is to be obtained.
c)
Be honest: Agent should
behave in his capacity as agent; he should not run the transaction in his own
name.
d)
Duty not to make
secret profit:
Agent should not make secret profits by utilizing reputation of the
principal.
e)
Duty to protect
the property of principal: Agent should safe guard property of principal particularly
upon happening of events like death of principal, insolvency of principal, etc.
f)
Duty to maintain
accounts:
Agent should maintain proper accounting records to enroll the transactions run
by him. Agent has to remit amounts to principal properly.
g)
Duty to remit
sums:
The agent is bound to pay to his principal all sum received on his account. He
should not use for his own work the amount received for principal.
h)
Duty not to
delegate:
Agents are appointed by the principal. Such agent cannot lawfully employ
another to perform acts which he has expressly or impliedly undertaken to
perform personally.
5. (a) Distinguish
between a sale and an agreement to sell. What are the essential elements of
sale? 6+5=11
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. |
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.
6. Includes both a ‘sale’ and ‘an agreement to
sell’: The term ‘contract of sale’ is a generic term and includes both a ‘sale’
and an ‘agreement to sell’.
Sale:
Where under a contract of sale, the property in the goods is immediately
transferred at the time of making the contract from the seller to the buyer;
the contract is called a 'sale' [Sec. 4(3)]. It refers to an absolute sale,
e.g., an outright sale on a counter in a shop. There is immediate conveyance of
the ownership and mostly of the subject-matter of the sale as well (delivery
may also be given in future). It is an executed contract.
An agreement to sell: Where under a contract of sale, the transfer of property
in the goods is to take place at a future time or subject to some condition
thereafter to be fulfilled, the contract is called 'an agreement to sell' [Sec.
4(3)]. It is an Executory contract and refers to a conditional sale.
Or
(b) State the rules in regard to passing of property from a seller
to a buyer in a contract for sale of goods.
11
Ans: Transfer of ownership/Passing of
property from a seller to a buyer:
Provisions of the Sale of Goods Act, 1930 relating to transfer of
ownership are stated below:
1. Goods must be ascertained: As per sec 18 this Act, the property
in the goods does not pass to the buyer unless and until the goods are
ascertained.
2. Intention of the parties for such transfer: The property on
goods transferred to the buyer only when the parties to the contract intended
to be transferred. The intention of the parties is ascertained from the terms
of the contract. When the intention of the parties cannot be ascertained, the
following provisions of the Act are applicable:
(i) Specific goods: (Sec. 20 to 22)
(a) Specific goods in a deliverable state: In an unconditional
contract for the sale of specific goods in a deliverable state, the property in
the goods passes to the buyer when the contract is made.
(b) Specific goods to be put into a deliverable state: Where there
is a contract for the sale of specific goods and the seller is bound to do
something to the goods to put them into a deliverable state, the property does
not pass until such thing is done.
(c) Specific goods in a deliverable state but the seller has to
weigh, measure, test or do some other act or thing for the purpose of
ascertaining the price, the property does not pass until such act or thing is
done and the buyer has notice thereof.
(ii) Unascertained Goods: (Sec 23)
(a) Where
there is a contract for the sale of unascertained or future goods by
description and goods of that description and in a deliverable state are
unconditionally appropriated to the contract, the property in the goods
thereupon passes to the buyer.
(b) Delivery to carrier: Where,
in pursuance of the contract, the seller delivers the goods to the buyer or to
a carrier or other bailee for the purpose of transmission to the buyer and does
not reserve the right of disposal, he is deemed to have unconditionally
appropriated the goods for the purpose of the contract.
(iii) Goods on approval or ‘on sale or
return’: (Sec 24)
When goods are delivered to the buyer on approval or on sale or
return or other similar terms, the property therein passes to the buyer:
(a) When he
signifies his approval or acceptance to the seller
(b) When he
does any other act adopting the transaction.
(c) If he does
not signify his approval or acceptance to the seller but retains the goods
without giving notice of rejection, then, if a time has been fixed for the
return of the goods, on the expiration of such time, and, if no time has been
fixed, on the expiration of a reasonable time.
Reservation of Right of Disposal (Sec
25)
Sec 25(1): The seller may reserve the right of disposal of the
goods until certain conditions are fulfilled. The property in the goods does
not pass to the buyer until the conditions imposed by the seller are fulfilled.
Sec 25(2): Where goods are shipped or delivered
to a railway administration for carriage by railway and by the bill of landing
or railway receipt, the goods are deliverable to the order of the seller or his
agent, the seller is prima facie deemed to reserve the right of disposal.
Sec 25(3): Where the
seller of goods draws on the buyer for the price and transmits to the buyer the
bill of exchange together with the bill of lading and buyer fails to honour the
bill of exchange, the property in the goods does not pass to him.
6. (a) How and
why is cheque crossed? Distinguish between cheque crossed generally and cheque
crossed specially. Illustrate your answer with examples of both the types of
crossing of cheques. 4+4+3=11
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.
The
following parties can cross a cheque:
a)
The Drawer: The drawer of a cheque may
cross a cheque before issuing it. He may cross it generally or specially.
b)
The Holder: The holder of a cheque can
cross in the following way:
Ø The
holder may cross an open cheque generally or specially.
Ø The
holder may specially cross a generally crossed cheque.
Ø The
holder may add the words “Not-Negotiable” in a generally or specially crossed
cheque.
c)
The Banker: The banker to whom the
cheque is crossed specially may again cross it especially to another banker's
agent, for collection. This is called double special crossing.
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 abbreviations 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,
it means 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. (Specimen - 2012
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.
Differences
between General and Special crossing
The difference between General and Special crossing are:
a)
In case of general crossing drawing
two parallel transverse lines on the face of the cheque is must. But, in case
of special crossing drawing two parallel lines is not necessary.
b)
In case of general crossing writing
the name of a bank across the face of the cheque is not required. But in case
of special crossing the name of a bank must be mentioned across the face of the
cheque.
c)
Generally crossed cheque is payable
through any bank account. But specially crossed cheque is payable only through
the specific bank mentioned in the crossing.
d)
A generally crossed cheque is safer as
compared to open cheque. But a specially crossed cheque is safer than open
cheque as well as generally crossed cheque.
e)
General crossing can be easily
converted into special crossing by inserting the name of a bank in between the
two lines. But special crossing is not convertible into general crossing except
by the drawer.
Or
(b) Define holder in due course. State and explain the privileges of
a holder in due course under the provisions of the Negotiable Instrument Act. 4+7=11
Ans: Holder and Holder in due course
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.
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.
7. (a) State the
rights and duties of partners according to the law of partnership in India. 6+6=12
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.
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.
Or
(b) What is an LLP agreement? What are the contents of such
agreement? 4+8=12
Ans:
LLP Agreement: LLP Agreement is
a very important document which defines the mutual rights and obligations of
the partners. Sec. 2 (o) of the LLP Act, 2008 defines LLP Agreement as under:
“Limited
Liability Partnership Agreement” means any written agreement between the
partners of the limited liability partnership or between the limited liability
partnership and its partners which determines the mutual rights and duties of
the partners and their rights and duties in relation to that limited liability
partnership.
The LLP
agreements provides the:
a) The mutual
rights and the duties of the LLP and its partners shall be governed by the LLP
agreement between the partners or between the LLP and its partners.
b) The LLP
agreement and any changes made therein shall be filed with the registrar of the
LLPs.
Contents
of LLP Agreement
An LLP agreement must contain the
following:
1. Name of the LLP
Name under which an LLP is
registered must be stated in LLP agreement. The name must end with LLP.
2. Date of the agreement and
parties to the agreement
LLP agreement is between all the
partners and designated partner. The agreement must contain the date of
entering into an agreement. The LLP agreement must be executed within 30 days
of its incorporation.
3. Introductory provisions
It includes all the definitions
of terms used in the LLP agreement. It must also include the name of partners,
new parts, designated partners, rules regarding management and accounting of
LLP etc.
4. Place of business
The registered address of an LLP
must be included in an LLP agreement.
5. Business to be carried on
An LLP must contain the details
of business which is to be carried on by LLP. It must be in the same nature as
approved at the time of incorporation of LLP.
6. Partner’s contribution
Capital contribution by each
partner, rules regarding drawings of capital, interest on capital and interest
on drawings must also be included in LLP agreement. It is important for
maintaining a good relationship between partners.
7. Duration of LLP
Duration for which an LLP is
incorporated must be stated in LLP agreement. If it is for a specific period,
LLP will be dissolved after completion of that period. If it is for a
particular purpose, LLP will be dissolved after completion of that purpose.
8. Accounting and auditing
How books of accounts are
maintained i.e., cash basis or accrual basis, partner’s right of access to
books of accounts, whether or not auditing is compulsory must be included in
LLP agreement.
9. Record keeping and bank
arrangement
It includes the maintenance,
storage, and recording of books and other related documents.
10. Allocation and
distribution
Profit sharing ratio to share
profits or loss must be included in LLP agreement. Also appropriations before
distribution of profit must be stated.
11. Disassociation of
partner
Terms and conditions relating to
disassociation or withdrawal of partners from LLP should be stated. It also states
the rights of partners after disassociation or withdrawal.
12. Partners’ rights to
records
Each partner has the right to access
the books of account and records for avoiding misappropriation.
Post a Comment
Kindly give your valuable feedback to improve this website.