Business
Laws Question Paper 2025 (November)
Dibrugarh
University BCOM 5th SEM NEP Syllabus
COMMERCE (Core)
Paper:
COMC5B (Business Law)
Full
Marks: 60 Time: 2 hours
The
figures in the margin indicate full marks for the questions
SECTION—A
1. Define any four of the following: 2*4 = 8
(a) Caveat Emptor
Ans: The term ‘Caveat Emptor’ means ‘Let
the buyer beware’ i.e. in sale of goods, the seller is under no duty to reveal
unflattering truths about the goods sold. Therefore, when a buyer buys some
goods, he must examine them thoroughly. If the goods turn out to be defective
or do not suit his purpose, or if he depends upon his own skill and judgment
and makes a bad selection, he cannot blame anybody excepting himself.
(b) 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 is 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) Voidable Contract
Ans: 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
contract. 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.
(d) Mutual Agency
Ans: A mutual
agency is a legally binding relationship entered into by business partners,
which gives each partner authority on behalf of the business. With this
agreement, each of the partners becomes an agent of the business and,
therefore, has the power to make business decisions, such as creating a binding
agreement with a third party.
(e) Offer vs. Invitation to Offer
Ans: An offer is a specific proposal made
by one party to another to enter into a legally binding agreement. An invitation to offer, also known as an
invitation to treat, is a statement or action by one party that signals a
willingness to enter into negotiations or discussions about a potential
agreement, but is not a specific proposal or commitment to enter into an
agreement. In other words, an offer is a specific and serious proposal to enter
into a contract, while an invitation to offer is an invitation for the other
party to make an offer.
(f) Dishonour of a cheque
Ans: When a cheque is presented for payment
and it is not paid the drawer fails to pay, it is called dishonour of a cheque.
A cheque may be dishonour due to the following reasons:
a)
When the cheque is post-dated and it is
presented for payment before the date it bears.
b)
When there are insufficient funds to the
credit of the drawer.
c)
When the cheque is presented for payment at
branch where the drawer of the cheque has no account.
d)
When a cheque is not duly, presented, as for
example a cheque presented outside banking hours.
e)
When the cheque is ambiguous, mutilated,
materially altered or irregular.
f)
When the cheque has become stale, that is it
is not presented within six months of the issue of the cheque.
g)
When the signatures of the drawer of a cheque
do not tally with the specimen signatures in the records of the bank.
h)
When the amount in figures and in words is not
the same in a cheque.
i)
When the cheque is crossed and it is not
presented through a bank.
j)
Where the bank receives a notice of the
insolvency or insanity of the customer.
2. Write short notes on the following: 4*4 = 16
(a) Types of Endorsement
Ans: The
term “Endorsement” of a negotiable instrument means writing of a person’s name
of the back of the instrument for the purpose of negotiation. According to
Section 15 of the Negotiable Instrument Act, 1881, “When the maker or holder of
a negotiable instrument sings his name, otherwise than such maker, for the
purpose of negotiation, on the back or face thereof or on a slip of paper
annexed thereto he is said to have endorsed the instrument.” The person who
puts his signature is called the “endorser” and the person in whose favour it
is being endorsed in called the “endorsee”. Endorsement of negotiable
instruments can be made only by the following parties of to the instrument:
The Payee
b) The holder c) The drawer of a bill of exchange d) The endorsee e) The maker.
(b) Types of Consumers
Ans:
Meaning and types of Consumer
Section 2 (1) (d) of the Consumer Protection
Act, 1986 defines the term "consumer". It says ‘consumer’ means any
person:
a)
Who buys goods and
has paid or promised to pay a consideration partly or fully under any system of
deferred payment.
b)
Who hires or avails
of services and has paid or promised to pay a consideration partly or fully
under any system of deferred payment.
c)
Who uses
the goods with the approval of the person who has bought the goods for a
consideration?
d)
Who is a
beneficiary of the services hired or availed by an individual with the
consent of that individual?
Who is not a consumer?
a)
An applicant for a passport has been held to
be not a consumer, because the duties of the passport officer do not fall in
the category of services for consideration.
b)
An applicant for ration card is not a
consumer.
c)
The beneficiaries of municipal services have
been held to be not in the category of consumers.
(c) Consideration
Ans: Section
2 (d) of Indian Contract Act, 1872, defines consideration as “When at the
desire of the promisor the promise or any other person has done or abstained
from doing or does or abstains from doing something, such act abstinence or
promise is called a consideration for the promisor.”
Consideration
is based on the term ‘quid-pro-quo’ which
means ‘something in return’. When
a person makes a promise to other, he does so with an intention to get some
benefit from him. This act to do or to refrain from doing something is known as
consideration.
The
following are the rules related to the consideration
(i)
Consideration must move at the desire of promisor.
(ii) It
may move from the Promisee or any other person in the Indian Law so that a
stranger to the consideration may maintain a suit.
(iii)
Consideration may be past, present or future.
(iv) It must
be real & not illusory, infinite or vague.
(v) Consideration must not be unlawful, illegal,
immoral or opposed to public policy.
(vi)
Consideration need not be adequate.
(d) Nominal Partner
Ans: Nominal
Partner: A person who lends his name to the firm, without having any real
interest in it is called a Nominal Partner. He does not invest any capital in
the business nor does he takes any active part in the business nor does he
share any profit of the firm. However, he is liable along with other partners
for all the liabilities of the firm.
While the
Act is silent on “nominal partner” as a term, the legal consequences of being
one are primarily governed by Section 28 of the Indian Partnership Act,
1932, which deals with the doctrine of holding out. According to Section
28, “Any person who by words spoken or written or by conduct represents
himself, or knowingly permits himself to be represented, to be a partner in a
firm is liable as a partner in that firm to anyone who has on the faith of any
such representation given credit to the firm.”
Characteristics
of a Nominal Partner
1. No Capital Contribution – The nominal partner does not invest in
the partnership.
2. No Participation in Profits or Losses – He is not entitled to any
share in the firm’s earnings.
3. No Managerial Role – He does not take part in running the
business.
***
Part B
3. (a) Define contract. Discuss
elaborately upon the essentials of a valid contract. 12
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 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) Explain the modes of discharge
of a contract. 12
Ans: 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. 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) Discuss elaborately upon the
rights of an unpaid seller against the goods and the buyer. 12
Rights of an Unpaid Seller against the Goods
According
to Section 46, an unpaid seller’s rights against the goods are:
(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
are 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.
Or
(b) Define negotiable instruments. Explain
in detail the features and types of negotiable instruments. 12
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.
The
term ‘negotiable’ means transferable and the word ‘document’ means ‘in
writing’. Therefore, negotiable means a written promise or order to pay money
which may be transferred from one person to another.
Section
13 of the Negotiable Instruments Act, 1881 states, “A negotiable instrument
means a promissory note, bill of exchange or cheque payable either to order or
to bearer.” A negotiable instrument may be made payable to two or more payees
jointly, or it may be made payable in the alternative to one of two, or one or
some of several payees.
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.
e)
Acquisition of
Property: Any person, who possesses a negotiable instrument, becomes its
owner and entitled to the sum of money, mentioned on the face of the
instrument. When it is payable to bearer, the property in its passes from one
holder to another by mere delivery. If it is payable to order, the property
passes by endorsement, i.e. by the signature of its holder on its back and its
delivery.
f)
Acquisition of Good
Title: The holder in due course, i.e. the transferee of a negotiable
instrument in good faith and for value, acquires a good title to the instrument
even if the title of the transferor is defective. Further his title will not be
affected, by any defect in the title of the transferor.
g)
No Need of Giving
Notice: There is no need of giving a notice of transfer of a negotiable
instrument to the party liable to pay the money.
h)
Right of the Holder
in Due Course: The holder in the due course remains unaffected by certain defense,
which might be available against previous holders, as for example, fraud, to
which he is not a party.
Types of Negotiable instruments
There are
mainly three types of negotiable instruments
Promissory
Note, in the law of negotiable instruments, is a written instrument
containing an unconditional promise by a party, called the maker, who signs the
instrument, to pay to another, called the payee, a definite sum of money either
on demand or at a specified or ascertainable future date. The note may be made
payable to the bearer, to a party named in the note, or to the order of the
party named in the note.
A bill of exchange or
“draft” is a written order by the drawer to the drawee to pay money to the
payee. It is an unconditional order issued by a person or business which
directs the recipient to pay a fixed sum of money to a third party at a future
date. The future date may be either fixed or negotiable. A bill of exchange
must be in writing and signed and dated. Bills of exchange are used primarily
in international trade, and are written orders by one person to his bank to pay
the bearer a specific sum on a specific date.
Cheque is a very
common form of negotiable instrument. If you have a savings bank account or
current account in a bank, you can issue a cheque in your own name or in favour
of others, thereby directing the bank to pay the specified amount to the person
named in the cheque. A cheque is an instrument drawn on a specified banker and
not expressed to be payable otherwise than on demand Therefore, a cheque may be
regarded as a bill of exchange; the only difference is that the bank is always
the drawee in case of a cheque.
5. (a) Define partnership. Explain
in detail the rights and duties of partners.
12
Ans: Partnership
is an association of two or more people who agreed to do business and share
profits and losses arises from it in an agreed ratio. The partners act both as
agents and principals of the firm.
In
India, Partnership firm is governed by the Indian Partnership Act 1932. Section
4 of this act defines partnership as: "The relationship between persons,
who have agreed to share the profits of a business carried on by all or any one
of them acting for all."
According to Prof. Haney, partnership is "the relation between persons competent to make contract who agree
to carry on a lawful business in common with a view to private gain."
Partnership in this way is an
agreement, between two or more persons to carry on legal business with profit
motive, which is carried on by all or any one of them acting for all.
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.
(viii)
Interest on loan: Every partner has a right to receive interest on loan
at the rate of 6% p.a. on any loans or advance payments made by him beyond the
capital. Such interest is payable not only out of the profits but also from the
assets of the firm.
(ix)
To act as agent of the firm: Every partner has a right to act as the
agent of the firm and to bind the firm and other partners for acts done by him
in ordinary course of business.
(x)
To retire: A partner has a right to retire (a) with the consent of all
the other partners, or (b) in accordance with the express agreement between the
partners or (c) in case of Partnership-at-will by giving notice to all the
other partners of his intention to retire.
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
firm’s business: Every partner is bound to hold and use the property of the
firm exclusively for the purposes of the business of the firm.
(viii) Not to assign his rights: A partner cannot assign
rights and interest in the firm to an outsider so as to make him the partner of
the firm. He can, however, assign his share of the profit and share in the
assets of the firm.
(ix) To be liable jointly and severally: Every partner is
liable jointly with all the other partners and also severally for all the acts
of the firms done during the period he is the partner.
Or
(b) Distinguish among LLP, partnership and
company. 12
Ans: Difference
between LLP, Partnership and Company
|
Basis |
LLP |
Partnership |
Company |
|
1. Law |
It is created under LLP Act, 2008. |
It is created under Indian Partnership Act, 1932. |
It is created under Companies Act, 2013. |
|
2. Name |
The term “LLP” is added with the name of an LLP. |
There is no guideline about the name of the partnership. |
The word “Ltd.” is added with the name of a public company and the
word “Pvt Ltd.” is added with the name of a private company. |
|
3. Separate legal entity |
It has a separate legal entity distinct from its members. |
Partnership does not have separate legal entity distinct from its
members. |
Company has a separate legal entity distinct from its members. |
|
4. Liability |
Liability of partners is limited. |
Liability of partners is unlimited. |
Liability of members is limited. |
|
5. Charter document |
LLP agreement is a charter of the LLP which denotes its scope of
operation and rights and duties of the partners. |
Partnership deed is a charter of a partnership firm which denotes it
scope of operation and rights and duties of the partners. |
Memorandum and articles of association is the charter of the company
that defines it scope and area of operations. |
|
6. Number of members |
Minimum number of partners is 2 but in
case of limited liability partnership there is no maximum limit. |
Minimum number of partners is 2 and
maximum 100 for a partnership firm. |
Minimum numbers of members are 7 in case
of a public company and there is no limit for maximum. In a private limited company minimum number
of members is 2 and 200 are maximum. |
|
7. Registration |
Registration of an LLP with ROC is
necessary. |
Registration of a partnership firm is
not compulsory under the Indian Partnership Act, 1932. |
Registration of a company is compulsory
under the Indian Companies Act, 2013. |
|
8. Foreign participation |
Foreign nationals can be a partner in LLPs. |
Foreign nationals cannot for a partnership business in India. |
Foreign nationals can be a member of a company. |
|
9. Admission of a partner |
A person can be admitted as a partner as per the LLP agreement. |
A person can be admitted as a partner with the consent of all
partners. |
A person can be member of a company by buying shares. |
|
10. Conversion |
A partnership can be converted into LLP. |
An LLP can be converted into company. |
A company cannot be converted into partnership but can be converted
into LLP. |
|
11. Entity |
No separate legal entity exists in partnership. |
An LLP has a separate legal entity distinct from its partners. |
A company has a separate legal entity distinct from its members and
can sue and be sued. |
|
12. Dissolution |
A firm can be dissolved by mutual consent, insolvency of partners, by
the order of court etc. |
An LLP can be dissolved voluntarily or by the order of National
company law tribunal. |
A company can be dissolved voluntarily or by the order of National
company law tribunal. |
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