2024
COMMERCE
Paper: BCMO3004
(Business Laws)
Full Marks: 60
Time: 2½ hours
The figures in the margin indicate full marks for the questions.
Answer either in English or in Assamese.
1. (A) Choose the most appropriate answer: 1 × 4 = 4
(a) The Indian Contract Act was passed in the year—
(i) 1872
(ii) 1782
(iii) 1982
(iv) None of the above
Answer: (i) 1872
(b) A contract of indemnity is a—
(i) quasi contract
(ii) contingent contract
(iii) wagering contract
(iv) None of the above
Answer: (ii) contingent contract
(c) In a sale, there is an implied condition on the part of the seller that he—
(i) is in possession of the goods
(ii) will have the right to sell
(iii) has a right to sell the goods
(iv) will possess the goods
Answer: (iii) has a right to sell the goods
(d) The collateral transactions to an illegal agreement are—
(i) void
(ii) voidable
(iii) illegal
(iv) unenforceable
Answer: (iv) unenforceable
1. (B) State whether the following statements are True or False: 1 × 4 = 4
(a) A promissory note can be crossed.
Answer: False
Explanation: Only cheques can be crossed, not promissory notes.
(b) Trademark, copyright, patent right are not considered as goods under the Sale of Goods Act.
Answer: True
Explanation: These are intangible rights and not "goods" as defined under the Sale of Goods Act, 1930.
(c) Registration of partnership firm is compulsory.
Answer: False
Explanation: Registration of a partnership firm is optional under the Indian Partnership Act, 1932, though it's beneficial.
(d) Wagering agreements are void but a contingent contract is not.
Answer: True
Explanation: Wagering agreements are void under the Indian Contract Act, but contingent contracts are valid and enforceable.
2. Give brief answers to the following questions: (any six) 2 × 6 = 12
(a) What is a contract of sale?
Answer: A contract of sale is an agreement where the seller transfers or agrees to transfer the ownership of goods to the buyer for a price. It includes both sale and agreement to sell under the Sale of Goods Act, 1930.
(b) What is partnership deed?
Answer: A partnership deed is a written legal document that outlines the rights, duties, profits, and liabilities of all partners involved in a business partnership.
(c) Define 'goods' under the Sale of Goods Act, 1930.
Answer: Under Section 2(7) of the Sale of Goods Act, 1930, "goods" means every kind of movable property, excluding actionable claims and money, and includes stock, shares, growing crops, and things attached to or forming part of the land.
(d) What is consideration?
Answer: Consideration is something of value promised or given by one party to another in exchange for something else. It is an essential element of a valid contract under Section 2(d) of the Indian Contract Act.
(e) What is the test of determining existence of an agency?
Answer: The true test of an agency is whether the person has the authority to bind the principal in a contract with a third party. If yes, then an agency exists.
(f) What is meant by 'capacity to contract'?
Answer: Capacity to contract means the legal ability of a person to enter into a valid contract. As per law, a person must be of sound mind, not a minor, and not disqualified by law to have capacity.
(g) Mention the different parties to a bill of exchange.
Answer: The three main parties to a bill of exchange are:
i) Drawer – who makes the bill,
ii) Drawee – who is ordered to pay, and
iii) Payee – to whom the payment is to be made.
(h) What is 'information' as per the RTI Act, 2005?
Answer: As per Section 2(f) of the RTI Act, 2005, 'information' means any material in any form like records, documents, memos, e-mails, opinions, advices, press releases, circulars, orders, etc., relating to the affairs of a public authority.
(i) State whether there is any contract in the following cases:
(i) A having accepted an invitation to dinner did not attend it.
Answer: No contract. This is a social agreement and not legally enforceable.
(ii) A takes a seat in a bus carrying passengers.
Answer: Yes, a contract exists. This is an implied contract between A and the bus operator.
(j) Define Pledge.
Answer: A pledge is a bailment of goods as security for repayment of a debt or performance of a promise. The person who gives the goods is called the pawnor, and the one who receives is the pawnee.
3. Answer any four from the following: 5 × 4 = 20
(a) Mention the implied conditions of a contract of sale under the Sale of Goods Act, 1930.
Answer: In a contract of sale, certain conditions are automatically included by law, even if they are not mentioned in the agreement. These are called implied conditions. The main implied conditions under the Sale of Goods Act, 1930 are:
i) Condition as to title – The seller must have the legal right to sell the goods. If he does not have such a right, the buyer can reject the goods.
ii) Condition as to description – If goods are sold by description, they must match the description exactly.
iii) Condition as to quality or fitness – If the buyer tells the seller the purpose for which he needs the goods and depends on the seller’s skill, the goods must be fit for that purpose.
iv) Condition as to merchantable quality – If goods are bought by description from a seller who deals in such goods, they must be of good quality and usable.
v) Condition as to sample – When goods are sold by showing a sample, the bulk of the goods must match the sample in quality.
vi) Condition as to wholesomeness – Especially in case of food items, goods must be safe and fit for consumption.
These conditions protect the buyer from faulty or misrepresented goods.
(b) "All contracts are agreements, but all agreements are not contracts." Discuss.
Answer: This statement is true and is based on the difference between agreement and contract.
An agreement is any understanding or promise between two or more people. It can be social, moral, or legal. For example, a promise to go for a walk together is an agreement.
But a contract is a special kind of agreement that is legally enforceable. According to Section 2(h) of the Indian Contract Act, 1872, "A contract is an agreement enforceable by law."
For an agreement to become a contract, it must have certain essential elements like:
Free consent of the parties
Lawful consideration
Lawful object
Capacity to contract
Intention to create legal relationship
So, all contracts start as agreements. But only those agreements which fulfill the legal requirements become contracts.
Example:
A promises to gift B a mobile – it's an agreement, but not a contract as there is no consideration.
A agrees to sell B a mobile for ₹10,000 – this is a contract as it is enforceable by law.
Hence, every contract is an agreement, but not every agreement is a contract.
(c) Write the differences between limited liability partnership and partnership.
Answer: The difference between a Limited Liability Partnership (LLP) and a Partnership Firm is given below:
In short, LLP is more modern and safer, especially for large businesses, as it provides limited liability protection, unlike traditional partnership.
(d) Discuss the various ways by which a contract may be discharged.
Answer: Discharge of contract means the end of the contract or termination of the obligations of parties under the contract. A contract can be discharged in the following ways:
By performance – When both parties perform their duties as promised, the contract is discharged. This is the most common method.
By mutual agreement – Sometimes both parties agree to cancel, alter, or substitute the old contract with a new one. This ends the original contract.
By lapse of time – If the contract is not performed within the time limit set by the Limitation Act, it becomes unenforceable and is discharged.
By operation of law – A contract ends automatically in some situations like death, insolvency, or unauthorized alteration of the contract by one party.
By impossibility of performance – If it becomes impossible to perform the contract due to events like war, natural disaster, or change in law, the contract ends.
By breach of contract – When one party fails to perform or refuses to perform, the contract is discharged and the other party can claim compensation.
Each of these methods results in the contract coming to an end, and the parties are freed from their legal obligations.
(e) Differentiate between Promissory Note and Bill of Exchange (in table form)
Answer:
(f) Discuss the essential elements of a contract of indemnity.
Answer: A contract of indemnity is a special type of contract where one party promises to protect the other from loss. As per Section 124 of the Indian Contract Act, it is a contract where one party agrees to compensate the other for loss caused by the promisor or by another person.
The essential elements of a contract of indemnity are:
i) Parties involved – There must be two parties: the indemnifier (the one who promises to compensate) and the indemnified (the one who is protected from loss).
ii) Loss must be caused – The contract is to protect against actual loss or damage. The loss can be due to the promisor or another third party.
iii) Promise to compensate – The main feature is the promise to pay for the loss, not to prevent the loss.
iv) Lawful object and consideration – Like other contracts, it must have a legal purpose and consideration.
v) Express or implied – The contract can be made either in writing or implied by conduct.
Example: A promises to indemnify B against any loss he may suffer by acting as a surety for C. If B suffers any loss, A must pay.
(g) What are the contents of a partnership deed?
Answer: A partnership deed is a written agreement that defines the terms and conditions of a partnership business. The main contents of a partnership deed are:
i) Name and address of the firm and partners
ii) Nature and scope of the business
iii) Duration of the partnership (fixed or continuing)
iv) Capital contribution by each partner
v) Profit and loss sharing ratio
vi) Duties and responsibilities of each partner
vii) Salaries or commissions to partners, if any
viii) Bank account operation – who will manage the account
ix) Admission or retirement of a partner
x) Settlement of disputes – method of resolving disagreements
xi) Rules for dissolution of the firm
This deed helps avoid confusion and ensures smooth operation of the business.
(h) "An acceptance to be effective, must be communicated to the offerer." Explain the statement and discuss the exceptions to this rule.
Answer: In contract law, when an offer is made, the acceptance must be clearly communicated to the offerer for it to be valid. Simply agreeing silently or mentally does not make it a contract.
Explanation: According to the Indian Contract Act, a contract is formed only when the offerer comes to know that the other party has accepted the offer. Without communication, there is no meeting of minds.
Example: If A offers to sell a book to B and B accepts it but never tells A about the acceptance, there is no contract.
Exceptions to this rule:
i) Acceptance by conduct – If the offeree performs an act (like boarding a bus), it is assumed acceptance.
ii) Postal rule – In case of acceptance by post, the contract is complete when the letter of acceptance is posted, not when it is received.
iii) Waiver of communication – If the offerer says that no need to communicate acceptance, then silence or action can be enough.
iv) Contracts by agents – Acceptance by an agent on behalf of the principal can be valid.
So, in general, acceptance must be communicated, but in some special cases, communication is not necessary, and even silent or implied actions are enough.
4. Answer any two of the following: 10 × 2 = 20
(a) Discuss the rights and duties of Bailor and Bailee.
Answer: The terms Bailor and Bailee come under the Contract of Bailment as per Section 148 of the Indian Contract Act, 1872. Bailment means delivering goods by one person (Bailor) to another person (Bailee) for a specific purpose, under the condition that the goods will be returned once the purpose is completed.
Rights and Duties of Bailor:
Duties of Bailor:
i) To disclose known faults: The Bailor must inform the Bailee of any known defects in the goods. If he fails, he will be responsible for any loss caused.
ii) To bear expenses: If the Bailment is for the benefit of the Bailor, he must pay all necessary expenses incurred by the Bailee.
iii) To receive back the goods: The Bailor must accept the goods back when returned by the Bailee after the purpose is completed.
iv) To indemnify the Bailee: If the Bailor’s goods cause any damage or loss to the Bailee due to hidden defects or legal issues, the Bailor must compensate the Bailee.
Rights of Bailor:
i) Right to claim damages: The Bailor can claim compensation if the Bailee causes damage due to negligence.
ii) Right to terminate the Bailment: If the Bailee misuses the goods or does something against the terms, the Bailor can end the contract.
iii) Right to demand goods: The Bailor has the right to demand return of goods after the purpose is served.
Rights and Duties of Bailee:
Duties of Bailee:
i) To take reasonable care: The Bailee must handle the goods as a reasonable man would handle his own goods.
ii) Not to make unauthorized use: The Bailee must use the goods only for the agreed purpose. Any misuse is a breach of contract.
iii) To return the goods: After the completion of the purpose or expiry of time, the Bailee must return the goods to the Bailor.
iv) To return any increase/profit from goods: If the goods produce any profit or increase (e.g., interest, offspring, etc.), the Bailee must return it along with the goods.
Rights of Bailee:
i) Right to compensation: The Bailee can demand compensation if he suffers any loss due to the faults of the Bailor.
ii) Right of lien: The Bailee can retain the goods until the Bailor pays lawful charges.
iii) Right to recover expenses: If the Bailee spends money for the preservation or maintenance of the goods, he can recover it from the Bailor.
Thus, both Bailor and Bailee have legal responsibilities and protections to ensure proper handling of goods.
(b) What are the different types of contract? Explain.
Answer: A contract is an agreement enforceable by law. There are different types of contracts based on formation, performance, and enforceability.
1. Based on Formation:
i) Express Contract: A contract where terms are clearly stated either in writing or spoken words.
Example: A written agreement to sell a house.
ii) Implied Contract: A contract formed by the conduct or actions of parties, not through words.
Example: Boarding a bus implies a contract to pay the fare.
iii) Quasi-Contract: Not a real contract, but created by law when one person enjoys a benefit at the expense of another.
Example: A person finds lost goods and the law requires him to return them.
2. Based on Performance:
i) Executed Contract: A contract where both parties have performed their obligations.
Example: Buying a product and making full payment.
ii) Executory Contract: A contract where one or both parties still have obligations to perform.
Example: A agrees to deliver goods next week.
iii) Unilateral Contract: Only one party has to perform at the time of agreement.
Example: A offers a reward for finding his dog.
iv) Bilateral Contract: Both parties have obligations to perform.
Example: A agrees to sell a car to B and B agrees to pay.
3. Based on Enforceability:
i) Valid Contract: Meets all legal requirements and is enforceable in court.
ii) Void Contract: A contract that is not enforceable by law.
Example: Agreement without consideration.
iii) Voidable Contract: A contract that is valid until one party cancels it due to issues like coercion or fraud.
Example: Contract made under pressure.
iv) Illegal Contract: Involves unlawful acts and is not recognized by law.
Example: Contract for selling drugs.
v) Unenforceable Contract: A contract that cannot be enforced due to some technical issues like lack of stamp or written form.
These classifications help in understanding how contracts work and how the law treats different agreements.
(c) Who is an unpaid seller? Discuss briefly the rights of an unpaid seller.
Answer: An unpaid seller is a person who has sold goods but has not received the whole price or has received a bill or cheque that is dishonoured.
As per the Sale of Goods Act, 1930, a seller is unpaid when:
i) Full price is not paid, or
ii) Conditional payment (e.g., cheque) is dishonoured.
Rights of an Unpaid Seller:
1. Rights Against the Goods:
i) Right of Lien: If the goods are still in the seller’s possession, he can keep them until full payment is made.
ii) Right of Stoppage in Transit: If goods are being transported and the buyer becomes insolvent, the seller can stop delivery and take back the goods.
iii) Right of Resale: If the buyer fails to pay even after notice, the seller can resell the goods and recover losses.
2. Rights Against the Buyer Personally:
i) Suit for Price: If ownership of goods has passed to the buyer and he fails to pay, the seller can file a suit for the price.
ii) Suit for Damages: If the buyer refuses to take delivery, the seller can claim damages for the loss suffered.
iii) Suit for Repudiation: If the buyer cancels the contract before due date, the seller can sue for anticipatory breach.
iv) Suit for Interest: If agreed, the seller can claim interest on unpaid amounts.
The law provides these rights to protect sellers and ensure fair dealings in trade.
(d) Discuss the obligations of public authority under the Right to Information Act, 2005.
Answer: The Right to Information (RTI) Act, 2005 is a law that gives citizens the right to get information from the government. Under this Act, public authorities (government departments and offices) have certain obligations to ensure transparency and accountability.
Main Obligations of Public Authorities:
Maintain Records:
Public authorities must keep proper records of their decisions, policies, rules, and procedures in a systematized and indexed manner.Suo Moto Disclosure:
Under Section 4(1)(b), authorities must publish important information voluntarily, such as:
Functions and duties
Decision-making procedures
Names of officers and staff
Budget and expenditure
Rules and regulations
Appointment of PIOs (Public Information Officers):
They must appoint officers to receive and respond to RTI applications.Provide Information on Request:
Citizens can file a request, and the authority must give information within 30 days (or 48 hours in life and liberty cases).Publish Annual Reports:
Authorities must submit reports to the Information Commission on the number of RTI requests received and disposed.Digitization and Website Update:
Efforts must be made to provide information online and update websites regularly for public access.Assist RTI Applicants:
If a person is illiterate or disabled, the PIO must help him in filing the application.Exemptions Should Be Limited:
Only specific types of information are exempted (e.g., national security, personal privacy), and even then, reasons must be provided.
Conclusion: The RTI Act makes it mandatory for public authorities to act transparently, respond to citizens' queries, and reduce corruption. Their main duty is to promote openness and help citizens participate in democracy.
(e) Define Negotiable Instrument. Discuss the characteristics of a negotiable instrument.
Answer: A Negotiable Instrument is a written document which guarantees the payment of a specific amount of money to the holder, either on demand or after a fixed time. It can be transferred freely from one person to another, and the person receiving it gets a good title to the instrument.
Definition: According to Section 13 of the Negotiable Instruments Act, 1881, a negotiable instrument means a promissory note, bill of exchange, or cheque, payable either to order or to bearer.
In simple terms, a negotiable instrument is a document that acts like money, which can be transferred easily, and the receiver gets full legal rights over it.
Examples of Negotiable Instruments:
Promissory Note
Bill of Exchange
Cheque
Bank Draft
Hundis
Characteristics of a Negotiable Instrument:
1. Freely Transferable: It can be transferred from one person to another easily by delivery (in case of bearer instruments) or by endorsement and delivery (in case of order instruments).
2. Title of the Holder: The person who receives the instrument in good faith and for value gets a better title, even if the previous holder had a defective title.
3. Must Be in Writing: All negotiable instruments must be in written form. Oral promises or orders to pay are not considered valid negotiable instruments.
4. Unconditional Promise or Order: The instrument must contain an unconditional promise (in case of promissory note) or unconditional order (in case of bill of exchange or cheque) to pay money.
5. Payment of a Certain Sum of Money Only: The amount to be paid must be certain and clearly mentioned in the document. It should not involve any goods or services—only money.
6. Definite Time for Payment: The instrument may be payable on demand or at a fixed or determinable future date. The time of payment must be clear.
7. Signature of the Maker or Drawer: It must be signed by the person who creates it (the maker or drawer), otherwise, it will not be valid.
8. Presumption of Consideration: It is presumed by law that a negotiable instrument has been issued for a valid consideration, unless proved otherwise.
9. Legal Recognition: Negotiable instruments are governed by the Negotiable Instruments Act, 1881, and recognized by courts for legal enforcement.
10. Rights of the Holder in Due Course: A holder in due course enjoys special protection under the law and can sue in his own name for payment, even if there were problems in the earlier ownership.
Conclusion: Negotiable instruments are important tools in the financial and business world as they make the transfer of money simple, quick, and secure. Their unique features like easy transferability and legal safety make them widely used in commercial transactions.
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