Business Laws Solved Question Papers
B.Com 1st Sem
Dibrugarh University
2013 (November) – Old Syllabus Semester System
1.
(a)
Discuss the various modes of discharge of contracts.
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:-
a) 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.
b) 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:
Ø 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.
Ø 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.
Ø 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.
Ø 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.
Ø 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.
Ø 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.
c) 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 –
Ø Impossibility existing at the time
formation of the contract: This is known as pre-contractual impossibility.
The fact of impossibility may be:
Ø 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.
Ø 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.
Ø 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.
d) 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.
e) 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:
Ø 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.
Ø By insolvency: When a person is
declared insolvent, he is discharged from all liabilities incurred prior to
such declaration.
Ø 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.
Ø By rights and liabilities becoming vested
in the same person: When the rights and liabilities under a contract vests
in the same person.
f) 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:-
Ø 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.
Ø 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.
Or
(b) Write the rules of
contingent contracts.
Ans: Contingent
Contract
According to the Contract Act a contingent
contract is one whose performance us uncertain. The performance of the contract
which comes under this category depends on the happening or non- happening of
certain uncertain-events. On the other hand, an ordinary or absolute contract
is such where performance is certain or absolute in itself and not dependent on
the happening or non-happening of an event. A contingent contract is defined as
a contract to do or not to do something, if some event, collateral to such
contract, does or does not happen (sec. 31).
Example
(A) A contracts to pay Rs. 50,000 if B’s house
is destroyed by five. This is a contingent contract as the performance depends
on the happening of an event.
(B) A asks B to give loan to M and promises
that he (A) will repay the loan if M does not return it in time.
Characteristics of a Contingent Contract: A
Contingent Contract must have three essential characteristics. There are:
(1) The performance of the contract
depends on the happening or non-happening of a certain event in future. This
dependence on a probable future event distinguishes a contingent contract from
an ordinary contract.
(2) This event must be uncertain, that
means happening or non-happening of the future event is not certain, i.e., it
may or may not happen. If the event is hundred percent sure to happen, and the
contract in that case has to be performed any way, such a contract is not
called a contingent contract.
(3) The event must be collateral or
incident to the contract. Therefore, contracts of indemnity, guarantee and
insurance are the most common instances of a contingent contract.
Rules regarding contingent contracts: To
enforce the performance of a contingent contract the following rules have to be
followed:
1. Where the performance of
a contingent depends on the happening of an uncertain future event, it cannot
be enforced till the event takes place. And if the happening of the event becomes
impossible, such contracts become void (sec. 32). Example- A
contracts to sell B a piece of land if he (A) wins the legal case involving
that piece of land. A loses the case. The contract becomes void.
2. Where the performance of
a contingent contract depends on the non-happening of a future event, the
contract can be enforced if the happening becomes impossible (sec. 33). Example- A
agrees to sell his house to B if Y dies. This contract cannot be enforced till
Y is alive.
3. If the contract is dependent
on the manner in which a person will act at an unspecified time, the event
shall be considered to become impossible when such person does anything which
makes it impossible that he should so act within any definite time or otherwise
than under further contingencies (sec. 34).
4. Contingent contract to do
or not to do anything, if a specified uncertain event happens within a fixed
time, becomes void if the event does not happen and the time expires or its
happening becomes impossible before the time expires [sec. 35(1)].
5. Contingent contract to do
or not to do anything, if a specific event does not happen within a specified
time, may be enforced when the time so specified expires and such event does
not happen, or before the time so specified it becomes certain that such event
will not happen [sec. 35(1)].
6. Contingent agreements to
do or not to do any thing, if an impossible event happens, are void, whether or
not the fact is known to the parties at the time when it is made (sec. 36).
2. (a) Distinguish
between sale and agreement to sale.
Ans: Difference
between ‘Sale’ and ‘agreement to sell’.
According to Section 4 of the Sale of Goods
Act, 1930, ‘A contract of sale of goods is a contract whereby the seller
transfers or agrees to transfer the property in the goods to the buyer for a
price.’
The term ‘Contract of sale’ is a generic term
and includes both a sale and an agreement to sell. 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’ but 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’. [Section 4(3)].
Difference
between Sale and Agreement to Sale:-
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 because nothing remains to be done.
|
It is an Executory contract because something remains to be
done.
|
Conveyance of property
|
Buyer gets a right to enjoy the goods against the whole world
including seller.
|
Buyer does not get such right.
|
Transfer of risk
|
Transfer of risk of loss of goods takes place immediately
because ownership is transferred.
|
Transfer of risk of loss of goods does not take place because
ownership is not transferred.
|
Right of seller against the buyer’s breach
|
Seller can sue the buyer for the price, even though the goods
are in his possession.
|
Buyer can sue the seller for damages only.
|
Rights of buyer against the seller’s breach
|
Buyer can sue the seller for damages and can sue the third party
who bought those goods for goods.
|
Buyer can sue the seller for damages only.
|
Effect of insolvency of seller having possession of goods.
|
Buyer can claim the goods from the official receiver or assignee
because the ownership of goods has transferred to the buyer.
|
Buyer cannot claim the goods, even when he has paid the price
because the ownership has not transferred to the buyer. The buyer who has
paid the price can only claim rateable dividend.
|
Effect of insolvency of the buyer before paying the price.
|
Seller must deliver the goods to the official receiver or
assignee because the ownership of goods has transferred to the buyer. He can
only claim rateable dividend for the unpaid price.
|
Seller can refuse to deliver the goods unless he is paid full
price of the goods because the ownership has not transferred to the buyer.
|
Right in rem / personam
|
It is a right in rem i.e.
right against the whole world.
|
It creates a right in
personam i.e. right against a person.
|
In risk of destruction of goods.
|
Buyer has to bear the risk even if possession is with the seller
as ownership has passed.
|
Seller has to bear the risk, even if possession is with the
buyer, as ownership has not passed.
|
Or
(b) What is warranty?
Mention its essential elements. When a condition is treated as a warranty?
Ans: Warranty: Section 12(3) states that a warranty is a
stipulation which is collateral to the main purpose of the contract. The breach
of a warranty gives rise to a claim for damages but not a right to reject the
goods and treat the contract as repudiated. The
above definition shows that for the implementation of a contract warranty is
not essential. For the breach of warranty only damages can be claimed.
Example: A while
selling his car to B, stated the car gives a mileage of 12 kms per litre of
petrol. The car gives only 10 kms per litre. B cannot reject the car. It is
breach of warranty. He can only claim damages for the loss due to extra
consumption of petrol.
Features or elements of Warranty
A stipulation which is collateral to the main purpose of the
contract.
|
The aggrieved party cannot terminate the contract.
|
The aggrieved party cannot terminate the contract but can only
claim damages.
|
A breach of warranty cannot be treated as breach of condition.
|
It is a subsidiary provision
related to the object of the contract.
|
When condition to be treated as warranty.
a) Where a
contract of sale is subject to any condition to be fulfilled by the seller, the
buyer may waive the condition or elect to treat the breach of the condition as
a breach of warranty and not as a ground for treating the contract as
repudiated.
b) Where a
contract of sale is not severable and the buyer has accepted the goods or part
thereof, the breach of any condition to be fulfilled by the seller can only be
treated as a breach of warranty and not as a ground for rejecting the goods and
treating the contract as repudiated, unless there is a term of the contract,
express or implied, to that effect.
c) Nothing in
this section shall affect the case of any condition or warranty fulfillment of
which is excused by law by reason of impossibility or otherwise.
3. (a) Define Bills of
Exchange. Discuss its essential elements.
Ans: Bills of Exchange
A bill of exchange or “draft” is a written
order by the drawer to the drawee to pay money to the payee. It is an
unconditional order issued by a person or business which directs the recipient
to pay a fixed sum of money to a third party at a future date. The future date
may be either fixed or negotiable. A bill of exchange must be in writing and
signed and dated. Bills of exchange are used primarily in international trade,
and are written orders by one person to his bank to pay the bearer a specific
sum on a specific date.
As per Section 5 a “bill of exchange” is “an
instrument in writing containing an unconditional order, signed by the maker,
directing a certain person to pay a certain sum of money only to, or to the
order of, a certain person or to the bearer of the instrument.”
Essentials
of a Bills of exchange
1) Number of
parties: A bill of exchange has 3
parties:
Ø
the drawer, who draws the bill of exchange
Ø
the drawee, who has to make the payment
Ø
the payee, who is entitled to the payment.
Sometimes
the drawer and the payee can be one and the same person.
2) It Must be
in writing: The Bill of Exchange must be in writing.
3) Express
order to pay: This is the essence of a
bill of exchange. There must be an ‘order by the drawer to the drawee to pay’.
The order must be a command and not an excessive request.
4) Order must
be unconditional: The order to pay must
be unconditional. In other words the happening of the condition must be
certain.
5) Order to
pay money only: Just as a promissory
note, the instrument must be for money only.
6) Sum
payable to be certain: The amount payable
must be certain. There should be no ambiguity in the amount to be paid through
the Bill of Exchange.
7) Must be
signed: The instrument is complete only
when it is signed by the drawer and the drawee.
8) Must bear
the stamp: A Bill of Exchange must be
properly stamped in accordance with the Indian Stamp Act, 1899 and must also be
properly cancelled.
9) Other
formalities: Formalities such as date,
place, consideration, etc. are usually found in a Bill of Exchange.
10) Requisites
of a contract to be complied with: All
requisites of a valid contract like capacity to contract, consideration, free
consent, lawful object must be present.
Or
(b) Write a note on the
presumptions in respect of negotiable instruments.
Ans: Meaning of
Negotiable Instruments
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.
Unless contrary proved certain presumptions
are in the made case of all negotiable instruments. Consideration, date,
signature of holder in due course, for example, is presumed in the case of all
instruments. The presumptions from Special rules of Evidence under section 118
to 119. Sec. 118 and 119 deal with the following presumptions:
1. Consideration: It is presumed that every negotiable
instrument was made or drawn, accepted, endorsed, negotiated or transferred for
consideration. As such the holder need not prove consideration. However, this
presumption would not arise if it is proved that the instrument was obtained
from its owner by any offence, fraud, or for unlawful consideration.
2. Date: Every negotiable instrument is presumed to
have been made on the date which it bears.
3. Time of acceptance: It is presumed that every accepted
bill was accepted within a reasonable time and before its maturity.
4. Time of transfer: It is presumed that every transfer
was made before maturity.
5. Order of endorsements: The endorsements are presumed to have
been made in the same order in which they appear.
6. Stamp: In case an instrument is lost, it is presumed
that it was duly stamped and the stamp was duly cancelled.
7. Every holder is a holder in due course: Every
holder is presumed to be a holder in due course.
8. Dishonour of instrument: In case a suit is filed for dishonour
of an instruments the Court, on the proof of protest presumes that the
instrument was dishonoured.
It should be noted that where the promisor
denies the execution of the promissory note taking the plea that he signed on a
blank paper, then the burden is on the plaintiff to prove execution.
It should be noted further that presumption,
as consideration, is not conclusive. If execution of promissory note is proved,
then burden to prove lack of consideration is on the defendant.
4. (a) What is ‘complaint’ under the Consumer
Protection Act? Who can file a complaint?
Ans: Complaint
In Section 2 (1) (c) "complaint"
means any allegation in writing made by a complainant that:
a) an unfair
trade practice or a restrictive trade practice has been adopted by any trader;
b) the goods
bought by him or agreed to be bought by him suffer from one or more defect;
c) the services
hired or availed of or agreed to be hired or availed of by him suffer from
deficiency in any respect;
d) a trader
has charged for the goods mentioned in the complaint a price in excess of the
price fixed by or under any law for the time being in force or displayed on the
goods or any package containing such goods;
e) goods
which will be hazardous to life and safety when used are being offered for sale
to the public in contravention of the provisions of any law for the time being
in force requiring traders to display information in regard to the contents,
manner and effect of use of such goods.
With a view to obtaining any relief provided by or
under this Act; the essential features of a “Complaint” are:
a) The
complaint must be in writing;
b) The
complaint must be made with a view to obtain any relief under the Act;
c) The
Complaint must make any of the five allegations stated under section 2 (1) (c),
against a trader or manufacturer;
d) The
complaint must be filed in a manner prescribed under law i.e. under section 12
of the Act.
e) The
complaint must be filed before appropriate consumer commission having
jurisdiction to entertain complaint. Section 17 & Section 21.
Ordinarily, the complaint must contain name,
description and address of the Complainant and the purpose for which he bought
the goods. It must also contain the name, description and address of the trader
or manufacturer. It must state clearly, the facts of the case e.g. when the
things was purchase? For what purpose? When the things were consumed or used?
Defects in goods or deficiency in the service etc., what injury suffered etc.
These facts must be supported by all relevant and proper documents. Lastly, the
complaint must mention the relief or relief’s asked for against the trader or manufacturer
i.e. the opposite party.
Complainant
Section 2 (1) (b) of the Consumer Protection
Act, 1986 defines the term "complainant" as: Complainant means
a) a
consumer; or
b) any
voluntary consumer association registered under the Companies Act, 1956 (1 of
1956), or under any other law for the time being in force; or
c) the
Central Government or any State Government,
d) one or
more consumers, where there are numerous consumers having the same interest;
e) who or
which makes a complaint;
A person seeking redress before the Consumer
Redressal Forum must come within any of the four categories stated above;
otherwise he has no locus standi to
proceed with his case. The ‘Complainant’ among others means a ‘consumer’
generally. The expression ‘complainant’ as defined in section 2 (1) (b), is
comprehensive to enable consumer as well as any voluntary consumer association.
This definition is very suitable in a country like India, where majority of the
people are illiterate and therefore, power to file a complaint is given to the
voluntary consumer associations. The only restriction laid down under the
Section in this regard is that, the association must be registered under the
Companies Act, 2013 or any other law for the time being in force.
However, a consumer association cannot file a
complaint on behalf of unspecified or unidentified number of consumers. In the
Case of Upbhokta Sanrakshan Samiti V/s. Winsard foods Ltd., the consumers
association found that, the biscuit packets sold by a food company were less in
weights. A complainant demanding compensation for the public of the State of
Rajasthan was not maintainable.
The act contemplates an identified consumer in
order to make the application of its provisions or any consumer association to
represent it. An act also contemplates an action in representative capacity, by
providing that, when there are numerous consumers having same interest, one or
more consumers must file complaint on behalf of others.
Or
(b) Discuss the
composition of State Commission and its jurisdiction.
Ans: The State Consumer Protection Councils
The State Government may, by
notification, establish with effect from such date as it may specify in such
notification, a council to be known as the Consumer Protection Council
(hereinafter referred to as the State Council).
a. The
Minister in-charge of consumer affairs in the State Government who shall be its
Chairman;
b. Such
number of other official or non-official members representing such interests as
may be prescribed by the State Government.
The objects of every State Council
shall be to promote and protect within the State the rights of the consumers
laid down in clauses (a) to (f) of section 6. (Objects of National Council)
State Consumer Disputes Redressal
Commission: The State Consumer Disputes Redress Commission is established in
each state and these have jurisdiction to entertain complaints where the value
of goods or services and the compensation if any, claimed exceeds Rs.20,00,000
(TWENTY LAKHS) but does not exceed Rs.1,00,00,000 (ONE CRORE).
5. (a) Explain
‘person’ and person resident in India’ under FEMA.
Or
(b) Who is authorised person’? Elucidate the power of
RBI to inspect authorized person.
6. Write short
notes on: Void contract, Days of grace, Price, Coercion
7. Choose the correct
answer:
(a) Offer and acceptance make
contract/ agreement.
(b) Quasi-contracts are created by circumstances/ parties.
(c) Sale of goods Act was passed in
1830/ 1930.
(d) Implied warranties are written/ not written in a contract of sale.
(e) In promissory note there are
three/ two parties.
(f) Days of grace is allowed/ not allowed in cheque.
(g) Consumer protection Act recognizes
eight/ six rights of
consumers.
(h) FEMA came into force from June 1, 1999/ 2000.