DIBRUGARH
UNIVERSITY SOLVED QUESTION PAPERS
BUSINESS LAWS’ 2021 (December) Held in 2022
COMMERCE (Core):
Paper: C – 102 (Business Law)
Full Marks:
80
Pass Marks: 32
Time: 3 hours
The figures in the margin indicate full marks for the questions.
1. (a) Write True or
False: 1x5=5
(1) Possibility of performance
is an essential element for a valid contract. True
(2) Contract with a minor is
void ab initio. True
(3) A bill of exchange is an
order to pay money. True
(4) The Sales of Goods Act was
enacted in the year 1932. False
(5) The Indian Partnership Act
and Negotiable Instruments Act were enacted in the same year. False
(b) Fill in the blanks: 1x3=3
(1) ‘Caveat Emptor’ means buyer be
aware. (buyer/seller)
(2) Registration of a
partnership firm is Optional. (compulsory/optional)
(3) Partners of an
unregistered firm cannot sue against their co-partners. (can/cannot)
2. Write short notes on
(any four): 4x4=16
a) Express contract.
Ans:
An express contract is an agreement with clearly stated terms to which both
parties are bound at the time it is formed. This contract may be either oral or
written. It must demonstrate an offer and unconditional acceptance, and be
expressed in an easy-to-understand manner.
An
express contract is different from an implied contract in the mode of manifesting
assent and the mode of proof required but there is no distinction in respect of
legal effects. Both forms of contract require mutual assent and a meeting of
the minds, but an express contract is proved by an actual agreement where an
implied contract is proved by circumstances and the contract of the parties.
If an express contract exists, there
may not be another implied contract that covers the same situation, because the
law does not allow any substitutes for the express contract terms.
b) Executory contract.
Ans: Executory Contract. Where the contract is yet to be performed either wholly or partially
or one or both the parties have yet to perform their obligations, the contract
is Executory contract.
Examples: A agrees to make furniture for B for Rs. 5,000 Mr. A has yet to make
furniture and Mr. B has not made the payment. So, both A & B are yet to
perform their obligations. Suppose A has made the furniture but B has yet to
make payment, it is executed on A’s part by Executory on B’s part.
Thus, Executory contract may be:
1) Unilateral.
2) Bilateral.
(1) Unilateral Contract: A unilateral contract is one in which a promise on one side is
exchanged for an act on the other side.
A contract is said to be unilateral where one party has discharged
his obligation either before or at time of entering into contract.
Example: Mr. A, a worker does manual labour at the request of Mr. B on a
particular day. On completion of work it is B’s obligation to pay him wages
because A has already performed his obligation.
(2) Bilateral Contract: These are the contracts where a promise on one side is exchanged for
a promise on the part of other party.
Classification of
Contracts under English Law: English Law classified
contracts into:
1) Formal Contracts.
2) Simple Contracts.
c) Agreement to sell.
Ans: Agreement to sell or
Conditional Sale: Where the transfer of property
(ownership) in the goods shall take place in future or one the fulfillment of
certain conditions, it shall be an agreement to sell or a conditional sale. The
property (ownership) in goods shall not be transferred from the seller to the
buyer until and unless some condition is fulfilled for the completion of the
contract of sale.
In the first stage every contract of sale is an agreement to sell.
When seller and buyer agrees to sell and buy some goods at a price, there is an
agreement between the two for the sale of the goods. Now what remains, is the
transfer of ownership of the goods from the seller to the buyer. If the
ownership is transferred by the seller immediately it becomes a sale and if he
does not transfer the ownership until some conditions is fulfilled it shall
remains an agreement to sell till the condition is fulfilled and the ownership
is transferred.
d) Essentials of partnership.
Ans: Essentials
of Partnership
(i)
Agreement: Partnership
is the result of an agreement, either written or oral, between two or more
persons. An agreement between the partners may be expressed or implied. It
arises from contract and not from status or process of law.
(ii)
Number
of Persons: In
a partnership firm there must be at least two people to form the business.
Partnership Act 1932, does not specifies the maximum numbers of persons, but
Section 464 of the Indian Companies Act 2013, restricts the number of Partners
to 50 for a partnership firm. But in case of limited liability partnership
there is no maximum limit.
(iii) Profit-Sharing: The agreement between/among partners
must be to share profit or losses. Sharing of profit is an essential feature of
partnership. But an agreement to share losses is not an essential element.
There may be specific provision in the partnership deed that a particular
partner or partners shall not bear the losses.
(iv)
Business: The existence of business is
essential in case of partnership. The term business includes every trade,
occupation and profession. Also the
motive of the business is the acquisition of gain which leads to the formation
of partnership. If there is no intention to carry on the business and to share
the profit thereof, there can be no partnership.
(v)
Business carried on by all or any of
them acting for all:
Business must be carried on by all the partners or any one of them acting as
agent of other partners. Each partner carrying on the business is the principle
as well as the agent for all the other partners. Any act of one partner in the
course of the business of the firm is in fact an act of all the partners. This
relationship between the partners is the true test of partnership.
e) Partnership deed.
Ans: Partnership deed: Meaning
A partnership is formed by an agreement. This agreement may be
oral or in writing. Though the law does not expressly require that the
partnership agreement should be in writing, it is desirable to have it in
writing. A written agreement, which contains the terms of partnership, as
agreed to by the partners is called ‘Partnership Deed.’
Importance: It is a very important document of the firm which
defines relationship amongst the partners. It is necessary to avoid disputes
amongst the partners and can be presented in the court as evidence.
Contents
(Clauses) of the Deed:
a)
Name and address of the firm.
b)
Names and addresses of the partners.
c)
Nature of Business.
d)
Amount of capital to be contributed by
each partner.
e)
Profit or loss sharing ratio.
f)
Date of commencement of partnership.
g)
Interest of Capital, if provided the
rate of interest must be specified.
h)
Partner’s salaries and commission, if
provided.
i)
Interest on Drawings, if charged, the
rate of interest should also be specified.
f) Parties to a bill of exchange.
Ans: Ans: Parties to a bill of
exchange
1. The Drawer: The person who draws a bill of exchange is called the drawer.
2. The Drawee: The party on
whom such bill of exchange is drawn and who is directed to pay is called the
drawee.
3. The Acceptor:
The person who accepts the bill is known as the
acceptor. Normally the drawee is the acceptor. But a stranger can also accept a
bill on behalf of a drawee.
4. The Payee: The person to whom the amount of the bill is payable is called the
payee.
5. The Endorser:
When the holder transfers or endorses the
instrument to any other person the holder becomes the endorser.
6. The Endorsee:
The person to whom the bill is endorsed is called
the endorsee.
7. The Holder: Holder of a bill of exchange means any person who is legally
entitled to the possession of it and to receive or recover the amount due
thereon from the parties. He is either the payee or the endorsee. The finder of
a lost bill payable to bearer or a person in wrongful possession of such
instrument is not a holder.
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) “All contract are agreements, but all agreements are not contract.” Discuss
the statement. 11
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.
Thus,
agreement is the genus of which contract is the specie.
Or
(b)
Under which circumstances consent is not treated as free consent? Discuss. 11
Ans:
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
(i)
Coercion: When a person is compelled to enter into a
contract by the use of force by the other party or under a threat, ‘coercion’
is said to have been employed. Section
15 of the Indian Contract Act, 1872 defines coercion as – “committing or
threatening to commit, any act forbidden by the Indian Penal Code or the
unlawful detaining, or threatening to detain any property, to the prejudice of
any person whatever, with the intention of causing any person to enter into an
agreement.”
Coercion includes fear, physical compulsion and menace of the
goods. For e.g. A threatens to shoot B
if B does not release A from the debt which he owed. B releases A under the
threat. The release has been brought about by coercion and therefore voidable
at the option of B.
Effect
of coercion: According to
section 19 when the consent is caused by coercion, fraud, misrepresentation,
the agreement is avoidable at the option of the party whose consent was so
caused. The aggrieved party may opt to rescind the contract. If the aggrieved
party seeks to rescind the contract, he must restore the benefit so obtained
under the contract from other party.
(ii) Undue
influence: Undue influence is the term used to
demonstrate unfair use of one’s position or power. There is once party who is
in a dominant position, while the other party is in a sub-ordinate position.
The dominant party exercising its influence over the subordinate party and
getting an unfair advantage. Unlike Coercion where there is physical pressure,
in undue influence, there is mental pressure.
Section 16 defines as “Where the relations subsisting between the
parties are such that one of the parties is in a position to dominate the will
of the other and uses that position to obtain an unfair advantage over the
other.”
Effect
of undue influence:
Section 19 A provides that when the consent is caused by undue influence, the
agreement is voidable at the option of the party whose consent was so caused.
The aggrieved party may opt to rescind the contract. If the aggrieved party
seeks to rescind the contract, he must restore the benefit so obtained under
the contract from other party, upon such terms and conditions as to the court
may seem just.
(iii)
Fraud: Fraud means cheating. It is intentionally
stating something untrue as true. Section 17 defines Fraud as “Fraud means and
included any of the following acts committed by a party to a contract or with
his connivance, or his agent, which intent to decide another party thereto or
his agent, or to induce him to enter into a contract.”
Effect
of Fraud: According to
section 19 when consent to an agreement is caused by coercion, fraud
or
misrepresentation, the agreement is a contract voidable at the option of the
party whose consent was
so caused.
A party to a
contract, whose consent was caused by fraud or misrepresentation, may, if he
thinks fit, insist
that the contract shall be performed, and that he shall be put in the position
in which he would have
been, if the representations made had been true.
However, there is
one exception to the rule of voidability of contract at the option of aggrieved
party. If such consent
was caused by misrepresentation, or by silence, fraudulent within the meaning
of section 17, the
contact, nevertheless, is not voidable, if the party whose consent was so
caused had the
means of discovering the truth with ordinary diligence.
(iv)
Misrepresentation: Section18 defines misrepresentation as “a
false representation a fact made innocently or non-disclosure of a material
fact without any intention to deceive the other party. “The essential features
of misrepresentation are
(i) Party to the contract making misrepresentation: The false
statement must be by the party to the contract or by his agent or by his
connivance. Further it must be addressed to the party who is misled. If not
address to the party who has been misled it will not be misrepresentation.
(ii) False representation: The statement made by the party must be
false, but the person making statement must honestly believe it to be true.
(iii) Representation as to fact: it is very important that the
false statement made must be of material facts. A mere expression of once
opinion is not statement of facts.
(iv) Object: The representation must be made with the view to
inducing the other party to enter into a contract but having no intention to
deceive the other.
(v) Actually acted upon: The innocent party must have actually
acted on the basis of the statement which turns out to be false.
Effect
of Misrepresentation: As
per section 19 when consent to an agreement is caused by misrepresentation, the
agreement is a
contract voidable at the option of the party whose consent was so caused. A
party to a contract, whose
consent was caused by misrepresentation, may, if he thinks fit, insist that the
contract shall be performed,
and that he shall be put in the position in which he would have been, if the
representations made
had been true.
4.
(a) Define bailment. Discuss the rights and responsibilities of a bailee. 3+8=11
Ans:
Bailment: Bailment is a kind of activity in which the property of one person
temporarily goes into the possession of another. The ownership of the property
remains with the giver, while only the possession goes to another. Several
situations in day to day life such as giving a vehicle for repair, or parking a
scooter in a parking lot, giving a cloth to a tailor for stitching, are
examples of bailment.
Section
148 of Indian Contract Act 1872, defines bailment as follows: “A
bailment is the delivery of goods by one person to another for some purpose,
upon a contract that they shall, when the purpose is accomplished, be returned
or otherwise disposed of according to the directions of the person delivering
them.”
Rights and
Duties of a Bailee
Rights
of a Bailee
1.
Right to necessary expenses (Section 158): As per Section 158 says that whereby conditions of the
bailment, the goods are to be kept or to be carried or to have work done upon
them by the bailee for the bailer and the bailee is to receive no remuneration,
the bailer shall repay to the bailee the necessary expenses incurred by him for
the purpose of bailment. Thus, a bailee is entitled to recover the charges as
agreed upon, or if there is no such agreement, the bailee is entitled to all
lawful expenses according to this section.
2.
Right to compensation (Section 164): As
per section 164, the bailer is responsible to the bailee for any loss which the
bailee may sustain by reason that the bailer was not entitled to make the
bailment, or to receive back the goods, or to give directions respecting them.
This means that if the bailer had no right to bail the goods and if still bails
them, he will be responsible for any loss that the bailee may incur because of
this.
3.
Right of Lien (Section 170-171): In
general, Lien means the right to keep the possession of the property of a
person until that person clear the debts. In case of bailment, the bailee has
the right to keep the possession of the property of the bailer until the bailer
pays lawful charges to the bailee. Thus, right of Lien is probably the most
important of rights of a bailee because it gives the bailee the power to get
paid for his services.
4.
Right to Sue (Section 180-181): Section
180 enables a bailee to sue any person who has wrongfully deprived him of the
use or possession of the goods bailed or has done them any injury. The bailee's
rights and remedies against the wrong doer are same as those of the owner. An
action may be brought either by the bailer or the bailee.
Duties/Responsibilities
of a Bailee
1.
Duty to take reasonable care (151): The
bailee is bound to take as much care of the goods bailed to him as a man of
ordinary prudence would, under similar circumstances take, of his own goods of
the same bulk, quality, and value as the goods bailed. The bailee must treat
the goods as his own in terms of care. However, this does not mean that if the
bailer is generally careless about his own goods, he can be careless about the
bailed goods as well. He must take care of the goods as any person of ordinary
prudence would of his things.
2.
Duty not to make unauthorized use (Section 154): Section 154 says that if the bailee makes any use of the
goods bailed which is not according to the conditions of the bailment; he is
liable to make compensation to the bailer for any damage arising to the goods
from or during such use of them.
3.
Duty not to mix (Section 155-157): The
bailee should maintain the separate identity of the bailer’s goods. He should
not mix his goods with bailer’s good without bailer’s consent. If he does so,
and if the goods are separable, he is responsible for separating them and if
they are not separable, he will be liable to compensate the bailer for his
loss.
4.
Duty to return (Section 160): Section
160 - It is the duty of the bailee to return or deliver according to the
bailer’s directions, the goods bailed, without demand, as soon as the time for
which they were bailed has expired or the purpose for which they were bailed
has been accomplished.
5.
If the bailee keeps the goods
after the expiry of the time for which they were bailed or after the purpose
for which they were bailed has been accomplished, it will be at bailee's risk
and he will be responsible for any loss or damage to the goods arising
howsoever.
Or
(b)
What do you mean by principal? Discuss the rights and duties of a principal. 3+8=11
Ans:
An 'agent' is a
person employed to do any act for another, or to represent another in dealings
with third person. The person for
whom such act is done, or who is so represented, is called the
'principal'.
Rights
of Principal:
1. To repudiate the contract (Sec 215): If an agent deals on his own account in the business of the
agency, without first obtaining the consent of his principal and acquainting
him with all material circumstances which have come to his own knowledge on the
subject, the principal may repudiate the transaction, if the case shows either
that any material fact has been dishonestly concealed from him by the agent or
that the dealings of the agent have been disadvantageous to him.
2. To claim benefit (Sec 216): If an agent, without the knowledge of the principal, deals in
the business of the agency on his own account instead of on account of his
principal, the principal is entitled to claim from the agent any benefit which
may have resulted from the transaction.
3. To ratify or disown an agent’s acts (Sec 196): Where acts are done by one person on behalf of another but
without his knowledge or authority, he may elect to ratify or disown such acts.
4. To revoke the agent’s authority (Sec 203): The principal may revoke the authority given to his agent by
giving reasonable notice of revocation at any time before the authority has
been exercised.
5. To claim loss or profit (Secs 211 & 212): The principal is entitled to compensation for any loss sustained
by him or to any profits accrued: 1) Where the agent acts contrary to the
directions given by the principal; or 2) Where loss is caused due to agent’s
neglect, want of skill, or misconduct.
6. To demand accounts (Sec 213): The principal is entitled to demand proper accounts from the
agent.
7. To refuse remuneration when the agent is guilty
of misconduct (Sec 220): The principal has a
right to refuse remuneration to the agent who is guilty of misconduct in the
business of the agency.
Duties
of Principal
1. To indemnify the agent:
a) Against
consequences of the lawful act (sec 222): the employer is bound to indemnify
his great against the consequences of all lawful acts done by such agent in
exercise of the authority conferred upon him. It must be noted that the
principal is liable only for such damages as are direct and immediate and
naturally follow the execution of the agency.
b) Against consequences of the acts done in good
faith (Sec 223): 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 though it causes an injury to the third
person.
2. To pay remuneration and dues (sec 217): It is the principal’s duty to pay his agent such remuneration as
may be payable to him as an agent, and also all monies due to the agent in
respect of advances made or expenses properly incurred by the agent in
conducting the principal’s business.
3. Compensate the agent for injury caused (Sec 225):
The principal must make
compensation to his agent in respect of injury caused to the agent by the
principal’s neglect or want of skill.
4. Misrepresentations or fraud by agent (sec 238): Misrepresentations made, or frauds committed, by an agent acting
in the course of business for his principal, has the same effect on an
agreement made by such agent as if such misrepresentations or fraud had been
made or committed by the principal. In order that a principal shall be made
liable for the misrepresentations and frauds committed by the agent, such
misrepresentations or frauds must be committed by the agent:
1) In the course of the business of his principal;
and
2) The act must be within the scope of the agent’s
authority.
5.
(a) Define the term ‘goods’. What are the different types of goods? 3+8=11
Ans: “Goods’ under the Sale of Goods
Act, 1930
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.
Goods may
be classified into various types as under:
1. Existing goods: These are goods which are owned and possessed
by the seller at the time of sale. Only existing goods can be the
subject-matter of a sale. The existing goods may be –
Specific goods: These are goods which are identified and agreed
upon at the time of contract of sale is made. For e.g. a person visit in a
Titan showroom and identifies a watch for purchase.
Ascertained goods: Though commonly used as similar in meaning to
specific goods, these are the goods which become ascertained subsequent to the
formation of contract of sale. For e.g. from say 10 Sony T.V. a person
identifies the particular T.V.
Unascertained goods: These are the goods which are not identified
and agreed upon at the time of the contract of sale. They are defined only by
description and may form part of a lot. For e.g. a shopkeeper has a bag
containing 50 kg of sugar. He agrees to sell 10 kg sugar to X out of that bag
The 10 kg of sugar is unascertained goods as they are yet to be identified from
the bag containing 50 kg.
2. Future Goods: These are goods which a seller does not possess
at the time of the contract but which will be manufactured, or produced, or
acquired by him after the making of the contract of sale. [Section 2(6)]. A
contract of present sale of future goods, though expresses as an actual sale,
purports to operate as an agreement to sell the goods and not a sale. This is
because the ownership of a thing cannot be transferred before that thing comes
into existence.
3. Contingent Goods: It is a type of future goods but these are
goods the acquisition of which by the seller depends upon a contingency which
may or may not happen.
Or
(b)
Who is an unpaid seller? What are the rights of an unpaid seller? 3+8=11
Ans:
Unpaid
Seller Meaning
Section 45 define an unpaid seller as “One who has not been paid
or tendered the whole of the price or one who receives a bill of exchange or
other negotiable instrument as conditional payment and the condition on which
it was received has not been fulfilled by reason of dishonour of the instrument
or otherwise.” The following conditions must be fulfilled before a seller can
be deemed to be an unpaid seller:
(i) He must be unpaid and the price must be due.
(ii) He must have an immediate right of action for the price.
(iii) A bill of exchange or other negotiable instrument was
received but the same has been dishonoured.
Rights of an Unpaid Seller against the
Goods
According to Section 46, an unpaid seller’s 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.
6.
(a) Discuss the nature and features of limited liability partnership. 11
Ans: LLP is simply a
combination of Partnership and Company form of business organisation. It is a
corporate business vehicle that enables profession expertise and
entrepreneurial initiative to combine and operate in flexible, innovative and
efficient manner. It provides an alternative to the traditional partnership
firm with unlimited liability.
Section 2(1) (n)
defines the expression ‘limited liability partnership’ as a partnership formed
and registered under LLP Act.
Nature and Features of LLP:
a) An LLP is a
body corporate formed and incorporated under this Act and is legal entity
separate from its partners.
b) It is an
alternative corporate business from that gives the benefit of limited liability
of a company and the flexibility of the partnership;
c) An LLP shall have perpetual succession.
d) Minimum number
of members for a LLP is 2 and no limit for maximum numbers.
e) Individuals
and Corporate body can be partners in an LLP.
f) It can
continue its existence irrespective of changes in partners. Admission,
retirement or death of a partner does not affect the existence, rights or
liabilities of the LLP.
g)
It is capable of entering into contracts and holding property in its own name;
h) The provisions
of the Indian Partnership Act, 1932 shall not apply to an LLP.
h) No partner is
liable on account of the independent or un-authorized actions of other
partners, thus individual partners are shielded from joint liability created by
another partner’s wrongful business decisions or misconduct.
i) LLP can be
dissolved by complying with the provisions of LLP (Winding up and Dissolution)
Rules, 2012.
j) Registration
of LLP is compulsory with ROC.
k) The term “LLP”
is added with the name of an LLP.
l) Annual
Statement of accounts and return is required to be file with ROC by an LLP.
Or
(b)
Define partnership. Explain the various types of partners. 11
Ans: Partnership
deed: Meaning
A partnership is formed by an agreement. This agreement may be oral or in writing. Though the law does not expressly require that the partnership agreement should be in writing, it is desirable to have it in writing. A written agreement, which contains the terms of partnership, as agreed to by the partners is called ‘Partnership Deed.’
Different Types of Partners: The
different types of Partners are:
(i) Active Partner: A person who is actively, actually or
effectively engaged in the conduct of business of the partnership firm is known
as an Active Partner. He is the agent of the other partners and has authority
to bind the firm and the other partners in the ordinary course of business.
(ii) Sleeping or Dormant Partner: A sleeping partner is one
who does not take an active part in the conduct of business of the firm. He
invests capital and shares the profits of the firm and is also equally liable
along with other partners for all the liabilities of the firm.
(iii) 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.
(iv) Partner in Profit only: Where a partner agrees with
the other partners that he shall share only profits and shall not be liable for
any losses of the firm he is called Partner in Profit only. However, he remains
liable to the creditors for the debts of the firm since under the Partnership
Act the liabilities of the partners are joint, several and unlimited.
(v) Sub-Partner: Where a partner agrees to share his
profits earned form the firm with a third person then that third person is
known as the sub-partner. A sub-partner has no rights against the firm and
cannot represent himself as a partner of the firm. He is in no way connected
with the firm and is thus not liable for the liabilities of the firm.
(vi) Partner by Estoppel or by Holding Out: Sometimes
strangers represent themselves to be partners in a firm and thereby induce
third parties to give credits to the firm such strangers are called as partners
by Estoppel or Partners by Holding Out. Section 28 of the Partnership
Act prescribes that a person be liable as a partner by Holding out must fulfill
the following condition:
(a) He must have by words, written or spoken or by his conduct,
represented himself to be a partner or
(b) He must have knowingly permitted himself to be represented as
a partner to the other person and
(c) The other person must have acted on the faith of such
representation and have given credit to the firm.
(vii) Minor Partner: As per Section 11 of the Indian
Contract Act, 1872 a minor cannot enter into an agreement. However, Section
30 of the Partnership Act provides that with the consent of all the
partners for the time being a minor may be admitted to the benefits of
Partnership.
7.
(a) What is meant by crossing of cheque? Explain the various types of crossing.
3+9=12
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.
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 identifying 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.
3. Account
payee crossing: This type of crossing is done by adding the words ‘Account
Payee’. This can be made both in general crossing and special crossing. The
implication of this type of crossing is that the collecting banker has to
collect the amount of the cheque only for the payee. If he wrongly credits the
amount of the cheque to another account, he will be held responsible for the
same.
4. Not
negotiable crossing: When the words ‘not negotiable’ is added in generally
or specially crossed cheques, it is called not negotiable crossing. A cheque
bearing not negotiable crossing cannot be transferred. If a cheque bearing ‘Not
negotiable crossing’ is transferred, care must be taken regarding the ownership
of title of both the transferor and transferee.
Or
(b)
Write notes on: 6+6=12
(1) Dishonor of cheque.
Ans: Dishonour of cheque means non-payment of cheque by banks due to
some unavoidable reasons. The bank may dishonour a cheque for
the following cases.
a)
When the cheque is postdated 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) Different types of negotiable instruments.
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.
There are mainly three types of negotiable instruments: Promissory
note, bills of exchange and cheque.
a) 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.
According to the Section 4 of the Negotiable Instrument Act, 1881
“A Promissory Note is an instrument in writing not being a bank note or a
current note containing an unconditional undertaking, signed by the maker, to
pay a certain sum of money only to, or do the order of, a certain person, or to
the bearer of the instrument.”
In other words, we can say that a promissory note is an
unconditional promise in writing made by one person to another, signed by the
maker, engaging to pay on demand to the payee, or at fixed or determinable
future time, certain in money, to order or to bearer.
b) 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.”
c) Cheque:
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 favor 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.
The maker of a cheque is called the ‘drawer’, and the person
directed to pay is the ‘drawee’. The person named in the instrument, to whom or
to whose order the money is, by the instrument directed, to be paid, is called
the ‘payee’
The Negotiable Instruments Act, 1881 defines a cheque as a bill of
exchange drawn on a specified banker and not expressed to be payable otherwise
than on demand.
From the above definition it appears that a cheque is an
instrument in writing, containing an unconditional order, signed by the maker,
directing a specified banker to pay, on demand, a certain sum of money only to,
to the order of, a certain person or to the bearer of the instrument. Actually,
a cheque is an order by the account holder of the bank directing his banker to
pay on demand, the specified amount, to or to the order of the person named therein
or to the bearer.
***
Post a Comment
Kindly give your valuable feedback to improve this website.