Assignment Code: BCOC-133/TMA/2021-22

Course Code: BCOC-133

Assignment Name: Business Law

Year: 2021-2022

Verification Status: Verified by Professor

Maximum Marks: 100

Note: Attempt all the questions.

Section – A

Q.1 Discuss the circumstances leading to lapse of an offer. (8)

Ans) The circumstances leading to lapse of an offer are:

1. By the expiration of a stipulated or reasonable time: The offeree must accept the offer within the time specified in the offer, or within a reasonable time if no time is specified. As a result, if the offer is not accepted within the time specified in the offer, or within a reasonable time, it will lapse.

2. Before acceptance, the offerer or the offeree dies or becomes insane: An offer lapses due to the death or insanity of the offerer if the acceptor learns of his death or insanity before he makes his acceptance. However, if the offer is accepted notwithstanding the offerer's death or insanity, the contract will be valid. This means that the offer is not immediately terminated if the offerer dies or becomes insane. Only when the offeree is aware of this information prior to acceptance does the offer lapse.

3. By failing to meet a condition previous to acceptance: If an offer contains a condition that must be met before the offer may be accepted, the offer will expire if the acceptance is granted without that condition being met.

4. By the offeree's rejection of the offer: When an offer is rejected by the offeree, it becomes void. An offer that has been rejected cannot be resurrected later. If the offeree expressly rejects or accepts the offer subject to specified conditions, it is considered to be rejected.

5. If it is not accepted in the prescribed or usual mode: The mode of acceptance is sometimes prescribed by the offerer. In this case, the offer must be accepted in that manner, and if it is not accepted in that manner, the offer will expire.

6. By the offeree's counter-offer: Instead of accepting the first offer, you can make a counter offer. The rejection of the previous offer is what a counter offer entails. As a result, the initial offer becomes void as soon as the counter offer is made. If the individual making the counter offer changes his mind and decides to accept the original offer, he will be unable to do so.

7. By revocation: If the offerer revokes the offer before the offeree accepts it, the offer becomes void. An offer can be revoked by providing a notice of revocation to the offeree at any point before it is accepted, according to the regulations. At an auction, for example, the top bidder can withdraw his offer to buy before the hammer falls.

8. By subsequent illegality or destruction of subject-matter: If an offer becomes illegal before it is accepted, it becomes void. A in Delhi, for example, offered to deliver 100 sacks of rice to B in Lucknow on a specific day. However, before B accepts this offer, the government has issued an order restricting the movement of foodgrains over state lines. The offer made by A is automatically terminated. Similarly, if the offer's subject substance is destroyed before it is accepted, the offer expires.

Q.2 a) Define the term ‘fraud’ as per section 17 of the Indian Contact Act. (5)

Ans) Fraud is defined as an intentional misrepresentation of fact committed by a contracting party with the intent to deceive or convince the other party to enter into a contract. Section 17 of the Indian Contract Act defines the term "fraud" as follows:

"Any of the following acts committed by a party to a contract, or by anybody with his connivance or by his agent, with the aim to deceive another party to the contract or his agent, or to convince him to enter into the contract, is defined as fraud:

1. The assertion of something that is not true as a fact by someone who does not believe it to be true;

2. The deliberate hiding of a fact by someone who knows or believes it;

3. A promise made with no intention of following through;

4. Any other conduct that is designed to deceive;

5. Any act or omission that is expressly declared fraudulent by the law."

b) What are the elements that must be present in the act to constitute fraud? (7)

Ans) The elements that must be present in the act to constitute fraud are:

1. A party to the contract, or anyone with his connivance, or his agent, must perpetrate the fraud. The contract's validity is unaffected by fraud committed by a third party.

2. The deception must be done with the intent to deceive the other person. For example, A makes a false statement to B that his factory produces 100 units each month, despite the fact that A is aware that only 75 to 80 units are produced every month. B is persuaded to purchase the factory. B's consent is secured by deception in this case.

3. A representation or statement must exist, and it must be false. To be considered fraudulent, there must be some false representation or assertion made by someone who knows it is untrue. For example, when A is selling his scooter to B, he claims it is brand new despite the fact that it is a used one. A's remark is deceptive.

4. The illustration must be based on a fact. A simple opinion, a statement of intent, or a puffed expression is not considered fraud.

5. Actively concealing a fact is also considered fraud. Active concealment occurs when a party takes proactive steps to prevent information from reaching the other party, and it constitutes fraud.

6. The other person must have been duped by the scam. The act must truly deceive if it is done with the aim to deceive. It is likely that the party relied on it to grant his permission. In other words, attempting to deceive the other party without really deceiving the other party is not fraud. As a result, it is possible to say that a deception that does not deceive is not fraud.

7. A loss must have been experienced by the party acting on the representation. "There can be no fraud without damage, and there can be no damage without injury," as the saying goes. The loss of money or the value of money, or some other type of harm or injury, may be the result of the damage or injury.

Q.3 Define a contract of guarantee. How can continuing guarantee be revoked? Explain (10)

Ans) A contract of guarantee, according to Section 126 of the Indian Contract Act, is a contract to perform a third person's promise or discharge his liability in the event of his default. The person who gives the guarantee is referred to as the ‘surety,' while the person whose default the guarantee is given to is referred to as the 'primary debtor,' and the person to whom the guarantee is given is referred to as the 'creditor.' A guarantee can be given orally or in writing. For example, if A and his friend B walk into a shop and A says to the shopkeeper, "Supply the articles necessary by B, and if he doesn't pay you, I'll pay you."

A continuing guarantee may be revoked in any of the following ways:

1. By Notification of Revocation: The surety may rescind his guarantee at any moment in the future by giving notice to the creditor. In this instance, the surety is still accountable for any transactions that have already occurred. For example, A guarantees to B that C will pay for all of the things he purchases over the following three months to the tune of Rs. 10,000. B sells 6,000 rupees worth of products to C. C is liable for Rs. 6,000 if A issues a notice of revocation. A will not be liable if any products are sold to C after the notice of revocation.

2. By Surety's Death: Unless there is a contract to the contrary, the death of a surety revokes the continuing guarantee in respect of transactions that occur after the surety's death.

3. In the Same Way That the Surety Is Discharged: A continuing promise is also cancelled in any situations where a surety is released from responsibility, such as:

i)  Novation (Section 62)

ii) Variance in terms of Contract (Section 133)

iii) Release or discharge of principal debtor (Section 134)

iv) When the creditor enters into an arrangement with the principal debtor (Section 135)

v) Creditor’s act or omission impairing surety’s eventual remedy (Section 139)

vi) Loss of Security (Section 141).

Q.4 Explain the rights and liabilities of partners on the dissolution of a partnership firm. (10)

Ans) The rights and liabilities of partners on the dissolution of a partnership firm are:

1. Right to an equitable distribution of the firm's property: Under Section 46 of the Act, each partner has the right to have the firm's property applied to the payment of third-party debts and other liabilities, with the surplus distributed among the partners or their representatives in accordance with their rights. This privilege is also known as the general lien of a partner.

2. Right to premium refund in case of premature winding-up: If a partner joins a firm for a defined term and paid a premium (goodwill), and the partnership is dissolved before that fixed time, he is entitled to a refund of the premium in whole or in part. The premium amount shall be determined by (i) the terms under which he became a partner and (ii) the length of time he was a partner.

3. Right to claim damages if the partnership contract is rescinded due to fraud or misrepresentation: The partnership contract, like any other contract, can be rescinded due to fraud or misrepresentation, and the aggrieved partners will have the right to claim damages in addition to other rights. When a partnership is dissolved due to fraud or deception, partners have the following rights under Section 52 of the Act.

4. Right to prevent any partner or his representative from using the firm name or property: Subject to contract between the partners, a partner has the right to prevent any other partner or his representative from carrying on a similar business in the firm name or using any of the firm's property for his own benefit until the firm's accounts are completely settled and the firm's affairs have been completely wound up until the firm's accounts are completely settled and the firm's affairs have been completely wound up until the firm's accounts are completely settled and the firm Of course, where a partner has purchased the firm's goodwill, he can carry on business in the firm's name and cannot be hindered from doing so by other partners or his representatives, even if the firm is in the process of being wound up.

Q.5 State the rules regarding the transfer of ownership from seller to buyer in case of ascertained goods in a contract of sale. (10)

Ans) The rules regarding the transfer of ownership from seller to buyer in case of ascertained goods in a contract of sale are as follows:

Specific goods in a deliverable state: When an unconditional contract for the sale of specific goods is made and the commodities are in a deliverable state, the buyer receives ownership of the goods at the time the contract is made. It is important to note that whether the time of payment of the price or the period of delivery of products, or both, is postponed is irrelevant (Section 20). When you examine this part, you'll notice that if the products are specific, the contract is unconditional, and the goods are in a deliverable state, ownership passes at the time of contracting. An unconditional contract is one in which the transfer of ownership of commodities is not subject to any conditions.

Specific products not in a deliverable state: Another scenario is when things are not in a deliverable state when the contract is signed. To put it another way, the vendor must do something to the items to make them deliverable. According to Section 21 of the Sale of Goods Act, if a contract for the sale of certain goods exists and the seller is obligated to do something to the goods in order to bring them into a deliverable state, the property does not pass to the buyer until that thing is done and the buyer is notified. The property in things does not pass to the buyer unless "something" is done to make them deliverable, according to this rule.

When the seller must do something to determine the pricing of specific products in a deliverable state: Even if the products are in a deliverable form, the seller is obligated to do something in order to determine the price. In this instance, the seller's property in the goods does not pass to the buyer unless the seller has done so in order to determine the price. "Where there is a contract for the sale of specific goods in a deliverable state, but the seller is bound to weigh, measure, test, or do some other act or thing with reference to goods for the purpose of ascertaining the price, the property does not pass until such act or thing is done and the buyer is given notice thereof," Section 22 of the Act states.

Section – B

Q.6 What are the privileges of a holder in due course ? (6)

Ans) The privileges of a holder in due course are:

1. In the meanwhile, every holder is presumed to be a holder prima facie. As a result, he is not responsible for presenting his title. It is up to the defendant to establish this. In addition, a holder in good standing has all of the rights and powers of a holder, and the bill is free of any personal defect of title of his immediate predecessors. Regardless of their individual obligation between themselves, the holder of a promissory note can recover the amount of the promissory note in due course from the maker and the payee.

2. In the case of an inchoate stamped instrument, the holder is protected in due course if the drawee fraudulently fills up the instrument with a higher amount than the drawer intended (but which is sufficiently covered by the stamp placed on the instrument) and disposes of it for value without anyone suspecting the fraud.

3. The acceptor of a bill of exchange cannot claim that the other parties to the bill were fictitious as against the holder in due course.

4. The party obligated to pay an instrument cannot claim that the instrument was lost or that it was obtained from him through deception or fraud, or for an illicit consideration, in the case of a holder in due course.

5. Even though he had knowledge of the preceding faults, a holder who receives an instrument from a holder in due course has the rights of the holder in due course, as long as he was not a party to them.

Q.7 Distinguish between ‘lien’ and ‘stoppage of goods in transit’. (6)

Ans) Though the two rights are similar in these respects, there are some important differences between Lien and Stoppage-in-Transit, they are as follows:

1. The goods must be in the seller's real possession to be eligible for a lien. The items must be in the possession of an independent carrier or bailee in order to be stopped in transit. The products are neither in the seller's nor the buyer's hands.

2. Even if the buyer is solvent, but refuses to pay the price, the lien might be used. Only when the buyer becomes insolvent may the buyer's right to stop goods in transit be utilised.

3. When the seller relinquishes possession of the items, the lien expires. Only when the seller delivers the items to a carrier does the right of stopping of goods in transit begin.

4. The lien is a legal right to keep possession of the items. The right to reclaim control of goods in transit is known as the right of stoppage.

5. The seller has the right to exercise his or her lien. The seller, through the carrier or the bailee in whose possession the goods are, has the right to stop the items in route.

Q.8 How will you determine whether a group of persons is a partnership or not? (6)

Ans) To decide whether a collection of people comprises a partnership and whether a certain person is or is not a partner in the firm, we must first determine the participants' true relationship. If the parties have drafted an express contract, the provisions of the partnership document may reveal their true relationship. However, if they have not drawn an express contract, other important criteria such as the conduct of the parties, the conditions under which the contract was made, books of account, employee statements, and so on must be used to determine their true relationship.

A person is usually considered a partner if he has been sharing profits from a business. However, this is not always the case. There may be people who receive a share of a company's earnings, or a payment based on the company's profitability, or a payment that varies with the company's profits, but they are not partners.

These are examples of such people:

1. Creditors of the firm who, in exchange for lending money to the firm, may agree to share in profits; the widow or child of a deceased partner who receives a share of profits as annuity;

2. A person receiving a share of profit in exchange for selling his business or the goodwill of his business to the firm; and

3. A servant or an agent receiving a share of profits in exchange for his association with the firm.

Q.9 What are necessaries? When is a minor liable on a contract for necessaries? (6)

Ans) A contract for the supply of necessities to a minor or others who are dependent on him can be enforced against him, but only to the extent of his property. In this case, Section 68 states that if a person who is incapable of entering into a contract, or anyone whom he is legally obligated to support, is supplied by another person with necessaries suited to his condition in life, the person who supplied such supplies is entitled to reimbursement from the incapable person's property.

It may be impossible to compile an entire list of what might be considered "necessaries." In fact, what one person considers "necessary" may be considered a luxury by another.

However, you should keep in mind that payment for necessities provided to a child can only be made from the minor's personal property. He can't be held personally liable for it, which means he can't be forced to work in exchange, and his earnings, if any, can't be taken. This guideline also applies to the necessary services that he receives.

Thus, lending money to a minor for the purpose of defending a claim on his behalf in which his property is at peril, defending him in court, or rescuing his property from being sold in execution of a decree is considered a service to the minor. Other examples of essential services provided to a minor include schooling, medical and legal counsel, and the rental of a home for a minor to live in while pursuing his studies.

Q.10 Who can demand performance of a contract? Explain. (6)

Ans) The one who can demand performance of a contract is listed as below:

1. Promisee: Under most contracts, the promisee is the only person who can demand that the promise be fulfilled. Even if the contract was made for his advantage, a third party cannot require that it be performed.

2. Legal Representative: If the promisee dies, his legal representative has the right to demand performance, unless the contract expressly states otherwise or the deal is of a personal character.

3. Third Party: In some extraordinary instances, a third party who is not a party to the contract might demand contract performance even if he is not a party to the contract.

4. Joint Promisees: When a person makes a promise to two or more people jointly, the promise may be demanded either I by all the promises jointly; or (ii) in the event of the death of any of the joint promisees, by the representatives of such deceased person jointly with the surviving promisees; or (iii) in the event of the death of all joint promisees, by representatives of all of them jointly, unless the contract expressly states otherwise. As a result, joint promisees' rights are solely joint, and none of them can seek performance unless it has been agreed upon.

Section – C

Q.11 Distinguish between void agreement and illegal agreement. (5)

Ans) The differences between void agreement and illegal agreement are:

1. When a contract is no longer enforceable under the law, it is called a void contract. It is a nullity since it is a contract having no legal effect. An 'illegal agreement' is one that has been specifically declared unlawful under the Contract Act or that violates any other legislation of the land.

2. It is not true that all void agreements are illegal. All illegal contracts are null and void.

3. Collateral transactions to an invalid agreement are unaffected, meaning they are not rendered void. Collateral transactions related to illegal agreements are also affected, and they become null and invalid.

4. If a contract is later declared void, the benefit gained by one party must be returned to the other. The money advanced or the item delivered cannot be sought back under an illegal agreement.

Q.12 Explain agency by estoppel with example. (5)

Ans) First and foremost, we must comprehend the definition of the term 'estoppel.' "Where a person has wilfully led another person to believe that a certain set of circumstances or facts exists, and that other person has acted on that belief, then he is estopped or precluded from denying the truth of such statements, even though such a state of thing did not exist in fact," according to the rule of estoppel.

Thus, if a person deliberately encourages another person to believe that a certain person is his agent through his behaviour or statement, he is estopped or prevented from rejecting the truth of agency. For example, X informs Y that he (X) is Z's agent while in the presence and hearing of Z. Z is silent and does not refute this assertion. Later, Y signs a contract with X, really believing that he is Z's representative. This contract binds Z, and in a lawsuit between Z and Y, Z cannot claim that X was not his agency, even if X was not his agent in the first place.

Q.13 What are the features of a limited liability partnership? (5)

Ans) The features of a limited liability partnership are:

1. Any two or more persons who are associated for the purpose of carrying on a lawful business for profit may sign an incorporation document and file it with the Registrar to form a Limited Liability Partnership.

2. Perpetual Succession: According to Section 3 of the Limited Liability Partnership Act, the Limited Liability Partnership enjoys a perpetual succession (2).

3. The existence, rights, and responsibilities of a limited liability partnership are unaffected by changes in the partners.

4. Mutual Rights and Responsibilities: An agreement between partners or between the Limited Liability Partnership and its partners governs the mutual rights and duties of partners and the Limited Liability Partnership and its partners, according to the Act's provisions.

5. Separate Legal Entity: No partner would be held accountable for other partners' autonomous or unauthorised actions or misconduct.

6. Number of Partners: If the number of partners falls below two, the remaining partner who has been in business for more than six months is personally accountable for the Limited Liability Partnership obligations accrued during that time.

7. Annual Account and Audit: Every Limited Liability Partnership must file an annual statement of accounts and solvency with the Registrar.

8. Other rules do not apply to Limited Liability Partnerships, such as the Indian Partnership Act of 1932. The central government, on the other hand, can use certain of the provisions of the Companies Act.

9. Limited Liability Partnerships can be formed from a partnership firm, a private company, or an unlisted public business.

Q.14 What are ambiguous instruments? (5)

Ans) An ambiguous instrument is one that, due to its form or terms, can be interpreted as either a bill of exchange or a promissory note. Section 17 states that "Where an instrument can be written as either a promissory note or a bill of exchange, the holder may treat it as either, or the document will be considered as such from now on."

When an instrument's form is so ambiguous that it can be interpreted as either a bill of exchange or a promissory note, the holder has the choice of treating it as either. However, once this stance is taken, it cannot be changed later. Bills drawn on the principal by an agent or by one bank branch on another are ambiguous instruments. For instance, A prepares a bill for B and negotiates with him. B is a made-up character. The bill can be treated as a promissory note by A. He is not required to show that he is present or to give notice of dishonour.