Tag: business law and contract act

Questions Related to business law and contract act

Given below is a statement of legal principle followed by a factual situation. Apply the principle to the facts given below and select the most appropriate answer.
Legal Principle: Contract is an agreement freely entered into between the parties. But when consent to an agreement is obtained to undue influence, the contract is voidable at the option of the party whose consent was so obtained.
Factual Situation: The pragya had been worked for a business man Anurag since the age of $18$, working for a range of Anurag's businesses. In $2000$, (aged $21$) Pragya purchased a flat. In $2005$, Mr. Anurag's business was facing financial difficulties, and he asked Pragya to offe up her flat as financial security against an overdraft facility for the business. In July of that year, the banks solicitors wrote to Pragya, advising that she should take Independent legal advice before putting her property up as a security for the debt. The bank also notified Pragya that the guarantee was unlimited in both time and financial amount. Having discussed the arrangement with Anurag, Pragya was unaware of the extent of the borrowing, but was assured that her mortgage would not be called upon, and that his own properties which were also used as security would be looked at first. A charge was executed over the Pragya's property in August $2005$. In $2009$, Mr.s Anurag's business went into liquidation and the bank formally demanded $Rs. 60,24,912$ from Pragya. Pragya raised the defence of undue influence - stating that Mr. Anurag had induced her to enter into the agreement, and the bank had full knowledge/ notice of this undue influence which should set aside the banks right to enforce the debt recovery against Pragya. Bank is contending that there is no undue influence.
Legal Principle: The acceptance must be absolute and unqualified, leaving no ground for doubt or uncertainty. If the acceptance is conditional, no valid contract is formed, and the offer can be withdrawn at any moment till the absolute acceptance has taken place within reasonable time of such offer.
Factual Situation: Delhi Government conducted an auction for the sale of license of wine shop. X offered the highest bid which was provisionally accepted "... subject to the confirmation of Chief Commissioner who may reject any bid without assigning any reasons." Since X failed to deposit the required amount, Chief Commissioner rejected the bid. The government held X liable for the difference between the bid offered by him and the highest bid accepted in reauction, and commenced proceedings for the recovery of the sum. It was contended on behalf of the government of Delhi that X was under a legal obligation to pay the difference as it was due to his default that a resale of the excise shop was ordered and hence X was liable for the deficiency in price and all expenses of such resale which was caused by his default.
Decide, giving reason, whether X is liable to make payment to the Delhi Government.

introduction of business laws business law and contract act business studies

  1. No, X is not liable to make payment as the shop was sold to the highest bidder

  2. X is liable to pay because the Government of Delhi has to conduct re-auction and also suffered loss in the sale of the shop

  3. X is liable because his bid was accepted but he failed to deposit the required amount on time

  4. No, contract for sale was not complete till the bid was confirmed by the Chief Commissioner and till such confirmation: the bidder was entitled to withdraw the bid

Show answer
Correct Option: D
Explanation:

No, contract for sale was not complete till the bid was confirmed by the Chief Commissioner and till such confirmation; the bidder was entitled to withdraw the bid. The contract for sale was uncertain and not absolute till confirmed by the Chief Commissioner. Because it was an uncertain contract, the bidder had the choice to withdraw the bid. (smt. Sohbatdei vs Devipal And Ors AIR $1971\ SC\ 2192, (1972) 3\ SCC\ 495, 1971\ III\ UJ\ 395\ SC)$.

Purchase book records signify :

introduction of business laws business law and contract act business studies

  1. All purchases made by the firm

  2. All purchases of fixed asset used by the firm

  3. Credit purchases of goods dealt in by the firm

  4. Cash purchases of goods dealt in by the firm

Show answer
Correct Option: C
Explanation:

Purchase Day book or a Purchase Register is the book of original entry in which all the transactions relating to only credit purchase are recorded. Cash purchases do not find place in purchase day book as they are recorded in Cash book.

Ad hoc means ______________.

introduction of business laws business law and contract act business studies

  1. from the beginning

  2. a body elected or appointed for a particular work

  3. according to value

  4. None of above

Show answer
Correct Option: B
Explanation:

An ad hoc committee is formed for a specific purpose, usually to solve a particular problem. For example, an ad hoc lawyer is one hired to handle one problem only, perhaps to analyze a specialized area of the law or argue a key point in court.

Out of the following what refers to the party on whose request the credit is issued to company.

introduction of business laws business law and contract act business studies

  1. Applicant

  2. Issuer

  3. Beneficiary

  4. Issuing bank

Show answer
Correct Option: A
Explanation:

Credit issued to the company is to be requested by the applicant. Applicant is the customer for the bank applyingfor credit to be issued to him.

The Indian Mercantile law is mainly an adaptation of______.

introduction of business laws business law and contract act business studies

  1. Greek Mercantile law

  2. English Mercantile law

  3. Roman Mercantile law

  4. German Mercantile law

Show answer
Correct Option: B
Explanation:

Mercantile law or commercial law is the law that regulates commercial activities of the economy. The Indian Mercantile Law owes its origin to the English Mercantile Law as  it has a direct influence on Indian law. The dependence of Indian Law on English Law is so high that, in the absence of any provision related to the issue in question, the direct recourse is to refer to the English Mercantile Law.

Choose the correct answer from the alternatives given.
Raghav, aged 16 years, falsely representing himself to be of 19 years, enters into an agreement to sell his property to Rahu! and receives from Rahu! a sum of  20,00,000 in advance. Out of this sum Raghav buys an imported car worth 10,00,000 and spends the rest on a pleasure trip to France. After Rahul attained majority, Rahu! sues him for the conveyance of the property or, in the alternative, for the refund of 20,00,000 and damages. The agreement between Raghav and Rahul is:

introduction of business laws business law and contract act business studies

  1. Void ab initio as it is a contract with a minor

  2. Voidable at the option of Rahu!

  3. Would be valid if Raghav ratifies the agreement on attending the age of majority

  4. Valid as Raghav has sold his own property for personal use

Show answer
Correct Option: A

Principle : False imprisonment is a tort (wrong) which means the total restraint of a person's liberty without lawful justification.
Facts : A part of a public road had been closed for spectators of a boat race. 'P' wanted to enter but he was prevented by 'D' and other policemen because he had not paid the admission fee. 'P' was able to enter the enclosure by other means but was unable to go where he wanted to go but allowed him to remain where he was or to go back. 'P' remained within the enclosure and refused to leave. Subsequently, 'P' sued 'D" for false imprisonment.

introduction of business laws business law and contract act business studies

  1. It was a case of false imprisonment, but 'D' could not be made liable for it.

  2. 'D' could not be made liable for false imprisonment, as he did not totally restrict P's movements.

  3. 'D' could not be made liable for false imprisonment, as he did restrict P's movements.

  4. 'D' could not be made liable for false imprisonment, as he has not touched him.

Show answer
Correct Option: B
Explanation:

The tort of false imprisonment is constituted when there is a total restraint. It is no imprisonment if a person prevented from going to a particular direction but he his free to go any other direction. If a man is prevented from going to a particular direction but is allowed to go back there is no false imprisonment. The reasonable conclusion in the above noted question is that there was no total restraint on the P's liberty. The reasonable conclusion drawn that D could not be held liable for false imprisonment and he did not restrict P's movement. Hence option (b) is correct.

CA/CS book is prepared ______.

introduction of business laws business law and contract act business studies

  1. On the basis of Cash Book

  2. On the basis of copies of invoices

  3. Both (a) and (b)

  4. On the basis of ca/cs order

Show answer
Correct Option: B
Explanation:

CA/CS book or Sales book records all credit sales made by a business. It is one of the secondary book of accounts and unlike cash sales which are recorded in cash book, sales book is only to record credit sales. The amount entered in the sales book is on behalf of invoices supplied to purchasers.

Withdrawal of cash from bank for official use will result into _____.

introduction of business laws business law and contract act business studies

  1. Increase of assets

  2. Increase of expenses

  3. No impact on assets

  4. None of the above

Show answer
Correct Option: C
Explanation:

When a business owner withdraws cash from a company account, the value of company assets decreases because some capital reserves have been transferred from business to personal use. Although an owner draw affects the value of a company's assets, it is essentially unrelated to the part of the equation that calculates how much the business has earned through its sales and operations. Hence, This entry will have nil impact on assets since, on one hand cash A/c will increases and on the other hand bank A/c will decrease. The entry to be passed is
Cash A/c              Dr.
            To Bank A/c

Which of the following accounts will be credited, when the goods are purchased for cash?

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  1. Stock Account

  2. Cash Account

  3. Supplier's Account

  4. Work in progress Account

Show answer
Correct Option: B
Explanation:

Cash account is the account that records details of all amounts paid or received in cash in arrangements for payment by customers, an account that is settled quickly in cash, rather than one which is paid later or in several payments another name. So, cash A/c will be credited.