PLEAINDIAN CONTRACT ACT

PART I
1. What are the essential elements of a valid contract? (Section 10) (Interview)
2. Is consideration necessary for a contract? (Interview)
3. What is the difference between an agreement and a contract? (Interview)
An agreement is an informal compromise between two or more parties, which may or may not be legally
binding. A contract is a legally-binding agreement that is entered into voluntarily by two or more parties, with the
intention of creating one or more legal obligations among them.

4. What is the difference between a void and voidable contract?

5. Is a contract with a minor valid? (Interview)
6. Difference between rescind, repudiate and revocation
7. What is anticipatory breach of contract?
8. Modes of discharging a contract
9. Difference between damage and damages (Interview)
10. Difference between loss and losses (Interview)
11. Different forms of compensation

12. Difference between contract of service and contract for service

13. What is a promissory estoppel.

GUARANTEE AND INDEMNITY

14. Difference between guarantee and indemnity (Interview) (Both interviews)
Difference between Indemnity and Guarantee
• A guarantee is a promise to someone that a third party will meet its obligation to them. “If they
do not pay you, I will pay you”.
• An indemnity is a promise to be responsible for another person’s loss and to agree to
compensate them for any loss or damage on mutually agreed terms. For example, one agrees to
pay the difference of repairs if they exceed a certain limit.

15. How do you enforce a guarantee or indemnity (Interview)

16. What is a bank guarantee?
A guarantee from a lending institution ensuring that the liabilities of a debtor will be met. In
other words, if the debtor fails to settle a debt, the bank will cover it. A bank guarantee enables
the customer (debtor) to acquire goods, buy equipment, or draw down loans, and thereby expand
business activity.
 17. Is the liability of a surety coextensive with the judgment debtor? (S128; yes. It means that
upon breach, both guarantee and surety will become co – judgment debtors)
BAILMENT
18. What is bailment?
The contractual transfer of possession of assets or property for a specific objective. In bailment,
the deliverer of the asset is the bailor, and the receiver is the bailee. In a bailment transaction,
ownership is never transfered, and the bailor is generally not entitled to use the property while
it's in possession of the bailee. In these ways, bailment differs from gifting and leasing. Bailment
is a legal relationship between two parties, whereby the owner retains full rights to the assets or
property but the possesses the property. For example, when a bank holds a borrower's asset as
collateral for a secured loan, this is a form of bailment. In this case, the bank is the bailee and the
borrower is the bailor.
19. Different forms of bailment (See wiki page of Coggs v Bernard)

20. Is a contract necessary for bailment?

21. Difference between bailment and sale

Sale and Bailment are two different types of contracts. A contract of sale is a straight forward contract where a
person may buy goods, services or property from a seller in exchange for remuneration, usually in the form of
money. Essentially, in abailment contract, the bailor gives the goods, assets or property to the bailee for a specific
amount of time. However, the goods, assets or property still belongs to the bailor.
22. What is the duty of care imposed on a bailee
The duty of care that must be exercised by a bailee varies, depending on the type of bailment. If
the bailee is the only person receiving a benefit from the bailment (exclusive beneficiary), then
the duty of care is extraordinary. But if the benefit is mutual, then the duty of care is
“reasonable”.
23. What is lien (general lien and particular lien)

A lien is a right of one person to retain property or goods which are in his possession, belonging
to another person until the promise or the liability is discharged. This lien may be particular or
general.

Particular Lien : A particular lien is available only against the particular property in respect of
which the bailee has expended labour and skill. A bailee is entitled to a particular lien only (Sec.
179).
Example: A gives two cars - An Ambassador and a Fiat, for repairs to B. B repaired only the
Ambassador car. A took delivery of the Ambassador car without making the payment of the
repair charges. B cannot retain the Fiat car for the repair charges due in respect of the
Ambassador car.
General Lien : A general lien is a right of one person to retain any property or goods which are
in his possession belonging to another person until the promise or liability is discharged. It is a
right to retain the property belonging to another for a general balance of account. General lien is
available to bankers, factors, wharfingers, attorneys of High Court and policy brokers.
Example: A has two accounts in a bank. In savings bank account, he has a credit balance of Rs.
500. In current account, he has an overdraft of Rs. 1,000. Bank can exercise right of lien on the
savings account for the amount due on the current account. It should be noted that right of lien
will not apply to properties deposited for safe custody or for a specific purpose.

24. What are the requirements to impose a particular lien

25. What is a pledge, pledgee, pawnbroker, pledgor?
26. Rights of a pledge –(special right- more than lien but less than mortgage. General rights
still vest with owner. Check this)
As the pledge is for the benefit of both parties, the pledgee is bound to exercise only ordinary
care over the pledge. The pledgee has the right of selling the pledge if the pledgor make default
in payment at the stipulated time. No right is acquired by the wrongful sale of a pledge except in
the case of property passing by delivery, such as money or negotiable securities. In the case of
a wrongful sale by a pledgee, the pledgor cannot recover the value of the pledge without a
tender of the amount due.

27. Difference between lien and pledge, pledge and mortgage

28. Difference between pledge and mortgage

AGENCY
29. Who is a mercantile agent
30. Will the principle be responsible for a sub agent
31. What is agent’s lien
32. Difference between agent and servant

INDIAN PARTNERSHIP ACT

33. What is a partnership
34. What is the nature of liabilities of partners
35. Does a partnership have to be in writing? (I think yes)
36. What is the nature of liabilities in an LLP (Trilegal Test)
37. What is holding out under the Partnership Act (S28) Also, can a retired partner be liable
(S32)
38. Can a minor be a partner (S30)
39. What is partnership at will (S7 I think) (Interview)
40. How does a partner in a partnership at will resign (Interview)

SALE OF GOODS
41. What is difference between hire purchase agreements and sale
42. Difference between conditions and warranties (S12)
 43. Difference between sale and service
44. What is the principle of caveat emptor (Hasenbhoy Jetha, Bombay v New India
Corporation Ltd. – case brief or internet will do ) (There is a diff between Indian law and
common law on this matter) (Trilegal test)

COMPANIES ACT
45. What is the difference between a public company and private company (Interview)
46. Difference between company ad partnership
47. When does it become an illegal associating of person
48. What is a prospectus and a statement in lieu of prospectus?
Prospectus: Basically a company issues it to raise money. It is a formal legal document that provides
details about an investment offering for sale to the public. A prospectus should contain the facts that an
investor needs to make an informed investment decision.

Statement in lieu of prospectus: If a company does not want to issue a prospectus to the public for
subscription of the shares, this statement is required to be issued to the public for necessary information.
It must be signed by every person named in it as director or by his agent authorized in writing: The
nature of the information of this document is more or less similar to that given in the prospectus. A copy
of this statement must be filed with registrar within prescribed time. This provision does not apply to
private company.

49. Certificate of registration or certificate of commencement.

http://www.caclubindia.com/articles/certificate-of-commencement-of-business-procedural-
analysis-3046.asp#.uydqlfmszoe
50. What are MOU and AOA (what do they contain)
MOA
MOA is the document that reveals the name, registered office address, aims and objectives of the company, clause
about its limited liability, share capital, minimum paid up capital etc. MOA also gives information about its first
shareholders including the number of shares subscribed by them. MOA is one document that tells people all about
the company and its relationship with the outside world. Though it is essential to submit MOA with the registrar when
a company is being formed, it does not find mention in the constitution of the company. Subsequent to an
amendment added in 2006 Companies Act, it is no longer mandatory to include the details about name, address,
objectives and first shareholders names. Hence there is no restriction upon a company to engage in a particular
business.
AOA
Articles of Association, also simply referred to as Articles, are necessary to be submitted during incorporation of a
company with the registrar of companies. When Articles are taken in conjunction with MOA, they form what is called
as the constitution of the company. Though there are differences in these articles as to their requirements in different
countries, in general AOA is a document that provides following information about the company.
• The manner in which shares have been distributed along with voting rights attached with different classes of shares
• Estimate of intellectual property rights
• The list of directors with shares allotted to each
• Schedule of the meetings of the board of directors along with the quorum required with percentage of votes with
directors
• Chairman’s special voting rights and the manner in which he is elected
• How profits are distributed through dividends
• How the company can be dissolved
• Secrecy of know-how and how it is managed
• How shares can be transferred, and so on.
How do you alter the same (special or general resolution and who alters directors, shareholder?)
(Interview): See note on resolutions
51. What type of resolution do you need to increase the capital in the capital clause in the
AOA (Interview): See Note on resolutions
52. What are the different types of shares (Interview)

Types of shares
It’s important to understand these distinctions because the characteristics of different types of shares can significantly
affect the way you decide to invest. The different types of shares include:

Ordinary shares
Most shares traded on ‘ordinary’ shares. Ordinary shares carry no special or preferred rights. Holders of ordinary
shares will usually have the right to vote at a general meeting of the company, and to participate in any dividends or
any distribution of assets on winding up of the company on the same basis as other ordinary shareholders.

Preference shares
Preference shares usually give their holder a priority or 'preference' over ordinary shareholders to payments of
dividends or on winding up of the company. There are different kinds of preference shares with different rights and
characteristics. Holders of preference shares usually have voting rights which are restricted to paricular
circumstances or particular resolutions, however this will depend on the terms of the shares.

Partly-paid shares
Partly-paid shares (also known as contributing shares) are issued without the company requiring payment of the full
issue price. At a specified future date or dates, the company is entitled to call for all or part of the outstanding issue
price, and the shareholder at the time the call is due is legally obliged to pay the call. (No liability companies are not
required to specify the date or dates on which calls will be made, and the shareholder at the time the call is due may
pay the call or forfeit the share.)

Generally, a holder of a partly paid share has the same rights as an ordinary shareholder to vote, to dividends and on
winding up of the company, but those rights will be proportional to the amount paid on the share (except for a vote by
show of hands, where a holder of a partly paid share has one vote, the same as any ordinary shareholder).

Retail investors are required to sign a client agreement with their broker before first trading in partly paid shares, to
acknowledge that they understand the risks involved.
 53. What are the different types of preference shares and what is the difference between them
(Interview)
Meaning Of Preference Shares
Preference shares are those, which enjoy the following two preferential rights:
1. Dividend at a fixed rate or a fixed amount on these shares before any dividend on equity
shares.
2. Return of preference share capital before the return of equity share capital at the time of
winding up of the company.

Preference shares also have a right to participate or in part in excess profits left after been
paid to equity shares, or has a right to participate in the premium at the time of redemption.
But these shares do not carry voting rights.

Types Of Preference Shares

Following are the major types of preference shares:

1. Cumulative Preference Shares

When unpaid dividends on preference shares are treated as arrears and are carried forward
to subsequent years, then such preference shares are known as cumulative preference
shares. It means unpaid dividend on such shares is accumulated till it is paid off in full.

2. Non-cumulative Preference Shares

Non-cumulative preference shares are those type of preference shares, which have right to
get fixed rate of dividend out of the profits of current year only. They do not carry the right to
receive arrears of dividend. If a company fails to pay dividend in a particular year then that
need not to be paid out of future profits.

3. Redeemable Preference Shares

Those preference shares, which can be redeemed or repaid after the expiry of a fixed
period or after giving the prescribed notice as desired by the company, are known as
redeemable preference shares. Terms of redemption are announced at the time of issue of
such shares.

4. Non-redeemable Preference Shares

Those preference shares, which can not be redeemed during the life time of the company,
are known as non-redeemable preference shares. The amount of such shares is paid at the
time of liquidation of the company.

5. Participating Preference Shares

Those preference shares, which have right to participate in any surplus profit of the
company after paying the equity shareholders, in addition to the fixed rate of their dividend,
are called participating preference shares.

6. Non-participating Preference Shares

Preference shares, which have no right to participate on the surplus profit or in any surplus
on liquidation of the company, are called non-participating preference shares.
7. Convertible Preference Shares
Those preference shares, which can be converted into equity shares at the option of the
holders after a fixed period according to the terms and conditions of their issue, are known
as convertible preference shares.

8. Non-convertible Preference Shares

Preference shares, which are not convertible into equity shares, are called non-convertible
preference shares.

54. What is- statutory meeting, general meeting and EGM

55. Different types of directors? Can a managing director be a director of more than one
company? (Not sure of this question. See taxxmann. It talks about managing director,
independent director, full time director etc etc): see note on director
56. What is the procedure for merger of company (Interview)
57. What is the procedure to be followed for hiving off (Interview)

58. What is demerger

A demerger is a form of corporate restructuring in which the entity's business operations are segregated into one or
more components.It is the converse of a merger or acquisition. It is a business strategy in which a single
business is broken into components, either to operate on their own, to be sold or to be
dissolved. A de-merger allows a large company, such as a conglomerate, to split off its
various brands to invite or prevent an acquisition, to raise capital by selling off components
that are no longer part of the business's core product line, or to create separate legal
entities to handle different operations.

59. What type of resolution do you need for merger (Interview) (I’m not sure if there is a
difference between 2/3rd majority and special resolution – find out. Also keep in mind if
the voting is b/w directors or shareholders) (Interview): see note on resolutions

60. Difference between special resolution and ordinary resolution (Interview)

TOPA AND GENERAL QUESTIONS FROM MY INTERVIEW

61. What is the difference between simple mortgage and English mortgage (S 57) (Interview)
62. You are given a MOA and AOA. The name of the company is blacked out. Is it a pvt co
or public co
63. There is a company with 30 members and 5 crores as share capital. Is it a pvt co or public
co
64. When a foreign entity wants to invest in India does it buy shares or bonds or what (not
sure of this question)