SUGGESTED SOLUTION

CA FOUNDATION
SUBJECT- LAW & BCR

Test Code – CMP 2202

BRANCH - () (Date :)

Head Office : Shraddha, 3rd Floor, Near Chinai College, Andheri (E), Mumbai – 69.
Tel : (022) 26836666

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ANSWER : 1(A)
A breach of contract occurring before the time fixed for performance has arrived is known as
anticipatory breach of contract. When the promisor refuses altogether to perform his p a r t o f
promise and signifies his unwillingness to perform before the a c t u a l time for performance has
arrived, it is known as Anticipatory Breach. The law in this regard was very well summed up in
Frost v. Knight and Hochster v. Dela Tour:
Section 39 of the Indian Contract Act deals with anticipatory breach of contract and provides as
follows: “When a party to a contract has refused to perform or disable himself from performing, his
promise in its entirety, the promisee may put an end to the contract, unless he has signified, by
words or conduct, his acquiescence in its continuance.”

Effect of anticipatory breach: The promisee is excused from performance of his part of promise.
Further he gets an option:

(1) To either treat the contract as rescinded and sue the other party for damages for breach of
contract immediately without waiting till the due date of performance; or
(2) He may elect not to rescind but to treat the contract as operative, and wait for the actual
date of performance and then hold the other party responsible for the consequences of
non- performance. But in this case, he will keep the contract alive for the benefit of the
other party as well as his own. If the other party fails to perform the contract on the actual
date of performance also , then, he can claim damages.
(4 MARKS)
ANSWER : 1(B)
(A) A company being an artificial person cannot own property and cannot sue or be sued
Incorrect: A company is an artificial person as it is created by Law. It is legal or judicial as it is
created by law. It is a person in the eyes of law with all the rights of an individual.
Further, the company being a separate legal entity can own property, have bank account,
raise loans, incur liabilities and enter into contracts. Even members can contract with the
company, acquire right against it or incur liability to it. It can sue and be sued in its own
name. It can do everything which a natural person can do except be sent to jail, take an
oath, marry or practice a learned profession. Hence, it is a legal person in its own name.
(B) A private limited company must have a minimum of two members, while a public limited
company must have at least seven members.
Correct: Section 3 of the Companies Act, 2013 deals with the basic requirement with
respect to the f ormat ion of a company. In the case of a public company, any 7 or
more persons can form a company for any lawful purpose by subscribing their names to
memorandum and complying with the requirements of this Act in respect of registration. In
exactly the same way,2 or more persons can form a private company.
(4 MARKS)
ANSWER : 1(C)
According to Section 24 of the Sales of Goods Act, 1930, in case of delivery of goods on approval
basis, the property in goods passes from seller to the buyer:-
(i) When the person to whom the goods are given either accepts them or does an act which
implies adopting the transaction.
(ii) When the person to whom the goods are given retains the goods without giving his
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 approval or giving notice of rejection beyond the time fixed for the return of goods and in
case no time is fixed after the lapse of reasonable time.
In the given case, seller has delivered 20 tables to the buyer on sale or return basis. Buyer
received the tables without examining them. Out of these 20 tables, he sold 5 tables to his
customer. It implies that he has accepted 5 tables out of 20.
(4 MARKS)
ANSWER : 2(A)(i)
(i) It is an implied contract and A must pay for the services of the coolie retained by him.
Implied Contracts: Implied contracts come into existence by implication. Most often the
implication is by law and or by action. Section 9 of the Act contemplates such implied
contracts when it lays down that in so far as such proposal or acceptance is made otherwise
than in words, the promise is said to be implied.
(ii) Obligation of finder of lost goods to return them to the true owner cannot be said to
arise out of a contract even in its remote sense, as there is neither offer and acceptance nor
consent. These are said to be quasi-contracts.
Quasi-Contract: A quasi-contract is not an actual contract but it resembles a contract. It is
created by law under certain circumstances. The law creates and enforces legal rights and
obligations when no real contract exists. Such obligations are known as quasi-contracts. In
other words, it is a contract in which there is no intention on part of either party to make a
contract but law imposes obligations like contract upon the parties.
(4 MARKS)
ANSWER : 2(A)(ii)
(a) Time is essence of this contract. As by the time apples reached B they were already rotten.
The contract is discharged due to destruction of subject matter of contract.
(b) Such contract is of personal nature and hence cannot be enforced due to occurrence of an
event resulting in an impossibility of performance of contract.
(c) Such contract is discharged without performance due to subsequent impossibility or illegality.
(3 MARKS)
ANSWER : 2(B)
LLP is an alternative corporate business form that gives the benefits of limited liability of a
company and the flexibility of a partnership
Limited Liability: Every partner of a LLP is, for the purpose of the business of LLP, the agent of the
LLP, but not of other partners (Section 26 of the LLP Act, 2008). The liability of the partners will be
limited to their agreed contribution in the LLP, while the LLP itself will be liable for the full extent of
its assets.

Flexibility of a partnership: The LLP allows its members the flexibility of organizing their internal
structure as a partnership based on a mutually arrived agreement. The LLP form enables
entrepreneurs, professionals and enterprises providing services of any kind or engaged in scientific
and technical disciplines, to form commercially efficient organizations suited to their requirements.
Owing to flexibility in its structure and operation, the LLP is a suitable vehicle for small enterprises
and for investment by venture capital.
(5 MARKS)
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ANSWER : 3(A)(i)
The implied authority of a partner may be extended or restricted by contract between the partners.
Under the following conditions, the restrictions imposed on the implied authority of a partner by
agreement shall be effective against the third party:
1. The third party knows about the restrictions.
2. The third party does not know that he is dealing with a partner in a firm.
(2 MARKS)
ANSWER : 3(A)(ii)

As per Section 28 of Indian Partnership Act, 1932, Partnership by holding out is also known as
partnership by estoppel. Where a man holds himself out as a partner, or allows others to do it, he is
then stopped from denying the character he has assumed and upon the faith of which creditors
may have acted. A person may himself, by his words or conduct have induced others to believe
that he is a partner or he may have allowed others to represent him as a partner. The result in both
the cases is identical.
In the given case, MU (the Manager) is also liable for the price because he becomes a partner by
holding out as per Section 28 of Indian Partnership Act, 1932.
(4 MARKS)
ANSWER : 3(B)
Expulsion of a Partner (Section 33 of the Indian Partnership Act, 1932):
A partner may not be expelled from a firm by a majority of partners except in exercise, in good
faith, of powers conferred by contract between the partners.
The test of good faith as required under Section 33(1) includes three things:
• The expulsion must be in the interest of the partnership.
• The partner to be expelled is served with a notice.
• He is given an opportunity of being heard.
If a partner is otherwise expelled, the expulsion is null and void.
(i) Action by the partners of M/s XYZ & Associates, a partnership firm to expel Mr. G from the
partnership was justified as he was expelled by united approval of the partners exercised
in good faith to protect the interest of the partnership against the unauthorized activities
charged against Mr. G. A proper notice and opportunity of being heard has to be given to
Mr. G.
(ii) The following are the factors to be kept in mind prior expelling a partner from the firm by
other partners:
(a) the power of expulsion must have existed in a contract between the partners;
(b) the power has been exercised by a majority of the partners; and
(c) it has been exercised in good faith.
(6 MARKS)
ANSWER : 4(A)
The right of stoppage of goods in transit means the right of stopping the goods after the seller
has parted with the goods. Thereafter the seller regains the possession of the goods.
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This right can be exercised by an unpaid seller when he has lost his right of lien over the goods
because the goods are delivered to a carrier for the purpose of taking the goods to the buyer.
This right is available to the unpaid seller only when the buyer has become insolvent. The
conditions necessary for exercising this right are:-
1. The buyer has not paid the total price to the seller
2. The seller has delivered the goods to a carrier thereby losing his right of lien
3. The buyer has become insolvent
4. The goods have not reached the buyer, they are in the course of transit. (Section 50, 51 and
52)
In the given case A, who is an agent of the buyer, had obtained the goods from the railway
authorities and loaded the goods on his truck. After this the railway authorities received a notice
from the seller to stop the goods as the buyer has become insolvent.

According to the Sales of Goods Act, 1930, the railway authorities cannot stop the goods because
the goods are not in transit. A who has loaded the goods on his truck is the agent of the buyer. That
means railway authorities have given the possession of the goods to the buyer. The transit comes
to an end when the buyer or his agent takes the possession of the goods.
(6 MARKS)
ANSWER : 4(B)
As per the provisions of Section 30(5) of the Indian Partnership Act, 1932, at any time within
six months of his attaining majority, or of his obtaining knowledge that he has been admitted to the
benefits of partnership, whichever date is later, such person may give public notice that he has
elected to become or that he has elected not to become a partner in the firm, and such notice shall
determine his position as regards the firm.
However, if he fails to give such notice, he shall become a partner in the firm on the expiry of the
said six months.
If the minor becomes a partner by his failure to give the public notice within specified time, his
rights and liabilities as given in Section 30(7) are as follows:
(A) He becomes personally liable to third parties for all acts of the firm done since he was
admitted to the benefits of partnership.
(B) His share in the property and the profits of the firm remains the same to which he was
entitled as a minor.
(i) In the instant case, since, X has failed to give a public notice, he shall become a partner
in the M/s ABC & Co. and becomes personally liable to Mr. L, a third party.
(ii) In the light of the provisions of Section 30(7) read with Section 30(5) of the Indian
Partnership Act, 1932, since X has failed to give public notice that he has not
elected to not to become a partner within six months, he will be deemed to be a
partner after the period of the above six months and therefore, Mr. L can recover
his debt from him also in the same way as he can recover from any other partners.
(6 MARKS)
ANSWER : 5(A)
Section 26 of the Sale of Goods Act, 1930 provides that unless otherwise agreed, the goods remain
at the seller’s risk until the property therein is transferred to the buyer, but when the property
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therein is transferred to the buyer, the goods are at buyer’s risk whether delivery has been made or
not. Further Section 18 read with Section 23 of the Act provide that in a contract for the sale of
unascertained goods, no property in the goods is transferred to the buyer, unless and until the
goods are ascertained and where there is contract for the sale of unascertained or future goods by
description, and goods of that description and in deliverable state are unconditionally
appropriated to the contract, either by the seller with the assent of the buyer or by the buyer
with the assent of the seller, the property in the goods thereupon passes to the buyer. Such
assent may be express or implied.
Applying the aforesaid law to the facts of the case in hand, it is clear that Mr. S has the right to
select the goods out of the bulk and he has sent his men for same purpose.
Hence the problem can be answered based on the following two assumptions and the answer will
varyaccordingly.
(i) Where the bales have been selected with the consent of the buyer’s representatives:
In this case, the property in the 60 bales has been transferred to the buyer and goods have
been appropriated to the contract. Thus, loss arising due to fire in case of 60 bales would be
borne by Mr. S. As regards 40 bales, the loss would be borne by Mr. V, since the goods have
not been identified and appropriated.
(ii) Where the bales have not been selected with the consent of buyer’s representatives:
In this case, the property in the goods has not been transferred at all and hence the loss
of 100 bales would be borne by Mr. V completely.
(6 MARKS)
ANSWER : 5(B)
Doctrine of Indoor Management
According to this doctrine, persons dealing with the company need not inquire whether internal
proceedings relating to the contract are followed correctly, once they are satisfied that the
transaction is in accordance with the memorandum and articles of association.
Outsiders need not enquire whether the necessary meeting was convened and held properly or
whether necessary resolution was passed properly or not. They are entitled to take it for granted
that the company has gone through all these proceedings in a regular manner.
The doctrine helps to protect external members from the company and states that the people are
entitled to presume that internal proceedings are as per documents submitted with the
Registrar of Companies.
Thus,
1. What happens within internal to a company is not a matter of public knowledge. An
outsider can only presume the intentions of a company, but do not know the information
he/she is not privy to.
2. If not for the doctrine, the company could escape creditors by denying the authority of
officials to act on its behalf.
(6 MARKS)
ANSWER : 6(A)

Problem as asked in the question is based on the provisions of the Indian Contract Act, 1872 as
contained in section 2(d) and on the principle ‘privity of consideration’. Consideration is one of

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the essential elements to make a contract valid and it can flow from the promisee or any other
person. In view of the clear language used in definition of ‘consideration’ in Section 2(d), it is not
necessary that consideration should be furnished by the promisee only. A promise is enforceable if
there is some consideration for it and it is quite immaterial whether it moves from the promisee or
any other person.
The leading authority in the decision of the Chinnaya Vs. Ramayya, held that the consideration can
legitimately move from a third party and it is an accepted principle of law in India.

In the given problem, Mr. Sohanlal has entered into a contract with Mr. Mohanlal, but Mr. Chotelal
has not given any consideration to Mr. Mohanlal but the consideration did flow from Mr. Sohanlal
to Mr. Mohanlal on the behalf of Mr. Chotelal and such consideration from third party is
sufficient to enforce the promise of Mr. Mohanlal to allow Mr. Chotelal to use 1 acre of land.
Further the deed of sale and the promise made by Mr. Mohanlal to Mr. Chotelal to allow the use of
1 acre of land were executed simultaneously and therefore they should be regarded as one
transaction and there was sufficient consideration for it.

Moreover, it is provided in the law that “in case covenant running with the land, where a person
purchases land with notice that the owner of the land is bound by certain duties affecting land,
the covenant affecting the land may be enforced by the successor of the seller.”

In such a case, third party to a contract can file the suit although it has not moved the
consideration. Hence, Mr. Chotelal is entitled to file a petition against Mr. Mohanlal for execution
of contract.

(5 MARKS)

ANSWER : 6(B)
As per Section 29 of Indian Partnership Act, 1932, a transfer by a partner of his interest in the firm,
either absolute or by mortgage, or by the creation by him of a charge on such interest, does not
entitle the transferee, during the continuance of the firm, to interfere in the conduct of business, or
to require accounts, or to inspect the books of the firm, but entitles the transferee only to
receive the share ofprofits of the transferring partner, and the transferee shall accept the account
of profits agreed to by the partners.
In the given case during the continuance of partnership, such transferee Mr. B is not entitled:
• to interfere with the conduct of the business.
• to require accounts.
• to inspect books of the firm.
However, Mr. B is only entitled to receive the share of the profits of the transferring partner and
he is bound to accept the profits as agreed to by the partners, i.e. he cannot challenge the
accounts.
(4 MARKS)
ANSWER : 6(C)
Similarities and dis-similarities between the Guarantee Company and the Company having share
capital:

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The common features between a ‘guarantee company’ and ‘share company’ are legal personality
and limited liability. In case of guarantee company, the liability of members is limited to the extent
of guarantee amount and in the latter case, the member’s liability is limited by the amount
remaining unpaid on the shares. Both of the companies have to state in the memorandum that the
members’ liability is limited.

However, the point of distinction between these two types of companies is that in the former case
the members may be called upon to discharge their liability only after commencement of the
winding up and only subject to certain conditions; but in the latter case, they may be called upon
to do so at any time, either during the company’s life-time or during its winding up.

(3 MARKS)

ANSWER : 7(A)

1. (B)

2. (C)

3. (B)

4. (D)

5. (A) (5 MARKS)

ANSWER : 7(B)

Should we monitor TV Content?

1. The effects of TV on chdrn.
1.1 violent progs. make them agrsv.
2. ACT formed in USA
2.1 To reduce vlnc. in TV progs.
2.2 To protest incsnt. cmrcl. Breaks
3. Basic chdrn. needs
3.1 amsmnt & engmnt
3.2 develop comm. skills
3.3 family rlnshps.
3.4 intll. dvlpmnt.
4. Passive TVwchngdtrmntl, reasons:
4.1 Rdcs.sclng.
4.2 Retards brain dvlpmnt.
4.3 Chdrn. can’t identify strnths & wknss.
Key for abbreviations
1. TV - Television
2. Chdrn.-Children
3. Vlnc.- violence
4. Progs.-programs

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 5. Agrsv.-aggressive
6. ACT- Action for Children’s Team
7. USA-United States of America
8. Vlnc.-violence
9. Incsnt.-incessant

10. Comrcl.-commercial
11. Amsmnt.-amusement
12. Engmnt.-engagement
13. Rlnshps.-relationships
14. Intll. - intellectual
15. Wchng.-watching
16. Dtrmntl.-detrimental
17. Rdcs.-reduces
18. Sclng-socialising
19. Comm.-Communication
20. &-and
21. Dvlpmnt.-development
22. Strnths.-strengths
23. Wknss.-weaknesses
Summary

Watching TV passively makes children aggressive. ACT (Action for Children Treatment) in USA has
been formed to check violence in TV programs and protest against TV ads that make children crave
for unnecessary products. Parents have to find an alternative way of keeping children engaged and
amused. Watching TV excessively retards verbal development and adversely affects family
relationships, communication skills and intellectual development in children. It also discourages
playing games that help them identify their strengths and weaknesses making them dull and
passive. However, TV can be watched for educational purposes.

(5 MARKS)

ANSWER : 8(A)
Vertical, circuit, chain, wheel, and star are the five main networks in communication.

The star communication network has all members of the group communicate with each other and
exchange information. This network propagates group communication and is essential where
teamwork is involved. The members communicate with each other without hesitation.

(2 MARKS)

ANSWER : 8(B)(i)

(I) Compound-Complex (1 MARKS)

(II) Compound-Complex (1 MARKS)

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(III) The asked his manager if he should email that letter again. (1 MARKS)

ANSWER : 8(C)
1) South Korea in deep trouble(Title)
South Korea having gained the status of a democracy is yet to settle issues like corruption, political
conflicts, lack of leadership & consensus and many more. The efforts made by the new leaders on
the economic and social front have resulted in unexpected turns leading to more conflicts, distrust
and erroneous policies. The resulting loop holes have made the civic organisations dominate the
political institutions.

(5 MARKS)

ANSWER : 9(A)(I)
Based on Communication channels, there are three kinds of categories:

• Verbal: Verbal communication involves the use of words and language in delivering the
intended message
• Non-Verbal: Nonverbal communication is the process of communicating by sending and
receiving wordless messages. These messages can aid verbal communication, convey
thoughts and feelings contrary to the spoken words or express ideas and emotions on their
own.
• Visual: Visual communication through visual aids such as signs, typography, drawing, graphic
design, illustration, colour and other electronic resources usually reinforces written
communication. Visuals like graphs, pie charts and other diagrammatic presentations convey
clearly and concisely a great deal of information. They are an essential part of official
presentations these days.
(2 MARKS)
ANSWER : 9(B)
(i) (a) Opening (1 MARKS)
(ii) (c) Experienced (1 MARKS)
(iii) The shopkeeper says that prices are shooting up. (1 MARKS)

ANSWER : 9(C)

 Mention the details of food items supplied and payment terms.

 List of food items recently supplied.
 List of food items shoddy in quality.
 Problems in taste/adulteration in ingredients.
 Health hazards caused.
 Warning to improve quality.
 Food to be tested and approved by Food Manager on daily basis at the time of delivery.
 Quality chart to be maintained.
(5 MARKS)

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ANSWER : 10(A)
The barriers in communication are physical, organisational structure, language, cultural, emotional,
attitude and perception, physiological, gender and technical.

Select the barrier you think impedes communication the most and give reasons for it.

(2 MARKS)

ANSWER : 10(B)

(i) The entire house was painted by Tom.

(ii) The country is covered by the corporation’s sales and service organisation.
(iii) A movie is going to be watched by us tonight.
(3*1 MARKS = 3)

ANSWER : 10(C)
Covid 19: Impact and Strategies for Education Sector in India
• Country began shutting down schools and colleges temporarily as a measure to contain
the spread of the novel corona virus.
• crucial events such as - board exams, entrance exams, admissions, etc.impacted.
• long-term impact on the continuity of learning for more than 285 million young learners
in India
• Structure of school, learning and teaching methodology affected.
• Handful of private schools could adopt online teaching.
• Low-income private schools/government schools shut because of no access to e-
learningsolutions.
• Disrupted the higher sector education which is a critical determinant of a country’s
economicalfuture.
• Students have been barred to leave the country.
• Unemployment shot up from 8.4% in mid-March to 23% in early April and the urban
unemployment rate to 30.9%.
• Disruption is pushing policymakers to figure out how to drive engagement at scale while
ensuring inclusive e-learning solutions.
• Strategies required to manage the crisis :
▪ Continuity of learning in government schools and universities.
▪ Learning solution at least for marginalised needs to be developed.
▪ Reconsider the current delivery and pedagogical methods in school and higher
education by seamlessly integrating classroom learning with e-learning modes to
build a unified learning system.
QUESTION: 11(A)

Chain of Command: The communication pattern that follows the chain of command from the
senior to the junior is called the chain network. Communication starts at the top, like from a CEO,
and works its way down to the different levels of employees. It involves a lot of organisational
hierarchy.
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Drawbacks: The chain network often takes up time, and communication may not be clear. It
creates a lot of miscommunication as the message travels a long path.

(2 MARKS)

QUESTION : 11(B)

(i) wild goose chase – a foolish and hopeless pursuit of something unattainable
(ii) jump on the bandwagon – an activity, group, movement, etc. that has become
successful orfashionable and so attracts many new people
(iii) The demure actress has won the hearts of the public.
(a) shy
(iv) Finishing the ten page home work in two days is a tedious job.
(a) tough
(4 * 1 MARKS = 4)
QUESTION: 11(C)

Cover Letter
Sender’s address
Date
Receiver’s designation
Receiver’s address
Subject- Application for the post of a journalist
Dear Sir/Madam,

This is with reference to your advertisement in ‘The Hindustan Times’ dated January 18, 2016 for
the post of a journalist in your esteemed organisation. I wish to apply for the same.
I am outgoing, diligent, open to learning and have an excellent command over English. After
completing my

M.A. in English meritoriously, I worked with Curry Makers as a Content Developer and was
acclaimed for my persistent hard work and dedication. I enjoy taking new challenges and have been
delivering good results. My curriculum vitae and other necessary documents are attached herewith.
I assure you of my utmost sincerity and dedication if an opportunity is given to me.

I will be readily available for a personal interaction any time as per your convenience, in case
my candidature is considered for the aforesaid post

I look forward to a positive reply.

Yours sincerely,

Mitali Joshi

ENCLOSURE:

1. Testimonials
2. Résumé

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Résumé

NAME : Mitali Joshi

FATHER’S NAME : Dr. R.P Joshi

PERMANENT ADDRESS : 20 Bailey Road

South Extension
Delhi
CONTACT : 989XXXXXXX

DATE OF BIRTH : 22 December 1989

NATIONALITY : Indian
MARITAL STATUS : Unmarried

ACADEMIC QUALIFICATION :

S. Subject / Board / Year of Percentage/

Qualification Institute
No. Stream University Passing Division

1 Higher Secondary Humanities Loreto Convent CBSE 2007 85%

Bangalore
2 B.A. (Hons.) English St. Mary’s Delhi 2010 I Division
College University
3 M.A. English St. Stephen’s Delhi 2012 I Division
College University

WORK EXPERIENCE :

S. No. Organisation Position held From To

1. Tehelka Senior Intern July 2012 January 2016

HOBBIES : Interacting with people and reading novels

LANGUAGES KNOWN : English, French and Hindi

REFERENCES : i) Ms. Indu Malhotra,

C.M.O., Bangalore.
Ph 9898765476
ii) Ms. Shalini Malik,
Editor, Tehelka
Ph- 9999967897
(4 MARKS)

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