Business law

Very short answer question

Define contract.
 A contract is an agreement between two or more parties that creates mutual
obligations that are enforceable by law
What is difference between offer and acceptance
 Offer is a proposal made by one party to another party with a view for forming
a contract.
 Acceptance is a positive action or statement by the offeree agreeing to the term
of the offer without any modification or conditions.
What is lawful consideration?
 Lawful consideration is the necessary component of a valid contract under the
Indian contract act of 1872.
What is misrepresentation?
 Misrepresentation is the intentional or unintentional use of inaccurate
information.
What is meant by crossing of cheque?
 Crossing a cheque means that the cheque can be paid into a bank account and
cannot be cashed over the counter.
What is fraud?
 Fraud is committed through false acts and the dissemination of false
information whether knowingly or under false belief.
What is meant by sleeping partner?
 A sleeping partner is also known as silent partner, is a person who contributes
capital to a business but doesn’t actively participate in its management.
When partnership act was enacted?
 October 1,1932.
When law of contract was enacted?
 April 25, 1872
When was negotiable instrument act was enacted?
 March 1, 1882.
When was the company act was enacted?
 January 18, 1956
What is under influence?
 Under influence, also known as undue influence is a contract law principle that
involves one part taking advantage of another for financial gain.
Define sale as per Goods Act?
 Sale of goods is a contract whereby the seller transfers or agrees to transfer the
property in goods to the buyer for a price.
What are minutes?
 Minutes are a formal written record of a meeting’s proceedings and business
transactions
What is legality object?
 The legality of an object is the requirement that the purpose of a contract must
be lawful.
What is express contract?
 An express contract is an agreement between at least two parties that is fully
spelled out either orally or in writing.
A place an order to B for supplying 50 bottles of orange juice. B sends 55 such bottles.
Can A reject the order?
 Ethically yes he can
What is Government Company?
 A government company is a company where the central government, state
government or both own at least 51% of the share .
What is specific good?
 Specific goods are goods that are identified and agreed upon by the seller and
buyer when the sale contract is made.
Unless otherwise agreed, the buyer is not bound to accept delivery of goods in
 Installments
What are future goods?
 Future goods are goods that are not yet in existence or do not yet belong to the
seller when the contract of sale is made.
 Delivery of the key of the go-down by the seller to the buyer will amount to
_________ (Actual / Constructive / Symbolic).
 Symbolic delivery
What is E-commerce contract?
 e-commerce contract refers to a contract that take pace through e-commerce
without the parties meeting each other.
A void agreement is void from the __________.
 Beginning
What is bailment?
 A bailment is the legal relationship between two parties, the bailor and the
bailee.
Unless otherwise agreed, delivery of goods and payment of price have to be
done________ (Separately / Concurrently)
 Concurrent condition.
What is unilateral contract?
 Unilateral contract is a type of agreement where one party makes an offer to a
person, organization or the general public.
Who is an entrepreneurial promoter?
 An entrepreneurial promoter is someone who conceive a business idea and
takes the necessary steps to launch the business.
What is prospectus?
 A prospectus is a legal document that provide information about a company’s
securities to the public.
What is meant by caveat emptor?
 Caveat emptor means let the buyer be vigilant.
What is the maximum numbers of partners allowed in a firm carrying on general
business?
 The maximum numbers of partners allowed in a firm carrying on general
business is 50 members.
 Mention the different types of partners in case of a partnership firm.
 Active partner
 Sleeping partner
Is registration of a partnership firm compulsory?
 No it’s not compulsory
How many parties should be there for a valid contract?
 There should be at least two parties for valid contract.
What is meant by Quantum meruit?
 Quantum meruit means as much as earned.
What is issued capital?
 Issued capital is the portion of a company’s authorized capital.
What is „good‟ according to the Sales of Good Act?
 Any kinds of moveable property other than actionable claim and money.
Which clause of the Memorandum of Association cannot be changed?
Subscription clause.
 Mention any two circumstances under which a partnership firm may be
dissolved.
Death of partner.
 Admission of new partner.
Who is a drawer in case of a promissory note?
 Drawer is the debtor.
Mention the two types of Company.
 Private company
 Public company
What is Article of Association?
 AOA are legal document that outline the rules and regulation of a company or
organization.
When was the Indian contract Act came into force?
 First day of September, 1872
What is Memorandum of Association?
  MOM is a legal document that establishes that authority of a company and the
terms under which it operates.

Short answer type questions

What are the essential elements of contract?

 Offer
 Acceptance
Define negotiable instrument.
 A negotiable instrument is a signed document that promises payment to a
specific person or assignee. It is a written contract that guarantees the benefit
from one person to another.
What is past consideration?
 Past consideration is used to mean a promise or act that was made or performed
prior to a contract.
Define company.
1. A company is a legal entity formed by a group of individuals to engage in and
operate a business commercial or industrial enterprise
What is meant by capacity of parties of a contract?
 The capacity of the parties specifies the person who can and who cannot enter
into a contract. Persons with unsound minds and minors cannot enter into a
contract. But a person who has achieved the age of majority and with a sound
mind can enter in a contract.
What is share of a company?
 Share represent units of ownership in a corporation or financial asset owned by
investors who exchange capital in return for these units.
What is hire purchase sale?
 Hire purchase is an agreement where the owner of goods permits someone to
hire the goods for set period of time.
What are different types of crossing cheque?
 General crossing
 Special crossing
Different between sale and agreement to sale?
 Sale refers to transfers ownership of goods Immediately.
 Sale agreement refers to the term and condition of sale of property by the seller
to the buyer.
What is share certificate?
 A share certificate is a written document signed on the behalf of a corporation
that serves as legal proof of ownership of the number of shares indicated.
No consideration no contract what are its exceptions?
 Gifts
 Bailment
 Charity
What is statement in lieu of prospectus?
 The statement in lieu of prospectus is a document filed with the registrar of the
companies when the company has not issued prospectus to the public for
inviting them to subscribe for shares.
What is share warrant?
 A share warrant is a contract between an individual to trade the company shares
at fixed price on or before a pre-decided date.
What is difference between bill of exchange and promissory?
Basis Bill of exchange Promissory note
1. Drawer Creditor is the drawer. Debtor is the drawer.
2. Order and promise It is an order to pay. It is promise to pay.

What is difference between civil law and criminal law?

 Civil law is a branch of law that regulates the rights and duties of people and
the legal relations between private individuals.
 Criminal law is a body of laws that apply to criminal acts.
What is the difference between holder and holder in due course?
 A holder is someone who legally owns a negotiable instrument like cheque or
promissory note.
 A holder in due course is someone who acquires a negotiable instrument before
its due for payment, in good faith, and for value.
Define contract.
 A contract is a legally binding agreement between two or more parties to
provide a product or services. Contract can be written or expressed verbally.
What is proposal?
 A proposal is a formal written offer from one party to another for an agreement.
Proposal can be used in many different situations, such as in business contracts
or project plans.
What is ‘intention to create legal relation’?
 Intention to create legal relations is a requirement for legally binding and
enforceable agreement between parties.
What is subsidiary company?
 A subsidiary company is a business that is partially or fully owned by another
company. The owning company is called the parent company.
Define unpaid seller.
 A person who has sold goods to another person but has not been paid for the
goods or been paid partially is called unpaid seller.
What is ‘Caveat Emptor’?
 Caveat emptor is a Latin phrase that means let the buyer beware. The principal
of caveat emptor is sometimes used in legal contracts as a type of disclaimer.
What is ‘Holder in Due Course’?
 A holder in due course is someone who acquire a negotiable instrument in good
faith and for value before it becomes due for payment.
What do mean by partnership?
 A partnership is a formal agreement between two or more people to manage
and operate a business. The partners share profit and losses of business.
Define statutory company.
 A statutory company is a company that is create by a special act of parliament
and provides services to the public.

What is coercion?
 Coercion is the act of forcing someone to do something they don’t want to do.
It can also involve using intimidating behavior to make someone feat the
consequences of not acting.
Who is promoter?
 A promoter is a person or organization that establishes a business at a specific
location and completes the necessary formalities.
What is quasi-contract?
 A quasi-contract is a legal obligation imposed by a court when one party
benefits at the expense of another.
What is hire-purchase agreement?
 A hire purchase agreement is a credit agreement that allow someone to hire an
item and pay for it in monthly installments.
Explain, in brief, different types of partners.
 Active partner: A partner who participates in the company’s management
 Sleeping partner: A partner who is inactive.
What are competent to make contract?
 They are of the age of majority.
 They are of sound mind.
What is an agreement?
 An agreement is a promise or commitment given by one party to another party
it consists of two or more parties. it includes an offer made by one person and
accepted by another person.

What is meant by void contract?

 A void contract is a contract that is not legally enforceable from the moment it
is created. It is treated as if it was never created and is unenforceable in court.
What is consideration?
 Consideration is a legal term that describes the benefit each party receives in a
contract. It’s a promise of something of value given by one party in exchange
for something of value given by the other party.
What is partnership deed?
 A partnership deed is a legal document that outlines the terms and condition of
a partnership between two or more people. It is also known as a partnership
agreement.
What is meant by sleeping partner?
  A sleeping partner is a person who provides capital for a business but doesn’t
participate in its management. Sleeping partner are also known as silent
partners.
Can a minor enter into partnership agreement?
 The partnership act 1932, does not permit a minor to become a partner in the
partnership firm.
Define Warranty.
 A warranty is a written promise from a manufacturer that a product or service is
from defects. It also refers to the terms and condition of repair, refunds, or
exchange if the product doesn’t function as intended.
„Risk prima facie passes with ownership‟- Comment.
 This means that the owner of goods is responsible for any loss or damage to the
goods,
Who is a drawer?
 A drawer is someone who write or draw up a bill, such as a bill of exchange or
cheque. The drawer is the seller or creditor who is entitled to receive money
from someone.
What is bill of exchange?
 A bill of exchange is a written order that blinds one party to pay a fixed sum of
money to another party on demand or at a predetermined date.
Define a Cheque.
 A cheque is a negotiable instrument that instructs a financial institution to pay a
specific amount of money from a specified account.
What is misstatement in prospectus?
 A misstatement in a prospectus is an inaccuracy, omission, or untrue
information included in a document that provides potential investors with
important details about a company’s securities proposition.
Define a director.
 A director is a person appointed to perform the duties and functions of director
of a company in accordance with the provision of the companies Act, 2013

long answer type questions

what is bill of exchange? What are its features?
 A bill of exchange is a short-term negotiable instrument that shows a buyer has
agreed to pay a seller a specific amount at certain time. It’s also known as a
bank draft.
Features of bill of exchange are as follow:
 It must be a written document
 It must name all relevant parties
 It must be addressed from one party to another
 It must bear the signature of the party giving it
 It must outline the time when the money is due
What is significance of crossing of a cheque?
 Enhance security
 Reduced fraudulent activity
 Easier tracking of the payment
 Improve traceability
 Additional protection with “Account payee” clauses

Difference between public company and private company.

Feature Private Company Public Company

Ownership Owned by a limited group Shares owned by the public and

(founders, family, investors) company personnel

Stock Trading Shares not publicly traded Shares traded on stock

exchanges

Transparency Less public disclosure of Stricter reporting requirements

financial information and public financial scrutiny

Capital Limited fundraising options Access to more capital through

Raising (loans, venture capital) stock offerings

Regulations Fewer regulations and More regulations and compliance

reporting requirements needs
 Focus Long-term growth and vision Public shareholders influence
driven by founders focus and short-term performance

Examples Local bakery, family-owned Apple, Google, Microsoft

restaurant

What are different types of meeting of a company?

 Onboarding meetings
 Shareholder’s meeting
 Team building
 Big decision meetings
 Company meetings
Explain the contents of partnership deed.
 The name of the firm.
 Name and details of all partners.
 Date of commencement of business.
 Duration of firm’s existence.
 Profit and loss sharing ratio.
Explain the doctrine of corporate veil.
 The corporate veil theory is a legal concept which separates the identity of the
company from its members. Hence, the member are shielded from the
liabilities arising out of the company’s actions. Therefore, if the company
incurs debts or contravenes any laws then the members are not liable for those
errors and enjoy corporate insulation. In simple words the shareholders are
protected from the acts of the company.
What is doctrine of supervising impossibility?
 The doctrine of supervising impossibility is also called the doctrine of
frustration, which is one of the aspects of the law of contracts. It deals with the
enforceability of contracts on the occurrence of some unforeseen incidents. The
word ‘frustration’ means efforts made ineffective and it is one of the modes by
which a contract can be discharged as per section 56 of the Indian contract Act,
1872.
Distinguish between fraud and misrepresentation.
Feature Fraud Misrepresentation

Definition Intentional misstatement of False or inaccurate statement

fact or omission of truth to made carelessly or unknowingly
 deceive and gain unfair
advantage

Intent Key element: Knows or Not always present: May be

recklessly disregards the negligent, honest mistake, or
falsity of the statement lack of knowledge

Elements to False statement, knowledge of False statement, reliance,

Prove falsity, intent to deceive, damages (may not require
reliance, damages knowledge of falsity)

Consequences Civil penalties, criminal Civil penalties, potential contract

charges, contract voidance voidance

Examples Selling a car with a hidden Overstating income on a loan

mechanical defect, forging application, failing to disclose
financial documents, lying property defects in a sale,
about qualifications to get a accidentally giving incorrect
job directions

Legal Term Fraudulent misrepresentation Negligent misrepresentation

How an offer can be revoked?

The offer can be revoked in a following way:
 By notice of revocation.
 By lapse of time.
 By death or insanity.
 By offer counter offer.
 By the subsequent illegality.

Distinguish between coercion and undue influence.

Feature Coercion Undue Influence

Method Force or threats (physical, Manipulation, exploitation of

verbal, emotional) trust, power imbalance
 Aim Get immediate compliance, Gain unfair advantage, control
regardless of long-term someone's decisions
consequences

Victim's State Fear, distress, lack of options Confusion, pressure, feeling

obligated

Relationship with Often strangers or unrelated Often people in positions of

Perpetrator trust (family, friends,
colleagues)

Duration Typically short-term, focused Can be long-term, impacting

on a specific act overall behaviour

Legality Often illegal, punishable by Not always illegal, but can be

law grounds for voiding contracts
or legal action

Explain different types of goods.

 Existing goods.
 Future goods.
 Contingent goods.
No consideration no contract”- write the exceptions to this rule.
 Natural love and affection.
 Past voluntary service.
 Creation of agency.
 Gifts.
 Bailment.
 Charity.

Distinguish between sale and agreement to sale.

Feature Sale Agreement to Sale

Ownership Immediate Future or conditional

Transfer
 Example Buying a shirt at a store Signing a contract to buy a house
later
Legal Status Completed contract Ongoing contract

Risk of Loss Passes to buyer Remains with seller until transfer

immediately

Payment Must be made at or May be made at different times

before transfer depending on conditions

Flexibility Less flexible, easier to Move flexible, easier to renegotiate

back out

Explain the essential elements of partnership.

 Partnership agreement
 A partnership can have maximum of 20 partners
 Operation of business in a partnership
 Profit sharing in partners
 Mutual agency between partners
Must a firm be registered? What are the effects of non-registration?
 According to the Indian partnership Act, 1932, registering a partnership firm is
not mandatory. However, registering a firm providing legal benefits and
protections that unregistered firms do not have.
the effects of non-registration are as follow:
 No suit to enforce right under the Act.
 No suit to enforce right against any third party.
 No proper relief.
 Partner cannot bring legal action against each other.
Discuss the provisions of company act relating to holding of annual General Meeting.
 An annual general meeting refers to the meeting which is held annually by the
companies.it is important for every type of company whether it is a private
company or a public company, limited by share or guarantee to conduct an
annual general meeting once in a year. There shouldn’t be a gap of more than
15 months between two annual general meetings. An exception id given when a
company is incorporated in such a case the company may not conduct an
 annual general meeting in the year at all as after incorporation, the company
needs to conduct an annual general meeting within 18 months.
State different provisions available for removing of Board of Directors in a public
limited company.
Feature Void Contract Illegal Contract
Basic Idea Not legally binding from the start, like it Prohibited by law and cannot be
never existed. enforced.

Example Contract signed by a minor to sell Agreement to commit a crime

alcohol together

Why it's invalid Lacks essential elements Goes against public policy or specific
laws
Consequences Parties are put back in their original Both parties may face legal penalties
positions (no gains/losses)

Enforcement Neither party can sue the other based Courts won't help either party with
on the contract. the agreement.

Recovering Generally, neither party can recover May involve returning any illegal
losses anything they lost. gains or facing damages.

Briefly discuss ‘Prospectus’ and ‘Statement in lieu of Prospectus’.

A prospectus is a document that provides information about an investment opportunity
such as a stock or bond offering. It is required by law to be provide to potential
investors before they make a decision to invest. A statement in lieu of prospectus on
the other hand is a simplified version of a prospectus that is used in certain
circumstances, such as when the securities being offered have been previously issued
and are being resold.it typically less information than a full prospectus.
Distinguish between Bills of Exchange and Promissory Note.
Bill of Exchange Promissory Note
Debtor (drawer) orders a third party Debtor directly promises to pay
(drawee) to pay

Third party (payee) who receives the order Creditor (payee) who receives the
promise
Three (drawer, drawee, payee) Two (maker, payee)

Yes, drawee must accept the order to be No, maker's signature suffices
liable
 Yes, can be endorsed and passed to Yes, can be endorsed and passed
others to others

International trade, large transactions Domestic credit, loans, personal

debts
Bank draft IOU note

State the grounds under which a partnership firm may be dissolved by the order of the
court.
A court may dissolve a partnership firm based on the following grounds:
 Insanity or unsound mind
 Incapable to perform duties
 Misconduct
 Transfer of interests
 Continuous loss in business
Distinguish between holder and holder in due course.
Holder Holder in Due Course
Owns a negotiable instrument Owns a negotiable instrument and has
(check, promissory note, etc.) special rights

Can receive it in any way Must receive it before it's due, in good faith,
for value, and without notice of problems
Not necessary Absolutely essential

Not always needed Always needed (payment, service, etc.)

Doesn't matter Cannot know or suspect anything wrong

Depends on the previous owner Gets a clean title, free of problems from past
owners
Limited. Can only sue the person Can sue everyone involved in the instrument
they got it from. if they don't pay.

Explain the matters to be stated in prospectus.

 Company details.
 Director details.
 Shares.
 Material contracts.
 Compliance.
 Project details.
Explain the rights available to an unpaid seller of goods.
 Right to withhold delivery.
 Right to sue the buyer.
 Right to resell.
 Right to stop delivery in transit.
 Right to claim damage

Very long answer type questions

Explain the features of a company.
 Incorporated association
 Separate legal entity
 Limited liabilities
 Transferability of shares
 Common seal
 Management and ownership separation
 Corporate governance
Explain the contain of memorandum of association of a company.
 The memorandum of association is a legal document that defines the
constitution of a company. It’s a foundational document that outline company’s
objectives, limitations, and scope of operations. The MOA is a public
document, so anyone entering into a contract with the company is expected to
have knowledge of it.
The MOA contains the following clauses:
 Name clauses
 Registered office clauses
 Objects clause
 Liability clause
 Situation clause
The MOA is filed with the registrar of companies along with other documents when
company is formed. The company cannot alter its capital clause without the written
consent of every member.
Explain the rights of an unpaid seller.
 Right of lien
 Right of stoppage in transit
 Right to reselling the goods
 Suit for the price
  Suit for damages
 Right to reclaim the goods
 Recission of the contract

Explain the contain of article of association of a company.

 Company details
 Purpose
 Duration
 Power distribution
 Company organization
 Share capital
 Shareholder meeting
Distinguish between hire purchase and installment payment system.
Feature Hire Purchase Installment Payment
System

Ownership during Seller retains ownership Buyer owns the goods

payment period

Risk of loss or damage Seller bears the risk Buyer bears the risk

Default consequences Seller repossesses the goods Seller sues for

(buyer loses payments) remaining payments

Down payment Usually required Optional or lower

Interest calculation Usually on full price of goods Usually on remaining

balance

Termination right Seller can terminate agreement Difficult for seller to

for non-payment terminate

Applicable law Hire Purchase Act Sale of Goods Act

Example Financing a car Buying furniture on

installment

Explain the essential element of contract.

 Identification
 Offer
 Acceptance
 Consideration
 Meeting of the minds
 Competency and capacity
 Legality