1.a. Define Commercial law and the scope of it in business.

Ans:
Definition of Commercial law:
The laws of a country relate to many different subjects. They include rules regarding inheritance
and transfer of property, relationship between persons, crimes and their punishment, matters
relating to voting and election, as well as matters relating to industry, trade and commerce. The
term Commercial Law or Mercantile Law is used to include only the last of the aforesaid subjects,
viz., rules relating to industry, trade, and commerce.
Scope of Commercial law in business:
The scope of commercial law is fairly large. It includes the laws relating to contract, partnership,
negotiable instruments, sale of goods, companies etc.
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1.b. Explain common elements regarding ‘Law of Contract’ in business dealing. Use
example.
Ans:
Common elements regarding ‘Law of Contract’ in business dealing:
Section 2 (h) of the Contract Act provides that, “An agreement enforceable by law is a contract”.
An agreement comes into existence whenever two or more persons promise to do or not to do
something. “Every promise and every set of promises, forming the consideration for each other, is
an agreement.”—Sec. 2(e). Some agreements cannot be enforced through the courts of law, e.g.
an agreement to play cards or go to a cinema. An agreement, which can be enforced through the
courts of law, is called a contract.
An agreement becomes enforceable by law when it fulfils certain conditions. These conditions,
which may be called the Essential Elements of a Contract, are stated below.
i. Offer and Acceptance:
There must be a lawful offer by one party and a lawful acceptance of the offer by the other party
or parties. The adjective “lawful” implies that the offer and acceptance must conform to the rules
laid down in the Contract Act regarding offer and acceptance.
Example- A offers to buy B’s car for rupees two lacs and B accepts such an offer. Now, this has
become a promise. When the proposal is accepted and it becomes a proposal it also becomes
irrevocable. An offer does not create any legal obligations, but after the offer is accepted it becomes
a promise. And a promise is irrevocable because it creates legal obligations between parties. An
offer can be revoked before it is accepted. But once acceptance is communicated it cannot be
revoked or withdrawn.
 ii. Legal Relationship:
There must be an intention (among the parties) that the agreement shall result in or create legal
relations. An agreement to dine at a friend’s house is not an agreement intended to create legal
relations and is not a contract. But an agreement to buy and sell goods or an agreement to marry,
are agreements intended to create some legal relationship and are therefore contracts, provided the
other essential elements are present.
Example -
a) A party may provide a written agreement
b) The parties may have separated.
c) If there is a third party to the agreement
d) lastly, if a party acted on his or her detriment in reliance on the agreement

iii. Lawful Consideration:

Subject to certain exceptions, an agreement is legally enforceable only when each of the parties to
it gives something and gets something. An agreement to do something for nothing is usually not
enforceable by law. The something given or obtained is called Consideration. The consideration
may be an act (doing something) or forbearance (not doing something) or a promise to do or not
to do something. Consideration may be past (something already done or not done). It may also be
present or future. But only those considerations are valid which are “lawful”.
Example- X received a license from the Forest Department to cut the grass of a certain area. The
authorities at the department told him he cannot pass on such interest to another person. But the
Forest Act has no such statute. So, X sold his interest to B and the contract was held as valid.
iv. Capacity:
The parties to an agreement must be legally capable of entering into an agreement, otherwise it
cannot be enforced by a court of law. Want of capacity arises from minority, lunacy, idiocy.
drunkenness, and similar other factors. If any of the parties to the agreement suffers from any such
disability, the agreement is not enforceable by law, except in some special cases.
Example- If an agent sells an insurance policy to a minor, and the insurance company agrees to
underwrite it, the policy can be voided at any time the minor wishes both before and after the minor
reaches the age of majority. The insurance company cannot void the contract.
v. Free Consent:
In order to be enforceable, an agreement must be based on the free consent of all the parties. There
is absence of genuine consent if the agreement is induced by coercion, undue influence, mistake,
misrepresentation, and fraud. An agreement vitiated by any of these factors cannot be enforced by
the party guilty of coercion, undue influence etc. The other party (the aggrieved party) can enforce
it, subject to rules laid down in the Act.
Example- X threatens to hurt Y if he does not sell his house to X for 5 lakh takas. Here even if Y
sells the house to X, it will not be a valid contract since Y’s consent was obtained by coercion.
vi. Legality of the object:
The object for which the agreement has been entered into must not be illegal, or immoral or
opposed to public policy.
Example- A, promises to pay TK 200 to B, if B would commit fraud on C. B agrees. B’s agreeing
to defraud is unlawful consideration for A’s promise to pay. Hence the agreement is illegal and
void.
vii. Writing and registration:
A contract may be oral. But the law lays down certain special cases where the agreement, to be
valid, must be in writing and registered, e.g. sale of immovable property.
Example- Insurance contract
viii. Certainty:
The agreement must not be vague. It must be possible to ascertain the meaning of the agreement,
for otherwise it cannot be enforced.
Example- The parties had agreed to the supply of a lorry on ‘hire purchase terms. The House of
Lords held that in the absence of any other evidence of the details of the hire purchase agreement
this was too vague to be enforceable, and there was therefore no contract.
ix. Possibility of performance:
The agreement must be capable of being performed. A promise to do an impossible thing cannot
be enforced.
Example- “A” agrees with “B” to discover a treasure by magic, the agreement is not enforceable.
The elements mentioned above must all be present. If any one of them is absent the agreement
does not become a contract. An agreement which fulfils all the essential elements is enforceable
by law and is called a contract.
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3.a. Differentiate between contract of sale and agreement to sell of goods with example.
Ans:
Differences between contract of sale and agreement to sell of goods:
(Sec. 4). A contract for the sale of goods may be either a sale or an agreement to sell. Where under
a contract of sale the property in the goods (i.e. the ownership) is transferred from the seller to the
buyer, the contract is called a sale. The transaction is a sale even though the price is payable at a
later date or delivery is to be given in the future, provided the ownership of the goods is transferred
from the seller to the buyer. Where the transfer of ownership is to take place at a future time or
subject to some condition to be fulfilled later, the contract is called an agreement to sell.
Differences between a Sale and an Agreement to Sell:
i. In an agreement to sell, the property in the goods remains with the seller until the agreement
'to sell becomes a sale by the expiry of the agreed time or the fulfilment of the agreed
conditions. Till this happens the goods can be resold by the seller or attached in execution
of a decree against him. In case of a sale the property passes to the buyer and the goods
cannot be seized in execution of a decree against the seller.
ii. Where the transaction amounts to a sale, the goods belong to the buyer and he has to bear
the loss if the goods are subsequently damaged or destroyed. (Sec. 26).
iii. In the case of a sale, the unpaid seller has certain reliefs available, e.g. lien, stoppage in
transit and resale. In case of an agreement to sell, the seller’s remedy for breach of contract
by the buyer is a suit for damages.
Example-
i. A agrees to buy from B a haystack on B’s land, with liberty to come on B's land to take it
away. This is a sale because the property in the goods has passed to buyer.
ii. P agrees to buy a quantity of soda to arrive by a certain ship. This is an agreement to sell
because the property in the goods will pass to the buyer when the goods come and the
agreement is naturally subject to the condition that the ship arrives in port with the goods.
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3.b. Which one is agreement to sell and contract for sale from below cases?
i. Ripon and Babul made a contract with the condition that Babul will sell a box of onion
to Ripon and the payment will be done upon receiving the onion box not by sign in
the contract paper.
ii. Ripon agrees to buy with the offered sale value of onion and purchased a box of onion
from Rabid.
Ans:
i. Ripon and Babul made a contract with the condition that Babul will sell a box of onion
to Ripon and the payment will be done upon receiving the onion box not by sign in
the contract paper.
This is an agreement to sell. Because the prescribed time elapses or the conditions, subject to which
the property in the goods is to be transferred, are not fulfilled.
i. Ripon agrees to buy with the offered sale value of onion and purchased a box of onion
from Rabid.
This is contract for sale. Because the prescribed time elapses or the conditions, subject to which
the property in the goods is to be transferred, are fulfilled.
3.c. What are the essential elements of a contract for the sale of goods?
Ans: The essential elements of a contract for the sale of goods are enumerated below.
i. There must be a contract for the exchange of movable goods for money. An exchange of
goods for goods is not a sale. But it has been held that if an exchange is made partly for
goods and partly for money, the contract is one of sale.
ii. Since a contract of sale involves a change of ownership, it follows that the buyer and the
seller must be different persons. A man cannot buy from or sell to himself. To this rule
there is one exception provided for in Section 4(1) of the Sale of Goods Act. A part-owner
can sell to another part-owner.
Example: P & Q are each of them one- fourth owners of a certain stock of movable goods.
P can sell his rights to Q. After the sale Q becomes owner of half share.
iii. A contract of sale is made by an offer to buy or sell goods for a price and the acceptance
of such offer. The contract may provide for the immediate delivery of the goods or
immediate payment of the price or both, or for the delivery and payment by instalments, or
that the delivery or payment or both shall be postponed. -Sec. 5(1).
iv. Subject to the provisions of any law for the time being in force, a contract of sale may be
in writing, or by word of mouth, or may be implied from the conduct of the parties. -Sec.
5(2).
v. The parties may agree upon any term concerning the time, place, and mode of delivery.
The terms may be of two types: essential and non-essential. Essential terms are called
Conditions, nonessential terms are called Warranties. The Sale of Goods Act provides that
in the absence of a contract to the contrary, certain conditions and warranties are to be
implied in all contracts of sale.
vi. The Price means the money consideration for the sale of goods. The price in a contract of
sale may be fixed by the contract of sale or may be left to be fixed in a manner agreed
between the parties. It may also be determined by the course of dealing between the parties.
Where there is no provision made in the contract regarding price, the buyer must pay a
reasonable price. What is reasonable is a question of fact depending upon the circumstances
of the case. -Sec. 9.
Goods may be sold on a condition that the valuation is to be made by a third party. In such
cases if the third party cannot or does not make the valuation, the agreement to sell becomes
void. But if the goods or any part thereof had been delivered to and appropriated by the
buyer, he shall pay a reasonable price therefor. Where such third party is prevented from
making the valuation by the fault of 'the seller or buyer, the party not in fault is entitled to
damages. -Sec. 10.
vii. A contract for the sale of specific goods becomes void if the goods without the knowledge
of the seller, have perished at the time when the contract was entered into or have become
so damaged as no longer to answer to their description in the contract. -Sec. 7. The same
rule applies if the goods perish, or are damaged after agreement to sell bull before sale. But
in this case, the agreement is not avoided if there is any fault on the part of either the buyer
or the seller or if the risk had passed to the buyer. (Sec. 8). The risk (of loss or damage to
 goods) passes to the buyer at the time agreed upon between the parties or when the
ownership passes to the buyer.
viii. A contract for the sale of goods must satisfy all the essential elements necessary for the
formation of a valid contract e.g. the parties must be competent to contract, there must be
free consent, there must be consideration, the object must be lawful etc.
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4.a. 'Material Alteration' in the contract documents is a popular way to find the (write the
correct one)
i. Causes of rejecting a contract
ii. Causes of changing a contract
Ans: 'Material Alteration' in the contract documents is a popular way to causes of changing a
contract. Alteration of a contract means change in one or more terms of the contract. Alteration is
perfectly valid if it is done with the consent of all the parties to the contract.
Causes of changing a contract:
i. A material alteration is one, which substantially changes the rights and liabilities of the
parties, or any of the parties, to the instrument, or,
ii. which changes the identity and the legal character of the instrument.
Changes in the following items are considered to be material alteration: amount of money payable;
date and time of payment; rate of interest; addition of a party; the medium of payment.
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4.b. Identify the `Novation' and 'Remission' from the below contract information.
i. Rubel and Jui, two business partners. Rubel owes Jui Tk.5000/-. After some time
Rubel shared about his business problem and requested Jul to accept Tk.2500/-
instead of Tk.5000/-. Jui accepts Tk.2500/-.
ii. Rubel and Jui, two business partners. Rubel lent Jui Tk.6000/-. After some time, due
to fund shortage Rubel and Jui agreed to a new contract that Jul will repay Tk..3000/-
and some of her stock (equivalent to the rest of the money lent) from business to
Rubel.
iii. Do you think the above two cases indicate any violation of business contract?
Ans:
i. Rubel and Jui, two business partners. Rubel owes Jui Tk.5000/-. After some time
Rubel shared about his business problem and requested Jul to accept Tk.2500/-
instead of Tk.5000/-. Jui accepts Tk.2500/-.
This is Remission. Because Remission may be defined as the acceptance of a lesser sum than what
was contracted for or a lesser fulfilment of the promise made. According to Section 63 of the
Contract Act, “Every promisee may dispense with or remit, wholly or in part, the performance of
the promise made to him, or may extend the time for such performance, or may accept instead of
it any satisfaction which he thinks fit.”
ii. Rubel and Jui, two business partners. Rubel lent Jui Tk.6000/-. After some time, due
to fund shortage Rubel and Jui agreed to a new contract that Jul will repay Tk..3000/-
and some of her stock (equivalent to the rest of the money lent) from business to
Rubel.
This is Novation. Because Novation occurs when a new contract is substituted for an existing
contract, either between the same parties or between different parties. The essence of the novation
of a contract lies in intention of the parties to supersede the old contract by the new.
iii. Do you think the above two cases indicate any violation of business contract?
No, I do not think the above two cases indicated any violation of business contract. Because in
novation and remission, all the parties mutually agreed and change or do a new contract.
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