VISHAL CLASSES

S.Y. BCOM BUSINESS LAW

MCQ IMPORTANCE
1) ‘Law in simple term means ‘rules’ or the system of rules which a particular country or
community recognizes as regulating the actions of its members and which it may enforce by the
imposition of penalties
2) The Contract Act came into force on 1stSeptember 1872.
3) Amit Sells his Vehicle to Balram for Rs. 2 lakh. Amit has right to recover the price of the car from
Balram only.The right of Amit is a ‘‘right in personam’’ i.e against a particular person Balram.
This is jus in personam.
4) The term ‘agreement’ for a common man means “to agree”. Here, one person offers or
proposes to another, and the later agrees to the offer or proposal made
5) Agreement = Offer + Acceptance
6) Contract=Offer + Acceptance+ Enforceability
7) A valid agreement is one which is enforceable by law
8) An illegal agreement is something against the law and public policy
9) Law of Contract is that branch of law which deals with making of legally valid agreements and
also for interpreting these agreements.
10) every agreement and promises enforceable by law is contract’ Section 2(h) of the Indian
Contract Act, 1872 states that “an agreement enforceable by law is contract
11) The object of an agreement must be valid.
12) A valid contract is one which has all essential elements and is enforceable by law
13) A contract which ceases to be enforceable by law becomes void, when it ceases to be
enforceable
14) When the terms of a contract are reduced in writing or are agreed upon by spoken words at the
time of its formation, the contract is express.
15) Certain obligations which are not contracts in fact but are so in the contemplation of law. These
are called Quasi-Contracts.
16) A unilateral contract is also known as a one-sided contract.
17) In a bilateral contract both the parties have to perform their respective promises
18) An E-Contract is a contract that is formed electronically.
19) An e-signature is an electronic sound, symbol, or process attached to or logically associated with
a record and executed
20) While contingent contract is the contract to do or not to do something, if some event collateral
to such contract does or does not happen.
21) The person making the offer is called the ‘offerer”

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 22) Assent: Means acceptance has been signified either in writing or by words of mouth or by
performance of some act
23) The offer may be made by positive acts or signs so that the personating or making signs means
to say or convey.
24) Offer may be express or implied
25) Offer must be distinguished from invitation to make offer
26) Offer may be general or specific
27) Offer must be communicated
28) If the offer made to the world at large, it is known as the general offer
29) Counter offer is the rejection of the original offer by the offeree and giving new offer
30) Silence cannot amount to acceptance
31) The offer must be communicated to the other party so that its acceptance may constitute a
contract
32) The communication of offer is complete when it comes to the knowledge of the person to
whom it is made
33) A proposal may be revoked at any time before the communication of its acceptance is complete
as against the proposer, but not afterwards
34) A proposal will come to an end by the lapse of time prescribed in such proposal for its
acceptance
35) An offer comes to end when the offeree makes a counter offer or rejects the offer
36) An offer lapses if it becomes illegal after it is made and before it is accepted
37) A Proposal may revoked at any time before the communication of the acceptance is complete as
against the proposer and not afterwards.
38) For construction of valid contract, the parties to a contract must have capacity i.e. competency
to enter into a contract.
39) An agreement with the minor is completely void
40) A trot is a civil wrong
41) A minor being in competent to contract cannot be a partner in a partnership firm
42) A person is said to be of sound mind for the purpose of making a contract, if, at the time when
he makes it, he is capable of understanding it and of forming a rational judgments as to its
effects upon his interests.
43) Idiocy - It is permanent and congenital (by birth), and therefore he can never understand the
contract and make rational judgments
44) Hypnotism - It also produces temporary incapacity, till the person is under the impact of
artificially induced sleep
45) An alien that is citizen of a foreign country living in India can enter into contracts with citizens of
India during peace time, by observing the restrictions imposed by the government in that
respect.
46) Consideration is the foundation stone of every contract
47) something in return' is called consideration
48) For a contract to be binding there must be valid consideration

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 49) Consideration is the price for which the promise of some other is brought and the promise thus
given for value is enforceable
50) Consideration are of three types
51) Consideration must be real and of some value in the eyes of law
52) A promise to pay a time-barred debt is also enforceable.
53) Consideration which moves simultaneously with the promise, is called ‘present consideration’ or
‘executed consideration’.
54) Stranger to Contract means the person who is not party to contract
55) As per Section 13."Consent" has defined as -Two or more persons are said to consent when they
agree upon the same thing in the same sense
56) Free consent is one of the most important essential elements of a valid contract
57) "Coercion" is the committing, or threatening to commit, any act forbidden by the Indian Penal
Code under(45,1860),
58) "Fraud" means and includes any act or an active concealment of material facts or
misrepresentation made knowingly by a party to a contract, or with his connivance, or by his
agent, with intent to deceive another party thereto of his agent or to induce him to enter into
the contract.
59) Under Sec. 55(i) (a) of the Transfer of Property Act, 1882, the seller is under an obligation to
disclose to the buyer any material defect in the property or in the seller's title of which the seller
is aware and the buyer is not aware, nor he (Buyer) could know with ordinary care.
60) When consent to an agreement is caused by fraud, the agreement is a contract voidable at the
option of the party whose consent was so caused.
61) The Word 'Misrepresentation' means a statement or positive assertion made by one party to
the other, before or at the time of the contract relating to it.
62) Mistake may be defined under Section 20 of Indian Contract Act, 1872, as "an erroneous belief
about something"
63) A contract is not voidable because it was caused by a mistake as to any law in force in India : but
a mistake as to law not in force in India has the same effect as a mistake of fact.
64) An agreement not enforceable by law is said to be void.
65) The agreement is unlawful if it involves doing of an act which is forbidden by any law
66) Agreements the meaning of which is not certain, ambigus are void.
67) The agreements which restrict trade business or Profession are called agreements in restraint of
trade
68) The agreements which restrict rights of Parents on their Children are called agreements in
restraint of Parental Rights
69) A lottery is a game of chance
70) The Contracts of Indemnity has been defined as: "A Contract wherein one party promises to
save the other from loss caused to him by the act of the promisor himself or by the act of any
other person is called a contract of indemnity
71) The person who promises to save the other is called the Indemnifier
72) A guarantee means a contract of a promise to be responsible for something, to perform the
promise or to discharge the liability of a third person, in case of his default

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 73) The primary liability is of the principal debtor
74) The surety must have to know all the facts regarding the contract.
75) In a contract of guarantee, there are three parties namely: principal creditor, creditor and surety
76) The term ‘bailment’ is derived from the French word ‘bailler’ which means to deliver a thing
under a contract.
77) The person who delivers the goods is known as the ‘Bailor’
78) A gratuitous bailment is the bailment without any charge or reward.
79) Lien means the rights to retain property until debt or claim is squared up
80) General lien means the right to retain all the goods of the other party until all the claims of the
holder are paid.
81) Particular lien means the right to retain particular goods until claims on account of those goods
are paid.
82) The bailee is bound to take care of the goods bailed to him.
83) A lien is a right of any one person to retain that, which is in his possession, belonging to another,
until certain demands of a person in possession are fulfilled
84) A Pledge is a bailment that conveys possessory title to property owned by a debtor (the Pledgor)
to a creditor (the Pledgee) to secure repayment for some debt or obligation and to the mutual
benefit of both parties.
85) It is an essential and important element of a valid pledge that the Possession of the goods must
be delivered by the Pawnor to the Pawnee.
86) Where a person pledges goods in which he has a limited interest, the pledge is valid to the
extent of that interest only.
87) Pawnee must not use the goods pledged
88) When a person employs another person to do any act for himself or to represent him in dealing
with third persons, it is called a ‘Contract of Agency’.
89) The agent must act as representative of principal
90) Any person may become an agent and he need not be competent to contract [Section 184].
91) Agent is a person employed to do any act for another or to represent another in relation with
third persons.
92) A general agent is one who has authority to do all the acts (generally related to business) in the
interest of his principal.
93) A broker is a special type of commercial agent who acts as a middleman between the buyer and
the seller
94) Auction is usually a public sale of goods made in the highest of several bidders.
95) A Del Credere agent is a mercantile agent who is employed to sell goods on behalf of his
principal.
96) An agent should not mix his account with the principal
97) Right of Compensation:Section 225
98) Right of Lien : Section 221.
99) The Principal is empowered to revoke the authority of the Agent at any time.
100) It is the termination of the agency at the instance of the Agent, when he no longer
wishes to continue working as Agent.

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 101) When the Principal becomes insolvent, the agency is terminated
102) Where the agency is created with reference to a particular property or subject matter, it
stands terminated automatically with the destruction of that property.
103) The sale of Goods Act 1930
104) Buyer means a person who buys or agrees to buy the goods
105) Delivery means voluntary transfer of the possession of goods from one person to
another.
106) Price must be the consideration in the contract of sale
107) The contract is called agreement to sell, when the transfer of ownership in the goods is
to take place at a future date.
108) A warranty is a term which is collateral to the main purpose of the contract and hence is
only a subsidiary.
109) In business laws, the phrase ‘Caveat Emptor’ stands for ‘let the buyer beware.’
110) The important aspects the transfer of ownership is that it can take place only in case of
ascertained and specific goods.
111) The goods must be unconditionally appropriated to the contract
112) ‘Lien’ is the right to retain possession of goods and refuse to deliver them to the buyer
until the price due in respect of them is paid or tendered.
113) Conditions under which Right of Stoppage in Transit can be Exercised [Section 50]
114) The term "negotiable instrument" means a document transferable from one person to
another. However the Act has not defined the term.
115) Negotiable instruments are payable by legal tender money of India
116) A document which fails to qualify as a negotiable instrument may nevertheless be used
as evidence of the fact of indebtedness.
117) The term ‘foreign instrument’ is defined in Section 12 of the Negotiable Instruments Act,
which provides that a foreign instrument is one which is not an Inland instrument.
118) The term ‘bearer’ instrument may be defined as negotiable instrument the payment of
which can be taken by a person who has the Instrument inpossession.
119) A promissory note has been defined by Sec. 4
120) The drawer or the depositor should not lay down any condition in the cheque.
121) The amount of cheque should be mentioned in words and figures.
122) Drawer :The person who draws the cheque.
123) When a cheque bears two separate special crossing, it is said to have been doubly
crossed.
124) The holder of a negotiable instrument means any person entitled to the possession of
the instrument in his/her own name and to receive or recover the amount due there on from
the parties liable.
125) The word ‘endorsement’ in its literal sense means, writing on the back of an instrument
126) Protest is a certificate by the notary public attesting the dishonour of the bill by non-
acceptance or by non-payment.
127) The business must be conducted for the purpose of acquisition of gain.

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 128) Section 148 permits a private company to commence business from the date of its
incorporation
129) The subscribers to the memorandum are deemed to have agreed to become members
130) When the director agrees to take qualification shares, such director is in same position
as if he has signed a memorandum of the company for those shares of that number of value.
131) A person can become a shareholder if he agrees to take shares in the company by
allotment.
132) As a minor is incapable of entering into a valid contract, he cannot become a member.
133) Every person who is competent to a contract may become a member.
134) An insolvent may be taken as member so long as his name appears in the register of
members, notwithstanding the right of official assignee or receiver to be registered as a
member.
135) Liability of members depends on the nature of the company
136) The index shall at all times, be kept at the same place as the register of members
137) PLACE OF KEEPING AND INSPECTION OF REGISTER (Sec 163)
138) Private Company: Where the minimum number is two & maximum is fifty
139) Public Company: Section 3(1)(iv) states that all companies other than private companies
are called public companies
140) A company limited by guarantee must have articles of association, which is to be
registered at the time of registration with Registrar.
141) PROCEDURE FOR CONVERTING A PRIVATE COMPANY INTO A PUBLIC LIMITED COMPANY
(Sec. 44)
142) A private company which is a subsidiary of another public company shall be deemed to
be a public company
143) Two members personally present from the quorum in the private company but in the
public company this number is five
144) Private company need not keep an index of members
145) The memorandum of association is the most basic document of a company. It sets out
the constitution of the Company and limits the scope of the activities of the company.
146) On the alteration of the name of the company, the Registrar must enter the new name
of the company in the register and issue a fresh certificate of incorporation.
147) Anything that a company does which is beyond the scope of the object clause is called
ultra vires
148) A contract that is ultra vires the company is absolutely null and void
149) Articles of association is a document containing rules and regulation for the
administration of the company
150) Prospectus means any document described or issued as a prospectus and includes any
notice, circular, advertisement or other document inviting deposits from the public or inviting
offers from the public for the subscription or purchase of any shares in, or debentures of a body
corporate”

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 151) A director or other person responsible for not setting out matters and reports required
to be set out in the prospectus as provided under sec. 56 of the Act, shall be punishable with
fine which may extended to Rs. 50,000/-.
152) Every person who authorize the issue of prospectus shall be punishable for untrue
statements with imprisonment for a term which may extend to 2 years or with fine which may
extend to Rs. 50,000 or with both.
153) When two or more companies engaging in similar business go into liquidation and a new
company is formed to take over their business, it is called amalgamation.
154) A reconstruction is commonly said to have taken place when a company resolves to
wind up its business and it is proposed to form a new company,
155) If a person fails to pay any monetary penalty imposed on him under the Act, the
Commissioner shall proceed to recover such penalty, in such a manner as may be specified by
the regulation.
156) The Central government may appoint a direct general for the purpose of assisting the
Commission in conducting inquiry into contravention of any provision of the act.
157) A vacancy in the office of the President or a member may occur, after the expiry of the
term, or by resignation, or by removal.
158) A person is not a consumer if he obtains goods for resale or for any commercial purpose
159) THE CONSUMER PROTECTION ACT 1986 .
160) U/s 18 of the Indian partnership act 1932 there must exist mutual agency relationship
amongst the partner.

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