Lernovate Ecommerce WEEK 4 Task (Friday)

Submitted By - Sanket Dhole Date: 23/07/2021

Learnovate e-commerce

Q1. a) Explain how firms and individuals participate

and interact in the product market and in the factor
market.

The circular flow diagram offers a simple way of organizing the economic transactions that occur

between households and firms in the economy.

Households are buyers and firms are sellers in the product market. In particular, households buy

the output of goods and services that firms produce.

Households are sellers, and firms are buyers in the factor market. In this market households

provide the inputs that firms use to produce goods and services.

b) What role does profit plays in Market System?

1.Source of income: It is the most important source of income and provides livelihood for the

businessman. Everyone has to satisfy his needs and hence no one is expected to undertake

business activities without any earnings for the same.

2. Source of finance: Profit is a source of finance for expansion and diversification of business

activities, A part of the profits can be retained for increasing the volume of the business.
Retention of profit is always considered the best way for carrying out business activities.

3. Efficient working: Profit is required for efficient and

smooth functioning of the business. It is considered as a barometer for judging the performance

of the business.

4. Goodwill : Profit helps in building the reputation

or goodwill of the business firms. With profit increasing over time, a business enterprise gains

reputation. Such goodwill creates market standing which ultimately helps to raise loans and

thereby obtain credit more easily.

5. Reward for risk bearing : Risk is always associated with any business. A person who invests

money in the business has to bear the risk also. In the eventuality of loss due to any risk, the

businessman doesn’t stop the business. It is the profit element that motivates him to carry on with

business even in the case of losses.

6. Social responsibility : Higher profits make better remuneration and amenities possible. It

increases the standard of living of workers. A firm with a higher profit is in a position to carry out

its social responsibility towards various groups.

Q2) a) Explain the concept and various determinants

of market demand.

The Five Determinants of Demand

The five determinants of demand are:

1)The price of the good or service.

2)The income of buyers.

3)The prices of related goods or services—either complementary and purchased along with a

particular item, or substitutes and bought instead of a product.

4)The tastes or preferences of consumers will drive demand.

5)Consumer expectations. Most often, this refers to whether a consumer believes prices for the

product will rise or fall in the future.

b) Write a detailed note on-Price output decisions in

multi plant firms.
Price and output decision of Multi plant monopoly

– When the firm produces the homogeneous product in two

different plants each with different costs, the multi plant

monopolist has to decide also how to allocate the profit

maximizing output between two plants.

Firm must determine how to distribute production between

both plants

1. Production should be split so that the MC in the plants is

the same

2. Output is chosen where MR=MC. Profit is therefore

maximized when MR=MC at each plant.

– Q1 and C1 is output and cost of production for Plant 1

– Q2 and C2 is output and cost of production for Plant 2

QT = Q1 + Q2 is total output

– Profit is then:

= PQT – C1(Q1) – C2(Q2)

Firm should increase output from each plant

until the additional profit from last unit

produced at Plant 1 equals 0

Same for Plant 2

• The firm should choose to produce where

MR = MC1 = MC2

• We can show this graphically

– MR = MCT

gives total output

– This point shows the MR for each firm

– Where MR crosses MC1 and MC2 shows the output for each firm

Q3) a) Elaborate the meaning and various types of

cost in detail.

Direct Costs

Direct costs are related to producing a good or service. A direct cost includes raw materials, labor,

and expense or distribution costs associated with producing a product. The cost can easily be

traced to a product, department, or project. For example, Ford Motor Company (F) manufactures

cars and trucks. A plant worker spends eight hours building a car. The direct costs associated with

the car are the wages paid to the worker and the cost of the parts used to build the car.

Indirect Costs

Indirect costs, on the other hand, are expenses unrelated to producing a good or service. An

indirect cost cannot be easily traced to a product, department, activity, or project. For example,

with Ford, the direct costs associated with each vehicle include tires and steel. However, the

electricity used to power the plant is considered an indirect cost because the electricity is used

for all the products made in the plant. No one product can be traced back to the electric bill.
Fixed Costs

Fixed costs do not vary with the number of goods or services a company produces over the short

term. For example, suppose a company leases a machine for production for two years. The

company has to pay $2,000 per month to cover the cost of the lease, no matter how many

products that machine is used to make. The lease payment is considered a fixed cost as it remains

unchanged.

Variable Costs

Variable costs fluctuate as the level of production output changes, contrary to a fixed cost. This

type of cost varies depending on the number of products a company produces. A variable cost

increases as the production volume increases, and it falls as the production volume decreases. For

example, a toy manufacturer must package its toys before shipping products out to stores. This is

considered a type of variable cost because, as the manufacturer produces more toys, its

packaging costs increase, however, if the toy manufacturer's production level is decreasing, the

variable cost associated with the packaging decreases.

Operating Costs

Operating costs are expenses associated with day-to-day business activities but are not traced

back to one product. Operating costs can be variable or fixed. Examples of operating costs, which

are more commonly called operating expenses, include rent and utilities for a manufacturing

plant. Operating costs are day-to-day expenses, but are classified separately from indirect costs –

i.e., costs tied to actual production. Investors can calculate a company's operating expense ratio,

which shows how efficient a company is in using its costs to generate sales.
Opportunity Costs

Opportunity cost is the benefits of an alternative given up when one decision is made over

another. This cost is, therefore, most relevant for two mutually exclusive events. In investing, it's

the difference in return between a chosen investment and one that is passed up. For companies,

opportunity costs do not show up in the financial statements but are useful in planning by

management.

Controllable Costs

Controllable costs are expenses managers have control over and have the power to increase or

decrease. Controllable costs are considered so when the decision of taking on the cost is made by

one individual. Common examples of controllable costs are office supplies, advertising expenses,

employee bonuses, and charitable donations. Controllable costs are categorized as short-term

costs as they can be adjusted quickly.

b) Discuss meaning of risk. Explain the decision making under risk in

detail.

In case of decision-making under uncertainty the probabilities of occurrence of various states of

nature are not known. When these probabilities are known or can be estimated, the choice of an

optimal action, based on these probabilities, is termed as decision making under risk.

Risk implies a degree of uncertainty and an inability to fully control the outcomes or

consequences of such an action. Risk or the elimination of risk is an effort that managers employ.

However, in some instances the elimination of one risk may increase some other risks. Effective

handling of a risk requires its assessment and its subsequent impact on the decision process. The

decision process allows the decision-maker to evaluate alternative strategies prior to making any
decision. The process is as follows:

The problem is defined and all feasible alternatives are considered. The possible outcomes for

each alternative are evaluated.

Outcomes are discussed based on their monetary payoffs or net gain in reference to assets or

time.

Various uncertainties are quantified in terms of probabilities.

The quality of the optimal strategy depends upon the quality of the judgments. The

decision-maker should identify and examine the sensitivity of the optimal strategy with respect

to the crucial factors.

Whenever the decision maker has some knowledge regarding the states of nature, he/she may be

able to assign subjective probability estimates for the occurrence of each state. In such cases, the

problem is classified as decision making under risk. The decision-maker is able to assign

probabilities based on the occurrence of the states of nature.

The decision making under risk process is as follows:

Use the information you have to assign your beliefs (called subjective probabilities) regarding

each state of the nature, p(s),

Each action has a payoff associated with each of the states of nature X(a,s),

We compute the expected payoff, also called the return (R), for each action R(a) = Sums of [X(a,s)

p(s)],

We accept the principle that we should minimize (or maximize) the expected payoff,

Execute the action which minimizes (or maximize) R(a)

The choice of an optimal action is based on The Bayesian Decision Criterion according to which an

action with maximum Expected Monetary Value (EMV) or minimum Expected Opportunity Loss

(EOL) or Regret is regarded as optimal.

Q4) a) Explain composition and functions of money

market in India.
Composition of Money Market

The money market is not a single homogeneous market. It consists of a number of sub-markets

which collectively constitute the money market. There should be competition within each

sub-market as well as between different sub-markets. The following are the main sub-markets of

a money market:

Call Money Market.

Commercial Bills Market or Discount Market.

Acceptance Market.

Treasury bill Market.

Indian money market was highly regulated and was characterized by limited number of

participants. The limited variety and instruments were available. Interest rate on the instruments

was under the regulation of Reserve Bank of India. The sincere efforts for developing the money

market were made when the financial sector reforms were started by the government.

Money markets are the markets for short-term, highly liquid debt securities. Examples of these

include bankers’ acceptances, repos, negotiable certificates of deposit, and Treasury Bills with

maturity of one year or less and often 30 days or less. Money market securities are generally very

safe investments, which return relatively; low interest rate that is most appropriate for

temporary cash storage or short-term time needs.

Functions of the Money Market

The money market contributes to the economic stability and development of a country by

providing short-term liquidity to governments, commercial banks, and other large organizations.

Investors with excess money that they do not need can invest it in the money market and earn

interest. Here are the main functions of the money market:

1. Financing Trade
The money market provides financing to local and international traders who are in urgent need of

short-term funds. It provides a facility to discount bills of exchange, and this provides immediate

financing to pay for goods and services.

International traders benefit from the acceptance houses and discount markets. The money

market also makes funds available for other units of the economy, such as agriculture and

small-scale industries.

2. Central Bank Policies

The central bank is responsible for guiding the monetary policy of a country and taking measures

to ensure a healthy financial system. Through the money market, the central bank can perform its

policy-making function efficiently.

For example, the short-term interest rates in the money market represent the prevailing

conditions in the banking industry and can guide the central bank in developing an appropriate

interest rate policy. Also, the integrated money markets help the central bank to influence the

sub-markets and implement its monetary policy objectives.

3. Growth of Industries
The money market provides an easy avenue where businesses can obtain short-term loans to

finance their working capital needs. Due to the large volume of transactions, businesses may

experience cash shortages related to buying raw materials, paying employees, or meeting other

short-term expenses.

Through commercial paper and finance bills, they can easily borrow money on a short-term basis.

Although money markets do not provide long-term loans, it influences the capital market and can

also help businesses obtain long-term financing. The capital market benchmarks its interest rates

based on the prevailing interest rate in the money market.

4. Commercial Banks Self-Sufficiency
The money market provides commercial banks with a ready market where they can invest their

excess reserves and earn interest while maintaining liquidity. Short-term investments, such as

bills of exchange, can easily be converted to cash to support customer withdrawals.

Also, when faced with liquidity problems, they can borrow from the money market on a

short-term basis as an alternative to borrowing from the central bank. The advantage of this is

that the money market may charge lower interest rates on short-term loans than the central bank

typically does.

b) Discuss role of Securities and Exchange Board of

India (SEBI) in monitoring regulating capital market in
India
Role of SEBI

SEBI is primarily set up to protect the interests of investors in the securities market.

It promotes the development of the securities market and regulates the business.

SEBI provides a platform for stockbrokers, sub-brokers, portfolio managers, investment advisers,

share transfer agents, bankers, merchant bankers, trustees of trust deeds, registrars,

underwriters, and other associated people to register and regulate work.

It regulates the operations of depositories, participants, custodians of securities, foreign portfolio

investors, and credit rating agencies.

It prohibits insider trading, i.e. fraudulent and unfair trade practices related to the securities

market.

It ensures that investors are educated on the intermediaries of securities markets.

It monitors substantial acquisitions of shares and take-over of companies.

SEBI takes care of research and development to ensure the securities market is efficient at all

times.
Q5) a) Write note on
i) Difference between WTO and GATT
The Differences between GATT and WTO

The points given below explain the difference between GATT and WTO in detail:

GATT was ad-hoc and provisional. The WTO and its agreement are permanent with WTO having a

sound legal basis because members have ratified the WTO agreements.

GATT refers to an international multilateral treaty to promote international trade and remove

cross-country trade barriers. On the contrary, WTO is a global body, which superseded GATT and

deals with the rules of international trade between member nations.

While GATT is a simple agreement, there is no institutional existence, but have a small

secretariat. Conversely, WTO is a permanent institution along with a secretariat.

The participating nations are called as contracting parties in GATT, whereas for WTO, they are

called as member nations.

The grandfather clause in the Protocol of Provisional Application in GATT 1947 has not been

carried forward to WTO. WTO contains an improved version of original GATT rules-GATT Rules

1994.

GATT commitments are provisional in nature, which after 47 years the government can make a

choice to treat it as a permanent commitment or not. On the other hand, WTO commitments are

permanent, since the very beginning.

The scope of WTO is wider than that of GATT in the sense that the rules of GATT are applied only

when the trade is made in goods. As opposed to, WTO whose rules are applicable to services and

aspects of intellectual property along with the goods.

GATT agreement is primarily multilateral, but the plurilateral agreement is added to it later. In

contrast, WTO agreements are purely multilateral.

The domestic legislation is allowed to continue in GATT, while the same is not possible in the case

of WTO.

The dispute settlement system of GATT was slower, less automatic and susceptible to blockages.
Unlike WTO, whose dispute settlement system is very effective.

ii) GDP and PPP

Gross domestic product, abbreviated as GDP, is a basic measure of the overall size of a country's

economy.

As an aggregate measure of production, GDP is equal to the sum of the gross value added of all

resident institutional units engaged in production, plus any taxes on products and minus any

subsidies on products. Gross value added is the difference between output and intermediate

consumption.

GDP is also equal to:

the sum of the final uses of goods and services (all uses except intermediate consumption)

measured in purchasers' prices, minus the value of imports of goods and services;

the sum of primary incomes distributed by resident producer units.

Purchasing power parities, abbreviated as PPPs, are indicators of price level differences across

countries. PPPs tell us how many currency units a given quantity of goods and services costs in

different countries. Using PPPs to convert expenditure expressed in national currencies into an

artificial common currency, the purchasing power standard (PPS), eliminates the effect of price

level differences across countries created by fluctuations in currency exchange rates.

Purchasing power parities are obtained by comparing price levels for a basket of comparable

goods and services that are selected to be representative of consumption patterns in the various

countries.

10

PPPs make it possible to produce meaningful indicators (based on either price or volume)

required for cross-country comparisons, truly reflecting the differences in the purchasing power

of, for example, households. Monetary exchange rates cannot be used to compare the volumes of

income or expenditure because they usually reflect more elements than just price differences, for

example, volumes of financial transactions between currencies and expectations in the foreign

exchange markets.

b) Define following terms in relation with Union

Budget
i) Revenue Account
Revenue Accounts are those accounts that report income of the business and therefore have

credit balances. Examples include Revenue from Sales, Revenue from Rental incomes, Revenue

from Interest income, etc.

ii) Capital Account

Capital account can be regarded as one of the primary components of the balance of payments of

a nation. It gives a summary of the capital expenditure and income for a country.

iii) Revenue deficit

The Revenue deficit refers to the financial position wherein the government’s revenue

expenditure exceeds its total revenue receipts. This means that government’s own earnings are

not sufficient to meet the day-to-day functioning of its departments and other provisions of

services.

iv) Capital deficit

A capital account deficit occurs when the equity in a business turns negative. This means that the

total amount of liabilities exceeds the total amount of assets.

v) Plan and non-plan expenditure

Plan expenditure is that component of government expenses which helps increase the productive

capacity in the economy. It includes outlays for different sectors, such as rural development and

education.

This is largely the revenue expenditure of the government, although it also includes capital

expenditure. It covers all expenditure not included in the Plan Expenditure.

Q1) a) Define contract. What are the essential elements of a valid contract?
What are the essential elements that form a legally binding contract?
What is a contract?

A contract is a legally binding promise made between at least 2 parties in order to

fulfil an obligation in exchange for something of value. Contracts can either be
written, oral, or a combination of both.
The essentials of a contract are laid down in Section 10 of the Indian Contract Act.
Section 10 reads as under:
“What agreements are contracts. —All agreements are contracts if they are made
by the free consent of parties competent to contract, for a lawful consideration
and with a lawful object, and are not hereby expressly declared to be void. —All
agreements are contracts if they are made by the free consent of parties
competent to contract, for a lawful consideration and with a lawful object, and
are not hereby expressly declared to be void." Nothing herein contained shall
affect any law in force in [India], and not hereby expressly repealed, by which any
contract is required to be made in writing or in the presence of witnesses, or any
law relating to the registration of documents.”
Accordingly, the following are the essentials of a Contract:
Proposal/ Offer - A party should have proposed to do or abstain from doing
something Acceptance - The offer/ proposal should be accepted.
Lawful consideration - Lawful consideration should be there. There are certain
exceptions to this rule. For exceptions, please refer to Section 25 of the Indian
Contract Act. Lawful object - The agreement should be for a lawful object. For
example, an agreement to murder someone will not be valid as murdering
someone is a crime.
Free consent of the parties - Agreement should not be entered into under
coercion, fraud, undue influence, misrepresentation or mistake.
Contract should be entered into between competent parties - Parties entering
into a contract should be competent - They should be of legal age, should not be
insane or at the time of entering into an agreement, neither of the parties should
be suffering from insanity or any mental illness which would impair them.
It should not have been expressly declared to be void - agreement in restraint of
trade, wagering agreement, etc. All necessary formalities, like agreement should
be in writing or it should be registered, should be complied with.
b) A, a minor, borrows Rs. 5000/- & executes a promissory note for the amount in
favor of B. After majority, 'A' executes another promote in settlement of
the first promote. Will 'B' succeed in recovering money from 'A' Give reasons.
No-B will not succeed in recovering money from A. Although Section 2(d)
recognize the concept of past consideration, but it must be something to which
law attaches a value. A contract with a minor is void ab initio. The consideration
for the second promote is a void agreement and hence of no value. Besides,
ratification by a minor of a contract, on attaining majority is not allowed.

Q2) a) What is meaning of Discharge of contract. What are the various ways in
which a contract may be discharged. Discharge of contract means termination of
the contractual relationship between the parties. A contract is said to be
discharged when it ceases to operate, i.e., when the rights and obligations
created by it come to an end.

A contract may be discharged –

1. By performance.
2. By agreement or consent
3. By impossibility or performance
4. By lapse of time
5. By operation of law
6. By breach of contract.

b) 'A' in Delhi rings up to 'B' of Bombay offering to sell a machine for Rs.
1,00,000/- B says that he accepts the offer but at the precise moment due to
some mechanical defect in A's telephone, A does not hear B's acceptance. Is there
binding contract between A & B.
Is there no binding contract between A and B. So, while verbal agreements
and certain promises technically constitute legal contracts, proving the details of
the offer and the fact that it was indeed accepted are difficult if not impossible
without a written contract. You also should keep in mind that certain types of
contracts are in fact required by law to be in writing. Binding contracts are legal
agreements between two or more parties, which are enforceable by law.
Binding contracts are not always writing. sometimes verbal statements can be
legally constructed as an offer or contract, even when the party never intended
it as such. essentially, if one party relies on the statement or promise made by
another and suffers financial harm, the court will treat the statement as though it
was a valid completed contract the court isn’t required to look for agreement or
consideration when looking at whether to enforce a promise, but it can prove
difficult to show a statement of the promise was made without it. In the event
the promisor accountable. Here A does not hear B’s acceptance and there will
not be a binding contract because the general rule is that an acceptance must be
communicated to the offeror. No contract comes into existence

Q3) a) Who is an 'unpaid seller'? Explain the rules for exercising the right of lien by
an unpaid seller. b) 'P' agrees to sell to 'Q' goods worth Rs. 5,000/- which will be
produced in his farm next year. What kinds of goods are these?

The Sale of Goods Act, 1930 (hereinafter referred to as the "Act") defines an
unpaid seller as a seller that has not been paid the full price of the goods that
have been sold or that has received a bill of exchange or other negotiable
instrument as conditional payment, and the condition on which it was received
has not been fulfilled
RULES FOR EXCERCISING THE RIGHT OF LIEN BY AN UNPAID SELLER
Seller’s Lien (Section 47)
According to subsection (1) of Section 47 of the Sale of Goods Act, 1930,
an unpaid seller, who is in possession of the goods can retain their
possession until payment. This is possible in the following cases:
● He sells the goods without any stipulation for credit
● The goods are sold on credit but the credit term has expired.
● The buyer becomes insolvent.
Subsection (2) specifies that the unpaid seller can exercise his right of lien
notwithstanding that he is in possession of the goods acting as an agent or
bailee for the buyer. Part-delivery (Section 48)
Further, Section 48 states that if an unpaid seller makes part-delivery of
the goods, then he may exercise his right of lien on the remainder. This is
valid unless there is an agreement between the buyer and the seller for
waiving the lien under part-delivery.
Termination of Lien (Section 49)
According to subsection (1) of Section 49 of the Sale of Goods Act, 1930,
an unpaid seller loses his lien: If he delivers the goods to a carrier or other bailee
for transmission to the buyer without reserving the right of disposal of the goods.
When the buyer or his agent obtain possession of the goods lawfully.
By waiver. Further, subsection (2) states that an unpaid seller, who has a lien,
does not lose his lien by reason only that he has obtained a decree for the price
of the goods.
1. Right of Lien
The right of lien is the right to retain possession of the goods until payment for
the same is made. Such a right is available to the unpaid seller having possession
of the goods if the goods have been sold without any stipulation as to credit or
they have been sold on credit, but the term of credit has expired. Such a right is
also available in case the buyer has become insolvent.
Rules regarding lien
1. Possession of goods is important to exercise the right of lien.
2. The right of lien is not affected even if the seller has parted with the
document of title to the goods.
3. The possession of the goods by the seller must not expressly exclude the right
of lien.
4. The lien can be exercised by the unpaid seller only for the price due and not
for any other charges like warehouse rent or carriage expenses.
5. If the unpaid seller has already made part delivery of the goods to the buyer,
he may exercise lien on the remainder.
Termination of Lien
The unpaid seller loses his right of lien on the goods in the following
circumstances:
1. If he delivers the goods to a carrier or other bailee for the purpose of
transmission to the buyer without reserving the right of disposal of the goods.
2. If the buyer or his agent lawfully obtains possession of the goods.
3. If he waives his right of lien on the goods. The seller may waive his rights
either expressly or impliedly. If the contract of sale itself provides in express
terms that the seller shall not retain possession of the goods even if the price
has not. been paid, it is said to be an express waiver of lien. Implied waiver of
lien takes place when the seller sells the goods on credit, or grants a fresh term
of credit on the expiry of the original term of credit.
b) ‘P’ agrees to sell to ‘Q’ goods worth Rs. 5,000/- which will be produced in his
farm next year. What kinds of goods are these?
The goods are called future goods, in sec 2(6) of the sale of goods Act,1930,
future goods have been defined as the goods that will either be manufactured
or produced or acquired by the seller at the time the contract of sale is made.
The contract for sale of future goods will never have the actual sale in it , it will
always be an agreement to sell. Thus , when P agrees to sell goods Q that will be
produced in ‘P’ s farm next year, this is a sale that has to occur in the future but
the goods have been identified already and the agreement made. Such goods
are known as future good.

Q4) a) Define ‘conditions’. Elaborate implied conditions in contract of sale.

A condition is a stipulation essential to the main purpose of the contract, the
breach of which gives the right to repudiate the contract and to claim damages.
In a contract of sale by sample, there is an implied condition that:
The bulk shall correspond with the sample in the quality;
The buyer shall have or shall be given a reasonable opportunity/chance of
comparing the bulk with the sample, and
The goods shall be free from any defect that may render them unmerchantable,
which would not be apparent on a reasonable examination of the sample.
[Section
For example, a company sells certain belts made up of a special material by
sample for the Indian Army. The belts are found to be made up of plastic of
cheaper quality, not discoverable by ordinary inspection. In this case, the buyer
is entitled to the refund of the price plus damages
b) State with reasons whether the following contracts of sale amount to ‘sale’ or
an ‘agreement to sell.
i) X entered into a contract for the sale of some goods in a
particular ship to be delivered on the arrival of the ship.
ii) ‘X’ purchases books at book stall for Rs. 10,000/- & pays cash &
gets the delivery of books.
1. This is a type of an agreement to sell. In agreement of sell the ownership
of the goods is not transferred until it reaches the buyer.
2. A contract of sale of goods is a contract whereby the seller transfers or
agrees to transfer the property in goods to the buyer for a price. There
may be a contract of sale between one part owner and another. Here the
book is purchased in exchange of a price; it can be called as a sale.

Q1) a) Define holder. Explain the rights of

holder in due course.
The "holder" of a promissory note, bill of exchange or cheque means any person
entitled in his own name to from the parties the possession thereof and to receive or
recover the amount due thereon thereto. Where the note, bill or cheque is lost or
destroyed, its holder is the person so entitled at the time of such loss or
destruction. Holder in due course" means any person who for consideration
became the possessor of a promissory note, bill of exchange or cheque if payable to
bearer, or the payee or endorsee thereof, if payable to order, before the amount
mentioned in it became payable, and without having sufficient cause to
believe that any defect existed in the title of the person from whom he derived his title.

RIGHTS OF HOLDER IN DUE COURSE

Section 36 of NI ACT1881 reads the rights of Holder in due

course.
“Every prior party to a negotiable instrument is liable
thereon to a holder in due course until the instrument is
duly satisfied.” In the above section;
‘Every prior party’ means the maker or drawer, the acceptor,
and intervening endorser/s.
Duly satisfied means if the liability of all the parties is
extinguished and the instrument is discharged.

b) 'A' sells a radio to M, a minor, who pays for it by cheque. 'A'

indorses the cheque to B who takes it in good faith &
for more value. The cheque is dishonored on presentation. Can
B' enforce payment of the cheque against 'A' or M?
Sol: Payment can’t be enforced against M as he is a minor.
But the instrument can be enforced against A.

Q2) a) Define promissory note. Explain the

essential features of promissory note
(Specimen is required)

Definition of Promissory Note:

“A promissory note is defined as an instrument in writing
(Not being a bank note or a currency note), containing an
unconditional undertaking signed by the maker, to pay a
certain sum of money only to or to the order of a certain
person, or to the bearer.”
Features of Promissory Note:
The features of promissory note are:
1. It must be in writing.
2. It must contain an unconditional promise to pay.
3. It should be signed by the maker.
4. The payment should be made to a certain person.
5. The certainty of the amount payable should be there.
6. It should be stamped
b) 'A' is the payee of a bearer instrument 'A' misplaces the instrument in his office. It is
picked by B delivers it to C who takes it in good faith & for valuable
consideration. Is 'C a holder in due course?

Holder in due course means any person who for consideration

became the possessor of a promissory note, bill of exchange
or cheque is payable to bearer, or the payee or endorsee
thereof, if payable to order before the amount mentioned in
it became payable and without having sufficient cause to
believe that any defect existed in the title of the person
from whom he derived his title.

Q3) Define company, Differentiate between a

company & a partnership firm

A company is a legal entity formed by a group of individuals to engage in and operate a

business—commercial or industrial—enterprise. File Copyright Online - File mutual
Divorce in Delhi - Online Legal Advice - Lawyers in India
Difference Between Partnership And Company the members of the partnership firm are
called partners whereas the members of company are called shareholders.
The partnership business is to be governed by the Indian Partnership Act, 1932 whereas
the business of the company is determined by Indian Companies act, 2013
Partnership firm is created by contract between two or more persons whereas company
is created by law i.e. registration. The rules of a partnership are to be registered by the
state government whereas in the case of the company it is to be regulated by the
central government. Registration of a firm is not necessary whereas the
company's registration is mandatory. The mandatory document in case of partnership is
partnership deed whereas in the case of a company the mandatory document is the
memorandum of association and articles of association. A partnership firm is not a
separate legal entity from its partners whereas a company is a separate legal entity.
Partners have unlimited liability whereas shareholders have limited liability.
Seal (Stamp) is not required for partnership whereas in case of company stamp is
required. In case of partnership, management is to be done by active partners whereas
in case of company management is done by the board of directors. Decree against a
firm can be executed against partners whereas decree can't be executed against
shareholders. In the case of a private company, the word is to be used Pvt. Ltd and in
case of a public company, the word is to be used Ltd. only whereas such words are not
required in case of partnership. A partnership firm has to maintain accounts as per the
conditions stated in partnership deed whereas a company should maintain accounts and
auditing of accounts by a certified Chartered Accountant. The name of the partnership
firm can be changed easily by having discussion between the partners and by following
the simple procedure provided in s.60 whereas the name of the company can't be
changed easily and prior approval of the central government is required.

Define company, Differentiate between private company &

public company.

A company is a legal entity formed by a group of individuals to engage in and operate a

business—commercial or industrial—enterprise. The major differences between a Public
and Private company are highlighted as under:
1. Meaning:
The public company refers to a company that is listed on a recognized stock exchange
and its securities are traded publicly. A private company is one that is not listed on a
stock exchange and its securities are held privately by its members.

2. Name:
A public company need not include the word “private” in its name. But for a private
company, it is mandatory to write the words “private limited” at the end of its name.

3. Number of Members:
There must be at least seven members to start a public company. But on the contrary,
the private company can be started with a minimum of two members. There is no
ceiling on the maximum number of members in a public company. Conversely, a private
company can have a maximum of 50 members, including its past and present
employees.

4. Number of Directors:
A public company should have at least three directors, whereas a private company can
have a minimum of 2 directors.

5. Quorum:
It is compulsory to call a statutory general meeting of members, in the case of a public
company. Presence of two members is an adequate quorum for the general meeting in
case of a private company. On the other hand, there must be at least five members,
personally present at the annual general meeting for constituting the requisite quorum
in case of a public company.

6. Capital:
A public company must have a paid-up capital of rupees five lakh. Conversely, a private
company must have a paid-up capital of rupees one lakh.

7. Commencement of Business:
To start a business, the public company needs a certificate of commencement of
business after it is incorporated. On the contrary, a private company can start its
business just after receiving a certificate of incorporation.

8. Articles of Association:
A public company can adopt the model Articles of Association given in the Companies
Act. On the other hand, a private company must prepare and file its own Articles of
Association.
9. Transferability of Shares:
The transferability of shares of a private company is completely restricted. On the
contrary, the shareholders of a public company can freely transfer their shares.

10. Restrictions on the Appointment of Directors:

A director of a public company shall file with the registrar consent to act as such. He/she
shall sign the memorandum and enter into a contact for qualification shares. He/she
cannot vote or take part in the discussion on a contract in which he/she is interested.
Two-thirds of the directors of a public company must retire by rotation. These
restrictions do not apply to a private company.

. Q4) Write short notes

a) Trade mark

A trademark is a distinctive sign that identifies certain goods or services as those

produced or provided by a specific person or enterprise. It may be one or a combination
of words, letters & numerals. They may consist of drawings, symbols, three dimensional
signs such as the shape packaging of goods, audible, signs such as the shape &
packaging of goods audible signs, such as music or vocal sound, fragrances or colors
used as distinguishing features. It provided protection to the owner of the mark by
ensuring the exclusive right to use it to identify goods or services or to authorize
another to use it in return for payment.

b) Digital signature

Digital signatures are used to authenticate the identity of the sender. It is like signing a
message in electronic form. A digital signature is a protocol that produces the same
effect as a real signature. It is a mark that only the sender can make and other people
can easily recognize that it belongs to the sender. A digital signature is also used to
confirm agreement to a message. A digital signature must be unforgeable and authentic.
In a digital signature process, the sender uses a signing algorithm to sign the message.
The message and the signature are sent to the receiver. The receiver receives the
message and the signature and applies the verifying algorithm to the
combination. If the result is true, the message is accepted otherwise it
is rejected. A conventional signature is like a private key belonging to
the signer of the document. The signer uses it to sign documents. The copy of the
signature on a file is like a public key so anyone can use it to verify a document to
compare it to the original signature.

c) Who is consumer & who is not consumer (with examples)

The words “customer” and “consumers” are often interchangeably used and are easily
confused with one another. It is high time that common folk and businesses
alike learn the meaning of “customer” and “consumer”. So, when do we use “customer”
and “consumer”, and for whom?
Definition Of Customer
A customer is the individual/business/organization who buys the offering from the seller
via a financial transaction or monetary exchange. In simple terms – Customer is the
buyer of the offering.
Example: A person buying a gift for someone from a gift shop the person is a customer
of the gift shop. In general, businesses tend to focus on getting more
customers as they help them grow and gain more profits. There are different ways of
classifying customers based on the different segments of businesses. But for the sake of
simplicity, we can classify them into two categories:
End-Customer – They are the people who buy the product offered for their own use, in
turn becoming the consumer of the specified product.
Reseller – They are the intermediary who buys the goods for selling it to others and
hence just acting as a customer and not as a consumer of the purchased product.

d) Patent

A patent is the granting of a property right by a sovereign authority to an inventor. This

grant provides the inventor exclusive rights to the patented process, design, or
invention for a designated period in exchange for a comprehensive disclosure of the
invention. They are a form of incorporeal right.

e) Unfair Trade Practices

Unfair trade practices refer to the use of various deceptive, fraudulent, or unethical
methods to obtain business. Unfair business practices include misrepresentation, false
advertising or representation of a good or service, tied selling, false free prize or gift
offers, deceptive pricing, and noncompliance with manufacturing standards. Such acts
are considered unlawful by statute through the Consumer Protection Law, which opens
up recourse for consumers by way of compensatory or punitive damages. An unfair
trade practice is sometimes referred to as “deceptive trade practices” or “unfair
business practices.”