LEARNOVATE ECOMMERCE

TASK -16

SUBMITTED BY

D.MANJU BHARGAV
 1A) FIRMS AND INDIVIDUALS PARTICIPATION AND
INTERACTION IN PRODUCT MARKET AND FACTOR MARKET

In the product market, households buy goods and services from businesses in

exchange for money. In the factor market, the businesses buy labor from
households in exchange for money. ... Households interact with businesses in
the factor market every time a person does paid work for a company

PRODUCT MARKET

A product market refers to a place where goods and services are bought and
sold.

 The main sellers of goods are different kinds of firms.

 Demand for goods is a direct demand. The good is bought for its intrinsic
use.
 The market facilitates the exchange of goods and services in the
economy. It is based on a voluntary transaction across a wide range of
places.

FACTOR MARKET

The factor market is a place where factors of production (land, labour,

capital) are bought and sold.

 Demand for labour and capital is a derived demand. Firms need to

employ more workers when there is greater demand for the product
that they make.
 If demand for takeaway coffee rises, then Starbucks will need to
employ more coffee workers (baristas)
 If there is an increase in demand for private dental treatment, there
will be an increase in demand for dentists and this will push up the
price of dental treatment and also the wage of dentists.
 1B) ROLE OF PROFIT IN MARKET SYSTEM

Profit plays two primary roles in the free-market system. First, it acts as a signal
to producers to increase or decrease the rate of output, or to enter or leave an
industry. Second, profit is a reward for entrepreneurial activity, including risk
taking and innovation. In a competitive industry, economic profits tend to be
transitory .The achievement of high profits by a firm usually results in other
firms increasing their output of that product, thus reducing price and profit.
Firms that have monopoly power may be able to earn above-normal profits over
a longer period, such profit does not play a socially useful role in the economy.
Although, profit maximization is a dominant objective of the firm, other
important objectives of the firm, other than profit maximization the following
are the reasons behind this objective:

1. Maximization of sales revenue.

2. Maximization of firm’s growth rate

3 .Maximization of manager’s own utility or satisfaction

4. Making a satisfactory rate of profit.

5. Long-run survival of the firm

6. Entry-prevention and risk avoidance.

2 A) THE VARIOUS DETERMINANTS OF MARKET DEMAND

Demand refers to the various quantities of a good or service that people

will be and able to purchase at various prices during a period of time. Income,
prices of related goods, taste and preferences of the consumer, expectations,
number of buyers in the market, distribution of income etc are likely to affect
the demand for the product. These factors are called “non-price determinants”
and are assumed to be constant while deriving the demand schedule and demand
curve. But any change in these non-price determinants will change the demand
schedule and demand curve. Let us analyse how these factors can affect the
demand for the product.

Income:

The demand depends up on income of the people. The greater the income
of the people, the greater will be their demand for goods and services. If their
income increases, people will tend to buy more goods and services than they did
before the increase in income. This is the case of most goods and services.
Hence economists refer to goods whose demand varies directly with income as
“normal goods”. Although most commodities are normal goods, there are cases
when consumers may not buy some goods more as their income increases.
Instead they buy less. Such goods are called “inferior goods” because as
people’s income increases they actually reduce the purchase of such goods.

Prices of related goods:

Goods and services may be related to each other in two ways; they may
be substitutes or they may be complements. One good is said to be substitute for
a second good if it can be used in the place of second good. Example: tea and
coffee, beef and chicken. Two goods are said to be complementary if they are
used together. Complementary goods are demanded jointly. Example: scooter
and petrol, computer and computer software. In general, if the price of a
substitute commodity increases, consumers tend to increase their purchases of
the substitute in question. Goods are substitutes when an increase in the price of
one leads to an increase in the quantity demanded of the other. For instance, if
the price of coffee increases, people will substitute tea for coffee and as a result
demand for tea increases. On the other hand, if the price of complement falls,
people will tend to increase their purchases of the commodity in question. Two
goods are complements if a fall in the price of one leads to increase in the
quantity demanded of the other. For instance, if the price of scooter falls, the
demand for them will increase which in turn will increase the demand for petrol.
Taste and Preferences:

The quantity of a commodity that people will buy will be affected by the
taste and preferences. Companies spend millions of Rupees in advertisement in
an attempt to influence consumer’s tastes in favour of their products.
Consumer’s taste and preferences often change and as a result, there is a change
in the demand for products. A good for which consumer’s tastes are greater, its
demand would be larger. On the contrary, any good goes out of fashion or
people’s taste and preferences no longer remain favourable to them, the demand
for them decreases.

Expectations:

The expectations of the consumers regarding the price in the future will
affect present purchases of goods and services. If consumers expect the price of
the product to increase in the future, they are likely to increase their present
purchases to stock up on the good and thus postpone paying the ensuing higher
price for as long as possible. Conversely, if the price is expected to fall in
future, consumers will attempt to delay their present purchases in order to take
advantage of the lower future prices. The expectations of the consumer about
the future change in income will also affect the purchases of goods and services.
If people expect substantial increase in their income sometime in the near
future, they are likely to buy more goods and services even before the increase
in income materialises. If the people expect decrease in their income, they are
likely to buy fewer goods and services.

Number of buyers in the market:

The quantity of the commodity that people will buy depends on the
number buyers in the market for that particular commodity. The greater the
number of buyers of a good, the greater the market demand for it. If population
increases we can expect the demand for most goods and services to increase as a
consequence

Distribution of income:

Distribution of income in the society also affects demand for goods. If

the distribution of income is more equal, then the propensity to consume of the
society as a whole will be higher which results in greater demand for goods. On
the other hand, if the distribution of income is more unequal, then the
propensity to consume of the society will be relatively less because propensity
to consume of rich people is less than that of poor people.

2B) PRICE OUTPUT DECISION IN MULTI PLANT FIRMS

In the long run, a monopoly organisation with a number of plants may

increase (or decrease) the number of its plants with a view to obtain the profit-
maximising solution. Now, each plant of the monopolist may be of a different
size, and in the long run the size of each plant is a variable.

However, in the long run since all sorts of input adjustments are possible,
the LAC curve and the associated SAC curves of each plant of the monopolist
would be identical, for what is good for a particular plant is good for every other
plant. The size of each plant should be such as would enable the firm to produce
the same quantity of output at the same minimum possible (average) cost.

3A) VARIOUS TYPES OF COST

Cost is the sacrifice made, usually measured by the resources given up, to
achieve a particular purpose. A sacrifice made in order to obtain some goods or
services

Fixed Costs (FC):

The costs which don’t vary with changing output. Fixed costs might

include the cost of building a factory, insurance and legal bills. Even if your
output changes or you don’t produce anything, your fixed costs stay the same.
In the above example, fixed costs are always £1,000.

Variable Costs (VC): 

Costs which depend on the output produced. For example, if you produce
more cars, you have to use more raw materials such as metal. This is a variable
cost.

Semi-Variable Cost:

 Labour might be a semi-variable cost. If you produce more cars, you need to
employ more workers; this is a variable cost. However, even if you didn’t
produce any cars, you may still need some workers to look after an empty
factory.

Total Costs (TC) = Fixed Costs + Variable Costs

Marginal Costs:

Marginal cost is the cost of producing an extra unit. If the total cost of 3
units is 1550, and the total cost of 4 units is 1900. The marginal cost of the 4th
unit is 350.

Opportunity Cost:

Opportunity cost is the next best alternative foregone. If you invest £1million in
developing a cure for pancreatic cancer, the opportunity cost is that you can’t
use that money to invest in developing a cure for skin cancer.

Economic Cost:

Economic cost includes both the actual direct costs (accounting costs)
plus the opportunity cost. For example, if you take time off work to a training
scheme. You may lose a weeks pay of £350, plus also have to pay the direct
cost of £200. Thus the total economic cost = £550.
Accounting Costs: this is the monetary outlay for producing a certain good.
Accounting costs will include your variable and fixed costs you have to pay.

Sunk Costs:

These are costs that have been incurred and cannot be recouped. If you
left the industry, you could not reclaim sunk costs. For example, if you spend
money on advertising to enter an industry, you can never claim these costs back.
If you buy a machine, you might be able to sell if you leave the industry.

Avoidable Costs:

 Costs that can be avoided. If you stop producing cars, you don’t have to
pay for extra raw materials and electricity. Sometimes known as an escapable
cost.

Explicit costs:

These are costs that a firm directly pays for and can be seen on the
accounting sheet. Explicit costs can be variable or fixed, just a clear amount.

Implicit costs:

These are opportunity costs, which do not necessarily appear on its

balance sheet but affect the firm. For example, if a firm used its assets, like a
printing press to print leaflets for a charity, it means that it loses out on revenue
from producing commercial leaflets.

3B) MEANING OF RISK AND DECISION MAKING UNDER

RISK IN DETAIL

The international standard definition of risk for common understanding in

different applications is “effect of uncertainty on objectives
 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:

1. The problem is defined and all feasible alternatives are considered. The
possible outcomes for each alternative are evaluated.

2. Outcomes are discussed based on their monetary payoffs or net gain in

reference to assets or time.

3. Various uncertainties are quantified in terms of probabilities.

4. 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.

4A) COMPOSITION AND FUNCTIONS OF MONEY MARKET

Money market is a segment of financial market. It is a market for short

term funds. It deals with all transactions in short term securities. These
transactions have a maturity period of one year or less. Examples are bills of
exchange, treasury bills etc. These short term instruments can be converted into
money at low transaction cost and without much loss. Thus, money market is a
market for short term financial securities that are equal to money.
Money Market performs the following functions:

1. Facilitating adjustment of liquidity position of commercial banks,

business undertakings and other non-banking financial institutions.
2. Enabling the central bank to influence and regulate liquidity in the
economy through its intervention in the market.
3. Providing a reasonable access to users of short term funds to meet their
requirements quickly at reasonable costs.
4. Providing short term funds to govt. institutions.
5. Enabling businessmen to invest their temporary surplus funds for short
period.
6. Facilitating flow of funds to the most important uses.

Composition of Money Market

Money market consists of a number of sub markets. All submarkets

collectively constitute the money market. Each sub market deals in a particular
financial instrument. The main components or constituents or sub markets of a
money markets are as follows:

1. Call money market

Call/Notice money is the money borrowed or lent on demand for a very

short period. When money is borrowed or lent for a day, it is known as Call
(Overnight) Money. Intervening holidays and/or Sunday are excluded for this
purpose. Thus money, borrowed on a day and repaid on the next working day,
(irrespective of the number of intervening holidays) is "Call Money". When
money is borrowed or lent for more than a day and up to 14 days, it is "Notice
Money". No collateral security is required to cover these transactions.
 2. Commercial bill market

These are negotiable instruments. These are generally issued for 30 days
to 120 days. Thus these are short term credit instruments. These are self
liquidating instruments with low risk. These can be discounted with a bank.
When a bill is discounted with a bank, the holder gets immediate cash. This
means bank provides credit to the customers. The credit is repayable on
maturity of the bill. In case of need for funds, the bank can rediscount the bill in
the money market and get ready money. These are used for settling payments
in the domestic as well as foreign trade. The creditor who draws the bill is
called drawer and the debtor who accepts the bill is called drawee

3. Treasury bill markets

Treasury Bills are short term (up to one year) borrowing instruments of
the union government. It is an IOU of the Government. It is a promise by the
Government to pay a stated sum after expiry of the stated period from the date
of issue (14/91/182/364 days i.e. less than one year). They are issued at a
discount to the face value, and on maturity the face value is paid to the holder.
The rate of discount and the corresponding issue price are determined at each
auction.

4. Certificates of deposits market

These are unsecured promissory notes issued by banks or financial

institutions. These are short term deposits of specific maturity similar to fixed
deposits.These are negotiable (freely transferable by endorsement and
delivery) .These are generally risk free. The rate of interest is higher than that
on T-bill or time deposits. These are issued at discount. These are repayable on
fixed date. These require stamp duty.

5. Commercial paper market

 CP is an unsecured promissory note privately placed with investors at a
discount rate to face value determined by market forces. CP is freely negotiable
by endorsement and delivery. A company shall be eligible to issue CP provided
–
(a) The tangible net worth of the company, as per the latest audited
balance sheet, is not less than Rs. 4 crore;
(b) The working capital (fund-based) limit of the company from the
banking system is not less than Rs.4 crore and
(c) The borrower account of the company is classified as a Standard
Asset by the financing bank/s.
(d) The minimum maturity period of CP is 7 days. The minimum
credit rating shall be P-2 of CRISIL or such equivalent rating by other
agencies.
(e) CPs can be issued in multiples of Rs. 5 lakhs subject to the
minimum issue size of Rs. 50 lakhs
6. Acceptance market

Acceptance Market is another component of money market. It is a market

for banker’s acceptance. The acceptance arises on account of both home and
foreign trade. Bankers’ acceptance is a draft drawn by a business firm upon a
bank and accepted by that bank. It is required to pay to the order of a particular
party or to the bearer, a certain specific amount at a specific date in future. It is
commonly used to settle payments in international trade. Thus acceptance
market is a market where the bankers’ acceptances are easily sold and
discounted.

6. Collateral loan market

Collateral loan market is another important sector of the money market.

The collateral loan market is a market which deals with collateral loans.
Collateral means anything pledged as security for repayment of a loan. Thus
collateral loans are loans backed by collateral securities such as stock, bonds
etc. The collateral loans are given for a few months. The collateral security is
returned to the borrower when the loan is repaid. When the borrower is not able
to repay the loan, the collateral becomes the property of the lender. The
borrowers are generally the dealers in stocks and shares.

4B) ROLE OF SEBI

SEBI plays a very important role in regulating capital market. SEBI is

regulator to control Indian capital market. Since its establishment in 1992, it is
doing hard work for protecting the interests of Investor.

Role of SEBI is as follows:

1. Power to make rules for controlling stock exchange:

SEBI has power to make new rules for controlling stock exchange in
India. For example, SEBI fixed the time of  trading 9 AM and 5 PM in stock
market. 

2. To provide license to dealers and brokers :

SEBI has power to provide license to dealers and brokers of capital

market. If SEBI sees that any financial product is of capital nature, then SEBI
can also control to that product and its dealers. One of main example is ULIPs
case. SEBI said, It is just like mutual funds and all banks and financial and
insurance companies who want to issue it, must take permission from SEBI."

3. To Control the Merge, Acquisition and Takeover the companies:

Many big companies in India want to create monopoly in capital market.

So, these companies buy all other companies or deal of merging. SEBI sees
whether this merge or acquisition is for development of business or to harm
capital market. 
4. To audit the performance of stock market :

SEBI uses his powers to audit the performance of different Indian stock
exchange for bringing transparency in the working of stock exchanges. 

5A) WRITE A NOTE ON

1. DIFFERNCE BETWEEN WTO AND GATT

The WTO is not an extension of the GATT but succession to the GATT. It
completely replace GATT and has a very different character. The major
differences between the two are:

1. The GATT had no status whereas the WTO has a legal status. It
has been created a by international treaty ratified by governments
and legislatures of member states.
2. The GATT was a set of rules and procedures relating to
multilateral agreements of selective nature. There were separate
agreements on separate issues, which were not binding on
members. Any member could stay out of the agreement The
agreements, which form part of the WTO, are permanent and
binding on all members.
3. The GATT dispute settlement system was dilatory and not binding
on the parties to the dispute. The WTO dispute settlement
mechanism is faster and binding on all parties.
4. GATT was a forum where the member countries met once in a
decade to discuss and solve world trade problems. The WTO, on
the other hand, is a properly established rule based World Trade
Organization where decisions on agreement are time bound.
 5. The GATT rules applied to trade in goods. Trade in services was
included in the Uruguay Round but no agreement was arrived at.
The WTO covers both trade in goods and trade in services.
6. The GATT had a small secretariat managed by a Director General.
But the WTO has a large secretariat and a huge organizational
setup.

2. GDP AND PPP

GDP

GDP is the final value of the goods and services produced within the
geographic boundaries of a country during a specified period of time, normally
a year. GDP growth rate is an important indicator of the economic performance
of a country.

PPP

One popular macroeconomic analysis metric to compare economic

productivity and standards of living between countries is purchasing power
parity (PPP). PPP is an economic theory that compares different countries'
currencies through a "basket of goods" approach.

5B) DEFINE THE FOLLOWING TERMS IN RELATION

WITH UNION BUDGET
1. REVENUE ACCOUNT
 A revenue account is an account with a credit balance. It includes all the
revenue receipts also known as current receipts of the government. These
receipts include tax revenues and other revenues of the government

2. CAPITAL ACCOUNT

A capital account is an account that includes the capital receipts and the
payments. It basically includes assets as well as liabilities of the government.
Capital receipts comprise of the loans or capital that are raised by governments by
different means.

3. REVENUE DEFICIT

Revenue deficit arises when the government’s revenue expenditure

exceeds the total revenue receipts. Revenue deficit includes those transactions
that have a direct impact on a government’s current income and expenditure.
This represents that the government’s own earnings are not sufficient to meet
the day-to-day operations of its departments. Revenue deficit turns into
borrowings when the government spends more than what it earns and has to
resort to the external borrowings

4. 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.

5. PLAN AND NON PLAN EXPENDITURE

Non-plan expenditure is what the government spends on the so-

called non-productive areas, such as salaries, subsidies, loans and interest,
while plan expenditure pertains to the money to be set aside for productive
purposes, like various projects of ministries.

1A) Define contract. What are the essential elements of a valid contract?

Contract may be defined as an agreement which creates rights and

obligations between the parties. These obligations and right s must be of such a
nature that these can be claimed in the court of law. According to Salmond, “A
contract is an agreement creating and defining obligation between the parties.”
Section 8(h) of the Indian Contract Act defines contract as an agreement which
is enforceable by law. From the above definitions of contract it is clear that a
contract essentially consists of three elements:

1. An agreement
2. Obligation
3. Enforceability

1. Agreement: An agreement involves a valid offer by one party a valid

acceptance by the other party.

2. Enforceability: It means contract must be legal in nature and which can be

claimed in the court of law. For example, X invites Y to a party and Y accepts
the invitation, then it is only a social agreement and not a contract. On the other
hand A agrees to sell his house to B for Rs. 5, 00,000. This is a contract.

ELEMENTS OF CONTRACT

An agreement to be enforced in the court has to satisfy certain conditions. On

satisfying these, the agreements become a contract, and those conditions
become essentials of a valid contract. The essential elements of a contract are
contained in the definition of contract given in sec. 10 of the contract Act.
According to this Act, “all agreements are contracts if they are made by 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.” The essential
elements of a contract include:

1. Agreement: -

There must be an agreement between the parties of a contract. It involves a

valid offer by one party and a valid acceptance by the other party. Agreement is
created by offer and acceptance. Therefore an agreement is = offer +
acceptance. It is only by an agreement a contractual relation is established
between the parties.

For example, A sends a proposal to B to purchase a property for Rs. 10

lakhs and B accept the same, then this result into an agreement.

2. Lawful consideration:

Consideration means something in return. An agreement is legally

enforceable only when each of the parties to it give something and gets
something. It may be past, present or future and must be real and lawful. A
contract without consideration is not a contract at all. The consideration must be
legal, moral and not against public policy.
3. Capacity of parties:

The parties to an agreement must be capable of entering into a valid

contract. According to sec. 11, the following persons are not competent to enter
in to a contract.

(a) Persons of unsound mind (Idiots, lunatic person etc.)

(b) Persons disqualified by law to which they are subject.

(c ) Minors (Not completed the age of 18)

4. Free consent:

For the formation of a contract one person must give his consent to
another person. The consent thus obtained must be a free consent. A consent is
said to be free if it is not caused by coercion, undue influence, fraud,
misrepresentation or mistake. If the consent is obtained by unfair means, the
contract would be voidable.

5. Consensus ad idem:

It means the two parties of the contract must agree upon the subject
matter of the contract in the same manner and in the same sense. That is there
must be identity of minds among the parties regarding the subject matter of the
contract. For example, A has two houses one at Calicut and another at Palakkad.
He has offered To sell one house to B. B accepts the offer thinking to purchase
the house at Palakkad, while A, when he offers; he has his mind to sell the
house at Calicut. So there is no consensus ad idem.

6. Lawful object:

The object of an agreement must be lawful. It must not be illegal or

immoral or opposed to public policy. If it is unlawful, the agreement becomes
void.
7. Not declared to be void:

There are certain agreements which have been expressly declared void
by the law. It includes: (a)Wagering agreement (b) Agreement in restraint to
marriage (c ) Agreement in restraint of trade etc. Thus an agreement made by
parties should not fall in the above category.

8. Certainty and possibility of performance: -

The terms of the contract must be precise and certain. They should not be
vague. The terms of agreement must be capable of performance. For example A
agrees to sell one of his houses. A has four houses. Here the terms of agreement
are uncertain and the agreement is void.

9. An intention to create legal relationship:-

There should be an intention between the parties to create a legal

relationship. Mere informal promise is not to be enforced. Social agreements are
not to be enforced as they do not create any legal obligations. An oral contract is
a valid contract except in those cases where writing, registration etc. is required
by some statute.

1B) A minor, borrows Rs. 5000 and executes a promissory note for the
amount in favour of B. After attaining majority, A executes another
pronote in settlement of the first pronote. Will B succeed in recovering
money from ‘A’ Give reasons.

B cannot recover money from A because this is not a valid contract as A

is a minor.
2A) What is the 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. When the rights and obligations arising out of a contract are
extinguish, the contracts are said to be discharged. A contract may be
discharged either by the acts of the parties of the operation of law.

 Discharge by performance

When the respective parties of the contract perform their shares of the
promises, it is said to be the contract is discharged. It is called as natural mode
of discharge.

 Discharge by agreement or consent

Section 62 of the Indian contract, 1872 provides that “if the parties to a
contract agree to substitute a new contract for it, or to rescind or alter it, the
original contract need not be performed” under the heading- Effect of novation,
rescission and alteration of contract.

 Discharge by impossibility of performance

As per section 56 of the Indian Contract Act, 1872 “An agreement to do

impossible act is void ab-initio.” It means agreement which is obviously
impossible cannot be binding.

Discharge by lapse of time

Specified period for performance of a contract prescribed by The Limitation

Act, 1963. If the contract is not performed and no legal action is taken by the
promisee within the period of limitation, the contract is discharged and he is
deprived of his remedy at law.

Discharge by operation of law

 A contract can be discharged by operation of law which includes
insolvency or death, of the promisor and also merger, judgement of court.

Discharge by breach of a contract

Breach of contract means failure to perform contractual obligation by

either of the parties without any lawful excuse, the contract discharged because
it is a ground for discharge of a contract.

2B) ‘A’ in Delhi rings up to B of Bombay offering to sell a machine for Rs.
100000. 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 and B.

There will be binding contract even if A hasn’t heard the acceptance.

3A) Who is an unpaid seller. Explain the rules for exercising the right of
lien by an unpaid seller.

An unpaid seller is one to whom the whole of the price has not been paid
or a bill of exchange or such other negotiable instrument given to him has been
dishonoured.

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

 Possession of goods is important to exercise the right of lien.

  The right of lien is not affected even if the seller has parted with the
document of title to the goods.
 The possession of the goods by the seller must not expressly exclude the
right of lien.
 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.
 If the unpaid seller has already made part delivery of the goods to the
buyer, he may exercise lien on the remainder.

B) P agrees to sell to Q goods worth Rs.5000 which will be produced in his

farm next year. What kinds of goods are these?

Agreement of sale of future goods. Sec. 2(6) of sale of goods act defines future
goods as ,”Future goods means goods to be manufactured or produced or
acquired by the seller after making of the contract of sale.” Future goods are not
in existence at the time of contract of sale.

4.A) Define conditions. Elaborate implied conditions in contract of sale.

A condition is an act or event, other than a lapse of time that affects a

duty to render a promised performance that is specified in a contract. A
condition may be viewed as a qualification placed upon a promise. The implied
conditions and warranties are those which are presumed by law to be present in
the contract though they have not been put into it in expressed words. Implied
conditions are dealt with in Sections 14 to 17 of the Sale of Goods Act, 1930.
Unless otherwise agreed, the law incorporates into a contract of a sale of goods
the following implied conditions:

IMPORTANT IMPLIED CONDITIONS:-

 1. Conditions as to title of goods sold: - The first implied condition in
the part of the seller is that, in the case of a sale, he has a right to sell the goods
and that in the case of an agreement to sell, he will have a right to sell the goods
at the time when the property is to pass. If the title of the seller turns out to be
defective, the buyer is entitled to reject the goods and can recover the whole
amount.

2. Goods sold should correspond to description: - Where there is a

contract of sale of goods by description, there is an implied condition that the
goods shall correspond with the description. The expression sale by description
includes the following things: a. Buyer has not seen the goods but buys them on
the basis of description given by the seller b. Buyer has seen the goods, but he
relies not on what he has seen but what was stated to him by the seller. c.
Packing of goods may sometimes be a part of the description d. The arrival of
goods at a particular time and place may form part of the description.

3. Sale by sample:-If the goods are supplied in a contract of sale,

according to sample agreed upon, the implied conditions are: a. The bulk shall
correspond with the sample b. the buyer shall have a reasonable opportunity of
comparing the bulk with the sample, and c. the goods supplied shall be free
from any defect.

4. Conditions as to quality or fitness: - Normally in a contract of sale

there is no implied condition as to quality or fitness of the gods for a particular
purpose. But there is an implied condition that the goods sold are reasonably fit
for the purpose for which they are purchased for. a. The goods are needed for a
particular purpose which the buyer brings to the knowledge of the seller, either
expressly or impliedly. b. The buyer relies on seller’s skill and judgment and c.
It is sellers duty to supply by description, then there is an implied condition that
the goods should be reasonably fit for that purposes.
 5. Condition as to merchantability: Where goods are bought by
description from a seller who deals in goods of that description, there is an
implied condition that the goods shall be mercantile quality.

6. Conditions as to wholesomeness: In a contract of sale of eatables and

provisions, there is an implied condition on the part of the seller that the goods
shall be wholesome. It means, the goods supplied by the seller must not be
dangerously adulterer and must be fit for human consumption.

4B) State with the 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.

It is agreement to sell because the sale has not happened.

(ii) X purchases books at book stall for Rs. 10000 and pays cash and gets
the delivery of books.

It is a sale because actual sale has occurred. And obligations of both pa

rties have fulfilled.
 1A) HOLDER AND THE RIGHTS OF HOLDER

IN DUE COURSE

A holder, to be a holder in due course must not only have acquired the
bill, note or cheque for a valid consideration but should have acquired the
cheque without having sufficient cause to believe that any defect existed in the
title of the person from whom he derived his title. This condition requires that
he should act in good faith and with reasonable caution. However, mere failure
to prove bona fide or absence of negligence on his part would not negative his
claim. But in a given case it is left to the court to decide whether the negligence
on part of the holder is so gross an extraordinary as to presume that he had
sufficient cause to believe that such title was defective.
Holder in due course acquiring the instrument for consideration and in good
faith gets the following rights under the act:

1. Holder in due course can file a suit in his own name against the parties
liable to pay. He is deemed prima facie to be holder in due course(Sec 118)
2. The holder is due course gets a good title even though the instruments were
originally stamped but was an inchoate instrument (Sec 20). The person
who has signed and delivered an inchoate instrument cannot plead as against
the holder in due course that the instrument has not been filled in
accordance with the authority given by him. However, a holder who himself
completes the instrument is not a holder in due course.
3. Every prior party to the instruments is liable to a holder in due course until
the instrument is duly satisfied (Sec 36).
4. Acceptor cannot plead against a holder in due course that the bill is drawn
in a fictitious name (Sec 42).
5. The other parties liable to pay cannot plead that the delivery of the
instrument was conditional or for a specific purposes only (Sec 46).
6. He gets a good title to the instrument even though the title of the
transferor or any price party to the instrument is defective (Sec 53) He
can recover the full amount unless he was a party to fraud; or if the
instrument is negotiated by means of a forged endorsement.
7. Even if the negotiable instrument is made without consideration, if it get
into the hands of the holder in due course, he can recover the amount on
it from any of the prior parties thereto.
8. The person liable cannot plead against the holder in due course that the
instrument had been lost or was obtained by means of an offence of
fraud or for an unlawful consideration (sec 58).
 9. The validity of the instrument as originally made or dawn cannot be
denied by the maker of drawer of a negotiable instrument or by acceptor
of a bill of exchange for honour of the drawer (Sec 120).
10.The maker of a note or an acceptor of a bill payable to order cannot deny
the payee’s capacity to indorse the same at the date of the note or bill
(sec 121).
11. Endorser is not permitted as against the holder in due course to deny the
signature or capacity to contract of any prior party to the instrument (Sec
122).

1B)B can enforce payment against A but not against M since M is a minor and
even though the act permits minor to negotiable instrument transactions, any
liability caused minor cannot be held liable for payment.

2A) PROMISSORY NOTE AND ITS ESSENTIAL FEATURES

A promissory note is a financial instrument that contains a written

promise by one party (the note's issuer or maker) to pay another party (the note's
payee) a definite sum of money, either on demand or at a specified future date.
A promissory note typically contains all the terms pertaining to the
indebtedness, such as the principal amount, interest rate, maturity date, date and
place of issuance, and issuer's signature.Although financial institutions may
issue them (see below), promissory notes are debt instruments that allow
companies and individuals to get financing from a source other than a bank.
This source can be an individual or a company willing to carry the note (and
provide the financing) under the agreed-upon terms. In effect, promissory notes
can enable anyone to be a lender. For instance, although it isn't a given, you
might be required to sign a promissory note in order to take out a small personal
loan.

ESSENTIAL FEATURES OF PROMISSORY NOTE

 Printed/Written Agreement – A promissory should be in writing, and

an oral promise to pay money is not accepted.

 Pay Defined Amount – It is a promise to pay the money on a particular

time or when demanded. The mentioned amount can neither be added nor
subtracted.

 Signed Documents – The document is duly signed and drawn by the

drawer and stamped.

 Unconditional Promise – The promise to pay a certain amount of money

must be absolute in all cases. In such notes, a conditional guarantee is not
accepted.

 Legal Composition – All the payment should be made in the nation’s

legal currency.
 Detailed Information – The note has all the required information
including the name of the drawer and payee, date of maturity, terms of

repayment, issue date, name of the drawee, name, and signature of the
drawer, principal amount, and the rate of interest, etc.
2B) Yes. The instrument was payable to bearer as it was a bearer instrument. It
could be negotiated by delivery despite the presence of special endorsements.

Now, C is the holder of the bearer instrument as he takes it from B in good

faith. But only B knows that he has taken from A.

3A) COMPANY

A company is an association of persons, formed and registered under the

Indian Companies Act, 2013 or any other previous act. The following are
the major features of a company:

 It is an artificial person.

 It has a separate legal entity.

 It has limited liability.

 It has perpetual succession.

 It has a common seal.

 It can possess property in its own name.

There are two types of company: Public Company and Private Company

The company can file a suit in its own name and vice versa. The company is run
by its representatives known as directors, which are appointed by the members
of the company at the “Annual General Meeting”. In addition to this, there is no
restriction on the transferability of shares in case of a public company, but if we
talk about a public company, there are certain restrictions.
DIFFERENCE BETWEEN A COMPANY AND PARTNERSHIP
FIRM

1. A partnership is an agreement between two or more persons who come

together to carry out a business and share profit & losses mutually. A
company is an incorporated association, also called an artificial person
having a separate identity, common seal and perpetual succession.

2. The registration of the partnership firm is not compulsory whereas to

form a company; it needs to be registered.

3. For the creation of a partnership, there must be at least two partners. For
the formation of a company, there must be at least two members in case
of private companies and 7 in regard to public companies.

4. The limit for the maximum number of partners in a partnership firm is

100. On the other hand, the maximum number of partners in case of a
public company is unlimited and in the case of a private company that
limit is 200.

5. The next major difference between them is, there is no minimum capital
requirement for starting a partnership firm. Conversely, the minimum
capital requirement for a public company is 5 lakhs and for a private
company, it is 1 lakh.

6. In the event of dissolution of the partnership firm, there are no legal

formalities. In opposition to this, a company has many legal formalities
for winding up.

7. A partnership firm can be dissolved by any one of the partners. In

contrast to this, the company cannot be wound up, by any one of the
members.
8. A partnership firm is not bound to use the word limited or private limited
at the end of its name while a company has to add the word ‘limited’ if it
is a public company and ‘private limited’ if it is a private company.

9. The liability of the partners is unlimited whereas the liability of the

company is limited to the extent of shares held by every member or
guarantee given by them.

10. As a company is an artificial person so that it can enter into contracts in

its own name, the members are not held liable for the acts of the company.
But in the case of a partnership firm, a partner can enter into a contract in
their own name with the mutual consent of the other partners, and they can
also be sued for the acts done by the firm.

3B) DIFFERENCE BETWEEN PRIVATE COMPANY AND

PUBLIC COMPANY

1. The public company refers to a company that is listed on a recognised

stock exchange and traded publicly. A Private Ltd. the company is one
that is not listed on a stock exchange and is held privately by the
members.

2. There must be at least seven members to start a public company. As

against this, the private company can be started with minimum two
members.

3. The is no ceiling on the maximum number of members in a public

company. Conversely, a private company can have a maximum of 200
members, subject to certain conditions.

4. A public company should have at least three directors whereas the Private
Ltd. company can have a minimum of 2 directors.
 5. It is compulsory to call a statutory general meeting of members, in the
case of a public company, whereas there is no such compulsion in the
case of a private company.

6. In a Public Ltd. Company, there must be at least five members,

personally present at the Annual General Meeting (AGM) for constituting
the requisite quorum. On the other hand, in the case of Private Ltd.
Company, that number is 2.

7. The issue of prospectus/statement instead of the prospectus is mandatory

in case of a public company, but this is not the case with the private
company.

8. To start a business, the public company needs a certificate of

commencement of business after it is incorporated. In contrast, a private
company can start its business just after receiving a certificate of
incorporation.

9. The transferability of shares of a Pvt. Ltd. company is completely

restricted. On the contrary, the shareholders of a public company can
freely transfer their shares.

10.A public company can invite the general public for subscribing shares of
the company. As opposed, a private company has no right to invite public
for subscription

4) WRITE SHORT NOTE ON THE FOLLOWING

a) TRADEMARK

A trademark (also written trade mark or trade-mark) is a type of intellectual

property consisting of a recognizable sign, design, or expression which
identifies products or services of a particular source from those of
others, although trademarks used to identify services are usually called service
marks A trademark is a sign capable of distinguishing the goods or services of
one enterprise from those of other enterprises. Trademarks are protected by
intellectual property rights. In principle, a trademark registration will confer an
exclusive right to the use of the registered trademark. This implies that the
trademark can be exclusively used by its owner, or licensed to another party for
use in return for payment. Registration provides legal certainty and reinforces
the position of the right holder, for example, in case of litigation. The term of
trademark registration can vary, but is usually ten years. It can be renewed
indefinitely on payment of additional fees. Trademark rights are private rights
and protection is enforced through court orders.

b) DIGITAL SIGNATURE

A digital signature is a mathematical technique used to validate the

authenticity and integrity of a message, software or digital document. As the
digital equivalent of a handwritten signature or stamped seal, a digital signature
offers far more inherent security, and it is intended to solve the problem of
tampering and impersonation in digital communications.

Digital signatures can provide the added assurances of evidence of origin,

identity and status of an electronic document, transaction or message and can
acknowledge informed consent by the signer.In many countries, including the
United States, digital signatures are considered legally binding in the same way
as traditional document signatures. A digital signature is a mathematical scheme
for verifying the authenticity of digital messages or documents. A valid digital
signature, where the prerequisites are satisfied, gives a recipient very strong
reason to believe that the message was created by a known sender
(authentication), and that the message was not altered in transit (integrity).
 c) WHO IS A CONSUMER AND WHO IS NOT A
CONSUMER
A Consumer is a person who purchases a product or avails a service for a
consideration, either for his personal use or to earn his livelihood by
means of self-employment. The consideration may be:
 Paid
 Promised
 Partly paid and partly promised. It also includes a beneficiary of
such goods/services when such use is made with the approval of
such person.
NOT A CONSUMER?
 Purchases any goods or avails any service free of charge.
 Purchases a good or hires a service for commercial purpose.
 Avails any service under contract of service.

d) PATENT

A patent is an exclusive right granted for an invention, which is a product or

a process that provides, in general, a new way of doing something, or offers
a new technical solution to a problem. To get a patent, technical information
about the invention must be disclosed to the public in a patent application.In
principle, the patent owner has the exclusive right to prevent or stop others
from commercially exploiting the patented invention. In other words, patent
protection means that the invention cannot be commercially made, used,
distributed, imported or sold by others without the patent owner's consent.
Patents are territorial rights. In general, the exclusive rights are only
applicable in the country or region in which a patent has been filed and
granted, in accordance with the law of that country or region.
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.”