5 Marks (any 3)

Q1. What are the types of agreement

Q2. What is Foreign Exchange Management Act,1999 and its objectives?

An Act to consolidate and amend the law relating to foreign exchange with the
objective of facilitating external trade and payments and for promoting the orderly
development and maintenance of foreign exchange market in India.

Objectives of the Act:

- The main objective of FEMA is to utilize foreign exchange resources of the

country effectively.

- It facilitates external trade, payment, orderly development & maintenance of

foreign exchange in India.

- It Is applicable to all parts of India.

- It is also applicable to all branches, offices & agencies outside India owned
or controlled by a person who is a resident of India.

- Its head office known as Enforcement Directorate is situated in New Delhi

& headed by a Director

- It is very important to an foreign trade & to maintain a good relation with

other countries.

- To reinforce and amend the law relating to foreign exchange

 - To simplify and ease the external trade and payments

- To promote the systematized development and maintenance of a healthy

foreign exchange market in India

Q3. Explain the rules regarding consideration with example(essentials)

Consideration, as given under Section 2(d) of the Indian Contract Act, 1872,
defines it as “when at the desire of the promisor, the promisee or any other person
has done or abstained from doing something, does or abstains from doing or
promises to do or to abstain from doing something. Such an act, abstinence or
promise is called a consideration for the promise”.

Why are essentials of valid consideration important?

Consideration forms the basis of a contract, and without it, a contract may be
deemed invalid or unenforceable.
Valid consideration ensures that the contract is legally binding and can be enforced
in a court of law. It represents the mutual exchange of something of value between
the parties to a contract. Parties must ensure that the consideration is significant,
adequate, unconditional, and real. It should not be impractical or legally
impossible.

The essentials or legal rules of a valid consideration are as under:-

1. It must move at the desire of the promisor: In order to constitute legal
consideration the act or abstinence forming the consideration for the promise
must be done at the desire or request of the promisor.
Example: X saves Y's house from the fire without being asked to do so. X
cannot demand payment for his services because X performed this act
voluntarily and not at the desire of Y.
2. It may move from the Promisee or any other person: The second
essential of a valid consideration is that consideration may move from the
promisee or from a third person on his behalf.
[Chinnaya v. Ramayya ]
3. It may be past, present or future: Consideration may be past present or
future.
A) Past Consideration: When the consideration for a present promise was
given before the date of the promise it is called a past consideration. It is not
a valid consideration.
B) Present Consideration: When consideration is given simultaneously by
one party to another at the time of contract, it is called Present
Consideration. The act constituting the consideration is wholly or
completely performed.

Example: A sells a book to B and B pays its price immediately it is a case of

present consideration.
C) Future Consideration: When the consideration on both sides is to be
given at a future date, it's called future consideration or executory
consideration. It consists of promises and each promise is a consideration for
the other.
4. It need not be adequate: It is not necessary that consideration should be
adequate to the value of the promise. The law only insists on the presence of
consideration and not on its adequacy. It is for the parties to the contract to
consider the adequacy of consideration and the courts are not concerned
about it.
Example: A agrees to sell his car worth Rs.20000 for Rs.5000 only and his
consent is free. The agreement is a valid contract.
 5. It must be real: It is necessary that consideration must be real and
competent. Example:
A promise to put life in X's dead body on B's promise to pay him Rs. 1000.
It is not real.

Q4. What is discharge by performance?

Discharge by performance-

A contract can be discharged by performance and it is the most common form of

discharge of contract. A contract will be discharged if the duty stated in the
contract has been fulfilled by the parties. If only one person in a contract performs
the promise which is mentioned then he alone is discharged. There are two types of
discharge of a contract by performance.

For example; A and B enter into a contract that A will pay B Rs 1,000 if B delivers
a package to C’s house. B does the agreed part specified in the contract and upon
doing it A pays B the mentioned amount in the contract. Thus, the contract is
discharged by performance since both parties performed the specified task in the
contract.

Actual performance

In this case both the parties in a contract must perform their promises. Unless the
Indian Contract Act, 1872 or any law at the time being prohibits the parties from
performing their promises. In case either party dies or is unable to fulfill the
promise then the representatives of such party shall be liable to perform the
promise laid down in the contract.

Attempted performance

When the promisor offers to give his performance under the contract, but the
promisee refuses to accept the same, then it amounts to discharge by attempted
performance.

Q5. Discuss the need for enacting consumer protection act

Consumer protection is the practice of safeguarding buyers of goods and services

against unfair practices in the market. It refers to the steps adopted for the
protection of consumers from corrupt and unscrupulous malpractices by the sellers,
manufacturers, service providers, etc. and to provide remedies in case their rights
as a consumer have been violated.

The rationale behind the enactment of COPRA 1986 was to set up a separate
department of consumer affairs in Central and State governments and it has
enabled us as consumers to have the right to represent in a consumer court.
Protection of consumers against exploitation was the main rationale behind the
enactment of Consumer Protection Act 1986.
The enactment of the Consumer Protection Act succeeded in bringing pressure on
business firms as well as the government to correct business conduct which may be
unfair and against the interests of consumers at large. The enactment of COPRA
has led to the setting up of separate departments of Consumer Affairs in central
and state governments to spread information about legal processes which people
can use. This information is spread through posters and advertisements on
television channels.

The main objective of the Act is to protect the interests of the consumers and to
establish a stable and strong mechanism for the settlement of consumer disputes.
The Act aims to:

1. Protect against the marketing of products that are hazardous to life and
property.
2. Inform about the quality, potency, quantity, standard, purity, and price of
goods to safeguard the consumers against unfair trade practices.
3. Establish Consumer Protection Councils for protecting the rights and
interests of the consumers.
4. Assure, wherever possible, access to an authority of goods at competitive
prices.
5. Seek redressal against unfair trade practices or unscrupulous exploitation
of consumers.
6. Protect the consumers by appointing authorities for timely and sufficient
administration and settlement of consumers’ disputes.
7. Lay down the penalties for offenses committed under the Act.
8. Hear and ensure that consumers’ welfare will receive due consideration at
appropriate forums in case any problem or dispute arises.
 9. Provide consumer education, so that the consumers are able to be aware
of their rights.
10. Provide speedy and effective disposal of consumer complaints
through alternate dispute resolution mechanisms.

Q6. Who is competent to enter into a contract?

One of the essential requirements of a valid contract under section 10 is that the
parties must be competent to contract.

“All agreements are contracts if they are made by the free consent of the parties
competent to contract, for lawful consideration and with a lawful object, and are
not expressly declared to be void”.(S.10)

Section 11 describes the persons who are competent to contract. It provides:

“Every person is competent to contract who is of age majority according to law to
which he is subject and who is of sound mind and is not disqualified from
contracting by any law to which he is subject ''.
According to section11 following persons are competent to contract:

(1) Who is the age of majority?

(2) Who is of sound mind?
(3) Who is not disqualified from contracting according to the Law to which he is
subject?
Conversely, it is clear from section 11 that the following persons are incompetent
to contract:
1. Minors;
2. Persons of unsound mind; and
3. Persons disqualified by law -from contracting

- The age of majority: Earlier it was 21 years when a guardian to person or

property of a minor was appointed, now a minor becomes a major when he
is of 18 years, in all cases. The reason for the age limit of 21 years was that
where disputes arise as to the management of properties of a minor, a court
would like to safeguard the property till the minor attains the age of 21
years. This inconvenience has been removed by1999 Amendment and now
in all cases the age of majority is 18 years.
- Law to which he is subject: The capacity to enter into agreements depends
upon the law of the place where the contracting party is domiciled. But there
is a tendency not to accept this law of domicile.
- Disqualified by Law: Some persons can be disqualified by law of the land
from entering into such agreements by issuing a notification to that effect
e.g. persons or firn\ms or companies blacklisted by government, countries at
war, enemies of country, etc.

Q7. Define consent. When is consent said to be free?

Section 13 defines consent as – “Two or more persons are set to consent when
they agree upon the same thing in the same sense. Which means to sign a contract
the parties should agree on the same thing at the same time.
According to section 14 – consent is said to be free when it is not caused by
coercion, undue influence, fraud, misrepresentation or mistake.

ELEMENTS OF FREE CONSENT –

- Section 15, Coercion – ‘Coercion’ is committing, or threatening to commit,

any act Forbidden by the Indian Penal Code (45 of 1860) or the unlawful
detaining, or threatening to detain, any property to the prejudice of any
person whatever with the intention of causing any person to enter into an
agreement.

For example – A threatens B to kill his son, if B won’t enter into a contract
to sell his house to A.

According to section 15, When one party is able to dominate the other, then
the contract made between them is said to be a contract made by undue
influence. There should not be undue influence to enter into a contract.

For example – An old man suffering from a serious disease is undue

influenced by his doctor, to give the doctor his house as a gift and then the
doctor will save his life for sure.

- Section 17, defines fraud that when one person intends to deceive another
then they commit fraud.

For example – Sohan sells his dog to his friend Mohan without informing
him that the dog is suffering from a disease.
 - According to section 18, Misrepresentation means deceiving the information
which results in assertion of the other party entering into the contract and
later on the party suffers a loss.

For example – Hasrish purchased land from Suresh stating that the land
produces 5 tones of wheat every year. Hence, Harish bought the land. Later
on Harish found that the land produces only 3 tons of wheat every year.
Here, suresh representation is misrepresentation.

- According to section 20 of Indian Contract Act 1872, Mistake is an incorrect

understanding by one or more parties. In this the agreement is void

For example – A and B came into a contract that A will sell B 10 tons of
rice. Due to some natural calamities, the rice was destroyed and both the
parties were not aware about this. Hence, the agreement is void.

Mistake is of two types –

1. Mistake of Law – Section 21 defines mistake of law. When one has

minimum knowledge about the law or when one is ignorant about the law.

For example – A believes that he doesn't have to come to a complete stop at

a “stop” sign when there are no cars at the intersection. This is a mistake in
law, whether there are cars or not, one must come to a complete stop.

2. Mistake in Fact – According to section 22, Mistake of fact occurs when one
or more parties in a contract have mistaken a term that is the essential
meaning of contract. Mistakes of fact are different from mistakes in law.
 For example – When the contract states the shipment of saree is to be
delivered. Here, the contract is referring to silk saree, but if one party
believes it to be chiffon saree. This is a mistake of fact.

Q8. What are the essentials of a contract of sale?

Section 4 of the Sale of Goods Act, 1930, contains the definition of a contract of
sale, whereby it is stated that a contract of sale of goods is one where the seller and
the buyer engage in a transfer of property, in the goods, and the property is either
sold or agreed to be sold by the buyer in exchange for a price by the seller. The
property in the goods is sold when the goods are transferred to the buyer and the
seller has received a price in return for the goods thus sold.

Essential Elements in a Contract of Sale

● Two parties: A contract of sale is between two parties, where one party
transfers goods to another party.
● Goods: The subject of the contract must be goods. This is usually the most
important element in a contract of sale because if the goods are not described
precisely, confusion could result.
● Transfer of ownership: Ownership of the goods must be moved from the
seller to the buyer, or there should be an agreement in which the transfer of
ownership is made.
● Price: The buyer in the contract must pay a price for the goods.
● A sales contract is a special type of contract. In order for it to be valid, it
must contain clauses about free consent and the competency of the signing
parties.
● A sale and an agreement to sell are part of a sales contract.
 ● No formalities. There is no particular form to define a valid contract of sale.
A contract of sale can be made simply by offering and accepting.

Q9. Discuss the implied warranties in the contract of sale

A warranty is referred to as extra information given with respect to the desired

good or its condition. The warranty is of secondary importance to the contract for
its fulfillment. Non-compliance of the seller to the warranty of the contract does
not render the contract repudiated and hence, the buyer cannot refuse to buy the
goods but can only claim compensation from the buyer.

Implied Warranty-

Enjoy Possession of the Goods [Section 14(b)]

Section 14(b) of the Act mentions ‘an implied warranty that the buyer shall have
and enjoy quiet possession of the goods’ which means a buyer is entitled to the
quiet possession of the goods purchased as an implied warranty which means the
buyer after receiving the title of ownership from the true owner should not be
disturbed either by the seller or any other person claiming superior title of the
goods. In such a case, the buyer is entitled to claim compensation and damages
from the seller as a breach of implied warranty.

Goods are free from any charge or encumbrance in favor of any third party
[Section 14(c)]

Any charge or encumbrance pending in favor of the third party which was not
declared to the buyer while entering into a contract shall be considered as a breach
of warranty, and the buyer is entitled to compensation and claim damages from the
seller for the same.

Q10. Explain the various unfair trade practices

UNFAIR TRADE PRACTICES-

The phrase unfair trade practices can be defined as any business practice or act that
is deceptive, fraudulent, or causes injury to a consumer. These practices can
include acts that are deemed unlawful, such as those that violate a consumer
protection law. Some examples of unfair trade methods are: the false
representation of a good or service; false free gift or prize offers; non-compliance
with manufacturing standards; false advertising; or deceptive pricing.

1. False representation of quality, standard of service

2. Rebuilt and second hand goods as new
3. Represents that goods have certain uses or benefits which they do not have
4. Represents that the seller has approval or affiliation which he does not have
5. Misleading representation of goods or services
6. Warranty or guarantee not based on proper test.
7. Misleads the public regarding the price

10 marks (any 2)

Q1. Define unpaid sellers. What are the rights of unpaid seller

Chapter V of the Sale of Goods Act, 1930, deals with unpaid sellers. In a contract
of sale, the seller is under an obligation to deliver the goods, and the buyer has to
pay for it. If the buyer fails or refuses to pay, such a seller becomes an unpaid
seller.

Rights of Unpaid Seller Against Buyer-

When the buyer of goods does not pay his dues to the seller, the seller becomes an
unpaid seller. And now the seller has certain rights against the buyer. Such rights
are the seller remedies against the breach of contract by the buyer. Such rights of
the unpaid seller are additional to the rights against the goods he sold.

1] Suit for Price

Under the contract of sale if the property of the goods is already passed but he
refuses to pay for the goods the seller becomes an unpaid seller. In such a case. the
seller can sue the buyer for wrongfully refusing to pay him his due.

But say the sales contract says that the price will be paid at a later date irrespective
of the delivery of goods. And on such a day if the buyer refuses to pay, the unpaid
seller may sue for the price of these goods. The actual delivery of the goods is not
of importance according to the law.

2] Suit for Damages for Non-Acceptance

If the buyer wrongfully refuses or neglects to accept and pay the unpaid seller, the
seller can sue the buyer for damages caused due to his non-acceptance of goods.
Since the buyer refused to buy the goods without any just cause, the seller may
face certain damages.
The measure of such damages is decided by the Section 73 of the Indian Contract
Act 1872, which deals with damages and penalties. Take for example the case of
seller A. He agrees to sell to B 100 liters of milk for a decided price. On the day, B
refuses to accept the goods for no justifiable reason. A is not able to find another
buyer and the milk goes bad. In such a case, A can sue B for damages.

3] Repudiation of Contract before Due Date

If the buyer repudiates the contract before the delivery date of the goods the seller
can still sue for damages. Such a contract is considered as a rescinded contract, and
so the seller can sue for breach of contract. This is covered in the Indian Contract
Act and is known as Anticipatory Breach of Contract.

4] Suit for Interest

If there is a specific agreement between the parties the seller can sue for the
interest amount due to him from the buyer. This is when both parties have
specifically agreed on the interest rate to be paid to the seller from the date on
which the payment becomes due.

But if the parties do not have such specific terms, still the court may award the
seller with the interest amount due to him at a rate which it sees fit.

Rights Against Goods-

1] Right of Lien-
The right of lien means the right to keep possession of the goods until the seller
receives the due price.

Section 47 of the Sale of Goods Act provides that an unpaid seller (as agent or
bailee of the buyer) in possession of the goods has the right to keep possession of
the goods until payment or tender of the price in the following cases:

● Where the goods have been sold with no stipulation to credit, or

● Where the goods have been sold on credit, but the term of credit has expired,
or
● Where the buyer becomes insolvent.

2] Right to Stoppage of Goods in Transit-

The unpaid seller delivered the goods to the carrier for transmission to the buyer,
and in the meantime, the buyer becomes insolvent, then the seller has the right to
stop and retain the goods in transit. Thus, the unpaid seller resumes possession of
the goods as long as it is in transit.

The unpaid seller can exercise the right of stoppage in transit only if he fulfills the
following conditions:
● The seller must have parted with the possession of goods, i.e., the goods
must not be in the seller’s possession.
● The goods must be in transit.
● The buyer must have become insolvent.

3] Right to Resale the Goods-

As per section 46(1) of the Sale of Goods Act, under the following circumstances,
the unpaid seller may resell the goods, if the goods are:
● Of a perishable nature, or
● When the unpaid seller exercised his right to lien or stoppage in transit and
gave notice to the buyer of his intention to resale.

We must note here that in such cases, on reselling the goods, it also entitles
the seller to:
● Recover the difference between the contract price and the resale price from
the original buyer as damage.
● Keep the profit if the resale price is higher than the contract price. But if the
unpaid seller does not give any notice, that shall not entitle such unpaid
seller to recover such damages, and the buyer can claim the profit on the
resale.

4] What Is Withholding Delivery

As per section 46(2) of the Sale of Goods Act, where the property in goods has not
passed to the buyer, the unpaid seller has, besides other remedies, a right to
withhold the delivery.

Q2. Define negotiable instruments. Explain the characteristics of negotiable

instrument act

According to the Indian negotiable instrument act 1881, negotiable instruments can
be anything that has a monetary value and are transferable. It enlists cheques,
exchange bills, and promissory notes, but excludes hundis, a common means of
monetary transfer prevalent in some parts of India.

The Negotiable Instruments Act, 1881 contains important provisions relating to the
negotiable instruments which are dealt by banks. The popular and main negotiable
instruments are promissory notes, bills of exchange and cheques. This Act came
into force from March 1, 1882 and the Act is divided into 17 chapters and contains
137 sections.

The words "negotiable" and "instrument" refer to transferability by delivery and

any written document by which there is a creation of a right in favor of a certain
individual. The term negotiable instrument is understood as a document
transferable by delivery.

The three instruments, promissory note, bill of exchange and cheque are regarded
as negotiable instruments. The characteristics of a negotiable instrument is that it is
a transferable document and passes on freely from one person to another. The three
instruments expressed above are negotiable instruments by statute. Apart from
these instruments, there are also certain negotiable instruments by the custom of
trade. For example in India, government promissory notes, hundies, railway
receipts and delivery order have been regarded negotiable by usage or custom or
trade.

CHARACTERISTICS OF NEGOTIABLE INSTRUMENTS-

1. The holder of the instrument is presumed to be the owner of the property

contained in it.
 2. They are freely transferable.
3. A holder in due course gets the instrument free from all defects of title of
any previous holder.
4. The holder in due course is entitled to sue on the instrument in his own
name.
5. The instrument is transferable till maturity and in case of cheques till it
becomes stale (on the expiry of 6 months from the date of issue).
6. Certain equal presumptions are applicable to all negotiable instruments
unless the contrary is proved

Q3. Explain scope and features FEMA, 1999

What is FEMA?

It is a set of regulations that empowers the Reserve Bank of India to pass

regulations and enables the Government of India to pass rules relating to foreign
exchange in tune with the foreign trade policy of India.

The scope of FEMA is narrow. It only deals with specified transactions related to
foreign exchange i.e. checking and controlling of only those transactions which are
specifically mentioned in the act and does not deal with transactions that are not
specifically mentioned in the act.

1. It gives powers to the Central Government to regulate the flow of payments

to and from a person situated outside the country.
2. All financial transactions concerning foreign securities or exchange cannot
be carried out without the approval of FEMA. All transactions must be
carried out through “Authorized Persons.”
 3. In the general interest of the public, the Government of India can restrict an
authorized individual from carrying out foreign exchange deals within the
current account.
4. Empowers RBI to place restrictions on transactions from capital Account
even if it is carried out via an authorized individual.
5. FEMA was also formulated in order to support the orderly growth and
maintain the Indian Forex market.
6. The processes and procedures for all foreign exchange transactions in India
are outlined by FEMA.
a. Both capital account transactions and current account transactions
have been included in the classification of these foreign exchange
transactions.
7. According to the FEMA Act, the balance of payment is a record of
transactions involving goods, services, and assets between citizens of
various nations. The balance of payment is divided into two main categories:
Capital Account and Current Account.
8. As per this act, Indians residing in India, have the permission to conduct a
foreign exchange, foreign security transactions or the right to hold or own
immovable property in a foreign country in case security, property, or
currency was acquired, or owned when the individual was based outside of
the country, or when they inherit the property from individual staying
outside the country.

Q4. Define cheque. Explain different kinds of crossing of cheque under the
negotiable instrument act
A cheque is a bill of exchange in which one party orders the bank to transfer the
money to the bank account of another party. It is a negotiable instrument that is
covered under the Negotiable Instruments Act, 1881.

Crossing a Cheque-

A crossing is an instruction to the paying banker to pay the amount of cheque to a

particular banker and not over the counter. The crossing of the cheque secures the
payment to a banker.
It also traces the person receiving the amount of cheque. Addition of words ‘Not
negotiable’ or ‘Account Payee only’ is necessary to restrain the negotiability of the
cheque. The crossing of a cheque ensures security and protection to the holder.
However, we can negotiate a crossed bearer cheque by delivery and a crossed
order cheque by endorsement and delivery.

Types of Cheque Crossing (Sections 123-131 A):

● General Crossing – cheque bears across its face an addition of two parallel
transverse lines.
● Special Crossing – cheque bears across its face an addition of the banker’s
name.
● Restrictive Crossing – It directs the collecting banker that he needs to credit
the amount of cheque only to the account of the payee.
● Non-Negotiable Crossing – It is when the words ‘Not Negotiable’ are
written between the two parallel transverse lines.
1] General Cheque Crossing-

In general crossing, the cheque bears across its face an addition of two parallel
transverse lines and/or the addition of words ‘and Co.’ or ‘not negotiable’ between
them.

In the case of general crossing on the cheque, the paying banker will pay money to
any banker. For the purpose of general crossing two transverse parallel lines at the
corner of the cheque are necessary.

Thus, in this case, the holder of the cheque or the payee will receive the payment
only through a bank account and not over the counter. The words ‘and Co.’ have
no significance as such.
But, the words ‘not negotiable’ are significant as they restrict the negotiability and
thus, in the case of transfer, the transferee will not give a title better than that of a
transferor.

2] Special Cheque Crossing-

In a special crossing, the cheque bears across its face an addition of the banker’s
name, with or without the words ‘not negotiable’.

In this case, the paying banker will pay the amount of cheque only to the banker
whose name appears in the crossing or to his collecting agent.

Thus, the paying banker will honor the cheque only when it is ordered through the
bank mentioned in the crossing or its agent bank.
However, in special crossing two parallel transverse lines are not essential but the
name of the banker is most important.
3] Restrictive Cheque Crossing or Account Payee’s Crossing-

This type of crossing restricts the negotiability of the cheque. It directs the
collecting banker that he needs to credit the amount of cheque only to the account
of the payee, or the party named or his agent.
Where the collecting banker credits the proceeds of a cheque bearing such crossing
to any other account, he shall be guilty of negligence.

Also, he will not be eligible for the protection of the collecting banker under
section 131 of the Act.

However, such crossing will have no effect on the paying banker. This is so
because it is not his duty to determine that the cheque is collected for the account
of the payee.

Q5. Distinguish between sale and agreement to sale

Sale-

Section 4(1) defines sale as a contract whereby the seller transfers or agrees to
transfer the property in goods to the buyer for a price. Thus, it happens in the
present. Such an event of sale is fixed, conditional and binding upon both the
parties. A contract of sale is made by an idea to purchase or sell merchandise at a
cost and the affirmation of such an offer.

Agreement to Sell-
An agreement to sell can be defined as the transfer of property in goods that is to
take place in future time or the transfer might take place depending on the
fulfillment of certain conditions. The same had been defined in section 4(3). An
agreement to sell also becomes a sale when the given time elapses or the
conditions that are needed for the transfer to happen gets fulfilled. Thus, an
agreement to sell establishes the terms and conditions of the offer of a property by
the seller to the buyer.

Difference Between Sale And Agreement To Sell

As already described above, the sale takes place immediately, while an agreement
to sell takes place in the future depending upon the fulfillment of certain terms and
conditions. Thus at the time of the sale, an actual transfer takes place whereas at
the time of the agreement to sell future transfer takes place. Risks are transferred
immediately in sale whereas in the agreement of sale risks are attached to the seller
till the goods are being transferred in the future. The sale is an executed contract
whereas agreement to sell is an executory contract.

As per section 6(1) the sale deed mostly comprises the existing goods owned or
possessed by the seller or future goods. Whereas in the agreement to sell, the seller
indicates to impact a present offer of future merchandise, thus it entirely depends
upon the contingency of the event which may or may not happen.

However, section 8 of the said act, deals with the goods perishing before the sale
but after the agreement to sell, thus this section again highlights the goods which
damage or perish without any fault of the seller or the buyer. Thus this also
happens to be an instance of an agreement to sell.
Further, section 9 deals with the ascertainment of the price of the goods. Hence,
when a sale is made, immediately a transfer takes place, and therefore the price is
certain and fixed, whereas in specific conditions the price is determined, depending
upon the circumstances of a certain particular case, thus an agreement to sell is
completed but the sale is not.

Therefore the price of the goods itself falls and thereby the risk being attached to
the seller, he suffers the loss. However, if the goods or a part thereof is delivered
and appropriated by the buyer, the buyer is bound to pay a reasonable price to the
seller. Thus it could be concluded that one is an instant action while the other is a
future action.

In the sale and agreement to sell the condition and warranty as being defined under
section 12 of the act which also plays an important role. Section 12(2), defines the
condition as a stipulation essential to the main purpose of the contract. While
section 12 (3) defines warranty as stipulation collateral to the main purpose of the
contract and a breach of it may give rise to claim for damages but not the right to
reject the goods and to treat the contract as denied.

Thus the term “condition” could be related more to the immediate sale, whereas
the term “warranty” could be more associated with the agreement to sell.
Subsequently, we also find that section 13 of the said act is also inclined towards
the agreement to sell as it states that when a condition could be treated as a
warranty.

When an immediate sale happens, all the rights which are attached to the goods to
the seller are impliedly transferred immediately to the buyer, whereas, in the
agreement to sell, this is not the case. In certain cases the sale also happens as per
the descriptions hence it is applicable to both to sale and agreement to sell as per
section 15 of the Sale of Goods Act, 1930.

15 marks (any 2)

1. Explain dissolution of partnership firm

When two or more people come together and pool funds to start a business, it's
known as a partnership firm. The primary aim of partnership firms is to earn profit.
Partnership firms in the country are bound by the laws defined under the Indian
Partnership Act, 1932

In this agreement, all the rights and responsibilities of each partner who has set up
the business. The partnership agreement features the names of both the parties or
partners, the purpose for which the partnership is founded, place of business, each
partner's investment amount, and sharing of profits between the partners.

However, this partnership can be dissolved only when some predefined provisions,
according to the Partnership Act of 1932 are matched, such as:
1. Dissolution by Agreement
2. Dissolution by Notice
3. Dissolution by the Court
4. Compulsory Dissolution
5. Conditional Dissolution
Dissolution of partnership is said to take place when one of the partners associated
with the business ceases to be a part of the business going forward. It is very
different from the termination of partnership. Dissolution can be defined as the
process that ultimately leads to the termination of partnership. After dissolution,
the remaining partners carry on the partnership but this partnership is a completely
new and different partnership.

Reasons for Dissolution of partnership-

There can be several reasons for the dissolution of a partnership, which are
mentioned below:
1. Death of a partner.
2. Admission of a new partner.
3. Insolvency of an existing partner.
4. Early retirement of a partner.
5. Due to expiry of a partnership period after a certain time as mutually agreed
upon by all partners.

How is a partnership dissolved?

Generally, a partnership terminates or dissolves when a partner discontinues

participating in the business operation. The dissolution can happen in three
different ways
.
● By an act of the partners- When a partner agrees to dissolve partnership at
a particular time. For instance, partners can come to an agreement that a
partnership should continue for a span of five years. The partners can
dissolve the agreement at the end of the five (5) years. Sometimes, it can be
 mentioned that a partner can be suspended under a specific condition. If a
partner breaks a rule, then this can dissolve the partnership.
● By operation of law- A Partnership is a consequence of an agreement which
is governed by the law. Therefore, any hindrance to the agreement or
unlawful operating of business can cancel the partnership contract. For
instance; you cannot make a valid partnership for selling illegal things.
● By court’s decree- A partner can demand partnership dissolution, and the
law will allow the dissolution only under this conditions: a partner’s
incapability to work; breach of the agreement by a partner; when a partner is
mentally unstable; and the misbehavior of a partner that impacts the
partnership.
● Statement of Dissolution – This is done by filing the statement to the
state’s secretary. The form can be taken from the website of the secretary of
state. The form must have the partnership name, date and reason of
dissolution.
● Personal Notification- This can be done by giving personal notice to the
partnership’s creditors. Also, inform who is associated with the partnership
by publishing the notification in a newspaper.

2. Define partnership act. What are the duties and rights of partner

Definition:

The Indian Partnership Act defines partnership as “the relation between persons
who have agreed to share the profits of a business carried on by all or any of them
acting for all.”

The Essential Features of Partnership :

1. An association of two or more persons;
2. An agreement entered into by all persons concerned;
3. Business;
4. The business being carried on by all or any of them acting for all; and
5. Sharing of profits (including losses) of the business.

Rights of Partners:

Broadly, the provisions of the Act regarding rights, duties and powers of
partners are as under::

(a) Every partner has a right to take part in the conduct and management of
business.

(b) Every partner has a right to be consulted and heard in all matters affecting the
business of the partnership.

(c) Every partner has a right of free access to all records, books and accounts of the
business, and also to examine and copy them.

(d) Every partner is entitled to share the profits equally.

(e) A partner who has contributed more than the agreed share of capital is entitled
to interest at the rate of 6 per cent per annum. But no interest can be claimed on
capital.

(f) A partner is entitled to be indemnified by the firm for all acts done by him in
the course of the partnership business, for all payments made by him in respect of
partnership debts or liabilities and for expenses and disbursements made in an
emergency for protecting the firm from loss provided he acted as a person of
ordinary prudence would have acted in similar circumstances for his own personal
business.:

(g) Every partner is, as a rule, joint owner of the partnership property. He is
entitled to have the partnership property used exclusively for the purposes of the
partnership.

(h) A partner has power to act in an emergency to protect the firm from loss, but he
must act reasonably.

(i) Every partner is entitled to prevent the introduction of a new partner into the
firm without his consent.

(J) Every partner has a right to retire according to the Deed or with the consent of
the other partners. If the partnership is at will, he can retire by giving notice to
other partners.

(k) Every partner has a right to continue in the partnership.

(l) A retiring partner or the heirs of a deceased partner are entitled to have a share
in the profits earned with the aid of the proportion of assets belonging to such
outgoing partner or interest at six per cent per annum at the option of the outgoing
partner (or his representative) until the accounts are finally settled.

Duties of Partners::
(a) Every partner is bound to diligently carry on the business of the firm to the
greatest common advantage. Unless the agreement provides, there is no salary.

(b) Every partner must be just and faithful to the other partners.

(c) A partner is bound to keep and render true, proper, and correct accounts of the
partnership and must permit other partners to inspect and copy such accounts.

(d) Every partner is bound to indemnify the firm for any loss caused by his willful
neglect or fraud in the conduct of the business.

(e) A partner must not carry on competing business, nor use the property of the
firm for his private purposes. In both cases, he must hand over to the firm any
profit or gain made by him but he must himself suffer any loss that might have
occurred.

(f) Every partner is bound to share the losses equally with the others.:

(g) A partner is bound to act within the scope of his authority.

(h) No partner can assign or transfer his partnership interest to any other person so
as to make him a partner in the business.

Q3. Explain the various kinds of damages that may be awarded in case of
breach of contract under Indian Contract Act

Damages are given as a form of compensation due to a breach, loss or injury

caused to the plaintiff. Section 73 provides compensation for loss or damage
caused by the breach of contract. When a contract has been broken, the party that
suffers from such infringement is entitled to receive compensation for any loss or
damage resulting from such infringement. Such compensation shall not be given
for any remote and indirect loss or damage sustained as a result of the breach.

What are the different types of damages?

General and Special Damages

General damages refer to those damages which arose naturally during the normal
course of the events. Whereas, Special damages are those that do not, of course,
arise from the breach of the defendant and can only be recovered if they were in
the reasonable consideration of the parties at the time they made the contract.

Nominal Damages

If the defendant is found liable for breach of contract, the plaintiff is entitled to
nominal damages even if no actual damage is proven. Nominal damages are
awarded if there is an infringement of a legal right and if it does not give rise to
any real damages, it gives the right to a verdict because of the infringement.

In the following circumstances, nominal damages are awarded to the plaintiff:

● The defendant committed a technical breach and the plaintiff himself did
not intend to execute the contract;
● The complainant fails to prove the loss he may have suffered as a result
of the contract breach;
 ● He has suffered actual damage, not because of the defendant’s wrongful
act, but because of the complainants’ own conduct or from an outside
event;
● The complainant may seek to establish the infringement of his legal rights
without being concerned about the actual loss. Where there is no basis for
determining the amount. The view that nominal damage does not connote
a trifling amount is erroneous; nominal damage means a small sum of
money. Nominal damages have been defined as a sum of money that can
be spoken of, but which does not exist in terms of quantity.

Where the loss is small and quantifiable, the damages awarded, although small, are
not nominal damages.

If the market rate on the date of the breach is not proven, the plaintiff shall be
entitled to nominal damages. However, the fact that the buyer does not sustain any
actual loss as a result of the seller’s failure to deliver the goods is no reason to
award the buyer nominal damage.

Substantial Damages

In cases where an offense is proven, many authorities may claim substantial

damages even if it is not only difficult but also impossible to calculate the damages
with certainty or accuracy. In all these cases, however, the extent of the breach has
been established. There was a complete failure to perform the contract on one side.
However, where the breach is partial and the extent of the failure is determined,
only nominal damage is awarded. The plaintiff who can not show that after the
breach he would have had the contract performed, he is in a worse financial
position, usually recovering only nominal damages for breach of contract.

Where a defendant refuses to accept goods sold or manufactured for him, the
plaintiff sells them to a third party on the same terms as the defendant agreed and
makes a similar profit, the plaintiff shall be entitled to nominal damages if the
demand exceeds the supply of similar goods; but if the supply exceeds the demand,
the plaintiff shall be entitled to recover his loss of profit on the defendant’s
contract.

Liquidated and Unliquidated Damages

Damages are said to be liquidated once agreed and fixed by the parties. It is the
sum agreed by the parties by contract as payable on the default of one of them,
Section 74 applies to such damages. In all other cases, the court quantifies or
assesses the damage or loss; such damages are unliquidated. The parties may only
fix an amount as liquidated damages for specific types of a breach, then the party
suffering from another type breach may sue for unliquidated damages resulting
from such breach.

Where, under the terms of the contract, the purchaser was entitled to claim
damages at the agreed rate if the goods were not delivered before the fixed date
and if they were not delivered within seven days of the fixed date, the purchaser
was entitled to cancel the contract and pay guarantee amount to the bank, but the
goods were delivered within the extended period. It was held that the buyer was
only entitled to claim damages at the agreed rate and that the banking guarantee
confiscation clause could not be invoked as the contract was not canceled.
4. What are the different types of partners ? Explain minor as a partner

According to Section 4 of the Indian Partnership Act, 1932, a partnership is

defined as a relationship between two persons who mutually agreed to share the
profits and losses in the business. Therefore, persons who have entered into an
agreement with one another are individually known as “partners”.
Types of partners-

1] Active Partner/Managing Partner

An active partner is also known as Ostensible Partner. As the name suggests he

takes active participation in the firm and the running of the business. He carries on
the daily business on behalf of all the partners. This means he acts as an agent of
all the other partners on a day to day basis and with regards to all ordinary business
of the firm.

Hence when an active partner wishes to retire from the firm he must give a public
notice about the same. This will absolve him of the acts done by other partners
after his retirement. Unless he gives a public notice he will be liable for all acts
even after his retirement.

2] Dormant/Sleeping Partner

This is a partner that does not participate in the daily functioning of the partnership
firm, i.e. he does not take an active part in the daily activities of the firm. He is
however bound by the action of all the other partners.
He will continue to share the profits and losses of the firm and even bring in his
share of capital like any other partner. If such a dormant partner retires he need not
give a public notice of the same.
3] Nominal Partner

This is a partner that does not have any real or significant interest in the
partnership. So, in essence, he is only lending his name to the partnership. He will
not make any capital contributions to the firm, and so he will not have a share in
the profits either. But the nominal partner will be liable to outsiders and third
parties for acts done by any other partners.

4] Partner by Estoppel

If a person holds out to another that he is a partner of the firm, either by his words,
actions or conduct then such a partner cannot deny that he is not a partner. This
basically means that even though such a person is not a partner he has represented
himself as such, and so he becomes partner by estoppel or partner by holding out.

5] Partner in Profits Only

This partner will only share the profits of the firm, he will not be liable for any
liabilities. Even when dealing with third parties he will be liable for all acts of
profit only, he will share none of the liabilities.

6] Minor Partner
A minor is a person who is yet to attain the age of majority in the law of the land.
According to Section 3 of the Indian Majority Act, 1875 a person is deemed to
have attained the age of majority when he attains 18 years of age. However, a
minor can also be appointed to claim the benefits of the Partnership.

It is pertinent to note that, Section 11 of the Indian Contract Act, 1872 prohibits a
minor from entering into an agreement, as the agreement entered by a minor is
void ab initio. However, the Partnership Act, 1932 allows a minor to enjoy benefits
of partnership when a set of rules and procedures are compiled in accordance with
the law. A minor will share the profits of the firm, however, his liability for losses
is only limited to his share of the firm.

A minor person after attaining the age of majority (i.e. 18 years of age) needs to
decide within 6 months if he is willing to become a partner for the firm. If at all a
minor partner decides to continue as a partner or wishes to retire, in both the cases
he needs to make such a declaration by a public notice.

5. Trace the different types of contract

A contract is an enforceable legal arrangement that establishes, details, and
regulates the rights and duties of the parties. The transfer of commodities, services,
money or a promise to transfer any of those at a later time are common
components of contracts. The Indian Contract Act, 1872’s Section 2(h) defines a
“Contract” as “An arrangement enforceable by law.”

The Indian Contract Act of 1872 specifies the requirements that must be met for a
contract to be recognised as legitimate. These consist of:

■ Offering and Acceptance

■ Free permission
■ Volume
■ Legitimate consideration

■ Valid Contracts – According to the definition of a valid contract, it is a

deal that is legally enforceable. A contract must comply with section 10 of
the Indian Contracts Act of 1872 in order to be enforceable. The Indian
Contracts Act of 1872’s Section 10 states that all agreements are considered
 to be contracts if they are freely entered into by parties who are legally able
to do so, are formed for legal consideration, have a legal purpose, and are
not expressly disregarded by this declaration.
■ Void Contracts – Section 2(j) of the Indian Contracts Act of 1872 defines a
void contract. A void contract was originally a valid contract, but as a result
of modifications made to some of the original terms, it is now void. A void
contract has no obligations or rights concepts and cannot be enforced by
any party. Even if both parties agree, these agreements are illegal and
cannot be upheld.
■ Voidable Contracts – An agreement that is enforceable by law at the
discretion of one or more of the parties involved but not at the option of the
others is said to render a contract voidable. Simply put, the terms of the
contract must be binding on at least one of the parties. The other party, who
might be a minor or temporarily unable to enter into a contract for other
reasons, is not bound by it and is free to reject or accept its conditions. The
agreement is void if the latter decides to renounce it.
■ Unforceable Contracts – If a contract does not satisfy the necessary legal
requirements, it is not enforceable. After fulfilling these requirements,
which typically take the form of technical errors, a contract of this kind can
be enforced.
■ Illegal Contracts – According to section 23 of the act, a contract may be
void or illegal. A contract is termed illegal if it violates some law or is in
conflict with public policy. An illegal contract is different from a void one.
These types of agreements are the ones that the law only states that the
court will not enforce if it is made, as opposed to an illegal contract, whose
consideration is prohibited by the law.