Legal Aspects of Business-2

Assignment – A

Question 1. Discuss the essential elements of a valid contract.

Question 2. What do you understand by the ‘doctrine of caveat emptor’? Explain.

Question 3. Explain in detail the “doctrines of Indoor Management” and “doctrine of constructive notice”

Question 4. Describe the kinds of Resolutions passed by the Board Directors under the companies Act, 1956.

Question 5. Define “goods”. Explain the conditions and warranties implied by law in a contract for sale of goods.

Assignment – B

Question 1. Enumerate the duties of an Arbitrator; Differentiate domestic and foreign awards.

Question 2. Nagendra issued a cheque in favour of Happy-home, a charitable institution, as his share of charitable subscription. The banker returned the cheque for the reason of insufficiency of funds in the drawer’s account.. The banker returned the cheque for the reason of insufficiency of funds in the drawer’s account. The demand for payment by way of written notice to Nagendra by Happy-home should be made within how many days from the date of receipt of information of the dishounour to initiate an action under section 138 of the Negotiable Instruments Act, 1881?

Question 3. Baiju, a singer, enters into a contract with Alok, the manager of a theatre, to sing at his theatre three nights in every week during the next three months, and Alok promises to pay him Rs.5,000 for each night’s performance. On the during the next three months, and Alok promises to pay him Rs.5,000 for each night’s performance. On the seventh night, Baiju wilfully absents himself from the theatre. Can Alok put an end to the contract?

Assignment – C

1. Which of the following contracts, in order to be valid under the Indian Contract Act, 1872, must be in writing, stamped and registered?
(a) Creation of a trust under the Indian Trust Act
(b) A promise to pay a time barred debt
(c) Cheque
(d) Contracts for sale of immoveable property
(e) Bill of exchange.

2. Under the Indian Contract Act, 1872, “every promise or set of promises forming the consideration for each other” is known as
(a) Offer
(b) Contract
(c) Agreement
(d) Consideration
(e) Acceptance.

3. Under the Indian Contract Act, 1872, if all the parties to a contract substitute a new contract for an existing contract, it is known as
(a) Rescission
(b) Restitution
(c) Novation
(d) Remission
(e) Waiver.

4. Which of the following agreements is voidable under the Indian Contract Act, 1872?
(a) Agreements by incompetent parties
(b) Agreements where consent is obtained by way of coercion
(c) Agreements under mutual mistake of fact material to the agreement
(d) Agreements in restraint of marriage
(e) Agreements with unlawful consideration.

5. Under the Indian Contract Act, 1872, which of the following agreements is Not considered to be opposed to public policy?
(a) Agreements restricting the enforcement of rights
(b) Agreements curtailing the period of limitation
(c) Agreement to refer to arbitration any disputes which have arisen or which may arise in future
(d) Agreements in restraint of marriage
(e) Agreements in restraint of trade.

6. Under the Indian Contract Act, 1872, the damages which are usually assessed on the basis of the actual loss suffered by the plaintiff are known as
(a) General damages
(b) Special damages
(c) Vindictive damages
(d) Nominal damages
(e) Exemplary damages.

7. Under the Indian Contract Act, 1872, in which of the following circumstances a continuing guarantee May not be revoked?
(a) By Novation
(b) By death of surety in respect of transactions prior to the date of death
(c) Release or discharge of principal debtor
(d) Compounding by the creditor with the principal debtor
(e) Loss of security by the creditor.

8. Abhimanyu purchased a Ford Ikon car and obtained a comprehensive insurance policy from Continental Insurance
Company. This type of contract is known as
(a) A wagering contract
(b) A contract of guarantee
(c) A voidable contract
(d) A contract of indemnity
(e) A contingent contract.

9. Under the Indian Contract Act, 1872 , the bailment of goods as security for payment of a debt is known as
(a) Lien
(b) Mortgage
(c) Charge
(d) Pledge
(e) Assignment.

10. Under normal circumstances which of the following statements is False regarding contract of agency?
(a) An agent should not set up an adverse title to the goods which he receives from the principal as an agent
(b) An agent is duty bound to pay sums received to the principal on his account
(c) An agent is bound to render proper accounts to his principal on demand
(d) An agent should protect and preserve there in the rests of the principal in case of his death or insolvency
(e) An agent can delegate his authority to a sub-agent.

11. Which of the following agents is considered as a non-mercantile agent under the Indian Contract Act, 1872?
(a) Auctioneer
(b) Broker
(c) Banker
(d) Factor
(e) Insurance agent.

12. Which of the following is considered as a payment in due course under the Negotiable Instruments? Not Act, 1881?
(a) Payment made in accordance with the apparent tenor of the instrument
(b) Payment made on an instrument before the date of maturity
(c) Payment made to a person who is in possession of the instrument as a holder
(d) Payment made in good faith and without negligence
(e) Payment made to a person in possession of an instrument ‘payable to bearer’.

13. Which of the following statements is false in respect of presumptions of a negotiable instrument under the Negotiable
Instruments Act, 1881?
(a) Every negotiable instrument is drawn for consideration irrespective of the consideration mentioned in the document
(b) Every bill is accepted within reasonable time before maturity
(c) Every accepted bill is transferred before its maturity
(d) The instruments were not endorsed in the order in which they appear on the instrument
(e) The holder of the instrument is holder in due course.

14. The pecuniary jurisdiction of State forum and National forum are:
(a) Rs 5 Lakh to10 lakh and 10-20 lakh
(b) Rs 20Lakhs -1 crore and 1crore and above
(c) Below Rs 20Lakhs and 20 lakh to 1 crore
(d) Rs 20 Lakh -50 Lakh and 75 Lakh &above
(e) None of these

15. Veedol Ltd. was incorporated on May 3, 2007. However, the company could obtain its certificate to commence business only on September 25, 2007. The company, in the meanwhile had entered into contracts with suppliers for import of machinery. Such contracts entered into after in corporation but before obtaining certificate of commencement of business are considered as
(a) Voidable contracts
(b) Provisional contracts
(c) Pre-incorporation contracts
(d) Illegal contracts
(e) Void contracts.

16. Which of the following instances is not treated as ‘crossing’ under the Negotiable Instruments Act, 1881?
(a) A cheque bearing across its face the words ‘account payee’ without two transverse parallel lines
(b) A cheque bearing across its face the words ‘not negotiable’ with two transverse parallel lines
(c) A cheque bearing across its face the words ‘not exceeding rupees two hundred within two transverse parallel lines
(d) A cheque bearing across its face the words ‘State Bank of India, Karol Bagh Branch, New Delhi’ within two transverse parallel lines
(e) A cheque bearing across its face the words ‘Andhra Bank, Daryaganj Branch, New Delhi’ Without two transverse parallel lines.

17. The term ‘goods’ under the Sale of Goods Act, 1930, does not include
(a) Stocks and shares
(b) Actionable claims
(c) Growing crops
(d) Grass
(e) Every kind of movable property.

18. Under the Sale of Goods Act, 1930, in case of breach of a warranty in a contract of sale, the buyer can
(a) Repudiate the contract
(b) Claim damages only
(c) Reject the goods
(d) Refuse to pay the price
(e) Not only reject the goods but also claim damages.

19. The right of lien available to an unpaid seller by implication of law under the Sale of Goods Act, 1930 is to
(a) Retain the possession of goods for the price
(b) Recover the possession of goods
(c) Recover the price
(d) Recover the damages
(e) Make use of the goods.

20. With reference to the Sale of Goods Act, 1930 which of the following statements is false?
(a) A breach of warranty can give rise only to a claim for damages
(b) Warranties are obligations which need to be performed
(c) A breach of a condition can be treated as a breach of warranty
(d) A breach of warranty can be treated as a breach of condition
(e) A particular stipulation is a condition or a warranty will depend upon the facts and circumstances of each case.

21. In which of the following cases corporate veil need not be lifted by a Court of law under the Companies Act, 1956?
(a) Where a company has been formed for defrauding the creditors
(b) Where a company is used to evade taxes and other legal obligations
(c) Where a company is used for the furtherance of welfare legislation
(d) Where there is a complaint of oppression by the shareholders
(e) Where there is a need to determine the enemy character of the company.

22. As per section 591 of the Companies Act, 1956, a foreign company means
(a) A comp any incorporated outside India and having place of business in India
(b) A comp any incorporated in India and having place of business outside India
(c) A comp any incorporated outside India and having place of business outside India
(d) A comp any incorporated in India and having place of business in India
(e) A comp any incorporated in India but not commenced its business.

23. Under the Companies Act, 1956, a public company which never commenced business is known as a/an
(a) Private company
(b) Closely held public company
(c) Unlimited company
(d) Widely held company
(e) Defunct company.

24. The Doctrine of Constructive Notice’ is used to protect
(a) Company against outsiders
(b) Outsiders against company
(c) Directors against outsiders
(d) Directors against company
(e) Outsiders against directors.

25. The directors of a newly floated company want to name it as Zeneca Finance Corporation. Under Companies Act, 1956, in order to use the keyword ‘Corporation’ in its name the company must have a minimum authorized capital of
(a) Rs. 1 crore
(b) Rs. 2 crore
(c) Rs. 5 crore
(d) Rs.10 crore
(e) Rs.25 crore.

26. The lock in period of minimum promoter’s contribution in case of a public issue is
(a) 1 year
(b) 2 years
(c) 3 years
(d) 4 years
(e) 5 years.

27. Under the Companies Act, 1956, if a public company does not register its own set of articles, then
(a) The regulations contained in Table A of Schedule I to the Act automatically apply
(b) The regulations contained in Table C of Schedule I to the Act automatically apply
(c) The regulations contained in Table D of Schedule I to the Act automatically apply
(d) The regulations contained in Table E of Schedule I to the Act automatically apply
(e) The company cannot be incorporated under the Companies Act, 1956.

28. The maximum number of public companies to which an individual can be appointed as a director at a time under section 276 of the Companies Act, 1956, is
(a) 10 companies
(b) 15 companies
(c) 20 companies
(d) 25 companies
(e) 50 companies.

29. Which of the following statements is false under the Companies Act, 1956?
(a) A director must be a member of the company
(b) Minimum seven persons are required for incorporation of a public company
(c) Proxy has no right to speak in the general meeting
(d) Company having profits need not declare dividends
(e) A private company cannot issue prospectus.

30. Section 292A of Companies Act, 1956 lays down compulsory constitution of ‘Audit Committee’ by certain public companies. Which of the following companies are required to constitute such committees?
(a) A public company having a paid-up capital of not less than Rs.1 crore
(b) A public company having a authorized capital of not less than Rs.1 crore
(c) A private company having a paid-up capital of not less than Rs.1 crore
(d) A foreign company having a p aid-up capital of not less than Rs.3 crore
(e) A public company having a paid-up capital of not less than Rs.5 crore.

31. Under the Companies Act, 1956, a public financial institution whose main object is financing shall file which of the following with the Registrar of Companies for issue of its securities?
(a) Statement in lieu of prospectus
(b) Information memorandum
(c) Red-herring prospectus
(d) Abridged prospectus
(e) Shelf prospectus.

32 Which of the following statements is false in respect of a proxy under the Companies Act, 1956?
(a) Proxy need not be a member of a company
(b) A member of a private company cannot appoint more than one proxy to attend the same meeting
(c) A proxy can vote only on poll
(d) Where the NCLT directs under Section 167 or 186 of the Companies Act, 1956 one member present in person or by proxy can constitute a quorum in a meeting
(e) he period fixed for depositing proxies cannot be extended beyond 72 hours before the meeting

33. The maximum maturity period for deposits accepted by a public company under the Companies (Acceptance of Deposits) Rules, 1975, cannot exceed
(a) 12 months
(b) 24 months
(c) 36 months
(d) 48 months
(e) 60 months.

34. Where more than one companies are merged together, it is known as
(a) Arrangement
(b) Compromise
(c) Reorganization
(d) Reconstruction
(e) Amalgamation.

35. The debentures, which are similar to share warrants are known as
(a) Registered debentures
(b) Secured debentures
(c) Bearer debentures
(d) Naked debentures
(e) Irredeemable debentures.

36. Which of the following is not a ground for winding up of a company by National Company Law Tribunal under section 433 of the Companies Act, 1956?
(a) Default in holding statutory meeting by a public company limited by shares
(b) Default in holding annual general meeting
(c) Failure to commence business within a year of its incorporation
(d) Inability to pay its debts
(e) Reduction of number of members below statutory minimum.

37. As per the provisions the Companies Act, 1956, an alternate director can be appointed, in place of the original director during his absence for a period not less than 3 months, by
(a) Securities Exchange Board of India
(b) Board of directors
(c) Financial Institutions
(d) The Central Government
(e) Share holders of the company.

38. Under the Companies Act, 1956, the amount held under unpaid dividend account of a company which remains unpaid or unclaimed for a period of 7 years from the date of such transfer must be transferred by the company to
(a) Securities premium account
(b) General reserve
(c) Revaluation reserve
(d) Investor education and protection fund
(e) Debenture redemption reserve.

39. Which of the following statements is true with respect to the requirement of quorum for a general meeting of
a company under the Companies Act, 1956?
(a) Quorum is required at the end of the meeting of the company
(b) Quorum is required only at the beginning of the meeting of the company
(c) Quorum is required throughout the meeting of the company
(d) Quorum is not required for the meeting of the company
(e) Quorum is required only for the listed companies.

40. Which of the following category of directors cannot be removed by the members of the company in general meeting under section 284 of the Companies Act, 195 6?
(a) The director appointed in casual vacancy
(b) The director appointed as additional director
(c) The director appointed as alternate director
(d) The director appointed by the Central Government
(e) Director appointed as regular director in a general meeting.