Legal Aspects of Business-1


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Q1. “All contracts are agreements, but all agreements are not contracts”. Explain.


Q2. What is a contract of indemnity? What are the rights of an indemnity-holder? Explain the difference between a contract of indemnity and contract of guarantee?


Q3. Explain the rules “nemo det quod non habet” (you can’t give what you don’t have) in the context of transfer of property to buyer. Give a list of exception to this rule.

Q4. What do you understand by the term “unpaid seller” under the sale of Goods Act, 1930? Explain the rules regarding unpaid seller’s right to resell the goods.

Q5. “The Partnership Act has effectively ensured the registration of firms without making it compulsory.” Comment.

Q6. Discuss the mutual rights and duties as between the partners in the absence of any express contract between them.




(a). Explain the various forms of discharge by mutual agreement.

(b). What are the remedies available to an agrieved party for breach of contract.


Q2. What is meant by implied authority of a partner? Are third parties affected by restrictions placed on such implied authority?

Q3. Explain the rules “nemo det quod non habet” (you can’t give what you don’t have) in the context of transfer of property to buyer. Give a list of exception to this rule.



1. M owes Rs. 14,000 to K. P, who is M’s friend but not his agent, pays on his own to K for M Rs. 11,000 and K accepts this in full settlement of M’s dues. Later K demands the balance of Rs. 3,000 from M. Can he succeed? Further, can P recover Rs. 11,000 from M?

2. A and B were partners in an unregistered firm carrying on business of sugar manufacturing. C was advanced Rs. 1,000 by the firm in lieu of his promise to supply sugarcane. There was short supply of sugarcane and Rs. 700 were due from C to the partnership firm. The firm was afterwards dissolved and on the division of assets of partnership this debts of Rs. 700 was allotted to A. Can A sue C to recover the amount?

3. M and P make a contract for the sale of two machines. The price for each is to be determined by K. M delivers one machine to P and P accepts it. Later, K refuses to fix the price. Then, P offers to pay a reasonable price for both the machines and M wants to take back the delivered machine. Decide.





Q1. Which of the following statement is false?

a) An agreement is enforceable by law is a contract

b) An agreement is an accepted proposal

c) A contract may have only one promise

d) There cannot be a contract between two brothers


Q2. Discharge of contract by rescission means:

a) Acceptance of lesser performance

b) Cancellation of the existing contract

c) Change in one or more terms of contract

d) Abandonment of rights by a party


Q3. A party may be entitled to claim remuneration for actual work done by him. It is called a suit for:

a) Damages b) Injunction

c) quantum meruit d) none of these


Q4. X sent a letter of offer on 10th August. It reaches Y on 14th August. Y posts his letter of acceptance on 17th August, which reaches X on 22nd August. The communication of offer is complete on:

a) 10th August b) 14th August

c) 17th August d) 22nd August


Q5. Which of the following persons are competent to contract?

a) minors

b) persons of unsound mind

c) persons disqualified by law

d) judges


Q6. D threatens to commit suicide if his father F did not make him general manager in his factory. F agrees. Here F’s consent is obtained by:

a) Undue influence b) mistake

c) coercion d) misrepresentation


Q7. A promise to pay a time-barred debt in enforceable if some conditions is fulfilled. Which of the following conditions is not required?

a) it must be signed by the promisor

b) it must be definite and express

c) it must be in writing

d) it must be registered in court of law


Q8. Where an agreement consists of two parts one legal and the other illegal, and the legal part is separable from the illegal one, such legal part is:

a) valid b) void

c) voidable d) illegal


Q9. An insurance contract is:

a) Wager b) valid

c) void d) voidable

Q10. In case of a pledge, the pawnee

a) Can retain the goods, until the debt is paid

b) Can retain the goods for payment of interest due on debt

c) can not retain the goods for necessary expenses incurred in respect of goods pledged

d) Both (a) & (b) above

Q11. Quasi contracts are:

a) valid b) voidable

c) illegal d) void

Q12. The party who gives promise of indemnity is known as:

a) indemnity-holder b) indemnifier

c) surety d) principal debtor

Q13. The liability of a surety:

a) may be more than that of debtor

b) may be less than that of debtor

c) is always same as that of principal debtor

d) is dependent on court

Q14. The bailment of goods can be made by the owner of:

a) movable goods only b) immovable goods only

c) both of these d?) none of these

Q15. A mercantile agent to whom the possession of goods is given for the purpose of selling the same, is known as:

a) broker b) factor

c) commission agent d) insurance agent

Q16. A person appointed by an agent as his own agent to set in the business of agencies known as:

a) second agent b) sub-agent

c) substituted agent d) del credere agent

Q17. A contract dependent on the happening of a collateral event is called:

a) void contract b) voidable contract

c) contingent contract d) uncertain contract

Q18. Match the following

i) Partnership business carried a) Evidence of Partnership

on by all

ii) Sharing of profits b) not necessary

iii) Registration of firm c) does not arise from the operation of law

iv) Contract of Partnership d) test of partnership

Q19. An unregistered firm wants to enforce against a third party a right arising from a contract it:

a) can sue the third party

b) can’t sue the third party

c) can sue the third party subject to certain conditions

Q20. The non-registration of a firm does not affect the right of the firm

a) to file a suit for the recovery of more than Rs. 100

b) to file a suit for the recovery of less than Rs. 100

c) to file a suit against a partner for recovery of money due by him

d) to claim a set off exceeding Rs. 100

Q21. The position of a minor partner is dealt with in the Partnership act in

a) sec 25

b) sec. 29

c) sec. 30

d) sec. 35

Q22. An unregistered firm cannot claim

a) set on

b) set off in excess of Rs. 100

c) set on & set off

d) none of the above

Q23. Partnership by holding out is also known as

a) sub partnership

b) partnership at will

c) partnership by estoppel

d) none of the above

Q24. Extension or restriction of implied authority can be made by

a) all the partners unanimously

b) any one partner

c) majority of the partners

d) at least 90% of total partner’s strength

Q25. If a partner carries on a competing business, he will be liable to

a) serve imprisonment

b) damages for default

c) account for the profit

d) pay fine

Q26. The expression “property of the firm” is not commonly referred to as:

a) joint stock

b) common inventory

c) joint estate

d) partnership assets

Q27. A Partnership firm reconstitutes in one of the following situations:

a) where an admission of a new partner is made

b) where a partner retires

c) where a partner dies

d) All of the above

Q28. A Partnership firm has to get registered with

a) registrar of companies

b) registrar of partners

c) registrar of firms

d) district court

Q29. A __________ does not take active part in the conduct of a business

b) minor partner

c) sub partner

d) partners by estoppel

a) (i) only

b) (ii) & (iii) only

c) (i) & (iii) only

d) Allof the above

Q30. ______________ refers to the value of the reputation of a business house in respect of profits expected in future

a) patent

b) copyright

c) trademark

d) goodwill

Q31. Which of the following is not the right of a partner i.e which he cannot claim as a matter of right

a) right to take part in business

b) right to have access to account books

c) right to share profits

d) right to receive remuneration

Q32. A partner of a trading firm has implied authority to

a) submit a dispute relating to the business of the firm to arbitration

b) open a banking account on behalf of the firm in his own name

c) employ a solicitor to defend an action against the firm

d) withdraw a suit or proceeding filed on behalf of the firm

Q33. Which of the following is correct

a) the liability of partners of a firm is unlimited

b) generally the liability of a member of a company is limited but it can be unlimited

c) All of the above

d) The liability of partner of firm is same as a member of a co.

Q34. Which of the following is a contract of sale of goods?

a) hire-purchase contract

b) barter

c) delivery of photographs by a photographer

d) delivery of photocopied material by a photocopy shop

Q35. The term “goods” under Sale of goods Act does not include

a) goodwill c) actionable claims

c) stocks and shares d) harvested crops

Q36. A contracted to sell to B a machine of carrying brand name “Elite”. But he sold a machine of another brand name which was equally good. A is guilty of violation of:

a) express condition b) express warranty

c) implied condition d) implied warranty

Q37. _____________ means voluntary transfer of possession of goods by one person to another

a) sale

b) auction

c) delivery

d) mortgage

Q38. Passing of property implies passing of

a) ownership

b) possession

c) ownership & possession

d) benefit & possession

Q39. In case the buyer rejects the whole quantity of goods due to short delivery or excess delivery, the contract is treated as:

a) continuing b) broken by buyer

c) void d) broken by seller

Q40. When by exercising the right stoppage-in-transit the unpaid seller regains the possession of goods then

a) contract of sale becomes voidable

b) buyer’s lien revives

c) buyer’s lien does not revive

d) seller’s possession is unlawful


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