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BA9207 - LEGAL ASPECT OF BUSINESS 2 MARK QUESTIONS UNIT I MERCANTILE AND COMMERCIAL LAW Indian Contract Act 1872 1. What is Mercantile Law? This is also known as Commercial law or Business Law. Mercantile law is concerned with the rights and obligations arising out of mercantile or commercial transactions between persons (individual and institutions). A mercantile person is one who enters into business transactions and he may be an individual, an association of persons, such as partnership or company. 2. Define Contract: An agreement which creates legal obligations is a contract. Section 2(h) of the Indian Contract Act 1872 defines a contract as An agreement enforceable by law is a contract. In other word, an agreement which can be enforced in a court of law is known contract. Thus a contract consists of the two elements: i. An agreement and ii. The agreement must be enforceable by law. CONTRACT = AGREEMENT+ its ENFORCEABILITY 3. What is meant by Agreement? The term agreement is defined in Section 2(e) of the Indian Contract Act, every promise and every set of promises, forming consideration for each other, is an agreement. Thus an agreement is an accepted proposal. An agreement consists of an offer or proposal from one party and its acceptance by the other. In other words: AGREEMENT = OFFER+ ACCEPTANCE 4. Define Offer. An offer is also known as a proposal. According to Section 2(a). When one person signifies to another his willingness to do or abstain from doing anything with a view to obtaining the assent of that other to such or abstinence, he is said to make a proposal. The person making the offer or proposal is called the offeror, promisor, or proposer.

5. What is acceptance? When the offer is accepted, the offeree will be called the promisee or the Acceptor. 6. What is consensus-ad-idem (consideration): For contract to be valid, the agreement between the parties must be backed by consideration. Consideration means Something in Return. Both the parties to the agreement must give and get something in return 7. What is meant by Genuine Consent? Consent means willingness .i.e., meeting or identity of mind. The consent of the parties to be valid contract must come freely. It must not be obtained by force or suppressing facts. The consent of the parties should not be obtained by misrepresentation, fraud, coercion or mistake. 8. How contract is formed? To form a contract, one of the parties makes an offer and the other party must accept the offer, and, consideration or something value. 9. What is Void Agreement? According to Sec 2(g) an agreement not enforceable by law is said to be void. Thus a void agreement does not give rise to any legal consequences and is void abinitio. (from the beginning) A void agreement does not create any legal rights and obligations. 10. What is voidable contract? An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the others. 12. Define a void contract? A contract which ceases to be enforceable by law becomes void when it ceases to be enforceable E.G., A agrees to sell his car to B for Rs.10000. All essentials of a contract are fulfilled. If A refuses to sell his car, B can go to the court and the court would enforce As promise

13. What is illegal agreement? An illegal agreement is one which is forbidden by law i.e it is entered with the intention of violating the law. EG: A agrees to steal furniture for B for a consideration of Rs. 1,00,000. It is illegal and therefore it is void 14. What is an unenforceable contract? Contract which have all the essentials of enforceability but cannot be enforced due to certain technicalities of stamp, etc., 15. What is executory contract? It is one where one or both the parties are yet to perform their respective promises. It is partly executed and partly executor. 16. Who is a minor? A minor is a person who has not completed 18 years of age on the date of the contract. But in the following two cases the minority would continue up to the completion of 21 years of age: i. Where a guardian to the person or property of a minor is appointed by the court ii. When the minor is under the guardianship of the court of Wards, i.e. Minors property is looked after by the court of Wards. 17. What is undue influence? A contract is said to be induced by undue influence where the relations subsisting between the parties are such that one of the parties is in a position to dominate the will of the other and uses that position to obtain an unfair advantage over the other. 18. Define a fraud Fraud means and includes any of the following acts committed by a party to a contract, or with his involvement or by his agent with intent to deceive another party thereto or his agent or to induce him to enter into the contract. 19. What is misrepresentation? It means positive assertion not warranted by the information of the person making it, of that which is not true, though he believes it to be true.

20. What is a contingent contract? It is a contract to do or not to do something, if some event, collateral to such contract does or does not happen. EG : The Company can apply for the insurance if any unexpected accidents occur and if not, it can leave. 21. Who is a quasi contract? It is an obligation or a right created by law. It is based on the principle that no person can enrich himself unjustly, at the expense of another. 22. Who is a finder of lost goods? A person who finds goods belonging to another and takes them into his custody is subject to the same responsibility. 23. Define performance of a contract. It means fulfillment of legal obligations created by the contract. That is, performance of contract means fulfilling of their respective legal obligations created under the contract by both the promise and the promise. When a contract is duly performed by both the parties, the contract comes to a happy ending. 24. Define an agent and a principal. An agent is a person employed to do any act for another or to represent another in dealing with third person. The person for whom such act is done or who is so represented is called the principal. 25. Who may employ agent? Any person who is of the age of majority according to the law to which he is subject, and who is of sound mind, may employ an agent. Whatever a person can do personally he can do through an agent. 26. What is agency by estoppels? When an agent has without authority done acts or incurred obligation to third persons on behalf of his principal, the principal is bound by such acts or obligations if he has, by his words, or conduct, induced such third persons to believe that such acts and obligations were within the scope of the agents authority.

27. What is actual performance? When a party has done what he had undertaken to do and nothing is left, the promise is said to be performed. The contract is completely terminated when both the parties perform the exact thing which each has agreed to do under the contract do what he had undertaken to do under the contract. 28. What is meant by attempted performance? It is also known as offer of performance or tender. A contract need not be actually performed. The promisor may offer to perform his obligation under the contract on the due date but the promise may refuse to accept performance. This is what is known as Attempted Performance or Tender 29. What is Breach of contract? Breach of contract takes place when a party to a contact fails to fulfill his obligations arising under it. Whenever there is breach of contract, the injured or the aggrieved party is entitled to bring an action for damages. 30. What is rescission? Rescission means cancellation of the contract. When a contract is broken by one party, the other party may treat the breach as discharge and refuse to perform his part of the contract. i.e., putting an end to the contract. On the rescission of the contract, the aggrieved or injured party is discharged from all the obligations under the contract 31. What is Quantum meruit It means as much as merited. It means proportion to the amount of work done or reasonable value of work done. contract. The person requests another to render some service and does not mention anything about remuneration the person rendering the service is entitled to receive quantum meruit, i.e., what he deserves, A person can, under certain circumstances, claim payment for work done or goods supplied without any

The sale of goods act, 1930. 32. Define a contract of sale of goods. According to Sec 4(I), / a contract of sale is a contract whereby the seller transfers or agrees to transfer property in goods to the buyer for a price. Contract of Sale includes both a sale and an agreement to sell, If the property in goods (ownership) is transferred from the seller to the buyer immediately it is known as Sale. 33. Define Goods. Goods form the subject matter of contract of sale. Sec2 (7) defines, goods as follows, every kind of movable property other than actionable claims, and money, and includes stocks and shares, growing crops, grass and things attached to or forming part of the land which are agreed to the served before sale or under the contract of sale. Trademarks, copyrights, patents, goodwill, electricity, water, gas are all goods. 34. What are unascertained goods? These goods are those which are not identified and agreed upon at the time of contract of sale. They are only defined by description 35. What are future goods? These are the goods which seller does not possess at the time of contract of sale but which will produced or acquired by him after entering into the contract of sale with the buyer- Sec2(6). 36. What is Condition? A condition is a stipulation that is essential to the main purpose of the contract. If there is a breach of conditions the affected party can treat the contact as repudiated (disowns or reject). 37. What is Warranty? It is stipulation that is collateral to the main purpose of the contract. If there is breaches of warranty the affected party can only claim damages only has no right to reject the contract.

38. What is caveat emptor? It is Latin rule that means let the buyer beware. In contract of sale, its not necessary for the seller to give all the details in respect of the goods he sells. It is duty of the buyer to examine the goods he buys thoroughly before making the decision to buy. If he makes bad selection, he cannot blame the seller. 39. What is transfer of title? The phrase transfer of property in goods means transfer of title of goods. The term property in the goods may be defined as the legal ownership of the goods. 40. What is risk of loss? Risk of loss is a term used in contract law to refer to the liability of a carrier, borrower or user of property or goods, or an insurance company to compensate if there is damage or loss. Between the times a contract is made and the time it is fully performed, goods identified to the contract may be lost, stolen, damaged, or destroyed. 41. Write a note on unpaid seller. The seller of goods is deemed to be an "unpaid seller" within the meaning of this Act (a) when the whole of the price has not been paid or tendered; (b) when a bill of exchange or other negotiable instrument has been received as conditional payment, and the condition on which it was received has not been fulfilled by reason of the dishonour of the instrument or otherwise. 42. What is delivery of goods? Delivery means voluntary transfer of possession of goods from one person to another sec2 (2). Negotiable Instrument Act 1881 43.Define Negotiable instrument? The word negotiable means transferable by delivery. And word instrument a written document by which right is created in favor of some person. According Sec13 (1) of the Act defines a negotiable instrument does. a negotiable instrument means promissory note, bill of exchange, cheque payable either to order or bearer.

44. What is promissory note? A promissory note is a negotiable , wherein one party (the maker or issuer) makes an unconditional promise in writing to pay a determinate sum of money to the other (the payee), either at a fixed or determinable future time 45. Define bill of exchange? an instrument in writing, conditioning an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to or the order of, a certain person, or to the bearer of the instrument. 46. Define a cheque According to sec 6, a cheque is a bill of exchange drawn on a specified banker and not expressed to be payable otherwise than on demand cheque is an unconditional order on the specified banker to pay on demand, a certain sum of money to the bearer of the cheque or to his order. 47. Who is called holder? According to Sec. 8, the holder of a promissory note, bill of exchange or cheque means any person entitled in his own name to the possession thereof and to receive or recover the amount due thereon from the parties thereto. 48. Who is called holder in due course? According to Sec.9, Holder in due course means any person who for consideration became the possessor of a promissory note, bill of exchange or cheque if payable to bearer; or the payee or endorsee thereof. 49. What is crossing of cheques? It is a direction to the paying banker by the drawer that payment should not be made across the counter. The payment on a crossed cheque can be collected only through a banker. Agency 50. What is Agency by Ratification? Ratification means subsequent acceptance by the principal in respect of an act done by the agent without authority. In other words, the subsequent adoption and acceptance of act originally done without authority or instructions.

51. When banker may refuse payment? i) When the cheque is post-dated. Refusal to pay a post-dated cheque before its due date does not make a banker liable for wrongful dishonor. ii) where the funds of the customer are insufficient iii) where a cheque is not duly presented.(for instance, a cheque presented after business hours) 52. What is termination of Agency? According to sec 201, of the Act, an agency is terminated by the principal revoking his authority: or by the agent renouncing the business of agency; or by the business of the agency being completed. Unit II The Company Law 53. Define a company: According Lindley L.J.defies a company as as association of many persons who contribute money or moneys worth to a common stock and employ it in some common trade or business and who share the profit or loss arising there from 53. What are statutory companies? Created by the special Act of the Legislature Eg. RBI. LIC. these are mostly concerned with public utility. E.g., Railways, 54. What are registered companies? Companies registered under the Companies Act, 1956, or the earlier companies are called registered companies. Sec12 (2) provides that the company registered under the act may be a) Limited Company a) A company limited by shares & b) A company limited by guarantee 2. An unlimited company 55. What is called Private Company? "Private company" means a company which has a minimum paid-up capital of one lakh rupees or such higher paid-up capital as may be prescribed

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56. What is public company? "Public company" means a company which is not a private company, has a minimum paid-up capital of five lakh rupees or such higher paid-up capital, as may be prescribed. 57. What is Government company? Sec 617, a company which not less than 51% of the paid up share capital is held by the Central Government or by any State Government or Government or partly by Central by one or more State Government. 58. What is foreign company? It means a company incorporated outside India and having a place of business in India. The Companies Amendment Act 1974 provides that were not less than 50% of the share capital is held by Indian Citizens. 59. What is promoter? A promoter is one who undertakes to form a company with reference to a given object and so set it going and who takes the necessary steps to accomplish the purpose. A promoter is not an agent. company. 60. What is memorandum of association? This is a fundamental core document if a company which has to be filed with the registrar of companies at the time of incorporation of company. It purposes is to enable shareholders and those who deal with the company to know what its permitted range of enterprise is. 61. What is an article of association? It just articles are the rules, regulations and bye laws for the aims and object as set out in memorandum of association. 62. What is prospectus? Sec2(36) defines a prospectus as any document described or issued as a prospectus and includes any notice, circular, advertisement or other document inviting deposits from the public or inviting offers from the public for the subscription of purchase of any shares in or debentures of a body corporate internal management of the affairs of a company, They framed with object of carrying out the A promoter stands in fiduciary (trust) position the

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63. What is meant by winding up of company? Winding up or liquidation of a company represents the last stage in its life. It means a proceeding by which a company is dissolved. The assets of a company are disposed of. The debts are paid of out of the realized assets, and the surplus, if any is then distributed among the members in proportion to their holdings in the company. 64. What is certificate of incorporation? It is a certificate issued by the Registrar under his signature after satisfied himself that the documents are filed and the necessary fees paid and after he entered the name of the company on the Registrar of companies maintained by him. 65. What is accounting year? The year commencing on the 1st day of April; or if the accounts of an establishment maintained by the employer thereof are closed and balanced on any day other than the 31st day of March, then, at the option of the employer, the year ending on the day on which its accounts are so closed and balanced 66. Define doctrine of ultra vires? The companys activities are confined strictly to the objects mentioned in its memorandum, and if they go beyond these objects, then such acts will be ultra vires (beyond the limits). The object of ulta vires is to protect the interests of shareholders and all others who deal with the company. UNIT III - INDUSTRIAL LAW 65. Give the meaning of the term factory prescribed in Factories Act. It means any premises wherein 10 or more workers are working or were working on any day of the preceding 12 months, any part of which a manufacturing process is being carried on with the aid of power Whereon 20 or more workers are working or were working on any day of the preceding 12 months.

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66. Who is a worker as defined in Factories Act? Workers means a person employed directly or through any agency (including a contractor) with or without the knowledge of the principal employer, whether for remuneration or not, in any manufacturing process 67. Who is certifying surgeon? Certifying surgeons are qualified medical practitioners, who are appointed by the State government for specified areas or factories. With the approval of the State government, a certifying surgeon may authorize and qualified medical practitioners to exercise any of the powers used by him. 68. Define industrial dispute It means any dispute or difference between Employers and employers Employers and workmen Workmen and workmen, which is connected with employment or non-employment It means any of the practices specified in the Fifth Schedule which declares certain labour practices as unfair on the part of employers and their trade unions and on the part of workmen and their trade unions. 69. Define strike It means suspension or cessation (stoppage) of work by a group of employees employed in any industry. Partial stoppage of work, hunger strike accompanied with cessation of work and sitting are also held to be strike. 70. Define lock-out It means the temporary closing of a place of employment or the suspension of work, or the refusal by an employer to continue to employ any number of persons employed by him. 71. What is Lay-off? It is temporary separation of an employee from the organization. This may be due to shortage of raw materials, breakdown in machinery. 72. What is retrenchment? It is permanent separation or termination of an employee from the organization.

68. What is an unfair labour practices?

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73. What is arbitration? This is mediation where employer and workmen refer the dispute to arbitration of any person or persons of their choice, by means of a written arbitration agreement. The arbitrators shall investigate into the dispute and submit the arbitration award to the government. 74. What is the term bonus called? The term bonus was regarded as an ex gratia payment (payment as an act of grace) made by an employer to his workers to provide a stimulus for extra effort by them in the production process. However, it means an annual payment obligatory on the employers to employees on the basis of profits or on the basis of production or productivity. 75. What is set on of allocable surplus? Set on means where the allocable surplus for any accounting year exceeds the amount of maximum bonus payable to the employees in the establishment. 76. What is Set off of allocable surplus? Where for any accounting year, there is no allocable surplus or the allocable surplus in respect of that year falls short of the amount of minimum bonus payable to the employees in that under establishment. 77. Define wages. Wages means all remuneration expressed in terms of money or capable of being so expressed. It is the compensation for the hired person. UNIT IV INCOME TAX AND SALES TAX ACT 78. What is tax planning? Tax planning can be defined as an arrangement of ones financial and economic affairs by taking complete legitimate benefit of all deductions, exemptions, allowances. 79. What is tax evasion? It means avoiding tax by illegal means, e.g., by suppressing facts, by not maintaining correct records, by falsifying facts.

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80. What is income tax? It is one of the major sources of revenue for the Government. The responsibility for collection of income tax vests with the central government. 81. What do you mean by direct tax? Give examples. Direct taxes are those which a person pays directly from his income, wealth, or estate. Direct taxes are paid after the income or benefit reaches the hands of the person. Examples: i) income tax ii) corporate tax iii) gift tax

82. What do you mean by indirect tax? Give examples Indirect tax is what the consumers and buyers pay to the State, while buying goods or availing services. It is a tax attached not to the income of a person, but to goods and services consumed. Examples: i) excise duty 83. What is Sales tax? Sales tax is a tax on the sale of goods. It is an indirect tax, under the constitution of India in which both central and State Government are empowered to levy tax on sale of goods subject to certain conditions. 84. What is state sales tax? State sales tax is levied on sale of goods as per the invoice or bill raised by the person dealing with the goods. The sales tax law has been enacted under the state legislature. 85. What are multiple point sales? It means that sales tax is levied at all stages of the sale of a commodity, i.e., tax will be levied and collected whenever goods are sold or purchased, at every point of sale. 86. What is VAT (Value Added Tax)? It is a multi point sales tax with set-off for tax paid on purchase. It is collected in installments at each transaction in the production-distribution system. VAT is a general consumption tax assessed on the value added to goods and services. ii) custom duty iii) sales duty

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UNIT V CONSUMER PROTECTION ACT AND INTRODUCTION OF CYBER LAWS 87. Define consumer Any person who buys any goods for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment, and includes a person who uses such goods with the approval of the buyer. It does not include a person who buys goods for resale or for any commercial purpose. 88. What are the rights of consumers? 1. Right to safety 2. Right to information 3. Right to choose 4. Right to education 89. Define cyber laws. This encompasses all the cases, statutes, and constitutional provisions that affect persons and institutions who control the entry to cyberspace, provide access cyberspace, create the hardware and software which enable people to access cyberspace or use their own devices to go online and enter cyberspace. 90. Define information technology (IT) This is generally applied to broad area of activities and technologies associated with the use of computers and communication. It is an application of computers to create, store, process and use of information particularly in the field of commerce. 91. Define the term electronic commerce The term electronic commerce refers to the business transacted electrically. The term refers to trading of goods over the internet. It is on-line sale and purchase of goods and services for value by using internet technologies. 92. What is digital signature? The expression digital signature has been defined to mean authentication of any electronic record by a subscriber, i.e... A person in whose name the Digital Signature Certificate is issued, by means of an electronic method or procedures.

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93. What is cyber crime? The term cyber crime is a misnomer. This is not radically different from the concept of conventional crime. Both include conduct whether act or omission, which cause breach of rule of law. 94. What is cyber terrorism? Cyber crime and cyber terrorism is both crimes of the cyber world. the perpetrator. 95. Who is a cyber criminal? Any person who commits an illegal act with a guilty intention or commits a crime an 96. What is patents? A patent is a government license that gives the holder exclusive rights to use, manufacture and sell a novel process, design or a new invention for a non-renewable limited time without interference or infringement by other parties. 97. What is copyright? The legal right granted to an author, composer, playwright, publisher, or distributor to exclusive production, production, sale or distribution of a literary, musical, and dramatic. It is the legal ownership of a work. 98. What are trademarks? A trademark is a visual symbol in the form of a word, device, brand, ticket, heading, and label; etc, applied to articles of commerce with a view to indicate to the purchasing public that they are goods manufactured by a particular person as distinguished from similar goods manufactured by other persons. 99. Define intellectual property? Intellectual property refers to creations of the mind; inventions literacy and artistic works, and symbols, names and images used in commerce. 100. What are intellectual property rights? Intellectual property rights are legal rights, which result from intellectual activity in industrial, scientific, literary and artistic fields. This allows the creator or owner of a patent trademark, or copyright to benefit from his or her own work or investment. The difference between the two however is with regard to the motive and the intention of