CA FOUNDATION COURSE

BUSINESS LAWS
COMPILER
Contents

Chapter-1 INDIAN CONTRACT ACT-1872 1-29

Chapter-2 SALE OF GOODS ACT,1930 30-39

Chapter-3 INDIAN PARTNERSHIP ACT 1932 40-44

Chapter-5 COMPANIES ACT,2013 45-51

 CHAPTER-1
INDIAN CONTRACT ACT-1872

Q.1.A woman fraudulently represented to a firm of jewelers that she was the wife of a certain minister and
thus obtained two pearl necklaces on credit on the pretext of buying them. She subsequently sold those
necklaces to a third party. Can the jeweler recover the necklaces from the third party?
Answer:
Ans.1.
Provision of Law:
As per the Provisions of The Indian Contract Act, 1872 ‘Fraud’ means and includes any act committed by a
party to a contract, or with his connivance, or by his agent, with an intent to deceive another party thereto or
his agent, or to induce him to enter into the contract .In case of Fraud Contract becomes Voidable at the
option of Aggrieved Party. Also looking into the Provisions of Sale Of Goods Act,1930 the person who acquires
goods without knowledge of Fraud gets a Good Title to the Goods.
Facts of the Case:
In the Current Case, a woman fraudulently acquired two pearl necklaces from jeweller. She subsequently sold
those necklaces to third party. Now jeweller wants to recover the necklaces from third party.
Conclusion:
Applying the above Provisions to the Current Case the jeweler has to right to file a suit on third party as third
party has acquired right in good faith and so contract remains valid.
No, the jeweler cannot recover the necklaces from the third party.
Q.2
Peter Feraro offered to pay Rs. 10,000 to any person, who would swim a hundred yards on Bombay’s sea coast on
the New Year’s Day of 1983. A fisherman, without any information about the offer, claimed Rs.10,000 on
swimming the distance to save his life after he was accidently thrown overboard by the rough sea waves.
Can the fisherman claim the money?
Ans:

Provision of Law:
As per the Provisions of The Indian Contract Act, 1872 Offer must be communicated to the offeree. An offer,
to be
complete, must be communicated to the person to whom it is made, otherwise there can be no acceptance of
it. Unless an offer is communicated, there can be no acceptance by it. An acceptance of an offer, in ignorance
of the offer, is not acceptance and does not confer any right on the acceptor.
Reference : Lalman Shukla v. Gauri Dutt
Fact of the Case:
In the Current situation Peter Feraro offered to pay 10,000 to any person, who would swim a hundred yards. A
fisherman without any information about the offer claimed 10,000 on swimming the distance after he was
accidentally thrown overboard by rough sea waves.
Conclusion:

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Applying the above Provision to the Current Situation, fisherman cannot recover the money from Peter Feraro
as fisherman had no knowledge of the offer, so acceptance made is not valid.
No, Fisherman cannot claim the reward.

Q.3
A took a bet of Rs.500 with B that a certain horse would win a race. Under this agreement A had to deposit Rs.100
with B. Since A had no money, he approached his friend C who advanced the sum to him on the condition that A
was to return Rs.200, if A should win bet against B, but to return nothing, if A lost, A won his bet against B. Can C
recover Rs.200 from A?
Ans.3.
Provision of Law:
As per Section 30 of The Indian Contract Act, 1872 An agreement by way of a wager is void. It is an agreement
involving payment of a sum of money upon the determination of an uncertain event. The essence of a wager is
that each side should stand to win or lose. Wagering Agreements are based on Luck. So Wagering Agreements
are expressly declared as Void. But collateral transaction to wagering are not necessarily Void.
Fact of Case:
In the Current Case A took a bet of 500 with B. A had to deposit 100 with B. His friend C advanced the sum to
him on a condition that A was to return 200,if he wins the bet and to return nothing if A lost. A won his best
against B. Now C wants to recover 200 from A.
Conclusion:
Applying the above Provision to the Current Case, C cannot file a suit on A for recovery of the amount as
Agreement between A and C is itself wagering. So it is Void.
No, C cannot recover 200 from A.
Q.4
A invites B to see a picture with him. B accepts the offer. A purchases a ticket for B and waits for him atthe
cinema hall. B does not turn up. Has A any cause of action against B?
Ans:4:
Provision of Law:
 This question relates to essential elements of a valid Contract under Indian Contract Act,1872.
 As per provisions of Indian Contract Act, The parties to contract must have an intention to create legal
obligation to create a valid Contract. If the parties don’t have an intention to create legal relation then
such offer even after Acceptance cannot create valid contract and parties cannot legally enforce the
same.
Facts of Case:
 In this case Mr.A invites Mr.B to see a picture with him and which Mr.B accepts Mr.A purchases the
ticket but Mr.B does not turn up.
Conclusion:
 If the parties at the time of Contract do not have an intention to create legal relation then it will be
treated as a Void agreement and they will not have any Legal remedy.
 Therefore by comparing provisions with facts we can say that here the parties had a social intention
while entering into an agreement and therefore Mr.A will not have any rights against Mr.B.
Q.5

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Anil Was due to perform a contract on 20th Feb. 1989, but on 16th Feb., repudiated his obligation. On 23rd Feb.,
the contract became illegal through a change in law. Varun, the other party to the contract, filed a suit for
breach of contract on 20th Feb. Decide the case with reasons.
Provision of Law:
 This question relates to Anticipatory Breach of Contract under Indian Contract Act,1872.
 When the party to contract before due date of performance refuses to perform the Contract it is
known as Anticipatory Breach and Anticipatory breach gives other party to repudiate the contract and
claim for damages or wait till the date of performance.
Facts of the case:
 In this case Anil was due to perform a contract on 20th Feb 1989 but on 18th Feb,1989 he
repudiated obligation i.e. he refused to perform. On 23rd Feb the contract became illegal due to
change of law. Varun the other party filed a suit on 20th Feb 1989.
Conclusion:
 In case of an Anticipatory Breach a party can either rescind the contract and sue for damages on
the day of breach itself or he can wait till the date of Performance.
 Here in this case Varun sued for breach of Contract on 20th Feb i.e. before it was declared as illegal
therefore the case filed by Varun is valid.
Q.6
An employee agrees not to institute any legal proceedings against his employer. Can the agreement beenforced
by the employer?
ANS : 6
Provision of Law:
 This question deals with Agreements opposed to public policy under Indian Contract Act,1872.
 As per the provision of Contract Act any Agreement restraining a party from enforcing their legal
remedies is opposed to public policy and void.
 Even if a party himself agrees not to enforce legal remedies in contract still it is void condition and they
can enforce the legal remedies even after agreeing not to use it.
Fact of Case:
 In this case an employee agrees not to enforce any legal proceedings against his employer.
Conclusion:
 Even if agreed by the parties themselves agreement not to enforce legal remedies is void.
 Therefore in this case he can sue his employer even after agreeing not to institute any legal
proceedings.
Q.7
A borrower grants a power of attorney to bank authorising the bank to sell a certain property belonging to him
and appropriate the sale proceeds towards his indebtedness. He also agrees not to institute any legal proceedings
against the bank challenging either the bank’s actions or its statements of account. The property is sold for a
low price and the bank calls upon the borrower to pay the balance. Can the borrower institute legal
proceedings against the bank questioning the sale?
Ans:7
Provision of Law:
 This question deals with Agreements opposed to public policy under Indian Contract Act,1872.
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  As per the provision of Contract Act any Agreement restraining a party from enforcing their legal
remedies is opposed to public policy and void.
 Even if a party himself agrees not to enforce legal remedies in contract still it is void condition and they
can enforce the legal remedies even after agreeing not to use it.
Facts of case:
 In this case borrower granted Power of attorney authorised bank to sell certain property belonging
to him and set off his debt against the value received and he agreed he will not challenge bank i.e.
he will not sue bank for selling the property or the price at which the bank sells the property but
the bank sold the property at very low price and proceeded to recover the balance amount.
Conclusion:
 Even if agreed by the parties themselves agreement not to enforce legal remedies is void.
 Therefore in this case even after the borrower agreed not to sue the bank the condition in such
agreement is void therefore he can sue even if he agreed not to sue.
Q.8
A bank sanctions to an oil merchant a loan against the security of groundnut oil and an agreement isentered
into between the bank and the borrower. Before the loan is disbursed, the Reserve Bank issues a statutory
directive to all banks prohibiting grant of advances against the security of groundnut oil and, therefore, the bank
cancels the loan. Can the customer sue the bank for damages for breach ofcontract?
Ans: 8
Provision of Law:
 This question relates to Impossibility of Performance under Indian Contract Act, 1872.
 As per the provision of law if after making the contract some event occurs which makes the
performance of contract impossible then such Contract becomes void on occurrence of such event
and therefore parties will not be able to sue for damages.
Facts of the Case:
 A bank sanctioned to an oil merchant loan against security of Groundnut oil and agreement is
entered between the bank and borrower but before the amount of loan is disbursed (released)
Government declared that borrowing on security of Groundnut oil is prohibited.
Conclusion:
 If after Contract is entered some event happens which makes performance illegal or impossible
then contract will become void and parties will not be able to sue on such contract.
 Therefore in this case too the borrower will not be able to enforce because of prohibition by
RBI the contract will be void due to impossibility.
Q.9
A stationer agreed to supply white paper on rate contract for one year. Later, due to steep increase in market
prices, the contractor stated that he would suffer very heavy loss by supplying at the contracted rates. Under the
contract, the rates were to be firm except for statutory levies. The stationer claimed that the contract had
become commercially impossible of performance and that he was discharged. Comment on the legality of his
plea.
Provision of Law:
 This question relates to the provisions of “Actual Impossibility” and “Commercial Impossibility”

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  As per the provisions of Contract Act if after the contract is made some event happens which makes
the performance impossible or illegal then Contract will become void on occurrence of such event but
contract will be void if it is absolute impossibility not commercial impossibility. Performance is difficult
or it is not profitable is not considered as valid ground for cancellation of Contract due to Impossibility.
Facts of case:
 In this case the stationer agreed to supply White paper on rate (Which were fixed except taxes)
contract for one year and later due to huge increase in market prices he claimed that he will suffer
huge loss by supplying at the decided rate. Later he refused to supply by claiming that the contract was
Commercially impossible and therefore he was discharged.
Conclusion:
 Commercial Impossibility is not a valid ground for cancellation of Contract and therefore parties cannot
be discharged from their legal obligations.
 Therefore in this case the claim of stationer is not valid and he is not discharged. If the Contract did not
provide for fixed rate then stationer could have asked for revision of rates but here he agreed for fixed
rate so he can not even claim revision.
Q.10
A letter of allotment of shares was claimed to have been posted by a company, but the applicant denied to
have received it. State if the contract is validly concluded in this case. Give reasons.
Ans:10
Provision of Law:
 This provision relates to Communication of Offer and Acceptance under Indian Contract Act,1872.
 As per the provisions of Indian Contract Act,1872 it is provided that if the letter of acceptance is
posted but lost in transit then also the contract will be considered as valid.
Facts of Case:
 In this case the letter of Share allotment is posted by company but not received by the allottee.
Conclusion:
 When the company issues Prospectus to invite public for applying for shares then it is invitation to
offer when Public subscribe for shares is is offer and when company allots the share it is known as
Acceptance.
 Therefore here in this case allotment letter that is acceptance which is posted by company but not
received by the allottee then also the valid contract is formed.
Q.11
A Hindu husband executed and registered a document in favour of his wife whereby, referring to quarrels
and disagreement between the parties, he agreed to transfer one of his properties to [Link], he refused
to effect the transfer. Can the wife file a suit against the husband for enforcing thecontract?
Ans:11
Provision of Law:
 This question relates to provision of exceptions to “No Consideration no contract” rule.
 The provisions of Indian Contract Act,1872 provides that generally there is no contract without
consideration but the one of the Exceptions provides that the Contract made out of Natural love and
affection is valid even without consideration if following conditions are satisfied :
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 1) It is in Writing
2) It is by Registered document.
3) It is out of Natural love and affection
4) It is between the parties having near relation.
Facts of case:
 Here in this case the Hindu Husband after referring to quarrels and disagreements between himself
and his wife he by a registered document agreed to transfer one of his properties to her an later he
refused to effect the transfer and wife wants to enforce the contract.
Conclusion:
 For contract to be valid on the basis of Natural love and affection all the conditions must be satisfied. If
any of the conditions are missing then it cannot create valid contract.
 Therefore, in this case Husband the contract can not be considered as valid as it was not out of Natural
love and affection.
Q.12
A, a tradesman, leaves his goods at B’s house by mistake. B treats the goods as his own and appropriates them. Can
A file a suit against B for the price of such goods?
Ans:12
Provision of Law:
 This question relates to Quasi Contract under Indian Contract Act,1872.
 As per the provisions of Indian Contract Act,1872 when parties to contract are not willingly
entering into contract but if it is imposed by law then it is known as Quasi Contract. There are many
examples of Quasi Contract like Necessity of life supplied to incapable person, Goods delivered by
mistake, Excess money paid, Finder of Goods etc….
 Quasi Contract works on grounds of natural justice and for preventing Unjust Enrichment.
Facts of Case:
 Here a tradesman leaves his goods by mistake to B’s house and B treats it as his own.
Conclusion:
 Quasi contract though not a real contract can create Legal Obligation on the parties on grounds of
Natural Justice.
 Therefore it can be said that A can file a suit against B for price of such goods under Quasi Contract.
Q.13
A Mohammedan lady asks for your advice whether she can sue her own father in law to recover arrearsof allowance
payable to her by the father in law under an agreement between her own father and her father in law in
consideration of her marriage. Give reasons for your answer.
Ans:13
Provision of law:
 This question relates to the provision related with exceptions to the rule of Privity of Contract.
 The general rule of Privity of Contract states that only the parties to contract can sue each other and
no third party has a right to sue the parties. Therefore it provides that stranger to contract cannot sue.
 But Exception to the Privity of Contract provides that if there is stranger for consideration then they
can sue the parties. i.e. Beneficiary can sue parties for his rights.
Facts of the case:
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  Here in this case the agreement is entered into by the Father-in - Law and Father of the lady for
being consideration in marriage.
Conclusion:
 Here in this case the lady is a stranger but she is stranger for consideration i.e. she is beneficiary.
 Therefore as per the provisions of Law the Lady can sue her Father-in-Law as a beneficiary.
Q.14
A, a minor, borrowed ` 5,000 on loan from B, stating that he was a major and executed a receipt in his favour.
Discuss the remedies available to B to recover the money lent by him.
Ans: 14
Provision of Law:
 This question relates to the provision of Injunction under Indian Contract Act, 1872.
 If a party has promised not to do something and if he is doing it then the other party can file a suit for
Injunction to prevent the person from doing what he has promised not to do.
Facts of case:
 Here in this case Miss Kokila agreed to sing at the Star Theatre for period of 3 months and during
that period she will not sing in any other theatre during that period.
Conclusion:
 As per provisions of Indian Contract Act,1872 a person can be prevented from performing what he
has promised not to do by bringing a suit for Injunction.
 In this case to Miss Kokila promised not to sing at any other theatre till the time of Contract this
contract is enforceable because the restriction to sing is during the 3 months of contract and if she
sings somewhere else then Injunction can be used against her.
Q.15
A, a minor, borrowed Rs. 5,000 on loan from B, stating that he was a major and executed a receipt in his favor.
Discuss the remedies available to B to recover the money lent by him.
Ans:15
Provision of Law:
 This question relates to effect of Agreement with Minor under Indian Contract Act,1872.
 As per Indian Contract Act ,1872 the agreement with minor is void ab initio and minor is not
liable even if he is Misrepresenting his age.
 The case related to such provision is Mohiribibi V/s Dharmodas Ghosh .
Facts of the Case:
 In This case minor borrowed money from B stating that he is major and signed a receipt in
favour of B.
Conclusion:
 As per Indian Contract Act,1872. Agreement with minor is void ab initio and he is not liable for
Misrepresentation of his age.
 Therefore, in this case Minor will not be liable for and B does not have any remedies.
Q.16
S, a singer, contracts with M, the manager of a theatre, to sing at the latter’s theatre for two evenings in every
week during the next two months. M engages to pay her ` 300 for each evening’s performance. On the seventh

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evening, S willfully absents herself from the theatre. M, in consequence, wants to rescind the contract and
claim compensation for the loss suffered by him through the non-fulfillment of the contract by S. Advise.
Provision of Law:
 This question relates to the provision of Breach of Contract under Indian Contract Act,1872.
 Breach of Contract can be of two ways Actual Breach and Anticipatory Breach. If before the
performance of Contract there is a breach then it is known as an Anticipatory Breach and if on the date
of Performance of Contract or during the performance there is a breach then it is known as Actual
Breach.
 Whenever there is a breach of contract the other party has a right to rescind the contract and claim for
damages.
Facts of Case:
 In this case S, a Singer agrees with manager M to sing at his theatre two evenings every week during
next two months at 300 Rs. Per Evening. On seventh evening S wilfully absents himself from theatre
and M wants to rescind contract and claim for damages.
Conclusion:
 Breach of Contract gives other party the right to rescind Contract and claim damages.
 In this case too M has a right to rescind and sue for damages
Q.17
A enters into a contract with B for supplying 800 tonnes of iron ore within 4 months. A fails to make
delivery in time owing to difficulty in transport. But he admitted the availability of iron ore in the
market at a higher price. Can A take the plea of impossibility of performance? Give reasons.
Ans:17
Provision of Law:
 This question relates to the provisions of “Actual Impossibility” and “Commercial Impossibility”
 As per the provisions of Contract Act if after the contract is made some event happens which makes
the performance impossible or illegal then Contract will become void on occurrence of such event but
contract will be void if it is absolute impossibility not commercial impossibility. Performance is difficult
or it is not profitable is not considered as valid ground for cancellation of Contract due to Impossibility.
Facts of Case:
 In this case A contracts with B for supplying 800 tonnes of iron ore within 4 months. A fails to make
delivery in time owing to difficulty in transportation but the iron ore was available in open market at a
higher price.
Conclusion:
 Commercial Impossibility is not a valid ground for cancellation of Contract and therefore parties cannot
be discharged from their legal obligations.
Therefore in this case A cannot take plea of impossibility of performance.

Q.18
X, an old lady, by a deed of gift made over certain property to her daughter D, with the specific directions
that she should pay P, who is the sister of the old lady, a sum of ` 100 per month. The same day D entered into an
agreement with P to pay her the agreed amount. D now refuses to pay her aunt P, the above amount on the plea

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that no consideration had moved from P to D. P, therefore, sues D. Is the suit maintainable and can D be held
liable to pay the amount? Decide
ANS:18
Provision of Law:
 This question relates to the essential elements of Consideration
 One of the essential element of Consideration is that it may move from promisee or any other
person. If the consideration is not depending upon personal trust or personal skill , it can be
provided even by third party.
 The facts of case are similar to the case of Chinnayya v/s Rammayya.
Facts of the case:
 In this case X, old lady transferred all her property to her daughter D, by a gift deed with the specific
directions to that she should pay P , her sister a certain amount as annuity. D also signed a bond
agreeing to pay the amount but then refused to pay by saying that she has not received any
consideration from P.
Conclusion:
 Consideration may be provided by Promisee or any other person and even if the Consideration is
provided by third party still a valid contract is created.
 In this case too D is bound to pay annuity to P as the consideration was already paid by X, an old lady
by transferring all her properties.
Q.19
A owes B rupees ten thousand. C, who is a friend of A, pays to B rupees five thousand in full satisfaction of B’s claim
on A which B accepts. Can B now recover the balance from A? Give reasons.
Ans: 19
Provision of Law:
 This question relates to discharge of parties by Remission under Indian Contract Act,1872.
 As per Indian Contract Act,1872 when the parties settle the contract by accepting lesser
performance from the other parties then it is known as discharge of contract by remission.
Facts of Case:
 In this case A owes B Rupees 10000.C who is friend of A pays 5000 in full satisfaction of
amount which B accepts.
Conclusion:
 When a party accepts lesser performance of Contract then the contract is discharged by
remission and the parties will also be discharged from liabilities.
 In this case also the contract is discharged by Remission so B cannot recover the remaining
amount from A as he agreed for less amount in full and final settlement .
Q.20
A is a minor aged seventeen years, who broke his right leg in a football match. He engaged B, a doctor,to set it.
Does the doctor have a valid claim for his services? Give reasons.
Ans: 20
Provision of law:
 This question relates to the provision of necessities of life supplied to minor under Indian Contract
Act,1872.
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  As per the provisions of Indian Contract Act,1872 property of minor can be liable for necessity of life
supplied to minor.
Facts of Case:
 Here A who is a minor aged 17 years broke his right leg in football match. He engaged B, a doctor to
set it.
Conclusion:
 Property of minor is liable for necessities of life.
 Medical treatment is considered as one of the necessity for life and therefore A’s property will be
liable for the amount.
Q.21
A is sixteen years of age. He lends rupees one lakh to B on the strength of a mortgage executed in hisfavour. Is
the borrower liable to repay the money? Give reasons.
ANS:21
Provision of Law:
 This provision relates to the effects of agreements with Minor under Indian Contract Act,1872.
 It is provided under Indian Contract Act,1872 that Agreement which is in benefit of minor can be
enforceable by minor.
Facts of the case:
 Here in this case A who is of age of 16 years lends Rs.1 lacs to B and B mortgages a property in his
favour.
Conclusion:
 Minor can enforce the contract which is in benefit of him Mortgage in favour of minor can be
enforced by Minor.
 Therefore in this this case A will be able to recover money and even he will be able to sell the
mortgaged property in case the money is not received.
Q.22
Explain the concept of ‘misrepresentation’ in matters of contract.
Sohan induced Suraj to buy his motorcycle saying that it was in a very good condition. After taking the motorcycle,
Suraj complained that there were many defects in the motorcycle. Sohan proposed to getit repaired and
promised to pay 40% cost of repairs. After a few days, the motorcycle did not work at [Link] Suraj wants to
rescind the contract. Decide giving reasons.
Ans:22
Provision of Law:
 This question relates to the provision of Misrepresentation under Indian Contract Act,1872.
 As per Indian Contract Act,1872, When the contract is entered by way of Fraud or Misrepresentation
then the aggrieved party has an option either to rescind the contract or to enforce the performance of
the same but if the party ratifies i.e validates the contract once then afterwards he does not have an
option to rescind contract.
Facts of Case:
 In this case Sohan induced Suraj to buy his motorcycle by saying it is in very good condition , Suraj
complained that there were many defects in the motorcycle then Sohan proposed to bear 40%
expenses of repair which Suraj accepts. After a few days motorcycle did not work at all.
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 Conclusion:
 When an aggrieved party to a voidable contract ratifies i.e. validates the transaction he cannot
rescind it later on.
 In this case Suraj accepted the repair expenses by Sohan which amounts to acceptance of voidable
contract therefore he will not be able to rescind it now. At the time when Soham offered Repair
expenses Suraj had an option to deny and rescind contract but not after he accepted the repair
expenses.
Q.23
Shambhu Dayal started “self service” system in his shop. Smt. Prakash entered the shop, took a basketand after
taking articles of her choice into the basket reached the cashier for payments. The cashier refuses to accept
the price. Can Shambhu Dayal be compelled to sell the said articles to Smt. Prakash? Decide.
Ans:23
Prvision of law:
 This question relates to the provision of Invitation to offer under Indian Contract Act,1872.
 When a party without expressing final willingness proposes certain terms on which he is willing
to negotiate then it is known as Invitation to offer and in case of Invitation to Offer no contract
is framed until the offer comes from the other party and the party making Invitation have
accepted the same.
 When the Goods are displayed in self service store it is known as Invitation to offer when
customer picks up the goods and take it to counter it is known as offer and when cashier
accepts the goods and makes bill it will be known as acceptance.
Facts of case:
 Shambhu Dayal started a self service store. [Link] entered the shop and took a basket
and after taking articles of her choice into the basket reached the cashier for payments.
Cashier refused to accept the price.
Conclusion:
 When goods are displayed its just an invitation to offer when customer selects its an offer
and the shop keeper has an authority to reject the same.
 In this case also Shabhu Dayal can not be compelled to sell the articles to [Link].
Q.24
Akhilesh entered into an agreement with Shekhar to deliver him (Shekhar) 5,000 bags to be manufacturedin his
factory. The bags could not be manufactured because of strike by the workers and Akhilesh failed tosupply the
said bags to Shekhar. Decide whether Akhilesh can be exempted from liability under the provisions of the
Indian Contract Act, 1872.
ANS:24
Provision of Law:
 This question relates to the provisions of “Actual Impossibility” and “Commercial Impossibility”
 As per the provisions of Contract Act if after the contract is made some event happens which makes
the performance impossible or illegal then Contract will become void on occurrence of such event but
contract will be void if it is absolute impossibility not commercial impossibility. Performance is difficult
or it is not profitable is not considered as valid ground for cancellation of Contract due to Impossibility.
Facts of the Case:
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  Here in this case Akhilesh entered into an agreement with Shekhar to deliver him 5000 bags to be
manufactured in his factory but bags could not be manufactured due to strike in his factory.
Conclusion:
 Strike is not considered as an absolute impossibility rather it is Commercial Impossibility and because
of Commercial Impossibility the party cannot be discharged from liability.
 Here in this case even after strike Akhilesh had an option to buy it from market and supply and
therefore he cannot refuse his liability.
Q.25
Ramaswami proposed to sell his house to Ramanathan. Ramanathan sent his acceptance by post. Next day,
Ramanathan sends a telegram withdrawing his acceptance. Examine the validity of the acceptance according to the
Indian Contract Act, 1872 in the light of the following:
 The telegram of revocation of acceptance was received by Ramaswami before the letter of acceptance.
 The telegram of revocation and letter of acceptance both reached together.
ANS-25:
Provision of law:
 This question relates to provision of communication of acceptance and revocation thereof under
Indian Contract Act,1872.
 It is provided under Indian Contract Act,1872 that the Acceptance can be revoked by Acceptor at any
time before it comes to the knowledge of Proposer.
 If the revocation is made before acceptance is known to proposer then such Revocation will be valid.
Facts of case:
 Here in this case Ramaswami proposed to sell his house to Ramanathan. Ramanathan send his
acceptance by post and revoked it by telegram on the next day.
Conclusion:
 Here in the first case letter of revocation is received first then such a revocation is valid as the
revocation was posted before the acceptance reached to proposer.
 In second case too if Acceptance and revocation both received together then also the revocation is
valid because in this case too revocation was posted before the acceptance reached to proposer.
Q.26
Mr. Balwant, an old man, by a registered deed of gift, granted certain landed property to Ms. Reema, hisdaughter.
By the terms of the deed, it was stipulated that an annuity of ` 20, 000 should be paid every year to Mr. Sawant,
who was the brother of Mr. Balwant. On the same day Ms. Reema made a promise to Mr. Sawant and executed
in his favour an agreement to give effect to the stipulation. Ms. Reemafailed to pay the stipulated sum. In an
action against her by Mr. Sawant, she contended that since Mr. Sawant had not furnished any consideration,
he has no right of action.
Examining the provisions of the Indian Contract Act, 1872, decide, whether the contention of Ms. Reema is
valid?
Ans-26
Provision of law:
 This question relates to the concept of Stranger to Consideration under Indian Contract Act, 1872.
 As per the provisions of Indian Contract Act Consideration may move from promisee or any other
person that means Stranger to Consideration can enforce the rights under contract.

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 Facts of case:
 In this case [Link] by a gift deed transferred his property to his daughter [Link]. Ans
[Link] agreed to pay Rs.20000 every year to [Link], brother of [Link]. [Link]
failed to pay the amount and claimed that she is not liable to pay the amount as there was no
consideration from side of [Link].
Conclusion:
 As per the provision consideration may move from promise or any other person.
 Here in this case too consideration has been furnished to [Link] by [Link] on behalf of his
brother [Link]. Therefore in this case [Link] is bound to pay.
Q.27
A coolie in uniform picks up the luggage of R to be carried out of the railway station without being asked
by R and R allows him to do so. Examine whether the coolie is entitled to receive money from R under the
Indian Contact Act, 1872.

Ans-27
 Provision of law: Contract can be created by express words or it can be implied from conduct of
the parties and contract created by conduct is also considered as valid.
 Fact of the case: In this case coolie picks up the luggage of R without being asked to so but still
R allowed the act.
 Conclusion: Here in this case Coolie by his behavior made an offer and R allowed him to do so.
In this way there is an implied contract between coolie and R and R is bound to pay.

Q.28
Ajay, Vijay and Sanjay are partners of software business and jointly promises to pay Rs. 6,00, 000 toKartik. Over
a period of time Vijay became insolvent, but his assets are sufficient to pay one fourth of his debts. Sanjay
is compelled to pay the whole. Decide whether Sanjay is required topay whole amount himself to Kartik in
discharging joint promise under the Indian Contract Act,1872.
Ans-28
Provision of Law:
 This question relates to rights and liabilities of Joint Promisors.
 It is provided under the act that liability of Joint promisors is joint as well as several and in case of
insolvency of one of the joint promisors the loss due to such insolvency will be borne by remaining
Joint Promisors in equal shares.
Facts of case:
 In this case Ajay, Vijay and Sanjay jointly promised to pay Rs.600000 to Kartik. Over a period of time
Vijay became insolvent and his assets are sufficient to pay only one fourth of his debts. Sanjay is
required to pay whole debt.
Conclusion:
 Here in this case Sanjay being a joint promisor is liable to pay the whole amount to Kartik but he will
after paying Sanjay will be able to recover from other too joint promisors and loss due to Vijay’s
insolvency will be borne equally by Ajay and Sanjay.
Q.29
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 X’ agreed to become an assistant for 2 years to ‘Y’ who was practicing Chartered Accountant at Jodhpur. It was also
agreed that during the term of agreement ‘X’ will not practice as a Chartered Accountant on his own account
within 20 kms of the office of ‘Y’ at Jodhpur. At the end of one year, ‘X’ left theassistantship of ‘Y’ and
started practice on his own account within the said area of 20 kms.
Referring to the provisions of the Indian Contract Act, 1872, decide whether ‘X’ could be restrained from
doing so?
Ans-29
Provision of law:
 This question relates to the topic of restraint of trade under Indian Contract Act,1872
 Agreement where the person is restricted from any lawful trade, occupation or profession then such
restraint is opposed to public policy and void.
 There are certain exceptions to this rule like a restraint can be made in case of sale of goodwill,
restraint can be made in case of partnership and restraint can be made in terms of employment
subject to they are reasonable.
Facts of the case:
 In this case X was appointed as an assistant for 2 years to Y who was practicing Chartered Accountant
at Jodhpur. It was agreed in terms of the terms of agreement that during the term of employment X
will not practice as a Chartered Accountant within 20 kms of Y’s office. At the end of the year X left the
job and started practice of his own within area of 20 kms of Y’s office.
Conclusion:
 As per the contract Act restraint on trade can be valid during an employment.
 Here the X has left the employment and therefore the restraint on him will also not be valid. Therefore,
X cannot be restrained.
Q.30
PM Ltd., contracts with Gupta Traders to make and deliver certain machinery to them by 30th June 2017 for ` 21.50
Lakhs. Due to labour strike, PM Ltd. could not manufacture and deliver the machinery toGupta Traders. Later
Gupta Traders procured the machinery from another manufacturer for ` 22.75 lakhs. Gupta Traders was also
prevented from performing a contract which it had made with ZenithTraders at the time of their contract with
PM Ltd. and were compelled to pay compensation for breach of contract. Calculate the amount of compensation
which Gupta Traders can claim from PM Ltd., referring to the legal provisions of the Indian Contract Act, 1872.
Ans.30:
Provision of law:
 This question relates to the provision of breach of contract under Indian Contract Act,1872.
 As per the Contract Act in case there is a breach of contract the aggrieved party can claim for
damages. Ordinary damages can be recovered in case of normal circumstances and Special
damages can be recovered in case when the other party has the notice about special
circumstances.
Facts of the case:
 Here in this case PM Ltd entered into contract with Gupta Traders to make and deliver certain
machinery to them by 30th June,[Link] to labour strike , PM limited could not manufacture and
deliver the machinery to Gupta Traders. Gupta Traders purchased it from market at a higher price
and they were also prevented from performing a contract which they entered with Zenith Traders.

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 Conclusion:
 Here in this case Gupta Traders will be able to recover the damages of 1.25 lacs(22.75 lacs Market
Price – 21.5 lacs Contract Price)from PM Limited for breach of contract as labour strike cannot be
considered as Supervening impossibility
 Secondly Gupta Limited will not be able to claim compensation paid to Zenith Limited as it was not
communicated to PK Limited at the time of making contracts.
Q.31
A student was induced by his teacher to sell his brand new car to the latter at less than the purchase price to
secure more marks in the examination. Accordingly the car was sold. However, the father of the student
persuaded him to sue his teacher. State on what ground the student can sue the teacher?
Ans.31:
Provision of Law:
 This question relates to the concept of absence of Free Consent under Indian Contract Act,
1872.
 As per the provisions of Contract Act if the consent of one of the parties is taken by Coercion,
Undue Influence, Fraud or Misrepresentation then the contract is voidable at the option of
aggrieved party.
Facts of the Case:
 In this case a student is induced by his teacher to sell his brand new car at a price lower
than Purchase Price to secure more marks.
Conclusion:
 As per the provision of Contract Act, The contract was entered by teacher by using Undue
Influence and therefore this contract is voidable at the option of Student.
Q.32
A received certain goods from B promising to pay Rs.1,00,000. Later on, A expressed his inability to make payment. C,
who is known to A, pays Rs.60,000 to B on behalf of A. However, A was not aware of thepayment. Now B is
intending to sue A for the amount of Rs.1,00,000. Discuss whether the contention of B is right?
Ans:32
Provision of law:
 This question relates to the provision of Stranger to Consideration.
 As per the Contract Act the Consideration may move from Promisee or any another person.
Facts of the Case:
 In this case A received goods from B promising to pay 1,00,000. And in case of his inability to make
payment C, who is known to A, pays 60,000 to B on behalf of A without A’s Knowledge. Now B is
intending to sue for the amount again.
Conclusion:
 Here C made payment to B on A’s behalf therefore Consideration is already paid by C and therefore A
is also discharged and B cannot recover from him.
Q.33
Father promised to pay his son a sum of rupee one lakh if the son passed C.A. examination in the first attempt.
The son passed the examination in the first attempt, but father failed to pay the amount as promised. Son files
a suit for recovery of the amount. State along with reasons whether son can recoverthe amount under the Indian

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Contract Act, 1872.
Answer 33:
Provision of Law:
 This question relates to the essential elements of Contract.
 As per Contract Act the parties to contract must have the intention to create legal relations.
Facts of the case:
 In this case Father promised to pay his sum of Rs.1 Lac if the son passes the examination in the first
attempt but father failed to pay the amount as promised.
Conclusion:
 In this case the agreement will not be considered as a contract as there was no intention to create legal
relation.
Q.34
‘X’ entered into a contract with ‘Y’ to supply him 1,000 water bottles @ Rs.5 per water bottle, to bedelivered at
a specified time. Thereafter, ‘X’ contracts with ‘Z’ for the purchase of 1,000 water bottles @ Rs.4.50 per water
bottle, and at the same time told ‘Z’ that he did so for the purpose of performing his contract entered into with ‘Y’.
‘Z’ failed to perform his contract in due course and market price of eachwater bottle on that day was Rs. 5.25 per
water bottle. Consequently, ‘X’ could not procure any water bottle and ‘Y’ rescinded the contract. Calculate the
amount of damages which ‘X’ could claim from ‘Z’inthe circumstances? What would be your answer if ‘Z’ had not
informed about the ‘Y’s contract? Explain with reference to the provisions of the Indian Contract Act, 1872.
Ans:
Provision of law:
 This question relates to the provision of breach of contract.
 As per the Contract Act in case there is a breach of contract the aggrieved party can claim for
damages. Ordinary damages can be recovered in case of normal circumstances and Special
damages can be recovered in case when the other party has the notice about special
circumstances.
Facts of the case:
 X entered into a contract with Y to supply 1000 bottles to be delivered at at a specified time.
Thereafter X contracts with Z for purchase of the same. Consequently X could not procure any
water bottle and Y rescinded the contract.
Conclusion:
 In this case X will be able to claim 0.75 per bottle(Ordinary Damages - 0.25 {5.25-5}+ Special
damages -0.5{5-4.5})
 In case Z was not informed about the contract with Y then X will be able to claim Ordinary
damages only.

Q.35
Mr. JHUTH entered into an agreement with Mr. SUCH to purchase his (Mr. SUCH’s) motor car for Rs.
5,00,000/ within a period of three months. A security amount of Rs. 20,000/ was also paid by Mr. JHUTH to
Mr. SUCH in terms of the agreement. After completion of three months of entering into the agreement, Mr.
SUCH tried to contract Mr. JHUTH to purchase the car in terms of the agreement. Even after lapse of another
three month period, Mr. JHUTH neither responded to Mr. SUCH, nor to his phone calls. After lapse of

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 another period of six months. Mr. JHUTH contracted Mr. SUCH and denied to purchase the motor car. He
also demanded back the security amount of Rs. 20,000/ from Mr. SUCH. Referring to the provisions of the
Indian Contract Act, 1872, state whether Mr. SUCH is required to refund the security amount to Mr.
JHUTH.
Also examine the validity of the claim made by Mr. JHUTH, if the motor car would have destroyed by an
accident within the three month’s agreement period.
Ans-35
Provision of Law:
 This question relates to performance of reciprocal promises under Indian Contract Act, 1872.
 In case of reciprocal promises if one of the parties is not performing within a reasonable duration then
he cannot demand the other party to perform the promise.
Facts of case:
 In this case MR. JHUTH entered into an agreement with [Link] to purchase his car for
Rs.5,00,000 within 3 months and paid advance security amount of Rs.20,000 was also paid by
[Link] to [Link]. After the decided period [Link] contacted [Link] but he neither
responded to [Link] nor to his phone calls. After lapse of six months, [Link] contacted
[Link] and denied to purchase the motor car and also demanded back the security amount of
Rs.20000.
Conclusion:
 In this case [Link] did not perform the promise of purchasing the car therefore he cannot claim
any refund of amount paid in advance
 If the car was destroyed during the period of 3 months then the contract would have been void due
to destruction of Subject matter and therefore in this case [Link] was entitled to refund for the
amount of Rs.20,000.
Q.36
Mr. SAMANT owned a motor car. He approached Mr. CHHOTU and offered to sale his motor car for Rs.
3,00,000. Mr. SAMANT told Mr. CHHOTU that the motor car is running at the rate of 30 KMs per litre of
petrol. Both the fuel meter and the speed meter of the car were working perfectly. Mr. CHHOTU agreed
with the proposal of Mr. SAMANT and took delivery of the car by paying Rs. 3,00,000/ to Mr. SAMANT.
After 10 days, Mr. CHHOTU came back with the car and stated that the claim made by Mr. SAMANT
regarding fuel efficiency was not correct and therefore there was a case of misrepresentation. Referring to
the provisions of the Indian Contract Act, 1872, decide and write whether Mr. CHHOTU can rescind the
contract in the above ground. .
Ans-36
Provision of law:
 This question relates to the concept of Fraud and Misrepresentation under Indian Contract Act,1872.
 As per the provisions of the Act if the consent is obtained by fraud or misrepresentation then contract
is voidable at the option of an aggrieved party but if the aggrieved party had the means of discovering
the truth by ordinary diligence then he cannot avoid contract on the grounds of Misrepresentation or
Silence amounting to fraud.
Facts of the case:

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 [Link] offered to sell his motorcar to [Link] for Rs.3,00,000. Mr. Samant told [Link] that
motorcar is running at the rate of 30 KMS per litre petrol. Both the fuel meter and speed meter of the
car were working perfectly. [Link] purchased the car for Rs.3,00,[Link] 10 days [Link]
came back with car and stated that claim made by [Link] was not correct and claimed for
misrepresentation.
Conclusion:
 In this case the speed meter and fuel meter were working correctly. [Link] could have checked it
by ordinary prudence now he cannot cancel the contract on grounds of Misrepresentation.
Q.37
X offered through an advertisement in the Statesman to sell certain “antique” on a particular day at aparticular
place in Delhi. In response to the advertisement a person traveled all the way from Bombay to Delhi and
found to his immeasurable annoyance that the place was locked and there was no such projected sale. He
wanted to sue X on this account. Would it be advisable for him to take this course of action?
Ans-37
Provision of law:
 This question relates to the concept of Invitation to offer and offer under Indian Contract Act,1872
 When there is an advertisement of sale a particular product then it is an Invitation to offer. Invitation
to offer will convert into a contract only if offer is made in response to Invitation to offer and it is
accepted by the party making Invitation. Invitation to offer is not a final offer its just a manner of
initiating negotiation.
Fact of the case:
 Here in this case X offered through advertisement to sell certain “antique” on a particular day at a
particular place in Delhi. In response to the advertisement a person traveled from Mumbai to
Delhi and found that the place was locked and there was no such sale.
Conclusion:
 Here the advertisement made by X was only an Invitation to offer and not a Final offer and
therefore he was not bound by such advertisement and therefore in this case X cannot be sued.
Q.38
W is the wife of H, who is lunatic, purchases a diamond set of ? 10 lacs from Beauty Jeweller on credit.
Referring to the provisions of the Indian Contract Act, 1872, decide whether the Beauty Jeweller is
entitled to claim the above amount from the property of H.
Provision of law:
 This question relates to supply of necessities to an incapable person or persons dependent on
him.
 As per Indian Contract Act normally the agreement with incapable person is void ab initio and
therefore it is not enforceable but if the necessities of life is supplied to incapable person or
persons dependent on him then the properties of this incapable person will be liable for the same.
Fact of the case:
 In this case W who is the wife of H, a lunatic purchases a diamond sets of 10 lacs from Beauty
Jeweller on Credit.
Conclusion:

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  If the necessities of life is supplied to incapable person or the persons dependent on him then
the amount of the same can be recovered from the property of incapable person but
otherwise agreement is void ab initio.
 Here in this case the diamond set was purchased by a wife of lunatic then in this case the
diamond set is not necessity of life therefore in this case the agreement is void and therefore
the jeweller cannot recover the amount.
Q.39
X, a minor was studying in [Link] in a college. On 1st July, 2005 he took a loan of ` 10,000 from B forpayment of
his college fees and to purchase books and agreed to repay by 31st December, 2005, X pos sesses assets worth ` 2 lakhs.
On due date X fails to pay back the loan to B. B now wants to recover the loan from X out of his (X’s) assets.
Referring to the provisions of the Indian Contract Act, 1872 decide whether B would succeed.
Ans.39
Provision of law:
 This question relates to supply of necessities to an incapable person or persons dependent on
him.
 As per Indian Contract Act normally the agreement with incapable person is void ab initio and
therefore it is not enforceable but if the necessities of life is supplied to incapable person or
persons dependent on him then the properties of this incapable person will be liable for the same.
Facts of the Case:
 Here X, the minor was studying in [Link] in a college and on 1st July he took a loan for his
college fees and to purchase books. X had assets worth Rs.2 lacs. On due date X fails to pay
the loan.
Conclusion:
 Here in this case X, a minor borrowed funds for his study and books which is known as
necessities of life and therefore property of minor will be liable for the same.
Q.40
A threatened his wife and son to commit suicide if they did not agree to transfer A’s house to his brother.
Thereupon his wife and son agreed to transfer the house. Subsequently, his wife and son filed a suit to set aside
the transfer. Will they succeed?
Ans:
Provision of law:
 This question is related to the provision of Coercion under Indian Contract Act,1872.
 To commit or threatening to commit any act which is forbidden by Indian Penal Code or
unlawfully detaining or threatening to detain property of the person to induce them to enter
into contract then consent is known to be obtained by coercion and if the consent is obtained
by coercion then the contract is voidable at the option of the party whose consent was so
caused.
Facts of case:
 In this case A threatened his wife and son to commit suicide if they did not agree to transfer
A’s house to his brother.
Conclusion:

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  Threat to commit suicide also amounts to coercion and therefore consent of A’s wife and
son is obtained by coercion therefore contract will be voidable at their option.
Q.41
A’ applies to a banker for a loan at a time when there is stringency in the money market. The banker
declines to make the loan except at an unusually high rate of interest. A accepts the loan on these
terms. Whether the contract is induced by undue influence? Decide.
Ans.41
Provision of Law:
 This question relates to the concept of Undue Influence.
 As per the provisions of Indian Contract Act,1872 if the consent of the parties is taken by the
way of Undue Influence then Contract will be considered as voidable at the option of the
party whose consent was so caused.
 Contract will be considered as caused due to Undue Influence when one of the parties is
under a position to dominate the will of the other party and the party having such a position
takes undue advantage of the position to obtain consent of other party.
Facts of the case:
 Here in this case A applies to banker for a loan at time when there is a stringency in market. The
banker agrees to give loan at an unusually high rate of interest.
Conclusion:
 For the contract to be caused due to Undue Influence one of the party must be in a position to
dominate the will of another if that Person is in a position to dominate the will of another and
the person is using this position to obtain undue advantage over the other. Here when manager
agreed to give loan at unusually higher rate due to stringent money market situation.
Q.42
A agreed to sell rice to B. Both A and B believed that the rice is old basmati and a very high price is settled.
Subsequently, it is discovered that rice is new one. Can B get back his price? Will your answer be different if B
alone purchased the rice thinking it to be old basmati?
Ans.42
Provision of Law:
 This question relates to concept of Mistake under Indian Contract Act, 1872.
 As per the provisions of Indian Contract Act,1872 if there is a bilateral mistake of fact then
contract is void but for contract to become void the mistake should relate to material fact
of Contract.
 If there is mistake of only one of the parties then contract will remain valid.
Facts of Case:
 Here in this case A agreed to sell rice to B. Both believed that the rice is old basmati and a
very high price is settled subsequently the rice were discovered to be new one.
Conclusion:
 Bilateral mistake of fact make the contract void. In this case both the parties were under
Bilateral Mistake of fact regarding the quality of rice which is the subject matter and
therefore the contract is void on grounds of Bilateral mistake.

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  But if only B was under a mistake as to quality of rice then contract will remain valid and B
will not be able to further avoid the same.
Q.43
P and S being traders enter into a contract. P has private information of a change in prices which wouldaffect S’s
willingness to proceed with the contract. Is P bound to inform?
Ans.43
Provision of Law:
 This question relates to the provision of fraud and silence amounting to fraud under Indian
Contract Act.
 Indian Contract Act provides that if the consent is obtained by fraud then contract will be
voidable at the option of aggrieved parties. Contract Act also provides that mere silence is not a
fraud. Silence will be treated as a fraud only if it is duty to speak and a person keeping a silence
or the silence of a person is equivalent to speech.
Facts of the case:
 In this case P and S both are traders and they entered into contract. P has some private
information of change in prices which can affect S’s decision.
Conclusion:
 Here in this case P is not bound to tell the information as well as his silence is not equivalent
to speech therefore his silence will not amount to fraud.
Q.44
Mr. Seth an industrialist has been fighting a long drawn litigation with Mr. Raman another industrialist. To support
his legal campaign Mr. Seth enlists the services of Mr. X a legal expert stating that an amount of ` 5 lakhs would be
paid, if Mr. X does not take up the brief of Mr. Raman. Mr. X agrees, but at the endof the litigation, Mr. Seth
refuses to pay. Decide whether Mr. X can recover the amount promised by Mr. Seth under the provisions of the
Indian Contract Act, 1872.
Ans.44
Provision of Law:
 This question relates to the agreement in restraint of trade under Indian Contract Act.
 As per the provisions of Indian Contract Act agreement restraining a person from carrying on any
lawful trade, profession or occupation is opposed to public policy and void.
 Sale of Goodwill , Contract of employment and Contract of Partnership is having certain
exceptions to this rule but other than that it will be opposed to public policy and void.
Facts of the Case:
 In this case [Link] an industrialist has been fighting a long-drawn litigation with [Link]
another industrialist, to support his legal campaign [Link] enlists the services of Mr. X, a legal
expert and agreed to pay Rs.5 lacs for not taking a brief of [Link]. Mr.X agreed but later on
[Link] refused to pay.
Conclusion:
 In this case Mr.X was restrained from carrying on Lawful Profession and it is not falling
within any exception therefore it will be treated as opposed to Public Policy and void.

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Q.45 X, a physician practicing in New Delhi, took Y as his assistant for three years during which T agreed not to
practice on his own in New Delhi. At the end of the year from the date of agreementwith X, the assistant, Y, left X and
began his own independent practice in New Delhi. Has X any legal remedy against Y?
Ans.45:
Provision of law:
 This question relates to the provision of Restraint of Trade under Indian Contract Act,1872.
 As per Indian Contract Act if there is an agreement to restraint a person from carrying on a lawful
trade, profession or occupation then it will be considered opposed to public policy and void.
 But there are exceptions to this rule one of such exception is contract of employment .During
employment the employer can restrict his employee from carrying on a lawful profession.
Facts of the case:
 X a physician in New Delhi, took Y as his assistant for three years on a contract during which Y will
not practice on his own in New Delhi. After a year Y left the service and started his own practice.
Conclusion:
 It is provided in the act that an employee can be restrained from carrying on lawful profession or
occupation during the term of Employment but here Y has left the employment and therefore the
restraint is not applicable and therefore X do not have any legal remedy.
Q.46
Z rent out his house situated at Mumbai to W for a rent of Rs.10,000 per month. A sum of Rs.5 lakh, the
house tax payable by Z to the Municipal Corporation being in arrears, his house is advertised for sale by the
corporation. W pays the corporation, the sum due from Z to avoid legal consequences. Referring tothe provisions
of the Indian Contract Act, 1872 decide whether W is entitled to get the reimbursement of the said amount
from Z.
Ans 46:
Provision of law:
 This question relates to the provision of Past Voluntary Services under Indian Contract Act,1872.
 Indian Contract Act provides that if a person has rendered any services to any person or has
discharged legal obligation of a person in past then he can claim reimbursement of the same.
Facts of the case:
 In this case Z rented out his house to W for a rent of Rs.10,000 per month. A sum of Rs.5 lacs, the
house tax payable by Z was in arrears, his house was to be sold by the corporation. W pays the
corporation , the sum due from Z to avoid legal consequences.
Conclusion:
 Here in this case W discharged the legal obligation of Z and therefore he can claim reimbursement
of the amount paid on behalf of Z under Past Voluntary Services.
Q.47
Mr. Ramaswamy of Chennai placed an order with Mr. Shah of Ahmedabad for supply of urid daal on 10.11.2006 at a
contracted price of R s . 40 per kg. The order was for the supply of 10 tonnes within a months’ time viz,, before
09.12.2006. On 04.12.2006 Mr. Shah wrote a letter to Mr. Ramaswamy stating that the price of urid daal was sky
rocketing to Rs.50 Per. Kg. and he would not be able to supply as per original contract. The price of urid daal rose to Rs.53
on 09.12.06 Advise Mr. Ramaswamyciting the legal position.
Ans.47
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Provision of law:
 This question relates to the concept of Joint Promisors under Indian Contract Act,1872.
 In case of Joint Promisors each of the Joint Promisor is liable jointly as well as severally
jointly liable towards third party and severally liable towards their own share.
 Loss due to insolvency of a joint promisor should be borne by remaining joint promisors
equally.
Facts of the case:
 In this case X,Y and Z are partners in a business and they jointly promised to pay
Rs.30,000 to A. Over a period of time Y became insolvent but his assets could realize
only 1/4th of the amount. Z was compelled to pay the whole amount.
Conclusion:
 Here in this case Z can recover 2500 from Y’s estate(1/4th of Rs.10000 i.e. share of Y)
and 13,750 from X ( Rs.10000 share of Mr.X + 3750 (share of X in insolvency of Y)
Q.48
A firework merchant booked 10 packets of some special kind of crackers with a transport company, and at that
time he informed the company that the packets were being sent for Diwali festival and in case they did not reach
their destination in time, he will lose his profit of Rs.2,000. However, the packets reached the destination
after Diwali festival was over. Can the merchant recover Rs.2,000 from the transport company.
Ans:
Provision of law:
 This question relates to the topic of Special damages under Indian Contract Act,1872.
 As per the provision of the Indian Contract Act,1872 if there is a breach of contract then the aggrieved
party can claim for special damages if there were special circumstances affecting the case and notice of
the special circumstances were given to the defaulting party.
Facts of case:
 Here in this case A firework merchant booked 10 packets of some special kind of crackers with a
transport company and at that time he informed company that packets were being sent for Diwali
festival and in case they did not reach in their destination in time he will lose profit of Rs.2000. The
packets reached the destination after Diwali.
Conclusion:
 As in this case there was a special circumstance of Diwali during which if the packets are not sent then
there will be losses and the situation was also communicated to the transport company and therefore
loss of profit of Rs.2000 can be recovered from transport company.
Q.49
Mr. X and Mr. Y entered into a contract on 1st August, 2018, by which Mr. X had to supply 50 tons of sugar to Mr. Y at
a certain price strictly within a period of 10 days of the contract. Mr. Y also paid an amount of Rs.50,000 towards
advance as per the terms of the above contract. The mode of transportation availablebetween their places is
roadway only. Severe flood came on 2nd August, 2018 and the only road connecting their places was damaged and
could not be repaired within fifteen days. Mr. X offered to supply sugar on 20th August, 2018 for which Mr. Y did
not agree. On 1st September, 2018, Mr. X claimed compensation of Rs.10,000 from Mr. Y for refusing to accept the
supply of sugar, which was not there within the purview of the contract. On the other hand, Mr. Y claimed for

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refund of Rs.50,000, which he had paid as advance interms of the contract. Analyse the above situation in terms of
the provisions of the Indian Contract Act, 1872 and decide on Y’s contention.
Ans.49
Provision of law:
 This question relates to the provision of Supervening Impossibility under Indian Contract Act, 1872.
 As per the provisions of Indian Contract Act,1872 if after entering into a valid contract some event
happens which makes the performance impossible then such contract becomes void due to
Supervening Impossibility and any party receiving any benefit is bound to restore it to others because
of Supervening Impossibility.
Facts of the case:
 Mr.X and Mr.Y entered into contract on 1st August,2018 where Mr.X had to supply 50 tons of Sugar
to Mr.Y at a certain price strictly within 10 days. Mr.Y also paid advance of Rs.50,000 as per the
terms. The only mode available for transportation was damaged and could not be repaired within
15 days. Mr.X offered to supply sugar on 20-08-2018 to which Mr.Y did not agree. On 1st September
Mr.X claimed Rs.10000 from Mr.Y for refusing to accept sugar which was not in terms of contract.
On the other hand Mr.Y claimed refund of Rs.50000 paid in advance.
Conclusion:
 In this case the contract becomes void due to Supervening Impossibility as the only mode of
transportation was damaged and therefore Y cannot claim damages of Rs.10,000 and he will also
be under obligation to refund advance of Rs.50000 received under void contract.
Q.50
Mr. Ramesh promised to pay Rs.50,000 to his wife Mrs. Lali so that she can spend the sum on her 30th
birthday. Mrs. Lali insisted her husband to make a written agreement if he really loved her. Mr. Ramesh
made a written agreement and the agreement was registered under the law. Mr. Ramesh failed to pay the
specified amount to his wife Mrs. Lali. Mrs. Lali wants to file a suit against Mr. Ramesh and recover the
promised amount. Referring to the applicable provisions of the Contract Act, 1872, advise whether Mrs.
Lali will succeed
Ans.50
Provision of law:
 This question relates to the provision of Natural love and affection under Indian Contract Act,1872.
 Usually the contract to be valid requires consideration from both the parties otherwise as per the
rule of “No Consideration no contract” the agreement will be void. But there are certain exceptions
to this rule, one of such exception is Natural Love and affection.
 In case of Natural Love and affection the contract without consideration is also valid if following
conditions are satisfied:
o It is in writing
o It is registered.
o It is between parties having immediate relation.
o It is out of natural love and affection.
Facts of case:

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  In this case [Link] promised to pay Rs.50,000 to his wife [Link] [Link] insisted to make the
promise in writing and registered if he really loved her and accordingly the promise was made.
[Link] failed to pay the amount.
Conclusion:
 Here in this case promise made by [Link] fulfills all the above conditions and therefore it is valid
under Natural love and affection and [Link] can file a suit against [Link] and recover the
promised amount.
Q.51
A shop keeper displayed a pair of dress in the show room and a price tag of Rs.2,000 was attached to the dress. Ms.
Lovely, looked at the tag and rushed to the cash counter. Then she asked the shop keeper to receive the payment and
pack up the dress. The shop keeper refused to hand over the dress to Ms. Lovely in consideration of the price
stated in the price tag attached to the dress. Ms. Lovely seeks your advice whether she can sue the shop keeper
for the above cause under the Indian Contract Act, 1872.
Ans.51
Provision of Law:
 This question relates to the topic of Invitation to offer under Indian Contract Act, 1872.
 When the goods are displayed with a price tag in a showroom it is an Invitation to offer, when a
customer takes it to cash counter for purchasing the same then it will be offer and when shopkeeper
accepts and makes a bill then it is an acceptance.
Facts of Case:
 A shop keeper displayed a pair of dress in show room and a price tag of Rs.2000 was attached to the
dress. [Link] took the dress to the counter. The shop-keeper refused to hand over the dress to
[Link].

Conclusion:
 Here in this case the display of goods with price tag is considered as Invitation to offer when [Link]
took it to counter she made an offer and contract could not be made till the shop-keeper accepts the
same and therefore shopkeeper has a right to refuse the same.
Q.52
M Ltd. contract with Shanti Traders to make and deliver certain machinery to them by 30.6.2017 for Rs. 11.50
lakhs. Due to labour strike, M Ltd. could not manufacture and deliver the machinery to Shanti Traders. Later,
Shanti Traders procured the machinery from another manufacturer for Rs.12.75 lakhs. Due to this Shanti Traders
was also prevented from performing a contract which it had made with Zenith Traders at the time of their
contract with M Ltd. and were compelled to pay compensation for breach of contract. Advise Shanti Traders the
amount of compensation which it can claim from M Ltd., referring to the legal provisions of the Indian
Contract Act, 1872.
Ans.52:

Provision of law:
 This question relates to the provision of breach of contract and damages.
 If there is a breach of contract then aggrieved party is entitled to claim damages from defaulting
parties and the damages recovered can be in the nature of ordinary damages(available as a direct loss)
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 amounting to the difference of contract price and market price. If there are special circumstances
affecting the case then aggrieved party can claim special damages too provided the aggrieved party has
informed about the circumstances in advance.
Facts of the case:
 M Ltd. Contract with Shanti Traders to make and deliver certain machinery to them by 30.06.2017
for Rs.11.50 lacs. Due to labour strike, M Ltd. Could not manufacture and deliver to Shanti Traders.
Later Shanti Traders procured the machinery from another manufacturer for 12.75 lacs and they
were also prevented from performing a contract which it made with Zenith Traders and were also
liable to pay compensation to them.
Conclusion:
 Here in this case M Ltd. Could not manufacture and deliver due to labor strike. Labor Strike cannot
be considered as absolute impossibility so it will be considered as breach of contract and he will be
liable to following damages.
 Ordinary damages of 1.25 lacs (12.75 lacs-11.5 lacs) and if M Ltd. was informed about the contract
with Zenith Traders then Shanti Traders would also be entitled to recover the compensation paid to
Zenith Limited as Special Damages.
Q.53
Mr. Sohanlal sold 10 acres of his agricultural land to Mr. Mohanlal on 25th September 2018 for Rs.25 Lakhs. The
Property papers mentioned a condition, amongst other details, that whosoever purchases the land is free to
use 9 acres as per his choice but the remaining 1 acre has to be allowed to be used by Mr. Chotelal, son of the seller
for carrying out farming or other activity of his choice. On 12th October, 2018, Mr. Sohanlal died leaving behind his
son and life. On 15th October, 2018 purchaser started construction of an auditorium on the whole 10 acres of
land and denied any land to the son.
Now Mr. Chotelal wants to file a case against the purchaser and get a suitable redressed. Discuss the above in
light of provisions of Indian Contract Act, 1872 and decide upon Mr. Chotelal ‘s plan of action?
Ans.53
Provision of Law:
 This question relates to the provision of Stranger for Consideration.
 As per the provisions of this act the stranger to contract cannot sue but stranger to
consideration can sue the parties to contract as the consideration may be given by promise or
any other person.
Facts of the case:
 [Link] sold the land of 10 acres to [Link] on 25th September,2018 for Rs.25 lacs.
The property papers mentioned a condition that whoever purchases the land is free to use 9
acres as per his choice but remaining 1 acre has to be allowed to be used by [Link], son of
seller for carrying out farming activity of their choice. On 12th October,2018 [Link] died
leaving behind his son. [Link] started construction of auditorium on whole 10 acres land
and denied any land to [Link].
Conclusion:
 Here in this case the consideration was paid to [Link] by [Link] on behalf of
[Link] and therefore [Link] cannot deny the land to [Link].
Q.54
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 Mr. Rich aspired to get a self-portrait made by an artist. He went to the workshop of Mr.C an artist and
asked whether he could sketch the former’s portrait on oil painting canvass. Mr. C agreed to the
offer and asked for ` 50,000 as full advance payment for the above creative work. Mr. C clarified
that thepainting shall be completed in 10 sittings and shall take 3 months.
On reaching to the workshop for the 6th sitting, Mr. Rich was informed that Mr. C became paralyzed and
would not be able to paint for near future. Mr. C had a son Mr. K who was still pursuing his studies and
had not taken up his father’s profession yet?
Discuss in light of the Indian Contract Act, 1872?
1. Can Mr. Rich ask Mr. K to complete the artistic work in lieu of his father?
2. Could Mr. Rich ask Mr. K for refund of money paid in advance to his father?
Ans.54
Provision of law:
 This question relates to the concept of discharge of contract due to operation of law.
 It is provided in the act that if the contract was dependent upon personal skill or confidence
and Promisor dies then such contract will be discharged due to the death of Promisor.
Facts of the case:
 [Link] aspired to get a self-portrait made by an artist. He went to workshop of Mr.C an
artist and asked whether he could sketch the portrait of [Link] Mr.C agreed and asked for
Rs.50,000 as full advance payment for the above creative work. The contract was to
complete the painting in 10 sittings and will take 3 months. On reaching to the workshop for
6th sitting ,[Link] was informed that Mr.C became paralyzed and would not be able to
paint for near future.
Conclusion:
 In this case the contract was depending upon personal skill of Mr.C and it will become void
due to his paralysis.
1. [Link] cannot ask Mr.K to complete the artistic work in lieu of his father as it was
depending upon personal skill and as per contract act if the contract is based on
personal skill then it should be performed by promisor only.
2. [Link] will be able to recover the amount from Mr.K the amount already paid as the
contract of portrait becomes void due to paralysis of Mr.C and as per contract act if the
contract becomes void then any party who has received any benefit under a void
contract is liable to return it to the other party.
Q.55
X found a wallet in a restaurant. He enquired of all the customers present there but the true owner
could not be found. He handed over the same to the manager of the restaurant to keep till the true
owner is found. After a week he went back to the restaurant to enquire about the wallet. The manager
refused to return it back to X, saying that it did not belong to him In the light of the Indian Contract
Act, 1872, can X recover it from the Manager?
Ans.55
Provision of Law:
 This question relates to the concept of finder of goods under Indian Contract Act,1872.
 As per the provision of Contract Act, the person who finds the goods belonging to other is
known as finder of goods.
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  Finder of goods has an authority to keep the goods with him until and unless the true owner
is found and has a duty to find true owner and return him the goods.
Facts of case:
 X found a wallet in restaurant he inquired in restaurant but true owner could not be found
he handed it to manager of restaurant to keep it until true owner is found. After a week he
went back to restaurant to inquire about the wallet. The manager refused to return it back
to him.
Conclusion:
 Here in this case as a finder of goods X has a right to recover the wallet from manager.
Q.56
Mr. Sonumal a wealthy individual provided a loan of Rs. 80,000 to Mr. Datumal on 26.02.2019.
The borrower Mr. Datumal asked, for a further loan of Rs. 1,50,000. Mr. Sonumal agreed but
provided the loan in parts at different dates. He provided Rs. 1,00,000 on 28.02.2019 and
remaining Rs. 50,000 on 03.03.2019.
On 10.03.2019 Mr. Datumal while paying off part Rs. 75,000 to Mr. Sonumal insisted that the
lender should adjusted Rs. 50,000 towards the loan taken on 03.03.2019 and balance as against
the loan on 26.02.2019.
Mr. Sonumal objected to this arrangement and asked the borrower to adjust in the order of
date of borrowing of funds.
Now you decide:
(i) Whether the contention of Mr. Datumal correct or otherwise as per the provisions of the
IndianContract Act 1872?
(ii) What would be the answer in case the borrower does not insist on such order of adjustment of
repayment?
(iii) What would the mode of adjustment/appropriation of such part payment in case neither
[Link] nor Mr. Datumal insist any order of adjustment on their part?
Ans:56
Provision of Law:
 This question relates to the provision of Appropriation of payment under Indian Contract
Act, 1872.
 As per the provisions of Indian Contract Act when there are more than one debt due from
same debtor and he makes a part payment then the amount so paid should be first
appropriated in the manner determined by the debtor if he cannot decide then creditor can
appropriate against any debt and if creditor also cannot decide then it should be
appropriated in the time ratio i.e earlier debt will be relieved first and it can also be a time
barred debt.
Facts of the case:
 In this case [Link] provided a loan of Rs.80,000 to [Link] on [Link]
loan of Rs.1,00,000 on 28.02.2019 and Rs.50,000 on 03.03.2019. On 10.03.2019 [Link]
paid Rs.75,000 with a direction to appropriate Rs.50,000 towards the loan of 03.03.2019
and the balance against loan on [Link] objected the same and asked
borrower to adjust in accordance with time.

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 Conclusion:
1. As per the act the appropriation should be first according to the direction of debtor
therefore contention of [Link] is not correct in this case.
2. If the borrower does not insist on order of adjustment of repayment then [Link] can
appropriate it against any debt which he deems fit.
3. If neither [Link] nor [Link] insist on any order of adjustment of their part then it
should be appropriated in order of time i.e. earlier debt will be relieved first.
Q.57
P sells by auction to Q a horse which P knows to be unsound. The horse appears to be sound but P
knows about the unsoundness of the horse. Is this contract valid in the following circumstances under
the Indian Contract Act, 1872:
a. If P says nothing about the unsoundness of the horse to Q.
b. If P says nothing about it to Q who is P’s daughter who has just come of age.
c. If Q says to P “If you do not deny it, I shall assume that the horse is sound.” P says nothing.
Ans:
Provision of law:
 This question relates to the concept of Silence amounting to fraud.
 Indian Contract Act, 1872, mere silence as to facts likely to affect the willingness of a person to enter into a
contract is not fraud, unless the circumstances of the case are such that, regard being had to them, it is the
duty of the person keeping silence to speak, or unless his silence is, in itself, equivalent to speech..
Facts of Case and conclusion:
 P sells by auction to Q a horse which P knows to be unsound. The horse appears to be
soundbut P knows about the unsoundness of the horse.
 if P says nothing to Q then also the contract is valid mere silence as to the facts likely to affect the willingness
of a person to enter into a contract is not fraud. Here, it is not the duty of the seller to disclose defects.
 If P says nothing about it to Q who is P’s daughter who has just come of age then This contract
is not valid since as per section 17 it becomes P’s duty to tell Q about the unsoundness of the horse because a
fiduciary relationship exists between P and his daughter Q. Here, P’s silence is equivalent to speech and hence
amounts to fraud.
 If Q says to P “If you do not deny it, I shall assume that the horse is sound.” P says nothing
then This contract is not valid since as per section 17, P’s silence is equivalent to speech and hence amounts to
fraud.

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 CHAPTER-2

SALE OF GOODS ACT,1930

Que.1
A agrees to sell a horse to B on a condition that B will keep it for 6 days on Trial Basis and have theoption to
return on the expiry of 6 days, if he does not find it suitable. 3 days after entering into contract, Horse died
without any fault of A or B. Whether contract will be valid or void?
Ans.1
Provision of law:
As per Section 24 of Sale of Goods Act, 1930, When goods are Sold on Sale or Return Basis, Propertyin goods
passes to Buyer when buyer approves/accepts goods by;
1) Express intimation to seller,,
2) Behavior of buyer indicates his approval of goods.
3) Buyer without sending notice of rejection keeps the goods with him beyond a specified time or
reasonable time.
Also as per Section 8 of Sale of Goods Act, 1030, when there is a contract for sale of Specific goods and such
goods destroy before passing property in goods to buyer without any fault of buyer or seller, the contract
becomes Void.
Fact of the Case:
In the given question, A sold to B a horse on sale or return basis for 6 days, however, horse died on 3rd day
without any fault of A or B. it indicates destruction of specific goods before passing property to buyer.
Conclusion:
Considering above Legal provisions and explanation, it is concluded that the contract between A and B is
void as the horse died before the property was passed.
Que.2
P agrees to sell apples to Q at price to be fixed by R. Subsequently, R refuses to value the goods and fix
the price. Whether agreement be valid or void? What will be consequences if R was willing to value the
apples but he was prevented from evaluating by wrongful act of P?
Ans.2
Provision:
As per Section 10 of Sale of Goods Act, 1930, When there is an agreement to sell goods on terms that price
to be fixed by valuation by third party and such third party does not or can not fix the price, the agreement
becomes void. Provided, that if the goods or part of goods were delivered and appropriated to buyer, he
shall pay Reasonable price to seller.
Where the third party is prevented from making valuation by wrongful act of buyer or seller, the
aggrieved party may claim damages from defaulting party.
Fact of the Case:
In the given question, P agreed to sell apples to Q at a price to be fixed by R (a third party) however,R could
not fix the price.
Conclusion:
Accordingly the contract becomes void as R could not fix the price and Property was not passed to Buyer.
However, if R was prevented from making valuation by wrongful act of P, Q may claim damages fromP for
breach of contract.

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Que.3
X sold to Y certain quantities of “foreign refined Oil” warranted equal to sample. The sample consisted of
“foreign refined Oil mixed with Hemp Oil”. The oil was matching with quality of samplebut not as known in
market to be “foreign refined Oil”. Can Y reject goods?
Ans.3 Provision:
As per Section 15 of Sale of Goods Act, 1930, when the goods are sold by sample as well as by description,
there is an implied condition that bulk of goods must correspond with Sample as well as description. If the
goods are matching with quality of sample but not according to description given, or vice versa or both, the
buyer may repudiate (cancel) the contract.

Fact of the Case:

In the given question, X sold to Y “Foreign Refined Oil” warranted equal to sample, it indicates sale by
sample as well as description. And the goods are matching with quality of sample but do not tallywith
description given as it is “foreign refined oil mix with hemp oil”
Conclusion:
Considering above legal provisions and explanations, Y can reject goods by repudiating contract as the goods
matched with sample but did not match with description.
Que.4
K bought a Necklace from a famous Jeweler L at high price thinking it to be of Natural pearl. In fact, the
necklace was of synthetic pearl (of which K was unaware but L was well aware). Whether Kcan cancel the
contract?
Ans. Provision:
As per Doctrine of Caveat Emptor, Buyer needs to be aware while he is selecting the goods. Buyer needs to
make sure that goods are suitable for his purpose. If he is not careful then for wrong / bad selection of
goods by buyer, seller cannot be made responsible. Seller is not under a duty to disclose defects in goods
Fact of the Case:
In the given question, K bought a necklace at high price thinking it to be of natural pearl in fact it was of
synthetic pearl, but it is wrong selection of goods by buyer, where seller is never responsible.
Conclusion:
Considering above provisions, buyer cannot repudiate the contract as he himself is responsible for wrong
selection of goods because he did not disclose the fact that he was purchasing thinking it was Natural
Pearls.
Que.5
N sold whole quantity of oil in his godown. The oil is to be put into casks by seller and then to be taken
away by buyer. Some casks were filled in the presence of the buyer, but before they were removed or
any other can be filled, the godown was caught by fire and whole quantity of oil was destroyed. Who
would bear the loss?

Ans. Provision:
As per Section 21 of Sale of Goods Act 1930, when there a contract for Sale of specific goods which are not in
a deliverable state, property in goods passes to buyer when;
1) seller puts the goods in deliverable state and
2) buyer is communicated about deliverable state of goods.
As per Section 26, Risk follows ownership. It means, the risk of loss of goods is borne by the partywho has
ownership of goods.
Fact of the Case:
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 In the given question, N sold whole quantity of goods to Buyer but the goods were to be put into casks by
seller it indicates sale of specific goods to be put in deliverable state. Some casks were filled in presence of
buyer so its property has been passed to buyer. While remaining is still to be filled so its property has not
been passed to buyer.
Conclusion:
As the whole quantity of oil has been destroyed by fire, the loss of packed goods whose property passed
to buyer, will be borne by buyer and remaining loss will be borne by seller.
Que.6
X given a Car to Y (his mercantile Agent ) stating that the car should not be sold below Rs. 50 0000 to
anyone. Y agreed for the same, but later on he sold the car to Z at Rs.400000 ( who bought it in good faith)
and Y absconded with money. Whether X can recover Car from Z?
Ans. Provision:
As per Proviso to Section 27 of Sale of goods Act 1930, A Sale made by Mercantile agent to buyer willpass
good title to buyer in following circumstances;
1) agent was in possession of goods with consent of owner,
2) the sale was made by agent acting in ordinary course of business and
3) buyer bought goods in good faith, without having any notice about no authority of seller tosell
goods.
Fact of the Case:
In the given question, Y agent of X, sold car to Z (below Rs.500000, instead of instruction by X non to sell
below Rs.500000) who bought the goods in good faith, the sale is treated as valid.
Conclusion:
Considering above provisions, X cannot recover Car from Z as Z has got good title over goods because he
Purchased from an agent and that too without knowledge of restriction on Agent’s authority.
Que.7
P sold certain goods to Q to be paid immediately. P sold the goods through railway sending Railway receipt
to Q. Q became Insolvent while the goods are in transit. He assigns the Railway receipt to R, who does not
know that Q is insolvent. P being Unpaid seller, want to exercise right ofstoppage in transit. Advise whether
P can stop goods in transit?
Would your answer change if R was aware about Q’s insolvency before assignment of railway receipt?
Ans. Provision:

As per Section 53 of Sale of Goods Act 1930, Unpaid seller’s Right of Lien or Stoppage in transit is notaffected
by Buyer selling or pledging goods to another person. It means, Unpaid seller may exercise Right of Lien or
Stoppage in transit even if buyer resold or pledged goods to another person.
However, the right of lien or Stoppage in transit is Lost in following exceptional situations;
1) where the seller has assented to buyer for re-sell or pledge of goods,
2) where another buyer bought goods in good faith and obtained document of title in his
name.
Fact of the Case:
In the given question, as R was unaware about Q’s insolvency at time of assignment of Railway Receipt,
it can be said that R bought in good faith and also he has obtained Document of title, Conclusion:
In case R was not aware about Q’s insolvency then P will not have any right to stop goods in transit.
However, if R was aware about Q’s insolvency at time of assignment of railway receipt, it is indicated that R
did not acquire in good faith. So P can stop goods in transit as his rights remains unaffected.
Que.8

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A made a bid at auction for old car. But before fall of hammer, A withdrew his bid. Still the auctioneer
continued with bid and compelled him to buy goods, as there was a pre-condition in auction that “bid once
made shall not be withdrawn”. Whether A can be compelled to buy goods?
Ans.
Provision:
As per Section 64 of Sale of Goods Act 1930, Auction sale completed when auctioneer announce its
completion by fall of hammer or any other manner, however, bidder may retract (withdraw) his bid before
announcement of sale by auctioneer.
Fact of the Case:
In the given question, A had withdrawn his bid before fall of hammer by auctioneer which is his right as per
rules of Auction.
Conclusion:
Considering above provisions and explanation, auctioneer cannot compel him to buy goods as it is permitted
under the Act even if there was a pre-condition in auction that the bid made once will not be able to be
withdrawn.
Que.9
State whether the following is a ‘Sale’ or an ‘agreement to sell’ :
(a) X agrees to buy from Y a hay - stack on Y's land, with the liberty to come to Y's land to take it
away.
(b) X agrees to buy 1,000 litres of coconut oil from Y's cistern. Y has many cisterns with more than 1,000
litres in them.
Ans :
Provision:
As per Section 4(3) of Sale of goods Act 1930, “Where under a contract of sale, property in goods is
transferred from seller to buyer, the contract is called a Sale” But “Where the property in goods is totake place
at some future time or subject to some condition thereafter to be fulfilled, the contract is called Agreement to
sell”
Fact of the Case and conclusion:
In situation (a) Y has given full liberty to X to come to his land to take Hay stack at any time, it
indicates passing of property to X immediately, so it is Sale.
In situation (b) Y has many cisterns with more than 1000 litres of oil out of which 1000 litre oil is to be
bought by X but goods have not been identified specifically, it indicates the contract of sale of
Unascertained goods. So it is Agreement to Sell.
Q.10
A bought a motor car from B. He used it for 3 months and thereafter the car was detected to havebeen
stolen. A was compelled to return it to the true owner. Could A recover the sale price from B?
Ans :
Provision:
This question relates to the concept of Implied Condition as to title. There is an Implied Condition in case of
sale of goods that Seller must have the ownership of goods or he must have the authority to sell the goods
on behalf of owner that means he must have authority to pass the title of owner to buyer if the seller cannot
pass the title of owner to buyer then in breach of condition Buyer may either repudiate contract or claim
damages or both.
Fact of the Case:
In the given question, B sold a car to A which was stolen by him, it indicates that seller had no rightto sell
the car (No title to goods)
Conclusion:

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 Considering above provisions and explanation, it may be concluded that Mr.B sold the car to Mr.A but he
could not pass the title of owner to Mr.A and therefore Mr.A can repudiate contract and can claim refund.
Q.11
M at Calcutta sold to N 20 bags of waste ‘silk’ then on their way from Murshidabad to Calcutta. But
when the bags reached N, he found that they contained waste silk no doubt but not of the quality he
had in view. Would N be entitled to reject the goods ?
Provision:
As per section 15 of Sale of Goods Act 1930, when there is a contract of sale by description, there is implied
condition that goods shall correspond with description. However, as per Doctrine of Caveat Emptor, the
buyer is responsible for selection of goods which as per his required quality and fitness. If the goods
correspond with description but not of quality as the buyer had in mind then he cannot blame seller.
Fact of the Case:
In the given question, N bought “Waste Silk” from M. When goods reached it found to be Waste Silk.
i.e. it was as per description given in contract of sale. However buyer wish to reject goods on basis of quality
as they did not match with his imagined quality.
Conclusion:
Considering above provisions and explanation, it may be concluded that N Is not entitled to reject
goods based on doctrine of Caveat Emptor.
Que.12
A contracts to sell Java Sugar according to the sample produced by him on the delivery of the sample to
B, the buyer. It transpires that the sugar matches with sample but is not Java Sugar. Will B be entitled to
any remedies?
Ans :
Provision:
As per Section 15 of Sale of Goods Act, 1930, when the goods are sold by sample as well as by description,
there is an implied condition that bulk of goods must correspond with Sample as well as description. If the
goods are matching with quality of sample but not according to description given, or vice versa or both, the
buyer may repudiate (cancel) the contract.
Fact of the Case:

In the given question A sold Java sugar to B equal to sample shown to him, so sugar must be as persample as
well as it should be java sugar (description) However, sugar match with sample but was not Java sugar.
Which indicates that goods do not match with description.
Conclusion:
Considering above provisions and explanation, it may be concluded that B will be entitled to reject the
goods and claim damages.
Que.13
X enters into a druggist's shop and asked for a hot water bottle. He is shown a bottle which the
proprietor of the shop say will not stand boiling water, but it is meant for hot water.
X buys the bottle, and one day while using it, it bursts and injures X. It is proved that the bottle wasnot
fit for use as a hot water bottle. Is the seller liable to damages for breach of warranty?
Ans :
Provision:

As per Section 16(1) of Sale of Goods Act 1930, ordinarily there is no implied condition as to Qualityor
fitness for buyer’s purpose. However, the condition as to reasonable fitness of goods for particular purpose
may be implied if it is made known to seller.
Fact of the Case:
In the given question, X asked for hot water bottle from Druggist which druggist sold to X saying it will stand
Navkar Institute 34 Business Laws-Complier
hot water. However, the bottle burst while using it instead of using hot water into it.
Accordingly it shows that seller has provided goods which are not suitable for the purpose.
Conclusion:
Considering above provisions and explanation, it may be concluded that Seller is liable for damages due to
injury to buyer as the goods were not fit for the purpose for which it was purchased.
Que.14
There was a sale by sample on the 5th May, of two parcels of rice containing 500 and 100 bushels
respectively. When, on the 12th May, the buyer went to examine the bulk, the parcel containing 500
bushels was shown to him but the seller refused to show him the other parcel which was not then in the
godown. On this account the buyer rescinded the whole contract. Could he do so?

Ans :
Provision:
As per Sale of Goods Act if the goods are purchased by way of Sample then there is an implied condition
that Goods must correspond with sample and buyer must be given an opportunity to match the bulk with
sample.
Fact of the Case:
In the given question, there was a contract to sell two parcels containing 500 and 100 bushels by a single
transaction and buyer was given an opportunity to examine the parcel of 500 bushels but not of 100 bushels.
Conclusion:
Considering above provisions and explanation, buyer is entitled to reject the whole lot as there was a single
transaction and buyer was not given opportunity to check the 100 bushels.
Que.15
X contracts to sell a stack of hay to Y, to weigh and deliver it at `100 per tonne. A part of it was weighed
and taken away but before anything more could be done a flood carried away the remainder. On whom
will the loss as regards the reminder fall ?
Ans :
Provision:
As per section 22 of Sale of goods act 1930, when there is a contract for sale of specific goods in deliverable
state but seller has to weigh, test, measure or do something with reference to goods forascertainment of
price, property in goods passes only when such thing is done and buyer has notice of it.
Fact of the Case:
In the given question, X agrees to sell to Y a stack of hay to be weighted and delivered to Y at Rs.100 per
ton. However, some of goods were weighted and delivered to Y but remaining goods were destroyed by
flood before remaining could be weighted or delivered. So it indicates destruction of goods before passing
property to buyer.
Conclusion:
Considering above provisions and explanation, it may be concluded that loss as regards remainder will fall on X
as property in goods has not passed to buyer.
Que.16
In the pursuance of a contract to fill 20 bags of sugar out of a large quantity, the seller filled four bags
which the buyer takes away. Subsequently, the seller filled 16 more bags, informed the buyer of this and
requested him to take them away. The buyer promised to do so. Did the property in the 16 bags of sugar
pass to the buyer?
Ans :
Provision:
As per Section 21 of Sale of Goods Act 1930, when there a contract for Sale of specific goods whichare not in
Navkar Institute 35 Business Laws-Complier
 a deliverable state, property in goods passes to buyer when;
1) seller puts the goods in deliverable state and
2) buyer comes to know about deliverable state of goods.
Fact of the Case:
In the given question, seller had filled remaining 16 bags and informed buyer about it where buyer hadalso
promised to take delivery of them. So it indicates that goods have been in deliverable state and buyer has
notice of it.
Conclusion:
Considering above provision and explanations, it may be concluded that property in goods has passed
to buyer.
Q.17
A agrees to purchase bales of paper from B at Madras. The goods are sent by railway, delivery to be against
payment by A through bank. A paid the amount and obtained a delivery order.
But the goods had been destroyed by fire before he had paid the amount. Has the property in the goods
passed to A?
Ans:
Provision:
As per section 25 (1) of Sale of goods act 1930, when the seller has appropriated goods to buyer subject to
fulfilment of certain conditions, seller is said to have reserved right of disposal where the property in goods
passes to buyer only when such condition is fulfilled. Also as per sub section 2 of section 25 when seller has
delivered goods through railway, but goods deliverable at order of seller, seller is deemed to have reserved
right of disposal.
Fact of the Case:
In the given question, B has sent goods through railway but delivery to be against payment by A through bank
which indicates reservation of right to disposal by seller. Goods had been destroyed before payment of price.
Conclusion:
Considering above provisions and explanation, it may be concluded that property in goods has not passed
to A
Que.18
The defendant purchased 975 bales of rice being the whole contents of a “Gola”, paid earnest money and
took part delivery of rice. The rest was afterwards destroyed by fire. Would the defendant be liable to pay
the balance of the price in respect of the goods destroyed?
Ans:
Provision:
As per Section 20 of Sale of Goods Act,1930, when there is Unconditional contract for sale of specific goods
in deliverable state, property in goods passes to buyer at time of contract irrespective of delivery or
payment or both have been postponed.
Fact of the Case:
In the given question, there is a sale of 975 bales of rice which are in deliverable state and there is no
condition for transfer of property in goods. Buyer has took part delivery but property has been passed for
total goods.
Conclusion:
Considering above provisions and explanation, it may be concluded that buyer would be liable to payfor
remaining goods as property has been passed to him.
Que.19
A manufacturing jeweller delivers cartain articles of jewellery to B (whose business is to travel about
the country selling jewellery) upon the term that they should remain the property of A until sold or paid
for. B fraudulently pledges the jewellery with a pawn-broker and money lender. Is thepledge valid ?
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 Provision:
As per section 30(2) of Sale of Goods Act 1930, when buyer has obtained possession of goods with consent of
seller before passing property to him, he may sell or pledge goods to third person, and ifsuch third person
takes goods in good faith and without knowledge of right of lien of seller over goods, such third person gets
good title to goods.
Fact of the Case:
In the given question, B had obtained delivery of Jewelry with A’s consent before passing property which
he pledged to Pawn broker and money lender. However, money lender obtained it in good faith.
Conclusion:
Considering above provisions and explanation, it may be concluded that pledge by buyer is valid.
Q.20
A, B, and C own certain cattle in common. A is left by B and C in possession of a cow which he sells to D. D
purchases it bona fide. Is the property in the cow transferred to D?
Ans:
Provision:
As per section 28 of Sale of Goods Act 1930, if one of joint owner of goods having sole possession of goods
with consent of other owners, sells goods to third party who buy goods in good faith and without notice
that seller had no authority to sell goods, such third person gets good title to goods. Fact of the Case:
In the given question, A B and C owned certain cattles of which one of Cow is left with A by B and C. when A
sold cow to D who bought in good faith.
Conclusion:
Considering above provisions and explanation, it may be concluded that property in goods has passed to D.
Q.21
P agrees to sell and deliver to Y 300 quintals of rice, but only 200 quintals are delivered. Y has the rice
weighed and accepts the quintals sent. Y afterwards objects that the whole of the 300 quintals was not
delivered and he refuses to pay for 200 quintals. Can Y be compelled to pay the price for 200 quintals ?
Ans :
Provision:
As per section 34 of Sale of goods act 1930, Delivery of part of goods with intention to have partdelivery of
goods by seller, is not valid delivery. So buyer have option to reject goods delivered. However, if Buyer accept
the part delivery of goods he has to pay for the goods so accepted.
Fact of the Case:
In the given question, there was contract to sell 300 quintals of rice however seller sent only 200 quintals of
rice which amounts to part delivery of goods. However, buyer accepted such part delivery of 200 quintals of
rice.
Conclusion:
Considering above provisions and explanation, it may be concluded that buyer has accepted part delivery of
200 quintals of rice, so he has to pay for goods accepted by them.
Q.22
There was a sale of 25 tonnes of cloves for October/November shipment. The seller shipped 20 tonnes in
November and 5 tonnes in December. Would the buyer be entitled to reject the whole 25tonnes ?
Ans:
Provision:
As per section 34 of Sale of goods act 1930, Delivery of part of goods with intention to have partdelivery of
goods by seller, is not valid delivery. So buyer have option to reject goods delivered. Fact of the Case:
In the given question, seller delivered 25 tons of cloves in two parts as 20 tons in November and
balance 5 tons in December which amounts to part delivery of goods.

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 Conclusion:
Considering above provisions and explanation, it may be concluded that there is a part delivery ofgoods
which can be rejected by buyer.
Q.23
There was a sale of 100 tonnes of paper to be shipped as early as possible by named ship or other vessels.
The named ship was not available and the seller shipped 50 tonnes on other ship, informing the buyer that
he has done so and that he had drawn on him for the price and proposing to ship the remainder of the
paper later. The buyer kept silent on this communication. The ship was lost. The seller brought an action
against the buyer for the price of 50 tonnes. Would he succeed?
Ans.
Provision:
As per section 34 of Sale of goods act 1930, Delivery of part of goods with intention to have partdelivery of
goods by seller, is not valid delivery. So buyer have option to reject goods delivered. However, if Buyer accept
the part delivery of goods he has to pay for the goods so accepted.
Fact of the Case:
In the given question, there was a contract to sell 100 tons of papers to be delivered as soon as possible.
However, seller delivered only 50 tons of paper and informed buyer about the same. At this
communication, buyer remained silent which indicates his acceptance of delivery of 50 tons. Conclusion:
Considering above provisions and explanations, it may be concluded that buyer is liable to pay for 50 tons of
papers which has been lost, as property in goods has passed to him.
Q.24
B (a London merchant) places an order with A (a Bombay merchant) for 100 bales of cotton. B sends his
ship to Bombay for cotton. A delivers the cotton on board the ship, and takes bill of lading from the master,
making the cotton deliverable to A's order or assigns. The cotton arrived at London, but before coming
into B's possession, B becomes insolvent. The cotton has not been paid for. Can A stop the cotton?
Ans :
Provision:
As per section 50 of Sale of goods Act 1930, when buyer becomes insolvent while the goods are in course of
transit, the seller may stop goods in transit and resume back the possession of goods.
Fact of the Case:
In the given question, A sent goods through ship sent by B, but made goods deliverable at A’s order and at
the time B became insolvent while goods were in transit
Conclusion:
Considering above provision and explanations, it may be concluded that seller may exercise right of stoppage
in transit.
Q.25
1. X purchased a VCR at a public auction. Neither the auctioneer nor X knew at that time that the VCR
was a stolen property.
(a) Has the true owner any claim against (i) X or (ii) the auctioneer?
Ans :
Provision:
As per section 14(a) of Sale of Goods Act, 1930, In every contract of sale, there is an impliedcondition on the
part of seller that;
I) in case of sale, the seller has a right to sell goods and
II) in case of agreement to sell, he will have a right to sell goods at time when property is to pass.
Fact of the Case:
In the given question, Auctioneer sold goods in auction to X which were stolen goods (about which
Navkar Institute 38 Business Laws-Complier
 Auctioneer or X were not aware). So the contract of sale in auction of stolen goods is not giving any title of
owner to X.
Conclusion:
Considering above provisions and explanation, it may be concluded that True owner can recover VCR back
from X.
Q.26
Mr. Samuel agreed to purchase 100 bales of cotton from Mr. Varun, out of his large stock and sent his
men to take delivery of the goods. They could pack only 60 bales. Later on, there was an accidental fire
and the entire stock was destroyed including 60 bales that were already packed. Referring to the
provisions of the Sale of Goods Act, 1930 explain as to who will bear the loss and towhat extent?
Ans :
Provision:
As per Section 21 of Sale of Goods Act 1930, when there a contract for Sale of specific goods whichare not in
a deliverable state, property in goods passes to buyer when;
1) seller puts the goods in deliverable state and
2) buyer comes to know about deliverable state of goods.
As per Section 26, Risk follows ownership. It means, the risk of loss of goods is borne by the party who
has ownership of goods.
Fact of the Case:
In the given question, there was a contract for sale of 100 bales of cotton to be packed and deliveredto
buyer. However, seller could pack only 60 bales in presence of buyer’s agent so its ownership has been
passed to buyer, but remaining goods were still not packed so its ownership is not passed to buyer.
Conclusion:
Considering above provisions and explanations, it may be concluded that loss of 60 bales of cotton which
were packed will be borne by [Link] ( Buyer) and loss of remaining 20 bales of cotton which were not
packed will be borne by [Link] (seller).
Q.27
Ram consults Shyam, a motor-car dealer for a car suitable for touring purposes to promote the sale of his
product. Shyam suggests ‘Maruti’ and Ram accordingly buys it from Shyam. The car turnsout to be unfit for
touring purposes. What remedy Ram is having now under the Sale of Goods Act, 1930?
Ans :
Provision:
As per Section 16(1) of Sale of Goods Act 1930, ordinarily there is no implied condition as to Qualityor fitness
for buyer’s purpose. However, the condition as to reasonable fitness of goods for particular purpose may be
implied if it is made known to seller.
Fact of the Case:
In the given question, Ram bought Maruti car to be fit for touring purpose, on suggestion of Shyam, a motor
car dealer. However car to be not fit for touring purpose.
Conclusion:
Considering above provisions and explanation, it may be concluded that Ram may reject Car by cancelling
contract and claim price back from Shyam.

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Navkar Institute 39 Business Laws-Complier

 CHAPTER-3
INDIAN PARTNERSHIP ACT 1932
Q-1
A and B were two partners in a firm of sugar dealers. Unknown to B, A supplies at a particular time his own
stock of sugar to the firm at market price and makes profit. Can he personally keep this profit?
Ans-1
Provision:
Subject to contract between the partners,
(a) If a partner derives any profit for himself from any transaction of the firm, or from the use of the property
or business connection of the firm or the firm name, he shall account for that profit and pay it to the firm;
(b) If a partner carries on any business of the same nature as and competing with that of the firm, he shall
account for and pay to the firm all profits made by him in that business.
Fact of case:
In the given case, A made a personal profit by supplying own stock of sugar to the firm at market price and
made personal profit. And these are the same goods in which firm deals, so it is considered as personal profit
earned by partner from competing activity.
Conclusion:
Considering above provision and fact of the case, it may be concluded that A can not keep personal profit
earned by him.
Q-2
A and B, co owners of a house, let it to a paying guest. They divide the net rents between them. Are they
partners?
Ans-2
Provision:
The sharing of profits or of gross returns arising from property by persons holding a joint or common interest
in that property does not of itself make such persons partners. As discussed earlier, sharing of profit is an
essential element to constitute a partnership. But, it is only prima facie evidence and not conclusive evidence,
in that regard.
Fact of case:
In the given question A and B are dividing net rents between them by letting a house on rent to paying guest,
which is not sufficient to determine partnership between them.

Conclusion:
Considering above provision and fact of case, it may be concluded that A and B are not partners but just co-
owners of a house
Q-3
X,Y and Z carry on business on partnership basis. A to whom they sent goods for sale on commission basis,
secretly allows Z a share in the commission, which he receives in consideration of Z’s using his influence to
send goods to him. X and Y come to know of the secret deal of Z. X and Y ask Z to account for the
commission and share it with them, but Z refuses. Decide.
Ans-3:
Provision:
Subject to contract between the partners,
(a) If a partner derives any profit for himself from any transaction of the firm, or from the use of the property
or business connection of the firm or the firm name, he shall account for that profit and pay it to the firm;
Navkar Institute 40 Business Laws-Complier
(b) If a partner carries on any business of the same nature as and competing with that of the firm, he shall
account for and pay to the firm all profits made by him in that business.
Fact of case:
In the given case, Z is earning commission from A by using his influence to send more goods to A from firm, so
it indicates secret profit earned by partner using firm’s properties.
Conclusion:
Considering above provision and fact of the case, it may be concluded that Z has to account for the
commission earned by him to firm.
Q-4
D, J and A are only partners in a firm. They decide to dissolve the partnership with effect from 1st
April,1988. The partners do not give a public notice of the dissolution, but continue the business. During the
course of business, D, J and A endorse certain Bills of Exchange of the partnership to a third party M, who
was not aware of the dissolution. M, the third party, had supplied certain stationery to the firm. The Bills of
Exchange are dishonored. The third party M wants to claim the money.
Decide: Whether the firm will be liable to pay for the bills of exchange?
Ans – 4
Provision:
partners continue to be liable as such to third parties for any act done by any of them which would have been
an act of the firm if done before the dissolution, until public notice is given of the dissolution:
Provided that the estate of a partner who dies, or who is adjudicated an insolvent, or of a partner who,not
having been known to the person dealing with the firm to be a partner, retires from the firm, is notliable
under this section for acts done after the date on which he ceases to be a partner.
(2) Notices under sub section (1) may be given by any partner
Fact of the case:
In the given case, the firm was dissolved by partners on 1st April 1988 without giving public notice, So third
party M supplied certain stationery items to firm against Bill of Exchange which was dishonoured. Here, M was
not aware about dissolution of firm.
Conclusion:
Considering above provision and fact of case, it may be concluded that firm will be liable to pay to M on
dishonor of bill of exchange.
Q-5
A, B and C are partners in a firm called ABC. A, with the intention of deceiving D, a supplier of office
stationery, buys certain stationery on behalf of the ABC firm. The stationery is of use in the ordinary course
of the firm’s business. A does not give the stationery to the firm, instead brings it to his own use. The
supplier D, who is unaware of the private use of stationery by A, claims the price from the firm. The firm
refuses to pay for the price, on the ground that the stationery was never received by it. Decide: Whether
the firm’s contention is tenable?
Ans-5
Provision:
a partner acting within his apparent authority receives money or property from a third party and misapplies it,
or
a firm in the course of its business receives money or property from a third party, and the money or property
is misapplied by any of the partners while it is in the custody of the firm, the firm is liable to make good the
loss.
Fact of case:
In the given case, A bought certain stationery from D on behalf of firm which is in ordinary use of office of firm,
however A did not give stationery to firm but used it for personal purpose. Here, the act done by A was within
his implied authority and it was in ordinary course of business of firm.
Conclusion:
Navkar Institute 41 Business Laws-Complier
Considering above provisions and fact of case, it may be concluded that firm’s contention about not paying
price of stationery to D as firm did not receive stationery items is not tenable.

Q-6
Ram and Kishan were partners in a business as suppliers of leather goods and they were regular contractors
to the Government. Kishan, without the knowledge of Ram, supplied to the Government certain leather
goods in which the firm was also dealing and made substantial profits. Can Ram claim the profit earned by
Kishan? Explain.
Ans-6
Provision:
Subject to contract between the partners,
(a) If a partner derives any profit for himself from any transaction of the firm, or from the use of the property
or business connection of the firm or the firm name, he shall account for that profit and pay it to the firm;
(b) If a partner carries on any business of the same nature as and competing with that of the firm, he shall
account for and pay to the firm all profits made by him in that business.
Fact of case:
In the given case, Ram and Kishan were partners in a business of supplying leather goods. Kishan supplied
leather goods to Government without knowledge of Ram and made substantial profit, which indicates earning
personal profit from competing activity.
Conclusion:
Considering above provision and fact of case, it may be concluded that Ram can claim profit earned by Kishan.
Q-7
A and B are partners in a firm dealing in cloth. A placed an order in the firm’s name and on the firm’sletter
pad for five bags of wheat to be supplied at his residence. Is the firm liable to pay the price ofwheat?
Ans-7
Provision:
The partners are jointly and severally responsible to third parties for all acts which come under the scope of
their express or implied authority. This is because that all the acts done within the scope of authority are the
acts done towards the business of the firm. The expression ‘act of firm’ connotes any act or omission by all the
partners or by any partner or agent
of the firm, which gives rise to a right enforceable by or against the firm. Again in order to bring a case under
Section 25, it is necessary that the act of the firm, in respect of which liability is brought to been forced against
a party, must have been done while he was a partner
Fact of case:
In the given case, the firm is dealing in cloth while A bought what in the firm name to be delivered at his
residence, it indicates the act is not within A’s authority
Conclusion:
Considering above provision and fact of case, it may be concluded that firm is not liable to pay for wheat.
Q-8
A and B were partners in a firm dealing in purchase and sale of cloth. B started cloth manufacturing business
individually. Can A ask B to share the profits of cloth manufacturing business with him?
Ans-8
Provision:
Subject to contract between the partners,
(a) If a partner derives any profit for himself from any transaction of the firm, or from the use of the property
or business connection of the firm or the firm name, he shall account for that profit and pay it to the firm;
(b) If a partner carries on any business of the same nature as and competing with that of the firm, he shall
account for and pay to the firm all profits made by him in that business.
Fact of case:
Navkar Institute 42 Business Laws-Complier
In the given case, A and B are in partnership dealing in purchase and sale of cloth, while B has started cloth
manufacturing business individually, which is not competing with firm.
Conclusion:
Considering above provision and fact of case, it may be concluded that A can not ask B to share profit of cloth
manufacturing business with him.
Q-9
A, B and C are partners of an unregistered firm. D owes this firm 1,000 on a contract. The firm files a suit
against D. The suit is dismissed for non registration of the firm. The firm is registered later on. Can the firm
now successfully bring the suit against D?

Ans-9
PROVISION:
The firm or any other person on its behalf cannot bring an action against the third party for breach of contract
entered into by the firm, unless the firm is registered and the persons suing are or have been shown in the
register of firms as partners in the firm. In other words, a registered firm can only le a suit against a third party
and thepersons suing have been in the register of firms as partners in the firm.
Fact of case:
Firm’s case was firstly disallowed as it was unregistered but later on firm got registered and then suit was filed
against D for sum of Rs.1000. here, the firm is registered at the time of fresh suit.
Conclusion:
Considering above provision and fact of case, it may be concluded that firm can successfully bring suit against
D.
Q-10
A, B and C were partners in a share broker’s firm. X, a customer of the firm, delivered certain securities to
the firm for sale. A and B sold away the securities without the knowledge of C and misappropriated the
money. Who will be held liable to X for the payment of the price of securities?
Ans-10
Provision:
a partner acting within his apparent authority receives money or property from a third party andmis applies it,
or
a firm in the course of its business receives money or property from a third party, and the money or property
is misapplied by any of the partners while it is in the custody of the firm, the firm is liable to make good the
loss.
Fact of case:
In the given case, A and B sold securities given by customer X without knowledge of C and misappropriated
the money. However, the act of selling securities is within apparent authority of partners.
Conclusion:
Considering above provision and fact of case, it may be concluded that whole firm will be liable to pay price of
securities to X.
Q-11
A and B purchased a taxi to ply in partnership. They plied the taxi for a year when A, without the consent of
B, disposed of the taxi. B brought an action to recover his share in the sale proceeds. A resisted B’s claim on
the ground that the firm was not registered. Will B succeed in his claim?
Ans-11
Provision:
Non registration of a firm does not effect the following rights:
1. The right of third parties to sue the firm or any partner.
2. The right of partners to sue for the dissolution of the firm or for the settlement of the accounts of a
dissolved firm, or for realization of the property of a dissolved firm.
Navkar Institute 43 Business Laws-Complier
3. The power of an Official Assignees, Receiver of Court to release the property of the insolvent partner and to
bring an action.
4. The right to sue or claim a set off if the value of suit does not exceed ‘ 100 in value.

Fact of case:
In the given case, sale of taxi by A put the firm to an end, so it indicates dissolution of firm and B wish to claim
his share of sale proceed from A.
Conclusion:
Considering above provision and fact of case, it may be concluded that B will succeed in his claim to get his
share of sale proceed from A.
Q-12
Kumar, Kishore and Krishna are partners in a business. Kumar is entitled, according to the terms of the
Partnership deed, to 3/8 th of the partnership property and profits. Kumar retires from the firm. Kishore
and Krishna continue the business under the name of the firm, without paying out the share of Kumarin the
assets of the firm or settling account with Kumar. Is Kumar entitled to any profits of the firm made after the
date of his retirement?
Decide stating the provisions of the Indian Partnership Act in this regard.
Ans-12
Provision:
A Partner is entitled to receive either Interest @6% p.a. on outstanding balance of retiring partner Or his share
of profit for all future profit earned by firm after his retirement until the outstanding balance is settled. The
choice between interest or profit sharing remains with retiring partner.
Fact of case:
In the given case, Kumar has retired from firm and remaining partners have continued business in firm name
without settling Kumar’s claim.
Conclusion::
Considering above provision and fact of case, it may be concluded that Kumar is entitled to profit of the firm
made after his retirement until his claim is settled by partners.
Q-13
‘A’ is a publisher; he agrees to publish at his own expense a book written by ‘B’ and to pay ‘B’ half of the net
profits. Does this create a relationship of partnership between A and B? Give reasons.
Ans-13
Provision:
Sharing of profit is Prima facie evidence of existence of partnership while Mutual agency is conclusive
evidence of existence of partnership. To check existence of partnership between persons, profit sharing is not
only sufficient, Mutual agency is cardinal principle of law and very helpful in reaching conclusion about
existence of partnership.
Fact of case:
In the given case, A is publisher of book. He bears all expenses and only half of profit is shared with B. The
facts are not sufficient to determine existence of partnership. Mutual agency element needs to be verified for
existence of partnership which seems missing in the case.
Conclusion:
Considering above provision and fact of case, it may be concluded that there is no partnership relation
between A and B.

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.

CHAPTER-5
COMPANIES ACT, 2013

Q.1
ABC Pvt. Ltd., is a Private Company having five members only. All the members of the company were going by car to Mumbai in
relation to some business. An accident took place and all of them died. Answer with reasons, under the Companies Act, 2013
whether existence of the company has also cometo the end?
Ans:
Provision:
As per provisions of companies act, 2013 , a company has perpetual Existence which means death or
insolvency of all members doesn’t impact of existence. Of company
Facts of Case:
Here in this case 5 members of ABC, a private company we are going by a car and all of them died in an
accident.
Conclusion:
Existence of company I will not come to end as per the provisions of Companies Act, Because by operation of
law either legal representative or nominee will become the new member.
Q.2
The Articles of Association of XYZ Ltd. provides that Board of Directors has authority to issue bonds provided such issue is
authorized by the shareholders by a necessary resolution in the general meeting of the company. The company was in dire
need of funds and therefore, it issued the bonds to Mr. X without passing any such resolution in general meeting. Can Mr. X
recover the money from the company?Decide referring the relevant provisions of the Companies Act, 2013.
Ans:
Provision:
As per companies act, 2013, an outsider is presumed to know about Public documents but not about internal
affairs or irregularities of the company.
Facts of Case:
In present case Board of directors of XYZ LTD had authority to issue bonds after shareholders resolution.
Company [Link] need of funds, so directors issued bonds to Mr X without resolution.
Conclusion:
The facts of case are similar to Royal British Bank vs Turquand where court enforced the repayment of bonds
despite the irregularities in issue.
Hence in present case xyz limited is liable to repay Mr X the amount of bonds issued.
Q.3
Krishna, an assessee, was a wealthy man earning huge income by way of dividend and interest. He formed three Private
Companies and agreed with each to hold a bloc of investment as an agent for them. The dividend and interest income
received by the companies was handed back to Krishna as a pretended loan. This way, Krishna divided his income into three
parts in a bid to reduce his tax liability.
Decide, for what purpose the three companies were established? Whether the legal personality of all the three companies
may be disregarded.
Ans:
Provision:
As Per Companies Act, there lies, corporate veil, which separate identity of company from its members.
However this veil can be lifted whn for protection of revenue of government.

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Facts of Case:
In present case Krishna is a wealthy man, earning huge interest and dividend. He didn't want to pay the tax so
he created three companies and transfer the income into these companies. He taken back the amount as
pretended loan. He did it to reduce his tax obligation.
Conclusion:
The facts of the case are similar to Dinshaw Maneckjee Petit, where Court disregarded separate identity of
Companies which Dinshaw created to avoid tax obligation.
Krishna created companies to avoid his tax obligation
In this case companies created by Krishna will not be treated as separate entities , their legal personalities will
be disregarded. Krishna's income will be clubbed with income of these companies.
Q.4
The Object Clause of Memorandum of Association of ABC Pvt. Ltd. authorised the company to carry onthe business of trading
in Fruits and Vegetables. The Directors of the company in recently concluded Board Meeting decided and accordingly, the
company ordered for fish for the purpose of trading. FSH Limited supplied fish to ABC Pvt. Ltd. worth Rs. 36 Lakhs. The
members of the company convened an extraordinary general meeting and negated the proposal of the Board of Directors on
the ground of ultra vires acts. FSH Limited being aggrieved of the said decision of ABC Pvt Ltd. seeks your advice. Advice
them
Ans:
Provision:
As per Companies Act, a company can only enter into the contracts which are within its scope given by it's
memorandum of association. Any contract beyond the memorandum is is ultra virus and always
unenforceable.
Facts of case:
In present case the object clause of memorandum of ABC Private limited authorised to the company to carry
on business of of trading in fruits and vegetables. The director of company e entered into a contract with fsh
limited for supply of fish World rupees 36 lacs. The members objected the same
Conclusion:
It was held in case of Ashbury railway vs Riche that any contract beyond powwer of memorandum is bnull
annd void.
Hence here FSH limited won’t be able to enforce ABC for payment neither it can claim damages, since the
contract was ultra vires.
Q.5
FAREB Limited was incorporated by acquisition of FAREB & Co., a partnership firm, which was earlier involved in many illegal
activities. The promoters furnished some false information and also suppressed some material facts at the time of incorporation
of the company. Some members of the public (not being directors or promoters of the company) approached the National
Company Law Tribunal (NCLT) against the incorporation status of FAREB Limited. NCLT is about to pass the order by directing
that theliability of the members of the company shall be unlimited.
Given the above, advice on whether the above order will be legal and mention the precaution to be taken by NCLT before
passing order in respect of the above as per the provisions of the Companies Act, 2013.
Ans:
Provision:
As per companies Act, when a company is created on basis of submission of false information or fraud, then
Registrar may punish people involved information of company. The tribunal can also pass the orders if anyone
had applied for the same
Facts of the case:
Here in this case promoters of of forever limited incorporated the company bye suppressing some material
information and also furnished some false fact. Some members applied against the incorporation status of
forever limited to the tribunal. The tribunal wants to make the liability of members unlimited.
Conclusion:
The tribunal can pass such order as it is within the power of tribunal however following two precautions must
be e taken by the tribunal before passing
Navkar Institute 46 Business Laws-Complier
  Tribunal e must give the company e an opportunity of being heard
 Tribunal must consider the transactions already entered into by the company and the obligations of
the company.
Que.6
The paid-up Share Capital of AVS Private Limited is ` 1 crore, consisting of 8 lacs Equity Shares of ` 10 each, fully paid-up and 2
lacs Cumulative Preference Shares of ` 10 each, fully paid-up. XYZ Private Limited and BCL Private Limited are holding 3 lacs
Equity Shares and 1,50,000 Equity Shares respectively in AVS Private Limited. XYZ Private Limited and BCL Private Limited are
the subsidiaries of TSR Private Limited. With reference to the provisions of the Companies Act, 2013, examine whether AVS
Private Limited is a subsidiary of TSR Private Limited? Would your answer be different if TSR Private Limited has 8 out of
total 10 directors on the Board of Directors of AVS Private Limited?
Ans:
Provision:.
As per Companies Act 2013, a company is said to be holding company when it controls the composition of board
of another company ee or it holds more than 50% of voting power of another company either on its own or
through its subsidiary.
Facts of Case:
Avs limited
8 lacs euqity shares
XYZ and BCL holds 300000 and 150000 shares in AVS..
Both XYZ ND BCL are subsidiaries of TSRprivate limited.
Conclusion:
Here TSR limited holds more than 50% ofvoting power (450000) in AVS limited thorough it’s subsidiaries.
As per definition we can say that TSR limited is holding company of AVS limited. The answer would remain same if
TSR limited has 8 out 10 Directors on board of AvS limited.
Q.7
The paid-up share capital of XYZ Pvt. Ltd. is ` 20 lakhs consisting of 2,00,000 Equity shares of ` 10 each fully paid-up. ABC Pvt. Ltd.
and its subsidiary DEF Pvt. Ltd. are holding 60,000 and 50,000 shares respectively in XYZ Pvt. Ltd. Examine with reference to
the provisions of the Companies Act, 2013 whether XYZ Pvt. Ltd. is a subsidiary of ABC Pvt. Ltd,? Would your answer be
different if only DEF Pvt. Ltd. is holding 1,10,000 shares in XYZ Pvt. Ltd.?
Ans:
Provision:
As per Companies Act 2013, a company is said to be holding company when it controls the composition of board
of another company ee or it holds more than 50% of voting power of another company either on its own or
through its subsidiary
Facts of the case:
XYZ limited 20 lakhs shares
ABC and it’s subsidiary Def limited holds 60000 and 50,000 shares respectively in in XYZ limited.
Conclusion:
As per definition ABC limited is holding more than 50% of voting power of XYZ limited through its subsidiary. Hens
ABC limited is holding for xyz [Link] answer would not be different even if only d e f Private limited is
holding 110000 shares in XYZ
Q.8
The object clause of the Memorandum of Association of the XYZ (Pvt.) Ltd., New Delhi, authorised to do trading in mangoes.
The company, however, entered into partnership with Mr. A and traded in mangoes and incurred liabilities to Mr. A. The
Company, subsequently, refused to admit the liability to‘A’ on the ground of “ultra vires the Company” Advice, whether stand
of the company is legally valid and if so, give reasons in support of your answer
Ans:
Provision:
As per Companies Act, a company can only enter into the contracts which are within its scope given by it's
memorandum of association. Any contract beyond the memorandum is is ultra virus and always
unenforceable.
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Facts of Case: In present case the memorandum of of XYZ limited authorised trading in mangoes. The company
entered into partnership with Mr A for trading in mangoes and incurred liabilities to Mr A which company
subsequently refused to Pay.
Conclusion: Applying the provisions of doctrine of ultra virus Mr a cannot recover money from xyz limited because
the partnership was not mentioned in memorandum of association hence this contract is is null and void.
Q.9
The Articles of a company required that all deeds etc. should be signed by the M.D., the secretary and an executive director
on behalf of the company. A deed of mortgage was signed by the managing director on behalf of the company in favour of
Z. Can it be a valid deed?
Ans:
Provision:
As per Companies Act 2013, every person entering into contract with company is presumed to have knowledge of
memorandum and articles of association of the company. They are believed to have read and understood the
public documents of company before entering into any contract of company. This is doctrine of Constructive
notice where company is favoured on the basis of this presumption.
Facts of Case:
In present case the articles of the company e required that all the documents must be signed bye managing
director secretary e and executive director. Mortgage deed was signed by managing director only in favour of
mister z.
Conclusion:
The facts of the case are similar to Kotla Venkat Swami vs Ram murthy, where court contended that such deed is
not enforceable since it contains just one signature
Applying the provisions and applicable law, in present case also , the mortgage will not be enforceable since MR z
should have known that deed is not as per the aarticles.
Q.10
A company registered under section 8 or the Companies Act, 2013, earned huge profits during the financial year ended on 31st
March, 2018 due to some favourable policies declared by the Government of India and implemented by the company.
Considering the development, some members of the company wanted the company to distribute dividends to the members of
the company. They approachedyou to advise them about the maximum amount of dividend that can be declared by the
company as per the provisions of the Companies Act, 2013. Examine the relevant provisions of the Companies Act, 2013 and
advise the members [Link]:
As per Companies Act 2013, section 8 company, cannot distribute dividend to its members. If company e
distribute its profits then Central government may revoke its licence.
Ans:
Fact of Case:
In present case a section 8 company earned huge profits hence few of its members demanded distribution of
dividend.
Conclusion:
Applying the relevant provisions it can be said that the company should not distribute any dividend to the
members otherwise Central government mein revoke its licence.
Q.11
Mr. X had purchased some goods from M/s ABC Limited on credit. A credit period of one month was allowed to Mr. X. Before
the due date
Mr. X went to the company and wanted to repay the amount due from him. He found only Mr. Z there, who was the factory
supervisor of the company. Mr. Z told Mr. X that the accountant and the cashier were on leave, he is in-charge of receiving
money and he may pay the amount to him. Mr. Z issued a money receipt under his signature. After two months M/s ABC
Limited issued a notice to Mr. X for non-payment of the dues within the stipulated period. Mr. X informed the company that
he had already cleared the dues and he is no more responsible for the same. He also contended that Mr. Z is an
employee of the company to whom he had made the payment and being an outsider, he trusted the words of Mr. Z as duty
distribution is a job of the internal management of the company.
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Analyse the situation and decide whether Mr. X is free from his liability.
Ans:
Provision:
As per Companies Act 2013, outsiders are deemed to have knowledge of memorandum and articles of
association. But there is doctrine of indoor Management with suggest that outsiders cannot be presumed to
have knowledge of internal irregularities of the company.
Facts of the case:
In present case Mr x purchased some goods from M/s ABC limited on credit period of one month.
Mr X went for payment where he found the supervisor only who told Me X that cashier is on leave and he is
authorised to collect amount. Mr Z the supervisor issued a receipt to Me X. After two months company sent a
notice to Mr X for non payment of dues in stipulated period.
Conclusion:
Applying the provision of Doctrine of Indoor Management, Mr X being an outsider can’t be presumed to know
that Mr Z was authorised or not, since it was internal affairs of company. Hence Mr X would be free from his
liability.
Q.12
Ravi Private Limited has borrowed ` 5 crores from Mudra Finance Ltd. This debt is ultra vires to the company. Examine, whether
the company is liable to pay this debt? State the remedy if any available to Mudra Finance Ltd.?
Ans:
Provision:
As per Companies Act 2013, any act beyond the powers of memorandum is ultra vires. Such acts are null and void,
they can’t be enforced against either of the party.
Facts of Case:
In present case mudra finance limited landed money e worth rupees 5 crores to Ravi Private limited which was
ultra vires act.
Conclusion:
Ravi Private limited is not liable to pay this debt. There will not be any remedy d for mudra finance limited
because the loan was ultra vires.
Q.13
Sound Syndicate Ltd., a public company, its articles of association empowers the managing agents to borrow both short and
long term loans on behalf of the company, Mr. Liddle, the director of the company, approached Easy Finance Ltd., a non banking
finance company for a loan of ` 25,00,000 in name of the company.
The Lender agreed and provided the above said loan. Later on, Sound Syndicate Ltd. refused to repay the money borrowed on
the pretext that no resolution authorizing such loan have been actually passed by the company and the lender should have
enquired about the same prior providing such loan hence company not liable to pay such loan.
Analyse the above situation in terms of the provisions of Doctrine of Indoor Management under the Companies Act, 2013
and examine whether the contention of Sound Syndicate Ltd. is correct or not?
Ans:
Provision:
As per Companies Act 2013 an outsider is presumed to know no about all the public documents of the company
before entering into any contract but he cannot be presumed to know about the internal affairs of the
company full stop if there is any internal irregularity outsider may not know about it.
Facts of case:
In present case sound syndicate limited empowered its directors to borrow funds on behalf of company through a
resolution. A director of the company approached easy finance limited for loan. It lended the loan worth RS
2500000. Later on company denied to pay saying that a resolution was not passed to that effect
Conclusion:
The contention of Sound Syndicate limited is incorrect, the company is liable to repay the loan because Easy
finance can’t be presumed to know about resolution.

Navkar Institute 49 Business Laws-Complier

Q.14
Popular Products Ltd. is company incorporated in India, having a total Share Capital of ‘ 20 Crores. The Share capital comprises of 12
Lakh equity shares of ‘ 100 each and 8 Lakhs Preference Shares of ‘ 100 each. Delight Products Ltd. and Happy Products Ltd.
hold 2,50,000 and 3,50,000 shares respectively in Popular Products Ltd. Another company Cheerful Products Ltd. holds 2,50,000
shares in Popular Products Ltd. Jovial Ltd. is the holding company for all above three companies namely Delight Products Ltd;
Happy Products Ltd.; Cheerful Products Ltd. Can Jovial Ltd. be termed as subsidiary company of Popular products. Ltd., if it.
Controls composition of directors of Popular Products Ltd. State the related provision in the favour of your answer.
Ans:
Provision:
As per Companies Act 2013, a company is said to be holding company when it controls the composition of board
of another company ee or it holds more than 50% of voting power of another company either on its own or
through its subsidiary.
Facts of Case:
In present case jovial limited is controlling the composition of Board of Popular products limited. Jovial is also
holding more than 50% of voting power in popular products limited through its subsidiaries.
Conclusion:
Jovial can’t be termed as subsidiary for popular limited rather it will be considered as Holding company as per the
definition.
Q.15.
"Mr. Anil formed a One Person Company (OPC) on 16th April, 2018 for manufacturing electric cars. The
turnover of the OPC for the financial year ended 31st March, 2019 was about Rs. 2.25 Crores. His friend
Sunil wanted to invest in his OPC, so they decided to convert it voluntarily in of a private limited company.
Can Anil do so?"
Ans:
Provision:
As per Companies Act 2013, a one person company can not be converted until 2 years have been elapsed since it’s
incorporation. OPC has to be converted mandatorily if it’s paid up capital exceed 50 lakhs rupees or it’s
average turnover for relevant period exceeds 2 crores
Facts of Case:
In present Case Mr anil created one person company on 16th April 2018. The turnover of the company for the
year ending on 31st March 2019 was 2.25 crores. MR Sunil wants to invest in this OPC so they decided to
convert it voluntarily into Private limited company.
Conclusion:
The contention of anil to convert the OPC voluntarily into a private limited company is incorrect since two years
have not been elapsed yet.
However average turnover has exceeded 2 crores so OPC must be converted mandatorily into Public or private
company.
Q.16
Flora Fauna Limited was registered as a public company. There are 230 members in the company as noted below:
The Board of Directors of the company propose to convert it into a private company. Also advisewhether reduction in
the number of members is necessary.
Directors and their relatives 190
Employees 15
Ex-Employees (Shares were allotted when they were employees 10
5 couples holding shares jointly in the name of husband and wife (5*2) 10
Others 5
 Ans:
Provision:
As per Companies Act 2013, a private company is company which by it’s articles of association, restricts the
transfer of shares, limits the number of members to 200 and prohibits invitation to public for issue of it’s
securities. In members present and past employees are excluded and joint members are counted as one.
Facts of Case and Conclusion:
The members of Flora Fauna limited can be calculated as under
Directors and Relatives :190
Employees – 0
Ex employees- 0
5 couples – 5
Others – 5
Total – 200
Since the number of members of Flora and Fauna limited is not more than 200, there is no need of reduction.
Q.17
Naveen incorporated a “One Person Company” making his sister Navita as the nominee. Navita is leaving India permanently
due to her marriage abroad. Due to this fact, she is withdrawing her consent of nomination in the said One Person Company.
Taking into considerations the provisions of the Companies Act, 2013 answer the questions given below. [RTP-May-20]
 If Navita is leaving India permanently, is it mandatory for her to withdraw her nomination in the said One Person
Company?
 If Navita maintained the status of Resident of India after her marriage, then can she continue her nomination in
the said One Person Company?
Ans:
Provision:
As per Companies Act 2013, the member and nominee of one person company must be resident of India.
Facts of case:
In present case Naveen Incorporated a one person company making his sister nivedita as nominee. Navita is
living India permanently because of marriage.
Conclusion:
Answer to (a)
If navita is living India permanently it is mandatory for her to withdraw the consent. she cannot continue to be a
nominee because of her loss of Indian residential status.
Answer to (b)
If Navita can maintain residential status i.e. if she stays in India for more than 182 days in every financial year
she can continue to be nominee.

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