Legal aspect of business

BLOCK 1

Case Study (BLOCK -1) 

Arti received a circular from Beauty and the Beast Hair Salon advertising massages and manicures for Rs 500. Realising that this was an exceptionally good deal, but not surprised because she knew that they had only just opened and were running a number of good opening specials, she rang and made a booking. When Arti arrived at the salon she was told that there had been a mistake on the circular and it should have said Rs2500. The manager of the salon explained that this was still a good price because normally a massage and manicure would have cost Rs.3500. Arti was furious, as it had taken her 30 minutes to get to the shop by car and if she had known it would cost Rs.2500, she would never have made the booking. Advise Arti. Would your advice have been any different if Arti had the massage and manicure before being told that the cost was Rs.2500. Would she have to pay the full price.    

    
Question 1
Law of contract is
  
not the whole of agreements nor is it the whole law of obligations
the whole law of agreements
the whole law of obligations
none of the above.

Question 2
An agreement is a voidable contract when it is
   
enforceable if certain conditions are fulfilled
enforceable bylaw at the option of the aggrieved party
enforceable by both parties
not enforceable at all.
 
Question 3
A letter of acceptance sufficiently stamped and duly addressed is put into course of transmission. There is
   
a contract voidable at the option of acceptor
"a contract voidable at the option of offerer,"
"no contract at all,"
a valid

Question 4
Consideration
   
must move from the promisee
may move from the promisee or any other person
may move from the third party
may move from the promisor.
 
Question 5
which of the following relationships raise presumption of undue influence?
   
landlord and tenant
parent and child
Husband and wife
creditor and debtor.
 
 
Question 6
"If there is a fraudulent misrepresentation as to the contents of a document , the contract is "
   
void
voidable
valid
illegal 
 
Question 7
A contract of life insurance is
   
a contract of indemnity
not a contract of indemnity
a wagering agreement
a contingent agreement.
  
Question 8
"If a new contract is substituted in place of an existing contract, it is called”
   
alteration
rescission
novation
remission
 
Question 9
Specific performance may be ordered by the court when
   
the contract is voidable
damages are an adequate remedy
damages are not an adequate remedy
the contract is uncertain.

Question 10

A wagering agreement is

forbidden by law
immoral
opposed to public policy
none of the above.
 

CASE STUDY (BLOCK- 2)    

As per Section 148 of the Indian Contract Act - A bailment is the delivery of goods by one person to another for some8purpose, upon a contract that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called the "bailor". The person to whom they are delivered is called the "bailee". For example, you deliver some gold to a jeweller B to make bangles for your sister. In this case you are bailor and B is bailee and by delivering gold to B, a reletionship of bailment is created between you and the jeweller.
, Essentials of Valid Bailment
If you analyse the definition of bailment you will find that for creating a relationship of bailment the following features must be present: Agreement; Delivery of goods; Purpose; Return of the specific goods.
Pawn or Pledge is a special kind of baillnent where a movable thing is bailed as security for the repayment of a debt or for the performance of a promise. For example, if you borrow rupees one hundred from B and keep your cycle with him as ecurity for repayment, it is a contract of pledge. The person taking the loan is called the pledger or pawnor and the person with whom goods are pledged is called the pawnee. Ownership of the pledged goods does not pass to the pledgee. The general property remains with the pledger but a "special property" in it passes to the pledgee. The special property is a right to the possession of the articles along with the power of sale on default. 'Delivery of the goods pawned is a necessary element in the making of a pawn. The property pledged should be delivered to the pawnee. Thus, where the producer of a film borrowed a sum of money from a financier-distributor and agreed to deliver the final prints of the film when ready, the agreement was held not to amount to a pledge, there being no actual transfer of possession. Delivery of possession may be actual or constructive. Delivery of the key of the godown where the goods are stored is an example of constructive dclivery. Where the goods are in the possession of a third person, who, on the directions of the' pledger, consents to hold them on the pledgee's behalf, that is enough delivery. A railway receipt is a document of title of the goods and a pledge of the receipt operates as a pledge of the goods. the persons who can make a valid pledge are :The owner, or his authorised agent, or One of the several co-owners, who is in the sole possession of goods, with the consent of other owners, or ; A mercantile agent, who is in possession of the goods with the consent of real owner, or; A person in possession under a voidable contract, before the contract is rescinded, or; A seller, who is in possession of goods after sale or a buyer who has obtained possession of the goods before sale, or; A person who has a limited interest in the property. In such a case the pawn is valid only to the extent of such interest.

QUESTION 1
The bailment is defined in ______ of Indian Contract Act
 
    Section 148
 
    section 56
 
    Section 42
 
    section 43

QUESTION 2
What is an essential element of a valid pledge?
 
    Delivery of goods
 
    Delivery of bills
 
    Price
 
    None of these

QUESTION 3
The Bailment of goods as security for payment of a debt or performance of a promise is called
 
    Pledge
 
    Bailment
 
    Contingent Contract
 
    Agreement

QUESTION 4
The bailor is bound to disclose to the bailee______
 
    faults of goods

 
     price of goods
 
    weight of goods
 
    owner of goods

QUESTION 5
Which of the following statements are False?(a)A pledge can be created both of movable as well as of immovable property; (b) In hypothecation the debtor loses the right to enjoy the goods (c)A person who has obtained the possession of goods under a voidable contract cannot create a valid pledge of such goods
 
    Only A
 
    Only B
 
    Only C
 
    "All A, B & C"

QUESTION 6
Who among the following can make a valid Pledge?
 
    "The owner, or his authorised agent"
 
    "A mercantile agent, who is in possession of the goods with the consent of real owner"
 
    "A person in possession under a voidable contract, before the contract is rescinded"
 
    All of the options

QUESTION 7
"In a sale, if the goods are destroyed, the loss falls on”
 
    the buyer
 
    the seller
 
    partly on buyer and partly on seller
 
    the seller if price has not been paid

QUESTION 8
Which of the following are FALSE with respect to the Bailment? (a)A finder of goods has a right to retain the goods until he is paid his expenses by the owner; (b)If the goods are bailed for a fixed period, the bailment does not necessarily terminate at the end of that period; (c)A gratuitous bailmcnt cannot be terminated by the bailor before the expiry of the time for which the goods were bailed.
 
    Option B& C
 
    Option A
 
    option A, B&C
 
    Option A & C

QUESTION 9
"For bailment, which of the following is necessary?”
 
    Agreement
 
    Purpose
 
    Delivery of Goods
 
    All of above

QUESTION 10
The person who is delivering the goods is called_______
 
    bailee
 
    bailor
 
    delivery man
 
    seller

CASE STUDY (BLOCK -3)

A lady called Gangabai was entitled, by endorsement, to a Government promissory note, which she had acquired through a broker named Acharya. Subsequently Acharya obtained possession of the note from Bai Gangabai, and he forged her endorsement on the note to himself. Subsequently he endorsed the note over to the defendants, the Bank of India, Ltd. The Bank sent the note, with other notes, to the Government Securities Department with a request for its renewal, and the note was in due course renewed by the prescribed officer of the Government Securities Department. When it was ultimately established that the signature of Bai Gangabai on the note had been forged by Acharya, Bai Gangabai sued the Secretary of State for the value of the note, and she recovered judgment for the amount due on the note with interest and costs. In this suit the Secretary of State sues the Bank of India, Ltd., and claims that the Bank is liable to indemnify him against the loss which he incurred by acting on the request of the Bank for the renewal of the note. Alternatively he claims that the renewed note, or the value thereof, may be returned to him on the basis that it was issued without consideration, or under a mistake of fact.

QUESTION 1
The doctrine of caveat emptor applies –
 
    in case of implied conditions and warranties
 
    when the buyer does not intimate the purpose to the seller and depends upon his own skill and judgment
 
    when goods are sold by sample
 
    when goods are sold by description

QUESTION 2
When the date is omitted
 
    the date when the instrument is negotiated is considered the date of issue.
 
    the instrument must be returned, and the date inserted.
 
    the date when the instrument is received is the date of issue.
 
    the instrument is not negotiable

QUESTION 3
"To be negotiable, an instrument"
 
    can be for a fixed or flexible amount of money.
 
    must bear the signature of the drawee or acceptor.
 
    can be oral or written.
 
    must be payable on demand or at a definite time.

QUESTION 4
A bad cheque is one that
 
    the bank deems to old to honor.
 
    the bank is liable for any loss that you might suffer
 
    is drawn on an account in which there is insufficient funds
 
    is signed by someone other than the drawer

QUESTION 5
"When you receive a check made out to you in your name, you are called the"
 
    maker
 
    holder
 
    assignee
 
    drawer

QUESTION 6
An assignment is
 
    a restrictive indorsement that allows for the transfer of an instrument from one party to another
 
    a negotiable instrument payable to the order of the person holding it.
 
    the transfer of an agreement in such a way that the transferee becomes a holder.
 
    the transfer of your rights under a contract to someone else

QUESTION 7
A blank indorsement
 
    "requires the words ""without recourse"" on the back of the check"
 
    "requires the words ""with recourse"" on the back of the check."
 
    consists of the signature alone on the instrument
 
    "requires the words ""pay to the order of"" on the back of a check"

QUESTION 8
In case of breach of a warranty, the buyer can –
2.    
 
    claim damages only
 
    repudiate the contract
 
    cannot return the goods
 
    refuse to take delivery of the goods

QUESTION 9
There are two basic kinds of negotiable instruments
 
    drafts and bonds
 
    drafts and checks
 
    notes and CDs
 
    notes and drafts

QUESTION 10
A holder in due course is a holder who
 
    accepts all liability for the paying of the instrument
 
    is found with a fraud in the inducement
 
    "takes an instrument for value, in good faith, and without notice"
 
    accepts a properly negotiated instrument

CASE STUDY (BLOCK -4)

Consumer awareness about their legitimate rights has been constantly growing in recent years. Consumer protection movement is a part of global recognition and concern that consumers are a weak party in buying goods and services as compared to the manufacturers and traders producing and selling them. Ideally, a market economy where firms compete to sell goods and services to the consumers should serve the interests of consumers better but more often than not the consumers are exploited by the adoption of unfair and restrictive trade practices. Far from being a sovereign the consumer is a child who is too weak to resist or challenge the suppliers of goods and services.
Therefore, even in a free market economy he needs protection of his rights by a legal authority. Consumer protection is necessary even in a controlled economy where public enterprises play a dominant role since consumers are likely to be denied their rights in their case too. Most consumers buy goods and services after being lured by advertisements exaggerating the contents and quality of their products or services. Legal support to them is required if they are to be protected from the exploitation and deception by the suppliers so that erring vendors are brought to book. 
It is this increasing realization of the helplessness of the consumers and to ensure their legitimate rights that led to the resolution of the United Nations General Assembly in 1985 recommending to the member states for adopting preventive, protective and curative measures for the benefit of consumers. Thus, this resolution required the member states to create agencies for adjudication of consumer claims and to create conducive environment for protection of consumers. In the UN General Assembly resolution Consumer Councils were recommended to be set up for redressal of the complaints and claims of consumers. Consumers are largely denied their due rights, especially in developing countries such as India. The consumers are spread widely all over a country and are poor, illiterate and are generally not aware of their rights, though their awareness has recently increased. The manufacturers and suppliers of goods or services often exploit consumers by adopting a number of unfair and restrictive trade practices. They often merge and also form tacit cartels to raise prices for maximising their profits at the expense of consumers.
For instance, in case of drugs manufacturers generally charge high prices which are much above their cost of production. Some pharmaceutical companies misuse their patent rights to exploit consumers. They therefore need protection from unfair and restrictive trade practices of producers and suppliers of goods or services.
Misleading advertising is another means by which the producers deceive the consumers. Advertisement is of two types. One is informative advertisement which informs the consumers about the availability of certain products at certain prices. This is not objectionable as it provides information to the consumers.
However, more often the purpose of advertisement by the manufacturers and suppliers is to mislead the ill-informed consumers about the quality and contents of their products and services. They indulge in what is called persuasive advertisement to compete away customers from their rivals. Such persuasive advertisements serve no useful social purpose and lead to deception of consumers.
The cost of advertisement is added to the cost of production and this leads to very high prices being charged from the consumers. The Indian readers will be knowing well that crores of rupees are spent on film actors and cricket players as brand ambassadors and on advertisements on print and electronic media to promote the sale of their products.
From whom such heavy costs incurred on advertising are recovered? Such heavy advertising expenditures just enable the manufacturers at the most to maintain their market shares of the product without adding much to its total output. The consumers need protection from such deception of persuasive advertisements. The government should not allow such heavy advertising cost to be incurred as valid cost for calculation of taxable profits of the firms.
The other and highly injurious practice by the suppliers, especially in India, is widespread practice of adulteration of commodities. The adulteration by private sector can take place right from the manufacturing point to the ultimate supplier of the products to the consumers.
It has been found that small pebbles and dust are mixed with wheat, maize, jawar and bajra to increase weight, sand is mixed with cement, leaves and barks of some trees are mixed with tea leaves. Again, Vanaspati is often mixed with Desi ghee and butter, etc. All these practices of adulteration are hazardous to health and life of the consumers and they need protection from them. But the most injurious is the widespread practice in India by manufacturers and dealers of spurious drugs which do immense harm to the health and life of the people.
It is due to the above practices of the manufacturers and suppliers which have resulted in consumer protection movement and have forced the governments to enact legislation to protect the consumers.
Consumerism:
Social movement to protect the consumers from unfair and unhealthy restrictive trade practices by the manufacturers and suppliers is also called consumerism. An eminent management expert states, “Consumerism is a social movement seeking to augment the rights and powers of consumers”. Similarly, Boyd and Allen state, “Consumerism may be defined as the dedication of those activities of both public and private organisations which are designed to protect individuals from practices that impinge upon their rights as consumers”.

QUESTION 1
The following is not a consumer
 
    The insurance companies   
 
    A licensee to run a phone
 
    A lottery ticket holder 
 
    All the above

QUESTION 2
Which of the following is not a function of consumer organisations NGOs?
 
    Accelerating consumer awareness
 
    “Filing suits, complaints on behalf of consumers”
 
    Solving personal and marital problems of consumers
 
    Collecting data on different products and testing them

QUESTION 3
Some ways and means of consumer protection followed in India include
 
    Lok adalats
 
    Public interest litigation
 
    Redressal forums and consumer
 
    All

QUESTION 4
Those complaints can be filed in the State Commission where the value of goods or services and the compensation claimed is
 
    More than 20 lakhs but less than Rs. 1 crore
 
    More than 1 crore
 
    Less than 20 lakhs
 
    More than 10 lakhs but less than 20 lakhs

QUESTION 5
Which one of the following know as Consumer disputes redressal agency?
 
    District forum
 
    State commission
 
    National commission 
 
    All the above

QUESTION 6
The chairman of the district consumer protection council is
 
    District magistrate 
 
    Collector of the District
 
    MP of the district 
 
    None of these

QUESTION 7
Any person aggrieved by an order made by the District forum may prefer an appeal such order to the State commission within
 
    60 days
 
    90 days
 
    1 month
 
    Thirty days

QUESTION 8
The central council shall meet as and when necessary but at least ___ meeting of the council shall be held every year
 
    One  
 
    Two
 
    Three
 
    Four 

QUESTION 9
Members of state consumer protection council should not exceed
 
    Two  
 
    Five
 
    Ten
 
    Three

QUESTION 10
Any person prefers an appeal to state commission shall be deposited amount in prescribed manner
 
    Fifty percent of that amount
 
    Twenty-five thousand rupees
 
    Whichever is less of the above A&B
 
    None of these

CASE STUDY (BLOCK - 5)

A company wants to include the following clause in its Articles of Association: “Each director shall be entitled to be paid out of the funds of the company for attending meetings of the Board or a Committee thereof including adjourned meeting such sum as sitting fees as shall be determined from time to time by the Directors but not exceeding a sum of `30,000 for each such meeting to be attended by the Director.” 
You are required to advise the company as to the validity of such a clause and the correct legal position under the provisions of the Companies Act, 2013.

QUESTION 1
What is the time limit for conducting statutory meeting?
 
    1 to 5 months
 
    1 to 6 months
 
    1 to 9 months
 
    None of these

QUESTION 2
Commencement of winding up of a company does not affect the nature of ______
 
    A fixed charge
 
    A floating charge
 
    Both a) & b)
 
    None of the above

QUESTION 3
_______ is a charge when it is made specifically to cover assets
 
    Fixed
 
    Specific
 
    Floating
 
    Both (a) & (b)

QUESTION 4
"In case of a wrongful dishonour of a cheque by a banker having funds to the credit of the customer, the court may award----"
 
    ordinary damages
 
    nominal damages
 
    exemplary damages  
 
    contemptuous damages.

QUESTION 5
In case of Statutory General Meeting receipts & payments are prepared up to _______ days before the date of report
 
    3
 
    5

    7
 
    10

        

QUESTION 6
Debentures payable to a holder of certificate is called ________
 
    Bearer
 
    Unregistered
 
    Secured
 
    Both (a) & (b)

QUESTION 7
Shareholders are _________
 
    Owners
 
    Creditors
 
    Debtors
 
    None of the above

QUESTION 8
Debenture holders are ________
 
    Owners
 
    Creditors
 
    Debtors
 
    None of the above

QUESTION 9
Which of the following have voting rights _______? 
 
    Share holders
 
    Debenture holder
 
    Both (a) & (b)
 
    None of the above
    

QUESTION 10
Debentures which have the charge on the property of the company is ________
 
    Secured
 
    Unsecured
 
    Registered
 
    None of the above

Full Syllabus Assessment

QUESTION 1
"Where both the parties to an agreement are under a mistake as a matter of fact essential to the agreement, the agreement is"
 
    void
 
    voidable
 
    illegal
 
    not affected at all.

QUESTION 2
In the given below who are required to hold A.G.M _______
 
    Public company
 
    Private company
 
    Government company
 
    All the three

QUESTION 3
Which one or more of the following resolution need not be filed with the registrar
 
    Special resolution
 
    A resolution of Board relating to appointment of a managing director
 
    A resolution approving the appointment of a sole selling agent
 
    An ordinary resolution

QUESTION 4
In which one or more of the following company a member does not have a right to appoint
 
    Public company having share capital
 
    Public company not having share capital
 
    Private company not having a share capital
 
    None of the above

QUESTION 5
The expenses of holding an E.G.M by the requisitionists will be ultimately borne by
 
    Company
 
    Requisitionists
 
    all directors in default
 
    None of the above

QUESTION 6
President of district forum is
 
    Collector of the district
 
    A person who are qualified as advocate
 
    A person who are qualified to be a district judge
 
    None of these

QUESTION 7
A contract creates
 
    rights in personam
 
    rights in rem
 
    only rights and no obligations
 
    only obligations and no rights.

QUESTION 8
"Where consent is caused by fraud or misrepresentation, the contract is "
 
    voidable at the option of the aggrieved party
 
    void
 
    unenforceable
 
    not affected in any manner .

QUESTION 9
"When a person positively asserts that a fact is true when his information does not warrant it to be so, though he believes it to be true, there is"
 
    misrepresentation
 
    fraud
 
    undue influence
 
    coercion

QUESTION 10
Compromise of dispute claims
 
    is a good consideration for a contract
 
    is not a good consideration for a contract
 
    results in a void agreement
 
    is not permitted by law

Course Summary Assessment

Live interactive session test

Question 1

Which of the following is an essential element of a valid contract?
   
Legal obligation
Lawful consideration
Capacity of parties
All of above
  
Question 2

"""Promisee"" is the person _____"
   
to whom the offer is made
the person who makes the offer
both a & b
None of these
  
Question 3

Mercantile Law is a Body of law that deals with and
   
customs & practices of local commerce
customs & practices of international commerce
both a & b
None of these
 
Question 4

Persons incapable of entering into a contract?
   
unsound mind
minor
disqualified by law
All of above
 
Question 5

Discharg of contract can be done by: (A)By Performance ; (B)By mutual agreement ; ( c) By Supervening Impossibility
   
Only A
Only A & B
"All A,B & C"
Only B & C

Question 6

"According to Enforceability, contract can be classified as: (a) Valid contract; (b) illegal Contracts ; ( c) voidable contracts"
   
"All A, B & C"
Only A & B
Only B & C
Only A & C
 
Question 7

Which of the following is a kind of negotiable instrument?
   
Bill of exchange
Promissory note
Cheque
All of above
 
Question 8

"In a Bill of Exchange, there are___ Parties. "
   
3
7
8
10
 
Question 9

Which of the following is a kind of Presentment?
   
Presentment of Bills of exchange for Payment
Presentment of Negotiable instruments for payment
both a & b
None of these
 
Question 10

Which of the following is a right of a Consumer?
   
Right to safety
Right to information
Right to be heard
All of above
 
 
Question 11

The monetary jurisdiction of National Commission is___
   
More than one crore
Between 20 lakhs to one crore
Up to 20 lakhs
Between 5 lakhs to 25 lakhs 
 
Question 12

The objective of Consumer Protection Act is to_____
   
To make provisions for better protection of the interests of consumers
To establish consumer protection councils
To establish authorities for the settlement of consumers disputes
All of above

Question 13

Dividend paid to the equity shareholders are paid according to the_____?
   
Profits earned
Fixed rate
Increasing rate
None of these
 
Question 14

Which of the following is correct in context of Memorandum of association
  
Contains fundamental conditions upon which alone the company can be incorporated
Tells the utmost possible scope of its operations beyond which actions cannot go
Both a & b
None of these
 
Question 15

Which of the following is the feature of a company
   
Separate Legal Entity
Perpetual Succession
Artificial Person
All of above
 

Summary: