B.Com 1st Year Business Regulatory Framework Examination Papers 2017
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Examination Paper 2017
This paper is divided into five Sections -A, B, C, D & E. Section-A (Short Answer Questions) contains one question of ten parts requiring short answer. All these ten parts are compulsory. Sections-B, C, D & E (Descriptive Answer Questions) each contains two questions. Attempt one question from each Section. Answer must be descriptive.
(Short Answer Questions)
Note: In this Section Question No. 1 (Short Answer Questions) contains ten parts, all parts are compulsory. Each part carries 4 marks. (4×10=40)
1. Explain the following:
(i) Kinds of contract.
Ans. Refer to Unit-I, Sec-B, Q.2.
(ii) Breach of contract.
Ans. Refer to Unit-I, Sec-A, Q.20.
(iii) Distinguish between contract of indemnity and contract of guarantee.
Ans. Refer to Unit-II, Sec-B, Q.1.
(iv) Termination of agency.
Ans. Refer to Unit-II, Sec-A, Q.15.
(v) Unpaid Seller.
Ans. Refer to Unit-III, Sec-B, Q.7.
(vi) Promissory note.
Ans. Refer to Unit-IV, Sec-B, Q.1.
(vii) Capital account transaction under FEMA.
Ans. Refer to Unit-VI, Sec-A, Q.3.
(viii) Consumer forum.
Ans. Refer to Unit-V, Sec-B, Q.15.
(ix) Main objectives of Consumer Protection Act.
Ans. Refer to Unit-V, Sec-B, Q.2.
(x) Types of Hundi and its characteristics.
Ans. Refer to Unit-IV, Sec-A, Q.18.
Characteristics of Hundi: The following are the essential characteristics of a hundi:
(a) A hundi is a local bill of exchange.
(b) While writing a hundi, the name of the God of Wealth is always mentioned,
(c) It is necessary to stamp a hundi.
(d) The time of payment is specified on the hundi.
(e) It is unconditional
Section-B, C, D & E
[Descriptive Answer Questions]
Note: Each Section contains two questions, attempt one question. Each question carries 15 marks.
2. All contracts are agreements but all agreements are not contracts. Explain.
Ans. All contracts are agreements but all agreements are not contracts’ is a valid and true stat Before we can critically examine the statement, it is necessary to understand the meaning of’agreeme and ‘contract. According to Section 2(e) of the Indian Contract Act of 1872: Every promise and e set of promises forming the consideration for each other is an agreement. In fact, an agreement proposal and its acceptance, by which two or more persons or parties promise to do or abstain fra doing an act. It is, therefore, clear that an agreement is comprised of a promise or promises, and theca promises by the parties to an agreement act as consideration for each other. According to Leake, for a contract to be legal, it needs to be an agreement that imposes certain obligations on one party and gives the right to enforce these obligations, to the other party. According to Section 2(h) of the Indian Contract Act, ‘An agreement enforceable by law is a contract, It is clear from these definitions that the three vital elements of a contract are:
(b) Contractual obligation,
(C) Enforceability by law.
From the preceding statements, it would be obvious that the term ‘agreement has a much wider scope than a ‘contract. An agreement can be religious, cultural, social or moral. Agreements that imply. no legal obligations would remain agreements. They cannot be contracts. For example, Arun invites his friend Varun to tea and the latter accepts the invitation. This is a social agreement, not a contract, because it does not imply any legal obligation. It, therefore, follows that all agreements that do not imply legal obligation and are confined to social or moral obligations would always be agreements but they cannot become contracts.
We can, therefore, conclude from what has been discussed, that: all contracts are agreements, but all agreements are not contracts.
All Contracts are Agreements
For a contract to be there, an agreement is essential. Without an agreement, there can be no contract. An agreement is the sine qua non and, as such, the primary essential element of a contract. As the saying goes ‘where there is smoke, there is fire’ for without fire, there can be no smoke. It could well be said ‘where there is contract, there is agreement-without an agreement, there can be no contract. Just as a fire gives birth to smoke, in the same way an agreement gives birth to a contract.
Another essential element of a contract is the emergence of legal obligations for the parties to the contract. There are many agreements that do not entail any legal obligations. As such, these agreements cannot be called contracts. According to Salmond, the Contract Act is an act related to the agreements that entail obligations and the obligations that arise out of agreements. Only those agreements that imply obligations are contracts. For example, A gives his car to B for repair and B asks for 2000 to the repair work. If A agrees to pay the price and B agrees to repair the car, the agreement imposes an obligation on both-which is a contract between the two.
The third vital element of a contract is that the agreement must be enforceable by the the land. This implies that if one party fails to keep his promise, the other has the right to go to court and force the defaulter to keep his promise. To convert an agreement into a contract, some elements are vital without which the agreement cannot be legally binding and enforceable.
All Agreements are not Contracts
An agreement is termed a ‘contract’ only when it is enforceable by law. All agreements are not necessarily legally enforceable. It can rightly be said that an agreement has a much wider scope than a contract. An agreement is indispensable for a contract, whereas it is not necessary to have a contract for an agreement. Examples of agreements that are not legally binding are an invitation to dinner or to go for a walk and its acceptance. These are agreements, not contracts.
An agreement does not necessarily imply a legal obligation on the parties to the agreement. It is important here to clarify what exactly is an obligation’. Obligation is a legal tie which imposes upon a person or persons the necessity of doing or abstaining from doing a definite act or acts,
Some agreements do not impose any legal obligation on the parties to the agreement and, as such, they are not classified as contracts. Such agreements can neither be enforced by law nor do they impose any obligation. As an example, let us say that Saurab invites Gaurav to dinner and Gaurav accepts the invitation, but does not reach at the appointed time. Saurab cannot argue against it because the agreement does not entail a glaring obligation, and is only a social agreement. In this connection, the case of Balfour vs Mrs. Balfour is a glaring example. Mr. Balfour who was employed in Sri Lanka, visited Britain to bring his wife to live with him. Mrs. Balfour could not come because she was not well and Mr. Balfour promised to send her £30 every month and came back to Sri Lanka but he could not send the 30 he had promised to his wife, and she filed a suit against her husband. Justice Lord Atkin dismissed the suit because the agreement (Balfour’s promise to send the money and his wife’s acceptance) did not entail any contractual obligation.
An agreement need not necessarily be within the framework of law and be legally enforceable. If it is, then it is a contract. If A promises B to do physical harm to C whom the latter does not like, and B promises to pay A3 1,000 to do that, it cannot be termed as a contract because such an act would be against the law. Any agreement of which the object or consideration is unlawful is void, and cannot be called a contract.
It would be clear from what has been said so far that an agreement has a much wider scope than a contract. An agreement implies fulfilling some agreed conditions it does not necessarily imply that the stipulated conditions conform to the law and are enforceable by it. It may well be said that’agreement is the genus of which contract is the species’. It also makes it clear that all agreements are not contracts but all contracts are agreements.
3. ‘Discuss the legal contractual capacity of following persons:
(i) An intoxicated person
(ii) An alien
(iii) A mirror
(iv) A married woman.
Ans. Capacity to Contract: Section 10 of the Contract Act requires that the parties must be competent to contract. Competence to contract is defined in section 11. ‘Every person’, the section says, ‘is competent to contract who is of the age of majority according to the law to which he is subject, and who is of sound mind, and is not disqualified from contracting by any law he is subject.’ Thus, the Section declares the following persons to be incompetent to contract:
(b) persons of unsound mind, and
(c) persons disqualified by law to which they are subject.
(i) Contractual Capacity of an Intoxicated Person
Any person with an unsound mind is incompetent to contract; only a person with a sound mind an contract. The vital question is: who can be said to be of sound mind following criterion: A person is said to be of sound mind for the purpose of making a contract if, at the time he makes it, he is capable of understanding it and framing rational judgement as to its effect una interests.
Section 12 also clarifies that a person who is usually of unsound mind, but occasionally of mind, may make a contract when he is of sound mind. On the other hand, a person who is usually of sound mind, but occasionally of unsound mind, may not make a contract when he is of unsound mind Soundness of mind of a person depends upon:
(a) His capacity to understand the basics of the business concerned, and
(b) His ability to form a rational judgement as to their effect upon his interests.
If a person is incapable of both, he is of unsound mind. Whether a party to a contract is of sound mind or not is decided by the court. The following paragraphs discuss the types of persons of unsound mind.
A person who is intoxicated by drinking, or is under the influence of drugs, or is delirious because of pain or sickness cannot make a rational decision and, as such, is incompetent to make a contract. In the case of Mathews vs Baxter, the court held that a person denying an obligation under a contract on the plea that he was drunk or delirious while making the contract has to prove that his state of mind was not sound when he made the contract.
It is pertinent to mention here that ‘old age’ does not come under the provisions of this section unless it is proven beyond doubt that the party to the contract was of unsound mind because of old age when the contract was made.
Section 12 of the Contract Act makes it clear that a person with an unsound mind is incompetent to make a contract, and any contract made by such person is void. A contract cannot be held void because of an allegation that the person making the contract was of unsound mind. To enforce the legal implications, it is mandatory to prove that the party to the contract did not, or could not, understand or comprehend the conditions thereto. Once it is established that the person was of unsound mind, then it is not required to prove whether or not the other party was aware of this weakness. All contracts made under such conditions are void.
(ii) Contractual Capacity of an Alien
Alien Enemy: An alien enemy, who is the subject of a foreign state, cannot make a contract with an Indian subject as per law. An alien enemy is one with whose country India is at war. If a contract has been made before the commencement of hostilities, it stands suspended and may be renewed after the hostilities are over. But in national interest, such contracts can be held void even after the state war has ended. Even an Indian subject who resides voluntarily in a hostile country, or who is carrying on business there, would be treated as an alien enemy.
Foreign Sovereigns, Diplomatic Staff and Accredited Representatives: Foreign sovereigns, diplomats and accredited representatives are not governed by Indian law and are beyond the jurisdiction of Indian courts. They cannot, generally, be sued unless they submit to the jurisdiction on the court on their own. They can enter into contracts and enforce those contracts in our courts, but an Indian citizen has to obtain prior sanction of the Central Government to sue them in our law courts.
As per Sections 80 to 87 of the Civil Procedure Code, such sanction is obtainable in the following situations:
(a) When the foreign sovereign, diplomat or accredited representative has filed a suit in a court against the person desiring to sue him,
(b) When the foreign sovereign, diplomat or accredited representative or his agent is carrying on trade within the jurisdiction of the court, and
(c) When the foreign sovereign, diplomat or accredited representative has immovable property in the jurisdiction of the court and is to be sued with reference to such property.
(iii) Contractual Capacity of a Minor
The age of ‘majority’ is different in different countries. As such, a major is a person who has attained the age of majority under the law of the land. According to Section 3 of the Indian Majority Act, 1875, every person who is not 18 years old is a minor. The day a person becomes 18 years old, he or she becomes a major. But where a guardian of a minor’s person or property has been appointed under the Guardians and Wards Act or where the superintendence of a minor’s property is assumed by a Court of Wards, the person attains majority after 21 years of age. Under the English law, a person becomes a major when he or she is 18 years old.
A minor is considered to be mentally weak in the sense that he is not fully aware of his rights and obligations. To be a minor is an incompetency for entering into a contract, but it is also a defence to a minor. A contract with a minor is absolutely void under Indian law because according to Section 11, no person who is a minor is competent to contract. A contract with a minor is not only voidable, it is void as per law. The Judicial Committee of the Privy Council affirmed this view in the case of Mohri Bibi vs. Dharmodas Ghosh. In this case Sir Lord Justice North observed that because a contract with a minor is void, the minor is not obliged by law to return any money advanced or paid to him under such contract. As Salmond said about the condition of being a minor, ‘The law protects their (minor’s) persons, preserves their rights and estates, excuses their laches and assists them in their pleadings. The judges are their counsellors, the jury their servants and the law is their guardian.
(iv) Contractual Capacity of a Married Woman
In our country the law of the land does not distinguish between man and woman. So, in the making of a contract both are equally eligible to enter a contract or legal agreement. According to Section 4 of the Married Women’s Property Act of 1874, a married woman can retain and use her personal property and can make a contract with respect to that property. The consent of the husband is not required. If a married woman, on her own free will leaves her husband and decides to live separately, she is not entitled to claim any maintenance, including the necessaries of life, from her estranged husband, and the latter cannot be held liable.
4. Define ‘Holder in due course! Explain the special privileges granted to a holder in due course under Negotiable Instrument Act.
Ans. Refer to Unit-IV, Sec-B, Q.4.
5. Distinguish between condition and warranty, When can a breach of condition be treated as breach of warranty?
Ans. Refer to Unit-III, Sec A, Q.7 and 8.
6. State the main provisions of Consumer Protection Act, 1986 and how consumer courts are different from civil courts?
Ans. Refer to Unit-V, Sec-A, Q.1.
Civil Court and Consumer Court: In India the civil law is the one of the two main branches of law. Based on English common law. The other branch is of criminal law. contract and tort. Civil courts deal with these matters. On the other hand consumer court relates to the matters of consumers. Consumer is one who consumes especially the fellow who uses a product. It is the person who buys or uses goods or services. The welfare of these consumers are protected by consumer court Following points are worth mentioning to differentiate between civil court and consumer court
(a) Civil courts were formulated by the British rulers in India, but consumer courts are established by legislation passed by central and state governments of India.
(b) The civil courts deal with a system of rules that a society or government has developed in order to deal with business agreements, social relationships and other contracts It includes many types of laws. On the other hand consumer courts deal with the rules mainly formulated by various consumer protection acts.
(C) Code of Civil Procedure of 1908 deals with the civil matters, while Consumer Protection Act of 1986 protects the interests of consumers.
(d) The complainant in civil court is called plaintiff and the opposite party is dependent. In consumer courts the plaintiff is always a consumer. The consumer is divided into two categories (a) Consumer of goods, and (b) Consumer of services.
(e) Civil court deals with the regulations formulated in various acts like Limitations Act of 1963, Transfer of Property Act of 1929, Torts Act, Contract Act, Easement Act and so on. Consumer court deals with drugs and cosmetics Act of, Essential Commodities Act of 1955, Prevention of Food Adulteration Act of 1954, Standards of Weights and Measures Act of 1976.
(f) Consumer court provides protection to the consumers from their exploitation by the unfair trade practices of producers or sellers, while civil court provides relief to the plaintiff or the defendant as the case may be and sanctions compensations for the loss suffered.
7. Write short notes on the following:
(1) General crossing and special crossing of a cheque.
Ans. Refer to Unit-IV, Sec-B, Q.3.
(ii) Pledge and mortgage.
Ans. Refer to Unit-II, Sec-A, Q.9 and Sec-B, Q.5.
Mortgage: A mortgage is a way to use one’s real property, like land, a house, or a building, as a guarantee for a loan to get money. Many people do this to buy the home they use for mortgage: the loan provides them the money to buy the house and the loan is guaranteed by the house.
In a mortgage, there is a debtor and a creditor. The debtor is the owner of the property, while the creditor is the owner of the loan. When the mortgage transaction is made, the debtor gets the money with the loan, and promises to pay the loan. The creditor will receive money back with interest over time (usually in payments made each month by the debtor). If the debtor does not pay the loan, the creditor may take the mortgaged property in place of the loan. This is called foreclosure.
So, mortgage is a debt instrument, secured by the collateral of specified real estate property, tha the borrower is obliged to pay back with a predetermined set of payments. Mortgages are used individuals and businesses to make large real estate purchases without paying the entire value of the purchase up front. Over a period of many years, the borrower repays the loan, plus interest, until hel she eventually owns the property free and clear: Mortgages are also known as ‘liens against property waims on property.’ If the borrower stops paying the mortgage the bank can foreclose,
In a residential mortgage, a home buyer pledges his or her house to the bank. The bank has a on the house should the home buyer default on paying the mortgage. In the case of a foreclosure ank may evict the home’s tenants and sell the house, using the income from the sale to clear the mortgage debt.
Other less common types of mortgages, such as interest-only mortgages and payment option ARMS, are best used by sophisticated borrowers. Many homeowners got into financial trouble with these types of mortgages during the housing bubble years.
When shopping for a mortgage, it is beneficial to use a mortgage calculator, as these tools can give vou an idea of the interest rates for the mortgage you’re considering. Mortgage calculators can also help you calculate the total cost of interest over the life of the mortgage.
(iii) Delivery to carrier is delivery to buyer.
Ans. Refer to Unit-III, Sec-B, Q.6.
8. What do you mean by FEMA? Discuss the provisions relating to regulation and management of
Ans. Refer to Unit-VI, Sec-A, Q.1. and Sec-B, Q.2.
9. Write short notes on the following:
(i) Types of Negotiable instruments.
Ans. Refer to Unit-IV, Sec-B, Q.1. and Q.2.
(ii) Difference between FERA and FEMA.
Ans. Difference between FERA and FEMA
|`S.No.||FERA, 1973||FEMA, 1999|
|It is an old enactment. It was passed in 1973.Now this Act has been repealed.||It is a new enactment. It was passedin the year 1999. It still exists.|
|It was a long enactment with 81 sections. It was very strict in nature.||It is a small enactment with only 49 sections it is liberal in nature.|
|Approach towards foreign exchange transactions was very conservative and restrictive.||Approach towards foreign exchange transactions is very positive and welcoming.|
|Penalty provisions were very hard. In this Act, imprisonment was imparted to the person violating its provisions.||It provides only for monetary penalty for violating the provisions. Laprisonment is imparted only on non-payment of monetary penalty.|
|The scope of FERA was very wide, it deals with all the transactions related to foreign exchange, i.e. anything and everything related to foreign exchange was controlled by FERA||The scope of FEMA is narrow. It deals only with specified transactions related to foreign exchange, i.e. it checks and controls only those transactions, which are specially mentioned in the Act.|
(iii) Foreign Exchange.
Ans. Foreign Exchange means foreign currency and include
(a) deposits, credits and balances payable in any foreign currency.
(b) drafts, travellers cheques, letters of credit or bills of exchange, expressed or draw Indian currency but payable in any foreign currency.
(c) drafts, travelers cheques, letters of credit or bills of exchange drawn by banks, institutions or persons outside India, but payable in Indian currency.