ICAI Foundation Business Laws - Complete Revision Notes

Comprehensive practice flashcards covering the Indian Regulatory Framework, Contract Act 1872, Sale of Goods Act 1930, Partnership Act 1932, LLP Act 2008, Companies Act 2013, and Negotiable Instruments Act 1881 based on the ICAI BOS Saransh lecture notes.

According to the study guidelines, what is the recommended four-part structure for answering practical or scenario-based legal questions?

1. Relevant Legal Provision (with correct Section number and correct name of the Act with year)
2. The facts given in the problem
3. Correlation of the legal provision with the facts
4. Conclusion (if possible)

How is 'Law' defined in the Indian Regulatory Framework?

Law is a set of obligations and duties imposed by the Government for securing welfare and providing justice to society.

What are the four primary sources of law identified in the Indian legal framework?

1. The Constitution
2. Precedents or the Judicial Decisions of various Courts
3. The statutes or laws made by Parliament and State Assemblies
4. Established Customs and Usages in some cases

What are the three legislative lists through which the Constitution of India divides law-making powers?

1. Central List
2. State List
3. Joint List

What is the sequential process of enacting a central law in India?

1. Proposed in Parliament as a Bill
2. Passed in the Lok Sabha after discussion and debate
3. Passed in the Rajya Sabha
4. Obtains the assent of the President of India
5. Notified by the Government in the Official Gazette of India

What legal principle is embodied by the doctrine of Stare Decisis?

The doctrine means "to stand by that which is decided" and reinforces the obligation of courts to follow established precedents when deciding subsequent cases with similar facts.

What are the three fundamental rules of Natural Justice (Jus Natural)?

1. No one should be made a judge in his own cause (Rule against Prejudice)
2. Hear the other party or give the other party a fair hearing
3. Reasoned decision

Can a judicial decision override statutory law?

No; a judgment can override or alter common law, but it cannot override or change a statute.

Which four Central Civil Services are controlled at the apex level by the Ministry of Finance?

1. Indian Revenue Service
2. Indian Audit and Accounts Service
3. Indian Economic Service
4. Indian Civil Accounts Service

Which six departments comprise the Ministry of Finance?

1. Department of Economic Affairs
2. Department of Expenditure
3. Department of Revenue
4. Department of Financial Services
5. Department of Investment and Public Asset Management
6. Department of Public Enterprise

Which civil service cadre runs the Ministry of Corporate Affairs (MCA), and what is its highest post?

It is mostly run by the Indian Corporate Law Service (ICLS) cadre, with the highest post being the Director General of Corporate Affairs (DGCoA), which is fixed at Apex Scale.

When was the Securities and Exchange Board of India (SEBI) established as an executive body, and when did it acquire statutory powers?

It was established as an executive body on 12 April 1988 and received statutory powers on 30 January 1992 through the SEBI Act, 1992.

Where are the two currency printing presses of the Bharatiya Reserve Bank Note Mudran (BRBNM) located?

Nashik (Western India) and Dewas (Central India).

When was the Insolvency and Bankruptcy Board of India (IBBI) established, and which two tribunals does it use to handle cases?

It was established on 1st October 2016 under the Insolvency and Bankruptcy Code (passed by Lok Sabha on 5th May 2016) and handles cases using the National Company Law Tribunal (NCLT) and the Debt Recovery Tribunal (DRT).

What is the bench size and current working strength limit of judges in the Supreme Court of India?

The principal bench consists of $7$ members including the Chief Justice of India, and the total number has increased to $34$ including the Chief Justice of India.

What is the pecuniary jurisdiction limit of a Civil Judge in a District Court?

A Civil Judge can try suits valuing not more than $₹2\text{ crore}$.

Under what population threshold is a Metropolitan Court established?

In metropolitan cities where the population is $10\text{ lakh}$ or more.

What are the essential elements of an enforceable contract under Section 10 of the Indian Contract Act, 1872?

It must be made by the free consent of parties competent to contract, for a lawful consideration, with a lawful object, and not expressly declared to be void.

What was the legal principle established in Carlill v. Carbolic Smoke Ball Co. regarding general offers?

A general offer made to the public at large can be accepted by anyone performing the conditions specified in the offer without prior communication of acceptance.

What was the ruling in Lalman Shukla v. Gauri Dutt regarding communication of an offer?

A person cannot accept an offer without knowledge of it; performing an act in ignorance of an announced reward does not constitute acceptance.

What was decided in Pharmaceutical Society of Great Britain v. Boots Cash Chemists Ltd regarding display of goods with price tags?

Display of goods with price tags on a shop shelf merely constitutes an invitation to treat, not an offer to sell.

What rule regarding acceptance was laid down in Felthouse v. Bindley?

Silence or non-communication cannot be prescribed as a mode of acceptance; an offeror cannot frame an offer so that failure to respond amounts to an acceptance.

As against the proposer, when the letter of acceptance is posted; as against the acceptor, when the letter reaches the proposer.

What rule concerning the flow of consideration was affirmed in Durga Prasad v. Baldeo?

Consideration must move at the desire of the promisor. Work done at the desire of a third party (such as a District Collector) does not constitute valid consideration.

What was the landmark decision in Mohori Bibi v. Dharmo Das Ghose concerning minors?

An agreement entered into by a minor is void ab initio, and the minor cannot be compelled to repay borrowed money.

What are the legal consequences when an agreement is induced by coercion versus undue influence?

Coercion makes the contract voidable at the option of the aggrieved party. Undue influence makes the contract voidable, and the court may set it aside entirely or enforce it in a modified form.

Under what circumstance does mere silence amount to fraud under the Indian Contract Act, 1872?

Where it is the duty of the person keeping silent to speak, or where his silence is, in itself, equivalent to speech.

What is the difference in legal effect between a bilateral mistake and a unilateral mistake?

A bilateral mistake as to an essential matter of fact renders an agreement altogether void. A unilateral mistake does not make a contract voidable, unless it relates to the identity of the person contracted with or the nature of the contract.

What rule was established in Hadley v. Baxendale regarding compensation for breach of contract?

A party can only recover ordinary damages naturally arising from the breach; special damages for loss of profits cannot be recovered unless the special circumstances were communicated to and known by the defaulting party.

What are the five recognized types of quasi-contracts under Sections 68 to 72 of the Indian Contract Act, 1872?

1. Claim for necessaries supplied to persons incapable of contracting
2. Right to recover money paid for another person
3. Obligation of a person enjoying benefits of a non-gratuitous act
4. Responsibility of a finder of goods
5. Liability for money paid or thing delivered by mistake or under coercion

What is the difference between a Contract of Indemnity and a Contract of Guarantee regarding the number of parties and nature of liability?

A contract of indemnity has $2$ parties (indemnifier and indemnified) with primary and unconditional liability. A contract of guarantee has $3$ parties (creditor, principal debtor, and surety) with the surety having secondary and conditional liability.

What is the difference between a Particular Lien and a General Lien under bailment?

A particular lien allows retention of specific goods on which labour or skill has been exercised until remuneration is paid. A general lien allows retention of any goods bailed as security for a general balance of account (available to bankers, factors, wharfingers, High Court attorneys, and policy brokers).

How does a Sub-agent differ from a Substituted Agent under the law of agency?

A sub-agent is appointed by and works under the control of the original agent with no privity of contract with the principal. A substituted agent is named by the agent pursuant to authority and acts as an agent of the principal with direct privity of contract.

When does an agency become irrevocable under Section 202 of the Indian Contract Act, 1872?

When the agent has himself an interest in the property which forms the subject matter of the agency, it cannot be terminated to the prejudice of such interest in the absence of an express contract.

What items are explicitly excluded from the definition of 'Goods' under Section 2(7) of the Sale of Goods Act, 1930?

Actionable claims and money in circulation.

What are the three forms of delivery recognized under the Sale of Goods Act, 1930?

1. Actual delivery (physical transfer)
2. Constructive delivery (acknowledgement of holding without change in actual possession)
3. Symbolic delivery (delivery of a token representing the goods, such as warehouse keys)

What is the legal difference between a 'Condition' and a 'Warranty' in a contract of sale?

A condition is a stipulation essential to the main purpose of the contract, breach of which gives the right to repudiate the contract and claim damages. A warranty is collateral to the main purpose, breach of which gives only a right to claim damages.

What are the three essential requirements to override the rule of Caveat Emptor regarding fitness for purpose under Section 16(1)?

1. The buyer made known to the seller the particular purpose for which the goods are required
2. The buyer relied on the skill and judgment of the seller
3. The seller's business is to supply goods of that description

What is the core principle of 'Nemo dat quod non habet' under Section 27 of the Sale of Goods Act, 1930?

"No one can give what he has not got"; a buyer acquires no better title to the goods than the seller had, unless an established legal exception applies.

What are the rights of an unpaid seller against the goods when the property in goods has passed to the buyer?

1. Lien on the goods for the price while in possession
2. Right of stopping the goods in transit after parting with possession
3. Right of resale under statutory conditions

What is the 'true test of partnership' under Section 4 of the Indian Partnership Act, 1932?

The existence of an agreement between persons to share the profits of a business carried on by all or any of them acting for all (mutual agency).

What statutory interest rate is a partner entitled to receive on advances made to the firm beyond subscribed capital?

$$6\%\text{ p.a.}$$

Name four acts that fall completely outside the implied authority of a partner under Section 19(2) of the Indian Partnership Act, 1932.

1. Submit a dispute relating to firm business to arbitration

2. Open a banking account on behalf of the firm in his own name

3. Compromise or relinquish any claim by the firm

4. Acquire or transfer immovable property belonging to the firm

5. withdraw a suit or proceedings filed on behalf of the firm

What are the rules regarding a minor admitted to the benefits of a partnership upon attaining majority?

Within $6\text{ months}$ of attaining majority or obtaining knowledge of being admitted, the minor must give public notice whether he elects to become a partner; failure to give notice makes him a full partner personally liable for all acts since admission.

What are the statutory requirements for the appointment of Designated Partners in a Limited Liability Partnership (LLP)?

Every LLP must have at least $2$ designated partners who are individuals, and at least $1$ of them must be a resident in India (stayed in India for not less than $120\text{ days}$ during the financial year).

What are the statutory threshold limits for a 'Small Limited Liability Partnership' under Section 2(1)(ta)?

Contribution does not exceed $₹25\text{ lakh}$ (up to maximum prescribed $₹5\text{ crore}$) and turnover for the immediately preceding financial year does not exceed $₹40\text{ lakh}$ (up to maximum prescribed $₹50\text{ crore}$).

What are the membership limits for a Private Company and a Public Company under the Companies Act, 2013?

Private Company: Minimum $2$ members, maximum $200$ members (excluding employees/ex-employees). Public Company: Minimum $7$ members, maximum no limit.

What are the capital and turnover ceilings for a company to be classified as a 'Small Company' under Section 2(85)?

Paid-up share capital not exceeding $₹4\text{ crore}$ (or higher prescribed amount up to $₹10\text{ crore}$) and turnover not exceeding $₹40\text{ crore}$ (or higher prescribed amount up to $₹100\text{ crore}$).

What are the conditions required to invoke Section 138 of the Negotiable Instruments Act, 1881 for dishonour of cheques?

1. Cheque issued to discharge a legally enforceable debt
2. Cheque presented within $3\text{ months}$
3. Notice demanding payment issued within $30\text{ days}$ of receiving dishonour advice
4. Drawer fails to pay within $15\text{ days}$ of receiving notice

What interest rate can a holder claim as compensation on dishonour of a negotiable instrument under Section 117?

$18\%\text{ p.a.}$ from the due date of payment to the date of realisation.