Business Law Exam Crash Course

Comprehensive practice flashcards covering mercantile law, the Indian Contract Act, 1872, the Sale of Goods Act, 1930, special contracts (indemnity, guarantee, bailment, pledge, agency), the Environment (Protection) Act, 1986, the IT Act, 2000, the Competition Act, 2002, and the LLP Act, 2008.

How is a contract defined under Section 2(h) of the Indian Contract Act, 1872?

A contract is an agreement enforceable by law.

What are the essential elements required for a valid contract under Section 10 of the Indian Contract Act, 1872?

1. Offer and acceptance
2. Intention to create legal relations
3. Lawful consideration
4. Capacity of parties
5. Free consent
6. Lawful object
7. Agreement not expressly declared void
8. Certainty
9. Possibility of performance
10. Compliance with required legal formalities (such as writing, registration, or stamping).

Who is competent to contract according to Section 11 of the Indian Contract Act, 1872?

Every person who has attained the age of majority, is of sound mind, and is not disqualified from contracting by any law.

What is the legal effect of an agreement entered into by a minor under Indian law?

A minor's agreement is generally void from the beginning (void ab initio).

What is the key difference between an offer and an invitation to offer?

An offer shows willingness to do or abstain from doing something to obtain assent and leads directly to a contract upon acceptance, whereas an invitation to offer (such as advertisements or display of goods) merely invites others to make an offer.

What rules govern a valid acceptance under the Indian Contract Act?

Acceptance must be absolute and unqualified, made in the prescribed or reasonable manner, communicated to the proposer, made while the offer remains open, and made by the person to whom the offer is addressed.

How is consideration defined under Section 2(d) of the Indian Contract Act, 1872?

Consideration is the value, act, or abstinence done or promised at the desire of the promisor in return for a promise.

What is the general rule regarding consideration, and what are the common statutory exceptions under Section 25?

The general rule is that an agreement without consideration is void. Exceptions include:

1. Written and registered agreements based on natural love and affection between near relations
2. A promise to compensate for a past voluntary act or something the promisor was legally compellable to do
3. A written promise to pay a time-barred debt.

What factors prevent consent from being 'free' under the Indian Contract Act?

Consent is not free when it is caused by coercion, undue influence, fraud, misrepresentation, or mistake.

What constitutes coercion under the Indian Contract Act?

Committing or threatening to commit any act forbidden by criminal law, or unlawfully detaining or threatening to detain property, to induce a person to enter into an agreement.

What is undue influence in the context of contract law?

A situation where one party is in a position to dominate the will of another and uses that position to obtain an unfair advantage over them.

How do fraud and misrepresentation differ under the Indian Contract Act?

Fraud involves intentional deception or wrongful acts/omissions committed with the intent to deceive or induce a contract, whereas misrepresentation is an untrue statement or conduct made without the intent to deceive.

What are the six recognized modes of discharge of a contract?

1. By performance
2. By mutual agreement (such as novation, rescission, alteration, remission, or waiver)
3. By impossibility/frustration
4. By lapse of time
5. By operation of law (such as insolvency, merger, or material alteration)
6. By breach.

Under Section 73 of the Indian Contract Act, what damages can be claimed for a breach of contract?

Monetary compensation for losses that naturally arose in the usual course of things or were contemplated by the parties when contracting; remote and indirect losses are generally not recoverable.

What remedies are available to an aggrieved party upon a breach of contract?

1. Ordinary or reasonable damages (Section 73 and Section 74)
2. Rescission of the contract
3. Specific performance (under the Specific Relief Act)
4. Injunction (under the Specific Relief Act)
5. Quantum meruit.

What does the remedy of quantum meruit allow?

It allows a party to claim reasonable payment for work done or benefits conferred in situations where the law permits recovery despite the contract not being fully performed.

What is a quasi-contract, and what is its legal objective?

A quasi-contract is an obligation imposed by law rather than by mutual agreement, created to prevent one person from being unjustly enriched at the expense of another.

What are examples of quasi-contractual obligations under the Indian Contract Act?

1. Supply of necessaries to a person incapable of contracting (or their legal dependents)
2. Payment of money by an interested party which another was legally bound to pay
3. Non-gratuitous acts where the other party benefits
4. Responsibilities of a finder of goods
5. Liability to return money or goods delivered by mistake or under coercion.

How is a contract of indemnity defined under Section 124 of the Indian Contract Act, 1872?

A contract by which one party promises to save the other from loss caused to them by the conduct of the promisor or by the conduct of any other person.

How is a contract of guarantee defined under Section 126 of the Indian Contract Act, 1872?

A contract to perform the promise or discharge the liability of a third person in case of their default.

What are the key differences between indemnity and guarantee regarding parties, purpose, and liability?

• Parties: Indemnity involves two parties (indemnifier and indemnity-holder); guarantee involves three (creditor, principal debtor, and surety).
• Purpose: Indemnity protects against a specified loss; guarantee secures another person's debt or performance.
• Liability: Indemnifier has primary liability arising when a covered loss occurs; surety has secondary liability arising only on the principal debtor's default.

How is bailment defined under Section 148 of the Indian Contract Act, 1872?

The delivery of goods by one person to another for a purpose, on a contract that the goods will be returned or disposed of according to the directions of the person delivering them once the purpose is accomplished.

What is a pledge according to Section 172 of the Indian Contract Act, 1872?

The bailment of goods specifically as security for the payment of a debt or the performance of a promise.

How do bailment and pledge differ in terms of purpose, right to sell, and parties?

• Purpose: Bailment can be for custody, repair, transport, or hire; pledge is specifically security for a debt or performance.
• Right to sell: Bailee ordinarily has no general right to sell; pawnee may sell the goods on default after giving required reasonable notice.
• Parties: Bailor and bailee in bailment; pawnor and pawnee in pledge.

What are the primary duties of an agent toward their principal?

Follow lawful instructions, conduct business with care and skill, render proper accounts, communicate in cases of difficulty, avoid secret profits or conflicts of interest, and pay over all sums received on behalf of the principal.

What are the common ways by which an agency contract can be terminated?

Revocation by principal, renunciation by agent, completion of the business, death or unsoundness of mind of either party, insolvency in relevant circumstances, expiry of the agreed period, or destruction of the subject matter.

What is the difference between a sale and an agreement to sell under the Sale of Goods Act, 1930?

A sale transfers ownership (property in goods) immediately to the buyer, whereas an agreement to sell transfers ownership at a future time or subject to the fulfillment of some condition.

How do a condition and a warranty differ under the Sale of Goods Act, 1930?

• Importance: A condition is a stipulation essential to the main purpose of the contract; a warranty is collateral to the main purpose.
• Breach: Breach of a condition permits rejection of goods and repudiation of the contract; breach of a warranty gives rise only to a claim for damages.

What does the rule 'nemo dat quod non habet' mean, and what are its recognized exceptions under the Sale of Goods Act?

It means 'no one can give what they do not have' (a seller cannot pass a better title than they possess). Exceptions include sales by a mercantile agent with consent, sales by joint owners, sales under a voidable contract before rescission, and sellers/buyers remaining in possession.

Who is an unpaid seller under the Sale of Goods Act, 1930?

A seller to whom the whole of the price has not been paid or tendered, or who has received a conditional payment (such as a negotiable instrument) that has been dishonored or unfulfilled.

What rights does an unpaid seller possess against the goods?

1. Right of lien (retaining possession until payment)
2. Right of stoppage in transit (resuming possession while goods are in transit if the buyer becomes insolvent)
3. Right of resale (subject to statutory rules)
4. Right to withhold delivery (where ownership has not passed).

What is the critical distinction between an unpaid seller's right of lien and right of stoppage in transit?

Lien is exercised when the seller still retains physical possession of the goods, whereas stoppage in transit is exercised when the seller has parted with possession and the goods are with a carrier in the course of transit.

When is a contract of sale complete in an auction sale?

When the auctioneer announces its completion by the fall of the hammer or in another customary manner. Bids may be retracted at any time before this announcement.

What are the main objectives of the Environment (Protection) Act, 1986?

To protect and improve environmental quality, prevent, control, and reduce pollution, coordinate the actions of regulatory authorities, and set safety standards for handling hazardous substances.

What are the primary objectives of the Information Technology Act, 2000?

To facilitate electronic commerce, provide legal recognition to electronic records and digital/electronic signatures, support electronic filing with government agencies, and penalize specified cyber offences.

How does the creation and verification of a digital signature function under the IT Act, 2000?

Creation involves the signer using their private key to encrypt or generate a unique mathematical mark linked to the electronic record. Verification is performed by the recipient using the signer's corresponding public key to confirm authenticity and data integrity.

What is the difference between an electronic signature and a digital signature under the IT Act?

An electronic signature is a broad legal category/technique used to authenticate an electronic record, while a digital signature is a specific, cryptography-based form of electronic signature recognized under the law.

What is E-Hastakshar?

An electronic-signature service in India that allows citizens to digitally sign documents online using an authentication process, commonly based on Aadhaar.

What practices are regulated under the Competition Act, 2002?

1. Anti-competitive agreements (such as price-fixing, bid rigging, and market allocation)
2. Abuse of dominant position (such as predatory pricing, denial of market access, or unfair conditions)
3. Combinations (mergers, amalgamations, and acquisitions exceeding statutory thresholds).

Under the Competition Act, 2002, is holding a dominant position in the market illegal?

No, holding a dominant position is not prohibited; only the abuse of that dominant position is illegal under the Act.

What are the core characteristics of a Limited Liability Partnership (LLP) under the LLP Act, 2008?

It is a body corporate with a separate legal personality distinct from its partners, has perpetual succession, limits partners' liability to their agreed contribution, and requires a minimum of two partners including designated partners.

How does a Limited Liability Partnership (LLP) differ from a traditional partnership firm?

An LLP has a separate legal personality and offers limited liability protection to all its partners, whereas a traditional partnership is not a separate legal person distinct from the partners, who bear unlimited personal liability.