Test: Additional Question Bank Of Mercantile Law - 1 - CA Foundation MCQ

Statement A: An agreement enforceable by law is a contract.
- This statement is true. A contract is a legally binding agreement between two or more parties. For an agreement to be considered a contract, it must be enforceable by law.
Statement B: An agreement is an accepted proposal.
- This statement is true. An agreement is a mutual understanding or arrangement between two or more parties regarding their rights and obligations. It is formed when one party makes an offer and the other party accepts that offer.
Statement C: An agreement can only consist of an offer.
- This statement is false. While an agreement can include an offer, it is not limited to just an offer. It also includes the acceptance of that offer, creating a mutual understanding between the parties involved.
Statement D: An agreement can only consist of an acceptance.
- This statement is false. An agreement consists of both an offer and an acceptance. Without an offer, there can be no acceptance and therefore no agreement.
In conclusion, statements A and B are true, while statements C and D are false.

The Contract Act of 1872
The Contract Act of 1872, also known as the Indian Contract Act, was enacted on 25th April, 1872.
Key Points:
- The Contract Act of 1872 is a legislation that governs the rules and regulations related to contracts in India.
- It was drafted by the first Indian Law Commission and introduced in the Council of the Governor-General of India.
- The Act consists of 266 sections and is divided into two parts: General Principles of Contract and Special Kinds of Contracts.
- The purpose of the Act is to ensure fairness, transparency, and enforceability of contracts in various business transactions.
- It covers essential elements of a valid contract, such as offer, acceptance, consideration, capacity, free consent, legality of object, and certainty.
- The Act also provides remedies for breach of contract, including damages, specific performance, and injunctions.
- It has been amended several times to keep up with changing societal and economic conditions.
- The Contract Act of 1872 has played a significant role in shaping contract law in India and has been the basis for many court decisions.
Conclusion:
The Contract Act of 1872 was enacted on 25th April, 1872, and it continues to be a crucial legislation governing contracts in India.

Smelting and the Formation of Slag
During the process of smelting, an additional substance is added to the raw materials to facilitate the removal of impurities. This substance combines with the impurities and forms a fusible product known as slag.
Explanation:
The process of smelting involves the extraction of metals from their ores by heating them at high temperatures. The impurities present in the ore are unwanted substances that need to be removed in order to obtain the desired metal in its pure form. This is where the addition of a substance called flux becomes essential.
What is Flux?
Flux is a substance that is added during smelting to lower the melting point of the impurities, making them easier to remove. It acts as a medium for the impurities to combine and form slag.
Formation of Slag:
When the flux is added to the heated ore, it reacts with the impurities present in the ore. The impurities combine with the flux to form a fusible product known as slag. Slag is a molten or glassy substance that floats on top of the molten metal. It is lighter than the metal and can be easily separated.
Characteristics of Slag:
- Slag is usually composed of a mixture of metal oxides and silicon dioxide.
- It has a lower melting point compared to the metal being smelted, allowing it to be easily removed.
- Slag is often used as a valuable byproduct in various industries, such as construction and cement production.
Conclusion:
During the process of smelting, the addition of a substance called flux facilitates the formation of slag. Slag is a fusible product that forms when the impurities in the ore combine with the flux. It has a lower melting point than the metal being smelted and can be easily separated, making it an important component of the smelting process.

Legal Requirements of a Valid Acceptance
Acceptance is an essential element in the formation of a legally binding contract. To be considered a valid acceptance, certain requirements must be met. The legal requirements of a valid acceptance are as follows:
A: It must be communicated
- Acceptance must be communicated to the offeror or their authorized agent.
- Silence or inaction generally does not constitute acceptance unless specified in the offer or the parties have a previous course of dealing where silence is considered acceptance.
B: It must be presumed from silence if not communicated within specified time
- In some cases, acceptance can be presumed from silence or inaction if the offer specifies a certain period for acceptance and the offeree remains silent for that period.
- This is known as the "postal rule" or "mailbox rule," which applies to acceptance by mail or similar means.
C: It must be absolute and unconditional
- Acceptance must be clear, definite, and unconditional.
- Any additions, modifications, or conditions to the offer may constitute a counteroffer and not a valid acceptance.
D: It must be accepted by a person who has the authority to accept
- The acceptance must be made by a person who has the legal capacity and authority to accept the offer.
- If the acceptance is made by someone without the proper authority, it may not be legally binding.
Overall, a valid acceptance requires communication, either explicitly or through silence, and must be absolute, unconditional, and accepted by a person with the authority to accept. It is crucial to ensure that all these legal requirements are met for a contract to be valid and enforceable.

Legal Requirements of a Valid Consideration:


There are several legal requirements that must be fulfilled for a consideration to be considered valid. These requirements ensure that the consideration is enforceable in a contract. The legal requirements of a valid consideration include:
A. It must move at the desire of the promisor:
- The consideration must be given in response to a request or desire of the promisor.
- It should be provided voluntarily and not under any duress or coercion.
B. It must be lawful:
- The consideration must not involve any illegal activities or go against public policy.
- It should be in compliance with the laws and regulations governing the jurisdiction.
C. It must be real and not illusory:
- The consideration must have some value or benefit to both parties involved.
- It should not be illusory or based on a mere promise without any commitment or obligation.
D. It needs to be adequate:
- While adequacy of consideration is not a strict requirement, it is generally expected that the consideration should be fair and reasonable.
- However, the courts usually do not examine the adequacy of consideration unless there are elements of fraud, undue influence, or unconscionability involved.
In summary, a valid consideration must move at the desire of the promisor, be lawful, real and not illusory, and does not necessarily need to be adequate. These requirements ensure that the consideration is legally binding and enforceable in a contract.

The correct answer is option D: a voidable contract.
Explanation:
Under section 2(i) of the Indian Contract Act, 1872, an agreement enforceable by law at the instance of one party and not the other is known as a voidable contract. Here is a detailed explanation:
1. Definition of a voidable contract:
- A voidable contract is a legal agreement that can be affirmed or rejected at the option of one party, while the other party is bound to fulfill their obligations.
- The party who has the power to avoid the contract has the right to enforce it if they choose to do so.
2. Characteristics of a voidable contract:
- A voidable contract is initially valid and enforceable, but it can be voided or canceled by one of the parties.
- The party with the power to avoid the contract can exercise this right due to certain legal grounds or circumstances.
3. Examples of voidable contracts:
- Contracts entered into by a minor: A contract with a person who is below the age of majority can be voidable at the option of the minor.
- Contracts induced by coercion: If a contract is entered into due to the use of force or threats, it can be voidable at the option of the party who was coerced.
- Contracts obtained through undue influence: If a contract is influenced by one party taking advantage of the mental or emotional weakness of the other party, it can be voidable.
4. Consequences of avoiding a voidable contract:
- If a voidable contract is avoided, it becomes void ab initio (from the beginning), and both parties are released from their obligations under the contract.
- The party avoiding the contract may be required to restore any benefits received under the contract.
In conclusion, a voidable contract is an agreement enforceable by law at the instance of one party and not the other, as per section 2(i) of the Indian Contract Act, 1872.

Elements that affect the consent of the party:

1. Undue Influence: Undue influence refers to the exertion of pressure or influence on a person to enter into a contract against their free will. It involves taking advantage of a person's vulnerability, trust, or dependence on another party. It can be categorized into two types:
   
   
   
   • Actual undue influence: This occurs when one party actively manipulates or coerces the other party into giving their consent.
   
   
   • Presumed undue influence: This occurs when there is a relationship of trust and confidence between the parties, and one party benefits unfairly from the contract.
   
   
   
   


2. Representation: Representation refers to the act of making statements or assertions to induce another party to enter into a contract. It involves providing information that may influence the decision of the other party. However, if the representation is false or misleading, it can affect the consent of the party. It can be categorized into two types:
   
   
   
   • Fraudulent representation: This occurs when a party intentionally makes false statements with the intention to deceive the other party.
   
   
   • Negligent misrepresentation: This occurs when a party makes false statements due to their negligence or lack of reasonable care in verifying the accuracy of the information.
   
   
   
   


3. Coercion: Coercion refers to the use of force or threats to compel a person to enter into a contract. It involves depriving the party of their free will and making them give their consent under duress. Coercion can be physical or psychological in nature.

Therefore, the elements that affect the consent of the party are undue influence, representation (including fraudulent representation and negligent misrepresentation), and coercion. These factors can undermine the voluntary and genuine consent required for a contract to be valid.

Void Contracts:

Void contracts are agreements that are not legally binding and have no legal effect. They are considered as if they never existed. In general, a contract may be void if it lacks certain essential elements or if it violates the law.

Void Contracts Examples:

• Agreement with unlawful consideration: A contract is void if it involves consideration that is illegal or against public policy. For example, an agreement to engage in illegal activities or to harm someone would be void.


• Agreement with inadequate consideration, if inadequacy is not supported by free consent: If one party provides insufficient consideration for a contract, and this inadequacy is not due to a lack of free consent, the contract may be void. For instance, if someone agrees to sell their car for $1, but there is no evidence of coercion or fraud, the contract may be void due to the inadequate consideration.


• Agreement in respect of legal proceedings: Contracts made in relation to ongoing or potential legal proceedings may be void. This is because such agreements may interfere with the administration of justice or undermine the authority of the court.

Based on the given options, the void contract is A: Agreement with unlawful consideration.

It is important to note that void contracts are different from voidable contracts. Voidable contracts are initially valid but can be voided by one of the parties based on certain circumstances, such as fraud or undue influence.

Legal Requirements of a Valid Contingent Contract:

A: It must be a valid contract

A valid contingent contract must meet the basic requirements for a valid contract, which include:

• Offer and acceptance: There must be a clear offer by one party and acceptance by the other party.


• Consideration: Both parties must exchange something of value, such as money or goods.


• Legal capacity: The parties involved must have the legal capacity to enter into a contract, such as being of legal age and mentally competent.


• Legal purpose: The contract must be for a lawful purpose and not involve any illegal activities.

C: The performance of the contract must be conditional

In a contingent contract, the performance of the contract is dependent on the occurrence or non-occurrence of a specific event. The contract will only be enforceable if the specified event takes place or does not take place, as agreed upon by the parties involved.

D: The event must be collateral to the contract

In a contingent contract, the event that determines the performance of the contract must be collateral or incidental to the main purpose of the contract. The event should not be directly related to the performance of the contract but should have an impact on it.

B: It must be certain

Although option B is included in the given choices, it is not a legal requirement for a valid contingent contract. While certainty is important in contract law, a contingent contract allows for the performance of the contract to be dependent on the occurrence or non-occurrence of a specific event, which may introduce an element of uncertainty.

In conclusion, the legal requirements for a valid contingent contract include being a valid contract in general, having the performance of the contract conditional on a specific event, and having the event be collateral to the contract.

Explanation:
The correct statements among the given options are A and B. The incorrect statements are C and D. Here's a detailed explanation:
A: Right of one party is the obligation of another party:
- This statement is correct as it represents the basic principle of contracts. One party's right implies that the other party has the corresponding obligation.
B: Every contract is an agreement, but every agreement is not a contract:
- This statement is correct. An agreement refers to a mutual understanding between two or more parties, while a contract is a legally enforceable agreement. Therefore, every contract is an agreement, but not every agreement fulfills the legal requirements to be considered a contract.
C: "Quantum meruit" means void from the beginning:
- This statement is incorrect. "Quantum meruit" is a Latin term that means "as much as he deserves." It refers to a legal principle where a party is entitled to receive fair compensation for the services or goods provided, even if there is no specific contract in place.
D: Social agreements are legally enforceable:
- This statement is incorrect. Social agreements, such as promises made between friends or family members, are generally not legally enforceable unless they fulfill specific legal requirements, such as consideration and intention to create legal relations.
In summary, the correct statements are A and B, while the incorrect statements are C and D.

The communication of the offer is complete on the 7th January. Let's break down the timeline of events:
1. X of Agrasends a letter by post to Y of Delhi offering to sell his car for Rs. 1,00,000 on 1st January.
2. The letter is posted on 1st January and takes 7 days to reach Y, which means it reaches Y on 7th January.
3. Y sends his acceptance by post on 10th January.
4. However, X receives the letter of acceptance on 15th January.
Based on this timeline, the communication of the offer is complete on the 7th January because that is when Y receives the offer letter from X. This is the point at which Y becomes aware of the offer and has the opportunity to respond.
Therefore, the correct answer is C: 7th January.

Communication of Acceptance:
The communication of acceptance is an important aspect of contract law. It refers to the moment when the acceptance of an offer is effectively communicated to the offeror. In the case of the acceptor, the communication of acceptance is complete when it is received by the offeror.
Options:
A: 6th January
B: 10th January
C: 11th January
D: 14th January

To determine when the communication of acceptance is complete as against the acceptor, we need to analyze the given options and consider the principles of contract law.
1. 6th January: This option is not relevant to the question, as it does not pertain to the communication of acceptance.
2. 10th January: This option is also not relevant, as it does not address the communication of acceptance.
3. 11th January: This option could potentially be the correct answer if it aligns with the principles of contract law. However, more analysis is needed.
4. 14th January: This option may be the correct answer, as it suggests that the communication of acceptance is complete on this date.
Conclusion:
Based on the given options and the principles of contract law, the communication of acceptance is complete as against the acceptor on the 14th of January (option D).

Analysis:
To determine the validity of the revocation of an offer sent via telegram, we need to consider the legal principles governing the revocation of offers and the mode of communication.
1. Offer and Acceptance:
- An offer is a proposal made by one party to another with the intention of creating a legally binding contract.
- Acceptance is the unqualified agreement to the terms of the offer.
2. Revocation of Offer:
- An offer can be revoked at any time before acceptance, even if the offeror has promised to keep the offer open for a specified period.
- The revocation of an offer is effective when it is communicated to the offeree.
- The mode of communication chosen by the offeror must be reasonable and appropriate.
3. Mode of Communication:
- The mode of communication chosen by the offeror must be as fast or faster than the mode of communication used by the offeree.
- If the offeror chooses a slower mode of communication, the revocation is effective when it is received by the offeree.

In this scenario, X sent a telegram revoking his offer on 7th January, before Y posted the acceptance letter. To determine the validity of the revocation, we need to consider the following:
- Sending a telegram is a reasonable and appropriate mode of communication.
- A telegram is generally faster than posting a letter.
- The revocation of the offer is effective when it is communicated to the offeree.
Based on these points, we can conclude that the revocation of the offer is valid, as the telegram reached Y before the letter of acceptance was posted. Therefore, Option A: "It is valid" is the correct answer.
Conclusion:
The revocation of an offer sent via telegram is valid if the telegram reaches the offeree before the acceptance letter is posted. In this scenario, X's revocation is valid as the telegram reached Y before the letter of acceptance was posted.

To determine the validity of the revocation of acceptance, we need to consider the relevant provisions of the Indian Contract Act, 1872.
Section 5: A proposal may be revoked at any time before the communication of its acceptance is complete as against the proposer, but not afterwards.
Based on the given information, we can analyze the situation as follows:
1. Y sends a telegram on 13th January revoking his acceptance.
2. Y's telegram reaches X before the letter of acceptance is received by Y.
Now, let's discuss the possible scenarios and their implications:
Scenario 1: Y's telegram reaches X before the letter of acceptance is dispatched by X:
- In this scenario, the revocation of acceptance is valid.
- As per Section 5 of the Indian Contract Act, the proposer (Y) can revoke the proposal (acceptance) at any time before the communication of its acceptance is complete as against the proposer (Y).
- Since Y's telegram reaches X before the letter of acceptance is dispatched, the communication of acceptance is not complete.
Scenario 2: Y's telegram reaches X after the letter of acceptance is dispatched by X:
- In this scenario, the revocation of acceptance is invalid.
- Once the letter of acceptance is dispatched, the communication of acceptance is complete.
- As per Section 5 of the Indian Contract Act, the proposer cannot revoke the proposal after the communication of its acceptance is complete.
Therefore, based on the given information, the revocation of acceptance is valid. Answer choice A is correct.

The position of the agreement between X and Y, where X agrees to sell "one hundred tons of oil" to Y, in the given case is a valid contract. Here's why:
1. Offer and Acceptance:
- X, the dealer in coconut oil, has made an offer to sell one hundred tons of oil to Y.
- Y has accepted this offer by agreeing to buy the oil.
2. Intention to Create Legal Relations:
- Both X and Y have entered into this agreement with the intention to create a legally binding contract.
3. Consensus ad Idem:
- There is a clear consensus between X and Y regarding the subject matter of the contract, i.e., one hundred tons of oil.
- The terms of the agreement are sufficiently certain and agreed upon by both parties.
4. Lawful Consideration:
- The consideration for the contract is the price of Rs. 10,000 per ton.
- This consideration is lawful and valuable.
5. Capacity to Contract:
- Both X and Y are assumed to have the legal capacity to enter into a contract.
- There is no indication of any incapacity or legal impediments in the given case.
6. Legal Formalities:
- There are no specific legal formalities required for this type of contract.
- The contract does not mention any specific requirements for its validity.
Based on these factors, it can be concluded that the agreement between X and Y is a valid contract. Both parties have willingly entered into the agreement with a clear understanding of the terms and conditions.

Contract Analysis:

The given scenario involves an agreement between X and Y for the sale of "one hundred tons of oil". The contract analysis is as follows:

Legal Principles:

In order to determine the position of the agreement, we need to consider the following legal principles:

• Offer and Acceptance: For a valid contract, there must be a clear offer made by one party and an unequivocal acceptance by the other party.


• Price Determination: The contract should have a definite price or a method for determining the price.


• Certainty of Terms: The terms of the contract must be certain and sufficiently definite to be enforceable.

Position of the Agreement:

Based on the given information, the position of the agreement between X and Y can be analyzed as follows:

• Valid Contract: The agreement is a valid contract if the following conditions are met:




• The agreement must be an offer by X to sell "one hundred tons of oil".


• Y must accept the offer without any ambiguity or condition.


• Even if the price is not fixed, it can be determined by the prevailing market price at the time of delivery or by a method agreed upon by both parties.


• The agreement must have certainty of terms, such as the quantity of oil, delivery terms, and any other essential terms.


• Assuming all these conditions are fulfilled, the agreement between X and Y for the sale of "one hundred tons of oil" is a valid contract.

Therefore, in the given case, the position of the agreement is a valid contract.

Position of Agreement:
The position of the agreement between X and Y, where X agrees to sell "one hundred tons of oil" to Y, depends on the scenario where X is a dealer in coconut oil and the price is to be fixed by Z.
In this case, the position of the agreement can be determined as follows:
1. Valid contract:
If the agreement meets all the essential elements of a valid contract, including offer, acceptance, consideration, capacity, and lawful object, it will be considered a valid contract. In this scenario, if X, Y, and Z fulfill all the necessary requirements, the agreement will be considered valid.
2. Void contract:
If the agreement is found to be illegal, against public policy, or involves fraudulent activities, it will be considered void. However, based on the given information, there is no indication that the agreement falls under this category.
3. Voidable contract:
A contract may be considered voidable if one party has the option to either enforce or rescind the contract due to certain circumstances, such as misrepresentation, duress, undue influence, or lack of capacity. If any of these factors are present in the agreement, it may be classified as a voidable contract. However, based on the given information, there is no indication of any such factors.
4. Uncertain contract:
An uncertain contract is one where the terms are not clear or the subject matter is uncertain. If the agreement lacks clarity regarding the quantity of oil to be sold or any other essential terms, it may be considered an uncertain contract. However, based on the given information, the agreement clearly states the quantity of "one hundred tons of oil."
Therefore, based on the information provided, the position of the agreement between X and Y, where X is a dealer in coconut oil and the price is to be fixed by Z, is a valid contract.

Explanation:
In this case, the agreement between X and Y is a void contract. Here's why:
1. Coconut oil: The agreement states that X, who is a dealer in coconut oil, agrees to sell one hundred tons of oil. This specifies the type of oil being sold.
2. Price: The agreement further states that X agrees to sell at Rs. 10,000/ton or Rs. 11,000/ton. This specifies the price at which the oil will be sold.
However, despite these specifications, the agreement is still considered a void contract because of the following reasons:
3. Uncertainty: The agreement does not provide a clear indication of whether X will sell at Rs. 10,000/ton or Rs. 11,000/ton. It leaves the choice of price open to X, which creates uncertainty and ambiguity in the contract.
4. Essential terms: A valid contract requires essential terms to be certain, such as the subject matter, price, and quantity. In this case, although the subject matter (coconut oil) and quantity (one hundred tons) are specified, the price is uncertain due to the open choice given to X.
5. Intention to create legal relations: For a contract to be valid, there must be an intention to create legal relations between the parties. In this case, the uncertainty in the price indicates a lack of intention to create a legally binding agreement.
Therefore, the agreement between X and Y for the sale of one hundred tons of oil at either Rs. 10,000/ton or Rs. 11,000/ton is considered a void contract.

Explanation:


To determine the position of the agreement between X and Y, we need to consider the nature of the contract and the parties involved. In this case, X is a dealer in coconut oil and mustard oil.
1. Valid contract:
- A valid contract is one that meets all the essential elements required for a contract to be legally binding. It must have an offer, acceptance, consideration, capacity, and intention to create legal relations.
- If X is a dealer in both coconut oil and mustard oil and the agreement clearly states the quantity of oil to be sold (one hundred tons), then it can be considered a valid contract.
2. Void contract:
- A void contract is one that is not enforceable by law and has no legal effect from the beginning. It is invalid and cannot be enforced by either party.
- If there are any legal issues or restrictions that prevent the sale of oil, such as a government ban or illegal activity, then the contract would be considered void.
3. Voidable contract:
- A voidable contract is one that is initially valid but can be voided by one party due to certain circumstances or legal reasons. The party who has the option to void the contract can choose to either enforce it or declare it void.
- If there are any misrepresentations, fraud, or undue influence involved in the agreement between X and Y, then the contract may be considered voidable. However, the given information does not indicate any such circumstances.
4. Uncertain contract:
- An uncertain contract is one where the terms or subject matter of the agreement are not clear or definite. If the terms of the agreement, such as the quantity or type of oil, are ambiguous or uncertain, then the contract may be considered uncertain. However, in this case, the agreement clearly states "one hundred tons of oil," so it is not uncertain.
Based on the given information, the position of the agreement between X and Y, where X is a dealer in coconut oil and mustard oil, would be a void contract if there are any legal restrictions or issues that prevent the sale of the oil.

Legal Position:
The legal position in this case is that the agreement between X and the buyer is void on the ground of mutual mistake.
Explanation:
- Mutual mistake occurs when both parties to a contract are mistaken about a fundamental fact at the time of agreement.
- In this case, both X and the buyer were unaware that the goods were already destroyed at the time of the agreement.
- As a result, there was a mutual mistake regarding the existence of the subject matter (the 1000 bales of cotton).
- When a contract is based on a mutual mistake, it is considered void because the parties' intention to contract was based on an erroneous assumption.
- Since the goods were destroyed and therefore no longer in existence, it is impossible for X to deliver them to the buyer's godown in Karachi.
- The doctrine of supervening impossibility also applies in this case, as the performance of the contract has become impossible due to the goods being destroyed.
- Commercial impossibility may also be invoked, as the destruction of the goods makes it commercially impracticable for X to fulfill the contract.
- Therefore, the agreement between X and the buyer is void on the ground of mutual mistake, as the subject matter of the contract was already destroyed at the time of agreement.

Legal Position: Void but X should compensate the buyer for any loss that it sustains through nonperformance.
Explanation:
- When X agreed to sell 1000 bales of cotton at Rs. 999/bale and deliver them within a fortnight, it created a valid contract between X and the buyer.
- However, if X knew at the time of the agreement that the goods were destroyed by fire, the contract becomes void on the ground of X's mistake.
- Mistake refers to a belief that is not in accordance with the facts, and if X was mistaken about the existence of the goods, the contract becomes void.
- In this case, X's mistake about the availability of the goods makes the contract void, meaning it is treated as if it never existed.
- However, even though the contract is void, X is still liable to compensate the buyer for any loss that it sustains through nonperformance.
- X's failure to deliver the goods as agreed has caused a loss to the buyer, and X should be held responsible for compensating the buyer for this loss.
- The compensation should be equivalent to the loss suffered by the buyer due to X's nonperformance.

Legal Position in Case of War Declaration between India and Pakistan:
There are four possible options given to determine the legal position in this case. Let's analyze each option to find the correct answer:
A: Void on the ground of supervening impossibility:
- This option suggests that the contract becomes void due to a supervening impossibility.
- If war is declared between India and Pakistan, it can be considered as a supervening impossibility, as it would make it impossible for X to deliver the goods in Karachi.
- This option seems to be the most appropriate legal position in this case.
B: Void on the ground of non-performance:
- Non-performance is a situation where one party fails to perform its obligations under the contract.
- While X failed to supply the goods, the reason for non-performance is crucial in determining the legal position.
- If the reason is war declaration between the two countries, it would fall under supervening impossibility rather than a mere non-performance.
C: Voidable:
- A voidable contract is one that can be either affirmed or rejected by the innocent party.
- In this case, the contract cannot be affirmed if war is declared between India and Pakistan, as it would make performance impossible.
- Therefore, this option does not seem to be the correct legal position.
D: Void on the ground of commercial impossibility:
- Commercial impossibility occurs when the performance of the contract becomes excessively burdensome or impracticable due to unforeseen circumstances.
- While war declaration may make performance impracticable, it is not merely a commercial impossibility but a supervening impossibility.
- Hence, this option does not accurately represent the legal position.
Conclusion:
Based on the analysis, option A: "Void on the ground of supervening impossibility" is the most appropriate legal position in this case. If war is declared between India and Pakistan, the contract would become void as it would be impossible for X to deliver the goods in Karachi.

Legal Position:
The legal position in this case is that the contract between X and the buyer is void on the ground of commercial impossibility.
Explanation:
- Commercial impossibility refers to a situation where the performance of a contract becomes impossible due to unforeseen circumstances that make it commercially impracticable or impossible for a party to fulfill their obligations.
- In this case, X agreed to sell 1000 bales of cotton to the buyer at a price of Rs. 999 per bale and deliver them within a fortnight at the buyer's godown in Karachi.
- However, X failed to supply these goods as agreed upon.
- The reason for X's failure to supply the goods is that they were supposed to be manufactured by Z, who is now unable to supply the goods at the agreed price of Rs. 1,111 per bale due to an unexpected increase in the cost of materials and labor.
- This unexpected increase in cost makes it commercially impossible for Z to supply the goods at the agreed price.
- As a result, X is unable to fulfill their obligation to deliver the goods to the buyer.
- In such a situation, the contract becomes void on the ground of commercial impossibility as it is not possible for X to perform their obligations under the contract.
- Both parties are discharged from their obligations under the contract and any payments made by the buyer to X must be refunded.
Conclusion:
The contract between X and the buyer is void on the ground of commercial impossibility. X is unable to supply the goods due to the unexpected increase in the cost of materials and labor, making it commercially impossible for them to fulfill their obligations. Both parties are discharged from their obligations under the contract.

Legal Position:
The legal position in this case is that the agreement to sell the 1000 bales of cotton at a certain price and deliver them within a fortnight at the buyer's godown in Karachi becomes void on the ground of non-performance.
Explanation:
The failure to deliver the goods due to a strike of transport operators can be considered as an instance of non-performance. Here are the reasons why this would be considered as non-performance and the agreement would become void:
1. Impossibility of performance: The strike of transport operators makes it impossible for X to deliver the goods within the agreed timeframe. This constitutes a case of supervening impossibility, where the performance of the contract becomes impossible due to unforeseen circumstances.
2. Non-performance of a fundamental obligation: The delivery of goods within the agreed timeframe is a fundamental obligation of the contract. X's failure to perform this obligation renders the contract void as it goes against the terms agreed upon by both parties.
3. Lack of control: X cannot be held responsible for the strike of transport operators, as it is a third-party default. This means that X has no control over the occurrence of the strike and cannot be expected to fulfill the contract in such circumstances.
4. Commercial impossibility: The strike of transport operators disrupts the normal course of business and makes it commercially impossible for X to deliver the goods within the specified timeframe. This constitutes a valid reason for non-performance and renders the contract void.
In conclusion, in the given scenario, the failure to deliver the goods due to a strike of transport operators would result in the agreement becoming void on the ground of non-performance.

Partnership Essential Elements:
A: There must be an association of two or more persons.
- Partnership requires the involvement of at least two or more individuals who join together to carry out a business venture.
B: There must be an agreement to share profits and losses equally.
- Partnerships are based on the principle of sharing both profits and losses in a predetermined ratio agreed upon by the partners.
C: There must be mutual agency among partners.
- Mutual agency means that each partner has the authority to act on behalf of the partnership and bind it legally. This allows partners to make decisions and enter into contracts on behalf of the partnership.
D: The relationship must be registered.
- Unlike a company, a partnership does not require registration with any government authority. However, partners may choose to register their partnership to enjoy certain legal benefits or to fulfill legal requirements in some jurisdictions.
Explanation:
- The essential elements of a partnership are crucial for its formation and functioning. While elements A, C, and D are essential, element B (equal sharing of profits and losses) and element D (registration) are not necessary for a partnership.
- Profit and loss sharing can be determined based on the agreement among partners, and it is not required to be equal.
- Registration is not a mandatory requirement for a partnership, although partners may opt for registration for various reasons such as tax benefits or legal recognition.
Therefore, the correct answer is B and D.

Partnership Relations
There are certain conditions that need to be met for a partnership relation to exist. Let's analyze each option to determine whether the partnership relation exists or not in each case.
A: Joint ownership of property and sharing profits or losses
- Joint owners of some property share profit or loss arising from the property.
- This condition fulfills the criteria for a partnership relation.
- Therefore, the partnership relation exists in this case.
B: Receiving a share of profit as part of remuneration
- A person receives a share of profit as a part of his remuneration.
- This condition does not fulfill the criteria for a partnership relation.
- Profit sharing as part of remuneration is not considered a partnership.
- Therefore, the partnership relation does not exist in this case.
C: Two friends deciding to form a partnership
- Two friends, A (age 19 years) and B (age 17 years), decide to form a partnership.
- Age is not a determining factor for a partnership relation.
- As long as the friends meet other partnership requirements, such as a mutual agreement to conduct business together and share profits and losses, the partnership relation exists.
- Therefore, the partnership relation exists in this case.
D: Agreement to sell clothes for joint account and share profits
- A and B agreed to sell clothes for their joint account and share the profits.
- This condition fulfills the criteria for a partnership relation.
- Both individuals have agreed to conduct business together, share profits, and bear the losses jointly.
- Therefore, the partnership relation exists in this case.
Conclusion
Based on the analysis of each option, the partnership relation does not exist when a person receives a share of profit as part of their remuneration. However, the partnership relation exists when joint owners share profits or losses from a property, when two friends decide to form a partnership, and when individuals agree to sell goods for their joint account and share the profits.

Answer:
Minor partner:
- A minor partner refers to a partner who is below the legal age of majority.
- They are not allowed to take an active part in the conduct of the business.
- Their involvement in decision-making and management activities is limited or restricted.
Sub partner:
- A sub partner is a partner who has been admitted to the partnership by one of the existing partners.
- They may not have an active role in the conduct of the business as they are not original partners.
- Their participation in decision-making and management activities may be limited by the terms of their arrangement.
Partner by estoppel:
- A partner by estoppel is someone who is not a legal partner but is held out or represented as a partner by the actions or statements of the actual partners.
- They may not have an active role in the conduct of the business as they are not legally recognized as partners.
- Their involvement is based on the belief or assumption created by the actions of the actual partners.
In conclusion, all three options A (minor partner), B (sub partner), and D (partner by estoppel) do not take an active part in the conduct of the business.

General Rights of Continuing Partners:
The general rights of continuing partners in a partnership include:
1. Right to get remuneration:
- Continuing partners have the right to receive a share of the profits generated by the partnership.
- They are entitled to a predetermined remuneration based on their contribution and agreement with other partners.
2. Right to be indemnified:
- Continuing partners have the right to be indemnified for any losses or liabilities incurred by the partnership.
- They are protected from personal liability for the partnership's debts and obligations.
3. Right to prevent the introduction of a new partner:
- Continuing partners have the right to veto or prevent the admission of a new partner into the partnership.
- This ensures that they have control over the composition and decision-making within the partnership.
4. Right to carry on competing business:
- Continuing partners have the right to engage in a competing business or trade.
- They can pursue other ventures that are not in direct conflict with the partnership's interests.
It is important to note that the specific rights of continuing partners may vary depending on the partnership agreement and applicable laws. It is advisable for partners to clearly define their rights and obligations in a written partnership agreement to avoid any disputes or misunderstandings in the future.

Doctrine of Implied Authority of a Partner:
The doctrine of implied authority of a partner refers to the authority that partners have to act on behalf of the firm in certain situations, even without explicit authorization from the other partners. This authority is implied by the partnership agreement and the nature of the partnership relationship.
The doctrine of implied authority applies to various acts that partners may undertake on behalf of the firm. In this case, we are asked to identify which acts are covered by the doctrine of implied authority. The correct answers are A and D.
A: Act of settling accounts with the person dealing with the firm:
- Partners have implied authority to settle accounts with individuals or entities that have transacted with the firm.
- This includes the authority to negotiate and agree on payment terms, resolve disputes, and handle any financial matters related to the firm's dealings.
D: Act of engaging servants for the business of the firm:
- Partners have implied authority to hire and engage employees or servants for the firm.
- This includes the authority to interview, hire, set terms of employment, and supervise employees on behalf of the firm.
It is important to note that the doctrine of implied authority has its limits. Partners cannot undertake acts that are outside the scope of the partnership's ordinary course of business or acts that are specifically prohibited by the partnership agreement. Additionally, if a partner acts beyond their implied authority, they may be personally liable for any resulting obligations or liabilities.
In summary, the doctrine of implied authority of a partner applies to various acts, including settling accounts with individuals dealing with the firm and engaging servants for the business of the firm. Partners have the authority to undertake these acts on behalf of the firm, even without explicit authorization from the other partners. However, it is crucial to consult the partnership agreement and understand the limits of implied authority to avoid any legal or financial implications.

Partnership Firms Becoming Illegal Associations
There are certain conditions under which a partnership firm can become an illegal association. In this case, the conditions are as follows:
A: The number of partners in a banking business exceeds 10.
- If a partnership firm engaged in a banking business has more than 10 partners, it becomes an illegal association.
D: The number of partners in a non-banking business exceeds 20.
- If a partnership firm engaged in a non-banking business has more than 20 partners, it also becomes an illegal association.
So, in this particular scenario, the partnership firm becomes an illegal association when both conditions A and D are met.