Business Laws Model Test Paper - 3 (Qestions) | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


MODEL TEST PAPER 3 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
Wherever necessary, suitable assumptions should be made and disclosed 
by way of note forming part of the answer. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a)  In light of provisions of the Indian Contract Act, 1872 answer the following:
(i) Mr. S and Mr. R made contract wherein Mr. S agreed to deliver paper
cup manufacture machine to Mr. R and to receive payment on delivery.
On the delivery date, Mr. R did not pay the agreed price. Decide
whether Mr. S is bound to fulfil his promise at the time of delivery?
(ii) Mr. Y has given loan to Mr. G of ` 30,00,000.  Mr. G defaulted the loan
on due date and debt became time barred. After the time barred debt,
Mr. G agreed to settle the full amount to Mr. Y. Whether acceptance of
time barred debt Contract is enforceable as per the Indian Contract Act,
1872?
(iii) A & B entered into a contract to supply unique item, alternate of which
is not available in the market. A refused to supply the agreed unique
item to B. What directions could be given by the court for breach of
such contract?            (7 Marks)
(b) (i)  Nolimit Private Company is incorporated as unlimited company having
share capital of ` 10,00,000. One of its creditors, Mr. Samuel filed a suit 
against a shareholder Mr. Innocent for recovery of his debt against Nolimit 
Private Company. Mr. Innocent has given his plea in the court that he is 
not liable as he is just a shareholder. Explain whether Mr. Samuel will be 
successful in recovering his dues from Mr. Innocent?  (4 Marks) 
(ii) A Company registered under Section 8 of the Companies Act, 2013,
has been consistently making profits for the past 5 years after a major
change in the management structure. Few members contented that
they are entitled to receive dividends. Can the company distribute
dividend? If yes, what is the maximum percentage of dividend that can
be distributed as per provisions of the Companies Act, 2013? Also, to
discuss this along with other regular matters, the company held a
general meeting by giving only 14 days’ notice. Is this valid?
 (3 Marks) 
(c) (i) "Whether a group of persons is or is not a firm, or whether a person is or
is not a partner in a firm." Explain the mode of determining existence of 
partnership as per the Indian Partnership Act, 1932? (4 Marks) 
88
Page 2


MODEL TEST PAPER 3 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
Wherever necessary, suitable assumptions should be made and disclosed 
by way of note forming part of the answer. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a)  In light of provisions of the Indian Contract Act, 1872 answer the following:
(i) Mr. S and Mr. R made contract wherein Mr. S agreed to deliver paper
cup manufacture machine to Mr. R and to receive payment on delivery.
On the delivery date, Mr. R did not pay the agreed price. Decide
whether Mr. S is bound to fulfil his promise at the time of delivery?
(ii) Mr. Y has given loan to Mr. G of ` 30,00,000.  Mr. G defaulted the loan
on due date and debt became time barred. After the time barred debt,
Mr. G agreed to settle the full amount to Mr. Y. Whether acceptance of
time barred debt Contract is enforceable as per the Indian Contract Act,
1872?
(iii) A & B entered into a contract to supply unique item, alternate of which
is not available in the market. A refused to supply the agreed unique
item to B. What directions could be given by the court for breach of
such contract?            (7 Marks)
(b) (i)  Nolimit Private Company is incorporated as unlimited company having
share capital of ` 10,00,000. One of its creditors, Mr. Samuel filed a suit 
against a shareholder Mr. Innocent for recovery of his debt against Nolimit 
Private Company. Mr. Innocent has given his plea in the court that he is 
not liable as he is just a shareholder. Explain whether Mr. Samuel will be 
successful in recovering his dues from Mr. Innocent?  (4 Marks) 
(ii) A Company registered under Section 8 of the Companies Act, 2013,
has been consistently making profits for the past 5 years after a major
change in the management structure. Few members contented that
they are entitled to receive dividends. Can the company distribute
dividend? If yes, what is the maximum percentage of dividend that can
be distributed as per provisions of the Companies Act, 2013? Also, to
discuss this along with other regular matters, the company held a
general meeting by giving only 14 days’ notice. Is this valid?
 (3 Marks) 
(c) (i) "Whether a group of persons is or is not a firm, or whether a person is or
is not a partner in a firm." Explain the mode of determining existence of 
partnership as per the Indian Partnership Act, 1932? (4 Marks) 
88
(ii) Discuss the provisions regarding personal profits earned by a partner
under the Indian Partnership Act, 1932? (2 Marks)
2. (a)  Mr. G sold some goods to Mr. H for a certain price by issue of an invoice, but
payment in respect of the same was not received on that day. The goods were 
packed and lying in the godown of Mr. G. The goods were inspected by H's 
agent and were found to be in order. Later on, the dues of the goods were 
settled in cash. Just after receiving cash, Mr. G asked Mr. H that goods should 
be taken away from his godown to enable him to store other goods purchased 
by him. After one day, since Mr. H did not take delivery of the goods, Mr. G 
kept the goods out of the godown in an open space. Due to rain, some goods 
were damaged. 
Referring to the provisions of the Sale of Goods Act, 1930, analyse the 
above situation and decide who will be held responsible for the above 
damage. Will your answer be different if the dues were not settled in cash 
and are still pending? (7 Marks) 
(b) Define OPC (One Person Company) and state the rules regarding its
membership. Can it be converted into a non-profit company under Section
8 or a private company?  (7 Marks)
(c) List the differences between the Limited Liability Partnership (LLP) and the
Limited Liability Company.  (6 Marks)
3. (a)  P, Q, R and S are the partners in M/S PQRS & Co., a partnership firm which
deals in trading of Washing Machines of various brands. 
Due to the conflict of views between partners, P & Q decided to leave the 
partnership firm and started competitive business on 31st July, 2023, in the 
name of M/S PQ & Co. Meanwhile, R & S have continued using the property 
in the name of M/S PQRS & Co. in which P & Q also has a share. 
Based on the above facts, explain in detail the rights of outgoing partners 
as per the Indian Partnership Act, 1932 and comment on the following: 
(i) Rights of P & Q to start a competitive business.
(ii) Rights of P & Q regarding their share in property of M/S PQRS & Co.
(7 Marks) 
(b) MNP Private Ltd. is a company registered under the Companies Act, 2013
with Paid Up Share Capital of ` 5 crores and turnover of ` 35 crores. Explain
the meaning of the "Small Company" and examine the following in
accordance with the provisions of the Companies Act, 2013:
(i) Whether the MNP Private Ltd. can avail the status of small company?
(ii) What will be your answer if the turnover of the company is ` 45 crores?
(7 Marks) 
(c) Define Misrepresentation and Fraud. Explain the difference between Fraud
and Misrepresentation as per the Indian Contract Act, 1872.  (6 Marks)
4. (a)  M Ltd. contract with Shanti Traders to make and deliver certain machinery
to them by 30
th
 June 2023 for ` 11.50 lakhs. Due to labour strike, M Ltd. 
could not manufacture and deliver the machinery to Shanti Traders. Later, 
89
Page 3


MODEL TEST PAPER 3 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
Wherever necessary, suitable assumptions should be made and disclosed 
by way of note forming part of the answer. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a)  In light of provisions of the Indian Contract Act, 1872 answer the following:
(i) Mr. S and Mr. R made contract wherein Mr. S agreed to deliver paper
cup manufacture machine to Mr. R and to receive payment on delivery.
On the delivery date, Mr. R did not pay the agreed price. Decide
whether Mr. S is bound to fulfil his promise at the time of delivery?
(ii) Mr. Y has given loan to Mr. G of ` 30,00,000.  Mr. G defaulted the loan
on due date and debt became time barred. After the time barred debt,
Mr. G agreed to settle the full amount to Mr. Y. Whether acceptance of
time barred debt Contract is enforceable as per the Indian Contract Act,
1872?
(iii) A & B entered into a contract to supply unique item, alternate of which
is not available in the market. A refused to supply the agreed unique
item to B. What directions could be given by the court for breach of
such contract?            (7 Marks)
(b) (i)  Nolimit Private Company is incorporated as unlimited company having
share capital of ` 10,00,000. One of its creditors, Mr. Samuel filed a suit 
against a shareholder Mr. Innocent for recovery of his debt against Nolimit 
Private Company. Mr. Innocent has given his plea in the court that he is 
not liable as he is just a shareholder. Explain whether Mr. Samuel will be 
successful in recovering his dues from Mr. Innocent?  (4 Marks) 
(ii) A Company registered under Section 8 of the Companies Act, 2013,
has been consistently making profits for the past 5 years after a major
change in the management structure. Few members contented that
they are entitled to receive dividends. Can the company distribute
dividend? If yes, what is the maximum percentage of dividend that can
be distributed as per provisions of the Companies Act, 2013? Also, to
discuss this along with other regular matters, the company held a
general meeting by giving only 14 days’ notice. Is this valid?
 (3 Marks) 
(c) (i) "Whether a group of persons is or is not a firm, or whether a person is or
is not a partner in a firm." Explain the mode of determining existence of 
partnership as per the Indian Partnership Act, 1932? (4 Marks) 
88
(ii) Discuss the provisions regarding personal profits earned by a partner
under the Indian Partnership Act, 1932? (2 Marks)
2. (a)  Mr. G sold some goods to Mr. H for a certain price by issue of an invoice, but
payment in respect of the same was not received on that day. The goods were 
packed and lying in the godown of Mr. G. The goods were inspected by H's 
agent and were found to be in order. Later on, the dues of the goods were 
settled in cash. Just after receiving cash, Mr. G asked Mr. H that goods should 
be taken away from his godown to enable him to store other goods purchased 
by him. After one day, since Mr. H did not take delivery of the goods, Mr. G 
kept the goods out of the godown in an open space. Due to rain, some goods 
were damaged. 
Referring to the provisions of the Sale of Goods Act, 1930, analyse the 
above situation and decide who will be held responsible for the above 
damage. Will your answer be different if the dues were not settled in cash 
and are still pending? (7 Marks) 
(b) Define OPC (One Person Company) and state the rules regarding its
membership. Can it be converted into a non-profit company under Section
8 or a private company?  (7 Marks)
(c) List the differences between the Limited Liability Partnership (LLP) and the
Limited Liability Company.  (6 Marks)
3. (a)  P, Q, R and S are the partners in M/S PQRS & Co., a partnership firm which
deals in trading of Washing Machines of various brands. 
Due to the conflict of views between partners, P & Q decided to leave the 
partnership firm and started competitive business on 31st July, 2023, in the 
name of M/S PQ & Co. Meanwhile, R & S have continued using the property 
in the name of M/S PQRS & Co. in which P & Q also has a share. 
Based on the above facts, explain in detail the rights of outgoing partners 
as per the Indian Partnership Act, 1932 and comment on the following: 
(i) Rights of P & Q to start a competitive business.
(ii) Rights of P & Q regarding their share in property of M/S PQRS & Co.
(7 Marks) 
(b) MNP Private Ltd. is a company registered under the Companies Act, 2013
with Paid Up Share Capital of ` 5 crores and turnover of ` 35 crores. Explain
the meaning of the "Small Company" and examine the following in
accordance with the provisions of the Companies Act, 2013:
(i) Whether the MNP Private Ltd. can avail the status of small company?
(ii) What will be your answer if the turnover of the company is ` 45 crores?
(7 Marks) 
(c) Define Misrepresentation and Fraud. Explain the difference between Fraud
and Misrepresentation as per the Indian Contract Act, 1872.  (6 Marks)
4. (a)  M Ltd. contract with Shanti Traders to make and deliver certain machinery
to them by 30
th
 June 2023 for ` 11.50 lakhs. Due to labour strike, M Ltd. 
could not manufacture and deliver the machinery to Shanti Traders. Later, 
89
Shanti Traders procured the machinery from another manufacturer for 
` 12.75 lakhs.  Due to this, Shanti Traders was also prevented from 
performing a contract which it had made with Zenith Traders at the time of 
their contract with M Ltd. and were compelled to pay compensation for 
breach of contract. Advise Shanti Traders the amount of compensation 
which it can claim from M Ltd., referring to the legal provisions of the Indian 
Contract Act, 1872.   (7 Marks) 
(b) What are Inchoate and Ambiguous Instruments under the Negotiable
Instruments Act, 1881?  (7 Marks)
(c) What is the significance of the Supreme Court and High Court in the Indian
judiciary?  (6 Marks)
5. (a) (i)  Ram sells 200 bales of cloth to Shyam and sends 100 bales by lorry and
100 bales by Railway. Shyam receives delivery of 100 bales sent by lorry, 
but before he receives the delivery of the bales sent by railway, he 
becomes bankrupt. Ram being still unpaid, stops the goods in transit. The 
official receiver, on Shyam’s insolvency claims the goods. Decide the 
case with reference to the provisions of the Sale of Goods Act, 1930. 
 (4 Marks) 
(ii) Classify the following transactions according to the types of goods they
are:
(A) A wholesaler of cotton has 100 bales in his godown. He agrees to sell
50 bales and these bales were selected and set aside.
(B) A agrees to sell to B one packet of sugar out of the lot of one hundred
packets lying in his shop.
(C) T agrees to sell to S all the apples which will be produced in his garden
this year.   (3 Marks)
(b) State the grounds on which a firm may be dissolved by the Court under the
Indian Partnership Act, 1932? (7 Marks)
(c) Explain whether the agency shall be terminated in the following cases
under the provisions of the Indian Contract Act, 1872:
(i) A gives authority to B to sell A's land, and to pay himself, out of the
proceeds, the debts due to him from A. Afterwards, A becomes insane.
(ii) A appoints B as A's agent to sell A's land. B, under the authority of A,
appoints C as agent of B. Afterwards, A revokes the authority of B but
not of C. What is the status of agency of C?  (6 Marks)
6. (a) (i)  Advik purchased a mobile from Bhanu. He issued a promissory note to
Bhanu which was payable on demand but no specific place for payment 
was mentioned on it. On maturity, Bhanu did not present the promissory 
note for payment. As the promissory note was not duly presented for 
payment, whether Advik would be discharged from liability under the 
provisions of the Negotiable Instruments Act, 1881?  (4 Marks) 
90
Page 4


MODEL TEST PAPER 3 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
Wherever necessary, suitable assumptions should be made and disclosed 
by way of note forming part of the answer. 
(Time allowed: 3 Hours) (100 Marks) 
1. (a)  In light of provisions of the Indian Contract Act, 1872 answer the following:
(i) Mr. S and Mr. R made contract wherein Mr. S agreed to deliver paper
cup manufacture machine to Mr. R and to receive payment on delivery.
On the delivery date, Mr. R did not pay the agreed price. Decide
whether Mr. S is bound to fulfil his promise at the time of delivery?
(ii) Mr. Y has given loan to Mr. G of ` 30,00,000.  Mr. G defaulted the loan
on due date and debt became time barred. After the time barred debt,
Mr. G agreed to settle the full amount to Mr. Y. Whether acceptance of
time barred debt Contract is enforceable as per the Indian Contract Act,
1872?
(iii) A & B entered into a contract to supply unique item, alternate of which
is not available in the market. A refused to supply the agreed unique
item to B. What directions could be given by the court for breach of
such contract?            (7 Marks)
(b) (i)  Nolimit Private Company is incorporated as unlimited company having
share capital of ` 10,00,000. One of its creditors, Mr. Samuel filed a suit 
against a shareholder Mr. Innocent for recovery of his debt against Nolimit 
Private Company. Mr. Innocent has given his plea in the court that he is 
not liable as he is just a shareholder. Explain whether Mr. Samuel will be 
successful in recovering his dues from Mr. Innocent?  (4 Marks) 
(ii) A Company registered under Section 8 of the Companies Act, 2013,
has been consistently making profits for the past 5 years after a major
change in the management structure. Few members contented that
they are entitled to receive dividends. Can the company distribute
dividend? If yes, what is the maximum percentage of dividend that can
be distributed as per provisions of the Companies Act, 2013? Also, to
discuss this along with other regular matters, the company held a
general meeting by giving only 14 days’ notice. Is this valid?
 (3 Marks) 
(c) (i) "Whether a group of persons is or is not a firm, or whether a person is or
is not a partner in a firm." Explain the mode of determining existence of 
partnership as per the Indian Partnership Act, 1932? (4 Marks) 
88
(ii) Discuss the provisions regarding personal profits earned by a partner
under the Indian Partnership Act, 1932? (2 Marks)
2. (a)  Mr. G sold some goods to Mr. H for a certain price by issue of an invoice, but
payment in respect of the same was not received on that day. The goods were 
packed and lying in the godown of Mr. G. The goods were inspected by H's 
agent and were found to be in order. Later on, the dues of the goods were 
settled in cash. Just after receiving cash, Mr. G asked Mr. H that goods should 
be taken away from his godown to enable him to store other goods purchased 
by him. After one day, since Mr. H did not take delivery of the goods, Mr. G 
kept the goods out of the godown in an open space. Due to rain, some goods 
were damaged. 
Referring to the provisions of the Sale of Goods Act, 1930, analyse the 
above situation and decide who will be held responsible for the above 
damage. Will your answer be different if the dues were not settled in cash 
and are still pending? (7 Marks) 
(b) Define OPC (One Person Company) and state the rules regarding its
membership. Can it be converted into a non-profit company under Section
8 or a private company?  (7 Marks)
(c) List the differences between the Limited Liability Partnership (LLP) and the
Limited Liability Company.  (6 Marks)
3. (a)  P, Q, R and S are the partners in M/S PQRS & Co., a partnership firm which
deals in trading of Washing Machines of various brands. 
Due to the conflict of views between partners, P & Q decided to leave the 
partnership firm and started competitive business on 31st July, 2023, in the 
name of M/S PQ & Co. Meanwhile, R & S have continued using the property 
in the name of M/S PQRS & Co. in which P & Q also has a share. 
Based on the above facts, explain in detail the rights of outgoing partners 
as per the Indian Partnership Act, 1932 and comment on the following: 
(i) Rights of P & Q to start a competitive business.
(ii) Rights of P & Q regarding their share in property of M/S PQRS & Co.
(7 Marks) 
(b) MNP Private Ltd. is a company registered under the Companies Act, 2013
with Paid Up Share Capital of ` 5 crores and turnover of ` 35 crores. Explain
the meaning of the "Small Company" and examine the following in
accordance with the provisions of the Companies Act, 2013:
(i) Whether the MNP Private Ltd. can avail the status of small company?
(ii) What will be your answer if the turnover of the company is ` 45 crores?
(7 Marks) 
(c) Define Misrepresentation and Fraud. Explain the difference between Fraud
and Misrepresentation as per the Indian Contract Act, 1872.  (6 Marks)
4. (a)  M Ltd. contract with Shanti Traders to make and deliver certain machinery
to them by 30
th
 June 2023 for ` 11.50 lakhs. Due to labour strike, M Ltd. 
could not manufacture and deliver the machinery to Shanti Traders. Later, 
89
Shanti Traders procured the machinery from another manufacturer for 
` 12.75 lakhs.  Due to this, Shanti Traders was also prevented from 
performing a contract which it had made with Zenith Traders at the time of 
their contract with M Ltd. and were compelled to pay compensation for 
breach of contract. Advise Shanti Traders the amount of compensation 
which it can claim from M Ltd., referring to the legal provisions of the Indian 
Contract Act, 1872.   (7 Marks) 
(b) What are Inchoate and Ambiguous Instruments under the Negotiable
Instruments Act, 1881?  (7 Marks)
(c) What is the significance of the Supreme Court and High Court in the Indian
judiciary?  (6 Marks)
5. (a) (i)  Ram sells 200 bales of cloth to Shyam and sends 100 bales by lorry and
100 bales by Railway. Shyam receives delivery of 100 bales sent by lorry, 
but before he receives the delivery of the bales sent by railway, he 
becomes bankrupt. Ram being still unpaid, stops the goods in transit. The 
official receiver, on Shyam’s insolvency claims the goods. Decide the 
case with reference to the provisions of the Sale of Goods Act, 1930. 
 (4 Marks) 
(ii) Classify the following transactions according to the types of goods they
are:
(A) A wholesaler of cotton has 100 bales in his godown. He agrees to sell
50 bales and these bales were selected and set aside.
(B) A agrees to sell to B one packet of sugar out of the lot of one hundred
packets lying in his shop.
(C) T agrees to sell to S all the apples which will be produced in his garden
this year.   (3 Marks)
(b) State the grounds on which a firm may be dissolved by the Court under the
Indian Partnership Act, 1932? (7 Marks)
(c) Explain whether the agency shall be terminated in the following cases
under the provisions of the Indian Contract Act, 1872:
(i) A gives authority to B to sell A's land, and to pay himself, out of the
proceeds, the debts due to him from A. Afterwards, A becomes insane.
(ii) A appoints B as A's agent to sell A's land. B, under the authority of A,
appoints C as agent of B. Afterwards, A revokes the authority of B but
not of C. What is the status of agency of C?  (6 Marks)
6. (a) (i)  Advik purchased a mobile from Bhanu. He issued a promissory note to
Bhanu which was payable on demand but no specific place for payment 
was mentioned on it. On maturity, Bhanu did not present the promissory 
note for payment. As the promissory note was not duly presented for 
payment, whether Advik would be discharged from liability under the 
provisions of the Negotiable Instruments Act, 1881?  (4 Marks) 
90
(ii) Shiva gave a gift of ` 21,000 to his sister through a cheque issued in
her favour on the occasion of Raksha Bandhan. Afterwards, Shiva
informed his sister not to present the cheque for payment and also
informed the bank to stop the payment. Examining the provisions of the
Negotiable Instruments Act, 1881, decide whether Shiva’s acts
constitute an offence under section 138 of the Act?   (3 Marks)
(b) What do you mean by Quantum Meruit and state the cases where the claim
for Quantum Meruit arises?  (6 Marks)
(c) Write the exceptions to the doctrine of Caveat Emptor as per the Sale of
Goods Act, 1930.  (7 Marks)
91