Mock Test: Business Laws & Business Correspondence and Reporting(Paper-2) - May 2023 | Mock Tests & Past Year Papers for CA Foundation PDF Download

 Page 1


1 
 
MOCK TEST PAPER - 1 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS AND BUSINESS CORRESPONDENCE AND REPORTING 
SECTION A: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
QUESTIONS 
1. (i)  Ashwin goes to super market to buy a Air Conditioner. He selects a branded Air Conditioner 
having a price tag of ` 40,000 after a discount of ` 3000. Ashwin reaches at cash counter for 
making the payment, but cashier says, “Sorry sir, the discount was upto yesterday. There is no 
discount from today. Hence you have to pay ` 43,000.” Ashwin got angry and insists for  
` 40,000. State with reasons whether under Indian Contract Act, 1872, Ashwin can enforce the 
cashier to sell at discounted price i.e. ` 40,000.    (4 Marks)  
(ii)  Mr. Mohan had purchased some goods from Sunflower Limited on credit. A credit period of one 
month was allowed to Mr. Mohan. Before the due date, Mr. Mohan went to the company and 
wanted to repay the amount due from him. He found only Mr. Ramesh there, who was the factory 
supervisor of the company. Mr. Ramesh told Mr. Mohan that the Accountant and the cashier are 
on leave, he is in-charge of receiving money and he may pay the amount to him. Mr. Ramesh 
issued a money receipt under his signature. After two months, Sunflower limited issued a notice 
to Mr. Mohan for non-payment of the dues within the stipulated period. Mr. Mohan informed th e 
company that he had already cleared the dues and he is no more responsible for the same. He 
also contended that Mr. Ramesh is an employee of the company whom he had made the 
payment and being an outsider, he trusted the words of Mr. Ramesh as duty distribution is a job 
of the internal management of the company. Analyse the situation and decide whether  
Mr. Mohan is free from his liability.   (4 Marks) 
(iii) 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 in the year 2023.  
 (4 Marks) 
2.  (i)  “An anticipatory breach of contract is a breach of contract occurring before the time fixed for 
performance has arrived”. Also, discuss the effect of anticipatory breach of contracts under the 
Indian Contract Act, 1872. (7 Marks) 
(ii)  “LLP is an alternative corporate business form that gives the benefits of limited liability of a  
company and the flexibility of a partnership”. Explain.  (5 Marks) 
3. (i)  Whether a minor may be admitted in the business of a partnership firm?  Explain the rights of a 
minor in the partnership firm.  (6 Marks) 
© The Institute of Chartered Accountants of India
Page 2


1 
 
MOCK TEST PAPER - 1 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS AND BUSINESS CORRESPONDENCE AND REPORTING 
SECTION A: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
QUESTIONS 
1. (i)  Ashwin goes to super market to buy a Air Conditioner. He selects a branded Air Conditioner 
having a price tag of ` 40,000 after a discount of ` 3000. Ashwin reaches at cash counter for 
making the payment, but cashier says, “Sorry sir, the discount was upto yesterday. There is no 
discount from today. Hence you have to pay ` 43,000.” Ashwin got angry and insists for  
` 40,000. State with reasons whether under Indian Contract Act, 1872, Ashwin can enforce the 
cashier to sell at discounted price i.e. ` 40,000.    (4 Marks)  
(ii)  Mr. Mohan had purchased some goods from Sunflower Limited on credit. A credit period of one 
month was allowed to Mr. Mohan. Before the due date, Mr. Mohan went to the company and 
wanted to repay the amount due from him. He found only Mr. Ramesh there, who was the factory 
supervisor of the company. Mr. Ramesh told Mr. Mohan that the Accountant and the cashier are 
on leave, he is in-charge of receiving money and he may pay the amount to him. Mr. Ramesh 
issued a money receipt under his signature. After two months, Sunflower limited issued a notice 
to Mr. Mohan for non-payment of the dues within the stipulated period. Mr. Mohan informed th e 
company that he had already cleared the dues and he is no more responsible for the same. He 
also contended that Mr. Ramesh is an employee of the company whom he had made the 
payment and being an outsider, he trusted the words of Mr. Ramesh as duty distribution is a job 
of the internal management of the company. Analyse the situation and decide whether  
Mr. Mohan is free from his liability.   (4 Marks) 
(iii) 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 in the year 2023.  
 (4 Marks) 
2.  (i)  “An anticipatory breach of contract is a breach of contract occurring before the time fixed for 
performance has arrived”. Also, discuss the effect of anticipatory breach of contracts under the 
Indian Contract Act, 1872. (7 Marks) 
(ii)  “LLP is an alternative corporate business form that gives the benefits of limited liability of a  
company and the flexibility of a partnership”. Explain.  (5 Marks) 
3. (i)  Whether a minor may be admitted in the business of a partnership firm?  Explain the rights of a 
minor in the partnership firm.  (6 Marks) 
© The Institute of Chartered Accountants of India
2 
(ii)  Mr. Gaurav and Mr. Vikas entered into a contract on 1
st
 July, 2022, according to which  
Mr. Gaurav had to supply 100 tons of sugar to Mr. Vikas at a certain price strictly within a period 
of 10 days of the contract. Mr. Vikas also paid an amount of ` 70,000 towards advance as per 
the terms of the above contract. The mode of transportation available between their places is 
roadway only. Severe flood came on 2
nd
 July, 2022 and the only road connecting their places was 
damaged and could not be repaired within fifteen days. Mr. Gaurav offered to supply sugar on 
20
th
 July, 2022 for which Mr. Vikas did not agree. On 1
st
 August, 2022, Mr. Gaurav claimed 
compensation of ` 20,000 from Mr. Vikas for refusing to accept the supply of sugar, which was 
not there within the purview of the contract. On the other hand, Mr. Vikas claimed for refund of  
` 70,000, which he had paid as advance in terms of the contract. Analyse the above situation in 
terms of the provisions of the Indian Contract Act, 1872 and decide on Mr. Vikas contention.  
  (6 Marks) 
4. (i)  Explain any six circumstances in detail in which a non-owner can convey better title to the bona 
fide purchaser of goods for value under the Sale of Goods Act, 1930. (6 Marks)  
(ii)  M/s ABC & Associates, a partnership firm with A, B and C as senior partners engaged in the 
business of curtain manufacturing and exporting to foreign countries.  On 25
th
 August, 2020, they 
inducted Mr. P, an expert in the field of curtain manufacturing as their partner. On 10
th
 January 
2022, Mr. P was blamed for unauthorized activities and thus expelled from the partnership by 
approval of all of the remaining partners.  
(i) Examine whether action by the partners was justified or not?  
(ii) What should have the factors to be kept in mind prior expelling a partner from the firm by 
other partners according to the provisions of the Indian Partnership Act, 1932? (6 Marks) 
5. (i) Mr. Dheeraj was running a shop selling good quality washing machines. Mr. Vishal came to his 
shop and asked for washing machine which is suitable for washing woollen clothes. Mr. Dheeraj 
showed him a particular machine which Mr. Vishal liked and paid for it. Later on, when the 
machine was delivered at Mr. Vishal’s house, it was found that it was wrong machine and also 
unfit for washing woollen clothes. He immediately informed Mr. Dheeraj about the delivery of 
wrong machine. Mr. Dheeraj refused to exchange the same, saying that the contract was 
complete after the delivery of washing machine and payment of price. With reference to th e 
provisions of Sale of Goods Act, 1930, discuss whether Mr. Dheeraj is right in refusing to 
exchange the washing machine?  (6 Marks) 
(ii)  Mr. Rajeev, an assessee, was a wealthy man earning huge income by way of dividend and 
interest. He formed three Private Companies and agreed with each to hold a bloc of investment 
as an agent for them. The dividend and interest income received by the companies was handed 
back to Mr. Rajeev as a pretended loan. This way, Mr. Rajeev divided his income into three parts 
in a bid to reduce his tax liability.  
 Decide, for what purpose the three companies were established? Whether the legal personality of 
all the three companies may be disregarded.  (6 Marks) 
6. (i)   Define consideration. State the characteristics of a valid consideration under the Indian Contract 
Act, 1872.   (5 Marks) 
© The Institute of Chartered Accountants of India
Page 3


1 
 
MOCK TEST PAPER - 1 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS AND BUSINESS CORRESPONDENCE AND REPORTING 
SECTION A: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
QUESTIONS 
1. (i)  Ashwin goes to super market to buy a Air Conditioner. He selects a branded Air Conditioner 
having a price tag of ` 40,000 after a discount of ` 3000. Ashwin reaches at cash counter for 
making the payment, but cashier says, “Sorry sir, the discount was upto yesterday. There is no 
discount from today. Hence you have to pay ` 43,000.” Ashwin got angry and insists for  
` 40,000. State with reasons whether under Indian Contract Act, 1872, Ashwin can enforce the 
cashier to sell at discounted price i.e. ` 40,000.    (4 Marks)  
(ii)  Mr. Mohan had purchased some goods from Sunflower Limited on credit. A credit period of one 
month was allowed to Mr. Mohan. Before the due date, Mr. Mohan went to the company and 
wanted to repay the amount due from him. He found only Mr. Ramesh there, who was the factory 
supervisor of the company. Mr. Ramesh told Mr. Mohan that the Accountant and the cashier are 
on leave, he is in-charge of receiving money and he may pay the amount to him. Mr. Ramesh 
issued a money receipt under his signature. After two months, Sunflower limited issued a notice 
to Mr. Mohan for non-payment of the dues within the stipulated period. Mr. Mohan informed th e 
company that he had already cleared the dues and he is no more responsible for the same. He 
also contended that Mr. Ramesh is an employee of the company whom he had made the 
payment and being an outsider, he trusted the words of Mr. Ramesh as duty distribution is a job 
of the internal management of the company. Analyse the situation and decide whether  
Mr. Mohan is free from his liability.   (4 Marks) 
(iii) 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 in the year 2023.  
 (4 Marks) 
2.  (i)  “An anticipatory breach of contract is a breach of contract occurring before the time fixed for 
performance has arrived”. Also, discuss the effect of anticipatory breach of contracts under the 
Indian Contract Act, 1872. (7 Marks) 
(ii)  “LLP is an alternative corporate business form that gives the benefits of limited liability of a  
company and the flexibility of a partnership”. Explain.  (5 Marks) 
3. (i)  Whether a minor may be admitted in the business of a partnership firm?  Explain the rights of a 
minor in the partnership firm.  (6 Marks) 
© The Institute of Chartered Accountants of India
2 
(ii)  Mr. Gaurav and Mr. Vikas entered into a contract on 1
st
 July, 2022, according to which  
Mr. Gaurav had to supply 100 tons of sugar to Mr. Vikas at a certain price strictly within a period 
of 10 days of the contract. Mr. Vikas also paid an amount of ` 70,000 towards advance as per 
the terms of the above contract. The mode of transportation available between their places is 
roadway only. Severe flood came on 2
nd
 July, 2022 and the only road connecting their places was 
damaged and could not be repaired within fifteen days. Mr. Gaurav offered to supply sugar on 
20
th
 July, 2022 for which Mr. Vikas did not agree. On 1
st
 August, 2022, Mr. Gaurav claimed 
compensation of ` 20,000 from Mr. Vikas for refusing to accept the supply of sugar, which was 
not there within the purview of the contract. On the other hand, Mr. Vikas claimed for refund of  
` 70,000, which he had paid as advance in terms of the contract. Analyse the above situation in 
terms of the provisions of the Indian Contract Act, 1872 and decide on Mr. Vikas contention.  
  (6 Marks) 
4. (i)  Explain any six circumstances in detail in which a non-owner can convey better title to the bona 
fide purchaser of goods for value under the Sale of Goods Act, 1930. (6 Marks)  
(ii)  M/s ABC & Associates, a partnership firm with A, B and C as senior partners engaged in the 
business of curtain manufacturing and exporting to foreign countries.  On 25
th
 August, 2020, they 
inducted Mr. P, an expert in the field of curtain manufacturing as their partner. On 10
th
 January 
2022, Mr. P was blamed for unauthorized activities and thus expelled from the partnership by 
approval of all of the remaining partners.  
(i) Examine whether action by the partners was justified or not?  
(ii) What should have the factors to be kept in mind prior expelling a partner from the firm by 
other partners according to the provisions of the Indian Partnership Act, 1932? (6 Marks) 
5. (i) Mr. Dheeraj was running a shop selling good quality washing machines. Mr. Vishal came to his 
shop and asked for washing machine which is suitable for washing woollen clothes. Mr. Dheeraj 
showed him a particular machine which Mr. Vishal liked and paid for it. Later on, when the 
machine was delivered at Mr. Vishal’s house, it was found that it was wrong machine and also 
unfit for washing woollen clothes. He immediately informed Mr. Dheeraj about the delivery of 
wrong machine. Mr. Dheeraj refused to exchange the same, saying that the contract was 
complete after the delivery of washing machine and payment of price. With reference to th e 
provisions of Sale of Goods Act, 1930, discuss whether Mr. Dheeraj is right in refusing to 
exchange the washing machine?  (6 Marks) 
(ii)  Mr. Rajeev, an assessee, was a wealthy man earning huge income by way of dividend and 
interest. He formed three Private Companies and agreed with each to hold a bloc of investment 
as an agent for them. The dividend and interest income received by the companies was handed 
back to Mr. Rajeev as a pretended loan. This way, Mr. Rajeev divided his income into three parts 
in a bid to reduce his tax liability.  
 Decide, for what purpose the three companies were established? Whether the legal personality of 
all the three companies may be disregarded.  (6 Marks) 
6. (i)   Define consideration. State the characteristics of a valid consideration under the Indian Contract 
Act, 1872.   (5 Marks) 
© The Institute of Chartered Accountants of India
3 
(ii) When does dissolution of a partnership firm take place under the provisions of the Indian 
Partnership Act, 1932?  Explain.    (4 Marks) 
(iii)  Aqua Limited was registered as a public company. There are 230 members in the company as 
noted below:  
(a) Directors and their relatives  190 
(b) Employees    15 
(c) Ex-Employees (Shares were allotted when they were employees    10 
(d) 5 couples holding shares jointly in the name of husband and wife (5*2)   10 
(e) Others      5 
 The Board of Directors of the company proposes to convert it into a private company. Also advise 
whether reduction in the number of members is necessary.   (3 Marks) 
© The Institute of Chartered Accountants of India
Page 4


1 
 
MOCK TEST PAPER - 1 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS AND BUSINESS CORRESPONDENCE AND REPORTING 
SECTION A: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
QUESTIONS 
1. (i)  Ashwin goes to super market to buy a Air Conditioner. He selects a branded Air Conditioner 
having a price tag of ` 40,000 after a discount of ` 3000. Ashwin reaches at cash counter for 
making the payment, but cashier says, “Sorry sir, the discount was upto yesterday. There is no 
discount from today. Hence you have to pay ` 43,000.” Ashwin got angry and insists for  
` 40,000. State with reasons whether under Indian Contract Act, 1872, Ashwin can enforce the 
cashier to sell at discounted price i.e. ` 40,000.    (4 Marks)  
(ii)  Mr. Mohan had purchased some goods from Sunflower Limited on credit. A credit period of one 
month was allowed to Mr. Mohan. Before the due date, Mr. Mohan went to the company and 
wanted to repay the amount due from him. He found only Mr. Ramesh there, who was the factory 
supervisor of the company. Mr. Ramesh told Mr. Mohan that the Accountant and the cashier are 
on leave, he is in-charge of receiving money and he may pay the amount to him. Mr. Ramesh 
issued a money receipt under his signature. After two months, Sunflower limited issued a notice 
to Mr. Mohan for non-payment of the dues within the stipulated period. Mr. Mohan informed th e 
company that he had already cleared the dues and he is no more responsible for the same. He 
also contended that Mr. Ramesh is an employee of the company whom he had made the 
payment and being an outsider, he trusted the words of Mr. Ramesh as duty distribution is a job 
of the internal management of the company. Analyse the situation and decide whether  
Mr. Mohan is free from his liability.   (4 Marks) 
(iii) 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 in the year 2023.  
 (4 Marks) 
2.  (i)  “An anticipatory breach of contract is a breach of contract occurring before the time fixed for 
performance has arrived”. Also, discuss the effect of anticipatory breach of contracts under the 
Indian Contract Act, 1872. (7 Marks) 
(ii)  “LLP is an alternative corporate business form that gives the benefits of limited liability of a  
company and the flexibility of a partnership”. Explain.  (5 Marks) 
3. (i)  Whether a minor may be admitted in the business of a partnership firm?  Explain the rights of a 
minor in the partnership firm.  (6 Marks) 
© The Institute of Chartered Accountants of India
2 
(ii)  Mr. Gaurav and Mr. Vikas entered into a contract on 1
st
 July, 2022, according to which  
Mr. Gaurav had to supply 100 tons of sugar to Mr. Vikas at a certain price strictly within a period 
of 10 days of the contract. Mr. Vikas also paid an amount of ` 70,000 towards advance as per 
the terms of the above contract. The mode of transportation available between their places is 
roadway only. Severe flood came on 2
nd
 July, 2022 and the only road connecting their places was 
damaged and could not be repaired within fifteen days. Mr. Gaurav offered to supply sugar on 
20
th
 July, 2022 for which Mr. Vikas did not agree. On 1
st
 August, 2022, Mr. Gaurav claimed 
compensation of ` 20,000 from Mr. Vikas for refusing to accept the supply of sugar, which was 
not there within the purview of the contract. On the other hand, Mr. Vikas claimed for refund of  
` 70,000, which he had paid as advance in terms of the contract. Analyse the above situation in 
terms of the provisions of the Indian Contract Act, 1872 and decide on Mr. Vikas contention.  
  (6 Marks) 
4. (i)  Explain any six circumstances in detail in which a non-owner can convey better title to the bona 
fide purchaser of goods for value under the Sale of Goods Act, 1930. (6 Marks)  
(ii)  M/s ABC & Associates, a partnership firm with A, B and C as senior partners engaged in the 
business of curtain manufacturing and exporting to foreign countries.  On 25
th
 August, 2020, they 
inducted Mr. P, an expert in the field of curtain manufacturing as their partner. On 10
th
 January 
2022, Mr. P was blamed for unauthorized activities and thus expelled from the partnership by 
approval of all of the remaining partners.  
(i) Examine whether action by the partners was justified or not?  
(ii) What should have the factors to be kept in mind prior expelling a partner from the firm by 
other partners according to the provisions of the Indian Partnership Act, 1932? (6 Marks) 
5. (i) Mr. Dheeraj was running a shop selling good quality washing machines. Mr. Vishal came to his 
shop and asked for washing machine which is suitable for washing woollen clothes. Mr. Dheeraj 
showed him a particular machine which Mr. Vishal liked and paid for it. Later on, when the 
machine was delivered at Mr. Vishal’s house, it was found that it was wrong machine and also 
unfit for washing woollen clothes. He immediately informed Mr. Dheeraj about the delivery of 
wrong machine. Mr. Dheeraj refused to exchange the same, saying that the contract was 
complete after the delivery of washing machine and payment of price. With reference to th e 
provisions of Sale of Goods Act, 1930, discuss whether Mr. Dheeraj is right in refusing to 
exchange the washing machine?  (6 Marks) 
(ii)  Mr. Rajeev, an assessee, was a wealthy man earning huge income by way of dividend and 
interest. He formed three Private Companies and agreed with each to hold a bloc of investment 
as an agent for them. The dividend and interest income received by the companies was handed 
back to Mr. Rajeev as a pretended loan. This way, Mr. Rajeev divided his income into three parts 
in a bid to reduce his tax liability.  
 Decide, for what purpose the three companies were established? Whether the legal personality of 
all the three companies may be disregarded.  (6 Marks) 
6. (i)   Define consideration. State the characteristics of a valid consideration under the Indian Contract 
Act, 1872.   (5 Marks) 
© The Institute of Chartered Accountants of India
3 
(ii) When does dissolution of a partnership firm take place under the provisions of the Indian 
Partnership Act, 1932?  Explain.    (4 Marks) 
(iii)  Aqua Limited was registered as a public company. There are 230 members in the company as 
noted below:  
(a) Directors and their relatives  190 
(b) Employees    15 
(c) Ex-Employees (Shares were allotted when they were employees    10 
(d) 5 couples holding shares jointly in the name of husband and wife (5*2)   10 
(e) Others      5 
 The Board of Directors of the company proposes to convert it into a private company. Also advise 
whether reduction in the number of members is necessary.   (3 Marks) 
© The Institute of Chartered Accountants of India
4 
SECTION-B: BUSINESS CORRESPONDENCE AND REPORTING  
Max Marks: 40 Marks 
Instructions 
The Question paper comprises of 5 questions of 10 Marks each. Question 1 is compulsory. Out of 2 
to 5, attempt any three. 
1.   (a)  Read the passage below and answer the questions that follow:  
 There are primarily three choices available to you when trying to influence people. The first is to 
ignore people and simply hope they will act in your best interest. You probably will agree that this 
is not a very practical option, as the results can neither be effective nor predictable. By ignoring 
other people, you are giving up any hope of influencing them and thus are surrendering yourself to 
the whims of fate. In effect you are saying to the world, ‘I will leave you alone and, in return, I want 
you to do what I want’, a naïve and unrealistic expectation. 
 The second opinion is to use coercion and force to compel others to act in the specific way you 
desire. The use of threats and intimidation may produce result s, atleast in the short term. Fear 
inducing tactics however, never bring out the best in people, since people themselves, must be the 
driving force behind their motivation if they are to put their hearts and souls into what they are 
doing. Fear forces people to operate in a survival mode. They may follow your instructions and 
orders to the letter but seldom will they contribute any real energy or enthusiasm to their efforts. 
 The third option is to persuade people to do what you want them to do simply beca use they really 
want to. People will do what you want them to do willingly in direct proportion to how they see their 
self interest being served. So you must convince that they will receive the real benefits and rewards 
if they follow the path suggested by you. However, these benefits must be those that the other 
party wants and understands. In effect, you are offering a reward that is valued by others in 
exchange for a reward that is valued by you. The highest reward you can offer people is to provide 
them opportunities to maximize their full potential. At the end, that is what matters! 
 Now come ideas outside the standard defined three discussed above. The first one is this idea of 
‘reciprocity’. Sometimes, you want to do something for the others because they once did something 
special or out of the way for you. So, you intend to influence them by matching their deeds and 
equating the favour done. Well, this is definitely not to be taken in bad light. It’s just about ensuring 
you give back what you receive from the others, in form of a help. Adding to this, comes the idea 
of ‘commitment’. If you can convince someone to commit a deed and perform it consistently you 
are ensuring good results. The commitment made leads to a long way, of better results and 
productivity. Influencing the others about this aspect is not only difficult but requires self assurance 
and belief in the other person. 
 The list goes on to ‘Scarcity’. The idea of an urgency to commit, perform, choose and decide as 
shown in advertisements is another way of influencing. You may emphasise on the shortage of 
time and hence the compulsion to take the next step soon. This is more done in Marketing where 
one needs to lure the customer into buying certain products. 
 Theories galore about influencing people. Management theories go deep into the psychology of 
the influencer and the one getting influenced. Physical attributes. environment, social conditions 
and the power to communicate, all play an immense role in this herculean task of influencing others! 
1. Why is the first choice not a practical option? (1 Mark) 
 
© The Institute of Chartered Accountants of India
Page 5


1 
 
MOCK TEST PAPER - 1 
FOUNDATION COURSE 
PAPER 2: BUSINESS LAWS AND BUSINESS CORRESPONDENCE AND REPORTING 
SECTION A: BUSINESS LAWS 
Question No. 1 is compulsory. 
Answer any four questions from the remaining five questions. 
QUESTIONS 
1. (i)  Ashwin goes to super market to buy a Air Conditioner. He selects a branded Air Conditioner 
having a price tag of ` 40,000 after a discount of ` 3000. Ashwin reaches at cash counter for 
making the payment, but cashier says, “Sorry sir, the discount was upto yesterday. There is no 
discount from today. Hence you have to pay ` 43,000.” Ashwin got angry and insists for  
` 40,000. State with reasons whether under Indian Contract Act, 1872, Ashwin can enforce the 
cashier to sell at discounted price i.e. ` 40,000.    (4 Marks)  
(ii)  Mr. Mohan had purchased some goods from Sunflower Limited on credit. A credit period of one 
month was allowed to Mr. Mohan. Before the due date, Mr. Mohan went to the company and 
wanted to repay the amount due from him. He found only Mr. Ramesh there, who was the factory 
supervisor of the company. Mr. Ramesh told Mr. Mohan that the Accountant and the cashier are 
on leave, he is in-charge of receiving money and he may pay the amount to him. Mr. Ramesh 
issued a money receipt under his signature. After two months, Sunflower limited issued a notice 
to Mr. Mohan for non-payment of the dues within the stipulated period. Mr. Mohan informed th e 
company that he had already cleared the dues and he is no more responsible for the same. He 
also contended that Mr. Ramesh is an employee of the company whom he had made the 
payment and being an outsider, he trusted the words of Mr. Ramesh as duty distribution is a job 
of the internal management of the company. Analyse the situation and decide whether  
Mr. Mohan is free from his liability.   (4 Marks) 
(iii) 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 in the year 2023.  
 (4 Marks) 
2.  (i)  “An anticipatory breach of contract is a breach of contract occurring before the time fixed for 
performance has arrived”. Also, discuss the effect of anticipatory breach of contracts under the 
Indian Contract Act, 1872. (7 Marks) 
(ii)  “LLP is an alternative corporate business form that gives the benefits of limited liability of a  
company and the flexibility of a partnership”. Explain.  (5 Marks) 
3. (i)  Whether a minor may be admitted in the business of a partnership firm?  Explain the rights of a 
minor in the partnership firm.  (6 Marks) 
© The Institute of Chartered Accountants of India
2 
(ii)  Mr. Gaurav and Mr. Vikas entered into a contract on 1
st
 July, 2022, according to which  
Mr. Gaurav had to supply 100 tons of sugar to Mr. Vikas at a certain price strictly within a period 
of 10 days of the contract. Mr. Vikas also paid an amount of ` 70,000 towards advance as per 
the terms of the above contract. The mode of transportation available between their places is 
roadway only. Severe flood came on 2
nd
 July, 2022 and the only road connecting their places was 
damaged and could not be repaired within fifteen days. Mr. Gaurav offered to supply sugar on 
20
th
 July, 2022 for which Mr. Vikas did not agree. On 1
st
 August, 2022, Mr. Gaurav claimed 
compensation of ` 20,000 from Mr. Vikas for refusing to accept the supply of sugar, which was 
not there within the purview of the contract. On the other hand, Mr. Vikas claimed for refund of  
` 70,000, which he had paid as advance in terms of the contract. Analyse the above situation in 
terms of the provisions of the Indian Contract Act, 1872 and decide on Mr. Vikas contention.  
  (6 Marks) 
4. (i)  Explain any six circumstances in detail in which a non-owner can convey better title to the bona 
fide purchaser of goods for value under the Sale of Goods Act, 1930. (6 Marks)  
(ii)  M/s ABC & Associates, a partnership firm with A, B and C as senior partners engaged in the 
business of curtain manufacturing and exporting to foreign countries.  On 25
th
 August, 2020, they 
inducted Mr. P, an expert in the field of curtain manufacturing as their partner. On 10
th
 January 
2022, Mr. P was blamed for unauthorized activities and thus expelled from the partnership by 
approval of all of the remaining partners.  
(i) Examine whether action by the partners was justified or not?  
(ii) What should have the factors to be kept in mind prior expelling a partner from the firm by 
other partners according to the provisions of the Indian Partnership Act, 1932? (6 Marks) 
5. (i) Mr. Dheeraj was running a shop selling good quality washing machines. Mr. Vishal came to his 
shop and asked for washing machine which is suitable for washing woollen clothes. Mr. Dheeraj 
showed him a particular machine which Mr. Vishal liked and paid for it. Later on, when the 
machine was delivered at Mr. Vishal’s house, it was found that it was wrong machine and also 
unfit for washing woollen clothes. He immediately informed Mr. Dheeraj about the delivery of 
wrong machine. Mr. Dheeraj refused to exchange the same, saying that the contract was 
complete after the delivery of washing machine and payment of price. With reference to th e 
provisions of Sale of Goods Act, 1930, discuss whether Mr. Dheeraj is right in refusing to 
exchange the washing machine?  (6 Marks) 
(ii)  Mr. Rajeev, an assessee, was a wealthy man earning huge income by way of dividend and 
interest. He formed three Private Companies and agreed with each to hold a bloc of investment 
as an agent for them. The dividend and interest income received by the companies was handed 
back to Mr. Rajeev as a pretended loan. This way, Mr. Rajeev divided his income into three parts 
in a bid to reduce his tax liability.  
 Decide, for what purpose the three companies were established? Whether the legal personality of 
all the three companies may be disregarded.  (6 Marks) 
6. (i)   Define consideration. State the characteristics of a valid consideration under the Indian Contract 
Act, 1872.   (5 Marks) 
© The Institute of Chartered Accountants of India
3 
(ii) When does dissolution of a partnership firm take place under the provisions of the Indian 
Partnership Act, 1932?  Explain.    (4 Marks) 
(iii)  Aqua Limited was registered as a public company. There are 230 members in the company as 
noted below:  
(a) Directors and their relatives  190 
(b) Employees    15 
(c) Ex-Employees (Shares were allotted when they were employees    10 
(d) 5 couples holding shares jointly in the name of husband and wife (5*2)   10 
(e) Others      5 
 The Board of Directors of the company proposes to convert it into a private company. Also advise 
whether reduction in the number of members is necessary.   (3 Marks) 
© The Institute of Chartered Accountants of India
4 
SECTION-B: BUSINESS CORRESPONDENCE AND REPORTING  
Max Marks: 40 Marks 
Instructions 
The Question paper comprises of 5 questions of 10 Marks each. Question 1 is compulsory. Out of 2 
to 5, attempt any three. 
1.   (a)  Read the passage below and answer the questions that follow:  
 There are primarily three choices available to you when trying to influence people. The first is to 
ignore people and simply hope they will act in your best interest. You probably will agree that this 
is not a very practical option, as the results can neither be effective nor predictable. By ignoring 
other people, you are giving up any hope of influencing them and thus are surrendering yourself to 
the whims of fate. In effect you are saying to the world, ‘I will leave you alone and, in return, I want 
you to do what I want’, a naïve and unrealistic expectation. 
 The second opinion is to use coercion and force to compel others to act in the specific way you 
desire. The use of threats and intimidation may produce result s, atleast in the short term. Fear 
inducing tactics however, never bring out the best in people, since people themselves, must be the 
driving force behind their motivation if they are to put their hearts and souls into what they are 
doing. Fear forces people to operate in a survival mode. They may follow your instructions and 
orders to the letter but seldom will they contribute any real energy or enthusiasm to their efforts. 
 The third option is to persuade people to do what you want them to do simply beca use they really 
want to. People will do what you want them to do willingly in direct proportion to how they see their 
self interest being served. So you must convince that they will receive the real benefits and rewards 
if they follow the path suggested by you. However, these benefits must be those that the other 
party wants and understands. In effect, you are offering a reward that is valued by others in 
exchange for a reward that is valued by you. The highest reward you can offer people is to provide 
them opportunities to maximize their full potential. At the end, that is what matters! 
 Now come ideas outside the standard defined three discussed above. The first one is this idea of 
‘reciprocity’. Sometimes, you want to do something for the others because they once did something 
special or out of the way for you. So, you intend to influence them by matching their deeds and 
equating the favour done. Well, this is definitely not to be taken in bad light. It’s just about ensuring 
you give back what you receive from the others, in form of a help. Adding to this, comes the idea 
of ‘commitment’. If you can convince someone to commit a deed and perform it consistently you 
are ensuring good results. The commitment made leads to a long way, of better results and 
productivity. Influencing the others about this aspect is not only difficult but requires self assurance 
and belief in the other person. 
 The list goes on to ‘Scarcity’. The idea of an urgency to commit, perform, choose and decide as 
shown in advertisements is another way of influencing. You may emphasise on the shortage of 
time and hence the compulsion to take the next step soon. This is more done in Marketing where 
one needs to lure the customer into buying certain products. 
 Theories galore about influencing people. Management theories go deep into the psychology of 
the influencer and the one getting influenced. Physical attributes. environment, social conditions 
and the power to communicate, all play an immense role in this herculean task of influencing others! 
1. Why is the first choice not a practical option? (1 Mark) 
 
© The Institute of Chartered Accountants of India
5 
2. Which of the following the meaning of the word ‘coercion’? 
(a) Likeable 
(b) Enforcement 
(c) Legal 
(d) Coexist  (1 Mark) 
3. What is the third way of influencing people, according to the author? (1 Mark) 
4. Why does fear not bring out the best in people? (1 Mark) 
5.  The phrase ‘to the letter’ in the passage means:  (1 Mark) 
(a) Effortlessly 
(b) Meaninglessly 
(c) Accurately 
(d) Blatantly   
(b)  Read the following passage  
The hopping kangaroo is a familiar sight in every snapshot relating to Australia. Members of the 
kangaroo family can be as small as a rat or as big as a man. Kangaroos are found mainly in 
Australia, Tasmania and New Guinea. Kangaroos which are big footed marsupials that evolved in 
Australia use their short front legs like arms. The man sized kangaroos of Australia are capable of 
speeding up to 88 km/hr for short distances, their means of locomotion being their powerful hind 
legs, which carry them over the ground in jumps of 9 metres or more at a time. 
Weighing around 70 kg, they have an average life span of around 6 to 8 years and a maximum life 
time of 20 years. When bothered by predators, kangaroos often head for the water, standing 
submerged to the chest, and attempting to drown the attacker by holding him under water. Another 
defensive technique is to get their back to a tree and kick at their adversary with their clawed hind 
feet; sometimes with sufficient force to kill a man. Normally shy animals, they alert other kangaroos 
to danger by beating on the ground with their hind feet. This loud alarm signal carries over a long 
distance. 
The tail is important for kangaroo. It holds them in balance and supports them when they sit or fight 
against other kangaroos. The kangaroo uses its short legs as arms. With them it scratches itself, 
cleans its furs and holds branches when it eats leaves. Kangaroos are marsupials and the females 
carry new borns in a pouch in front of their abdomens. The babies are born small and climb up into 
the safety of the pouch. There for the next 225 days or so they eat, sleep and grow. Once they 
reach full development, they leave the pouch. A young kangaroo that leaves the pouch is called a 
‘joey’. To keep from getting too hot, the kangaroos take naps in the afternoons and do most of their 
grazing at night but the best stay- cool secret of these creatures is the ‘spit bath’! Kangaroos drool 
and lick saliva all over their faces and bodies to cool down. 
(i) Make notes, sub-headings, abbreviations, wherever necessary giving a suitable title. 
 (3 Marks)  
(ii) Write a summary. (2 Marks) 
2. (a)  What role does ‘Appearance’ play in non- verbal communication? (2 Marks) 
 (b)  (i)  Choose the suitable synonym for the word:   (1 Mark) 
 Adroit 
(a) Attain    
© The Institute of Chartered Accountants of India