Revision Test Paper- May 2019 - Notes | Study Mock Tests & Past Year Papers for CA Foundation - CA Foundation

 Page 1


PAPER – 2: BUSINESS LAWS& BUSINESS CORRESPONDENCE AND REPORTING 
SECTION A: BUSINESS LAWS 
PART – I: RELEVANT AMENDMENTS APPLICABLE FOR MAY 2019 EXAMINATION 
Applicability of Relevant Amendments/ Circulars/ Notifications/ Regulations etc. 
For May 2019 examinations for Paper 2, Section A: Business Laws, the significant 
amendments made in the respective subject for the period 1
st
 May, 2018 to 31
st
 October, 2018 
are relevant and applicable for said examinations. 
This RTP of May 2019 examination is very important to the students to update themselves 
with the relevant amendments pertaining to the Business Laws. 
Students are advised to refer the following publications – 
1.  Study Material (Edition July 2017) containing Legislative amendments issued 
upto 30th April, 2017. 
2.  RTP of May 2019 examination containing a gist of all the significant legislative 
amendments from 1st May, 2017 to 31
st
 October, 2018 along with the suggested 
sample questions and answers for understanding and practice. 
Following are the relevant amendments/ Chapters of the Study material: 
S. No. Subject Matter 
1.  The Ministry of Corporate Affairs vide Notification S.O. 3086(E) dated 20th 
September, 2017 has notified the proviso to clause (87) of section 2 of the 
Companies Act, 2013 w.e.f. 20th September, 2017. [Proviso to clause (87) of 
Section 2 of the Companies Act, 2013 is covered on Page No. 5.12, Chapter 5 
of the study material] 
2. The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the word “and” in clause (71) of section 
2, in sub-clause (a), after the word "company”. [Section 2(71) of the 
Companies Act, 2013 is covered on Page No. 5.12, chapter 5 of the study 
material] 
3.  The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the following Explanation in clause (46) 
of section 2: 
‘Explanation- For the purposes of this clause, the expression “company” 
includes any body corporate.’ 
[Section 2(46) of the Companies Act, 2013 is covered on Page No. 5.12, 
chapter 5 of the study material] 
4.  The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the words “other than this Act or the 
© The Institute of Chartered Accountants of India
Page 2


PAPER – 2: BUSINESS LAWS& BUSINESS CORRESPONDENCE AND REPORTING 
SECTION A: BUSINESS LAWS 
PART – I: RELEVANT AMENDMENTS APPLICABLE FOR MAY 2019 EXAMINATION 
Applicability of Relevant Amendments/ Circulars/ Notifications/ Regulations etc. 
For May 2019 examinations for Paper 2, Section A: Business Laws, the significant 
amendments made in the respective subject for the period 1
st
 May, 2018 to 31
st
 October, 2018 
are relevant and applicable for said examinations. 
This RTP of May 2019 examination is very important to the students to update themselves 
with the relevant amendments pertaining to the Business Laws. 
Students are advised to refer the following publications – 
1.  Study Material (Edition July 2017) containing Legislative amendments issued 
upto 30th April, 2017. 
2.  RTP of May 2019 examination containing a gist of all the significant legislative 
amendments from 1st May, 2017 to 31
st
 October, 2018 along with the suggested 
sample questions and answers for understanding and practice. 
Following are the relevant amendments/ Chapters of the Study material: 
S. No. Subject Matter 
1.  The Ministry of Corporate Affairs vide Notification S.O. 3086(E) dated 20th 
September, 2017 has notified the proviso to clause (87) of section 2 of the 
Companies Act, 2013 w.e.f. 20th September, 2017. [Proviso to clause (87) of 
Section 2 of the Companies Act, 2013 is covered on Page No. 5.12, Chapter 5 
of the study material] 
2. The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the word “and” in clause (71) of section 
2, in sub-clause (a), after the word "company”. [Section 2(71) of the 
Companies Act, 2013 is covered on Page No. 5.12, chapter 5 of the study 
material] 
3.  The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the following Explanation in clause (46) 
of section 2: 
‘Explanation- For the purposes of this clause, the expression “company” 
includes any body corporate.’ 
[Section 2(46) of the Companies Act, 2013 is covered on Page No. 5.12, 
chapter 5 of the study material] 
4.  The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the words “other than this Act or the 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: MAY, 2019 
previous company law” after the words “State Act” in clause (A) in proviso to 
clause (72) of section 2.  
[Section 2(72) of the Companies Act, 2013 is covered on Page No. 5.17, 
chapter 5 of the study material] 
5.  The MCA vide the Companies (Amendment) Act, 2017 has made the following 
change in section 2(6) (effective from 7th May 2018) 
“for the Explanation:- 
For the purposes of this clause, "significant influence" means control of at 
least twenty per cent of total share capital, or of business decisions under an 
agreement 
the following Explanation shall be substituted, namely:- 
Explanation.—For the purpose of this clause,— 
(a) the expression "significant influence" means control of at least twenty per 
cent. of total voting power, or control of or participation in business decisions 
under an agreement; 
(b) the expression "joint venture" means a joint arrangement whereby the 
parties that have joint control of the arrangement have rights to the net assets 
of the arrangement” 
[Section 2(6) of the Companies Act, 2013 is covered on page no. 5.13, 
chapter 5 of the study material] 
6.  The MCA vide the Companies (Amendment) Act, 2017 has made the following 
change in section 7(1)(c) (effective from 27
th
July, 2018) 
 
In section 7 in sub-section (1), in item (c):   
for the words "an affidavit", the words "a declaration" shall be substituted. 
[Section 7(1)(c) of the Companies Act, 2013 is covered on page no. 5.19, 
chapter 5 of the study material] 
Part II: Questions and Answers 
Questions 
The Indian Contract Act, 1872 
1. (i) P sells by auction to Q a horse which P knows to be unsound. The horse appears to 
be sound but P knows about the unsoundness of the horse. Is this contract valid in 
the following circumstances: 
(a) If P says nothing about the unsoundness of the horse to Q. 
(b) If P says nothing about it to Q who is P’s daughter who has just come of age. 
© The Institute of Chartered Accountants of India
Page 3


PAPER – 2: BUSINESS LAWS& BUSINESS CORRESPONDENCE AND REPORTING 
SECTION A: BUSINESS LAWS 
PART – I: RELEVANT AMENDMENTS APPLICABLE FOR MAY 2019 EXAMINATION 
Applicability of Relevant Amendments/ Circulars/ Notifications/ Regulations etc. 
For May 2019 examinations for Paper 2, Section A: Business Laws, the significant 
amendments made in the respective subject for the period 1
st
 May, 2018 to 31
st
 October, 2018 
are relevant and applicable for said examinations. 
This RTP of May 2019 examination is very important to the students to update themselves 
with the relevant amendments pertaining to the Business Laws. 
Students are advised to refer the following publications – 
1.  Study Material (Edition July 2017) containing Legislative amendments issued 
upto 30th April, 2017. 
2.  RTP of May 2019 examination containing a gist of all the significant legislative 
amendments from 1st May, 2017 to 31
st
 October, 2018 along with the suggested 
sample questions and answers for understanding and practice. 
Following are the relevant amendments/ Chapters of the Study material: 
S. No. Subject Matter 
1.  The Ministry of Corporate Affairs vide Notification S.O. 3086(E) dated 20th 
September, 2017 has notified the proviso to clause (87) of section 2 of the 
Companies Act, 2013 w.e.f. 20th September, 2017. [Proviso to clause (87) of 
Section 2 of the Companies Act, 2013 is covered on Page No. 5.12, Chapter 5 
of the study material] 
2. The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the word “and” in clause (71) of section 
2, in sub-clause (a), after the word "company”. [Section 2(71) of the 
Companies Act, 2013 is covered on Page No. 5.12, chapter 5 of the study 
material] 
3.  The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the following Explanation in clause (46) 
of section 2: 
‘Explanation- For the purposes of this clause, the expression “company” 
includes any body corporate.’ 
[Section 2(46) of the Companies Act, 2013 is covered on Page No. 5.12, 
chapter 5 of the study material] 
4.  The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the words “other than this Act or the 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: MAY, 2019 
previous company law” after the words “State Act” in clause (A) in proviso to 
clause (72) of section 2.  
[Section 2(72) of the Companies Act, 2013 is covered on Page No. 5.17, 
chapter 5 of the study material] 
5.  The MCA vide the Companies (Amendment) Act, 2017 has made the following 
change in section 2(6) (effective from 7th May 2018) 
“for the Explanation:- 
For the purposes of this clause, "significant influence" means control of at 
least twenty per cent of total share capital, or of business decisions under an 
agreement 
the following Explanation shall be substituted, namely:- 
Explanation.—For the purpose of this clause,— 
(a) the expression "significant influence" means control of at least twenty per 
cent. of total voting power, or control of or participation in business decisions 
under an agreement; 
(b) the expression "joint venture" means a joint arrangement whereby the 
parties that have joint control of the arrangement have rights to the net assets 
of the arrangement” 
[Section 2(6) of the Companies Act, 2013 is covered on page no. 5.13, 
chapter 5 of the study material] 
6.  The MCA vide the Companies (Amendment) Act, 2017 has made the following 
change in section 7(1)(c) (effective from 27
th
July, 2018) 
 
In section 7 in sub-section (1), in item (c):   
for the words "an affidavit", the words "a declaration" shall be substituted. 
[Section 7(1)(c) of the Companies Act, 2013 is covered on page no. 5.19, 
chapter 5 of the study material] 
Part II: Questions and Answers 
Questions 
The Indian Contract Act, 1872 
1. (i) P sells by auction to Q a horse which P knows to be unsound. The horse appears to 
be sound but P knows about the unsoundness of the horse. Is this contract valid in 
the following circumstances: 
(a) If P says nothing about the unsoundness of the horse to Q. 
(b) If P says nothing about it to Q who is P’s daughter who has just come of age. 
© The Institute of Chartered Accountants of India
 PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 3 
(c) If Q says to P “If you do not deny it, I shall assume that the horse is sound.” P 
says nothing. 
(ii) Comment on the following statements: 
(a) Acceptance must be absolute and unqualified. 
(b) Acceptance must be in the prescribed mode. 
2. (i) (a)  Explain the concept of ‘misrepresentation’ in matters of contract.  
(b)  Sohan induced Suraj to buy his motorcycle saying that it was in a very good 
condition. After taking the motorcycle, Suraj complained that there were many 
defects in the motorcycle. Sohan proposed to get it repaired and promised to 
pay 40% cost of repairs. After a few days, the motorcycle did not work at all. 
Now Suraj wants to rescind the contract. Decide giving reasons. 
(ii) X received certain goods from Y and promised to pay ` 60,000. Later on, X 
expressed his inability to make payment. Z, who is known to X, pays ` 40,000 to Y 
on behalf of X. however, X was not aware of the payment. Now Y is intending to sue 
X for the amount of` 60,000. Can Y do so? Advise. 
3. (i) “No consideration, no contract” Comment. 
(ii) Explain the meaning of ‘Contingent Contracts’ and state the rules relating to such 
contracts. 
The Sale of Goods Act, 1930 
4. (i) For the purpose of making uniform for the employees, Mr. Yadav bought dark blue 
coloured cloth from Vivek, but did not disclose to the seller the purpose of said 
purchase.  When uniforms were prepared and used by the employees, the cloth was 
found unfit.  However, there was evidence that the cloth was fit for caps, boots and 
carriage lining.  Advise Mr. Yadav whether he is entitled to have any remedy under 
the sale of Goods Act, 1930? 
(ii) 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. 
5. (i) State briefly the essential element of a contract of sale under the Sale of Goods Act, 
1930.  
(ii)  Distinguish between a ‘Condition’ and a ‘Warranty’ in a c ontract of sale.  When shall 
a ‘breach of condition’ be treated as ‘breach of warranty’ under the provisions of the 
Sale of Goods Act, 1930?  Explain. 
6. What are the rules related to Acceptance of Delivery of Goods? 
© The Institute of Chartered Accountants of India
Page 4


PAPER – 2: BUSINESS LAWS& BUSINESS CORRESPONDENCE AND REPORTING 
SECTION A: BUSINESS LAWS 
PART – I: RELEVANT AMENDMENTS APPLICABLE FOR MAY 2019 EXAMINATION 
Applicability of Relevant Amendments/ Circulars/ Notifications/ Regulations etc. 
For May 2019 examinations for Paper 2, Section A: Business Laws, the significant 
amendments made in the respective subject for the period 1
st
 May, 2018 to 31
st
 October, 2018 
are relevant and applicable for said examinations. 
This RTP of May 2019 examination is very important to the students to update themselves 
with the relevant amendments pertaining to the Business Laws. 
Students are advised to refer the following publications – 
1.  Study Material (Edition July 2017) containing Legislative amendments issued 
upto 30th April, 2017. 
2.  RTP of May 2019 examination containing a gist of all the significant legislative 
amendments from 1st May, 2017 to 31
st
 October, 2018 along with the suggested 
sample questions and answers for understanding and practice. 
Following are the relevant amendments/ Chapters of the Study material: 
S. No. Subject Matter 
1.  The Ministry of Corporate Affairs vide Notification S.O. 3086(E) dated 20th 
September, 2017 has notified the proviso to clause (87) of section 2 of the 
Companies Act, 2013 w.e.f. 20th September, 2017. [Proviso to clause (87) of 
Section 2 of the Companies Act, 2013 is covered on Page No. 5.12, Chapter 5 
of the study material] 
2. The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the word “and” in clause (71) of section 
2, in sub-clause (a), after the word "company”. [Section 2(71) of the 
Companies Act, 2013 is covered on Page No. 5.12, chapter 5 of the study 
material] 
3.  The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the following Explanation in clause (46) 
of section 2: 
‘Explanation- For the purposes of this clause, the expression “company” 
includes any body corporate.’ 
[Section 2(46) of the Companies Act, 2013 is covered on Page No. 5.12, 
chapter 5 of the study material] 
4.  The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the words “other than this Act or the 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: MAY, 2019 
previous company law” after the words “State Act” in clause (A) in proviso to 
clause (72) of section 2.  
[Section 2(72) of the Companies Act, 2013 is covered on Page No. 5.17, 
chapter 5 of the study material] 
5.  The MCA vide the Companies (Amendment) Act, 2017 has made the following 
change in section 2(6) (effective from 7th May 2018) 
“for the Explanation:- 
For the purposes of this clause, "significant influence" means control of at 
least twenty per cent of total share capital, or of business decisions under an 
agreement 
the following Explanation shall be substituted, namely:- 
Explanation.—For the purpose of this clause,— 
(a) the expression "significant influence" means control of at least twenty per 
cent. of total voting power, or control of or participation in business decisions 
under an agreement; 
(b) the expression "joint venture" means a joint arrangement whereby the 
parties that have joint control of the arrangement have rights to the net assets 
of the arrangement” 
[Section 2(6) of the Companies Act, 2013 is covered on page no. 5.13, 
chapter 5 of the study material] 
6.  The MCA vide the Companies (Amendment) Act, 2017 has made the following 
change in section 7(1)(c) (effective from 27
th
July, 2018) 
 
In section 7 in sub-section (1), in item (c):   
for the words "an affidavit", the words "a declaration" shall be substituted. 
[Section 7(1)(c) of the Companies Act, 2013 is covered on page no. 5.19, 
chapter 5 of the study material] 
Part II: Questions and Answers 
Questions 
The Indian Contract Act, 1872 
1. (i) P sells by auction to Q a horse which P knows to be unsound. The horse appears to 
be sound but P knows about the unsoundness of the horse. Is this contract valid in 
the following circumstances: 
(a) If P says nothing about the unsoundness of the horse to Q. 
(b) If P says nothing about it to Q who is P’s daughter who has just come of age. 
© The Institute of Chartered Accountants of India
 PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 3 
(c) If Q says to P “If you do not deny it, I shall assume that the horse is sound.” P 
says nothing. 
(ii) Comment on the following statements: 
(a) Acceptance must be absolute and unqualified. 
(b) Acceptance must be in the prescribed mode. 
2. (i) (a)  Explain the concept of ‘misrepresentation’ in matters of contract.  
(b)  Sohan induced Suraj to buy his motorcycle saying that it was in a very good 
condition. After taking the motorcycle, Suraj complained that there were many 
defects in the motorcycle. Sohan proposed to get it repaired and promised to 
pay 40% cost of repairs. After a few days, the motorcycle did not work at all. 
Now Suraj wants to rescind the contract. Decide giving reasons. 
(ii) X received certain goods from Y and promised to pay ` 60,000. Later on, X 
expressed his inability to make payment. Z, who is known to X, pays ` 40,000 to Y 
on behalf of X. however, X was not aware of the payment. Now Y is intending to sue 
X for the amount of` 60,000. Can Y do so? Advise. 
3. (i) “No consideration, no contract” Comment. 
(ii) Explain the meaning of ‘Contingent Contracts’ and state the rules relating to such 
contracts. 
The Sale of Goods Act, 1930 
4. (i) For the purpose of making uniform for the employees, Mr. Yadav bought dark blue 
coloured cloth from Vivek, but did not disclose to the seller the purpose of said 
purchase.  When uniforms were prepared and used by the employees, the cloth was 
found unfit.  However, there was evidence that the cloth was fit for caps, boots and 
carriage lining.  Advise Mr. Yadav whether he is entitled to have any remedy under 
the sale of Goods Act, 1930? 
(ii) 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. 
5. (i) State briefly the essential element of a contract of sale under the Sale of Goods Act, 
1930.  
(ii)  Distinguish between a ‘Condition’ and a ‘Warranty’ in a c ontract of sale.  When shall 
a ‘breach of condition’ be treated as ‘breach of warranty’ under the provisions of the 
Sale of Goods Act, 1930?  Explain. 
6. What are the rules related to Acceptance of Delivery of Goods? 
© The Institute of Chartered Accountants of India
4 FOUNDATION EXAMINATION: MAY, 2019 
The Indian Partnership Act, 1932 
7. (i) P, X, Y and Z are partners in a registered firm A & Co. X died and P retired. Y and Z 
filed a suit against W in the name and on behalf of firm without notifying to the 
Registrar of firms about the changes in the constitution of the firm. Is the suit 
maintainable? 
(ii) Ram, Mohan and Gopal were partners in a firm.  During the course of partnership, 
the firm ordered Sunrise Ltd. to supply a machine to the firm.  Before the machine 
was delivered, Ram expired.  The machine, however, was later delivered to the firm.  
Thereafter, the remaining partners became insolvent and the firm failed to pay the 
price of machine to Sunrise Ltd.  
Explain with reasons: 
(i) Whether Ram’s private estate is liable for the price of the machine purchased 
by the firm? 
(ii) Against whom can the creditor obtain a decree for the recovery of the price? 
8. (i)  What is the procedure of registration of a partnership firm under the Indian 
Partnership Act, 1932?   
(ii)  What do you mean by “implied authority” of the partners in a firm?  Point out the 
extent of partner’s implied authority in case of emergency, referring to the 
provisions of the Indian Partnership Act, 1932. 
The Limited Liability Partnership Act, 2008 
9. What is the meaning of the Limited Liability Partnership? State the various characteristics 
of it? 
The Companies Act, 2013 
10. Flora Fauna 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 propose to convert it into a private company. Also 
advise whether reduction in the number of members is necessary.  
11. (i) F, 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 
© The Institute of Chartered Accountants of India
Page 5


PAPER – 2: BUSINESS LAWS& BUSINESS CORRESPONDENCE AND REPORTING 
SECTION A: BUSINESS LAWS 
PART – I: RELEVANT AMENDMENTS APPLICABLE FOR MAY 2019 EXAMINATION 
Applicability of Relevant Amendments/ Circulars/ Notifications/ Regulations etc. 
For May 2019 examinations for Paper 2, Section A: Business Laws, the significant 
amendments made in the respective subject for the period 1
st
 May, 2018 to 31
st
 October, 2018 
are relevant and applicable for said examinations. 
This RTP of May 2019 examination is very important to the students to update themselves 
with the relevant amendments pertaining to the Business Laws. 
Students are advised to refer the following publications – 
1.  Study Material (Edition July 2017) containing Legislative amendments issued 
upto 30th April, 2017. 
2.  RTP of May 2019 examination containing a gist of all the significant legislative 
amendments from 1st May, 2017 to 31
st
 October, 2018 along with the suggested 
sample questions and answers for understanding and practice. 
Following are the relevant amendments/ Chapters of the Study material: 
S. No. Subject Matter 
1.  The Ministry of Corporate Affairs vide Notification S.O. 3086(E) dated 20th 
September, 2017 has notified the proviso to clause (87) of section 2 of the 
Companies Act, 2013 w.e.f. 20th September, 2017. [Proviso to clause (87) of 
Section 2 of the Companies Act, 2013 is covered on Page No. 5.12, Chapter 5 
of the study material] 
2. The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the word “and” in clause (71) of section 
2, in sub-clause (a), after the word "company”. [Section 2(71) of the 
Companies Act, 2013 is covered on Page No. 5.12, chapter 5 of the study 
material] 
3.  The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the following Explanation in clause (46) 
of section 2: 
‘Explanation- For the purposes of this clause, the expression “company” 
includes any body corporate.’ 
[Section 2(46) of the Companies Act, 2013 is covered on Page No. 5.12, 
chapter 5 of the study material] 
4.  The Ministry of Corporate Affairs vide the Companies (Amendment) Act, 2017 
dated 9
th
February, 2018 has inserted the words “other than this Act or the 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: MAY, 2019 
previous company law” after the words “State Act” in clause (A) in proviso to 
clause (72) of section 2.  
[Section 2(72) of the Companies Act, 2013 is covered on Page No. 5.17, 
chapter 5 of the study material] 
5.  The MCA vide the Companies (Amendment) Act, 2017 has made the following 
change in section 2(6) (effective from 7th May 2018) 
“for the Explanation:- 
For the purposes of this clause, "significant influence" means control of at 
least twenty per cent of total share capital, or of business decisions under an 
agreement 
the following Explanation shall be substituted, namely:- 
Explanation.—For the purpose of this clause,— 
(a) the expression "significant influence" means control of at least twenty per 
cent. of total voting power, or control of or participation in business decisions 
under an agreement; 
(b) the expression "joint venture" means a joint arrangement whereby the 
parties that have joint control of the arrangement have rights to the net assets 
of the arrangement” 
[Section 2(6) of the Companies Act, 2013 is covered on page no. 5.13, 
chapter 5 of the study material] 
6.  The MCA vide the Companies (Amendment) Act, 2017 has made the following 
change in section 7(1)(c) (effective from 27
th
July, 2018) 
 
In section 7 in sub-section (1), in item (c):   
for the words "an affidavit", the words "a declaration" shall be substituted. 
[Section 7(1)(c) of the Companies Act, 2013 is covered on page no. 5.19, 
chapter 5 of the study material] 
Part II: Questions and Answers 
Questions 
The Indian Contract Act, 1872 
1. (i) P sells by auction to Q a horse which P knows to be unsound. The horse appears to 
be sound but P knows about the unsoundness of the horse. Is this contract valid in 
the following circumstances: 
(a) If P says nothing about the unsoundness of the horse to Q. 
(b) If P says nothing about it to Q who is P’s daughter who has just come of age. 
© The Institute of Chartered Accountants of India
 PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 3 
(c) If Q says to P “If you do not deny it, I shall assume that the horse is sound.” P 
says nothing. 
(ii) Comment on the following statements: 
(a) Acceptance must be absolute and unqualified. 
(b) Acceptance must be in the prescribed mode. 
2. (i) (a)  Explain the concept of ‘misrepresentation’ in matters of contract.  
(b)  Sohan induced Suraj to buy his motorcycle saying that it was in a very good 
condition. After taking the motorcycle, Suraj complained that there were many 
defects in the motorcycle. Sohan proposed to get it repaired and promised to 
pay 40% cost of repairs. After a few days, the motorcycle did not work at all. 
Now Suraj wants to rescind the contract. Decide giving reasons. 
(ii) X received certain goods from Y and promised to pay ` 60,000. Later on, X 
expressed his inability to make payment. Z, who is known to X, pays ` 40,000 to Y 
on behalf of X. however, X was not aware of the payment. Now Y is intending to sue 
X for the amount of` 60,000. Can Y do so? Advise. 
3. (i) “No consideration, no contract” Comment. 
(ii) Explain the meaning of ‘Contingent Contracts’ and state the rules relating to such 
contracts. 
The Sale of Goods Act, 1930 
4. (i) For the purpose of making uniform for the employees, Mr. Yadav bought dark blue 
coloured cloth from Vivek, but did not disclose to the seller the purpose of said 
purchase.  When uniforms were prepared and used by the employees, the cloth was 
found unfit.  However, there was evidence that the cloth was fit for caps, boots and 
carriage lining.  Advise Mr. Yadav whether he is entitled to have any remedy under 
the sale of Goods Act, 1930? 
(ii) 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. 
5. (i) State briefly the essential element of a contract of sale under the Sale of Goods Act, 
1930.  
(ii)  Distinguish between a ‘Condition’ and a ‘Warranty’ in a c ontract of sale.  When shall 
a ‘breach of condition’ be treated as ‘breach of warranty’ under the provisions of the 
Sale of Goods Act, 1930?  Explain. 
6. What are the rules related to Acceptance of Delivery of Goods? 
© The Institute of Chartered Accountants of India
4 FOUNDATION EXAMINATION: MAY, 2019 
The Indian Partnership Act, 1932 
7. (i) P, X, Y and Z are partners in a registered firm A & Co. X died and P retired. Y and Z 
filed a suit against W in the name and on behalf of firm without notifying to the 
Registrar of firms about the changes in the constitution of the firm. Is the suit 
maintainable? 
(ii) Ram, Mohan and Gopal were partners in a firm.  During the course of partnership, 
the firm ordered Sunrise Ltd. to supply a machine to the firm.  Before the machine 
was delivered, Ram expired.  The machine, however, was later delivered to the firm.  
Thereafter, the remaining partners became insolvent and the firm failed to pay the 
price of machine to Sunrise Ltd.  
Explain with reasons: 
(i) Whether Ram’s private estate is liable for the price of the machine purchased 
by the firm? 
(ii) Against whom can the creditor obtain a decree for the recovery of the price? 
8. (i)  What is the procedure of registration of a partnership firm under the Indian 
Partnership Act, 1932?   
(ii)  What do you mean by “implied authority” of the partners in a firm?  Point out the 
extent of partner’s implied authority in case of emergency, referring to the 
provisions of the Indian Partnership Act, 1932. 
The Limited Liability Partnership Act, 2008 
9. What is the meaning of the Limited Liability Partnership? State the various characteristics 
of it? 
The Companies Act, 2013 
10. Flora Fauna 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 propose to convert it into a private company. Also 
advise whether reduction in the number of members is necessary.  
11. (i) F, 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 
© The Institute of Chartered Accountants of India
 PAPER – 2 : BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 5 
investment as an agent for them. The dividend and interest income received by the 
companies was handed back to F as a pretended loan. This way, F 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. 
(ii) Can a non-profit organization be registered as a company under the Companies 
Act, 2013? If so, what procedure does it have to adopt? 
SUGGESTED ANSWERS/HINTS 
1. (i)  According to section 17 of the Indian Contract Act, 1872, mere silence as to facts 
likely to affect the willingness of a person to enter into a contract is not fraud, unless 
the circumstances of the case are such that, regard being had to them, it is the duty 
of the person keeping silence to speak, or unless his silence is, in itself, equivalent 
to speech. Hence, in the instant case,  
(a) This contract is valid since as per section 17 mere silence as to the facts likely 
to affect the willingness of a person to enter into a contract is not fraud. Here, 
it is not the duty of the seller to disclose defects. 
(b) This contract is not valid since as per section 17 it becomes P’s duty to tell Q 
about the unsoundness of the horse because a fiduciary relationship exists 
between P and his daughter Q. Here, P’s silence is equivalent to speech and 
hence amounts to fraud. 
(c) This contract is not valid since as per section 17, P’s silence is equivalent to 
speech and hence amounts to fraud.  
 (ii)  (a) Acceptance must be absolute and unqualified: As per section 7 of the 
Indian Contract Act, 1872 acceptance is valid only when it is absolute and 
unqualified and is also expressed in some usual and reasonable manner 
unless the proposal prescribes the manner in which it must be accepted. If the 
proposal prescribes the manner in which it must be accepted, then it must be 
accepted accordingly.  
 Example: ‘A’ enquires from ‘B’, “Will you purchase my car for ` 2 lakhs?” If ‘B’ 
replies “I shall purchase your car for ` 2 lakhs, if you buy my motorcycle for ` 
50000/-, here ‘B’ cannot be considered to have accepted the proposal. If on 
the other hand ‘B’ agrees to purchase the car from ‘A’ as per his proposal 
subject to availability of valid Registration Certificate / book for the car, then 
the acceptance is in place though the offer contained no mention of R.C. book. 
This is because expecting a valid title for the car is not a condition. Therefore, 
the acceptance in this case is unconditional. 
© The Institute of Chartered Accountants of India