Business Laws Revision Test Paper | Business Laws for CA Foundation PDF Download

 Page 1


PAPER – 2: BUSINESS LAWS & BUSINESS CORRESPONDENCE AND REPORTING 
SECTION A: BUSINESS LAWS 
PART – I: RELEVANT AMENDMENTS APPLICABLE FOR NOVEMBER 2018 EXAMINATION 
Applicability of Relevant Amendments/ Circulars/ Notifications/ Regulations etc. 
For November 2018 examinations for Paper 2, Section A: Business Laws, the significant 
amendments made in the respective subject for the period 1st November, 2017 to 30th April, 2018 
are relevant and applicable for said examinations. 
This RTP of November 2018 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 u pto 
30th April, 2017. 
2. RTP of November 2018 examination containing a gist of all the significant legislative 
amendments from 1st May 2017 to 30
th
 April, 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] 
© 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 NOVEMBER 2018 EXAMINATION 
Applicability of Relevant Amendments/ Circulars/ Notifications/ Regulations etc. 
For November 2018 examinations for Paper 2, Section A: Business Laws, the significant 
amendments made in the respective subject for the period 1st November, 2017 to 30th April, 2018 
are relevant and applicable for said examinations. 
This RTP of November 2018 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 u pto 
30th April, 2017. 
2. RTP of November 2018 examination containing a gist of all the significant legislative 
amendments from 1st May 2017 to 30
th
 April, 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] 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: NOVEMBER, 2018 
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 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] 
PART II: QUESTIONS AND ANSWERS 
QUESTIONS 
The Indian Contract Act, 1872 
1. (i) Ramaswami proposed to sell his house to Ramanathan. Ramanathan sent his acceptance 
by post. Next day, Ramanathan sends a telegram withdrawing his acceptance. Examine 
the validity of the acceptance according to the Indian Contract Act, 1872 in the light of the 
following: 
(a) The telegram of revocation of acceptance was received by Ramaswami before the 
letter of acceptance. 
(b) The telegram of revocation and letter of acceptance both reached together. 
(ii) “An anticipatory breach of contract is a breach of contract occurring before the time fixed 
for performance has arrived ”. Discuss stating also the effect of anticipatory breach on 
contracts. 
2. (i) Mr. Balwant, an old man, by a registered deed of gift, granted certain landed property to 
Ms. Reema, his daughter. By the terms of the deed, it was stipulated that an annuity of  
` 20, 000 should be paid every year to Mr. Sawant, who was the brother of Mr. Balwant. 
On the same day Ms. Reema made a promise to Mr. Sawant and executed in his favour 
an agreement to give effect to the stipulation. Ms. Reema failed to pay the stipulated sum. 
In an action against her by Mr. Sawant, she contended that since Mr. Sawant had not 
furnished any consideration, he has no right of action.  
 Examining the provisions of the Indian Contract Act, 1872, decide, whether the contention 
of Ms. Reema is valid?  
(ii) A coolie in uniform picks up the luggage of R to be carried out of the railway station 
without being asked by R and R allows him to do so. Examine whether the coolie is 
entitled to receive money from R under the Indian Contact Act, 1872<  
 
© 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 NOVEMBER 2018 EXAMINATION 
Applicability of Relevant Amendments/ Circulars/ Notifications/ Regulations etc. 
For November 2018 examinations for Paper 2, Section A: Business Laws, the significant 
amendments made in the respective subject for the period 1st November, 2017 to 30th April, 2018 
are relevant and applicable for said examinations. 
This RTP of November 2018 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 u pto 
30th April, 2017. 
2. RTP of November 2018 examination containing a gist of all the significant legislative 
amendments from 1st May 2017 to 30
th
 April, 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] 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: NOVEMBER, 2018 
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 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] 
PART II: QUESTIONS AND ANSWERS 
QUESTIONS 
The Indian Contract Act, 1872 
1. (i) Ramaswami proposed to sell his house to Ramanathan. Ramanathan sent his acceptance 
by post. Next day, Ramanathan sends a telegram withdrawing his acceptance. Examine 
the validity of the acceptance according to the Indian Contract Act, 1872 in the light of the 
following: 
(a) The telegram of revocation of acceptance was received by Ramaswami before the 
letter of acceptance. 
(b) The telegram of revocation and letter of acceptance both reached together. 
(ii) “An anticipatory breach of contract is a breach of contract occurring before the time fixed 
for performance has arrived ”. Discuss stating also the effect of anticipatory breach on 
contracts. 
2. (i) Mr. Balwant, an old man, by a registered deed of gift, granted certain landed property to 
Ms. Reema, his daughter. By the terms of the deed, it was stipulated that an annuity of  
` 20, 000 should be paid every year to Mr. Sawant, who was the brother of Mr. Balwant. 
On the same day Ms. Reema made a promise to Mr. Sawant and executed in his favour 
an agreement to give effect to the stipulation. Ms. Reema failed to pay the stipulated sum. 
In an action against her by Mr. Sawant, she contended that since Mr. Sawant had not 
furnished any consideration, he has no right of action.  
 Examining the provisions of the Indian Contract Act, 1872, decide, whether the contention 
of Ms. Reema is valid?  
(ii) A coolie in uniform picks up the luggage of R to be carried out of the railway station 
without being asked by R and R allows him to do so. Examine whether the coolie is 
entitled to receive money from R under the Indian Contact Act, 1872<  
 
© The Institute of Chartered Accountants of India
 PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3 
3. (i)  Point out with reason whether the following agreements are valid or void:  
(a) Kamala promises Ramesh to lend ` 500,000 in lieu of consideration that Ramesh 
gets Kamala’s marriage dissolved and he himself marries her. 
(b) Sohan agrees with Mohan to sell his black horse. Unknown to both the parties, the 
horse was dead at the time of agreement. 
(c) Ram sells the goodwill of his shop to Shyam for ` 4,00,000 and promises not to 
carry on such business forever and anywhere in India. 
(d) In an agreement between Prakash and Girish, there is a condition that they will not 
institute legal proceedings against each other without consent. 
(e) Ramamurthy, who is a citizen of India, enters into an agreement with an alien friend. 
(ii)  Ajay, Vijay and Sanjay are partners of software business and jointly promises to pay  
` 6,00, 000 to Kartik. Over a period of time Vijay became insolvent, but his assets are 
sufficient to pay one-fourth of his debts. Sanjay is compelled to pay the whole. Decide 
whether Sanjay is required to pay whole amount himself to Kartik in discharging joint 
promise under the Indian Contract Act, 1872. 
4. (i) Define consideration. State the characteristics of a valid consideration. 
(ii)  “Mere silence does not amount to fraud”. Discuss. 
The Sale of Goods Act, 1930 
5. (i) Ram consults Shyam, a motor-car dealer for a car suitable for touring purposes to 
promote the sale of his product. Shyam suggests ‘Maruti’ and Ram accordingly buys it 
from Shyam. The car turns out to be unfit for touring purposes. What remedy Ram is 
having now under the Sale of Goods Act, 1930? 
(ii) Referring to the provisions of the Sale of Goods Act, 1930, state the rules provided to 
regulate the “Sale by Auction.” 
6. (i)  Referring to the provisions of the Sale of Goods Act, 1930, state the circumstances under 
which when goods are delivered to the buyer “on approval” or “on sale or return” or other 
similar terms, the property therein passes to the buyer. 
Ms. Preeti owned a motor car which she handed over to Mr. Joshi on sale or return basis. 
After a week, Mr. Joshi pledged the motor car to Mr. Ganesh. Ms. Preeti now claims back 
the motor car from Mr. Ganesh. Will she succeed? Referring to the provisions of the Sale 
of Goods Act, 1930, decide and examine what recourse is available to Ms. Preeti.  
(ii)  State briefly the essential element of a contract of sale under the Sale of Goods Act, 1930. 
© 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 NOVEMBER 2018 EXAMINATION 
Applicability of Relevant Amendments/ Circulars/ Notifications/ Regulations etc. 
For November 2018 examinations for Paper 2, Section A: Business Laws, the significant 
amendments made in the respective subject for the period 1st November, 2017 to 30th April, 2018 
are relevant and applicable for said examinations. 
This RTP of November 2018 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 u pto 
30th April, 2017. 
2. RTP of November 2018 examination containing a gist of all the significant legislative 
amendments from 1st May 2017 to 30
th
 April, 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] 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: NOVEMBER, 2018 
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 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] 
PART II: QUESTIONS AND ANSWERS 
QUESTIONS 
The Indian Contract Act, 1872 
1. (i) Ramaswami proposed to sell his house to Ramanathan. Ramanathan sent his acceptance 
by post. Next day, Ramanathan sends a telegram withdrawing his acceptance. Examine 
the validity of the acceptance according to the Indian Contract Act, 1872 in the light of the 
following: 
(a) The telegram of revocation of acceptance was received by Ramaswami before the 
letter of acceptance. 
(b) The telegram of revocation and letter of acceptance both reached together. 
(ii) “An anticipatory breach of contract is a breach of contract occurring before the time fixed 
for performance has arrived ”. Discuss stating also the effect of anticipatory breach on 
contracts. 
2. (i) Mr. Balwant, an old man, by a registered deed of gift, granted certain landed property to 
Ms. Reema, his daughter. By the terms of the deed, it was stipulated that an annuity of  
` 20, 000 should be paid every year to Mr. Sawant, who was the brother of Mr. Balwant. 
On the same day Ms. Reema made a promise to Mr. Sawant and executed in his favour 
an agreement to give effect to the stipulation. Ms. Reema failed to pay the stipulated sum. 
In an action against her by Mr. Sawant, she contended that since Mr. Sawant had not 
furnished any consideration, he has no right of action.  
 Examining the provisions of the Indian Contract Act, 1872, decide, whether the contention 
of Ms. Reema is valid?  
(ii) A coolie in uniform picks up the luggage of R to be carried out of the railway station 
without being asked by R and R allows him to do so. Examine whether the coolie is 
entitled to receive money from R under the Indian Contact Act, 1872<  
 
© The Institute of Chartered Accountants of India
 PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3 
3. (i)  Point out with reason whether the following agreements are valid or void:  
(a) Kamala promises Ramesh to lend ` 500,000 in lieu of consideration that Ramesh 
gets Kamala’s marriage dissolved and he himself marries her. 
(b) Sohan agrees with Mohan to sell his black horse. Unknown to both the parties, the 
horse was dead at the time of agreement. 
(c) Ram sells the goodwill of his shop to Shyam for ` 4,00,000 and promises not to 
carry on such business forever and anywhere in India. 
(d) In an agreement between Prakash and Girish, there is a condition that they will not 
institute legal proceedings against each other without consent. 
(e) Ramamurthy, who is a citizen of India, enters into an agreement with an alien friend. 
(ii)  Ajay, Vijay and Sanjay are partners of software business and jointly promises to pay  
` 6,00, 000 to Kartik. Over a period of time Vijay became insolvent, but his assets are 
sufficient to pay one-fourth of his debts. Sanjay is compelled to pay the whole. Decide 
whether Sanjay is required to pay whole amount himself to Kartik in discharging joint 
promise under the Indian Contract Act, 1872. 
4. (i) Define consideration. State the characteristics of a valid consideration. 
(ii)  “Mere silence does not amount to fraud”. Discuss. 
The Sale of Goods Act, 1930 
5. (i) Ram consults Shyam, a motor-car dealer for a car suitable for touring purposes to 
promote the sale of his product. Shyam suggests ‘Maruti’ and Ram accordingly buys it 
from Shyam. The car turns out to be unfit for touring purposes. What remedy Ram is 
having now under the Sale of Goods Act, 1930? 
(ii) Referring to the provisions of the Sale of Goods Act, 1930, state the rules provided to 
regulate the “Sale by Auction.” 
6. (i)  Referring to the provisions of the Sale of Goods Act, 1930, state the circumstances under 
which when goods are delivered to the buyer “on approval” or “on sale or return” or other 
similar terms, the property therein passes to the buyer. 
Ms. Preeti owned a motor car which she handed over to Mr. Joshi on sale or return basis. 
After a week, Mr. Joshi pledged the motor car to Mr. Ganesh. Ms. Preeti now claims back 
the motor car from Mr. Ganesh. Will she succeed? Referring to the provisions of the Sale 
of Goods Act, 1930, decide and examine what recourse is available to Ms. Preeti.  
(ii)  State briefly the essential element of a contract of sale under the Sale of Goods Act, 1930. 
© The Institute of Chartered Accountants of India
4 FOUNDATION EXAMINATION: NOVEMBER, 2018 
7. (i)  “There is no implied warranty or condition as to quality or fitness for any particular purpose 
of goods supplied under a contract of sale.” Discuss the significance and State 
exceptions, if any. 
(ii) Explain the provisions of law relating to unpaid seller’s ‘right of lien’ and distinguish it from 
the “right of stoppage the goods in transit”. 
The Indian Partnership Act, 1932 
8. (i)  Ram & Co., a firm consists of three partners A, B and C having one third share each in 
the firm.  According to A and B, the activities of C are not in the interest of the partnership 
and thus want to expel C from the firm.  Advise A and B whether they can do so quoting 
the relevant provisions of the Indian Partnership Act, 1932.  
(ii)  What is Partnership Deed? What are the particulars that the partnership deed may contain? 
9. (i)  State the modes by which a partner may transfer his interest in the firm in favour of 
another person under the Indian Partnership Act, 1932. What are the rights of such a 
transferee? 
(ii) State the grounds on which a firm may be dissolved by the Court under the Indian 
Partnership Act, 1932? 
The Limited Liability Partnership Act, 2008 
10. (i)  State the essential elements to incorporate a LLP? 
(ii)  Differentiate between a LLP and a partnership firm? 
The Companies Act, 2013 
11. (i)  ABC Pvt. Ltd., is a Private Company having five members only. All the members of the 
company were going by car to Mumbai in relation to some business. An accident took 
place and all of them died. Answer with reasons, under the Companies Act, 2013 whether 
existence of the company has also come to the end?  
(ii) 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?  
12. (i) Briefly explain the doctrine of “ultravires” under the Companies Act, 2013. What are the 
consequences of ultravires acts of the company?  
(ii) Examine the following whether they are correct or incorrect along with reasons: 
(a) A company being an artificial person cannot own property and cannot sue or be sued. 
(b) A private limited company must have a minimum of two members, while a public 
limited company must have at least seven members. 
© 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 NOVEMBER 2018 EXAMINATION 
Applicability of Relevant Amendments/ Circulars/ Notifications/ Regulations etc. 
For November 2018 examinations for Paper 2, Section A: Business Laws, the significant 
amendments made in the respective subject for the period 1st November, 2017 to 30th April, 2018 
are relevant and applicable for said examinations. 
This RTP of November 2018 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 u pto 
30th April, 2017. 
2. RTP of November 2018 examination containing a gist of all the significant legislative 
amendments from 1st May 2017 to 30
th
 April, 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] 
© The Institute of Chartered Accountants of India
2 FOUNDATION EXAMINATION: NOVEMBER, 2018 
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 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] 
PART II: QUESTIONS AND ANSWERS 
QUESTIONS 
The Indian Contract Act, 1872 
1. (i) Ramaswami proposed to sell his house to Ramanathan. Ramanathan sent his acceptance 
by post. Next day, Ramanathan sends a telegram withdrawing his acceptance. Examine 
the validity of the acceptance according to the Indian Contract Act, 1872 in the light of the 
following: 
(a) The telegram of revocation of acceptance was received by Ramaswami before the 
letter of acceptance. 
(b) The telegram of revocation and letter of acceptance both reached together. 
(ii) “An anticipatory breach of contract is a breach of contract occurring before the time fixed 
for performance has arrived ”. Discuss stating also the effect of anticipatory breach on 
contracts. 
2. (i) Mr. Balwant, an old man, by a registered deed of gift, granted certain landed property to 
Ms. Reema, his daughter. By the terms of the deed, it was stipulated that an annuity of  
` 20, 000 should be paid every year to Mr. Sawant, who was the brother of Mr. Balwant. 
On the same day Ms. Reema made a promise to Mr. Sawant and executed in his favour 
an agreement to give effect to the stipulation. Ms. Reema failed to pay the stipulated sum. 
In an action against her by Mr. Sawant, she contended that since Mr. Sawant had not 
furnished any consideration, he has no right of action.  
 Examining the provisions of the Indian Contract Act, 1872, decide, whether the contention 
of Ms. Reema is valid?  
(ii) A coolie in uniform picks up the luggage of R to be carried out of the railway station 
without being asked by R and R allows him to do so. Examine whether the coolie is 
entitled to receive money from R under the Indian Contact Act, 1872<  
 
© The Institute of Chartered Accountants of India
 PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 3 
3. (i)  Point out with reason whether the following agreements are valid or void:  
(a) Kamala promises Ramesh to lend ` 500,000 in lieu of consideration that Ramesh 
gets Kamala’s marriage dissolved and he himself marries her. 
(b) Sohan agrees with Mohan to sell his black horse. Unknown to both the parties, the 
horse was dead at the time of agreement. 
(c) Ram sells the goodwill of his shop to Shyam for ` 4,00,000 and promises not to 
carry on such business forever and anywhere in India. 
(d) In an agreement between Prakash and Girish, there is a condition that they will not 
institute legal proceedings against each other without consent. 
(e) Ramamurthy, who is a citizen of India, enters into an agreement with an alien friend. 
(ii)  Ajay, Vijay and Sanjay are partners of software business and jointly promises to pay  
` 6,00, 000 to Kartik. Over a period of time Vijay became insolvent, but his assets are 
sufficient to pay one-fourth of his debts. Sanjay is compelled to pay the whole. Decide 
whether Sanjay is required to pay whole amount himself to Kartik in discharging joint 
promise under the Indian Contract Act, 1872. 
4. (i) Define consideration. State the characteristics of a valid consideration. 
(ii)  “Mere silence does not amount to fraud”. Discuss. 
The Sale of Goods Act, 1930 
5. (i) Ram consults Shyam, a motor-car dealer for a car suitable for touring purposes to 
promote the sale of his product. Shyam suggests ‘Maruti’ and Ram accordingly buys it 
from Shyam. The car turns out to be unfit for touring purposes. What remedy Ram is 
having now under the Sale of Goods Act, 1930? 
(ii) Referring to the provisions of the Sale of Goods Act, 1930, state the rules provided to 
regulate the “Sale by Auction.” 
6. (i)  Referring to the provisions of the Sale of Goods Act, 1930, state the circumstances under 
which when goods are delivered to the buyer “on approval” or “on sale or return” or other 
similar terms, the property therein passes to the buyer. 
Ms. Preeti owned a motor car which she handed over to Mr. Joshi on sale or return basis. 
After a week, Mr. Joshi pledged the motor car to Mr. Ganesh. Ms. Preeti now claims back 
the motor car from Mr. Ganesh. Will she succeed? Referring to the provisions of the Sale 
of Goods Act, 1930, decide and examine what recourse is available to Ms. Preeti.  
(ii)  State briefly the essential element of a contract of sale under the Sale of Goods Act, 1930. 
© The Institute of Chartered Accountants of India
4 FOUNDATION EXAMINATION: NOVEMBER, 2018 
7. (i)  “There is no implied warranty or condition as to quality or fitness for any particular purpose 
of goods supplied under a contract of sale.” Discuss the significance and State 
exceptions, if any. 
(ii) Explain the provisions of law relating to unpaid seller’s ‘right of lien’ and distinguish it from 
the “right of stoppage the goods in transit”. 
The Indian Partnership Act, 1932 
8. (i)  Ram & Co., a firm consists of three partners A, B and C having one third share each in 
the firm.  According to A and B, the activities of C are not in the interest of the partnership 
and thus want to expel C from the firm.  Advise A and B whether they can do so quoting 
the relevant provisions of the Indian Partnership Act, 1932.  
(ii)  What is Partnership Deed? What are the particulars that the partnership deed may contain? 
9. (i)  State the modes by which a partner may transfer his interest in the firm in favour of 
another person under the Indian Partnership Act, 1932. What are the rights of such a 
transferee? 
(ii) State the grounds on which a firm may be dissolved by the Court under the Indian 
Partnership Act, 1932? 
The Limited Liability Partnership Act, 2008 
10. (i)  State the essential elements to incorporate a LLP? 
(ii)  Differentiate between a LLP and a partnership firm? 
The Companies Act, 2013 
11. (i)  ABC Pvt. Ltd., is a Private Company having five members only. All the members of the 
company were going by car to Mumbai in relation to some business. An accident took 
place and all of them died. Answer with reasons, under the Companies Act, 2013 whether 
existence of the company has also come to the end?  
(ii) 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?  
12. (i) Briefly explain the doctrine of “ultravires” under the Companies Act, 2013. What are the 
consequences of ultravires acts of the company?  
(ii) Examine the following whether they are correct or incorrect along with reasons: 
(a) A company being an artificial person cannot own property and cannot sue or be sued. 
(b) A private limited company must have a minimum of two members, while a public 
limited company must have at least seven members. 
© The Institute of Chartered Accountants of India
 PAPER – 2 : BUSINESS LAW & BUSINESS CORRESPONDENCE AND REPORTING 5 
ANSWERS 
1. (i)  The problem is related with the communication and time of acceptance and its revocation. 
As per Section 4 of the Indian Contract Act, 1872, the communication of an acceptance 
is complete as against the acceptor when it comes to the knowledge of the proposer. 
An acceptance may be revoked at any time before the communication of the acceptance 
is complete as against the acceptor, but not afterwards. 
Referring to the above provisions: 
(a) Yes, the revocation of acceptance by Ramanathan (the acceptor) is valid. 
(b) If Ramaswami opens the telegram first (and this would be normally so in case of a 
rational person) and reads it, the acceptance stands revoked. If he opens the letter 
first and reads it, revocation of acceptance is not possible as the contract has 
already been concluded. 
(ii) An anticipatory breach of contract is a breach of contract occurring before the time fixed 
for performance has arrived. When the promisor refuses altogether to perform his promise 
and signifies his unwillingness even before the time for performance has arrived, it is 
called Anticipatory Breach.  
Section 39 of the Indian Contract Act, 1872 deals with anticipatory breach of contract 
and provides as follows: "When a party to a contract has refused to perform or disa ble 
himself from performing, his promise in its entirety, the promisee may put an end to the 
contract, unless he has signified, but words or conduct, his acquiescence in its 
continuance."  
Effect of anticipatory breach: The promisee is excused from performance or from 
further performance. Further he gets an option:  
(1) To either treat the contract as “rescinded and sue the other party for damages from 
breach of contract immediately without waiting until the due date of performance; or 
(2) He may elect not to rescind but to treat the contract as still operative, and wait for 
the time of performance and then hold the other party responsible for the 
consequences of non-performance. But in this case, he will keep the contract alive 
for the benefit of the other party as well as his own, and the guilty party, if he so 
decides on re-consideration, may still perform his part of the contract and can also 
take advantage of any supervening impossibility which may have the effect of 
discharging the contract.  
 
© The Institute of Chartered Accountants of India