Test: Business Laws - 1 - CA Foundation MCQ

An offer is a proposal made by one party (the offeror) to another party (the offeree) indicating a willingness to enter into a contract. In order for a contract to be legally binding, there must be an offer, acceptance, and consideration.
Here are the details regarding who can accept an offer:
Acceptance by the Person to Whom It Is Made

• Only the person to whom the offer is made can accept it. This is because an offer is a proposal made specifically to someone, and only that person has the authority to agree or disagree with the proposal.
• If someone other than the person to whom the offer is made tries to accept it, it would not create a legally binding contract. This is because the offeror intended the contract to be with the specific offeree, and not with any other party.
  For example, if Alice offers to sell her car to Bob for $5,000, only Bob can accept the offer. If Carol, who overhears the conversation, tries to accept the offer, it would not result in a valid contract between Alice and Carol.

An offer does not lapse due to acceptance because, in fact, acceptance is the very step required to create a legally binding agreement between the parties involved. When an offer is made by one party (the offeror) and accepted by the other party (the offeree) without any modifications, it forms a contract. The offer is no longer open for anyone else to accept, as it has already been accepted and a contract has been formed.

Let me explain the other options as well:

1. Subsequent illegality: An offer would lapse if, after the offer was made, but before acceptance, the subject matter of the offer became illegal. In such a case, the offeree cannot accept the offer, and the offer would be considered terminated due to the change in law.

3. Rejection: If the offeree rejects the offer, the offer lapses. This means that the offeree has declined to accept the offer, and the offeror is no longer obligated to keep the offer open. The offeree cannot later change their mind and accept the original offer unless the offeror chooses to make the same offer again.

4. Lapse of reasonable time: If the offeree does not accept the offer within a reasonable time, the offer lapses. What constitutes a reasonable time can vary depending on the specifics of the situation, such as the nature of the subject matter and the customary practices within the industry. Once an offer has lapsed due to the passage of a reasonable time, it can no longer be accepted.

In summary, an offer does not lapse due to acceptance, as acceptance is the necessary step to form a contract between the parties. An offer can lapse due to subsequent illegality, rejection, or the lapse of a reasonable time.

A Proposal when accepted becomes a promise. In simple words, when an offer is accepted it becomes promise.

An offer is a proposal made by one party to another, expressing their willingness to enter into a legally binding contract upon the acceptance of the terms by the other party. In order for an offer to be valid, it must satisfy certain criteria. Let's discuss why none of the given options are valid offers:
1. Prospectus issued by a company: A prospectus is a document that provides detailed information about a company, its financial condition, and the securities it is issuing to investors. It is not an offer in the context of a contract, but rather a disclosure document. It helps investors make informed decisions about whether or not to invest in the company's securities. Therefore, a prospectus is not a valid offer.
2. Advertisement for a job opening: An advertisement for a job opening is an invitation for potential candidates to apply for the position. It provides information about the job role, requirements, and qualifications needed for the job. However, it does not constitute a legally binding offer, as it does not express the employer's willingness to enter into a contract with any specific candidate. It simply invites candidates to apply, and the employer may choose to accept or reject any application based on their discretion. Thus, an advertisement for a job opening is not a valid offer.
3. Catalogue in a restaurant: A catalogue in a restaurant typically lists the various dishes and their prices. It serves as an invitation to treat, which means that it invites customers to make an offer to buy a particular dish at the stated price. The restaurant can then accept or reject the customer's offer. In this case, the restaurant's menu does not represent a legally binding offer to enter into a contract; instead, it is an invitation for customers to make an offer. Therefore, a catalogue in a restaurant is not a valid offer.
In conclusion, none of the given options qualify as a valid offer in the context of the formation of a legally binding contract.

When there is no specific time mentioned for the delivery of goods, the law assumes that the goods should be delivered within a "reasonable time." The concept of reasonable time varies depending on the circumstances of each case, including the nature of the goods, the specific industry, and the distance between the buyer and the seller.

Legal Relationship:

• A legal relationship is created when parties agree to enter into a binding contract, which is enforceable by law.
• An offer is a proposal made by one party (offeror) to another party (offeree), indicating a willingness to enter into a contract.
• The offer sets out the terms and conditions under which the contracting parties will be bound.
• When the offeree accepts the offer, a legally binding agreement is formed, and both parties are obligated to fulfill the terms and conditions outlined in the contract.

Validity and enforceability refer to whether a contract is legally binding and can be enforced in a court of law. Illegal contracts, by definition, involve activities that are against the law, and therefore, cannot be enforced or considered valid. The other types of contracts (implied, bilateral, and quasi) can all potentially be valid and enforceable, depending on the specific circumstances and conditions involved.

A contract creates rights and obligations between the parties concerned. When two or more parties agree on specific terms and conditions and intend to create a legally binding relationship, a contract is formed. This contract enforces the parties' promises and actions, ensuring that each party fulfills their respective duties as outlined in the agreement. If one party fails to fulfill their obligations, the other party may seek remedies through the legal system.

A contract which ceases to be enforceable by law becomes void.
Void: A void contract is one that is not legally valid or enforceable from the very beginning. It lacks one or more of the essential elements required for a legally binding agreement. Examples of void contracts are agreements with illegal subject matter, those entered into by minors, and contracts made under duress or undue influence. Since a void contract is not legally binding, no party can enforce its terms or claim any remedy for its breach.
Other terms mentioned in the question for clarity:
Voidable: A voidable contract is a valid contract that can be enforced by law, but one or more parties have the right to void (cancel) the agreement due to certain circumstances, such as misrepresentation, mistake, or undue influence. When a contract is voided, it is treated as if it never existed.
Illegal: An illegal contract is one that involves an agreement to engage in illegal activities or violates public policy. These contracts are void and unenforceable, as they are against the law.
Unenforceable: An unenforceable contract is one that has all the essential elements of a valid contract but cannot be enforced by law due to certain technical defects or issues. Examples include contracts that do not meet the Statute of Frauds requirements or those that have become impossible to perform. While the agreement may have been valid initially, it becomes unenforceable due to the specific circumstances or issues that arise.

Specific goods:

• These are goods that are specifically identified, agreed upon, and distinguished from other goods at the time of contract formation.
  For example, a car with a specific VIN (vehicle identification number) or a painting with a specific title.

Ascertained goods:

• These are goods that are identified and agreed upon by the buyer and seller after the formation of a contract.
• They may not be specifically identified at the time of the contract but are later selected according to the terms of the agreement.
  For example, a buyer may order 100 units of a product, and the seller later identifies and sets aside those units to fulfill the order.

Contingent goods:

• Contingent goods are not a part of existing goods, as they depend on the occurrence or non-occurrence of a specific event or condition.
• The goods may or may not come into existence, depending upon the specified event or condition.
  For example, a contract for the sale of crops that will be harvested in the future, where the harvest is subject to weather and other factors.

Unascertained goods:

• These are goods that are not specifically identified or agreed upon at the time of contract formation.
• They are usually described in general terms and are chosen from a larger group of similar goods.
  For example, a contract to purchase 10 units of a product from a warehouse containing 1000 units of that product. The specific units to be sold are not yet identified or set aside.

Formal contract is a contract where the parties have signed under seal, while an informal contract is one not under seal. A seal can be any impression made upon the document by the parties to the contract. 
Therefore, Formal contracts are not recognized under the Indian law.

The partnership firm is not regarded as a legal entity, therefore the firm cannot on its own create or enter into any contract. Any Partner authorized by all the partners or all the Partners of the firm shall execute the contract.

A valid contract can only be formed when the parties involved meet certain legal requirements. In order to enter into a valid contract, the individual must:
1. Be of the age of majority: In most jurisdictions, a person is considered a minor until they reach the age of 18 or 21. Minors generally do not have the legal capacity to enter into contracts. However, in some cases, a minor can enter into a contract if it is for necessaries, such as food, clothing, or shelter.
2. Have sound mind: A person must be mentally competent and capable of understanding the nature and consequences of the contract. A person with an unsound mind, such as someone suffering from a mental illness or under the influence of drugs or alcohol, may not be able to enter into a valid contract.
3. Not be disqualified by law: Certain individuals may be disqualified from entering into contracts due to specific legal restrictions, such as bankruptcy or being a public official in a position that would create a conflict of interest.
Considering these requirements, the correct answer is "Not minor with sound mind and not disqualified by law" because this option includes individuals who are of the age of majority, have a sound mind, and are not legally disqualified from entering into contracts. These individuals have the legal capacity to enter into valid contracts, whereas the other options include factors that would prevent a valid contract from being formed.

A contract of sale involves the transfer of goods, services, or property from one party to another in exchange for a consideration. As per the Sale of Goods Act, the subject matter of a contract of sale includes goods that are movable property, regardless of their nature.
1. Stock and Shares:
- Stocks and shares represent ownership in a company and can be bought or sold.
- These are considered as movable property and can be the subject matter of a contract of sale.
2. Growing crops:
- Growing crops are considered as goods attached to or forming part of the land until they are severed and can be transferred.
- Once the crops are harvested, they become movable property and can be the subject matter of a contract of sale.
3. Consignment from a foreign country:
- A consignment is a shipment of goods from one party to another.
- Goods that are being imported from a foreign country are also considered as movable property.
- They can be the subject of a contract of sale between the importer and the buyer.
In conclusion, all the given options can be the subject matter of a contract of sale.

Joint Property of Partners
A partnership firm is a business arrangement in which two or more individuals come together to share the profits and losses of the business. In this type of entity, the assets of the firm are considered to be the joint property of the partners. This means that:

• All the partners have a common interest in the assets of the firm.
• Each partner has a right to participate in the management and control of the assets.
• The assets cannot be divided or allocated to individual partners without the consent of all partners.
• In case of dissolution of the firm, the assets must be distributed among the partners according to their agreed-upon profit-sharing ratio.
• The partners are responsible for the liabilities of the firm to the extent of their respective shares in the partnership.

In the sales of goods, all of these factors are taken into consideration.
1. Goods - The type, quality, and quantity of the goods being sold are important factors in any sales transaction. The seller must accurately represent the goods and the buyer must understand what they are purchasing.
2. Money - The price of the goods being sold is a critical aspect of any sales transaction. Both the buyer and seller must agree on a fair price for the goods being exchanged.
3. Property - In some cases, sales of goods may involve the transfer of property, such as real estate or intellectual property. In these instances, the terms of the property transfer must be clearly defined and agreed upon by both parties involved

Unilateral Contracts

• As the name itself denotes, these are one-sided contracts. In such contracts, only one party vows to perform a duty. The agreement is then open to anyone who wishes to vow the same and enter into the contract. A unilateral agreement is, however, complete only when one of the parties fulfills the promise.
• A unilateral contract is a one-sided agreement in which one party promises to do something while the other does not follow through immediately. The opposing party, on the other hand, will act in the future. Contests are one example of unilateral contracts.
• Furthermore, after the acting party fulfills the agreement's promise, the other party is obligated to follow suit because the promise is now enforceable. The unilateral contract will be breached if the side does not behave as promised.
• Suppose, a person has announced a reward of Rs.1000 for anyone who finds him his lost puppy. Here, a unilateral offer is formed where only this person is in the contract initially. When someone finds the puppy and hands it over to that person, he is bound to pay him the reward. Once this is done, the unilateral contract is fulfilled.

When the proposal is accepted, the person making the proposal is called as promisor and the person accepting the proposal is called as promisee.

A standing offer, also known as a continuing offer, is an ongoing proposal from one party to another that remains open for acceptance during a specified period. It provides flexibility, is commonly used in business transactions, and can be revoked by the offeror before acceptance.

A partnership firm is a business entity formed by two or more partners who have agreed to share the profits and losses of the business. The acts of the partners are considered as the acts of the partnership firm, except when a partner acts in their personal capacity.
In summary, a partner's act done in their personal capacity is not considered as an act done by the partnership firm because it does not involve the firm's representation or its interests. The other options given involve partners acting on behalf of the firm or within the scope of its business, making them acts of the partnership firm.

This is because when considering events, actions, or situations, we can refer to them as happening in the past, the present, or the future. Let's break this down:
Past: Refers to events or actions that have already occurred. When discussing the past, we often use the past tense to describe these events or actions. For example, "I visited the museum last week."
Present: Refers to events or actions that are happening right now or in the immediate time frame. When discussing the present, we often use the present tense to describe these events or actions. For example, "I am currently eating lunch."
Future: Refers to events or actions that have yet to happen. When discussing the future, we often use the future tense to describe these events or actions. For example, "I will go to the store tomorrow."

A partnership firm may need to be dissolved under various circumstances.
On death or insolvency of partners:
- When a partner dies, their legal representatives cannot usually continue as partners in the firm. The partnership usually needs to be dissolved, and the assets and liabilities need to be settled.
- If a partner becomes insolvent, they may no longer be able to fulfill their obligations as a partner, and the partnership may need to be dissolved.
Mutual agreement:
- Partners may agree to dissolve the partnership by mutual consent. This can happen if the partners decide to pursue other interests or if they no longer wish to continue the partnership for any reason.
Expiration or completion of the partnership:
- A partnership may be formed for a specific period or to achieve a specific objective. Once the period expires or the objective is achieved, the partnership may be dissolved.
Breach of the partnership agreement:
- If a partner breaches the terms of the partnership agreement, the other partners may have the right to dissolve the partnership. This could include situations where a partner engages in illegal activities or fails to fulfill their responsibilities as a partner.
Court intervention:
- A court may order the dissolution of a partnership under certain circumstances, such as when a partner is declared to be of unsound mind or when it is impossible to carry on the partnership business.
In summary, a partnership firm may need to be dissolved in several situations, such as on the death or insolvency of partners, mutual agreement, expiration or completion of the partnership, breach of the partnership agreement, or court intervention.

• An agreement to sale is a preliminary document outlining the terms and conditions of a property sale.
• A contract of sale is formed when the agreement to sale is signed by both parties, and it legally binds them to the terms and conditions of the sale.
• An agreement to sale becomes a contract of sale on a future specified date, which is usually mentioned in the agreement itself.

The term "third party" refers to any individual, business, or organization that is not directly involved in a particular partnership or transaction. In the context of a partnership firm, a third party would be an entity that is not a partner or the firm itself. This can include suppliers, customers, creditors, or any other external parties that the partnership firm interacts with during the course of its business activities.

A void agreement is an agreement that lacks the essential elements required to make it a valid contract. It is important to differentiate between void agreements and illegal agreements. Here's why:
1. Void agreements: These are agreements that do not meet the required elements of a valid contract. They are not enforceable by law, and the parties are not bound by any legal obligations. Reasons for an agreement to be void can include lack of capacity, lack of consent, lack of consideration, or an indefinite or vague subject matter. However, the subject matter of the contract itself may not necessarily be illegal.
2. Illegal agreements: These are agreements that involve subject matters that are explicitly prohibited by law or go against public policy. Engaging in such agreements can lead to penalties and legal consequences for the parties involved.
In summary, while void agreements are not enforceable by law, they are not necessarily illegal. It is crucial to distinguish between void and illegal agreements, as the latter carries legal consequences and penalties for the parties involved.