CMA (Cost & Management Accountancy) Foundation: Fundamentals of Business Laws and Business Communication Syllabus

Foundation: Fundamentals of Business Laws and Business Communication syllabus — full chapter and topic list

Expand any chapter to see its topics and sub-topics. This is the whole examinable outline for Foundation: Fundamentals of Business Laws and Business Communication in CMA (Cost & Management Accountancy), not a summary of it.

1. 1

   Indian Contracts and Special Contracts

   4 topics

   • Essentials of a Valid Contract
     • Offer, acceptance and consideration
     • Capacity of parties and free consent
     • Lawful object and consideration; void agreements
   • Performance and Discharge of Contracts
     • Modes of performance
     • Discharge by breach, frustration and novation
     • Remedies for breach of contract
   • Contract of Indemnity and Guarantee
     • Rights and liabilities of surety
     • Discharge of surety
   • Bailment, Pledge and Agency
     • Rights and duties of bailee and bailor
     • Creation and termination of agency
2. 2

   Sale of Goods and Negotiable Instruments

   3 topics

   • Sale of Goods Act, 1930
     • Conditions and warranties
     • Transfer of ownership and risk
     • Rights of unpaid seller
   • Negotiable Instruments Act, 1881
     • Promissory note, bill of exchange and cheque
     • Negotiation and endorsement
     • Dishonour and noting/protesting
   • Holder and Holder in Due Course
3. 3

   Partnership and Corporate Forms

   3 topics

   • Indian Partnership Act, 1932
     • Registration and effects of non-registration
     • Rights and duties of partners
     • Dissolution of firm
   • Limited Liability Partnership (LLP)
   • Introduction to Company Form of Organisation
4. 4

   Business Communication

   4 topics

   • Principles and Process of Communication
     • Barriers to communication
     • Verbal and non-verbal communication
   • Business Correspondence
     • Business letters and emails
     • Notices, circulars and memos
   • Reports, Notices and Minutes
   • Precis Writing and Comprehension

Foundation: Fundamentals of Business Laws and Business Communication flashcards for CMA (Cost & Management Accountancy)

20 of 62 cards from the Foundation: Fundamentals of Business Laws and Business Communication deck — real questions with worked answers.

1. What is the legal definition of a 'contract' under Section 2(h) of the Indian Contract Act, 1872?

   A contract is 'an agreement enforceable by law.' Thus, Contract = Agreement + Enforceability by law. An agreement (offer + acceptance creating reciprocal promises) becomes a contract only when it satisfies the essentials of Section 10.

2. List the essential elements of a valid contract under Section 10 of the Indian Contract Act, 1872.

   (1) Offer and acceptance, (2) Intention to create legal relations, (3) Lawful consideration, (4) Capacity of parties (competency), (5) Free consent, (6) Lawful object, (7) Agreement not expressly declared void, (8) Certainty of meaning, (9) Possibility of performance, and (10) Legal formalities where required.

3. Distinguish between an 'agreement' and a 'contract'.

   Agreement = offer + acceptance (every promise and set of promises forming consideration for each other, Sec 2(e)). A contract is an agreement enforceable by law. Every contract is an agreement, but every agreement is not a contract — only those satisfying Section 10 essentials. So: all contracts are agreements, but not vice versa.

4. How does Section 2(a) of the Indian Contract Act define a 'proposal' (offer)?

   When one person signifies to another his willingness to do or to abstain from doing anything, with a view to obtaining the assent of that other to such act or abstinence, he is said to make a proposal. The person making it is the 'promisor/offeror' and the one accepting is the 'promisee/offeree'.

5. What is the difference between an 'offer' and an 'invitation to offer'? Give examples.

   An offer, when accepted, becomes a binding promise; an invitation to offer merely invites others to make offers. Examples of invitations to offer: display of goods with price tags in a shop, auction notices, tenders, catalogues, advertisements, and prospectus of a company. The customer makes the offer, which the shopkeeper may accept or reject.

6. State the legal rules regarding a valid acceptance.

   Acceptance must be: (1) absolute and unqualified (Sec 7), (2) communicated to the offeror, (3) in the prescribed/usual reasonable mode, (4) given by the person to whom the offer was made, (5) given while the offer is still alive (before lapse/revocation), and (6) cannot precede an offer. Mental acceptance or silence is not acceptance.

7. What is the rule about communication of acceptance and revocation (Sections 4 and 5)?

   Communication of an offer is complete when it comes to the knowledge of the offeree. Acceptance is complete as against the proposer when it is put in course of transmission so as to be out of the acceptor's power, and as against the acceptor when it comes to the proposer's knowledge. An offer may be revoked any time before acceptance is complete against the proposer; acceptance may be revoked before it is complete against the acceptor.

8. Define 'consideration' under Section 2(d) of the Indian Contract Act, 1872.

   When, at the desire of the promisor, the promisee or any other person has done or abstained from doing, or does or abstains from doing, or promises to do or abstain from doing something, such act, abstinence or promise is called consideration for the promise. It may be past, present (executed), or future (executory).

9. What does the maxim 'consideration may move from the promisee or any other person' mean in Indian law?

   Under Indian law, consideration need not move from the promisee alone — it may flow from any other person (a stranger to consideration can sue). This differs from English law, where consideration must move from the promisee. Established in Chinnaya v. Ramayya.

10. State the exceptions where an agreement without consideration is valid (Section 25).

    An agreement without consideration is void EXCEPT: (1) natural love and affection between parties in near relation, in writing and registered; (2) compensation for voluntary past services; (3) promise to pay a time-barred debt, in writing and signed; (4) completed gifts; and (5) agency (no consideration needed to create agency, Sec 185).

11. Who are persons competent to contract under Section 11 of the Indian Contract Act, 1872?

    Every person is competent to contract who is (1) of the age of majority according to the law to which he is subject (18 years, or 21 if a guardian is appointed under old rule — now generally 18), (2) of sound mind, and (3) not disqualified from contracting by any law to which he is subject (e.g., alien enemies, insolvents, convicts).

12. What is the legal status of an agreement entered into by a minor?

    An agreement with a minor is void ab initio (void from the beginning) — Mohori Bibee v. Dharmodas Ghose. A minor can be a beneficiary/promisee but not a promisor; the contract cannot be ratified on attaining majority; the rule of estoppel does not apply against a minor; but a minor is liable for necessaries supplied (Sec 68) out of his estate, not personally.

13. Define 'consent' and 'free consent' under Sections 13 and 14.

    Consent (Sec 13): two or more persons are said to consent when they agree upon the same thing in the same sense (consensus ad idem). Free consent (Sec 14): consent is free when not caused by coercion, undue influence, fraud, misrepresentation, or mistake. If caused by the first four, the contract is voidable; if by mistake of fact (bilateral), it is void.

14. Define 'coercion' under Section 15 of the Indian Contract Act.

    Coercion is the committing or threatening to commit any act forbidden by the Indian Penal Code, or the unlawful detaining or threatening to detain any property, to the prejudice of any person, with the intention of causing him to enter into an agreement. A contract caused by coercion is voidable at the option of the aggrieved party.

15. Define 'undue influence' under Section 16 and state when it is presumed.

    Undue influence exists where one party is in a position to dominate the will of the other and uses that position to obtain an unfair advantage. The dominant position is presumed where one holds real/apparent authority, stands in a fiduciary relation, or contracts with a person whose mental capacity is temporarily/permanently affected. The contract is voidable; burden of proof lies on the dominant party.

16. Distinguish between 'fraud' (Sec 17) and 'misrepresentation' (Sec 18).

    Fraud involves an intentional/deliberate false statement or concealment made to deceive, with knowledge of falsity. Misrepresentation is an innocent/unintentional false statement believed to be true. In fraud, the aggrieved party can rescind AND claim damages; in misrepresentation, the party can rescind or insist on performance but generally cannot claim damages. Both make the contract voidable.

17. What is the effect of a 'mistake' on a contract under Sections 20, 21, and 22?

    Bilateral mistake of fact essential to the agreement (Sec 20) makes the contract void. Mistake of law in force in India (Sec 21) is no excuse — contract remains valid; mistake of foreign law is treated as mistake of fact. Unilateral mistake (Sec 22) does not make a contract voidable merely because one party was under a mistake of fact.

18. State the lawful object and consideration requirements under Section 23.

    The consideration or object of an agreement is unlawful if it is: (1) forbidden by law, (2) of such nature that if permitted it would defeat the provisions of any law, (3) fraudulent, (4) involves or implies injury to the person or property of another, or (5) the court regards it as immoral or opposed to public policy. Such agreements are void.

19. List the agreements expressly declared void under the Indian Contract Act.

    (1) Agreements in restraint of marriage (Sec 26), (2) restraint of trade (Sec 27), (3) restraint of legal proceedings (Sec 28), (4) uncertain/ambiguous agreements (Sec 29), (5) wagering agreements (Sec 30), (6) agreements to do impossible acts (Sec 56), and (7) agreements made without consideration (Sec 25).

20. What is a 'wagering agreement' (Section 30) and its legal effect?

    A wagering agreement is one between two parties on the outcome of an uncertain future event, where one wins and the other loses depending on the event, with no other interest than the stake. Wagering agreements are void; no suit can be brought to recover winnings. Insurance contracts and skill-based competitions are NOT wagers because of insurable interest/skill.

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