CA (Chartered Accountancy) Foundation: Business Laws, BCR and Quantitative Aptitude Flashcards

24 sample cards from the Foundation: Business Laws, BCR and Quantitative Aptitude deck

Sampled from the end of the deck, so these are different cards from the ones shown on the syllabus page.

1. Define a 'contract of indemnity' under Section 124 of the Indian Contract Act, 1872.

   A contract by which one party promises to save the other from loss caused to him by the conduct of the promisor himself, or by the conduct of any other person, is a contract of indemnity. It has two parties: indemnifier and indemnity-holder.

2. Define a 'contract of guarantee' and name the three parties involved (Section 126).

   A contract of guarantee is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The three parties are: the surety (who gives the guarantee), the principal debtor, and the creditor.

3. Distinguish a contract of indemnity from a contract of guarantee.

   Indemnity has two parties and one contract; the indemnifier's liability is primary and arises on loss. Guarantee has three parties and three contracts; the surety's liability is secondary/collateral and arises only on the principal debtor's default.

4. Define 'bailment', 'bailor' and 'bailee' under Section 148.

   Bailment is the delivery of goods by one person to another for some purpose, upon a contract that they shall, when the purpose is accomplished, be returned or disposed of according to the directions of the deliverer. The deliverer is the bailor; the receiver is the bailee.

5. What is a 'pledge' (pawn) and who are the 'pawnor' and 'pawnee' (Section 172)?

   Pledge is the bailment of goods as security for payment of a debt or performance of a promise. The bailor (who pledges) is the pawnor; the bailee (who holds the security) is the pawnee.

6. Define 'agent' and 'principal' under Section 182 of the Indian Contract Act, 1872.

   An agent is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is the principal.

7. State the rule on a 'sub-agent' versus a 'substituted agent' in agency.

   A sub-agent works under the control of the original agent (agent of the agent); the principal is generally not bound by a sub-agent unless properly appointed. A substituted agent acts under the principal and is the principal's agent, directly responsible to the principal.

8. Define a 'contract of sale of goods' under Section 4 of the Sale of Goods Act, 1930.

   A contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price. It includes a sale (property transferred at once) and an agreement to sell (property to transfer at a future time or on conditions).

9. Distinguish a 'sale' from an 'agreement to sell' under the Sale of Goods Act, 1930.

   In a sale, ownership passes immediately; it is an executed contract creating a right in rem; risk passes to the buyer. In an agreement to sell, ownership passes in future/on conditions; it is executory, creates a right in personam; risk remains with the seller.

10. Distinguish a 'condition' from a 'warranty' under Section 12 of the Sale of Goods Act, 1930.

    A condition is a stipulation essential to the main purpose of the contract; its breach gives the right to repudiate the contract. A warranty is collateral to the main purpose; its breach gives only a right to claim damages, not to reject the goods.

11. When may a breach of condition be treated as a breach of warranty under the Sale of Goods Act, 1930?

    When the buyer waives the condition or elects to treat its breach as a breach of warranty, or where the contract is non-severable and the buyer has accepted the goods (or part of them), the breach of condition can only be treated as a breach of warranty.

12. State the maxim 'caveat emptor' and a key exception under the Sale of Goods Act, 1930.

    Caveat emptor means 'let the buyer beware' - it is the buyer's duty to examine goods before purchase. Exception: where the buyer makes known the particular purpose and relies on the seller's skill/judgment, there is an implied condition of fitness for purpose (S.16).

13. State the primary rule for transfer of ownership in specific or ascertained goods (Section 19).

    Where there is a contract for the sale of specific or ascertained goods, the property passes to the buyer at the time the parties intend it to pass, as determined from the terms of the contract, conduct, and circumstances.

14. Who is an 'unpaid seller' under Section 45 of the Sale of Goods Act, 1930?

    A seller is unpaid when the whole price has not been paid or tendered, or when a bill of exchange or other negotiable instrument received as conditional payment has been dishonoured. It includes an agent who has paid or is responsible for the price.

15. List the rights of an unpaid seller against the goods under the Sale of Goods Act, 1930.

    Right of lien (retention of possession until paid), right of stoppage of goods in transit (when the buyer becomes insolvent), and right of resale. These exist even though property in the goods has passed to the buyer.

16. Define 'partnership', 'partner', 'firm' and 'firm name' under Section 4 of the Indian Partnership Act, 1932.

    Partnership is the relation between persons who have agreed to share the profits of a business carried on by all or any of them acting for all. Persons are individually 'partners', collectively a 'firm', and the name under which they carry on business is the 'firm name'.

17. What is the 'true test' of partnership and the role of profit-sharing (Section 6)?

    The true test is the existence of mutual agency - each partner acting as both principal and agent of the others. Sharing of profits is prima facie evidence but not conclusive proof of partnership; mutual agency is the conclusive test.

18. State key duties of partners under the Indian Partnership Act, 1932.

    To carry on the business to the greatest common advantage, to be just and faithful, to render true accounts and full information, to indemnify for fraud, to act diligently, not to make secret profits, not to compete, and to account for personal profits from firm transactions.

19. What are the effects of non-registration of a partnership firm under Section 69?

    An unregistered firm/partner cannot sue the firm or other partners to enforce contractual rights, and the firm cannot sue third parties to enforce contractual rights. However, registration is optional, and non-registration does not affect third parties' right to sue the firm or claims for set-off up to certain limits.

20. What is a Limited Liability Partnership (LLP) under the LLP Act, 2008, and its key features?

    An LLP is a body corporate with a separate legal entity from its partners and perpetual succession. Partners' liability is limited; one partner is not liable for another's wrongful acts; it requires at least two partners and two designated partners (one resident in India).

21. Distinguish an LLP from a traditional partnership firm.

    An LLP is a separate legal entity with perpetual succession and limited liability, governed by the LLP Act 2008. A traditional partnership has no separate legal entity, unlimited liability, no perpetual succession, and is governed by the Indian Partnership Act 1932.

22. Define a 'company' and state the doctrine of 'separate legal entity' (Salomon v. Salomon).

    A company is an artificial legal person created by law, having a separate legal entity distinct from its members, with perpetual succession and a common seal. Salomon v. Salomon established that a company is legally separate from its shareholders, even a one-man company.

23. Distinguish a 'private company' from a 'public company' under the Companies Act, 2013.

    A private company restricts transfer of shares, limits members to 200 (excluding employees), prohibits public invitation for securities, and needs minimum 2 members/2 directors. A public company has no such restrictions, needs minimum 7 members/3 directors, and can invite the public for securities.

24. Describe the main steps in the incorporation of a company under the Companies Act, 2013.

    Obtain DSC and DIN, reserve the name (RUN/SPICe+), prepare and file the Memorandum (MOA) and Articles (AOA) with SPICe+ form and required documents, pay fees, and the Registrar issues the Certificate of Incorporation with a Corporate Identity Number (CIN), bringing the company into existence.

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