QP CODE: 23124661

B. COM DEGREE (CBCS) REGULAR / IMPROVEMENT / REAPPEARANCE

EXAMINATIONS, MAY 2023
Second Semester
Core Course - CO2CRT05 - BUSINESS REGULATORY FRAMEWORK
(Common to all B.Com Degree Programmes)
2017 Admission Onwards

General Instructions
- Marks required for pass in external examination is 24.
- The Scheme of valuation is a broader guideline. Any relevant point not covered in the
scheme shall be given due credit.

Part A
Answer any ten questions. Each question carries 2 marks.
1. Can consideration move from a stranger?
Section 2 (d) provides that a consideration may move from "the promisee or any
other person". It means that as long as there is a consideration for a promise, it is immaterial
who has furnished it. But according to English law consideration must move from the i
promisee and the promisee only.
2. Explain free consent.
Section 14 provides that "consent is said to be free when it not caused by
1) coercion 2) undue influence 3) fraud or 4) misrepresentation5)mistake
3. What is waiver?
It is a deliberate abandonment of the rights which parties to the contract mutually have
against each other. No consideration is necessary for waiver.
4. What is gratuitous bailment?
Where no consideration passes between the bailor and the bailee it is a gratuitous bailment.
For example, someone gives his car to his friend for a journey, without claiming any charges.
5. List out the circumstances where the finder of goods acquires the right to sell the goods.
Right of sale can be exercised in the following situations;
a. If the owner cannot, with reasonable diligence, be found, or
b. The owner refuses to pay the lawful charges of the finder, or
c. The goods are of a perishable nature, or
d. The lawful charges of the finder in respect of the goods found exceed two thirds of the
total value of goods. (Section 169).
6. Define the contract of guarantee.
A contract of guarantee is a contract to perform the promise or to discharge the liability of a
third person in case of his default. (Section 126).
7. Define Agent.
Section 182 of the Act, defines an agent as "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 called the "principal".
8. What is the meaning of actual authority?
Actual or real authority. It is the authority conferred on him by the principal. It may be
expressed or implied. (Section 186). An authority is said to be express when it is given by
words spoken or written. An authority is said to be implied when it is to be inferred from the
 circumstances of the case; and things spoken or written, or the ordinary course of dealing.
(Section 187).
9. What is the meaning of Delegatus non-potestdelegare?
The Latin legal maxim 'Delegatus non-potestdelegare', means that a person to whom
authority has been given, cannot delegate that authority to another. Section 190 of the Act
reiterates this principle. It provides that an agent cannot lawfully employ another to perform
acts which he has expressly or impliedly undertaken to personally.
10. What are unascertained goods?
These are goods which are not identified and agreed upon at the time of the contract of
sale. These are goods which are defined by description only.
11. Explain Warranties.
A warranty is a stipulation which is collateral to the main purpose of the contract. [Section
12 (3)]. Warranty visualizes a situation where the stipulation is important but it is not
fundamental to the contract.
12. What is stoppage in transit?
The right of stoppage in transit is an extension of the right of lien. This right enables the
seller to stop the transit of goods and to regain possession of the goods. The purpose of this
right of stoppage is to prevent the goods from getting to the hands of an insolvent buyer.

Part B
Answer any six questions. Each question carries 5 marks.
13. Differentiate void agreement and illegal agreement.
a. All illegal agreements are void, but all void agreements are not illegal.
b. An agreement becomes void when any of the essential elements are absent, but an
agreement becomes illegal when it is criminal in nature, immoral or opposed to
public policy.
c. An agreement collateral to an illegal agreement is also void. But a collateral
agreement to a void agreement may not be void.
14. When an object becomes unlawful?
a. If it is forbidden by law. An act is forbidden by law when it is punishable by the
criminal law of the country or when it is forbidden by a special legislation. If the
consideration or the object of an agreement is forbidden by law it shall be void.
b. If it is of such a nature that if permitted it would defeat the provisions of any law.
The agreement may not be providing for something against the provisions of law.
But if the agreement is permitted to be performed some other valid legislation may
be violated in its spirit.
c. If it is fraudulent. An agreement which is made for a fraudulent purpose is void.
d. If it involves or implies injury to the person or property of another. The word
injury means 'wrong' or 'harm'. If the purpose of the agreement or the consideration
of the agreement is inflicting some injury to the person or property of another the
agreement would become void under section 23.
e. If the court regards it as immoral. If an agreement involves committing of an
immoral act, especially sexual immorality, then the agreement would be void.
f. If the court regards it as opposed to public policy. An agreement is said to be
opposed to public policy when it is harmful to public welfare.
15. Explain wagering agreement and its essentials.
Wagering agreement or wager (Section 30) Wager means a 'bet'. It is defined as an
agreement between two parties by which one promises to pay money or money's
worth on the happening of some uncertain event in consideration of the other
party's promise to pay if the event does not happen.
The following are the essentials of a wagering agreement;
a. There must be a promise to pay money or money's worth
b. Promise is conditional on the happening or not happening of an event.
c. The event is Uncertain.
d. There must be two parties and each party may stand to win or lose.
e. The parties should not have any control over the event.
f. The parties should have no interest other than the stake involved.

16. Explain the rights of a pawnee.

1. Right of retainer. The pawnee can exercise lien on the goods pledged not only for
payment of debt or performance of promise but for interest and all other necessary
expenses in connection with preservation of the goods pledged.
2. Right to extraordinary expenses. The pawnee has a right to recover from the pawnor
extraordinary expenses incurred for the preservation of goods pledged. But he has no right
of lien over the goods for extraordinary expenses.
3. Right of retainer for subsequent advances also. When the pawnee lends money to the
same pawnor after the date of the pledge, it is presumed that the right of retainer over the
pledged goods extends to subsequent advances also.
4. Rights where pawnor makes default. Where the pawnor of a goods makes default in the
performance of the promise or payment of a debt at the stipulated time, the following rights
are available to the pawnee;
a. He may file a case against the pawnor upon the debt or promise and may
retain the goods pledged as a collateral security.
b. He may sell the goods pledged after giving reasonable notice to the
pawnor.
c. The pawnee can recover from the pawnor any deficiency arising on the sale
of the goods on default. However he is also bound to hand over the surplus,
if any, on the sale.
17. Explain the rights of the surety.
The surety has rights against (i) the creditor, (ii) the principal debtor, and (iii) the co-sureties.
The following are the rights.
1. Rights against the principal debtor
a. Right to indemnity. In every contract of guarantee there is an implied promise by the
principal debtor to indemnify the surety and the surety is entitled to recover from the
principal debtor all payments properly made. (Section 145).
b. Right of subrogation. On the default of the principal debtor, the surety can, after paying
off the creditor, claim all those rights which the creditor had against the principal debtor.
The surety who pays off the debt is entitled to all the remedies which the creditor could
have enforced not merely against the principal debtor but also against all persons claiming
under him.
 c. Right to be relieved of liability. Before making the payments, the surety can compel the
principal debtor to relieve him from liabilities by paying off the debt.
2. Rights against the creditor
a. Before payment of the guaranteed debt. A surety may, after the guaranteed debt has
become due and before he is called upon to pay, require the creditor to sue the principal
debtor. However the surety will have to indemnify the creditor for any expenses or loss
resulting there from
b. Right of set off. On being sued by the creditor, the surety can rely on any set off or
counterclaim which the debtor has against the creditor.
c. Subrogation. Where a guaranteed debt has become due and the surety has paid all that
he is liable for, he is invested with all the rights which the creditor had against the principal
debtor (Section 140).
d. Right to equities. After paying off the guaranteed debt, the surety is entitled to all
equities which the creditor could have enforced not only against the principal debtor himself
but also against the person claiming through him.
e. Right to securities. The surety is entitled to the benefit of every security held by the
creditor at the time of making the contract whether the existence of the security is, or is not,
known to him. If any such security is lost without the consent of the surety, the liability of
the surety will be reduced to that extent.
3. Rights against co-sureties
When a debt is guaranteed by two or more sureties, they are called co-sureties.
a. Co-sureties liable to contribute equally. Where there are two or more co-sureties for
the same debt or duty and the principal debtor makes a default, the co-sureties, in the
absence of any contract to the contrary, are liable to contribute equally to the extent of
the default. (Section 146).
b. Liability of co-sureties bound in different sums. Where the co-sureties have agreed to
guarantee different sums, they have to contribute equally subject to the maximum
amount guaranteed by each one.
c. Release of a co surety. Where there are co-sureties, a release by the creditor of one of
them does not discharge the others, neither does it free the surety so released from his
liability to the other sureties. (Section 138).
(Note: All points need not be insisted)
18. Explain the essentials of Agency .
1. Agreement between the principal and the agent. Agency is created on the basis of an
agreement between the principal and the agent. The agreement may be express or implied.
2. Principal should be competent. Only a person who is competent to contract may appoint
an agent.
3. The agent need not be competent. An agent need not be competent to contract. Even a
minor can bring about a contractual relationship between a principal and a third party.
4. No consideration is required to create agency. Section 185 of the Act expressly provides
that there need not be any consideration to create an agency.
19. Explain the exceptions to the general rule "delegatus non postestdelegare ".
The following are the exceptional situations where the agent may appoint a sub-agent;
a. Custom of trade. If the custom of trade permits the appointment of a sub-agent, there
can be a valid appointment of a sub-agent by the agent.
 b. Nature of agency. If the nature of business of agency is such that it demands or permits
appointment of sub-agent.
c. Implied consent of the principal. If the principal is aware of the intention of the agent to
appoint a sub-agent but does not object to it.
d. Emergency. If unforeseen emergencies arise demanding the appointment of a sub-agent.
e. Ministerial acts. Where the act to be done is purely ministerial and does not involve any
confidence or require any skill.
f. Express consent of the principal. If the principal has given express permission to appoint a
sub-agent
20. When an agency can be terminated by operation of law?
a) Performance of the contract. The agency comes to an end by performing what the agent
has undertaken to do. (Section 201).
b) Expiry of time. Where the agency is for a fixed period, it terminates when that period
lapses, even if the work undertaken is not completed.
c) Death or insanity. When the agent or the principal dies or becomes of unsound mind, the
agency is terminated. (Section 201)
d) Insolvency. When the principal becomes insolvent the agency gets terminated.
e) Destruction of the subject matter. If a contract of agency is created to deal with a
particular subject matter, it gets terminated when there is a destruction of that subject
f) Principal becoming an alien enemy. If the principal becomes an alien enemy the agency
becomes invalid.
g) Dissolution of a company. If a company has the role of either a principal or an agent,
agency gets terminated when it is dissolved.
h) Termination of sub-agents authority. When the authority of an agent is terminated, the
authority of all sub-agents appointed by him also ceases.
21. Differentiate between ownership of goods and possession of good.
Ownership involves transfer of property in goods. It is an absolute right. Possession is only
physical control of property. For possession, ownership is not required.
Risk follows ownership. In a sale the ownership of the goods is transferred from the seller to
the buyer. In the case of a bailment only possession is transferred.

Part C
Answer any two questions. Each question carries 15 marks.
22. What are the essential elements of a valid offer?
An offer may give rise to a valid contract only if the following conditions are satisfied;

1. It must intend to create legal relations. An offer may be capable of creating a legal
relationship only if the parties intended to enter a legal relationship.
2. The terms of the offer must be definite and certain. If the terms of the offer is vague or
lacks clarity, it cannot be treated as a valid offer. Only if the offer is clear the parties
could identify the legal requirement of the contract.
3. Offer must be communicated to the offeree. An offer is valid only if it is communicated
to the offeree. If a person prepare a letter containing an offer but fails to send it, there
will not be any legal offer.
 4. An offer is different from a statement of intention or invitation to offer. When a
merchant exhibits his goods in a shop window it is not an offer. It is only an invitation to
the public to make an offer.
5. Special conditions attached to an offer must be communicated. If there are some
special conditions in a contract, like a clause which may limit the liability of a party to the
contract, such conditions should be brought to the notice of the other party at the time
of the offer itself.
6. An offer may be general or specific. A specific offer is made to a specific individual or a
definite group of individuals .When the offer is made to the world at large it is said to be
general .Sometimes it may be given to the world at large and any person could accept it.
7. Offer must be made with a view to obtaining the assent of the other party. An offer
must be distinguished from mere expression of intention. When an offer is made the
intention of the party should be to get the consent of the party for the proposal.
8. An offer may be conditional. If an offer is made subject to a condition it can be accepted
only if the condition is satisfied. If the condition is not accepted the offer lapses.
9. Offer should not contain a term, the non-compliance of which would amount to
acceptance. An offeror cannot say that if no response is given before a due date it will
be presumed to have been accepted.
23. What is Lien? Explain the different types of lien with examples.
Lien means a right of a person to retain possession of some goods belonging to another until
some debt or claim of the person in possession is satisfied. This right is based on possession
and therefore it is also called possessory lien.
The person who claims a right of lien should have this right invested in him by (i) statute, or
(ii) express implied contract, or (iii) by the usual course of dealing between the parties in a
particular trade.
Lien may be (i) particular lien, or (ii) general lien.
1. Particular lien. A particular lien is one which is available to the bailee against only those
goods in respect of which he has rendered some service involving the exercise of labour or
skill. For example, A delivers a rough diamond to B, a jeweler, to be cut and polished. B is
entitled to retain the finished diamond till he is paid for services he has rendered.
The right available to a bailee under a contract of bailment is in the nature of particular lien.
Lien can be exercised only if the work has been performed in full and the payment is due.
There should not be any agreement to provide the services on credit and there should not
be any agreement stating that no lien would be exercised.
2. General lien. It is the right of a person to retain possession of goods as security for
general balance of account. Here, the bailee can retain any goods bailed to him for any
amount due to him in respect of those goods or any other goods.
A general lien is available only to certain categories of persons like, bankers, factors,
wharfingers, attorneys of High Courts and policy brokers. (Section 171).

24. Who is a surety? Explain the circumstances of discharging the liabilities of the surety.
A contract of guarantee is a contract to perform the promise or to discharge the liability of a
third person in case of his default. (Section 126). The person who gives the guarantee is
called the 'surety', the person in respect of whose default the guarantee is given is called the
'principal debtor', and the person to whom the guarantee is given is called the 'creditor'.
 1. Discharge by revocation
a. Revocation by giving notice. A continuing guarantee can be revoked as regards future
transactions by giving a notice to the creditor.
b. Revocation by death. The death of a surety operates as termination of continuing
guarantee as to future transactions. But with respect to past transactions the legal
representatives shall be responsible.

2. Discharge of surety by conduct of the creditor

a. Variation in terms of contract. If the terms of a contract between the principal debtor
and the creditor are varied without the consent of the surety, the surety is discharged
from liability as to transactions made after the variance. (Section 133)
b. Release or discharge of principal debtor. The surety may be discharged in two different
modes by the provisions of section 134. Firstly, if the creditor and the principal debtor
enter into a contract whereby the latter is released, the consequence would be the
release of the surety.
c. Compounding with or giving time to the principal debtor. Section 135 of the Act
provides three situations where the surety may be discharged from liability. They are (i)
creditor making a composition with the principal debtor, or, (ii) creditor gives time to the
principal debtor, or (iii) promises not to sue the principal debtor. If any of these acts are
done without the consent of the surety the contract of guarantee may be discharged.
d. Creditors act or omission impairing surety's eventual remedy. A surety is discharged if a
creditor does any act which is inconsistent with the rights of the surety or omits to do
any act which his duty to the surety requires him to do, and the eventual remedy of the
surety himself against the principal debtor is thereby impaired. (Section 139).
e. Loss of security. If the creditor loses the securities deposited with him by the principal
debtor or parts with it without the consent of the surety, the surety is discharged to the
extent of security lost. (Section 141).
3. Discharge of surety by invalidation of contract
a. Fraud, concealment etc. If a guarantee has been obtained by fraud, or concealment of
material facts, the guarantee would become invalid and the surety will be discharged.
b. Lack of essential elements of a valid contract. If any of the essential elements of a valid
contract are absent, the surety ship also would get discharged.

25. Explain the rights and duties of principal.

Rights of the principal
The principal has got the following rights against an agent who fails in his duty.
1. Right to recover damages. The principal has got a right to recover damages from an
agent if he suffers any loss due to disregard by the agent of the directions by the
principal.
2. To demand account and to claim secret profits made. If the agent makes any secret
profit the principal has got the right to recover them. If such secret profits are made the
agent loses hisright to claim remuneration from the principal.
 3. To resist agent's claim for indemnity. If the agent has entered into the contract with the
third party in his own account, the principal can resist the agent's claim for indemnity.
Duties of principal
1. To indemnify the agent against the consequence of all lawful acts. The principal is
bound to indemnify the agent against the consequences of all lawful acts done by such
agent in exercise of the authority conferred upon him. (Section 222)
2. Right to be indemnified against consequences of acts done in good faith. When an
agent does the act in good faith, the employer is liable to indemnify the agent against
the consequences of that act even though such act causes injury to the rights of third
persons. (Section 223)
3. Right to compensation. The agent has a right to be compensated for injuries sustained
by him by neglect or want of skill on the part of the principal (Section 225).
4. To pay the remuneration to the agent. The agent has got right to receive the agreed
remuneration, or a reasonable remuneration.

MCQ for Private Candidates

1. (b) obligations of the parties to it.
2. (b) Contract
3. (b) Offer+ Acceptance
4. (b) Offer, acceptance , consideration, contract
5. (a) The knowledge of that person
6. (a) Promisor
7. (a) Implied offer
8. (c) Valid
9. (b) Liquidated Damages
10. (a) agreement
11. (d) actual ownership of goods is necessary
12. (a) Pawnee
13. (d) A gift you give someone for their birthday
14. (a) When a third party is not informed of the exercise of the principal and believes the agent
is acting on his own behalf.
15. (b) Revocation by the principal
16. (b) Special agent
17. (b) sale or agreement
18. (c) fail to return goods
19. (a) before fall on hammer
20. (a) Contract of indemnity

Chairperson:
Dr Manoj Narayanan K S
Baselius College, Kottayam
9447110212
manojnarayananks@baselius.ac.in